KMB_2012_1Q10Q
Table of Contents

 
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 March 31, 2012
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
incorporation or organization)
 
(I.R.S. Employer
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)
 
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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
  
Accelerated filer
¨
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
  
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  x
As of April 27, 2012, there were 392,121,472 shares of the Corporation’s common stock outstanding.
 



Table of Contents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(Unaudited)

 
 
Three Months Ended
March 31
(Millions of dollars, except per share amounts)
 
2012
 
2011
 
 
 
 
 
Net Sales
 
$
5,241

 
$
5,029

Cost of products sold
 
3,537

 
3,566

Gross Profit
 
1,704

 
1,463

Marketing, research and general expenses
 
996

 
921

Other (income) and expense, net
 
8

 
(2
)
Operating Profit
 
700

 
544

Interest income
 
4

 
4

Interest expense
 
(71
)
 
(64
)
Income Before Income Taxes and Equity Interests
 
633

 
484

Provision for income taxes
 
(185
)
 
(152
)
Income Before Equity Interests
 
448

 
332

Share of net income of equity companies
 
39

 
40

Net Income
 
487

 
372

Net income attributable to noncontrolling interests
 
(19
)
 
(22
)
Net Income Attributable to Kimberly-Clark Corporation
 
$
468

 
$
350

 
 
 
 
 
Per Share Basis:
 
 
 
 
Net Income Attributable to Kimberly-Clark Corporation
 
 
 
 
Basic
 
$
1.19

 
$
0.87

Diluted
 
$
1.18

 
$
0.86

Cash Dividends Declared
 
$
0.74

 
$
0.70

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
 
 
 
Three Months Ended
March 31
(Millions of dollars)
 
2012
 
2011
 
 
 
 
 
Net Income
 
$
487

 
$
372

Other Comprehensive Income, Net of Tax:
 
 
 
 
Unrealized currency translation adjustments
 
261

 
222

Employee postretirement benefits
 
16

 
1

Other
 
(12
)
 
(20
)
Total Other Comprehensive Income, Net of Tax
 
265

 
203

Comprehensive Income
 
752

 
575

Comprehensive income attributable to noncontrolling interests
 
(24
)
 
(27
)
Comprehensive Income Attributable to Kimberly-Clark Corporation
 
$
728

 
$
548

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
 
(Millions of dollars)
 
March 31
2012
 
December 31
2011
 
 
 
 
 
ASSETS
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
$
785

 
$
764

Accounts receivable, net
 
2,672

 
2,602

Inventories
 
2,354

 
2,356

Other current assets
 
506

 
561

Total Current Assets
 
6,317

 
6,283

 
 
 
 
 
Property
 
18,511

 
18,240

Less accumulated depreciation
 
10,393

 
10,191

Net Property
 
8,118

 
8,049

Investments in Equity Companies
 
395

 
338

Goodwill
 
3,373

 
3,340

Other Intangible Assets
 
260

 
265

Long-Term Notes Receivable
 
394

 
394

Other Assets
 
700

 
704

 
 
$
19,557

 
$
19,373

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current Liabilities
 
 
 
 
Debt payable within one year
 
$
691

 
$
706

Trade accounts payable
 
2,382

 
2,388

Accrued expenses
 
1,885

 
2,026

Other current liabilities
 
291

 
277

Total Current Liabilities
 
5,249

 
5,397

Long-Term Debt
 
5,707

 
5,426

Noncurrent Employee Benefits
 
1,423

 
1,460

Other Liabilities
 
993

 
1,014

Redeemable Preferred and Common Securities of Subsidiaries
 
547

 
547

Stockholders’ Equity
 
 
 
 
Kimberly-Clark Corporation
 
5,353

 
5,249

Noncontrolling interests
 
285

 
280

Total Stockholders’ Equity
 
5,638

 
5,529

 
 
$
19,557

 
$
19,373

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
(Unaudited)
 
 
 
Three Months Ended
March 31
(Millions of dollars)
 
2012
 
2011
 
 
 
 
 
Operating Activities
 
 
 
 
Net income
 
$
487

 
$
372

Depreciation and amortization
 
218

 
243

Stock-based compensation
 
13

 
12

Increase in operating working capital
 
(215
)
 
(151
)
Deferred income taxes
 
115

 
45

Net losses on asset dispositions
 
11

 
6

Equity companies’ earnings in excess of dividends paid
 
(37
)
 
(39
)
Postretirement benefits
 
(3
)
 
(234
)
Other
 
(4
)
 
(4
)
Cash Provided by Operations
 
585

 
250

Investing Activities
 
 
 
 
Capital spending
 
(259
)
 
(234
)
Proceeds from sales of investments
 

 
5

Investments in time deposits
 
(35
)
 
(43
)
Maturities of time deposits
 
43

 
53

Other
 

 
1

Cash Used for Investing
 
(251
)
 
(218
)
Financing Activities
 
 
 
 
Cash dividends paid
 
(277
)
 
(269
)
Net increase (decrease) in short-term debt
 
386

 
(20
)
Proceeds from issuance of long-term debt
 
309

 
700

Repayments of long-term debt
 
(417
)
 
(7
)
Cash paid on redeemable preferred securities of subsidiary
 
(7
)
 
(14
)
Proceeds from exercise of stock options
 
115

 
81

Acquisitions of common stock for the treasury
 
(438
)
 
(812
)
Other
 
(6
)
 
9

Cash Used for Financing
 
(335
)
 
(332
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
 
22

 
9

Increase (decrease) in Cash and Cash Equivalents
 
21

 
(291
)
Cash and Cash Equivalents, beginning of year
 
764

 
876

Cash and Cash Equivalents, end of period
 
$
785

 
$
585

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1. Accounting Policies
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all material adjustments which are of a normal and recurring nature necessary for a fair presentation of the results for the periods presented have been reflected.
For further information, refer to the Consolidated Financial Statements and footnotes included in our Annual Report on Form  10-K for the year ended December 31, 2011. The terms “Corporation,” “Kimberly-Clark,” “K-C,” “we,” “our” and “us” refer to Kimberly-Clark Corporation and its consolidated subsidiaries.
Highly Inflationary Accounting for Venezuelan Operations
Our Venezuelan subsidiary (“K-C Venezuela”) accounts for its operations as highly inflationary, as required by GAAP.  Under highly inflationary accounting, K-C Venezuela's functional currency became the U.S. dollar, and its income statement and balance sheet are measured into U.S. dollars using both current and historical rates of exchange.  The effect of changes in exchange rates on bolivar-denominated monetary assets and liabilities is reflected in earnings in Other (income) and expense, net.  We determined that the Central Bank of Venezuela regulated currency exchange system rate of 5.4 bolivars per U.S. dollar was the appropriate exchange rate to measure K-C Venezuela's bolivar-denominated transactions into U.S. dollars during 2011 and through March 31, 2012.
New Accounting Standards
In May 2011, the Financial Accounting Standards Board ("FASB") and the International Accounting Standards Board ("IASB") issued Accounting Standards Update ("ASU") No. 2011-04 and IFRS 13, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, respectively, to provide largely identical guidance about fair value measurement and disclosure requirements. The ASU does not extend the use of fair value but, rather, provides guidance about how fair value should be applied where it is already required or permitted under GAAP. We adopted this ASU effective January 1, 2012. The adoption of this update did not have a material impact on our consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, amending Topic 220, Comprehensive Income. The new standard increases the prominence of other comprehensive income in financial statements. Under this ASU, an entity will have the option to present the components of net income and comprehensive income in either one continuous or two consecutive financial statements. The ASU eliminates the option in GAAP to present other comprehensive income in the statement of changes in equity. In December 2011, the FASB issued ASU No. 2011-12, which deferred the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income, which was originally proposed in ASU No. 2011-05. We adopted these ASUs effective January 1, 2012. These updates did not have a material impact on our consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment, amending Topic 350, Intangibles - Goodwill and Other. This ASU permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount before being required to apply the two-step goodwill impairment test. We adopted this ASU effective January 1, 2012. The adoption of this update did not have a material impact on our consolidated financial statements.

