Kimberly-Clark Reports Fourth Quarter 2001 Results DALLAS, January 24, 2002—Kimberly-Clark Corporation (NYSE: KMB) today reported that sales for the fourth quarter of 2001 were approximately $3.7 billion, an increase of 2.0 percent compared with 2000. Excluding currency effects, sales rose about 3 percent. Diluted net income per share for the fourth quarter was 68 cents in 2001 compared with 85 cents in 2000, a decrease of 20.0 percent.
Fourth quarter earnings before unusual items were 82 cents per share, down 5.7 percent from 87 cents per share in 2000. As previously announced, the unusual items in the fourth quarter of 2001 relate primarily to the streamlining of manufacturing operations in Latin America, including the shutdown of four small, older plants, as well as the closure of a Technical Paper mill in the U.S. and the write off of excess manufacturing equipment and a one-time payment under a contract settlement agreement in North America. In addition, the company recorded a pretax charge of approximately $17 million pursuant to an arbitration ruling released on January 21, 2002. The ruling resolves the first of two disputes related to the closure of the company’s Mobile, Ala., pulp mill in 1999 and the supply of energy to the company’s Mobile tissue mill. A second arbitration ruling is expected at the end of the month. In total, the company recorded pretax charges of approximately $118 million, equivalent to 14 cents per share, in the fourth quarter of 2001. The unusual items in 2000 consisted of charges for business integration, improvement and other programs.
As expected, the decline in earnings per share before unusual items was due primarily to lower sales and earnings for the company’s operations in Argentina and Brazil and for most of the company’s business-to-business operations in North America in the face of difficult economic conditions. The weakness in Argentina and Brazil was the main reason for lower operating profit in the company’s personal care business. Meanwhile, the company’s consumer tissue business posted solid improvements in sales and operating profit before unusual items despite continued competitive market conditions. Health care sales and operating profit increased again in the fourth quarter, capping a strong year. During the quarter, the company also incurred start-up costs equivalent to approximately 2 cents per share to support the rollout of new and improved products. These investments are intended to drive future growth.
Cash provided by operations rose approximately 19 percent in the fourth quarter on a comparable basis with 2000, adjusting for differences in the timing of income tax payments. For the full year, cash provided by operations was $2.3 billion in 2001, approximately 6 percent greater than in the prior year. During the quarter, the company repurchased 5.9 million shares of common stock at a cost of $338 million. Kimberly-Clark invested a total of $900 million in 2001 to repurchase 15.0 million shares, or nearly 3 percent of the shares outstanding at the beginning of the year. The net impact of currency and energy costs on the company’s earnings in the fourth quarter of 2001 was minimal, marking a significant improvement versus the first nine months of the year when those factors penalized earnings by an unprecedented 19 cents per share.
Review of fourth quarter sales by segment
Sales of $3.7 billion for the fourth quarter were up 2.0 percent compared with 2000. Excluding currency effects, sales increased about 3 percent, driven mainly by higher sales of consumer tissue products. Overall sales volumes were approximately 4 percent higher while selling prices were about 1 percent lower. Sales in the fourth quarter of 2001 included approximately $125 million as a result of the company’s acquisition in July 2001 of an additional 5 percent of Kimberly-Clark Australia Pty. Limited (KCA), bringing K-C’s ownership of the former equity affiliate to 55 percent. Effective July 1, the company began consolidating KCA’s net sales and operating results.
Consumer tissue sales climbed 6.6 percent compared with the fourth quarter of 2000, with gains in all major regions of the world. Sales volumes were up 5 percent and selling prices were approximately 1 percent higher, mainly due to increases implemented in North America and Europe over the past year. Product mix improvements also contributed to the increase. Sales were up sharply in Europe, driven by market share gains for Andrex and Scottex bathroom tissue, and also in Asia, as a result of the consolidation of KCA. The increase in Latin America was highlighted by double-digit growth in the Andean region due to new and improved products. In North America, sales of consumer tissue products rose 2 percent, led by higher sales of improved Scott paper towels and Huggies baby wipes.
Sales of personal care products rose almost 1 percent compared with the fourth quarter of 2000 despite a decline in sales in Argentina and Brazil in excess of 30 percent. Global sales were up more than 2 percent before currency effects on a 5 percent rise in sales volumes, partially offset by a shift in product mix, primarily in Latin America. Selling prices were slightly lower. The volume gains were highlighted by continued double-digit growth in sales volumes of Huggies diapers in Europe and a strong increase in Asia due to the consolidation of KCA. In North America, sales volumes of Pull-Ups training pants, GoodNites youth pants and Depend and Poise adult incontinence products registered solid improvement, but sales volumes of Huggies diapers were down compared with all-time record levels in the fourth quarter of 2000. Sales of business-to-business products declined 4.1 percent. Overall volumes were flat and selling prices were nearly 4 percent lower. Sales of health care products continued to improve, boosted by sales volume growth of 7 percent. Meanwhile, sales of K-C Professional’s away-from-home products in North America were more than 7 percent lower, as further slowing in the economy since September caused market demand to soften.
