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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2005

OR

For the transition period from.............to.....................

Commission file number 1-225

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. 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

As of  April 28, 2005, there were 478,416,927 shares of the Corporation’s common stock outstanding.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT

Unaudited

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET

Unaudited

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Unaudited

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The unaudited consolidated financial statements have been prepared on a basis consistent with that used in the Annual Report on Form 10-K for the year ended December 31, 2004, and include all normal recurring adjustments necessary to present fairly the condensed consolidated balance sheet, consolidated income statement and condensed consolidated cash flow statement for the periods indicated. Certain reclassifications have been made to conform prior year data to the current year presentation.

On November 30, 2004, the Corporation completed the spin-off of Neenah Paper, Inc. As a result, the Corporation’s prior period consolidated income statement and condensed consolidated cash flow statement and related disclosures present the fine paper and technical paper businesses as discontinued operations. The December 31, 2004 condensed consolidated balance sheet and related disclosures are presented on their historic basis. Unless otherwise noted, the information contained in the notes to the consolidated financial statements relates to the Corporation’s continuing operations.

Note 2. Stock-Based Employee Compensation

The Corporation continues to account for stock-based compensation using the intrinsic-value method permitted by Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees. No employee compensation for stock options has been charged to earnings because the exercise prices of all stock options granted have been equal to the market value of the Corporation’s common stock at the date of grant. Information about net income and earnings per share as if the Corporation had applied the fair value expense recognition requirements of Statement of Financial Accounting Standards (“SFAS”) 123, Accounting for Stock-Based Compensation, to all employee stock options granted is presented below:

The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and experience.

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Note 2.  (Continued)

On April 14, 2005, the Securities and Exchange Commission amended the compliance date for SFAS 123R, Share-Based Payment, by requiring adoption of the fair value method of accounting for share-based payments to employees no later than the first fiscal year beginning after December 15, 2005. The Corporation is evaluating SFAS 123R and expects to adopt it effective January 1, 2006.

Note 3. Inventories

The following schedule presents inventories by major class as of March 31, 2005 and December 31, 2004:

FIFO cost of total inventories on the LIFO method was $817.0 million and $768.5 million at March 31, 2005 and December 31, 2004, respectively.

Note 4. Synthetic Fuel Partnerships

The Corporation has minority interests in two synthetic fuel partnerships. The production of synthetic fuel results in pretax losses, which totaled $46.3 million and $51.5 million in the first quarter of 2005 and 2004, respectively, and are reported as nonoperating expense on the Corporation’s income statement. The production of synthetic fuel results in tax credits as well as tax deductions for the nonoperating losses, which reduce the Corporation’s income tax expense. The Corporation’s participation in these synthetic fuel partnerships resulted in tax credits, which totaled $43.3 million and $46.7 million in the first quarter of 2005 and 2004, respectively. The nonoperating losses generated tax benefits of an additional $16.2 million and $18.0 million in the first quarter of 2005 and 2004, respectively. The tax credits and tax benefits combined to reduce the Corporation’s income tax provision by $59.5 million and $64.7 million in the first quarter of 2005 and 2004, respectively.

Note 5. Components of Net Periodic Benefit Cost

Shown below is the interim period disclosure required by SFAS 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits.

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Note 5. (Continued)

During the first quarter of 2005 and 2004, the Corporation made cash contributions of approximately $11 million and $62 million, respectively, to its pension trusts. The Corporation currently anticipates contributing about $68 million in 2005 to its pension trusts outside the U.S.

Note 6. Earnings Per Share

There are no adjustments required to be made to net income for purposes of computing basic and diluted earnings per share (“EPS”). The average number of common shares outstanding used in the basic EPS computations is reconciled to those used in the diluted EPS computation as follows:

Options outstanding during the first quarter ended March 31, 2005 and 2004 to purchase 5.3 million and 11.1 million shares of common stock, respectively, were not included in the computation of diluted EPS because the exercise prices of the options were greater than the average market price of the common shares.

The number of common shares outstanding as of March 31, 2005 and 2004 was 478.9 million and 501.3 million, respectively.

Note 7. Comprehensive Income

The following schedule presents the components of comprehensive income:

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Note 7.  (Continued)

The net unrealized currency translation adjustment for the three months ended March 31, 2005 is primarily due to the weakining of the euro, British pound, Swiss franc and Australian dollar versus the U.S. dollar.

