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, 2000
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 7, 2000, THERE WERE 538,156,284 SHARES OF THE CORPORATION'S
COMMON STOCK OUTSTANDING.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED INCOME STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------------- ---------------------
(Millions of dollars except per share amounts) 2000 1999 2000 1999
---------------------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES................................................ $3,464.5 $3,148.6 $6,851.7 $6,273.8
Cost of products sold................................. 2,032.1 1,851.6 4,013.0 3,703.5
--------- --------- --------- ---------
GROSS PROFIT............................................. 1,432.4 1,297.0 2,838.7 2,570.3
Advertising, promotion and selling expenses........... 534.0 517.6 1,086.2 1,024.8
Research expense...................................... 68.4 62.2 129.6 117.0
General expense....................................... 183.4 166.8 366.5 316.9
Goodwill amortization................................. 20.7 10.2 39.0 17.0
Restructuring......................................... - (1.4) - 1.5
Other (income) expense, net........................... (12.4) (27.7) (99.6) (20.8)
--------- --------- --------- ---------
OPERATING PROFIT......................................... 638.3 569.3 1,317.0 1,113.9
Interest income....................................... 7.2 5.2 15.0 11.2
Interest expense...................................... (54.0) (54.6) (103.4) (108.1)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES............................... 591.5 519.9 1,228.6 1,017.0
Provision for income taxes............................ 182.9 165.8 385.1 327.0
--------- --------- --------- ---------
INCOME BEFORE EQUITY INTERESTS........................... 408.6 354.1 843.5 690.0
Share of net income of equity companies............... 41.1 46.9 88.7 90.5
Minority owners' share of subsidiaries' net income.... (15.4) (9.9) (27.7) (14.8)
--------- --------- --------- ---------
NET INCOME............................................... $ 434.3 $ 391.1 $ 904.5 $ 765.7
========= ========= ========= =========
NET INCOME PER SHARE:
Basic................................................. $ .80 $ .73 $ 1.66 $ 1.43
========= ========= ========= =========
Diluted............................................... $ .79 $ .73 $ 1.65 $ 1.42
========= ========= ========= =========
CASH DIVIDENDS DECLARED.................................. $ .27 $ .26 $ .54 $ .52
========= ========= ========= =========
</TABLE>
Unaudited
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEET
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
JUNE 30, December 31,
(Millions of dollars) 2000 1999
----------------------- ------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................... $ 222.9 $ 322.8
Accounts receivable................................. 1,698.5 1,600.6
Inventories......................................... 1,384.9 1,239.9
Other current assets................................ 391.3 398.5
--------- ---------
TOTAL CURRENT ASSETS............................. 3,697.6 3,561.8
PROPERTY............................................... 11,613.3 11,080.8
Less accumulated depreciation....................... 5,027.0 4,858.8
--------- ---------
NET PROPERTY..................................... 6,586.3 6,222.0
INVESTMENTS IN EQUITY COMPANIES........................ 807.9 863.1
GOODWILL, NET OF ACCUMULATED AMORTIZATION.............. 2,040.3 1,246.1
OTHER ASSETS........................................... 773.4 922.5
--------- ---------
$13,905.5 $12,815.5
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Debt payable within one year........................ $ 1,113.8 $ 782.4
Accounts payable.................................... 1,098.9 1,025.7
Accrued expenses.................................... 1,263.3 1,312.1
Other current liabilities........................... 679.0 725.6
--------- ---------
TOTAL CURRENT LIABILITIES........................ 4,155.0 3,845.8
LONG-TERM DEBT......................................... 2,050.9 1,926.6
NONCURRENT EMPLOYEE BENEFIT AND OTHER OBLIGATIONS...... 856.1 868.5
DEFERRED INCOME TAXES.................................. 914.0 836.9
MINORITY OWNERS' INTERESTS IN SUBSIDIARIES............. 310.0 244.6
STOCKHOLDERS' EQUITY................................... 5,619.5 5,093.1
--------- ---------
$13,905.5 $12,815.5
========= =========
