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 MARCH 31, 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 MAY 5, 2000, THERE WERE 542,548,245 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
Ended March 31
-------------------
(Millions of dollars except per share amounts) 2000 1999
- ---------------------------------------------------- ---- ----
<S> <C> <C>
NET SALES................................................ $3,387.2 $3,125.2
Cost of products sold................................. 1,980.9 1,851.9
-------- --------
GROSS PROFIT............................................. 1,406.3 1,273.3
Advertising, promotion and selling expenses........... 552.2 507.2
Research expense...................................... 61.2 54.8
General expense....................................... 183.1 150.1
Goodwill amortization................................. 18.3 6.8
Restructuring......................................... - 2.9
Other (income) expense, net........................... (87.2) 6.9
-------- --------
OPERATING PROFIT......................................... 678.7 544.6
Interest income....................................... 7.8 6.0
Interest expense...................................... (49.4) (53.5)
-------- --------
INCOME BEFORE INCOME TAXES............................... 637.1 497.1
Provision for income taxes............................ 202.2 161.2
-------- --------
INCOME BEFORE EQUITY INTERESTS........................... 434.9 335.9
Share of net income of equity companies............... 47.6 43.6
Minority owners' share of subsidiaries' net income.... (12.3) (4.9)
-------- --------
NET INCOME............................................... $470.2 $374.6
======== ========
PER SHARE BASIS:
NET INCOME
Basic.............................................. $.86 $.70
========= =========
Diluted............................................ $.86 $.69
========= =========
CASH DIVIDENDS DECLARED............................... $.27 $.26
========= =========
</TABLE>
Unaudited
See Notes to Consolidated Financial Statements.
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
MARCH 31, December 31,
(Millions of dollars) 2000 1999
- ----------------------- ---- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................... $212.9 $322.8
Accounts receivable................................. 1,648.1 1,600.6
Inventories......................................... 1,336.7 1,239.9
Other current assets................................ 388.7 398.5
--------- ---------
TOTAL CURRENT ASSETS.............................. 3,586.4 3,561.8
PROPERTY............................................... 11,473.4 11,080.8
Less accumulated depreciation....................... 5,011.9 4,858.8
--------- ---------
NET PROPERTY...................................... 6,461.5 6,222.0
INVESTMENTS IN EQUITY COMPANIES........................ 821.3 863.1
GOODWILL, NET OF ACCUMULATED AMORTIZATION.............. 1,963.7 1,246.1
OTHER ASSETS........................................... 955.1 922.5
--------- ---------
$13,788.0 $12,815.5
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Debt payable within one year........................ $989.1 $782.4
Accounts payable.................................... 1,078.3 1,025.7
Accrued expenses.................................... 1,237.8 1,312.1
Other current liabilities........................... 761.1 725.6
--------- ---------
TOTAL CURRENT LIABILITIES......................... 4,066.3 3,845.8
LONG-TERM DEBT......................................... 1,950.0 1,926.6
NONCURRENT EMPLOYEE BENEFIT AND OTHER OBLIGATIONS...... 862.1 868.5
DEFERRED INCOME TAXES.................................. 864.1 836.9
MINORITY OWNERS' INTERESTS IN SUBSIDIARIES............. 302.3 244.6
STOCKHOLDERS' EQUITY................................... 5,743.2 5,093.1
--------- ---------
$13,788.0 $12,815.5
========= =========
</TABLE>
Unaudited
See Notes to Consolidated Financial Statements.
