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, 1996
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) 281-1200
(Registrant's telephone number, including area code)
NO CHANGE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X . No .
---- ------
AS OF AUGUST 5, 1996, 281,830,980 SHARES OF THE CORPORATION'S COMMON STOCK
WERE OUTSTANDING.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Three Months Six Months
Ended June 30 Ended June 30
----------------- ------------------
(Millions of dollars
except per share amounts) 1996 1995 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES ............................ $3,347.7 $3,393.7 $6,549.8 $6,565.6
Cost of products sold ............. 2,093.4 2,220.5 4,127.4 4,340.7
-------- ------- ------- -------
GROSS PROFIT ......................... 1,254.3 1,173.2 2,422.4 2,224.9
Advertising, promotion and selling
expenses ....................... 565.2 531.8 1,065.3 1,027.2
Research expense .................. 51.4 50.1 97.0 99.5
General expense ................... 149.5 155.6 278.6 293.6
-------- ------- ------- -------
OPERATING PROFIT ..................... 488.2 435.7 981.5 804.6
Interest Income ................... 7.2 6.6 14.7 18.2
Interest expense .................. (50.5) (64.6) (102.1) (125.8)
Other income (expense), net ....... 73.1 36.0 72.4 39.7
-------- ------- ------- -------
INCOME BEFORE INCOME TAXES ........... 518.0 413.7 966.5 736.7
Provision for income taxes ........ 181.4 144.7 338.3 261.4
-------- ------- ------- -------
INCOME BEFORE EQUITY INTERESTS ....... 336.6 269.0 628.2 475.3
20
Share of net income of equity
companies ...................... 37.9 48.6 72.8 50.9
Minority owners' share of subsidiaries'
net income ..................... (9.8) (10.2) (21.5) (19.2)
-------- ------- ------- -------
NET INCOME ........................... $ 364.7 $ 307.4 $ 679.5 $ 507.0
======== ======== ======== ========
PER SHARE BASIS:
Net Income ............................ $ 1.30 $ 1.10 $ 2.41 $ 1.81
======== ======= ======= ========
Cash Dividends Declared................ $ .46 $ .45 $ .92 $ .90
======== ======= ======= ========
</TABLE>
Unaudited
See Notes to Financial Statements.
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEET
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
June 30, December 31,
(Millions of dollars) 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................... $ 95.9 $ 221.6
Accounts receivable .......................... 1,650.3 1,678.0
Inventories .................................. 1,364.5 1,426.1
Other current assets ......................... 415.6 488.1
--------- ---------
TOTAL CURRENT ASSETS ....................... 3,526.3 3,813.8
--------- ---------
PROPERTY ........................................ 11,178.1 10,919.9
Less accumulated depreciation ................ 5,114.6 4,866.6
--------- ---------
NET PROPERTY ............................... 6,063.5 6,053.3
--------- ---------
INVESTMENTS IN EQUITY COMPANIES ................. 516.4 413.4
ASSETS HELD FOR SALE ............................ 196.4 330.2
GOODWILL, DEFERRED CHARGES AND OTHER ASSETS ..... 814.5 828.5
--------- ---------
$11,117.1 $11,439.2
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Debt payable within one year ................. $ 568.7 $ 817.8
Accounts payable ............................. 853.8 1,103.6
Accrued expenses ............................. 1,406.2 1,555.3
Other current liabilities .................... 485.6 392.9
--------- ---------
TOTAL CURRENT LIABILITIES .................. 3,314.3 3,869.6
LONG-TERM DEBT .................................. 1,884.4 1,984.7
NONCURRENT EMPLOYEE BENEFIT AND OTHER OBLIGATIONS 898.3 974.9
DEFERRED INCOME TAXES ........................... 781.5 723.1
MINORITY OWNERS' INTERESTS IN SUBSIDIARIES ...... 218.3 236.5
STOCKHOLDERS' EQUITY ............................ 4,020.3 3,650.4
--------- ---------
$11,117.1 $11,439.2
========= =========
</TABLE>
Unaudited
See Notes to Financial Statements.
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Six Months
Ended June 30
--------------------
(Millions of dollars) 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net Income .............................................. $ 679.5 $ 507.0
Depreciation ............................................ 279.1 287.7
Changes in operating working capital .................... (201.3) (590.2)
Net gains on asset dispositions ......................... (62.9) (52.3)
Pension funding less than (in excess) of expense ........ 4.0 (57.3)
Other .................................................... (.8) 28.4
-------- -------
CASH PROVIDED BY OPERATIONS ........................ 697.6 123.3
-------- -------
INVESTING
Capital spending ........................................ (335.6) (372.0)
Acquisition of businesses, net of cash acquired ......... (68.0) (64.4)
Disposals of property and businesses .................... 265.5 172.4
Other ................................................... .1 (1.4)
-------- -------
CASH USED FOR INVESTING ............................ (138.0) (265.4)
-------- -------
FINANCING
Cash dividends paid ..................................... (202.3) (173.0)
Changes in debt payable within one year ................. (308.5) 182.4
Increases in long-term debt ............................. 19.9 55.7
Decreases in long-term debt ............................. (114.8) (724.8)
Proceeds from exercise of stock options ................. 157.9 69.6
Acquisitions of common stock for the treasury ........... (243.9) (128.6)
Other ................................................... 6.4 (35.2)
-------- -------
CASH USED FOR FINANCING ............................ (685.3) (753.9)
-------- -------
DECREASE IN CASH AND CASH EQUIVALENTS ...................... $(125.7) $(896.0)
======== ========
</TABLE>
Unaudited
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
1. On December 12, 1995, Kimberly-Clark Corporation (the `Corporation'')
merged with Scott Paper Company (`Scott'') in a transaction that was
accounted for as a pooling of interests for financial reporting
purposes. As a result, prior period financial information has been
restated to give effect to this merger except for cash dividends
declared per share, which represents the historical dividends declared
by the Corporation. Certain promotional costs incurred by former
Scott units in 1995 and the first quarter of 1996 have been
reclassified from advertising, promotion and selling expenses to a
reduction in net sales to conform to the current presentation of such
data for the second quarter and the six months ended June 30, 1996.
2. The unaudited consolidated financial statements of the Corporation
have been prepared on the same basis as those in the 1995 Annual
Report to Stockholders and include adjustments necessary to present
fairly the condensed consolidated balance sheet and consolidated
income and condensed cash flow statements for the periods indicated.
3. Share of net income of equity companies and net income for the second
quarter and six months ended June 30, 1996 include a loss of $.6
million, with no per share impact, and a gain of $1.4 million, or $.01
per share, respectively, for the translation of U.S. dollar
denominated liabilities into pesos resulting from the fluctuation of
the Mexican peso. During the second quarter and six months ended June
30, 1995, the translation of the Mexican peso resulted in a gain of
$8.4 million, or $.03 per share, and a loss of $18.4 million, or $.07
per share, respectively.
4. The average number of common shares outstanding used in the
calculation of net income per share for the six months ended June 30,
1996 and 1995, was 282.0 million and 279.2 million, respectively.
There were 281.7 million shares outstanding at June 30, 1996.
