(Mark One)
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
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 incorporation or organization) | P. O. Box 619100 Dallas, Texas 75261-9100 (Address of principal executive offices) (Zip Code) (972) 281-1200 (Registrant's telephone number, including area code) |
(I.R.S. Employer Identification No.) |
No change (Former name, former address and former fiscal year, if changed since last report) |
||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X . No .Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes X . No .As of April 28, 2005, there were 478,416,927 shares of the Corporation’s common stock outstanding.
| Three Months Ended March 31 |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Millions of dollars, except per share amounts) |
2005 |
2004 | |||||||||
| Net Sales | $ | 3,905.8 | $ | 3,711.5 | |||||||
| Cost of products sold | 2,599.2 | 2,455.8 | |||||||||
| Gross Profit | 1,306.6 | 1,255.7 | |||||||||
| Marketing, research and general expenses | 653.9 | 617.8 | |||||||||
| Other (income) expense, net | 15.1 | 14.5 | |||||||||
| Operating Profit | 637.6 | 623.4 | |||||||||
| Nonoperating expense | (46.3 | ) | (51.5 | ) | |||||||
| Interest income | 6.0 | 4.0 | |||||||||
| Interest expense | (43.9 | ) | (38.7 | ) | |||||||
| Income Before Income Taxes, Equity Interests and Discontinued | |||||||||||
| Operations | 553.4 | 537.2 | |||||||||
| Provision for income taxes | (117.2 | ) | (107.3 | ) | |||||||
| Share of net income of equity companies | 34.1 | 30.9 | |||||||||
| Minority owners' share of subsidiaries' net income | (20.2 | ) | (17.0 | ) | |||||||
| Income From Continuing Operations | 450.1 | 443.8 | |||||||||
Income From Discontinued Operations, Net of Income Taxes | - | 15.5 | |||||||||
| Net Income | $ | 450.1 | $ | 459.3 | |||||||
| Per Share Basis: | |||||||||||
| Basic | |||||||||||
| Continuing operations | $ | .94 | $ | .88 | |||||||
| Discontinued operations | - | .04 | |||||||||
| Net income | $ | .94 | $ | .92 | |||||||
| Diluted | |||||||||||
| Continuing operations | $ | .93 | $ | .88 | |||||||
| Discontinued operations | - | .03 | |||||||||
| Net income | $ | .93 | $ | .91 | |||||||
| Cash Dividends Declared | $ | .45 | $ | .40 | |||||||
Unaudited
See Notes to Consolidated Financial Statements.
2
| (Millions of dollars) |
March 31, 2005 |
December 31, 2004 | ||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
Current Assets | ||||||||
| Cash and cash equivalents | $ | 833.5 | $ | 594.0 | ||||
| Accounts receivable | 1,944.2 | 2,038.3 | ||||||
| Inventories | 1,682.0 | 1,670.9 | ||||||
| Other current assets | 683.2 | 658.7 | ||||||
| Total Current Assets | 5,142.9 | 4,961.9 | ||||||
Property | 14,756.2 | 14,823.1 | ||||||
| Less accumulated depreciation | 6,923.8 | 6,832.6 | ||||||
| Net Property | 7,832.4 | 7,990.5 | ||||||
| Investments in Equity Companies | 466.3 | 444.4 | ||||||
Goodwill | 2,688.4 | 2,702.9 | ||||||
| Other Assets | 904.1 | 918.3 | ||||||
| $ | 17,034.1 | $ | 17,018.0 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Debt payable within one year | $ | 1,435.6 | $ | 1,214.7 | ||||
| Accounts payable | 1,235.4 | 1,248.7 | ||||||
| Accrued expenses | 1,303.0 | 1,431.6 | ||||||
| Other current liabilities | 668.9 | 642.2 | ||||||
| Total Current Liabilities | 4,642.9 | 4,537.2 | ||||||
| Long-Term Debt | 2,278.7 | 2,298.0 | ||||||
Noncurrent Employee Benefit and Other Obligations | 1,648.8 | 1,621.7 | ||||||
| Deferred Income Taxes | 853.2 | 840.3 | ||||||
Minority Owners' Interests in Subsidiaries | 378.9 | 368.4 | ||||||
| Preferred Securities of Subsidiary | 731.3 | 722.9 | ||||||
Stockholders' Equity | 6,500.3 | 6,629.5 | ||||||
| $ | 17,034.1 | $ | 17,018.0 | |||||
Unaudited
See Notes to Consolidated Financial Statements.
