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 September 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 November 4, 1994, 160,145,525 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 Nine Months
Ended September 30 Ended September 30
------------------ -------------------
(Millions of dollars except per share amounts) 1994 1993 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales ...................................... $1,836.8 $1,781.0 $5,443.4 $5,208.9
Cost of products sold .......................... 1,247.5 1,193.1 3,628.5 3,414.2
-------- -------- -------- --------
Gross Profit ................................... 589.3 587.9 1,814.9 1,794.7
Advertising, promotion and selling expenses .... 272.6 273.8 811.8 824.6
Research expense ............................... 41.0 37.4 120.8 117.9
General expense ................................ 93.3 87.1 271.6 275.0
-------- ------- ------- -------
Operating Profit ............................... 182.4 189.6 610.7 577.2
Interest expense ............................... (33.0) (27.4) (96.4) (81.6)
Other income (expense), net .................... 23.4 4.3 32.5 18.0
-------- -------- -------- -------
Income Before Income Taxes ..................... 172.8 166.5 546.8 513.6
Provision for income taxes ..................... 60.1 76.0 204.1 207.9
-------- ------- ------- -------
Income Before Equity Interests ................. 112.7 90.5 342.7 305.7
Share of net income of equity companies ........ 32.0 24.8 95.5 74.8
Minority owners' share of subsidiaries'
net income ................................... (2.9) (4.1) (8.7) (11.2)
-------- -------- -------- --------
Net Income ..................................... $ 141.8 $ 111.2 $ 429.5 $ 369.3
======== ======== ======== ========
Per Share Basis:
Net Income ..................................... $ .88 $ .69 $ 2.67 $ 2.30
======== ======== ======== ========
Cash Dividends Declared ........................ $ .44 $ .43 $ 1.32 $ .86
======== ======== ======== ========
Cash Dividends Paid ............................ $ .44 $ .43 $ 1.31 $ 1.27
======== ======== ======== ========
</TABLE>
Unaudited
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
September 30, December 31,
(Millions of dollars) 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ............................. $ 29.1 $ 34.8
Accounts receivable ................................... 806.1 738.7
Inventories ........................................... 823.4 775.9
Other current assets .................................. 135.1 125.8
-------- --------
Total Current Assets .............................. 1,793.7 1,675.2
-------- --------
Property ................................................ 6,532.7 6,372.8
Less accumulated depreciation ......................... 2,371.6 2,330.0
-------- --------
Net Property ...................................... 4,161.1 4,042.8
Investments in Equity Companies ......................... 485.7 398.3
Deferred Charges and Other Assets ....................... 332.5 264.4
-------- --------
$6,773.0 $6,380.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Debt payable within one year .......................... $ 728.5 $ 684.8
Accounts payable ...................................... 465.2 438.1
Other current liabilities ............................. 821.9 785.6
-------- --------
Total Current Liabilities ......................... 2,015.6 1,908.5
Long-Term Debt .......................................... 934.4 933.1
Noncurrent Employee Benefit Obligations ................. 440.5 430.0
Deferred Income Taxes ................................... 608.3 585.0
Minority Owners' Interests in Subsidiaries .............. 70.6 66.9
Stockholders' Equity .................................... 2,703.6 2,457.2
-------- --------
$6,773.0 $6,380.7
======== ========
</TABLE>
Unaudited
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CASH FLOW STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Nine Months
Ended September 30
(Millions of dollars) 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net income ................................................. $ 429.5 $ 369.3
Depreciation ............................................... 243.8 215.6
Changes in operating working capital, excluding
the effects of businesses acquired and sold .............. (156.0) (8.2)
Pension funding in excess of expense ....................... (49.5) (51.2)
Other ...................................................... (17.7) 19.4
------- -------
Cash Provided by Operations ............................ 450.1 544.9
------- -------
Investing
Capital spending ........................................... (331.5) (493.0)
Acquisition of business .................................... (97.2) -
Proceeds from disposition of property and businesses ....... 138.1 3.9
Other ...................................................... (6.7) (44.2)
------- -------
Cash Used for Investing ................................ (297.3) (533.3)
------- -------
Financing
Cash dividends paid ........................................ (210.9) (204.2)
Changes in debt payable within one year .................... 59.6 150.8
Increases in long-term debt ................................ 167.0 75.9
Decreases in long-term debt ................................ (165.7) (29.2)
Other ...................................................... (8.5) 1.7
------- -------
Cash Used for Financing ................................ (158.5) (5.0)
------- -------
(Decrease) Increase in Cash and Cash Equivalents ............. $ (5.7) $ 6.6
======= =======
</TABLE>
Unaudited
See Notes to Financial Statements.
