FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from.......... to.........
Commission file number 1-225
KIMBERLY-CLARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 39-0394230
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. BOX 619100
DALLAS, TEXAS
75261-9100
(Address of principal executive offices)
(Zip Code)
(972) 281-1200
(Registrant's telephone number, including area code)
NO CHANGE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X. No.
-------
AS OF AUGUST 6, 2001, THERE WERE 529,683,231 SHARES OF THE CORPORATION'S
COMMON STOCK OUTSTANDING.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED INCOME STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Three Months Six Months
Ended June 30 Ended June 30
-------------------- --------------------
(Millions of dollars except per share amounts) 2001 2000 2001 2000
- --------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
NET SALES. . . . . . . . . . . . . . . . . . . . . . . . $3,534.2 $3,464.5 $7,142.6 $6,851.7
Cost of products sold. . . . . . . . . . . . . . . . . . 2,103.7 2,032.1 4,254.7 4,013.0
-------- -------- -------- --------
GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . 1,430.5 1,432.4 2,887.9 2,838.7
Advertising, promotion and selling expenses. . . . . . . 552.5 534.0 1,107.6 1,086.2
Research expense . . . . . . . . . . . . . . . . . . . . 73.2 68.4 141.9 129.6
General expense. . . . . . . . . . . . . . . . . . . . . 183.7 183.4 362.2 366.5
Goodwill amortization. . . . . . . . . . . . . . . . . . 22.5 20.7 44.3 39.0
Other (income) expense, net. . . . . . . . . . . . . . . 8.0 (12.4) 10.2 (99.6)
-------- -------- -------- --------
OPERATING PROFIT . . . . . . . . . . . . . . . . . . . . 590.6 638.3 1,221.7 1,317.0
Interest income. . . . . . . . . . . . . . . . . . . . . 4.0 7.2 8.7 15.0
Interest expense . . . . . . . . . . . . . . . . . . . . (48.4) (54.0) (98.9) (103.4)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . 546.2 591.5 1,131.5 1,228.6
Provision for income taxes . . . . . . . . . . . . . . . 164.3 182.9 339.2 385.1
-------- -------- -------- --------
INCOME BEFORE EQUITY INTERESTS . . . . . . . . . . . . . 381.9 408.6 792.3 843.5
Share of net income of equity companies. . . . . . . . . 52.6 41.1 92.1 88.7
Minority owners' share of subsidiaries' net income . . . (19.1) (15.4) (35.6) (27.7)
-------- -------- -------- --------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . $415.4 $434.3 $848.8 $904.5
======== ======== ======== ========
NET INCOME PER SHARE:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . $.78 $.80 $1.59 $1.66
======== ======== ======== ========
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . $.78 $.79 $1.58 $1.65
======== ======== ======== ========
CASH DIVIDENDS DECLARED. . . . . . . . . . . . . . . . . $.28 $.27 $.56 $.54
======== ======== ======== ========
Unaudited
See Notes to Consolidated Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEET
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
JUNE 30, December 31,
(Millions of dollars) 2001 2000
- -------------------------------------------------------------------------------
<s> <c> <c>
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . $ 320.9 $ 206.5
Accounts receivable . . . . . . . . . . . . . . . . 1,695.3 1,809.6
Inventories . . . . . . . . . . . . . . . . . . . . 1,385.6 1,390.4
Other current assets. . . . . . . . . . . . . . . . 379.8 383.4
--------- ---------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . 3,781.6 3,789.9
PROPERTY . . . . . . . . . . . . . . . . . . . . . . . 12,206.7 12,014.8
Less accumulated depreciation. . . . . . . . . . . 5,243.4 5,096.3
--------- ---------
NET PROPERTY . . . . . . . . . . . . . . . . . . . . . 6,963.3 6,918.5
INVESTMENTS IN EQUITY COMPANIES. . . . . . . . . . . . 854.5 798.8
GOODWILL, NET OF ACCUMULATED AMORTIZATION. . . . . . . 1,994.9 2,009.9
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . 1,035.5 962.7
--------- ---------
$14,629.8 $14,479.8
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Debt payable within one year. . . . . . . . . . . . $ 1,200.4 $ 1,490.5
Accounts payable. . . . . . . . . . . . . . . . . . 1,073.3 1,175.9
Accrued expenses. . . . . . . . . . . . . . . . . . 1,120.8 1,239.8
Other current liabilities . . . . . . . . . . . . . 617.4 667.7
--------- ---------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . 4,011.9 4,573.9
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . 2,027.7 2,000.6
NONCURRENT EMPLOYEE BENEFIT AND OTHER OBLIGATIONS. . . 873.1 869.2
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . 1,012.7 987.5
MINORITY OWNERS' INTERESTS IN SUBSIDIARIES . . . . . . 280.6 281.3
PREFERRED SECURITIES OF SUBSIDIARY . . . . . . . . . . 527.2 -
STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . 5,896.6 5,767.3