Note 8. Description of Business Segments

The Corporation is organized into 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. The reportable segments are headed by executive officers who report to the Corporation’s Chief Executive Officer. These officers are 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, 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 global business segment are described below.

The Personal Care segment manufactures and markets disposable diapers, training and youth pants and swimpants; baby wipes; 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, napkins and related products for household use. Products in this segment are sold under the Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Hakle, Page and other brand names.

The Business-to-Business segment manufactures and markets disposable, single-use, health and hygiene products to the away-from-home marketplace. These products include facial and bathroom tissue, paper towels, napkins, wipers, surgical gowns, drapes, infection control products, sterilization wrap, disposable face masks and exam gloves, respiratory products, other disposable medical products 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.

The following schedule presents information concerning consolidated operations by business segment.

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Note 8.  (Continued)

Note: Unallocated items – net, consists of expenses not associated with the business segments.

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Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

This management’s discussion and analysis of financial condition and results of operations is intended to provide investors with an understanding of the Corporation’s recent performance, its financial condition and its prospects. The following will be discussed and analyzed:

Overview of First Quarter 2005 Results

Despite inflationary pressures and difficult price competition in several key businesses, the Corporation delivered net sales and earnings per share growth in line with its objectives.

Business Segments

On April 21, 2005, the Corporation announced organizational changes that, while maintaining its three global business segments – Personal Care, Consumer Tissue and Business-to-Business – changed certain reporting relationships within the operating structure of the Personal Care and Consumer Tissue segments. The Personal Care and Consumer Tissue North Atlantic organizations now report to the same executive officer.

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Results of Operations and Related Information

This section presents a discussion and analysis of the Corporation’s first quarter 2005 net sales, operating profit and other information relevant to an understanding of the results of operations.

First Quarter of 2005 Compared With First Quarter of 2004

Analysis of Net Sales

By Business Segment
(Millions of dollars)

Commentary:

Consolidated net sales for the first quarter of 2005 were 5.2 percent higher than in 2004. Overall sales volumes increased slightly more than 2 percent, on continued strength in the developing and emerging markets in each of the business segments along with successful product launches in North America. Net selling prices added about 1 percent, as price increases for consumer tissue and professional products in North America were largely offset by lower pricing for diapers and training pants in North America and Europe and for consumer tissue products in Europe. Favorable currency effects contributed nearly 3 percent. The divestiture of the pulp operations, as part of the spin-off of Neenah Paper on November 30, 2004, reduced net sales by about 1 percent.

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Analysis of Results by Geography
(Millions of dollars)

Commentary:

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Analysis of Operating Profit

By Business Segment
(Millions of dollars)

Note:   Unallocated items - - net, consists of expenses not associated with the business segments.

Commentary:

(a)     Includes higher raw material, energy and distribution costs net of cost savings achieved.

Consolidated operating profit in the first quarter of 2005 increased 2.3 percent from the prior year. The higher net selling prices and sales volumes, along with about $45 million of gross cost savings more than offset about $100 million of inflation in key cost components, including over $50 million of inflation in raw materials other than fiber, driven by increases in oil-based costs. Higher resin costs, which have reached record levels, were responsible for a majority of this increase. In addition, fiber costs were almost $20 million higher, and distribution costs increased approximately $25 million versus the year-ago quarter. Operating profit in the first quarter included about $10 million from a favorable legal settlement; however, this benefit was offset by currency transaction losses and the negative effect of the devaluation of the Venezuelan bolivar.

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Analysis of Results by Geography
(Millions of dollars)

Note:  Unallocated items - net, consists of expenses not associated with the geographic areas.

Commentary:

Additional Income Statement Commentary

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Liquidity and Capital Resources

New Accounting Pronouncements

In March 2005, the Financial Accounting Standards Board issued Financial Accounting Standards Board Interpretation (“FIN”) 47, Accounting for Conditional Asset Retirement Obligations. FIN 47 clarifies the term conditional asset retirement obligation as used in Statement of Financial Accounting Standards (“SFAS”) 143, Accounting for Asset Retirement Obligations, by stating that the obligation to perform the asset retirement activity is not conditional even though the timing or method of retirement may be conditional. Consequently, FIN 47 requires that a liability be recognized for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated. FIN 47 is effective for years ending after December 15, 2005. The Corporation is currently evaluating the effect of FIN 47 and will adopt it at December 31, 2005.