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 consoli-
dated 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 nine months
ended September 30, 1994 and 1993, was 161.1 million and
160.8 million, respectively. There were 161.1 million
shares outstanding at September 30, 1994.
3. The provision for income taxes and net income for the quar-
ter and nine months ended September 30, 1993 included a tax
charge related to enactment of the 1993 Tax Act, which
increased the U.S. federal statutory income tax rate to
35 percent from 34 percent. This charge reduced 1993 net
income by $11.9 million or seven cents a share.
4. The comparison of cash dividends declared for the nine
months ended September 30, 1994 and 1993, was affected by
the timing of dividends declared in the respective years.
In the 1994 period, three quarterly dividends of $.44 per
share were declared, whereas in the 1993 period, two quar-
terly dividends of $.43 per share were declared. In 1993 a
quarterly dividend of $.43 per share was paid in April which
was declared in December 1992.
5. The following schedule details inventories by major class as
of September 30, 1994 and December 31, 1993:
September 30, December 31,
(Millions of dollars) 1994 1993
----------------------------------------------------------------------------
At lower of cost on the First-In,
First-Out (FIFO) method or market:
Raw materials ....................... $171.7 $155.1
Work in process ..................... 146.0 169.6
Finished goods ...................... 499.2 439.9
Supplies and other .................. 130.7 121.5
------ ------
947.6 886.1
Excess of FIFO cost over Last-In,
First-Out (LIFO) cost ................. (124.2) (110.2)
------ ------
Total ................................. $823.4 $775.9
====== ======
Unaudited
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Management believes that the following tables and commentary
appropriately discuss and analyze the comparative results of
operations for the periods covered.
Product Classes referred to in the following discussion and
analysis are:
- Class I includes tissue products for household, commer-
cial, institutional and industrial uses; infant, child,
feminine and incontinence care products; industrial and
commercial wipers; health care products; and related
products.
- Class II includes newsprint, printing papers, premium
business and correspondence papers, tobacco industry
papers and products, technical papers, and related
products.
- Class III includes aircraft services, commercial air
transportation and other products and services.
Adjustments:
- Adjustments to sales shown in the following tables
consist of intercompany sales of products between prod-
uct classes or geographic areas. Adjustments to operat-
ing profit consist of expenses not associated with
product classes or geographic areas.
RESULTS OF OPERATIONS:
Third Quarter 1994 Compared With Third Quarter 1993
By Product Class
($ Millions)
% Change % of 1994
Net Sales 1994 vs. 1993 Consolidated
- ----------------------------------------------------------------------
Class I ........................ $1,470.6 +3.0% 80.1%
Class II ....................... 278.1 +5.5 15.1
Class III ...................... 103.6 +7.2 5.6
Adjustments .................... (15.5) ( .8)
-------- -----
Consolidated ................... $1,836.8 +3.1% 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 ........................ $143.4 - .5% 78.6% 9.8% 10.1%
Class II ....................... 47.6 + 8.9 26.1 17.1 16.6
Class III ...................... 4.6 -46.5 2.5 4.4 8.9
Adjustments .................... (13.2) (7.2)
------ -----
Consolidated ................... $182.4 - 3.8% 100.0% 9.9% 10.6%
====== =====
</TABLE>
Commentary:
Net sales increased 3.1 percent in the third quarter of 1994,
with almost 90 percent of the increase attributable to higher
sales volumes.
- Sales volumes improved for consumer products in Europe,
primarily due to the introduction and expansion of
Huggies Pull-Ups disposable training pants and
Huggies disposable diapers, as well as the
acquisition of a feminine care business.
- Sales volumes were higher in North America for Huggies
disposable diapers, professional health care products,
Depend and Poise incontinence care products, Huggies
baby wipes, U.S. tobacco industry papers, service and
industrial products, technical papers, Neenah Paper's
premium business and correspondence papers and Midwest
Express Airlines, Inc.
