UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
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)
(972) 281-1200
(Registrant's telephone number, including area code)
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 August 1, 2003, there were 506,650,990 shares of the Corporation's
common stock outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED INCOME STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Three Months Six Months
Ended June 30 Ended June 30
---------------------- ---------------------
(Millions of dollars, except per share amounts) 2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------------------
Net Sales ........................................................... $ 3,544.6 $3,408.9 $7,004.3 $6,739.8
Cost of products sold .......................................... 2,337.4 2,166.1 4,593.5 4,284.6
--------- -------- -------- --------
Gross Profit ....................................................... 1,207.2 1,242.8 2,410.8 2,455.2
Marketing, research and general expenses ....................... 579.5 587.3 1,168.4 1,153.5
Other (income) expense, net .................................... 20.8 31.2 56.2 12.5
--------- -------- -------- --------
Operating Profit .................................................... 606.9 624.3 1,186.2 1,289.2
Interest income ................................................ 4.3 3.5 9.1 7.2
Interest expense ............................................... (44.6) (45.1) (87.6) (91.8)
--------- -------- -------- --------
Income Before Income Taxes .......................................... 566.6 582.7 1,107.7 1,204.6
Provision for income taxes ..................................... 164.9 163.2 322.4 348.3
--------- -------- -------- --------
Income Before Equity Interests ...................................... 401.7 419.5 785.3 856.3
Share of net income of equity companies ........................ 30.3 21.5 56.3 53.9
Minority owners' share of subsidiaries' net income ............. (14.7) (16.4) (26.6) (35.0)
--------- -------- -------- --------
Income Before Cumulative Effect of
Accounting Change .............................................. 417.3 424.6 815.0 875.2
Cumulative effect of accounting change,
net of income taxes ................................... - - - (11.4)
--------- -------- -------- --------
Net Income ....................................................... $ 417.3 $ 424.6 $ 815.0 $ 863.8
========= ======== ======== ========
Per Share Basis:
Basic
Income before cumulative effect of
accounting change ..................................... $ .82 $ .82 $ 1.60 $ 1.69
========= ======== ======== ========
Net income ................................................. $ .82 $ .82 $ 1.60 $ 1.66
========= ======== ======== ========
Diluted
Income before cumulative effect of
accounting change ..................................... $ .82 $ .81 $ 1.60 $ 1.67
========= ======== ======== ========
Net income ................................................. $ .82 $ .81 $ 1.60 $ 1.65
========= ======== ======== ========
Cash Dividends Declared ........................................ $ .34 $ .30 $ .68 $ .60
========= ======== ======== ========
Unaudited
See Notes to Consolidated Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEET
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
June 30, December 31,
(Millions of dollars) 2003 2002
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents ........................................................ $ 376.8 $ 494.5
Accounts receivable .............................................................. 1,876.4 1,952.1
Inventories ...................................................................... 1,559.5 1,430.1
Other current assets ............................................................. 512.6 397.2
--------- ---------
Total Current Assets ......................................................... 4,325.3 4,273.9
Property .............................................................................. 14,404.2 13,564.0
Less accumulated depreciation .................................................... 6,493.9 5,944.6
--------- ---------
Net Property ................................................................. 7,910.3 7,619.4
Investments in Equity Companies ....................................................... 614.1 571.2
Goodwill .............................................................................. 2,353.2 2,254.9
Other Assets ......................................................................... 966.8 866.4
--------- ---------
$16,169.7 $15,585.8
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Debt payable within one year ..................................................... $ 1,004.5 $ 1,086.6
Accounts payable ................................................................. 1,038.8 1,122.0
Accrued expenses ................................................................. 1,287.4 1,271.4
Other current liabilities ........................................................ 668.4 558.3
--------- ---------
Total Current Liabilities .................................................... 3,999.1 4,038.3
Long-Term Debt ........................................................................ 2,807.8 2,844.0
Noncurrent Employee Benefit and Other Obligations ..................................... 1,362.8 1,390.0
Deferred Income Taxes ................................................................. 862.3 854.2
Minority Owners' Interests in Subsidiaries ............................................ 258.1 255.5
Preferred Securities of Subsidiary .................................................... 559.7 553.5
Stockholders' Equity .................................................................. 6,319.9 5,650.3
--------- ---------
$16,169.7 $15,585.8
========= =========
Unaudited
See Notes to Consolidated Financial Statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
Six Months
Ended June 30
(Millions of dollars) 2003 2002
- --------------------------------------------------------------------------------------------------------------------
Operations
Net income ............................................................................. $ 815.0 $ 863.8
Cumulative effect of accounting change, net of income taxes ............................ - 11.4
Depreciation ........................................................................... 370.7 341.1
Changes in operating working capital ................................................... 39.3 (55.6)
Deferred income tax (benefit) provision ................................................ (10.7) 77.7
Equity companies' earnings in excess of dividends paid ................................. (30.9) (25.1)
Postretirement benefits ................................................................ (27.6) 6.7
Other .................................................................................. 53.6 97.9
-------- --------
Cash Provided by Operations ........................................................ 1,209.4 1,317.9
-------- --------
Investing
Capital spending ....................................................................... (402.1) (382.0)
Acquisitions of businesses, net of cash acquired ....................................... (45.2) (405.1)
Proceeds from sales of investments ..................................................... 17.0 27.9
Net (increase) decrease in time deposits ............................................... (144.0) 1.2
Investments in marketable securities ................................................... (10.9) (1.5)
Other .................................................................................. (14.6) 7.3
-------- --------
Cash Used for Investing ............................................................ (599.8) (752.2)
-------- --------
Financing
Cash dividends paid .................................................................... (327.5) (302.5)
Net decrease in short-term debt ........................................................ (132.5) (638.3)
Proceeds from issuance of long-term debt ............................................... 8.5 801.0
Repayments of long-term debt ........................................................... (19.7) (127.9)
Proceeds from exercise of stock options ................................................ 17.4 53.5
Acquisitions of common stock for the treasury .......................................... (251.7) (331.6)
Other .................................................................................. (27.3) (31.8)
-------- --------
Cash Used for Financing ............................................................ (732.8) (577.6)
-------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents ................................ 5.5 (8.6)
-------- --------
Decrease in Cash and Cash Equivalents ....................................................... (117.7) (20.5)
-------- --------
Cash and Cash Equivalents, beginning of year ................................................ 494.5 364.5
-------- --------
Cash and Cash Equivalents, end of period .................................................... $ 376.8 $ 344.0
======== ========
Unaudited
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
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, 2002, 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.
1. In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 148, Accounting for
Stock-Based Compensation and Disclosure, which amends SFAS 123, Accounting
for Stock-Based Compensation, and provides alternative methods of
transition for a voluntary change to the fair value-based method of
accounting for stock-based compensation. The Corporation currently plans
to continue 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. The following presents
information about net income and earnings per share as if the Corporation
had applied the fair value expense recognition requirements of SFAS 123 to
all employee stock options granted.
Three Months Six Months
Ended June 30 Ended June 30
----------------- -----------------
(Millions of dollars, except per share amounts) 2003 2002 2003 2002
------------------------------------------------------------------------------------------------------------
Net income, as reported ........................................... $417.3 $424.6 $815.0 $863.8
Less: Stock-based employee compensation
determined under the fair value requirements
of SFAS 123, net of income tax benefits .................. 13.4 18.2 29.4 34.9
------ ------ ------ ------
Pro forma net income .............................................. $403.9 $406.4 $785.6 $828.9
====== ====== ====== ======
Earnings per share
Basic - as reported ........................................... $ .82 $ .82 $ 1.60 $ 1.66
====== ====== ====== ======
Basic - pro forma ............................................. $ .79 $ .79 $ 1.54 $ 1.60
====== ====== ====== ======
Diluted - as reported ......................................... $ .82 $ .81 $ 1.60 $ 1.65
====== ====== ====== ======
Diluted - pro forma ........................................... $ .79 $ .77 $ 1.54 $ 1.58
====== ====== ====== ======
The assumptions used to calculate the fair value of options granted are
evaluated and revised, as necessary, to reflect market conditions and
experience.
2. There are no adjustments required to be made to net income for purposes of
computing basic and diluted earnings per share ("EPS"). The average number
of common shares outstanding used in the basic EPS computation is
reconciled to those used in the diluted EPS computation as follows:
Average Common Shares Outstanding
Three Months Six Months
Ended June 30 Ended June 30
--------------- ---------------
(Millions of shares) 2003 2002 2003 2002
---------------------------------------------------------------------------------------------------------
Basic .............................................................. 508.1 518.5 509.2 519.4
Dilutive effect of stock options ............................... 1.3 3.8 .9 3.4
Dilutive effect of deferred compensation plan
shares .................................................... .3 .3 .3 .3
----- ----- ----- -----
Diluted ........................................................... 509.7 522.6 510.4 523.1
===== ===== ===== =====
Options outstanding during the three month and six month periods ended June
30, 2003 to purchase 20.5 million and 26.8 million shares of common stock,
respectively, were not included in the computation of diluted EPS because
the exercise prices of the options were greater than the average market
price of the common shares.
Options outstanding during the three month and six month periods ended June
30, 2002 to purchase 11.4 million and 5.8 million shares of common stock,
respectively, were not included in the computation of diluted EPS because
the exercise prices of the options were greater than the average market
price of the common shares.
