<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from.............to.....................
Commission file number 1-225
KIMBERLY-CLARK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 39-0394230
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 619100
Dallas, Texas
75261-9100
(Address of principal executive offices)
(Zip Code)
(214) 830-1200
(Registrant's telephone number, including area code)
No change
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No .
------- -------
As of May 6, 1994, 161,064,698 shares of the Corporation's
common stock were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements.
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Three Months
Ended March 31
(Millions of dollars except per share amounts) 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales ................................................. $1,776.5 $1,702.0
Cost of products sold ..................................... 1,171.1 1,099.3
-------- --------
Gross Profit .............................................. 605.4 602.7
Advertising, promotion and selling expenses ............... 268.6 279.8
Research expense .......................................... 38.7 41.0
General expense ........................................... 85.9 85.9
-------- --------
Operating Profit .......................................... 212.2 196.0
Interest expense .......................................... (31.1) (26.1)
Other income (expense), net ............................... 2.5 4.8
-------- --------
Income Before Income Taxes ................................ 183.6 174.7
Provision for income taxes ................................ 68.8 66.4
-------- --------
Income Before Equity Interests ............................ 114.8 108.3
Share of net income of equity companies ................... 24.9 19.9
Minority owners' share of subsidiaries' net income ........ (3.5) (3.4)
-------- --------
Net Income ................................................ $ 136.2 $ 124.8
======== ========
Per Share Basis:
Net Income ............................................... $ .85 $ .78
======== ========
Cash Dividends Declared ................................... $ .44 $ -
======== ========
Cash Dividends Paid ....................................... $ .43 $ .41
======== ========
</TABLE>
Unaudited
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
March 31, December 31,
(Millions of dollars) 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents .......................... $ 63.3 $ 34.8
Accounts receivable ................................ 778.0 738.7
Inventories ........................................ 803.2 775.9
Other current assets ............................... 132.1 125.8
-------- --------
Total Current Assets ............................. 1,776.6 1,675.2
-------- --------
Property ............................................. 6,400.6 6,372.8
Less accumulated depreciation ...................... 2,367.7 2,330.0
-------- --------
Net Property ..................................... 4,032.9 4,042.8
Investments in Equity Companies ...................... 409.3 398.3
Deferred Charges and Other Assets .................... 356.7 264.4
-------- --------
$6,575.5 $6,380.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Debt payable within one year ....................... $ 732.1 $ 684.8
Accounts payable ................................... 430.8 438.1
Other current liabilities .......................... 828.5 785.6
-------- --------
Total Current Liabilities ........................ 1,991.4 1,908.5
Long-Term Debt ....................................... 990.9 933.1
Noncurrent Employee Benefit Obligations .............. 432.1 430.0
Deferred Income Taxes ................................ 588.0 585.0
Minority Owners' Interests in Subsidiaries ........... 69.8 66.9
Stockholders' Equity ................................. 2,503.3 2,457.2
-------- --------
$6,575.5 $6,380.7
======== ========
</TABLE>
Unaudited
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CASH FLOW STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Three Months
Ended March 31
(Millions of dollars) 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net income ................................................. $136.2 $124.8
Depreciation ............................................... 79.0 69.5
Changes in operating working capital ....................... (55.3) (13.0)
Pension funding in excess of expense ....................... (47.6) (1.4)
Other ...................................................... (6.2) 5.4
-------- --------
Cash Provided by Operations .............................. 106.1 185.3
-------- --------
Investing
Capital spending ........................................... (82.1) (156.3)
Other ...................................................... (31.2) (13.1)
-------- --------
Cash Used for Investing .................................. (113.3) (169.4)
-------- --------
Financing
Cash dividends paid ........................................ (69.2) (65.9)
Changes in debt payable within one year .................... 47.3 34.1
Increases in long-term debt ................................ 103.5 41.3
Decreases in long-term debt ................................ (45.7) (11.4)
Other ...................................................... (.2) .7
-------- --------
Cash Provided by (Used for) Financing .................... 35.7 (1.2)
-------- --------
Increase in Cash and Cash Equivalents ........................ $ 28.5 $ 14.7
======== ========
</TABLE>
Unaudited
See Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
1. The unaudited consolidated financial statements of Kimberly-
Clark Corporation (the "Corporation") generally have been
prepared on the same basis as those in the 1993 Annual
Report and include all adjustments necessary to present
fairly the condensed consolidated balance sheet and
consolidated income and condensed cash flow statements for
the periods indicated. Certain reclassifications have been
made to conform 1993 data to the current period
presentation.
