EXHIBIT 13
CONSOLIDATED INCOME STATEMENT
Kimberly-Clark Corporation and Subsidiaries
(Millions of dollars Year Ended December 31
except per share amounts) 1994 1993 1992
-------------------------------------------------------------------------------------
Net Sales ........................................... $7,364.2 $6,972.9 $7,091.1
Cost of products sold ............................. 4,925.1 4,581.4 4,534.5
-------- -------- --------
Gross Profit ........................................ 2,439.1 2,391.5 2,556.6
Advertising, promotion and selling expenses ....... 1,079.8 1,068.3 1,255.6
Research expense .................................. 167.1 158.5 156.1
General expense ................................... 373.1 371.2 351.8
Restructuring charge .............................. - - 250.0
-------- -------- --------
Operating Profit .................................... 819.1 793.5 543.1
Interest expense .................................. (129.4) (112.6) (99.4)
Other income (expense), net ....................... 50.9 32.1 18.2
-------- -------- --------
Income Before Income Taxes .......................... 740.6 713.0 461.9
Provision for income taxes ........................ 276.4 284.4 186.3
-------- -------- --------
Income Before Equity Interests ...................... 464.2 428.6 275.6
Share of net income of equity companies ........... 87.1 98.0 82.9
Minority owners' share of subsidiaries'
net income ...................................... (16.2) (15.7) (13.5)
-------- -------- --------
Income Before Cumulative Effects of Accounting Changes 535.1 510.9 345.0
Cumulative effects of accounting changes:
Other postretirement benefits, net of
income taxes .................................. - - (245.0)
Income taxes .................................... - - 35.0
-------- -------- --------
Net Income .......................................... $ 535.1 $ 510.9 $ 135.0
======== ======== ========
Per Share Basis
Income before cumulative effects of accounting
changes ......................................... $ 3.33 $ 3.18 $ 2.15
Cumulative effects of accounting changes:
Other postretirement benefits, net of
income taxes .................................. - - (1.53)
Income taxes .................................... - - .22
-------- -------- --------
Net income ........................................ $ 3.33 $ 3.18 $ .84
======== ======== ========
See Notes to Financial Statements.
CONSOLIDATED BALANCE SHEET
Kimberly-Clark Corporation and Subsidiaries
December 31
(Millions of dollars) ASSETS 1994 1993
------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents ................................... $ 23.8 $ 34.8
Accounts receivable ......................................... 847.5 738.7
Inventories ................................................. 804.2 775.9
Deferred income tax benefits ................................ 89.8 93.7
Prepaid expenses ............................................ 44.6 32.1
-------- --------
Total Current Assets ...................................... 1,809.9 1,675.2
-------- --------
Property
Land and timberlands ........................................ 125.5 121.0
Buildings ................................................... 1,053.6 1,004.5
Machinery and equipment ..................................... 5,213.0 5,034.6
Construction in progress .................................... 211.9 212.7
-------- --------
6,604.0 6,372.8
Less accumulated depreciation ............................... 2,404.6 2,330.0
-------- --------
Net Property .............................................. 4,199.4 4,042.8
Investments in Equity Companies ............................... 376.2 398.3
Deferred Charges and Other Assets ............................. 330.2 264.4
-------- --------
$6,715.7 $6,380.7
======== ========
See Notes to Financial Statements.
December 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
------------------------------------------------------------------------------------
Current Liabilities
Debt payable within one year ............................... $ 771.8 $ 684.8
Trade accounts payable ..................................... 358.0 322.0
Other payables ............................................. 137.6 116.1
Accrued expenses ........................................... 633.9 594.6
Accrued income taxes ....................................... 87.0 121.8
Dividends payable .......................................... 70.5 69.2
-------- --------
Total Current Liabilities ................................ 2,058.8 1,908.5
-------- --------
Long-Term Debt ............................................... 929.5 933.1
-------- --------
Noncurrent Employee Benefit Obligations ...................... 438.7 430.0
-------- --------
Deferred Income Taxes ........................................ 612.8 585.0
-------- --------
Minority Owners' Interests in Subsidiaries ................... 80.1 66.9
-------- --------
Stockholders' Equity
Common stock-$1.25 par value-authorized 300.0 million
shares; issued 161.9 million ............................. 202.4 202.4
Additional paid-in capital ................................. 27.0 27.1
Common stock held in treasury, at cost - 1.7 million
and 1.0 million shares at December 31, 1994 and
1993, respectively ....................................... (76.8) (32.9)
Unrealized currency translation adjustments ................ (310.0) (240.6)
Retained earnings .......................................... 2,753.2 2,501.2
-------- --------
Total Stockholders' Equity ............................... 2,595.8 2,457.2
-------- --------
$6,715.7 $6,380.7
======== ========
CONSOLIDATED CASH FLOW STATEMENT
Kimberly-Clark Corporation and Subsidiaries
Year Ended December 31
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------------------------
Operations
Net income ......................................... $ 535.1 $ 510.9 $ 135.0
Depreciation ....................................... 329.6 295.9 289.0
Restructuring charge ............................... - - 250.0
Cumulative effects of accounting changes ........... - - 210.0
Deferred income tax provision (benefit) ............ 31.8 23.6 (3.4)
Equity companies' earnings in excess of
dividends paid ................................... (40.1) (49.0) (35.6)
Minority owners' share of subsidiaries'
net income ....................................... 16.2 15.7 13.5
Changes in operating working capital ............... (184.2) (41.8) (105.1)
Pension funding in excess of expense ............... (40.1) (41.0) (48.1)
Other .............................................. 20.7 32.4 48.7
------- ------ -------
Cash Provided by Operations .................... 669.0 746.7 754.0
------- ------ -------
Investing
Capital spending ................................... (485.2) (654.5) (690.5)
Acquisitions of businesses ......................... (118.0) - -
Proceeds from disposition of property and
businesses ....................................... 155.5 33.8 4.3
Other .............................................. 4.9 (44.9) (83.3)
------- ------ -------
Cash Used for Investing ........................ (442.8) (665.6) (769.5)
------- ------ -------
Financing
Cash dividends paid ................................ (281.8) (273.4) (262.8)
Changes in debt payable within one year ............ 102.9 239.5 138.7
Increases in long-term debt ........................ 176.6 83.9 237.4
Decreases in long-term debt ........................ (180.2) (145.4) (117.5)
Acquisition of common stock for the treasury ....... (52.2) (.8) (2.3)
Other .............................................. (2.5) 8.8 20.3
------- ------ -------
Cash (Used for) Provided by Financing .......... (237.2) (87.4) 13.8
------- ------ -------
Decrease in Cash and Cash Equivalents ................ $ (11.0) $ (6.3) $ (1.7)
======= ======= =======
See Notes to Financial Statements.
Notes to Financial Statements
Note 1. Accounting Policies
Kimberly-Clark Corporation's accounting policies conform to
generally accepted accounting principles. Significant policies
followed are described below.
Basis of Presentation
The consolidated financial statements include the accounts of
Kimberly-Clark Corporation and all significant subsidiaries
which are more than 50 percent owned and controlled.
Investments in significant nonconsolidated companies which 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.
Certain reclassifications have been made to conform prior
years' data to the current year presentation.
Start-Up and Preoperating Costs
Costs of bringing certain significant new or expanded
facilities into operation are recorded as deferred charges and
amortized to income over periods of not more than five years.
Advertising and Promotion Expenses
Advertising expenses are charged to income during the year in
which they are incurred. Promotion expenses are charged to
income over the period of the promotional campaign.
Per Share Data
Per share data are based on the average number of common shares
outstanding, which was 160.9 million for the years ended
December 31, 1994 and 1993, and 160.4 million for the year
ended December 31, 1992.
Inventories
U.S. inventories valued at cost on the Last-In, First-Out
(LIFO) method for U.S. income tax purposes are valued in the
same manner for accounting purposes. The balance of the U.S.
inventories and inventories of consolidated operations outside
the U.S. are valued at the lower of cost, using the First-In,
First-Out (FIFO) method, or market.
Property and Depreciation
Property, plant and equipment are stated at cost. Depreciable
property is depreciated on the straight-line or units-of-
production method for accounting purposes and generally on an
accelerated method for income tax purposes. 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.
Environmental Expenditures
Environmental expenditures related to current operations which
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.
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.
Note 2. Income Taxes
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS No. 109) was adopted in
1992, and the $35.0 million cumulative effect of adopting the
standard was credited to 1992 income as a separate item in the
consolidated income statement.
An analysis of the provision for income taxes follows:
Year Ended December 31
(Millions of dollars) 1994 1993 1992
---------------------------------------------------------------------------
Current income taxes:
United States ............................. $180.1 $181.9 $131.0
State ..................................... 23.1 38.8 34.0
Other countries ........................... 41.4 40.1 24.7
------ ------ ------
244.6 260.8 189.7
------ ------ ------
Deferred income taxes:
United States ............................. 35.4 34.2 12.9
State ..................................... 9.5 .6 (1.8)
Other countries ........................... (13.1) (11.2) (14.5)
------ ------ ------
31.8 23.6 (3.4)
------ ------ ------
Total ................................... $276.4 $284.4 $186.3
====== ====== ======
Deferred income tax assets (liabilities) as of December 31,
1994 and 1993 are comprised of the following:
(Millions of dollars) 1994 1993
----------------------------------------------------------------------------------------
Current deferred income tax assets (liabilities) attributable to:
Advertising and promotion accruals ........................... $ 19.6 $ 13.9
Pension, postretirement and other employee benefits .......... 43.7 43.7
Other accrued liabilities .................................... 29.2 31.2
Prepaid expenses ............................................. (4.4) (3.5)
Other ........................................................ 3.4 13.0
Valuation allowances ......................................... (1.7) (4.6)
-------- -------
Net current deferred income tax asset ...................... $ 89.8 $ 93.7
======== =======
Noncurrent deferred income tax assets (liabilities) attributable to:
Accumulated depreciation ..................................... $(807.3) $(754.7)
Start-up and preoperating costs .............................. (22.9) (29.7)
Operating loss carryforwards ................................. 137.3 92.6
Other postretirement benefits ................................ 151.5 153.7
Prepaid pension asset ........................................ (34.5) (19.4)
Other ........................................................ (.7) (1.5)
Valuation allowances ......................................... (36.2) (26.0)
-------- -------
Net noncurrent deferred income tax liability ............... $(612.8) $(585.0)
======= =======
The valuation allowances for deferred income tax assets
increased $7.3 million in 1994 and $7.7 million in 1993.