<PAGE>
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months
Ended March 31
-------------------
(Millions of dollars) 2000 1999
- ----------------------- ---- ----
<S> <C> <C>
OPERATIONS
Net income.............................................. $470.2 $374.6
Depreciation............................................ 153.1 148.0
Goodwill amortization................................... 18.3 6.8
Changes in operating working capital.................... (62.6) (104.3)
Pension funding in excess of expense.................... (18.8) (7.5)
Other................................................... 22.0 14.7
------- ------
CASH PROVIDED BY OPERATIONS........................... 582.2 432.3
------- ------
INVESTING
Capital spending........................................ (235.5) (168.6)
Acquisitions of businesses, net of cash acquired........ 7.3 -
Disposals of property and businesses.................... 1.0 18.5
Proceeds from investments............................... 32.3 -
Other................................................... (26.5) (57.7)
------- ------
CASH USED FOR INVESTING............................... (221.4) (207.8)
------- ------
FINANCING
Cash dividends paid..................................... (141.0) (135.5)
Changes in debt payable within one year................. 176.5 194.7
Increases in long-term debt............................. 23.5 21.2
Decreases in long-term debt............................. (145.3) (18.2)
Proceeds from exercise of stock options................. 10.1 6.0
Acquisitions of common stock for the treasury........... (387.4) (339.9)
Other................................................... (7.1) 8.3
------- ------
CASH USED FOR FINANCING............................... (470.7) (263.4)
------- ------
DECREASE IN CASH AND CASH EQUIVALENTS...................... $(109.9) $(38.9)
======= ======
</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. Certain of these programs affect the
financial statements for the first quarter ended March 31, 2000 and 1999 as
follows:
- 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 first quarter of 2000 and
1999.
- In the fourth quarter of 1997, the Corporation announced a plan to
restructure its worldwide operations. Certain assets that were 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 2000 and 1999.
The accelerated depreciation adjustments and other less significant
adjustments related to the described plans were charged to earnings in
the following income statement categories for the periods indicated:
<TABLE>
<CAPTION>
First Quarter
Ended March 31
-------------------
(Millions of dollars) 2000 1999
- ----------------------- ---- ----
<S> <C> <C>
Cost of products sold...................................... $8.1 $18.5
General expense............................................ 1.4 1.4
Restructuring.............................................. - 2.9
----- -----
Total charges........................................... $9.5 $22.8
==== =====
</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:
<PAGE>
<TABLE>
<CAPTION>
Average Common Shares
Outstanding for the
Three Months Ended March 31
-----------------------------
(Millions) 2000 1999
- ---------- -----------------------------
<S> <C> <C>
Basic...................................................... 545.3 535.9
Dilutive effect of stock options........................ 3.7 2.4
Dilutive effect of deferred compensation plan shares.... .1 .1
Dilutive effect of shares issued for
participation share awards.............................. .8 .7
----- -----
Diluted.................................................... 549.9 539.1
===== =====
</TABLE>
Options outstanding at March 31, 2000 to purchase .7 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.
There were 8.7 million options to purchase common stock outstanding at
March 31, 1999 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 at March 31, 2000 and 1999 was
544.1 million and 531.8 million, respectively.
4. The following schedule details inventories by major class as of
March 31, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
MARCH 31, 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................................ $346.7 $342.3
Work in process.............................. 166.1 171.2
Finished goods............................... 810.2 713.4
Supplies and other........................... 213.4 215.4
------- --------
1,536.4 1,442.3
Excess of FIFO cost over Last-In,
First-Out (LIFO) cost.......................... (199.7) (202.4)
-------- --------
Total........................................ $1,336.7 $1,239.9
======== ========
</TABLE>
5. The following schedule provides the detail of comprehensive income:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
(Millions of dollars) 2000 1999
- ----------------------- ---- ----
<S> <C> <C>
Net income................................................. $470.2 $374.6
Unrealized currency translation adjustments................ (42.3) (111.1)
------ ------
Comprehensive income....................................... $427.9 $263.5
====== ======
</TABLE>
<PAGE>
6. The following schedule presents information concerning consolidated
operations by business segment:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
(Millions of dollars) 2000 1999
- ----------------------- ---- ----
<S> <C> <C>
NET SALES
Tissue................................................ $1,793.9 $1,714.3
Personal Care......................................... 1,298.3 1,201.2
Health Care and Other................................. 306.3 217.6
Intersegment sales.................................... (11.3) (7.9)
--------- ---------
Consolidated.......................................... $3,387.2 $3,125.2
========= =========
OPERATING PROFIT (reconciled to income before income taxes):
Tissue................................................ $305.3 $287.4
Personal Care......................................... 269.5 234.5
Health Care and Other................................. 44.7 41.6
Other income (expense), net........................... 87.2 (6.9)
Unallocated items - net............................... (28.0) (12.0)
--------- ---------
Total Operating Profit................................ 678.7 544.6
Interest income.................................... 7.8 6.0
Interest expense................................... (49.4) (53.5)
--------- ---------
Income Before Income Taxes............................ $637.1 $497.1
========= =========
MARCH 31, December 31,
2000 1999
--------- ------------
ASSETS:
Tissue.............................................. $6,153.9 $6,096.6
Personal Care....................................... 3,401.9 3,234.8
Health Care and Other(a)............................ 2,637.6 1,679.0
Unallocated and intersegment assets................. 1,594.6 1,805.1
--------- ---------
Consolidated........................................ $13,788.0 $12,815.5
========= =========
</TABLE>
(a) Health Care and Other for March 31, 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.