</TABLE>
Unaudited
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Six Months
Ended June 30
------------------
(Millions of dollars) 2000 1999
----------------------- ---- ------
<S> <C> <C>
OPERATIONS
Net income.......................................... $ 904.5 $ 765.7
Depreciation........................................ 300.1 285.1
Goodwill amortization............................... 39.0 17.0
Changes in operating working capital................ (175.0) (144.0)
Other............................................... 6.6 14.7
--------- --------
CASH PROVIDED BY OPERATIONS...................... 1,075.2 938.5
--------- --------
INVESTING
Capital spending.................................... (495.2) (359.9)
Acquisitions of businesses, net of cash acquired.... (160.0) (351.4)
Disposals of property and businesses................ 9.6 29.8
Proceeds from investments........................... 38.3 -
Proceeds from notes receivable...................... 220.0 -
Other............................................... (32.8) (28.4)
--------- --------
CASH USED FOR INVESTING.......................... (420.1) (709.9)
--------- --------
FINANCING
Cash dividends paid................................. (289.2) (274.6)
Changes in debt payable within one year............. 127.0 404.4
Increases in long-term debt......................... 328.6 23.6
Decreases in long-term debt......................... (179.2) (40.0)
Proceeds from exercise of stock options............. 34.4 37.0
Acquisitions of common stock for the treasury....... (768.1) (359.5)
Other............................................... (8.5) 11.0
--------- --------
CASH USED FOR FINANCING.......................... (755.0) (198.1)
--------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS....... $ (99.9) $ 30.5
========= ========
</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 Kimberly-Clark
Corporation (the "Corporation") have been prepared on the same basis as
those in the Annual Report on Form 10-K for the year ended
December 31, 1999 and include all normal recurring 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. 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 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 second quarter and six months ended June 30, 2000 and 1999.
The accelerated depreciation adjustments and other less significant
adjustments related to these programs were charged to earnings in the
following income statement categories for the periods indicated:
<TABLE>
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
---------------- ---------------
(Millions of dollars) 2000 1999 2000 1999
----------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Cost of products sold..................... $ 4.6 $ 5.8 $12.7 $24.3
General expense........................... 1.4 1.4 2.8 2.8
Restructuring............................. - (1.4) - 1.5
----- ------ ----- -----
Total charges.......................... $ 6.0 $ 5.8 $15.5 $28.6
====== ====== ===== =====
</TABLE>
3. There are no adjustments required to be made to net income 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:
<TABLE>
<CAPTION>
Average Common Shares Outstanding
------------------------------------
Second Quarter Six Months
Ended June 30 Ended June 30
--------------- ---------------
(Millions) 2000 1999 2000 1999
---------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic...................................................... 542.1 532.3 543.7 534.1
Dilutive effect of stock options........................ 3.9 3.5 3.7 2.8
Dilutive effect of deferred compensation plan shares.... .1 .1 .1 .1
Dilutive effect of shares issued for participation
share awards......................................... .7 .4 .6 .4
----- ----- ----- -----
Diluted.................................................... 546.8 536.3 548.1 537.4
===== ===== ===== =====
</TABLE>
Options outstanding during the second quarter and six months ended
June 30, 2000 to purchase .6 million and .5 million shares of common stock,
respectively, 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.
<PAGE>
All options outstanding during the second quarter ended June 30, 1999 were
included in the computation of diluted EPS. Options outstanding during the
six months ended June 30, 1999 to purchase 2.9 million shares of common
stock 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 number of common shares outstanding as of June 30, 2000 and 1999 was
538.7 million and 532.6 million, respectively.
