Exhibit No. (13)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Kimberly-Clark Corporation and Subsidiaries
GLOBAL BUSINESS SEGMENTS
The Corporation is organized into three global business segments. The
major products manufactured and marketed by each of the Corporation's business
segments are as follows:
- - Tissue - facial and bathroom tissue, paper towels, wipers and napkins
for household and away-from-home use; wet wipes; printing, premium
business and correspondence papers; and related products. Products in this
segment are sold under the Kleenex, Scott, Kimberly-Clark, Kleenex
Cottonelle, Kleenex Viva, Huggies, Kimwipes, WypAll, Surpass and other
brand names.
- - Personal Care - disposable diapers,training and youth pants and swimpants;
feminine and incontinence care products; and related products. Products
in this segment are primarily for household use and are sold under a
variety of well-known brand names, including Huggies, Pull-Ups, Little
Swimmers, GoodNites, Kotex, Lightdays, Depend, Poise and other brand names.
- - Health Care and Other - health care products such as surgical gowns,
drapes, infection control products, sterilization wraps, disposable face
masks and exam gloves, respiratory products, and other disposable medical
products; specialty and technical papers; and other products. Products
in this segment are sold under the Kimberly-Clark, Safeskin, Tecnol,
Ballard and other brand names.
BUSINESS IMPROVEMENT AND OTHER PROGRAMS
The Corporation announced business improvement programs in 1998 and 1997
to address its ongoing competitiveness and improve its operating efficiency
and cost structure. A summary of these programs together with cost and other
information is presented below.
1998 Plan
In the fourth quarter of 1998, the Corporation announced a facilities
consolidation plan (the "1998 Plan") to, among other things, further align
tissue manufacturing capacity with demand in Europe, close a diaper
manufacturing facility in Canada, shut down and dispose of a tissue machine in
Thailand, write down certain excess feminine care production equipment in
North America and reduce the Corporation's workforce by approximately 830
employees. Costs for the 1998 Plan of $18.2 million, $42.6 million and $49.1
million were recorded in 2000, 1999 and 1998, respectively. The year 2000 costs
are composed primarily of certain severance costs and charges for accelerated
depreciation for the Corporation's Larkfield, U.K. tissue manufacturing facility
that remained in use until it was shut down in October 2000. Through
December 31, 2000, the Corporation had notified and subsequently terminated 814
employees. The costs of this workforce reduction were charged to earnings in the
period in which such employee severance benefits were appropriately
communicated.
1997 Plan
On November 21, 1997, the Corporation announced a restructuring plan (the
"1997 Plan"). The plan, among other things, resulted in the sale, closure or
downsizing of 16 manufacturing facilities worldwide and a workforce reduction of
approximately 3,740 employees. In 1998, the Corporation determined that its
Villanovetta, Italy tissue manufacturing facility was an impaired asset because
its cash flows from use and disposal were insufficient to cover the carrying
amount of the asset. In 1998, other less significant modifications were made to
the 1997 Plan, the largest of which was a charge for losses on European feminine
care equipment removed from service. Costs for the 1997 Plan of $250.8 million
were recorded in 1998 at the time costs became accruable under appropriate
accounting principles. Included in such costs was an asset impairment charge for
the Villanovetta facility of $26.8 million, losses on the European feminine care
equipment of $12.1 million and accelerated depreciation related to assets that
were to be disposed of but which continued to be operated during 1998. In 1999,
the Corporation recorded a net credit of $16.7 million, which was composed of
accelerated depreciation expense of $23.7 million, reductions in accrued costs
of $31.9 million and lower asset write-offs and higher sales proceeds totaling
$8.5 million, due to changes in estimates.
Charges (credits) under these two plans for the three years ended
December 31, 2000 are summarized below:
Amounts Charged to Earnings
---------------------------
(Millions of dollars) 2000 1999 1998
- ----------------------------------------------------------------------------------------------
Workforce severance . . . . . . . . . . . . . . . . . . . . . . . $ 5.5 $ 11.2 $ 64.3
Write-downs of property, plant and equipment and other assets . . - (11.5) 91.4
Contract settlements,lease terminations and other costs . . . . . - (27.1) 31.3
Asset impairments . . . . . . . . . . . . . . . . . . . . . . . . - - 31.3
Accelerated depreciation. . . . . . . . . . . . . . . . . . . . . 12.7 53.3 81.6
----- ------ ------
Total pretax charge . . . . . . . . . . . . . . . . . . . . $18.2 $ 25.9 $299.9
===== ====== ======
Income statement classification:
Cost of products sold . . . . . . . . . . . . . . . . . . . . . $18.2 $ 52.9 $183.1
Restructuring and other unusual charges . . . . . . . . . . . . - (27.0) 116.8
----- ------ ------
Total pretax charge . . . . . . . . . . . . . . . . . . . . $18.2 $ 25.9 $299.9
===== ====== ======
The effects of these two plans were included in operating profit by business
segment and geography as follows:
Year Ended December 31
--------------------------
(Millions of dollars) 2000 1999 1998
- ---------------------------------------------------------------------------------------------
By Business Segment
Tissue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17.1 $19.9 $164.2
Personal Care . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 13.4 121.8
Health Care . . . . . . . . . . . . . . . . . . . . . . . . . . - (1.3) 13.2
Unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . - (6.1) .7
----- ----- ------
Total pretax charge . . . . . . . . . . . . . . . . . . . . $18.2 $25.9 $299.9
===== ====== ======
By Geography
North America . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.0 $ 6.4 $194.9
Outside North America . . . . . . . . . . . . . . . . . . . . . 17.2 25.6 104.3
Unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . - (6.1) .7
----- ------ ------
Total pretax charge . . . . . . . . . . . . . . . . . . . . $18.2 $25.9 $299.9
===== ====== ======
These two plans decreased operating profit and net income as follows:
Year Ended December 31
---------------------------
(Millions of dollars) 2000 1999 1998
- ---------------------------------------------------------------------------------------------
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . $18.2 $25.9 $299.9
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.8 21.1 213.0
Set forth below is a summary of the types and amounts recognized as accrued
expenses for these two plans together with cash payments made against such
accruals for the two years ended December 31, 2000.
2000
---------------------
Balance Balance
(Millions of dollars) 12/31/99 Additions Payments 12/31/00
- -----------------------------------------------------------------------------------------------------
Workforce severance . . . . . . . . . . . . . . . . . . . $16.5 $5.5 $(18.7) $3.3
Environmental costs and lease contract terminations . . . 8.0 - (3.0) 5.0
----- ---- ------- ----
$24.5 $5.5 $(21.7) $8.3
===== ==== ======= ====
1999
---------------------
Balance Additions Balance
(Millions of dollars) 12/31/98 (Reductions) Payments 12/31/99
- -----------------------------------------------------------------------------------------------------
Workforce severance . . . . . . . . . . . . . . . . . . $ 53.3 $ 11.2 $(48.0) $16.5
Asset removal costs . . . . . . . . . . . . . . . . . . 15.2 (8.9) (6.3) -
Environmental costs and lease contract terminations . . 41.2 (9.1) (24.1) 8.0
Other costs . . . . . . . . . . . . . . . . . . . . . . 20.1 (12.1) (8.0) -
------ ------- ------- -----
$129.8 $(18.9) $(86.4) $24.5
====== ======= ======= =====
These two plans were completed as of December 31, 2000. The accrued expense
balance of $8.3 million will be paid in accordance with the terms of the
applicable employee severance and other agreements.
OTHER INFORMATION
1999 Unusual Charges
In 1999, the Corporation incurred $13.6 million of unusual business
improvement costs that were not related to the business improvement plans
discussed above. The costs, which primarily were for employee severance and
write off of assets removed from service, were charged to cost of products sold
when incurred.
Write-down of Certain Intangible and Other Assets
In 1998, the carrying amounts of trademarks and unamortized goodwill of
certain European businesses were determined to be impaired and written down. In
addition, the Corporation began depreciating the cost of all newly acquired
personal computers ("PCs") over two years. In recognition of the change in
estimated useful lives, PC assets with a remaining net book value of $16.6
million became subject to accelerated depreciation charges. These charges, along
with $8.8 million of charges for write-downs of other assets and a loss on a
pulp contract, reduced 1998 operating profit $81.2 million and net income $64.7
million. Of the $81.2 million, $6.8 million was charged to cost of products sold
and $74.4 million was charged to general expense. In 1999, accelerated
depreciation on PCs reduced operating profit $8.3 million, $2.7 million of which
was charged to cost of products sold and $5.6 million was charged to general
expense. In 2000, accelerated depreciation on PCs reduced operating profit
$6.2 million, $2.0 million of which was charged to cost of products sold and
$4.2 million was charged to general expense. At September 30, 2000, these PCs
were fully depreciated.
Approximately 91 percent of the 1998 write-down of certain intangible and
other assets and accelerated depreciation on PCs described above related to the
Personal Care segment and 9 percent related to the Tissue segment. In 2000 and
1999, 50 percent of $6.2 million and $8.3 million, respectively, of accelerated
depreciation was charged to each of the Personal Care and Tissue segments.
ANALYSIS OF CONSOLIDATED NET SALES - THREE YEARS ENDED DECEMBER 31, 2000
By Business Segment
Net Sales
-----------------------------------
(Millions of dollars) 2000 1999 1998
- ----------------------------------------------------------------------------------------
Tissue. . . . . . . . . . . . . . . . . . . . . . . $ 7,303.2 $ 6,968.8 $ 6,733.1
Personal Care . . . . . . . . . . . . . . . . . . . 5,437.6 5,138.1 4,596.5
Health Care and Other . . . . . . . . . . . . . . . 1,291.0 936.4 1,001.5
Intersegment sales. . . . . . . . . . . . . . . . . (49.8) (36.5) (33.3)
--------- --------- ---------
Consolidated. . . . . . . . . . . . . . . . . . . $13,982.0 $13,006.8 $12,297.8
========= ========= =========
By Geographic Area
Net Sales
-----------------------------------
(Millions of dollars) 2000 1999 1998
- ----------------------------------------------------------------------------------------
United States . . . . . . . . . . . . . . . . . . . $ 9,059.4 $ 8,392.5 $ 7,992.8
Canada. . . . . . . . . . . . . . . . . . . . . . . 990.3 843.4 785.1
Intergeographic sales . . . . . . . . . . . . . . . (673.5) (507.4) (408.9)
--------- --------- ---------
Total North America . . . . . . . . . . . . . . . 9,376.2 8,728.5 8,369.0
Europe. . . . . . . . . . . . . . . . . . . . . . . 2,474.5 2,544.7 2,471.2
Asia, Latin America, Africa and Middle East . . . . 2,680.5 2,084.6 1,766.2
Intergeographic sales . . . . . . . . . . . . . . . (549.2) (351.0) (308.6)
------- --------- ---------
Consolidated. . . . . . . . . . . . . . . . . . . $13,982.0 $13,006.8 $12,297.8
========= ========= =========
Commentary:
2000 versus 1999
Consolidated net sales increased 7.5 percent above 1999. In 1999, the
Corporation closed its Mobile, Alabama pulp mill and sold its Southeast
Timberlands ("SET") and its pulp mill located in Miranda, Spain. Excluding the
revenues of these divested businesses, consolidated net sales increased more
than 8 percent. Sales volumes increased approximately 9 percent, with each
business segment contributing to the gain. While selling prices increased nearly
2 percent, changes in foreign currency exchange rates, primarily in Europe,
reduced consolidated net sales by almost 3 percent. Although the preceding
tables include the divested businesses, the following net sales commentary
excludes their results in order to facilitate a more meaningful discussion.
- - Worldwide net sales of tissue products increased by more than 6 percent.
Sales volumes grew 7 percent and selling price increases added 2 percent,
while unfavorable currency exchange rate effects reduced net sales by 3
percent. Excluding currency effects, net sales increased in each geographic
region. The increase in sales volumes was primarily due to higher sales of
Kleenex Cottonelle and Scott bathroom tissue and washroom systems in North
America. Other significant contributors to the increase were household
towels and wet wipes products in North America. Sales volumes in Europe
benefited from the Attisholz Holding AG ("Attisholz") tissue brands
acquired in
June 1999. In Latin America, higher sales volumes accounted for
the increase in net sales. On March 31, 2000, the Corporation increased its
ownership interest in Hogla-Kimberly Limited ("Hogla"), its Israeli
affiliate, to 50.1 percent and began to consolidate Hogla's results in
April 2000.
- - Worldwide net sales of personal care products were 5.8 percent higher
primarily due to increased sales volumes. Selling price increases of
nearly 2 percent were offset by the negative effect of changes in foreign
currency exchange rates. Net sales were higher in every geographic region.
In North America, a slight decline in overall sales volumes was more than
offset by increased selling prices. In Europe, sales volumes were 16
percent greater, driven by strong sales of Huggies diapers. The net sales
increase in Latin America was primarily due to continued expansion in sales
volumes. Asia benefited from increased sales volumes of diapers and
feminine care products in Korea and the acquisition of S-K Corporation, a
former licensee, in Taiwan. The consolidation of Hogla also contributed to
the overall higher sales volumes.
- - Net sales for health care and other products increased 37.9 percent
principally due to the acquisitions of Ballard Medical Products ("Ballard")
in September 1999 and Safeskin Corporation ("Safeskin") in February 2000.
1999 versus 1998
Consolidated net sales increased 5.8 percent above 1998. In 1998, the
Corporation sold K-C Aviation Inc. ("KCA"). Excluding the revenues of the
divested businesses for both years, consolidated net sales increased about 8
percent. Sales volumes increased approximately 9 percent, with each of the
business segments contributing to the gain. However, changes in foreign currency
exchange rates reduced consolidated net sales by about 1 percent, with favorable
effects in Korea being more than offset by unfavorable changes in Brazil and
Europe. Although the preceding tables include the divested businesses, the
following net sales commentary excludes their results in order to facilitate a
more meaningful discussion.
- - Worldwide net sales of tissue products increased 5 percent. Sales volumes
grew by nearly 6 percent, while slightly lower prices and unfavorable
foreign currency exchange rate effects, primarily in Europe, reduced net
sales by approximately 1 percent. The increase in sales volumes was
primarily attributable to the contribution from the Attisholz tissue brands
in Europe and improved sales of Kleenex Cottonelle and Scott bathroom
tissue in North America. Other significant contributors to the increase
were Kleenex facial tissue, washroom systems and wet wipes products, which
more than offset a decline in sales volumes for household towels in North
America. A portion of the tissue sales volume increase was due to
operations in Colombia, in which the Corporation made an additional
investment in late 1998 to gain majority ownership of certain Latin
American equity companies (the "Colombian Investment").
- - Worldwide net sales of personal care products were 11.8 percent greater
primarily due to a 13 percent increase in sales volumes. A selling price
increase of approximately 1 percent was more than offset by the negative
effect of changes in foreign currency exchange rates of slightly more than
2 percent. Net sales were higher in every geographic region. In North
America, net sales increased across all brands, led by higher volumes for
Huggies diapers. There was improvement in diaper sales in Europe and
notably increased sales of personal care products in Korea. In addition, a
portion of the increase in net sales was attributable to the Colombian
Investment.
- - Net sales for health care and other products increased 11 percent primarily
due to sales volume growth for professional health care products, including
the contribution from the acquisition of Ballard.
UNUSUAL ITEMS
For purposes of this Management's Discussion and Analysis, and in order to
facilitate a meaningful discussion of the ongoing operations of the Corporation,
the items summarized in the following table are considered to be unusual items
("Unusual Items").
Year Ended December 31
-----------------------------------
(Millions of dollars) 2000 1999 1998
- ---------------------------------------------------------------------------------------------------
Charges (credits) to Operating Profit:
Business Improvement and Other Programs:
1998 and 1997 Plans . . . . . . . . . . . . . . . . . . . . $ 18.2 $ 25.9 $ 299.9
1999 unusual charges. . . . . . . . . . . . . . . . . . . . - 13.6 -
Write-down of certain intangible and other assets . . . . . . 6.2 8.3 81.2
Gains on disposals of assets . . . . . . . . . . . . . . . . . - (176.7) (140.0)
Patent settlement and accrued liability reversal . . . . . . . (75.8) - -
Litigation settlements . . . . . . . . . . . . . . . . . . . . 15.2 - -
Mobile pulp mill fees and related severance . . . . . . . . . - 9.0 42.3
Business integration and other costs . . . . . . . . . . . . . 35.1 22.6 (3.3)
------ -------- --------
Net(credit) charge for unusual items . . . . . . . . . . . . . (1.1) (97.3) 280.1
Operating profit as reported . . . . . . . . . . . . . . . . . . 2,633.8 2,435.4 1,697.7
-------- -------- --------
Operating profit excluding unusual items . . . . . . . . . . . . $2,632.7 $2,338.1 $1,977.8
======== ======== ========
- - A description of the items included in the 1998 and 1997 Plans, the 1999
unusual charges and the write-down of certain intangible and other assets
is contained in the Business Improvement and Other Programs section above.
- - Gains on disposals of assets are primarily related to the sale of SET in
1999 and the sale of KCA in 1998.
- - In the first quarter of 2000, as part of settlement of a patent dispute,
the Corporation was compensated for royalty income related to prior years.
This settlement was recorded as other income. Also, certain estimated
liabilities accrued under the terms of the agreement for the 1997 sale of a
pulp and newsprint business were reversed to other income because no claims
had been made by the buyer and the accrual ceased to be required.
- - In the third and fourth quarters of 2000, the Corporation reached
agreements to settle certain litigation and accordingly recorded charges
related to these settlements.
- - In 1999, the Corporation recorded workforce severance costs related to the
sale of SET. In 1998, a contract cancellation fee and workforce severance
costs related to the closure of the Mobile pulp mill were recorded.
- - As part of the integration of acquired businesses, Attisholz, Ballard and
Safeskin, certain costs related to assimilating these operations were
expensed as incurred in 1999 and 2000. In addition, the Corporation has
incurred certain costs related to the reorganizations of its North American
professional health care and European away-from-home sales forces, which
were recorded in 2000.
The items displayed in the preceding table have been excluded from
operating profit in the "Excluding Unusual Items" columns in the following
Consolidated Operating Profit tables.