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.
Unuaudited
<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. Certain of these programs affect the financial statements for
the first quarter ended March 31, 2000 and 1999 as follows:
- - 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 first quarter of 2000 and 1999.
- - In the fourth quarter of 1997, the Corporation announced a plan to
restructure its worldwide operations. Certain assets that were 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 2000 and 1999.
The accelerated depreciation adjustments and other less significant
adjustments related to these plans were charged to earnings in the following
income statement categories for the periods indicated:
<TABLE>
<CAPTION>
First Quarter
Ended March 31
----------------
(Millions of dollars) 2000 1999
- ----------------------- ---- ----
<S> <C> <C>
Cost of products sold...................................... $8.1 $18.5
General expense............................................ 1.4 1.4
Restructuring.............................................. - 2.9
---- -----
Total charges........................................... $9.5 $22.8
==== =====
</TABLE>
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>
<CAPTION>
First Quarter
Ended March 31
----------------
(Millions of dollars) 2000 1999
- ----------------------- ---- ----
<S> <C> <C>
Charges (credits) to operating profit:
Business Improvement and Other Programs................ $9.5 $22.8
Business integration and other costs................... 12.2 -
Patent settlement and accrued liability reversal....... (75.8) -
------ ----
Total charges (credits).............................. $(54.1) $22.8
====== =====
</TABLE>
<PAGE>
- - 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, 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 $15 million of costs related to these activities will be incurred
and expensed in 2000. In addition, 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.
- - 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 2000, the Unusual Items are included in operating profit as follows: cost
of products sold -$14.3 million; advertising, promotion and selling expenses
- -$2.5 million; general expense -$4.9 million; and other (income) expense, net
- -$(75.8) million.
In 1999, the Unusual Items are included in operating profit as follows: cost
of products sold -$18.5 million; general expense -$1.4 million; and
restructuring -$2.9 million.
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>
FIRST QUARTER OF 2000 COMPARED WITH FIRST QUARTER OF 1999
By Business Segment
(Millions of dollars)
NET SALES 2000 1999
- ---------- ---- ----
<S> <C> <C>
Tissue................................................. $1,793.9 $1,714.3
Personal Care.......................................... 1,298.3 1,201.2
Health Care and Other.................................. 306.3 217.6
Intersegment sales..................................... (11.3) (7.9)
-------- --------
Consolidated........................................... $3,387.2 $3,125.2
======== ========
</TABLE>
<TABLE>
<CAPTION>
2000 1999
---------------------- ----------------------
AS EXCLUDING As Excluding
OPERATING PROFIT REPORTED UNUSUAL ITEMS Reported Unusual Items
- ---------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Tissue.......................... $305.3 $318.6 $287.4 $300.2
Personal Care................... 269.5 272.3 234.5 243.8
Health Care and Other........... 44.7 50.3 41.6 42.5
Other income (expense), net..... 87.2 11.4 (6.9) (6.9)
Unallocated items - net......... (28.0) (28.0) (12.0) (12.2)
------ ------ ------ ------
Consolidated.................... $678.7 $624.6 $544.6 $567.4
====== ====== ====== ======
</TABLE>
Note: Unallocated items - net, consists of expenses not associated with the
business segments.
<PAGE>
Commentary:
Consolidated net sales for the quarter were 8.4 percent higher than in 1999.
Net sales would have increased approximately 10 percent if the revenue of the
Corporation's pulp and timberlands operations in the southeastern United States
("SET") and pulp operations in Spain, which were sold or closed in 1999, were
excluded. Sales volumes, excluding the divestitures, were 12 percent higher,
while changes in foreign currency exchange rates reduced net sales by about
2 percent.
- - Worldwide sales of tissue products rose 4.6 percent from the first quarter
of 1999. Excluding the revenue of divested businesses, however, sales were
up nearly 8 percent, driven by an increase in sales volumes of approximately
10 percent.
