FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 August 5, 1994, 161,102,200 shares of the
Corporation's common stock were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements.
CONSOLIDATED INCOME STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
(Millions of dollars except per share amounts) 1994 1993 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales ..................................... $1,830.1 $1,725.9 $3,606.6 $3,427.9
Cost of products sold ......................... 1,209.9 1,121.8 2,381.0 2,221.1
-------- -------- -------- --------
Gross Profit .................................. 620.2 604.1 1,225.6 1,206.8
Advertising, promotion and selling expenses ... 270.6 271.0 539.2 550.8
Research expense .............................. 41.1 39.5 79.8 80.5
General expense ............................... 92.4 102.0 178.3 187.9
-------- -------- -------- --------
Operating Profit .............................. 216.1 191.6 428.3 387.6
Interest expense .............................. (32.3) (28.1) (63.4) (54.2)
Other income (expense), net ................... 6.6 8.9 9.1 13.7
-------- -------- -------- --------
Income Before Income Taxes .................... 190.4 172.4 374.0 347.1
Provision for income taxes .................... 75.2 65.5 144.0 131.9
-------- -------- -------- --------
Income Before Equity Interests ................ 115.2 106.9 230.0 215.2
Share of net income of equity companies ....... 38.6 30.1 63.5 50.0
Minority owners' share of subsidiaries'
net income ............................... (2.3) (3.7) (5.8) (7.1)
-------- -------- -------- --------
Net Income .................................... $ 151.5 $ 133.3 $ 287.7 $ 258.1
======== ======== ======== ========
Per Share Basis:
Net Income .................................... $ .94 $ .83 $ 1.79 $ 1.61
======== ======== ======== ========
Cash Dividends Declared ....................... $ .44 $ .43 $ .88 $ .43
======== ======== ======== ========
Cash Dividends Paid ........................... $ .44 $ .43 $ .87 $ .84
======== ======== ======== ========
</TABLE>
Unaudited
See Notes to Financial Statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
June 30, December 31,
(Millions of dollars) 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents .......................... $ 27.1 $ 34.8
Accounts receivable ................................ 812.0 738.7
Inventories ........................................ 807.0 775.9
Other current assets ............................... 139.1 125.8
-------- --------
Total Current Assets ............................. 1,785.2 1,675.2
-------- --------
Property ............................................. 6,482.0 6,372.8
Less accumulated depreciation ...................... 2,409.9 2,330.0
-------- --------
Net Property ..................................... 4,072.1 4,042.8
Investments in Equity Companies ...................... 464.4 398.3
Deferred Charges and Other Assets .................... 286.3 264.4
-------- --------
$6,608.0 $6,380.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Debt payable within one year ....................... $ 768.3 $ 684.8
Accounts payable ................................... 411.2 438.1
Other current liabilities .......................... 787.9 785.6
-------- --------
Total Current Liabilities ........................ 1,967.4 1,908.5
Long-Term Debt ....................................... 933.0 933.1
Noncurrent Employee Benefit Obligations .............. 438.7 430.0
Deferred Income Taxes ................................ 596.7 585.0
Minority Owners' Interests in Subsidiaries ........... 67.0 66.9
Stockholders' Equity ................................. 2,605.2 2,457.2
-------- --------
$6,608.0 $6,380.7
======== ========
</TABLE>
Unaudited
See Notes to Financial Statements.
<PAGE>
CONSOLIDATED CASH FLOW STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months
Ended June 30
(Millions of dollars) 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net income ................................................. $287.7 $258.1
Depreciation ............................................... 162.4 141.4
Changes in operating working capital ....................... (173.0) (67.0)
Pension funding in excess of expense ....................... (37.0) (2.2)
Other ...................................................... (6.8) 11.9
------ ------
Cash Provided by Operations .............................. 233.3 342.2
------ ------
Investing
Capital spending ........................................... (201.9) (339.0)
Other ...................................................... 24.1 (20.8)
------ ------
Cash Used for Investing .................................. (177.8) (359.8)
------ ------
Financing
Cash dividends paid ........................................ (140.0) (135.0)
Changes in debt payable within one year .................... 83.5 121.8
Increases in long-term debt ................................ 152.3 62.5
Decreases in long-term debt ................................ (152.4) (20.0)
Other ...................................................... (6.6) .7
------ ------
Cash (Used for) Provided by Financing .................... (63.2) 30.0
------ ------
(Decrease) Increase in Cash and Cash Equivalents ............. $ (7.7) $ 12.4
====== ======
</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 six
months ended June 30, 1994 and 1993, was 161.0 million
and 160.8 million, respectively. There were
161.1 million shares outstanding at June 30, 1994.
