10-K 1 kmb_2012x10k.htm 10-K KMB_2012_10K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K 

x
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 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        

KIMBERLY-CLARK CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
1-225
39-0394230
(State or other jurisdiction of incorporation)
(Commission file number)
(I.R.S. Employer Identification No.)
 
 
 
P. O. Box 619100, Dallas, Texas
 
75261-9100
(Address of principal executive offices)
 
(Zip code)
Registrant's telephone number, including area code: (972) 281-1200
Securities registered pursuant to Section 12(b) of the Act:
Common Stock—$1.25 Par Value
 
New York Stock Exchange
(Title of each class)
 
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes    x    No    o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes    o    No    x
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    o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes    x    No    o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
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   o
Non-accelerated filer   o(Do not check if a smaller reporting company)
 
Smaller reporting company  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).           Yes  o    No  x
The aggregate market value of the registrant's common stock held by non-affiliates on June 30, 2012 (based on the closing stock price on the New York Stock Exchange on such date) was approximately $33.1 billion.
As of February 15, 2013, there were 387,621,860 shares of Kimberly‑Clark common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the definitive Proxy Statement for Kimberly-Clark's Annual Meeting of Stockholders to be held on May 2, 2013 is incorporated by reference into Part III.



KIMBERLY-CLARK CORPORATION
 TABLE OF CONTENTS
 
 
 
Page
Part I
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
Part II
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
Part III
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
Part IV
 
 
Item 15.
 
 

 
 


 
 
KIMBERLY-CLARK CORPORATION - 2012 Annual Report

PART I




ITEM 1.    BUSINESS
Kimberly‑Clark Corporation was incorporated in Delaware in 1928. We are a global company focused on leading the world in essentials for a better life through product innovation and building our personal care, consumer tissue, K‑C professional and health care brands. We are principally engaged in the manufacturing and marketing of a wide range of products mostly made from natural or synthetic fibers using advanced technologies in fibers, nonwovens and absorbency. Unless the context indicates otherwise, the terms "Corporation," "Kimberly‑Clark," "K‑C," "we," "our" and "us" refer to Kimberly-Clark Corporation and its consolidated subsidiaries.
For financial information by business segment and geographic area, including revenue, profit and total assets of each reportable segment, and information about our principal products and markets, see Item 7,"Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") and Item 8, Note 17 to the Consolidated Financial Statements.
Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.
Recent Developments
In 2012, we approved strategic changes related to our Western and Central European consumer and professional businesses to focus our resources and investments on stronger market positions and growth opportunities. We will exit the diaper category in that region, with the exception of the Italian market, and divest or exit some lower-margin businesses, mostly in consumer tissue, in certain markets. Restructuring actions related to the strategic changes will involve the sale or closure of five of our European manufacturing facilities and streamlining of our administrative organization. The restructuring actions commenced in the fourth quarter of 2012 and are expected to be completed by December 31, 2014. For additional information, see MD&A and Item 8, Note 2 to the Consolidated Financial Statements.
Description of Kimberly‑Clark
We are organized into operating segments based on product groupings. These operating segments have been aggregated into four reportable global business segments. Information on these four segments, as well as their principal sources of revenue, is included 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, Depend, Plenitud, 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 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 essentials that help restore patients to better health and improve the quality of patients' lives. This segment offers surgical and infection prevention products for the operating room, and a portfolio of innovative medical devices focused on pain management, respiratory and digestive health. 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.
These reportable segments were determined in accordance with how our chief operating decision maker and our executive managers develop and execute our global strategies to drive growth and profitability of our worldwide personal care, consumer tissue, K‑C Professional and Health Care operations. 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.



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KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Products for household use are sold directly to supermarkets, mass merchandisers, drugstores, warehouse clubs, variety and department stores and other retail outlets, as well as through other distributors and e-commerce. Products for away-from-home use are sold through distributors and directly to manufacturing, lodging, office building, food service, health care establishments and high volume public facilities.
Net sales to Wal-Mart Stores, Inc. were approximately 12 percent in 2012 and 2011, and 13 percent in 2010.
Patents and Trademarks
We own various patents and trademarks registered domestically and in many foreign countries. We consider the patents and trademarks which we own and the trademarks under which we sell certain of our products to be material to our business. Consequently, we seek patent and trademark protection by all available means, including registration.
Raw Materials
Cellulose fiber, in the form of kraft pulp or fiber recycled from recovered waste paper, is the primary raw material for our tissue products and is a component of disposable diapers, training pants, feminine pads and incontinence care products.
Polypropylene and other synthetics and chemicals are the primary raw materials for manufacturing nonwoven fabrics, which are used in disposable diapers, training and youth pants, wet wipes, feminine pads, incontinence and health care products, and away-from-home wipers. Superabsorbent materials are important components of disposable diapers, training and youth pants and incontinence care products.
Most raw materials are purchased from third parties, and we consider the supply to be adequate to meet the needs of our businesses. See Item 1A, "Risk Factors."
Competition
We have several major competitors in most of our markets, some of which are larger and more diversified than us. The principal methods and elements of competition include brand recognition and loyalty, product innovation, quality and performance, price, and marketing and distribution capabilities. For additional discussion of the competitive environment in which we conduct our business, see Item 1A, "Risk Factors."
Research and Development
Research and development expenditures are directed toward new or improved personal care, tissue, wiping, safety and health care products and nonwoven materials. Consolidated research and development expense was $356 in 2012, $316 in 2011 and $317 in 2010.
Foreign Market Risks
We operate and market our products globally, and our business strategy includes targeted growth in Asia, Latin America, Eastern Europe, the Middle East and Africa, with a particular emphasis in China, Russia and Latin America. See Item 1A, "Risk Factors" for a discussion of foreign market risks that may affect our financial results.



2
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Environmental Matters
Total worldwide capital expenditures for voluntary environmental controls or controls necessary to comply with legal requirements relating to the protection of the environment at our facilities are expected to be as follows:
 
2013
 
2014
Facilities in U.S.
$
4

 
$
17

Facilities outside U.S.
17

 
15

Total
$
21

 
$
32

Total worldwide operating expenses for environmental compliance, including pollution control equipment operation and maintenance costs, governmental payments, and research and engineering costs are expected to be as follows:
 
2013
 
2014
Facilities in U.S.
$
77

 
$
95

Facilities outside U.S.
87

 
90

Total
$
164

 
$
185

Total environmental capital expenditures and operating expenses are not expected to have a material effect on our total capital and operating expenditures, consolidated earnings or competitive position. These expected amounts do not include potential remediation costs associated with our Western and Central European strategic changes (see "Recent Developments") as the outcome related to the impacted facilities is not known. Current environmental spending estimates could be modified as a result of changes in our plans, changes in legal requirements, including any requirements related to global climate change, or other factors.
Employees
In our worldwide consolidated operations, we had approximately 58,000 employees as of December 31, 2012.
Available Information
We make financial information, news releases and other information available on our corporate website at www.kimberly‑clark.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on this website as soon as reasonably practicable after we file these reports and amendments with, or furnish them to, the Securities and Exchange Commission ("SEC"). The information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report filed with the SEC. Stockholders may also contact Stockholder Services, P.O. Box 612606, Dallas, Texas 75261-2606 or call 972-281-1522 to obtain a hard copy of these reports without charge.


ITEM 1A.    RISK FACTORS
Our business faces many risks and uncertainties that we cannot control. Any of the risks discussed below, as well as factors described in other places in this Form 10-K, or in our other filings with the SEC, could adversely affect our business, consolidated financial position, results of operations or cash flows. In addition, these items could cause our future results to differ from those in any of our forward-looking statements. These risks are not the only ones we face. Other risks that we do not presently know about or that we presently believe are not material could also adversely affect us.
Significant increases in prices for raw materials, energy, transportation and other necessary supplies and services, without corresponding increases in our selling prices, could adversely affect our financial results.
Increases in the cost and availability of raw materials, including pulp and petroleum-based materials, the cost of energy, transportation and other necessary services, supplier constraints, an inability to maintain favorable supplier arrangements and relations or an inability to avoid disruptions in production output could have an adverse effect on our financial results.
Cellulose fiber, in the form of kraft pulp or recycled fiber from recovered waste paper, is used extensively in our tissue products and is subject to significant price fluctuations. Cellulose fiber, in the form of fluff pulp, is a key component in our personal care



3
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


products. In recent years, pulp prices have experienced significant volatility, and this volatility is expected to continue. Increases in pulp prices or limits in the availability of recycled fiber could adversely affect our earnings if selling prices for our finished products are not adjusted or if these adjustments significantly trail the increases in pulp prices. Derivative instruments have not been used to manage these risks.
A number of our products, such as diapers, training and youth pants, feminine pads, incontinence care products, disposable wipes and various health care products, contain certain materials that are principally derived from petroleum. These materials are subject to price fluctuations based on changes in petroleum prices, availability and other factors, with these prices experiencing significant volatility in recent years. We purchase these materials from a number of suppliers. Significant increases in prices for these materials could adversely affect our earnings if selling prices for our finished products do not adjust, if these adjustments significantly trail the increases in prices for these materials, or if we do not utilize substitutes with lower prices for these materials. Generally derivative instruments have not been used to manage these risks.
Our manufacturing operations utilize electricity, natural gas and petroleum-based fuels. To ensure that we use all forms of energy efficiently and cost-effectively, we maintain ongoing energy efficiency improvement programs at all of our manufacturing sites. Our contracts with energy suppliers vary as to price, payment terms, quantities and duration. Our energy costs are also affected by various market factors including the availability of supplies of particular forms of energy, energy prices and local and national regulatory decisions (including actions taken to address climate change and related market responses). There can be no assurance that we will be fully protected against substantial changes in the price or availability of energy sources. Derivative instruments are used to manage a portion of natural gas price risk in accordance with our risk management policy.
Increased pricing pressure, intense competition for sales of our products and the inability to innovate effectively could have an adverse effect on our financial results.
We compete in highly competitive markets against well-known, branded products and low-cost or private label products both domestically and internationally. Inherent risks in our competitive strategy include uncertainties concerning trade and consumer acceptance, the effects of consolidation within retailer and distribution channels, and competitive actions. Our competitors for these markets include not only our traditional competitors but also private label manufacturers, low-cost manufacturers and rapidly-expanding international manufacturers. Some of these competitors may have better access to financial resources and greater market penetration, which enable them to offer a wider variety of products and services at more competitive prices. Alternatively, some of these competitors may have significantly lower product development and manufacturing costs, allowing them to offer products at a lower price. The actions of these competitors could adversely affect our financial results. It may be necessary for us to lower prices on our products and increase spending on advertising and promotions, each of which could adversely affect our financial results.
In addition, we compete in highly competitive regional markets, such as Latin America, Europe, Africa and Asia. Intense competition in these areas may slow our sales growth and earnings potential, as well as adversely impact our margins.
Our ability to develop new products is affected by whether we can successfully anticipate consumer needs and preferences, develop and fund technological innovations, and receive and maintain necessary patent and trademark protection. In addition, we incur substantial development and marketing costs in introducing new and improved products and technologies. The introduction of a new consumer product (whether improved or newly developed) usually requires substantial expenditures for advertising and marketing to gain recognition in the marketplace. If a product gains consumer acceptance, it normally requires continued advertising and promotional support to maintain its relative market position. Some of our competitors may spend more aggressively on advertising and promotional activities, introduce competing products more quickly and respond more effectively to changing business and economic conditions.
We may not be successful in developing new or improved products and technologies necessary to compete successfully in the industry, and we may not be successful in advertising, marketing, timely launching and selling our products.
Global and regional economic conditions, including recessions or slow economic growth, and continuing global and regional credit market volatility, could continue to adversely affect our business and financial results.
The global economy continues to be volatile, with particular regions facing uncertain or slow economic growth. These unfavorable economic conditions could negatively impact:
consumer demand for our products, including shifting consumer purchasing patterns to lower cost options such as