A reconciliation of income tax computed at the U.S. federal
statutory tax rate to the provision for income taxes is as
follows:
(Millions of dollars) 1994 1993 1992
Amount Percent Amount Percent Amount Percent
----------------------------------------------------------------------------------------
Tax at U.S. statutory rate ............. $259.2 35.0% $249.6 35.0% $157.0 34.0%
State income taxes, net of federal
tax benefit .......................... 22.1 3.0 25.4 3.6 21.0 4.5
Operating losses for which no tax
benefit was recognized ............... 10.0 1.4 10.0 1.4 10.8 2.3
U.S. federal income tax rate increase .. - - 8.8 1.2 - -
Other - net ............................ (14.9) (2.1) (9.4) (1.3) (2.5) (.5)
------ ---- ------ ---- ------ -----
Provision for income taxes ........... $276.4 37.3% $284.4 39.9% $186.3 40.3%
====== ==== ====== ==== ====== ====
At December 31, 1994, income taxes have not been provided on
$969 million of permanently invested unremitted net income of
subsidiaries operating outside the U.S. These earnings could
become subject to additional 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.
Any resulting U.S. or foreign tax liability would be largely
offset by U.S. foreign tax credits.
Income before income taxes included income of $14.4 million in
1994, income of $31.2 million in 1993 and a loss of
$23.5 million in 1992 from subsidiaries outside the U.S.
Net operating loss carryforwards of $405.7 million at
December 31, 1994 were applicable to certain subsidiaries
outside the U.S. If not utilized against taxable income,
$110.7 million of this amount will expire through the year
1999. The remaining $295.0 million has no expiration date.
Note 3. Postretirement and Other Benefits
Pension Benefits
The Corporation and its subsidiaries in North America and the
United Kingdom have defined-benefit retirement plans (the
principal plans) covering substantially all full-time
employees. Retirement benefits are based on years of service
and generally on the average compensation earned in the highest
five of the last 15 years of service. The funding policy is to
contribute assets that, at a minimum, fully fund the
accumulated benefit obligation, subject to regulatory and tax
deductibility limits. At December 31, 1994 and 1993, the fair
value of plan assets exceeded the accumulated benefit
obligation by $87.9 million and $57.2 million, respectively.
Assets held in the pension trusts are comprised principally of
common stocks, high-grade corporate and government bonds and
various short-term investments.
Most other subsidiaries outside the U.S. have pension plans
covering substantially all full-time employees. Obligations
under such plans are provided for by contributing to trusts,
purchasing insurance policies, or recording liabilities.
The components of net pension cost were as follows:
Year Ended December 31
(Millions of dollars) 1994 1993 1992
------------------------------------------------------------------------
Benefits earned ............................ $ 64.1 $ 56.2 $ 51.2
Interest on projected benefit obligation ... 109.8 106.3 102.2
Amortizations and other .................... 7.2 3.2 4.2
------ ------ ------
181.1 165.7 157.6
Less expected return on plan assets
(Actual return on plan assets was
a $2.0 million loss in 1994, and
gains of $152.5 million in 1993
and $66.7 million in 1992) ............... 121.8 115.3 106.1
------ ------ ------
Net pension cost ........................... $ 59.3 $ 50.4 $ 51.5
====== ====== ======
The assumed long-term rates of return on pension assets for
purposes of pension cost recognition for the principal plans
were as follows:
1994 1993 1992
------ ----- -----
United States plans .................. 9.25% 10.00% 10.00%
Canadian plans ....................... 10.00% 10.50% 10.50%
United Kingdom plan .................. 9.50% 10.50% 11.00%
Transition adjustments are being amortized on the straight-line
method over 14 to 18 years.
The funded status of the principal plans is presented below:
December 31
(Millions of dollars) 1994 1993
--------------------------------------------------------------------
Actuarial present value of plan benefits:
Accumulated benefit obligation:
Vested ............................... $1,160.0 $1,181.2
Nonvested ............................ 19.9 13.6
-------- --------
Total .............................. $1,179.9 $1,194.8
======== ========
Projected benefit obligation ........... $1,453.6 $1,428.8
Plan assets at fair value ................ 1,267.8 1,252.0
-------- --------
Plan assets less than projected
benefit obligation ..................... $ (185.8) $ (176.8)
======== ========
Consisting of:
Unfavorable actuarial experience ..... $ (263.9) $ (211.2)
Unamortized transition
adjustments ........................ (1.9) (2.2)
Unamortized prior service costs ...... (14.6) (14.1)
Net prepaid pension asset ............ 94.6 50.7
-------- --------
Total .......................... $ (185.8) $ (176.8)
======== ========
The assumed discount rates used to determine the projected
benefit obligation and accumulated benefit obligation for the
principal plans were as follows:
December 31
1994 1993
----- ------
United States plans .......... 8.75% 7.50%
Canadian plans ............... 10.00% 8.50%
United Kingdom plan .......... 9.50% 8.00%
The assumed long-term rates of compensation increases used to determine
the projected benefit obligation for the principal plans were as follows:
December 31
1994 1993
----- -----
United States plans .......... 5.50% 3.75%
Canadian plans ............... 6.25% 4.25%
United Kingdom plan .......... 6.00% 4.75%
Postretirement Health Care and Life Insurance Benefits
Substantially all retired employees of the Corporation and its
North American subsidiaries are covered by unfunded health care
and life insurance benefit plans. Benefits are based on years
of service and age at retirement. The plans are principally
noncontributory for current retirees, and are contributory for
most future retirees. The U.S. plans place a limit on the
Corporation's cost of future annual per capita retiree medical
benefits at no more than 200 percent of the 1992 annual per
capita cost.
Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS No. 106) was adopted in 1992. The estimated
accumulated postretirement benefit obligation (i.e., transition
obligation) of $395.0 million, less related deferred income tax
benefits of $150.0 million, was charged to 1992 income as a
cumulative effect of adopting SFAS No. 106. The net charge of
$245.0 million is shown as a separate item in the consolidated
income statement.
The components of postretirement health care and life insurance
benefit costs were as follows:
Year Ended December 31
(Millions of dollars) 1994 1993 1992
----------------------------------------------------------------------------------------
Benefits earned ........................................... $ 6.5 $ 6.3 $ 6.7
Interest on accumulated postretirement benefit
obligation .............................................. 26.8 28.3 32.4
Amortization .............................................. (.3) (1.9) -
------- ------ ------
Net postretirement benefit costs (of which
$26.2 million, $24.9 million and $24.1 million
were paid in 1994, 1993 and 1992, respectively) ......... $ 33.0 $ 32.7 $ 39.1
====== ====== ======
The components of the postretirement health care and life
insurance benefit obligation are presented below:
December 31
(Millions of dollars) 1994 1993
-----------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees ................................................ $219.0 $243.2
Fully eligible active plan participants ................. 55.7 55.0
Other active plan participants .......................... 89.0 96.6
------ ------
Total ................................................. 363.7 394.8
Favorable actuarial experience ............................ 54.9 22.6
------ ------
Total accrued postretirement benefit liability ............ 418.6 417.4
Less current portion ...................................... 29.2 27.7
------ ------
Noncurrent portion ........................................ $389.4 $389.7
====== ======
The December 31, 1994 accumulated postretirement benefit
obligation for the U.S. plans was determined using an assumed
health care cost trend rate of 10.4% in 1995, declining to zero
in 2002 and thereafter, which reflects the previously described
limit on the Corporation's cost of annual per capita retiree
medical benefits. The December 31, 1993 accumulated
postretirement benefit obligation was determined using an
assumed health care cost trend rate of 16% in 1994, declining
to zero in 2000 and thereafter. Assumed discount rates of
8.75% and 7.5% were used to determine the accumulated
postretirement benefit obligation at December 31, 1994 and
December 31, 1993, respectively.
A one-percentage point increase in the health care cost trend
rate would increase the accumulated postretirement benefit
obligation by $7.4 million at December 31, 1994 and expense by
$.5 million for the year then ended.
Other Benefits
Voluntary contributory investment plans are provided to
substantially all U.S. employees. Under the plans, the
Corporation matches a portion of employee contributions. Costs
under the plans were $17.8 million, $18.0 million and
$16.4 million in 1994, 1993 and 1992, respectively.
Note 4. Debt
The major issues of long-term debt outstanding were:
December 31
(Millions of dollars) 1994 1993
-------------------------------------------------------------------------------
Kimberly-Clark Corporation
7 7/8% Debentures due 2023 ............................ $ 199.7 $ 199.7
8 5/8% Notes due 2001 ................................. 199.6 199.5
9 3/4% Notes due 1995 ................................. 100.1 100.3
9 1/8% Notes due 1997 ................................. 100.0 100.0
9% Notes due 2000 ..................................... 99.8 99.8
6 7/8% Debentures due 2014 ............................ 99.7 -
9 1/2% Sinking Fund Debentures due 2018 ............... 49.9 73.7
12% Notes ............................................. - 100.0
6 1/8% to 9.67% Industrial Development Revenue
Bonds maturing to 2023 .............................. 98.0 58.2
Other ................................................. 3.4 3.1
-------- -------
950.2 934.3
Subsidiaries
11% to 16.8% Debentures due 1995, 1996 and 1997 ....... 51.9 41.5
Bank loans in various currencies at fixed rates (8% to
13.69% at December 31, 1994) maturing to 2000 ....... 16.5 34.7
Bank loans at variable rates (6.25% to 7.81% at
December 31, 1994) maturing to 2003 ................. 21.4 21.4
Other ................................................. 37.0 30.9
-------- --------
1,077.0 1,062.8
Less current portion .................................... 147.5 129.7
-------- --------
Total ................................................. $ 929.5 $ 933.1
======== ========
Scheduled maturities of long-term debt are $26.8 million in
1996, $127.9 million in 1997, $10.2 million in 1998 and
$13.8 million in 1999.