Note 2. Fair Value Information
Fair Value Measurements
The following fair value information is based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels in the hierarchy used to measure fair value are:
Level 1 – Unadjusted quoted prices in active markets accessible at the reporting date for identical assets and liabilities.

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Level 2 – Quoted prices for similar assets or liabilities in active markets. Quoted prices for identical or similar assets and liabilities in markets that are not considered active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 – Prices or valuations that require inputs that are significant to the valuation and are unobservable.
During the three months ended March 31, 2012 and for full year 2011, there were no significant transfers among level 1, 2, or 3 fair value determinations.
Set forth below are the assets and liabilities that are measured on a recurring basis at fair value and the inputs used to develop those fair value measurements.
 
March 31
2012
 
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
(Millions of dollars)
Assets
 
 
 
 
 
 
 
Company-owned life insurance (“COLI”)
$
48

 
$

 
$
48

 
$

Available-for-sale securities
17

 
17

 

 

Derivatives
40

 

 
40

 

Total
$
105

 
$
17

 
$
88

 
$

Liabilities
 
 
 
 
 
 
 
Derivatives
$
52

 
$

 
$
52

 
$

 
December 31
2011
 
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
 
 
(Millions of dollars)
 
 
Assets
 
 
 
 
 
 
 
COLI
$
45

 
$

 
$
45

 
$

Available-for-sale securities
15

 
15

 

 

Derivatives
61

 

 
61

 

Total
$
121

 
$
15

 
$
106

 
$

Liabilities
 
 
 
 
 
 
 
Derivatives
$
120

 
$

 
$
120

 
$

The COLI policies are a source of funding primarily for our nonqualified employee benefits and are included in other assets. Available-for-sale securities are included in other assets. See Note 8 for information on the classification of derivatives in the Condensed Consolidated Balance Sheet.
Level 1 Fair Values - The fair values of certain available-for-sale securities are based on quoted market prices in active markets for identical assets. Unrealized losses on these securities were not significant at March 31, 2012 and December 31, 2011 and have been recorded in other comprehensive income until realized. The unrealized losses have not been recognized in earnings because we have both the intent and ability to hold the securities for a period of time sufficient to allow for an anticipated recovery of fair value to the cost of these securities.
Level 2 Fair Values - The fair value of the COLI policies is derived from investments in a mix of money market, fixed income and equity funds managed by unrelated fund managers. The fair values of derivatives used to manage interest rate risk and commodity price risk are based on LIBOR rates and interest rate swap curves and NYMEX price quotations, respectively. The fair value of hedging instruments used to manage foreign currency risk is based on published quotations of spot currency rates and forward points, which are converted into implied forward currency rates. Additional information on our use of derivative instruments is contained in Note 8.

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Fair Value Disclosures
The following table includes the fair value of our financial instruments for which disclosure of fair value is required:
 
Fair Value
Hierarchy Level
 
Carrying
Amount
 
Estimated
Fair  Value
 
Carrying
Amount
 
Estimated
Fair  Value
 
 
March 31, 2012
 
December 31, 2011
 
 
 
(Millions of dollars)
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents(a)
1
 
$
785

 
$
785

 
$
764

 
$
764

Time deposits(b)
1
 
88

 
88

 
95

 
95

Notes receivable(c)
3
 
394

 
380

 
394

 
373

Liabilities and redeemable preferred and common securities of subsidiaries
 
 
 
 
 
 
 
 
 
Short-term debt(d)
2
 
473

 
473

 
87

 
87

Monetization loan(c)
3
 
397

 
391

 
397

 
386

Long-term debt(e)
2
 
5,528

 
6,477

 
5,648

 
6,671

Redeemable preferred securities of subsidiary(c)
3
 
506

 
562

 
506

 
568

Redeemable common securities of subsidiary(f)
3
 
41

 
41

 
41

 
41

(a) 
Cash equivalents are comprised of certificates of deposit, time deposits and other interest-bearing investments with original maturity dates of 90 days or less. Cash equivalents are recorded at cost, which approximates fair value.
(b) 
Time deposits, included in Other current assets on the Condensed Consolidated Balance Sheet, are comprised of deposits with original maturities of more than 90 days but less than one year. Time deposits are recorded at cost, which approximates fair value.
(c) 
The note, monetization loan and redeemable preferred securities of subsidiary are not traded in active markets. Accordingly, their fair values were calculated using a floating rate pricing model that compared the stated spread to the fair value spread to determine the price at which each of the financial instruments should trade. The model used the following inputs to calculate fair values: face value, current LIBOR rate, unobservable fair value credit spread, stated spread, maturity date and interest payment dates. The difference between the carrying amount of the note and its fair value represents an unrealized loss position for which an other-than-temporary impairment has not been recognized in earnings because we have both the intent and ability to hold the note for a period of time sufficient to allow for an anticipated recovery of fair value to the carrying amount of the note.
(d) 
Short-term debt is comprised of U.S. commercial paper and other similar short-term debt issued by non-U.S. subsidiaries, all of which are recorded at cost, which approximates fair value.
(e) 
Long-term debt excludes the monetization loan and includes the current portion ($218 million and $619 million at March 31, 2012 and December 31, 2011, respectively) of these debt instruments. Fair values were estimated based on quoted prices for financial instruments for which all significant inputs were observable, either directly or indirectly.
(f) 
The fair value of the redeemable common securities of subsidiary was based on various inputs, including an independent third-party appraisal, adjusted for current market conditions.

Note 3. Pulp and Tissue Restructuring Actions
On January 21, 2011, we initiated a pulp and tissue restructuring plan (the "Restructuring") in order to exit our remaining integrated pulp manufacturing operations and improve the underlying profitability and return on invested capital of our consumer tissue and K-C Professional ("KCP") businesses. The Restructuring involves the streamlining, sale or closure of six of our manufacturing facilities around the world. In conjunction with these actions, we have begun to exit certain non-strategic products, primarily non-branded offerings, and transfer some production to lower-cost facilities in order to improve overall profitability and returns.
In addition, on January 24, 2012, we announced our decision to streamline an additional manufacturing facility in North America ("Additional Streamlining") to further enhance the profitability of our consumer tissue business. Estimated charges related to this additional restructuring action are expected to range from $30 million to $50 million before tax.
Both restructuring actions are anticipated to be substantially completed by the end of 2012. The restructuring actions are expected to result in cumulative pre-tax charges of approximately $550 million to $600 million ($385 million to $420 million after tax) over 2011 and 2012. Cash costs related to the streamlining of operations, sale or closure, relocation of equipment, severance and

