FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1999
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)
(972) 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 2, 1999, 532,757,486 SHARES OF THE CORPORATION'S COMMON STOCK
WERE OUTSTANDING.
<PAGE>
SIGNIFICANT FINANCIAL AND ACCOUNTING DEVELOPMENTS
On December 15, 1998, Kimberly-Clark Corporation ("Kimberly-Clark" or the
"Corporation") filed a Registration Statement on Form S-3 (the "Form S-3")
with the Securities and Exchange Commission (the "SEC"). The Form S-3 related
to the shelf registration of $500 million of debt securities to be issued by
Kimberly-Clark from time to time.
On January 29, 1999 and February 2, 1999, Kimberly-Clark received from the
SEC's Division of Corporation Finance (the "Division") a number of legal and
accounting comments, respectively, with respect to the Form S-3. On March 12,
1999, Kimberly-Clark responded to each set of comments and filed a Current
Report on Form 8-K to report its audited consolidated financial statements for
the year ended December 31, 1998, the related notes and management's
discussion and analysis with respect thereto.
On March 26, 1999, Kimberly-Clark filed its Annual Report on Form 10-K for the
year ended December 31, 1998. On May 12, 1999, Kimberly-Clark filed its
Quarterly Report on Form 10-Q for the three months ended March 31, 1999
(the "1999 First Quarter Form 10-Q").
From April through early July 1999, representatives of Kimberly-Clark and the
Division engaged in an extensive dialogue concerning specific accounting
comments that the Division had raised. The primary focus of the comments
related to the restructuring and other charges that Kimberly-Clark had
previously recorded in connection with its 1995 merger with Scott Paper
Company ("Scott"), its 1997 restructuring plan and its 1998 facilities
consolidation plan.
Following these discussions, Kimberly-Clark management concluded that it would
recommend to the Board of Directors that there should be a restatement of the
Corporation's 1995, 1996, 1997, 1998 and first quarter 1999 financial
statements and related disclosures (the "Restatement"). On July 20, 1999, the
Kimberly-Clark Board of Directors authorized the Restatement and, on July 21,
1999, the Corporation issued a press release to that effect. On August 5,
1999, the Board of Directors approved the restated financial statements
reflected in this Quarterly Report on Form 10-Q/A for the period ended March
31, 1999 (this "Form 10-Q/A") and the related Annual Report on Form 10-K/A for
the year ended December 31, 1998.
The purpose of this Form 10-Q/A is to restate the Corporation's first quarter
1999 and 1998 financial statements to reflect, among other things and to the
extent applicable, the following changes:
- - Certain employee severance costs originally recorded in 1995 in
connection with the Scott merger have been recorded as costs of subsequent
periods when such employee severances and benefits were
appropriately communicated;
- - The effects of changes in estimates to restructuring and other unusual
charges and facility closure charges have been recorded in the periods when
estimates for individual programs included in the applicable plan changed.
In prior presentations, on an aggregate basis, the changes in estimates
were either reallocated to other components of each such plan or were
returned to earnings at the time aggregate amounts were identified as
being in excess of the then current estimate to complete each plan;
and
<PAGE>
- - Certain assets that were to be disposed of but which were not
immediately removed from operations have been depreciated on an accelerated
basis over their remaining useful life. In prior presentations, these
assets had been written down to estimated fair value as of the date such
assets were expected to be removed from service, assuming continuation of
normal depreciation until the estimated date of removal.
The principal effects of these items on the accompanying financial statements
are presented in Note 7 to the unaudited Consolidated Financial Statements.
For purposes of this Form 10-Q/A, and in accordance with Rule 12b-15 under the
Securities Exchange Act of 1934, as amended, Kimberly-Clark has amended and
restated in its entirety each item of the 1999 First Quarter Form 10-Q which
has been affected by the Restatement. In order to preserve the nature and
character of the disclosures set forth in such items as of May 12, 1999, the
date on which the 1999 First Quarter Form 10-Q was originally filed, no
attempt has been made in this Form 10-Q/A to modify or update such disclosures
except as required to reflect the effects of the Restatement and other
potentially material events.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Three Months
Ended March 31
------------------------
(Millions of dollars, except per share amounts) 1999 1998
- ------------------------------------------------------------------------------------
(As Restated - See Note 7)
<S> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . . . . . . . . . $3,125.2 $3,048.6
Cost of products sold . . . . . . . . . . . . . . . . . . . 1,851.9 1,936.0
--------- ---------
GROSS PROFIT. . . . . . . . . . . . . . . . . . . . . . . . . 1,273.3 1,112.6
Advertising, promotion and selling expenses . . . . . . . . 507.2 494.9
Research expense. . . . . . . . . . . . . . . . . . . . . . 54.8 52.9
General expense . . . . . . . . . . . . . . . . . . . . . . 150.1 150.4
Goodwill amortization . . . . . . . . . . . . . . . . . . . 6.8 7.8
Restructuring and other unusual charges . . . . . . . . . . 2.9 23.4
--------- ---------
OPERATING PROFIT. . . . . . . . . . . . . . . . . . . . . . . 551.5 383.2
Interest income . . . . . . . . . . . . . . . . . . . . . . 6.0 8.6
Interest expense. . . . . . . . . . . . . . . . . . . . . . (53.5) (48.2)
