Kimberly-Clark is a household products company that produces and sells various paper products under popular brand names such as Kleenex and Scott. In many respects, Kimberly- Clark is similar to Colgate: both are mature and profitable consumer products companies that are of similar size. Therefore, Kimberly-Clark is a good company with which to compare Colgate’s financial performance. The tables below provide summary financial information for both Colgate and Kimberly-Clark over the 2001–2011 period.

Required:

Conduct a detailed comparative analysis of Colgate and Kimberly-Clark’s financial performance over the 2001–2011 period. Specifically:

a. Conduct an index-number trend analysis separately for every item reported in the table (e.g., net sales, gross profit, etc.). Use 2001 as the base year (i.e., set 2001 numbers equal to 100).

b. Calculate the following ratios for every year for each company: return on investment (return on assets, return on common equity), operating performance (gross profit margin, operating profit margin), asset utilization (total asset turnover), capital structure (total debt to equity, long-term debt to equity), dividend payout rate, and market measures (price-to-earnings, price-to-book).

c. Conduct an index-number trend analysis separately for every one of the ratios that you computed in (b). Once again use 2001 as the base year.

d. For analysis in (a), (b), and (c) that involves net income or operating income, it is important to also examine these numbers after removing the costs relating to restructuring activities. The tables calculate net income and operating income after adding the pretax cost of restructuring (e.g., net income before restructuring). Compute all trends and ratios using these adjusted income numbers in addition to those using the reported numbers.

e. Finally, we need to determine the stock price performance of the two companies over this period. To do that, we need to determine cum-dividend return. Cum-dividend return is the return on a stock including cash dividends.

Colgate’s compounded annualized cum-dividend return over the 2002–2011 period is 6.9% compared to 5.3% for Kimberly-Clark Verify these numbers are true.

Opening stock price]

1.Using this formula, determine the cum-dividend return for each company for every year. Then determine the compounded annualized return over the entire period).

f. Examine all of the previous analyses and provide a commentary that compares the performance of Colgate and Kimberly-Clark over the 2002–2011 period.

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COLGATE'S SUMMARY FINANCIAL DATA (In billions, except per share data) 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Net sales 16.73 15.56 15.33 15.33 13.79 12.24 11.40 10.58 9.90 9.29 9.43 Gross profit Operating income 9.59 9.20 9.01 9.01 8.22 7.21 6.62 6.15 5.75 5.35 5.46 3.84 3.49 3.62 3.33 2.96 2.57 2.37 2.20 2.14 2.02 1.86 2.20 0.06 1.35 0.29 1.15 0.00 Net income 2.43 2.29 1.96 1.74 1.35 1.33 1.42 1.29 0.00 Restructuring charge (after tax) Net income before restructuring Op income before restructuring 0.00 0.00 0.11 0.18 0.15 0.06 0.04 2.43 2.26 2.29 2.07 1.92 1.64 1.50 1.39 1.46 1.29 1.15 3.84 3.55 3.62 3.44 3.14 2.86 2.52 2.26 2.18 2.02 1.86 Total assets 12.72 11.17 11.13 9.98 10.11 9.14 8.51 8.67 7.48 7.09 6.98 Total liabilities 10.18 8.36 7.88 7.94 7.72 7.62 7.05 7.21 6.38 6.53 5.93 Long-term debt Shareholders' equity Treasury stock at cost 4.43 2.07 12.81 2.82 2.82 3.59 3.22 2.72 2.92 3.09 2.68 3.21 2.81 2.68 3.12 1.92 2.29 1.41 1.35 1.25 0.89 0.35 0.85 11.31 10.48 9.70 8.90 8.07 7.58 6.97 6.50 6.15 5.20 4.98 Basic earnings per share Cash dividends per share Closing stock price Shares outstanding (billions) 4.45 4.53 3.81 3.35 2.57 2.54 2.45 2.60 2.33 2.02 2.27 2.03 1.72 1.56 1.40 1.25 1.11 0.96 0.90 0.72 0.68 92.39 0.48 80.37 82.15 68.54 65.24 54.85 51.16 0.53 77.96 50.05 52.43 57.75 0.49 0.49 0.50 0.51 0.51 0.52 0.53 0.54 0.55