2. The average number of common shares outstanding used in the
calculation of net income per share for the three months ended
March 31, 1994 and 1993, was 161.0 million and 160.8 million,
respectively. There were 161.0 million shares outstanding
at March 31, 1994.
3. The dividend paid on April 2, 1993 of $.43 per share was
declared on December 17, 1992. The dividend paid on April
4, 1994 of $.44 per share was declared on February 17, 1994.
4. The following schedule details inventories by major class as
of March 31, 1994 and December 31, 1993:
<TABLE>
<CAPTION>
March 31, December 31,
(Millions of dollars) 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
At lower of cost on the First-In,
First-Out (FIFO) method or market:
Raw materials ........................... $147.2 $155.1
Work in process ......................... 161.2 169.6
Finished goods .......................... 476.8 439.9
Supplies and other ...................... 125.7 121.5
------ ------
910.9 886.1
Excess of FIFO cost over Last-In,
First-Out (LIFO) cost ................... (107.7) (110.2)
------ ------
Total ................................... $803.2 $775.9
====== ======
</TABLE>
Unaudited
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Management believes that the following tables and commentary
appropriately discuss and analyze the comparative results of
operations for the periods covered.
Product Classes referred to in the following discussion and
analysis are:
- Class I includes tissue products for household,
commercial, institutional and industrial uses; infant,
child, feminine and incontinence care products; industrial
and commercial wipers; health care products; and related
products.
- Class II includes newsprint, printing papers, premium
business and correspondence papers, tobacco industry
papers and products, technical papers, and related
products.
- Class III includes aircraft services, commercial air
transportation and other products and services.
Adjustments:
- Adjustments to sales shown in the following tables consist
of intercompany sales of products between product classes
or geographic areas. Adjustments to operating profit
consist of expenses not associated with product classes or
geographic areas.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS:
First Quarter 1994 Compared With First Quarter 1993
By Product Class
($ Millions)
% Change % of 1994
Net Sales 1994 vs. 1993 Consolidated
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Class I ........................ $1,431.8 +6.5% 80.6%
Class II ....................... 263.8 -2.6 14.8
Class III ...................... 92.3 -5.6 5.2
Adjustments .................... (11.4) (.6)
-------- ------
Consolidated ................... $1,776.5 +4.4% 100.0%
======== ======
</TABLE>
<TABLE>
% Change % of 1994 % Return on Sales
Operating Profit 1994 vs. 1993 Consolidated 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class I ........................ $164.6 +10.0% 77.5% 11.5% 11.1%
Class II ....................... 46.6 + 7.1 22.0 17.7 16.1
Class III ...................... 5.1 +37.8 2.4 5.5 3.8
Adjustments .................... (4.1) (1.9)
------ ------
Consolidated ................... $212.2 + 8.3% 100.0% 11.9% 11.5%
====== ======
</TABLE>
<PAGE>
Commentary:
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 were up 9.4 percent
compared with the first quarter of 1993.
- Sales volumes increased in North America. Noteworthy
contributors were Huggies disposable diapers, Kotex and
New Freedom feminine care products, Depend and Poise
incontinence care products, Huggies baby wipes, Kleenex
facial tissue, professional health care products,
technical papers, Neenah Paper's premium business and
correspondence papers, and Midwest Express Airlines,
Inc.
- Sales volumes were higher in Europe due to the
expansion of Huggies Pull-Ups training pants and the
January 1994 launch of Huggies disposable diapers.
- Sales volumes also increased for consumer products in
Asia, primarily in Korea.