- - Worldwide sales of personal care products were 8.1 percent greater than in
1999, with increased sales volumes accounting for the entire gain.
- - Worldwide sales of health care and other products rose 40.8 percent, due to
the acquisitions of Ballard and Safeskin along with solid growth in sales
volumes of the Corporation's base business.
Excluding the Unusual Items, operating profit for the first quarter of 2000 was
$624.6 million compared with $567.4 million in the first quarter of 1999.
Excluding the Unusual Items from both years, first quarter operating profit was
10.1 percent higher in 2000, and operating profit as a percentage of sales
increased from 18.2 percent in 1999 to 18.4 percent in 2000.
- - The increase in operating profit for the worldwide tissue segment was
primarily due to the increased sales volume 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 productivity gains that more
than offset increased marketing expenses.
- - The increase in operating profit for the health care and other segment was
principally due to the higher sales volume related to the Ballard and
Safeskin acquisitions.
By Geography
(Millions of dollars)
<TABLE>
<CAPTION>
NET SALES 2000 1999
- ---------- ---- ----
<S> <C> <C>
North America............................................ $2,259.4 $2,092.2
Outside North America.................................... 1,214.6 1,111.9
Intergeographic sales.................................... (86.8) (78.9)
-------- --------
Consolidated............................................. $3,387.2 $3,125.2
======== ========
</TABLE>
<TABLE>
<CAPTION>
2000 1999
---------------------- ----------------------
AS EXCLUDING As Excluding
OPERATING PROFIT REPORTED UNUSUAL ITEMS Reported Unusual Items
- ---------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
North America.................... $516.0 $532.5 $468.7 $484.9
Outside North America............ 103.5 108.7 94.8 101.6
Other income (expense), net...... 87.2 11.4 (6.9) (6.9)
Unallocated items - net.......... (28.0) (28.0) (12.0) (12.2)
------ ------ ------ ------
Consolidated..................... $678.7 $624.6 $544.6 $567.4
====== ====== ====== ======
</TABLE>
Note: Unallocated items - net, consists of expenses not associated with the
geographic areas.
<PAGE>
Commentary:
- - Excluding the revenue of SET, net sales in North America increased 10
percent due to the higher sales volumes in each business segment.
- - 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 nearly 10 percent due to the increased sales volumes and
manufacturing cost benefits, which combined to offset the significantly
higher costs of raw materials and higher marketing expenses.
- - Excluding the Unusual Items in both years, operating profit outside North
America increased 7 percent due to the higher sales volumes and cost savings
programs, which combined to more than offset the higher raw materials costs,
higher marketing expenses and the unfavorable effect of currency exchange
rates in Europe.
Additional Income Statement Commentary:
- - Interest expense decreased primarily due to a lower average debt level.
- - Excluding the Unusual Items in both years, the effective tax rate was
31.0 percent in the first quarter 2000 compared to 32.4 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 increased 9.2
percent from 1999. This increase was primarily attributable to higher
earnings of Kimberly-Clark de Mexico, S.A. de C.V. that benefited from
strong double-digit sales growth, driven primarily by higher selling prices
and continued excellent margins. In 1999, there was a gain of approximately
$5 million at Klabin Kimberly S.A. related to the devaluation of the
Brazilian real.
- - Diluted net income was $.86 per share in 2000 compared to $.69 in 1999, an
increase of 24.6 percent. Excluding the Unusual Items, earnings from
operations were $.80 per share compared to $.72 per share in 1999, an
increase of 11.1 percent.
LIQUIDITY AND CAPITAL RESOURCES:
- - Cash provided by operations in the first quarter of 2000 increased by nearly
$150 million compared with the first quarter of 1999. This increase was due
to a higher level of net income plus net noncash items included in net
income combined with a reduced investment in working capital.
- - During the first quarter of 2000, the Corporation repurchased 7.5 million
shares of its common stock at a cost of $387 million.
- - At March 31, 2000, total debt was $2.9 billion compared with $2.7 billion at
December 31, 1999. Net debt (total debt net of cash, cash equivalents and
$220 million of long-term notes receivable) was $2.5 billion compared with
$2.2 billion at December 31, 1999. The Corporation's ratio of net debt to
capital was 29.3 percent at March 31, 2000, which is below the target range
of 30 percent to 40 percent.