4. The following schedule details inventories by major class as of
June 30, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
JUNE 30, December 31,
(Millions of dollars) 2000 1999
----------------------- --------- -------------
<S> <C> <C>
At lower of cost on the First-In,
First-Out (FIFO) method or market:
Raw materials....................................... $ 359.5 $ 342.3
Work in process..................................... 188.5 171.2
Finished goods...................................... 833.4 713.4
Supplies and other.................................. 220.8 215.4
--------- ---------
1,602.2 1,442.3
Excess of FIFO cost over Last-In, First-Out (LIFO) cost (217.3) (202.4)
--------- ---------
Total............................................... $1,384.9 $1,239.9
========= =========
</TABLE>
5. The following schedule provides the detail of comprehensive income:
<TABLE>
<CAPTION>
Six Months Ended June 30
----------------------------
(Millions of dollars) 2000 1999
----------------------- ---- ----
<S> <C> <C>
Net Income............................................. $ 904.5 $ 765.7
Unrealized currency translation adjustments............ (106.6) (135.3)
-------- --------
Comprehensive income................................... $ 797.9 $ 630.4
======== ========
</TABLE>
6. The following schedule presents information concerning consolidated
operations by business segment:
<TABLE>
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
---------------------- ----------------------
(Millions of dollars) 2000 1999 2000 1999
----------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES:
Tissue........................... $1,784.1 $1,636.3 $3,578.0 $3,350.6
Personal Care.................... 1,360.8 1,297.5 2,659.1 2,498.7
Health Care and Other............ 333.4 221.0 639.7 438.6
Intersegment Sales............... (13.8) (6.2) (25.1) (14.1)
--------- --------- --------- ---------
Consolidated..................... $3,464.5 $3,148.6 $6,851.7 $6,273.8
========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
------------------ -----------------
(Millions of dollars) 2000 1999 2000 1999
----------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING PROFIT (reconciled to income before taxes):
Tissue.......................................... $ 320.3 $ 255.6 $ 625.6 $ 543.0
Personal Care................................... 279.9 266.6 549.4 501.1
Health Care and Other........................... 46.0 43.2 90.7 84.8
Other income (expense), net..................... 12.4 27.7 99.6 20.8
Unallocated Items - net......................... (20.3) (23.8) (48.3) (35.8)
--------- -------- --------- ---------
Total Operating Profit.......................... 638.3 569.3 1,317.0 1,113.9
Interest income.............................. 7.2 5.2 15.0 11.2
Interest expense............................. (54.0) (54.6) (103.4) (108.1)
--------- -------- --------- ---------
Income Before Income Taxes...................... $ 591.5 $ 519.9 $1,228.6 $1,017.0
========= ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
ASSETS:
Tissue...................................... $ 6,349.1 $ 6,096.6
Personal Care............................... 3,590.0 3,234.8
Health Care and Other(a).................... 2,618.3 1,679.0
Unallocated and intersegment assets(b)...... 1,348.1 1,805.1
--------- ---------
Consolidated................................ $13,905.5 $12,815.5
========= =========
</TABLE>
(a) Health Care and Other for June 30, 2000 includes the assets of Safeskin
Corporation ("Safeskin"). The acquisition of Safeskin was completed on
February 8, 2000 and was accounted for as a purchase.
(b) In June 2000, $220 million of notes receivable were transferred for cash
to a nonconsolidated special purpose entity in which the Corporation has a
minority voting interest. On March 31, 2000, the Corporation made an
additional investment in Hogla-Kimberly, Limited ("Hogla") to gain a
majority ownership. An approximate $58 million representing the
Corporation's investment in Hogla was therefore reclassified from
unallocated.
Description of Business Segments
The Tissue segment manufactures and markets facial and bathroom tissue,
paper towels, wipers and napkins 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 and swimpants; feminine and incontinence care
products; and related products.
The Health Care and Other segment manufactures and markets health care
products such as surgical gowns, drapes, infection control products,
sterilization wraps, disposable face masks and exam gloves, respiratory
products and other disposable medical products; specialty and technical
papers; and other products.
7. On July 27, 2000, the Corporation issued $300 million principal amount of
7.10 percent notes due August 1, 2007. Because of this issuance,
$300 million of commercial paper was classified as long-term debt at
June 30, 2000.
Unaudited
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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. In the fourth quarter of 1998, the Corporation announced a
facilities consolidation plan to, among other things, align tissue
manufacturing capacity with demand in Europe, close a diaper manufacturing
facility in Canada 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 second quarter and six months ended June 30, 2000
and 1999.
The accelerated depreciation adjustments and other less significant adjustments
related to these programs were charged to earnings in the following income
statement categories for the periods indicated:
<TABLE>
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
--------------- -----------------
(Millions of dollars) 2000 1999 2000 1999
--------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Cost of products sold................ $ 4.6 $ 5.8 $12.7 $24.3
General expense...................... 1.4 1.4 2.8 2.8
Restructuring........................ - (1.4) - 1.5
----- ------ ----- -----
Total charges................... $ 6.0 $ 5.8 $15.5 $28.6
===== ====== ===== =====
<PAGE>
Unusual Items
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 items summarized in the following table are considered to be
unusual items ("Unusual Items").
</TABLE>
<TABLE>
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
-------------- -------------
(Millions of dollars) 2000 1999 2000 1999
--------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Charges (credits) to operating profit:
Business Improvement and Other Programs............ $ 6.0 $ 5.8 $ 15.5 $28.6
Business integration and other costs............... 5.2 - 17.4 -
Patent settlement and accrued liability reversal.. - - (75.8) -
Mobile severance costs............................. - 9.0 - 9.0
Gain on disposal of assets......................... - (23.4) - (23.4)
----- ------ ------- ------
Total charges (credits)......................... $11.2 $(8.6) $(42.9) $14.2
===== ====== ======= ======
</TABLE>
- A description of the items included in Business Improvement and Other
Programs is provided above.