At December 31, 1994, the Corporation had $600 million of
revolving credit facilities with a group of U.S. and European
banks. These facilities, which were unused at
December 31, 1994, permit borrowing at competitive interest
rates and are available for general corporate purposes,
including backup for commercial paper borrowings. The
Corporation pays commitment fees on the unused portion but may
cancel the facilities without penalty at any time prior to
their expiration. Of these facilities, $300 million expires in
September 1995 and the remainder expires in December 1999.
Debt payable within one year:
December 31
(Millions of dollars) 1994 1993
-------------------------------------------------------------------------------
Commercial paper .......................................... $520.2 $475.4
Current portion of long-term debt ......................... 147.5 129.7
Other short-term debt ..................................... 104.1 79.7
------ ------
Total ................................................... $771.8 $684.8
====== ======
At December 31, 1994 and 1993, the weighted average interest
rate for commercial paper was 6.0 percent and 3.2 percent,
respectively. At December 31, 1994 and 1993, the weighted
average interest rate for other short-term debt was 9.5 percent
and 10.8 percent, respectively.
At December 31, 1994 and 1993, the estimated fair value of the
Corporation's long-term debt was $1,052.9 million and
$1,165.0 million compared with a carrying value of
$1,077.0 million and $1,062.8 million, respectively. The fair
value of the Corporation's commercial paper and other short-
term debt approximated the carrying amount. These fair values
were based on quoted market prices for the same or similar debt
or on current rates offered to the Corporation for obligations
with the same maturities.
Note 5. Foreign Currency
Foreign Exchange Risk
The Corporation and its subsidiaries and affiliates have
manufacturing facilities in more than 25 countries throughout
the world, as well as transactions denominated in numerous
currencies. Consequently, Kimberly-Clark is subject to both
foreign exchange translation and transaction risks as a result
of strengthening or weakening of various currencies against
each other and local currencies versus the U.S. dollar.
Foreign currency losses included in consolidated net income
were $54.9 million in 1994, $15.7 million in 1993 and $9.2
million in 1992. The 1994 loss includes a $39.2 million
nonoperating charge for the Corporation's share of a foreign
currency loss attributable to the effect of the devaluation of
the Mexican peso, as discussed below. The amounts also include
losses from other currency transactions and from the
translation of balance sheet accounts of operations in
hyperinflationary economies.
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 currency
translation adjustments.
Summary of unrealized currency translation adjustments:
(Millions of dollars) 1994 1993
-----------------------------------------------------------------------
Balance, beginning of year ...................... $(240.6) $(197.9)
------- -------
Adjustments for the year:
Australian dollar ............................. 13.5 (1.0)
British pound ................................. 11.9 (5.4)
Canadian dollar ............................... (22.3) (16.5)
French franc .................................. 17.1 (9.2)
Mexican peso .................................. (102.4) (.8)
Other ......................................... 12.8 (9.8)
------- -------
(69.4) (42.7)
------- -------
Balance, end of year ............................ $(310.0) $(240.6)
======= =======
The income statements and balance sheets of operations in
hyperinflationary economies, i.e., Brazil (through July 1994
when the operation was sold) and Venezuela, 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.
Translation exposure is not hedged. However, 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 local currency, thereby minimizing the effect of currency
rate changes on their local operating profit margins.
Transaction Risk
Foreign currency risks arise from transactions and commitments
denominated in non-local currencies. These transactions and
commitments include the purchase of raw materials, finished
goods or items of property, plant and equipment, the sale of
products and the repayment of loans.
Management selectively hedges the Corporation's foreign
currency risks when it is practicable and economical to do so.
The instruments used to hedge foreign currency risks are
forward contracts and, to a lesser extent, option contracts.
These instruments are purchased from well-known money center
banks or government agencies (counterparties) throughout the
world. Usually the contracts extend for no more than 12
months, although their contractual term has been as long as 25
months. Credit risks with respect to the counterparties, and
the foreign currency risks that would not be hedged if the
counterparties fail to fulfill their obligations under the
contracts, are minimal in view of the financial strength of the
counterparties.
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. All other gains and losses are included in
current period income based on the period-end market price of
the instrument.
At December 31, 1994 there were outstanding forward and option
contracts, maturing at various dates in 1995, to purchase $199
million and to sell $312 million of various foreign currencies.
These contracts have not given rise to any significant net
deferred gains or losses as of December 31, 1994.
Certain equity affiliates and subsidiaries, located in Mexico
and Latin America, have financed a portion of their operations
with U.S. dollar-denominated liabilities, thereby creating
foreign currency transaction risks. The total U.S. dollar-
denominated liabilities of these entities at December 31, 1994
was approximately $400 million of which approximately $330
million was attributable to the Corporation's Mexican
affiliate. The Corporation's share of the foreign currency
transaction risk attributable to these liabilities was
approximately $170 million. During December 1994, the Mexican
peso was devalued. The Corporation's share of the
nonoperating, after-tax foreign currency loss attributable to
the effect of the devaluation on the U.S. dollar-denominated
liabilities of its Mexican affiliate was $39.2 million, or $.24
per share.
Note 6. Equity Participation Plans
Equity Participation Plans adopted in 1976, 1986 and 1992
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 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.
Data concerning participation and dividend shares follow:
1994 1993 1992
----------------------------------------------------------------------------------------
Outstanding - Beginning of year .............. 3,584,354 2,986,154 3,143,791
Awarded ...................................... - 1,351,100 -
Dividend shares credited - net ............... 358,499 432,788 303,317
Matured ...................................... (84,775) (1,142,988) (396,554)
Forfeited .................................... (62,400) (42,700) (64,400)
--------- --------- ---------
Outstanding - End of year .................... 3,795,678 3,584,354 2,986,154
========= ========= =========
Stock options are granted at not less than market value, become
exercisable over three years and expire 10 years after the date
of the grant.
Data concerning stock options follow:
1994 Number of Options
Price Range 1994 1993 1992
-------------------------------------------------------------------------------------
Outstanding - Beginning of year ... $11 7/8-$58 5/8 3,576,935 2,451,973 3,190,498
Granted ........................... - 1,351,100 -
Exercised* ........................ $11 7/8-$46 1/4 (255,559) (208,658) (720,685)
Cancelled or expired .............. $41 3/8-$58 5/8 (38,100) (17,480) (17,840)
--------- --------- ---------
Outstanding - End of year ......... $15.22 -$58 5/8 3,283,276 3,576,935 2,451,973
========= ========= =========
Exercisable ....................... $15.22 -$58 5/8 2,363,516 2,107,995 1,624,073
========= ========= =========
* Price ranges for options exercised were $11 7/8 to $46 1/4
per share in both 1993 and 1992.
At December 31, 1994, the number of additional shares of common
stock of the Corporation available for option and sale under
the 1992 Plan or for award as participation shares at such date
under the 1992 Plan was 7,397,500 shares. The 1976 and 1986
Plans have expired and no additional grants will be made under
these Plans. Amounts expensed for shares under the Plans were
$12.3 million, $10.6 million and $5.1 million in 1994, 1993 and
1992, respectively.
Note 7. Commitments
Operating Leases:
Future minimum rental payments under operating leases as of
December 31, 1994, were:
(Millions of dollars)
----------------------------------------------------------------------
Year Ending December 31:
1995 ....................................................... $ 52.8
1996 ....................................................... 36.1
1997 ....................................................... 27.9
1998 ....................................................... 20.6
1999 ....................................................... 15.4
Thereafter ................................................. 67.1
------
Total .................................................... $219.9
======
Consolidated rental expense under operating leases was
$113.1 million, $100.3 million and $118.9 million in 1994, 1993
and 1992, respectively.
Other:
The Corporation has entered into long-term contracts for the
purchase of certain raw materials. Minimum purchase
commitments, at current prices, are approximately
$230 million in each of the years 1995 and 1996. These
purchase commitments are not expected to result in losses.
Note 8. Stockholders' Equity
Changes in common stock issued, treasury stock, additional
paid-in capital and retained earnings are shown below:
Additional
(Millions of dollars Common Stock Issued Treasury Stock Paid-In Retained
except share amounts) Shares Amount Shares Amount Capital Earnings
-----------------------------------------------------------------------------------------
Balance at December 31,
1991 ................ 161,906,544 $202.4 1,829,324 $(59.4) $26.0 $2,395.1
Exercise of stock
options ............. - - (720,685) 22.8 1.6 -
Purchased for
treasury ............ - - 39,359 (2.3) - -
Net income ............ - - - - - 135.0
Cash dividends
declared ............ - - - - - (332.2)
----------- ------ --------- ------ ---- -------
Balance at December 31,
1992 ................ 161,906,544 202.4 1,147,998 (38.9) 27.6 2,197.9
Exercise of stock
options ............. - - (208,658) 6.8 (.5) -
Purchased for
treasury ............ - - 16,526 (.8) - -
Net income ............ - - - - - 510.9
Cash dividends
declared ............ - - - - - (207.6)
----------- ------ --------- ------ ---- -------
Balance at December 31,
1993 ................ 161,906,544 202.4 955,866 (32.9) 27.1 2,501.2
Exercise of stock
options ............. - - (255,559) 8.3 (.1) -
Purchased for
treasury ............ - - 1,013,848 (52.2) - -
Net income ............ - - - - - 535.1
Cash dividends
declared ............ - - - - - (283.1)
----------- ------ --------- ------ ---- -------
Balance at December 31,
1994 ................ 161,906,544 $202.4 1,714,155 $(76.8) $27.0 $2,753.2
=========== ====== ========= ====== ===== ========
At December 31, 1994, unremitted net income of equity companies
included in consolidated retained earnings was $427.9 million.