--------- ---------
$14,629.8 $14,479.8
========= =========
Unaudited
See Notes to Consolidated Financial Statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Six Months
Ended June 30
----------------
(Millions of dollars) 2001 2000
- ---------------------------------------------------------------------------
<s> <c> <c>
OPERATIONS
Net income. . . . . . . . . . . . . . . . . . . . . . $848.8 $ 904.5
Depreciation. . . . . . . . . . . . . . . . . . . . . 314.8 300.1
Goodwill amortization . . . . . . . . . . . . . . . . 44.3 39.0
Changes in operating working capital. . . . . . . . . (235.7) (175.0)
Other . . . . . . . . . . . . . . . . . . . . . . . . 26.0 6.6
------ -------
CASH PROVIDED BY OPERATIONS . . . . . . . . . . . . 998.2 1,075.2
------ -------
INVESTING
Capital spending. . . . . . . . . . . . . . . . . . . (547.7) (495.2)
Acquisitions of businesses, net of cash acquired. . . (61.7) (160.0)
Disposals of property and businesses. . . . . . . . . 7.4 9.6
Proceeds from investments . . . . . . . . . . . . . . 14.9 38.3
Proceeds from notes receivable. . . . . . . . . . . . - 220.0
Other . . . . . . . . . . . . . . . . . . . . . . . . (34.3) (32.8)
------ -------
CASH USED FOR INVESTING . . . . . . . . . . . . . . (621.4) (420.1)
------ -------
FINANCING
Cash dividends paid . . . . . . . . . . . . . . . . . (293.5) (289.2)
Changes in debt payable within one year . . . . . . . (68.5) 127.0
Increases in long-term debt . . . . . . . . . . . . . 50.1 328.6
Decreases in long-term debt . . . . . . . . . . . . . (243.3) (179.2)
Issuance of preferred securities of subsidiary. . . . 516.5 -
Proceeds from exercise of stock options . . . . . . . 79.9 34.4
Acquisitions of common stock for the treasury . . . . (295.8) (768.1)
Other . . . . . . . . . . . . . . . . . . . . . . . . (7.8) (8.5)
------ -------
CASH USED FOR FINANCING . . . . . . . . . . . . . . (262.4) (755.0)
------ -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . $114.4 $ (99.9)
====== =======
Unaudited
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
1. The unaudited consolidated financial statements of Kimberly-Clark
Corporation (the "Corporation") have been prepared on a basis consistent
with that used in the Annual Report on Form 10-K for the year ended
December 31, 2000, and include all normal recurring adjustments necessary
to present fairly the condensed consolidated balance sheet, consolidated
income statement and condensed consolidated cash flow statement for
the periods indicated.
Statements of Financial Accounting Standards ("SFAS") 141, Business
Combinations, and 142, Goodwill and Other Intangible Assets, were issued in
June 2001. FAS 141 is effective July 1, 2001 and FAS 142 is effective for
fiscal years beginning after December 15, 2001. Under these new standards,
goodwill and intangible assets having indefinite lives will no longer be
amortized but will be subject to annual impairment tests. Other intangible
assets will continue to be amortized over their estimated useful lives.
SFAS 142 will be adopted beginning in the first quarter of 2002. Application
of the nonamortization provisions of SFAS 142 would have increased reported
net income in 2000 by approximately $88.3 million, or $.16 per share. During
2002, the Corporation will perform the required impairment tests of goodwill
and indefinite lived intangible assets as of January 1, 2002.
In April 2001, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board issued EITF 00-25, Accounting for
Consideration from a Vendor to a Retailer in Connection with the Purchase
or Promotion of the Vendor's Products. Under EITF 00-25, the cost of
promotion activities offered to customers will be classified as a reduction
in sales revenue. The Corporation is currently reviewing the rule and plans
to adopt EITF 00-25, as required, in the first quarter of 2002. Adoption
is not expected to change reported earnings.
Also in April 2001, the EITF delayed implementation of EITF 00-14, Accounting
for Certain Sales Incentives, to coincide with the implementation date for
EITF 00-25. Under EITF 00-14, the estimated redemption value of consumer
coupons must be recorded at the time the coupons are issued and classified as
a reduction in sales revenue. The Corporation will adopt EITF 00-14 in the
first quarter of 2002 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 during the second quarter
and six months ended June 30, 2001 were approximately $45 million and $95
million, respectively. Discounts recorded as promotion expense during the
second quarter and six months ended June 30, 2000 were approximately $46
million and $95 million, 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, which at December 31, 2000 was estimated to be an after-tax
charge equal to approximately $.02 per share.