5. The following schedule details inventories by major class as of June
30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
June 30, December 31,
(Millions of dolllars 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
At lower of cost on the First-In,
First-Out (FIFO) method or market:
Raw materials .......................... $ 311.1 $ 373.7
Work in process ........................ 266.1 281.0
Finished goods ......................... 813.6 785.2
Supplies and other ..................... 195.8 251.1
-------- --------
1,586.6 1,691.0
Excess of FIFO cost over Last-In,
First-Out (LIFO) cost ................... (222.1) (264.9)
-------- --------
Total .................................. $1,364.5 $1,426.1
======== ========
</TABLE>
Unaudited
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management believes that the following commentary and tables appropriately
discuss and analyze the comparative results of operations and the financial
condition of the Corporation for the periods covered.
BUSINESS SEGMENTS
In conjunction with the previously discussed Scott merger and the
application of pooling of interests accounting, management redefined its
consolidated operations into the following three business segments to
appropriately reflect the businesses in which the Corporation now operates.
. Personal Care Products include infant, child, feminine and
incontinence care products; wet wipes; health care products; and
related products.
. Tissue-Based Products include tissue and wipers for household and
away-from-home use; pulp; and related products.
. Newsprint, Paper and Other includes newsprint, printing papers,
premium business and correspondence papers, specialty papers,
technical papers, and related products; and other products and
services.
Business segment data for all periods presented have been restated to this
revised presentation.
RESULTS OF OPERATIONS:
SECOND QUARTER OF 1996 COMPARED WITH SECOND QUARTER OF 1995
<TABLE>
<CAPTION>
By Business Segment
($ Millions)
% Change % of 1996
NET SALES 1996 vs. 1995 Consolidated
- ------------------------------------------------------------------
<S> <C> <C> <C>
Personal Care Products..... $1,198.1 + 4.9% 35.8%
Tissue-Based Products...... 1,923.0 + 3.3 57.4
Newsprint, Paper and Other. 247.2 - 41.9 7.4
Adjustments................ (20.6) (.6)
-------- ------
Consolidated............... $3,347.7 - 1.4% 100.0%
======== ======
</TABLE>
<TABLE>
<CAPTION>
% Change % of 1996 % Return on Sales
-----------------
OPERATING PROFIT 1996 vs. 1995 Consolidated 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Personal Care Products .... $183.1 + 21.6% 37.5% 15.3% 13.2%
Tissue-Based Products ..... 253.2 + 1.4 51.9 13.2 13.4
Newsprint, Paper and Other 63.5 - 6.8 13.0 25.7 16.0
Adjustments................ (11.6) (2.4)
------ ------
Consolidated............... $488.2 + 12.0% 100.0% 14.6% 12.8%
====== ======
</TABLE>
Commentary:
The decline in net sales of 1.4 percent was attributable to the 1995 net
sales of businesses which were subsequently divested, principally
Schweitzer-Mauduit International, Inc. and Midwest Express Airlines, Inc.
Excluding the sales of these businesses, which were included in the
Newsprint, Paper and Other business segment and which totaled $198.5
million in the second quarter of 1995, consolidated net sales and sales
volumes increased 4.8 percent and 5.5 percent, respectively.
. On a worldwide basis, sales volumes of personal care products
increased approximately 8 percent.
. In North America, sales volumes increased for training and youth
pants, diapers, away-from-home products, professional health care
products, wet wipes, incontinence care products, feminine care
products and technical papers, but declined approximately 6 percent
for consumer tissue products in North America.
. In Europe, sales volumes were higher for disposable diapers as a
result of market share gains in the United Kingdom, France and
Belgium. Sales volumes also were higher for household and away-from-
home products.
. Sales volumes for consumer products improved in Latin America,
particularily in Argentina.
. Although relative to 1995 second quarter levels, selling prices were
higher in North America for facial tissue and household towels, they
were lower than 1996 first quarter levels.
. Selling prices improved in Europe for consumer and away-from-home
tissue products, and in the Asia/Pacific region for various consumer
products.
. Changes in currency exchange rates had no significant effect on
consolidated net sales in the second quarter of 1996.
Gross profit improved 6.9 percent in absolute terms and as a percentage of
sales due, in large part, to lower fiber costs and improved operating
efficiencies.
. Pulp costs were lower worldwide.
. Cost reductions and manufacturing efficiencies were achieved in North
America primarily in the personal care business and in newsprint.
. Start-up costs declined in the personal care business.
The increase in operating profit of 12.0 percent was greater than the
increase in gross profit primarily because of merger-related cost savings
and lower general expenses, partially offset by higher marketing expenses.
. Excluding the 1995 operating profit of the previously mentioned
divested businesses, the increase in 1996 operating profit was 20.2
percent.
. Marketing expenses increased 6.3 percent because of higher advertising
and promotion expenses to support the Corporation's U.S. tissue
products and its European diaper expansion, partially offset by
savings from the merger-related integration of sales and marketing
teams in the U.S. and Europe.
. The key contributors to the increase in operating profit were the
personal care business in North America and the tissue business in
Europe.
. Changes in currency exchange rates had no significant effect on
consolidated operating profit in the second quarter of 1996.
<TABLE>
<CAPTION>
By Geography
($ Millions)
% Change % of 1996
NET SALES 1996 vs. 1995 Consolidated
- -------------------------------------------------------------------
<S> <C> <C> <C>
North America.............. $2,240.5 - 5.8% 66.9%
Outside North America...... 1,195.2 +10.2 35.7
Adjustments................ (88.0) (2.6)
-------- ------
Consolidated............... $3,347.7 - 1.4% 100.0%
======== ======
</TABLE>
<TABLE>
<CAPTION>
% Change % of 1996 % Return on Sales
------------------
OPERATING PROFIT 1996 vs. 1995 Consolidated 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North America.............. $389.0 + 2.4% 79.7% 17.4% 16.0%
Outside North America...... 110.8 + 25.2 22.7 9.3 8.2
Adjustments................ (11.6) (2.4)
------- -----
Consolidated .............. $488.2 + 12.0% 100.0% 14.6% 12.8%
====== ======
</TABLE>
Commentary:
. Operating profit for Europe increased significantly due to the higher
sales volumes, lower fiber costs and savings from the merger-related
integration of sales and marketing teams.
. Operating results for the disposable diaper business in Europe
remained essentially flat as increased sales volumes and the benefits
of cost savings programs were offset by higher costs to introduce an
improved diaper and by lower selling prices in France and the United
Kingdom.
Additional Income Statement Commentary:
. The decline in interest expense was primarily the result of lower
average debt levels. In addition, a lower average interest rate on
borrowed funds reduced interest expense.
. Other income includes a net pretax gain of approximately $70 million,
or $.16 per share after taxes, related to the divestiture of the
former Scott baby wipes and facial tissue businesses in the U.S., to
meet regulatory requirements related to the merger, and the sale of
the Corporation's remaining 20 percent interest in Midwest Express
Holdings, Inc., the parent company of Midwest Express Airlines, Inc.
. In 1995, asset sales and other nonoperating gains in other income
totaled approximately $35 million, or $.08 per share after taxes.
. The effective income tax rate was 35.0 percent in both years and is
expected to remain at approximately 35.0 percent for the balance of
1996.