The number of common shares outstanding as of June 30, 2003 and 2002 was
507.0 million and 517.2 million, respectively.
3. The following schedule presents inventories by major class as of June 30,
2003 and December 31, 2002:
June 30, December 31,
(Millions of dollars) 2003 2002
---------------------------------------------------------------------------------------------------------
At lower of cost on the First-In, First-Out (FIFO) method or market:
Raw materials .......................................................... $ 326.9 $ 323.2
Work in process ........................................................ 191.0 186.7
Finished goods ......................................................... 995.5 866.9
Supplies and other ..................................................... 227.4 210.7
-------- --------
1,740.8 1,587.5
Excess of FIFO cost over Last-In, First-Out (LIFO) cost ..................... (181.3) (157.4)
-------- --------
Total .................................................................. $1,559.5 $1,430.1
======== ========
FIFO cost of total inventories on the LIFO method was $724.7 million and
$642.7 million at June 30, 2003 and December 31, 2002, respectively.
4. In August 2003, the Corporation issued $500 million of 5.0% Notes due
August 15, 2013. The proceeds were used to retire commercial paper. During
June and July 2003, the Corporation issued redemption notices on
$200 million of 7 7/8% and $200 million of 7.0% debentures, respectively.
At June 30, 2003, the Corporation classified a net $100 million of
commercial paper to be refinanced as long-term debt.
In June 2003, the Corporation announced the repurchase of $45 million for
industrial revenue bonds to be effective August 1, 2003. At June 30, 2003,
the Corporation classified the $45 million as debt payable within one year
and reduced long-term debt by that same amount.
5. The following schedule presents the components of comprehensive income:
Six Months
Ended June 30
(Millions of dollars) 2003 2002
-------------------------------------------------------------------------------------------------------------
Net Income ............................................................................. $ 815.0 $863.8
Unrealized currency translation adjustments, net of tax ................................ 405.2 50.9
Deferred losses on cash flow hedges, net of tax ........................................ (5.7) (5.1)
Unrealized holding gains on securities ................................................. .3 -
-------- ------
Comprehensive income ................................................................... $1,214.8 $909.6
======== ======
6. The following schedule presents information concerning consolidated
operations by business segment:
Three Months Six Months
Ended June 30 Ended June 30
--------------------- ---------------------
(Millions of dollars) 2003 2002 2003 2002
-------------------------------------------------------------------------------------------------------------
NET SALES:
Personal Care .............................................. $1,328.9 $1,329.1 $2,611.4 $2,586.3
Consumer Tissue ............................................ 1,287.1 1,215.2 2,612.4 2,470.0
Business-to-Business ....................................... 967.4 898.4 1,855.2 1,751.3
Intersegment sales ......................................... (38.8) (33.8) (74.7) (67.8)
-------- -------- -------- --------
Consolidated ............................................... $3,544.6 $3,408.9 $7,004.3 $6,739.8
======== ======== ======== ========
OPERATING PROFIT (reconciled to income before income taxes):
Personal Care .............................................. $ 273.7 $ 293.3 $ 533.9 $ 557.4
Consumer Tissue ............................................ 197.9 221.0 431.7 466.2
Business-to-Business ....................................... 181.3 171.1 325.8 331.0
Other income (expense), net ................................ (20.8) (31.2) (56.2) (12.5)
Unallocated items - net .................................... (25.2) (29.9) (49.0) (52.9)
-------- -------- -------- --------
Total Operating Profit ..................................... 606.9 624.3 1,186.2 1,289.2
Interest income ........................................ 4.3 3.5 9.1 7.2
Interest expense ....................................... (44.6) (45.1) (87.6) (91.8)
-------- -------- -------- --------
Income Before Income Taxes ................................. $ 566.6 $ 582.7 $1,107.7 $1,204.6
======== ======== ======== ========
Note: Unallocated items - net, consists of expenses not associated with the
business segments.
Description of Business Segments:
The Corporation is organized into operating segments based on product groupings.
These operating segments have been aggregated into three reportable global
business segments: Personal Care; Consumer Tissue; and Business-to-Business.
Each reportable segment is headed by an executive officer who reports to the
Corporation's Chief Executive Officer and is responsible for the development and
execution of global strategies to drive growth and profitability of the
Corporation's worldwide
personal care, consumer tissue and business-to-business
operations. These strategies include global plans for branding and product
positioning, technology and research and development programs, cost reductions
including supply chain management, and capacity and capital investments for each
of these businesses. The principal sources of revenue in each of the global
business segments are described below.
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 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.
Unaudited
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS:
Second Quarter of 2003 Compared With Second Quarter of 2002
By Business Segment
(Millions of dollars)
Net Sales 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
Personal Care ................................................................................. $1,328.9 $1,329.1
Consumer Tissue ............................................................................... 1,287.1 1,215.2
Business-to-Business .......................................................................... 967.4 898.4
Intersegment sales ............................................................................ (38.8) (33.8)
-------- --------
Consolidated .................................................................................. $3,544.6 $3,408.9
======== ========
Commentary:
Consolidated net sales for the second quarter of 2003 were 4.0 percent higher
than in 2002, primarily driven by an improvement of about 4 percent in currency
exchange rates. Sales volumes were essentially flat, reflecting
weaker-than-expected growth in a number of key categories in North America,
particularly diapers and consumer tissue products. Net selling prices were
approximately the same as last year, as price increases in certain geographies
were offset by continued high levels of competitive promotional spending
overall.
o Personal care net sales were flat in the second quarter. Favorable
currency effects of about 3 percent and slightly higher net selling prices
were offset by lower sales volumes. Sales volumes were affected by intense
competition in the diaper category in a number of key markets as well as a
slowdown in category growth in North America.
In North America, personal care sales volumes decreased approximately
4 percent versus the second quarter of 2002 despite record shipments of
Pull-Ups training pants, GoodNites youth pants and Huggies Little Swimmers
swimpants. Although sales volumes of Huggies diapers were lower than last
year, the brand's market share improved sequentially from the first quarter
to the second quarter of 2003. Net selling prices of personal care products
in North America were similar to last year. Personal care sales in Europe
increased more than 11 percent primarily due to favorable currency rates,
partially offset by lower sales volumes for diaper products. In Asia,
personal care net sales rose nearly 11 percent, highlighted by strong
double-digit growth in Australia from a combination of favorable currency
effects and higher sales volumes. Sales volumes were higher for a majority
of the Corporation's operations in the region. Finally, in Latin America,
sales decreased about 15 percent, as selling price increases were not
sufficient to offset weakness in sales volumes and unfavorable currency
effects throughout most of the region.
o Net sales of consumer tissue products increased 5.9 percent from 2002,
primarily driven by favorable currency effects in Europe and Australia.
Overall sales volumes increased nearly 1 percent. Net selling prices were
about the same as last year, as response to competitive promotional
activity in North America and Europe negated list price increases mainly in
those geographies.
In North America, sales volumes of tissue products rose 1 percent. Sales
volume growth remained solid for Cottonelle and Scott bathroom tissue
despite below-trend consumer demand for the overall category. Net selling
prices were down almost 1 percent due to increases in competitive promotion
spending. In Europe, net sales advanced about 20 percent primarily as a
result of favorable currency exchange rates for the euro and the British
pound. Sales volumes rose about 3 percent and net selling prices rose more
than 1 percent. Meanwhile, consumer tissue net sales were more than
5 percent higher in Asia, as sales volume increases in Korea and favorable
currency effects in Australia were partially offset by continued weakness
in Taiwan. In Latin America, net sales declined almost 1 percent, as
unfavorable currency effects more than offset sales volume increases of
nearly 4 percent.
o Net sales of business-to-business products increased 7.7 percent in the
quarter, boosted by sales volume growth of about 3 percent and a more than
4 percent benefit from favorable currency effects. The Corporation's global
health care business posted record quarterly net sales. Sales volumes for
health care products rose almost 10 percent, with strong growth outside
North America and substantially higher sales of face masks and gloves.
Sales volumes for the professional businesses increased approximately
4 percent in North America and nearly 10 percent in Asia, but were flat in
Europe. Overall segment selling prices declined about 1 percent compared
with the second quarter of last year.
Operating Profit 2003 2002
- --------------------------------------------------------------------------------------------------------------------
Personal Care ................................................................................... $273.7 $293.3
Consumer Tissue ................................................................................. 197.9 221.0
Business-to-Business ............................................................................ 181.3 171.1
Other income (expense), net ..................................................................... (20.8) (31.2)
Unallocated items - net ......................................................................... (25.2) (29.9)
------ ------
Consolidated .................................................................................... $606.9 $624.3
====== ======
Note: Unallocated items - net, consists of expenses not associated with the
business segments.
Commentary:
Consolidated operating profit in the second quarter of 2003 declined 2.8 percent
from the prior year. The Corporation made further progress in its efforts to
reduce costs in 2003, as it achieved savings of nearly $50 million in the
quarter, up from more than $40 million in the first quarter. These savings are
net of higher resin costs. The cost reductions, however, were more than offset
by an increase in pension expense of about $35 million and higher fiber and
energy costs of approximately $40 million.
Each of the three business segments incurred more than $10 million of the
increased pension expense.