- Sales volumes declined for Huggies Pull-Ups training
pants in North America caused, in part, by the entry of
a major competitor into the market with a branded
product, and market share growth of private-label and
economy-branded competitors. Sales volumes also
declined in the consumer bathroom tissue business in
North America due to competitive conditions in both
Canada and the private label business in the U.S.
- Selling prices were lower in North America for facial
tissue, disposable diapers and feminine care products,
principally in response to competitive business
conditions which necessitated price reductions in mid-
to-late 1993.
- Changes in currency exchange rates are estimated to
have reduced consolidated sales by $15 million.
Gross profit, which benefited from the higher sales volumes,
increased by .4 percent in absolute terms, but declined as a
percentage of sales, primarily because of the lower selling
prices.
- Start-up costs for expansion of Huggies Pull-Ups
training pants, as well as costs associated with the
January 1994 launch of disposable diapers, were
incurred in Europe.
- Product improvement costs were higher, primarily for
the new Huggies Supreme diapers in the U.S. and Huggies
UltraTrim diapers in Canada.
- Newsprint selling prices remain at depressed levels due
to industry overcapacity.
- Cost reductions and manufacturing efficiencies were
achieved in certain North American consumer products
businesses.
- Raw material costs were lower.
<PAGE>
Operating profit increased more than gross profit primarily
because of lower promotion spending.
- Promotion expenses were lower in North America for
facial tissue and feminine care products in connection
with the lower selling prices.
- Industry overcapacity and weak prices in the consumer
and industrial bathroom tissue markets led to
continuing poor results for these businesses in North
America and Continental Europe. However, the U.S.
consumer bathroom tissue business improved during the
quarter as a result of manufacturing efficiencies and
lower promotional spending, which more than offset
reduced selling prices.
- Product introduction costs were higher in Europe to
support the expansion of disposable training pants and
the launch of disposable diapers.
- Changes in currency exchange rates had no significant
effect on consolidated operating profit in the first
quarter of 1994.
<PAGE>
<TABLE>
<CAPTION>
By Geography
($ Millions)
% Change % of 1994
Net Sales 1994 vs. 1993 Consolidated
- --------------------------------------------------------------------
<S> <C> <C> <C>
North America .............. $1,416.4 + 4.0% 79.7%
Outside North America ...... 382.7 + 9.6 21.5
Adjustments ................ (22.6) (1.2)
-------- -----
Consolidated ............... $1,776.5 + 4.4% 100.0%
======== =====
</TABLE>
<TABLE>
<CAPTION>
% Change % of 1994 % Return on Sales
Operating Profit 1994 vs. 1993 Consolidated 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North America .............. $213.8 +25.9% 100.7% 15.1% 12.5%
Outside North America ...... 2.5 -90.8 1.2 .7 7.8
Adjustments ................ (4.1) (1.9)
-------- -----
Consolidated ............... $212.2 + 8.3% 100.0% 11.9% 11.5%
======== =====
</TABLE>
<TABLE>
<CAPTION>
% Change % of 1994
Net Income 1994 vs. 1993 Consolidated
- --------------------------------------------------------------------
<S> <C> <C> <C>
North America .............. $125.8 +28.2% 92.4%
Outside North America ...... 10.4 -61.0 7.6
-------- -----
Consolidated ............... $136.2 + 9.1% 100.0%
======== =====
</TABLE>
Additional commentary:
- Sales volumes and selling prices for tobacco industry
papers declined in France.
- Operating losses were incurred in Europe, principally
because of the higher product introduction costs for
the expansion of training pants and the costs
associated with the launch of diapers. These
investments are part of the Corporation's long-term
strategy to increase its business in Europe, and losses
should decline as the year progresses.
- Interest expense was higher primarily as a result of
higher debt levels.
- The effective income tax rate was lower due to benefits
from company-owned life insurance and reduction in
tax liabilities previously provided which are no longer
required in the U.S., partially offset by losses
incurred outside the U.S. for which no tax benefits
were recorded.
