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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, 1998
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. [X]
As of March 19, 1999, 533,724,982 shares of common stock were outstanding, and
the aggregate market value of the registrant's common stock held by
non-affiliates on such date (based on the closing stock price on the New York
Stock Exchange) was approximately $26.7 billion.
DOCUMENTS INCORPORATED BY REFERENCE
Kimberly-Clark Corporation's 1998 Annual Report to Stockholders and 1999 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
1998 Annual Report to Stockholders and 1999 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
- ------------------------------- --------------------------------
1998 Annual Report to Stockholders PART I
(Year ended December 31, 1998) 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 14. Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K
1999 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
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 Financial Statements contained
in the 1998 Annual Report to Stockholders, are incorporated in this Item 1
by reference.
RECENT DEVELOPMENTS. Historically, the Corporation has been engaged in a wide
variety of diversified businesses, including the manufacture and sale of
consumer products, paper and forest products, airline services and various
other businesses. In recent years, the Corporation has been undergoing a
transition to a global consumer products company based on the strategy of
building on its core technologies, well-known trademarks and consumer product
franchises. The Corporation also has been seeking opportunities to expand its
health care business. Those businesses that did not, or could not, build on
the Corporation's strengths were candidates for divestiture. Those businesses
that fit into the Corporation's strategy were candidates for further
investment and support. Outside businesses that were perceived as
opportunities consistent with the strategy were candidates for acquisition.
As a result, since 1992, the Corporation has completed over 30 strategic
acquisitions and nearly 20 strategic divestitures, including the following
transactions:
- - On December 12, 1995, Scott Paper Company ("Scott") became a
wholly-owned subsidiary of Kimberly-Clark upon completion of a merger
transaction in which the outstanding Scott common shares were converted into
shares of Kimberly-Clark common stock. The transaction was valued at
approximately $9.4 billion and accounted for as a pooling of interests.
On February 14, 1996, Scott changed its name to Kimberly-Clark Tissue
Company ("KCTC").
- - On June 28, 1996, the Corporation sold the baby and child wipe
businesses previously conducted by Scott, consisting of the Baby Fresh, Wash
a-Bye Baby and Kid Fresh brands and the Dover, Delaware production facility,
to The Procter & Gamble Company. This divestiture was required by the U.S.
Justice Department as part of the Scott merger.
- - On September 16, 1996, the Corporation sold its tissue mill in Prudhoe,
England and certain consumer tissue businesses in the United Kingdom and
Ireland to Svenska Cellulosa Aktiebolaget (SCA) of Sweden. This divestiture
was required by the European Commission as part of the Scott merger.
- - On March 27, 1997, the Corporation sold its Coosa Pines, Alabama pulp
and newsprint operations, and related woodlands, to Alliance Forest Products
Inc., a publicly-held Canadian corporation, for approximately $600 million in
cash.
- - On June 6, 1997, the Corporation sold its 50.1 percent interest in Scott
Paper Limited, a publicly-traded Canadian company to Kruger, Inc., a Canadian
paper and forest products company, for approximately $127 million.
- - On December 18, 1997, the Corporation acquired Tecnol Medical Products,
Inc. ("Tecnol"), a leading maker of disposable face masks and patient care
products, in a merger transaction which involved the conversion of all
outstanding shares of Tecnol common stock into shares of Kimberly-Clark common
stock. The transaction was valued at approximately $428 million and was
accounted for as a purchase.
- - 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.
- - 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.
- - On July 29, 1998, the Corporation purchased a 51 percent ownership
interest in Kimberly Bolivia, S.A., a new joint venture company in Bolivia.
- - 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.
On November 21, 1997, the Corporation announced a restructuring plan
("Announced Plan") which includes the sale, closure or downsizing of 18
manufacturing facilities worldwide and a workforce reduction of approximately
5,000 employees. In connection with the Announced Plan, the Corporation
recorded a pretax charge of $701.2 million in 1997 ("1997 Charge") and a
pretax charge of $108.8 million in 1998 ("1998 Charge").
In the fourth quarter of 1998, the Corporation recorded a pretax charge for
facility consolidations of $123.2 million to, among other things, further
align tissue manufacturing capacity with demand in Europe, close a diaper
manufacturing facility in Canada, shut down and dispose of a tissue machine in
Thailand and write down certain excess feminine care production equipment in
North America.
On May 5, 1998, the Corporation announced its intention to shut down its pulp
mill in Mobile, Alabama on September 1, 1999 and to sell the associated
woodlands operations (the "Southeeast Timberlands").
The net effect of this transaction is expected to result
in a gain, which will be recorded upon completion of the sale
of the Southeast Timberlands.
On December 23, 1998, the Corporation announced that it had signed a
definitive agreement to acquire Ballard Medical Products ("Ballard"), a
leading maker of disposable medical devices for respiratory care,
gastroenterology and cardiology. Under the agreement, Ballard shareholders
will receive $25 for each share of Ballard common stock, payable in shares of
the Corporation's common stock. The transaction, which is valued at
approximately $764 million, remains subject to regulatory clearances and
approval by the Ballard shareholders. The transaction is expected to be
completed in the first half of 1999 and will be accounted for as a purchase.
DESCRIPTION OF THE CORPORATION. The Corporation is principally engaged in the
manufacturing and marketing throughout the world of a wide range of products
for personal, business and industrial uses. Most of these products are made
from natural and synthetic fibers using advanced technologies in fibers,
nonwovens and absorbency.
For financial reporting purposes, the Corporation's businesses are separated
into three segments: Tissue; Personal Care; and Health Care and Other.
The Tissue segment includes facial and bathroom tissue, and paper towels and
wipers for household and away-from-home use; wet wipes; printing, premium
business and correspondence papers; and related products. Products in this
business segment are sold under the Kleenex, Scott, Kimberly-Clark, Kleenex
Cottonelle, Kleenex Viva, Huggies, Kimwipes, Wypall and other brand names.