3. The comparison of cash dividends declared for the six
months ended June 30, 1994 and 1993, was affected by
the timing of dividends declared in the respective
years. In the 1994 period, quarterly dividends of $.44
per share were declared on February 17 and April 21,
whereas in the 1993 period, a quarterly dividend of
$.43 per share was declared on April 22. A quarterly
dividend of $.43 per share paid on April 2, 1993, was
declared on December 17, 1992.
4. The following schedule details inventories by major
class as of June 30, 1994 and December 31, 1993:
June 30, December 31,
(Millions of dollars) 1994 1993
---------------------------------------------------------------------------
At lower of cost on the First-In,
First-Out (FIFO) method or market:
Raw materials .......................... $169.5 $155.1
Work in process ........................ 158.5 169.6
Finished goods ......................... 461.7 439.9
Supplies and other ..................... 127.6 121.5
------ ------
917.3 886.1
Excess of FIFO cost over Last-In,
First-Out (LIFO) cost ................... (110.3) (110.2)
------ ------
Total ................................... $807.0 $775.9
====== ======
Unaudited
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Management believes that the following tables and commentary
appropriately discuss and analyze the comparative results of
operations for the periods covered.
Product Classes referred to in the following discussion and
analysis are:
- Class I includes tissue products for household,
commercial, institutional and industrial uses; infant,
child, feminine and incontinence care products;
industrial and commercial wipers; health care products;
and related products.
- Class II includes newsprint, printing papers, premium
business and correspondence papers, tobacco industry
papers and products, technical papers, and related
products.
- Class III includes aircraft services, commercial air
transportation and other products and services.
Adjustments:
- Adjustments to sales shown in the following tables
consist of intercompany sales of products between
product classes or geographic areas. Adjustments to
operating profit consist of expenses not associated with
product classes or geographic areas.
RESULTS OF OPERATIONS:
Second Quarter 1994 Compared With Second Quarter 1993
By Product Class
($ Millions)
% Change % of 1994
Net Sales 1994 vs. 1993 Consolidated
- ----------------------------------------------------------------------
Class I ........................ $1,479.2 +7.6% 80.8%
Class II ....................... 270.6 - .8 14.8
Class III ...................... 93.1 -5.9 5.1
Adjustments .................... (12.8) ( .7)
-------- -----
Consolidated ................... $1,830.1 +6.0% 100.0%
======== =====
<TABLE>
<CAPTION>
% Change % of 1994 % Return on Sales
Operating Profit 1994 vs. 1993 Consolidated 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class I ........................ $179.7 +22.2% 83.2% 12.1% 10.7%
Class II ....................... 44.7 - 1.3 20.7 16.5 16.6
Class III ...................... 5.0 -29.6 2.3 5.4 7.2
Adjustments .................... (13.3) (6.2)
------ -----
Consolidated ................... $216.1 +12.8% 100.0% 11.8% 11.1%
====== =====
</TABLE>
<PAGE>
Commentary:
Net sales increased as a result of higher sales volumes for
most of the Corporation's businesses. Sales volumes
increased 10.4 percent compared with the second quarter of
1993.
- Sales volumes increased in North America. Noteworthy
contributors were Huggies disposable diapers, Kleenex
facial tissue, Kotex and New Freedom feminine care
products, Huggies baby wipes, Depend and Poise
incontinence care products, professional health care
products, newsprint, U.S. tobacco industry 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 disposable training pants and the
January 1994 launch of Huggies disposable diapers.
- Sales volumes also increased for consumer products in
Asia, primarily in Korea, and in Latin America.
- Selling prices were lower in North America for facial
tissue, disposable diapers, feminine care products,
consumer bathroom tissue and Midwest Express Airlines,
Inc., principally in response to competitive business
conditions.
- Newsprint selling prices remain at depressed levels,
although increased newsprint consumption and lower
publishers' inventories have occurred in the industry.
- Changes in currency exchange rates are estimated to have
reduced consolidated net sales by $19 million.