2. There are no adjustments required to be made to net income for purposes
of computing basic and diluted earnings per share ("EPS"). The average number
of common shares outstanding used in the basic EPS computations is reconciled
to those used in the diluted EPS computation as follows:
Average Common Shares Outstanding
---------------------------------
Second Quarter Six Months
Ended June 30 Ended June 30
-------------- -----------------
(Millions) 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . 531.9 542.1 532.5 543.7
Dilutive effect of stock options. . . . . . . . . . . . 3.2 3.9 4.1 3.7
Dilutive effect of deferred compensation plan
shares .2 .1 .2 .1
Dilutive effect of shares issued for participation share
awards . . . . . . . . . . . . . . . . . . . . . . . - .7 - .6
----- ----- ----- -----
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . 535.3 546.8 536.8 548.1
===== ===== ===== =====
Options outstanding during the second quarter and six months ended June
30, 2001 to purchase 5.9 million and 4.3 million shares of common stock,
respectively, were not included in the computation of diluted EPS because the
exercise prices of the options were greater than the average market price of
the common shares.
Options outstanding during the second quarter and six months ended June
30, 2000 to purchase .6 million and .5 million shares of common stock,
respectively, were not included in the computation of diluted EPS because the
exercise prices of the options were greater than the average market price of
the common shares.
The number of common shares outstanding as of June 30, 2001 and 2000 was
530.4 million and 538.7 million, respectively.
3. Details of inventories by major class as of June 30, 2001 and December 31,
2000 are as follows:
JUNE 30, December 31,
(Millions of dollars) 2001 2000
- -------------------------------------------------------------------------------------------
<s> <c> <c>
At lower of cost on the First-In,
First-Out (FIFO) method or market:
Raw materials. . . . . . . . . . . . . . . . . . . . . . $ 364.8 $ 387.2
Work in process. . . . . . . . . . . . . . . . . . . . . 153.0 159.1
Finished goods . . . . . . . . . . . . . . . . . . . . . 853.2 840.1
Supplies and other . . . . . . . . . . . . . . . . . . . 210.3 220.0
-------- --------
1,581.3 1,606.4
Excess of FIFO cost over Last-In, First-Out (LIFO) cost . . (195.7) (216.0)
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $1,385.6 $1,390.4
======== ========
4. Detail of accrued consumer coupon redemption costs is as follows:
Second Quarter Six Months
Ended June 30 Ended June 30
-------------- --------------
(Millions of dollars) 2001 2000 2001 2000
- ------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Beginning balance. . . . . . . . $52.1 $55.0 $54.0 $58.7
Additions charged to expense . . 39.0 42.8 77.8 78.5
Payments . . . . . . . . . . . . (36.7) (37.8) (78.1) (76.8)
Changes in estimates . . . . . . (2.5) (5.9) (1.5) (6.1)
Currency rate changes. . . . . . (.1) (.2) (.4) (.4)
----- ----- ----- -----
Ending balance $51.8 $53.9 $51.8 $53.9
===== ===== ===== =====
5. Detail of comprehensive income is as follows:
Six Months
Ended June 30
----------------
(Millions of dollars) 2001 2000
- ----------------------------------------------------------------------
<s> <c> <c>
Net Income. . . . . . . . . . . . . . . . . . . . . $848.8 $904.5
Unrealized currency translation adjustments . . . . (213.9) (106.6)
Deferred gains on cash flow hedges, net of tax. . . .2 -
------ ------
Comprehensive income. . . . . . . . . . . . . . . . $635.1 $797.9
====== ======
6. Information concerning consolidated operations by business segment is
as follows:
Second Quarter Six Months
Ended June 30 Ended June 30
------------------ -----------------
(Millions of dollars) 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
NET SALES:
Tissue. . . . . . . . . . . . . . . . . . . . . . . . $1,791.3 $1,784.1 $3,700.6 $3,578.0
Personal Care . . . . . . . . . . . . . . . . . . . . 1,413.7 1,360.8 2,790.8 2,659.1
Health Care and Other . . . . . . . . . . . . . . . . 338.1 333.4 672.7 639.7
Intersegment Sales. . . . . . . . . . . . . . . . . . (8.9) (13.8) (21.5) (25.1)
-------- -------- -------- -------
Consolidated. . . . . . . . . . . . . . . . . . . . . $3,534.2 $3,464.5 $7,142.6 $6,851.7
======== ======== ======== =======
OPERATING PROFIT (reconciled to income before taxes):
Tissue. . . . . . . . . . . . . . . . . . . . . . . . $305.7 $320.3 $644.2 $625.6
Personal Care . . . . . . . . . . . . . . . . . . . . 264.2 279.9 527.8 549.4
Health Care and Other . . . . . . . . . . . . . . . . 48.2 46.0 95.2 90.7
Other income (expense), net . . . . . . . . . . . . . (8.0) 12.4 (10.2) 99.6
Unallocated items - net . . . . . . . . . . . . . . . (19.5) (20.3) (35.3) (48.3)
-------- -------- -------- -------
Total Operating Profit. . . . . . . . . . . . . . . . 590.6 638.3 1,221.7 1,317.0
Interest income . . . . . . . . . . . . . . . . . . . 4.0 7.2 8.7 15.0
Interest expense. . . . . . . . . . . . . . . . . . . (48.4) (54.0) (98.9) (103.4)
-------- -------- -------- -------
Income Before Income Taxes. . . . . . . . . . . . . . $546.2 $591.5 $1,131.5 $1,228.6
======== ======== ======== ========
Description of Business Segments:
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.
