FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
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)
Registrant's telephone number, including area code: (972) 281-1200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ----------------------------------- -----------------------------------------
Common Stock - $1.25 Par Value New York Stock Exchange
Preferred Stock Purchase Rights Chicago Stock Exchange
Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 .
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X . No .
------ ------
The aggregate market value of the registrant's common stock held by
non-affiliates on June 30, 2002 (based on the closing stock price on the New
York Stock Exchange) on such date was approximately $32.1 billion.
(Continued)
FACING SHEET
(Continued)
Documents Incorporated By Reference
Kimberly-Clark Corporation's 2002 Annual Report to Stockholders and 2003 Proxy
Statement contain much of the information required in this Form 10-K, and
portions of those documents are incorporated by reference herein from the
applicable sections thereof. The following table identifies the sections of this
Form 10-K which incorporate by reference portions of the Corporation's 2002
Annual Report to Stockholders and 2003 Proxy Statement. The Items of this Form
10-K, where applicable, specify which portions of such documents are
incorporated by reference. The portions of such documents that are not
incorporated by reference shall not be deemed to be filed with the Commission as
part of this Form 10-K.
Document of Which Portions Items of this Form 10-K
are Incorporated by Reference in Which Incorporated
- ---------------------------------- -------------------------------
2002 Annual Report to Stockholders Part I
(Year ended December 31, 2002) Item 1. Business
Part II
Item 5. Market for the
Registrant's Common Stock
and Related Stockholder
Matters
Item 7. Management's
Discussion and Analysis of
Financial Condition and
Results of Operations
Item 7A. Quantitative and
Qualitative Disclosures
About Market Risk
Item 8. Financial Statements
and Supplementary Data
Part IV
Item 15. Exhibits,
Financial Statement
Schedules and Reports on
Form 8-K
2003 Proxy Statement Part III
Item 10. Directors and
Executive Officers of the
Registrant
Item 11. Executive
Compensation
Item 12. Security Ownership
of Certain Beneficial
Owners and Management and
Related Stockholder Matters
Item 13. Certain
Relationships and
Related Transactions
PART I
- --------------------------------------------------------------------------------
ITEM 1. BUSINESS
Kimberly-Clark Corporation was incorporated in Delaware in 1928. As used in
Items 1, 2 and 7 of this Form 10-K, the term "Corporation" refers to
Kimberly-Clark Corporation and its consolidated subsidiaries. In the remainder
of this Form 10-K, the terms "Kimberly-Clark" or "Corporation" refer only to
Kimberly-Clark Corporation. Financial information by business segment and
geographic area, and information about principal products and markets of the
Corporation, contained under the caption "Management's Discussion and Analysis"
and in Note 16 to the Consolidated Financial Statements contained in the 2002
Annual Report to Stockholders, are incorporated in this Item 1 by reference.
Recent Developments. The Corporation is a global consumer products company based
on the strategy of building its personal care, consumer tissue and
business-to-business operations. Since 1998, the Corporation has completed about
20 acquisitions, each of which was accounted for as a purchase, in its core
businesses and approximately 5 strategic divestitures, including the following
transactions:
o On May 28, 1998, the Corporation purchased a 50 percent equity interest in
Klabin Tissue S.A. (now known as Klabin Kimberly S.A.), the leading tissue
manufacturer in Brazil.
o On July 21, 1998, the Corporation purchased an additional 10 percent
ownership interest in its Korean affiliate, YuHan-Kimberly, Limited,
increasing its ownership interest to 70 percent.
o On August 19, 1998, the Corporation sold the outstanding shares of K-C
Aviation Inc., a leading provider of business aviation services, to
Gulfstream Aerospace Corporation for $250 million in cash.
o On June 10, 1999, the Corporation purchased the European consumer and
away-from-home tissue businesses of Attisholz Holding AG for approximately
$365 million. The acquired businesses are located in Germany, Switzerland
and Austria.
o On September 23, 1999, the Corporation acquired Ballard Medical Products, a
leading maker of disposable medical devices for respiratory care,
gastroenterology and cardiology, at a cost of approximately $788 million,
including the value of common stock exchanged and other costs of the
transaction.
o On September 30, 1999, the Corporation completed the sale of approximately
460,000 acres of timberland in Alabama, Mississippi and Tennessee for notes
receivable having a face value of $397 million (and a fair value of
$383 million).
o On February 8, 2000, the Corporation acquired Safeskin Corporation
("Safeskin"), a leading maker of disposable gloves for health care,
high-technology and scientific industries, in a merger transaction in which
the outstanding Safeskin shares were converted into shares of
Kimberly-Clark common stock. The transaction was valued at approximately
$750 million.
o On July 5, 2000, the Corporation acquired a majority of the shares of
privately held S-K Corporation of Taiwan, which held trademark and
distribution rights in Taiwan for the Corporation's global brands including
Kleenex, Huggies and Kotex. Prior to the acquisition, the Corporation owned
approximately 3 percent of S-K Corporation.
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 1. BUSINESS (Continued)
o On December 20, 2000, the Corporation purchased an additional 33.3 percent
ownership interest in its Taiwanese affiliate, Taiwan Scott Paper
Corporation, increasing its ownership interest to 100 percent.
o On January 31, 2001, the Corporation acquired Linostar S.p.A., a leading
Italian-based diaper manufacturer that produced and marketed Lines, Italy's
second largest diaper brand.
o Prior to 2001, the Corporation and its joint venture partner, Amcor Limited
("Amcor"), held a 50/50 ownership interest in Kimberly-Clark Australia Pty.
Ltd. ("KCA"). In July 2001, the Corporation purchased an additional
5 percent ownership interest in KCA for A$77.5 million (approximately
$39 million), and exchanged options with Amcor for the purchase by the
Corporation of the remaining 45 percent ownership interest. In June 2002,
the Corporation exercised this option and purchased the remaining
45 percent interest from Amcor for A$697.5 million (approximately
$390 million). The acquisition of KCA reflects the Corporation's strategy
to expand its three business segments within Australia. As a result of
these transactions, KCA became a consolidated subsidiary effective
July 1, 2001 and a wholly-owned subsidiary on June 30, 2002.
In the fourth quarter of 1998, the Corporation announced a facilities
consolidation plan (the "1998 Plan"). The 1998 Plan, among other things,
resulted in further alignment of tissue manufacturing capacity with demand in
Europe, closure of a diaper manufacturing facility in Canada, shut down and
disposal of a tissue machine in Thailand, write down of certain excess feminine
care production equipment in North America and a reduction in the Corporation's
workforce of 814 employees. Costs for the 1998 Plan of $18.2 million,
$42.6 million and $49.1 million were recorded in 2000, 1999 and 1998,
respectively, and charged to cost of products sold. The year 2000 costs were
composed primarily of certain severance costs and charges for accelerated
depreciation for the Corporation's Larkfield, U.K. tissue manufacturing facility
that remained in use until it was shutdown in October 2000. The 1998 Plan was
completed as of December 31, 2000.