On June 21, 1988, the board of directors declared a
distribution of one preferred share purchase right for each
outstanding share of the Corporation's common stock. 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 $100, but will not become exercisable
until 10 days after a person or group acquires, or announces a
tender offer which 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, or after a vote of stockholders at a special
meeting shall, 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 21, 1998.
The Corporation has 20 million shares of authorized preferred
stock with no par value, none of which has been issued.
Note 9. Acquisition and Disposition of Businesses
In 1994, the Corporation purchased the feminine care products
businesses of VP-Schickedanz AG, a German company, and a 90
percent interest in the Handan Comfort and Beauty Group, a Chinese
company, for approximately $144 million. During the year, the Corporation
sold its tissue mill in Memphis, Tenn., adhesive-coated label
stock business in Troy, Ohio, tissue subsidiary in Brazil and
Spenco Medical Corporation and received total proceeds of
$118.2 million. These transactions, individually and in the
aggregate, are not significant to ongoing operations or to the
consolidated financial statements.
Note 10. Restructuring Charge
In 1992, the Corporation announced a restructuring plan to
strengthen its competitive position in consumer and service
products operations in Europe and certain operations in North
America. The plan included eliminating approximately
800 positions, principally in Europe; restructuring
manufacturing facilities at Rouen, France, and Larkfield,
England; discontinuing diaper production at mills in Fullerton,
Calif., and Memphis, Tenn.; writing off the No. 2 newsprint
machine at the Coosa Pines, Ala., mill; and integrating certain
U.S. and Canadian consumer and service products operations.
The $250.0 million pretax cost of the restructuring was charged
to 1992 operating profit. The restructuring reduced 1992 net
income by $172.0 million, or $1.07 per share.
Events and decisions underlying the 1992 restructuring were as
follows:
- In Europe, the Corporation's earnings had been
unsatisfactory due to weak economies, high marketing
expenses incurred in entering certain markets and defending
against intense competition, and an inability to achieve
sales goals primarily in the tissue business. In 1992,
management decided to significantly reduce costs to improve
its long-term cost structure, competitive position and
financial performance. The cost-cutting measures included
reducing the workforce at mills where personnel costs were
too high in relation to competition and focusing on
production of fewer products at each mill to simplify the
manufacturing process. The principal mills affected were in
Rouen, France, and Larkfield, England.
- In North America, partially in response to the easing of
border restrictions and tariffs, management decided to
integrate certain U.S. and Canadian operations to increase
manufacturing efficiencies and reduce overhead costs. Due
to changes in product design and improved rates of
operation, certain of the Corporation's older diaper
manufacturing equipment was no longer needed. As a
consequence, diaper production was discontinued at mills in
Fullerton, Calif., and Memphis, Tenn.
- The No. 2 newsprint machine at the Coosa Pines, Ala., mill
was shut down indefinitely in the first quarter of 1992 in
response to weak newsprint markets, and severance costs were
incurred. During the balance of 1992, depreciation
continued to be recorded on the machine while management
assessed its options. In December, management concluded
that there was no profitable manner in which to use the
machine in the foreseeable future, and wrote off the
remaining book value of the machine.
- Approximately $162 million of the $250 million restructuring
charge related to asset write-offs and $88 million related
to the accrual of liabilities for severance pay and other
cash obligations arising from the restructuring. These cash
obligations have been settled as of December 31, 1994.
Note 11. Supplemental Data (Millions of dollars)
Supplemental Balance Sheet Data
December 31
Summary of Accounts Receivable and Inventories 1994 1993
--------------------------------------------------------------------------------------
Accounts Receivable:
From customers ........................................... $788.1 $688.9
Other .................................................... 76.9 64.6
Less allowances for doubtful accounts and
sales discounts ........................................ (17.5) (14.8)
------- ------
Total ................................................ $847.5 $738.7
====== ======
Inventories by Major Class:
At the lower of cost on the First-In, First-Out
(FIFO) method or market:
Raw materials ........................................ $180.8 $155.1
Work in process ...................................... 143.3 169.6
Finished goods ....................................... 495.0 439.9
Supplies and other ................................... 132.8 121.5
------ ------
951.9 886.1
Excess of FIFO cost over Last-In, First-Out
(LIFO) cost ............................................ (147.7) (110.2)
------ ------
Total ................................................ $804.2 $775.9
====== ======
Total inventories include $337.6 million and $387.8 million of
inventories valued on the LIFO method at December 31, 1994 and
1993, respectively.
December 31
Summary of Accrued Expenses 1994 1993
---------------------------------------------------------------------------
Accrued advertising and promotion expense ............. $154.3 $ 139.4
Accrued salaries and wages ............................ 178.2 169.5
Other accrued expenses ................................ 301.4 285.7
------ -------
Total .............................................. $633.9 $ 594.6
====== =======
Supplemental Cash Flow Statement Data
Summary of Cash Flow Effects of Changes Year Ended December 31
in Operating Working Capital* 1994 1993 1992
-----------------------------------------------------------------------------
Accounts receivable ....................... $(140.4) $ 36.4 $ (84.0)
Inventories ............................... (55.5) (60.7) (38.2)
Prepaid expenses .......................... (13.6) 32.8 (10.0)
Trade accounts payable .................... 33.8 (50.9) 91.0
Other payables ............................ 32.0 16.5 (45.7)
Accrued expenses .......................... 13.6 (45.0) 7.1
Accrued income taxes ...................... (34.8) 26.6 (6.5)
Currency rate changes ..................... (19.3) 2.5 (18.8)
------- ------ -------
Changes in operating working capital ...... $(184.2) $(41.8) $(105.1)
======= ====== =======
* Excludes the effects of acquisitions, dispositions and the
1992 restructuring charge.
Year Ended December 31
Other Cash Flow Data 1994 1993 1992
----------------------------------------------------------------------------------
Interest paid .................................. $137.7 $126.1 $ 120.7
Interest capitalized ........................... 9.6 19.0 18.6
Income taxes paid .............................. 277.9 231.4 208.6
Increase (decrease) in cash and cash equivalents
due to exchange rate changes ................. 1.5 (3.1) (2.4)
Reconciliation of changes in cash and
cash equivalents:
Balance, January 1 ......................... $ 34.8 $ 41.1 $ 42.8
Decrease ................................... (11.0) (6.3) (1.7)
------ ------ -------
Balance, December 31 ....................... $ 23.8 $ 34.8 $ 41.1
====== ====== =======
Note 12. Unaudited Quarterly Data
(Millions of
dollars except
per share 1994 1993
amounts) Fourth(a) Third Second First Fourth Third(b) Second First
----------------------------------------------------------------------------------------
Net sales ..... $1,920.8 $1,836.8 $1,830.1 $1,776.5 $1,764.0 $1,781.0 $1,725.9 $1,702.0
Gross profit... 624.2 589.3 620.2 605.4 596.8 587.9 604.1 602.7
Operating
profit ...... 208.4 182.4 216.1 212.2 216.3 189.6 191.6 196.0
Net income .... 105.6 141.8 151.5 136.2 141.6 111.2 133.3 124.8
Per share basis:
Net income... .66 .88 .94 .85 .88 .69 .83 .78
Cash dividends:
Declared .. .44 .44 .44 .44 .43 .43 .43 -(c)
Paid ...... .44 .44 .44 .43 .43 .43 .43 .41
Market price:
High ...... 59 60 57 5/8 58 1/4 53 3/4 50 5/8 55 3/8 62
Low ....... 47 52 1/2 51 3/4 51 3/8 48 3/8 44 5/8 45 5/8 53 5/8
Close ..... 50 3/8 58 3/4 52 7/8 52 7/8 51 7/8 49 49 1/2 54 3/4
(a) Results for the fourth quarter 1994 include a nonoperating
charge of $39.2 million, or $.24 per share, for the
Corporation's share of foreign currency losses incurred by its
43 percent-owned Mexican affiliate on the translation of U.S.
dollar-denominated liabilities into pesos. The translation
losses are related to the devaluation of the Mexican peso in
December 1994.
(b) Results for the third quarter 1993 include additional
income tax expense of $13.5 million, or $.08 per share, related
to the increase in the U.S. statutory income tax rate to
35 percent from 34 percent as a result of legislation enacted
in the third quarter effective as of January 1, 1993.
(c) Historically, the Corporation declares one dividend per
quarter; however, in the fourth quarter of 1992, two dividends
were declared and thus no dividend was declared in the first
quarter of 1993.
Note 13. Product Class and Geographic Data
For reporting purposes, the Corporation's products and services
are segmented into three classes. Class I includes tissue
products for household, commercial, institutional and
industrial uses; infant, child, feminine and incontinence care
products; industrial and commercial wipers; health care
products; and related products. Class II includes newsprint,
printing papers, premium business and correspondence papers,
tobacco industry papers and products, technical papers, and
related products. Class III includes aircraft services,
commercial air transportation and other products and services.