4
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


private-label products, as well as declining birth rates in countries due to slow economic growth or other factors,
demand by businesses for our products, including the effects of increased unemployment and cost savings efforts of customers,
the social and political environment,
the product mix of our sales, and
our ability to collect accounts receivable on a timely basis from certain customers.
Ongoing volatility in global and regional commodity, currency and financial markets has continued to result in uncertainty in the business environment.  We rely on access to credit markets, specifically the commercial paper and public bond markets, to provide supplemental funding for our operations.  Although we have not experienced a disruption in our ability to access credit markets, it is possible that we may have difficulty accessing credit markets in the future, which may disrupt our businesses or further increase our cost of funding our operations.
Prolonged global or regional recessions, slow economic growth or credit market disruptions could result in decreased revenue, margins and earnings.
If we are unable to hire, develop or retain key employees or a skilled and diverse workforce, it could have an adverse effect on our business.
Our strategy includes a focus on hiring, developing and retaining our management team and a skilled and diverse international workforce. A skilled and diverse international workforce is a significant factor in developing product innovation, as well as providing key viewpoints representative of our international consumer base. We compete to hire new employees and then seek to train them to develop their skills. We may not be able to successfully recruit, develop and retain the key personnel that we need. Unplanned turnover or failure to develop an effective succession plan for our leadership positions, or to hire and retain a diverse, skilled workforce, could increase our operating costs and adversely affect our results of operations.

Changes in the policies of our retail trade customers, increasing dependence on key retailers in developed markets, and the emergence of new sales channels may adversely affect our business.
Our products are sold in a highly competitive global marketplace, which continues to experience increased concentration and the growing presence of large-format retailers and discounters. With the consolidation of retail trade, especially in developed markets such as the U.S., Europe and Australia, we are increasingly dependent on key retailers, and some of these retailers, including large-format retailers, may have greater bargaining power. They may use this leverage to demand higher trade discounts or allowances which could lead to reduced profitability. We may also be negatively affected by changes in the policies of our retail trade customers, such as inventory de-stocking, limitations on access to shelf space, delisting of our products, additional requirements related to safety, environmental, social and other sustainability issues, and other conditions. If we lose a significant customer or if sales of our products to a significant customer materially decrease, our business, financial condition and results of operations may be adversely affected. In addition, the emergence of new sales channels may affect customer preferences and market dynamics and could adversely impact our financial results. These new channels include sales of consumer and other products via e-commerce, as well as the growth of large-format retailers and discounters that exclusively sell private-label products.
Our international operations are subject to foreign market risks, including foreign exchange risk, currency restrictions and political, social and economic instability, which may adversely affect our financial results.
Because we and our equity companies have manufacturing facilities in 40 countries, with products sold in more than 175 countries, our results may be substantially affected by foreign market risks. We are subject to the impact of economic, social and political instability in developing countries.
We are exposed to the movement of various currencies against each other and versus the U.S. dollar. A portion of the exposures, arising from transactions and commitments denominated in non-local currencies, is systematically managed through foreign currency forward and swap contracts. We do not generally hedge our translation exposure with respect to foreign operations.
Weaker foreign currency exchange rates increase the potential impact of forecasted increases in dollar-based input costs for operations outside the U.S. There can be no assurance that we will be protected against substantial foreign currency fluctuations.



5
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


In addition, we face increased risks in our international operations, including currency exchange restrictions and other limits on our ability to repatriate earnings from outside the U.S., adverse political and economic conditions, legal and regulatory constraints, tariffs and other trade barriers, risks of expropriation, difficulties in enforcing contractual and intellectual property rights, and developing and maintaining successful business alliances, and potentially adverse tax consequences. Each of these factors could adversely affect our financial results. See MD&A and Item 8, Note 19 for information about the effects of currency restrictions and related exposures in Venezuela.
Pending litigation, administrative actions, tax matters, regulatory requirements and new legal requirements could have an adverse effect on our financial results.
As a global company, during the course of our business we are subject to various legal and administrative actions in which we assert our rights under various laws, including intellectual property laws. We may not be successful in defending against these actions or in asserting these rights. In addition, we could incur substantial costs in defending against, or in asserting our rights in, these actions.
We are subject to income tax requirements in various jurisdictions in the U.S. and internationally. Many of these jurisdictions face budgetary shortfalls or have unpredictable enforcement activity. Increases in applicable tax rates, implementation of new taxes, changes in applicable tax laws and interpretations of these tax laws and actions by tax authorities in jurisdictions in which we operate could reduce our after-tax income and have an adverse effect on our results of operations. 
Aspects of our business, including Health Care and personal care, are subject to many laws and governmental regulations, including regulations by the Food and Drug Administration and comparable foreign agencies, as well as potential litigation. Adverse regulatory action, including a recall, regulatory or other governmental investigation, or product liability or other litigation may adversely affect our financial condition and business operations.
Our sales and results of operations may also be adversely impacted by new legal requirements, including healthcare reform legislation, financial reform legislation and regulations, export control and foreign sanctions legislation, and climate change and other environmental legislation and regulations. The costs and other effects of pending litigation and administrative actions against us and new legal requirements cannot be determined with certainty. For example, new legislation or regulations may result in increased costs to us, directly for our compliance or indirectly to the extent suppliers increase prices of goods and services because of increased compliance costs or reduced availability of raw materials.
Although we believe that none of these proceedings or requirements will have a material adverse effect on us, the outcome of these proceedings or effects of new legal requirements may not be as expected. See Item 3, "Legal Proceedings."
Damage to the reputation of Kimberly-Clark or to one or more of our brands could adversely affect our business.
Developing and maintaining our reputation, as well as the reputation of our brands, is a critical factor in our relationship with consumers, customers, suppliers and others. Our inability to address adverse publicity or other issues, including concerns about product safety, quality, efficacy or similar matters, real or perceived, could negatively impact sentiments towards us and our products and brands, and our business and financial results could suffer. Our business and results could also be negatively impacted by the effects of a significant product recall, product-related litigation, allegations of product tampering or contamination or the distribution and sale of counterfeit products. 
There is no guarantee that our ongoing efforts to reduce costs will be successful.
We continue to implement plans to improve our competitive position by achieving cost reductions in our operations. In addition, we expect ongoing cost savings from our continuous improvement activities. We anticipate these cost savings will result from reducing material costs and manufacturing waste and realizing productivity gains, distribution efficiencies and overhead reductions in each of our business segments. See our discussion of our cost savings activities in MD&A. If we cannot successfully implement our cost savings plans, we may not realize all anticipated benefits. Any negative impact these plans have on our relationships with employees or customers or any failure to generate the anticipated efficiencies and savings could adversely affect our financial results.



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KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Disruption in our supply chain or the failure of third-party providers to satisfactorily perform could adversely impact our operations.
We operate on a global scale and therefore our ability to manufacture, distribute and sell products is critical to our operations. These activities are subject to inherent risks such as natural disasters, power outages, fires or explosions, labor strikes, terrorism, pandemics, import restrictions, regional economic, business, environmental, or political events, governmental regulatory requirements or nongovernmental voluntary actions in response to global climate change or other concerns regarding the sustainability of our business, which could impair our ability to manufacture or sell our products. This interruption, if not mitigated in advance or otherwise effectively managed, could adversely impact our business, financial condition and results of operations, as well as require additional resources to address.
In addition, third parties manufacture some of our products and provide certain administrative services. Disruptions or delays at these third-party manufacturers or service providers due to the reasons above or the failure of these manufacturers or service providers to otherwise satisfactorily perform, could adversely impact our operations, sales, payments to our vendors, employees, and others, and our ability to report financial and management information on a timely and accurate basis.
We may acquire or divest product lines or businesses, which could impact our results.
We may pursue acquisitions of product lines or businesses from third parties. Acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies, services and products of the acquired product lines or businesses, estimation and assumption of liabilities and contingencies, personnel turnover and the diversion of management's attention from other business concerns. We may be unable to identify suitable additional acquisition candidates or may be unable to successfully integrate and manage product lines or businesses that we have acquired or may acquire in the future. In addition, we may be unable to achieve anticipated benefits or cost savings from acquisitions in the timeframe we anticipate, or at all.
The inability to integrate and manage acquired product lines or businesses in a timely and efficient manner, the inability to achieve anticipated cost savings or other anticipated benefits from these acquisitions in the timeframe we anticipate or the unanticipated required increases in trade, promotional or capital spending from these acquisitions could adversely affect our business, consolidated financial condition, results of operations or liquidity.
Moreover, acquisitions could result in substantial additional indebtedness, exposure to contingent liabilities such as litigation or the impairment of goodwill or other intangible assets, or transactional costs, all of which could adversely affect our financial condition, results of operations and liquidity.
Alternatively, we may periodically divest product lines or businesses, such as in connection with the strategic changes we are making in our Western and Central European consumer and professional businesses. These divestitures may adversely impact our results if we are unable to offset the dilutive impacts from the loss of revenue associated with the divested products or businesses, or otherwise achieve the anticipated benefits or cost savings from the divestitures. In addition, businesses under consideration for or otherwise subject to divestiture may be adversely impacted prior to the divestiture, which could negatively affect our financial results. Furthermore, the divestitures could adversely affect our ongoing business operations, including by enhancing our competitors' positions or reducing consumer confidence in our ongoing brands and products.
If our information technology systems suffer interruptions or failures, our business operations could be disrupted.
Our information technology systems, some of which are dependent on services provided by third parties, serve an important role in the efficient operation of our business. This role includes ordering and managing materials from suppliers, managing our inventory, converting materials to finished products, facilitating order entry and fulfillment, processing transactions, summarizing and reporting our results, facilitating internal and external communications, administering human resources functions, and providing other processes necessary to manage our business. The failure of these information technology systems to perform as we anticipate could disrupt our business and negatively impact our results. In addition, these information technology systems could be damaged or cease to function properly due to any number of causes, such as catastrophic events, power outages, security breaches, computer viruses, or cyber-based attacks. While we have contingency plans in place to prevent or mitigate the impact of these events, if they were to occur and our disaster recovery plans do not effectively address the issues on a timely basis, we could suffer interruptions in our ability to manage our operations, which may adversely affect our business and financial results.