Included in the second quarter of 2002 were charges for business improvement
programs of $15.1 million primarily related to the previously announced plans to
streamline manufacturing operations in Latin America and to consolidate
administrative functions in Europe. The major components of the charge were
severance costs of approximately $9.7 million and additional depreciation of
$2.3 million. These costs were included in the business segments as follows:
personal care $4.6 million; consumer tissue $7.3 million; and
business-to-business $3.2 million. These charges were included in the
consolidated income statement as follows: cost of products sold $6.6 million;
and marketing, research and general expenses $8.5 million.
o Personal care segment operating profit declined 6.7 percent primarily due
to the lower diaper sales volumes, primarily in North America, partially
offset by cost reduction programs. Operating profit improved somewhat in
Europe, due to cost savings, and in Asia on the strength of performance in
Australia. However, in Latin America, operating profit declined primarily
because of the lower sales volumes attributable in part to weak economic
conditions in the region.
o Consumer tissue segment operating profit decreased 10.5 percent from last
year, despite the higher sales volumes and significant cost savings. These
benefits were more than offset by higher fiber and energy costs and
increased promotional activity. Promotional levels remained high for
consumer tissue products in North America and Europe, which limited
recovery of the higher fiber costs.
o Business-to-business segment operating profit increased 6.0 percent from
the prior year. Operating profit for the health care business achieved an
all-time record driven by the sales volume growth and the benefits of cost
savings programs. Operating profit for the Corporation's professional
businesses in both North America and Europe increased due to cost
reductions that more than offset higher fiber costs.
o Other income (expense), net included a charge of $26.5 million, or $.03 per
share, in 2002 for losses associated with tax credits in Brazil. The second
quarter of 2002 also included higher transaction currency gains compared
with 2003. The second quarter of 2003 reflects a higher level of expenses
related to affordable housing and historic renovation real estate projects
than 2002.
By Geography
(Millions of dollars)
Net Sales 2003 2002
- -------------------------------------------------------------------------------------------------------------------
North America .............................................................................. $2,232.4 $2,252.4
Outside North America ...................................................................... 1,456.0 1,293.5
Intergeographic sales ...................................................................... (143.8) (137.0)
-------- --------
Consolidated ............................................................................... $3,544.6 $3,408.9
======== ========
Operating Profit 2003 2002
- -------------------------------------------------------------------------------------------------------------------
North America .............................................................................. $ 514.6 $ 554.7
Outside North America ...................................................................... 138.3 130.7
Other income (expense), net ................................................................ (20.8) (31.2)
Unallocated items - net .................................................................... (25.2) (29.9)
-------- --------
Consolidated ............................................................................... $ 606.9 $ 624.3
======== ========
Note: Unallocated items - net, consists of expenses not associated with the
geographic areas.
Commentary:
o Net sales in North America decreased .9 percent from last year primarily
due to the lower sales volumes for personal care products.
o Net sales outside of North America increased 12.6 percent principally due
to the favorable currency effects in Europe.
o Operating profit in North America decreased 7.2 percent because the lower
personal care sales volumes, higher fiber and energy costs, and higher
pension expense more than offset the benefits of cost savings programs.
o Operating profit outside North America increased 5.8 percent. Personal care
operating results in Europe and Asia, and the growth of the health care
business contributed to the improvement but were partially offset by lower
earnings in the Latin American personal care business. Operating profit in
2002 included $11.0 million of charges for the previously discussed
business improvement programs.
Additional Income Statement Commentary:
o Interest expense decreased because the benefit of lower interest rates more
than offset a higher average level of debt.
o The effective tax rate increased from 28.0 percent in 2002 to 29.1 percent
in 2003 due to the favorable resolution of certain prior year income tax
matters in the second quarter of 2002.
o The Corporation's share of net income of equity companies in the second
quarter increased to $30.3 million in 2003 from $21.5 million in 2002
primarily due to higher net income at Kimberly-Clark de Mexico, S.A. de
C.V. ("KCM"). Most of the increase in KCM's results was attributable to
lower currency transaction losses compared with last year. Before currency
effects, KCM's second quarter sales improved approximately 6 percent,
nearly offsetting inflationary cost increases.
o On a diluted basis, net income was $.82 per share, an increase of 1.2
percent compared with $.81 per share in 2002.
First Six Months of 2003 Compared With First Six Months of 2002
By Business Segment
(Millions of dollars)
Net Sales 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
Personal Care ................................................................................. $2,611.4 $2,586.3
Consumer Tissue ............................................................................... 2,612.4 2,470.0
Business-to-Business .......................................................................... 1,855.2 1,751.3
Intersegment sales ............................................................................ (74.7) (67.8)
-------- --------
Consolidated .................................................................................. $7,004.3 $6,739.8
======== ========
Operating Profit 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
Personal Care ................................................................................. $ 533.9 $ 557.4
Consumer Tissue ............................................................................... 431.7 466.2
Business-to-Business .......................................................................... 325.8 331.0
Other income (expense), net ................................................................... (56.2) (12.5)
Unallocated items - net ....................................................................... (49.0) (52.9)
-------- --------
Consolidated .................................................................................. $1,186.2 $1,289.2
======== ========
Note: Unallocated items - net, consists of expenses not associated with the
business segments.
Commentary:
Consolidated net sales for the first six months of 2003 were 3.9 percent higher
than in the prior year. Excluding favorable currency effects, net sales were
essentially flat. Overall, an increase in sales volumes of about 1 percent was
offset by higher promotion spending of nearly 1 percent.
o Net sales of personal care products, excluding currency effects, were more
than 1 percent lower due to a decline in sales volumes. Net selling prices
were slightly below last year.
o Net sales of consumer tissue products, excluding currency effects,
increased about 1 percent. Sales volumes increased more than 1 percent,
however, net selling prices were slightly lower than last year.
o Excluding currency effects, net sales of business-to-business products were
nearly 2 percent higher due to increased sales volumes.
Consolidated operating profit declined 8.0 percent due to higher promotional
spending, higher fiber and energy costs and increased pension expense of
approximately $70 million that more than offset the benefits of cost reduction
programs of nearly $90 million.
Each of the three business segments incurred more than $20 million of the
increased pension expense.
Included in the first six months of 2002 were charges for business improvement
programs of $24.0 million primarily related to the previously announced plans to
streamline manufacturing operations in Latin America and to consolidate
administrative functions in Europe. The major components of the charge were
severance costs of nearly $11.5 million and additional depreciation of
$6.6 million. These costs were included in the business segments as follows:
personal care $8.0 million; consumer tissue $11.5 million; and business-to-
business $4.5 million. These charges were included in the consolidated income
statement as follows: cost of products sold $14.1 million; and marketing,
research and general expenses $9.9 million.
o Personal care segment operating profit decreased 4.2 percent primarily due
to lower sales volumes and net selling prices because of the competitive
environment.
o Consumer tissue segment operating profit declined 7.4 percent because lower
net selling prices, due to promotional spending, and higher fiber, energy
and distribution costs more than offset higher sales volumes and the
benefit of cost savings programs.
o Business-to-business segment operating profit declined 1.6 percent because
cost savings and higher sales volumes for health care products were not
sufficient to overcome lower net selling prices and higher fiber costs for
other operations in the segment.
o Other income (expense), net included a charge of $15.6 million, or $.02 per
share, in 2003 for a legal judgment in Europe, compared with the previously
mentioned $26.5 million in 2002 for tax credit related losses in Brazil. In
addition to these charges, other expense in 2003 reflected currency
transaction losses compared with other income in 2002 for currency
transaction gains, including a gain of $17.3 million on Australian dollar
forward contracts related to last year's acquisition of the remaining
45 percent interest in Kimberly-Clark Australia Pty. Limited.
By Geography
(Millions of dollars)
Net Sales 2003 2002
- -------------------------------------------------------------------------------------------------------------------
North America .............................................................................. $4,429.3 $4,463.2
Outside North America ...................................................................... 2,847.4 2,545.4
Intergeographic sales ...................................................................... (272.4) (268.8)
-------- --------
Consolidated ............................................................................... $7,004.3 $6,739.8
======== ========
Operating Profit 2003 2002
- -------------------------------------------------------------------------------------------------------------------
North America .............................................................................. $1,013.3 $1,092.8
Outside North America ...................................................................... 278.1 261.8
Other income (expense), net ................................................................ (56.2) (12.5)
Unallocated items - net .................................................................... (49.0) (52.9)
-------- --------
Consolidated ............................................................................... $1,186.2 $1,289.2
======== ========
Note: Unallocated items - net, consists of expenses not associated with the
geographic areas.
Commentary:
o Net sales in North America declined .8 percent, as the lower net selling
prices for personal care and consumer tissue products and lower personal
care sales volumes more than offset higher sales volumes for consumer
tissue and business-to-business products.
o Net sales outside North America increased 11.9 percent primarily due to
favorable currency effects in Europe.
o Operating profit in North America decreased 7.3 percent because the effects
of the lower net sales for personal care and consumer tissue products,
higher fiber and energy costs and increased pension expense more than
offset cost savings benefits.
o Operating profit outside North America increased 6.2 percent. Personal care
results in Europe and Asia, and the growth of the health care business
contributed to this improvement. Lower earnings in the Latin American
personal care business partially offset this improvement. Operating profit
in 2002 included $18.8 million of charges for the previously discussed
business improvement programs.
