Cash Provided by Operations Improved Nearly 10 Percent Compared With Second Quarter of 2000 DALLAS, July 24, 2001--Kimberly-Clark Corporation (NYSE: KMB) today reported sales in the second quarter of 2001 were $3.5 billion, an increase of 2.0 percent compared with 2000. Excluding currency effects, sales rose about 5 percent, benefiting from continued volume growth and higher selling prices.
Second quarter earnings from operations of 81 cents per share were the same as in 2000. Increased pricing and sales volumes contributed positively; however, currency effects reduced earnings by 3 cents per share and the company incurred higher energy costs equivalent to 2 cents per share. As previously announced, the second quarter also included expenses of $18 million, or 2 cents per share, related to the start-up of a new consumer tissue machine and the company's new Cottonelle Fresh rollwipes operations.
In addition, consumer demand for Cottonelle bathroom tissue in the U.S. and Huggies diapers in Europe during the quarter temporarily exceeded production capacity, tempering sales and earnings growth. The company successfully resolved supply constraints for these consumer-preferred products before the end of the quarter by starting up the new consumer tissue machine and ramping up diaper production.
Cash provided by operations in the second quarter of 2001 was $540.6 million compared with $493.0 million in 2000, an increase of nearly 10 percent.
Wayne R. Sanders, chairman and chief executive officer of Kimberly-Clark, said, "In the second quarter, the average rates of exchange for all major currencies, with the exception of the Mexican peso, have declined relative to the strong U.S. dollar. As a result, our growth outside North America has been diminished or, in some cases, eliminated. The situation was particularly severe in Brazil, where the plunge in the value of the real has also affected market conditions and pricing. At the same time, higher energy costs continued to impact our margins in North America.
"Despite these near-term pressures, our fundamentals remain strong and we are focused on aggressively building competitive advantage. In the second quarter, our teams continued to deliver good top-line growth in a challenging business environment and continued to make investments that will drive the future growth of our business. And while I am far from satisfied with our bottom-line results for the quarter, the pick up in cash flow gives me confidence that our strategies are on track."
Including unusual items, diluted net income per share for the second quarter was 78 cents per share in 2001 compared with 79 cents per share in 2000, a decrease of 1.3 percent. The unusual items consisted primarily of charges for business improvement programs in both years.
Review of second quarter sales by segment
Sales of $3.5 billion for the second quarter were up 2.0 percent compared with 2000. As noted above, excluding currency effects, sales increased about 5 percent, with improvement in each of the company's core businesses. Sales volumes were approximately 3 percent higher, while selling prices increased 2 percent.
Tissue sales were slightly greater than in the second quarter of 2000. Excluding currency effects, sales rose more than 3 percent. Selling price increases implemented during 2000 accounted for most of the improvement, with overall sales volumes essentially the same as the prior year. In North America, sales volumes of Kleenex facial tissue, Scott bathroom tissue and Huggies baby wipes moved higher, while shipments of Scott towels were below year-ago levels and supply of Cottonelle bathroom tissue was constrained in advance of the start-up of the company's new tissue machine in Jenks, Okla. Sales volumes for away-from-home tissue products in North America were approximately 1 percent lower. In other regions, sales volumes of tissue products rose in Latin America and in Asia, spurred by good growth in Korea, but were down about 1 percent in Europe.
Sales of personal care products rose 3.9 percent compared with the second quarter of 2000, and were up over 7 percent before currency effects. Sales volumes increased about 6 percent and selling prices were 1 percent higher. The volume gains were highlighted by continued strong improvement in sales volumes of Huggies diapers in Europe and double-digit growth in Asia.
Sales of health care and other products increased 1.4 percent. Sales of health care products alone were up more than 5 percent, driven by solid growth in sales volumes. The improvement, however, was largely offset by soft demand for other products in the segment.
Other second quarter operating results
Operating profit in the second quarter of 2001 was $590.6 million, 7.5 percent lower than the prior year. Excluding unusual items, operating profit declined 4.7 percent to $619.1 million in the second quarter of 2001 compared with $649.5 million in 2000. Lower fiber costs of approximately $20 million were not sufficient to counter the impact of cost increases. These included significantly higher energy costs, start-up costs related to the company's new consumer tissue and rollwipes machines, and higher levels of marketing support for tissue and personal care products, particularly in Europe.
In addition, weakness of key currencies, including the euro, the British pound, the Brazilian real and the South Korean won reduced operating profit approximately $40 million compared with the second quarter of 2000.
Kimberly-Clark's share of net income of equity companies in the second quarter increased to $52.6 million in 2001 from $41.1 million in 2000, due primarily to all-time record sales, operating profit and net income at Kimberly-Clark de Mexico, S.A. de C.V. An increase in the value of the Mexican peso was a key factor contributing to the improved results.
During the quarter, the company repurchased 2.7 million shares of common stock at a cost of $159 million. Year-to-date, Kimberly-Clark has invested a total of $295 million to repurchase 4.7 million shares.
Year-to-date results
For the first six months of 2001, sales of $7.1 billion were up 4.2 percent from $6.9 billion last year. Excluding currency effects, sales were more than 7 percent higher. Operating profit declined 7.2 percent to $1,221.7 million in 2001 versus $1,317.0 million in 2000. However, before unusual items, year-to-date operating profit increased slightly to $1,278.3 million from $1,274.1 million in 2000. Diluted earnings per share for the first six months of 2001 were $1.58 versus $1.65 in 2000, a decline of 4.2 percent. Diluted earnings per share before unusual items were $1.65 in 2001 compared with $1.60 in 2000, an increase of 3.1 percent.
Conference call
A conference call to discuss the news release and other matters of interest to investors and analysts will be held at 9:00 a.m. (CDT) today. The conference call will be simultaneously broadcast over the World Wide Web. Stockholders and others are invited to listen to the live broadcast or a playback, which can be accessed by following the instructions set out in the Investors section of the company's Web site (www.kimberly-clark.com).
Kimberly-Clark Corporation is a leading consumer products company. Its global tissue, personal care and health care brands include Huggies, Pull-Ups, Kotex, Depend, Kleenex, Scott, Kimberly-Clark, Safeskin, Tecnol, Kimwipes and WypAll. 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
Description of Business Segments
The Tissue segment manufactures and markets facial and bathroom tissue, paper towels, wipers and napkins for household and away-from-home use; wet wipes; printing, premium business and correspondence papers; and related products.
Products in this segment are sold under the Kleenex, Scott, Kimberly-Clark, Kleenex Cottonelle, Kleenex Viva, Huggies, Kimwipes, WypAll, Surpass and other brand names.
The Personal Care segment manufactures and markets disposable diapers, training and youth pants and swimpants; feminine and incontinence care products; and related products. Products in this segment are primarily for household use and are sold under a variety of well-known brand names, including Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays, Depend, Poise and other brand names.
The Health Care and Other segment manufactures and markets 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; specialty and technical papers; and other products. Products in this segment are sold under the Kimberly-Clark, Safeskin, Tecnol, Ballard and other brand names.
N.M.-Not meaningful
Unaudited