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other expenses are expected to account for approximately 30 percent to 40 percent of the charges. Noncash charges will consist primarily of incremental depreciation.
Through March 31, 2012, cumulative pre-tax charges for the restructuring actions were $450 million ($313 million after tax), including cumulative pre-tax cash charges of $101 million.  On a geographic basis, these cumulative pre-tax charges were incurred as follows: North America - $237 million; Australia - $135 million and Other - $78 million.  On a business segment basis, these cumulative pre-tax charges were incurred as follows: Consumer Tissue - $389 million; K-C Professional & Other - $59 million and Other (income) and expense, net - $2 million.
The following charges were incurred in connection with the restructuring actions:
 
Three Months Ended March 31
 
2012
 
2011
 
The
Restructuring
 
Additional
Streamlining
 
Total
 
The
Restructuring
 
(Millions of dollars)
Incremental depreciation
$
6

 
$
6

 
$
12

 
$
40

Charges for workforce reductions
1

 
3

 
4

 
42

Asset write-offs
8

 

 
8

 

Other exit costs
11

 

 
11

 

Cost of products sold
26

 
9

 
35

 
82

Provision for income taxes
(8
)
 
(3
)
 
(11
)
 
(25
)
Net charges
$
18

 
$
6

 
$
24

 
$
57

See Note 9 for additional information on the pulp and tissue restructuring charges by segment.
Pre-tax charges for the restructuring actions relate to activities in the following geographic areas:
 
Three Months Ended March 31, 2012
 
North
America
 
Australia
 
Other
 
Total
 
(Millions of dollars)
Incremental depreciation
$
12

 
$

 
$

 
$
12

Charges for workforce reductions
4

 

 

 
4

Asset write-offs
8

 

 

 
8

Other exit costs
9

 
2

 

 
11

Total charges
$
33

 
$
2

 
$

 
$
35

 
Three Months Ended March 31, 2011
 
North
America
 
Australia
 
Other
 
Total
 
(Millions of dollars)
Incremental depreciation
$
18

 
$
19

 
$
3

 
$
40

Charges for workforce reductions

 
40

 
2

 
42

Total charges
$
18

 
$
59

 
$
5

 
$
82


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The following summarizes the cash charges recorded and reconciles these charges to accrued expenses for the restructuring actions:
(Millions of dollars)
 
 
Accrued expenses - December 31, 2011
 
$
37

Charges for workforce reductions and other exit costs
 
15

Cash payments
 
(31
)
Accrued expenses - March 31, 2012
 
$
21


Note 4. Inventories
The following schedule presents a summary of inventories by major class:
 
 
March 31, 2012
 
December 31, 2011
(Millions of dollars)
 
LIFO
 
Non-
LIFO
 
Total
 
LIFO
 
Non-
LIFO
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
At the lower of cost, determined on the FIFO or weighted-average cost methods, or market:
 
 
 
 
 
 
 
 
 
 
 

Raw materials
 
$
159

 
$
343

 
$
502

 
$
163

 
$
334

 
$
497

Work in process
 
212

 
125

 
337

 
245

 
126

 
371

Finished goods
 
662

 
787

 
1,449

 
708

 
760

 
1,468

Supplies and other
 

 
305

 
305

 

 
300

 
300

 
 
1,033

 
1,560


2,593


1,116


1,520

 
2,636

Excess of FIFO or weighted-average cost over LIFO cost
 
(239
)
 

 
(239
)
 
(280
)
 

 
(280
)
Total
 
$
794

 
$
1,560

 
$
2,354

 
$
836

 
$
1,520

 
$
2,356

We use the LIFO method of valuing inventory for financial reporting purposes for most U.S. inventories. Interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and costs at that time.

Note 5. Employee Postretirement Benefits
The table below presents net periodic benefit cost information for defined benefit plans and other postretirement benefit plans:
 
 
Defined
Benefit Plans
 
Other Postretirement
Benefit Plans
 
 
Three Months Ended March 31
(Millions of dollars)
 
2012
 
2011
 
2012
 
2011
 
 
 
 
 
 
 
 
 
Service cost
 
$
12

 
$
14

 
$
4

 
$
4

Interest cost
 
70

 
76

 
9

 
11

Expected return on plan assets
 
(83
)
 
(86
)
 

 

Recognized net actuarial loss
 
27

 
24

 

 

Other
 
11

 

 

 
1

Net periodic benefit cost
 
$
37

 
$
28

 
$
13

 
$
16

During the first quarter of 2012 and 2011, we made cash contributions of $45 million and $265 million, respectively, to our pension trusts. We currently anticipate contributing between $50 million and $100 million for the full year 2012 to our pension trusts.
Various derivative instruments are utilized in the management of our defined benefit plan assets. These derivative instruments are used to manage risk or achieve a target asset allocation. For the U.S. pension plan, equity volatility is managed by entering into exchange-traded puts and over-the-counter calls to create equity collars with a zero net premium at initiation. The equity collar strategy is designed to reduce potential equity losses while limiting gains, resulting in lower equity volatility for the plan. As of March 31, 2012, equity collars are in place on approximately 17 percent of the U.S. plan’s $1.5 billion equity allocation.


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Note 6. Earnings Per Share ("EPS")
There are no adjustments required to be made to net income for purposes of computing basic and diluted EPS. The average number of common shares outstanding is reconciled to those used in the basic and diluted EPS computations as follows:
 
 
Three Months Ended March 31
(Millions of shares)
 
2012
 
2011
 
 
 
 
 
Average shares outstanding
 
393.7

 
402.5

Participating securities
 
0.1

 
0.9

Basic
 
393.8

 
403.4

Dilutive effect of stock options
 
1.9

 
1.4

Dilutive effect of restricted share and restricted share unit awards
 
1.4

 
1.1

Diluted
 
397.1

 
405.9

There were no outstanding options excluded from the computation of diluted EPS for the three months ended March 31, 2012. Options outstanding during the three months ended March 31, 2011 to purchase 4.7 million shares of common stock were not included in the computation of diluted EPS mainly because the exercise prices of the options were greater than the average market price of the common shares during the periods.
The number of common shares outstanding as of March 31, 2012 and 2011 was 391.4 million and 395.2 million, respectively.

Note 7. Stockholders’ Equity
Set forth below are reconciliations for the three months ended March 31, 2012 and 2011 of the carrying amount of total stockholders’ equity from the beginning of the period to the end of the period. In addition, each of the reconciliations displays the amount of net income allocable to redeemable securities of subsidiaries.
 
 
 
 
Stockholders’  Equity
Attributable to
 
 
(Millions of dollars)
 
Comprehensive
Income
 
The
Corporation
 
Noncontrolling
Interests
 
Redeemable
Securities
 of
Subsidiaries
 
 
 
 
 
 
 
 
 
Balance at December 31, 2011
 
 
 
$
5,249

 
$
280

 
$
547

Comprehensive Income:
 
 
 
 
 
 
 
 
Net income
 
$
487

 
468

 
11

 
8

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Unrealized translation
 
261

 
254

 
7

 

Employee postretirement benefits
 
16

 
17

 
(1
)
 

Other
 
(12
)
 
(11
)
 
(1
)
 

Total Comprehensive Income
 
$
752

 
 
 
 
 
 
Stock-based awards exercised or vested
 
 
 
114

 

 

Income tax benefits on stock-based compensation
 
 
 
7

 

 

Shares repurchased
 
 
 
(469
)
 

 

Recognition of stock-based compensation
 
 
 
13

 

 

Dividends declared
 
 
 
(291
)
 
(13
)
 

Other
 
 
 
2

 
2

 
(1
)
Return on redeemable securities of subsidiaries
 
 
 

 

 
(7
)
Balance at March 31, 2012
 
 
 
$
5,353

 
$
285

 
$
547


12

Table of Contents

The change in net unrealized currency translation adjustments for the three months ended March 31, 2012 was due to a weakening of the U.S. dollar against most foreign currencies.
In the three months ended March 31, 2012, we repurchased 6.3 million shares for a total cost of $460 million.
 