. The year-to-year comparison of the Corporation's share of net income
of equity companies was negatively affected by the change in the value
of the Mexican peso in 1995. During the second quarter of 1995, the
peso gained approximately 8.5 percent of its value versus the U.S.
dollar, whereas it declined approximately .7 percent in the second
quarter of 1996. The Corporation's Mexican affiliate, Kimberly-Clark
de Mexico, S.A. de C.V., has financed part of its operations with
U.S. dollar-denominated liabilities, and the remeasurement of these
liabilities by the affiliate resulted in an after-tax gain in 1995, of
which Kimberly-Clark's share was $8.4 million, compared with an after-
tax loss in 1996, of which Kimberly-Clark's share was $.6 million.
These factors resulted in a negative year-to-year comparison of $.03
per share.
. The Corporation's share of equity company net income declined 22.0
percent in 1996 compared to a year ago. Excluding the previously
mentioned peso effect, the Corporation's share of equity company net
income declined 4.2 percent, or $1.7 million. The decline occurred in
the Corporation's equity affiliate in Mexico due to lower sales
volumes and operating profit which were attributable to depressed
economic conditions.
. Excluding the previously discussed effects of the peso, asset sales
and other nonoperating gains, net income for the second quarter of
1996 increased 16.0 percent to $321.8 million, or $1.14 per share,
from $275.8 million, or $.99 per share, in the second quarter of 1995.
On a per share basis, the increase was 15.2 percent.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS:
FIRST SIX MONTHS OF 1996 COMPARED WITH FIRST SIX MONTHS OF 1995
By Business Segment
($ Millions)
% Change % of 1996
NET SALES 1996 vs. 1995 Consolidated
- --------------------------------------------------------------------
<S> <C> <C> <C>
Personal Care Products..... $2,341.0 + 8.8% 35.8%
Tissue-Based Products...... 3,739.7 + 2.4 57.1
Newsprint, Paper and Other. 505.2 - 38.2 7.7
Adjustments................ (36.1) (.6)
-------- -------
Consolidated............... $6,549.8 - .2% 100.0%
======== =======
</TABLE>
<TABLE>
<CAPTION>
% Change % of 1996 % Return on Sales
----------------
OPERATING PROFIT 1996 vs. 1995 Consolidated 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Personal Care Products .... $ 364.6 + 33.7% 37.2% 15.6% 12.7%
Tissue-Based Products ..... 522.6 + 15.6 53.2 14.0 12.4
Newsprint, Paper and Other 117.5 - 7.6 12.0 23.3 15.6
Adjustments................ (23.2) (2.4)
--------- ------
Consolidated............... $ 981.5 + 22.0% 100.0% 15.0% 12.3%
======== =====
</TABLE>
Commentary:
Despite improved selling prices, which were up 3.6 percent in the first six
months of 1996, net sales declined .2 percent due to the 1995 sales of the
previously discussed divested businesses. Excluding sales of these
businesses, which totaled $400.7 million for the first six months of 1995,
consolidated net sales and sales volumes increased 6.2 percent and 2.4
percent, respectively.
. Selling prices increased in many North American businesses, most
importantly for consumer and away-from-home tissue products, newsprint
and diapers.
. Selling prices improved in Europe for consumer and away-from-home
tissue products, and in the Asia/Pacific region for various consumer
products.
. On a worldwide basis, sales volumes of personal care products
increased approximately 10 percent.
. In North America, sales volumes increased for diapers, training and
youth pants, professional health care products, wet wipes,
incontinence care products and technical papers.
. Sales volumes for consumer tissue products in North America declined
approximately 11 percent. As previously discussed, they declined
approximately 6 percent in the second quarter of 1996, compared with a
decline of approximately 15 percent in the first quarter. Although
market shares declined in the first quarter compared to 1995 levels,
sales trends improved during the second quarter, and market shares, in
units, for household towels and bathroom tissue products reflect these
trends. The Corporation's share of the North American household towel
market was approximately 18 percent in June compared with
approximately 15 percent in March, and its share of the bathroom
tissue market was approximately 31 percent in June compared with
approximately 26 percent in March.
. In Europe, sales volumes were higher for disposable diapers as a
result of market share gains in the United Kingdom, France and
Belgium. Sales volumes also were higher for household products.
. Sales volumes for consumer products improved in Latin America,
particularily in Argentina.
. Changes in currency exchange rates had no significant effect on
consolidated net sales in the first six months of 1996.
Gross profit increased 8.9 percent in absolute terms and as a percentage of
sales due primarily to the higher selling prices.
. Cost reductions, manufacturing efficiencies and lower start-up costs
were achieved in North America primarily in the personal care segment.
The increase in operating profit of 22.0 percent was greater than the
increase in gross profit primarily because of merger-related cost savings
and lower research and general expenses, partially offset by higher
marketing expenses.
. Excluding the 1995 operating profit of the previously mentioned
divested businesses, the increase in 1996 operating profit was nearly
30 percent.
. Marketing expenses increased 3.7 percent because of higher advertising
and promotion expenses to support the Corporation's U.S. tissue
products and its European diaper expansion, partially offset by
savings from the merger-related integration of sales and marketing
teams in the U.S. and Europe.
. The key contributors to the increase in operating profit were the
personal care business in North America and the tissue business in
Europe.
. Changes in currency exchange rates had no significant effect on
consolidated operating profit in the first six months of 1996.
<TABLE>
<CAPTION>
By Geography
($ Millions)
% Change % of 1996
NET SALES 1996 vs. 1995 Consolidated
- -----------------------------------------------------------------
<S> <C> <C> <C>
North America.............. $4,452.1 - 4.5% 68.0%
Outside North America...... 2,258.9 +10.7 34.5
Adjustments................ (161.2) (2.5)
-------- ------
Consolidated............... $6,549.8 - .2% 100.0%
======== =====
</TABLE>
<TABLE>
<CAPTION>
% Change % of 1996 % Return on Sales
-----------------
OPERATING PROFIT 1996 vs. 1995 Consolidated 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North America.............. $826.1 +18.8% 84.2% 18.6% 14.9%
Outside North America...... 178.6 +14.2 18.2 7.9 7.7
Adjustments................ (23.2) (2.4)
------ -------
Consolidated $981.5 +22.0% 100.0% 15.0% 12.3%
====== =====
</TABLE>
Commentary:
. Operating profit for Europe increased significantly primarily due to
the higher sales volumes.
. Despite benefiting from the higher sales volumes, operating results
for the disposable diaper business in Europe declined due to higher
costs to introduce an improved diaper and lower selling prices in
France and the United Kingdom.
Additional Income Statement Commentary:
. The decline in interest expense was primarily the result of lower
average debt levels.
. Other income includes a net pretax gain of approximately $70 million,
or $.16 per share after taxes, from the previously mentioned
regulatory divestitures and the sale of the Corporation's remaining 20
percent interest in Midwest Express Holdings, Inc.
. As previously mentioned, asset sales and other nonoperating gains in
other income totaled approximately $35 million in 1995, or $.08 per
share after taxes.
. The effective income tax rate declined from 35.5 percent in 1995 to
35.0 percent in 1996.