ANALYSIS OF CONSOLIDATED OPERATING PROFIT - THREE YEARS ENDED
DECEMBER 31, 2000
By Business Segment
2000 1999 1998
----------------------- ----------------------- --------------------
EXCLUDING Excluding Excluding
AS UNUSUAL As Unusual As Unusual
(Millions of dollars) REPORTED ITEMS Reported Items Reported Items
- --------------------------------------------------------------------------------------------------------
Tissue. . . . . . . . . . . . . $1,305.0 $1,339.8 $1,114.1 $1,171.3 $ 921.3 $1,135.7
Personal Care . . . . . . . . . 1,136.7 1,141.9 1,092.8 1,109.1 588.7 785.3
Health Care and Other . . . . . 186.1 205.6 154.3 161.9 161.2 173.7
Other income (expense), net . . 104.2 43.6 180.0 3.3 124.4 (15.6)
Unallocated - net . . . . . . . (98.2) (98.2) (105.8) (107.5) (97.9) (101.3)
-------- -------- ------- -------- -------- --------
Consolidated. . . . . . . . . $2,633.8 $2,632.7 $2,435.4 $2,338.1 $1,697.7 $1,977.8
======== ======== ======== ======== ======== ========
By Geographic Area
2000 1999 1998
----------------------- ----------------------- --------------------
EXCLUDING Excluding Excluding
AS UNUSUAL As Unusual As Unusual
(Millions of dollars) REPORTED ITEMS Reported Items Reported Items
- --------------------------------------------------------------------------------------------------------
United States . . . . . . . . . $1,937.1 $1,972.0 $1,821.9 $1,868.8 $1,407.2 $1,663.4
Canada. . . . . . . . . . . . . 211.3 212.7 105.3 110.9 112.7 104.8
Europe. . . . . . . . . . . . . 149.7 172.9 183.3 219.8 (39.7) 123.1
Asia, Latin America, Africa and
Middle East . . . . . . . . . 329.7 329.7 250.7 242.8 191.0 203.4
Other income (expense), net . . 104.2 43.6 180.0 3.3 124.4 (15.6)
Unallocated - net . . . . . . . (98.2) (98.2) (105.8) (107.5) (97.9) (101.3)
--------- --------- --------- --------- --------- ---------
Consolidated. . . . . . . . . $2,633.8 $2,632.7 $2,435.4 $2,338.1 $1,697.7 $1,977.8
======== ======== ======== ======== ======== ========
Note: Unallocated - net consists of expenses not associated with the business
segments or geographic areas.
Commentary:
2000 versus 1999
Excluding the Unusual Items, operating profit increased 12.6 percent, and
operating profit as a percentage of net sales increased from 18.0 percent in
1999 to 18.8 percent in 2000. The increase in operating profit was primarily
driven by the higher sales volumes. In addition, selling price increases and
manufacturing cost improvements combined to more than offset the higher cost
of raw materials, primarily pulp costs, and increased goodwill amortization.
The following commentary excludes the Unusual Items in both years.
- - Operating profit for tissue products was greater by 14.4 percent primarily
due to increased selling prices and sales volumes that combined to more
than offset the higher costs of raw materials. In North America, increased
sales volumes and reduced manufacturing costs for Kleenex Cottonelle and
Scott bathroom tissue and higher selling prices and sales volumes for towel
products were the principal contributors to improved results. In Europe,
increased sales volumes did not offset the negative impact of higher pulp
prices and currency effects.
- - Operating profit for personal care products increased 3.0 percent as
increased sales volumes and selling prices combined to more than offset
higher raw materials costs and greater advertising and promotion expense,
which was incurred to support launches of new products and geographic
expansion. Higher sales volumes for diapers in Europe and diapers and
feminine care products in Korea and selling price increases in North
America, principally for diapers and feminine care products, were major
contributors to the results achieved.
- - Operating profit for the health care and other segment increased 27.0
percent principally due to the additional sales volumes associated with the
Ballard and Safeskin acquisitions.
- - Operating profit in North America benefited from a pension credit,
primarily attributable to favorable returns on pension assets, which more
than offset higher costs for other postretirement benefits.
- - Other income (expense), net increased primarily due to favorable foreign
currency effects and gains on minor asset sales.
1999 versus 1998
Excluding the Unusual Items, operating profit increased 18.2 percent, and
operating profit as a percentage of net sales increased to 18.0 percent in 1999
from 16.1 percent in 1998. Excluding the divested businesses and the Unusual
Items for both years, operating profit increased 20.0 percent. The increase in
operating profit was driven by the higher sales volumes, with productivity
improvements and other manufacturing cost efficiencies contributing to the gain.
The benefits of these improvements more than offset the additional investments
in marketing and product improvement initiatives. The following commentary
excludes the Unusual Items and the results of divested businesses in both years.
- - Operating profit for tissue products increased slightly more than 4 percent
primarily due to higher sales volumes for facial and bathroom tissue and
wet wipes products in North America, the Attisholz acquisition in Europe
and the Colombian Investment. The sales growth along with manufacturing
efficiencies more than offset the increased marketing costs for new Kleenex
Cottonelle bathroom tissue and improved Scott towels and bathroom tissue in
North America.
- - Operating profit for personal care products increased 41.2 percent, led by
results in North America where the higher sales volumes, manufacturing cost
reductions and selling price increases more than offset increased marketing
costs. Operating profit also benefited from contributions by Europe due to
the increased diaper sales volume, other cost savings and lower marketing
expense and the Colombian Investment.
- - Operating profit for the health care and other segment increased nearly
3 percent primarily due to increased sales volumes for professional health
care products, which benefited from the Ballard acquisition.
- - Other income (expense), net increased due to lower adverse currency
effects.
ADDITIONAL INCOME STATEMENT COMMENTARY
2000 versus 1999
- - Interest expense increased due to both higher average debt levels and
increased interest rates.
- - The Corporation's effective income tax rate was 31.1 percent in 2000
compared with 32.4 percent in 1999. Excluding the Unusual Items from both
years, the Corporation's effective income tax rate was 31.0 percent in 2000
compared with 32.1 percent in 1999. The lower effective tax rate was
primarily due to tax initiatives.
- - The Corporation's share of net income of equity companies was $186.4
million in 2000 compared with $189.6 million in 1999. The decrease was
primarily due to the previously mentioned consolidation of Hogla in 2000.
- - Minority owners' share of subsidiaries' net income increased in 2000
primarily due to improved results of the Corporation's majority owned
subsidiaries in the Andean region and the consolidation of Hogla.
- - On a diluted share basis, net income was $3.31 per share in 2000 compared
with $3.09 per share in 1999, an increase of 7.1 percent. Excluding the
Unusual Items in both years, earnings from operations were $3.32 per share
in 2000 compared with $2.98 per share in 1999, an increase of 11.4 percent.
1999 versus 1998
- - Interest expense increased primarily due to higher average debt levels.
- - The Corporation's effective income tax rate was 32.4 percent in 1999
compared with 34.3 percent in 1998. Excluding the Unusual Items from both
years, the Corporation's effective income tax rate was 32.1 percent in 1999
compared with 32.0 percent in 1998.
- - The Corporation's share of net income of equity companies was $189.6
million in 1999 compared with $146.3 million in 1998, excluding a charge
related to the change in value of the Mexican peso in 1998. The increase
was primarily due to the results of Kimberly-Clark de Mexico, S.A. de C.V.,
which benefited from higher selling prices and increased sales volumes.
- - Minority owners' share of subsidiaries' net income increased in 1999
primarily due to the previously mentioned Colombian Investment and the
improved results of the Corporation's majority owned subsidiary in Korea.
- - On a diluted share basis, net income was $3.09 per share in 1999 compared
with $1.99 per share in 1998, an increase of 55.3 percent. Excluding the
Unusual Items in both years, the charge for the devaluation of the Mexican
peso and the cumulative effect of the accounting change for start-up costs
in 1998, earnings from operations were $2.98 per share in 1999 compared
with $2.44 per share in 1998, an increase of 22.1 percent.
SALES OF PRINCIPAL PRODUCTS
(Billions of dollars) 2000 1999 1998
- ------------------------------------------------------------------------------
Tissue-based products . . . . . . . . $ 6.4 $ 5.9 $ 5.7
Diapers . . . . . . . . . . . . . . . 3.2 3.0 2.6
All other . . . . . . . . . . . . . . 4.4 4.1 4.0
----- ----- -----
Consolidated. . . . . . . . . . . . $14.0 $13.0 $12.3
===== ===== =====
LIQUIDITY AND CAPITAL RESOURCES
Year Ended December 31
-----------------------------
(Millions of dollars) 2000 1999
- ------------------------------------------------------------------------------------------------------
Cash provided by operations. . . . . . . . . . . . . . . . . . . . . . . . $2,133.2 $2,139.9
Capital spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,170.3 786.4
Acquisitions of businesses, net of cash acquired . . . . . . . . . . . . . 294.5 271.9
Proceeds from dispositions of property, businesses and investments . . . . 97.6 115.2
Proceeds from notes receivable . . . . . . . . . . . . . . . . . . . . . . 220.0 383.0
Ratio of net debt to capital . . . . . . . . . . . . . . . . . . . . . . . 35.2% 28.9%
Pretax interest coverage - times . . . . . . . . . . . . . . . . . . . . . 11.4 11.4
Cash Flow Commentary:
- - Cash provided by operations was essentially even with last year. Net income
plus noncash charges included in net income increased to $2.5 billion in
2000 compared with $2.2 billion in 1999. The Corporation invested $338.3
million in working capital in 2000, including the effect of the timing of
income tax payments, versus $61.5 million in 1999.
- - Approximately $22 million and $86 million of cash payments were charged
to the accruals for the Business Improvement and Other Programs in 2000 and
1999, respectively.
- - Capital spending in 2000 increased nearly $384 million over 1999 in large
part due to the Corporation's continued investments in its proprietary
technologies for tissue, wet wipes and adult care products in North America
and for diaper manufacturing outside North America.
- - In June 2000, the Corporation transferred $220 million of notes receivable
for cash to a noncontrolled special purpose entity in which the Corporation
has a minority voting interest. This transfer resulted in no gain or loss
to the Corporation.
Financing Commentary:
- - In 2000, the Corporation repurchased 21.0 million shares of its common
stock in connection with its share repurchase program at a total cost of
nearly $1.2 billion. At December 31, 2000, authority to repurchase 36.5
million shares remained under February and November 2000 repurchase
authorities from the Corporation's board of directors. In 1999, the
Corporation repurchased 13.5 million shares of its common stock at a total
cost of about $750 million.
- - At December 31, 2000, total debt was $3.5 billion, an increase of almost
$.8 billion above the prior year-end total. Net debt (total debt net of
cash, cash equivalents and, at December 31, 1999, $220 million of long-term
notes receivable) was nearly $3.3 billion at December 31, 2000 compared
with almost $2.2 billion at December 31, 1999. The Corporation's ratio of
net debt to capital was 35.2 percent, approximately the mid-point of the
Corporation's targeted range of 30 to 40 percent.
- - Excluding the Unusual Items in both years, the pretax interest coverage
ratio was 11.4 in 2000 and 11.0 in 1999.
- - On July 27, 2000, the Corporation issued $300 million aggregate principal
amount of 7.10 percent notes due August 1, 2007.
- - Revolving credit facilities of $1.1 billion, which were unused at
December 31, 2000, are in place for general corporate purposes and to back
up commercial paper borrowings.
- - The Corporation's long-term debt securities have a Double-A rating and its
commercial paper is rated in the top category.
Other Commentary:
- - On January 31, 2001, the Corporation completed the acquisition of Linostar
S.p.A., a leading Italian-based diaper manufacturer that produces and
markets Lines, Italy's second largest diaper brand. The Corporation intends
to account for this acquisition using the purchase method.
- - Management believes that the Corporation's ability to generate cash from
operations and its capacity to issue short-term and long-term debt are
adequate to fund working capital, capital spending and other needs in the
foreseeable future.
MARKET RISK SENSITIVITY AND INFLATION RISKS
As a multinational enterprise, the Corporation is exposed to changes in
foreign currency exchange rates, interest rates and commodity prices. A variety
of practices are employed to manage these market risks, including operating and
financing activities and, where deemed appropriate, the use of derivative
instruments. Derivative instruments are used only for risk management purposes
and not for speculation or trading. All derivative instruments are either
exchange traded or are entered into with major financial institutions in order
to reduce credit risk and risk of nonperformance by third parties.
Foreign Currency Risk
Foreign currency risk is managed by the use of foreign currency forward,
swap and option contracts. The use of these contracts allows management of
transactional exposure to exchange rate fluctuations because the gains or losses
incurred on the derivative instruments will offset, in whole or in part, losses
or gains on the underlying foreign currency exposure. Management of foreign
currency transactional exposures was not changed during 2000, and management
does not foresee or expect any significant change in such exposures or in the
strategies it employs to manage them in the near future.
Foreign currency contracts and transactional exposures are sensitive to
changes in foreign currency exchange rates. As of December 31, 2000, a 10
percent unfavorable change in the exchange rate of the U.S. dollar against the
prevailing market rates of foreign currencies involving transactional exposures
would have resulted in a net pretax loss of approximately $51 million. These
hypothetical gains or losses on foreign currency contracts and transactional
exposures are defined as the difference between the contract rates and the
hypothetical exchange rates. In the view of management, the above losses
resulting from the hypothetical changes in foreign currency exchange rates are
not material to the Corporation's consolidated financial position, results of
operations or cash flows.
Interest Rate Risk
Interest rate risk is managed through the maintenance of a portfolio of
variable- and fixed-rate debt composed of short- and long-term instruments. The
objective is to maintain a cost-effective mix that management deems appropriate.
At December 31, 2000, the debt portfolio was composed of approximately 49
percent variable-rate debt, adjusted for the effect of variable-rate assets, and
51 percent fixed-rate debt. The strategy employed to manage exposure to interest
rate fluctuations did
not change significantly during 2000, and management does not foresee or expect
any significant changes in its exposure to interest rate fluctuations or in how
such exposure is managed in the near future.
Various outstanding interest-bearing instruments are sensitive to changes
in interest rates. Interest rate changes would result in gains or losses in the
market value of fixed-rate debt due to differences between the current market
interest rates and the rates governing these instruments. With respect to
fixed-rate debt outstanding at December 31, 2000, a 10 percent change in
interest rates would have resulted in no material change in the fair value of
fixed-rate debt. With respect to commercial paper and other variable-rate debt,
a 10 percent increase in interest rates would have had no material effect on the
future results of operations.
Commodity Price Risk
The Corporation is subject to commodity price risk, the most significant of
which relates to the price of pulp. Selling prices of tissue products are
influenced, in part, by the market price for pulp, which is determined by
industry supply and demand. On a worldwide basis, the Corporation supplies
approximately 40 percent of its virgin fiber needs from internal pulp
manufacturing operations. Management still intends to reduce its level of pulp
integration, when market conditions permit, to approximately 25 percent, and
such a reduction in pulp integration, if accomplished, could increase the
Corporation's commodity price risk. Specifically, increases in pulp prices
could adversely affect earnings if selling prices are not adjusted or if such
adjustments significantly trail the increases in pulp prices. Derivative
instruments have not been used to manage these risks. Management does not
believe that commodity price risk is material to the Corporation's business or
its consolidated financial position, results of operations or cash flows.
Inflation Risk
The Corporation's inflation risk is managed on an entity-by-entity basis
through selective price increases, productivity increases and cost-containment
measures. Management does not believe that inflation risk is material to the
Corporation's business or its consolidated financial position, results of
operations or cash flows.
CONTINGENCIES AND LEGAL MATTERS
In April 1998, the U.S. Environmental Protection Agency enacted new and
more stringent air emission and water discharge regulations, referred to as the
Cluster Rule, that impose additional pollution control requirements on the
Corporation's pulp production facilities. These rules would have required the
Corporation to spend more than $250 million to meet the Cluster Rule
requirements at its Mobile, Alabama pulp mill. Sappi Fine Paper (S.D. Warren
Company), a producer of printing and publishing papers, had purchased
approximately one-third of the pulp mill's output. On May 4, 1998, S.D. Warren
and the Corporation announced an agreement to terminate their pulp supply
contract effective September 1, 1999. As a result of the cancellation of the
pulp supply contract and the cost of implementing the Cluster Rule, on
May 5, 1998, the Corporation announced its intention to dispose of its entire
integrated pulp operation in Mobile, Alabama, including the related sale of
the associated woodlands operations (the "Southeast Timberlands") and the
closure of its pulp production facility. The pulp facility was shut down in
August 1999. Closure of the pulp mill resulted in the elimination of
approximately 450 jobs, and severance costs of $18.0 million for these employees
were charged to cost of products sold in the third quarter of 1998, at the time
the employees were notified of their termination benefits.
On September 30, 1999, the Corporation sold approximately 460,000 acres of
the Southeast Timberlands to Joshua Timberlands, LLC for notes receivable with
approximate face value of $400 million ("Joshua Notes"). The Joshua Notes, which
were recorded at their fair value of approximately $383 million, bear interest
initially at floating rates based on LIBOR less 15 basis points and are backed
by irrevocable standby letters of credit issued by a major money-center bank,
are due September 30, 2009 and are extendable in additional five-year increments
up to September 30, 2029, at the option of the note holder. Additional acres of
such timberland and related equipment were sold to other buyers prior to
September 30, 1999 for $66 million in cash. The closure of the pulp mill
combined with the sale of the related timberlands resulted in a pretax gain of
$153.3 million, which was recorded in other (income) expense, net. The after-tax
effect of the transaction was a gain of $95.7 million, or $.18 per share.
In November 1999, the Joshua Notes were transferred for cash to a
noncontrolled special purpose entity ("SPE") in which the Corporation has a
minority voting interest. The transfer of the Joshua Notes, which was accounted
for as a sale, resulted in no gain or loss to the Corporation. The SPE is
accounted for as an equity investment.
In connection with the Mobile pulp mill closure, on May 5, 1998, the
Corporation gave notice to Mobile Energy Services Company, L.L.C. ("MESC") of
its intent to terminate a long-term energy services contract. The resulting
termination penalty of $24.3 million was charged to cost of products sold in
the second quarter of 1998. On January 14, 1999, MESC and related parties
(the "Debtors") filed for Chapter 11 bankruptcy protection and instituted an
action against the Corporation claiming unspecified damages in connection with
the pulp mill closure.
On December 31, 1999, a joint motion (the "Motion") was filed with the U.S.
Bankruptcy Court (the "Court") seeking approval of a settlement agreement and
compromise of claims and pending litigation against the Corporation arising from
the closure of the pulp mill and termination of the energy services contract.
Under the proposed settlement agreement, the Corporation agreed to pay MESC at
closing approximately $30 million, subject to certain adjustments. The Court
granted the Motion on January 24, 2000. Closing of the settlement would be
subject to, among other conditions, the Debtors filing a plan of reorganization
from bankruptcy and the ultimate approval of that plan by the Court. The
approximate $30 million payment, which will be accrued when the conditions for
settlement are met, is in addition to $24.3 million previously accrued by the
Corporation. In addition, the proposed settlement provides, among other things,
an agreement by MESC to provide energy to the Corporation's Mobile tissue mill
at market rates.