Unaudited
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
SECOND QUARTER OF 2001 COMPARED WITH SECOND QUARTER OF 2000
By Business Segment
(Millions of dollars)
Net Sales 2001 2000
- -------------------------------------------------------------------------------
<s> <c> <c>
Tissue. . . . . . . . . . . . . . . . . . . . . . $1,791.3 $1,784.1
Personal Care 1,413.7 1,360.8
Health Care and Other . . . . . . . . . . . . . . 338.1 333.4
Intersegment Sales. . . . . . . . . . . . . . . . (8.9) (13.8)
-------- --------
Consolidated. . . . . . . . . . . . . . . . . . . $3,534.2 $3,464.5
======== ========
Commentary:
Consolidated net sales for the quarter were 2.0 percent higher than in 2000.
Excluding currency effects, net sales increased about 5 percent, with
improvement in each of the Corporation's business segments. Sales volumes
were approximately 3 percent higher with acquisitions contributing
approximately 1 percentage point of that growth. Selling prices increased 2
percent.
- - Worldwide net sales for tissue products were slightly greater than in the
second quarter of 2000. Excluding currency effects, net sales rose more
than 3 percent. Selling price increases implemented during 2000 accounted
for most of the improvement, with overall sales volumes essentially the
same as the prior year. In North America, sales volumes of Kleenex facial
tissue, Scott bathroom tissue and Huggies baby wipes moved higher, while
shipments of Scott towels were below year-ago levels and supply of
Cottonelle bathroom tissue was constrained in advance of the start-up
of the Corporation's new tissue machine located in Jenks, Oklahoma. Sales
volumes for away-from-home tissue products in North America were
approximately 1 percent lower. In other regions, sales volumes of tissue
products rose in Latin America and in Asia, spurred by good growth in
Korea, but were down about 1 percent in Europe.
- - Worldwide net sales of personal care products rose 3.9 percent compared
with the second quarter of 2000, and were up over 7 percent before currency
effects. Sales volumes increased about 6 percent and selling prices were 1
percent higher. The volume gains were highlighted by continued strong
improvement in sales volumes of Huggies diapers in Europe and double-digit
growth in Asia. Sales volumes in Europe benefited from the first quarter
2001 acquisition of Linostar Spa ("Linostar") in Italy and in Asia from
the June 2000 acquisition of S-K Corporation ("S-K"). These acquisitions
accounted for approximately 3 percent of the increased sales volumes.
- - Worldwide net sales of health care and other products increased 1.4
percent. Net sales of health care products alone were up more than 5
percent, driven by solid growth in sales volumes. The improvement,
however, was largely offset by soft demand for other products in
the segment.
Unusual Items:
During the second quarter and first six months of 2001 and 2000, the
Corporation recorded the following unusual items ("Unusual Items"), which for
the purpose of facilitating a meaningful discussion of ongoing operations have
been excluded from the operating profit in the "Excluding Unusual Items"
columns in the Operating Profit tables.
Second Quarter Six Months
Ended June 30 Ended June 30
-------------- -------------
(Millions of dollars) 2001 2000 2001 2000
- ------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Charges (credits) to operating profit:
Business improvement and other programs. . . . . . . $21.1 $ 6.0 $42.3 $ 15.5
Business integration and other costs . . . . . . . . 7.4 5.2 14.3 17.4
Patent settlement and accrued liability reversal . . - - - (75.8)
----- ----- ----- ------
Total charges (credits). . . . . . . . . . . . . . . $28.5 $11.2 $56.6 $(42.9)
===== ===== ===== ======
Income Statement Classification of Unusual Items:
- -----------------------------------------------------
Second Quarter Six Months
Ended June 30 Ended June 30
-------------- -------------
(Millions of dollars) 2001 2000 2001 2000
- ------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Cost of products sold. . . . . . . . . . . . . . . . $22.2 $4.7 $43.8 $ 19.0
Advertising, promotion and selling expenses. . . . . 1.3 1.0 2.0 3.5
General expense. . . . . . . . . . . . . . . . . . . 5.0 5.5 10.3 10.4
Other (income) expense, net. . . . . . . . . . . . . - - .5 (75.8)
----- ----- ----- ------
Total pretax charge (credit) . . . . . . . . . . . . $28.5 $11.2 $56.6 $(42.9)
===== ===== ===== ======
- - The 2001 business improvement charges primarily relate to workforce
severance and asset consolidation programs to streamline personal care
operations in North America and China. The 2000 charges primarily were for
accelerated depreciation stemming from business improvement programs
announced in 1998.