Additional Income Statement Commentary:
o Interest expense decreased because the benefit of lower interest rates more
than offset a higher average level of debt.
o The Corporation's share of net income of equity companies increased to
$56.3 million in 2003 from $53.9 million in 2002, as lower net income from
KCM was more than offset by higher earnings elsewhere in Latin America.
o On a diluted basis, net income was $1.60 per share in 2003, a decrease of
3.0 percent compared with $1.65 per share in 2002. The first six months of
2002 included a charge of $.02 per share for the cumulative effect of an
accounting change related to the adoption of an accounting pronouncement
regarding trade and consumer promotion.
LIQUIDITY AND CAPITAL RESOURCES
o Cash provided by operations for the first six months of 2003 decreased
$108.5 million or 8 percent compared with the first six months of 2002. The
effect on working capital of higher levels of finished goods inventory,
principally due to the lower sales volumes, was primarily offset by
increased income tax liabilities due to net refunds of prior year taxes and
lower payments of U.S. federal taxes. In 2003, cash provided by operations
was reduced by a contribution of $100 million to the Corporation's U.S.
defined benefit pension plan.
o During the first six months of 2003, the Corporation repurchased
4.7 million shares of its common stock at a cost of approximately
$225 million, including 2.2 million shares repurchased in the second
quarter at a cost of approximately $113 million.
o At June 30, 2003, total debt and preferred securities was $4.4 billion, a
decrease of $.1 billion from December 31, 2002. Net debt (total debt net of
cash and cash equivalents and time deposits) and preferred securities was
$3.8 billion at June 30, 2003 compared with $3.9 billion at December 31,
2002. The ratio of net debt and preferred securities to capital at June 30,
2003 was 36.4 percent, which is within the Corporation's target range of
35 to 45 percent.
o In July 2003, Standard & Poor's ("S&P") revised the Corporation's credit
rating for long-term debt from AA to AA-. Moody's Investor Service
maintained its short- and long-term ratings but changed the Corporation's
outlook to negative from stable, indicating that a ratings downgrade could
be possible within the next 12 months. These changes were primarily based
on the Corporation's recent business performance in the heightened
competitive environment and because S&P changed the way in which it
evaluates liabilities for pensions and other postretirement benefits.
Management believes that these actions will not have a material adverse
effect on the Corporation's access to credit or its borrowing costs since
these credit ratings remain strong and are in the top eight percent of
companies listed in S&P's ranking of the 500 largest companies. The
Corporation's commercial paper continues to be rated in the top category.
o In June 2003, the Corporation filed a registration statement with the
Securities and Exchange Commission to issue up to $1.5 billion in long-term
debt securities.
As part of its financing plan, in August 2003, the Corporation issued
$500 million of 5.0% Notes due August 15, 2013. The proceeds were used to
retire commercial paper. In connection with the borrowing, the Corporation
entered into an interest rate swap agreement maturing on August 15, 2013
with a counterparty under which the difference between fixed- and floating-
rate interest amounts calculated on a $300 million notional amount is
exchanged on a quarterly basis. The floating rate is 3-month average LIBOR
plus 4.4 basis points. The swap agreement will permit the Corporation to
maintain its desired ratio of fixed and floating-rate borrowings. During
June and July 2003, the Corporation issued redemption notices on
$200 million of 7 7/8% and $200 million of 7.0% debentures, respectively.
At June 30, 2003, the Corporation classified a net $100 million of
commercial paper to be refinanced as long-term debt. The costs associated
with redeeming the debentures, totaling approximately $20 million, will be
recorded in the third quarter.
In June 2003, the Corporation announced the repurchase of $45 million of
industrial revenue bonds to be effective August 1, 2003. At June 30, 2003,
the Corporation classified the $45 million as debt payable within one year
and reduced long-term debt by that same amount.
o During the first quarter of 2003, a minority owner in Kimberly-Clark Peru
S.A. informed the Corporation of its intent to exercise an option to sell
its 49 percent ownership to the Corporation. This acquisition closed in
July 2003. During the second quarter of 2003, the Corporation's partner in
its joint tissue venture in Brazil informed the Corporation of its intent
to exercise its option to sell its 50 percent ownership in the venture to
the Corporation. This acquisition is expected to close in August 2003. The
combined cash cost of these transactions is approximately $200 million.
o Management believes that the Corporation's ability to generate cash from
operations and its capacity to issue short-term and long-term debt are
adequate to fund working capital, capital spending and other needs of the
business in the foreseeable future.
NEW ACCOUNTING PRONOUNCEMENTS
In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS 150
requires that certain instruments classified as part of stockholders' equity or
between stockholders' equity and liabilities be classified as liabilities
effective in the third quarter of 2003. The Corporation currently has no such
instruments and, accordingly, adoption of SFAS 150 will have no effect on the
Corporation's consolidated financial position.
In January 2003, the FASB issued Interpretation ("FIN") 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB 51. FIN 46 requires
consolidation of certain entities in which the primary beneficiary has a
controlling financial interest despite not having voting control. Likewise, it
does not permit consolidation of entities in which an entity has voting control
but not a controlling financial interest. The Corporation is continuing to
evaluate the impact of applying FIN 46 and has not yet completed this analysis.
It is reasonably possible that the Corporation will be required to consolidate
certain of the entities described in Note 13 to the consolidated financial
statements included in the Corporation's Form 10-K for the year ended
December 31, 2002, beginning in the third quarter of 2003. Also, it is
reasonably possible that the Corporation will be required to deconsolidate its
Luxembourg financing subsidiary described in Note 9 to such consolidated
financial statements. The debt of the entities that may become consolidated is
nonrecourse and the notes receivable are guaranteed, and the net obligation to a
third party in the Luxembourg financing subsidiary is presently included as
preferred securities of subsidiary and included in the Corporation's ratio of
net debt and preferred securities to capital. Therefore, consolidation/
deconsolidation of these entities is not expected to have a material adverse
effect on the Corporation's results of operations or financial position,
including its ability to obtain financing.
ENVIRONMENTAL MATTERS
The Corporation has been named as a potentially responsible party 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 its
business, financial condition or results of operations.
OUTLOOK
Based on soft growth in the product categories in which it competes, intense
competition and higher raw material and energy costs, the Corporation expects
its business environment will remain difficult. Management will continue to
focus on increasing sales volumes and aggressively reducing costs over the
balance of 2003 in order to manage the challenges the Corporation is facing.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain information contained in this report is forward-looking and is based on
various assumptions. Such information includes, without limitation, the business
outlook, including new product introductions, cost savings and acquisitions,
anticipated financial and operating results, strategies, contingencies and
contemplated transactions of the Corporation. These forward-looking statements
are based upon management's expectations and beliefs concerning future events
impacting the Corporation. There can be no assurance that such events will occur
or that the Corporation's results will be as estimated. For a description of
certain factors that could cause the Corporation'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 Corporation's Annual Report on Form 10-K for
the year ended December 31, 2002 entitled "Factors That May Affect Future
Results."
Item 4. Controls and Procedures.
As of June 30, 2003, an evaluation was performed under the supervision and with
the participation of the Corporation's management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Corporation's disclosure controls and procedures. Based on that
evaluation, the Corporation's management, including the Chief Executive Officer
and Chief Financial Officer, concluded that the Corporation's disclosure
controls and procedures were effective as of June 30, 2003. There have been no
significant changes in the Corporation's internal controls or in other factors
that could significantly affect internal controls subsequent to the date of the
most recent evaluation of internal controls.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(3)a Restated Certificate of Incorporation, dated June 12, 1997,
incorporated by reference to Exhibit No. (3)a of the
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1999.
(3)b By-Laws, as amended April 24, 2003, filed herewith.
(4) Copies of instruments defining the rights of holders of
long-term debt will be furnished to the Securities and
Exchange Commission on request.
(31)a Certification of Chief Executive Officer required by Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), filed herewith.
(31)b Certification of Chief Financial Officer required by Rule
13a-14(a) or Rule 15d-14(a) of the Exchange Act, filed
herewith.
(32)a Certification of Chief Executive Officer required by Rule
13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section
1350 of Chapter 63 of Title 18 of the United States Code,
filed herewith.
(32)b Certification of Chief Financial Officer required by Rule
13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section
1350 of Chapter 63 of Title 18 of the United States Code,
filed herewith.
(b) Reports on Form 8-K
The Corporation filed the following Current Report after March 31, 2003 and
prior to June 30, 2003:
Current Report on Form 8-K dated April 22, 2003, to furnish the text
of a press release issued on April 22, 2003 regarding first quarter
results of operations.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KIMBERLY-CLARK CORPORATION
(Registrant)
By: /s/ Mark A. Buthman
----------------------------------------
Mark A. Buthman
Senior Vice President and
Chief Financial Officer
(principal financial officer)
By: /s/ Randy J. Vest
----------------------------------------
Randy J. Vest
Vice President and Controller
(principal accounting officer)
August 7, 2003
EXHIBIT INDEX
Exhibit No. Description
(3)a Restated Certificate of Incorporation, dated June 12, 1997,
incorporated by reference to Exhibit No. (3)a of the Coporation's
Annual Report on Form 10-K for the year ended December 31, 1999.