 
 
 
Stockholders’ Equity
Attributable to
 
 
(Millions of dollars)
 
Comprehensive
Income
 
The
Corporation
 
Noncontrolling
Interests
 
Redeemable
Securities
of
Subsidiaries
 
 
 
 
 
 
 
 
 
Balance at December 31, 2010
 
 
 
$
5,917

 
$
285

 
$
1,047

Comprehensive Income:
 
 
 
 
 
 
 
 
Net income
 
$
372

 
350

 
8

 
14

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Unrealized translation
 
222

 
217

 
5

 

Employee postretirement benefits
 
1

 
1

 

 

Other
 
(20
)
 
(20
)
 

 

Total Comprehensive Income
 
$
575

 
 
 
 
 
 
Stock-based awards
 
 
 
85

 

 

Income tax benefits on stock-based compensation
 
 
 
3

 

 

Shares repurchased
 
 
 
(850
)
 

 

Recognition of stock-based compensation
 
 
 
12

 

 

Dividends declared
 
 
 
(281
)
 
(12
)
 

Other
 
 
 

 
1

 
(1
)
Return on redeemable securities of subsidiaries
 
 
 

 

 
(14
)
Balance at March 31, 2011
 
 
 
$
5,434

 
$
287

 
$
1,046

Net unrealized currency gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries, except those in highly inflationary economies, are recorded in Accumulated Other Comprehensive Income ("AOCI"). For these operations, changes in exchange rates generally do not affect cash flows; therefore, unrealized translation adjustments are recorded in AOCI rather than net income. Upon sale or substantially complete liquidation of any of these subsidiaries, the applicable unrealized translation adjustment would be removed from AOCI and reported as part of the gain or loss on the sale or liquidation.
Also included in unrealized translation amounts are the effects of foreign exchange rate changes on intercompany balances of a long-term investment nature and transactions designated as hedges of net foreign investments.

Note 8. Objectives and Strategies for Using Derivatives
As a multinational enterprise, we are exposed to financial risks, such as changes in foreign currency exchange rates, interest rates, commodity prices and the value of investments of our defined benefit pension plans. We employ a number of practices to manage these risks, including operating and financing activities and, where deemed appropriate, the use of derivative instruments. Our policies allow the use of derivatives for risk management purposes and prohibit their use for speculation. Our policies also prohibit the use of any leveraged derivative instrument. Consistent with our policies, foreign currency derivative instruments, interest rate swaps and locks, equity collars and the majority of commodity hedging contracts are entered into with major financial institutions.
On the date a derivative contract is entered into, we formally designate certain derivatives as cash flow, fair value or net investment hedges and establish how the effectiveness of these hedges will be assessed and measured. This process links the derivatives to the transactions or financial balances they are hedging. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings as they occur.

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Table of Contents

Set forth below is a summary of the fair values of our derivative instruments classified by the risks they are used to manage:
 
Assets
 
Liabilities
 
March 31
2012
 
December 31
2011
 
March 31
2012
 
December 31
2011
 
(Millions of dollars)
Foreign currency exchange risk
$
32

 
$
45

 
$
10

 
$
33

Interest rate risk
8

 
16

 
25

 
75

Commodity price risk

 

 
17

 
12

Total
$
40

 
$
61

 
$
52

 
$
120

The derivative assets are presented in the Condensed Consolidated Balance Sheet in Other current assets and Other assets, as appropriate. The derivative liabilities are presented in the Condensed Consolidated Balance Sheet in Accrued expenses and Other liabilities, as appropriate.
Foreign Currency Exchange Risk Management
We have a centralized U.S. dollar functional currency international treasury operation (“In-House Bank”) that manages foreign currency exchange risks by netting, on a daily basis, our exposures to recorded non-U.S. dollar assets and liabilities and entering into derivative instruments with third parties whenever our net exposure in any single currency exceeds predetermined limits. These derivative instruments are not designated as hedging instruments. Changes in the fair value of these instruments are recorded in earnings when they occur. The In-House Bank also records the gain or loss on the remeasurement of its non-U.S. dollar-denominated monetary assets and liabilities in earnings. Consequently, the net effect on earnings from the use of these non-designated derivatives is substantially neutralized by transactional gains and losses recorded on the underlying assets and liabilities. The In-House Bank’s daily notional derivative positions with third parties averaged $1.4 billion in the first three months of 2012 and its average net exposure for the same period was $1.3 billion. The In-House Bank used nine counterparties for its foreign exchange derivative contracts.
We enter into derivative instruments to hedge a portion of the net foreign currency exposures of our non-U.S. operations, principally for their forecasted purchases of pulp, which are priced in U.S. dollars, and imports of intercompany finished goods and work-in-process priced predominately in U.S. dollars and euros. The derivative instruments used to manage these exposures are designated and qualify as cash flow hedges. As of March 31, 2012, outstanding derivative contracts of $840 million notional value were designated as cash flow hedges for the forecasted purchases of pulp and intercompany finished goods and work-in-process.
The foreign currency exposure on non-functional currency denominated monetary assets and liabilities managed outside the In-House Bank, primarily intercompany loans and accounts payable, is hedged with derivative instruments with third parties. At March 31, 2012, the notional amount of these predominantly undesignated derivative instruments was $590 million.
Foreign Currency Translation Risk Management
Translation adjustments result from translating foreign entities’ financial statements to U.S. dollars from their functional currencies. The risk to any particular entity's net assets is reduced to the extent that the entity is financed with local currency borrowing. Translation exposure, which results from changes in translation rates between functional currencies and the U.S. dollar, generally is not hedged. However, consistent with other years, a portion of our net investment in our Mexican affiliate has been hedged. At March 31, 2012, we had in place net investment hedges of $136 million for a portion of our investment in our Mexican affiliate. Changes in the fair value of net investment hedges are recognized in other comprehensive income to offset the change in value of the net investment being hedged. There was no significant ineffectiveness related to net investment hedges as of March 31, 2012 and 2011.
Interest Rate Risk Management
Interest rate risk is managed using a portfolio of variable- and fixed-rate debt composed of short- and long-term instruments and interest rate swaps. From time to time, interest rate swap contracts, which are derivative instruments, are entered into to facilitate the maintenance of the desired ratio of variable- and fixed-rate debt. These derivative instruments are designated and qualify as fair value hedges or, to a lesser extent, cash flow hedges.
From time to time, we hedge the anticipated issuance of fixed-rate debt, using forward-starting swaps or “treasury locks” (e.g., a 10-year “treasury lock” hedging the anticipated underlying U.S. Treasury interest rate related to issuance of 10-year debt at a future date). These contracts are designated as cash flow hedges.