The Personal Care segment includes disposable diapers, training and youth
pants, and swimpants; feminine and incontinence care products; and related
products. Products in this business segment are primarily for household use
and are sold under a variety of well-known brand names, including Huggies,
Pull-Ups, Little Swimmers, GoodNites, Kotex, New Freedom, Lightdays, Depend,
Poise and KimCare.
The Health Care and Other segment includes health care products, consisting of
surgical gowns, drapes, infection control products, sterilization wraps,
disposable face masks, cold therapy products, patient restraints and other
disposable medical products; specialty and technical papers; and other
products. Products in this segment are sold under the Kimberly-Clark, Tecnol
and other brand names.
Products for household use are sold directly and through wholesalers to
supermarkets, mass merchandisers, drugstores, warehouse clubs, home health
care, 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. Paper products are
sold directly to users, converters, manufacturers, publishers and printers,
and through paper merchants, brokers, sales agents and other resale agencies.
Health care products are sold to distributors, converters and end-users.
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 "Trademarks" contained
in the 1998 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 primary raw materials for
manufacturing nonwoven fabrics which are used in disposable diapers, training
and youth pants, feminine pads, incontinence and health care products, and
away-from-home wipers.
Cellulose fiber, in the form of kraft pulp or recycled fiber, 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.
Most recovered paper and all 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 6.4 million acres of forestland in North
America, principally as a fiber source for pulp production which is consumed
internally within the tissue and personal care businesses. In the United
States, approximately .5 million acres are owned in Alabama and Mississippi.
In Canada, 1.0 million acres in the province of Nova Scotia are owned by the
Corporation, and 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, health care and
tissue products, and nonwoven materials. Consolidated research and development
expense was $224.8 million in 1998, $211.8 million in 1997 and $207.9 million
in 1996.
ENVIRONMENTAL MATTERS. Total worldwide capital expenditures for environmental
controls to meet legal requirements and otherwise relating to the protection
of the environment at the Corporation's facilities are expected to be about
$107 million in 1999 and $68 million in 2000. Of this amount, approximately
$51 million in 1999 and $34 million in 2000 are expected to be spent at
facilities in the United States. Approximately $9 million and $19 million of
such U.S. expenditures in 1999 and 2000, respectively, relate to compliance
with the Environmental Protection Agency's ("EPA") Cluster Rule for sulfite
pulping operations at the Corporation's Everett, Washington pulp mill. The
remainder of the expected U.S. expenditures, approximately $42 million in
1999 and $15 million in 2000, is expected to be applied at various other
production facilities for other environmental control system improvements.
For facilities outside the U.S., capital expenditures for environmental
controls are expected to be approximately $56 million in 1999 and $34 million
in 2000.
Total worldwide operating expenses for environmental compliance are expected
to be $157 million in 1999 and $160 million in 2000. U.S. operating expenses
are expected to be $91 million in 1999 and $92 million in 2000. Operating
expenses for facilities outside the U.S. are expected to be $67 million in
1999 and $68 million in 2000. 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 contingent 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 does not consider these obligations to be
material and has established appropriate accrued liabilities with respect
thereto.
EMPLOYEES. In its worldwide consolidated operations, the Corporation had
54,700 employees as of December 31, 1998.
Approximately 25 percent of the Corporation's United States workforce and
approximately 40 percent of the Corporation's non-United States workforce are
represented by unions. In the United States, 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), and various independent unions.
At those facilities where one or more unions represent employees, the
Corporation and the unions generally have good working relationships. The
labor agreements are generally three years or more in duration and contain
wage and fringe benefit programs which management of the Corporation believes
are competitive within the applicable industry segment and geographic region.
Throughout the Corporation, management seeks to establish and maintain an open
and respectful relationship with its employees. Management believes that
communications should flow freely in the organization to provide all employees
the opportunity to maximize the use of their talents in the attainment of the
Corporation's business objectives.
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, anticipated financial and operating results, strategies,
contingencies and contemplated transactions of the Corporation; the adequacy
of the 1998 and 1997 Charges; the adequacy of the 1998 facility consolidations
charge; the anticipated sale of the Southeast Timberlands; and the remaining
costs of the Announced Plan 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 following factors, as well as factors described elsewhere in this Form
10-K, or in other Securities and Exchange Commission 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.
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 quality and performance, price, 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 products and line extensions as a means of achieving
and/or maintaining category leadership. In order to maintain its competitive
position, the Corporation must develop technological innovation with respect
to its products.
COST SAVING STRATEGY. A significant portion of the Corporation's anticipated
cost savings are expected to result from operating efficiencies, the Announced
Plan and the 1998 facility consolidations. However, such savings will require
the continued consolidation and integration of facilities, functions, systems
and procedures, all of which present significant management challenges. There
can be no assurance that such actions will be successfully accomplished as
rapidly as expected or of the extent to which such cost savings and
efficiencies 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 20 percent of the
Corporation's overall fiber requirements. On a worldwide basis, the
Corporation has reduced its internal supply of pulp to approximately
75 percent of its virgin fiber requirements and has announced its intention to
reduce its level of pulp integration to approximately 20 percent. However,
such a reduction in pulp integration could increase the Corporation's
commodity price risk. Specifically, increases in pulp prices could adversely
affect the Corporation's earnings if selling prices are not adjusted or if
such adjustments significantly trail the increases in pulp prices.
Conversely, if the Corporation does not lower its level of pulp integration
and the market price for pulp declines, thereby possibly causing selling
prices for tissue products to fall, the Corporation's profit margin could
suffer. The Corporation has not used derivative instruments in the management
of these risks.
ACQUISITION AND DIVESTITURE STRATEGY. The Corporation's anticipated financial
results and business outlook are dependent in part upon the consummation of
projected divestitures on terms advantageous to the Corporation and the
availability of suitable acquisition candidates. There can be no assurance
that such divestitures will be consummated, or, if consummated, that the terms
of such divestitures will be advantageous to the Corporation. In addition,
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 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 be as estimated.