- - Costs to integrate acquired businesses into the Corporation's existing
operations were recorded in both 2001 and 2000. Also in 2000, a downward
revision in the estimated market value of certain nonproductive assets was
recorded.
- - In 2000, as part of a patent settlement, the Corporation was compensated
for royalty income related to prior years. The settlement, together with the
reversal of certain estimated accrued liabilities, related to the 1997 sale
of a pulp and newsprint mill that ceased to be required, was recorded in
other income.
2001 2000
---------------------------- --------------------------
AS EXCLUDING As Excluding
Operating Profit REPORTED UNUSUAL ITEMS Reported Unusual Items
- ---------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Tissue. . . . . . . . . . . . . . . . . $305.7 $314.6 $320.3 $325.5
Personal Care . . . . . . . . . . . . . 264.2 281.7 279.9 281.1
Health Care and Other . . . . . . . . . 48.2 50.3 46.0 50.8
Other income (expense), net . . . . . . (8.0) (8.0) 12.4 12.4
Unallocated items - net . . . . . . . . (19.5) (19.5) (20.3) (20.3)
------ ------ ------ ------
Consolidated. . . . . . . . . . . . . . $590.6 $619.1 $638.3 $649.5
====== ====== ====== ======
Note: Unallocated items - net, consists of expenses not associated with the
business segments.
Commentary:
Excluding the Unusual Items, operating profit declined 4.7 percent to $619.1
million in the second quarter of 2001 compared with $649.5 million in 2000.
Lower fiber costs of approximately $20 million were not sufficient to counter
the impact of cost increases. These included significantly higher energy
costs, start-up costs related to the Corporation's new consumer tissue and
rollwipes machines, and higher levels of marketing support for tissue and
personal care products, particularly in Europe. In addition, weakness of key
currencies, including the euro, the British pound, the Brazilian real and the
South Korean won reduced operating profit approximately $40 million compared
with the second quarter of 2000.
- - Operating profit for the tissue segment declined primarily as a result
of the start-up costs and significantly higher energy costs. The start-up
costs for the two new machines mentioned above amounted to $18 million in
the second quarter. Although energy costs moderated from first quarter 2001
levels, they increased by $15 million compared with second quarter 2000.
These cost increases were tempered by lower fiber costs of almost $18
million in the quarter in North America.
- - Operating profit for the personal care segment was essentially even with
the second quarter of 2000. The segment's results benefited from the prior
year's price increases for diapers and training and youth pants in North
America. However, operating profit in Latin America declined substantially.
Brazil in particular was severely impacted by the significant decline in the
value of the Brazilian real that has affected market conditions and pricing.
- - Operating profit for health care products increased 16 percent, but
lower earnings for other products in the segment resulted in an overall 1
percent decline in operating profit for the health care and other segment.
- - The change in other income (expense), net is primarily due to currency
transactions that resulted in losses in 2001 compared with gains last year.
By Geography
(Millions of dollars)
Net Sales 2001 2000
- ------------------------------------------------------------------------------------------------------
<s> <c> <c>
North America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,375.6 $2,343.3
Outside North America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,294.2 1,224.8
Intergeographic Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (135.6) (103.6)
-------- --------
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,534.2 $3,464.5
======== ========
2001 2000
---------------------------- --------------------------
AS EXCLUDING As Excluding
Operating Profit REPORTED UNUSUAL ITEMS Reported Unusual Items
- ---------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
North America. . . . . . . . . . . . . $534.0 $548.8 $546.5 $553.9
Outside North America. . . . . . . . . 84.1 97.8 99.7 103.5
Other income (expense), net. . . . . . (8.0) (8.0) 12.4 12.4
Unallocated items - net. . . . . . . . (19.5) (19.5) (20.3) (20.3)
------ ------ ------ ------
Consolidated . . . . . . . . . . . . . $590.6 $619.1 $638.3 $649.5
====== ====== ====== ======
Note: Unallocated items - net, consists of expenses not associated with the
geographic areas.
Commentary:
- - Net sales in North America increased 1.4 percent compared with 2000
principally due to the higher selling prices for tissue and personal care
products tempered by lower sales volumes for printing papers.