Other income (expense), net . . . . . . . . . . . . . . . . (6.9) (.3)
--------- ---------
INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . . . . . . 497.1 343.3
Provision for income taxes. . . . . . . . . . . . . . . . . 161.2 108.3
--------- ---------
INCOME BEFORE EQUITY INTERESTS. . . . . . . . . . . . . . . . 335.9 235.0
Share of net income of equity companies . . . . . . . . . . 43.6 29.3
Minority owners' share of subsidiaries' net income. . . . . (4.9) (6.4)
--------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE. . . . . 374.6 257.9
Cumulative effect of accounting change, net of income taxes - (11.2)
--------- ---------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . $ 374.6 $ 246.7
========= =========
PER SHARE BASIS:
BASIC:
Income before cumulative effect of accounting change. . . . $ .70 $ .46
Cumulative effect of accounting change, net of income taxes - (.02)
--------- ---------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ .70 $ .44
========= =========
DILUTED:
Income before cumulative effect of accounting change. . . . $ .69 $ .46
Cumulative effect of accounting change, net of income taxes - (.02)
--------- ---------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ .69 $ .44
========= =========
CASH DIVIDENDS DECLARED . . . . . . . . . . . . . . . . . . . $ .26 $ .25
========= =========
</TABLE>
Unaudited
See Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
MARCH 31, December 31,
(Millions of dollars) 1999 1998
- -----------------------------------------------------------------------
(As Restated
- See Note 7)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . $ 105.1 $ 144.0
Accounts receivable . . . . . . . . . . . 1,451.4 1,465.2
Inventories . . . . . . . . . . . . . . . 1,265.8 1,283.8
Other current assets. . . . . . . . . . . 439.9 492.8
------------ ---------
TOTAL CURRENT ASSETS. . . . . . . . . . 3,262.2 3,385.8
PROPERTY. . . . . . . . . . . . . . . . . . 10,508.4 10,560.0
Less accumulated depreciation . . . . . . 4,560.6 4,561.9
------------ ---------
NET PROPERTY. . . . . . . . . . . . . . 5,947.8 5,998.1
INVESTMENTS IN EQUITY COMPANIES . . . . . . 827.0 813.1
ASSETS HELD FOR SALE. . . . . . . . . . . . 109.7 109.5
GOODWILL, DEFERRED CHARGES AND OTHER ASSETS 1,425.9 1,381.3
------------ ---------
$ 11,572.6 $11,687.8
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Debt payable within one year. . . . . . . $ 880.6 $ 635.4
Accounts payable. . . . . . . . . . . . . 907.4 1,003.2
Accrued expenses. . . . . . . . . . . . . 1,309.3 1,419.1
Other current liabilities . . . . . . . . 719.8 706.4
------------- --------
TOTAL CURRENT LIABILITIES . . . . . . . 3,817.1 3,764.1
LONG-TERM DEBT. . . . . . . . . . . . . . . 2,086.7 2,068.2
NONCURRENT EMPLOYEE BENEFIT AND OTHER
OBLIGATIONS . . . . . . . . . . . . . . . 894.6 899.9
DEFERRED INCOME TAXES . . . . . . . . . . . 730.8 721.6
MINORITY OWNERS' INTERESTS IN SUBSIDIARIES. 219.4 202.5
STOCKHOLDERS' EQUITY. . . . . . . . . . . . 3,824.0 4,031.5
-------------- --------
$ 11,572.6 $11,687.8
============= =========
</TABLE>
Unaudited
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CASH FLOW STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Three Months
Ended March 31
--------------------
(Millions of dollars) 1999 1998
- ----------------------------------------------------------------------------------
(As Restated - See Note 7)
<S> <C> <C>
OPERATIONS
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . $ 374.6 $ 246.7
Cumulative effect of accounting change, net of income taxes - 11.2
Charges for business improvement and other programs:
Restructuring and other unusual charges . . . . . . . . . 2.9 23.4
Other charges . . . . . . . . . . . . . . . . . . . . . . 1.7 5.8
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . 148.0 166.2
Goodwill amortization . . . . . . . . . . . . . . . . . . . 6.8 7.8
Changes in operating working capital. . . . . . . . . . . . (104.3) (39.7)
Pension funding in excess of expense. . . . . . . . . . . . (7.5) (5.6)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1 (7.6)
-------- --------
CASH PROVIDED BY OPERATIONS . . . . . . . . . . . . . . . 432.3 408.2
-------- --------
INVESTING
Capital spending. . . . . . . . . . . . . . . . . . . . . . (168.6) (135.3)
Acquisitions of businesses, net of cash acquired. . . . . . - (.9)
Disposals of property and businesses. . . . . . . . . . . . 18.5 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . (57.7) (31.9)
-------- --------
CASH USED FOR INVESTING . . . . . . . . . . . . . . . . . (207.8) (168.1)
-------- --------
FINANCING
Cash dividends paid . . . . . . . . . . . . . . . . . . . . (135.5) (131.4)
Changes in debt payable within one year . . . . . . . . . . 194.7 (52.9)
Increases in long-term debt . . . . . . . . . . . . . . . . 21.2 221.8
Decreases in long-term debt . . . . . . . . . . . . . . . . (18.2) (261.6)
Proceeds from exercise of stock options . . . . . . . . . . 6.0 18.2
Acquisitions of common stock for the treasury . . . . . . . (339.9) (9.1)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3 (16.6)
-------- --------
CASH USED FOR FINANCING . . . . . . . . . . . . . . . . . (263.4) (231.6)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . . . . $ (38.9) $ 8.5
======== ========
</TABLE>
Unaudited
See Notes to Consolidated Financial Statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
1. The unaudited consolidated financial statements of the Corporation have
been prepared on the same basis as those in the Annual Report on Form
10-K/A for the year ended December 31, 1998 and include all adjustments
necessary to present fairly the condensed consolidated balance sheet,
consolidated results of operations and condensed consolidated cash flow
statement for the periods indicated.