In August 2000, the Debtors filed a plan of reorganization with the Court
that would implement the settlement agreement. During the fourth quarter of
2000, several crucial elements of the Debtors' plan became no longer viable.
As a result, the Debtors have sought and received from the Court and the
Corporation several extensions of deadlines contained in the settlement
agreement.
Because of uncertainty involving the Debtors' business plans, the
settlement agreement may not be finalized and approved by the Court.
Consequently, the Corporation has developed contingency plans to minimize or
avoid disruption to its Mobile operations in the event that MESC is unable or
unwilling to supply energy to the Mobile tissue mill. If the settlement
agreement is not finalized, the litigation and arbitration proceedings between
the Corporation and the Debtors could resume. The outcome of the MESC
litigation, arbitration and settlement is not expected to have a material
adverse effect on the Corporation's business, financial condition or results
of operations.
ENVIRONMENTAL MATTERS
The Corporation is subject to federal, state and local environmental
protection laws and regulations with respect to its business operations and is
operating in compliance with, or taking action aimed at ensuring compliance
with, such laws and regulations. Compliance with these laws and regulations is
not expected to have a material adverse effect on the Corporation's business or
results of operations. The Corporation has been named as a potentially
responsible party at a number of waste disposal sites, none of which,
individually or in the aggregate, in management's opinion, is likely to have
a material adverse effect on the Corporation's business, financial condition
or results of operations.
NEW PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") 133, Accounting for
Derivative Instruments and Hedging Activities, was issued in 1998 and amended
in 2000 by SFAS 138, Accounting for Certain Derivative Instruments and Hedging
Activities. SFAS 133, which will be adopted January 1, 2001, will require that
all derivatives be recorded on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Corporation has completed an inventory of its
derivative instruments and has determined which of these derivatives qualify for
hedge accounting. Based on its derivative positions at December 31, 2000, the
Corporation will, upon adoption, recognize the cumulative effect of an
accounting change as a pretax loss of approximately $.5 million in other
(income) expense, net and an after-tax gain of $1.5 million in other
comprehensive income.
During 2000, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board issued EITF 00-14, Accounting for Certain Sales
Incentives. Under EITF 00-14, the face value of consumer coupons must be
recorded at the time they are issued based upon estimated redemptions and
classified along with similar discounts as a reduction in sales revenue. The
effective date of EITF 00-14 is the second quarter of 2001. The Corporation
has historically followed the practice of recording the face value of coupons
based upon estimated redemptions as promotion expense in the period that the
related sales revenue is recognized. The Corporation will adopt EITF 00-14 in
the second quarter of 2001 and will reclassify the face value of coupons and
similar discounts ("Discounts") as a reduction in revenue for all periods
presented. Discounts recorded as promotion expense were approximately $186
million, $204 million and $158 million in 2000, 1999 and 1998, respectively.
Upon adoption of EITF 00-14, the Corporation will report a cumulative effect
of a change in accounting principle resulting from a change in the period for
recognizing the face value of coupons. The net income effect of this change
is currently estimated to be an after-tax charge equal to $.02 per share.
OUTLOOK
The Corporation expects 2001 to be a year of continued growth that will
provide it opportunity to build on its global franchises. The Corporation
intends to invest more than $50 million in comprehensive marketing programs
and start-up costs to support the introduction of its new Cottonelle Fresh
rollwipes, making it one of the most significant new product launches in the
Corporation's history. The Corporation will also incur start-up costs for
its new tissue machines in Oklahoma and Tennessee. Additionally, the
Corporation expects to expand its diaper business in Europe with the
acquisition of Linostar. The Corporation's objectives remain unchanged. The
Corporation is continuing to target sales increases of 6 to 8 percent and
double-digit increases in earnings per share from operations annually.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report concerning, among other things,
the business outlook, including new product introductions, cost savings and
acquisitions, anticipated financial and operating results, strategies,
contingencies and contemplated transactions of the Corporation constitute
forward-looking statements and are based upon management's expectations and
beliefs concerning future events impacting the Corporation. There can be no
assurance that these events will occur or that the Corporation's results will
be as estimated.
The assumptions used as a basis for the forward-looking statements include
many estimates that, among other things, depend on the achievement of future
cost savings and projected volume increases. Furthermore, the Corporation has
assumed that it will continue to identify suitable acquisition candidates in
those product markets where it intends to grow by acquisition. In addition,
many factors outside the control of the Corporation, including the prices of the
Corporation's raw materials, potential competitive pressures on selling prices
or advertising and promotion expenses for the Corporation's products, and
fluctuations in foreign currency exchange rates, as well as general economic
conditions in the markets in which the Corporation does business, also could
impact the realization of such estimates.
For a description of these and other factors that could cause the
Corporation's future results to differ materially from those expressed in any
such forward-looking statements, see the section of Part I, Item I of the
Corporation's Annual Report on Form 10-K entitled "Factors That May Affect
Future Results."
CONSOLIDATED INCOME STATEMENT
Kimberly-Clark Corporation and Subsidiaries
Year Ended December 31
---------------------------------
(Millions of dollars, except per share amounts) 2000 1999 1998
- --------------------------------------------------------------------------------------------
NET SALES. . . . . . . . . . . . . . . . . . . . . . . . $13,982.0 $13,006.8 $12,297.8
Cost of products sold. . . . . . . . . . . . . . . . . 8,228.5 7,681.6 7,700.2
---------- ---------- ----------
GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . 5,753.5 5,325.2 4,597.6
Advertising, promotion and selling expenses. . . . . . 2,122.7 2,097.8 1,937.4
Research expense . . . . . . . . . . . . . . . . . . . 277.4 249.8 224.8
General expense. . . . . . . . . . . . . . . . . . . . 742.1 707.4 717.0
Goodwill amortization. . . . . . . . . . . . . . . . . 81.7 41.8 33.3
Restructuring and other unusual charges. . . . . . . . - (27.0) 111.8
Other (income) expense, net. . . . . . . . . . . . . . (104.2) (180.0) (124.4)
---------- ---------- ----------
OPERATING PROFIT. . . . . . . . . . . . . . . . . . . . . 2,633.8 2,435.4 1,697.7
Interest income . . . . . . . . . . . . . . . . . . . . 24.0 29.4 24.3
Interest expense. . . . . . . . . . . . . . . . . . . . (221.8) (213.1) (198.7)
---------- ---------- ----------
INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . . . . 2,436.0 2,251.7 1,523.3
Provision for income taxes. . . . . . . . . . . . . . . 758.5 730.2 522.2
---------- ---------- ----------
INCOME BEFORE EQUITY INTERESTS. . . . . . . . . . . . . . 1,677.5 1,521.5 1,001.1
Share of net income of equity companies . . . . . . . . 186.4 189.6 137.1
Minority owners' share of subsidiaries' net income. . . (63.3) (43.0) (23.9)
---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE. . . 1,800.6 1,668.1 1,114.3
Cumulative effect of accounting change,
net of income taxes. . . . . . . . . . . . . . . . . - - (11.2)
---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . $ 1,800.6 $ 1,668.1 $ 1,103.1
========== ========== ==========
PER SHARE BASIS
BASIC
Income before cumulative effect of accounting change $ 3.34 $ 3.11 $ 2.02
========== ========== ==========
Net income . . . . . . . . . . . . . . . . . . . . . $ 3.34 $ 3.11 $ 2.00
========== ========== ==========
DILUTED
Income before cumulative effect of accounting change $ 3.31 $ 3.09 $ 2.01
========== ========== ==========
Net income . . . . . . . . . . . . . . . . . . . . . $ 3.31 $ 3.09 $ 1.99
========== ========== ==========
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEET
Kimberly-Clark Corporation and Subsidiaries
December 31
------------------------
(Millions of dollars) ASSETS 2000 1999
- ---------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . $ 206.5 $ 322.8
Accounts receivable . . . . . . . . . . . . . . 1,809.6 1,600.6
Inventories . . . . . . . . . . . . . . . . . . 1,390.4 1,239.9
Deferred income taxes . . . . . . . . . . . . . 287.1 311.4
Prepaid expenses and other. . . . . . . . . . . 96.3 81.5
--------- ---------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . 3,789.9 3,556.2
PROPERTY
Land. . . . . . . . . . . . . . . . . . . . . . 239.2 190.7
Buildings . . . . . . . . . . . . . . . . . . . 1,854.4 1,739.2
Machinery and equipment . . . . . . . . . . . . 9,135.1 8,811.7
Construction in progress. . . . . . . . . . . . 786.1 408.8
--------- ---------
12,014.8 11,150.4
Less accumulated depreciation . . . . . . . . . 5,096.3 4,858.8
--------- ---------
NET PROPERTY. . . . . . . . . . . . . . . . . 6,918.5 6,291.6
INVESTMENTS IN EQUITY COMPANIES . . . . . . . . . 798.8 863.1
GOODWILL, NET OF ACCUMULATED AMORTIZATION . . . . 2,009.9 1,246.1
OTHER ASSETS. . . . . . . . . . . . . . . . . . . 962.7 858.5
--------- ---------
$14,479.8 $12,815.5
========= =========
See Notes to Consolidated Financial Statements.
December 31
---------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
- --------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Debt payable within one year. . . . . . . . . . . . . . . . . . . . . . . $ 1,490.5 $ 782.4
Trade accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 872.8 780.4
Other payables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303.1 245.3
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,239.8 1,312.1
Accrued income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 523.5 584.6
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144.2 141.0
---------- ----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 4,573.9 3,845.8
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000.6 1,926.6
NONCURRENT EMPLOYEE BENEFIT AND OTHER OBLIGATIONS . . . . . . . . . . . . . 869.2 868.5
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 987.5 836.9
MINORITY OWNERS' INTERESTS IN SUBSIDIARIES. . . . . . . . . . . . . . . . . 281.3 244.6
STOCKHOLDERS' EQUITY
Preferred stock - no par value - authorized 20.0 million shares,
none issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Common stock - $1.25 par value - authorized 1.2 billion shares;
issued 568.6 million shares at December 31, 2000 and 1999 . . . . . . . 710.8 710.8
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . 412.3 166.4
Common stock held in treasury, at cost - 35.2 million and 28.0 million
shares at December 31, 2000 and 1999, respectively. . . . . . . . . . . (1,974.1) (1,420.4)
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . (1,337.6) (1,114.8)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,982.0 6,764.6
Unearned compensation on restricted stock . . . . . . . . . . . . . . . . (26.1) (13.5)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . . . . . . . . . . . . . . . 5,767.3 5,093.1
---------- ----------
$14,479.8 $12,815.5
========== ==========
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Kimberly-Clark Corporation and Subsidiaries
Common Stock Accumulated Unearned Total
Issued Additional Treasury Stock Other Compensation Stock- Compre-
(Millions of dollars, ------------------- Paid-In --------------- Comprehensive Retained on Restricted holders' hensive
except share amounts) Shares Amount Capital Shares Amount Income(Loss) Earnings Stock Equity Income
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at
December 31, 1997 . . . . . .568,596,810 $710.8 $113.3 12,250,368 $(617.1) $(966.6) $5,099.9 $ - $4,340.3
Shares issued for the
exercise of stock options
and awards. . . . . . . . . . - - (43.8) (1,643,718) 82.1 - - - 38.3
Stock option income tax
benefits. . . . . . . . . . . - - 16.8 - - - - - 16.8
Shares purchased for
treasury. . . . . . . . . - - - 19,732,752 (919.7) - - - (919.7)
Comprehensive income:
Net income. . . . . . . . . . - - - - - - 1,103.1 - 1,103.1 $1,103.1
Other comprehensive
income (loss):
Unrealized translation
adjustments . . . . . . - - - - - 3.1 - - 3.1 3.1
Minimum pension liability
adjustment. . . . . . . - - - - - (.8) - - (.8) (.8)
--------
Comprehensive income. . . . . . - - - - - - - - - $1,105.4
========
Dividends declared on
common shares . . . . . . . . - - - - - - (549.6) - (549.6)
--------- ------ ------- ----------- --------- -------- -------- ------ -------- --------
Balance at
December 31, 1998 . . . . . .568,596,810 710.8 86.3 30,339,402 (1,454.7) (964.3) 5,653.4 - 4,031.5
Shares issued for the
exercise of stock options
and awards. . . . . . . . . . - - (48.2) (2,189,629) 108.9 - - - 60.7
Stock option income tax
benefits. . . . . . . . . . . - - 28.5 - - - - - 28.5
Shares purchased for
treasury. . . . . . . . . . . - - - 13,940,653 (779.0) - - - (779.0)
Shares issued for the
acquisition of Ballard
Medical Products. . . . . . . - - 100.6 (13,758,610) 686.2 - - - 786.8
Stock issued, net of
forfeitures, under restricted
stock plans, less
amortization. . . . . . . . . - - (.8) (362,000) 18.2 - - (13.5) 3.9
Comprehensive income:
Net income. . . . . . . . . . - - - - - - 1,668.1 - 1,668.1 $1,668.1
Other comprehensive
income (loss):
Unrealized translation
adjustments . . . . . . - - - - - (154.6) - - (154.6) (154.6)
Minimum pension liability
adjustment. . . . . . . - - - - - 4.1 - - 4.1 4.1
--------
Comprehensive income. . . . . . - - - - - - - - - $1,517.6
========
Dividends declared on
common shares . . . . . . . . - - - - - - (556.9) - (556.9)
----------- ------ ------- ----------- --------- -------- -------- ------ -------- --------
Balance at
December 31, 1999 . . . . . .568,596,810 710.8 166.4 27,969,816 (1,420.4)(1,114.8) 6,764.6 (13.5) 5,093.1
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Kimberly-Clark Corporation and Subsidiaries
Common Stock Accumulated Unearned Total
Issued Additional Treasury Stock Other Compensation Stock- Compre-
(Millions of dollars, ------------------- Paid-In --------------- Comprehensive Retained on Restricted holders' hensive
except share amounts) Shares Amount Capital Shares Amount Income(Loss) Earnings Stock Equity Income
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at
December 31, 1999 . . . . . .568,596,810 710.8 166.4 27,969,816 (1,420.4) (1,114.8) 6,764.6 (13.5) 5,093.1
Shares issued for the
exercise of stock options
and awards. . . . . . . . . . - - (63.7) (2,900,773) 154.0 - - - 90.3
Stock option income tax
benefits. . . . . . . . . . . - - 25.2 - - - - - 25.2
Shares purchased for
treasury. . . . . . . . . . . - - - 21,216,618 (1,190.7) - - - (1,190.7)
Shares issued for the
acquisition of Safeskin
Corporation . . . . . . . . . - - 282.4 (10,695,002) 464.0 - - - 746.4
Stock issued, net of
forfeitures, under restricted
stock plans, less
amortization. . . . . . . . . - - 2.0 (357,400) 19.0 - - (12.6) 8.4
Comprehensive income:
Net income. . . . . . . . . . - - - - - - 1,800.6 - 1,800.6 $1,800.6
Other comprehensive
income (loss):
Unrealized translation
adjustments . . . . . . - - - - - (218.8) - - (218.8) (218.8)
Minimum pension liability
adjustment. . . . . . . - - - - - (4.0) - - (4.0) (4.0)
--------
Comprehensive income. . . . . . - - - - - - - - - $1,577.8
========
Dividends declared on
common shares . . . . . . . . - - - - - - (583.2) - (583.2)
----------- ------ ------- ----------- --------- --------- -------- ------ ----------
Balance at
December 31, 2000 . . . . . .568,596,810 $710.8 $412.3 35,233,259 $(1,974.1) $(1,337.6) $7,982.0 $(26.1) $5,767.3
=========== ====== ====== ========== ========= ========= ======== ====== ========
See Notes to Consolidated Financial Statements.
CONSOLIDATED CASH FLOW STATEMENT
Kimberly-Clark Corporation and Subsidiaries
Year Ended December 31
---------------------------------
(Millions of dollars) 2000 1999 1998
- ------------------------------------------------------------------------------------------------
OPERATIONS
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,800.6 $ 1,668.1 $ 1,103.1
Business improvement programs 7.2 (13.8) 292.5
Cumulative effect of accounting change, net of income taxes. - - 11.2
Mobile pulp mill fees and related severance. . . . . . . . . - 9.0 42.3
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 591.7 586.2 594.5
Goodwill amortization. . . . . . . . . . . . . . . . . . . . 81.7 41.8 33.3
Deferred income tax provision. . . . . . . . . . . . . . . . 84.1 126.2 13.6
Net losses (gains) on asset sales. . . . . . . . . . . . . . 19.3 (143.9) (125.9)
Equity companies' earnings in excess of dividends paid . . . (67.0) (78.7) (15.1)
Minority owners' share of subsidiaries' net income . . . . . 63.3 43.0 23.9
(Increase) decrease in operating working capital . . . . . . (338.3) (61.5) 63.6
Postretirement benefits. . . . . . . . . . . . . . . . . . . (121.9) (43.1) (57.5)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5 6.6 14.2
---------- ---------- ----------
CASH PROVIDED BY OPERATIONS . . . . . . . . . . . . . . 2,133.2 2,139.9 1,993.7
---------- ---------- ----------
INVESTING
Capital spending. . . . . . . . . . . . . . . . . . . . . . (1,170.3) (786.4) (669.5)
Acquisitions of businesses, net of cash acquired. . . . . . (294.5) (271.9) (342.5)
Proceeds from dispositions of property and businesses . . . 44.5 115.2 324.9
Proceeds from investments . . . . . . . . . . . . . . . . . 53.1 - -
Proceeds from notes receivable. . . . . . . . . . . . . . . 220.0 383.0 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . (37.7) (22.3) (16.7)
---------- ---------- ----------
CASH USED FOR INVESTING . . . . . . . . . . . . . . . . (1,184.9) (582.4) (703.8)
---------- ---------- ----------
FINANCING
Cash dividends paid . . . . . . . . . . . . . . . . . . . . (580.1) (551.3) (545.5)
Net increase (decrease) in short-term debt. . . . . . . . . 700.7 (163.8) (2.6)
Increases in long-term debt . . . . . . . . . . . . . . . . 359.4 117.7 541.3
Decreases in long-term debt . . . . . . . . . . . . . . . . (446.7) (75.9) (319.1)
Proceeds from exercise of stock options . . . . . . . . . . 90.3 60.8 38.3
Acquisitions of common stock for the treasury . . . . . . . (1,190.7) (779.0) (919.7)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 12.8 (29.4)
---------- ---------- ----------
CASH USED FOR FINANCING . . . . . . . . . . . . . . . . (1,064.6) (1,378.7) (1,236.7)
---------- ---------- ----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . $ (116.3) $ 178.8 $ 53.2
========== ========== ==========
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Kimberly-Clark Corporation and Subsidiaries
NOTE 1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of
Kimberly-Clark Corporation and all subsidiaries that are more than 50 percent
owned and controlled (the "Corporation"). Investments in nonconsolidated
companies that are at least 20 percent owned are stated at cost plus equity in
undistributed net income. These latter companies are referred to as equity
companies. All significant intercompany transactions and accounts are
eliminated in consolidation. Certain reclassifications have been made to
conform prior year data to the current year presentation.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingencies at the date of the financial
statements and the reported amounts of net sales and expenses during the
reporting period. Differences from those estimates are recorded in the
appropriate period.