- Sales volumes also increased for consumer products in
Asia.
- Sales volumes declined for training pants in North
America 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 Kleenex facial tissue,
consumer bathroom tissue and feminine care products due
to competitive conditions in both Canada and the U.S.
- Selling prices were lower for facial and bathroom tissue
products in North America and for Midwest Express Air-
lines, Inc., principally as a result of competitive
business conditions.
- Changes in currency exchange rates are estimated to have
increased consolidated net sales approximately $9 mil-
lion.
Despite the higher sales volumes and manufacturing efficien-
cies, operating profit declined 3.8 percent in absolute terms,
and as a percentage of sales, because of the lower selling
prices, increased fiber costs and higher research and general
expenses.
- Manufacturing efficiencies and cost reductions were
achieved in certain North American consumer products
businesses, most notably in the disposable diaper busi-
ness.
- Product improvement costs were higher, primarily for
Huggies Supreme diapers.
- Despite declines in sales volumes and selling prices,
results for the U.S. consumer bathroom tissue business
continued the improvement that began during the first
quarter of 1994, primarily due to lower promotion spend-
ing. Results for the consumer bathroom tissue business
in Europe suffered from industry overcapacity, higher
fiber costs and weak prices.
- Higher research and general expenses were largely relat-
ed to the development of new and improved products and
European business expansions.
- Increased marketing costs associated with the introduc-
tion of an improved Huggies disposable diaper in Europe
contributed to the operating profit decline. Results in
Europe declined compared with the third quarter of 1993,
with losses in the 1994 third quarter also exceeding
those in the second quarter of this year.
- Changes in currency exchange rates are estimated to have
reduced consolidated operating profit approximately $1
million in the third quarter of 1994.
By Geography
($ Millions)
% Change % of 1994
Net Sales 1994 vs. 1993 Consolidated
- ----------------------------------------------------------------------
North America .............. $1,443.7 - .1% 78.6%
Outside North America ...... 410.5 +18.1 22.3
Adjustments ................ (17.4) ( .9)
-------- -----
Consolidated ............... $1,836.8 + 3.1% 100.0%
======== =====
<TABLE>
<CAPTION>
% Change % of 1994 % Return on Sales
Operating Profit 1994 vs. 1993 Consolidated 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North America .............. $198.2 + 7.5% 108.6% 13.7% 12.8%
Outside North America ...... (2.6) N.M. (1.4) (.6) 3.5
Adjustments ................ (13.2) (7.2)
------ -----
Consolidated ............... $182.4 - 3.8% 100.0% 9.9% 10.6%
====== =====
</TABLE>
% Change % of 1994
Net Income 1994 vs. 1993 Consolidated
- ---------------------------------------------------------------------
North America .............. $126.0 +42.2% 88.9%
Outside North America ...... 15.8 -30.1 11.1
------ -----
Consolidated ............... $141.8 +27.5% 100.0%
====== =====
Additional commentary:
- Other income benefited from gains on completion of the
previously announced sales of the Corporation's Brazil-
ian tissue subsidiary, tissue mill in Memphis, Tenn.,
and adhesive-coated label stock business in Troy, Ohio,
as well as from gains on the sale of woodlands.
- Interest expense increased primarily because of higher
debt levels and interest rates.
- Net income from equity companies grew 29.0 percent
primarily as a result of higher net income at the
Corporation's equity affiliates, Kimberly-Clark de
Mexico, S.A. de C.V., Kimberly-Clark Australia Pty.
Limited and Kimberly-Clark Argentina S.A.
-- Earnings at the Mexican affiliate benefited from
higher sales volumes and lower promotion expenses,
partially offset by higher pulp costs and changes
in currency exchange rates.
-- Earnings at the Australian affiliate benefited from
higher sales volumes in nearly all product lines,
improved manufacturing costs and changes in curren-
cy exchange rates.
-- On July 8, 1994, the Corporation's wholly owned
subsidiary in Argentina combined its operations
with Buenos Aires-based Descartables Argentinos
S.A. to form a joint venture to manufacture and
market personal care products. As a result of the
formation of the joint venture, the Corporation's
share of the results in Argentina began to be re-
ported as net income from equity companies.