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On April 14, 2005, the Securities and Exchange Commission amended the compliance date for SFAS 123R, Share-Based Payment, by requiring adoption of the fair value method of accounting for share-based payments to employees no later than the first fiscal year beginning after December 15, 2005. The Corporation is evaluating SFAS 123R and will adopt it effective January 1, 2006.

Environmental Matters

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, results of operations, or liquidity.

Business Outlook

Based on results in the first quarter and plans for the balance of the year, the Corporation continues to believe its previous guidance for 2005 is appropriate. Specifically, the Corporation is targeting sales growth of 3 to 5 percent, consistent with its long-term objective. The gain is expected to come largely from volume improvements, driven by strong innovation and marketing programs. Top-line growth and continued success in reducing costs are expected to help achieve operating profit growth of 3 to 6 percent despite inflationary cost pressures.

A number of steps are being taken that should help counteract the significant and continuing escalation in costs. During the second quarter, the Corporation will begin to benefit from price increases on Cottonelle bathroom tissue, Viva paper towels and K-C Professional products in North America. Changes are being made to facial tissue package counts in North America that are expected to drive growth for the category and the Kleenex brand, and further cost reductions in Personal Care in North America and Europe are being initiated. In addition, plans were recently finalized to increase prices for Huggies diapers and Pull-Ups training pants, GoodNites youth pants and Little Swimmers swimpants, and Depend and Poise in the U.S. early in the third quarter.

The Corporation expects to deliver earnings of $3.70 to $3.85 per share for the year, representing mid- to high single-digit growth compared with net income from continuing operations of $3.55 per share in 2004.

As for the second quarter, earnings are anticipated to be in a range of 92 to 94 cents per share. Compared with net income from continuing operations of 88 cents per share in 2004, this would represent growth of approximately 5 to 7 percent, similar to the expected level of improvement for the full year. The Corporation is planning to continue a stepped-up level of marketing spending in the quarter compared with the prior year. The spending will support product launches, including Huggies toiletries, Pull-Ups training pants with Wetness Liner, Scott Extra Soft bathroom tissue and Kleenex Moist Cloths. Distribution and raw material costs are expected to continue to increase in the second quarter.

Information Concerning Forward-Looking Statements

Certain matters discussed in this report concerning, among other things, the business outlook, including new product introductions, cost savings, 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.

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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. 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.

For a description of these and other factors that could cause the Corporation’s future results to differ materially from those expressed in any such forward-looking statements, see the section Part 1 of Item I of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004 entitled “Factors That May Affect Future Results.”

Item 4. Controls and Procedures.

As of March 31, 2005, 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 March 31, 2005. There have been no significant changes during the quarter covered by this report in the Corporation’s internal control over financial reporting or in other factors that could significantly affect internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 2.  Stock Repurchases.

The Corporation regularly repurchases shares of Kimberly-Clark common stock pursuant to publicly announced share repurchase programs. All share repurchases by the Corporation were made through brokers on the New York Stock Exchange. During 2005, the Corporation anticipates purchasing $1.0 billion or more of its common stock. The following table contains information for shares repurchased during the first quarter of 2005. None of the shares in this table were repurchased directly from any officer or director of the Corporation.

In addition, during January, February and March 2005, 5,101 shares at a cost of $329,578; 66,299 shares at a cost of $4,455,326; and 1,972 shares at a cost of $128,765, respectively, were purchased from current or former employees in connection with the exercise of employee stock options and other awards.

Item 4.  Submission of Matters to a Vote of Security Holders.

The 2005 Annual Meeting of Stockholders was held on Thursday, April 28, 2005, at the Four Seasons Resort and Club, 4150 North MacArthur Boulevard, Irving, Texas. Represented at the meeting in person or by proxy were 426,397,544 shares of common stock, or more than 88.5 percent of all shares of common stock outstanding.

Following is a list of directors elected to three-year terms expiring in 2008 and the corresponding vote tabulation for the shares represented at the meeting. Of the shares represented at the meeting, at least 96.7 percent voted for each nominee. There were no broker non-votes with respect to this matter.

The Corporation’s other directors are Dennis R. Beresford, Pastora San Juan Cafferty, Thomas J. Falk, Claudio X. Gonzalez, Mae C. Jemison, M.D., Linda Johnson Rice and Marc J. Shapiro.

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The stockholders also voted on two proposals at the Annual Meeting. The following table shows the vote tabulation for the shares represented at the meeting:

Item 6.  Exhibits.

(a)  Exhibits

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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.

May 5, 2005

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EXHIBIT INDEX