3
| Three Months Ended March 31 | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Millions of dollars) |
2005 |
2004 | ||||||
| Continuing Operations: | ||||||||
Operating Activities |
||||||||
| Income from continuing operations | $ | 450.1 | $ | 443.8 | ||||
| Depreciation and amortization | 192.0 | 200.4 | ||||||
| Changes in operating working capital | (79.5 | ) | (44.6 | ) | ||||
| Deferred income tax provision | 11.1 | 10.1 | ||||||
| Equity companies' earnings in excess of dividends paid | (33.6 | ) | (29.8 | ) | ||||
| Postretirement benefits | 29.0 | (15.5 | ) | |||||
| Other | 39.3 | 40.6 | ||||||
| Cash Provided by Operations | 608.4 | 605.0 | ||||||
| Investing Activities | ||||||||
| Capital spending | (108.9 | ) | (106.2 | ) | ||||
| Proceeds from sales of investments | 10.5 | 13.5 | ||||||
| Net increase in time deposits | (17.4 | ) | (6.9 | ) | ||||
| Investments in marketable securities | - | (4.0 | ) | |||||
| Other | (12.1 | ) | 14.3 | |||||
| Cash Used for Investing | (127.9 | ) | (89.3 | ) | ||||
| Financing Activities | ||||||||
| Cash dividends paid | (194.2 | ) | (171.1 | ) | ||||
| Net increase (decrease) in short-term debt | 301.5 | (165.5 | ) | |||||
| Proceeds from issuance of long-term debt | - | 22.1 | ||||||
| Repayments of long-term debt | (84.5 | ) | (114.9 | ) | ||||
| Proceeds from exercise of stock options | 67.0 | 110.7 | ||||||
| Acquisitions of common stock for the treasury | (321.9 | ) | (166.7 | ) | ||||
| Other | (3.3 | ) | 1.4 | |||||
| Cash Used for Financing | (235.4 | ) | (484.0 | ) | ||||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents | (5.6 | ) | (3.2 | ) | ||||
| Cash Provided by Continuing Operations | 239.5 | 28.5 | ||||||
| Cash Provided by Discontinued Operations | - | 9.9 | ||||||
| Increase in Cash and Cash Equivalents | 239.5 | 38.4 | ||||||
| Cash and Cash Equivalents, beginning of year | 594.0 | 290.6 | ||||||
| Cash and Cash Equivalents, end of period | $ | 833.5 | $ | 329.0 | ||||
Unaudited
See Notes to Consolidated Financial Statements.
4
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.
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:
| Three Months Ended March 31 | ||||||||
|---|---|---|---|---|---|---|---|---|
| (Millions of dollars, except per share amounts) |
2005 |
2004 | ||||||
| Net income, as reported | $ | 450.1 | $ | 459.3 | ||||
| Less: Stock-based employee compensation determined under the fair | ||||||||
| value requirements of SFAS 123, net of income tax benefits | 7.9 | 9.4 | ||||||
| Pro forma net income | $ | 442.2 | $ | 449.9 | ||||
| Earnings per share: | ||||||||
| Basic - as reported | $ | .94 | $ | .92 | ||||
| Basic - pro forma | $ | .92 | $ | .90 | ||||
| Diluted - as reported | $ | .93 | $ | .91 | ||||
| Diluted - pro forma | $ | .91 | $ | .89 | ||||
The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and experience.
5
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.
The following schedule presents inventories by major class as of March 31, 2005 and December 31, 2004:
| (Millions of dollars) |
March 31, 2005 |
December 31, 2004 | ||||||
|---|---|---|---|---|---|---|---|---|
| At lower of cost on the First-In, | ||||||||
| First-Out (FIFO) method or market: | ||||||||
| Raw materials | $ | 328.1 | $ | 332.7 | ||||
| Work in process | 228.2 | 225.9 | ||||||
| Finished goods | 1,069.6 | 1,044.6 | ||||||
| Supplies and other | 232.8 | 235.4 | ||||||
| 1,858.7 | 1,838.6 | |||||||
| Excess of FIFO cost over Last-In, First-Out (LIFO) cost | (176.7 | ) | (167.7 | ) | ||||
| Total | $ | 1,682.0 | $ | 1,670.9 | ||||
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.
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.
Shown below is the interim period disclosure required by SFAS 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits.
6
Note 5. (Continued)
| Defined Benefit Plans |
Other Postretirement Benefit Plans | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended March 31 | ||||||||||||||
| (Millions of dollars) |
2005 |
2004 |
2005 |
2004 | ||||||||||
| Service cost | $ | 23.0 | $ | 23.1 | $ | 4.2 | $ | 4.7 | ||||||
| Interest cost | 73.1 | 77.1 | 12.1 | 12.2 | ||||||||||
| Expected return on plan assets | (80.9 | ) | (82.5 | ) | - | - | ||||||||
| Recognized net actuarial loss | 22.7 | 23.7 | 1.3 | .9 | ||||||||||
| Other | 1.5 | 2.5 | .2 | .1 | ||||||||||
| Net periodic benefit cost | $ | 39.4 | $ | 43.9 | $ | 17.8 | $ | 17.9 | ||||||