- The effective income tax rate declined to 34.8 percent
for the quarter from 45.6 percent a year ago. The
effective rate comparison is affected by tax benefits
related to the previously mentioned sale of K-C do
Brasil Ltda. and by 1994 benefits from U.S. tax credits.
The comparison also was affected by the enactment of the
1993 Tax Act, which increased deferred income taxes of
prior years and current income taxes related to the
first six months of 1993, thereby reducing 1993 third
quarter net income by $11.9 million, or 7 cents per
share.
RESULTS OF OPERATIONS:
First Nine Months of 1994 Compared with First Nine Months of 1993
By Product Class
($ Millions)
% Change % of 1994
Net Sales 1994 vs. 1993 Consolidated
- -----------------------------------------------------------------------
Class I ........................ $4,381.6 + 5.6% 80.5%
Class II ....................... 812.5 + .6 14.9
Class III ...................... 289.0 - 1.5 5.3
Adjustments .................... (39.7) (.7)
-------- -----
Consolidated ................... $5,443.4 + 4.5% 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 ........................ $487.7 +10.6% 79.9% 11.1% 10.6%
Class II ....................... 138.9 + 4.8 22.7 17.1 16.4
Class III ...................... 14.7 -24.2 2.4 5.1 6.6
Adjustments .................... (30.6) (5.0)
------ -----
Consolidated ................... $610.7 + 5.8% 100.0% 11.2% 11.1%
====== =====
</TABLE>
Commentary:
Net sales increased 4.5 percent as a result of higher sales
volumes for most of the Corporation's businesses, partially
offset by lower selling prices and changes in currency exchange
rates. Sales volumes increased 7.5 percent compared with the
first nine months of 1993.
- Sales volumes were higher in North America for 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, U.S. tobacco industry papers,
technical papers, newsprint, Neenah Paper's premium
business and correspondence papers and Midwest Express
Airlines, Inc.
- Sales volumes increased for consumer products in Europe,
primarily due to the introduction and expansion of
Huggies Pull-Ups training pants and Huggies disposable
diapers.
- Sales volumes also improved for consumer products in
Asia, primarily in Korea, and in Latin America.
- Sales volumes declined for training pants in North
America 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 North America due to competitive business conditions
in both Canada and the U.S.
- Selling prices were lower in North America for facial
tissue, feminine care products, disposable diapers,
consumer bathroom tissue, newsprint, and Midwest Express
Airlines, Inc., principally in response to competitive
business conditions.
- Changes in currency exchange rates are estimated to have
reduced consolidated net sales by approximately $26
million.
Operating profit increased 5.8 percent in absolute terms, and
as a percentage of sales, primarily because of the higher sales
volumes, manufacturing efficiencies, lower promotion spending
and lower fiber costs. These benefits were offset, in part, by
the lower selling prices and higher product improvement costs,
selling expenses and start-up costs.
- Cost reductions and manufacturing efficiencies were
achieved in certain North American consumer products
businesses, most notably in the disposable diaper busi-
ness.
- Product improvement costs were higher, primarily for the
new Huggies Supreme diapers in the U.S. and Huggies
UltraTrim diapers in Canada.
- 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
consumer bathroom tissue business in Europe were poor
because of industry overcapacity and weak prices.
- Selling expenses were higher due principally to the
higher sales volumes.
- Start-up costs were higher, primarily attributable to
the new consumer products mill at Taejon, Korea.
- Cost control measures benefited general expense in 1994.
In addition, the nine-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 $6.5 million.
- Operating losses for the first nine months in Europe
were greater than those of a year ago primarily due to
losses on Huggies Pull-Ups training pants and the cost
of launching an improved Huggies disposable diaper.
- Changes in currency exchange rates had no significant
effect on consolidated operating profit in the first
nine months of 1994.