INVENTORIES AND DISTRIBUTION COSTS
Most U.S. inventories are valued at cost on the Last-In, First-Out (LIFO)
method for U.S. income tax and financial reporting purposes. The balance of
the U.S. inventories and inventories of consolidated operations outside the
U.S. are generally valued at the lower of cost, using either the First-In,
First-Out (FIFO) or weighted average cost methods, or market. Distribution
costs are classified as cost of products sold.
PROPERTY AND DEPRECIATION
Property, plant and equipment are stated at cost and are depreciated over
their estimated useful lives on the straight-line or units-of-production
method for financial reporting purposes and generally on an accelerated method
for income tax purposes. Capitalized costs of purchased and internally
developed software are amortized on the straight-line method over not more
than five years. Estimated useful lives are periodically reviewed and, when
warranted, changes are made that result in an acceleration of depreciation.
These long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that their cost may not be recoverable. An
impairment loss would be recognized when estimated future cash flows from the
use of the asset and its eventual disposition are less than its carrying
amount. When property is sold or retired, the cost of the property and the
related accumulated depreciation are removed from the balance sheet and any
gain or loss on the transaction is included in income.
The cost of major maintenance performed on the Corporation's
manufacturing facilities, composed of labor, materials and other incremental
costs, is charged to operations as incurred.
Costs of bringing significant new or expanded facilities into operation
are expensed as incurred. Prior to 1998, the Corporation's practice had
been to record such costs as deferred charges and to amortize them over
periods of not more than five years. The Corporation adopted Statement of
Position 98-5, Reporting on the Costs of Start-Up Activities, effective
January 1, 1998, and recorded a pretax charge of $17.8 million, $11.2 million
after taxes, or $.02 per share, as the cumulative effect of this accounting
change.
NOTE 1. (Continued)
GOODWILL
Goodwill is amortized on the straight-line method over periods ranging
from 10 years to 40 years. Accumulated amortization of goodwill at December
31, 2000 and 1999 was $242.3 million and $185.8 million, respectively. The
realizability and period of benefit of goodwill are evaluated periodically
when events or circumstances indicate that nonrecoverability of goodwill is
possible. If it becomes probable that the future undiscounted cash flow
associated with such goodwill is less than its carrying value, an
impairment loss would be recognized. These recoverability evaluations
are subjective and require management assessments and judgments. Historically,
acquired businesses generally have generated sufficient cash flows to
recover the cost of goodwill and other intangible assets.
REVENUE RECOGNITION
Sales revenue is recognized at the time of product shipment to
unaffiliated customers and appropriate provision is made for uncollectible
accounts.
ADVERTISING EXPENSE
Advertising expenses are charged to income during the period incurred,
except for expenses related to the development of a major commercial or media
campaign, which are charged to income during the period in which the
advertisement or campaign is first presented by the media. Advertising
expenses charged to income totaled $349.3 million in 2000, $336.5 million in
1999 and $295.3 million in 1998.
ENVIRONMENTAL EXPENDITURES
Environmental expenditures related to current operations that qualify as
property, plant and equipment or which substantially increase the economic
value or extend the useful life of an asset are capitalized, and all other
expenditures are expensed as incurred. Environmental expenditures that relate
to an existing condition caused by past operations are expensed as incurred.
Liabilities are recorded when environmental assessments and/or remedial
efforts are probable and the costs can be reasonably estimated. Generally,
the timing of these accruals coincides with completion of a feasibility study
or a commitment to a formal plan of action.
STOCK-BASED COMPENSATION
Compensation cost for stock options and awards is measured based on
intrinsic value under Accounting Principles Board Opinion ("APB") 25,
Accounting for Stock Issued to Employees.
NEW PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") 133, Accounting for
Derivative Instruments and Hedging Activities, was issued in 1998 and amended
in 2000 by SFAS 138, Accounting for Certain Derivative Instruments and Hedging
Activities. SFAS 133, which will be adopted January 1, 2001, will require
that all derivatives be recorded on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings
or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in
fair value will be immediately recognized in earnings. The Corporation has
completed an inventory of its derivative instruments and has determined which
of these derivatives qualify for hedge accounting. Based on its derivative
positions at December 31, 2000, the Corporation will, upon adoption, recognize
the cumulative effect of an accounting change as a pretax loss of
NOTE 1. (Continued)
approximately $.5 million in other (income) expense, net and an after-tax gain
of $1.5 million in other comprehensive income.
During 2000, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board issued EITF 00-14, Accounting for Certain Sales
Incentives. Under EITF 00-14, the face value of consumer coupons must be
recorded at the time they are issued based upon estimated redemptions and
classified along with similar discounts as a reduction in sales revenue. The
effective date of EITF 00-14 is the second quarter of 2001. The Corporation
has historically followed the practice of recording the face value of coupons
based upon estimated redemptions as promotion expense in the period that the
related sales revenue is recognized. The Corporation will adopt EITF 00-14 in
the second quarter of 2001 and will reclassify the face value of coupons and
similar discounts ("Discounts") as a reduction in revenue for all periods
presented. Discounts recorded as promotion expense were approximately $186
million, $204 million and $158 million in 2000, 1999 and 1998, respectively.
Upon adoption of EITF 00-14, the Corporation will report a cumulative
effect of a change in accounting principle resulting from a change in the
period for recognizing the face value of coupons. The net income effect
of this change is currently estimated to be an after-tax charge equal
to $.02 per share.
NOTE 2. BUSINESS IMPROVEMENT AND OTHER PROGRAMS
The Corporation announced business improvement programs in 1998 and 1997
to address its ongoing competitiveness and improve its operating efficiency
and cost structure. A summary of these programs together with cost and other
information is presented below.
1998 PLAN
In the fourth quarter of 1998, the Corporation announced a facilities
consolidation plan (the "1998 Plan") to, among other things, further align
tissue manufacturing capacity with demand in Europe, close a diaper
manufacturing facility in Canada, shut down and dispose of a tissue machine in
Thailand, write down certain excess feminine care production equipment in
North America and reduce the Corporation's workforce by approximately 830
employees. Costs for the 1998 Plan of $18.2 million, $42.6 million and $49.1
million were recorded in 2000, 1999 and 1998, respectively. The year 2000
costs are composed primarily of certain severance costs and charges for
accelerated depreciation for the Corporation's Larkfield, U.K. tissue
manufacturing facility that remained in use until it was shut down in October
2000. Through December 31, 2000, the Corporation had notified and
subsequently terminated 814 employees. The costs of this workforce reduction
were charged to earnings in the period in which such employee severance
benefits were appropriately communicated.
1997 PLAN
On November 21, 1997, the Corporation announced a restructuring plan (the
"1997 Plan"). The plan, among other things, resulted in the sale, closure or
downsizing of 16 manufacturing facilities worldwide and a workforce reduction
of approximately 3,740 employees. In 1998, the Corporation determined that
its Villanovetta, Italy tissue manufacturing facility was an impaired asset
because its cash flows from use and disposal were insufficient to cover the
carrying amount of the asset. In 1998, other less significant modifications
were made to the 1997 Plan, the largest of which was a charge for losses on
European feminine care equipment removed from service. Costs for the 1997
Plan of $250.8 million were recorded in 1998 at the time costs became
accruable under appropriate accounting principles. Included in such costs was
an asset impairment charge for the Villanovetta facility of $26.8 million,
losses on the European feminine care equipment of $12.1 million and
accelerated depreciation related to assets that were to be disposed of but
which continued to be operated during 1998. In 1999, the Corporation recorded
a net credit of $16.7 million, which was composed of accelerated depreciation
expense of $23.7 million, reductions in accrued costs of $31.9 million and
lower asset write-offs and higher sales proceeds totaling $8.5 million, due to
changes in estimates.
Charges (credits) under these two plans for the three years ended
December 31, 2000 are summarized below:
Amounts Charged to Earnings
---------------------------
(Millions of dollars) 2000 1999 1998
- ---------------------------------------------------------------------------------------
Workforce severance . . . . . . . . . . . . . . . . . . . . . $ 5.5 $ 11.2 $ 64.3
Write-downs of property, plant and equipment and other assets - (11.5) 91.4
Contract settlements, lease terminations and other costs. . . - (27.1) 31.3
Asset impairments . . . . . . . . . . . . . . . . . . . . . . - - 31.3
Accelerated depreciation. . . . . . . . . . . . . . . . . . . 12.7 53.3 81.6
----- ------- ------
Total pretax charge . . . . . . . . . . . . . . . . . . . $18.2 $ 25.9 $299.9
===== ======= ======
Income statement classification:
Cost of products sold . . . . . . . . . . . . . . . . . . . $18.2 $ 52.9 $183.1
Restructuring and other unusual charges . . . . . . . . . . - (27.0) 116.8
----- ------- ------
Total pretax charge . . . . . . . . . . . . . . . . . . . $18.2 $ 25.9 $299.9
===== ======= ======
NOTE 2. (Continued)
The effects of these two plans were included in operating profit by
business segment and geography as follows:
Year Ended December 31
---------------------------
(Millions of dollars) 2000 1999 1998
- --------------------------------------------------------------------------------------
By Business Segment . . . . . . . . . . . . . . . . . . . . .
Tissue. . . . . . . . . . . . . . . . . . . . . . . . . . . $17.1 $19.9 $164.2
Personal Care . . . . . . . . . . . . . . . . . . . . . . . 1.1 13.4 121.8
Health Care . . . . . . . . . . . . . . . . . . . . . . . . - (1.3) 13.2
Unallocated . . . . . . . . . . . . . . . . . . . . . . . . - (6.1) .7
----- ----- ------
Total pretax charge . . . . . . . . . . . . . . . . . . . $18.2 $25.9 $299.9
===== ===== ======
By Geography
North America . . . . . . . . . . . . . . . . . . . . . . . $ 1.0 $ 6.4 $194.9
Outside North America . . . . . . . . . . . . . . . . . . . 17.2 25.6 104.3
Unallocated . . . . . . . . . . . . . . . . . . . . . . . . - (6.1) .7
----- ----- ------
Total pretax charge . . . . . . . . . . . . . . . . . . . $18.2 $25.9 $299.9
===== ===== ======
These two plans decreased operating profit and net income as follows:
Year Ended December 31
---------------------------
(Millions of dollars) 2000 1999 1998
- --------------------------------------------------------------------------------------
Operating profit . . . . . . . . . . . . . . . . . . . . . . . $18.2 $25.9 $299.9
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . 12.8 21.1 213.0
Set forth below is a summary of the types and amounts recognized as
accrued expenses for these two plans together with cash payments made against
such accruals for the two years ended December 31, 2000.
2000
-------------------
Balance Balance
(Millions of dollars) 12/31/99 Additions Payments 12/31/00
- --------------------------------------------------------------------------------------------------
Workforce severance . . . . . . . . . . . . . . . . $16.5 $5.5 $(18.7) $3.3
Environmental costs and lease contract terminations 8.0 - (3.0) 5.0
----- ---- ------- ----
$24.5 $5.5 $(21.7) $8.3
===== ==== ======= ====
1999
-------------------
Balance Additions Balance
(Millions of dollars) 12/31/98 (Reductions) Payments 12/31/99
- --------------------------------------------------------------------------------------------------
Workforce severance . . . . . . . . . . . . . . . . $ 53.3 $ 11.2 $(48.0) $16.5
Asset removal costs . . . . . . . . . . . . . . . . 15.2 (8.9) (6.3) -
Environmental costs and lease contract terminations 41.2 (9.1) (24.1) 8.0
Other costs . . . . . . . . . . . . . . . . . . . . 20.1 (12.1) (8.0) -
------ ------ ------ -----
$129.8 $(18.9) $(86.4) $24.5
====== ====== ====== =====
NOTE 2. (Continued)
These two plans are completed as of December 31, 2000. The accrued
expense balance of $8.3 million will be paid in accordance with the terms of
the applicable employee severance and other agreements.
OTHER INFORMATION
1999 Unusual Charges
In 1999, the Corporation incurred $13.6 million of unusual business
improvement costs that were not related to the business improvement plans
discussed above. The costs, which primarily were for employee severance and
write off of assets removed from service, were charged to cost of products
sold when incurred.
Write-down of Certain Intangible and Other Assets
In 1998, the carrying amounts of trademarks and unamortized goodwill of
certain European businesses were determined to be impaired and written down.
In addition, the Corporation began depreciating the cost of all newly acquired
personal computers ("PCs") over two years. In recognition of the change in
estimated useful lives, PC assets with a remaining net book value of $16.6
million became subject to accelerated depreciation charges. These charges,
along with $8.8 million of charges for write-downs of other assets and a loss
on a pulp contract, reduced 1998 operating profit $81.2 million and net income
$64.7 million. Of the $81.2 million, $6.8 million was charged to cost of
products sold and $74.4 million was charged to general expense. In 1999,
accelerated depreciation on PCs reduced operating profit $8.3 million, $2.7
million of which was charged to cost of products sold and $5.6 million was
charged to general expense. In 2000, accelerated depreciation on PCs reduced
operating profit $6.2 million, $2.0 million of which was charged to cost of
products sold and $4.2 million was charged to general expense. At September
30, 2000, these PCs were fully depreciated.
Approximately 91 percent of the 1998 write-down of certain intangible and
other assets and accelerated depreciation on PCs described above related to
the Personal Care segment and 9 percent related to the Tissue segment. In
2000 and 1999, 50 percent of $6.2 million and $8.3 million, respectively, of
accelerated depreciation was charged to each of the Personal Care and Tissue
segments.
NOTE 3. INCOME TAXES
An analysis of the provision for income taxes follows:
Year Ended December 31
------------------------
(Millions of dollars) 2000 1999 1998
- --------------------------------------------------------------------------------------
Current income taxes:
United States. . . . . . . . . . . . . . . . . . . . . . . $407.3 $386.9 $402.0
State. . . . . . . . . . . . . . . . . . . . . . . . . . . 36.5 69.8 26.8
Other countries. . . . . . . . . . . . . . . . . . . . . . 230.6 147.3 79.8
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . 674.4 604.0 508.6
------- ------- -------
Deferred income taxes:
United States. . . . . . . . . . . . . . . . . . . . . . . 91.3 139.2 39.8
State. . . . . . . . . . . . . . . . . . . . . . . . . . . 14.0 (18.7) 5.5
Other countries. . . . . . . . . . . . . . . . . . . . . . (21.2) 5.7 (38.3)
------- ------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . 84.1 126.2 7.0
------- ------- -------
Total provision for income taxes . . . . . . . . . . . . . . 758.5 730.2 515.6
Less income taxes related to cumulative effect of
accounting change. . . . . . . . . . . . . . . . . . . . . - - (6.6)
------- ------- -------
Total provision excluding income taxes related to cumulative
effect of accounting change. . . . . . . . . . . . . . . . $758.5 $730.2 $522.2
======= ======= =======
Income before income taxes is classified in the Consolidated Income
Statement as follows:
Year Ended December 31
---------------------------
(Millions of dollars) 2000 1999 1998
- ----------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Change:
United States. . . . . . . . . . . . . . . . . . . . . . . $1,787.5 $1,782.7 $1,455.6
Other countries. . . . . . . . . . . . . . . . . . . . . . 648.5 469.0 67.7
-------- ------- -------
$2,436.0 $2,251.7 $1,523.3
======== ======== ========
Cumulative Effect of Accounting Change:
United States. . . . . . . . . . . . . . . . . . . . . . . $ - $ - $ (17.2)
Other countries. . . . . . . . . . . . . . . . . . . . . . - - (.6)
-------- -------- ---------
$ - $ - $ (17.8)
======== ======== =========
NOTE 3. (Continued)
Deferred income tax assets are composed of the following:
December 31
-----------------
(Millions of dollars) 2000 1999
- --------------------------------------------------------------------------------------
Current deferred income tax asset attributable to:
Advertising and promotion accruals. . . . . . . . . . . . . . . . $ 20.8 $ 27.5
Pension, postretirement and other employee benefits . . . . . . . 130.4 121.9
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . 100.0 124.6
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.8 31.0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.7 6.7
Valuation allowances. . . . . . . . . . . . . . . . . . . . . . . (3.6) (.3)
-------- --------
Net current deferred income tax asset . . . . . . . . . . . . . . . $ 287.1 $ 311.4
======== ========
Noncurrent deferred income tax asset attributable to:
Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . $ (16.7) $ (42.4)
Income tax loss carryforwards . . . . . . . . . . . . . . . . . . 222.3 294.1
Foreign tax credits . . . . . . . . . . . . . . . . . . . . . . . 30.0 22.9
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.1 11.1
Valuation allowances. . . . . . . . . . . . . . . . . . . . . . . (155.2) (278.7)
-------- --------
Net noncurrent deferred income tax asset included in other assets $ 102.5 $ 7.0
======== ========
Noncurrent deferred income tax liability attributable to:
Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . $(928.5) $(888.8)
Income tax loss carryforwards . . . . . . . . . . . . . . . . . . 40.7 55.3
Pension and other postretirement benefits . . . . . . . . . . . . 157.9 227.0
Installment sales . . . . . . . . . . . . . . . . . . . . . . . . (275.7) (275.7)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.1 45.3
-------- --------
Net noncurrent deferred income tax liability. . . . . . . . . . . . $(987.5) $(836.9)
======== ========
Valuation allowances for deferred income tax assets decreased $120.2
million in 2000 and decreased $6.6 million in 1999. Valuation allowances at
the end of 2000 primarily relate to the potentially unusable portion of income
tax loss carryforwards of $766 million in jurisdictions primarily outside the
United States. If not utilized against taxable income, $190 million of the
loss carryforwards will expire from 2001 through 2010. The remaining $576
million has no expiration date.
Realization of deferred tax assets is dependent on generating sufficient
taxable income prior to expiration of the loss carryforwards. Although
realization is not assured, management believes it is more likely than not
that all of the deferred tax assets, net of applicable valuation allowances,
will be realized. The amount of the deferred tax assets considered realizable
could be reduced or increased if estimates of future taxable income
during the carryforward period are reduced or increased.