<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 February 8, 2000, the Corporation completed the acquisition of Safeskin
at a cost of approximately $750 million, including the value of common stock
exchanged and other costs of the transaction. This acquisition has been
accounted for as a purchase.
- - On March 31, 2000, the Corporation acquired an additional .2 percent of the
common stock of Hogla-Kimberly Limited, increasing its ownership to 50.1
percent. This subsidiary's balance sheet is included in the Corporation's
consolidated balance sheet at March 31, 2000 and its income statement will
be consolidated beginning with April 2000.
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
On April 14, 2000, a complaint was filed by Anne Meader and others against
Kimberly-Clark Tissue Company (formerly known as Scott Paper Company) ("KCTC")
in Maine Superior Court. Eighteen plaintiffs allege that hazardous and toxic
substances disposed of at the Central Maine Disposal Landfill in Fairfield,
Maine from two former KCTC mills resulted in releases to the environment
causing severe diseases and death.
On February 8, 2000, the Corporation completed the acquisition of Safeskin
Corporation ("Safeskin"). As of March 31, 2000, approximately 234 product
liability lawsuits seeking monetary damages, in most cases of an unspecified
amount, were pending in federal and state courts against Safeskin and other
manufacturers of latex gloves. These lawsuits allege injuries ranging from
dermatitis to severe allergic reactions caused by the residual chemicals or
latex proteins in gloves worn by medical workers while performing their duties.
Safeskin has referred the defense of these lawsuits to its insurance carriers.
Also, since March 11, 1999, numerous lawsuits (collectively the "Securities
Actions") have been filed in the U.S. District Court for the Southern District
of California against Safeskin and certain of its officers and directors
alleging violations of Sections 10(b) and 20(a) of the Securities and Exchange
Act of 1934, and Rule 10b-5 promulgated thereunder. The Securities Actions
were brought by plaintiffs in their individual capacities and on behalf of a
purported class of persons who purchased or otherwise acquired Safeskin
publicly traded securities during various periods occurring prior to the
Corporation's acquisition of Safeskin. The suits allege that plaintiffs
purchased Safeskin securities at prices artificially inflated by defendants'
misrepresentations and omissions concerning Safeskin's financial condition and
prospects and seek an unspecified amount of damages. Defendants' motion to
dismiss is pending before the court.
In addition, a shareholder derivative action has been filed against certain of
Safeskin's directors, and Safeskin as a nominal defendant, in the Supreme
Court of the State of California, San Diego County (the "Derivative Action").
The Derivative Action alleges breach of fiduciary duty, waste of corporate
assets and gross negligence in connection with Safeskin's stock repurchase
program and seeks an unspecified amount of damages. On October 27, 1999, the
director defendants submitted their answer. The court has stayed discovery in
the Derivative Action so that it can be coordinated with discovery in the
Securities Actions.
The Corporation intends to contest the foregoing claims vigorously and, in
management's opinion, they are not, individually or in the aggregate, expected
to have a material adverse effect on the Corporation's business, financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 2000 Annual Meeting of Stockholders was convened at 11:00 a.m. on
Thursday, April 13, 2000, at the Corporation's World Headquarters, 351 Phelps
Drive, Irving, Texas. Represented at the meeting in person or by proxy were
506,373,823 shares of common stock or 91.8% of all shares of common stock
outstanding.
The following directors were elected to three-year terms expiring in 2003:
Thomas J. Falk, William O. Fifield, Wayne R. Sanders, Wolfgang R. Schmitt and
Randall L. Tobias. Of the shares represented at the meeting, at least 96.9%
voted for each nominee, and 2.5% withheld authority to vote.
<PAGE>
The Corporation's other directors are John F. Bergstrom, Paul J. Collins,
Robert W. Decherd, Pastora San Juan Cafferty, Claudio X. Gonzalez,
Louis E. Levy, Frank A.McPherson, Linda Johnson Rice.
In addition to the election of directors, the stockholders approved the
selection of Deloitte & Touche LLP as the independent auditors for the
Corporation. Of the shares represented at the meeting, 99.3% voted for such
selection, .4% voted against and .3% abstained or did not vote.
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.
<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)
May 10, 2000
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