By Geography
($ Millions)
% Change % of 1994
Net Sales 1994 vs. 1993 Consolidated
- ---------------------------------------------------------------------
North America .............. $4,326.1 + 3.3% 79.5%
Outside North America ...... 1,182.2 +11.8 21.7
Adjustments ................ (64.9) (1.2)
-------- -----
Consolidated ............... $5,443.4 + 4.5% 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 .............. $634.3 +18.9% 103.9% 14.7% 12.7%
Outside North America ...... 7.0 -88.2 1.1 .6 5.6
Adjustments ................ (30.6) (5.0)
------ -----
Consolidated ............... $610.7 + 5.8% 100.0% 11.2% 11.1%
====== =====
</TABLE>
% Change % of 1994
Net Income 1994 vs. 1993 Consolidated
- ----------------------------------------------------------------------
North America .............. $378.2 +29.9% 88.1%
Outside North America ...... 51.3 -34.4 11.9
------ -----
Consolidated ............... $429.5 +16.3% 100.0%
====== =====
Additional commentary:
- The increase in interest expense of $14.8 million was
caused by higher debt levels and a lower amount of
interest capitalized.
- Other income benefited from gains on the completion of
the previously announced sales of the Corporation's
Brazilian tissue subsidiary, tissue mill in Memphis,
Tenn., and adhesive-coated label stock business in Troy,
Ohio, as well as from gains on the sale of woodlands.
- Net income from equity companies grew 27.7 percent. The
improvement was largely due to the readoption of
equity accounting in the second quarter of 1994 for
the Corporation's investment in its South African
affiliate, Carlton Paper Corporation Limited. Also
contributing to the improvement was higher
net income at the Corporation's equity affiliates,
Kimberly-Clark de Mexico, S.A. de C.V.; Colombiana
Kimberly S.A.; Colombiana Universal de Papeles S.A.; and
Kimberly-Clark Argentina S.A., which began operating as
a joint venture in July 1994.
- The effective income tax rate declined to 37.3 percent
from 40.5 percent a year ago. The effective rate com-
parison is affected by the previously mentioned sale of
K-C do Brasil Ltda. and by 1994 U.S. tax credits. The
comparison also was affected by the enactment of the
1993 Tax Act which increased deferred income taxes
related to prior years, thereby reducing 1993 net income
by $8.8 million, or 5 cents per share.
Liquidity and Capital Resources
- Despite higher net income, cash provided by operations
decreased primarily as a result of an increase in oper-
ating working capital of $156.0 million. The increase
in operating working capital was comprised primarily of
an increase in accounts receivable of $99.0 million due,
in part, to increased sales, and increased inventories
of $74.7 million primarily related to business expan-
sions, partially offset by increases in accounts payable
and accrued liabilities.
- The decline in capital spending of $161.5 million for
the first nine months of 1994 as compared to 1993 is in
line with the Corporation's expected annual capital
spending of $500 million to $550 million for 1994 com-
pared 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 the Town of Menasha, Wis. and a new
diaper and training pants production plant in Barton-
upon-Humber, England.
- On July 29, the Corporation finalized the sale of its
wholly owned Brazilian subsidiary, K-C do Brasil Ltda.;
on September 19, it completed the sale of its Troy, Ohio
based adhesive-coated label stock business; and on
September 21, it completed the sale of its Memphis,
Tenn., tissue mill.
- On October 13, the Corporation filed a preliminary
prospectus with the Ontario Securities Commission where-
in it proposed to sell its entire interest in the Coosa
Pines, Alabama pulp and newsprint mill and the Terrace
Bay, Ontario pulp mill, and related woodlands by a
secondary offering of common shares. However, as a
result of recent forecasts for higher-than-expected
increases in pulp and newsprint prices and consequent
concerns about cost pressure on the Corporation's tissue
and other U.S. consumer products businesses, the Corpo-
ration now intends to either withdraw or amend the
preliminary prospectus and to sell an approximate one-
third interest in these operations through a partial
public offering. Such an offering is subject to stock
market conditions and to approval by Canadian securities
regulators and the Kimberly-Clark board of directors.
The earliest such a public offering could occur would be
the first quarter of 1995. The Corporation's long-term
strategy continues to be the divestiture of these units.
Foreign Currencies Risks, Hedging Activities and Inflation Risks
The Corporation and its subsidiaries and affiliates have manu-
facturing facilities in more than 20 countries throughout the
world, as well as transactions denominated in numerous curren-
cies. Consequently, Kimberly-Clark is subject to both foreign
exchange transaction risks and translation risks as a result of
strengthening or weakening of various currencies against each
other and local currencies versus the U.S. dollar. The risk to
any particular entity's net 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. Manage-
ment selectively hedges foreign currency transaction risks when
it is practicable and economically feasible to do so. Such transac-
tion risks relate to firm commitments for the purchase of raw
materials, finished goods or items of property, plant and
equipment, the sale of products or the repayment of short-term
intercompany loans.