NOTE 3. (Continued)
Presented below is a reconciliation of the income tax provision computed
at the U.S. federal statutory tax rate to the provision for income taxes
excluding income taxes applicable to the cumulative effect of an accounting
change.
Year Ended December 31
-------------------------------------------------------------
2000 1999 1998
----------------- ---------------- ------------------
(Millions of dollars) AMOUNT PERCENT Amount Percent Amount Percent
- ---------------------------------------------------------------------------------------------------
Income before income taxes:
As reported. . . . . . . . . . . . $2,436.0 $2,251.7 $1,523.3
Charges (credits) for business
improvement programs and
other unusual items. . . . . . . (1.1) (97.3) 280.1
-------- -------- --------
Income before income taxes
excluding the above charges. $2,434.9 $2,154.4 $1,803.4
======== ======== ========
Tax at U.S. statutory rate(a). . . . $ 852.2 35.0% $ 754.0 35.0% $ 631.2 35.0%
State income taxes, net of federal
tax benefit. . . . . . . . . . . . 32.5 1.3 29.7 1.4 17.3 1.0
Operating losses for which no tax
benefit was recognized . . . . . . 15.8 .6 19.7 .9 34.6 1.9
Net operating losses realized. . . . (71.4) (2.9) (12.7) (.6) (10.2) (.5)
Other - net. . . . . . . . . . . . . (73.9) (3.0) (99.1) (4.6) (96.1) (5.4)
-------- ---- -------- ---- -------- -----
755.2 31.0% 691.6 32.1% 576.8 32.0%
==== ==== ====
Tax effects of business improvement
programs and other unusual items . 3.3 - 38.6 39.7% (54.6) (19.5)%
-------- ==== -------- ==== --------- =====
Provision for income taxes . . . . . $ 758.5 31.1% $ 730.2 32.4% $ 522.2 34.3%
======== ==== ======== ==== ======== ====
(a) Tax at U.S. statutory rate is based on income before income taxes excluding
the charges (credits) for business improvement programs and other unusual
items. The tax effects of such programs are shown elsewhere in the table.
At December 31, 2000, income taxes have not been provided on
approximately $2.4 billion of unremitted earnings of subsidiaries operating
outside the U.S. These earnings, which are considered to be invested
indefinitely, would become subject to income tax if they were remitted as
dividends, were lent to the Corporation or a U.S. affiliate, or if the
Corporation were to sell its stock in the subsidiaries. Determination of the
amount of unrecognized deferred U.S. income tax liability on these unremitted
earnings is not practicable because of the complexities associated with its
hypothetical calculation. Withholding taxes of approximately $210 million
would be payable upon remittance of all previously unremitted earnings at
December 31, 2000.
NOTE 4. POSTRETIREMENT AND OTHER BENEFITS
PENSION PLANS
The Corporation and its subsidiaries in North America and the United
Kingdom have defined benefit and/or defined contribution retirement plans
covering substantially all regular employees. Certain other subsidiaries have
defined benefit pension plans or, in certain countries, termination pay plans
covering substantially all regular employees. For the principal defined
benefit plans in North America and the United Kingdom, the funding policy is
to contribute assets that, at a minimum, fully fund the accumulated benefit
obligation, subject to regulatory and tax deductibility limits. The funding
policy for nonqualified U.S. plans providing pension benefits in excess of
limitations imposed by the U.S. income tax code and for the remaining defined
benefit plans outside North America is based on legal requirements, tax
considerations, investment opportunities, and customary business practices in
such countries.
OTHER POSTRETIREMENT BENEFIT PLANS
Substantially all retired employees of the Corporation and its North
American subsidiaries and certain international employees are covered by
health care and life insurance benefit plans. Certain benefits are based on
years of service and age at retirement. The plans are principally
noncontributory for employees who retired before 1993 and are contributory for
most employees who retire in 1993 or after. Certain U.S. plans limit
the Corporation's cost of future annual per capita retiree medical benefits
to no more than 200 percent of the 1992 annual per capita cost. Certain
other U.S. plans limit the Corporation's future cost for retiree medical
benefits to a defined annual per capita medical cost.
Summarized financial information about postretirement plans, excluding
defined contribution retirement plans, is presented below.
NOTE 4. (Continued)
Pension Benefits Other Benefits
------------------- -----------------
Year Ended December 31
---------------------------------------
(Millions of dollars) 2000 1999 2000 1999
--------------------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year. . . . . . $3,648.5 $3,867.5 $ 626.9 $ 658.6
Service cost . . . . . . . . . . . . . . . . . . . 63.4 73.3 10.9 12.5
Interest cost. . . . . . . . . . . . . . . . . . . 263.6 251.1 48.3 45.2
Participants' contributions. . . . . . . . . . . . 8.5 7.2 5.2 4.9
Amendments . . . . . . . . . . . . . . . . . . . . 4.5 11.6 - -
Actuarial loss (gain). . . . . . . . . . . . . . . 181.3 (292.9) 41.0 (28.4)
Acquisitions . . . . . . . . . . . . . . . . . . . 6.6 1.0 - -
Curtailments . . . . . . . . . . . . . . . . . . . - 11.9 - (4.1)
Special termination benefits . . . . . . . . . . . 1.1 1.9 - -
Currency exchange rate effects . . . . . . . . . . (68.9) (12.2) (.9) 1.5
Benefit payments . . . . . . . . . . . . . . . . . (261.5) (271.9) (69.5) (63.3)
-------- -------- ------- -------
Benefit obligation at end of year. . . . . . . . . 3,847.1 3,648.5 661.9 626.9
-------- -------- ------- -------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year . . 4,426.2 3,927.2 - -
Actual (loss) return on plan assets. . . . . . . . (47.5) 736.9 - -
Acquisitions . . . . . . . . . . . . . . . . . . . 2.7 - - -
Employer contributions . . . . . . . . . . . . . . 19.3 25.0 64.3 58.4
Participants' contributions. . . . . . . . . . . . 8.5 7.2 5.2 4.9
Currency exchange rate effects . . . . . . . . . . (67.7) (8.4) - -
Benefit payments . . . . . . . . . . . . . . . . . (255.0) (261.7) (69.5) (63.3)
-------- -------- ------- -------
Fair value of plan assets at end of year . . . . . 4,086.5 4,426.2 - -
-------- -------- ------- -------
FUNDED STATUS
Excess (deficiency) of plan assets over benefit
obligation. . . . . . . . . . . . . . . . . . 239.4 777.7 (661.9) (626.9)
Unrecognized net actuarial gain. . . . . . . . . . (37.0) (682.4) (46.2) (91.6)
Unrecognized transition amount . . . . . . . . . . (5.4) (10.9) - -
Unrecognized prior service cost. . . . . . . . . . 62.5 67.0 (13.4) (15.5)
-------- -------- ------- -------
Net amount recognized. . . . . . . . . . . . . . . $ 259.5 $ 151.4 $(721.5) $(734.0)
======== ======== ======= =======
AMOUNTS RECOGNIZED IN THE BALANCE SHEET CONSIST OF:
Prepaid benefit cost . . . . . . . . . . . . . . . $ 364.1 $ 248.2 $ - $ -
Accrued benefit cost . . . . . . . . . . . . . . . (131.9) (117.9) (721.5) (734.0)
Intangible asset . . . . . . . . . . . . . . . . . 4.6 4.9 - -
Accumulated other comprehensive income . . . . . . 22.7 16.2 - -
-------- -------- ------- -------
Net amount recognized. . . . . . . . . . . . . . . $ 259.5 $ 151.4 $(721.5) $(734.0)
======== ======== ======= =======
The above pension benefits information has been presented on an
aggregated basis whereby benefit obligation and plan asset information for
plans in which plan assets exceed accumulated benefit obligations ("ABO") have
been combined with plans where the ABO exceeds plan assets.
NOTE 4. (Continued)
Summary disaggregated information about these pension plans follows:
Assets Exceed ABO Exceeds
ABO Assets
--------------- --------------
December 31
----------------------------------
(Millions of dollars) 2000 1999 2000 1999
- ----------------------------------------------------------------------------
Projected benefit obligation . . . . . . $3,650.0 $3,483.1 $197.1 $165.4
ABO. . . . . . . . . . . . . . . . . . . 3,364.6 3,309.1 167.6 152.6
Fair value of plan assets. . . . . . . . 4,037.5 4,379.6 49.0 46.6
Pension Benefits Other Benefits
----------------- ---------------
December 31
------------------------------------
2000 1999 2000 1999
- ----------------------------------------------------------------------------
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate . . . . . . . . . . 7.2% 7.4% 7.5% 7.7%
Expected return on plan assets. . 9.3% 9.3% - -
Rate of compensation increase . . 4.1% 4.3% - -
Health care cost trend rate(a). . - - 6.9% 7.5%
(a) Assumed to decrease gradually to 6% in 2003 and remain at that level
for the large majority of plans and to zero by 2005 and thereafter for the
balance.
Pension Benefits Other Benefits
---------------------------- ---------------------
Year Ended December 31
---------------------------------------------------
(Millions of dollars) 2000 1999 1998 2000 1999 1998
- ------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC
BENEFIT COST
Service cost. . . . . . . . . . . . $ 63.4 $ 73.3 $ 69.2 $10.9 $12.5 $11.8
Interest cost . . . . . . . . . . . 263.6 251.1 247.1 48.3 45.2 44.2
Expected return on plan assets. . . (397.6) (352.8) (332.3) - - -
Amortization of prior service cost. 9.1 9.5 8.5 (2.1) (2.1) (2.1)
Amortization of transition amount . (4.4) (4.6) (5.3) - - -
Recognized net actuarial (gain)
loss. . . . . . . . . . . . . . . (20.2) 4.8 2.9 (4.3) (4.4) (4.9)
Curtailments. . . . . . . . . . . . - 18.0 .7 - (4.1) (.4)
Other . . . . . . . . . . . . . . . 1.0 6.1 5.1 - - -
------- ------- ------- ----- ----- -----
Net periodic benefit cost (credit). $ (85.1) $ 5.4 $ (4.1) $52.8 $47.1 $48.6
======= ======= ======= ===== ===== =====
Assumed health care cost trend rates affect the amounts reported for
postretirement health care benefit plans. A one-percentage-point change in
assumed health care trend rates would have the following effects:
One-Percentage-Point
--------------------
(Millions of dollars) Increase Decrease
- ---------------------------------------------------------------------------------
Effect on total of service and interest cost components . . . $ 3.2 $ 4.3
Effect on postretirement benefit obligation . . . . . . . . . 40.9 42.4
NOTE 4. (Continued)
DEFINED CONTRIBUTION RETIREMENT PLANS
The Corporation's contributions to the defined contribution retirement
plans are based on the age and compensation of covered employees. The
Corporation's contributions, all of which were charged to expense, were $29.8
million, $26.1 million and $23.8 million in 2000, 1999 and 1998, respectively.
INVESTMENT PLANS
Voluntary contribution investment plans are provided to substantially all
North American employees. Under the plans, the Corporation matches a portion
of employee contributions. Cos s charged to expense under the plans were
$22.6 million, $25.1 million and $26.1 million in 2000, 1999 and 1998,
respectively.
NOTE 5. EARNINGS PER SHARE
A reconciliation of the average number of common shares outstanding used
in the basic and diluted EPS computations follows:
Average Common Shares Outstanding
-----------------------------------
(Millions) 2000 1999 1998
- ----------------------------------------------------------------------------------------------------
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539.5 536.3 550.3
Dilutive effect of stock options. . . . . . . . . . . . . . . . . 3.9 3.1 2.3
Dilutive effect of deferred compensation plan shares. . . . . . . .1 .1 -
Dilutive effect of shares issued for participation share awards . .3 .6 .5
----- ----- -----
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543.8 540.1 553.1
===== ===== =====
Options outstanding that were not included in the computation of diluted
EPS because their exercise price was greater than the average market price of
the common shares are summarized below:
Description 2000 1999 1998
- ----------------------------------------------------------------------------------------------------
Average number of share equivalents (millions). . . . . . . . . . . .5 .1 8.9
Weighted-average option price . . . . . . . . . . . . . . . . . . . $157.27(a) $58.10 $52.74
Expiration date of options. . . . . . . . . . . . . . . . . . . . . 2001 TO 2010 2009 2004 to 2008
Options outstanding at year end . . . . . . . . . . . . . . . . . . .5 .1 9.1
(a) The weighted-average option price in 2000 represents converted options
from the Safeskin Corporation acquisition.
The number of common shares outstanding as of December 31, 2000, 1999 and
1998 was 533.4 million, 540.6 million and 538.3 million, respectively.
NOTE 6. DEBT
Long-term debt is composed of the following:
Weighted-
Average December 31
Interest ----------------
Rate Maturities 2000 1999
- ---------------------------------------------------------------------------------------------------
Notes and debentures. . . . . . . . . . . . . . . . . . . 7.3% 2001 to 2028 $1,652.8 $1,591.6
Industrial development revenue bonds. . . . . . . . . . . 4.7% 2002 to 2034 414.1 416.8
Bank loans and other financings in various currencies . . 9.7% 2001 to 2016 211.2 215.6
-------- --------
Total long-term debt. . . . . . . . . . . . . . . . . . . 2,278.1 2,224.0
Less current portion. . . . . . . . . . . . . . . . . . 277.5 297.4
-------- -------
Long-term portion . . . . . . . . . . . . . . . . . . . . $2,000.6 $1,926.6
======== ========
Fair value of long-term debt was $2,295.9 million and $2,212.0 million at
December 31, 2000 and 1999, respectively. Scheduled maturities of long-term
debt are $45.6 million in 2002, $33.5 million in 2003, $122.7 million in 2004
and $56.1 million in 2005.
At December 31, 2000, the Corporation had a $1.1 billion syndicated
revolving credit facility. This facility, unused at December 31, 2000,
permits borrowing at competitive interest rates and is available for general
corporate purposes, including backup for commercial paper borrowings. The
Corporation pays commitment fees on the unused portion but may cancel the
facility without penalty at any time prior to its expiration. Of this
facility, $550 million expires in October 2001 and the balance expires in
November 2005.
Debt payable within one year:
December 31
----------------
(Millions of dollars) 2000 1999
- -------------------------------------------------------------------------------------------------
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,046.3 $353.4
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . 277.5 297.4
Other short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166.7 131.6
-------- ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,490.5 $782.4
======== ======
At December 31, 2000 and 1999, the weighted-average interest rate for
commercial paper was 6.5 percent and 5.4 percent, respectively.
NOTE 7. RISK MANAGEMENT
As a multinational enterprise, the Corporation is exposed to changes in
foreign currency exchange rates, interest rates and commodity prices. A
variety of practices are employed to manage these market risks, including
operating and financing activities and, where deemed appropriate, the use of
derivative instruments. Derivative instruments are used only for risk
management purposes and not for speculation or trading. All derivative
instruments are either exchange traded or are entered into with major
financial institutions in order to reduce credit risk and risk of
nonperformance by third parties.
Foreign Currency Risk Management
Foreign currency risk is managed by the use of foreign currency
forward, swap and option contracts. The use of these contracts allows
management of transactional exposure to exchange rate fluctuations because the
gains or losses incurred on the derivative instruments will offset, in whole
or in part, losses or gains on the underlying foreign currency exposure.
Management of foreign currency transactional exposures was not changed during
2000, and management does not foresee or expect any significant change in such
exposures or in the strategies it employs to manage them in the near future.
Changes in foreign currency transaction rates decreased net income $2.2
million, $1.4 million and $32.8 million in 2000, 1999 and 1998, respectively.
Included in foreign currency losses were the Corporation's share of foreign
currency gains and losses at the Corporation's Mexican affiliate,
Kimberly-Clark de Mexico, S.A. de C.V. ("KCM"), attributable to changes in the
value of the Mexican peso, which is the Corporation's most significant
foreign currency risk. The Corporation's share of the peso currency losses
was not significant in 2000 and 1999, and was $.02 per share in 1998.
Beginning in 1999, the Mexican economy was no longer deemed to be
hyperinflationary and the peso, rather than the U.S. dollar, became the
functional currency for accounting purposes. Consequently, changes in the
value of the peso resulted in gains or losses on U.S. dollar obligations of
KCM. Prior to 1999, Mexico's economy was deemed to be hyperinflationary and
the functional currency of KCM was the U.S. dollar. Accordingly, changes in
the value of the peso did not result in foreign currency gains or losses
attributable to the U.S. dollar obligations of KCM. However, changes in the
value of the peso in 1998 resulted in gains or losses attributable to
peso-denominated monetary assets held by KCM.
Gains and losses on instruments that hedge firm commitments are deferred
and included in the basis of the underlying hedged items. Premiums paid for
options are amortized ratably over the life of the option. Contracts used to
hedge recorded foreign currency transactions generally mature within
one year and are marked-to-market with the resulting gains or losses included
in current income. These gains and losses offset foreign exchange gains and
losses on the underlying transactions. Notwithstanding the sizable notional
principal amounts involved, the Corporation's credit exposure under these
arrangements is limited to the fair value of the agreements with a positive
fair value at the reporting date. Additionally, credit risk with respect to
the counterparties is considered minimal in view of the financial strength of
the counterparties.
The following table presents the aggregate notional principal amounts,
carrying values and fair values of the Corporation's foreign currency forward
contracts outstanding at December 31, 2000 and 1999:
2000 1999
---------------------------------- ---------------------------------
NOTIONAL Notional
PRINCIPAL CARRYING FAIR Principal Carrying Fair
(Millions of dollars) AMOUNTS VALUES VALUES Amounts Values Values
- ------------------------------------------------------------------------------------------------------
Forward contracts
Assets. . . . . . . . . . . $333.5 $ 12.1 $ 7.3 $770.5 $18.0 $16.8
Liabilities . . . . . . . . 664.3 (20.2) (13.9) 375.9 (6.8) (4.4)
NOTE 7. (Continued)
Translation Risk
The income statements of foreign operations, other than those in
hyperinflationary economies, are translated into U.S. dollars at rates of
exchange in effect each month. The balance sheets of these operations are
translated at period-end exchange rates, and the differences from historical
exchange rates are reflected in stockholders' equity as unrealized translation
adjustments.
The income statements and balance sheets of operations in
hyperinflationary economies are translated into U.S. dollars using both
current and historical rates of exchange. For balance sheet accounts
translated at current exchange rates, such as cash and accounts receivable,
the differences from historical exchange rates are reflected in income.
Operations that are deemed to be hyperinflationary are as follows: Ecuador
(prior to 2000), Russia, Turkey and Venezuela.