. The year-to-year comparison of the Corporation's share of net income
of equity companies was positively affected by the change in the value
of the Mexican peso in 1995. During the the first six months of 1995,
the peso lost approximately 18.5 percent of its value versus the U.S.
dollar, whereas it gained approximately 1.6 percent in the first six
months of 1996. The Corporation's Mexican affiliate, Kimberly-Clark
de Mexico, S.A. de C.V., has financed part of its operations with
U.S. dollar-denominated liabilities, and the remeasurement of these
liabilities by the affiliate resulted in an after-tax loss in 1995, of
which Kimberly-Clark's share was $18.4 million, compared with an
after-tax gain in 1996, of which Kimberly-Clark's share was $1.4
million. These factors resulted in a positive year-to-year comparison
of $.08 per share.
. The Corporation's share of equity company net income improved 43.0
percent in 1996 compared to a year ago. Excluding the previously
mentioned peso effects, the Corporation's share of equity company net
income improved 3.0 percent, or $2.1 million.
. Excluding the previously discussed effects of the peso, asset sales
and other nonoperating gains, net income for the first six months of
1996 increased 26.1 percent to $634.6 million, or $2.24 per share,
from $502.2 million, or $1.80 per share, in the the first six months
of 1995. On a per share basis, the increase was 24.4 percent.
LIQUIDITY AND CAPITAL RESOURCES
. Cash provided from operations increased $574.3 million in the first six
months of 1996 compared to 1995. The cash flow improvement resulted, in
large part, from the increase in net income, the timing of income tax
payments, and lower accounts receivable and inventories. The decline in
accounts receivable is consistent with the lower sales for the period,
and the reduction in inventories is attributable, in part, to increased
emphasis on minimizing inventory levels. Partially offsetting these
sources of cash from operations was a decline in dividends received from
equity companies, lower accounts payable and a decrease in accrued
liabilities, attributable, in part, to the 1995 restructuring and other
unusual accruals as explained more fully below.
. In the fourth quarter of 1995, the Corporation recorded a one-time
pretax charge of $1,440.0 million for the estimated costs of the
merger with Scott, for restructuring the combined operations, and for
other unusual charges ( the `1995 one-time charge''). The 1995 one-
time charge included:
. The write-down of certain mills and facilities in the U.S. and
Europe that will be disposed of to eliminate excess capacity,
improve manufacturing efficiencies in the combined company and to
comply with consent decrees of the U.S. Department of Justice and
the European Commission.
. Employee severance and other employee-related costs.
. The costs of terminating leases, contracts and other long-term
agreements.
. Impaired asset charges for certain mills or operations the future
cash flows of which are estimated to be insufficient to recover
their carrying amounts.
. Fees for investment bankers, outside legal counsel and independent
auditors and other costs of the merger.
. Other asset write-downs.
. During the first six months of 1996, more than $200 million of
employee severance and other employee-related costs; fees for
investment bankers, lawyers and accountants; and lease and contract
termination costs were charged to these accruals.
. On June 28, 1996, the Corporation completed the sale of the baby and
child wipes business previously conducted by Scott, consisting of
three baby and child wipe brands - Baby Fresh, Wash a-Bye Baby and Kid
Fresh - and Scott's Dover, Delaware, production facility, to The
Procter & Gamble Company. Proceeds from the sale were in excess of
$200 million. In addition, on July 31, 1996, the Corporation
completed the sale of Scott's Fort Edward, New York mill and the
Scotties facial tissue business to Irving Tissue, Inc., a privately
held Canadian company. The Corporation is continuing its efforts to
sell a second U.S. tissue mill.
. In Europe, the Corporation has decided to divest the baby wipes
converting plant in Neunkirchen, Germany, and to consolidate its
feminine care production at its Forchheim mill in Germany, selling or
closing its feminine care products mill in Veenendaal, Netherlands.
In addition, the Corporation has restructured its tissue mill in
Larkfield, England, and, over the next 18 months, it expects to
downsize other facilities in Flensburg and Koblenz, Germany, and
Gennep, Netherlands. Negotiations also are underway to sell the
Prudhoe, England tissue mill and to license the Kleenex bathroom
tissue and towel brands, along with the former Scott facial tissue
brands in the U.K., as required by the European Commission.
. The previously mentioned sale of the Corporation's remaining 20 percent
interest in Midwest Express Holdings resulted in proceeds of
approximately $43 million.
. During the first six months of 1996, the Corporation purchased 3.1
million shares of its common stock for the treasury at a total cost of
$220.4 million in connection with its 6.5 million share reacquisition
program announced in April 1996 and the remaining authority of a 1994
program. An additional 4.7 million shares remain to be acquired under
the program announced in 1996.
. Total debt was reduced approximately $350 million during the first six
months of 1996.
. On April 18, 1996, the Corporation announced that it would sell its 50.1
percent interest in Scott Paper Limited, a publicly traded Canadian
company (``SPL''). The Corporation acquired its interest in SPL when it
merged with Scott. Discussions are continuing with SPL concerning the
terms of sale of the Corporation's interest. The sale is expected to
result in a gain which will be recorded when realized.
. In the second quarter of 1996, the Corporation:
. Increased its ownership of Kimberly-Clark Argentina S.A. to 100
percent from 51 percent;
. Formed a joint venture company in Israel by purchasing 49.9 percent of
Hogla Ltd., the country's leading consumer products company;
. Purchased 51 percent of the tissue company Papelera Guaicaipuro,
marking its first entry into the Venezuelan tissue market; and
. In early July, the Corporation entered the Brazilian personal care
market with the purchase of 51 percent of Kenko do Brasil.
ENVIRONMENTAL MATTERS
The Corporation has been named as a potentially responsible party at a
number of waste disposal sites, none of which, individually or in the
aggregate, in management's opinion, is likely to have a material adverse
effect on its business or results of operations.
OUTLOOK
The Corporation believes that it has taken many positive steps during the
second quarter to ensure the future growth of Kimberly-Clark, while
managing its businesses in the short term to mitigate the adverse impact of
lower selling prices for its U.S. consumer and international tissue
products. The Corporation has launched new or improved products such as
Kleenex Cottonelle bathroom tissue, Kleenex Cold Care facial tissue and
Huggies Pull-Ups training pants in the U.S. and, more recently, announced
product improvements for Huggies diapers in Europe and the U.S. It has
recently made strategic acquisitions in the growth markets of Argentina,
Brazil, Israel and Venezuela. In addition, the Corporation believes that
it has continued to make excellent progress with the integration of the
Kimberly-Clark and Scott operations and is well on its way to realizing
savings of at least $250 million this year, increasing to $500 million in
1998.