Gross profit, which benefited from the higher sales volumes,
increased by 2.7 percent in absolute terms, but declined as
a percentage of sales, primarily because of the lower
selling prices.
- Cost reductions and manufacturing efficiencies were
achieved in certain North American consumer products
businesses, most notably in the disposable diaper
business.
- Product improvement costs were higher, primarily for the
new Huggies Supreme diapers in the U.S. and Huggies
UltraTrim diapers in Canada.
Operating profit increased 12.8 percent in absolute terms,
and as a percentage of sales, primarily because of the
higher sales volumes, lower promotion spending and reduced
general expenses.
- Promotion expenses were lower in North America for
facial tissue products in connection with the lower
selling prices.
- Results for the U.S. consumer bathroom tissue business
continued the improvement begun during the first quarter
of 1994 as a result of lower promotion spending and
manufacturing efficiencies, which more than offset the
effect of reduced selling prices. Results for the
bathroom tissue business in Continental Europe remained
poor because of industry overcapacity and weak prices.
- Product introduction costs and related general expenses
were higher in Europe to support the expansion of
disposable training pants and the launch of disposable
diapers.
- Cost control measures benefited general expense in 1994.
In addition, the quarter-to-quarter comparison was affected by the
settlement of a class action lawsuit involving the
Corporation's Coosa Pines, Ala., pulp and newsprint mill
which increased 1993 general expense by $6.5 million.
- Changes in currency exchange rates had no significant
effect on consolidated operating profit in the second
quarter of 1994.
<PAGE>
By Geography
($ Millions)
% Change % of 1994
Net Sales 1994 vs. 1993 Consolidated
- ---------------------------------------------------------------------
North America .............. $1,466.0 + 6.3% 80.1%
Outside North America ...... 389.0 + 8.0 21.3
Adjustments ................ (24.9) (1.4)
-------- -----
Consolidated ............... $1,830.1 + 6.0% 100.0%
======== =====
<TABLE>
<CAPTION>
% Change % of 1994 % Return on Sales
Operating Profit 1994 vs. 1993 Consolidated 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North America .............. $222.3 +24.1% 102.9% 15.2% 13.0%
Outside North America ...... 7.1 -64.9 3.3 1.8 5.6
Adjustments ................ (13.3) (6.2)
------ -----
Consolidated ............... $216.1 +12.8% 100.0% 11.8% 11.1%
====== =====
</TABLE>
% Change % of 1994
Net Income 1994 vs. 1993 Consolidated
- -----------------------------------------------------------------------
North America .............. $126.4 +21.1% 83.4%
Outside North America ...... 25.1 -13.1 16.6
------ -----
Consolidated ............... $151.5 +13.7% 100.0%
====== =====
Additional commentary:
- In Europe, operating losses continued, but, as expected,
were slightly lower in the second quarter of 1994 than
in the first quarter of this year. These losses were
caused principally by product introduction costs and
related general expenses for the expansion of training
pants and the launch of diapers.
- Interest expense was higher primarily as a result of
higher debt levels.
- Net income from equity companies grew 28.2 percent. The
improvement was largely due to the readoption of equity
accounting for the Corporation's South African
affiliate, Carlton Paper Corporation Limited, and
slightly higher net income at the Corporation's Mexican
affiliate, Kimberly-Clark de Mexico, S.A. de C.V.
Earnings at the Mexican affiliate benefited from higher
sales volumes partially offset by lower selling prices
and changes in currency exchange rates. The
Corporation's Australian affiliate, Kimberly-Clark
Australia Pty. Limited, had strong operating results,
but its net income declined because earnings in the
second quarter of 1993 were affected by a reduction in
the country's corporate income tax rate.
- The readoption of equity accounting for the
Corporation's South African affiliate increased net
income from equity companies by $10.0 million and, after
providing related income taxes, increased net income by
$6.3 million, or four cents per share. In 1988, as a
result of political unrest in South Africa and the
enactment of punitive U.S. tax rules and other
legislative activity which made recoverability of the
Corporation's full carrying amount of its investment in
South African operations doubtful, the Corporation wrote
down its investment and began to recognize earnings only
when dividends were received. In view of improved
economic and political conditions in South Africa
following the historic multiracial elections of April
1994, the Corporation readopted equity accounting for
this investment and recognized its share of the
affiliate's unremitted earnings from 1988 to June 30,
1994.