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KIMBERLY-CLARK CORPORATION - 2012 Annual Report


ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.


ITEM 2.    PROPERTIES
At December 31, 2012 we own or lease:
our principal executive offices located in the Dallas, Texas metropolitan area;
four operating segment and geographic headquarters at two U.S. and two international locations; and
five administrative centers at two U.S. and three international locations.

The locations of our and our equity affiliates' principal production facilities by major geographic areas of the world are as follows: 
Geographic Area:
Number of
Facilities
United States (in 18 states)
24

Canada
1

Europe
18

Asia, Latin America and other
66

Worldwide Total (in 40 countries)
109

Many of these facilities produce multiple products. The types of products produced by these facilities are as follows: 
Products Produced:
Number of
Facilities
Tissue, including consumer tissue and K‑C Professional products
64

Personal Care
50

Health Care
15

We believe that our and our equity affiliates' facilities are suitable for their purpose, adequate to support their businesses and well maintained. Restructuring actions related to the Western and Central European strategic changes will involve the sale or closure of five of our European manufacturing facilities. See "Recent Developments."

ITEM 3.    LEGAL PROCEEDINGS
We are subject to various legal proceedings, claims and governmental inspections, audits or investigations pertaining to issues such as contract disputes, product liability, tax matters, 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 sites where hazardous substances are present. 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.



8
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of our executive officers as of February 22, 2013, together with certain biographical information, are as follows:
Robert E. Abernathy, 58, was elected Group President - Europe, Global Nonwovens, and Continuous Improvement & Sustainability in November 2012. He is responsible for our European consumer businesses and the strategic changes we are making in that region, leading the development of new business strategies for Global Nonwovens, driving continuous improvement processes throughout our businesses and functions and leveraging our efforts in sustainability. Mr. Abernathy joined Kimberly‑Clark in 1982. His past responsibilities at Kimberly‑Clark have included overseeing its businesses in Asia, Latin America, Eastern Europe, the Middle East and Africa, as well as operations and major project management in North America. He was appointed Vice President - North American Diaper Operations in 1992; Managing Director of Kimberly-Clark Australia Pty. Limited in 1994; Group President of our Business-to-Business segment in 1998; Group President - Developing and Emerging Markets in 2004; and Group President - North Atlantic Consumer Products in 2008. He is a director of RadioShack Corporation.
Joanne B. Bauer, 57, was elected President - Global Health Care in 2006. She is responsible for our global health care business, which includes a variety of surgical and infection prevention products and medical devices. Ms. Bauer joined Kimberly-Clark in 1981. Her past responsibilities have included various marketing and management positions in the Adult Care and Health Care businesses. She was appointed Vice President of KimFibers, Ltd. in 1996; Vice President of Global Marketing for Health Care in 1998; and President of Health Care in 2001. She is a director of AdvaMed, the Advanced Medical Technology Association, and MedShare.
Christian A. Brickman, 48, was elected Group President - KC International in May 2012. He is responsible for our businesses in Asia, Latin America, Eastern Europe, the Middle East and Africa. Mr. Brickman joined Kimberly‑Clark in 2008 as Senior Vice President and Chief Strategy Officer and served as President - Global KC Professional from 2010 to 2012. Prior to joining Kimberly‑Clark, Mr. Brickman served as a Principal of McKinsey & Company, Inc., a management consulting firm, from 2003 to 2008, and as an Associate Principal from 2001 to 2003. He is a director of Sally Beauty Holdings, Inc.
Mark A. Buthman, 52, was elected Senior Vice President and Chief Financial Officer in 2003. Mr. Buthman joined Kimberly‑Clark in 1982. He has held various positions of increasing responsibility in operations, finance and strategic planning. Mr. Buthman was appointed Vice President of Strategic Planning and Analysis in 1997 and Vice President of Finance in 2002. He is a director of West Pharmaceutical Services, Inc. and Pavillon, International.
Thomas J. Falk, 54, was elected Chairman of the Board and Chief Executive Officer in 2003 and President and Chief Executive Officer in 2002. Prior to that, he served as President and Chief Operating Officer since 1999. Mr. Falk previously had been elected Group President - Global Tissue, Pulp and Paper in 1998, where he was responsible for Kimberly‑Clark's global tissue businesses. Earlier in his career, Mr. Falk had responsibility for Kimberly‑Clark's North American Infant Care, Child Care and Wet Wipes businesses. Mr. Falk joined Kimberly‑Clark in 1983 and has held other senior management positions. He has been a director of Kimberly-Clark since 1999. He also serves on the board of directors of Lockheed Martin Corporation, Catalyst Inc., the Global Consumer Goods Forum, and the University of Wisconsin Foundation, and serves as a governor of the Boys & Girls Clubs of America.
Lizanne C. Gottung, 56, was elected Senior Vice President and Chief Human Resources Officer in 2002. She is responsible for leading the design and implementation of all human capital strategies for Kimberly‑Clark, including global compensation and benefits, talent management, diversity and inclusion, organizational effectiveness and corporate health services. Ms. Gottung joined Kimberly‑Clark in 1981. She has held a variety of human resources, manufacturing and operational roles of increasing responsibility, including Vice President of Human Resources from 2001 to 2002. She is a director of Louisiana-Pacific Corporation.
Michael D. Hsu, 48, was elected Group President - North America Consumer Products in November 2012. He is responsible for our consumer business in North America. Prior to joining Kimberly‑Clark, Mr. Hsu served as  Executive Vice President and Chief Commercial Officer of Kraft Foods, Inc., a North American grocery manufacturing and processing conglomerate, from January 2012 to July 2012, as President of Sales, Customer Marketing and Logistics from 2010 to 2012 and as President of its grocery business unit from 2008 to 2010. Prior to that, Mr. Hsu served as President and Chief Operating Officer, Foodservice at H. J. Heinz Company, a manufacturer and marketer of food products.



9
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Nancy S. Loewe, 45, was elected Senior Vice President, Treasurer and Chief Strategy Officer in November 2012. She is responsible for leading the development and monitoring of our strategic plans and processes to enhance our enterprise growth initiatives. Ms. Loewe joined Kimberly‑Clark in 2011 as Vice President and Treasurer. Prior to joining Kimberly-Clark, Ms. Loewe served as Executive Vice President, Chief Financial Officer at Frito-Lay North America, which manufactures, markets and sells corn chips, potato chips and other snack foods, from 2009 to 2011. Prior to that, Ms. Loewe served as Vice President, Strategic Transactions for GE Consumer & Industrial, a division of General Electric Company, a diversified technology and financial services company.
Thomas J. Mielke, 54, was elected Senior Vice President - General Counsel and Chief Compliance Officer in May 2012. From 2007 to 2012, his title was Senior Vice President - Law and Government Affairs and Chief Compliance Officer. His responsibilities include our legal affairs, internal audit and government relations activities. Mr. Mielke joined Kimberly‑Clark in 1988. He held various positions within the legal function and was appointed Vice President and Chief Patent Counsel in 2000, and Vice President and Chief Counsel - North Atlantic Consumer Products in 2004.
Anthony J. Palmer, 53, was elected President - Global Brands and Innovation in May 2012. Previously, he served as Senior Vice President and Chief Marketing Officer from 2006 to 2012. He leads the global development of the company's three consumer categories through marketing, innovations, category and customer development, shopper marketing and lean cost transformation. In addition, he leads the company's global marketing, innovation, corporate research and development and corporate communications functions. Prior to joining Kimberly‑Clark in 2006, he served in a number of senior marketing and general management roles at the Kellogg Company, a producer of cereal and convenience foods, from 2002 to 2006, including as managing director of Kellogg's U.K. business. He is a director of The Hershey Company.
Elane B. Stock, 48, was elected President - Global KC Professional in May 2012. She is responsible for our global professional business, which includes commercial tissue and wipers, and skin care, safety and Do-It-Yourself products. She previously served as Senior Vice President and Chief Strategy Officer from 2010 to 2012. Prior to joining Kimberly-Clark, Ms. Stock served as national vice president of strategy for the American Cancer Society from 2008 to 2010. From 2007 to 2008, she was a regional manager at Georgia Pacific (Koch Industries). Ms. Stock was a partner at McKinsey & Company, Inc. in Ireland from 2005 to 2007.


ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.




10
KIMBERLY-CLARK CORPORATION - 2012 Annual Report

PART II


ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The dividend and market price data included in Item 7, MD&A "Unaudited Quarterly Data," are incorporated in this Item 5 by reference.
Quarterly dividends have been paid continually since 1935. Dividends have been paid on or about the second business day of January, April, July and October.
Kimberly-Clark common stock is listed on the New York Stock Exchange. The ticker symbol is KMB.
As of February 15, 2013, we had 26,286 holders of record of our common stock.
For information relating to securities authorized for issuance under equity compensation plans, see Part III, Item 12 of this Form 10-K.
We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. Our Board of Directors authorized share repurchase programs on July 23, 2007 and on January 21, 2011, each of which allows for the repurchase of 50 million shares in an amount not to exceed $5 billion. During 2012, purchases of our common stock totaled $1.3 billion, of which $1,286 were repurchased under the 2011 program, and $14 were purchased under and completed the 2007 program. All of these shares were purchased through a broker in the open market. At December 31, 2012, there were 33.7 million shares of repurchase authority remaining under the 2011 program.