- Net income from equity companies grew 25.1 percent on
the strength of higher sales volumes in Mexico,
Australia and Colombia. Net income at the
Corporation's Mexican affiliate improved despite a
currency charge caused by the 1994 weakening of the
Mexican peso.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- Despite higher net income, cash provided by operations
decreased primarily as a result of pension plan funding
in excess of expense recognition, an increase in
accounts receivable due, in part, to increased sales,
and increased inventories primarily related to business
expansions.
- In February 1994, the Corporation issued $100 million
of 6-7/8% Debentures due February 15, 2014. The
proceeds were used principally to reduce short-term
debt.
- On March 31, 1994, the Corporation sold Spenco Medical
Corporation and, on April 14, 1994, announced an
agreement in principle to sell its mill in Memphis,
Tenn., which primarily makes private-label tissue
products. The latter transaction is expected to close
later this year.
- Negotiations for the sale of the Corporation's
Brown-Bridge business unit, which manufactures
adhesive-coated stocks for labels and related
applications, were terminated during the
quarter as a result of opposition by the Federal Trade
Commission to the proposed transaction. Discussions,
however, are proceeding with other potential buyers.
- The disposition of these entities will have no material
effect on the consolidated financial statements.
ENVIRONMENTAL MATTERS
The Corporation has not been identified as a potentially
responsible party at any Environmental Protection Agency
designated cleanup site which, in management's opinion, could
have a material adverse effect on its business or results of
operations. See "Legal Proceedings."
<PAGE>
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
The Corporation is subject to routine litigation from time to
time which individually or in the aggregate is not expected to
have a material adverse effect on the business or results of
operations of the Corporation.
The Corporation has been named a potentially responsible party
("PRP") under the provisions of the federal Comprehensive
Environmental Response, Compensation and Liability Act,
or analogous state statute, at 25 waste disposal
sites, none of which, in management's opinion, could,
individually or in the aggregate, have a material adverse
impact on the Corporation's business or results of operations.
Notwithstanding its opinion, management believes it appropriate
to disclose the following recent developments concerning four
of these sites where the extent of the Corporation's liability
cannot yet be established:
A. On March 14, 1994, the Corporation received an information
request regarding the Purity Oil Sales Superfund Site in
Malaga, California. The Environmental Protection Agency
("EPA") believes that the Corporation's former facility in
Anderson, California arranged for the disposal, treatment
or transportation of waste oil and/or solvents to the
site. The Corporation is conducting an investigation to
determine if any waste oils or solvents used by the
facility were transported to the site. The Corporation's
estimated share of the total site remediation cost, if
any, cannot be established on the basis of currently
available information.
B. On March 22, 1994, the Corporation received an information
request regarding the Niagara County Refuse Superfund Site
in Wheatfield, New York. EPA believes that the
Corporation's former facility in Niagara Falls, New York
disposed of four cubic yards of waste at the site in
October, November and December of 1971. The Corporation
is conducting an investigation to determine if any wastes
generated by the Niagara Falls facility were disposed of
at the site and, if so, if such wastes were hazardous.
The Corporation's estimated share of the total site
remediation cost, if any, cannot be established on the
basis of currently available information.
C. On April 11, 1994, the Corporation received a special
notice letter and information request regarding the Marina
Cliffs Barrel Dump Site in Milwaukee, Wisconsin. The
Wisconsin Department of Natural Resources believes that
the Corporation disposed of drums at the site. The
Corporation is conducting an investigation to determine if
any drums used by its Wisconsin facilities were disposed
of at the site, and, if so, if such drums contained
hazardous waste. The Corporation's estimated share of the
total site remediation cost, if any, cannot be established
on the basis of currently available information.
D. On April 7, 1994, the Corporation received a demand letter
prior to the filing of a contribution lawsuit from the PRP
Committee of the Ekotek Superfund Site in Salt Lake City,
Utah. The PRP Committee believes that the Corporation
disposed of 410 gallons of used oil at the site. The
Corporation is conducting an investigation to determine if
any of its facilities disposed of used oil at the site.