Description of the Corporation. The Corporation is principally engaged in the
manufacturing and marketing of a wide range of consumer and business-to-business
products around the world. Most of these products are made from natural or
synthetic fibers using advanced technologies in fibers, nonwovens and
absorbency.
The Corporation is organized into 12 operating segments based on product
groupings. These operating segments have been aggregated into three reportable
global business segments: Personal Care; Consumer Tissue; and
Business-to-Business. Each reportable segment is headed by an executive officer
who reports to our Chief Executive Officer and is responsible for the
development and execution of global strategies to drive growth and profitability
of the Corporation's worldwide personal care, consumer tissue and
business-to-business operations. These strategies include global plans for
branding and product positioning, technology and research and development
programs, cost reductions including supply chain management, and capacity and
capital investments for each of these businesses. The principal sources of
revenue in each of our global business segments are described below.
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 1. BUSINESS (Continued)
The Personal Care segment manufactures and markets disposable diapers, training
and youth pants and swimpants; feminine and incontinence care products; and
related products. Products in this segment are primarily for household use and
are sold under a variety of brand names, including Huggies, Pull-Ups, Little
Swimmers, GoodNites, Kotex, Lightdays, Depend, Poise and other brand names.
The Consumer Tissue segment manufactures and markets facial and bathroom tissue,
paper towels and napkins for household use; wet wipes; and related products.
Products in this segment are sold under the Kleenex, Scott, Cottonelle, Viva,
Andrex, Scottex, Page, Huggies and other brand names.
The Business-to-Business segment manufactures and markets facial and bathroom
tissue, paper towels, wipers and napkins for away-from-home use; 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; printing, premium business and
correspondence papers; specialty and technical papers; and other products.
Products in this segment are sold under the Kimberly-Clark, Kleenex, Scott,
Kimwipes, WypAll, Surpass, Safeskin, Tecnol, Ballard and other brand names.
Products for household use are sold directly, and through wholesalers, to
supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and
department stores and other retail outlets. Products for away-from-home use are
sold through distributors and directly to manufacturing, lodging, office
building, food service and health care establishments and other high volume
public facilities. Health care products are primarily sold to distributors,
converters and end-users. Paper products are sold directly to users, converters,
manufacturers, publishers and printers, and through paper merchants, brokers,
sales agents and other resale agencies.
Approximately 12 percent, 11 percent and 10 percent of net sales were to
Wal-Mart Stores, Inc. in 2002, 2001 and 2000, respectively, primarily in the
Personal Care and Consumer Tissue businesses.
Patents and Trademarks. The Corporation owns various patents and trademarks
registered domestically and in many foreign countries. The Corporation considers
the patents and trademarks which it owns and the trademarks under which it sells
certain of its products to be material to its business. Consequently, the
Corporation seeks patent and trademark protection by all available means,
including registration. A partial list of the Corporation's trademarks is
included under the caption "Additional Information - Trademarks" contained in
the 2002 Annual Report to Stockholders and is incorporated herein by reference.
Raw Materials. Superabsorbent materials are important components in disposable
diapers, training and youth pants and incontinence care products. Polypropylene
and other synthetics and chemicals are the primary raw materials for
manufacturing nonwoven fabrics, which are used in disposable diapers, training
and youth pants, wet wipes, feminine pads, incontinence and health care
products, and away-from-home wipers.
Cellulose fiber, in the form of kraft pulp or fiber recycled from recovered
pulp, is the primary raw material for the Corporation's tissue and paper
products and is an important component in disposable diapers, training pants,
feminine pads and incontinence care products.
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 1. BUSINESS (Continued)
Most recovered paper and synthetics are purchased from third parties. Pulp and
recycled fiber are produced by the Corporation and purchased from others. The
Corporation considers the supply of such raw materials to be adequate to meet
the needs of its businesses. See "Factors That May Affect Future Results - Raw
Materials."
The Corporation owns or controls approximately 5.9 million acres of forestland
in Canada, principally as a fiber source for pulp production, which is consumed
internally for tissue products. Approximately 1.0 million acres in the province
of Nova Scotia are owned by the Corporation, and approximately 4.9 million
acres, principally in the province of Ontario, are held under long-term Crown
rights or leases.
Competition. For a discussion of the competitive environment in which the
Corporation conducts its business, see "Factors That May Affect Future Results -
Competitive Environment."
Research and Development. A major portion of total research and development
expenditures is directed toward new or improved personal care, tissue and health
care products and nonwoven materials. Consolidated research and development
expense was $289.0 million in 2002, $295.3 million in 2001 and $277.4 million in
2000.
Environmental Matters. Total worldwide capital expenditures for voluntary
environmental controls or controls necessary to comply with legal requirements
relating to the protection of the environment at the Corporation's facilities
are expected to be approximately $42 million in 2003 and $36 million in 2004. Of
these amounts, approximately $31 million in 2003 and $9 million in 2004 are
expected to be spent at facilities in the U.S. For facilities outside of the
U.S., capital expenditures for environmental controls are expected to be
approximately $11 million in 2003 and $27 million in 2004.
Total worldwide operating expenses for environmental compliance are expected to
be approximately $163 million in 2003 and $170 million in 2004. Operating
expenses for environmental compliance with respect to U.S. facilities are
expected to be approximately $82 million in 2003 and $85 million in 2004.
Operating expenses for environmental compliance with respect to facilities
outside the U.S. are expected to be approximately $81 million in 2003 and
$85 million in 2004. Operating expenses include pollution control equipment
operation and maintenance costs, governmental payments, and research and
engineering costs.
Total environmental capital expenditures and operating expenses are not expected
to have a material effect on the Corporation's total capital and operating
expenditures, consolidated earnings or competitive position. However, current
environmental spending estimates could be modified as a result of changes in the
Corporation's plans, changes in legal requirements or other factors.
In connection with certain divestitures, including those described in "Recent
Developments," the Corporation has agreed to indemnify the purchasers of certain
divested businesses against certain environmental liabilities. Generally, these
indemnification obligations apply only to environmental liabilities which are
actually incurred by the purchaser within a specified time period after closing
and are limited to a specified dollar amount of coverage. The Corporation has
established appropriate accrued liabilities with respect thereto, and does not
otherwise consider these obligations to be material.
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 1. BUSINESS (Continued)
Employees. In its worldwide consolidated operations, the Corporation had
63,900 employees as of December 31, 2002.
Approximately 20 percent of the Corporation's United States workforce and
approximately 24 percent of the Corporation's workforce outside of the United
States are represented by unions. In the U.S., the largest concentration of
union membership is with the Paper, Allied-Industrial, Chemical & Energy Workers
International Union (PACE). Other employees are represented by the International
Brotherhood of Electrical Workers (IBEW), the International Association of
Machinists and Aerospace Workers (IAM), the Association of Western Pulp and
Paper Workers (AWPPW), the United Brotherhood of Carpenters and Joiners and
various independent unions. The Corporation's collective bargaining agreements
in the U.S. typically have a term of 5 to 6 years and provide for wage and
fringe benefit increases during the term. The agreements have staggered
termination dates.