FOREIGN MARKET RISKS. Because the Corporation and its equity companies have
manufacturing facilities in 38 countries and its products are sold in
approximately 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. Recent economic
uncertainty and currency devaluations in Asia and Latin America have and may
continue to have an impact on the Corporation's earnings. Also, the extremely
competitive situation in European personal care and tissue markets, and the
challenging economic environments in Mexico and developing countries in
eastern Europe and Latin America, may slow the Corporation's sales growth and
earnings potential. In addition, the Corporation is subject to (i) foreign
exchange translation risk associated with the introduction of the Euro in
certain European countries, and the strengthening or weakening of various
currencies against each other and local currencies versus the U.S. dollar, and
(ii) foreign currency risk arising from transactions and commitments
denominated in non-local currencies. See "Management's Discussion and
Analysis - Market Risk Sensitivity and Inflation Risks" and "- Adoption of the
Euro" contained in the 1998 Annual Report to Stockholders, which is
incorporated herein by reference. Translation exposure for the Corporation's
balance sheet with respect to foreign operations is not hedged. Although the
Corporation uses instruments to hedge its foreign currency risks (through
foreign currency forward, swap and option contracts), these instruments are
used selectively to manage risk and 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," below.
"YEAR 2000" READINESS. For a discussion of the Corporation's readiness for
the "Year 2000" in terms of its computer systems, see "Management's Discussion
and Analysis - 'Year 2000' Readiness" contained in the 1998 Annual Report to
Stockholders, which is incorporated herein by reference.
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 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 CENTER
Knoxville, Tennessee
WORLDWIDE PRODUCTION AND SERVICE FACILITIES
UNITED STATES
ALABAMA
Mobile - tissue products and pulp (1)
ARIZONA
Tucson - nonwovens
ARKANSAS
Conway - feminine care, incontinence care, nonwovens
Maumelle - wet wipes, nonwovens
CALIFORNIA
Escondido - printing inks
Fullerton - tissue products
CONNECTICUT
New Milford - diapers, tissue products
GEORGIA
LaGrange - nonwovens
KENTUCKY
Owensboro - tissue products
MICHIGAN
Munising - technical papers
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, tissue products
TENNESSEE
Loudon - tissue products
TEXAS
Cleburne - tissue products
Del Rio - nonwovens
Fort Worth - nonwovens
Italy - tissue products
Paris - diapers, training and youth pants
San Antonio - personal cleansing products and systems
UTAH
Ogden - diapers
VERMONT
East Ryegate - technical papers
WASHINGTON
Everett - tissue products, pulp
WISCONSIN
Marinette - tissue products
Neenah - diapers, training and youth pants, feminine care, incontinence
care, business and correspondence papers, nonwovens
Whiting - business and correspondence papers
OUTSIDE THE UNITED STATES
ARGENTINA
*Bernal - tissue products
Pilar - feminine care, incontinence care
San Luis - diapers
AUSTRALIA
*Albury - nonwovens
*Ingleburn - diapers
*Lonsdale - diapers, incontinence care, feminine care
*Millicent - pulp, tissue products
*Tantanoola - pulp
*Warwick Farm - tissue products
BAHRAIN
*East Riffa - tissue products
BELGIUM
Duffel - tissue products
BOLIVIA
La Paz - tissue products
Santa Cruz - diapers, feminine care, tissue products
BRAZIL
*Correia - tissue products
*Cruzeiro - tissue products
*Mendes - feminine care
*Mogi das Cruzes - tissue products
Porto Alegre - diapers, feminine care
*Recife - tissue products
Suzano - diapers, feminine care
CANADA
Huntsville, Ontario - tissue products, wipers
New Glasgow, Nova Scotia - pulp
St. Hyacinthe, Quebec - feminine care
Terrace Bay, Ontario - pulp (2)
CHINA (3)
Beijing - feminine care, diapers
Chengdu - feminine care
Guangzhou - tissue products
Handan - feminine care
Harbin - feminine care
Hong Kong - tissue products (4)
Kunming - feminine care
Nanjing - feminine care
Shanghai - tissue products
Shenyang - feminine care
Wuhan - feminine care
COLOMBIA
Barbosa - tissue products, specialty papers, fine papers, notebooks
Guarne - tissue products
Pereira - tissue products, feminine care, incontinence care, diapers
Tocancipa - diapers
*Villa Rica - diapers, incontinence care
COSTA RICA
Belen - tissue products
Cartago - diapers, feminine care
CZECH REPUBLIC
Jaromer - diapers, incontinence care
Litovel - feminine care
DOMINICAN REPUBLIC
Santo Domingo - tissue products
ECUADOR
Babahoyo - tissue products
Guayaquil - diapers, feminine care
EL SALVADOR
San Salvador - tissue products
Sitio del Nino - tissue products, feminine care
FRANCE
Rouen - tissue products
Villey-Saint-Etienne - tissue products
GERMANY
Flensburg - tissue products (5)
Forchheim - feminine care, incontinence care
Koblenz - tissue products
Reisholz - tissue products
GUATEMALA
Guatemala City - tissue products, feminine care, notebooks
HONDURAS
San Pedro Sula - tissue products, feminine care
Villanueva - nonwovens
INDIA
*Pune - feminine care, diapers
Pune - tissue products
INDONESIA
Jakarta - tissue products
*Medan - specialty papers
ISRAEL
*Afula - diapers, feminine care, incontinence care
*Hadera - tissue products
ITALY
Alanno - tissue products
Romagnano - tissue products
Villanovetta - tissue products
JAPAN
Shinga - personal cleansing products, soap
KOREA
Anyang - feminine care, diapers, tissue products
Kimcheon - feminine care, tissue products, nonwovens
Taejon - feminine care, diapers
MALAYSIA
Kluang - tissue products
MEXICO
Acuna - nonwovens
*Bajio - tissue products, fine papers
*Cuautitlan - feminine care, diapers, nonwovens
*Ecatepec - tissue products
Empalme - nonwovens
Magdalena - nonwovens
*Morelia - tissue products, pulp
*Naucalpan - tissue products, diapers, feminine care
Nogales - nonwovens
*Orizaba - tissue products, fine papers, pulp
*Ramos Arizpe - tissue products, diapers
*San Juan - tissue products
*San Rafael - tissue products, fine papers
*Tlaxcala - diapers
PERU
Lima - diapers, feminine care, incontinence care, tissue products
PHILIPPINES
San Pedro, Laguna - feminine care, diapers, tissue products, specialty