In combination, these factors have resulted in stronger cash flow than
earlier estimates. The Corporation is encouraged by the financial strength
and flexibility this provides. It now expects to generate additional cash
of $200-$300 million over the balance of the year which will be used to
continue purchasing shares of its common stock on the open market and to
reduce debt.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain information contained in this report is forward-looking and is
based on various assumptions. Such information includes, without
limitation, discussions with respect to expected selling prices for tissue-
based products; expected savings attributable to the Scott merger; expected
cash flow and the estimated effective income tax rate in 1996; status of
the restructuring and other unusual accruals at June 30, 1996; and
expectations with respect to mills and facilities targeted for
restructuring or disposal in 1996 and 1997. These forward-looking
statements are made based on management's current expectations and beliefs
concerning future events impacting the Corporation. There can be no
assurance that such events will occur or that their effects on the
Corporation will be as currently expected.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Litigation
- ----------
On June 18, 1996, the Corporation was served with an amended complaint in
the action originally filed on September 20, 1994 by the Attorney General of
the State of West Virginia in the Circuit Court of Kanawha County seeking to
recover from certain tobacco companies and other defendants, including the
Corporation, monies which West Virginia allegedly has spent and will spend on
medical care for its citizens with alleged tobacco-related illnesses. Among
other things, the amended complaint alleges that the Corporation aided,
abetted and participated in the manufacture of cigarettes by supplying
reconstituted tobacco sheets to the tobacco company defendants and
advertising that the use of such sheets would allow the tobacco companies to
manipulate the level of nicotine in their cigarettes. The Attorney General
amended the original complaint to add Public Employees Insurance Agency as a
plaintiff in an effort to reinstate eight common law counts which had been
dismissed against the Corporation and the other defendants on June 6, 1995 on
the basis that the Attorney General lacked the authority to bring the suit in
his own name. The Corporation has filed a motion to dismiss the amended
complaint on several grounds. The Corporation believes the Attorney General's
claims are without merit.
Environmental Matters
- ---------------------
The Corporation has received a Notice of Violation from the Michigan
Department of Environmental Quality alleging excess particulate emissions
from the Munising mill's coal-fired power boiler. The Corporation has
ordered and will install additional air pollution control equipment to
improve the environmental performance of the power boiler. Settlement
discussions with the State to fully resolve this matter are ongoing.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(3) Restated Certificate of Incorporation of Kimberly-Clark Corporation,
December 12, 1995.
(4) Copies of instruments defining the rights of holders of long-term debt
will be furnished to the Securities and Exchange Commission upon
request.
(10) Kimberly-Clark Corporation Outside Directors' Stock Compensation Plan,
incorporated by reference to Exhibit 4.5 to the Registration Statement
on Form S-8 of the Corporation filed with the Securities and Exchange
Commission on April 18, 1996 (Registration No. 33-02607).
(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 1, Item I, 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 securit-
ies 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 1996 and 1995 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 second quarter and first six months of 1996 and
1995.
(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
(DOLLAR AMOUNTS IN MILLIONS)
Six Months Ended June 30
------------------------
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Consolidated Companies
Income before income taxes .................. $ 966.5 $736.7
Interest expense ............................. 102.1 125.8
Interest factor in rent expense............... 13.6 17.8
Amortization of capitalized interest.......... 4.2 4.4
Equity Affiliates
Share of 50%-owned:
Income before income taxes ................. 20.1 22.4
Interest expense............................ 4.7 4.0
Interest factor in rent expense............. .4 .3
Amortization of capitalized interest........ .4 .3
Distributed income of less than 50%-owned .... 12.2 6.8
-------- ------
Earnings ....................................... $1,124.2 $918.5
======== ======
Consolidated Companies
Interest expense ............................. $ 102.1 $125.8
Capitalized interest ......................... 8.0 6.6
Interest factor in rent expense .............. 13.6 17.8
Equity Affiliates
Share of 50%-owned:
Interest expense and capitalized interest... 4.7 4.3
Interest factor in rent expense ............ .4 .3
-------- ------
Fixed charges .................................. $ 128.8 $154.8
======== ======
Ratio of earnings to fixed charges ....... 8.73 5.93
======== ======
</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
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KIMBERLY-CLARK CORPORATION
(Registrant)
By: /s/ John W. Donehower
----------------------------
John W. Donehower
Senior Vice President and
Chief Financial Officer
(principal financial officer)
By: /s/ Randy J. Vest
-----------------------------
Randy J. Vest
Vice President and Controller
(principal accounting officer)
August 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 95900
<SECURITIES> 0
<RECEIVABLES> 1650300
<ALLOWANCES> 0<F1>
<INVENTORY> 1364500
<CURRENT-ASSETS> 3526300
<PP&E> 6063500
<DEPRECIATION> 5114600
<TOTAL-ASSETS> 11117100
<CURRENT-LIABILITIES> 3314300
<BONDS> 1884400
0
0
<COMMON> 0
<OTHER-SE> 0<F1>
<TOTAL-LIABILITY-AND-EQUITY> 11117100
<SALES> 6549800
<TOTAL-REVENUES> 6549800
<CGS> 4127400
<TOTAL-COSTS> 5568300
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102100
<INCOME-PRETAX> 966500
<INCOME-TAX> 338300
<INCOME-CONTINUING> 679500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 679500
<EPS-PRIMARY> 2.41
<EPS-DILUTED> 2.41
<FN>
<F1>Items not disclosed since they are not required for intermim reporting under
regulation S-X, Article 10.
</FN>
</TABLE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
KIMBERLY-CLARK CORPORATION
DECEMBER 12, 1995
The date of filing of the original certificate of
incorporation of this Corporation with the Secretary of State was June
29, 1928.
ARTICLE I
The name of this Corporation is KIMBERLY-CLARK CORPORATION.
ARTICLE II
Its registered office in the State of Delaware is located at
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name and address of its registered agent is The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware. The Corporation shall possess and may
exercise all powers and privileges necessary or convenient to effect
such purpose and all powers and privileges now or hereafter conferred by
the laws of Delaware upon corporations formed under the General
Corporation Law of Delaware.
ARTICLE IV
The total number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is six hundred
and twenty million (620,000,000) shares which shall be divided into two
classes as follows:
(a) Twenty million (20,000,000) shares of Preferred Stock without par
value; and (b) Six hundred million (600,000,000) shares of Common Stock
of the par value of One Dollar and Twenty-five Cents ($1.25) per share.
ARTICLE V
A statement of the voting powers and of the designations,
preferences and relative, participating, optional or other special
rights, and the qualifications, limitations and restrictions thereof, of
each class of stock of the Corporation, is as follows:
(1) In General
No holders of shares of this Corporation of any
class, or of bonds, debentures or other securities convertible into
stock of any class, shall be entitled as of right to subscribe for,
purchase, or receive any stock of any class whether now or hereafter
authorized, or any bonds, debentures or other securities whether now or
hereafter authorized, convertible into stock of any class, or any stock
into which said bonds, debentures or other securities may be
convertible, and all such additional shares of stock, debentures or
other securities, together with the stock into which the same may be
converted, may be issued and disposed of by the Board of Directors to
such persons and on such terms and for such consideration (as far as may
be permitted by law) as the Board of Directors in their absolute
discretion may deem advisable.
All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of this Certificate of
Incorporation.