- As part of the integration of acquired businesses, Attisholz Holding AG
tissue brands ("Attisholz"), Ballard Medical Products ("Ballard") and
Safeskin Corporation ("Safeskin"), the Corporation recorded certain costs,
which were expensed as incurred, related to assimilating these operations.
It is estimated that an additional $10 million of costs related to these
activities will be incurred and expensed in 2000. In addition, in the
first quarter of 2000 certain non-productive assets related to the 1999
shut down of the Mobile, Ala. pulp mill were determined to have lower
salvage value than originally estimated. The write down to their revised
estimated market value was charged to cost of products sold.
- In the first quarter of 2000, as part of settlement of a patent dispute,
the Corporation was compensated for royalty income related to prior years.
This settlement was recorded as other income. Also, certain estimated
liabilities accrued in connection with a 1997 sale of a pulp and newsprint
business were reversed to other income in the first quarter of 2000 because
no claims had been made by the buyer and the accrual ceased to be required
under the terms of the sales agreement.
- In 1999, the Corporation recorded severance costs related to the sale of
its pulp and timberlands operation in the southeastern United States
("SET").
- In 1999, the Corporation recorded a gain on the sale of its pulp mill in
Miranda, Spain ("Miranda").
<TABLE>
<CAPTION>
Consolidated Income Statement Classification of Unusual Items:
-------------------------------------------------------------
Second Quarter Six Months
Ended June 30 Ended June 30
-------------- --------------
(Millions of dollars) 2000 1999 2000 1999
----------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Cost of products sold.......................... $ 4.7 $14.8 $ 19.0 $33.3
Advertising, promotion and selling expenses.... 1.0 - 3.5 -
General expense................................ 5.5 1.4 10.4 2.8
Restructuring.................................. - (1.4) - 1.5
Other (income) expense, net.................... - (23.4) (75.8) (23.4)
----- ------ ------- ------
Total pretax charge (credit)................... $11.2 $(8.6) $(42.9) $14.2
===== ====== ======= ======
</TABLE>
<PAGE>
The items displayed in the preceding table have been excluded from operating
profit in the "Excluding Unusual Items" columns in the following Consolidated
Operating Profit tables.
RESULTS OF OPERATIONS:
<TABLE>
<CAPTION>
SECOND QUARTER OF 2000 COMPARED WITH SECOND QUARTER OF 1999
By Business Segment
(Millions of dollars)
NET SALES 2000 1999
---------- ---- ----
<S> <C> <C>
Tissue................................... $1,784.1 $1,636.3
Personal Care............................ 1,360.8 1,297.5
Health Care and Other.................... 333.4 221.0
Intersegment Sales....................... (13.8) (6.2)
--------- ---------
Consolidated............................. $3,464.5 $3,148.6
======== ========
</TABLE>
<TABLE>
<CAPTION>
2000 1999
-------------------------- -----------------------
AS EXCLUDING As Excluding
OPERATING PROFIT REPORTED UNUSUAL ITEMS Reported Unusual Items
---------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Tissue...................... $320.3 $325.5 $255.6 $264.5
Personal Care............... 279.9 281.1 266.6 272.3
Health Care and Other....... 46.0 50.8 43.2 43.4
Other income (expense), net. 12.4 12.4 27.7 4.3
Unallocated items - net..... (20.3) (20.3) (23.8) (23.8)
------- ------- ------- -------
Consolidated................ $638.3 $649.5 $569.3 $560.7
======= ======= ======= =======
</TABLE>
Note: Unallocated items - net, consists of expenses not associated with
the business segments.
Commentary
Consolidated net sales for the quarter were 10.0 percent higher than in 1999.
Net sales would have increased approximately 11 percent if SET and Miranda,
which were closed or sold in 1999, were excluded. Sales volumes, excluding
the divestitures, were 12 percent higher, while selling prices increased 1
percent and changes in foreign currency exchange rates reduced net sales by
about 2 percent.