2. The Corporation has undertaken a number of actions in recent years to
address ongoing business competitiveness by improving its operating
efficiency and cost structure. Certain of these programs affect the
first quarter 1999 and 1998 financial statements as follows.
- In the fourth quarter of 1998, the Corporation announced a facilities
consolidation plan to, among other things, further align tissue
manufacturing capacity with demand in Europe, close a diaper
manufacturing facility in Canada, shut down and dispose of a tissue
machine in Thailand and write down certain excess feminine care
production equipment in North America. Certain assets, primarily a
tissue manufacturing facility in the United Kingdom, which will remain
in use until its expected shutdown in October 2000, became subject to
accelerated depreciation, some of which was recorded in the first
quarter of 1999.
- In the fourth quarter of 1997, the Corporation announced a plan to
restructure its worldwide operations. Certain assets that are to be
disposed of, but remained or will remain in use until disposed of in
1999 and 2000, became subject to accelerated depreciation, some of which
was recorded in the first quarter of 1999 and 1998.
The accelerated depreciation adjustments described above and other
less significant adjustments related to the described plans were
charged to earnings in the following income statement categories
for the periods indicated.
First Quarter
----------------
(Millions of dollars) 1999 1998
-------------------------------------------------------
Cost of products sold . . . . . . . . . $18.5 $48.4
General expense . . . . . . . . . . . . 1.4 -
Restructuring and other unusual charges 2.9 23.4
----- -----
Total charges . . . . . . . . . . . . . $22.8 $71.8
===== =====
3. There are no adjustments required to be made to Income Before Effect of
Cumulative Accounting Change for purposes of computing basic and
diluted earnings per share ("EPS"). A reconciliation of the average
number of common shares outstanding used in the basic and diluted
EPS computations is as follows:
<PAGE>
Average Common Shares
Outstanding for the
Three Months Ended March 31
-------------------------------
(Millions) 1999 1998
-------------------------------------------------------------------------
Basic. . . . . . . . . . . . . . . . . . . . . . . . . 535.9 556.7
Dilutive effect of stock options . . . . . . . . . . 2.4 3.0
Dilutive effect of deferred compensation plan shares .1 -
Dilutive effect of shares issued for participation
share awards . . . . . . . . . . . . . . . . . . . .7 .3
----- -----
Diluted. . . . . . . . . . . . . . . . . . . . . . . . 539.1 560.0
===== =====
Options outstanding during the quarter ended March 31, 1999 to purchase
8.7 million shares of common stock at a weighted average price of $52.75
were not included in the computation of diluted EPS because the exercise
prices of the options were greater than the average market price of the
common shares. The options, which expire in 2004, 2007 and 2008, were
still outstanding at March 31, 1999.
There were 3.1 million shares of common stock at a weighted average price
of $55.94 outstanding at March 31, 1998 which were excluded from the
diluted EPS computation because the exercise prices of the options were
greater than the average market price of the common shares.
The number of common shares outstanding as of March 31, 1999 and 1998 was
531.8 million and 557.0 million, respectively.