Other fourth quarter operating results
Operating profit in the fourth quarter of 2001 was $514.0 million, 23.8 percent lower than the prior year. Excluding unusual items, operating profit declined 8.5 percent to $632.1 million in the fourth quarter of 2001 compared with $690.7 million in 2000. The decline was due primarily to difficult business conditions affecting the company’s operations in Latin America and its business-to-business operations in North America, as noted above. In addition, the fourth quarter included costs of about $13 million related to start-up of new tissue machines and the company’s Cottonelle Fresh rollwipes operations. Lower fiber costs of approximately $75 million were more than offset by a step-up in advertising and promotion expenses for both new product introductions and increased levels of competitive activity.
Other income and expense in the fourth quarter of 2001 includes a charge of approximately 3 cents per share related to sales tax credits in Latin America partially offset by foreign currency gains from Australian dollar forward contracts equivalent to nearly 2 cents per share. As previously announced, the forward contracts relate to the anticipated acquisition of the remaining 45 percent ownership interest in Kimberly-Clark Australia. In addition, there was a net gain on the devaluation of the Argentine peso of about 1 cent per share in the fourth quarter, as the company’s consolidated operation in Argentina recorded a gain that was partially offset by a loss at the company’s equity affiliate in that country. Kimberly-Clark’s share of net income of equity companies in the fourth quarter decreased in 2001 due primarily to lower net income at Klabin Kimberly S.A. in Brazil, as well as the consolidation of Kimberly-Clark Australia and above-mentioned devaluation loss at the company’s equity affiliate in Argentina. These reductions offset improved results at Kimberly-Clark de Mexico, S.A. de C.V., which benefited from continued strong operating profit margin and an increase in the value of the Mexican peso.
Full year results
For the full year of 2001, sales of $14.5 billion were up 3.9 percent from $14.0 billion in the prior year. Excluding currency effects, sales were more than 6 percent higher. Operating profit declined 10.2 percent to $2,364.8 million in 2001 versus $2,633.8million in 2000. However, before unusual items, year-to-date operating profit decreased 3.1 percent to $2,551.1 million from $2,632.7 million in 2000. Diluted earnings per share for 2001 were $3.05 versus $3.31 in 2000, a decline of 7.9 percent. Earnings per share before unusual items were $3.27 in 2001 compared with $3.32 in 2000, a decline of 1.5 percent.
Wayne R. Sanders, chairman and chief executive officer of Kimberly-Clark, said, “In 2001, Kimberly-Clark faced the most difficult business environment in recent memory. While everyone at K-C is disappointed with our performance last year, we are confident that we have been doing the right things to drive profitable growth going forward. Comprehensive marketing programs will continue to drive volume growth for our consumer products. While the outlook for improvement in Argentina and Brazil remains uncertain, we should benefit from improved market conditions for our business-to-business operations in North America as the economy recovers. We’re building competitive advantage to grow the top- and bottom-lines, and we’re focused on increasing cash flow to help fund our growth.”
Conference call
A conference call to discuss this news release and other matters of interest to investors and analysts will be held at 9:00 a.m. (CST) today. The conference call will be simultaneously broadcast over the World Wide Web. Stockholders and others are invited to listen to the live broadcast or a playback, which can be accessed by following the instructions set out in the Investors section of the company’s Web site (www.kimberly-clark.com).
Kimberly-Clark Corporation is a leading consumer products company. Its global personal care, tissue and health care brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott, Kimwipes, Kimberly-Clark, WypAll, Safeskin and Tecnol. Other brands well known outside the U.S. include Andrex, Scottex, Page, Popee and Kimbies. Kimberly-Clark also is a major producer of premium business, correspondence and technical papers. The company has manufacturing operations in 41 countries and sells its products in more than 150 countries.
Certain matters contained in this news release concerning the business outlook, including new product introductions, cost savings and acquisitions, anticipated financial and operating results, strategies, contingencies and transactions of the company constitute forward-looking statements and are based upon management’s expectations and beliefs concerning future events impacting the company. There can be no assurance that these future events will occur as anticipated or that the company’s results will be as estimated. For a description of certain factors that could cause the company’s future results to differ materially from those expressed in any such forward-looking statements, see the section of Part I, Item 1 of the company’s Annual Report on Form 10-K for the year ended December 31, 2000 entitled “Factors That May Affect Future Results.”
Kimberly-Clark Web site: www.kimberly-clark.com