Insurance. The Corporation maintains coverage consistent with industry practice
for most risks that are incident to its operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain matters discussed in this Form 10-K, or documents a portion of which are
incorporated herein by reference, concerning, among other things, the business
outlook, including new product introductions, cost savings and acquisitions,
anticipated financial and operating results, strategies, contingencies and
contemplated transactions of the Corporation, 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 these
events will occur or that the Corporation's results will be as estimated.
The assumptions used as a basis for the forward-looking statements include many
estimates that, among other things, depend on the achievement of future cost
savings and projected volume increases. Furthermore, the Corporation has assumed
that it will continue to identify suitable acquisition candidates in those
product markets where it intends to grow by acquisition. In addition, many
factors outside the control of the Corporation, including the prices of the
Corporation's raw materials, potential competitive pressures on selling prices
or advertising and promotion expenses for the Corporation's products, and
fluctuations in foreign currency exchange rates, as well as general economic
conditions in the markets in which the Corporation does business, also could
impact the realization of such estimates.
The following factors, as well as factors described elsewhere in this Form 10-K,
or in other SEC filings, among others, could cause the Corporation's future
results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Corporation.
Such factors are described in accordance with the provisions of the Private
Securities Litigation Reform Act of 1995, which encourages companies to disclose
such factors.
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 1. BUSINESS (Continued)
Competitive Environment. The Corporation experiences intense competition for
sales of its principal products in its major markets, both domestically and
internationally. The Corporation's products compete with widely advertised,
well-known, branded products, as well as private label products, which are
typically sold at lower prices. The Corporation has several major competitors in
most of its markets, some of which are larger and more diversified than the
Corporation. The principal methods and elements of competition include brand
recognition and loyalty, product innovation, quality and performance, price, and
marketing and distribution capabilities. Inherent risks in the Corporation's
competitive strategy include uncertainties concerning trade and consumer
acceptance, the effects of recent consolidations of retailers and distribution
channels, and competitive reaction. Aggressive competitive reaction may lead to
increased advertising and promotional spending by the Corporation in order to
maintain market share. Increased competition with respect to pricing would
reduce revenue and could have an adverse impact on the Corporation's financial
results. In addition, the Corporation relies on the development and introduction
of new or improved products as a means of achieving and/or maintaining category
leadership. In order to maintain its competitive position, the Corporation must
develop technology to support its products.
Cost Savings Strategy. The Corporation's anticipated cost savings are expected
to result from reducing material costs and manufacturing waste and realizing
productivity gains and distribution efficiencies in each of its business
segments. The Corporation's strategic investments in its information systems
should also allow further cost savings through streamlining of its back office
operations. There can be no assurance that such cost savings will be achieved.
Raw Materials. Cellulose fiber, in the form of kraft pulp or recycled fiber, is
used extensively in the Corporation's tissue and paper products and is subject
to significant price fluctuations due to the cyclical nature of the pulp
markets. Recycled fiber accounts for approximately 30 percent of the
Corporation's overall fiber requirements. On a worldwide basis, the
Corporation's internally manufactured pulp supplies approximately 40 percent of
its virgin fiber requirements.
The Corporation still intends to reduce its level of pulp integration, when
market conditions permit, to approximately 20 percent, and such a reduction in
pulp integration, if accomplished, could increase the Corporation's commodity
price risk. Specifically, increases in pulp prices could adversely affect the
Corporation's earnings if selling prices for its finished products are not
adjusted or if such adjustments significantly trail the increases in pulp
prices. Derivative instruments have not been used to manage these risks.
Polymer resins, principally polypropylene, are used extensively in the
Corporation's products, such as diapers, training and youth pants, and
incontinence care products. Polymer resins, which are principally derived from
petroleum, may be subject to price fluctuations. The Corporation purchases
polymer resins from a number of suppliers. Significant increases in resin prices
could adversely affect the Corporation's earnings if selling prices for its
finished products are not adjusted or if adjustments significantly trail the
increases in resin prices.
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 1. BUSINESS (Continued)
Energy Costs. The Corporation's manufacturing operations utilize electricity,
natural gas and petroleum-based fuels. To insure that it uses all forms of
energy cost-effectively, the Corporation maintains ongoing energy efficiency
improvement programs at all of its manufacturing sites and also provides expert
staff assistance to operating units in negotiating favorable utility and other
energy supply agreements. The Corporation's contracts with energy suppliers vary
as to price, payment terms, quantities and duration. Kimberly-Clark's energy
costs are also affected by various market factors including the availability of
supplies of particular forms of energy, energy prices and local and national
regulatory decisions. There can be no assurance that the Corporation will be
fully protected against substantial changes in the price or availability of
energy sources. Derivative instruments are used to hedge natural gas price risk
when management deems it prudent to do so.
Acquisition Strategy. The Corporation's anticipated financial results and
business outlook are, in part, dependent upon the availability of suitable
acquisition candidates. The Corporation could encounter significant challenges
in locating suitable acquisition candidates that are consistent with its
strategic objectives and will contribute to its long-term success. Furthermore,
there can be no assurance that any such acquired business can or will be
successfully integrated with the Corporation's businesses in order to provide
anticipated synergies and earnings growth.
Volume Forecasting. The Corporation's anticipated financial results reflect
forecasts of future volume increases in the sales of its products. Challenges in
such forecasting include anticipating consumer preferences, estimating sales of
new products, estimating changes in population characteristics (such as birth
rates and changes in per capita income), anticipating changes in technology and
competitive responses and estimating the acceptance of the Corporation's
products in new markets. As a result, there can be no assurance that the
Corporation's volume increases will occur as estimated.
Foreign Market Risks. Because the Corporation and its equity companies have
manufacturing facilities in 42 countries and their products are sold in more
than 150 countries, the Corporation's results may be substantially affected by
foreign market risks. The Corporation is subject to the impact of economic and
political instability in developing countries. The extremely competitive
situation in European personal care and tissue markets, and the challenging
economic environments in Argentina, Brazil, Mexico, Venezuela and developing
countries in eastern Europe, Asia and Latin America, may slow the Corporation's
sales growth and earnings potential. In addition, the Corporation is subject to
the strengthening and weakening of various currencies against each other and
local currencies versus the U.S. dollar. Transaction exposure, arising from
transactions and commitments denominated in non-local currency, is selectively
hedged (through foreign currency forward and swap contracts). See "Management's
Discussion and Analysis - Risk Sensitivity", contained in the 2002 Annual Report
to Stockholders, which is incorporated herein by reference. Translation exposure
for the Corporation with respect to foreign operations is generally not hedged.
There can be no assurance that the Corporation will be fully protected against
substantial foreign currency fluctuations.
Contingencies. The costs and other effects of pending litigation and
administrative actions against the Corporation cannot be determined with
certainty. Although management believes that no such proceedings will have a
material adverse effect on the Corporation, there can be no assurance that the
outcome of such proceedings will be as expected. See "Item 3. Legal
Proceedings."