papers
SAUDI ARABIA
*Al-Khobar - diapers, feminine care, tissue products
SLOVAK REPUBLIC
Piestany - nonwovens
SOUTH AFRICA
Cape Town - tissue products, feminine care, incontinence care
Springs - tissue products, diapers
SPAIN
Aranguren - tissue products
Arceniega - tissue products, personal cleansing products and systems
Calatayud - diapers
Canary Islands - tissue products
Miranda del Ebro - pulp (2)
Salamanca - tissue products
TAIWAN
Hsin-Ying - tissue products (6)
Ta-Yuan - tissue products
THAILAND
Pathumthani - feminine care, diapers, tissue products
Samutprakarn - tissue products
UNITED KINGDOM
Barrow - tissue products
Barton-upon-Humber - diapers
Flint - tissue products, nonwovens
Larkfield - tissue products
Northfleet - tissue products
VENEZUELA
Guacara - diapers, feminine care
Maracay - tissue products
VIETNAM
Hanoi - feminine care
Ho Chi Minh City - feminine care
* Equity company production facility
_________________________________
(1) Portions of the land under this facility are held under various
long-term operating leases, the more significant of which contain options
to purchase the land. The Corporation has announced its intention to
close the pulp mill located at this facility in September 1999.
(2) The Corporation has announced its intention to sell this facility.
(3) Except as otherwise noted, the land on which these facilities are located
is held under long-term leases.
(4) This facility is held under a short-term renewable lease.
(5) The Corporation has announced its intention to close this facility.
(6) The land and a portion of this facility are subject to a mortgage.
ITEM 3. LEGAL PROCEEDINGS
The following is a brief description of certain legal and administrative
proceedings to which the Corporation or any of its subsidiaries is a party or
to which the Corporation's or any of its subsidiaries' properties is subject:
Litigation
- ----------
A. On May 13, 1997, the State of Florida, acting through its attorney
general, filed a complaint in the Gainesville Division of the United States
District Court for the Northern District of Florida (the "Florida District
Court") alleging that manufacturers of tissue products for away-from-home use,
including the Corporation and Scott, agreed to fix prices by coordinating
price increases for such products. Following Florida's complaint, an action
by the states of Maryland, New York and West Virginia, as well as
approximately 45 class action complaints, have been filed in various federal
and state courts around the United States. These actions contain allegations
similar to those made by the State of Florida in its complaint. The actions
in federal courts have been consolidated for pretrial proceedings in the
Florida District Court. Class certification was granted in the federal
proceedings in July 1998 and will be contested in the state cases. The
foregoing actions seek an unspecified amount of actual and treble damages.
The Corporation has answered the complaints in these actions and has denied
the allegations contained therein as well as any liability. Discovery is
proceeding. The Corporation intends to contest these claims vigorously.
These actions are not expected to have a material adverse effect on the
Corporation's business or results of operations.
B. On January 14, 1999, Mobile Energy Services Company, L.L.C. ("MESC") and
Mobile Energy Services Holdings, Inc. filed an adversary proceeding against
KCTC in the United States Bankruptcy Court in Mobile, Alabama. Plaintiffs,
as debtors-in-possession, own a cogeneration complex that provides energy
services to KCTC's Mobile facility. The complaint alleges that: (i) the sale
of the cogeneration complex by KCTC to MESC in December 1994 was a fraudulent
transfer; (ii) KCTC cannot effect a pulp mill closure while it continues to
operate the wastewater treatment facility and "produce pulp" at the Mobile
facility; (iii) Kimberly-Clark's announced pulp mill closure was a repudiation
of the site operating agreements; (iv) KCTC breached the master operating
agreement by failing to give MESC reasonable assistance in developing new
business opportunities for the energy complex after Kimberly-Clark announced
the pulp mill closure; and (v) KCTC failed to allow the sale of the Mobile
pulp mill. The complaint does not specify the amount of damages demanded. The
Corporation intends to contest these claims vigorously. This action is not
expected to have a material adverse effect on the Corporation's business or
results of operations.
C. 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 or results of operations.
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 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 statute, 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 or results of operations.
Notwithstanding its opinion, management believes it appropriate to discuss the
following matters concerning two of these sites where the Corporation's
estimated share of total site remediation costs, if any, cannot be established
on the basis of currently available information:
A. In 1994, Scott received a notice of responsibility from the
Massachusetts Department of Environmental Protection regarding the South
Hadley Site in South Hadley, Massachusetts. The notice implicated Scott
Graphics, Inc., a former Scott subsidiary, as having disposed of hazardous
waste at the site. There have been no significant developments since the date
the Corporation received the notice.
B. In January 1998, the Corporation was notified by the Tennessee
Department of Environment and Conservation of its status as a potentially
liable party at the Bellevue Avenue Landfill in Shelby County, Tennessee. The
Corporation currently lacks adequate information to make a determination as to
the extent of its liability at the site.
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,
1999, together with certain biographical information, are as follows:
ROBERT E. ABERNATHY, 44, was elected Group President effective January 1,
1997. He is responsible for the global health care business, nonwovens
manufacturing and research, the technical papers business, corporate research
and development, and the World Support Group. 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.