14

Table of Contents

At March 31, 2012, the aggregate notional values of outstanding interest rate contracts designated as fair value hedges and cash flow hedges were $300 million and $280 million, respectively.
Commodity Price Risk Management
We use derivative instruments to hedge a portion of our exposure to market risk arising from changes in the price of natural gas. Hedging of this risk is accomplished by entering into forward swap contracts, which are designated as cash flow hedges of specific quantities of natural gas expected to be purchased in future months.
As of March 31, 2012, outstanding commodity forward contracts were in place to hedge forecasted purchases of about 30 percent of our estimated natural gas requirements for the next twelve months and a lesser percentage for future periods.
Effect of Derivative Instruments on Results of Operations and Other Comprehensive Income
Fair Value Hedges
Derivative instruments that are designated and qualify as fair value hedges are predominantly used to manage interest rate risk. The fair values of these instruments are recorded as an asset or liability, as appropriate, with the offset recorded in current earnings. The offset to the change in fair values of the related hedged items also is recorded in current earnings. Any realized gain or loss on the derivatives that hedge interest rate risk is amortized to interest expense over the life of the related debt.
Fair value hedges resulted in no significant ineffectiveness in the three months ended March 31, 2012 and 2011. For the three month periods ended March 31, 2012 and 2011, no gain or loss was recognized in earnings as a result of a hedged firm commitment no longer qualifying as a fair value hedge.
Cash Flow Hedges
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is initially recorded in AOCI, net of related income taxes, and recognized in earnings in the same period that the hedged exposure affects earnings.
Cash flow hedges resulted in no significant ineffectiveness in the three months ended March 31, 2012 and 2011. For the three months ended March 31, 2012 and 2011, no gains or losses were reclassified into earnings as a result of the discontinuance of cash flow hedges due to the original forecasted transaction no longer being probable of occurring. At March 31, 2012, an insignificant amount of after-tax losses are expected to be reclassified from AOCI primarily to cost of sales during the next twelve months, consistent with the timing of the underlying hedged transactions. The maximum maturity of cash flow hedges in place at March 31, 2012 is April 2014.
Quantitative Information about Our Use of Derivative Instruments
The following tables display the location and amount of pre-tax gains and losses reported in the Consolidated Income Statement and Consolidated Statement of Other Comprehensive Income.
For the three months ended March 31 (Millions of dollars):
 
Income Statement Classifications
 
(Gain) or Loss
Recognized in Income
 
 
 
2012
 
2011
Undesignated foreign exchange hedging instruments
Other (income) and expense, net(a)
 
$
(42
)
 
$
(40
)
 
 
 
 
 
 
Fair Value Hedges
 
 
 
 
 
Interest rate swap contracts
Interest expense
 
$
6

 
$
(5
)
Hedged debt instruments
Interest expense
 
$
(6
)
 
$
5


15

Table of Contents

 
Amount of (Gain) or
Loss Recognized In
AOCI
 
Income Statement
Classification of (Gain) or Loss
Reclassified from AOCI
 
(Gain) or Loss Reclassified
from AOCI into Income
 
2012
 
2011
 
 
 
2012
 
2011
Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Interest rate contracts
$
(3
)
 
$
(1
)
 
Interest expense
 
$

 
$
(1
)
Foreign exchange contracts
13

 
34

 
Cost of products sold
 
(3
)
 
6

Foreign exchange contracts
2

 
5

 
Other (income) and expense,
   net
 
2

 
6

Commodity contracts
8

 

 
Cost of products sold
 
4

 
2

Total
$
20

 
$
38

 
 
 
$
3

 
$
13

Net Investment Hedges
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
(1
)
 
$
1

 
 
 
$

 
$

(a) 
(Gains) and losses on these instruments primarily relate to derivatives entered into with third parties to manage foreign currency exchange exposure on the remeasurement of non-functional currency denominated monetary assets and liabilities. Consequently, the effect on earnings from the use of these undesignated derivatives is substantially neutralized by the recorded transactional gains and losses on the underlying assets and liabilities.

Note 9. Description of Business Segments
We are organized into operating segments based on product groupings. These operating segments have been aggregated into four reportable global business segments: Personal Care, Consumer Tissue, K-C Professional & Other, and Health Care. The reportable segments were determined in accordance with how our executive managers develop and execute global strategies to drive growth and profitability. These strategies include global plans for branding and product positioning, technology, research and development programs, cost reductions including supply chain management, and capacity and capital investments for each of these businesses. Segment management is evaluated on several factors, including operating profit. Segment operating profit excludes other (income) and expense, net and income and expense not associated with the business segments, including the charges related to the pulp and tissue restructuring actions described in Note 3.
The principal sources of revenue in each global business segment are described below:
Personal Care brands offer parents a trusted partner in caring for their families and deliver confidence, protection and discretion to adults, through a wide variety of innovative solutions and products such as disposable diapers, training and youth pants, swimpants, baby wipes, feminine and incontinence care products, and other related products. Products in this segment are sold under the Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays, Depend, Poise and other brand names.
Consumer Tissue offers a wide variety of innovative solutions and trusted brands that touch and improve people's lives every day. Products in this segment include facial and bathroom tissue, paper towels, napkins and related products, and are sold under the Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Hakle, Page and other brand names.
K-C Professional & Other helps transform workplaces for employees and patrons, making them healthier, safer, and more productive, through a range of solutions and supporting products such as apparel, wipers, soaps, sanitizers, tissues, and towels. Key brands in this segment include: Kleenex, Scott, WypAll, Kimtech, and Jackson Safety.
Health Care provides the essentials that help restore patients to better health and improve the quality of patients' lives. Through a portfolio of innovative medical device and infection prevention products, Health Care offers clinicians a range of solutions in pain management, respiratory and digestive health and medical supplies for the operating room. This business is a global leader in education to prevent healthcare-associated infections. Products are sold primarily under the Kimberly‑Clark and ON‑Q brand names.

16

Table of Contents

The following schedules present information concerning consolidated operations by business segment:
 
 
Three Months Ended March 31
 
 
2012
 
2011
 
 
(Millions of dollars)
NET SALES:
 
 
 
 
Personal Care
 
$
2,367

 
$
2,187

Consumer Tissue
 
1,659

 
1,674

K-C Professional & Other
 
797

 
768

Health Care
 
405

 
388

Corporate & Other
 
13

 
12

Consolidated
 
$
5,241

 
$
5,029

 
 
 
 
 
OPERATING PROFIT (reconciled to Income Before Income Taxes and Equity Interests):
 
 
 
 
Personal Care
 
$
399

 
$
389

Consumer Tissue
 
217

 
150

K-C Professional & Other
 
125

 
104

Health Care
 
53

 
50

Other (income) and expense, net
 
8

 
(2
)
Corporate & Other(a)
 
(86
)
 
(151
)
Total Operating Profit
 
700

 
544

Interest income
 
4

 
4

Interest expense
 
(71
)
 
(64
)
Income Before Income Taxes and Equity Interests
 
$
633

 
$
484

(a) 
For the three months ended March 31, 2012 and 2011, Corporate & Other includes pulp and tissue restructuring charges of $35 million and $82 million, respectively. The three months ended March 31, 2011 also includes a non-deductible business tax charge of $32 million related to a law change in Colombia. See additional information in Note 3 for the pulp and tissue restructuring actions. The restructuring charges related to the business segments are as follows:
 
Three Months Ended March 31
 
2012
 
2011
 
(Millions of dollars)
Consumer Tissue
$
32

 
$
75

K-C Professional & Other
3

 
7

Total
$
35

 
$
82

 


17

Table of Contents

Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Introduction
This management’s discussion and analysis of financial condition and results of operations is intended to provide investors with an understanding of our recent performance, financial condition and prospects.  The following will be discussed and analyzed:
Overview of First Quarter 2012 Results
Results of Operations and Related Information
Liquidity and Capital Resources
Legal Matters
Business Outlook
Overview of First Quarter 2012 Results
Net sales increased 4.2 percent primarily due to increases in net selling prices and sales volumes.
Operating profit and net income attributable to Kimberly-Clark Corporation increased 28.7 percent and 33.7 percent, respectively.
Net income in 2012 includes $24 million in after tax charges ($35 million pre-tax) for pulp and tissue restructuring actions. The prior year results include $57 million in after tax charges ($82 million pre-tax) for the restructuring actions as well as a non-deductible business tax charge of $35 million related to a law change in Colombia.
Cash provided by operations was $585 million compared to $250 million in the prior year.
Results of Operations and Related Information
This section presents a discussion and analysis of our first quarter of 2012 net sales, operating profit and other information relevant to an understanding of the results of operations.