(2) Preferred Stock
The Preferred Stock may be issued from time to time in one or
more series, with such distinctive serial designations as may be stated
or expressed in the resolution or resolutions providing for the issue of
such stock adopted from time to time by the Board of Directors; and in
such resolution or resolutions providing for the issue of shares of each
particular series, the Board of Directors is also expressly authorized
to fix: the consideration for which the shares of such series are to be
issued; the number of shares constituting such series; the rate of
dividends upon which and the times at which dividends on shares of such
series shall be payable and the preference, if any, which such dividends
shall have relative to dividends on shares of any other class or classes
or any other series of stock of the Corporation; whether such dividends
shall be cumulative or noncumulative, and if cumulative, the date or
dates from which dividends on shares of such series shall be cumulative;
the voting rights, if any, to be provided for shares of such series; the
rights, if any, which the holders of shares of such series shall have in
the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation; the rights, if any, which
the holders of shares of such series shall have to convert such shares
into or exchange such shares for shares of any other class or classes or
any other series of stock of the Corporation and the terms and
conditions, including price and rate of exchange, of such conversion or
exchange; the redemption price or prices and other terms of redemption,
if any, for shares of such series; and any and all other preferences and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof pertaining to shares
of such series.
(3) Common Stock
(a) Subject to preferences and rights to which holders of
stock other than the Common Stock may have become entitled by resolution
or resolutions of the Board of Directors as hereinbefore provided, such
dividends (payable in cash, stock, or otherwise) as may be determined by
the Board of Directors may be declared and paid out of funds legally
available therefor upon the Common Stock from time to time.
(b) In the event of any liquidation, dissolution or winding up
of the affairs of the Corporation, the holders of the Common Stock shall
be entitled to share ratably in all assets available for distribution to
the shareholders, subject to preferences and rights to which the holders
of stock other than the Common Stock may have become entitled by
resolution or resolutions of the Board of Directors as hereinbefore
provided.
(c) The holders of Common Stock shall be entitled to one vote
for each of the shares held by them of record at the time for
determining holders thereof entitled to vote.
ARTICLE VI
(1) The following corporate action shall require the approval,
given at a stockholders' meeting or by consent in writing, of the
holders of at least two-thirds of the stock issued and outstanding and
entitled to vote thereon:
(a) the dissolution of the Corporation, or
(b) the sale, lease, exchange or conveyance of all or
substantially all of the property and assets of the Corporation, or
(c) the adoption of an agreement of merger or consolidation,
but no stockholder approval shall be required for any merger or
consolidation which, under the Laws of Delaware, need not be approved by
the stockholders of the Corporation.
(2) The number of authorized shares of any class or classes of
stock may be increased or decreased by the approval of the holders of a
majority of all of the stock of the Corporation entitled to vote
thereon, except to the extent that, in the resolution or resolutions
providing for the issuance of a class or series of stock, the Board of
Directors shall specify that approval of the holders of one or more
classes or series of stock shall be required to increase or decrease the
number of authorized shares of one or more classes or series of stock.
(3) Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual
or special meeting of stockholders of the Corporation and may not be
effected by any consent in writing by such stockholders, except for
stockholder approvals required by Section (1) of this Article VI.
(4) Meetings of stockholders of the Corporation may be called
only by the Board of Directors pursuant to a resolution adopted by the
affirmative vote of a majority of the entire Board of Directors, by the
Chairman of the Board, or by the Chief Executive Officer.
ARTICLE VII
The private property of the stockholders of the Corporation
shall not be subject to the payment of corporate debts to any extent
whatever.
ARTICLE VIII
(1) Power of the Board of Directors . The business and affairs
of the Corporation shall be managed under the direction of its Board of
Directors. In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Delaware, the Board of Directors
is expressly
authorized:
(a) to make, alter, amend or repeal the By-Laws of the
Corporation; provided , however, that no By-Laws hereafter adopted shall
invalidate any prior act of the Directors that would have been valid if
such By-Laws had not been adopted;
(b) to determine the rights, powers, duties, rules and
procedures that affect the power of the Board of Directors to direct the
business and affairs of the Corporation, including the power to
designate and empower committees of the Board of Directors, to elect,
appoint and empower the officers and other agents of the Corporation,
and to determine the time and place of, and the notice requirements for,
Board meetings, as well as quorum and voting requirements (except as
otherwise provided in this Certificate of Incorporation) for, and the
manner of taking, Board action; and
(c) to exercise all such powers and do all such acts as may be
exercised by the Corporation, subject to the provisions of the laws of
the State of Delaware, this Certificate of Incorporation, and any By-
Laws of the Corporation.
(2) Number of Directors . The number of Directors constituting
the entire Board of Directors shall be not less than 11 nor more than
25. The specific number of Directors constituting the entire Board of
Directors shall be as authorized from time to time exclusively by the
affirmative vote of a majority of the entire Board of Directors. As used
in this Certificate of Incorporation, the term "entire Board of
Directors" means the total authorized number of Directors that the
Corporation would have if there were no vacancies.
(3) Classified Board . At the 1986 Annual Meeting of
Stockholders, the Directors shall be divided into three classes, with
respect to the time that they severally hold office, as nearly equal in
number as possible, with the initial term of office of the first class
of Directors to expire at the 1987 Annual Meeting of Stockholders, the
initial term of office of the second class of Directors to expire at the
1988 Annual Meeting of Stockholders and the initial term of office of
the third class of Directors to expire at the 1989 Annual Meeting of
Stockholders. Commencing with the 1987 Annual Meeting of Stockholders,
Directors elected to succeed those Directors whose terms have thereupon
expired shall be elected for a term of office to expire at the third
succeeding Annual Meeting of Stockholders after their election, and upon
the election and qualification of their successors. A person elected as
a Director shall be deemed a Director as of the time of such election.
If the number of Directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain or attain, if possible,
an equal number of Directors in each class, but in no case will a
decrease in the number of Directors shorten the term of any incumbent
Director. If such equality is not possible, the increase or decrease
shall be apportioned among the classes in such a way that the difference
in the number of Directors in any two classes shall not exceed one.
(4) Nominations . Subject to the rights of holders of any
series of Preferred Stock or any other class of capital stock of the
Corporation (other than the Common Stock) then outstanding, nominations
for the election of Directors may be made by the affirmative vote of a
majority of the entire Board of Directors or by any stockholder of
record entitled to vote generally in the election of Directors. However,
any stockholder of record entitled to vote generally in the election of
Directors may nominate one or more persons for election as Directors at
a meeting only if a written notice of such stockholder's intent to make
such nomination or nominations, meeting the requirements described
below, has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation, and received
by the Corporation, not less than 50 days nor more than 75 days prior to
the meeting; provided , however , that in the event that less than 60
days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of meeting was mailed
or such public disclosure was made, whichever first occurs. Each such
notice to the Secretary shall set forth: (i) the name and address of
record of the stockholder who intends to make the nomination; (ii) a
representation that the stockholder is a holder of record of shares of
the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) the name, age, business and residence
addresses, and principal occupation or employment of each nominee; (iv)
a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations
are to be made by the stockholder; (v) such other information regarding
each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (vi) the consent of each nominee
to serve as a Director of the Corporation if so elected. The Corporation
may require any proposed nominee to furnish such other information as
may reasonably be required by the Corporation to determine the
eligibility of such proposed nominee to serve as a Director of the
Corporation. The presiding officer of the meeting may, if the facts
warrant, determine that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(5) Vacancies . Subject to the rights of the holders of any
series of Preferred Stock or any other class of capital stock of the
Corporation (other than the Common Stock) then outstanding, any
vacancies in the Board of Directors for any reason and any newly created
Directorships resulting by reason of any increase in the number of
Directors may, if occurring prior to the expiration of the term of
office of the class in which such vacancy or increase occurs, be filled
only by the Board of Directors, acting by the affirmative vote of a
majority of the remaining Directors then in office, although less than a
quorum, and any Directors so elected shall hold office until the next
election of the class for which such Directors have been elected and
until their successors are elected and qualified.