- Worldwide sales of tissue products rose 9.0 percent from the second
quarter of 1999. Excluding the revenues of the divested businesses,
however, net sales were up over 11 percent, driven by an increase in sales
volumes of approximately 12 percent and a 2 percent rise in selling prices,
partially offset by foreign currency exchange rate effects.
- Worldwide sales of personal care products were 4.9 percent greater than
in 1999, with increased sales volumes accounting for the entire gain.
- Worldwide sales of health care and other products rose 50.9 percent,
primarily due to the acquisitions of Ballard and Safeskin along with solid
growth in sales volumes of the Corporation's base business.
<PAGE>
Excluding the Unusual Items, operating profit rose 15.8 percent to
$649.5 million in the second quarter of 2000 compared with $560.7 million in
1999, with improvement in each business segment. The increase was achieved
despite significantly higher raw materials costs worldwide, mainly for fiber
used in the Corporation's tissue business. Operating profit as a percentage of
sales increased from 17.8 percent in 1999 to 18.7 percent in 2000.
- The increase in operating profit for the worldwide tissue segment was
primarily due to the increased sales volumes and manufacturing cost benefits
which combined to more than offset significantly higher raw materials costs,
principally fiber costs.
- The increase in operating profit for the worldwide personal care segment
was primarily due to the higher sales volumes and selling price increases
that together more than offset higher raw materials costs.
- The increase in operating profit for the health care and other segment
was principally due to the higher sales volumes related to the Ballard and
Safeskin acquisitions, reduced by higher goodwill amortization.
<TABLE>
<CAPTION>
By Geography
(Millions of dollars)
NET SALES 2000 1999
--------- -------- --------
<S> <C> <C>
North America................. $2,343.3 $2,138.1
Outside North America......... 1,224.8 1,102.1
Intergeographic Sales......... (103.6) (91.6)
--------- ---------
Consolidated.................. $3,464.5 $3,148.6
======== ========
</TABLE>
<TABLE>
<CAPTION>
2000 1999
----------------------- ------------------------
AS EXCLUDING As Excluding
OPERATING PROFIT REPORTED UNUSUAL ITEMS Reported Unusual Items
---------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
North America................. $546.5 $553.9 $470.5 $480.6
Outside North America......... 99.7 103.5 94.9 99.6
Other income (expense), net... 12.4 12.4 27.7 4.3
Unallocated items - net....... (20.3) (20.3) (23.8) (23.8)
------- ------- ------- -------
Consolidated.................. $638.3 $649.5 $569.3 $560.7
====== ====== ====== ======
</TABLE>
Note: Unallocated items - net, consists of expenses not associated with the
geographic areas.
Commentary:
- Excluding the revenue of SET, net sales in North America increased
11 percent primarily due to higher sales volumes in the tissue, and health
care and other segments.
- Net sales outside of North America increased primarily due to higher sales
volumes which more than offset unfavorable currency effects principally
in Europe. The increased sales volume was due to the Attisholz acquisition
and the consolidation of Hogla-Kimberly, Limited ("Hogla") beginning with
the second quarter 2000. The Corporation made an additional investment in
Hogla on March 31, 2000 to gain a majority ownership.
<PAGE>
- Excluding the Unusual Items in both years, operating profit in North America
increased due to higher sales volume and manufacturing cost benefits for
tissue products, the higher sales volumes for health care products and lower
fringe benefit costs, primarily due to favorable returns on pension assets,
which combined to more than offset higher raw materials cost, principally
for fiber, and lower diaper sales volumes.
- Excluding the Unusual Items in both years, operating profit outside North
America increased due to higher sales volumes, including Hogla and
Attisholz, partially offset by higher fiber costs.
- Excluding the Unusual Items in 1999, other income (expense), net increased
primarily due to favorable foreign currency effects.
Additional Income Statement Commentary:
- Excluding the Unusual Items in both years, the effective tax rate was
31.0 percent in the second quarter of 2000 compared with 32.0 percent in
1999. The lower effective tax rate was primarily due to tax initiatives and
incentives.
- The Corporation's share of net income of equity companies was $41.1 million
in 2000 compared with $46.9 million in 1999. The decrease was primarily
attributable to lower earnings at Kimberly-Clark de Mexico, S.A. de C.V.
("KCM"). Although KCM posted double-digit gains in sales and operating
profit before currency effects, its strong operating performance was more
than offset by changes in the value of the Mexican peso.