- - Net sales outside of North America increased 5.7 percent primarily due
to the sales volume growth for Huggies diapers in Europe and the higher
personal care sales volumes in Asia that more than offset the unfavorable
currency effects.
- - Excluding the Unusual Items, operating profit in North America declined
slightly because the higher start-up and energy costs exceeded the effect of
increased selling prices and lower fiber costs. Also, the effect of lower
fringe benefit costs, primarily due to favorable returns on pension assets,
was less significant in 2001 compared with the prior year.
- - Excluding the Unusual Items, operating profit outside North America
decreased 5.5 percent from 2000 as the higher marketing costs and
unfavorable currency effects more than offset the increased sales volumes.
Additional Income Statement Commentary:
- - Interest expense decreased primarily due to lower interest rates.
- - Excluding the Unusual Items from both years, the effective tax rate was
30.2 percent in the second quarter of 2001 compared with 31.0 percent in
2000. The lower tax rate was primarily because the mix of the Corporation's
income continues to shift to jurisdictions with lower effective tax rates.
- - The Corporation's share of net income of equity affiliates increased
28.0 percent primarily due to all-time record sales, operating profit and
net income at Kimberly-Clark de Mexico, S.A. de C.V. ("KCM"). An increase
in the value of the Mexican peso was a key factor contributing to the
improved results.
- - On a diluted basis, net income was $.78 per share in 2001 compared to
$.79 per share in 2000, a decrease of 1.3 percent. Excluding the
Unusual Items, earnings from operations were $.81 per share in both years.
FIRST SIX MONTHS OF 2001 COMPARED WITH FIRST SIX MONTHS OF 2000
By Business Segment
(Millions of dollars)
Net Sales 2001 2000
- ----------------------------------------------------------------------------------------------------
<s> <c> <c>
Tissue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,700.6 $3,578.0
Personal Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,790.8 2,659.1
Health Care and Other . . . . . . . . . . . . . . . . . . . . . . . . 672.7 639.7
Intersegment Sales. . . . . . . . . . . . . . . . . . . . . . . . . . (21.5) (25.1)
-------- --------
Consolidated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,142.6 $6,851.7
======== =======
2001 2000
---------------------------- --------------------------
AS EXCLUDING As Excluding
Operating Profit REPORTED UNUSUAL ITEMS Reported Unusual Items
- ---------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Tissue. . . . . . . . . . . . . . . . $ 644.2 $ 654.6 $ 625.6 $ 644.1
Personal Care . . . . . . . . . . . . 527.8 566.7 549.4 553.4
Health Care and Other . . . . . . . . 95.2 102.0 90.7 101.1
Other income (expense), net . . . . . (10.2) (9.7) 99.6 23.8
Unallocated items - net . . . . . . . (35.3) (35.3) (48.3) (48.3)
-------- -------- -------- --------
Consolidated. . . . . . . . . . . . . $1,221.7 $1,278.3 $1,317.0 $1,274.1
======== ======== ======== ========
Note: Unallocated items - net, consists of expenses not associated with the
business segments.
Commentary:
Consolidated net sales for the first six months of 2001 were 4.2 percent
higher than in 2000. Excluding currency effects, net sales were more than 7
percent higher, with improvement in each of the Corporation's business
segments. Sales volumes were approximately 4 percent higher, including a 2
percent increase for the sales volumes of Linostar, S-K and the consolidation
of Hogla-Kimberly, Limited ("Hogla") beginning in the second quarter of 2000.
Selling prices increased nearly 3 percent.
- - Worldwide net sales for tissue products were 3.4 percent greater than
in 2000. Excluding currency effects, net sales rose more than 6 percent.
Sales volumes were nearly 2 percent higher, principally due to increased
sales of bathroom tissue and Huggies baby wipes in North America. Selling
prices were more than 4 percent higher because of price increases
implemented in 2000.
- - Worldwide net sales for personal care products increased 5.0 percent
from 2000 and excluding currency effects, increased more than 8 percent.
Sales volumes rose more than 6 percent, driven by the increased diaper sales
in Europe, and selling prices increased by 2 percent.
- - Worldwide net sales of health care and other products increased 5.2
percent above 2000 primarily due to higher sales volumes for health care
products.
Excluding the Unusual Items, operating profit increased slightly with gains in
each of the business segments.
- - The increase in operating profit for the tissue segment was primarily
due to the higher selling prices tempered by the higher energy and start-up
costs, increased marketing expenses and the unfavorable currency effects.
- - The increase in operating profit for personal care products was
attributable to the higher sales volumes and selling prices partially offset
by increased marketing expenses, primarily in Europe and the unfavorable
currency effects.
- - The nearly 1 percent increase in operating profit for the health care
and other segment was principally due to the higher sales volumes for health
care products, partially offset by lower earnings for other products in the
segment.