Translation exposure generally is not hedged. The risk to any particular
entity's net assets is minimized to the extent that the entity is financed
with local currency borrowing. In addition, many of the Corporation's
non-U.S. operations buy the majority of their inputs and sell the majority of
their outputs in their local currency, thereby minimizing the effect of
currency rate changes on their local operating profit margins.
Interest Rate Risk Management
Interest rate risk is managed through the maintenance of a portfolio of
variable- and fixed-rate debt composed of short- and long-term instruments.
The objective is to maintain a cost-effective mix that management deems
appropriate. The strategy employed to manage exposure to interest rate
fluctuations did not change significantly during 2000 and management does not
foresee or expect any significant changes in its exposure to interest rate
fluctuations or in how such exposure is managed in the near future.
Commodity Price Risk Management
The Corporation is subject to commodity price risk, the most significant
of which relates to the price of pulp. Selling prices of tissue products are
influenced, in part, by the market price for pulp, which is determined by
industry supply and demand. On a worldwide basis, the Corporation supplies
approximately 40 percent of its virgin fiber needs from internal pulp
manufacturing operations. Management still intends to reduce its level of
pulp integration, when market conditions permit, to approximately 25 percent,
and such a reduction in pulp integration, if accomplished, could increase the
Corporation's commodity price risk. Specifically, increases in pulp prices
could adversely affect earnings if selling prices are not adjusted or if such
adjustments significantly trail the increases in pulp prices. Derivative
instruments have not been used to manage these risks.
NOTE 8. STOCK COMPENSATION PLANS
Kimberly-Clark Equity Participation Plans ("Plans") provide for awards of
participation shares and stock options to key employees of the Corporation and
its subsidiaries. Upon maturity, participation share awards are paid in cash
based on the increase in the book value as defined by the Plans of the
Corporation's common stock during the award period. Participants do not
receive dividends on the participation shares, but their accounts are credited
with dividend shares payable in cash at the maturity of the award. Neither
participation nor dividend shares are shares of common stock. In conjunction
with the restricted stock plan discussed later in this note, no additional
participation shares will be awarded after 1998.
Data concerning participation and dividend shares follow:
(Thousands of shares) 2000 1999 1998
- ------------------------------------------------------------------------------
Outstanding - Beginning of year . . . . . 10,229 10,049 9,381
Awarded . . . . . . . . . . . . . . . . . - - 2,145
Dividend shares credited - net. . . . . . 602 808 883
Matured . . . . . . . . . . . . . . . . . (4,015) (483) (1,925)
Forfeited . . . . . . . . . . . . . . . . (208) (145) (435)
------ ------ ------
Outstanding - End of year . . . . . . . . 6,608 10,229 10,049
====== ====== ======
Amounts expensed related to participation shares were $44.5 million,
$34.9 million and $23.1 million in 2000, 1999 and 1998, respectively.
The Corporation also has stock option plans under which executives and
key employees may be granted awards. Under these plans, all stock options are
granted at not less than market value at the date of grant, expire 10 years
after the date of grant and generally become exercisable over three years.
In October 1997, approximately 57,000 employees worldwide were granted
approximately 3.2 million stock options and .2 million stock appreciation
rights under the Corporation's Global Stock Option Plan. Employees were
granted options to purchase a fixed number of shares, ranging from 25 to 125
shares per employee, of common stock at a price equal to the fair market value
of the Corporation's stock at the date of grant. The grants generally became
exercisable after the third anniversary of the grant date and have a term of
seven years.
As part of the acquisitions of Safeskin Corporation ("Safeskin") in 2000
and Ballard Medical Products ("Ballard") in 1999, outstanding Safeskin and
Ballard stock options were converted into options to acquire approximately 1.4
million and .5 million shares, respectively, of the Corporation's common stock
at a weighted-average exercise price of $85.22 and $36.13, respectively.
NOTE 8. (Continued)
Data concerning stock option activity follows:
2000 1999 1998
----------------------- -------------------------- ---------------------
WEIGHTED- Weighted- Weighted-
AVERAGE Average Average
EXERCISE Exercise Exercise
(Options in thousands) OPTIONS PRICE Options Price Options Price
- ------------------------------------------------------------------------------------------------------------
Outstanding - Beginning of
year . . . . . . . . . . . 20,167 $44.08 17,132 $41.04 16,195 $36.73
Granted. . . . . . . . . . . 5,799 52.95 5,271 48.46 3,076 55.94
Exercised. . . . . . . . . . (2,876) 30.88 (2,154) 27.24 (1,608) 22.91
Canceled or expired. . . . . (554) 67.96 (545) 51.46 (531) 50.86
Converted Safeskin and
Ballard stock options. . . 1,405 85.22 463 36.13 - -
------ ------ ------
Outstanding - End of year. . 23,941(a) 49.67 20,167 44.08 17,132 41.04
====== ====== ======
Exercisable - End of year. . 11,330 46.95 9,588 36.59 8,429 30.10
====== ====== ======
(a) Data concerning stock options at December 31, 2000 follows (options in
thousands):
Options Outstanding
----------------------------------
Options Exercisable
Weighted- ------------------------
Average Remaining Weighted-
Exercise Contractual Average
Excercise Price Range Options Price Life (Years) Options Price
- -----------------------------------------------------------------------------------------
$12.36 - $28.34. . . . . 2,908 $ 25.16 3.1 2,908 $ 25.16
30.42 - 40.43. . . . . 2,106 39.88 4.8 2,106 39.88
40.85 - 52.13. . . . . 9,891 49.58 6.4 4,213 49.29
53.05 - 64.50. . . . . 8,583 54.01 8.3 1,705 55.98
82.44 - 255.63. . . . . 453 172.56 1.4 398 179.85
----- ------
23,941 11,330
====== ======
At December 31, 2000, the number of additional shares of common stock of
the Corporation available for awards under the 1992 Plan was 10.3 million
shares.
The Corporation has elected to follow APB 25 and related interpretations
in accounting for its stock options. Under APB 25, because the exercise price
of employee stock options that have been awarded was equal to the market price
of the underlying stock on the date of grant, no compensation expense was
required to be recognized. However, SFAS 123, Accounting for Stock-Based
Compensation, requires presentation of pro forma net income and earnings per
share as if the Corporation had accounted for its employee stock options under
a fair value method. For purposes of pro forma disclosure, the estimated fair
value of such stock options is amortized to expense over the vesting period.
Under the fair value method, the Corporation's net income and net income per
share would have been reduced as follows:
(Millions of dollars, except per share amounts) 2000 1999 1998
- ---------------------------------------------------------------------------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . $53.3 $41.2 $31.0
Basic and diluted net income per share. . . . . . . . . . .10 .08 .06
NOTE 8. (Continued)
The weighted-average fair value of the individual options granted during
2000, 1999 and 1998 is estimated as $16.24, $11.77 and $13.36, respectively,
on the date of grant. The fair values were determined using a Black-Scholes
option-pricing model with the following assumptions:
2000 1999 1998
- ------------------------------------------------------------
Dividend yield. . . . . . 2.04% 2.15% 1.79%
Volatility. . . . . . . . 26.20% 21.40% 17.60%
Risk-free interest rate . 6.50% 5.25% 5.59%
Expected life . . . . . . 5.8 YEARS 5.8 years 5.8 years
UNEARNED COMPENSATION ON RESTRICTED STOCK AWARDS
Effective January 1, 1999, the Corporation adopted a restricted stock
plan under which certain key employees may be granted, in the aggregate, up to
2.5 million shares or awards of restricted stock units of the Corporation's
common stock. These restricted stock awards vest and become unrestricted
shares in three to 10 years from the date of grant. Although plan
participants are entitled to cash dividends and may vote such awarded shares,
the sale or transfer of such shares is limited during the restricted period.
During 2000, .5 million shares were awarded at an average share price of
$58.18. During 1999, .4 million shares were awarded at an average share price
of $48.59. As of December 31, 2000, 1.6 million shares of the Corporation's
common stock remained available for awards.
The market value of the Corporation's common stock determines the
value of the restricted stock, and such value is recorded at the date of the
award as unearned compensation on restricted stock in a separate component of
stockholders' equity. This unearned compensation is amortized to compensation
expense over the periods of restriction. During 2000 and 1999, $10.8 million
and $5.0 million, respectively, was charged to compensation expense under the
plan. The tax effect of differences between compensation expense for
financial statement and income tax purposes is charged or credited to
additional paid-in capital.
NOTE 9. COMMITMENTS
LEASES
The future minimum obligations under leases having a noncancelable term
in excess of one year as of December 31, 2000, are as follows:
Operating
(Millions of dollars) Leases
- -------------------------------------------------------------
Year Ending December 31:
2001 . . . . . . . . . . . . . . . . . . . . . . . $ 72.2
2002 . . . . . . . . . . . . . . . . . . . . . . . 45.2
2003 . . . . . . . . . . . . . . . . . . . . . . . 31.4
2004 . . . . . . . . . . . . . . . . . . . . . . . 24.1
2005 . . . . . . . . . . . . . . . . . . . . . . . 17.6
Thereafter . . . . . . . . . . . . . . . . . . . . 47.3
------
Future minimum obligations . . . . . . . . . . . . . $237.8
======
Operating lease obligations have been reduced by approximately $8.7
million for rental income from noncancelable sublease agreements.
Consolidated rental expense under operating leases was $145.9 million,
$151.4 million and $156.9 million in 2000, 1999 and 1998, respectively.
RAW MATERIALS
The Corporation has entered into long-term contracts for the purchase of
raw materials, primarily pulp. The minimum purchase commitments extend to
2005. At current prices, the commitments are approximately $651 million, $668
million and $465 million in 2001, 2002 and 2003, respectively. The commitment
beyond the year 2003 is approximately $339 million in total.
Although the Corporation is primarily liable for rental payments on the
above-mentioned leases and, considering the purchase commitments for raw
materials described above, management believes the Corporation's exposure to
losses, if any, under these arrangements is not material.
NOTE 10. STOCKHOLDERS' EQUITY AND OTHER COMPREHENSIVE INCOME
STOCKHOLDERS' EQUITY
At December 31, 2000, unremitted net income of equity companies included
in consolidated retained earnings was $771 million.
On June 21, 1988, the board of directors of the Corporation declared a
distribution of one preferred share purchase right for each outstanding share
of the Corporation's common stock. On June 8, 1995, the board amended the
plan governing such rights. The rights are intended to protect the
stockholders against abusive takeover tactics.
A right will entitle its holder to purchase one two-hundredth of a share
of Series A Junior Participating Preferred Stock at an exercise price of $225,
but will not become exercisable until 10 days after a person or group acquires
or announces a tender offer that would result in the ownership of 20 percent
or more of the Corporation's outstanding common shares.
Under certain circumstances, a right will entitle its holder to acquire
either shares of the Corporation's stock or shares of an acquiring company's
common stock, in either event having a market value of twice the exercise
price of the right. At any time after the acquisition by a person or group of
20 percent or more, but fewer than 50 percent, of the Corporation's common
shares, the Corporation may exchange the rights, except for rights held by the
acquiring person or group, in whole or in part, at a rate of one right for one
share of the Corporation's common stock or for one two-hundredth of a share of
Series A Junior Participating Preferred Stock.
The rights may be redeemed at $.005 per right prior to the acquisition by
a person or group of 20 percent or more of the common stock. Unless
redeemed earlier, the rights expire on June 8, 2005.
OTHER COMPREHENSIVE INCOME (LOSS)
The changes in the components of other comprehensive income (loss) are as
follows:
Year Ended December 31
----------------------------------------------------------------------------------------
2000 1999 1998
------------------------- ---------------------------- -------------------------
PRETAX TAX EXP. NET Pretax Tax Exp. Net Pretax Tax Exp. Net
(Millions of dollars) AMOUNT (CREDIT) AMOUNT Amount (Credit) Amount Amount (Credit) Amount
- ---------------------------------------------------------------------------------------------------------------------
Unrealized translation
adjustments. . . . . . . $(218.8) $ - $(218.8) $(154.6) $ - $(154.6) $ 3.1 $ - $3.1
Minimum pension liability
adjustment . . . . . . . (6.5) (2.5) (4.0) 6.6 2.5 4.1 (1.4) (.6) (.8)
------- ----- ------- ------- ---- ------ ----- ---- ----
Other comprehensive
income (loss). . . . . . $(225.3) $(2.5) $(222.8) $(148.0) $2.5 $(150.5) $ 1.7 $(.6) $2.3
======= ===== ======= ======= ==== ======= ===== ==== ====
Accumulated balances of other comprehensive income (loss), net of
applicable income taxes:
December 31
-----------------------
(Millions of dollars) 2000 1999
- --------------------------------------------------------------------------------
Unrealized translation adjustments . . . . . . . . . . . $(1,323.5) $(1,104.7)
Minimum pension liability adjustment . . . . . . . . . . (14.1) (10.1)
--------- ---------
Accumulated other comprehensive income (loss). . . . . . $(1,337.6) $(1,114.8)
========= =========
NOTE 11. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES
ACQUISITIONS
On February 8, 2000, the Corporation completed the acquisition of
Safeskin through the exchange of approximately 10.7 million shares of the
Corporation's common stock for all the outstanding shares of Safeskin. The
value of the exchange of stock plus related acquisition costs was
approximately $750 million. On June 30, 2000, the Corporation completed the
acquisition of S-K Corporation ("S-K") in Taiwan. These acquisitions were
accounted for as purchases. Accordingly, the results of operations of these
two entities have been included in the Corporation's consolidated results of
operations from the date of their acquisition and their assets and liabilities
are included in the consolidated balance sheet as of December 31, 2000.
The Corporation engaged independent appraisers to assist in the
determination of the fair value of the acquired assets of Safeskin and S-K.
Although the appraisals are not yet complete, the Corporation believes that
the allocation of the purchase price will result in assigning values to
goodwill and other intangible assets in a range of $755 million to $780
million. These intangibles will be amortized on the straight-line method over
periods of up to 30 years.
The unaudited pro forma combined historical results of the Corporation,
as if Safeskin and S-K had been acquired at the beginning of fiscal 2000 and
1999, are estimated to be:
(Millions of dollars, except per share amounts) 2000 1999
- ------------------------------------------------------------------------------------
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . $14,066.7 $13,329.3
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . 1,799.3 1,636.2
Basic net income per share . . . . . . . . . . . . . . . . . . 3.33 3.05
Diluted net income per share . . . . . . . . . . . . . . . . . 3.30 3.03
The pro forma results include amortization of the intangibles discussed
above and interest expense on debt assumed to be issued to acquire the
treasury stock exchanged in the Safeskin purchase and to finance the purchase
of S-K. The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been completed as of the beginning
of each of the fiscal periods presented, nor are they necessarily indicative
of future consolidated results.
In June 1999, the Corporation acquired the European consumer and
away-from-home tissue businesses of Attisholz Holding AG for $365 million in
cash. In September 1999, the Corporation completed the acquisition of Ballard
through the exchange of approximately 13.8 million shares of the Corporation's
common stock for all the outstanding shares of Ballard. The value of the
exchange of stock plus related acquisition costs was approximately $788
million. These two acquisitions were both recorded as purchases and resulted
in the allocation of values to goodwill and other intangible assets of $704
million.
The costs of other acquisitions relating primarily to increased ownership
and expansion in Asia and Latin America in 2000, 1999 and 1998 were $175.5
million, $44.8 million and $343.5 million, respectively. The Corporation
recognized goodwill on acquisitions of consolidated subsidiaries of $130.0
million in 2000, $41.4 million in 1999 and $72.8 million in 1998. In
addition, goodwill of $150.4 million related to the acquisitions of equity
companies in 1998 was recorded in investments in equity companies.
NOTE 11. (Continued)
DISPOSITIONS
Southeast Timberlands
- ----------------------
In April 1998, the U.S. Environmental Protection Agency enacted new and
more stringent air emission and water discharge regulations, referred to as
the Cluster Rule, that impose additional pollution control requirements on the
Corporation's pulp production facilities. These rules would have required the
Corporation to spend more than $250 million to meet the Cluster Rule
requirements at its Mobile, Alabama pulp mill. Sappi Fine Paper (S.D. Warren
Company), a producer of printing and publishing papers, had purchased
approximately one-third of the pulp mill's output. On May 4, 1998, S.D.
Warren and the Corporation announced an agreement to terminate their pulp
supply contract effective September 1, 1999. As a result of the cancellation
of the pulp supply contract and the cost of implementing the Cluster Rule, on
May 5, 1998, the Corporation announced its intention to dispose of its entire
integrated pulp operation in Mobile, Alabama, including the related sale of
the associated woodlands operations (the "Southeast Timberlands") and the
closure of its pulp production facility. The pulp facility was shut down in
August 1999. Closure of the pulp mill resulted in the elimination of
approximately 450 jobs, and severance costs of $18.0 million for these
employees were charged to cost of products sold in the third quarter of 1998,
at the time the employees were notified of their termination benefits.
On September 30, 1999, the Corporation sold approximately 460,000 acres
of the Southeast Timberlands to Joshua Timberlands, LLC for notes receivable
with approximate face value of $400 million ("Joshua Notes"). The Joshua
Notes, which were recorded at their fair value of approximately $383 million,
bear interest initially at floating rates based on LIBOR less 15 basis points
and are backed by irrevocable standby letters of credit issued by a major
money-center bank, are due September 30, 2009 and are extendable in additional
five-year increments up to September 30, 2029, at the option of the note
holder. Additional acres of such timberland and related equipment were sold
to other buyers prior to September 30, 1999 for $66 million in cash. The
closure of the pulp mill combined with the sale of the related timberlands
resulted in a pretax gain of $153.3 million, which was recorded in other
(income) expense, net. The after-tax effect of the transaction was a gain of
$95.7 million, or $.18 per share.
In November 1999, the Joshua Notes were transferred for cash to a
noncontrolled special purpose entity ("SPE") in which the Corporation has a
minority voting interest. The transfer of the Joshua Notes, which was
accounted for as a sale, resulted in no gain or loss to the Corporation. The
SPE is accounted for as an equity investment.
In connection with the Mobile pulp mill closure, on May 5, 1998, the
Corporation gave notice to Mobile Energy Services Company, L.L.C. ("MESC") of
its intent to terminate a long-term energy services contract. The resulting
termination penalty of $24.3 million was charged to cost of products sold in
the second quarter of 1998. On January 14, 1999, MESC and related parties
(the "Debtors") filed for Chapter 11 bankruptcy protection and instituted an
action against the Corporation claiming unspecified damages in connection with
the pulp mill closure.