(3)b By-Laws, as amended April 24, 2003, filed herewith.
(4) Copies of instruments defining the rights of holders of long-term debt
will be furnished to the Securities and Exchange Commission on
request.
(31)a Certification of Chief Executive Officer required by Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), filed herewith.
(31)b Certification of Chief Financial Officer required by Rule 13a-14(a) or
Rule 15d-14(a) of the Exchange Act, filed herewith.
(32)a Certification of Chief Executive Officer required by Rule 13a-14(b) or
Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of
Title 18 of the United States Code, filed herewith.
(32)b Certification of Chief Financial Officer required by Rule 13a-14(b) or
Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of
Title 18 of the United States Code, filed herewith.
Exhibit (3)b
BY-LAWS
OF
KIMBERLY-CLARK CORPORATION
As Amended Through April 24, 2003
Note: For convenience, the masculine has been used in these By-Laws with the
intention that it include the feminine as well.
CAPITAL STOCK
1. CERTIFICATES
Every stockholder shall be entitled to have a certificate in such form as
the Board shall from time to time approve, signed by the Chairman of the Board,
a Vice Chairman of the Board, the President or a Vice President and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
certifying the number of shares owned by him. Any of or all the signatures on
the certificate and the corporate seal may be facsimiles. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue. While the corporation is authorized to issue
more than one class of stock or more than one series of any class, there shall
be set forth on the face or back of each certificate issued a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof of the corporation and
the qualifications, limitations or restrictions of such preferences and/or
rights.
2. RECORD OWNERSHIP
The name and address of the holder of each certificate, the number of shares
represented thereby, and the date of issuance thereof shall be recorded in the
corporation's books and records. The corporation shall be entitled to treat the
holder of record of any share of stock as the holder in fact thereof, and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in any share on the part of any other person, whether or not it shall
have express or other notice thereof, except as required by law.
3. TRANSFER
Transfer of stock shall be made on the books of the corporation only by
direction of the person named in the certificate or his attorney, lawfully
constituted in writing, and only upon the surrender for cancellation of the
certificate therefor and a written assignment of the shares evidenced thereby.
4. LOST CERTIFICATES
Any person claiming a stock certificate in lieu of one lost or destroyed
shall give the corporation an affidavit as to his ownership of the certificate
and of the facts which go to prove its loss or destruction. He shall also, if
required by the Board, give the corporation a bond or other indemnification, in
such form as may be approved by the Board, sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss of the certificate or the issuance of a new certificate.
5. TRANSFER AGENT; REGISTRAR
The corporation shall maintain one or more transfer offices or agencies,
each in charge of a transfer agent designated by the Board, where the shares of
stock of the corporation shall be transferable. The corporation shall also
maintain one or more registry offices, each in charge of a registrar designated
by the Board, where such shares of stock shall be registered. The same entity
may be both transfer agent and registrar.
6. RECORD DATE; CLOSING TRANSFER BOOKS
So that the corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders, or any adjournment thereof, or
entitled to express consent to corporate action in writing without a meeting as
provided in Article VI of the Certificate of Incorporation, or entitled to
receive payment of any dividend or other distribution or allotment of rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of capital stock, or for the purpose of any other lawful action, the Board may
fix a record date which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board and which record date
shall not be more than sixty days nor less than ten days before the date of such
meeting, nor more than ten days from the date upon which the resolution fixing
the record date is adopted by the Board in the case of a determination of the
stockholders entitled to express consent to corporate action without a meeting,
nor more than sixty days before any other action, and only such stockholders as
shall be stockholders of record on the date so fixed shall be entitled to such
notice of and to vote at such meeting, or to give such consent, or to receive
such dividend or other distribution or allotment of rights, or to exercise such
rights, or to take such other lawful action, as the case may be, notwithstanding
any transfer of any stock on the books of the corporation after any such record
date fixed as aforesaid. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board may fix a new record date for
the adjourned meeting.
MEETINGS OF STOCKHOLDERS
7. ANNUAL
The annual meeting of stockholders for the election of directors and the
transaction of such other business as may properly be brought before the meeting
shall be held on the third Thursday in April in each year, or on such other day,
which shall not be a legal holiday, as shall be determined by the Board. The
annual meeting shall be held at such place and hour, within or without the State
of Delaware, as shall be determined by the Board. The day, place and hour of
each annual meeting shall be specified in the notice of the annual meeting. The
meeting may be adjourned by the chairman of the meeting from time to time and
place to place. At any adjourned meeting the corporation may transact any
business which might have been transacted at the original meeting. In accordance
with the provisions of applicable law, the Board acting by resolution may
postpone and reschedule any previously scheduled annual meeting of stockholders.
8. SPECIAL
Special meetings shall be held at such place, within or without the State of
Delaware, as may from time to time be fixed consistent with the provisions of
Article VI of the Certificate of Incorporation. In the event no such place has
been fixed, special meetings shall be held at the offices of the corporation
located in Dallas County, Texas. The meeting may be adjourned by the chairman of
the meeting from time to time and place to place. At any adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. In accordance with the provisions of applicable law, the Board
acting by resolution may postpone and reschedule any previously scheduled
special meeting of stockholders.
9. NOTICE
Written notice of every meeting of stockholders, stating the place, day,
hour and purposes thereof, shall, except when otherwise required by law, be
mailed at least ten, but not more than sixty days before such meeting to each
stockholder of record entitled to vote thereat.
10. QUORUM
The holders of a majority of the voting power of the issued and outstanding
shares of capital stock of the corporation entitled to vote, present in person
or represented by proxy, shall constitute a quorum at any meeting, except as
otherwise required by law. In the event of lack of a quorum, the chairman of the
meeting or a majority of the voting power of the shares of capital stock present
in person or represented by proxy may adjourn the meeting from time to time
without notice other than announcement at the meeting, until a quorum shall be
obtained. At any such adjourned meeting at which there is a quorum, any business
may be transacted which might have been transacted at the meeting originally
called. The stockholders present at a duly called meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
11. CONDUCT OF MEETINGS
(a) The Chief Executive Officer, or in his absence such other officer as may
be designated by the Board, shall be the chairman at stockholders' meetings. The
Secretary of the corporation shall be the secretary at stockholders' meetings
but in his absence the chairman of the meeting may appoint a secretary for the
meeting. The opening and closing of the polls for matters upon which the
stockholders will vote at a meeting shall be announced at the meeting by the
chairman of the meeting. The Board may, to the extent not prohibited by law,
adopt by resolution such rules and regulations for the conduct of the meeting of
stockholders as it shall deem appropriate. Except to the extent inconsistent
with such rules and regulations as adopted by the Board, the chairman of any
meeting of stockholders shall have the right and authority to prescribe such
rules, regulations or procedures and to do all acts as, in the judgment of the
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board or prescribed by the
chairman of the meeting, may to the extent not prohibited by law include,
without limitation, the following: (i) the establishment of an agenda or order
of business for the meeting; (ii) rules and procedures for maintaining order at
the meeting and the safety of those present; (iii) limitations on attendance at
or participation in the meeting to stockholders of record of the corporation,
their duly authorized and constituted proxies (which shall be reasonable in
number) or such other persons as the chairman of the meeting shall determine;
(iv) restrictions on entry to the meeting after the time fixed for the
commencement thereof; and (v) limitations on the time allotted to questions or
comments by participants.
(b) At a meeting of the stockholders, only such business shall be conducted
as shall have been properly brought before the meeting in accordance with these
By-Laws. To be properly brought before a meeting, business must (a) be specified
in the notice of the meeting (or any supplement thereto) given by or at the
direction of the Board, (b) otherwise properly be brought before the meeting by
or at the direction of the Board, or (c) otherwise (i) properly be requested to
be brought before the meeting by a stockholder of record entitled to vote in the
election of directors generally, and (ii) constitute a proper subject to be
brought before such meeting. For business to be properly requested to be brought
before an annual meeting of stockholders by a stockholder of record, any
stockholder who intends to bring any matter (other than in connection with the
election of directors) before an annual meeting of stockholders and is entitled
to vote on such matter must deliver written notice of such stockholder's intent
to bring the matter before the annual meeting of stockholders, either by
personal delivery or by United States mail, postage prepaid, to the Secretary of
the corporation. Such notice must be received by the Secretary not less than 75
days nor more than 100 days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than 30 days or delayed by more than 60 days
from such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 100th day prior to such
annual meeting and not later than the close of business on the later of the 75th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made. In no event shall
the public announcement of an adjournment of an annual meeting commence a new
time period for the giving of a stockholder notice as described above. For
purposes of this By-Law 11, "public announcement" shall mean the date disclosure
of the date of the meeting of stockholders is first made in a press release
reported by the Dow Jones News Service, Associated Press or comparable national
news service, or in a document publicly filed by the corporation with the
Securities and Exchange Commission pursuant to Sections 13, 14, or 15(d) of the
Securities Exchange Act of 1934, as amended. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting.