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 1. BUSINESS (Continued)
One of the Corporation's North American tissue mills has an agreement to provide
its local utility company a specified amount of electric power per year for the
next 16 years. In the event that the mill was shut down, the Corporation would
be required to continue to operate the power generation facility on behalf of
its owner, the local utility company. The net present value of the cost to
fulfill this agreement as of December 31, 2002 is estimated to be approximately
$87 million. However, management considers the probability of closure of this
mill to be remote.
AVAILABLE INFORMATION
The Corporation makes available financial information, news releases and other
information on the Corporation's Web site at www.kimberly-clark.com. There is a
direct link from the Web site to the Corporation's Securities and Exchange
Commission filings via the EDGAR database, where the Corporation's annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and any amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of
charge as soon as reasonably practicable after the Corporation files such
reports and amendments with, or furnishes them to, the Securities and Exchange
Commission. Stockholders may also contact Stockholder Services, P.O. Box 612606,
Dallas, Texas 75261-2606 or call 972-281-1521 to obtain a hard copy of these
reports without charge.
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 2. PROPERTIES
Management believes that the Corporation's production facilities are suitable
for their purpose and adequate to support its businesses. The extent of
utilization of individual facilities varies, but they generally operate at or
near capacity, except in certain instances such as when new products or
technology are being introduced or when mills are being shut down. Certain
facilities of the Corporation are being expanded. Various facilities contain
pollution control, solid waste disposal and other equipment which have been
financed through the issuance of industrial revenue or similar bonds and are
held by the Corporation under lease or installment purchase agreements.
The principal facilities of the Corporation (including the Corporation's equity
companies) and the products or groups of products made at such facilities are as
follows:
Headquarters Locations
Dallas, Texas
Roswell, Georgia
Neenah, Wisconsin
Reigate, United Kingdom
Bangkok, Thailand
Administrative Centers
Knoxville, Tennessee
Brighton, United Kingdom
Worldwide Production and Service Facilities
United States
Alabama
Mobile - tissue products
Arizona
Tucson - health care products
Arkansas
Conway - feminine care and incontinence care products and nonwovens
Maumelle - wet wipes and nonwovens
California
Fullerton - tissue products
San Diego - health care products
Connecticut
New Milford - diapers and tissue products
Georgia
LaGrange - nonwovens
Idaho
Pocatello - respiratory care and gastroenterology products
Kentucky
Owensboro - tissue products
Michigan
Munising - technical papers
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 2. PROPERTIES (Continued)
Mississippi
Corinth - nonwovens, wipers and towels
Hattiesburg - tissue products
North Carolina
Hendersonville - nonwovens
Lexington - nonwovens
Oklahoma
Jenks - tissue products
Pennsylvania
Chester - tissue products
South Carolina
Beech Island - diapers and tissue products
Tennessee
Loudon - tissue products
Texas
Del Rio - health care products
Fort Worth - health care products
Paris - diapers and training and youth pants
San Antonio - personal cleansing products and systems
Utah
Draper - respiratory care and gastroenterology products
Ogden - diapers
Washington
Everett - tissue products and pulp
Wisconsin
Marinette - tissue products
Neenah - diapers, training, feminine care and incontinence care products,
business and correspondence papers and nonwovens
Whiting - business and correspondence papers
Outside the United States
Argentina
* Bernal - tissue products
Pilar - feminine care and incontinence care products
San Luis - diapers
Australia
Albury - nonwovens
Ingleburn - diapers
Lonsdale - diapers and feminine care and incontinence care products
Millicent - pulp and tissue products
Tantanoola - pulp
Warwick Farm - tissue products
Bahrain
* East Riffa - tissue products
* Equity company production facility
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 2. PROPERTIES (Continued)
Belgium
Duffel - tissue products
Bolivia
La Paz - tissue products
Santa Cruz - diapers and feminine care and tissue products
Brazil
* Bahia - tissue products
* Correia Pinto - tissue products
* Cruzeiro - tissue products
* Mogi das Cruzes - tissue products
Porto Alegre - feminine care products
* Sao Paulo - tissue products
Suzano - diapers, wet wipes and incontinence care products
Canada
Huntsville, Ontario - tissue products and wipers
New Glasgow, Nova Scotia - pulp
St. Hyacinthe, Quebec - feminine care and incontinence care products
Terrace Bay, Ontario - pulp
Chile
Colina - tissue products
Santiago - diapers and feminine care products
China
Beijing - feminine care products and diapers
Chengdu - feminine care products
Guangzhou - tissue products
Nanjing - feminine care products
Shanghai - tissue products
Wuhan - feminine care products
Colombia
Barbosa - notebooks, business and correspondence papers and wipers
Guarne - tissue products
Pereira - tissue products and diapers
Puerto Tejada - tissue products
Tocancipa - diapers and feminine care products
* Villa Rica - diapers and incontinence care products
Costa Rica
Belen - tissue products
Cartago - diapers and feminine care and incontinence care products
Czech Republic
Jaromer - diapers and incontinence care products
Litovel - feminine care products
Dominican Republic
Santo Domingo - tissue products
* Equity company production facility
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 2. PROPERTIES (Continued)
Ecuador
Babahoyo - tissue products
Mapasingue - tissue products, diapers and feminine care products
El Salvador
Sitio del Nino - tissue products
France
Rouen - tissue products
Villey-Saint-Etienne - tissue products
Germany
Forchheim - feminine care and incontinence care products
Koblenz - tissue products
Mainz - tissue products
Reisholz - tissue products
Guatemala
Poza Verde - tissue products
Honduras
Villanueva - health care products
India
* Pune - feminine care products and diapers
Indonesia
Jakarta - tissue products
* Medan - specialty papers
Israel
Afula - diapers and feminine care and incontinence care products
Hadera - tissue products
Nahariya - tissue products
Italy
Alanno - tissue products
Patrica - diapers
Romagnano - tissue products
Villanovetta - tissue products
Japan
Shiga - soap
Korea
Anyang - feminine care products, diapers and tissue products
Kimcheon - tissue products and nonwovens
Taejon - feminine care products, diapers and nonwovens
Malaysia
Kluang - tissue products, feminine care products and diapers
* Equity company production facility
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 2. PROPERTIES (Continued)
Mexico
Acuna - health care products
* Bajio - tissue products, fine papers and notebooks
* Cuautitlan - feminine care products, diapers and nonwovens
* Ecatepec - tissue products
Empalme - health care products
Magdalena - health care products
* Morelia - tissue products, pulp and fine papers
* Naucalpan - tissue products and specialty papers
Nogales - health care products
* Orizaba - tissue products, fine papers and pulp
* Ramos Arizpe - tissue products and diapers
* San Rafael - fine papers
* Texmelucan - tissue products
* Tlaxcala - diapers, nonwovens and wet wipes
Peru
Puente Piedra - tissue products
Villa - diapers and feminine care and incontinence care products
Philippines
San Pedro, Laguna - feminine care products, diapers, tissue products and
specialty papers
Puerto Rico
Toa Alta - diapers
Saudi Arabia
* Al-Khobar - diapers and feminine care and tissue products
Slovak Republic
Piestany - health care products
South Africa
Cape Town - tissue, feminine care and incontinence care products
Springs - tissue products and diapers
Spain
Aranguren - tissue products
Arceniega - tissue products and personal cleansing products and systems
Calatayud - diapers
Salamanca - tissue products
Telde, Canary Islands - tissue products
Switzerland
Balsthal - tissue products and specialty papers
Niederbipp - tissue products
Reichenburg - tissue products
Taiwan
Chung Li -tissue products, feminine care products and diapers
Hsin-Ying - tissue products
Neihu - feminine care products and diapers
Ta-Yuan - tissue products
* Equity company production facility
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 2. PROPERTIES (Continued)
Thailand
Hat Yai - disposable gloves
Pathumthani - feminine care products, diapers and tissue products
Samut Prakarn - tissue products
Turkey
Istanbul - diapers
United Kingdom
Barrow - tissue products
Barton-upon-Humber - diapers
Flint - tissue products and nonwovens
Northfleet - tissue products
Venezuela
Maracay - tissue products and diapers
Vietnam
Binh Duong - feminine care products
Hanoi - feminine care products
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS
The following is a brief description of certain legal and administrative
proceedings to which the Corporation or its subsidiaries is a party or to which
the Corporation's or its subsidiaries' properties are subject. In management's
opinion, none of the legal and administrative proceedings described below,
individually or in the aggregate, is expected to have a material adverse effect
on the Corporation's business, financial condition or results of operations.