- On a diluted share basis, net income was $.79 per share in 2000 compared
to $.73 per share in 1999, an increase of 8.2 percent. Excluding the Unusual
Items, earnings from operations were $.81 per share compared to $.72 per
share in 1999, an increase of 12.5 percent.
<TABLE>
<CAPTION>
FIRST SIX MONTHS OF 2000 COMPARED WITH FIRST SIX MONTHS OF 1999
By Business Segment
(Millions of dollars)
NET SALES 2000 1999
--------- -------- --------
<S> <C> <C>
Tissue..................... $3,578.0 $3,350.6
Personal Care.............. 2,659.1 2,498.7
Health Care and Other...... 639.7 438.6
Intersegment Sales......... (25.1) (14.1)
--------- ---------
Consolidated............... $6,851.7 $6,273.8
======== ========
</TABLE>
<TABLE>
<CAPTION>
2000 1999
----------------------- ------------------------
AS EXCLUDING As Excluding
OPERATING PROFIT REPORTED UNUSUAL ITEMS Reported Unusual Items
----------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Tissue...................... $ 625.6 $ 644.1 $ 543.0 $ 564.7
Personal Care............... 549.4 553.4 501.1 516.1
Health Care and Other....... 90.7 101.1 84.8 85.9
Other income (expense), net. 99.6 23.8 20.8 (2.6)
Unallocated items - net..... (48.3) (48.3) (35.8) (36.0)
-------- -------- -------- --------
Consolidated................ $1,317.0 $1,274.1 $1,113.9 $1,128.1
======== ======== ======== ========
</TABLE>
Note: Unallocated items - net, consists of expenses not associated with the
business segments.
<PAGE>
Commentary
Consolidated net sales for the first six months of 2000 were 9.2 percent higher
than in 1999. However, excluding the net sales of the divested businesses,
net sales were about 11 percent higher, primarily due to increased sales
volumes.
- Worldwide sales of tissue products rose 6.8 percent from last year.
Excluding the divested businesses, net sales were over 9 percent higher.
Increased sales volumes more than offset the unfavorable effect of currency
rate changes, primarily in Europe.
- Worldwide sales of personal care products increased 6.4 percent over 1999,
with all of the gain due to higher sales volumes outside North America.
- Worldwide sales of health care and other products increased due to the
Ballard and Safeskin acquisitions and growth in sales volumes of the
Corporation's base business.
Excluding the Unusual Items, operating profit was 12.9 percent higher than in
1999, with gains in each business segment. Operating profit as a percentage
of sales increased from 18.0 percent in 1999 to 18.6 percent in 2000.
- The increase in operating profit for the worldwide tissue segment was
primarily due to the sales volume increase that more than offset higher
fiber costs.
- The increase in operating profit for worldwide personal care products was
due to the higher sales volumes and selling price increases, and
manufacturing cost improvements that combined to offset higher raw material
costs.
- The increase in operating profit for health care and other products was
principally because of the higher sales related to the Ballard and Safeskin
acquisitions reduced by higher goodwill amortization.
<TABLE>
<CAPTION>
By Geography
(Millions of dollars)
NET SALES 2000 1999
--------- -------- --------
<S> <C> <C>
North America.............. $4,602.7 $4,230.3
Outside North America...... 2,439.4 2,214.0
Intergeographic Sales...... (190.4) (170.5)
--------- ---------
Consolidated............... $6,851.7 $6,273.8
======== ========
</TABLE>
<TABLE>
<CAPTION>
2000 1999
----------------------- ------------------------
AS EXCLUDING As Excluding
OPERATING PROFIT REPORTED UNUSUAL ITEMS Reported Unusual Items
----------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
North America............... $1,062.5 $1,086.4 $ 939.2 $ 965.5
Outside North America....... 203.2 212.2 189.7 201.2
Other income (expense), net. 99.6 23.8 20.8 (2.6)
Unallocated items - net..... (48.3) (48.3) (35.8) (36.0)
--------- --------- --------- ---------
Consolidated................ $1,317.0 $1,274.1 $1,113.9 $1,128.1
======== ======== ======== ========
</TABLE>
Note: Unallocated items - net, consists of expenses not associated with the
geographic areas.
<PAGE>
Commentary:
- Excluding the revenues of SET, net sales in North America increased over
10 percent, primarily due to higher sales volumes in the tissue, and health
care and other segments.
- Net sales outside of North America increased primarily due to higher sales
volumes that more than offset the unfavorable effect of currency exchange
rates, principally in Europe.