A stockholder's notice to the Secretary required by this By-Law 11 shall set
forth as to each matter the stockholder proposes to bring before the meeting of
stockholders: (i) a brief description of the business to be brought before the
meeting and the reasons for conducting such business at the meeting; (ii) the
name and address of the stockholder intending to propose such business; (iii)
the number of shares of stock of the corporation beneficially held, either
personally or in concert with others, by the stockholder, and a representation
that the stockholder is a holder of stock of the corporation entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
present such proposal; and (iv) any material interest of the stockholder in such
business. No business shall be conducted at a meeting of stockholders except in
accordance with the procedures set forth in this By-Law 11. The chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that
the business was not properly brought before the meeting in accordance with the
provisions hereof and, if he should so determine, he shall so declare to the
meeting that any such business not properly brought before the meeting shall not
be transacted.
12. VOTING
Except as otherwise provided in the Certificate of Incorporation, at each
meeting of the stockholders, each holder of shares entitled to vote at such
meeting shall, as to all matters in respect of which such shares have voting
rights, be entitled to one vote in person or by written proxy for each share
held of record by him. No vote upon any matter, except the election of directors
or the amendment of the Certificate of Incorporation, is required to be by
ballot unless demanded by the holders of at least 10% of the voting power of the
shares of capital stock represented and entitled to vote at the meeting. All
motions to introduce a matter for a vote by the stockholders at a meeting
thereof, except for nominations for election as directors recommended by the
Nominating Committee and approved by the Board, shall be seconded prior to a
vote thereon by the stockholders.
A stockholder may authorize another person or persons to act for him as
proxy by transmitting or authorizing the transmission of a telegram, cablegram,
or other means of electronic transmission to the person who will be the holder
of the proxy or to a proxy solicitation firm, proxy support service organization
or like agent duly authorized by the person who will be the holder of the proxy
to receive such transmission, provided that any such telegram, cablegram or
other means of electronic transmission must either set forth or be submitted
with information from which it can be determined that the telegram, cablegram or
other electronic transmission was authorized by the stockholder.
The date and time of the opening and closing of the polls for each matter
upon which the stockholders will vote at a meeting shall be announced at the
meeting. No ballot, proxies or votes, nor any revocations thereof or changes
thereto, shall be accepted by the inspectors after the closing of the polls. All
elections and questions shall be decided by plurality vote, except as otherwise
required by the laws of Delaware or the Certificate of Incorporation.
13. INSPECTORS OF ELECTION
The Chief Executive Officer shall, in advance of any meeting of
stockholders, appoint one or more inspectors to act at the meeting and make a
written report thereof. He may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the chairman of the
meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
The inspectors shall (i) ascertain the number of shares outstanding and the
voting power of each, (ii) determine the number of shares represented at a
meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the
meeting, and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors. The inspectors shall determine the validity of and
count the proxies and ballots in accordance with applicable law.
14. LIST OF STOCKHOLDERS
A complete list of the stockholders entitled to vote at stockholders'
meetings (arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder)
shall be prepared by the Secretary and filed at least ten days prior to each
meeting, either at a place specified in the notice of such meeting within the
city or town where such meeting is to be held, or if no such place is specified,
at the place where such meeting is to be held. Such list shall be open to the
examination of any stockholder for any purpose germane to the meeting, and shall
be produced and kept at the time and place of such meeting during the whole time
thereof, and subject to the inspection of any stockholder who may be present.
The original or duplicate stock ledger shall be the only evidence as to who are
stockholders entitled to inspect such list.
BOARD OF DIRECTORS
15. RESIGNATION
A director may resign at any time by giving written notice to the
corporation, addressed to the Chief Executive Officer or the Secretary. Such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein. Acceptance of a resignation shall not be necessary
to make it effective unless otherwise stated in the notice.
16. ANNUAL MEETING
A meeting of the Board, to be known as the annual Board meeting, shall be
held without call or notice immediately after and at the same general place as
the annual meeting of the stockholders. The annual Board meeting shall be held
for the purpose of organizing the Board, electing officers, and transacting any
other business that may properly come before the meeting.
17. REGULAR MEETINGS
Regular meetings of the Board may be held without call or notice at such
place and at such time as shall be fixed by the Board.
18. SPECIAL MEETINGS
Special meetings of the Board may be called by the Chief Executive Officer,
and shall be called by the Secretary upon the request in writing of not less
than two of the directors then in office. Special meetings of the Board may be
held at such place and at such time as shall be designated in the call thereof.
Notice of special meetings of the Board shall either be mailed by the Chief
Executive Officer or the Secretary to each director at least three days before
the meeting, or served upon, or sent by electronic means by the Chief Executive
Officer or the Secretary to, each director at least one day before the meeting,
but during an emergency as defined in By-Law 20, notice may be given only to
such of the directors as it may be feasible to reach at the time and by such
means as may be feasible at the time, including publications or private or
public electronic means. Unless required by law, the notice need not state the
purposes of the meeting.
19. TELEPHONIC MEETINGS
Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
20. QUORUM
Except during the existence of an emergency and except as otherwise provided
in these By-Laws or in the Certificate of Incorporation, one-third of the total
number of directors, as fixed pursuant to Section (2) of Article VIII of the
Certificate of Incorporation, shall constitute a quorum for the transaction of
business. During the existence of an emergency, three directors shall constitute
a quorum for the transaction of business. To the extent required to constitute a
quorum at any meeting of the Board during an emergency, the officers of the
corporation who are present shall be deemed, in order of rank and within the
same rank in order of seniority, directors for such meeting. Subject to the
provisions of the Certificate of Incorporation, the action of the majority of
directors present at a meeting at which a quorum is present shall be the act of
the Board. In the event of lack of a quorum, a majority of the directors present
may adjourn the meeting from time to time without notice other than announcement
at the meeting until a quorum shall be obtained. At any such adjourned meeting
at which there is a quorum, any business may be transacted which might have been
transacted at the meeting originally called.
An "emergency" for the purpose of these By-Laws shall be any emergency
resulting from an attack on the United States or on a locality in which the
corporation conducts its business or customarily holds meetings of its Board or
its stockholders, or during any nuclear or atomic disaster, or during the
existence of any catastrophe, or other similar emergency condition, as a result
of which a quorum of the Board or a standing committee thereof cannot readily be
convened for action.
21. ACTION WITHOUT MEETING
Any action required or permitted to be taken at any meeting of the Board may
be taken without a meeting if all members of the Board consent thereto in
writing and such written consent is filed with the minutes of the proceedings of
the Board.
22. ORGANIZATION
The Chairman of the Board, or in his absence the Chief Executive Officer, or
in his absence a director chosen by the directors present, shall act as chairman
at meetings of the Board. The Secretary of the corporation shall act as
secretary at meetings of the Board but in his absence the chairman of the
meeting may appoint a secretary for the meeting.
23. COMPENSATION
The compensation of directors for services as directors and as members of
committees of the Board shall be as fixed by the Board from time to time. The
compensation, if any, of the directors need not be uniform as between directors
and the compensation, if any, of the members of the committees of the Board need
not be uniform either as between members of a committee or as between
committees. The Board shall provide for reimbursing the directors for expenses
incurred in attending meetings of the Board or committees thereof.
Any director may also serve the corporation in any other capacity and
receive compensation, including fees and expenses, for such service.
24. INDEPENDENT DIRECTORS
The nomination of an individual to serve as a member of the Board shall be
such that immediately after the election of such nominee to the Board a majority
of all directors holding office shall, in the determination of the Board, be
independent directors.
COMMITTEES OF THE BOARD
25. STANDING AND OTHER COMMITTEES
The directors shall from time to time designate, by resolution passed by a
majority of the entire Board of Directors (as defined in Section (2) of Article
VIII of the Certificate of Incorporation), an Audit Committee, a Compensation
Committee, an Executive Committee and a Nominating and Corporate Governance
Committee, each of which shall have and may exercise the powers of the Board in
the direction of the business and affairs of the corporation in respect to the
matters and to the extent hereinafter set forth, subject to the power of the
Board to assign from time to time to any such committees or to any other
committees such powers in respect to specific matters as the Board may deem
desirable. These four committees shall be the standing committees of the
corporation. The Board may, by resolution passed by a majority of the entire
Board of Directors, designate such other committees as it from time to time may
deem appropriate; no such committee shall consist of fewer than two directors,
and the powers of each such committee shall be limited to those specified in the
resolution designating the committee.
26. PROCEDURE AND COMMITTEE CHARTERS
Each committee shall fix its own rules of procedure and shall meet where and
as provided by such rules, but the presence of a majority shall be necessary to
constitute a quorum, unless otherwise provided by these By-Laws. Each committee
shall keep minutes of its meetings. Any action required or permitted to be taken
at any meeting of any committee may be taken without a meeting if all the
members consent thereto in writing and such written consent is filed with the
minutes of the proceedings of such committee. All action by each committee shall
be reported to the Board. The Audit, Compensation, and Nominating and Corporate
Governance Committees shall each adopt, subject to the approval of the Board, a
committee charter that identifies the responsibilities and processes of such
committee.
27. AUDIT COMMITTEE
The Audit Committee shall consist of three or more members. The Board shall
select the members of the Audit Committee from among the directors who are not
officers or employees of the corporation and shall designate the Chairman of the
Committee. The members of the Audit Committee shall meet the independence and
experience requirements of the New York Stock Exchange, the Securities Exchange
Act of 1934, and the rules and regulations of the Securities and Exchange
Commission. All Audit Committee members shall be financially literate, and at
least one member shall be a financial expert, as defined by the rules and
regulations of the Securities and Exchange Commission and the New York Stock
Exchange. The Audit Committee shall, with respect to the corporation and the
other entities as to which the corporation has power to select and engage
auditors, select and engage independent public accountants to audit books,
records and accounts, determine the scope of audits to be made by the auditors
and establish policy in connection with internal audit programs and the scope
thereof, and shall perform such other duties as the Board may from time to time
prescribe, including those set forth in the Audit Committee charter.