The Corporation's liability for cleanup costs at such site
is expected to be de minimis.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
The 1994 Annual Meeting of Stockholders was convened at 11:00
a.m. on Thursday, April 21, 1994, at the Corporation's Roswell
Operations Headquarters in Roswell, Georgia. Represented at
the meeting in person or by proxy were 146,752,662 shares of
common stock or 91.1% of all shares of common stock
outstanding.
The following directors were elected to three-year terms
expiring in 1997: Paul J. Collins, Wayne R. Sanders, Wolfgang
R. Schmitt, Randall L. Tobias, and H. Blair White. Of the
shares represented at the meeting, 99.5% voted for each nominee
and .5% withheld authority to vote for each nominee.
The Corporation's other directors are John F. Bergstrom, James
D. Bernd, Pastora San Juan Cafferty, Claudio X. Gonzalez, James
G. Grosklaus, Phala A. Helm, M.D., Louis E. Levy and Frank A.
McPherson.
In addition to the election of directors, the stockholders
approved the selection of Deloitte & Touche as independent
auditors for the Corporation. Of the shares represented at the
meeting, 99.5% voted for such selection, .2% voted against and
.3% abstained or did not vote.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(4) Copies of instruments defining the rights of
holders of long-term debt will be furnished to
the Securities and Exchange Commission upon
request.
(11) The following statement is filed as an exhibit
to Part I of this Form 10-Q:
The net income per common share computations
included in the Consolidated Income Statement in
Part I, Item 1, of this Form 10-Q are based on
average number of shares of common stock
outstanding. The only "common stock
equivalents" or other potentially dilutive
securities or agreements (as defined in
Accounting Principles Board Opinion No. 15)
which were contained in the Corporation's
capital structure during the periods presented
were options outstanding under the Corporation's
Equity Participation Plans.
Alternative computations of "primary" and "fully
diluted" net income per share amounts for 1994
and 1993 assume the exercise of outstanding
stock options using the "treasury stock method."
There is no significant difference between net
income per share presented in Item 1 and net
income per share calculated on a "primary" and
"fully diluted" basis for the first quarter of
1994 and 1993.
<PAGE>
(12) The following computation is filed as an exhibit
to Part I of this Form 10-Q:
<TABLE>
<CAPTION>
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
($ Millions)
Three Months
Ended March 31
1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Consolidated Companies
Income before income taxes ........................... $183.6 $174.7
Interest expense ..................................... 31.1 26.1
Interest factor in rent expense ...................... 6.2 7.2
Amortization of capitalized interest ................. 1.4 1.4
Equity Affiliates
Share of 50%-owned:
Income before income taxes ......................... 9.5 6.5
Interest expense ................................... 1.9 2.0
Interest factor in rent expense .................... .1 .1
Amortization of capitalized interest ............... .1 .1
Distributed income of less than 50%-owned ............ - -
------ ------
Earnings ............................................... $233.9 $218.1
====== ======
Consolidated Companies
Interest expense ..................................... $ 31.1 $ 26.1
Capitalized interest ................................. 2.3 6.1
Interest factor in rent expense ...................... 6.2 7.2
Equity Affiliates
Share of 50%-owned:
Interest expense and capitalized interest .......... 1.9 2.1
Interest factor in rent expense .................... .1 .1
------ ------
Fixed charges .......................................... $ 41.6 $ 41.6
====== ======
Ratio of earnings to fixed charges ............... 5.62 5.24
====== ======
</TABLE>
(b) Reports on Form 8-K
(i) The Corporation filed a Current Report on Form
8-K dated February 17, 1994, which reported the
Corporation's 1993 audited financial statements
and management's discussion and analysis.
(ii) The Corporation filed a Current Report on Form
8-K dated February 18, 1994 which reported the
offering of $100 million principal amount of
debt securities by the Corporation.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Kimberly-Clark Corporation
(Registrant)
By: /s/ John W. Donehower
----------------------------------------------------
John W. Donehower
Senior Vice President and Chief Financial Officer
(principal financial officer)
By: /s/ Randy J. Vest
---------------------------------------------------
Randy J. Vest
Vice President and Controller
(principal accounting officer)
May 11, 1994
<PAGE>
