DALLAS, July 7, 2004--Kimberly-Clark Corporation (NYSE: KMB) today disclosed further details about its previously announced plan to spin off Neenah Paper, the company's fine paper business; Technical Paper, its specialty paper business; and its pulp and timber operations in Canada. As described in a Form 10 filing with the Securities and Exchange Commission, the spin-off will create a new publicly traded company called Neenah Paper, Inc., with businesses that had net sales of approximately $665 million in 2003.
The spin-off will take the form of a tax-free distribution of 100 percent of the new company's common stock to Kimberly-Clark shareholders, with the distribution ratio to be determined shortly before the spin-off occurs. The distribution is expected to be completed late in the third quarter or early in the fourth quarter, subject to market, regulatory and other conditions.
Kimberly-Clark said it will receive cash proceeds in connection with the spin-off, the amount of which will be determined prior to the spin-off.
"We believe this transaction will provide greater value for Kimberly-Clark shareholders by further enhancing our position as a highly focused and innovative health and hygiene company. The spin-off will enable us to concentrate on our core businesses and drive further improvements in our return on invested capital, consistent with our Global Business Plan," said Thomas J. Falk, Chairman and Chief Executive Officer of Kimberly-Clark. "Additionally, shareholders should benefit from having a direct stake in Neenah Paper, Inc., with its sound operations, experienced management team and attractive prospects for value creation."
As previously announced, Sean T. Erwin, who has held numerous senior positions in Kimberly-Clark's pulp and paper business, will lead Neenah Paper, Inc. as Chief Executive Officer. Mr. Erwin, 53, joined Kimberly-Clark in 1978 and has also managed its consumer products and nonwovens businesses.
"Neenah Paper, Inc. represents a significant opportunity for our shareholders, customers, business partners and employees alike," Mr. Erwin said. "We believe that substantial value can be created in these businesses through innovation, service and excellence in execution."
Historical Financials
For the first quarter of 2004, the businesses that will be included in Neenah Paper, Inc., achieved net sales of approximately $186 million, pretax income of $23 million and net income of $14 million. That compares with about $164 million, $15 million and $9 million, respectively, for the same period a year ago. Although the businesses on a stand-alone basis had approximately $665 million in sales in 2003, they accounted for less than 3 percent of Kimberly-Clark's sales. The net income of the businesses in 2003 was approximately $39 million, or less than 2.5 percent of Kimberly-Clark's net income.
Other Details of Spin-Off
Kimberly-Clark will become one of the new company's largest customers through a long-term pulp supply agreement. Following the spin-off, Kimberly-Clark will produce about 10 percent of its worldwide virgin fiber requirements, which is consistent with its previously stated plan of reducing its pulp integration.
As discussed in the Form 10, following the spin-off from Kimberly-Clark, the new company expects to write down the carrying amount of its Terrace Bay pulp operations by recording a non-cash impairment charge. Based on a preliminary analysis, the new company expects the charge to total approximately $110 million. This charge is expected to result in a net loss for the new company in the quarter immediately following the spin-off, and the consolidated assets of the new company and future depreciation expense will be reduced accordingly.
Kimberly-Clark has submitted a request to the Internal Revenue Service for a private letter ruling confirming the tax-free nature of the spin-off. Neenah Paper, Inc. is expected to file an application to list the new company on the New York Stock Exchange under the ticker symbol "NP."
About Neenah Paper, Inc.
Neenah Paper, Inc. will be headquartered in Alpharetta, Ga., near Atlanta, and will have five manufacturing facilities in the U.S. and Canada. It will produce a range of fine and technical paper grades and approximately 700,000 metric tons of pulp annually. It will have leading positions in many of its markets, about 2,100 employees and rights to harvest wood from 5.9 million acres of Canadian timberlands.
Additional Details on Neenah Paper, Inc.
The new company will have three business segments: fine paper, technical paper and pulp.
The fine paper business has long been recognized as a leading manufacturer of premium writing, text, cover and specialty papers used in corporate annual reports, corporate identity packages, invitations, personal stationery and high-end packaging. It markets some of the most recognized and preferred papers in North America, with distinguished brands including CLASSIC, CLASSIC CREST, ENVIRONMENT, NEENAH and UV/ULTRA II. In 2003, the fine paper business had net sales of approximately $200 million. The operation employs approximately 520 people and has manufacturing facilities in Neenah and Whiting, Wis. Kimberly-Clark acquired the business in 1956.
The technical paper business is a leading producer of durable, saturated and coated base papers for a variety of end uses, including tapes, labels, abrasives, medical packaging and heat transfer products. With customers in 41 countries, it also is a global supplier of materials used to create customer-specific components for original equipment manufacturers' products, furniture, book covers and other consumer markets. The technical paper business had net sales of approximately $120 million in 2003. It employs approximately 350 people and has a manufacturing facility in Munising, Mich. Kimberly-Clark acquired the technical paper business in 1952.
The pulp business consists of mills in Pictou, Nova Scotia, and Terrace Bay, Ontario, together with related timberlands. In 2003, the pulp business had revenues of approximately $365 million.
The Pictou mill began production in 1967. It is comprised of a single-line pulp facility, as well as one million acres of owned and 200,000 acres of licensed or managed timberlands in Nova Scotia. The operation primarily produces softwood pulp, and its location on the coast, near New Glasgow, is desirable to customers in North America and Europe. In 2003, the Pictou mill produced approximately 250,000 metric tons of bleached kraft pulp, about 90 percent of which was used to make Kimberly-Clark products, including less than 1 percent consumed by the fine paper and technical paper businesses. The Pictou operation employs approximately 350 people. Kimberly-Clark acquired this business in 1995 as a result of its merger with Scott Paper Company.
The Terrace Bay mill began production in 1948, supplying pulp to customers in the U.S. and Canada. Built by Kimberly-Clark, the Terrace Bay mill currently manufactures both softwood and hardwood pulp. Terrace Bay holds non-exclusive rights to harvest approximately 4.7 million acres of land owned by the Province of Ontario. In 2003, it produced approximately 450,000 metric tons of pulp, 90 percent of which was consumed within Kimberly-Clark, including about 12 percent which was used to make fine paper and technical paper products. The operation employs approximately 920 people and is located on the north shore of Lake Superior in Ontario.
About Kimberly-Clark
Kimberly-Clark and its well-known global brands are an indispensable part of life for people in more than 150 countries. Every day, 1.3 billion people--nearly a quarter of the world's population--trust K-C's brands to enhance their health, hygiene and well being. With brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend, Kimberly-Clark holds the No. 1 or No. 2 share position in more than 80 countries. To keep up with the latest K-C news and to learn more about the company's 132-year history of innovation, visit www.kimberly-clark.com
Certain matters contained in this news release concerning the business outlook, including new product introductions, cost savings and acquisitions, anticipated financial and operating results, strategies, contingencies and anticipated transactions of the company constitute forward-looking statements and are based upon management's expectations and beliefs concerning future events impacting the company. There can be no assurance that these future events will occur as anticipated or that the company's results will be as estimated. For a description of certain factors that could cause the company's future results to differ materially from those expressed in any such forward-looking statements, see the section of Part I, Item 1 of the company's Annual Report on Form 10-K for the year ended December 31, 2003 entitled "Factors That May Affect Future Results".