28. COMPENSATION COMMITTEE
The Compensation Committee shall consist of three or more members. The Board
shall select the members of the Compensation Committee from among the
independent directors and shall designate the Chairman of the Committee. The
Compensation Committee shall constitute the Stock Option Committee provided for
under any stock option plan of the corporation. It shall from time to time fix
the compensation of employees who are directors of the corporation and, in
consultation with the Chief Executive Officer, the compensation of officers of
the corporation who are elected by the Board. The Compensation Committee shall
perform such other duties as the Board may from time to time prescribe,
including those set forth in the Compensation Committee charter.
29. EXECUTIVE COMMITTEE
The Executive Committee shall consist of three or more members including, by
virtue of his office, the Chief Executive Officer. The Board shall select the
other members of the Committee from among the directors and shall designate the
Chairman thereof.
The Executive Committee, when the Board is not in session, shall have and
may exercise all of the powers of the Board to direct the business and the
affairs of the corporation, including but not limited to the power to declare
dividends and to authorize the issuance of stock, except the powers hereinafter
in these By-Laws assigned to any other standing committee and except to the
extent, if any, that the authority of the Committee may be limited in any
respect by law, by the Certificate of Incorporation or by these By-Laws.
30. NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee shall consist of three or
more members. The Board shall select the members of the Nominating Committee
from among the independent directors. The Nominating and Corporate Governance
Committee shall have the power to: propose and consider suggestions as to
candidates for membership on the Board; periodically recommend to the Board
candidates for vacancies on the Board due to resignations or retirements or due
to such standards for composition of Board membership as may from time to time
legally prevail; review and recommend to the Board such modifications to the
prevailing Board of Directors retirement policy as may be deemed appropriate in
light of contemporary standards; propose to the Board on or before March 1 of
each year a slate of directors for submission to the stockholders at the annual
meeting; oversee matters of corporate governance, including advising the Board
on board organization, membership and function, committee structure and
membership, and succession planning for executive management of the corporation;
review and make recommendations to the Board from time to time with respect to
the compensation of directors pursuant to By-Law 23; and such other duties as
the Board may from time to time prescribe, including those set forth in the
Nominating and Corporate Governance charter.
31. ALTERNATES; VACANCIES IN COMMITTEES
The Board may designate one or more directors as alternate members of any
committee. Alternate members shall serve, in the order in which the Board shall
determine, when one or more members of the committee shall be absent or
disqualified. Alternate members may attend committee meetings as observers,
without the right to vote when all members are present; when fewer than all are
present, only an alternate member serving in the place of an absent or
disqualified member shall have the right to vote. If no alternate is available,
the committee member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in place
of any absent or disqualified member. All members of all committees (including
Chairmen) shall serve at the pleasure of the Board.
OFFICERS
32. DESIGNATION; ELECTION; QUALIFICATION; TERM
Each year at the annual Board meeting the directors shall elect a Chairman
of the Board, a Chief Executive Officer, a Secretary and a Treasurer. From time
to time the Board may also elect or appoint a Vice Chairman of the Board or Vice
Chairmen of the Board, a President, such Executive, Senior or other Vice
Presidents as it may deem appropriate, a Chief Financial Officer, and such other
officers, including a Controller, Assistant Vice Presidents, Assistant
Secretaries, Assistant Treasurers and Assistant Controllers, as it may deem
appropriate. The Chief Executive Officer may appoint any officers of the
corporation not required to be elected by the Board, as he may deem appropriate.
The Chairman of the Board, the Chief Executive Officer, and any Vice Chairman of
the Board must be directors; no other officer need be a director. Any number of
offices may be held by the same person. The term of each officer, whenever
elected or appointed, shall be until the election or appointment (as the case
may be) and qualification of his successor or until his earlier resignation or
removal.
33. DUTIES
The officers shall have such powers and perform such duties as are
prescribed in these By-Laws, or, in the case of an officer whose powers and
duties are not so prescribed, as may be assigned by the Board or delegated by or
through the Chief Executive Officer.
34. RESIGNATION; REMOVAL; VACANCIES
Any officer may resign at any time by giving notice to the corporation
addressed to the Chief Executive Officer or the Secretary. Such resignation
shall take effect at the date of the receipt of such notice or at any later time
specified therein. Acceptance of a resignation shall not be necessary to make it
effective unless otherwise stated in the notice. Any officer may be removed by
the Board at any time with or without cause. Any appointed officer may be
removed by the Chief Executive Officer at any time with or without cause. A
vacancy in any office may be filled by the Board, and a vacancy in any appointed
office may be filled by the Chief Executive Officer, for the unexpired portion
of the term.
35. CHIEF EXECUTIVE OFFICER
The Chief Executive Officer of the corporation shall be elected by the
Board. Subject to the Board, he shall be in general and active charge, control
and supervision over the management and direction of the business, property and
affairs of the corporation. He shall keep the Board fully informed, and shall
freely consult it, concerning the business of the corporation in his charge.
He shall, subject to these By-Laws, have authority to:
(i) appoint or approve the appointment of employees to various posts and
positions in the corporation bearing titles designated or approved by
him and to prescribe their authority and duties, which may include the
authority to appoint subordinates to various other posts and positions;
and
(ii) remove or approve the removal of employees so appointed; and
(iii) sign, execute and acknowledge, on behalf of the corporation, all
deeds, mortgages, bonds, notes, debentures, stock certificates,
contracts, including contracts of guaranty and suretyship, leases,
reports and other documents and instruments, except where the signing or
execution thereof by some other officer or employee of the corporation
shall be expressly authorized and directed by law, or by the Board, or
by these By-Laws. Unless otherwise provided by law, or by these By-Laws,
or by the Board, he may authorize in a writing filed with the Secretary,
any officer, employee, or agent of the corporation to sign, execute and
acknowledge, on behalf of the corporation and in his place and stead,
any or all such documents and instruments.
He shall have such other authority and perform such other duties as are
incident to the office of Chief Executive Officer and as may be prescribed from
time to time by the Board and these By-Laws.
In the absence or disability of the Chief Executive Officer, or in case of
an unfilled vacancy in that office, until such time as the Board shall elect his
successor, his duties shall be performed and his powers shall be exercised by
other elected officers of the corporation who are also directors (unless none
are directors) in the order in which such officers were listed in their
respective elections.
36. CHAIRMAN OF THE BOARD, VICE CHAIRMAN OF THE BOARD AND PRESIDENT
The Chairman of the Board, any Vice Chairman of the Board and the President,
each acting alone, shall have authority to sign, execute and acknowledge on
behalf of the corporation, all deeds, mortgages, bonds, notes, debentures, stock
certificates, contracts, including contracts of guaranty and suretyship, leases,
reports and other documents and instruments, except where the signing or
execution thereof by some other officer or employee shall be expressly
authorized and directed by law, or by the Board, or by the Chief Executive
Officer or by these By-Laws. Each shall have such additional powers and perform
such additional duties as may be assigned to him by the Board or as may be
delegated to him by the Chief Executive Officer.
37. VICE PRESIDENTS
Each Vice President shall have such powers and perform such duties as may be
assigned to him by the Board or as may be delegated to him by the Chief
Executive Officer.
Each Executive Vice President shall have authority to sign, execute and
acknowledge on behalf of the corporation, all deeds, mortgages, bonds, notes,
debentures, contracts, including contracts of guaranty and suretyship, leases,
reports and other documents and instruments, except where the signing or
execution thereof by some other officer or employee shall be expressly
authorized and directed by law, or by the Board, or by the Chief Executive
Officer, or by these By-Laws.
38. CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall:
(i) be the principal financial officer of the corporation and have
responsibility for all financial affairs of the corporation; and
(ii) protect the cash, securities, receivables and other financial
resources of the corporation, have responsibility for investment,
receipt, custody and disbursement of such resources, and establish
policies for granting credit to customers; and
(iii) maintain the creditworthiness of the corporation; and
(iv) negotiate and procure capital required by the corporation,
including long-term debt and equity, maintain adequate sources for the
corporation's short-term financing requirements and maintain banking
relationships; and
(v) administer the accounting policies of the corporation and the
internal controls with respect to its financial affairs; and
(vi) supervise the corporation's books of account, and have access to
all records, including the Secretary's records; and
(vii) in general, have such other powers and perform such other duties
as may be assigned from time to time by the Board or by or through the
Chief Executive Officer.
39. CONTROLLER
The Controller shall:
(i) be the principal accounting officer of the corporation; and
(ii) have custody and charge of the corporation's books of account, and
have access to all records, including the Secretary's and the
Treasurer's records, for purpose of obtaining information necessary to
verify or complete the records of the Controller's office; and
(iii) implement the policies for granting credit to customers; and
(iv) implement the internal controls with respect to the financial
affairs of the corporation; and
(v) have the responsibility for processing vouchers for payment by the
Treasurer; and
(vi) in general, have such other powers and perform such other duties as
may be assigned from time to time by the Board or by or through the
Chief Executive Officer.