On December 31, 1999, a joint motion (the "Motion") was filed with the
U.S. Bankruptcy Court (the "Court") seeking approval of a settlement agreement
and compromise of claims and pending litigation against the Corporation
arising from the closure of the pulp mill and termination of the energy
services contract. Under the proposed settlement agreement, the Corporation
agreed to pay MESC at closing approximately $30 million, subject to certain
adjustments. The Court granted the Motion on January 24, 2000. Closing of
the settlement would be subject to, among other conditions, the Debtors filing
a plan
NOTE 11. (Continued)
of reorganization from bankruptcy and the ultimate approval of that
plan by the Court. The approximate $30 million payment, which will be
accrued when the conditions for settlement are met, is in addition to $24.3
million previously accrued by the Corporation. In addition, the proposed
settlement provides, among other things, an agreement by MESC to provide
energy to the Corporation's Mobile tissue mill at market rates.
In August 2000, the Debtors filed a plan of reorganization with the Court
that would implement the settlement agreement. During the fourth quarter of
2000, several crucial elements of the Debtors' plan became no longer viable.
As a result, the Debtors have sought and received from the Court and the
Corporation several extensions of deadlines contained in the settlement
agreement.
Because of uncertainty involving the Debtors' business plans, the
settlement agreement may not be finalized and approved by the Court.
Consequently, the Corporation has developed contingency plans to minimize or
avoid disruption to its Mobile operations in the event that MESC is unable or
unwilling to supply energy to the Mobile tissue mill. If the settlement
agreement is not finalized, the litigation and arbitration proceedings between
the Corporation and the Debtors could resume. The outcome of the MESC
litigation, arbitration and settlement is not expected to have a material
adverse effect on the Corporation's business, financial condition or results
of operations.
K-C Aviation Inc.
- -------------------
In August 1998, the Corporation completed the sale of its subsidiary, K-C
Aviation Inc., for $250 million in cash. The sale resulted in a pretax gain
of $140.0 million, which was included in other (income) expense, net. The
transaction resulted in an after-tax gain of $78.3 million, or $.14 per share.
NOTE 12. CONTINGENCIES AND LEGAL MATTERS
LITIGATION
On May 13, 1997, the State of Florida, acting through its attorney
general, filed a complaint in the Gainesville Division of the United States
District Court for the Northern District of Florida alleging that
manufacturers of tissue products for away-from-home use, including the
Corporation and Scott, agreed to fix prices by coordinating price increases
for such products. Following Florida's complaint, similar actions by the
States of Maryland, New York and West Virginia, as well as approximately 45
class action complaints, were filed in various federal and state courts around
the United States.
The actions by the States of Florida, Maryland, New York and West
Virginia, the private plaintiffs in Minnesota and the federal private class
action plaintiffs were dismissed with prejudice pursuant to settlements with
defendants. A settlement was reached in the California class action
litigation and was preliminarily approved by the judge in December 2000. With
respect to the only remaining litigation, filed in Tennessee on behalf of a
purported class of indirect purchasers of commercial products, the Corporation
has answered the complaint and has denied the allegations contained therein as
well as any liability.
On February 8, 2000, the Corporation completed the acquisition of
Safeskin. Approximately 300 product liability lawsuits seeking monetary
damages, in most cases of an unspecified amount, were pending in federal and
state courts against Safeskin. Safeskin is typically one of several
defendants who manufacture or sell natural rubber latex gloves. These lawsuits
allege injuries ranging from dermatitis to severe allergic reactions caused by
the residual chemicals or latex proteins in gloves worn by health care workers
and other individuals while performing their duties. Safeskin has referred
the defense of these lawsuits to its insurance carriers.
Since March 11, 1999, numerous lawsuits (collectively the "Securities
Actions") have been filed in the U.S. District Court for the Southern District
of California against Safeskin and certain of its officers and directors
alleging violations of Sections 10(b) and 20(a) of the Securities and Exchange
Act of 1934, and Rule 10b-5 promulgated thereunder. The Securities Actions
were brought by plaintiffs in their individual capacity and on behalf of a
purported class of persons who purchased or otherwise acquired Safeskin
publicly traded securities during various periods occurring prior to the
Corporation's acquisition of Safeskin. The suits allege that plaintiffs
purchased Safeskin securities at prices artificially inflated by defendants'
misrepresentations and omissions concerning Safeskin's financial condition and
prospects and seek an unspecified amount of damages. Defendants' motion to
dismiss was denied and discovery is proceeding.
In addition, a shareholder derivative action has been filed against
certain of Safeskin's directors, and Safeskin as a nominal defendant, in the
Supreme Court of the State of California, San Diego County (the "Derivative
Action"). The Derivative Action alleges breach of fiduciary duty, waste of
corporate assets and gross negligence in connection with Safeskin's stock
repurchase program and seeks an unspecified amount of damages. The court has
stayed discovery in the Derivative Action so that it can be coordinated with
discovery in the Securities Actions. Safeskin has referred the defense of the
Derivative Action and the Securities Actions to its insurance carriers.
On April 14, 2000, a complaint was filed against Kimberly-Clark Tissue
Company (formerly known as Scott Paper Company) ("KCTC") and others in State
of Maine Superior Court. Nineteen plaintiffs seek compensation for injuries
allegedly caused by exposure to substances emitted by the defendants' mills,
including two former KCTC mills, and from the Central Maine Disposal Landfill
in Fairfield, Maine.
NOTE 12. (Continued)
The Corporation intends to contest the foregoing claims vigorously and,
in management's opinion, they are not, individually or in the aggregate,
expected to have a material adverse effect on the Corporation's business,
financial condition or results of operations.
The Corporation is subject to routine litigation from time to time,
which, individually or in the aggregate, is not expected to have a material
adverse effect on the Corporation's business, financial condition or results
of operations.
ENVIRONMENTAL MATTERS
The Corporation has been named a potentially responsible party under the
provisions of the federal Comprehensive Environmental Response, Compensation
and Liability Act, or analogous state statute, at a number of waste disposal
sites, none of which, individually or in the aggregate, in management's
opinion, is likely to have a material adverse effect on the Corporation's
business, financial condition or results of operations.
NOTE 13. UNAUDITED QUARTERLY DATA
2000 1999
(Millions of dollars, -------------------------------------------------------------------------------------
except per share amounts) FOURTH(A) THIRD(B) SECOND(C) FIRST(D) Fourth(e) Third(f) Second(g) First(h)
- --------------------------------------------------------------------------------------------------------------------
Net sales . . . . . . . . . . $3,600.8 $3,529.5 $3,464.5 $3,387.2 $3,425.5 $3,307.5 $3,148.6 $3,125.2
Gross profit. . . . . . . . . 1,483.4 1,431.4 1,432.4 1,406.3 1,409.0 1,345.9 1,297.0 1,273.3
Operating profit. . . . . . . 674.7 642.1 638.3 678.7 602.5 719.0 569.3 544.6
Net income. . . . . . . . . . 455.7 440.4 434.3 470.2 424.0 478.4 391.1 374.6
Per share basis:
Basic . . . . . . . . . . .85 .82 .80 .86 .78 .90 .73 .70
Diluted . . . . . . . . . .85 .81 .79 .86 .77 .89 .73 .69
Cash dividends declared
per share . . . . . . . . . .27 .27 .27 .27 .26 .26 .26 .26
Market price per share:
High. . . . . . . . . . . . 73.25 61.81 62.94 68.13 69.56 62.19 64.06 54.88
Low . . . . . . . . . . . . 53.63 49.94 53.00 42.00 50.81 52.13 48.00 44.81
Close . . . . . . . . . . . 70.69 55.81 57.56 56.06 65.44 52.75 57.00 47.94
(a) Included in the fourth quarter 2000 are the following items:
Net Income per Share
--------------------
Gross Operating Net
(Millions of dollars, except per share amounts) Profit Profit Income Basic Diluted
------------------------------------------------------------------------------------------------------------
Charges for business improvement and other
programs . . . . . . . . . . . . . . . . . . . . . . . . $5.8 $ 5.8 $ 4.0
Business integration and other costs . . . . . . . . . . . 1.2 9.6 7.0
Litigation settlements . . . . . . . . . . . . . . . . . . - .6 .3
---- ----- -----
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $7.0 $16.0 $11.3 $.03 $.02
==== ===== ===== ==== ====
(b) Included in the third quarter 2000 are the following items:
Net Income per Share
--------------------
Gross Operating Net
(Millions of dollars, except per share amounts) Profit Profit Income Basic Diluted
------------------------------------------------------------------------------------------------------------
Charges for business improvement and other
programs . . . . . . . . . . . . . . . . . . . . . . . . $4.1 $ 5.5 $ 3.6
Business integration and other costs . . . . . . . . . . . .2 5.7 3.5
Litigation settlements . . . . . . . . . . . . . . . . . . - 14.6 9.0
---- ----- -----
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $4.3 $25.8 $16.1 $.03 $.03
==== ===== ===== ==== ====
(c) Included in the second quarter 2000 are the following items:
Net Income per Share
--------------------
Gross Operating Net
(Millions of dollars, except per share amounts) Profit Profit Income Basic Diluted
------------------------------------------------------------------------------------------------------------
Charges for business improvement and other
programs . . . . . . . . . . . . . . . . . . . . . . . $4.2 $ 5.6 $3.8
Business integration and other costs . . . . . . . . . . .5 5.6 3.5
---- ----- ----
Total. . . . . . . . . . . . . . . . . . . . . . . . . $4.7 $11.2 $7.3 $.01 $.02
==== ===== ==== ==== =====
NOTE 13. (continued)
(d) Included in the first quarter 2000 are the following items:
Net Income per Share
--------------------
Gross Operating Net
(Millions of dollars, except per share amounts) Profit Profit Income Basic Diluted
------------------------------------------------------------------------------------------------------------
Charges for business improvement and other
programs . . . . . . . . . . . . . . . . . . . . . . . $ 6.1 $ 7.5 $ 5.0
Business integration and other costs . . . . . . . . . . 8.2 14.2 9.0
Patent settlement and accrued liability reversal . . . . - (75.8) (46.5)
---- ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . . . $14.3 $(54.1) $(32.5) $(.06) $(.06)
===== ======= ======= ====== ======
(e) Included in the fourth quarter 1999 are the following items:
Net Income per Share
--------------------
Gross Operating Net
(Millions of dollars, except per share amounts) Profit Profit Income Basic Diluted
------------------------------------------------------------------------------------------------------------
Charges for business improvement and other
programs . . . . . . . . . . . . . . . . . . . . . . . $ 8.5 $(.2) $2.4
Business integration and other costs . . . . . . . . . . 1.8 9.2 6.1
----- ---- ----
Total. . . . . . . . . . . . . . . . . . . . . . . . . $10.3 $9.0 $8.5 $.02 $.02
===== ==== ==== ==== ====
(f) Included in the third quarter 1999 are the following items:
Net Income per Share
--------------------
Gross Operating Net
(Millions of dollars, except per share amounts) Profit Profit Income Basic Diluted
------------------------------------------------------------------------------------------------------------
Charges for business improvement and other
programs . . . . . . . . . . . . . . . . . . . . . . . $36.2 $ 19.4 $ 13.4
Business integration and other costs . . . . . . . . . . 9.4 13.4 8.4
Gain on asset disposal . . . . . . . . . . . . . . . . . - (153.3) (95.7)
----- ------- ------
Total. . . . . . . . . . . . . . . . . . . . . . . . . $45.6 $(120.5) $(73.9) $(.14) $(.14)
===== ======= ====== ===== =====
(g) Included in the second quarter 1999 are the following items:
Net Income per Share
--------------------
Gross Operating Net
(Millions of dollars, except per share amounts) Profit Profit Income Basic Diluted
------------------------------------------------------------------------------------------------------------
Charges for business improvement and other
programs. . . . . . . . . . . . . . . . . . . . . . . $ 5.8 $ 5.8 $ 4.4
Mobile pulp mill fees and related severance . . . . . . 9.0 9.0 5.6
Gains on asset disposals. . . . . . . . . . . . . . . . - (23.4) (16.6)
---- ------ ------
Total . . . . . . . . . . . . . . . . . . . . . . . $14.8 $ (8.6) $ (6.6) $(.01) $(.01)
===== ====== ====== ===== =====
(h) Gross profit, operating profit, net income and basic and diluted net income
per share in the first quarter 1999 includes $18.5 million, $22.8
million, $15.4 million and $.03, respectively, related to the charges
for business improvement and other programs.
NOTE 14. SUPPLEMENTAL DATA (Millions of dollars)
SUPPLEMENTAL BALANCE SHEET DATA
December 31
------------------
Summary of Accounts Receivable 2000 1999
- ------------------------------------------------------------------------------------------------------------------
Accounts Receivable:
From customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,683.9 $1,492.3
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198.8 179.9
Less allowance for doubtful accounts and sales discounts . . . . . . . . . . . . . . . . . (73.1) (71.6)
-------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,809.6 $1,600.6
======== ========
Accounts receivable are carried at amounts that approximate fair value.
In June 2000, $220 million of long-term notes receivable, previously
classified as other assets, were transferred for cash to a noncontrolled
special purpose entity in which the Corporation has a minority voting
interest.
December 31
-------------------
Summary of Inventories 2000 1999
- ----------------------------------------------------------------------------------------------------------------
Inventories by Major Class:
At the lower of cost on the FIFO method, weighted-average cost
method or market:
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 387.2 $ 342.3
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159.1 171.2
Finished goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 840.1 713.4
Supplies and other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220.0 215.4
------- --------
1,606.4 1,442.3
Excess of FIFO cost over LIFO cost. . . . . . . . . . . . . . . . . . . . . . . . . . . (216.0) (202.4)
------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,390.4 $1,239.9
======== ========
Total inventories include $444.1 million and $399.2 million of
inventories valued on the LIFO method at December 31, 2000 and 1999,
respectively.
December 31
-------------------
Summary of Accrued Expenses 2000 1999
- ----------------------------------------------------------------------------------------------------------------
Accruals for the 1998 and 1997 Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.3 $ 24.5
Accrued advertising and promotion expense . . . . . . . . . . . . . . . . . . . . . . . . 214.1 277.8
Accrued salaries and wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428.7 392.8
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588.7 617.0
-------- --------
Total accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,239.8 $1,312.1
======== ========
NOTE 14. (Continued)
Summary of Accrued Consumer Coupon Redemption Costs
- ---------------------------------------------------------
Balance, December 31, 1999 . . . . . $ 58.7
Additions charged to expense . . . . 158.8
Payments . . . . . . . . . . . . . . (136.1)
Changes in estimates . . . . . . . . (26.6)
Currency rate changes. . . . . . . . (.8)
-------
Balance, December 31, 2000 . . . . . $ 54.0
=======
SUPPLEMENTAL CASH FLOW STATEMENT DATA
Summary of Cash Flow Effects of (Increase) Decrease in Year Ended December 31
Operating Working Capital(a) 2000 1999 1998
- --------------------------------------------------------------------------------------------
Accounts receivable........................................ $ (88.8) $ (10.3) $ 87.5
Inventories................................................ (49.0) 111.2 (.4)
Prepaid expenses........................................... 10.4 28.0 14.2
Trade accounts payable..................................... (2.4) 41.1 (101.2)
Other payables............................................. 24.5 (98.4) 41.0
Accrued expenses........................................... (116.3) (147.3) (116.3)
Accrued income taxes....................................... (77.4) 34.9 130.8
Currency rate changes...................................... (39.3) (20.7) 8.0
-------- -------- --------
(Increase) decrease in operating working capital........... $(338.3) $ (61.5) $ 63.6
======== ======== ========
(a) Excludes the effects of acquisitions, dispositions and the business
improvement and other programs discussed in Note 2 to the Consolidated
Financial Statements.
Year Ended December 31
-----------------------------
Other Cash Flow Data 2000 1999 1998
- ----------------------------------------------------------------------------------------
Reconciliation of changes in cash and cash equivalents:
Balance, January 1....................................... $ 322.8 $144.0 $ 90.8
(Decrease)/Increase...................................... (116.3) 178.8 53.2
-------- ------ ------
Balance, December 31..................................... $ 206.5 $322.8 $144.0
======== ====== ======
Interest paid.............................................. $ 233.1 $227.1 $192.1
Income taxes paid.......................................... 783.2 557.8 368.6
Increase (decrease) in cash and cash equivalents due to
currency rate changes.................................... 11.4 .1 2.4
Year Ended December 31
----------------------------
Interest Expense 2000 1999 1998
- ----------------------------------------------------------------------------------------
Gross interest cost.......................................... $242.7 $226.0 $211.1
Capitalized interest on major construction projects.......... (20.9) (12.9) (12.4)
------- ------- -------
Interest expense............................................. $221.8 $213.1 $198.7
======= ======= =======
NOTE 15. BUSINESS SEGMENT AND GEOGRAPHIC DATA INFORMATION
The Corporation is organized into three global business segments as follows:
- - The Tissue segment manufactures and markets facial and bathroom tissue,
paper towels, wipers and napkins for household and away-from-home use; wet
wipes; printing, premium business and correspondence papers; and related
products. Products in this segment are sold under the Kleenex, Scott,
Kimberly-Clark, Kleenex Cottonelle, Kleenex Viva, Huggies, Kimwipes, WypAll,
Surpass and other brand names.
- - The Personal Care segment manufactures and markets disposable diapers,
training and youth pants and swimpants; feminine and incontinence care
products; and related products. Products in this segment are primarily for
household use and are sold under a variety of well-known brand names,
including Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays,
Depend, Poise and other brand names.
- - The Health Care and Other segment manufactures and markets health care
products such as surgical gowns, drapes, infection control products,
sterilization wraps, disposable face masks and exam gloves, respiratory
products, and other disposable medical products; specialty and technical
papers; and other products. Products in this segment are sold under the
Kimberly-Clark, Safeskin, Tecnol, Ballard and other brand names.