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Table of Contents

First Quarter of 2012 Compared With First Quarter of 2011
Analysis of Net Sales
By Business Segment
Net Sales
 
2012
 
2011
 
 
(Millions of dollars)
Personal Care
 
$
2,367

 
$
2,187

Consumer Tissue
 
1,659

 
1,674

K-C Professional & Other
 
797

 
768

Health Care
 
405

 
388

Corporate & Other
 
13

 
12

 
 
 
 
 
Consolidated
 
$
5,241

 
$
5,029

By Geography
Net Sales
 
2012
 
2011
 
 
(Millions of dollars)
North America
 
$
2,678

 
$
2,637

Outside North America
 
2,758

 
2,568

Intergeographic sales
 
(195
)
 
(176
)
 
 
 
 
 
Consolidated
 
$
5,241

 
$
5,029

Commentary:
 
Percent Change in Net Sales Versus Prior Year
 
Total
Change
 
Changes Due To
 
Volume
Growth
 
Net
Price
 
Mix/
Other
 
Currency
 
 
 
 
 
 
 
 
 
 
 
Consolidated
4.2

 
1

 
3

 
1

 
(1
)
Personal Care
8.2

 
6

 
3

 

 
(1
)
Consumer Tissue
(0.9
)
 
(5
)
 
4

 
1

 
(1
)
K-C Professional & Other
3.8

 
2

 
2

 
1

 
(1
)
Health Care
4.4

 
4

 
1

 
(1
)
 

Personal care net sales in North America increased 1 percent. Net selling prices rose approximately 2 percent, driven by improved revenue realization for Huggies diapers, and product mix was favorable by 1 percent, while sales volumes decreased about 1 percent. Infant care and child care volumes were down mid- and high-single digits, respectively, primarily reflecting category declines and consumer trade-down in child care. Volumes rose high-single digits in adult care, including benefits from market share growth, sales of new Poise Hourglass Shape Pads and introductory shipments of new Depend Real Fit and Silhouette briefs. Feminine care volumes were up low-single digits.
In Europe, personal care net sales increased 4 percent, despite an unfavorable currency impact of about 3 percent. Sales volumes rose 11 percent, with growth in child care, Huggies diapers and baby wipes and non-branded offerings. Net selling prices fell approximately 5 percent, primarily due to increased promotional activity in the diaper category.
Personal care net sales increased about 17 percent in our international operations in Asia, Latin America, the Middle East, Eastern Europe and Africa ("K-C International"), which included an approximate 2 percent decline from changes in currency rates. Sales volumes were up 12 percent, with double-digit growth in each major region of K-C International. Sales volume performance was strong in a number of markets, including Australia, Brazil, China, Israel, Russia, South Africa, South Korea, Venezuela and Vietnam. Net selling prices improved about 6 percent compared to the year-ago period, driven by increases in Latin America.

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Table of Contents

Consumer tissue net sales in North America were even with the prior year, despite a 4 percent negative impact from lost sales in conjunction with pulp and tissue restructuring actions. Net selling prices rose 6 percent, while organic sales volumes (i.e., sales volume impacts other than the lost sales from restructuring actions) decreased 2 percent. Bathroom tissue net sales increased at a solid rate, as higher selling prices more than offset a low-single digit decline in sales volumes. Kleenex facial tissue net sales were even with year-ago, as higher selling prices and improved product mix were offset by lower volumes, which were impacted by a weak cold and flu season and sheet count reductions. Paper towel net sales and volumes rose at a double-digit rate and benefited from improved distribution levels.
In Europe, consumer tissue net sales decreased 5 percent, including an unfavorable currency impact of 2 percent. Sales volumes fell 2 percent and changes in product mix reduced sales by 1 percent, reflecting challenging economic conditions.
In K-C International, consumer tissue net sales increased about 1 percent. Net selling prices improved 4 percent and product mix advanced 3 percent, reflecting our strategies to improve net realized revenue and profitability. On the other hand, organic sales volumes fell 3 percent, lost sales in conjunction with pulp and tissue restructuring actions reduced sales volumes about 2 percent and currency rates were unfavorable by approximately 2 percent.
Net sales of K-C Professional ("KCP") & other products in North America increased 4 percent. Increased sales volumes, higher net selling prices and changes in product mix each improved sales by approximately 1 percent. The volume gain was driven by increased washroom product volumes, reflecting some improvement in market demand and benefits from innovation and selling initiatives.
In Europe, KCP net sales decreased 4 percent. Lost sales in conjunction with pulp and tissue restructuring actions reduced sales volumes 5 percent and changes in currency rates decreased net sales by 2 percent. On the other hand, higher organic sales volumes, improved selling prices and favorable product mix each contributed 1 percent of sales growth.
KCP net sales in K-C International increased 9 percent. Sales volumes were up 7 percent, with particular strength in Latin America, and net selling prices rose 3 percent, while currency rates reduced net sales 1 percent.
Net sales of health care products increased 4 percent over the prior year. Sales volumes rose about 4 percent and net selling prices increased approximately 1 percent. Medical supply volumes rose at a mid-single digit rate, led by growth in exam gloves and surgical products. Medical device volumes increased low-single digits, with solid growth in airway management products.
Analysis of Operating Profit
By Business Segment
Operating Profit
 
2012
 
2011
 
 
(Millions of dollars)
Personal Care
 
$
399

 
$
389

Consumer Tissue
 
217

 
150

K-C Professional & Other
 
125

 
104

Health Care
 
53

 
50

Corporate & Other(a)
 
(86
)
 
(151
)
Other (income) and expense, net
 
8

 
(2
)
 
 
 
 
 
Consolidated
 
$
700

 
$
544



20

Table of Contents

By Geography
Operating Profit
 
2012
 
2011
 
 
(Millions of dollars)
North America
 
$
479

 
$
467

Outside North America
 
315

 
226

Corporate & Other(a)
 
(86
)
 
(151
)
Other (income) and expense, net
 
8

 
(2
)
 
 
 
 
 
Consolidated
 
$
700

 
$
544

(a) 
For the three months ended March 31, 2012 and 2011, Corporate & Other includes pulp and tissue restructuring charges of $35 million and $82 million, respectively. The three months ended March 31, 2011 also included a non-deductible business tax charge of $32 million related to a law change in Colombia.
Commentary: 
 
Percentage Change in Operating Profit Versus Prior Year
 
 
 
Change Due To
 
Total
Change
 
Volume
 
Net
Price
 
Input
Costs(a)
 