The instruments used to hedge foreign currency transaction
risks are forward contracts, and, to a lesser extent, option
contracts. These instruments are purchased from well-known
money center banks (counterparties) throughout the world.
Usually the contracts extend for no more than 12 months, al-
though their contractual term has been as long as 25 months.
Gains and losses on instruments that hedge firm commitments are
appropriately deferred and included in the basis of the under-
lying hedged item. Premiums paid for options are amortized
ratably over the life of the option. All other gains or losses
on forward contracts or options are included in current period
income based on the period-end market price of the instrument.
Credit risks with respect to the counterparties, and the for-
eign currency transaction risks that would not be hedged if the
counterparties fail to fulfill their obligation under the
contracts, are believed to be minimal in view of the financial
strength of the counterparties.
At September 30, 1994, there were outstanding forward
contracts related to firm commitments, maturing at
various dates in 1994 and 1995, to purchase $181 million and to
sell $295 million of various foreign currencies. At that date,
there were no material option contracts outstanding and there
were no contracts maturing after 1995.
Translation exposure is not hedged. 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.
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 were not
significant.
Environmental Matters
The Corporation has not been identified as a potentially re-
sponsible 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.
Litigation
- - On September 20, 1994, the State of West Virginia filed an
action against several tobacco companies, industry trade
associations and consultants, and tobacco wholesalers,
including the Corporation, seeking to recover monies which
West Virginia allegedly has spent and will spend in provid-
ing medical care for its citizens whose illnesses are al-
leged to be tobacco-related. The lawsuit, filed in the
Circuit Court of Kanawha County, West Virginia, seeks actual
and punitive damages in an unspecified amount. The com-
plaint alleges that the Corporation aided, abetted and
participated in the manufacture of cigarettes by supplying
reconstituted tobacco sheets to the tobacco company defen-
dants and advertising that the use of such sheets would
allow the tobacco companies to manipulate the level of
nicotine in their cigarettes. The Corporation believes that
West Virginia's claim is without merit.
- - Since September 28, 1990, numerous lawsuits currently con-
solidated into four actions in state and federal courts have
been filed against numerous defendants, including the Corpo-
ration, by over 4,000 plaintiffs of whom about 218 claim to
have worked at the Corporation's Coosa Pines, Ala. mill as
employees of independent contractors at various times since
the mill's construction. The plaintiffs allege, with re-
spect to the Corporation, that they sustained personal
injuries and/or emotional distress from alleged exposure to
asbestos-containing materials while working at the mill.
The complaints do not specify the amount of damages demand-
ed. The Corporation believes the claims are without merit.
The subject matter of these proceedings was previously
reported in Item 3.B. of the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1993.
The parties to all of these actions have reached tentative
oral agreement in principle to settle. Pursuant to this
agreement in principle, all pending claims in these actions
would be dismissed. It is anticipated that the final set-
tlement agreement will require payment, on the Corporation's
behalf, of an amount to be paid in part by the Corporation's
insurance carrier. The amount expected to be paid by the
Corporation is not expected to be material. Since these
actions are not part of a class action, there remains the
possibility that similar additional suits may be filed
against the Corporation.
- - The Corporation also 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.
Environmental Matters
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 27 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. Notwithstanding its opinion, management
believes it appropriate to disclose the following recent devel-
opments concerning five of these sites:
- - On August 1, 1994, the Corporation received a special notice
letter and information request regarding the Shelby County
Penal Farm Site in Memphis, Tennessee. The Tennessee De-
partment of Environment and Conservation believes that the
Corporation's former Memphis facility arranged for the
disposal, treatment or transportation of hazardous
substances to the site. The Corporation has
determined that unknown amounts of primarily nonhazardous
wastes generated by its former Memphis facility were
disposed of at 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.