ITEM 6.
SELECTED FINANCIAL DATA
 
Year Ended December 31
 
2012(a)
 
2011(b)
 
2010(c)
 
2009(d)
 
2008(e)
Net Sales
$
21,063

 
$
20,846

 
$
19,746

 
$
19,115

 
$
19,415

Gross Profit
6,749

 
6,152

 
6,550

 
6,420

 
5,858

Operating Profit
2,686

 
2,442

 
2,773

 
2,825

 
2,547

Share of Net Income of Equity Companies
176

 
161

 
181

 
164

 
166

Net Income
1,828

 
1,684

 
1,943

 
1,994

 
1,829

Net Income Attributable to Noncontrolling Interests
(78
)
 
(93
)
 
(100
)
 
(110
)
 
(139
)
Net Income Attributable to Kimberly‑Clark Corporation
1,750

 
1,591

 
1,843

 
1,884

 
1,690

Per Share Basis:
 
 
 
 
 
 
 
 
 
Basic
4.45

 
4.02

 
4.47

 
4.53

 
4.04

Diluted
4.42

 
3.99

 
4.45

 
4.52

 
4.03

Cash Dividends Per Share:
 
 
 
 
 
 
 
 
 
Declared
2.96

 
2.80

 
2.64

 
2.40

 
2.32

Paid
2.92

 
2.76

 
2.58

 
2.38

 
2.27

Total Assets
19,873

 
19,373

 
19,864

 
19,209

 
18,089

Long-Term Debt
5,070

 
5,426

 
5,120

 
4,792

 
4,882

Total Stockholders' Equity
5,287

 
5,529

 
6,202

 
5,690

 
4,261

(a)
Results include pre-tax charges of $299, $242 after tax, related to the strategic changes in Western and Central Europe. Additionally, results were negatively impacted by $135 in pre-tax charges, $86 after tax, for the pulp and tissue restructuring actions. See Item 8, Notes 2 and 3 of the Consolidated Financial Statements for details.
(b)
Results include a non-deductible business tax charge related to a law change in Colombia of $32, as well as the effect of the 2011 pulp and tissue restructuring pre-tax charges of $415, $289 after tax. See Item 8, Notes 3 and 17 of the Consolidated Financial Statements for details.
(c)
Results include the impact of the 2010 pre-tax charge of $98, $96 after tax, related to the adoption of highly inflationary accounting in Venezuela. See Item 8, Note 1 of the Consolidated Financial Statements for details.
(d)
Results include the impact of a $128 pre-tax charge, $91 after tax, related to the organization optimization plan, an initiative to reduce our worldwide salaried workforce.
(e)
Results include the impact of a $60 pre-tax charge, $36 after tax, related to the strategic cost reductions plan aimed at streamlining manufacturing and administrative operations.



11
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Introduction
 
This MD&A 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 Business
Overview of 2012 Results
Results of Operations and Related Information
Unaudited Quarterly Data
Liquidity and Capital Resources
Variable Interest Entities
Critical Accounting Policies and Use of Estimates
Legal Matters
New Accounting Standards
Business Outlook
Information Concerning Forward-Looking Statements
 
Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.

Overview of Business
 
We are a global company focused on leading the world in essentials for a better life, with manufacturing facilities in 37 countries and products sold in more than 175 countries. Our products are sold under well-known brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend. We have four reportable global business segments: Personal Care, Consumer Tissue, K‑C Professional ("KCP") and Health Care. These global business segments are described in greater detail in Item 8, Note 17 to the Consolidated Financial Statements.
 
In operating our global business, we seek to:
manage our portfolio to balance growth, margin and cash flow,
invest in our brands, innovation and growth initiatives,
deliver sustainable cost reductions, and
provide disciplined capital management to improve return on invested capital and return cash to shareholders.

Key strategies for our segments include:
We plan to grow our strong positions in personal care by leveraging our brands and providing innovations.
For consumer tissue, we seek to bring differentiated, value-added innovations to grow and strengthen our brands while focusing on net realized revenue, improving mix and reducing costs.
We plan to continue to shift our mix to faster-growing, higher-margin segments within KCP and Health Care, including safety and wiping in KCP and medical devices in Health Care.

We plan to drive growth throughout KC International ("KCI"), which includes our businesses in Asia, Latin America, the Middle East, Eastern Europe and Africa, with a particular emphasis in China, Russia and Latin America. Our goals for KCI include seeking targeted expansion and growth, taking advantage of attractive market opportunities and deploying our strong brands and innovation capabilities.



12
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Highlights for 2012 include the following:
We executed our growth strategies in KCI with a focus on markets in China, Russia and Latin America. Net sales in KCI grew mid-single digits in 2012, including a 10 percent increase before taking into account the impact of changes in foreign currency exchange rates. KCI accounted for 37 percent of company net sales in 2012, up from 36 percent in the previous year.
In North America, we launched a number of new or improved products, including super-premium Depend briefs, New U by Kotex tampons and pads and a number of new products in KCP. In KCI, we launched diaper pants, premium feminine care products and adult care offerings in several markets. These innovations are examples of our translation of consumer insights into solutions that generate growth. Our innovations and supporting marketing programs helped improve our brands' market positions. In the U.S., we improved or maintained market share in 6 of 8 of our consumer categories. We also increased our market share in a number of businesses in KCI.
We continued to support innovations and growth initiatives with increased spending in strategic marketing of $115 in 2012 over the previous year, and increased research and development spending at a double digit rate. To help fund those investments, we are generating cost savings through several initiatives, including leveraging our global procurement organization and deploying lean principles throughout our company. Full-year cost savings from our ongoing program in 2012 were $295.
In 2012, we approved strategic changes related to our Western and Central European consumer and professional businesses to focus our resources and investments on stronger market positions and growth opportunities. We will exit the diaper category in that region, with the exception of the Italian market, and divest or exit some lower-margin businesses, mostly in consumer tissue, in certain markets. Restructuring actions related to the strategic changes will involve the sale or closure of five of our European manufacturing facilities and streamlining our administrative organization. The restructuring actions commenced in the fourth quarter of 2012 and are expected to be completed by December 31, 2014. See additional information in Item 8, Note 2 to the Consolidated Financial Statements.
In 2011, we initiated a pulp and tissue restructuring 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. In 2012, we decided to streamline an additional facility in North America to further enhance the profitability of the consumer tissue business. These restructuring actions were substantially completed as of December 31, 2012, including the pending sale of a manufacturing facility that is expected to close in the first half of 2013. See additional information in Item 8, Note 3 to the Consolidated Financial Statements.
We continued to focus on generating cash flow and allocating capital to shareholders. In 2012, we generated $3.3 billion in cash provided by operations, up 44 percent from the prior year. We repurchased $1.3 billion of Kimberly‑Clark common stock in 2012, and expect to repurchase $1.0 billion to $1.2 billion of our common stock in 2013, subject to market conditions. In addition, we raised our dividend in 2012 by 6 percent, the 40th consecutive annual increase in our dividend. Altogether, share repurchases and dividends in 2012 amounted to $2.5 billion.

We are subject to risks and uncertainties, which can affect our business operations and financial results. See Item 1A, "Risk Factors" in this Form 10-K for additional information.
 
Overview of 2012 Results
Net sales increased 1 percent due to increases in net selling prices and volumes, partially offset by unfavorable currency effects.
Operating profit and net income attributable to Kimberly‑Clark Corporation each increased 10 percent and diluted earnings per share increased 11 percent.
Results in 2012 include pre-tax charges of $299, $242 after tax, related to the strategic changes in Western and Central Europe. Additionally, comparisons are impacted by $135 in pre-tax charges, $86 after tax, for the pulp and tissue restructuring actions in 2012 versus $415 in pre-tax charges, $289 after tax, in 2011.



13
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Cash provided by operations was $3.3 billion compared to $2.3 billion last year, with the increase primarily due to higher earnings, improved working capital and lower defined benefit pension contributions ($110 in 2012 versus $679 in 2011).

Results of Operations and Related Information
This section presents a discussion and analysis of net sales, operating profit and other information relevant to an understanding of 2012 results of operations. This discussion and analysis compares 2012 results to 2011, and 2011 results to 2010.
Analysis of Net Sales
By Business Segment
 
Year Ended December 31
2012
 
2011
 
2010
Personal Care
$
9,576

 
$
9,128

 
$
8,670

Consumer Tissue
6,527

 
6,770

 
6,497

K-C Professional
3,283

 
3,294

 
3,110

Health Care
1,622

 
1,606

 
1,460

Corporate & Other
55

 
48

 
9

Consolidated
$
21,063

 
$
20,846

 
$
19,746

By Geographic Area
 
Year Ended December 31
2012
 
2011
 
2010
United States
$
10,512

 
$
10,463

 
$
10,480

Canada
718

 
726

 
684

Intergeographic sales
(453
)
 
(443
)
 
(445
)
Total North America
10,777

 
10,746

 
10,719

Europe
3,247

 
3,401

 
3,179

Asia, Latin America and other
7,851

 
7,467

 
6,561

Intergeographic sales
(812
)
 
(768
)
 
(713
)
Consolidated
$
21,063

 
$
20,846

 
$
19,746

Commentary:
2012 versus 2011 
 
Percent Change in Net Sales Versus Prior Year


Total
 
Changes Due To
 
Volume
Growth
 
Net
Price
 
Mix/
Other
 
Currency
Consolidated
1.0
 
1
 
2
 
1
 
(3)
Personal Care
4.9
 
5
 
3
 
 
(3)
Consumer Tissue
(3.6)
 
(3)
 
2
 
(1)
 
(2)
K-C Professional
(0.3)
 
1
 
1
 
 
(2)
Health Care
1.0
 
2
 
 
 
(1)



14
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Personal care net sales in North America increased 2 percent. Net selling prices rose 3 percent, driven by improved revenue realization for Huggies diapers and baby wipes. Overall volumes were down 1 percent as infant care volumes decreased mid-single digits, primarily reflecting category declines. This decrease was mostly offset by improvements in adult care volumes of mid-single digits and feminine care of low-single digits, primarily due to innovations in Depend and U by Kotex brands.
In KCI, personal care net sales increased 8 percent despite a 5 percent decrease from unfavorable changes in currency rates. Sales volumes were up 9 percent, with high-single digit to low-double digit growth in each major region. Volume performance was strong in a number of markets, including Brazil, China, Russia, South Africa, South Korea, Vietnam and Venezuela. Overall net selling prices improved 3 percent compared to the year-ago period, driven by increases in Latin America.
In Europe, personal care net sales increased 2 percent, despite an unfavorable currency impact of 6 percent. Sales volumes rose 10 percent, mostly due to growth in non-branded offerings, Huggies baby wipes and child care offerings.
Consumer tissue net sales in North America were down 3 percent compared to the prior year, including a 5 percent decrease from lost sales in conjunction with pulp and tissue restructuring actions. Organic sales volumes (i.e., sales volume impacts other than lost sales from restructuring actions) were essentially flat with 2011, as gains in paper towels were offset by lower volumes in facial tissue. Overall net selling prices increased 3 percent and changes in product mix reduced net sales 1 percent.
Consumer tissue net sales decreased 1 percent in KCI. Currency rates were unfavorable by 4 percent and lost sales in conjunction with pulp and tissue restructuring actions reduced sales volumes by 1 percent. Net selling prices increased 3 percent and changes in product mix increased net sales by 1 percent. These benefits were partially offset by decreases in organic sales volumes of 1 percent.
In Europe, consumer tissue net sales decreased 8 percent, including an unfavorable currency impact of 5 percent. Changes in product mix, net selling prices and volumes each decreased net sales by 1 percent.
Net sales of KCP products in North America were essentially even with the prior year. Although washroom product volumes increased, these gains were offset by lower volumes in other areas, including safety products and wipers.
KCP net sales increased 5 percent in KCI, despite a 4 percent decrease from unfavorable changes in currency rates. Sales volumes increased 6 percent, driven by double-digit growth in Latin America, and net selling prices rose 3 percent.
In Europe, KCP net sales decreased 9 percent. Currency rates were unfavorable by 6 percent and lost sales in conjunction with pulp and tissue restructuring actions reduced sales volumes by 4 percent. Organic sales volumes were essentially flat with 2011 and net selling prices increased 1 percent.
Net sales of health care products increased 1 percent as sales volumes increased 2 percent and unfavorable currency effects reduced net sales by 1 percent. Medical device volumes increased 3 percent and surgical and infection prevention volumes increased 2 percent.
Commentary:
2011 versus 2010 
 