Cost
Savings
 
Currency
 
Other(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
28.7

 
4

 
28

 
(2
)
 
11

 
(1
)
 
(11
)
Personal Care
2.6

 
9

 
17

 
(9
)
 
7

 

 
(21
)
Consumer Tissue
44.7

 
(14
)
 
46

 
17

 
17

 
(1
)
 
(20
)
K-C Professional & Other
20.2

 
4

 
14

 
2

 
14

 
(2
)
 
(12
)
Health Care
6.0

 
7

 
5

 
(1
)
 
(17
)
 
2

 
10

(a) 
Includes inflation in raw materials, energy and distribution costs.
(b) 
Consolidated includes the impact of the charges in 2012 and 2011 related to the pulp and tissue restructuring actions and a non-deductible business tax charge in 2011 related to a law change in Colombia.
Consolidated operating profit increased compared to the prior year. The benefits of higher net sales and cost savings of $60 million were partially offset by net inflation in key cost inputs of approximately $10 million, higher marketing, research and general expenses, including a $45 million increase in strategic marketing, primarily to support product innovations and targeted growth initiatives, and administrative and research spending increases, in part to build further capabilities and support future growth. In addition, the current year results include $35 million of pre-tax charges for the pulp and tissue restructuring actions, while the prior year period includes $82 million of pre-tax charges for the restructuring actions and a $32 million non-deductible charge due to a legislative change in the assessment of a business tax in Colombia.
Personal care segment operating profit increased due to higher net sales and cost savings, partially offset by input cost inflation and increased marketing, research and general expenses. In North America, operating profit decreased due to lower sales volumes, higher marketing, research and general expenses and the negative impact of lower production volumes, partially offset by higher net selling prices and cost savings. Operating profit in Europe increased slightly due to cost savings, higher sales volumes and the impact of higher production volumes, mostly offset by lower net selling prices and higher marketing, research and general expenses. In K-C International, operating profit increased as higher net selling prices, higher sales volumes and cost savings were partially offset by higher input costs and marketing, research and general expenses.
Consumer tissue segment operating profit increased as selling price increases, input cost deflation and cost savings were partially offset by decreased sales volumes and higher marketing, research and general expenses. Operating profit in North America increased as higher net selling prices, input cost deflation and cost savings were partially offset by lower sales volumes and higher marketing, research and general expenses. In Europe, operating profit increased as cost savings and cost input deflation were partially offset by higher marketing, research and general expenses and unfavorable product mix. Operating profit in K-C International increased as higher net selling prices, cost savings and favorable product mix were partially offset by higher marketing, research and general expenses and lower sales volumes.

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Table of Contents

Operating profit for the KCP & Other segment increased as sales growth and cost savings were partially offset by higher marketing, research and general expenses.
Health care segment operating profit increased driven by sales growth and lower marketing, research and general expenses.
Pulp and Tissue Restructuring Actions:
On January 21, 2011, we initiated a pulp and tissue restructuring plan in order to exit our remaining integrated pulp manufacturing operations and improve the underlying profitability and return on invested capital of our consumer tissue and KCP businesses. The restructuring involves the streamlining, sale or closure of six of our manufacturing facilities around the world. In conjunction with these actions, we have begun to exit certain non-strategic products, primarily non-branded offerings, and transfer some production to lower-cost facilities in order to improve overall profitability and returns.
In addition, on January 24, 2012, we announced our decision to streamline an additional manufacturing facility in North America to further enhance the profitability of our consumer tissue business.
Both restructuring actions are anticipated to be substantially completed by the end of 2012. The restructuring actions are expected to result in cumulative pre-tax charges of approximately $550 million to $600 million ($385 million to $420 million after tax) over 2011 and 2012. Cash costs related to the streamlining of operations, sale or closure, relocation of equipment, severance and other expenses are expected to account for approximately 30 percent to 40 percent of the charges. Noncash charges will consist primarily of incremental depreciation.
As a result of the restructuring activities, versus the 2010 baseline, we expect that by 2013 annual net sales will decrease by $250 million to $300 million, and operating profit will increase by at least $75 million in 2013 and at least $100 million in 2014. Through the first quarter of 2012, we have recognized cumulative operating profit benefits of $25 million from the restructuring actions. Most of the restructuring will impact the consumer tissue business segment.
See additional information on the pulp and tissue restructuring actions in Note 3 to the Condensed Consolidated Financial Statements.
Additional Income Statement Commentary
Interest expense for the first quarter of 2012 was $7 million higher than the prior year primarily due to a higher level of debt.
Our effective tax rate for the first quarter of 2012 was 29.2 percent compared to 31.4 percent in the prior year. The rate in 2011 was impacted by a non-deductible business tax law change in Colombia, partially offset by favorable audit resolutions.  The rate in 2012 was impacted by favorable resolutions of matters with tax authorities. 
Our share of net income of equity companies in the first quarter of 2012 was $1 million lower than the prior year. The year- ago results included a $3 million charge as a result of a non-deductible business tax at one of our equity affiliates in Colombia. At Kimberly-Clark de Mexico, S.A.B. de C.V., despite increased sales volumes, net sales were even with the year-ago period and earnings were down, as a result of a decline in the value of the Mexican peso.
Liquidity and Capital Resources
Cash provided by operations for the first three months of 2012 was $585 million compared to $250 million in the prior year. The increase was driven by lower defined benefit plan contributions and higher cash earnings. Contributions to our defined benefit pension plans totaled $45 million for the three months ended March 31, 2012 versus $265 million for the three months ended March 31, 2011. We expect to contribute $50 million to $100 million to our pension trusts in 2012.
During the first quarter of 2012, we repurchased approximately 6.3 million shares of our common stock at a cost of approximately $460 million. In 2012, we plan to repurchase $900 million to $1.1 billion of shares through open market purchases, subject to market conditions.
Capital spending for the first three months was $259 million compared with $234 million last year. We anticipate that full year 2012 capital spending will be between $1.0 and $1.1 billion.
At March 31, 2012, total debt and redeemable securities was $6.9 billion compared with $6.7 billion at December 31, 2011.
Our short-term debt as of March 31, 2012 was $473 million (included in Debt payable within one year on the Condensed Consolidated Balance Sheet) and consisted of U.S. commercial paper with original maturities up to 90 days and other similar short-term debt issued by non-U.S. subsidiaries. The average month-end balance of short-term debt for the first quarter of