Information concerning consolidated operations by product class
and geographic area, as well as data for equity companies, is
presented in the tables below and on the following pages:
Consolidated Operations by Product Class
Net Sales Operating Profit
(Millions of dollars) 1994 1993 1992 1994 1993 1992(a)
----------------------------------------------------------------------------------------
Class I ....................... $5,911.4 $5,565.5 $5,781.5 $655.6 $624.6 $434.7
Class II ...................... 1,099.1 1,071.7 1,061.4 188.2 171.2 121.1
Class III ..................... 410.1 383.0 298.9 19.4 26.2 6.4
-------- -------- -------- ------ ------ ------
Combined ...................... 7,420.6 7,020.2 7,141.8 863.2 822.0 562.2
Interclass sales .............. (56.4) (47.3) (50.7) - - -
Unallocated items-net ......... - - - (44.1) (28.5) (19.1)
-------- -------- -------- ------ ------ ------
Consolidated .................. $7,364.2 $6,972.9 $7,091.1 $819.1 $793.5 $543.1
======== ======== ======== ====== ====== ======
(Millions of Assets Depreciation Capital Spending
dollars) 1994 1993 1992 1994 1993 1992 1994 1993 1992
----------------------------------------------------------------------------------------
Class I ....... $5,225.9 $4,920.5 $4,667.8 $272.3 $242.1 $233.7 $393.4 $548.5 $600.9
Class II ...... 835.8 802.4 759.2 38.9 35.8 35.6 65.1 86.5 64.3
Class III ..... 208.7 196.3 232.5 10.4 9.9 10.6 12.4 9.8 9.0
-------- -------- -------- ------ ------ ------ ------ ------ ------
Combined ...... 6,270.4 5,919.2 5,659.5 321.6 287.8 279.9 470.9 644.8 674.2
Unallocated(b).. 649.3 616.7 608.5 8.0 8.1 9.1 14.3 9.7 16.3
Interclass
assets ...... (204.0) (155.2) (238.9) - - - - - -
-------- -------- -------- ------ ------ ------ ------ ------ ------
Consolidated .. $6,715.7 $6,380.7 $6,029.1 $329.6 $295.9 $289.0 $485.2 $654.5 $690.5
======== ======== ======== ====== ====== ====== ====== ====== ======
(a) Operating profit in 1992 for Class I, II, III and Unallocated
includes $216.2 million, $21.5 million, $8.2 million and
$4.1 million, respectively, of the restructuring charge
described in Note 10.
(b) Assets include investments in equity companies of
$376.2 million, $398.3 million and $349.7 million in 1994, 1993
and 1992, respectively.
Consolidated Operations by Geographic Area
Net Sales Operating Profit
(Millions of dollars) 1994 1993 1992 1994 1993 1992(a)
-----------------------------------------------------------------------------------------
United States ............... $5,547.6 $5,282.5 $5,297.2 $817.2 $780.0 $571.4
Canada ...................... 613.9 568.7 587.3 25.0 (28.8) (17.1)
Intergeographic items(b)...... (334.0) (243.6) (236.1) - - -
-------- -------- -------- ------ ------ ------
North America ............... 5,827.5 5,607.6 5,648.4 842.2 751.2 554.3
Europe ...................... 1,074.8 917.0 1,016.9 (59.4) .9 (56.9)
Asia and Latin America ...... 544.2 501.0 443.5 80.4 69.9 64.8
-------- -------- -------- ------ ------ ------
Combined .................... 7,446.5 7,025.6 7,108.8 863.2 822.0 562.2
Intergeographic items ....... (82.3) (52.7) (17.7) - - -
Unallocated items-net ....... - - - (44.1) (28.5) (19.1)
-------- -------- -------- ------ ------ ------
Consolidated ................ $7,364.2 $6,972.9 $7,091.1 $819.1 $793.5 $543.1
======== ======== ======== ====== ====== ======
Assets
(Millions of dollars) 1994 1993 1992
--------------------------------------------------------------
United States ............... $3,805.6 $3,720.8 $3,626.4
Canada ...................... 460.0 487.8 499.4
Intergeographic items ....... (55.0) (35.6) (34.7)
-------- -------- --------
North America ............... 4,210.6 4,173.0 4,091.1
Europe ...................... 1,371.4 1,085.2 965.5
Asia and Latin America ...... 667.2 630.2 594.4
-------- -------- --------
Combined .................... 6,249.2 5,888.4 5,651.0
Intergeographic items ....... (182.8) (124.4) (230.4)
Unallocated items-net(c)...... 649.3 616.7 608.5
-------- -------- --------
Consolidated ................ $6,715.7 $6,380.7 $6,029.1
======== ======== ========
(a) Operating profit in 1992 for the U.S., Canada, Europe, Asia
and Unallocated includes $148.9 million, $13.9 million,
$81.8 million, $1.3 million and $4.1 million, respectively, of
the restructuring charge described in Note 10.
(b) Net sales include $226.0 million, $162.3 million and
$185.8 million by operations in Canada to the U.S. in 1994,
1993 and 1992, respectively.
(c) Assets include investments in equity companies of
$376.2 million, $398.3 million and $349.7 million in 1994, 1993
and 1992, respectively.
Kimberly-Clark's Share
Income Before of Income Before
Equity Interests Equity Interests
(Millions of dollars) 1994 1993 1992(a) 1994 1993 1992(a)
---------------------------------------------------------------------------------------
United States ................ $478.0 $432.9 $310.8 $478.0 $432.9 $310.8
Canada ...................... 16.0 (17.9) (9.6) 16.0 (17.9) (9.6)
------ ------ ------ ------ ------ ------
North America ................ 494.0 415.0 301.2 494.0 415.0 301.2
Europe ....................... (66.6) (19.6) (61.8) (70.2) (24.5) (66.5)
Asia and Latin America........ 36.8 33.2 36.2 24.2 22.4 27.4
------ ------ ------ ------ ------ ------
Consolidated Companies ....... $464.2 $428.6 $275.6 $448.0 $412.9 $262.1
====== ====== ====== ====== ====== ======
(a) Income in 1992 for the U.S., Canada, Europe and Asia includes
$98.9 million, $8.6 million, $63.7 million and $.8 million,
respectively, of the restructuring charge described in Note 10.
Intercompany sales of products between classes or geographic
areas are made at market prices and are referred to as
interclass sales or intergeographic items.
Assets reported by product class or geographic area represent
assets which are directly used and an allocated portion of
jointly used assets. These assets include receivables from
other product classes or geographic areas and are referred to
as interclass assets or intergeographic items. Expense and
asset amounts not associated with classes or geographic areas
are referred to as unallocated items-net.
Equity Companies' Data by Geographic Area
Kimberly-
Clark's
Share
Net Gross Operating Net of Net
(Millions of dollars) Sales Profit Profit Income Income
------------------------------------------------------------------------------------------
December 31, 1994
Latin America(b) ........... $1,346.2 $514.3 $365.1 $149.2(a) $65.5(a)
Asia, Australia, Africa
and Middle East ......... 577.9 202.5 58.7 37.4 21.6(c)
-------- ------ ------ ------ -----
Total ................... $1,924.1 $716.8 $423.8 $186.6 $87.1
======== ====== ====== ====== =====
December 31, 1993
Latin America ............. $1,120.9 $464.0 $294.7 $196.2 $86.4
Asia, Australia and
Middle East ............. 385.9 127.4 38.2 24.7(d) 11.6
-------- ------ ------ ------ -----
Total ................... $1,506.8 $591.4 $332.9 $220.9 $98.0
======== ====== ====== ====== =====
December 31, 1992
Latin America ............. $ 953.2 $374.1 $221.8 $150.9(d) $68.5
Asia, Australia and
Middle East ............. 377.6 142.2 50.7 31.3(d) 14.4
-------- ------ ------ ------ -----
Total ................... $1,330.8 $516.3 $272.5 $182.2 $82.9
======== ====== ====== ====== =====
Non- Non- Stock-
Current Current Current Current holders'
(Millions of dollars) Assets Assets Liabilities Liabilities Equity
----------------------------------------------------------------------------------------
December 31, 1994
Latin America(e) ............ $552.2 $ 539.4 $275.4 $295.7 $520.5
Asia, Australia, Africa
and Middle East ......... 164.8 454.9 159.6 151.7 308.4
-------- ------ ------ ------ -----
Total ................... $717.0 $ 994.3 $435.0 $447.4 $828.9
======== ====== ====== ====== =====
December 31, 1993
Latin America ............. $551.3 $ 678.3 $245.2 $311.2 $673.2
Asia, Australia and
Middle East ............. 98.8 342.3 85.0 148.4 207.7
-------- ------ ------ ------ -----
Total ................... $650.1 $1,020.6 $330.2 $459.6 $880.9
======== ====== ====== ====== =====
December 31, 1992
Latin America ............. $491.4 $ 556.0 $226.4 $233.3 $587.7
Asia, Australia and
Middle East ............. 94.8 325.5 76.4 162.6 181.3
-------- ------ ------ ------ -----
Total ................... $586.2 $ 881.5 $302.8 $395.9 $769.0
======== ====== ====== ====== =====
(a) Net income and Kimberly-Clark's share of net income in Latin
America in 1994 include a nonoperating charge of
$91.2 million and $39.2 million, respectively, for foreign
currency losses incurred by the Corporation's 43 percent-
owned Mexican affiliate in Mexico on the translation of U.S.
dollar-denominated liabilities into pesos. The translation
losses are related to the devaluation of the Mexican peso in
December 1994.
(b) Results for Latin America in 1994 include operations of a
newly formed joint venture in Argentina. In June 1994, the
Corporation combined its wholly owned subsidiary in
Argentina with the operations of another company to create
the joint venture.
(c) The Corporation's share of net income for 1994 includes a
gain of $10.0 million due to the readoption of equity
accounting for the Corporation's South African affiliate.
Income taxes of $3.7 million related to this item are
reflected in the provision for income taxes in the
consolidated income statement.
(d) Net income in Australia in 1993 includes a $7.8 million
credit from a decrease in the statutory income tax rate to
33 percent from 39 percent. Net income in Mexico and
Australia in 1992 includes a $4.5 million charge and
$1.6 million credit, respectively, from the cumulative
effect of adopting SFAS No. 109. Kimberly-Clark's share of
these items is included in the cumulative effects of
accounting changes in the consolidated income statement.