JUAN ERNESTO DE BEDOUT, 53, was elected President - Latin American Operations
in December 1998. Mr. de Bedout joined the Corporation in 1981 as Managing
Director of Colombiana Kimberly S.A. Additional responsibilities were
assigned to him in 1988 for the management of the Kimberly-Clark companies
in the Central American countries. In 1992, he was named General
Manager - Latin American Operations with responsibility for the Corporation's
business units in Central and South America. He was appointed Vice
President - Latin American Operations in 1994 and President - Latin American
Operations in August 1998.
JOHN W. DONEHOWER, 52, was elected Senior Vice President and Chief Financial
Officer in 1993. Mr. Donehower joined the Corporation in 1974. He was
appointed Director of Finance - Europe in 1978, Vice President, Marketing and
Sales - Nonwovens in 1981, Vice President, Specialty Papers in 1982, Managing
Director, Kimberly-Clark Australia Pty. Limited in 1982, and Vice President,
Professional Health Care, Medical and Nonwoven Fabrics in 1985. He was
appointed President, Specialty Products - U.S. in 1987, and
President - World Support Group in 1990. Mr. Donehower is a director of
Eastman Chemical Co. and Allendale Mutual Insurance Company.
O. GEORGE EVERBACH, 60, 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, 40, was elected Group President - Tissue, Pulp and Paper in
April 1998. He is responsible for the Corporation's global tissue businesses.
He also is 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. His
responsibilities have included internal audit, finance and strategic analysis,
and operations management. In 1993, he was elected Group President - Infant
and Child Care and has held various senior management positions in the
Corporation's Consumer and Away From Home businesses in North America and
Europe since that time. Mr. Falk is a member of the University of Wisconsin -
Madison School of Business Dean's Advisory Board and serves on the Board of
Directors of Associated Bank - Fox Cities and Newell-Rubbermaid, Inc.
PAUL S. GEISLER, 57, was elected Group President - Asia/Pacific in April 1996.
He was appointed President - Asia in 1994. Mr. Geisler joined the Corporation
in 1982 as Marketing Director - Facial Tissue and Table Napkins. He was
appointed Vice-President - DEPEND Absorbent Products and New Technology
Products in 1984, and Vice-President - Home Health Care in 1985. In 1990, Mr.
Geisler was appointed President - U.S. Infant Care Sector, and in 1992, he was
elected Group President - North American Feminine Care and Adult Care Sectors.
WAYNE R. SANDERS, 51, has served as Chief Executive Officer of the
Corporation since 1991 and Chairman of the Board of the Corporation since
1992. He previously had been elected President and Chief Operating Officer in
1990. Employed by the Corporation in 1975, Mr. Sanders was appointed Vice
President of Kimberly-Clark Canada Inc., a wholly owned subsidiary of the
Corporation, in 1981 and was appointed Director and President in 1984. Mr.
Sanders was elected Senior Vice President of Kimberly-Clark Corporation in
1985 and was appointed President - Infant Care Sector in 1987, President -
Personal Care Sector in 1988 and President - World Consumer, Nonwovens and
Service and Industrial Operations in 1990. Mr. Sanders is a director of Adolph
Coors Company, Coors Brewing Company, Texas Instruments Incorporated and Chase
Bank of Texas, National Association. He also is a member of the Marquette
University Board of Trustees and is a national trustee of the Boys and Girls
Clubs of America. He has been a director of the Corporation since 1989.
KATHI P. SEIFERT, 49, was elected Group President - Personal Care Products in
April 1998. She is responsible for the Infant Care, Child Care, Feminine
Care, and Adult Care business sectors, the Safety and Quality Assurance team
and the U.S. and Canadian Sales organizations, and leads a team responsible
for the Corporation's global personal care businesses. Ms. Seifert joined
Kimberly-Clark in 1978. Her responsibilities in the Corporation have included
various marketing positions within the Away From Home, Consumer Tissue and
Feminine Care business sectors. She was appointed President - Feminine Care
Sector in 1991, was elected Group President - Feminine and Adult Care in
1994, elected Group President - North American Consumer Products in January
1995, and elected Group President - North American Personal Care Products in
July 1995. Ms. Seifert is a member of the Board of Directors of Eli Lilly and
Company and Aid Association for Lutherans.
PART II
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
"Dividends and Dividend Reinvestment Plan" and "Stock Exchanges" contained in
the 1998 Annual Report to Stockholders are incorporated in this Item 5 by
reference.
As of March 19, 1999, the Corporation had 54,334 holders of record of its
common stock.
ITEM 6. SELECTED FINANCIAL DATA
(Millions of Dollars, Year Ended December 31
except per share amounts) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
Net Sales. . . . . . . . $12,297.8 $12,546.6 $13,149.1 $13,373.0 $11,627.9
Restructuring and Other
Unusual Charges . . . . 101.5 481.1 -- 1,440.0 --
Operating Profit . . . . 1,676.1 1,303.2 2,053.7 213.0 1,277.1
Share of Net Income of
Equity Companies. . . . 137.1 157.3 152.4 113.3 110.5
Income from Continuing
Operations Before
Extraordinary Items and
Cumulative Effect of
Accounting Change . . . 1,177.0 884.0 1,403.8 33.2 766.5
Per Share Basis:
Basic . . . . . . . . 2.14 1.59 2.49 .06 1.38
Diluted . . . . . . . 2.13 1.58 2.48 .06 1.37
Net Income 1,165.8 901.5 1,403.8 33.2 753.8
Per Share Basis:
Basic . . . . . . . . 2.12 1.62 2.49 .06 1.35
Diluted . . . . . . . 2.11 1.61 2.48 .06 1.34
Cash Dividends Declared. 1.00 .96 .92 .90 .88
Cash Dividends Paid. . . .99 .95 .92 .90 .88
Total Assets . . . . . . $11,510.3 $11,266.0 $11,845.7 $11,439.2 $12,555.7
Long-Term Debt . . . . . 2,068.2 1,803.9 1,738.6 1,984.7 2,085.4
Stockholders' Equity . . 3,887.2 4,133.3 4,489.4 3,667.3 4,145.9
NOTES TO SELECTED FINANCIAL DATA
(1) In the fourth quarter 1997, the Corporation announced a plan to
restructure its worldwide operations ("Announced Plan"), the total pretax cost
of which was estimated at $810.0 million. In conjunction with the Announced
Plan, the Corporation recorded a pretax charge of $701.2 million in 1997
("1997 Charge") and recorded the remaining $108.8 million in 1998 ("1998
Charge") at the time these costs became accruable under appropriate accounting
principles.