(6) Removal of Directors. Subject to the rights of the
holders of any series of Preferred Stock or any other class of capital
stock of the Corporation (other than the Common Stock) then outstanding,
(i) any Director, or the entire Board of Directors, may be removed from
office at any time prior to the expiration of his or their term of
office, but only for cause and only by the affirmative vote of the
holders of record of outstanding shares representing at least eighty
percent (80%) of the voting power of all of the shares of capital stock
of the Corporation then entitled to vote generally in the election of
Directors, voting together as a single class, and (ii) any Director may
be removed from office by the affirmative vote of a majority of the
entire Board of Directors, at any time prior to the expiration of his
term of office, but only for cause.
ARTICLE IX
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any creditor or
stockholder thereof, or on the application of any receiver or receivers
appointed for this Corporation under the provisions of section 291 of
Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation,
as the case may be, to be summoned in such manner as the said Court
directs. If a majority in number representing three-fourths in value of
the creditors or class of creditors, and/or of the stockholders or class
of stockholders of this Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation
as a consequence of such compromise or arrangement, the said compromise
or arrangement and the said reorganization shall, if sanctioned by the
Court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class
of stockholders, of this Corporation, as the case may be, and also on
this Corporation.
ARTICLE X
(1) Certain Definitions . For the purposes of this Article X
and the second proviso of Article XI:
A. "Business Combination" means:
(i) any merger or consolidation of the Corporation or any
Subsidiary with (a) an Interested Stockholder or (b) any other Person
(whether or not itself an Interested Stockholder) which is, or after
such merger or consolidation would be, an Affiliate or Associate of an
Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to or
with, or proposed by or on behalf of, an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market Value of
not less than one percent (1%) of the total assets of the Corporation as
reported in the consolidated balance sheet of the Corporation as of the
end of the most recent quarter with respect to which such balance sheet
has been prepared; or
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to, or proposed by or on
behalf of, an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate Fair Market
Value of not less than one percent (1%) of the total assets of the
Corporation as reported in the consolidated balance sheet of the
Corporation as of the end of the most recent quarter with respect to
which such balance sheet has been prepared; or
(iv) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation, or any spin-off or split-up of any
kind of the Corporation or any Subsidiary, proposed by or on behalf of
an Interested Stockholder or an Affiliate or Associate of an Interested
Stockholder; or
(v) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any Subsidiary or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the percentage of the outstanding shares of (a) any class of
equity securities of the Corporation or any Subsidiary or (b) any class
of securities of the Corporation or any Subsidiary convertible into
equity securities of the Corporation or any Subsidiary, represented
by securities of such class which are directly or indirectly owned by an
Interested Stockholder and all of its Affiliates and Associates; or
(vi) any agreement, contract or other arrangement providing
for any one or more of the actions specified in clauses (i) through (v)
of this Section (1)A.
B. "Affiliate" or "Associate" have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on January 1, 1986.
C. "Beneficial Owner" has the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under the Exchange
Act, as in effect on January 1, 1986.
D. "Continuing Director" means: (i) any member of the Board of
Directors of the Corporation who (a) is neither the Interested Stockholder
involved in the Business Combination as to which a vote of Continuing
Directors is provided hereunder, nor an Affiliate, Associate, employee,
agent, or nominee of such Interested Stockholder, or the relative of any
of the foregoing, and (b) was a member of the Board of Directors of the
Corporation prior to the time that such Interested Stockholder became an
Interested Stockholder; and (ii) any successor of a Continuing Director
described in clause (i) who is recommended or elected to succeed a
Continuing Director by the affirmative vote of a majority of Continuing
Directors then on the Board of Directors of the Corporation.
E. "Fair Market Value" means: (i) in the case of stock, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the Composite
Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not
reported on the Composite Tape, on the New York Stock Exchange, or, if
such stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Exchange Act on which
such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of
such stock during the 30day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations
System or any similar interdealer quotation system then in use, or, if
no such quotation is available, the fair market value on the date in
question of a share of such stock as determined by a majority of the
Continuing Directors in good faith; and (ii) in the case of property
other than cash or stock, the fair market value of such property on the
date in question as determined by a majority of the Continuing Directors
in good faith.
F. "Interested Stockholder" means any Person (other than the
Corporation or any Subsidiary, any employee benefit plan maintained by the
Company or any Subsidiary or any trustee or fiduciary with respect to
any such plan when acting in such capacity) who or which:
(i) is, or was at any time within the two-year period
immediately prior to the date in question, the Beneficial Owner of five
percent (5%) or more of the voting power of the then outstanding Voting
Stock of the Corporation; or
(ii) is an assignee of, or has otherwise succeeded to, any
shares of Voting Stock of the Corporation of which an Interested
Stockholder was the Beneficial Owner at any time within the two-year
period immediately prior to the date in question, if such assignment or
succession shall have occurred in the course of a transaction, or series
of transactions, not involving a public offering within the meaning of
the Securities Act of 1933, as amended.
For the purpose of determining whether a Person is an
Interested Stockholder, the outstanding Voting Stock of the Corporation
shall include unissued shares of Voting Stock of the Corporation of
which the Interested Stockholder is the Beneficial Owner but shall not
include any other shares of Voting Stock of the Corporation which may be
issuable pursuant to any agreement, arrangement or understanding, or
upon the exercise of conversion rights, warrants or options, or
otherwise, to any Person who is not the Interested Stockholder.
G. A "Person" means any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group deemed to be a person under
Section 14(d)(2) of the Exchange Act.
H. "Subsidiary" means any corporation of which the Corporation
owns, directly or indirectly, (i) a majority of the outstanding shares
of equity securities of such corporation, or (ii) shares having a
majority of the voting power represented by all of the outstanding
shares of Voting Stock of such corporation. For the purpose of
determining whether a corporation is a Subsidiary, the outstanding
Voting Stock and shares of equity securities thereof shall include
unissued shares of which the Corporation is the Beneficial Owner but
shall not include any other shares of Voting Stock of the corporation
which may be issuable pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, warrants or
options, or otherwise, to any Person who is not the corporation.
I. "Voting Stock" means outstanding shares of capital stock
of the relevant corporation entitled to vote generally in the election of
Directors.
(2) Higher Vote for Business Combinations . In addition to any
affirmative vote required by law or by this Certificate of
Incorporation, and except as otherwise expressly provided in Section (3)
of this Article, any Business Combination shall require the affirmative
vote of the holders of record of outstanding shares representing at
least eighty percent (80%) of the voting power of the then outstanding
shares of the Voting Stock of the Corporation, voting together as a
single class, voting at a stockholders' meeting and not by consent in
writing. Such affirmative vote shall be required notwithstanding the
fact that no vote may be required, or that a lesser percentage may be
specified, by law or in any agreement with any national securities
exchange or otherwise.