4. The following schedule details inventories by major class as of March
31, 1999 and December 31, 1998:
<TABLE>
<CAPTION>
MARCH 31, December 31,
(Millions of dollars) 1999 1998
---------------------------------------------------------------------------------
<S> <C> <C>
At lower of cost on the First-In,
First-Out (FIFO) method or market:
Raw materials . . . . . . . . . . . . . . . . . . . . $ 333.4 $ 355.4
Work in process . . . . . . . . . . . . . . . . . . . 150.6 164.2
Finished goods. . . . . . . . . . . . . . . . . . . . 750.7 751.3
Supplies and other. . . . . . . . . . . . . . . . . . 205.0 195.5
-------- --------
1,439.7 1,466.4
Excess of FIFO cost over Last-In, First-Out (LIFO) cost (173.9) (182.6)
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . $1,265.8 $1,283.8
======== ========
</TABLE>
<PAGE>
5. The following schedule provides the detail of comprehensive income:
Three Months Ended March 31
-------------------------------
(Millions of dollars) 1999 1998
--------------------------------------------------------------------
Net Income. . . . . . . . . . . . . . . . . $ 374.6 $246.7
Unrealized currency translation adjustments (111.1) (4.1)
-------- -------
Comprehensive income. . . . . . . . . . . . $ 263.5 $242.6
======== =======
6. The following schedule presents information concerning consolidated
operations by business segment:
<TABLE>
<CAPTION>
Three Months Ended March 31
-------------------------------
(Millions of dollars) 1999 1998
---------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES:
Tissue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,708.0 $1,695.0
Personal Care. . . . . . . . . . . . . . . . . . . . . . . . . 1,196.4 1,101.9
Health Care and Other. . . . . . . . . . . . . . . . . . . . . 228.7 261.3
Intersegment Sales . . . . . . . . . . . . . . . . . . . . . . (7.9) (9.6)
--------- --------
Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . $3,125.2 $3,048.6
========= ========
OPERATING PROFIT (reconciled to income before income taxes):
Tissue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 284.5 $ 235.5
Personal Care. . . . . . . . . . . . . . . . . . . . . . . . . 232.3 136.1
Health Care and Other. . . . . . . . . . . . . . . . . . . . . 46.7 37.1
Unallocated Items - net. . . . . . . . . . . . . . . . . . . . (12.0) (25.5)
--------- --------
Total Operating Profit . . . . . . . . . . . . . . . . . . . . 551.5 383.2
Interest income. . . . . . . . . . . . . . . . . . . . . . . 6.0 8.6
Interest expense . . . . . . . . . . . . . . . . . . . . . . (53.5) (48.2)
Other income (expense), net. . . . . . . . . . . . . . . . . (6.9) (.3)
-------- --------
Income Before Income Taxes . . . . . . . . . . . . . . . . . . $ 497.1 $ 343.3
======== ========
</TABLE>
Description of Business Segments:
The Tissue segment manufactures and markets facial and bathroom tissue,
and paper towels and wipers for household and away-from-home use;
wet wipes; printing, premium business and correspondence papers; and
related products.
The Personal Care segment manufactures and markets disposable
diapers, training and youth pants; feminine and incontinence care
products; and related products.
<PAGE>
The Health Care and Other segment manufactures and markets health
care products such as surgical packs and gowns, sterilization wraps and
disposable face masks; specialty and technical paper and related
products; and other products.
7. Restatement
Subsequent to the issuance of the Corporation's 1998 financial
statements and the filing of its Form 10-K with the SEC,
and following extensive discussions with representatives of
the Division concerning its review of the Corporation's
financial statements, Kimberly-Clark concluded that it would restate
its 1995, 1996, 1997, 1998 and first quarter 1999 financial
statements and related disclosures. The accompanying
consolidated income statements for the three months ended March 31,
1999 and 1998 and condensed consolidated balance sheet as of March
31, 1999 present restated results to reflect, among other things and
to the extent applicable, the following changes:
- Certain employee severance costs originally recorded in
1995 in connection with the Scott merger have been recorded as
costs of subsequent periods when such employee severances and
benefits were appropriately communicated.
- The effects of changes in estimates to restructuring and other
unusual charges and facility closure charges have been recorded in
the periods when estimates for individual programs included in the
applicable plan changed. In prior presentations, on an aggregate
basis, the changes in estimates were either reallocated to other
components of each such plan or were returned to earnings at the
time aggregate amounts were identified as being in excess of
the then current estimate to complete each plan.
- Certain assets that were to be disposed of but which were
not immediately removed from operations have been depreciated on an
accelerated basis over their remaining useful life. In prior
presentations, these assets had been written down to estimated fair
value as of the date such assets were expected to be removed from
service, assuming continuation of normal depreciation until the
estimated date of removal.