(2) The 1998 Charge reduced operating profit, net income and net income
per share by $108.8 million, $86.9 million and $.16, respectively. Of the
1998 Charge, $7.3 million relates to the write-down of certain assets and
inventories and has been charged to cost of products sold, and $101.5 million
has been recorded as restructuring and other unusual charges on the income
statement.
(3) In 1998, the carrying amounts of trademarks and unamortized goodwill
of certain European businesses were determined to be impaired and written
down. In addition, the Corporation began depreciating the cost of all new
personal computers ("PCs") acquired after September 30, 1998 over two years.
Accordingly, in recognition of the change in estimated useful lives of its
existing PC assets, the remaining book value of all PCs acquired prior to 1997
was written down. These write-downs, along with $8.8 million of charges for
write-downs of other assets and a loss on a pulp contract, reduced operating
profit, net income and net income per share by $95.6 million, $73.6 million
and $.13, respectively. Of the $95.6 million, $11.3 million was charged to
cost of products sold and $84.3 million was charged to general expense.
(4) In 1998, the Corporation recorded a charge for facility
consolidations of $123.2 million to, among other things, further align
tissue-manufacturing capacity with demand in Europe, close a diaper
manufacturing facility in Canada, shut down and dispose of a tissue machine in
Thailand and write down certain excess feminine care production equipment in
North America. These costs, which were charged to cost of products sold,
reduced operating profit, net income and net income per share by $123.2
million, $86.1 million and $.16, respectively.
(5) Net income and net income per share for 1998 includes a gain on the
sale of the Corporation's subsidiary, K-C Aviation Inc., of $78.3 million and
$.14, respectively.
(6) In 1998, the Corporation changed its method of accounting for the
costs of start-up activities effective January 1, 1998, as required by
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities."
The Corporation recorded a net after income tax charge of $11.2 million, or
$.02 per share, as the cumulative effect of this accounting change.
(7) The 1997 Charge reduced operating profit, net income and net income
per share by $701.2 million, $503.1 million and $.91, respectively. Of the
1997 Charge, $220.1 million related to the write-down of certain assets and
inventories and was charged to cost of products sold, and $481.1 million was
recorded as restructuring and other unusual charges on the income statement.
(8) In 1997, the Corporation sold its equity interest in Scott Paper
Limited, a 50.1 percent-owned Canadian tissue subsidiary, and its Coosa Pines,
Alabama, newsprint and pulp manufacturing mill, together with related
woodlands. Also, the Corporation recorded impairment losses on the planned
sales of a pulp manufacturing mill in Miranda, Spain; a recycled fiber
facility in Oconto Falls, Wisconsin; and a tissue converting facility in
Yucca, Arizona; and on an integrated pulp making facility in Everett,
Washington. These transactions were aggregated and reported as extraordinary
gains totaling $17.5 million, or $.03 per share.
(9) Share of net income of equity companies and net income for 1997
includes a net gain of $16.3 million, or $.03 per share, primarily related to
the sale of a portion of the tissue business of Kimberly-Clark de Mexico, S.A.
de C.V. ("KCM"). The sale was required by the Mexican regulatory authorities
following the merger of KCM and Scott Paper Company's ("Scott") former Mexican
affiliate.
(10) Results for 1996 include a net pretax gain from regulatory
divestitures required in connection with the Scott merger and from the sale of
the Corporation's remaining interest in Midwest Express Holdings, Inc. These
transactions resulted in a gain of $.13 per share.
(11) Share of net income of equity companies and net income for 1996
includes a charge recorded by KCM for restructuring costs related to its
merger with Scott's former Mexican affiliate. The Corporation's share of the
after-tax charge was $5.5 million, or $.01 per share.
(12) Results for 1995 include a pretax charge of $1,440.0 million or
$1,070.9 million after income taxes and minority interests, or $1.92 per
share, for the estimated costs of the merger with Scott, for restructuring the
combined operations, and for other unusual charges.
(13) In 1995, share of net income of equity companies and net income
includes a charge of $38.5 million, or $.07 per share, for foreign currency
losses incurred by KCM on the translation of the net exposure of U.S.
dollar-denominated liabilities into pesos.
(14) In 1994, share of net income of equity companies and net income
includes a charge of $39.2 million, or $.07 per share, for foreign currency
losses incurred by KCM on the translation of the net exposure of U.S.
dollar-denominated liabilities into pesos.
(15) Results for 1994 include income of a discontinued operation, net of
taxes, of $48.4 million, or $.08 per share, related to S.D. Warren Company, a
former printing and publishing papers subsidiary, which was sold in December
1994.
(16) Results for 1994 include an extraordinary loss related to the early
extinguishment of debt of $61.1 million, or $.11 per share.
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 1998 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 - Market Risk Sensitivity and Inflation Risks" contained in the 1998
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
1998 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 1999 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 1999 Proxy Statement captioned
"Executive Compensation" under "Proposal 1. Election of Directors" is
incorporated in this Item 11 by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information in the section of the 1999 Proxy Statement captioned "Security
Ownership of Management" under "Proposal 1. Election of Directors" is
incorporated in this Item 12 by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in the section of the 1999 Proxy Statement captioned "Certain
Transactions and Business Relationships" under "Proposal 1. Election of
Directors" is incorporated in this Item 13 by reference.
PART IV
ITEM 14. 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, 1998 and 1997, and the
related Consolidated Statements of Income, Stockholders' Equity and Cash Flow
for the years ended December 31, 1998, 1997 and 1996, 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 1998 Annual Report to Stockholders.