Information concerning consolidated operations by business segment and
geographic area, as well as data for equity companies, is presented in the
tables below and on the following pages:
CONSOLIDATED OPERATIONS BY BUSINESS SEGMENT
Net Sales Operating Profit(a)
--------------------------------- -----------------------------
(Millions of dollars) 2000 1999 1998 2000 1999 1998
- ---------------------------------------------------------------------------------------------
Tissue................... $ 7,303.2 $ 6,968.8 $ 6,733.1 $1,305.0 $1,114.1 $ 921.3
Personal Care............ 5,437.6 5,138.1 4,596.5 1,136.7 1,092.8 588.7
Health Care and Other.... 1,291.0 936.4 1,001.5 186.1 154.3 161.2
---------- ---------- ---------- -------- -------- --------
Combined................. 14,031.8 13,043.3 12,331.1 2,627.8 2,361.2 1,671.2
Intersegment sales....... (49.8) (36.5) (33.3) - - -
Unallocated - net(b)..... - - - 6.0 74.2 26.5
---------- ---------- ---------- -------- -------- --------
Consolidated............ $13,982.0 $13,006.8 $12,297.8 $2,633.8 $2,435.4 $1,697.7
========== ========== ========== ======== ======== ========
Assets Depreciation Capital Spending
-------------------------------------------------------------------------------
(Millions of dollars) 2000 1999 1998 2000 1999 1998 2000 1999 1998
- --------------------------------------------------------------------------------------------------------
Tissue............... $ 6,773.3 $ 6,096.6 $ 5,870.8 $345.9 $359.6 $341.5 $ 682.2 $482.2 $345.6
Personal Care........ 3,667.7 3,234.8 3,138.7 200.9 195.8 220.0 410.7 260.7 290.4
Health Care
and Other.......... 2,583.3 1,679.0 951.1 43.7 29.8 31.8 74.8 43.0 31.2
--------- --------- --------- ------ ------ ------ -------- ------ ------
Combined............. 13,024.3 11,010.4 9,960.6 590.5 585.2 593.3 1,167.7 785.9 667.2
Unallocated
assets(c).......... 1,455.5 1,805.1 1,727.2 1.2 1.0 1.2 2.6 .5 2.3
--------- --------- --------- ------ ------ ------ -------- ------ ------
Consolidated........ $14,479.8 $12,815.5 $11,687.8 $591.7 $586.2 $594.5 $1,170.3 $786.4 $669.5
========= ========= ========= ====== ====== ====== ======== ====== ======
NOTE 15. (Continued)
(a) Included in Business Segment operating profit are the following unusual
items:
2000
---------------------------------------------------------
Personal Health Care
(Millions of dollars) Tissue Care and Other Unallocated Total
- ----------------------- -------- ---------- ------------ ----------- --------
Charges for business improvement
and other programs............................... $20.2 $4.2 $ - $ - $ 24.4
Business integration and other costs............... 14.6 1.0 19.5 - 35.1
Patent settlement and accrued liability reversal... - - - (75.8) (75.8)
Litigation settlements............................. - - - 15.2 15.2
----- ---- ----- ------ ------
Total.......................................... $34.8 $5.2 $19.5 $(60.6) $ (1.1)
===== ==== ===== ====== ======
1999
----------------------------------------------------------
Personal Health Care
(Millions of dollars) Tissue Care and Other Unallocated Total
- ----------------------- -------- ---------- ------------ ----------- ---------
Charges for business improvement
and other programs.............................. $31.8 $16.3 $1.4 $ (1.7) $ 47.8
Business integration and other costs.............. 16.4 - 6.2 - 22.6
Mobile pulp mill fees and related severance....... 9.0 - - - 9.0
Gains on asset disposals.......................... - - - (176.7) (176.7)
----- ----- ---- ------- -------
Total......................................... $57.2 $16.3 $7.6 $(178.4) $ (97.3)
===== ===== ==== ======= =======
1998
----------------------------------------------------------
Personal Health Care
(Millions of dollars) Tissue Care and Other Unallocated Total
- ----------------------- -------- ---------- ------------ ----------- --------
Charges for business improvement
and other programs.............................. $172.1 $196.6 $12.5 $ (3.4) $377.8
Mobile pulp mill fees and related severance....... 42.3 - - - 42.3
Gain on asset disposal............................ - - - (140.0) (140.0)
------ ------ ----- ------- ------
Total......................................... $214.4 $196.6 $12.5 $(143.4) $280.1
====== ====== ===== ======= ======
(b) Consists of other income (expense), net and expenses not associated with
the business segments.
(c) Includes investments in equity companies of $798.8 million, $863.1
million and $813.1 million in 2000, 1999 and 1998, respectively.
CONSOLIDATED OPERATIONS BY GEOGRAPHIC AREA
Net Sales Operating Profit(a)
------------------------- --------------------
(Millions of dollars) 2000 1999 1998 2000 1999 1998
- --------------------------- ----------------------------------------------------------------
United States............... $ 9,059.4 $ 8,392.5 $ 7,992.8 $1,937.1 $1,821.9 $1,407.2
Canada...................... 990.3 843.4 785.1 211.3 105.3 112.7
Intergeographic items(b).... (673.5) (507.4) (408.9) - - -
---------- ---------- ---------- -------- -------- ---------
North America............... 9,376.2 8,728.5 8,369.0 2,148.4 1,927.2 1,519.9
Europe...................... 2,474.5 2,544.7 2,471.2 149.7 183.3 (39.7)
Asia, Latin America, Africa
and Middle East........... 2,680.5 2,084.6 1,766.2 329.7 250.7 191.0
---------- ---------- ---------- -------- -------- ---------
Combined.................... 14,531.2 13,357.8 12,606.4 2,627.8 2,361.2 1,671.2
Intergeographic items....... (549.2) (351.0) (308.6) - - -
Unallocated - net(c)........ - - - 6.0 74.2 26.5
---------- ---------- ---------- -------- -------- ---------
Consolidated.............. $13,982.0 $13,006.8 $12,297.8 $2,633.8 $2,435.4 $1,697.7
========== ========== ========== ======== ======== =========
NOTE 15. (Continued)
Assets
----------------------------------
(Millions of dollars) 2000 1999 1998
- ----------------------- ----------------------------------
United States............................... $ 7,599.9 $ 6,363.1 $ 5,807.4
Canada...................................... 517.0 497.5 470.0
Intergeographic items....................... (79.4) (79.0) (52.6)
---------- ---------- ----------
North America............................... 8,037.5 6,781.6 6,224.8
Europe...................................... 2,447.3 2,404.1 2,133.2
Asia, Latin America, Africa and Middle East. 2,676.0 1,960.7 1,714.9
---------- ---------- ----------
Combined ................................... 13,160.8 11,146.4 10,072.9
Intergeographic items....................... (136.5) (136.0) (112.3)
Unallocated assets - net(d)................. 1,455.5 1,805.1 1,727.2
---------- ---------- ----------
Consolidated.............................. $14,479.8 $12,815.5 $11,687.8
========== ========== ==========
(a) Included in geographic operating profit are the following unusual
items:
2000
-------------------------------------------------------------------
Asia,
Latin America,
Africa and
(Millions of dollars) U.S. Canada Europe Middle East Unallocated Total
- ----------------------- -------------------------------------------------------------------
Charges for business improvement
and other programs............... $ 6.1 $1.1 $17.2 $- $ - $ 24.4
Business integration and other
costs............................ 28.8 .3 6.0 - - 35.1
Patent settlement and accrued
liability reversal............... - - - - (75.8) (75.8)
Litigation settlements............. - - - - 15.2 15.2
----- ---- ----- -- ------ ------
Total.......................... $34.9 $1.4 $23.2 $- $(60.6) $ (1.1)
===== ==== ===== === ====== ======
1999
------------------------------------------------------------------
Asia,
Latin America,
Africa and
(Millions of dollars) U.S. Canada Europe Middle East Unallocated Total
- ---------------------- ------------------------------------------------------------------
Charges for business improvement
and other programs............... $20.5 $5.6 $31.3 $(7.9) $ (1.7) $ 47.8
Business integration and other
costs............................ 17.4 - 5.2 - - 22.6
Mobile pulp mill fees and related
severance........................ 9.0 - - - - 9.0
Gains on asset disposals........... - - - - (176.7) (176.7)
----- ---- ----- ------ ------- -------
Total.......................... $46.9 $5.6 $36.5 $(7.9) $(178.4) $ (97.3)
===== ==== ===== ===== ======= =======
1998
------------------------------------------------------------------
Asia,
Latin America,
Africa and
(Millions of dollars) U.S. Canada Europe Middle East Unallocated Total
- ---------------------- ------------------------------------------------------------------
Charges for business improvement
and other programs............... $213.9 $(7.9) $162.8 $12.4 $ (3.4) $ 377.8
Mobile pulp mill fees and related
severance........................ 42.3 - - - - 42.3
Gain on asset disposal............. - - - - (140.0) (140.0)
------ ------ ------ ----- ------- -------
Total.......................... $256.2 $(7.9) $162.8 $12.4 $(143.4) $ 280.1
====== ====== ====== ===== ======= =======
NOTE 15. (Continued)
(b) Net sales include $409.2 million, $287.6 million and $255.9 million by
operations in Canada to the U.S. in 2000, 1999 and 1998, respectively.
(c) Consists of other income (expense), net and expenses not associated with
geographic areas.
(d) Includes investments in equity companies of $798.8 million, $863.1 million
and $813.1 million in 2000, 1999 and 1998, respectively.
EQUITY COMPANIES' DATA BY GEOGRAPHIC AREA
Kimberly-
Clark's
Share
Net Gross Operating Net of Net
(Millions of dollars) Sales Profit Profit Income Income
- -----------------------------------------------------------------------------------------------
For the year ended:
December 31, 2000
Latin America........................ $1,902.5 $730.2 $514.7 $339.1 $158.5
Asia, Australia and Middle East(a)... 602.1 242.1 88.9 56.9 27.9
-------- ------ ------ ------ ------
Total.......................... $2,504.6 $972.3 $603.6 $396.0 $186.4
======== ====== ====== ====== ======
For the year ended:
December 31, 1999
Latin America(b)................... $1,611.6 $638.9 $477.7 $334.1 $154.0
Asia, Australia and Middle East.... 714.0 263.1 98.6 73.4 35.6
-------- ------ ------ ------ ------
Total.......................... $2,325.6 $902.0 $576.3 $407.5 $189.6
======== ====== ====== ====== ======
For the year ended:
December 31, 1998
Latin America(c).................. $1,606.8 $574.4 $344.5 $245.5 $113.5
Asia, Australia and Middle East... 666.9 236.6 81.8 49.1 23.6
-------- ------ ------ ------ ------
Total......................... $2,273.7 $811.0 $426.3 $294.6 $137.1
======== ====== ====== ====== ======
(a) As of March 31, 2000, the Corporation consolidated Hogla-Kimberly Limited,
its Israeli affiliate, in which the Corporation made an additional
investment to gain majority ownership.
(b) As of January 1, 1999, the Corporation consolidated Colombiana Kimberly
Colpapel S.A., its Colombian affiliate, in which the Corporation made an
additional investment in late 1998 to gain majority ownership of certain
equity affiliates.
(c) Operating profit, net income and Kimberly-Clark's share of net income
includes a loss of $38.9 million, $19.8 million and $9.2 million,
respectively, related to the change in the value of the Mexican peso. In
May 1998, the Corporation acquired 50 percent of Klabin Tissue, S.A., the
leading tissue manufacturer in Brazil.
NOTE 15. (Continued)
Non- Non- Stock-
Current Current Current Current holders'
(Millions of dollars) Assets Assets Liabilities Liabilities Equity
- -----------------------------------------------------------------------------------------
December 31, 2000
Latin America.................. $ 846.6 $1,172.0 $496.7 $382.7 $1,139.2
Asia, Australia and Middle East 163.9 270.7 92.7 151.1 190.8
-------- -------- ------ ------ --------
Total...................... $1,010.5 $1,442.7 $589.4 $533.8 $1,330.0
======== ======== ====== ====== ========
December 31, 1999
Latin America ................. $ 860.6 $1,076.4 $428.8 $400.9 $1,107.3
Asia, Australia and Middle East 254.0 391.7 143.3 194.1 308.3
-------- -------- ------ ------ --------
Total...................... $1,114.6 $1,468.1 $572.1 $595.0 $1,415.6
======== ======== ====== ====== ========
December 31, 1998
Latin America.................. $ 785.5 $1,170.7 $575.0 $154.0 $1,227.2
Asia, Australia and Middle East 239.2 359.1 129.5 173.8 295.1
-------- -------- ------ ------ --------
Total...................... $1,024.7 $1,529.8 $704.5 $327.8 $1,522.3
======== ======== ====== ====== ========
Equity companies are principally engaged in operations in the Tissue and
Personal Care businesses.
KCM is partially owned by the public and its stock is publicly traded in
Mexico. At December 31, 2000, the Corporation's investment in this equity
company was $455.3 million, and the estimated fair value of the investment
was $1.7 billion based on the market price of publicly traded shares.
INDEPENDENT AUDITORS' REPORT
Kimberly-Clark Corporation and Subsidiaries
Kimberly-Clark Corporation, Its Directors and Stockholders:
We have audited the accompanying consolidated balance sheets of
Kimberly-Clark Corporation and Subsidiaries as of December 31, 2000 and 1999,
and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 2000.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Kimberly-Clark Corporation
and Subsidiaries at December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
- ---------------------------
Deloitte & Touche LLP
Dallas, Texas
January 23, 2001
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
Kimberly-Clark Corporation and Subsidiaries
The management of Kimberly-Clark Corporation is responsible for conducting
all aspects of the business, including the preparation of the consolidated
financial statements in this annual report. The consolidated financial
statements have been prepared using generally accepted accounting principles
considered appropriate in the circumstances to present fairly the Corporation's
consolidated financial position, results of operations and cash flows on a
consistent basis. Management also has prepared the other information in this
annual report and is responsible for its accuracy and consistency with the
consolidated financial statements.
As can be expected in a complex and dynamic business environment, some
financial statement amounts are based on management's estimates and judgments.
Even though estimates and judgments are used, measures have been taken to
provide reasonable assurance of the integrity and reliability of the financial
information contained in this annual report. These measures include an
effective control-oriented environment in which the internal audit function
plays an important role, an Audit Committee of the board of directors that
oversees the financial reporting process, and independent audits.
One characteristic of a control-oriented environment is a system of internal
control over financial reporting and over safeguarding of assets against
unauthorized acquisition, use or disposition, designed to provide reasonable
assurance to management and the board of directors regarding preparation of
reliable published financial statements and such asset safeguarding. The
system is supported with written policies and procedures, contains
self-monitoring mechanisms and is audited by the internal audit function.
Appropriate actions are taken by management to correct deficiencies as they are
identified. All internal control systems have inherent limitations, including
the possibility of circumvention and overriding of controls, and, therefore,
can provide only reasonable assurance as to financial statement preparation and
such asset safeguarding.
The Corporation also has adopted a code of conduct that, among other things,
contains policies for conducting business affairs in a lawful and ethical
manner everyplace in which it does business, for avoiding potential conflicts
of interest and for preserving confidentiality of information and business
ideas. Internal controls have been implemented to provide reasonable
assurance that the code of conduct is followed.
The consolidated financial statements have been audited by the independent
accounting firm, Deloitte & Touche LLP. During their audits, independent
auditors were given unrestricted access to all financial records and related
data, including minutes of all meetings of stockholders and the board of
directors and all committees of the board. Management believes that all
representations made to the independent auditors during their audits were
valid and appropriate.
During the audits conducted by both the independent auditors and the
internal audit function, management received recommendations to strengthen or
modify internal controls in response to developments and changes. Management
has adopted, or is in the process of adopting, all recommendations that are
cost effective.
The Corporation has assessed its internal control system as of December 31,
2000, in relation to criteria for effective internal control over financial
reporting described in "Internal Control - Integrated Framework" issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on
this assessment, management believes that, as of December 31, 2000, its system
of internal control over the preparation of its published interim and annual
consolidated financial statements and over safeguarding of assets against
unauthorized acquisition, use or disposition met those criteria.
/s/ Wayne R. Sanders /s/ Thomas J. Falk /s/ John W. Donehower
- ----------------------- ------------------- ---------------------
Wayne R. Sanders Thomas J. Falk John W. Donehower
Chairman of the Board and President and Senior Vice President and
Chief Executive Officer Chief Operating Officer Chief Financial Officer
January 23, 2001
ADDITIONAL INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Fleet National Bank is the Transfer Agent, Registrar and Dividend Disbursing
Agent for the Company's common stock and is responsible for maintaining
shareholder account records. Inquiries regarding dividend payments, lost
certificates, IRS Form 1099, changes in address, name or ownership, or
information regarding Kimberly-Clark's Dividend Reinvestment and Stock
Purchase Plan should be addressed to:
Fleet National Bank
c/o EquiServe
P.O. Box 43010
Providence, RI 02940-3010
Telephone: 800-730-4001
Internet: http://www.equiserve.com
Dividends and Dividend Reinvestment Plan
Quarterly dividends have been paid continually since 1935. Dividends are paid
on or about the second day of January, April, July and October. The Automatic
Dividend Reinvestment service of Fleet National Bank is available to
Kimberly-Clark stockholders of record. The service makes it possible for
Kimberly-Clark stockholders of record to have their dividends automatically
reinvested in common stock and to make additional cash investments up to
$3,000 per quarter.
Stock Exchanges
Kimberly-Clark common stock is listed on the New York, Chicago and Pacific
stock exchanges. The ticker symbol is KMB.
Annual Meeting of Stockholders
The Annual Meeting of Stockholders will be held at the Company's World
Headquarters, 351 Phelps Drive, Irving, Texas, at 11:00 a.m. on Thursday,
April 26, 2001.
Investor Relations
Securities analysts, portfolio managers and representatives of institutional
investors seeking information about the Company should contact Michael D.
Masseth, Vice President - Investor Relations, at 972-281-1478. Investors may
also obtain information about Kimberly-Clark and copies of documents released
by the Company by calling 800-639-1352.
Calendar
Kimberly-Clark's fiscal year ends December 31. The annual report is
distributed in March.
SEC Form 10-K and Other Information/Company Web Site
Stockholders and others will find the Company's financial information, press
releases and other information on the Company's Web site at
www.kimberly-clark.com. There is a direct link from the Web site to the
Securities and Exchange Commission (SEC) filings via the EDGAR database,
including Forms 10-K, 10-Q and 8-K. Stockholders may contact Stockholder
Services, P.O. Box 612606, Dallas, Texas 75261-2606 or call 972-281-1521 to
obtain a hard copy of these reports without charge.
Employees and Stockholders
In its worldwide consolidated operations, Kimberly-Clark had 66,300 employees
as of December 31, 2000. Equity companies had an additional 11,700 employees.
The Corporation had 48,516 stockholders of record and 533.4 million shares of
common stock outstanding as of the same date.
Trademarks
The brand names mentioned in this report - Andrex, Ballard, Classic Crest,
Cottonelle, Cottonelle Fresh, Depend, DryNites, GoodNites, Huggies, Just for
Me, Kimberly-Clark, KimGuard, KimTech, Kimwipes, KleenBebe, Kleenex, Kotex,
Lightdays, Lines, Little Swimmers, Neve, Parentstages.com, Poise, Popee,
Pull-Ups, Safeskin, Scott, Scottex, Scottfold, Splash 'n Go!, Surpass, Tecnol,
Viva and WypAll - are trademarks of Kimberly-Clark Corporation or its
affiliates.