A comparison of the restated and previously reported financial
statements as of March 31, 1999 and 1998 and for the three
months then ended follows:
<PAGE>
7. Restatement (Continued)
<TABLE>
<CAPTION>
Consolidated Income Statements
---------------------------------------------
Three Months Ended
---------------------------------------------
March 31, 1999 March 31, 1998
--------------------- ----------------------
As As
As Previously As Previously
(Millions of dollars, except per share amounts) Restated Reported Restated Reported
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES. . . . . . . . . . . . . . . . . . . . . . $3,125.2 $3,125.2 $3,048.6 $3,048.6
Cost of products sold. . . . . . . . . . . . . . . 1,851.9 1,833.4 1,936.0 1,884.1
--------- --------- --------- ---------
GROSS PROFIT . . . . . . . . . . . . . . . . . . . . 1,273.3 1,291.8 1,112.6 1,164.5
Advertising, promotion and selling expenses. . . . 507.2 507.2 494.9 494.9
Research expense . . . . . . . . . . . . . . . . . 54.8 54.8 52.9 52.9
General expense. . . . . . . . . . . . . . . . . . 150.1 148.7 150.4 150.4
Goodwill amortization. . . . . . . . . . . . . . . 6.8 6.8 7.8 7.8
Restructuring and other unusual charges. . . . . . 2.9 (22.3) 23.4 14.2
--------- --------- --------- ---------
OPERATING PROFIT . . . . . . . . . . . . . . . . . . 551.5 596.6 383.2 444.3
Interest income. . . . . . . . . . . . . . . . . . 6.0 6.0 8.6 8.6
Interest expense . . . . . . . . . . . . . . . . . (53.5) (53.5) (48.2) (48.2)
Other income (expense), net. . . . . . . . . . . . (6.9) (6.9) (.3) (.3)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . 497.1 542.2 343.3 404.4
Provision for income taxes . . . . . . . . . . . . 161.2 177.1 108.3 129.6
--------- --------- --------- ---------
INCOME BEFORE EQUITY INTERESTS . . . . . . . . . . . 335.9 365.1 235.0 274.8
Share of net income of equity companies. . . . . . 43.6 43.6 29.3 29.3
Minority owners' share of subsidiaries' net income (4.9) (5.0) (6.4) (6.5)
--------- --------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE . . . . . . . . . . . . . . . . . . . . . . 374.6 403.7 257.9 297.6
Cumulative effect of accounting change, net of
income taxes . . . . . . . . . . . . . . . . . - - (11.2) (11.2)
--------- --------- --------- ---------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 374.6 $ 403.7 $ 246.7 $ 286.4
========= ========= ========= =========
PER SHARE BASIS:
BASIC:
Income before cumulative effect of accounting
change . . . . . . . . . . . . . . . . . . . $ .70 $ .75 $ .46 $ .53
Cumulative effect of accounting change, net of
income taxes . . . . . . . . . . . . . . . . - - (.02) (.02)
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . $ .70 $ .75 $ .44 $ .51
======== ======== ======== ========
DILUTED:
Income before cumulative effect of accounting
change . . . . . . . . . . . . . . . . . . . $ .69 $ .75 $ .46 $ .53
Cumulative effect of accounting change, net of
income taxes . . . . . . . . . . . . . . . . - - (.02) (.02)
-------- -------- --------- --------
Net income . . . . . . . . . . . . . . . . . . $ .69 $ .75 $ .44 $ .51
======== ======== ========= ========
CASH DIVIDENDS DECLARED. . . . . . . . . . . . . $ .26 $ .26 $ .25 $ .25
======== ======== ========= ========
</TABLE>
<PAGE>
7. Restatement (Continued)
<TABLE>
<CAPTION>
Consolidated
Balance Sheet
--------------------
As of March 31, 1999
--------------------
As
As Previously
(Millions of dollars) Restated Reported
- -------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . $ 105.1 $ 105.1
Accounts receivable . . . . . . . . . . . 1,451.4 1,451.4
Inventories . . . . . . . . . . . . . . . 1,265.8 1,265.8
Other current assets. . . . . . . . . . . 439.9 411.5
--------- ---------
TOTAL CURRENT ASSETS. . . . . . . . . . 3,262.2 3,233.8
PROPERTY. . . . . . . . . . . . . . . . . . 10,508.4 10,464.4
Less accumulated depreciation . . . . . . 4,560.6 4,649.1
--------- ---------
NET PROPERTY. . . . . . . . . . . . . . 5,947.8 5,815.3
INVESTMENTS IN EQUITY COMPANIES . . . . . . 827.0 827.0
ASSETS HELD FOR SALE. . . . . . . . . . . . 109.7 109.7
GOODWILL, DEFERRED CHARGES AND OTHER ASSETS 1,425.9 1,419.5
--------- ---------
$11,572.6 $11,405.3
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Debt payable within one year . . . . . . $ 880.6 $ 880.6
Accounts payable . . . . . . . . . . . . 907.4 907.4
Accrued expenses . . . . . . . . . . . . 1,309.3 1,318.5
Other current liabilities. . . . . . . . 719.8 711.8
--------- ---------
TOTAL CURRENT LIABILITIES. . . . . . . 3,817.1 3,818.3
LONG-TERM DEBT . . . . . . . . . . . . . . 2,086.7 2,086.7
NONCURRENT EMPLOYEE BENEFIT AND OTHER
OBLIGATIONS. . . . . . . . . . . . . . . 894.6 894.6
DEFERRED INCOME TAXES. . . . . . . . . . . 730.8 681.9
MINORITY OWNERS' INTERESTS IN SUBSIDIARIES 219.4 215.0
STOCKHOLDERS' EQUITY . . . . . . . . . . . 3,824.0 3,708.8
--------- ---------
$11,572.6 $11,405.3
========= =========
</TABLE>
<PAGE>
ITEM 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.