- Excluding the Unusual Items in both years, operating profit in North
America increased due to higher sales volumes and manufacturing cost
benefits for tissue products, the higher sales volumes for health care
products and lower fringe benefit costs, primarily due to favorable returns
on pension assets, which combined to more than offset higher raw materials
cost, principally for fiber.
- Excluding the Unusual Items in both years, operating profit outside North
America increased because higher sales volumes and selling prices combined
to more than offset higher fiber costs.
- Excluding the Unusual Items in both years, other income (expense), net
increased primarily due to favorable foreign currency effects in 2000
compared to unfavorable effects in 1999.
Additional Income Statement Commentary:
- The decrease in interest expense is primarily due to a lower average debt
level.
- Excluding the Unusual Items in both years, the effective tax rate was
31.0 percent compared with 32.2 percent in 1999. The lower effective tax
rate was primarily due to tax initiatives and incentives.
- The Corporation's share of net income of equity companies declined
2.0 percent from 1999. Increased earnings in Mexico and Australia were more
than offset by lower income from Brazil and the consolidation of Hogla in
2000. In 1999, there was a gain of approximately $5 million at Klabin
Kimberly S.A. related to the devaluation of the Brazilian real.
- On a diluted share basis, net income was $1.65 per share in 2000 compared
to $1.42 per share in 1999, an increase of 16.2 percent. Excluding the
Unusual Items, earnings from operations were $1.60 compared to $1.44 per
share in 1999, an increase of 11.1 percent.
LIQUIDITY AND CAPITAL RESOURCES
- Cash provided by operations in the first six months of 2000 increased by
nearly $137 million compared to the first six months of 1999 because of the
higher level of net income plus net noncash charges included in net income,
partially offset by an increased investment in working capital.
- During the first six months of 2000, the Corporation repurchased 14 million
shares of its common stock for $764 million, including 6.5 million
repurchased in the second quarter for $377 million.
- At June 30, 2000, total debt was $3.2 billion compared with $2.7 billion
at December 31, 1999. Net debt (total debt net of cash and cash
equivalents) was $2.9 billion in 2000 compared with $2.2 billion, that was
also net of $220 million of notes receivable, at December 31, 1999. In
June 2000, the $220 million of notes receivable were transferred for cash
to a nonconsolidated special purpose entity in which the Corporation has a
minority voting interest. The transfer resulted in no gain or loss. The
Corporation's ratio of net debt to capital was 33.2 percent at June 30,
2000, which is within the target range of 30 percent to 40 percent.
<PAGE>
- On July 27, 2000, the Corporation issued $300 million principal amount
of 7.10 percent notes due August 1, 2007. Because of this issuance,
$300 million of commercial paper was classified as long-term debt at
June 30, 2000.
- 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 30, 2000, the Corporation completed the acquisition of the majority
shares of S-K Corporation of Taiwan. The Corporation now owns more than
99 percent of S-K Corporation, which holds trademark and distribution rights
in Taiwan for such Kimberly-Clark global brands as Kleenex, Huggies and
Kotex.
- In July 2000, the Corporation undertook a plan to consolidate its existing
14 European administrative offices into one centralized office. Each
administrative office will move certain functions to the centralized office
in conjunction with the country specific implementation of a new
computerized processing system. This project is expected to result in a
net reduction of approximately 165 employees and annual net cost savings of
approximately $5 million, when fully implemented in the fourth quarter of
2003. The costs of implementing this project, which will be recorded as
they become accruable, are expected to aggregate approximately $26 million.
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, financial condition or results of operations.
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,
anticipated financial and operating results, strategies, contingencies and
contemplated transactions of the Corporation, including, but not limited to,
the adequacy of the business improvement and other plans announced in 1997 and
1998. These forward-looking statements 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 their effects on
the Corporation 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 for the year
ended December 31, 1999 entitled "Factors That May Affect Future Results."
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
With respect to the away-from-home tissue products antitrust litigation
described in Item 3. Legal Proceedings contained in the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1999, the States of
Maryland, West Virginia and New York and the private plaintiffs in Minnesota
agreed in June 2000 to dismiss their respective complaints with prejudice
pursuant to settlements with defendants.
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
Annual Report on Form 10-K for the year ended December 31, 1999.
(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.
(b) Reports on Form 8-K
The Corporation filed a Current Report on Form 8-K, dated July 25,
2000, to report its 2000 second quarter earnings.
<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 10, 2000