- The effective income tax rate increased to 39.5 percent for the
quarter from 38.0 percent a year ago, primarily as a result of
recording income taxes on the unremitted earnings of the
Corporation's South African affiliate.
<PAGE>
RESULTS OF OPERATIONS:
First Six Months of 1994 Compared with First Six Months of 1993
By Product Class
($ Millions)
% Change % of 1994
Net Sales 1994 vs. 1993 Consolidated
- -----------------------------------------------------------------------
Class I ........................ $2,911.0 + 7.0% 80.7%
Class II ....................... 534.4 - 1.7 14.8
Class III ...................... 185.4 - 5.7 5.1
Adjustments .................... (24.2) (.6)
-------- -----
Consolidated ................... $3,606.6 + 5.2% 100.0%
======== =====
<TABLE>
<CAPTION>
% Change % of 1994 % Return on Sales
Operating Profit 1994 vs. 1993 Consolidated 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class I ........................ $344.3 +16.0% 80.4% 11.8% 10.9%
Class II ....................... 91.3 + 2.8 21.3 17.1 16.3
Class III ...................... 10.1 - 6.5 2.4 5.4 5.5
Adjustments .................... (17.4) (4.1)
------ ----
Consolidated ................... $428.3 +10.5% 100.0% 11.9% 11.3%
====== =====
</TABLE>
Commentary:
Net sales increased as a result of higher sales volumes for
most of the Corporation's businesses. Sales volumes
increased 9.9 percent compared with the first six months of
1993.
- Sales volumes increased in North America. Noteworthy
contributors were Huggies disposable diapers, Kotex and
New Freedom feminine care products, Kleenex facial
tissue, Depend and Poise incontinence care products,
Huggies baby wipes, professional health care products,
newsprint, U.S. tobacco industry papers, 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, and in Latin America.
- Sales volumes declined for the training pant business 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, feminine care products,
consumer bathroom tissue and Midwest Express Airlines,
Inc., principally in response to competitive business
conditions.
<PAGE>
- Newsprint selling prices remain at depressed levels.
- Changes in currency exchange rates are estimated to have
reduced consolidated net sales by $35 million.
Gross profit, which benefited from the higher sales volumes,
increased by 1.6 percent in absolute terms, but declined as
a percentage of sales, primarily because of the lower
selling prices.
- Cost reductions and manufacturing efficiencies were
achieved in certain North American consumer products
businesses, most notably in the disposable diaper
business.
- Product improvement costs were higher, primarily for the
new Huggies Supreme diapers in the U.S. and Huggies
UltraTrim diapers in Canada.
- Raw material costs were lower.
Operating profit increased 10.5 percent in absolute terms,
and as a percentage of sales, primarily because of the
higher sales volumes, lower promotion spending and reduced
general expenses.
- Promotion expenses were lower in North America for
facial tissue products in connection with the lower
selling prices.
- Results for the U.S. consumer bathroom tissue business
improved as a result of lower promotion spending and
manufacturing efficiencies, which more than offset the
effect of reduced selling prices. Results for the
bathroom tissue business in Continental Europe remained
poor because of industry overcapacity and weak prices.
- Product introduction costs and related general expenses
were higher in Europe to support the expansion of
disposable training pants and the launch of disposable
diapers.
- Cost control measures benefited general expense in 1994.
In addition, the six-month comparison was affected by
the settlement of a class action lawsuit involving the
Corporation's Coosa Pines, Ala., pulp and newsprint mill
which increased 1993 general expense by $6.5 million.
- Changes in currency exchange rates had no significant
effect on consolidated operating profit in the first six
months of 1994.
<PAGE>
By Geography
($ Millions)
% Change % of 1994
Net Sales 1994 vs. 1993 Consolidated
- ----------------------------------------------------------------------
North America .............. $2,882.4 + 5.1% 79.9%
Outside North America ...... 771.7 + 8.8 21.4
Adjustments ................ (47.5) (1.3)
-------- -----
Consolidated ............... $3,606.6 + 5.2% 100.0%
======== =====
<TABLE>
<CAPTION>
% Change % of 1994 % Return on Sales
Operating Profit 1994 vs. 1993 Consolidated 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North America .............. $436.1 +25.0% 101.9% 15.1% 12.7%
Outside North America ...... 9.6 -79.7 2.2 1.2 6.7
Adjustments ................ (17.4) (4.1)
------ -----
Consolidated ............... $428.3 +10.5% 100.0% 11.9% 11.3%
====== =====
</TABLE>
% Change % of 1994
Net Income 1994 vs. 1993 Consolidated
- ----------------------------------------------------------------------
North America .............. $252.2 +24.5% 87.7%
Outside North America ...... 35.5 -36.2 12.3
------ -----
Consolidated ............... $287.7 +11.5% 100.0%
====== =====
Additional commentary:
- In Europe, operating losses occurred principally because
of product introduction costs and related general
expenses for the expansion of training pants and the
launch of diapers.