Restatement
Subsequent to the issuance of the Corporation's 1998 financial statements and
the filing of its 1998 Form 10-K with the Securities and Exchange
Commission (the "SEC"), and following extensive discussions with
representatives of the SEC's Division of Corporation Finance concerning its
review of the Corporation's financial statements, Kimberly-Clark concluded
that it would restate its 1995, 1996, 1997, 1998 and first quarter 1999
financial statements and related disclosures (the "Restatement"). Additional
information concerning the Restatement is contained in "Significant
Financial and Accounting Developments" contained elsewhere in this
Form 10-Q/A.
The following discussion should be read in conjunction with the accompanying
condensed consolidated financial statements as of and for the three months
ended March 31, 1999 and 1998.
Business Improvement and Other Programs
The Corporation has undertaken a number of actions in recent years to address
ongoing business competitiveness by improving its operating efficiency and
cost structure. Certain of these programs affect the first quarter 1999 and
1998 financial statements as follows.
- - In the fourth quarter of 1998, the Corporation announced a facilities
consolidation plan to, among other things, further align tissue
manufacturing capacity with demand in Europe, close a diaper
manufacturing facility in Canada, shut down and dispose of a tissue
machine in Thailand and write down certain excess feminine care
production equipment in North America. Certain assets, primarily a
tissue manufacturing facility in the United Kingdom, which
will remain in use until its expected shutdown in October 2000, became
subject to accelerated depreciation, some of which was recorded in
the first quarter of 1999.
- - In the fourth quarter of 1997, the Corporation announced a plan to
restructure its worldwide operations. Certain assets that are to be
disposed of, but remained or will remain in use until disposed of
in 1999 and 2000, became subject to accelerated depreciation, some of
which was recorded in the first quarter of 1999 and 1998.
The accelerated depreciation adjustments described above and other less
significant adjustments related to the described plans were charged to
earnings in the following income statement categories for the periods
indicated.
First Quarter
-----------------
(Millions of dollars) 1999 1998
- --------------------------------------------------------
Cost of products sold . . . . . . . . . $18.5 $48.4
General expense . . . . . . . . . . . . 1.4 -
Restructuring and other unusual charges 2.9 23.4
----- -----
Total charges . . . . . . . . . . . . . $22.8 $71.8
===== =====
<PAGE>
RESULTS OF OPERATIONS:
For purposes of this Management's Discussion and Analysis, and in order to
facilitate a meaningful discussion of the ongoing operations of the
Corporation, the changes described in the "Business Improvement and Other
Programs" section above are considered to be unusual items ("Unusual Items")
and have been excluded from operating profit in the "Excluding Unusual Items"
columns in the following Operating Profit tables.
FIRST QUARTER OF 1999 COMPARED WITH FIRST QUARTER OF 1998
<TABLE>
<CAPTION>
By Business Segment
(Millions of dollars)
NET SALES 1999 1998
- --------------------------------------------
<S> <C> <C>
Tissue. . . . . . . . $1,708.0 $1,695.0
Personal Care . . . . 1,196.4 1,101.9
Health Care and Other 228.7 261.3
Intersegment Sales. . (7.9) (9.6)
-------- --------
Consolidated. . . . . $3,125.2 $3,048.6
======== ========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
---------------------- ----------------------
AS EXCLUDING As Excluding
OPERATING PROFIT RESTATED UNUSUAL ITEMS Restated Unusual Items
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tissue. . . . . . . . . $284.5 $297.3 $235.5 $267.2
Personal Care . . . . . 232.3 241.6 136.1 171.1
Health Care and Other . 46.7 47.6 37.1 41.4
Unallocated items - net (12.0) (12.2) (25.5) (24.7)
------- ------ ------ ------
Consolidated. . . . . . $551.5 $574.3 $383.2 $455.0
====== ====== ====== ======
</TABLE>
Commentary:
Consolidated net sales for the quarter were 2.5 percent higher than in 1998;
however, excluding the revenues of K-C Aviation Inc. ("KCA"), which was sold
in the third quarter of 1998, net sales increased approximately 4 percent.
Excluding the net sales of KCA, worldwide sales volumes were 4 percent higher.
- - Worldwide sales of tissue products for the quarter were in line with
management's expectations. Due to strong sales in the first quarter of
1998 in advance of a consumer tissue price increase in North
America and the Corporation's strategy of shedding unprofitable
private label sales in Europe, sales volumes were essentially
unchanged. However, overall tissue sales moved up .8 percent
primarily due to the favorable effect of changes in foreign
currency exchange rates.
- - Worldwide sales of personal care products increased 8.6 percent from
the first quarter of 1998. Personal care product sales volumes were 10
percent higher, with increases in all product categories in
North America, and improvement in Latin America and Asia. A
portion of the increase in Latin America is attributable to
operations in Colombia, in which the Corporation made an additional
investment in late 1998 to gain majority ownership of certain
equity affiliates.
<PAGE>
- - Worldwide sales of health care and other products, excluding the
revenues of KCA, were 5 percent higher primarily because of continued
growth in sales of professional health care products.
Excluding the Unusual Items, operating profit for the first quarter of 1999
was $574.3 million compared with $455.0 million in the first quarter of 1998.