(e) Includes effect of December 1994 devaluation of the Mexican
peso on the translated balance sheet of the Corporation's
Mexican affiliate.
Equity companies are principally engaged in Class I operations.
A listing of the Corporation's percentage ownership of the
common stock of each significant subsidiary and equity company
is contained elsewhere in this annual report. Kimberly-Clark
de Mexico, S.A. de C.V. is partially owned by the public and
its stock is publicly traded in Mexico. At December 31, 1994
the Corporation's investment in this equity company was
$165.4 million, and the estimated fair value was $1.0 billion
based on quoted market prices for 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 sheet of
Kimberly-Clark Corporation and Subsidiaries as of December 31,
1994 and 1993 and the related consolidated income and cash flow
statements for each of the three years in the
period ended December 31, 1994. 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 generally accepted
auditing standards. 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 of
Kimberly-Clark Corporation and Subsidiaries present fairly, in
all material respects, the financial position of the companies
at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes 2 and 3 to the consolidated financial
statements, in 1992 the Corporation changed its methods of
accounting for Income Taxes and Postretirement Health Care and
Life Insurance Benefits to conform with Statements of Financial
Accounting Standards No. 109 and 106, respectively.
/s/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP
Dallas, Texas January 27, 1995
AUDIT COMMITTEE CHAIRMAN'S LETTER
Kimberly-Clark Corporation and Subsidiaries
The members of the Audit Committee are selected by the board of
directors. During 1994, the committee consisted of four
outside directors and met three times.
The Audit Committee oversees the financial reporting process on
behalf of the board of directors. As part of that
responsibility, the committee recommended to the board of
directors, subject to stockholder approval, the selection of
the Corporation's independent public accountants. The Audit
Committee discussed the overall scope and specific plans for
audits with the Corporation's internal auditors and
Deloitte & Touche LLP. The committee also discussed the
Corporation's annual consolidated financial statements and the
adequacy of its internal controls. The committee met regularly
with the internal auditors and Deloitte & Touche LLP, without
management present, to discuss the results of their audits,
their evaluations of the Corporation's internal controls, and
the overall quality of the Corporation's financial reporting.
The meetings also were designed to facilitate any private
communication with the committee desired by the internal
auditors or independent public accountants.
/s/ Louis E. Levy
----------------------------
Louis E. Levy
Chairman, Audit Committee January 27, 1995
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 financial statements in this annual report.
The 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 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 which 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 has also adopted a code of conduct which, among
other things, contains policies for conducting business affairs
in a lawful and ethical manner in each country 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 financial statements have been audited by the independent
accounting firm, Deloitte & Touche LLP. During their audits,
the 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 which are
cost-effective.
The Corporation has assessed its internal control system as of
December 31, 1994 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, 1994, its system of internal control
over the preparation of its published interim and annual
financial statements and over safeguarding of assets against
unauthorized acquisition, use or disposition met those
criteria.
/s/ Wayne R. Sanders /s/ John W. Donehower
---------------------------- --------------------------
Wayne R. Sanders John W. Donehower
Chairman of the Board Senior Vice President and
and Chief Executive Officer Chief Financial Officer
January 27, 1995
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management believes that the following commentary and tables
appropriately discuss and analyze the comparative results of
operations and the financial condition of the Corporation for
the periods covered.
Analysis Of Consolidated Operating Results
By Product Class
($ Millions)
% Change % of 1994
Net Sales 1994 1993 vs. 1993 Consolidated
-------------------------------------------------------------------------------
Class I ........................ $5,911.4 $5,565.5 + 6.2% 80.3%
Class II ....................... 1,099.1 1,071.7 + 2.6 14.9
Class III ...................... 410.1 383.0 + 7.1 5.6
Adjustments .................... (56.4) (47.3) (.8)
-------- -------- -----
Consolidated ................... $7,364.2 $6,972.9 + 5.6% 100.0%
======== ======== =====
% Change % Return on Sales
Operating Profit 1994 1993 vs. 1993 1994 1993
-------------------------------------------------------------------------------------
Class I ........................ $ 655.6 $ 624.6 + 5.0% 11.1% 11.2%
Class II ....................... 188.2 171.2 + 9.9 17.1 16.0
Class III ...................... 19.4 26.2 -26.0 4.7 6.8
Adjustments .................... (44.1) (28.5)
-------- --------
Consolidated ................... $ 819.1 $ 793.5 + 3.2% 11.1% 11.4%
======== ========
Product Classes referred to in this Management's Discussion and
Analysis are:
- Class I includes tissue products for household,
commercial, institutional and industrial uses; infant,
child, feminine and incontinence care products;
industrial and commercial wipers; health care
products; and related products.
- Class II includes newsprint, printing papers, premium
business and correspondence papers, tobacco industry
papers and products, technical papers, and related
products.
- Class III includes aircraft services, commercial air
transportation and other products and services.
Commentary:
Net sales increased as a result of higher sales volumes for
most of the Corporation's businesses, which more than offset
the effect of lower selling prices. Sales volumes improved 6.9
percent compared to 1993, despite the effect of businesses
sold.
- Sales volumes were higher in North America for Huggies
disposable diapers, Kotex feminine care products,
Huggies baby wipes, Depend and Poise incontinence care
products, Kleenex facial tissue, and professional
health care products; tobacco industry papers,
technical papers and newsprint; Neenah Paper's premium
business and correspondence papers; pulp; and Midwest
Express Airlines, Inc.
- Sales volumes increased for consumer products in
Europe, primarily due to the introduction and
expansion of Huggies disposable diapers and the July
1994 acquisition of the feminine care products
business of VP-Schickedanz AG, a German company.
- Sales volumes also improved for consumer products in
Asia, primarily in Korea.
- Sales volumes declined in North America for Huggies
Pull-Ups training pants due, in part, to the entry of
a major competitor into the market with a branded
product in early 1994 and market share growth of
private-label and economy-branded competitors.
- Sales volumes also declined for consumer bathroom
tissue in Canada and household towels and private-
label bathroom tissue in the U.S. These declines were
partially offset by improved sales volumes for Kleenex
premium bathroom tissue in the U.S.
- Selling prices were lower in both North America and
Europe for consumer tissue products, in North America
for feminine care products and at Midwest Express
Airlines, Inc., principally in response to competitive
business conditions. Selling prices increased for
pulp and premium business and correspondence papers.
Gross profit improved in absolute terms, 2.0 percent, but
declined as a percentage of sales, primarily because of the
lower selling prices, higher labor and fiber costs and the
lower sales volumes for training pants in North America.
- Cost reductions and manufacturing efficiencies were
achieved in certain North American consumer products
businesses, most notably the disposable diaper
business, and in the newsprint and tobacco industry
papers businesses.
- Product improvement costs were higher, primarily for
the new Huggies Supreme diapers in the U.S. and
Huggies UltraTrim diapers in Canada.
- Start-up costs were incurred at the Corporation's new
diaper plant in Europe and diaper and feminine care
products facility in Korea.
Consolidated operating profit increased 3.2 percent compared
with 1993, but declined as a percentage of sales due primarily
to the lower gross profit margin.
- Promotion expenses declined in North America for
consumer tissue products, in connection with the lower
selling prices, and for feminine care products, due to
timing of product introductions, but increased for
disposable diapers in response to competitive
activity.
- Selling expenses were higher in support of business
expansions and the higher sales volumes.
- Results for the U.S. consumer bathroom tissue business
improved as a result of manufacturing efficiencies and
lower promotion spending, which more than offset the
effect of reduced selling prices.
- Operating losses in Europe exceeded those of a year
ago due primarily to the cost of launching Huggies
disposable diapers. Results for the consumer bathroom
tissue business in Europe remained poor because of
industry overcapacity, weak prices and higher fiber
costs.
- Research expenses were higher in 1994 to support new
product and process development.
- General expense in 1993 included a $6.5 million charge
related to the settlement of a class action lawsuit
brought by a group of property and business owners
near the Coosa Pines, Ala., pulp and newsprint mill.
By Geography
($ Millions)
% Change % of 1994
Net Sales 1994 1993 vs. 1993 Consolidated
--------------------------------------------------------------------------------
North America ............... $5,827.5 $5,607.6 + 3.9% 79.1%
Outside North America ....... 1,619.0 1,418.0 +14.2 22.0
Adjustments ................. (82.3) (52.7) (1.1)
-------- -------- -----
Consolidated ................ $7,364.2 $6,972.9 + 5.6% 100.0%
======== ======== =====
% Change % Return on Sales
Operating Profit 1994 1993 vs. 1993 1994 1993
--------------------------------------------------------------------------------------
North America ............... $ 842.2 $ 751.2 +12.1% 14.5% 13.4%
Outside North America ....... 21.0 70.8 -70.3 1.3 5.0
Adjustments ................. (44.1) (28.5)
-------- --------
Consolidated ................ $ 819.1 $ 793.5 + 3.2% 11.1% 11.4%
======== ========
% Change
Net Income 1994 1993 vs. 1993
---------------------------------------------------------------
North America ............... $ 494.0 $ 415.0 +19.0%
Outside North America ....... 41.1 95.9 -57.1
-------- --------
Net Income .................. $ 535.1 $ 510.9 + 4.7%
======== ========
Additional Commentary:
- The decline in operating profit outside North America
is attributable to the losses in Europe, as previously
discussed.
- Interest expense increased $16.8 million primarily as
a result of higher debt levels and a lower amount of
interest capitalized.
- Other income improved primarily as a result of net
gains on the sales of woodlands and the sale of the
Corporation's tissue mill in Memphis, Tenn., adhesive-
coated label stock business in Troy, Ohio, tissue
subsidiary in Brazil and Spenco Medical Corporation in
Waco, Texas.