- Interest expense was higher primarily as a result of
higher debt levels.
- Net income from equity companies grew 27.0 percent. The
improvement was largely due to the previously discussed
readoption of equity accounting for the Corporation's
South African affiliate and higher net income at the
Corporation's Mexican affiliate, Kimberly-Clark de
Mexico, S.A. de C.V.
- The effective income tax rate increased to 38.5 percent
for the first six months from 38.0 percent a year ago,
primarily as a result of recording income taxes on the
unremitted earnings of the Corporation's South African
affiliate. The effective income tax rate comparison
also is affected by a reduction in tax liabilities
previously provided which are no longer required in the
U.S., offset in part by the effect of losses incurred
outside the U.S. for which no tax benefits were
recorded.
<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 principally due to increased sales,
and increased inventories primarily related to business
expansions.
- The decline in capital spending of $137.1 million for
the first six months of 1994 is in line with the
Corporation's expected annual capital spending of
$500 million to $550 million for 1994 compared with
actual capital spending of $654.5 million for 1993. The
lower spending in 1994 reflects completion of several
major projects, including a new feminine care products
plant in Neenah, Wis. and a new diaper and training
pants production plant in Barton-upon-Humber, England.
- In June 1994, the Corporation through the Mississippi
Business Finance Corporation issued $40 million of 7.55%
industrial development revenue bonds due June 1, 2004.
The proceeds are being used to finance improvements at
the Corporation's nonwovens products facility in
Corinth, Miss.
- In June 1994, a shelf registration statement for $200
million of debt securities was filed with and declared
effective by the Securities and Exchange Commission.
The filing allows flexibility to issue debt promptly if
the Corporation's needs and market conditions warrant.
- On June 15, 1994, the Corporation agreed to sell its
Troy, Ohio-based adhesive-coated label stock business in a
transaction which is expected to close in the third quarter.
On July 6, 1994, it sold its wholly owned Brazilian subsidiary,
K-C do Brasil Ltda. Neither transaction is material to the
consolidated financial statements.
- On July 8, 1994, the Corporation's wholly owned
subsidiary Kimberly-Clark Argentina S.A. agreed to
combine its operations with Buenos Aires-based
Descartables Argentinos S.A. to form a joint venture
company to manufacture and market personal care
products, including disposable diapers, feminine care
products and incontinence care products. Products
produced by the joint venture will be distributed by an
affiliate of the Unilever Group, Unilever de Argentina,
S.A.
- On July 16, 1994, the Corporation's wholly owned
subsidiary Kimberly-Clark GmbH acquired the feminine
care products business of German-based VP-Schickedanz AG
for approximately $123 million. The transaction
includes a feminine care products plant in Forchheim,
Germany; feminine care products machines now located at
a plant in Mayen, Germany; the Camelia and Tampona
brands; patents related to feminine care products; and
feminine care inventories. In 1993, VP-Schickedanz's
sales of feminine care products were approximately $120
million. The acquisition doubles the size of the
Corporation's European feminine care business.
FOREIGN CURRENCY RISKS AND INFLATION RISKS
Because the Corporation has manufacturing facilities in more
than 20 countries throughout the world, it is subject to
currency risks as a result of strengthening or weakening of
local currencies versus the U.S. dollar. The risk to any
particular entity's assets is minimized to the extent that
the entity is financed with local currency borrowings. 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. Management hedges the Corporation's foreign
currency transaction risks when it is practicable and
economically feasible to do so. The Corporation does not
hedge its translation exposure. Gains and
losses on such translation are recorded in current period
income for entities operating in hyperinflationary economies
and as increases or decreases in Unrealized Currency
Translation Adjustments in Stockholders' Equity for all
other entities.