40. SECRETARY
The Secretary shall:
(i) attend and keep the minutes of all meetings of the stockholders, the
Board, and of such committees as the Board may direct; and
(ii) have custody of the corporate seal and all corporate records
(including transfer books and stock ledgers), contracts, papers,
instruments, documents and books of the corporation except those
required to be kept by other officers under these By-Laws; and
(iii) sign on behalf of the corporation such documents and instruments
as require his signature when approved in accordance with these By-Laws,
and to such documents he shall affix the corporate seal when necessary
and may do so when he deems it desirable; and
(iv) see that notices are given and records and reports are properly
kept and filed by the corporation as required by these By-Laws or as
required by law; and
(v) in general, have such other powers and perform such other duties as
are incident to the office of Secretary and as may be assigned to him
from time to time by the Board or by or through the Chief Executive
Officer.
41. TREASURER
The Treasurer shall:
(i) receive and sign receipts for all moneys paid to the corporation and
shall deposit the same in the name and to the credit of the corporation
in authorized banks or depositories; and
(ii) when necessary or desirable, endorse for collection on behalf of
the corporation all checks, drafts, notes and other obligations payable
to it; and
(iii) disburse the funds of the corporation only upon vouchers duly
processed and under such rules and regulations as the Board may from
time to time adopt; and
(iv) keep full and accurate accounts of the transactions of his office
in books belonging to the corporation; and
(v) render as the Board may direct an account of the transactions of his
office; and
(vi) in general, have such other powers and perform such other duties as
are incident to the office of Treasurer and as may be assigned to him
from time to time by the Board or by or through the Chief Executive
Officer.
MISCELLANEOUS
42. OFFICES
The registered office of the corporation in the State of Delaware shall be
located at 1209 Orange Street, Wilmington, Delaware 19801 and the name of the
registered agent in charge thereof shall be The Corporation Trust Company. The
corporation may have such other offices as the Board may from time to time
determine. The books of the corporation may be kept outside the State of
Delaware.
43. SEAL
The corporation's seal shall be circular in form with "KIMBERLY-CLARK
CORPORATION -- DELAWARE" around the periphery and "1928 -- CORPORATE SEAL"
within.
44. FISCAL YEAR
The fiscal year of the corporation shall begin on January 1 of each year.
45. ANNUAL REPORT
At least fifteen days in advance of the annual meeting of stockholders, but
not later than three months after the close of the fiscal year, the Board shall
publish and submit to the stockholders a consolidated balance sheet of the
corporation and its consolidated subsidiaries as of the end of the previous
fiscal year and the related consolidated income and cash flow statements of the
corporation and its consolidated subsidiaries for the previous fiscal year.
46. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall:
(i) indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of the fact
that he is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of
another corporation, or in the case of an officer or director of the
corporation is or was serving as an employee or agent of a partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful; and
(ii) indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director or officer of the corporation, or is
or was serving at the request of the corporation as a director or officer of
another corporation, or in the case of an officer or director of the
corporation is or was serving as an employee or agent of a partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
The corporation shall be required to indemnify an indemnitee in connection
with a proceeding (or part thereof) initiated by such indemnitee against the
corporation or any of its directors, officers or employees only if the
initiation of such proceeding (or part thereof) by the indemnitee was authorized
by the Board. Notwithstanding the foregoing, the corporation shall be required
to indemnify an indemnitee in connection with a proceeding seeking to enforce
rights to indemnification without the authorization of the Board to the extent
that such proceeding is successful on the merits. To the extent that a director
or officer of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections (i) and
(ii), or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Any indemnification under subsections (i) and (ii) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director or officer is proper
in the circumstances because he has met the applicable standard of conduct set
forth in subsections (i) and (ii). Such determination shall be made (1) by a
majority vote of the directors who were not parties to such action, suit or
proceedings, even though less than a quorum; or (2) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion; or (3) by the stockholders.
Expenses (including attorneys' fees) incurred in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in this By-Law.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other paragraphs of this By-Law shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
The corporation's obligation, if any, to indemnify any person who was or is
serving at its request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or nonprofit entity
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture, trust, enterprise or
nonprofit entity.
The Board may authorize and direct that insurance be purchased and
maintained on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or in the case of an officer or
director of the corporation is or was serving as an employee or agent of a
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this By-Law.
47. RELIANCE ON RECORDS
Each director, each member of any committee designated by the Board, and
each officer, shall, in the performance of his duties, be fully protected in
relying in good faith upon the records of the corporation and upon such
information, opinion, reports or statements presented to the corporation by any
of the corporation's officers or employees, or committees of the Board, or by
any other person as to matters the director, member or officer reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the corporation.
48. INSPECTION OF BOOKS
The directors shall determine from time to time whether, and, to what extent
and at what times and places and under what conditions and regulations the
accounts and other books and records of the corporation (except such as may by
statute be specifically open to inspection) or any of them, shall be open to the
inspection of the stockholders, and the stockholders' rights in this respect are
and shall be restricted and limited accordingly.
49. TRANSACTIONS WITH THE CORPORATION
No contract or transaction between the corporation and one or more of its
directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the Board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(i) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board or the
committee, and the Board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less
than a quorum; or
(ii) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(iii) the contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board, a
committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the Board or of a committee which authorizes the
contract or transaction.
No other contract or transaction in which a director or officer has an
interest and which may, under law, be authorized, approved or ratified by the
Board, a committee thereof, or the stockholders shall be void or voidable if
authorized, approved or ratified by the body which under law may authorize,
approve or ratify such contract or transaction.
50. RATIFICATION
Any transaction questioned in any stockholders' derivative suit on the
ground of lack of authority, defective or irregular execution, adverse interest
of director, officer or stockholder, nondisclosure, miscomputation, or the
application of improper principles or practices of accounting may be ratified
before or after judgment, by the Board or by the stockholders in case less than
a quorum of directors is qualified; and, if so ratified, shall have the same
force and effect as if the questioned transaction had been originally duly
authorized, and said ratification shall be binding upon the corporation and its
stockholders and shall constitute a bar to any claim or execution of any
judgment in respect to such questioned transaction.
51. VOTING OF STOCKS
Unless otherwise ordered by the Board, any one of the Chief Executive
Officer, the Chairman of the Board, the President, any Vice Chairman of the
Board, any Executive Vice President or any Senior Vice President shall have full
power and authority, on behalf of the corporation, to consent to or approve of
any action by, and to attend, act and vote at any meeting of stockholders of,
any company in which the corporation may hold shares of stock, and in giving
such consent or approval or at any such meeting shall possess and may exercise
any and all rights and powers incident to the ownership of such shares and which
as the holder thereof, the corporation might possess and exercise if personally
present, and may exercise such power and authority through the execution of
proxies or may delegate such power and authority to any other officer, agent or
employee of the corporation.
52. NOTICE
Any notice which the corporation is required to give under these By-Laws may
be given personally or it may be given in writing by depositing the notice in
the post office or letter box in a postpaid envelope directed to such address as
appears on the books of the corporation. Such notice shall be deemed to be given
at the time of mailing.
53. WAIVER OF NOTICE
Whenever any notice is required to be given, a waiver thereof in writing
signed by the person or persons entitled to the notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
54. DISPENSING WITH NOTICE
No notice need be given to any person with whom communication is made
unlawful by any law of the United States or any rule, regulation, proclamation
or executive order issued under any such law.
55. AMENDMENTS
Subject to the provisions of the Certificate of Incorporation, these By-Laws
may be altered, amended or repealed by the stockholders or by the Board.
Exhibit (31)a
CERTIFICATIONS
I, Thomas J. Falk, Chief Executive Officer of Kimberly-Clark Corporation,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Kimberly-Clark
Corporation (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability
to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
August 7, 2003 /s/ Thomas J. Falk
------------------
Thomas J. Falk
Chief Executive Officer
Exhibit (31)b
CERTIFICATIONS
I, Mark A. Buthman, Chief Financial Officer of Kimberly-Clark Corporation,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Kimberly-Clark
Corporation (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability
to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
August 7, 2003 /s/ Mark A. Buthman
-------------------
Mark A. Buthman
Chief Financial Officer
Exhibit (32)a
Certification of Chief Executive Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
I, Thomas J. Falk, Chief Executive Officer of Kimberly-Clark Corporation,
certify that, to my knowledge:
(1) the Form 10-Q, filed with the Securities and Exchange Commission on
August 7, 2003 ("accompanied report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) the information contained in the accompanied report fairly presents, in
all material respects, the financial condition and results of operations
of Kimberly-Clark Corporation.
/s/ Thomas J. Falk
------------------
Thomas J.Falk
Chief Executive Officer
August 7, 2003
Exhibit (32)b
Certification of Chief Financial Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
I, Mark A. Buthman, Chief Financial Officer of Kimberly-Clark Corporation,
certify that, to my knowledge:
(1) the Form 10-Q, filed with the Securities and Exchange Commission on
August 7, 2003 ("accompanied report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) the information contained in the accompanied report fairly presents, in
all material respects, the financial condition and results of operations
of Kimberly-Clark Corporation.
/s/ Mark A. Buthman
-------------------
Mark A. Buthman
Chief Financial Officer
August 7, 2003