- Net income outside North America was adversely
affected by the devaluation of the Mexican peso, which
during December 1994 lost more than 32 percent of its
value expressed in U.S. dollars. Kimberly-Clark's 43
percent-owned Mexican affiliate, Kimberly-Clark de
Mexico, S.A. de C.V., has financed approximately $330
million of its operations with U.S. dollar-denominated
liabilities. As a result of the remeasurement of
dollar-denominated liabilities by this equity company,
a nonoperating, after-tax foreign currency loss was
incurred, of which Kimberly-Clark's share was $39.2
million, or $.24 per share.
- The Corporation's effective tax rate declined to 37.3
percent from 39.9 percent in 1993. The comparison is
affected by lower taxes on unremitted earnings of the
Corporation's Mexican affiliate due to the peso
devaluation loss, the previously mentioned sale of the
Corporation's Brazilian tissue subsidiary, and by
benefits from company-owned life insurance and U.S.
affordable housing tax credits. In addition, the
enactment of the 1993 Tax Act increased deferred
income taxes related to prior years, which reduced
1993 net income $8.8 million, or $.05 per share. This
tax change had the effect of increasing the 1993
effective tax rate 1.2 percentage points.
- The Corporation's share of net income from equity
companies, which includes the translation loss from
the peso devaluation, fell 11.1 percent. Excluding
the effect of the peso devaluation, higher net income
was earned at the Corporation's equity affiliate in
Mexico. In addition, net income was up at affiliates
in Australia, Colombia and Argentina.
-- Sales volumes increased more than 20 percent in
Mexico.
-- Earnings from Australia improved primarily because
of higher sales volumes, improved operations and a
favorable change in currency exchange rates.
-- Earnings in Colombia improved on the strength of
higher sales volumes and selling prices.
-- The Corporation expanded its Argentine operations
through investment in a consumer products
affiliate in that country, which began operation
in the third quarter of 1994.
-- Equity company results in 1994 benefited from the
previously announced readoption of equity
accounting for the Corporation's investment in its
South African affiliate, Carlton Paper Corporation
Limited. The Corporation intends to buy
additional shares in Carlton which will result in
that company becoming a consolidated subsidiary.
Adjustments:
- Adjustments to sales shown in the preceding tables
consist of intercompany sales of products between
product classes or geographic areas. Adjustments to
operating profit consist of expenses not associated
with product classes or geographic areas.
LIQUIDITY AND CAPITAL RESOURCES
Year Ended
December 31
($ Millions) 1994 1993
-----------------------------------------------------------------
Cash provided by operations .................. $669.0 $746.7
Capital spending ............................. 485.2 654.5
Ratio of total debt to capital ............... 38.9% 39.1%
Pretax interest coverage - times ............. 6.6 6.6
Commentary:
- Despite higher net income, cash provided by operations
in 1994 declined due to an increase in operating
working capital needs of $184.2 million. Major
factors affecting the change in operating working
capital, excluding businesses bought and sold, were:
-- an increase in accounts receivable of $140.4
million related principally to higher net sales,
especially in December;
-- an increase in inventories of $55.5 million due,
in part, to preparation for the 1995 launch of
diapers in France; and
-- higher trade accounts payable and accrued expenses
associated with the overall growth in the
Corporation's businesses.
- The decline in capital spending of $169.3 million for
1994 reflects the completion of several major
projects, including consumer products plants in
Neenah, Wis.; Barton-upon-Humber, England; and Taejon,
Korea.
- In July 1994, the Corporation's wholly owned
subsidiary Kimberly-Clark GmbH acquired the feminine
care products business of VP-Schickedanz AG, a German
company, for approximately $123 million; $97.2 million
was paid in 1994 and the balance is payable in 1995.
- In December 1994, the Corporation purchased a 90
percent interest in the Handan Comfort and Beauty
Group, a manufacturer of feminine care products in
China.
- In 1994, four cash dividends were paid aggregating
$281.8 million, or $1.75 per share. In 1993, four
cash dividends were paid aggregating $273.4 million,
or $1.70 per share.
- In 1994, the Corporation repurchased approximately one
million shares of its common stock for $52.2 million.
The shares will be used for general corporate
purposes, including certain of the Corporation's
employee benefit and compensation plans. The
Corporation intends to purchase up to four million
additional shares over several years as market
conditions warrant.
- The ratio of total debt to capital remains outside the
Corporation's target range of 28 to 32 percent due, in
part, to the cumulative effects of weaker currencies
in certain non-U.S. operations, most notably Canada,
Mexico and the United Kingdom, which had the effect of
reducing stockholders' equity by $310.0 million at
December 31, 1994. Capital is the sum of total debt,
minority owners' interests in subsidiaries and
stockholders' equity.
- A shelf registration for $200 million of debt
securities is on file with the Securities and Exchange
Commission. The filing allows flexibility to issue
debt promptly if the Corporation's needs and market
conditions warrant.
- In February 1994, the Corporation issued $100 million
of 6-7/8% Debentures due February 2014. The proceeds
were used principally to reduce short-term debt.
- In June 1994, the Corporation, through the Mississippi
Business Finance Corporation, issued $40 million of
7.55% industrial development revenue bonds due June
2004. The proceeds are being used to finance
improvements at the Corporation's nonwovens products
facility in Corinth, Miss.
- Revolving credit facilities of $600 million are in
place for general corporate purposes and to back up
commercial paper borrowings. Of these facilities,
which are currently unused, $300 million expires in
September 1995, and $300 million expires in December
1999.
- The Corporation's long-term debt securities have a
Double-A rating, and its commercial paper is rated in
the top category.
- Management believes that the Corporation's ability to
generate cash from operations and its capacity to
issue short-term and long-term debt are adequate to
fund working capital, capital spending and other needs
in the foreseeable future.
TRENDS IN THE LAST THREE YEARS
Net Sales
($ Billions) 1994 1993 1992
---------------------------------------------------------------------------
Principal products:
Disposable diapers .............................. $ 1.7 $ 1.5 $ 1.6
Household and other tissue-based products ....... 1.8 1.9 1.9
Feminine care products .......................... .7 .7 .7
All other ....................................... 3.2 2.9 2.9
----- ----- -----
Consolidated ...................................... $ 7.4 $ 7.0 $ 7.1
===== ===== =====
- Consolidated net sales grew $.6 billion since 1991.
The increase was due to improved sales volumes,
partially offset by lower selling prices.
Analysis of Operating Profit as a Percentage of Net Sales
1994 1993 1992
--------------------------------------------------------------------------
Net sales ........................................ 100.0% 100.0% 100.0%
Less:
Cost of products sold ........................... 66.9 65.7 63.9
Marketing expense ............................... 14.7 15.3 17.7
Research expense ................................ 2.3 2.3 2.2
General expense ................................. 5.0 5.3 5.0
Restructuring charge ............................ - - 3.5
----- ----- ----
Operating profit ................................. 11.1% 11.4% 7.7%
===== ===== ====
Operating profit margin declined during 1994 as a result
of lower selling prices, higher labor and fiber costs and
lower sales volumes for training pants in North America
which more than offset the effect of higher sales volumes
for most other products, improved manufacturing
efficiencies and lower marketing expenses. Excluding the
1992 restructuring charge discussed below, the improvement
in operating profit margin in 1993 was primarily
attributable to higher sales volumes and lower raw
material and marketing costs offset, in part, by lower
selling prices. Other factors affecting operating profit
margins for the last three years were:
- higher product improvement and start-up costs,
particularly in 1994 and 1993,
- higher than historical marketing expenses in 1992,
- lower net price realizations for newsprint in all
three years, despite recent pricing improvement,
- poor results for consumer and industrial bathroom
tissue businesses in North America, primarily in 1993
and 1992, and in Europe in all three years, and
- litigation settlement expenses in 1993 and recovery of
legal fees in 1992.
Changes in Net Sales and Earnings versus the Preceding Year
1994 1993
------------------------------------------------------------------------------------------
Net sales ............................................................ +5.6% - 1.7%
Gross profit ......................................................... +2.0 - 6.5
Operating profit ..................................................... +3.2 + 46.1
Income before cumulative effects of accounting changes ............... +4.7 + 48.1
Net income ........................................................... +4.7 +278.4
Per share basis:
Income before cumulative effects of accounting changes ............. +4.7 + 47.9
Net income ......................................................... +4.7 +278.6
The comparison of 1994 to 1993 has previously been discussed.
Highlights of 1993 compared to 1992 are as follows.
- Net sales declined in 1993 as a result of lower
selling prices and currency translation which more
than offset higher sales volumes.
- Gross profit declined in 1993 primarily as a result of
lower selling prices.
- Excluding the effect of the 1992 restructuring charge,
operating profit was virtually unchanged but improved
slightly as a percentage of sales. The gross profit
decline was more than offset by lower marketing
expenses.
- Excluding the 1992 restructuring charge, income before
cumulative effects of accounting changes declined 1.2
percent in 1993. On a per share basis, it declined
1.7 percent. The decline in net income and net income
per share was primarily attributable to the effect of
the 1993 increase in the U.S. statutory income tax
rate, as discussed below.
- Net income was adversely affected by the enactment of
the 1993 Tax Act, which increased the U.S. federal
income tax rate to 35 percent from 34 percent. This
tax change reduced 1993 net income by $15.5 million or
$.10 per share. Five cents related to 1993 and five
cents related to deferred taxes for prior years. The
effective income tax rate declined to 39.9 percent in
1993 from 40.3 percent in 1992. Significant factors
affecting the comparison were lower operating losses
in certain non-U.S. operations for which no income tax
benefits were recognized in 1993, a lower 1993
effective state income tax rate and lower effective
tax rates associated with certain other non-U.S.
operations in 1993, partially offset by the U.S. tax
increase. In addition, the 1992 effective income tax
rate was unusually high because a portion of the 1992
restructuring charge related to certain non-U.S.
operations for which no tax benefits were recognized.