Percent Change in Net Sales Versus Prior Year
Total
Change
 
Changes Due To
Volume
Growth
 
Net
Price
 
Mix/
Other
 
Currency
Consolidated
5.6
 
1
 
2
 
 
3
Personal Care
5.3
 
2
 
1
 
(1)
 
3
Consumer Tissue
4.2
 
(2)
 
3
 
 
3
K-C Professional
5.9
 
2
 
2
 
(1)
 
3
Health Care
10.0
 
8
 
 
 
2
Personal care net sales in North America decreased about 2 percent due to lower net selling prices and unfavorable product mix of 2 percent and 1 percent, respectively, partially offset by favorable currency effects. Volumes were essentially flat as



15
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


improvements in Huggies baby wipes, adult incontinence products and feminine care, including benefits from product innovation in the Poise, Depend and U by Kotex brands, were mostly offset by lower sales of Huggies diapers and Pull-Ups training pants.
In Europe, personal care net sales increased about 4 percent due to favorable currency effects of 5 percent and increases in sales volumes of 2 percent, partially offset by lower net selling prices of 2 percent.
In KCI, personal care net sales increased about 14 percent, driven by increases in sales volumes of 5 percent, higher net selling prices of 5 percent, primarily in Latin America, and favorable currency effects of 5 percent. The growth in sales volumes was broad-based, with particular strength in South Korea, China and Latin America, excluding Venezuela.
Consumer tissue net sales in North America increased 2 percent due to higher net selling prices of 2 percent, partially offset by a sales volume decline of about 1 percent. Sales volumes were up high single-digits in paper towels but were more than offset by low single-digits decreases in both bath and facial tissue.
In Europe, consumer tissue net sales increased 5 percent due to favorable currency effects of 6 percent, partially offset by a 1 percent decrease in sales volumes.
In KCI, consumer tissue net sales increased 8 percent due to higher net selling prices of 7 percent, primarily in Latin America, favorable currency effects of 5 percent and improvements in product mix of 2 percent, partially offset by a decrease in sales volumes of 6 percent. Sales volumes were negatively impacted by revenue realization strategies and lost sales from a divestiture of a non-core business in Latin America and exiting non-strategic products in conjunction with the pulp and tissue restructuring actions.
KCP's net sales in North America increased 3 percent due to higher net selling prices of 2 percent and an increase in sales volumes of 1 percent driven by the safety and wiper categories, while washroom product volumes declined in a continued challenging economic environment. In Europe, sales of KCP products increased 7 percent due to favorable currency effects of 6 percent and increased sales volumes of about 2 percent. Net sales in KCI of KCP products increased 14 percent due to favorable currency effects of 6 percent, higher sales volumes of 5 percent and higher net selling prices of 3 percent.
Higher sales volumes for health care products were driven by increases in exam gloves and medical devices.
Analysis of Operating Profit
By Business Segment
 
Year Ended December 31
 
2012
 
2011
 
2010
Personal Care
$
1,660

 
$
1,526

 
$
1,764

Consumer Tissue
887

 
775

 
660

K-C Professional
545

 
487

 
468

Health Care
229

 
219

 
174

Other (income) and expense, net
(6
)
 
(51
)
 
104

Corporate & Other
(641
)
 
(616
)
 
(189
)
Consolidated
$
2,686

 
$
2,442

 
$
2,773




16
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


By Geographic Area 
 
Year Ended December 31
 
2012
 
2011
 
2010
United States
$
1,915

 
$
1,754

 
$
1,901

Canada
138

 
161

 
125

Europe
227

 
170

 
222

Asia, Latin America and other
1,041

 
922

 
818

Other (income) and expense, net
(6
)
 
(51
)
 
104

Corporate & Other
(641
)
 
(616
)
 
(189
)
Consolidated
$
2,686

 
$
2,442

 
$
2,773

Charges related to European strategic changes of $299 in 2012 and pulp and tissue restructuring charges of $134 and $413 in 2012 and 2011, respectively, are included in Corporate & Other. Additionally, a non-deductible business tax charge of $32 related to a law change in Colombia is included in Corporate & Other in 2011. See Item 8, Notes 2 and 3 to the Consolidated Financial Statements for additional information. In 2010, Other (income) and expense, net includes a $79 charge and Corporate & Other includes a $19 charge related to the adoption of highly inflationary accounting in Venezuela.
Commentary:
2012 versus 2011  
 
Percentage Change in Operating Profit Versus Prior Year
 
 
 
Change Due To
 
Total
Change
 
Volume
 
Net
Price
 
Input
Costs(a)
 
Cost
Savings
 
Currency
Translation
 
Other(b)
Consolidated
10.0
 
5
 
17
 
4
 
12
 
(2)
 
(26)
Personal Care
8.8
 
8
 
16
 
(2)
 
13
 
(2)
 
(24)
Consumer Tissue
14.5
 
(5)
 
19
 
8
 
9
 
(2)
 
(15)
K-C Professional
11.9
 
5
 
6
 
7
 
10
 
(3)
 
(13)
Health Care
4.6
 
6
 
(1)
 
12
 
(7)
 
1
 
(6)
(a)
Includes inflation/deflation in raw materials, energy and distribution costs.
(b)
Consolidated includes the impact of the charges in 2012 related to the European strategic changes, in 2012 and 2011 related to pulp and tissue restructuring actions and a 2011 non-deductible business tax charge related to a law change in Colombia.
Consolidated operating profit increased $244 compared to the prior year. Operating profit benefited from increases in net sales, cost savings of $295 and deflation in input costs of $90. These benefits were partially offset by increased marketing, research and general expenses, including $115 in higher strategic marketing spending. Administrative and research spending also increased, in part to build further capabilities and support future growth. Foreign currency translation effects reduced operating profit by $55 as a result of the weakening of several currencies relative to the U.S. dollar. A lower level of income in other (income) expense, net adversely impacted the operating profit comparison by $45.
Operating profit for the personal care segment increased due to higher net sales and cost savings, partially offset by inflation in input costs, increases in marketing, research and general expenses and manufacturing costs and unfavorable currency effects. In North America, operating profit increased as higher net sales, cost savings and deflation in input costs were partially offset by increased marketing, research and general expenses. Operating profit in KCI increased due to higher net sales and cost savings, partially offset by increases in marketing, research and general expenses and manufacturing costs, inflation in input costs and unfavorable currency effects. In Europe, operating profit increased primarily due to cost savings.
Consumer tissue segment operating profit increased due to higher net selling prices, cost savings and deflation in input costs, partially offset by increased marketing, research and general expenses and lower sales volumes. Operating profit in North America increased due to deflation in input costs, cost savings and higher net selling prices, partially offset



17
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


by the impact of lower sales volumes and increases in marketing, research and general expenses. Operating profit in KCI increased as higher net selling prices and cost savings were partially offset by increased marketing, research and general expenses and unfavorable currency effects. In Europe, operating profit decreased due to higher marketing, research and general expenses, lower net sales and the negative impact of lower production volumes, partially offset by cost savings and deflation in input costs.
Operating profit for KCP increased due to higher sales volumes and net selling prices, cost savings and deflation in input costs, partially offset by increased marketing, research and general expenses, unfavorable currency effects and increased manufacturing costs.
Operating profit for the health care segment increased as higher net sales, deflation in input costs and lower marketing, research and general expenses were partially offset by increased manufacturing costs.
European Strategic Changes
On October 23, 2012, we approved strategic changes related to our Western and Central European consumer and professional businesses to focus our resources and investments on stronger market positions and growth opportunities. We will be exiting the diaper category in that region, with the exception of the Italian market, and divesting or exiting some lower-margin businesses, mostly in consumer tissue, in certain markets. The changes will primarily affect our consumer businesses, with a modest impact on KCP. The businesses that will be exited or divested generate annual net sales of approximately $500 and negligible operating profit.
Restructuring actions related to the strategic changes will involve the sale or closure of five of our European manufacturing facilities and a streamlining of our administrative organization. In total, these actions will result in reducing our European workforce by approximately 1,300 to 1,500 positions.
The restructuring actions commenced in the fourth quarter of 2012 and are expected to be completed by December 31, 2014. The restructuring is expected to result in cumulative charges of approximately $250 to $350 after tax ($300 to $400 pre-tax) over that period. Cash costs related to severance and other expenses are expected to account for approximately 50 to 60 percent of the charges. Noncash charges will consist primarily of asset impairment charges and incremental depreciation.
During 2012, $299 of pre-tax charges were recognized for the strategic changes, including $250 recorded in Cost of products sold and $49 recorded in Marketing, research and general expenses. A related benefit of $57 was recorded in Provision for income taxes. On a segment basis, $66, $213 and $20 of the charges were related to consumer tissue, personal care and KCP, respectively. Non-cash charges totaled $165 in 2012, and $4 of the $134 cash charges recorded in 2012 have been paid as of December 31, 2012.
For additional information on the European strategic changes, see Item 8, Note 2 to the Consolidated Financial Statements.
Pulp and Tissue Restructuring Actions
In 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 involved the streamlining, sale or closure of six of our manufacturing facilities around the world. In conjunction with these actions, we have exited certain non-strategic products, primarily non-branded offerings, and transferred some production to lower-cost facilities in order to improve overall profitability and returns. In 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 were substantially complete as of December 31, 2012, including the pending sale of one facility expected to close in the first half of 2013.
As a result of the restructuring activities, versus the 2010 baseline, we expect that by 2013 annual net sales will decrease by $250 to $300, and operating profit will increase by at least $75 in 2013 and at least $100 in 2014. Through December 31, 2012, we have recognized cumulative operating profit benefits of $60 from the restructuring actions.
During 2012, $135 of charges were recognized for the restructuring actions, including $128 recorded in Cost of products sold, $6 recorded in Marketing, research and general expenses, and $1 recorded in Other (income) and expense, net. A related benefit of $49 was recorded in Provision for income taxes. On a segment basis, $125 and $9 of the charges were related to consumer tissue