As of December 31, 2002, approximately 165 product liability lawsuits seeking
monetary damages, in most cases of an unspecified amount, are pending in federal
and state courts against Safeskin. Safeskin is typically one of several
defendants who manufacture or sell natural rubber 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 health care workers
and other individuals while performing their duties. Safeskin has referred the
defense of these lawsuits to its insurance carriers and management believes its
insurance coverage is adequate for these types of claims.
Safeskin and certain of its former officers and directors are defendants in two
cases filed in 1999, prior to the acquisition of Safeskin by the Corporation.
One case is a class action lawsuit alleging violations of the federal securities
laws and the other is a shareholder derivative action alleging breach of
fiduciary duty, waste of corporate assets and gross negligence in connection
with a stock repurchase program undertaken by Safeskin. In December 2002, a
settlement agreement was entered into pursuant to which all claims against
Safeskin and the other defendants in these two cases are to be released and
dismissed with prejudice and without admission of liability or wrongdoing by any
party in exchange for $55 million, most of which is covered by insurance. The
Corporation recorded a charge of $21 million in the fourth quarter of 2002
related to this matter. The settlement is subject to notice to the class and
approval by the U.S. District Court for the Southern District of California.
Court approval is expected in March 2003.
As of December 31, 2002, the Corporation, along with many other nonaffiliated
companies, was a party to lawsuits with allegations of personal injury resulting
from asbestos exposure on the defendants' premises and allegations that the
defendants manufactured, sold, distributed or installed products which cause
asbestos-related lung disease. These general allegations are often made against
the Corporation without any apparent evidence or identification of a specific
product or premises of the Corporation. The Corporation has denied the
allegations and raised numerous defenses in all of these asbestos cases. All
asbestos claims have been tendered to the Corporation's insurance carriers for
defense and indemnity. The Corporation's financial statements reflect
appropriate accruals for its portion of the costs estimated to be incurred in
connection with settling these claims.
The Corporation is subject to routine litigation from time to time, which,
individually or in the aggregate, is not expected to have a material adverse
effect on the Corporation's business, financial condition or results of
operations.
PART I
(Continued)
- --------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (Continued)
Environmental Matters
- ---------------------
The Corporation is subject to federal, state and local environmental protection
laws and regulations with respect to its business operations and is operating in
compliance with, or taking action aimed at ensuring compliance with, such laws
and regulations. Compliance with these laws and regulations is not expected to
have a material adverse effect on the Corporation's business, financial
condition or results of operations.
The Corporation has been named a potentially responsible party under the
provisions of the federal Comprehensive Environmental Response, Compensation and
Liability Act, or analogous state statutes, 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 the Corporation's business,
financial condition or results of operations.
PART II
- --------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of the executive officers of the Corporation as of March 1,
2003, together with certain biographical information, are as follows:
Robert E. Abernathy, 48, was elected Group President effective January 1, 1997.
He is responsible for the global Business-to-Business segment which includes the
K-C Professional Tissue and Wiper business, the Health Care business, Nonwovens
manufacturing, Research and Sales functions, the Technical Paper business, the
Neenah Paper business and the Energy and Environment organization. Mr. Abernathy
joined the Corporation in 1982. His past responsibilities in the Corporation
have included operations and major project management in North America. He was
appointed Vice President - North American Diaper Operations in 1992 and Managing
Director of Kimberly-Clark Australia Pty. Limited in 1994.
Mark A. Buthman, 42, was elected Senior Vice President and Chief Financial
Officer effective January 1, 2003. Mr. Buthman joined the Corporation in 1982.
He has held various positions of increasing responsibility in the operations,
finance and strategic planning areas of the Corporation. Mr. Buthman was
appointed Vice President of Finance in 2002 and Vice President of Strategic
Planning and Analysis in 1997.
O. George Everbach, 64, was elected Senior Vice President - Law and Government
Affairs in 1988. Mr. Everbach joined the Corporation in 1984. His
responsibilities have included direction of legal, human resources and
administrative functions. He was elected Vice President and General Counsel in
1984; Vice President, Secretary and General Counsel in 1985; and Senior Vice
President and General Counsel in 1986.
Thomas J. Falk, 44, was elected Chairman of the Board and Chief Executive
Officer in February 2003 and President and Chief Executive Officer in September
2002. Prior to that, he served as President and Chief Operating Officer of the
Corporation since his election in 1999. Mr. Falk previously had been elected
Group President - Global Tissue, Pulp and Paper in 1998, where he was
responsible for the Corporation's global tissue businesses. He also was
responsible for the Wet Wipes and Neenah Paper sectors, Pulp Operations and
Consumer Business Services, Environment and Energy and Human Resources
organizations. Mr. Falk joined the Corporation in 1983 and has held other senior
management positions in the Corporation. He has been a director of the
Corporation since 1999.
Steven R. Kalmanson, 50, was elected Group President in January 1996. He is
responsible for the Consumer Tissue segment, which includes the Family Care and
Wet Wipes businesses, Pulp Operations and North America Supply Chain and
Logistics organizations. Mr. Kalmanson joined the Corporation in 1977. His past
responsibilities have included various marketing positions within the consumer
products businesses. He was appointed President, Adult Care in 1990, President,
Child Care in 1991 and President, Family Care in 1995.