- - On August 18, 1994, the Corporation received a demand letter
regarding the JK Drum Superfund Site in New London, Wiscon-
sin. The Environmental Protection Agency ("EPA") believes
that four of the Corporation's facilities in Neenah, Wiscon-
sin and one facility in Appleton, Wisconsin sent drums to
the site for recycling. The Corporation has determined that
it sent empty drums to the site for recycling. The
Corporation's estimated share of the total site remediation
cost, if any, cannot be established on the basis of current-
ly available information.
- - On September 12, 1994, the Corporation received a special
notice letter and information request regarding the Omega
Chemical Company Site in Whittier, California. The Califor-
nia Department of Toxic Substances Control believes that the
Corporation's facility in Fullerton, California arranged for
the disposal, treatment or transportation of hazardous
substances to the site. The Corporation is conducting an
investigation to determine if any hazardous substances
generated 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 current-
ly available information.
- - 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, and Part
II, Item 1 of the Corporation's Quarterly Report on Form 10-
Q for the quarterly period ended June 30, 1994, the Corpora-
tion has entered into an Administrative Order on Consent
implementing the settlement between certain de minimis PRPs,
including the Corporation, and the EPA.
- - With respect to the Ekotek Superfund Site in Salt Lake City,
Utah, which was previously reported in Part II, Item 1.D. of
the Corporation's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1994, the Corporation has
entered into an Administrative Order on Consent implementing
the settlement between certain de minimis PRPs, including
the Corporation, and the EPA.
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 re-
quest.
(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 secu-
rities or agreements (as defined in Accounting Princi-
ples Board Opinion No. 15) which were contained in the
Corporation's capital structure during the periods
presented were options outstanding under the Corpora-
tion'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 third quarter
and first nine months 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)
Nine Months Ended September 30
1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C>
Consolidated Companies
- ----------------------
Income before income taxes ........................... $546.8 $513.6
Interest expense ..................................... 96.4 81.6
Interest factor in rent expense ...................... 17.9 20.8
Amortization of capitalized interest ................. 4.8 4.2
Equity Affiliates
- -----------------
Share of 50%-owned:
Income before income taxes ......................... 32.3 24.6
Interest expense ................................... 5.9 5.9
Interest factor in rent expense .................... .5 .4
Amortization of capitalized interest ............... .5 .4
Distributed income of less than 50%-owned ............ 21.7 20.8
------ ------
Earnings ............................................... $726.8 $672.3
====== ======
Consolidated Companies
- ----------------------
Interest expense ..................................... $ 96.4 $ 81.6
Capitalized interest ................................. 7.8 16.0
Interest factor in rent expense ...................... 17.9 20.8
Equity Affiliates
- -----------------
Share of 50%-owned:
Interest expense and capitalized interest .......... 6.1 6.2
Interest factor in rent expense .................... .5 .4
------ ------
Fixed charges .......................................... $128.7 $125.0
====== ======
Ratio of earnings to fixed charges ............... 5.65 5.38
====== ======
</TABLE>
(27) The Financial Data Schedule required by Item 601(b)(27)
of Regulation S-K has been included with the electronic
filing of this Form 10-Q.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Corpo-
ration during the third quarter of 1994.
<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)
November 10, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Certain items below are not disclosed since they are not required for interim
reporting under Requlation S-X, Article 10.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<CASH> 29100
<SECURITIES> 0
<RECEIVABLES> 806100
<ALLOWANCES> 0<F1>
<INVENTORY> 823400
<CURRENT-ASSETS> 1793700
<PP&E> 6532700
<DEPRECIATION> 2371600
<TOTAL-ASSETS> 6773000
<CURRENT-LIABILITIES> 2015600
<BONDS> 934400
<COMMON> 0<F1>
0
0
<OTHER-SE> 0<F1>
<TOTAL-LIABILITY-AND-EQUITY> 6773000
<SALES> 5443400
<TOTAL-REVENUES> 5443400
<CGS> 3628500
<TOTAL-COSTS> 4832700
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96400
<INCOME-PRETAX> 546800
<INCOME-TAX> 204100
<INCOME-CONTINUING> 342700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 429500
<EPS-PRIMARY> 2.67
<EPS-DILUTED> 2.67
<FN>
<F1>Items not disclosed since they are not required for interim reporting
under Requlation S-X, Article 10
</FN>
</TABLE>