- - Other income (expense), net reflects currency transaction losses in 2001
compared to gains in 2000. Also included in 2000 are gains on minor asset
sales.
By Geography
(Millions of dollars)
Net Sales 2001 2000
- ----------------------------------------------------------------------------------------------------
<s> <c> <c>
North America. . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,769.2 $4,602.7
Outside North America. . . . . . . . . . . . . . . . . . . . . . . . 2,632.6 2,439.4
Intergeographic Sales. . . . . . . . . . . . . . . . . . . . . . . . (259.2) (190.4)
-------- --------
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,142.6 $6,851.7
======== ========
2001 2000
---------------------------- --------------------------
AS EXCLUDING As Excluding
Operating Profit REPORTED UNUSUAL ITEMS Reported Unusual Items
- ---------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
North America. . . . . . . . . . . . . $1,068.8 $1,110.5 $1,062.5 $1,086.4
Outside North America 198.4 212.8 203.2 212.2
Other income (expense), net. . . . . . (10.2) (9.7) 99.6 23.8
Unallocated items - net. . . . . . . . (35.3) (35.3) (48.3) (48.3)
-------- -------- -------- --------
Consolidated . . . . . . . . . . . . . $1,221.7 $1,278.3 $1,317.0 $1,274.1
======== ======== ======== ========
Note: Unallocated items - net, consists of expenses not associated with the
geographic areas.
Commentary:
- - Net sales in North America increased 3.6 percent in 2001 because of the
selling price increase for tissue and personal care products and the higher
sales volumes for tissue products.
- - Net sales outside of North America were 7.9 percent greater in 2001
because the higher selling prices for tissue in Europe and the increased
sales volumes for diapers, particularly in Europe and Asia more than
offset the unfavorable currency effects. Acquisitions and the
consolidation of Hogla contributed 5.6 percent to the improvement in
sales volumes.
- - Excluding the Unusual Items in both years, operating profit in North
America increased 2.2 percent in 2001 principally due to the selling price
increases for tissue and personal care products, partially offset by the
higher start-up and energy costs. The effect of lower fringe benefit costs
related to returns on pension assets was less significant in 2001 compared
with 2000.
- - Excluding the Unusual Items in both years, operating profit outside
North America was essentially even with last year because the increased
selling prices and sales volumes were offset by the higher marketing
expenses and the unfavorable currency effects.
Additional Income Statement Commentary:
- - Excluding the Unusual Items in both years, the effective tax rate was
30.2 percent in 2001 compared with 31.0 percent in 2000. The lower tax rate
was primarily because the mix of the Corporation's income continues to shift
to jurisdictions with lower effective tax rates.
- - The Corporation's share of net income of equity affiliates increased 3.8
percent from 2000 because the higher earnings of KCM more than offset
the economically constrained performance of the Corporation's affiliate in
Brazil.
- - On a diluted share basis, net income was $1.58 per share in 2001
compared with $1.65 per share in 2000, a decline of 4.2 percent.
Excluding the Unusual Items in both years, earnings from operations were
$1.65 per share in 2001 compared with $1.60 per share in 2000, an
increase of 3.1 percent.
LIQUIDITY AND CAPITAL RESOURCES:
- - Cash provided by operations for the first six months of 2001 declined by
$77 million compared with the first six months of 2000. In 2000, cash
inflows included approximately $55 million from the settlement of a patent
dispute. In the first quarter of 2001, there was a reduction of accrued
expenses of nearly $70 million due to the payout of long-term incentive
compensation, which will not recur in subsequent quarters of the
year.
- - During the first six months of 2001, the Corporation repurchased 4.7
million shares of its common stock at cost of $295 million, including 2.7
million shares repurchased in the second quarter for $159 million.
- - At June 30, 2001 the Corporation's total debt and preferred securities
was $3.8 billion compared with $3.5 billion at December 31, 2000. Net debt
(total debt net of cash and cash equivalents) and preferred securities
was $3.4 billion compared with $3.3 billion at December 31, 2000.
The Corporation's ratio of net debt and preferred securities to capital
was 35.7 percent, which was within the target range of 30 percent to
40 percent.
- - During the second quarter of 2001, the Corporation entered into an
agreement to acquire an additional 5 percent ownership in its 50
percent-owned joint venture, Kimberly-Clark Australia ("K-CA"), for
A$77.5 million (approximately U.S. $39 million). Effective July 1, the
Corporation will begin consolidating K-CA's net sales and operating
results. The Corporation and its joint venture partner, Amcor Limited, also
exchanged options for the purchase by the Corporation of the remaining 45
percent ownership interest for A$697.5 million (approximately U.S. $355
million) within the next four years. In contemplation of the acquisition
of the 5 percent ownership interest and the exchange of options, the
Corporation entered into forward contracts to purchase Australian
dollars needed to complete the acquisition of such ownership interests.