- The Corporation's share of net income of equity
companies increased in 1993, primarily because of
higher sales volumes and selling prices at Kimberly-
Clark de Mexico, S.A. de C.V.
1992 RESTRUCTURING
In 1992, the Corporation announced a restructuring plan to
strengthen its competitive position in consumer and service
products operations in Europe and certain operations in North
America. The plan included eliminating approximately 800
positions, principally in Europe; restructuring manufacturing
facilities at Rouen, France, and Larkfield, England;
discontinuing diaper production at mills in Fullerton, Calif.,
and Memphis, Tenn.; writing off the No. 2 newsprint machine at
the Coosa Pines, Ala., mill; and integrating certain U.S. and
Canadian consumer and service products operations. The $250.0
million pretax cost of the restructuring was charged to 1992
operating profit. The restructuring reduced 1992 net income by
$172.0 million, or $1.07 per share. The Corporation is realizing
lower ongoing operating costs and improved operating cash flow from the
restructured operations. Additional information concerning
events and decisions which gave rise to the restructuring plan
is presented in Note 10 to the Financial Statements.
1992 ACCOUNTING CHANGES
New required accounting rules were adopted in 1992 for
postretirement health care and life insurance benefits and for
income taxes which resulted in a one-time "catch-up" charge of
$210.0 million, or $1.31 per share, against 1992 net income.
These changes had no effect on cash flow.
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 materially affect the Corporation's business or
competitive position. Management does not believe that the
Corporation has been identified as a potentially responsible
party at any Environmental Protection Agency-designated cleanup
site which could have a material adverse impact on the
Corporation's business or results of operations. Additional
information concerning environmental matters is disclosed in
the Corporation's annual report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1994
under the "Business" and "Legal Proceedings" sections.
FOREIGN CURRENCY RISKS, HEDGING ACTIVITIES AND INFLATION RISKS
The Corporation's foreign currency risks and its hedging
activities are discussed in Note 5 to the Financial Statements.
As previously discussed, the Mexican peso was devalued in
December 1994 and resulted in a foreign currency loss to the
Corporation. Excluding the foreign currency loss, the
Corporation's Mexican affiliate accounted for approximately 15
percent of Kimberly-Clark's 1994 consolidated net income.
Historically, the Corporation's Mexican affiliate has been able
to increase both selling prices and sales volumes to recover,
over time, the effects of changes in currency exchange rates,
as well as cost increases. However, management is unable at
this time to assess the effect of this foreign currency risk on
1995 consolidated net income because of the uncertainty
surrounding the current Mexican economy, the value of the peso,
and the effectiveness of the affiliate's 1995 actions to
increase selling prices and sales volumes.
The Corporation's inflation risks are managed on an entity-by-
entity basis through selective price increases, productivity
increases and cost containment measures. The net assets of
subsidiaries and affiliates operating in hyperinflationary
countries are not significant. The devaluation of the Mexican
peso and uncertainties in the Mexican economy may increase that
country's inflation rate.
OUTLOOK - 1995
During the year, Kimberly-Clark expects to benefit from price
increases on tissue, newsprint and other paper products. On
the other hand, in at least the first quarter of the year, the
Corporation will face the uncertain impact of the weaker
Mexican peso and the need to match a competitor's price
reductions on diapers in the U.S.
Regarding the peso, Kimberly-Clark de Mexico has experienced
devaluations in the past. Based on these experiences, Kimberly-Clark
management expects that the company will continue its trend of
strong sales and earnings growth over the long term.
In 1995, with start-up costs at Kimberly-Clark's Barton-upon-
Humber diaper plant behind it, with sales volumes improving and
with tissue prices increasing, the Corporation's position in
Europe should be stronger, and its losses are expected to be
less than in 1994.
For 1995, the Corporation's present estimate of capital
spending is in the range of $500 million to $600 million.
In terms of capital structure, the Corporation's long-term
objective is to maintain total debt to capital in a range of 28
to 32 percent. While the year-end ratio of 38.9 percent was
higher than expected, primarily as a result of the Mexican peso
devaluation, the ratio is expected to be closer to the
Corporation's target by the end of 1995.
To maximize stockholder value, the Corporation has modified its
previously announced plan for divesting its North American pulp
and newsprint operations. Because of rapid escalation of pulp
and newsprint prices and deterioration in the Canadian equity
market in late 1994, Kimberly-Clark has concluded that, for
now, the benefits of retaining ownership of these operations
outweigh the longer-term strategic benefits of selling them.
The Corporation's long-term strategy continues to be the
divestiture of these units; however, the revised plan should
benefit Kimberly-Clark's earnings during what is expected to be
a peak period for pulp and newsprint businesses.
ADDITIONAL INFORMATION
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 The First National Bank of
Boston 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.
Trademarks
The brand names mentioned in this report -- Kleenex(R), Huggies(R), Pull-
Ups(R), Kotex(R), New Freedom(R), Depend(R), Poise(R), Hi-Dri(R),
Kimguard(R), GoodNites(R), Discreet(R), Kotex Understands(R), Kimwipes(R),
Kimbies (R), Classic(R), Classic Crest(R), Classic Columns(R), Camelia(R),
Tampona(R), Comfort and Beauty(R), Skyway (SM) and Midwest Express(R) -- are
trademarks or service marks of Kimberly-Clark Corporation or its
subsidiaries.
CONSOLIDATED SUBSIDIARIES AND EQUITY COMPANIES
The following list includes certain companies which were
20 to 100 percent owned directly or indirectly by Kimberly-
Clark Corporation, a Delaware corporation, Dallas, Texas, as of
December 31, 1994. Kimberly-Clark's percentage ownership of each
company is 100 percent unless otherwise indicated.
This list includes all significant subsidiaries and equity
companies. The place of incorporation is the same as the location of
the company except as shown parenthetically.
CONSOLIDATED SUBSIDIARIES
Astral Aviation, Inc. (Delaware) Milwaukee, Wisconsin
Avent, Inc. (Delaware) Tucson, Arizona
Chengdu Comfort & Beauty Sanitary Articles Co., Ltd., China (90%)
Handan Comfort & Beauty (Group) Co., Ltd., China (90%)
Jet Professionals, Inc. (Delaware) Fairfield, Connecticut
K-C Advertising, Inc. (Delaware) Neenah, Wisconsin
K-C Aviation Inc. (Delaware) Dallas, Texas
Kimberly-Clark Benelux Operations B.V., Veenendaal, Netherlands
Kimberly-Clark Canada European Finance B.V., Netherlands
Kimberly-Clark Canada Global Finance Ltd., Barbados
Kimberly-Clark Canada Inc., Mississauga, Ontario, Canada
Kimberly-Clark de Centro America, S.A., Sitio del Nino,
El Salvador (75%)
Kimberly-Clark Costa Rica, S.A., Cartago, Costa Rica (75%)
Kimberly-Clark Far East Pte. Limited, Singapore (60%)
Kimberly-Clark Forest Products Inc., Terrace Bay, Ontario, Canada
Kimberly-Clark France S.A.R.L., Paris, France
Kimberly-Clark GmbH, Koblenz, Germany
Kimberly-Clark Inc., Mississauga, Ontario, Canada
Kimberly-Clark Industries S.A., Paris, France
Kimberly-Clark Integrated Services Corporation (Delaware) Roswell,
Georgia
Kimberly-Clark International, S.A., Panama City, Panama
Kimberly-Clark International Services Corporation (Delaware)
Neenah, Wisconsin
Kimberly-Clark Limited, Larkfield, Kent, England
Kimberly-Clark PHC International, Inc. (Delaware) Roswell, Georgia
Kimberly-Clark Philippines Inc., Makati, Philippines (87%)
Kimberly-Clark Puerto Rico, Inc. (Delaware) San Juan, Puerto Rico
Kimberly-Clark Sales Corporation (Virgin Islands) Veenendaal,
Netherlands
Kimberly-Clark Sopalin, St. Cloud, France
Kimberly-Clark Technical Products, Inc. (Delaware) Roswell,
Georgia
Kimberly-Clark Thailand Limited, Bangkok, Thailand
Kunming Comfort & Beauty Hygienic Products Co., Ltd., China (90%)
LTR Industries S.A., Paris, France (72%)
Midwest Express Airlines, Inc. (Delaware) Milwaukee, Wisconsin
Nanjing Comfort & Beauty Sanitary Products Co., Ltd., China (90%)
Papeteries de Malaucene S.A., Malaucene, France
Papeteries de Mauduit S.A., Quimperle, France
Ridgeway Insurance Company Limited, Hamilton, Bermuda
SYZYGY, Inc. (Delaware) Waco, Texas
Venekim, C.A., Caracas, Venezuela (60%)
YuHan-Kimberly, Limited, Seoul, Korea (60%)
EQUITY COMPANIES
Carlton Paper Corporation Limited, Johannesburg, South Africa
(38.7%)
Colombiana Kimberly S.A., Medellin, Colombia (50%)
Colombiana Universal de Papeles S.A., Pereira, Colombia (50%)
Kimberly-Clark Argentina S.A., Cordoba, Argentina (33.3%)
Kimberly-Clark Australia Pty. Limited, Milsons Point, New South
Wales, Australia (50%)
Kimberly-Clark Lever, Ltd., India (50%)
Kimberly-Clark Malaysia Sendirian Berhad, Petaling Jaya, Malaysia
(30.6%)
Kimberly-Clark de Mexico, S.A. de C.V., Mexico City, Mexico (43%)
Olayan Kimberly-Clark Arabia Company, Al-Khobar, Kingdom of Saudi
Arabia (49%)
Olayan Kimberly-Clark (Bahrain) WLL, Manama, Bahrain (49%)
P.T. Kimsari Paper Indonesia, Medan, Indonesia (50%)