Kimberly-Clark Reports First Quarter 2002 Results DALLAS, April 23, 2002—Kimberly-Clark Corporation (NYSE: KMB) today reported that sales for the first quarter of 2002 were approximately $3.3 billion, slightly higher than 2001. Excluding currency effects, sales rose more than 2 percent, driven mainly by higher sales volumes of consumer tissue and personal care products in North America and the consolidation of Kimberly-Clark Australia Pty. Limited. Overall sales volumes were 4.5 percent higher while competitive pricing, including promotional activity, reduced sales by about 2 percent. Sales in both years are stated net of the cost of trade promotions and consumer coupons as required under a newly effective accounting pronouncement issued by the Financial Accounting Standards Board (EITF 01-9).
Diluted net income for the first quarter of 2002 was 84 cents per share, including a charge of 2 cents per share for the cumulative effect of the accounting change associated with the adoption of EITF 01-9. Diluted net income in the first quarter of 2001 was 81 cents per share.
First quarter earnings before unusual items and the cumulative effect of the accounting change were 87 cents per share in 2002, up 3.6 percent from 84 cents per share in 2001. Cash provided by operations in the first quarter was $521 million in 2002, 14 percent greater than the prior year.
A solid gain in operating profit before unusual items for the consumer tissue business and fewer shares outstanding due to the company’s repurchase program contributed to the increase in earnings per share. As expected, lower earnings in personal care partially offset those improvements. Consumer tissue profits in the first quarter of 2002 were boosted by an increase in sales volumes of nearly 5 percent, with particular strength in bathroom tissue and paper towels in North America. In addition, operating profit rose strongly in Europe and in the Asia/Pacific region. Overall, lower fiber costs more than compensated for stepped up levels of promotional activity and marketing expense.
Although personal care sales volumes rose about 6 percent, results were constrained by strategic actions to counter aggressive competition in the diaper and training pant markets in the U.S. and Europe as well as continued difficult business conditions in Argentina and Brazil. In the business-to-business segment, operating profit before unusual items increased modestly in the first quarter and sales of K-C Professional products in North America began to show signs of recovery from the weakness experienced in late 2001.
Marketing, research and general expenses were higher in the first quarter primarily as a result of increased advertising, consumer promotion and employee benefits costs. These increases were mitigated by the elimination of goodwill amortization in accordance with Statement of Financial Accounting Standards 142, which took effect January 1, 2002. On a proforma basis, elimination of goodwill amortization in the first quarter of 2001 would have increased net income by 4 cents per share.
Wayne R. Sanders, chairman and chief executive officer of Kimberly-Clark, said, “We’re off to a good start in 2002 and remain cautiously optimistic about the outlook for the balance of the year. We have a full product pipeline that we believe will drive sales volume growth while currency and price comparisons are expected to moderate. Our businesses are well-positioned to benefit from the investments we have made to expand our proprietary technologies and to support our global brands. And our costs should go down as a result of our information technology investments that support our Go To Market efforts and further streamline our administrative functions.
“Although the outlook for improvement in Argentina and Brazil continues to be uncertain, we expect our business-to-business operations in North America to improve as the economy recovers. Meanwhile, we’ll continue to focus on increasing cash flow to help fund our growth. We are doing the right things strategically to build competitive advantage and drive top- and bottom-line growth going forward.”
Unusual items
Unusual items in the first quarter of 2002 of approximately $9 million before tax, equivalent to 1 cent per share, were comprised primarily of costs associated with the previously announced plans to streamline manufacturing operations in Latin America. In the first quarter of 2001, pretax charges for unusual items of approximately $28 million, or 3 cents per share, related mainly to reorganizing the company’s feminine and adult care operations in North America and business integration programs.
Review of first quarter sales by segment
As noted above, sales excluding currency effects increased more than 2 percent. Overall sales volumes were 4.5 percent higher while selling prices were about 2 percent lower.
Sales in the first quarter of 2002 included approximately $100 million as a result of the company’s acquisition in July 2001 of an additional 5 percent of Kimberly-Clark Australia Pty. Limited (KCA), bringing K-C’s ownership of the former equity affiliate to 55 percent (by segment: about $40 million in both consumer tissue and personal care and $20 million in business-to-business). Effective July 1, 2001, the company began consolidating KCA’s operating results. Along with this acquisition, other factors affecting the sales comparisons for each of the company’s business segments are summarized below.
Consumer tissue sales increased 1.9 percent compared with the first quarter of 2001 and climbed approximately 4 percent before currency effects. Sales volumes were up nearly 5 percent while selling prices were approximately 1 percent lower. In North America, sales volumes were more than 4 percent higher, driven by rising sales of Cottonelle and Scott bathroom tissue and Scott towels. Overall selling prices in North America slipped 1 percent due to competitive promotional activity. In Europe, sales of consumer tissue products increased 1 percent before currency effects. Selling prices were about 3 percent higher while sales volumes were nearly 2 percent lower. Market shares remain healthy for Andrex bathroom tissue in the U.K. and Scottex, Page and Hakle bathroom tissue and Kleenex facial tissue in key European markets.