18
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


and KCP, respectively. On a geographic basis, $97 of the charges were recorded in North America, $35 in Australia, and $3 elsewhere.
Non-cash charges of $44 were recorded in 2012. Cash payments of $91 were made in 2012.
For additional information on the pulp and tissue restructuring actions, see Item 8, Note 3 to the Consolidated Financial Statements.
Other (income) and expense, net
Other (income) and expense, net for 2012 includes $19 in asset impairment charges, as well as currency transaction gains of $14. In 2011, other (income) and expense, net includes gains from the divestiture of a small non-core business in Latin America and the sale of a venture investment in a health care start-up company, as well as currency transaction gains of $27.
Commentary:
2011 versus 2010 
 
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
(11.9)
 
3
 
13
 
(21)
 
10
 
5
 
(22)
Personal Care
(13.5)
 
3
 
6
 
(18)
 
5
 
2
 
(11)
Consumer Tissue
17.4
 
(4)
 
28
 
(19)
 
16
 
2
 
(6)
K-C Professional
4.1
 
4
 
12
 
(18)
 
13
 
5
 
(12)
Health Care
25.9
 
24
 
2
 
(33)
 
11
 
3
 
19
(a)
Includes inflation/deflation in raw materials, energy and distribution costs.
(b)
Consolidated includes the effect of the 2011 pulp and tissue restructuring charges and a non-deductible business tax charge related to a law change in Colombia, as well as the impact of the 2010 charge related to the adoption of highly inflationary accounting in Venezuela.
Consolidated operating profit decreased $331 compared to the prior year.  The benefits of increases in net sales and cost savings of $265 were more than offset by charges of $415 related to the pulp and tissue restructuring, inflation in key cost inputs of $580 and the negative effect of lower production volumes.  Comparisons were also impacted by the effect of a $98 charge related to the adoption of highly inflationary accounting in Venezuela in 2010. 
Operating profit for the personal care segment decreased due to inflation in key cost inputs and the negative effect of lower production volumes, partially offset by increases in net sales and cost savings. In North America, operating profit decreased due to inflation in key cost inputs, lower net sales and the negative effects of lower production volumes, partially offset by lower marketing, research and general expenses. In Europe, operating profit decreased due to inflation in key cost inputs, partially offset by cost savings, higher net sales and lower marketing, research and general expenses. Operating profit in KCI increased due to higher net sales, cost savings and favorable currency effects, partially offset by inflation in key cost inputs and increases in marketing, research and general expenses.
Consumer tissue segment operating profit increased due to increases in net sales, cost savings and lower marketing, research and general expenses, partially offset by inflation in key cost inputs and the negative effect of lower production volumes. Operating profit in North America increased as higher net sales, cost savings and lower marketing, research and general expenses were partially offset by inflation in key cost inputs. In Europe, operating profit decreased as favorable currency effects, cost savings and lower general expenses were more than offset by inflation in key cost inputs. Operating profit in KCI increased as higher net sales and favorable currency effects were partially offset by the negative effect of production volumes and inflation in key cost inputs.
Operating profit for KCP increased due to higher net sales, cost savings and favorable currency effects, partially offset by inflation in key cost inputs and increased marketing, research and general expenses.
Operating profit for the health care segment increased as higher net sales, cost savings and lower marketing, research and general expenses, primarily due to a lower level of litigation expenses, were partially offset by inflation in key cost inputs.



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KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Other (income) and expense, net
Other (income) and expense, net for 2011 includes gains from the divestiture of a small non-core business in Latin America and the sale of a venture investment in a health care start-up company, as well as currency transaction gains of $27. Other (income) and expense, net for 2010 includes a $79 charge related to the adoption of highly inflationary accounting in Venezuela and currency transaction losses of $20.
Additional Income Statement Commentary
2012 versus 2011
Our effective income tax rate in 2012 was 31.7 percent compared to 30.2 percent in 2011. The increase was primarily due to the tax impact related to the charges for the European strategic changes, partially offset by favorable audit resolutions.
Our share of net income of equity companies increased by $15 primarily due to higher earnings at Kimberly‑Clark de Mexico, S.A.B. de C.V. ("KCM"). KCM's net sales grew 3 percent due to increased sales volumes of 6 percent, higher net selling prices of 3 percent and a slight improvement in product mix, partially offset by unfavorable currency effects of 7 percent. Results were also impacted by higher marketing, research and general expenses, cost savings and deflation in input costs.
Net income attributable to noncontrolling interests decreased $15 primarily due to the redemption in 2011 of certain redeemable preferred securities. See Item 8, Note 8 for information on these securities and their redemption.
2011 versus 2010
Interest expense increased in 2011 over 2010 due to a higher average level of debt.
Our effective income tax rate was 30.2 percent for 2011 compared with 30.9 percent for 2010. The decrease was primarily due to the timing of tax initiatives.
Our share of net income of equity companies decreased by $20 primarily due to lower earnings at KCM. KCM's net sales grew 4 percent due to a 2 percent benefit from the peso strengthening against the U.S. dollar, increased sales volumes of 1 percent, and a 1 percent impact from the combination of higher net selling prices and improvements in product mix. However, benefits from the increase in net sales were more than offset by inflation in key cost inputs, the negative effect of lower production volumes and increases in marketing expense.
The average number of common shares outstanding declined in 2011 as compared to 2010 due to share repurchases.




20
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Unaudited Quarterly Data
 
2012
 
2011
 
Fourth
 
Third
 
Second
 
First
 
Fourth
 
Third
 
Second
 
First
Net sales
$
5,307

 
$
5,246

 
$
5,269

 
$
5,241

 
$
5,176

 
$
5,382

 
$
5,259

 
$
5,029

Gross profit
1,524

 
1,766

 
1,755

 
1,704

 
1,544

 
1,588

 
1,557

 
1,463

Operating profit
449

 
783

 
754

 
700

 
611

 
662

 
625

 
544

Net income attributable to the Corporation
267

 
517

 
498

 
468

 
401

 
432

 
408

 
350

Per share basis:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
0.68

 
1.31

 
1.27

 
1.19

 
1.02

 
1.10

 
1.04

 
0.87

Diluted
0.68

 
1.30

 
1.26

 
1.18

 
1.01

 
1.09

 
1.03

 
0.86

Cash dividends declared per share
0.74

 
0.74

 
0.74

 
0.74

 
0.70

 
0.70

 
0.70

 
0.70

Market price per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
High
87.80

 
88.25

 
83.77

 
74.39

 
74.06

 
71.78

 
68.49

 
66.66

Low
82.15

 
81.29

 
73.33

 
70.50

 
68.27

 
61.00

 
63.40

 
62.33

Close
84.43

 
85.78

 
83.77

 
73.89

 
73.56

 
71.01

 
66.56

 
65.27


Results include charges related to the strategic changes in Western and Central Europe in 2012 and charges related to the pulp and tissue restructuring actions in 2012 and 2011. See Item 8, Notes 2 and 3 for more information. Additionally, 2011 includes a non-deductible business tax charge related to a law change in Colombia.

Liquidity and Capital Resources
Cash Provided by Operations Commentary:
Cash provided by operations was $3.3 billion in 2012 compared to $2.3 billion in 2011, with the increase primarily due to higher earnings, improved working capital and lower defined benefit pension contributions ($110 in 2012 versus $679 in 2011).
Obligations Commentary:
The following table presents our total contractual obligations for which cash flows are fixed or determinable. 
 
Total
 
2013
 
2014
 
2015
 
2016
 
2017
 
2018+
Long-term debt
$
5,826

 
$
756

 
$
523

 
$
343

 
$
46

 
$
957

 
$
3,201

Interest payments on long-term debt
2,914

 
282

 
245

 
237

 
226

 
201

 
1,723

Returns on redeemable preferred securities
54

 
27

 
27

 

 

 

 

Operating leases
701

 
174

 
141

 
109

 
89

 
64

 
124

Unconditional purchase obligations
2,101

 
1,008

 
178

 
137

 
139

 
149

 
490

Open purchase orders
1,817

 
1,712

 
84

 
5

 
10

 
5

 
1

Total contractual obligations
$
13,413

 
$
3,959

 
$
1,198

 
$
831

 
$
510

 
$
1,376

 
$
5,539

Projected interest payments for variable-rate debt were calculated based on the outstanding principal amounts and prevailing market rates as of December 31, 2012.
Returns on redeemable preferred securities reflect required return payments through the next potential redemption date.
The unconditional purchase obligations are for the purchase of raw materials, primarily pulp, and utilities. Although we are primarily liable for payments on the above operating leases and unconditional purchase obligations, based on historic operating performance and forecasted future cash flows, we believe exposure to losses, if any, under these arrangements is not material.