Excluding the Unusual Items from both years, first quarter operating profit
was 26.2 percent higher in 1999, and operating profit as a percentage of sales
increased from 14.9 percent in 1998 to 18.4 percent in 1999.
- - The increase in operating profit for worldwide tissue was primarily
due to productivity gains and other manufacturing cost benefits.
- - The increase in operating profit for worldwide personal care was
primarily due to the increase in unit sales volumes and
manufacturing cost reductions.
- - Excluding the operating results of KCA, operating profit for health
care and other increased 23.3 percent primarily due to the increased
sales volumes and productivity gains in professional health care.
<TABLE>
<CAPTION>
By Geography
(Millions of dollars)
NET SALES 1999 1998
- --------------------------------------------
<S> <C> <C>
North America . . . . $2,097.6 $2,100.3
Outside North America 1,088.8 1,018.8
Intergeographic Sales (61.2) (70.5)
-------- --------
Consolidated. . . . . $3,125.2 $3,048.6
======== ========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
--------------------- -----------------------
AS EXCLUDING As Excluding
OPERATING PROFIT RESTATED UNUSUAL ITEMS Restated Unusual Items
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North America . . . . . $468.9 $485.0 $359.0 $413.1
Outside North America . 94.6 101.5 49.7 66.6
Unallocated items - net (12.0) (12.2) (25.5) (24.7)
------ ------ ------ ------
Consolidated. . . . . . $551.5 $574.3 $383.2 $455.0
====== ====== ====== ======
</TABLE>
Note: Unallocated items - net, consists of expenses not associated with
the business segments or geographic areas.
Commentary:
- - Excluding the revenues of KCA, net sales in North America increased 2
percent due to the increased sales volumes for personal care
products.
- - Net sales outside North America increased due, in part, to the
previously mentioned consolidation of certain operations in Colombia
and the higher sales in Latin America and Asia.
<PAGE>
- - Excluding the Unusual Items in both years, operating profit in North
America increased 17.4 percent. This increase was primarily
due to the increased sales volumes for personal care products and
overall manufacturing cost benefits.
- - Excluding the Unusual Items in both years, operating profit outside
North America increased 52.4 percent. This increase was due to
improvement in Europe from lower manufacturing and marketing costs,
the consolidation of the Colombian operations and improvements
elsewhere in Latin America and in Asia.
Additional Income Statement Commentary:
- - The increase in interest expense was primarily due to an increase in
the level of debt.
- - The effective income tax rate was 32.4 percent compared to 31.5 percent
last year. The effective tax rate is expected to be between 32.0
percent and 32.5 percent for 1999.
- - The Corporation's share of net income of equity companies increased
48.8 percent from 1998. This increase was primarily attributable
to higher earnings of Kimberly-Clark de Mexico, S.A. de C.V. due to
increased selling prices, higher sales volumes and the favorable
effect of changes in the value of the Mexican peso. In addition,
there was a gain of approximately $5 million at Klabin Kimberly S.A.
related to the 1999 devaluation of the Brazilian real.
LIQUIDITY AND CAPITAL RESOURCES
- - Cash provided by operations in the first quarter of 1999 increased by
$24.1 million compared with the first quarter of 1998. A higher level
of net income plus net noncash charges included in net income more
than offset an increase in working capital. Although the investment
in accounts receivable and inventories was reduced, the timing of
payments for income tax liabilities and currency rate changes
caused working capital to increase.
- - Accrued expenses associated with the Corporation's restructuring
program announced in 1997 are summarized below:
<TABLE>
<CAPTION>
First Quarter 1999
--------------------
Balance at Charges Balance at
(Millions of dollars) December 31, 1998 (Credits) Payments March 31, 1999
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 Plan $111.0 $(.4) $(39.4) $71.2
</TABLE>
The balance at March 31, 1999 is estimated to be adequate to
complete the actions contemplated in this plan. The activities
involved in this plan have not disrupted the Corporation's business
operations to any significant extent. The principal benefits of
this plan have resulted in lower production costs and simplified
manufacturing and sourcing strategies.
- - During the first quarter of 1999, the Corporation repurchased 7 million
shares of its common stock at a cost of approximately $340
million.
- - At March 31, 1999, total debt was $3.0 billion compared with $2.7
billion at December 31, 1998. Net debt (total debt net of
cash, cash equivalents and $220 million of long-term notes
receivable) was $2.6 billion at March 31, 1999 compared with
$2.3 billion at December 31, 1998. The Corporation's ratio of
net debt to capital was 39.5 percent at March 31, 1999 compared
with 35.6 percent at December 31, 1998.
<PAGE>
- - Management believes that the Corporation's ability to generate cash
from operations and its capacity to issue short-term and
long-term debt are adequate to fund working capital, capital
spending and other needs in the foreseeable future.
- - On June 10, 1999, the Corporation purchased the European consumer and
away-from-home tissue businesses of Attisholz Holding AG for
approximately $365 million. Such businesses are located in
Germany, Switzerland and Austria.
<PAGE>
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.
