With Approximately $650 Million in Annual Sales and Further Strengthen Kimberly-Clark's Focus on its Health and Hygiene Businesses
DALLAS, February 25, 2004 - Kimberly-Clark Corporation (NYSE: KMB) announced today that its board of directors has authorized management to evaluate a potential tax-free spin-off of the company's Neenah Paper and Technical Paper businesses along with its pulp and timber assets in Pictou, Nova Scotia, and Terrace Bay, Ontario.
A spin-off would create a publicly traded pulp and paper company with approximately $650 million in annual sales. The new company would produce a range of premium and specialty paper lines and more than 700,000 metric tons of pulp. It would have leading positions in many of its markets, about 2,100 employees and access to 5.9 million acres of Canadian timberlands.
"We believe that a spin-off will provide greater value for Kimberly-Clark shareholders as it will further enhance our position as a highly focused and innovative health and hygiene company, allowing us to concentrate our management and financial resources on our core businesses and to improve our capital effectiveness," said Thomas J. Falk, chairman and chief executive officer. "Moreover, a spin-off of this unique set of premium paper, technical paper, pulp and timber assets would provide shareholders with a direct stake in a new, high-quality pulp and paper company with its own opportunities for additional value creation."
The businesses being evaluated for spin-off are all part of Kimberly-Clark's Business-to-Business segment. Although the businesses on a stand-alone basis would have approximately $650 million in annual sales, they represent less than 3 percent of K-C's annual net sales. It is expected that Kimberly-Clark would become one of the new company's largest customers through a pulp supply agreement.
Following a spin-off, Kimberly-Clark would produce about 10 percent of its worldwide virgin fiber requirements, which is consistent with its previously stated plan of reducing its pulp integration.
Sean T. Erwin, the current president of Kimberly-Clark's Pulp and Paper Sector, would become head of the new company. Mr. Erwin, 52, joined Kimberly-Clark in 1978 and has held numerous management positions in the company's pulp and paper businesses, as well as its consumer products and nonwovens operations.
Management is expected to complete its evaluation and present recommendations to the board of directors during the second quarter. If the board ultimately approves a spin-off, a transaction would likely be completed during the second half of 2004, subject to market, regulatory and other conditions. Goldman, Sachs & Co. has been retained to assist management in the evaluation process.
Additional Details about the Operations
Neenah Paper has long been recognized as a leading manufacturer of world-class premium writing, text, cover and watermark papers used in corporate annual reports, corporate identity packages, invitations, personal stationery and high-end packaging. Neenah Paper markets some of the most recognized and preferred premium papers in North America, with distinguished brands including UV/ULTRA, CLASSIC, ENVIRONMENT and NEENAH. In 2003, Neenah Paper had net sales of more than $200 million. The operation employs approximately 500 people and has manufacturing facilities in Neenah and Whiting, Wis. Kimberly-Clark acquired Neenah Paper in 1956.
Technical Paper is a leading producer of durable, saturated and coated base papers for a variety of end uses, including tapes, labels, abrasives, medical packaging and heat transfer products. With commercial customers in 35 countries worldwide, Technical Paper had net sales in excess of $100 million in 2003. It employs approximately 350 people and has a manufacturing facility in Munising, Mich. Kimberly-Clark acquired Technical Paper in 1952.
Pictou began production in 1967 and includes a pulp mill, as well as timberlands encompassing approximately 1.2 million acres of owned, licensed or managed land in Nova Scotia. The operation produces softwood and hardwood pulp and is capable of providing various softwood/hardwood blends to meet customer needs. In 2003, the Pictou mill produced nearly 260,000 metric tons of bleached kraft pulp, about 90 percent of which was used to make Kimberly-Clark products. The Pictou operation employs approximately 350 people and is located in New Glasgow, Nova Scotia, near three ocean ports--Pictou, Mulgrave and Sheet Harbour--and a container port in Halifax. Kimberly-Clark acquired this business in 1995 as a result of its merger with Scott Paper Company.
Terrace Bay has been a leading Canadian pulp mill since it first began production in 1948, supplying pulp to both the U.S. and Canada. Built by Kimberly-Clark, Terrace Bay manufactures both softwood and hardwood pulp and includes a woodlands operation. Terrace Bay holds the rights to harvest approximately 4.7 million acres of Crown land under a sustainable forest license. It produces approximately 470,000 metric tons of pulp per year, 85 percent of which is consumed within Kimberly-Clark. The operation employs approximately 900 people and is located on the north shore of Lake Superior in Ontario.
About Kimberly-Clark
Kimberly-Clark and its well-known global brands are an indispensable part of life for people in more than 150 countries. Every day, one in four people around the world trust K-C's brands to enhance their health, hygiene and well being. With brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend, Kimberly-Clark holds the No. 1 or No. 2 brand position in more than 80 countries. To keep up with the latest K-C news and to learn more about the company's 132-year history of innovation, visit www.kimberly-clark.com
Certain matters contained in this news release concerning the business outlook, including new product introductions, cost savings and acquisitions, anticipated financial and operating results, strategies, contingencies and anticipated transactions of the company constitute forward-looking statements and are based upon management's expectations and beliefs concerning future events impacting the company. There can be no assurance that these future events will occur as anticipated or that the company's results will be as estimated. For a description of certain factors that could cause the company's future results to differ materially from those expressed in any such forward-looking statements, see the section of Part I, Item 1 of the company's Annual Report on Form 10-K for the year ended December 31, 2002 entitled "Factors That May Affect Future Results".