21
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


The open purchase orders displayed in the table represent amounts for goods and services we have negotiated for delivery.
The table does not include amounts where payments are discretionary or the timing is uncertain. The following payments are not included in the table:
We will fund our defined benefit pension plans to meet or exceed statutory requirements and currently expect to contribute approximately $100 to $300 to these plans in 2013.
Other postretirement benefit payments are estimated using actuarial assumptions, including expected future service, to project the future obligations. Based upon those projections, we anticipate making annual payments for these obligations of $58 in 2013 to more than $60 by 2022.
Accrued income tax liabilities for uncertain tax positions, deferred taxes and noncontrolling interests.
In the event the holder of the redeemable preferred securities elects to redeem them at the next redemption election date, we would be required to repay approximately $500 in December 2014.
Investing Commentary:
During 2012, our capital spending was $1.1 billion. We expect capital spending to be $1.0 billion to $1.1 billion in 2013.
Financing Commentary:
At December 31, 2012 and 2011, total debt and redeemable securities was $6.7 billion.
We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. During 2012, we repurchased $1.3 billion of our common stock through a broker in the open market. In 2013, we plan to repurchase $1.0 billion to $1.2 billion of shares through open market purchases, subject to market conditions.
On February 9, 2012, we issued $300 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 aggregate principal amount of 5.625% notes that were due February 15, 2012.
We maintain a $1.5 billion revolving credit facility, scheduled to expire in October 2016, as well as the option to increase this facility by an additional $500. This facility, currently unused, supports our commercial paper program and would provide liquidity in the event our access to the commercial paper markets is unavailable for any reason. We had an additional $500 facility that expired pursuant to its terms in October 2012.
Our short-term debt as of December 31, 2012 was $359 (included in Debt payable within one year on the 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 fourth quarter of 2012 was $526, and for the twelve months ended December 31, 2012 was $501. These short-term borrowings provide supplemental funding for supporting our operations. The level of short-term debt 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.
During the second quarter of 2010, the Venezuelan government enacted reforms to its currency exchange regulations that limited U.S. dollar availability to pay for the historical levels of U.S. dollar-denominated imports to support operations of our Venezuelan subsidiary ("KC Venezuela"). On February 13, 2013, the Venezuelan government announced a devaluation of the Central Bank of Venezuela regulated currency exchange system rate to 6.3 bolivars per U.S. dollar and the elimination of the SITME rate. At December 31, 2012, KC Venezuela had a bolivar-denominated net monetary asset position of $211 and our net investment in K-C Venezuela was approximately $351, both valued at 5.4 bolivars per U.S. dollar. As a result of the devaluation, we expect to record an after tax charge of $25 to $35 in the first quarter of 2013 related to the remeasurement of the local currency-denominated balance sheet to the new exchange rate.
Net sales of K‑C Venezuela represented 2 percent of Consolidated Net Sales for the year ended December 31, 2012, and 1 percent of Consolidated Net Sales in 2011 and 2010. In 2012 and 2011, K‑C Venezuela represented 4 percent



22
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


of Consolidated Operating Profit. In 2010, Operating Profit at our Venezuelan subsidiary was negative due to the charge recorded as a result of adopting highly inflationary accounting.
Management believes 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.
Variable Interest Entities
We have interests in the financing entities discussed in Item 8, Notes 5 and 8 to the Consolidated Financial Statements.
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. The critical accounting policies we used in the preparation of the Consolidated Financial Statements are those that are important both to the presentation of our financial condition and results of operations and require significant judgments by management with regard to estimates used. The critical judgments by management relate to accruals for sales incentives and trade promotion allowances, pension and other postretirement benefits, future cash flows associated with impairment testing for goodwill and long-lived assets and deferred income taxes and potential income tax assessments. These critical accounting policies have been reviewed with the Audit Committee of the Board of Directors.
Sales Incentives and Trade Promotion Allowances
Among those factors affecting the accruals for promotions are estimates of the number of consumer coupons that will be redeemed and the type and number of activities within promotional programs between us and our trade customers. Generally, the estimates for consumer coupon costs are based on historical patterns of coupon redemption, influenced by judgments about current market conditions such as competitive activity in specific product categories. Estimates of trade promotion liabilities for promotional program costs incurred, but unpaid, are generally based on estimates of the quantity of customer sales, timing of promotional activities and forecasted costs for activities within the promotional programs. Trade promotion programs include introductory marketing funds such as slotting fees, cooperative marketing programs, temporary price reductions, favorable end-of-aisle or in-store product displays and other activities conducted by our customers to promote our products. Promotion accruals as of December 31, 2012 and 2011 were $319 and $339, respectively. Rebate accruals are based on estimates of the quantity of products expected to be sold to specific customers, and were $340 and $344 at December 31, 2012 and 2011, respectively.
Employee Postretirement Benefits
Pension Plans
We have defined benefit pension plans in North America and the United Kingdom (the "Principal Plans") and/or defined contribution retirement plans covering substantially all regular employees. Certain other subsidiaries have defined benefit pension plans or, in certain countries, termination pay plans covering substantially all regular employees. The funding policy for the qualified defined benefit plans in North America and the defined benefit plans in the United Kingdom is to contribute assets at least equal to regulatory minimum requirements. Funding for the remaining defined benefit plans outside the U.S. is based on legal requirements, tax considerations, investment opportunities, and customary business practices in these countries. Nonqualified U.S. plans providing pension benefits in excess of limitations imposed by the U.S. income tax code are not funded.
Consolidated pension expense for defined benefit pension plans was $122 in 2012 compared with $119 for 2011. Pension expense is calculated based upon a number of actuarial assumptions applied to each of the defined benefit plans. The weighted-average expected long-term rate of return on pension fund assets used to calculate pension expense was 6.49 percent in 2012 compared with 7.14 percent in 2011 and will be 6.26 percent in 2013. The weighted-average expected long-term rate of return on pension fund assets used to calculate pension expense for the Principal Plans was 6.68 percent in 2012 compared with 7.35 percent in 2011 and will be 6.43 percent in 2013. The expected long-term rates of return are evaluated on an annual basis. In setting these assumptions, we consider a number of factors including projected future returns by asset class relative to the current asset allocation. Actual asset allocations are regularly reviewed and they are periodically rebalanced to the targeted allocations when considered appropriate.



23
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Pension expense is determined using the fair value of assets rather than a calculated value that averages gains and losses ("Calculated Value") over a period of years. Investment gains or losses represent the difference between the expected return calculated using the fair value of assets and the actual return based on the fair value of assets. The variance between actual and expected gains and losses on pension assets is recognized in pension expense more rapidly than it would be if a Calculated Value was used for plan assets. As of December 31, 2012, the Principal Plans had cumulative unrecognized investment and actuarial losses of approximately $2.9 billion. These unrecognized net losses may increase future pension expense if not offset by (i) actual investment returns that exceed the assumed investment returns, (ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate pension obligations, or (iii) other actuarial gains, including whether such accumulated actuarial losses at each measurement date exceed the "corridor" as required.
The discount (or settlement) rate used to determine the present value of our future U.S. pension obligation at December 31, 2012 was based on a portfolio of high quality corporate debt securities with cash flows that largely match the expected benefit payments of the plan. For the U.K. and Canadian plans, the discount rate was determined based on yield curves constructed from a portfolio of high quality corporate debt securities. Each year's expected future benefit payments were discounted to their present value at the appropriate yield curve rate to determine the pension obligations. The weighted-average discount rate for the Principal Plans decreased to 4.12 percent at December 31, 2012 from 4.90 percent at December 31, 2011.
Consolidated pension expense for defined benefit pension plans is estimated to approximate $65 to $75 in 2013 compared to $122 incurred in 2012. The 2013 estimate includes an approximate $30 benefit from a plan curtailment related to the restructuring associated with the European strategic changes, and is based on an expected weighted-average long-term rate of return on assets in the Principal Plans of 6.43 percent, a weighted-average discount rate for the Principal Plans of 4.12 percent and various other assumptions. Pension expense beyond 2013 will depend on future investment performance, our contributions to the pension trusts, changes in discount rates and various other factors related to the covered employees in the plans.
If the expected long-term rates of return on assets for the Principal Plans were lowered by 0.25 percent, our annual pension expense would increase by approximately $12 in 2013. If the discount rate assumptions for these same plans were reduced by 0.25 percent, annual pension expense would increase by approximately $3 and the December 31, 2012 pension liability would increase by about $197.
The fair value of the assets in our defined benefit plans was $5.4 billion and $5.2 billion at December 31, 2012 and December 31, 2011, respectively. The projected benefit obligations of the defined benefit plans exceeded the fair value of plan assets by approximately $1.2 billion and $0.7 billion at December 31, 2012 and December 31, 2011, respectively. On a consolidated basis, we contributed $110 to our pension plans in 2012 compared with $679 in 2011. In addition, we made direct benefit payments of $14 in both 2012 and 2011. We currently anticipate contributing $100 to $300 to our pension plans in 2013.
The methodology for determining the discount rate used for each country's pension obligation is the same as the methodology used to determine the discount rate used for that country's other postretirement benefit obligation. The discount rates displayed for the two types of obligations for our consolidated operations may appear different due to the unique benefit payments of the plans.
Other Postretirement Benefit Plans
Substantially all U.S. retirees and employees are covered by unfunded health care and life insurance benefit plans. Certain benefits are based on years of service and/or age at retirement. The plans are principally noncontributory for employees who were eligible to retire before 1993, contributory for most employees who retire after 1992, and we provide no subsidized benefits to most employees hired after 2003.
We made benefit payments of $55 in 2012 compared with $74 in 2011. The determination of the discount rates used to calculate the benefit obligations of the plans is discussed in the pension benefit section above. If the discount rate assumptions for these plans were reduced by 0.25 percent, there would be no impact to 2013 other postretirement benefit expense and the December 31, 2012 benefit liability would increase by about $20.
The health care cost trend rate is based on a combination of inputs including our recent claims history and insights from external advisers regarding recent developments in the health care marketplace, as well as projections of future trends in the marketplace. The annual increase in the consolidated weighted-average health care cost trend rate is expected to be 7.1 percent in 2013 and to gradually decline to 5.1 percent in 2018 and thereafter. See Item 8, Note 10 to the Consolidated Financial Statements for disclosure of the effect of a one percentage point change in the health care cost trend rate.