PART II
(Continued)
- --------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (Continued)
Kathi P. Seifert, 53, was elected Executive Vice President in November 1999. She
is responsible for the Personal Care segment which includes the Infant Care,
Child Care, Feminine Care and Adult Care businesses, and the Safety and Quality
Assurance team and the U.S. and Canadian Sales organizations. Ms. Seifert joined
the Corporation in 1978. Her responsibilities in the Corporation have included
various marketing positions within the K-C Professional, Consumer Tissue and
Feminine Care businesses. She was appointed President - Feminine Care in 1991,
was elected Group President - Feminine and Adult Care in 1994, elected Group
President - North American Consumer Products in January 1995, elected Group
President - North American Personal Care Products in July 1995 and elected Group
President - Global Personal Care Products in April 1998. Ms. Seifert is a member
of the board of directors of Eli Lilly and Company, the U.S. Fund for UNICEF,
Theda Care Health Group and The Fox Cities Performing Arts Center.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The dividend and market price data included in Note 14 to the Consolidated
Financial Statements, and the information set forth under the captions
"Additional Information - Dividends and Dividend Reinvestment Plan" and
"Additional Information - Stock Exchanges" contained in the 2002 Annual Report
to Stockholders are incorporated in this Item 5 by reference.
As of March 12, 2003, the Corporation had 37,731 holders of record of its
common stock.
PART II
(Continued)
- --------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31(a)
(Millions of dollars, -----------------------------------------------------------------------------
except per share amounts) 1998(b) 1999 2000 2001 2002
- ---------------------------------------------------------------------------------------------------------------------------
Net Sales.................................. $11,261.4 $11,901.0 $12,909.5 $13,287.6 $13,566.3
Gross Profit............................... 3,557.1 4,215.5 4,676.7 4,669.6 4,815.6
Operating Profit........................... 1,697.7 2,435.4 2,633.8 2,338.2 2,463.8
Share of Net Income of
Equity Companies........................ 137.1 189.6 186.4 154.4 113.3
Income from Continuing
Operations Before
Cumulative Effect of
Accounting Change....................... 1,114.3 1,668.1 1,800.6 1,609.9 1,686.0
Per Share Basis:
Basic................................. 2.02 3.11 3.34 3.04 3.26
Diluted............................... 2.01 3.09 3.31 3.02 3.24
Net Income................................. 1,103.1 1,668.1 1,800.6 1,609.9 1,674.6
Per Share Basis:
Basic................................. 2.00 3.11 3.34 3.04 3.24
Diluted............................... 1.99 3.09 3.31 3.02 3.22
Cash Dividends Per Share
Declared................................ 1.00 1.04 1.08 1.12 1.20
Paid.................................... .99 1.03 1.07 1.11 1.18
Total Assets............................... $11,687.8 $12,815.5 $14,479.8 $15,007.6 $15,585.8
Long-Term Debt............................. 2,068.2 1,926.6 2,000.6 2,424.0 2,844.0
Stockholders' Equity....................... 4,031.5 5,093.1 5,767.3 5,646.9 5,650.3
(a) During 2001, the Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board ("FASB") issued EITF 01-9,
Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products. Under EITF 01-9, the
cost of promotion activities offered to customers is classified as a reduction in sales revenue. In addition, the estimated
redemption value of consumer coupons is required to be recorded at the time the coupons are issued and classified as a
reduction in sales revenue. The Corporation adopted EITF 01-9 effective January 1, 2002, and reclassified the face value of
coupons and other applicable promotional activities from expense to a reduction in revenue, which reduced net sales by
$1.0 billion for 1998, $1.1 billion for 1999, $1.1 billion for 2000 and $1.2 billion for 2001. The adoption of EITF 01-9 did
not change reported earnings for prior years but did require the recording of a cumulative effect of a change in accounting
principle in 2002, equal to an after-tax charge of approximately $.02 per share, which resulted from a change in the period
for recognizing the face value of coupons.
(b) The Corporation adopted Statement of Position 98-5, Reporting on the Costs of Start-up Activities, effective January 1, 1998,
and restated 1998 first quarter results to record a pretax charge of $17.8 million, $11.2 million after taxes, or $.02 per
share, as the cumulative effect of this accounting change.
PART II
(Continued)
- --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth under the caption "Management's Discussion and
Analysis" contained in the 2002 Annual Report to Stockholders is incorporated in
this Item 7 by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth under the caption "Management's Discussion and
Analysis - Risk Sensitivity" contained in the 2002 Annual Report to Stockholders
is incorporated in this Item 7A by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Corporation and its consolidated
subsidiaries and the independent auditors' report thereon contained in the 2002
Annual Report to Stockholders are incorporated in this Item 8 by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
- --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section of the 2003 Proxy Statement captioned "Certain Information Regarding
Directors and Nominees" under "Proposal 1. Election of Directors" identifies
members of the board of directors of the Corporation and nominees, and is
incorporated in this Item 10 by reference.
See also "EXECUTIVE OFFICERS OF THE REGISTRANT" appearing in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information in the section of the 2003 Proxy Statement captioned "Executive
Compensation" is incorporated in this Item 11 by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information in the section of the 2003 Proxy Statement captioned "Security
Ownership of Management" under "Proposal 1. Election of Directors" is
incorporated in this Item 12 by reference.
Equity Plans
The following table gives information about the Corporation's common stock that
may be issued upon the exercise of options, warrants and rights under all of the
Corporation's equity compensation plans as of December 31, 2002.
Number of securities
remaining available for
Number of securities to Weighted-average future issuance under equity
be issued upon exercise exercise price of compensation plans
of outstanding options, outstanding options, (excluding securities
warrants and rights warrants and rights reflected in column (a))
Plan category (a) (b) (c)
- ------------------------------- -------------------------- ----------------------- ------------------------------
Equity compensation plans
approved by stockholders (1) 28,187,240 (2) $55.13 23,736,628 (3)
Equity compensation plans not
approved by stockholders (4) 1,683,393 (5)(6) $52.73 (6) 938,207
Total 29,870,633 $55.00 24,674,835
PART III
(Continued)
- --------------------------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS (Continued)
(1) Includes the 1992 Equity Participation Plan and 2001 Equity Participation
Plan.
(2) Does not include 126,372 restricted share units granted under the 2001
Equity Participation Plan. Upon vesting, a share of the Corporation's
common stock is issued for each restricted share unit.
(3) Includes 2,443,828 shares that may be granted as restricted shares or
restricted share units under the 2001 Equity Participation Plan.
(4) Includes the 125th Anniversary Options Program, Outside Directors
Compensation Plan, 1999 Restricted Stock Plan and certain acquired
equity compensation plans.
(5) Does not include 126,506 restricted share units granted under the 1999
Restricted Stock Plan. Upon vesting, a share of the Corporation's
common stock is issued for each restricted share unit.
(6) Does not include 437,588 options at a weighted-average exercise price
of $39.15 granted, and 6,295 shares of the Corporation's common stock
that may be issued, under equity compensation plans assumed by the
Corporation in connection with acquisitions to honor existing
obligations of acquired entities. The Corporation will not make any
additional grants or awards under such plans, although the terms of one
acquired deferred compensation plan provide for issuance of a
de minimus number of shares of the Corporation's common stock for
reinvested dividends on deferred amounts.
125th Anniversary Options Program
- ---------------------------------
In 1997, approximately 57,000 employees worldwide were granted approximately
3,200,000 stock options and 200,000 stock appreciation rights under the
Corporation's 125th Anniversary Options Program, approved by the Corporation's
board of directors. Employees were granted options to purchase a fixed number of
shares, ranging from 25 to 125 shares per employee, of common stock at a price
equal to the fair market value of the Corporation's stock at the date of grant.