In addition, related reports of Deloitte & Touche LLP are 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 1998 Annual
Report to Stockholders.
Independent Auditors' Reports
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 to the Corporation's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
Exhibit No. (3)b. By-Laws, as amended November 22, 1996, incorporated by
reference to Exhibit No. 4.2 of the Corporation's Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on December 6, 1996
(File No. 333-17367).
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 as of January 1, 1998, 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 as of
December 10, 1998.
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. 1986 Equity Participation Plan, as amended effective
November 20, 1997, incorporated by reference to Exhibit No. (10)d of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997.
Exhibit No. (10)e. 1992 Equity Participation Plan, as amended effective
November 20, 1997, incorporated by reference to Exhibit No. (10)e of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997.
Exhibit No. (10)f. Deferred Compensation Plan, effective as of October 1,
1994, incorporated by reference to Exhibit No. (10)g of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994.
Exhibit No. (10)g. First Amendment to Deferred Compensation Plan, effective as
of November 22, 1996, incorporated by reference to Exhibit No. (10)g of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1996.
Exhibit No. (10)h. Outside Directors' Stock Compensation Plan, incorporated by
reference to Exhibit No. 4.5 to the Corporation's Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on April 18, 1996
(File No. 33-02607).
Exhibit No. (10)i. Supplemental Benefit Plan to Salaried Employees' Retirement
Plan, amended and restated as of November 17, 1994, incorporated by reference
to Exhibit No. (10)i of the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1996.
Exhibit No. (10)j. Second Supplemental Benefit Plan to Salaried Employees'
Retirement Plan, amended and restated as of November 17, 1994, incorporated by
reference to Exhibit No. (10)j of the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996.
Exhibit No. (10)k. Retirement Contribution Excess Benefit Program, as amended
and restated as of August 19, 1998.
Exhibit No. (10)l. 1999 Restricted Stock Plan, effective as of January 1,
1999, incorporated by reference to Exhibit No. 4.5 to the Corporation's
Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on February 3, 1999 (File No. 333-71661).
Exhibit No. (12). Computation of ratio of earnings to fixed charges for the
five years ended December 31, 1998.
Exhibit No. (13). Portions of the Corporation's 1998 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 of Deloitte & Touche LLP.
Exhibit No. (24). Powers of Attorney.
Exhibit No. (27). The Financial Data Schedule required by Item 601(b)(27) of
Regulation S-K has been included with the electronic filing of this Form 10-K.
(B) REPORTS ON FORM 8-K
(i) The Corporation filed a Current Report on Form 8-K, dated January 26,
1999, to report its 1998 fourth quarter earnings.
(ii) The Corporation filed a Current Report on Form 8-K, dated March 12,
1999, to report its 1998 audited financial statements.
(iii) The Corporation filed a Current Report on Form 8-K, dated March 16,
1999, to report the mutual termination of the agreement to sell its Southeast
Timberlands to Southstar Timber Resources, LLC.
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 26, 1999
By: /s/ John W. Donehower
----------------------
John W. Donehower
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/ Wayne R. Sanders Chairman of the Board March 26, 1999
- ------------------------ and Chief Executive Officer
Wayne R. Sanders and Director
(principal executive officer)
/s/ John W. Donehower Senior Vice President and March 26, 1999
- ------------------------- Chief Financial Officer
John W. Donehower (principal financial officer)
/s/ Randy J. Vest Vice President and March 26, 1999
- --------------------- Controller
Randy J. Vest (principal accounting officer)
Directors
John F. Bergstrom Louis E. Levy
Pastora San Juan Cafferty Frank A. McPherson
Paul J. Collins Linda Johnson Rice
Robert W. Decherd Wolfgang R. Schmitt
William O. Fifield Randall L. Tobias
Claudio X. Gonzalez
By: /s/ O. George Everbach March 26, 1999
---------------------------------------
O. George Everbach, Attorney-in-Fact
INDEPENDENT AUDITORS' REPORT
KIMBERLY-CLARK CORPORATION:
We have audited the consolidated financial statements of Kimberly-Clark
Corporation as of December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998, and have issued our report thereon
dated January 25, 1999; such consolidated financial statements and report are
included in your Annual Report and are incorporated herein by reference. Our
audits also included the consolidated financial statement schedule of
Kimberly-Clark Corporation, listed in Item 14. 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 14, 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
January 25, 1999
SCHEDULE II Kimberly-Clark Corporation and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(Millions of dollars)
Additions Deductions
--------------------------- --------------
Balance at Charged to Charged to Write-Offs Balance
Beginning Costs and Other and Discounts at End of
Description of Period Expenses Accounts(a) Allowed Period
- ---------------------------------------------------------------------------------------------------------------------
December 31, 1998
Allowances deducted from
assets to which they apply
Allowances for doubtful
accounts $ 37.8 $ 21.5 $ 3.1 $ 10.9(b) $ 51.5
Allowances for sales
discounts 22.1 182.5 .2 189.0(c) 15.8
December 31, 1997
Allowances deducted from
assets to which they apply
Allowances for doubtful
accounts $ 33.0 $ 12.3 $ 2.2 $ 9.7(b) $ 37.8
Allowances for sales
discounts 13.3 174.5 7.8 173.5(c) 22.1
December 31, 1996
Allowances deducted from
assets to which they apply
Allowances for doubtful
accounts $ 54.0 $ 13.1 $ .1 $ 34.2(b) $ 33.0
Allowances for sales
discounts 30.7 181.4 (.4) 198.4(c) 13.3
(a) Includes bad debt recoveries and the effects of changes in foreign currency exchange rates.
1997 includes the balances of Tecnol Medical Products, Inc. acquired in December 1997.