Sales of personal care products decreased slightly from the first quarter of 2001, but were up more than 3 percent before currency effects. Global sales volumes increased approximately 6 percent despite a significant decline in sales volumes in Argentina and Brazil. Lower selling prices, down 2 percent, and product mix partially offset the volume gains. In North America, sales volumes rose about 6 percent, highlighted by a double-digit increase in shipments of Depend and Poise adult incontinence care products and solid gains for Huggies diapers and Pull-Ups training pants. Selling prices declined nearly 4 percent in response to competitive pricing and promotional moves and due to selected package count increases to improve consumer value. Sales of personal care products in Europe were down approximately 3 percent measured in constant exchange rates. Sales volumes were off slightly and net selling prices declined more than 2 percent amid intense competition in diapers and training pants.
Sales of business-to-business products declined 3.3 percent and about 2 percent excluding currency. Overall volumes were almost 2 percent higher and selling prices were nearly 4 percent lower. Sales of K-C Professional’s away-from-home products in North America began to show signs of recovery, with sales volumes up 1 percent in the first quarter in contrast to a decline of 8 percent in the fourth quarter of 2001. Meanwhile, sales of health care products were essentially even with last year as 5 percent growth in sales volumes was offset by reduced selling prices.
Other first quarter operating results
Operating profit in the first quarter of 2002 was $664.9 million, 5.4 percent greater than the prior year. Before unusual items, operating profit increased 2.2 percent to $673.8 million in the first quarter of 2002 compared with $659.2 million in 2001. Higher sales volumes and elimination of goodwill amortization contributed to the increase and fiber and energy costs were approximately $80 million lower. These positive factors were partially offset by the stepped-up level of advertising and promotion activities and a rise in pension and other employee benefits costs.
On an overall basis, the net impact of changes in foreign currency rates on first quarter earnings was minimal. This includes the negative effect of currency translation as well as currency gains from Australian dollar forward contracts equivalent to approximately 2 cents per share recorded in other income and expense. As previously announced, the forward contracts relate to the anticipated acquisition of the remaining 45 percent ownership interest in Kimberly-Clark Australia.
Kimberly-Clark’s share of net income of equity companies in the first quarter decreased in 2002 due primarily to the consolidation of Kimberly-Clark Australia, as well as lower net income at Kimberly-Clark de Mexico, S.A. de C.V. (KCM). At KCM, continued strong performance of its consumer products operations boosted sales and operating profit; however, a higher tax rate caused net income to decline.
The increase in cash provided by operations in the first quarter was achieved in spite of cash payments totaling more than $50 million in February 2002 under the terms of two arbitration rulings. As previously reported, the rulings settled certain disputes involving the company’s Mobile, Ala., operations. At the end of the first quarter, net debt and preferred securities totaled $3.8 billion, essentially unchanged from December 31, 2001. During the quarter, the company repurchased 2.5 million shares of common stock at a cost of $155 million.
Conference call
A conference call to discuss this news release and other matters of interest to investors and analysts will be held at 9:00 a.m. (CDT) today. The conference call will be simultaneously broadcast over the World Wide Web. Stockholders and others are invited to listen to the live broadcast or a playback, which can be accessed by following the instructions set out in the Investors section of the company’s Web site (www.kimberly-clark.com).
Kimberly-Clark Corporation is a leading consumer products company. Its global personal care, tissue and health care brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott, Kimwipes, Kimberly-Clark, WypAll, Safeskin and Tecnol. Other brands well known outside the U.S. include Andrex, Scottex, Page, Popee and Kimbies. Kimberly-Clark also is a major producer of premium business, correspondence and technical papers. The company has manufacturing operations in 42 countries and sells its products in more than 150 countries.
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 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, 2001 entitled “Factors That May Affect Future Results.”
Kimberly-Clark Web site: www.kimberly-clark.com
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Notes:
- In 2002, charges (credits) for unusual items are included as follows: cost of products sold - $7.5 million; marketing, research and general expenses - $1.4 million; minority owners’ share of subsidiaries’ net income - $(1.3) million; and cumulative effect of accounting change, net of income taxes - $11.4 million.
- In 2001, charges (credits) for unusual items are included as follows: cost of products sold - $21.6 million; marketing, research and general expenses - $6.0 million; other (income) expense, net – $.5 million; and share of net income of equity companies – $(.2) million.
- Following is a reconciliation of net income and diluted earnings per share reflecting the implementation of SFAS 142, Goodwill and Other Intangible Assets:
Description of Business Segments
The Personal Care segment manufactures and markets disposable diapers, training and youth pants and swimpants; feminine and incontinence care products; and related products. Products in this segment are primarily for household use and are sold under a variety of well-known brand names, including Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays, Depend, Poise and other brand names.
The Consumer Tissue segment manufactures and markets facial and bathroom tissue, paper towels and napkins for household use; wet wipes; and related products. Products in this segment are sold under the Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Page, Huggies, and other brand names.
The Business-to-Business segment manufactures and markets facial and bathroom tissue, paper towels, wipers and napkins for away-from-home use; health care products such as surgical gowns, drapes, infection control products, sterilization wraps, disposable face masks and exam gloves, respiratory products, and other disposable medical products; printing, premium business and correspondence papers; specialty and technical papers; and other products. Products in this segment are sold under the Kimberly-Clark, Kleenex, Scott, Kimwipes, WypAll, Surpass, Safeskin, Tecnol, Ballard and other brand names.
N.M.–Not meaningful
Unaudited