(3) When Higher Vote Is Not Required . The provisions of
Section (2) of this Article shall not be applicable to any particular
Business Combination, and such Business Combination shall require only
such affirmative vote, if any, of the stockholders as is required by law
and any other provision of this Certificate of Incorporation, if the
conditions specified in either of the following paragraphs A and B are
met.
A. Approval by Continuing Directors . The Business Combination
shall have been approved by the affirmative vote of a majority of the
Continuing Directors, even if the Continuing Directors do not constitute
a quorum of the entire Board of Directors.
B. Form of Consideration, Price and Procedure Requirements .
All of the following conditions shall have been met:
(i) With respect to each share of each class of Voting Stock of the
Corporation (including Common Stock), the holder thereof shall be
entitled to receive on or before the date of the consummation of the
Business Combination (the "Consummation Date"), consideration, in the
form specified in subsection (3)(B)(ii) hereof, with an aggregate Fair
Market Value as of the Consummation Date at least equal to the highest
of the following:
(a) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Stockholder to which the Business Combination relates, or by
any Affiliate or Associate of such Interested Stockholder, for any
shares of such class of Voting Stock acquired by it (1) within the two-
year period immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date") or (2) in
the transaction in which it became an Interested Stockholder, whichever
is higher;
(b) the Fair Market Value per share of such class of Voting
Stock of the Corporation on the Announcement Date; and
(c) the highest preferential amount per share, if any, to
which the holders of shares of such class of Voting Stock of the
Corporation are entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
(ii) The consideration to be received by holders of a
particular class of outstanding Voting Stock of the Corporation
(including Common Stock) as described in subsection (3)(B)(i) hereof
shall be in cash or if the consideration previously paid by or on behalf
of the Interested Stockholder in connection with its acquisition of
beneficial ownership of shares of such class of Voting Stock consisted
in whole or in part of consideration other than cash, then in the same
form as such consideration. If such payment for shares of any class of
Voting Stock of the Corporation has been made in varying forms of
consideration, the form of consideration for such class of Voting Stock
shall be either cash or the form used to acquire the beneficial
ownership of the largest number of shares of such class of Voting Stock
previously acquired by the Interested Stockholder.
(iii) After such Interested Stockholder has become an
Interested Stockholder and prior to the Consummation Date: (a) except as
approved by the affirmative vote of a majority of the Continuing
Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not
cumulative) on the outstanding Preferred Stock of the Corporation, if
any; (b) there shall have been (1) no reduction in the annual rate of
dividends paid on the Common Stock of the Corporation (except as
necessary to reflect any subdivision of the Common Stock), except as
approved by the affirmative vote of a majority of the Continuing
Directors, and (2) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding shares of
Common Stock, unless the failure so to increase such annual rate is
approved by the affirmative vote of a majority of the Continuing
Directors; and (c) such Interested Stockholder shall not have become the
Beneficial Owner of any additional shares of Voting Stock of the
Corporation except as part of the transaction which results in such
Interested Stockholder becoming an Interested Stockholder.
(iv) After such Interested Stockholder has become an
Interested Stockholder, neither such Interested Stockholder nor any
Affiliate or Associate thereof shall have received the benefit, directly
or indirectly (except proportionately as a stockholder of the
Corporation), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages provided
by the Corporation.
(v) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Exchange
Act and the General Rules and Regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to
the stockholders of the Corporation at least 45 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions thereof).
(4) Powers of Continuing Directors . A majority of the
Continuing Directors shall have the power and duty to determine, on the
basis of information known to them after reasonable inquiry, all facts
necessary to determine compliance with this Article, including, without
limitation, (A) whether a Person is an Interested Stockholder, (B) the
number of shares of Voting Stock of the Corporation beneficially owned
by any Person, (C) whether a Person is an Affiliate or Associate of
another, (D) whether the requirements of paragraph B of Section (3) have
been met with respect to any Business Combination, and (E) whether the
assets which are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of securities
by the Corporation or any Subsidiary in any Business Combination has, an
aggregate Fair Market Value of not less than one percent (1%) of the
total assets of the Corporation as reported in the consolidated balance
sheet of the Corporation as of the end of the most recent quarter with
respect to which such balance sheet has been prepared; and the good
faith determination of a majority of the Continuing Directors on such
matters shall be conclusive and binding for all the purposes of this
Article.
(5) No Effect on Fiduciary Obligations .
A. Nothing contained in this Article shall be construed to
relieve the members of the Board of Directors or an Interested
Stockholder from any fiduciary obligation imposed by law.
B. The fact that any Business Combination complies with the
provisions of Section (3) of this Article shall not be construed to
impose any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business Combination
or recommend its adoption or approval to the stockholders of the
Corporation, nor shall such compliance limit, prohibit or otherwise
restrict in any manner the Board of Directors, or any member thereof,
with respect to evaluations of or actions and responses taken with
respect to such Business Combination.
(6) Effect on Other Provisions. The provisions of this
Article X are in addition to, and shall not alter or amend, the
provisions of Section (1) of Article VI of this Certificate of
Incorporation.
ARTICLE XI
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in
the manner now or hereafter prescribed by law, and all rights and powers
conferred herein on stockholders, directors and officers are subject to
this reserved power; provided that, notwithstanding the fact that a
lesser percentage may be specified by the General Corporation Law of
Delaware, the affirmative vote of the holders of record of outstanding
shares representing at least eighty percent (80%) of the voting power of
all of the shares of capital stock of the Corporation then entitled to
vote generally in the election of Directors, voting together as a single
class, shall be required to amend, alter, change, repeal, or adopt any
provision or provisions inconsistent with, Section (2) of Article V,
Sections (3) and (4) of Article VI, and Articles VIII and XI (except for
the second proviso of this Article XI) of this Certificate of
Incorporation unless such amendment, alteration, change, repeal or
adoption of any inconsistent provision or provisions is declared
advisable by the Board of Directors by the affirmative vote of at least
seventy-five percent (75%) of the entire Board of Directors; and
provided further that, notwithstanding the fact that a lesser
percentage may be specified by the General Corporation Law of Delaware,
the affirmative vote of the holders of record of outstanding shares
representing at least eighty percent (80%) of the voting power of all
the outstanding Voting Stock of the Corporation, voting together as a
single class, shall be required to amend, alter or repeal, or adopt any
provision or provisions inconsistent with, any provision of Article X or
this proviso of this Article XI, unless such amendment, alteration,
repeal, or adoption of any inconsistent provision or provisions is
declared advisable by the Board of Directors by the affirmative vote of
at least seventy-five percent (75%) of the entire Board of Directors and
by a majority of the Continuing Directors.
ARTICLE XII
No Director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty
by such Director as a Director. Notwithstanding the foregoing, a
Director shall be liable to the extent provided by applicable law (i)
for breach of the Director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the Director derived an
improper personal benefit. No amendment to or repeal of these provisions
shall apply to or have any effect on the liability or alleged liability
of any Director of the Corporation for or with respect to any acts or
omissions of such Director occurring prior to such