(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, 1998, 1997 AND 1996
(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(b) Period
- ------------------------------------------------------------------------------------------------------------------------
1998 and 1997 Charges
December 31, 1998
Contra assets deducted from
assets to which they apply
Inventory $ 23.8 $ - $ 1.8 $ 17.0 $ 8.6
Property, plant and
equipment 360.2 12.7 6.4 314.1 65.2
Other Assets 12.1 6.1 40.2 17.8 40.6
December 31, 1997
Contra assets deducted from
assets to which they apply
Inventory $ - $ 28.8 $ - $ 5.0 $ 23.8
Property, plant and
equipment - 452.2 - 92.0 360.2
Other Assets - 16.9 - 4.8 12.1
(a) Reclassifications from accrued liabilities.
(b) Includes reclassifications of $5.0 million in 1998 to accrued liabilities.
SCHEDULE II Kimberly-Clark Corporation and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(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(b) Period
- -----------------------------------------------------------------------------------------------------------------------
1995 Restructuring and Other
Unusual Charges
December 31, 1998
Contra assets deducted from
assets to which they apply
Property, plant and
equipment $ 29.6 $ - $ - $ 29.6 $ -
December 31, 1997
Contra assets deducted from
assets to which they apply
Accounts receivable $ .6 $ - $ 18.4 $ 19.0 $ -
Inventory 12.7 - 9.3 22.0 -
Property, plant and
equipment 109.9 - - 80.3 29.6
Assets held for sale 15.9 - - 15.9 -
Other Assets .3 - 8.7 9.0 -
December 31, 1996
Contra assets deducted from
assets to which they apply
Accounts receivable $ 41.5 $ - $ 68.7 $ 109.6 $ .6
Inventory 51.5 - - 38.8 12.7
Property, plant and
equipment 369.0 - - 259.1 109.9
Assets held for sale 128.3 - - 112.4 15.9
Other Assets 81.5 - - 81.2 0.3
(a) Reclassifications from accrued liabilities.
(b) Includes reclassifications to accrued liabilities of $4.4 million in 1998,
$12.9 million in 1997 and $254.9 million in 1996.
SCHEDULE II Kimberly-Clark Corporation and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(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, 1998
Deferred Taxes
Valuation Allowance $ 228.1 $ 61.4 $ - $ (5.5) $ 295.0
December 31, 1997
Deferred Taxes
Valuation Allowance $ 206.6 $ 65.2 $ - $ 43.7 $ 228.1
December 31, 1996
Deferred Taxes
Valuation Allowance $ 260.7 $ 17.6 $ - $ 71.7 (b) $ 206.6
(a) Includes the net currency effects of translating valuation allowances at
current rates under SFAS No. 52 of $15.6 million in 1998, $(26.0) million
in 1997 and $(16.7) million in 1996. Included in this column are also expired
income tax loss carryforwards of $15.8 million in 1998, $16.9 million in 1997
and $18.6 million in 1996. Also see note (b). These items offset deferred tax
assets resulting in no effect on the consolidated balance sheet.
(b) Includes $(44.1) million of valuation allowances for a German Holding Company
that was no longer required as net operating losses were eliminated from the
deferred tax asset balance. This entry had no effect on the consolidated balance
sheet.
INDEX TO DOCUMENTS FILED AS A PART OF THIS REPORT
DESCRIPTION
-----------
Consolidated financial statements, incorporated by reference
Independent Auditors' Reports, incorporated by reference
Independent Auditors' Reports
Schedules for Kimberly-Clark Corporation and Subsidiaries:
Schedule II Valuation and Qualifying Accounts
Exhibit No. (3)a. Restated Certificate of Incorporation, dated June 12, 1997,
incorporated by reference to Exhibit No. (3)a to the Corporation's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
Exhibit No. (3)b. By-Laws, as amended November 22, 1996, incorporated by
reference to Exhibit No. 4.2 of the Corporation's Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on December 6, 1996
(File No. 333-17367).
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 as of January 1, 1998, 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 as of
December 10, 1998.
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. 1986 Equity Participation Plan, as amended effective
November 20, 1997, incorporated by reference to Exhibit No. (10)d of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997.
Exhibit No. (10)e. 1992 Equity Participation Plan, as amended effective
November 20, 1997, incorporated by reference to Exhibit No. (10)e of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997.
Exhibit No. (10)f. Deferred Compensation Plan, effective as of October 1,
1994, incorporated by reference to Exhibit No. (10)g of the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1994.
Exhibit No. (10)g. First Amendment to Deferred Compensation Plan, effective as
of November 22, 1996, incorporated by reference to Exhibit No. (10)g of the
Corporation's Annual Report on Form 10-K for the year ended December 31, 1996.
Exhibit No. (10)h. Outside Directors' Stock Compensation Plan, incorporated by
reference to Exhibit No. 4.5 to the Corporation's Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on April 18, 1996
(File No. 33-02607).
INDEX TO DOCUMENTS FILED AS A PART OF THIS REPORT
(Continued)
DESCRIPTION
-----------
Exhibit No. (10)i. Supplemental Benefit Plan to Salaried Employees' Retirement
Plan, amended and restated as of November 17, 1994, incorporated by reference
to Exhibit No. (10)i of the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1996.
Exhibit No. (10)j. Second Supplemental Benefit Plan to Salaried Employees'
Retirement Plan, amended and restated as of November 17, 1994, incorporated by
reference to Exhibit No. (10)j of the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996.
Exhibit No. (10)k. Retirement Contribution Excess Benefit Program, as amended
and restated as of August 19, 1998.
Exhibit No. (10)l. 1999 Restricted Stock Plan, effective as of January 1,
1999, incorporated by reference to Exhibit No. 4.5 to the Corporation's
Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on February 3, 1999 (File No. 333-71661).
Exhibit No. (12). Computation of ratio of earnings to fixed charges for the
five years ended December 31, 1998.
Exhibit No. (13). Portions of the Corporation's 1998 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 of Deloitte & Touche LLP.
Exhibit No. (24). Powers of Attorney.
Exhibit No. (27). The Financial Data Schedule required by Item 601(b)(27) of
Regulation S-K has been included with the electronic filing of this Form 10-K.