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2012 was $462 million. These short-term borrowings, which included commercial paper that we issue from time to time, provide supplemental funding for supporting our operations. The level of short-term debt during a quarter generally fluctuates depending upon the amount of operating cash flows and the timing of customer receipts and payments for items such as dividends and income taxes.
On February 9, 2012, we issued $300 million of 2.4% notes due March 1, 2022. Proceeds from the offering were used for general corporate purposes, including to repay a portion of our $400 million aggregate principal amount of 5.625% notes that were due February 15, 2012.
We have an unused revolving credit facility comprised of (1) a 5 year facility of $1.5 billion scheduled to expire in October 2016, (2) an additional $500 million facility scheduled to expire in October 2012, and (3) an option to increase either (but not both) the $1.5 billion facility or the $500 million facility by an additional $500 million.  This facility supports our commercial paper program and would provide liquidity in the event our access to the commercial paper market is unavailable for any reason.
The Venezuelan government has currency exchange regulations that limit U.S. dollar availability to pay for the historical levels of U.S. dollar-denominated imports to support operations of our Venezuelan subsidiary (“K-C Venezuela”).  At March 31, 2012, K-C Venezuela had a bolivar-denominated net monetary asset position of $155 million and our net investment in K-C Venezuela was $271 million, both valued at 5.4 bolivars per U.S. dollar. Net sales of K-C Venezuela represented 1 percent of Consolidated Net Sales for full-year 2011. The Venezuelan government has enacted price controls effective April 1, 2012 that will reduce the net selling prices of certain of K-C Venezuela's products.  We do not expect the enacted price controls to have a material impact on our consolidated financial results.       
We believe that our ability to generate cash from operations and our capacity to issue short-term and long-term debt are adequate to fund working capital, capital spending, payment of dividends, pension plan contributions and other needs for the foreseeable future. Further, we do not expect restrictions or taxes on repatriation of cash held outside of the United States to have a material effect on our overall liquidity, financial condition or results of operations for the foreseeable future.
Legal Matters
We are subject to various legal proceedings, claims and governmental inspections, audits or investigations pertaining to issues such as contract disputes, product liability, patents and trademarks, advertising, governmental regulations, employment and other matters. Although the results of litigation and claims cannot be predicted with certainty, we believe that the ultimate disposition of these matters, to the extent not previously provided for, will not have a material adverse effect, individually or in the aggregate, on our business, financial condition, results of operations or liquidity.
We are subject to federal, state and local environmental protection laws and regulations with respect to our business operations and are operating in compliance with, or taking action aimed at ensuring compliance with, these laws and regulations. We have been named a potentially responsible party under the provisions of the U.S. federal Comprehensive Environmental Response, Compensation and Liability Act, or analogous state statutes, at a number of waste disposal sites. None of our compliance obligations with environmental protection laws and regulations, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition, results of operations or liquidity.

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Business Outlook
During 2012, we expect economic conditions will remain positive in emerging markets overall.  In the U.S., with the economic environment improving modestly, we do not expect a significant increase in market demand in the near term.  In Europe, we expect economic conditions to remain challenging.  In this global environment, we will seek to continue to increase strategic marketing faster than net sales and pursue our targeted growth initiatives.  We expect commodity cost inflation to be relatively benign overall in 2012, but we believe results will likely be negatively impacted by foreign currency exchange rates weakening against the U.S. dollar.  We will continue to manage our company with financial discipline, and expect to deliver cost savings to offset cost increases.
Information Concerning Forward-Looking Statements
Certain matters contained in this report concerning the business outlook, including the anticipated costs, scope, timing and effects of restructuring actions, the impact of foreign government actions, cash flow, cash sources and uses of cash, economic conditions and market demand, cost inflation and input costs, anticipated currency rates and exchange risk, cost savings and reductions, anticipated financial and operating results, contingencies and anticipated transactions of Kimberly-Clark, including share repurchases and pension contributions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are based upon management's expectations and beliefs concerning future events impacting Kimberly-Clark. There can be no assurance that these future events will occur as anticipated or that our results will be as estimated. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them.
The assumptions used as a basis for the forward-looking statements include many estimates that, among other things, depend on the achievement of future cost savings and projected volume increases. In addition, many factors outside our control, including the prices and availability of our raw materials, potential competitive pressures on selling prices or advertising and promotion expenses for our products, energy costs, retail trade customer actions, and fluctuations in foreign currency exchange rates, as well as general economic and political conditions globally and in the markets in which we do business, could affect the realization of these estimates.
For a description of certain factors that could cause our future results to differ from those expressed in these forward-looking statements, see Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011 entitled “Risk Factors.”

Item 4.
Controls and Procedures
As of March 31, 2012, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of March 31, 2012. There were no changes in our internal control over financial reporting during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II.
– OTHER INFORMATION
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. All our share repurchases during the first quarter of 2012 were made through a broker in the open market.
The following table contains information for shares repurchased during the first quarter of 2012. None of the shares in this table were repurchased directly from any of our officers or directors.
Period (2012)
 
Total Number
of Shares
Purchased(a)
 
Average
Price Paid
Per Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
 
Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs(b)
January 1 to January 31
 
2,056,896

 
$
72.70

 
1,871,307

 
48,128,693

February 1 to February 29
 
2,058,104

 
71.53

 
3,929,411

 
46,070,589

March 1 to March 31
 
2,232,000

 
72.87

 
6,161,411

 
43,838,589

Total
 
6,347,000

 
 
 
 
 
 
(a) 
Share repurchases were made pursuant to share repurchase programs authorized by our Board of Directors on July 23, 2007 (the "2007 Program") and January 21, 2011 (the "2011 Program"), respectively. Each program allows for the repurchase of 50 million shares in an amount not to exceed $5 billion. Purchases in January 2012 of 185,589 shares exhausted the authority under the 2007 Program and, as a result, that program has expired. All remaining purchases in the first quarter of 2012 were made pursuant to the 2011 Program.
(b) 
Includes shares available under the 2011 Program only.


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Item 6.
Exhibits

(a)
Exhibits
Exhibit No. (3)a. Amended and Restated Certificate of Incorporation, dated April 30, 2009, incorporated by reference to Exhibit No. (3)a of the Corporation’s Current Report on Form 8-K dated May 1, 2009.
Exhibit No. (3)b. By-Laws, as amended April 30, 2009, incorporated by reference to Exhibit No. (3)b of the Corporation’s Current Report on Form 8-K dated May 1, 2009.
Exhibit No. (4). Copies of instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission on request.
Exhibit No. (10)n. Form of Award Agreements under 2011 Equity Participation Plan, filed herewith.
Exhibit No. (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.
Exhibit No. (31)b. Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, filed herewith.
Exhibit No. (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, furnished herewith.
Exhibit No. (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, furnished herewith.
Exhibit No. (101).INS XBRL Instance Document
Exhibit No. (101).SCH XBRL Taxonomy Extension Schema Document
Exhibit No. (101).CAL XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit No. (101).DEF XBRL Taxonomy Extension Definition Linkbase Document
Exhibit No. (101).LAB XBRL Taxonomy Extension Label Linkbase Document
Exhibit No. (101).PRE XBRL Taxonomy Extension Presentation Linkbase Document



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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/ Michael T. Azbell
 
 
Michael T. Azbell
 
 
Vice President and Controller
 
 
(principal accounting officer)
May 4, 2012

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EXHIBIT INDEX
 
 
 
 
Exhibit No.
  
Description
 
 
  (3)a.
  
Amended and Restated Certificate of Incorporation, dated April 30, 2009, incorporated by reference to Exhibit No. (3)a of the Corporation’s Current Report on Form 8-K dated May 1, 2009.
 
 
 (3)b.
  
By-Laws, as amended April 30, 2009, incorporated by reference to Exhibit No. (3)b of the Corporation’s Current Report on Form 8-K dated May 1, 2009.
 
 
   (4).
  
Copies of instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission on request.
 
 
 
(10)n.
 
Form of Award Agreements under 2011 Equity Participation Plan, filed herewith.
 
 
(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, furnished 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, furnished herewith.
 
 
(101).INS
  
XBRL Instance Document
 
 
(101).SCH
  
XBRL Taxonomy Extension Schema Document
 
 
(101).CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
(101).DEF
  
XBRL Taxonomy Extension Definition Linkbase Document
 
 
(101).LAB
  
XBRL Taxonomy Extension Label Linkbase Document
 
 
(101).PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document



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