These grants generally became exercisable after the third anniversary of the
grant date and have a term of seven years. The Corporation is no longer granting
options under this program.
1999 Restricted Stock Plan
- --------------------------
In 1999, the Corporation's board of directors approved the 1999 Restricted Stock
Plan under which certain key employees could be granted, in the aggregate, up to
2,500,000 shares of the Corporation's common stock or awards of restricted stock
units. These restricted stock awards vest and become unrestricted shares in
three to ten years from the date of grant. Although plan participants are
entitled to cash dividends and may vote such awarded shares, the sale or
transfer of such shares is limited during the restricted period. The market
value of the Corporation's stock at the date of grant determines the value of
the restricted stock award. Although no additional awards can be granted under
this plan, unvested restricted share units are credited with dividends that are
converted to additional restricted share units.
PART III
(Continued)
- --------------------------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS (Continued)
Outside Directors Compensation Plan
- -----------------------------------
In 2001, the Corporation's board of directors approved the Outside Directors
Compensation Plan. This Plan was amended and restated effective January 1, 2003.
A maximum of 1,000,000 shares of the Corporation's common stock is available for
grant under this plan. Each director who is not an officer or employee of the
Corporation or any of its subsidiaries, affiliates or equity companies (an
"Outside Director"), is granted an annual option to purchase 2,500 shares of the
Corporation's common stock. Each Outside Director who serves as chair of the
Audit, Compensation, or Nominating and Corporate Governance Committee is granted
an additional option to purchase 300 shares for each chair position held during
the year. Outside Directors may also elect to receive a portion of their cash
compensation in additional stock options under this plan. Options become
exercisable one year from the date of grant, at an option price equal to the
fair market value of the Corporation's common stock on the date of grant, and
expire after ten years, except under certain circumstances, including a change
in control of the Corporation. The Corporation's board of directors may also
grant awards in the form of stock, stock appreciation rights, restricted shares,
restricted share units, or any combination of cash, options, stock, stock
appreciation rights, restricted shares or restricted share units under this
plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in the section of the 2003 Proxy Statement captioned "Certain
Transactions and Business Relationships" under "Proposal 1. Election of
Directors" is incorporated in this Item 13 by reference.
ITEM 14. CONTROLS AND PROCEDURES
As of December 31, 2002, an evaluation was performed under the supervision and
with the participation of the Corporation's management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Corporation's disclosure controls and procedures.
Based on that evaluation, the Corporation's management, including the Chief
Executive Officer and Chief Financial Officer, concluded that the Corporation's
disclosure controls and procedures were effective as of December 31, 2002. There
have been no significant changes in the Corporation's internal controls or in
other factors that could significantly affect internal controls subsequent to
December 31, 2002, the date of the most recent evaluation of internal controls.
PART IV
- --------------------------------------------------------------------------------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report.
1. Financial statements:
The Consolidated Balance Sheet as of December 31, 2002 and 2001, and the related
Consolidated Statements of Income, Stockholders' Equity and Cash Flow for the
years ended December 31, 2002, 2001 and 2000, and the related Notes thereto, and
the Independent Auditors' Report of Deloitte & Touche LLP thereon are
incorporated in Part II, Item 8 of this Form 10-K by reference to the financial
statements contained in the 2002 Annual Report to Stockholders. In addition, a
related report of Deloitte & Touche LLP is included herein.
2. Financial statement schedule:
The following information is filed as part of this Form 10-K and should be read
in conjunction with the financial statements contained in the 2002 Annual Report
to Stockholders.
Independent Auditors' Report
Schedule for Kimberly-Clark Corporation and Subsidiaries:
Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted because they were not applicable or
because the required information has been included in the financial statements
or notes thereto.
3. Exhibits:
Exhibit No. (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.
Exhibit No. (3)b. By-Laws, as amended November 12, 2002.
Exhibit No. (4). Copies of instruments defining the rights of holders of
long-term debt will be furnished to the Securities and Exchange Commission on
request.
Exhibit No. (10)a. Management Achievement Award Program, as amended and
restated, incorporated by reference to Exhibit No. (10)a of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1997.
Exhibit No. (10)b. Executive Severance Plan, as amended and restated.
Exhibit No. (10)c. Fourth Amended and Restated Deferred Compensation Plan for
Directors, incorporated by reference to Exhibit No. (10)c of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996.
PART IV
(Continued)
- --------------------------------------------------------------------------------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(Continued)
Exhibit No. (10)d. Executive Officer Achievement Award Program.
Exhibit No. (10)e. 1992 Equity Participation Plan, as amended, incorporated by
reference to Exhibit No. (10)e of the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2000.
Exhibit No. (10)f. Deferred Compensation Plan, as amended.
Exhibit No. (10)g. Outside Directors' Stock Compensation Plan, as amended.
Exhibit No. (10)h. Supplemental Benefit Plan to the Kimberly-Clark Corporation
Pension Plan, as amended.
Exhibit No. (10)i. Second Supplemental Benefit Plan to the Kimberly-Clark
Corporation Pension Plan, as amended and restated.
Exhibit No. (10)j. Retirement Contribution Excess Benefit Program, as amended
and restated, incorporated by reference to Exhibit No. (10)j of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2000.
Exhibit No. (10)k. 1999 Restricted Stock Plan, as amended, incorporated by
reference to Exhibit No. (10)k of the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2000.
Exhibit No. (10)l. Outside Directors' Compensation Plan, as amended and
restated.
Exhibit No. (10)m. 2001 Equity Participation Plan, incorporated by reference to
Exhibit No. (10)m of the Corporation's Annual Report on Form 10-K for the year
ended December 31, 2001.
Exhibit No. (12). Computation of ratio of earnings to fixed charges for the
five years ended December 31, 2002.
Exhibit No. (13). Portions of the Corporation's 2002 Annual Report to
Stockholders incorporated by reference in this Form 10-K.
Exhibit No. (21). Subsidiaries of the Corporation.
Exhibit No. (23). Independent Auditors' Consent.
Exhibit No. (24). Powers of Attorney.
Exhibit No. (99.1). Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit No. (99.2). Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
PART IV
(Continued)
- --------------------------------------------------------------------------------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(Continued)
(b) Report on Form 8-K
The Corporation filed the following Current Report on Form 8-K since
October 1, 2002:
1. Current Report on Form 8-K, dated December 11, 2002, to report the text of
(i) a press release issued on December 11, 2002 regarding fourth quarter
2002 guidance and the 2003 business outlook and (ii) a conference call
webcasted on December 11, 2002 regarding the 2003 business outlook.