The longest of these contracts, which hedge the currency exposure relating
to this transaction, matures in August 2003. These forward contracts
are marked to market each period and gains or losses are included in
current earnings. In the second quarter of 2001, net losses on these
contracts of approximately $3.9 million were recorded in other expense.
- - 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.
NEW PRONOUNCEMENTS
Statements of Financial Accounting Standards ("SFAS") 141, Business
Combinations, and 142, Goodwill and Other Intangible Assets, were issued in
June 2001. FAS 141 is effective July 1, 2001 and FAS 142 is effective for
fiscal years beginning after December 15, 2001. Under these new standards,
goodwill and intangible assets having indefinite lives will no longer be
amortized but will be subject to annual impairment tests. Other intangible
assets will continue to be amortized over their estimated useful lives.
SFAS 142 will be adopted beginning in the first quarter of 2002. Application
of the nonamortization provisions of SFAS 142 would have increased reported
net income in 2000 by approximately $88.3 million, or $.16 per share. During
2002, the Corporation will perform the required impairment tests of goodwill
and indefinite lived intangible assets as of January 1, 2002.
In April 2001, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board issued EITF 00-25, Accounting for Consideration
from a Vendor to a Retailer in Connection with the Purchase or Promotion of
the Vendor's Products. Under EITF 00-25, the cost of promotion activities
offered to customers will be classified as a reduction in sales revenue. The
Corporation is currently reviewing the rule and plans to adopt EITF 00-25, as
required, in the first quarter of 2002. Adoption is not expected to change
reported earnings.
Also in April 2001, the EITF delayed implementation of EITF 00-14, Accounting
for Certain Sales Incentives, to coincide with the implementation date for
EITF 00-25. Under EITF 00-14, the estimated redemption value of consumer
coupons must be recorded at the time the coupons are issued and classified as
a reduction in sales revenue. The Corporation will adopt EITF 00-14 in the
first quarter of 2002 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 during the second quarter
and six months ended June 30, 2001 were approximately $45 million and $95
million, respectively. Discounts recorded as promotion expense during the
second quarter and six months ended June 30, 2000 were approximately $46
million and $95 million, 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, which at December 31, 2000 was estimated to be an after-tax
charge equal to approximately $.02 per share.
ENVIRONMENTAL MATTERS
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 its
business, financial condition or results of operations.
OUTLOOK
On July 12, 2001, the Corporation stated in a press release its belief that
for the full year 2001, assuming no further deterioration in foreign currency
rates, earnings per share from operations will be toward the lower end of the
range of analysts' estimates, which at that time was $3.40 per share to $3.55
per share. The Corporation expects earnings per share from operations will
improve sequentially in the second half of 2001. That expectation assumes
lower fiber, polymer and energy costs and cost savings programs that will have
a positive impact on its results in the second half of 2001. The Corporation
also expects that its growth investments in new machines, for Cottonelle Fresh
rollwipes and proprietary uncreped through air-dried tissue technology, will
begin to contribute to earnings later in 2001.
The Corporation expects solid and sustainable growth in sales and earnings in
2002, with sales in line with its objective of 6 percent to 8 percent,
assuming no further deterioration in foreign currency rates. The Corporation
also believes that it will return to its targeted double-digit rate of growth
in earnings per share from operations in 2002.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain information contained in this report is forward-looking and is based
on various assumptions. Such information includes, without limitation,
anticipated financial and operating results, strategies, contingencies and
contemplated transactions of the Corporation. These forward-looking statements
are based upon management's expectations and beliefs concerning future events
impacting the Corporation. There can be no assurance that such events will
occur or that their effects on the Corporation will be as currently expected.
For a description of certain 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 1 of the Corporation's Annual
Report on Form 10-K for the year ended December 31, 2000 entitled "Factors
That May Affect Future Results."
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(3)a Restated Certificate of Incorporation, dated June 12, 1997,
incorporated by reference to Exhibit No. (3)a of the
Corporation's Annual Report on Form 10-K for the year ended
December 31, 2000.
(3)b By-Laws, as amended November 22, 1996, incorporated by reference
to Exhibit No. 4.2 of the Corporation's Registration Statement
on Form S-8 filed with the Securities and Exchange Commission
on December 6, 1996 (File No. 33-17367).
(4) Copies of instruments defining the rights of holders of long-term
debt will be furnished to the Securities and Exchange Commission
upon request.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KIMBERLY-CLARK CORPORATION
(Registrant)
By: /s/ John W. Donehower
----------------------
John W. Donehower
Senior Vice President and
Chief Financial Officer
(principal financial officer)
By: /s/ Randy J. Vest
------------------
Randy J. Vest
Vice President and Controller
(principal accounting officer)
August 9, 2001