The Corporation and its subsidiaries and affiliates manage
their inflation risks on an entity-by-entity basis through
selective price increases, productivity increases and cost
containment measures. The net assets of subsidiaries and
equity affiliates operating in hyperinflationary countries
were $17.1 million at June 30, 1994 compared with Kimberly-
Clark's consolidated net assets of $2.6 billion at that
date. Accordingly, management believes its
hyperinflationary risks are minimal.
HEDGING ACTIVITIES
The Corporation hedges foreign currency risks for
transactions that are denominated in a currency other than
the functional currency of the applicable entity when it is
practicable and economically feasible to do so. Such
hedged transactions relate to firm commitments associated
with the purchase of raw materials or items of property,
plant and equipment or for the sale of products. The
instruments used to hedge foreign currency risks are
primarily forward contracts purchased from well-known money
center banks (counterparties) throughout the world. Usually
the contracts extend for no more than 12 months, although
the maximum contractual term of such instruments has been 25
months. At June 30, 1994, the Corporation had outstanding
forward exchange contracts, maturing at various dates in
1994 and 1995, to purchase $169 million and to sell
$263 million of various foreign currencies. At that date,
the Corporation had no forward exchange contracts maturing
after 1995.
Credit risks and market risks with respect to the
counterparties, and the exchange risks that would not be
hedged if the counterparties fail to fulfill their
obligation under forward contracts, are believed to be
minimal in view of the financial strength of the
counterparties. Kimberly-Clark's accounting policy for
forward contracts that hedge firm commitments is to defer
gains or losses on the hedge into the basis of the
underlying hedged items. All other forward contracts are
marked to market, and the resulting gains or losses on such
contracts are included in current period income.
ENVIRONMENTAL MATTERS
The Corporation has not been identified as a potentially
responsible party ("PRP") 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.
In May 1994, the Corporation settled its patent infringement
claim against Pope & Talbot, Inc. and Pope & Talbot, Wis.,
Inc. and the related antitrust counterclaim against the
Corporation. In June 1994, the Corporation settled its
patent infringement claim against Drypers Corporation and
the related antitrust counterclaim against the Corporation.
The subject matter of this litigation was previously
reported in Item 3.C. of the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1993.
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 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 have a material adverse effect on the
Corporation's business or results of operations. With
respect to the Niagara County Refuse Superfund Site in
Wheatfield, New York, which was previously reported in Part
II, Item 1.B. of the Corporation's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1994, the
Corporation has determined that nonhazardous wastes
generated by its former Niagara Falls facility were disposed
of at the site. Based on such determination, the
Corporation expects its liability for cleanup costs at the
site to be de minimis.
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 Part I, Item 1 and
net income per share calculated on a "primary"
and "fully diluted" basis for the second quarter
and first six months of 1994 and 1993.
(12) The following computation is filed as an exhibit
to Part I of this Form 10-Q:
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
($ Millions)
Six Months
Ended June 30
1994 1993
- ----------------------------------------------------------------------------
Consolidated Companies
Income before income taxes ....................... $374.0 $347.1
Interest expense ................................. 63.4 54.2
Interest factor in rent expense .................. 12.4 13.8
Amortization of capitalized interest ............. 3.0 2.9
Equity Affiliates
Share of 50%-owned:
Income before income taxes ..................... 20.0 15.0
Interest expense ............................... 3.8 4.1
Interest factor in rent expense ................ .3 .3
Amortization of capitalized interest ........... .3 .3
Distributed income of less than 50%-owned......... 10.9 10.5
------ -----
Earnings ........................................... $488.1 $448.2
====== ======
Consolidated Companies
Interest expense ................................. $ 63.4 $ 54.2
Capitalized interest ............................. 5.1 10.9
Interest factor in rent expense .................. 12.4 13.8
Equity Affiliates
Share of 50%-owned:
Interest expense and capitalized interest ...... 3.9 4.2
Interest factor in rent expense ................ .3 .3
------ ------
Fixed charges ...................................... $ 85.1 $ 83.4
====== ======
Ratio of earnings to fixed charges ........... 5.74 5.37
====== ======
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Corporation during the second quarter of 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
KIMBERLY-CLARK CORPORATION
(Registrant)
By: /s/ John W. Donehower
-----------------------------------------
John W. Donehower
Senior Vice President and Chief Financial Officer
(principal financial officer)
By: /s/ Randy J. Vest
-----------------------------------------
Randy J. Vest
Vice President and Controller
(principal accounting officer)
August 10, 1994