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) 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
March 14, 2003
By: /s/ Mark A. Buthman
-------------------------
Mark A. Buthman
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Thomas J. Falk Chairman of the Board March 14, 2003
- ------------------- and Chief Executive Officer
Thomas J. Falk and Director
(principal executive officer)
/s/ Mark A. Buthman Senior Vice President and March 14, 2003
- ------------------- Chief Financial Officer
Mark A. Buthman (principal financial officer)
/s/ Randy J. Vest Vice President and March 14, 2003
- ------------------- Controller
Randy J. Vest (principal accounting officer)
Directors
Dennis R. Beresford Claudio X. Gonzalez
John F. Bergstrom Mae C. Jemison
Pastora San Juan Cafferty Linda Johnson Rice
Paul J. Collins Wolfgang R. Schmitt
Robert W. Decherd Marc J. Shapiro
Thomas J. Falk Randall L. Tobias
William O. Fifield
By: /s/ O. George Everbach March 14, 2003
-------------------------------------
O. George Everbach, Attorney-in-Fact
CERTIFICATIONS
I, Thomas J. Falk, Chief Executive Officer of Kimberly-Clark Corporation,
certify that:
1. I have reviewed this annual report on Form 10-K of Kimberly-Clark
Corporation (the "registrant");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Thomas J. Falk
---------------------------------------
Thomas J. Falk, Chief Executive Officer
Date: March 14, 2003
CERTIFICATIONS
I, Mark A. Buthman, Chief Financial Officer of Kimberly-Clark Corporation,
certify that:
1. I have reviewed this annual report on Form 10-K of Kimberly-Clark
Corporation (the "registrant");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Mark A. Buthman
----------------------------------------
Mark A. Buthman, Chief Financial Officer
Date: March 14, 2003
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
Kimberly-Clark Corporation:
We have audited the consolidated financial statements of Kimberly-Clark
Corporation as of December 31, 2002 and 2001, and for each of the three years in
the period ended December 31, 2002, and have issued our report thereon dated
February 6, 2003; such consolidated financial statements and report are included
in your 2002 Annual Report to Stockholders and are incorporated herein by
reference. Our audits also included the consolidated financial statement
schedule of Kimberly-Clark Corporation, listed in Item 15. This consolidated
financial statement schedule is the responsibility of the Corporation's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits. In our opinion, the consolidated
financial statement schedule listed in Item 15, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Dallas, Texas
February 6, 2003
SCHEDULE II Kimberly-Clark Corporation and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(Millions of dollars)
Additions Deductions
-------------------------- -----------------
Balance at Charged to Charged to Write-Offs Balance
Beginning Costs and Other and at End of
Description of Period Expenses Accounts(a) Reclassifications Period
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 2002
Allowances deducted from
assets to which they apply
Allowances for doubtful
accounts................... $ 49.8 $ 10.4 $ .2 $ 12.0 (b) $48.4
Allowances for sales
discounts.................. 20.0 218.8 .6 220.2 (c) 19.2
December 31, 2001
Allowances deducted from
assets to which they apply
Allowances for doubtful
accounts................... $ 53.2 $ 18.2 $(3.1) $ 18.5 (b) $49.8
Allowances for sales
discounts.................. 19.9 215.9 2.0 217.8 (c) 20.0
December 31, 2000
Allowances deducted from
assets to which they apply
Allowances for doubtful
accounts................... $ 50.9 $ 12.7 $ 3.9 $ 14.3 (b) $53.2
Allowances for sales
discounts.................. 20.7 203.7 (.4) 204.1 (c) 19.9
(a) Includes bad debt recoveries and the effects of changes in foreign currency
exchange rates. Also includes the beginning balances resulting from
acquisitions made during the year and from the consolidation of
Kimberly-Clark Australia Pty. Ltd., the Corporation's Australian affiliate,
and Hogla-Kimberly Limited, the Corporation's Israeli affiliate, in 2001
and 2000, respectively.
(b) Primarily uncollectible receivables written off.
(c) Sales discounts allowed.
SCHEDULE II Kimberly-Clark Corporation and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(Millions of dollars)
Additions
---------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End of
Description of Period Expenses Accounts Deductions(a) Period
- ---------------------------------------------------------------------------------------------------------------------------
December 31, 2002
Deferred Taxes
Valuation Allowance............ $177.2 $ 55.3 $ - $ (8.1) $240.6
December 31, 2001
Deferred Taxes
Valuation Allowance............ $158.8 $ - $ - $(18.4) $177.2
December 31, 2000
Deferred Taxes
Valuation Allowance............ $279.0 $(102.6) $ - $ 17.6 $158.8
(a) Includes the net currency effects of translating valuation allowances at current rates under Statement of Financial
Accounting Standards No. 52 of $(1.5) million in 2002, $(3.4) million in 2001 and $(17.8) million in 2000. Also,
reflects a valuation allowance of approximately $24 million in 2001 related to a net operating loss carryforward that
had not previously been recorded. This entry had no effect on the consolidated statement of income or the
consolidated balance sheet.
EXHIBIT INDEX
----------------------------------------------------------------
Exhibit No. (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.
Exhibit No. (3)b. By-Laws, as amended November 12, 2002.*
Exhibit No. (4). Copies of instruments defining the rights of holders of
long-term debt will be furnished to the Securities and Exchange Commission on
request.
Exhibit No. (10)a. Management Achievement Award Program, as amended and
restated, incorporated by reference to Exhibit No. (10)a of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1997.
Exhibit No. (10)b. Executive Severance Plan, as amended and restated.*
Exhibit No. (10)c. Fourth Amended and Restated Deferred Compensation Plan for
Directors, incorporated by reference to Exhibit No. (10)c of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1996.
Exhibit No. (10)d. Executive Officer Achievement Award Program.*
Exhibit No. (10)e. 1992 Equity Participation Plan, as amended, incorporated by
reference to Exhibit No. (10)e of the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2000.
Exhibit No. (10)f. Deferred Compensation Plan, as amended.*
Exhibit No. (10)g. Outside Directors' Stock Compensation Plan, as amended.*
Exhibit No. (10)h. Supplemental Benefit Plan to the Kimberly-Clark Corporation
Pension Plan, as amended.*
Exhibit No. (10)i. Second Supplemental Benefit Plan to the Kimberly-Clark
Corporation Pension Plan, as amended and restated.*
Exhibit No. (10)j. Retirement Contribution Excess Benefit Program, as amended
and restated, incorporated by reference to Exhibit No. (10)j of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 2000.
Exhibit No. (10)k. 1999 Restricted Stock Plan, as amended, incorporated by
reference to Exhibit No. (10)k of the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2000.
Exhibit No. (10)l. Outside Directors' Compensation Plan, as amended and
restated.*
Exhibit No. (10)m. 2001 Equity Participation Plan, incorporated by reference to
Exhibit No. (10)m of the Corporation's Annual Report on Form 10-K for the year
ended December 31, 2001.
Exhibit No. (12). Computation of ratio of earnings to fixed charges for the
five years ended December 31, 2002.*
Exhibit No. (13). Portions of the Corporation's 2002 Annual Report to
Stockholders incorporated by reference in this Form 10-K.*
Exhibit No. (21). Subsidiaries of the Corporation.*
Exhibit No. (23). Independent Auditors' Consent.*
Exhibit No. (24). Powers of Attorney.*
Exhibit No. (99.1). Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
Exhibit No. (99.2). Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
*Filed herewith.