"YEAR 2000" READINESS
Since 1995, the Corporation has been involved in a worldwide program to be
"Year 2000" ready. The program involves reviews of major business, financial
and other information systems, including equipment with embedded
microprocessors; development of specific plans for modification or replacement
of date-sensitive software or microprocessors; execution of such plans; and
the testing of such systems to ensure their "Year 2000" readiness. Included
within the scope of the program are contacts with key suppliers and customers
to determine the extent of their "Year 2000" readiness in order to ensure a
steady flow of goods and services to the Corporation and continuity with
respect to customer service.
The Corporation's Crisis Management Program has been expanded, where
necessary, to include contingency plans relating to possible "Year 2000"
issues. This program includes, among other things, contingency plans and
backup procedures to be followed in case of failure of production operations,
the inability of major suppliers to fulfill their commitments, and the
inability of major customers to submit orders and receive product.
Progress against the "Year 2000" readiness plan is monitored and reported to
senior management and to the Corporation's board of directors or audit
committee on a regular basis. As of March 31, 1999, management estimates that
it has completed almost 80 percent of the work involved in modifying,
replacing and testing the Corporation's major systems and microprocessors.
Management has plans to have substantially all such work completed as of June
30, 1999 and the balance completed by September 30, 1999.
The total cost to ensure "Year 2000" readiness, which is primarily comprised
of staff time and the cost of replacing certain computerized systems and
microprocessors, is estimated to be approximately $80 million. Management
estimates that $52 million has been incurred for this purpose as of March 31,
1999.
Neither the "Year 2000" issue nor the financial effects of the reviews,
modifications, replacements and testing are expected to have a material
adverse effect on the Corporation's business or its consolidated financial
position, results of operations, or cash flow.
<PAGE>
Management believes that its "Year 2000" readiness program has encompassed all
reasonable actions and contingency plans to avoid business interruptions
resulting from "Year 2000" problems. The effect, if any, on the Corporation's
future results of operations from the Corporation's major customers or
suppliers not being "Year 2000" ready cannot be reasonably estimated. This
latter risk is mitigated somewhat by the Corporation's broad base of customers
and suppliers and the worldwide nature of the Corporation's operations.
OUTLOOK
Management believes that the fundamental strengths of the Corporation's
well-known brands and proprietary technologies were evident in its first
quarter results as the Corporation generated more top-line growth and achieved
record margins and earnings. Management plans to continue to build upon the
Corporation's strengths going forward. Management is committed to improving
top-line growth and sustaining double-digit growth in earnings per share.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain information discussed in this Form 10-Q/A, or documents a portion of
which are incorporated by reference concerning, among other things, the
business outlook, anticipated financial and operating results, strategies,
contingencies and contemplated transactions of the Corporation, including, but
not limited to, the adequacy of the charges under the Corporation's 1997
restructuring plan and its 1998 facilities consolidation plan, the
Corporation's estimated effective tax rate for 1999 and its "Year 2000"
readiness program, constitute forward-looking statements and are based upon
management's expectations and beliefs concerning future events impacting the
Corporation. There can be no assurance that such events will occur or that
the Corporation's results will be as currently expected. For a description of
certain factors that could cause the Corporation's future results to differ
materially from those expressed in any such forward-looking statements, see
the section of Part I, Item 1 of the Corporation's Annual Report on Form
10-K/A for the year ended December 31, 1998 entitled "Factors That May Affect
Future Results."
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(3)a Restated Certificate of Incorporation, dated June 12,
1997, incorporated by reference to Exhibit No. (3)a of
the Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997.
(3)b By-Laws, as amended November 22, 1996, incorporated by reference
to Exhibit No. 4.2 of the Corporation's Registration Statement
on Form S-8 filed with the Securities and Exchange
Commission on December 6, 1996 (File No. 33-17367).
(4) Copies of instruments defining the rights of holders of
long-term debt will be furnished to the Securities
and Exchange Commission upon request.
(27) Financial Data Schedule.*
-----------------
*Filed herewith
(b) Reports on Form 8-K
Previously reported.
<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)
August 6, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 105100
<SECURITIES> 0
<RECEIVABLES> 1451400
<ALLOWANCES> 0<F1>
<INVENTORY> 1265800
<CURRENT-ASSETS> 3262200
<PP&E> 10508400
<DEPRECIATION> 4560600
<TOTAL-ASSETS> 11572600
<CURRENT-LIABILITIES> 3817100
<BONDS> 2086700
0
0
<COMMON> 0
<OTHER-SE> 0<F1>
<TOTAL-LIABILITY-AND-EQUITY> 11572600
<SALES> 3125200
<TOTAL-REVENUES> 3125200
<CGS> 1851900
<TOTAL-COSTS> 2573700
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53500
<INCOME-PRETAX> 497100
<INCOME-TAX> 161200
<INCOME-CONTINUING> 374600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 374600
<EPS-BASIC> .70
<EPS-DILUTED> .69
<FN>
<F1>Items not disclosed since they are not required for interim reporting under
regulation S-X, Article 10.
</FN>
</TABLE>