24
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


Goodwill and Other Intangible Assets
The carrying amount of goodwill is tested annually as of the beginning of the fourth quarter and whenever events or circumstances indicate that impairment may have occurred. Impairment testing is conducted at the reporting unit level of our businesses and is based on a discounted cash flow approach to determine the fair value. The determination of fair value requires significant management judgment including estimating future sales volumes, selling prices and costs, changes in working capital, investments in property and equipment and the selection of an appropriate discount rate. Sensitivities of these fair value estimates to changes in assumptions for sales volumes, selling prices and costs are also tested. If the carrying amount of a reporting unit that contains goodwill exceeds fair value, a possible impairment would be indicated.
If a possible impairment is indicated, the implied fair value of goodwill would be estimated by comparing the fair value of the net assets of the unit excluding goodwill to the total fair value of the unit. If the carrying amount of goodwill exceeds its implied fair value, an impairment charge would be recorded. Judgment is used in assessing whether goodwill should be tested more frequently for impairment than annually. Factors such as unexpected adverse economic conditions, competition, product changes and other external events may require more frequent assessments. The annual goodwill impairment testing has been completed and, as the fair value of each reporting unit was in excess of the respective reporting unit's carrying value, it has been determined that our $3.3 billion of goodwill is not impaired.
We have no significant intangible assets with indefinite useful lives. At December 31, 2012, we have intangible assets with finite useful lives with a gross carrying amount of $516 and a net carrying amount of $235. These intangibles are being amortized over their estimated useful lives and are tested for impairment whenever events or circumstances indicate that impairment may have occurred. If the carrying amount of an intangible asset is not recoverable based on estimated future undiscounted cash flows, an impairment loss would be indicated. The amount of the impairment loss to be recorded would be based on the excess of the carrying amount of the intangible asset over its fair value (based on discounted future cash flows). Judgment is used in assessing whether the carrying amount of intangible assets is not expected to be recoverable over their estimated remaining useful lives. The factors considered are similar to those outlined in the goodwill impairment discussion above.
Deferred Income Taxes and Potential Assessments
As of December 31, 2012, we have recorded deferred tax assets related to income tax loss carryforwards, income tax credit carryforwards and capital loss carryforwards totaling $716 and had established valuation allowances against these deferred tax assets of $189, thereby resulting in a net deferred tax asset of $527. As of December 31, 2011, the net deferred tax asset was $603. These carryforwards are primarily in non-U.S. taxing jurisdictions and in certain states in the U.S. Foreign tax credits earned in the U.S. in current and prior years, which cannot be used currently, also give rise to net deferred tax assets. In determining the valuation allowances to establish against these deferred tax assets, many factors are considered, including the specific taxing jurisdiction, the carryforward period, income tax strategies and forecasted earnings for the entities in each jurisdiction. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.
As of December 31, 2012, U.S. income taxes and foreign withholding taxes have not been provided on approximately $9.5 billion of unremitted earnings of subsidiaries operating outside the U.S. These earnings are considered by management to be invested indefinitely. However, they would be subject to income tax if they were remitted as dividends, were lent to one of our U.S. entities, or if we were to sell our stock in the subsidiaries. It is not practicable to determine the amount of unrecognized deferred U.S. income tax liability on these unremitted earnings. We periodically determine whether our non-U.S. subsidiaries will invest their undistributed earnings indefinitely and reassess this determination, as appropriate.
We record our global tax provision based on the respective tax rules and regulations for the jurisdictions in which we operate. Where we believe that a tax position is supportable for income tax purposes, the item is included in our income tax returns. Where treatment of a position is uncertain, a liability is recorded based upon the expected most likely outcome taking into consideration the technical merits of the position based on specific tax regulations and facts of each matter. These liabilities may be affected by changing interpretations of laws, rulings by tax authorities, or the expiration of the statute of limitations. Our U.S. federal income tax returns have been audited through 2009. IRS assessments of additional taxes have been paid through 2003. We have various federal income tax return positions in administrative appeals or litigation for 1999 to 2009. We currently believe that the ultimate resolution of these matters, individually or in the aggregate, will not have a material effect on our business, financial condition, results of operations or liquidity.



25
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


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, tax matters, 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 federal Comprehensive Environmental Response, Compensation and Liability Act, or analogous state statutes, at a number of sites where hazardous substances are present. 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.
New Accounting Standards
See Item 8, Note 1 to the Consolidated Financial Statements for a description of new accounting standards and their anticipated effects on our Consolidated Financial Statements.
Business Outlook
European Strategic Changes
On October 23, 2012, we approved strategic changes related to our Western and Central European consumer and professional businesses to focus our resources and investments on stronger market positions and growth opportunities. We will be exiting the diaper category in that region, with the exception of the Italian market, and divesting or exiting some lower-margin businesses, mostly in consumer tissue, in certain markets. The changes will primarily affect our consumer businesses, with a modest impact on KCP. The businesses that will be exited or divested generate annual net sales of approximately $500 and negligible operating profit.
Restructuring actions related to the strategic changes will involve the sale or closure of five of our European manufacturing facilities and a streamlining of our administrative organization. In total, these actions will result in reducing our European workforce by approximately 1,300 to 1,500 positions.
The restructuring actions commenced in the fourth quarter of 2012 and are expected to be completed by December 31, 2014. The restructuring is expected to result in cumulative charges of approximately $250 to $350 after tax ($300 to $400 pre-tax) over that period. Cash costs related to severance and other expenses are expected to account for approximately 50 to 60 percent of the charges. Noncash charges will consist primarily of asset impairment charges and incremental depreciation.
K‑C Venezuela
On February 13, 2013, the Venezuelan government announced a devaluation of the Central Bank of Venezuela regulated currency exchange system rate to 6.3 bolivars per U.S. dollar and the elimination of the SITME rate. As a result of the devaluation, we expect to record an after tax charge of $25 to $35 in the first quarter of 2013 related to the remeasurement of the local currency-denominated balance sheet to the new exchange rate.
2013 Operating Results
In 2013, we plan to continue to pursue targeted growth initiatives, launch product innovations and support our brands with increased strategic marketing spending. We expect to achieve cost savings, which should help us overcome moderate commodity cost inflation. We will continue to manage our company with financial discipline, including a focus on cash generation and shareholder-friendly capital allocation. We plan to continue our program of share repurchases, and have increased the amount of our regular quarterly dividend by 9 percent for 2013.
Information Concerning Forward-Looking Statements
Certain matters discussed in this Form 10-K or related documents, a portion of which are incorporated herein by reference, concerning, among other things, the business outlook, including the anticipated costs, scope, timing and effects of the Western



26
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


and Central European strategic changes and the pulp and tissue restructuring actions, the impact of foreign government actions, cost inflation and input costs, cost savings and reductions, plans for growth, liquidity, cash flow, cash sources and uses of cash, anticipated currency rates and exchange risk, anticipated financial and operating results, contingencies and anticipated transactions of Kimberly-Clark, including share repurchases, capital spending 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 fluctuations in foreign currency exchange rates, the prices and availability of our raw materials, potential competitive pressures on selling prices for our products, energy costs and retail trade customer actions, 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.
The factors described under Item 1A, "Risk Factors" in this Form 10-K, or in our other SEC filings, among others, could cause our future results to differ from those expressed in any forward-looking statements made by us or on our behalf. Other factors not presently known to us or that we presently consider immaterial could also affect our business operations and financial results.


ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a multinational enterprise, we are exposed to risks such as changes in foreign currency exchange rates, interest rates and commodity prices. A variety of practices are employed to manage these risks, including operating and financing activities and, where deemed appropriate, the use of derivative instruments. Derivative instruments are used only for risk management purposes and not for speculation. All foreign currency derivative instruments are entered into with major financial institutions. Our credit exposure under these arrangements is limited to agreements with a positive fair value at the reporting date. Credit risk with respect to the counterparties is actively monitored but is not considered significant since these transactions are executed with a diversified group of financial institutions.
Presented below is a description of our risks (foreign currency risk and interest rate risk) together with a sensitivity analysis, performed annually, of each of these risks based on selected changes in market rates and prices. These analyses reflect management's view of changes which are reasonably possible to occur over a one-year period. Also included is a description of our commodity price risk.
Foreign Currency Risk
Foreign currency risk is managed by the systematic use of foreign currency forward and swap contracts for a portion of our exposure. The use of these instruments allows the management of transactional exposures to exchange rate fluctuations because the gains or losses incurred on the derivative instruments will offset, in whole or in part, losses or gains on the underlying foreign currency exposure.
Foreign currency contracts and transactional exposures are sensitive to changes in foreign currency exchange rates. An annual test is performed to quantify the effects that possible changes in foreign currency exchange rates would have on annual operating profit based on our foreign currency contracts and transactional exposures at the current year-end. The balance sheet effect is calculated by multiplying each affiliate's net monetary asset or liability position by a 10 percent change in the foreign currency exchange rate versus the U.S. dollar. The results of these sensitivity tests are presented in the following paragraphs.
As of December 31, 2012, a 10 percent unfavorable change in the exchange rate of the U.S. dollar against the prevailing market rates of foreign currencies involving balance sheet transactional exposures would have resulted in a net pre-tax loss of approximately $60. These hypothetical losses on transactional exposures are based on the difference between the December 31, 2012 rates and the assumed rates. In the view of management, the above hypothetical losses resulting from these assumed changes in foreign currency exchange rates are not material to our consolidated financial position, results of operations or cash flows.
Our operations in Venezuela are reported using highly inflationary accounting and their functional currency is the U.S. dollar. Changes in the value of a Venezuelan bolivar versus the U.S. dollar applied to our bolivar-denominated net monetary asset position



27
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


are recorded in income at the time of the change. At December 31, 2012, a 10 percent unfavorable change in the exchange rate would have resulted in a net pre-tax loss of approximately $20. There are no viable options for hedging this exposure.
The translation of the balance sheets of non-U.S. operations from local currencies into U.S. dollars is also sensitive to changes in foreign currency exchange rates. Consequently, an annual test is performed to determine if changes in currency exchange rates would have a significant effect on the translation of the balance sheets of non-U.S. operations into U.S. dollars. These translation gains or losses are recorded as unrealized translation adjustments ("UTA") within stockholders' equity. The hypothetical change in UTA is calculated by multiplying the net assets of these non-U.S. operations by a 10 percent change in the currency exchange rates. The results of this sensitivity test are presented in the following paragraph.
As of December 31, 2012, a 10 percent unfavorable change in the exchange rate of the U.S. dollar against the prevailing market rates of our foreign currency translation exposures would have reduced stockholders' equity by approximately $900. These hypothetical adjustments in UTA are based on the difference between the December 31, 2012 exchange rates and the assumed rates. In the view of management, the above UTA adjustments resulting from these assumed changes in foreign currency exchange rates are not material to our consolidated financial position because they would not affect our cash flow.
Interest Rate Risk
Interest rate risk is managed through the maintenance of a portfolio of variable- and fixed-rate debt composed of short- and long-term instruments. The objective is to maintain a cost-effective mix that management deems appropriate. At December 31, 2012, the debt portfolio was composed of approximately 16 percent variable-rate debt and 84 percent fixed-rate debt.
Two separate tests are performed to determine whether changes in interest rates would have a significant effect on our financial position or future results of operations. Both tests are based on consolidated debt levels at the time of the test. The first test estimates the effect of interest rate changes on fixed-rate debt. Interest rate changes would result in gains or losses in the market value of fixed-rate debt due to differences between the current market interest rates and the rates governing these instruments. With respect to fixed-rate debt outstanding at December 31, 2012, a 10 percent decrease in interest rates would have increased the fair value of fixed-rate debt by about $169. The second test estimates the potential effect on future pre-tax income that would result from increased interest rates applied to our current level of variable-rate debt. With respect to variable-rate debt, a 10 percent increase in interest rates would not have a material effect on the future results of operations or cash flows.
Commodity Price Risk
We are subject to commodity price risk, the most significant of which relates to the price of pulp. Selling prices of tissue products are influenced, in part, by the market price for pulp, which is determined by industry supply and demand. As previously discussed under Item 1A, "Risk Factors," increases in pulp prices could adversely affect earnings if selling prices are not adjusted or if such adjustments significantly trail the increases in pulp prices. Derivative instruments have not been used to manage these risks.
Our energy, manufacturing and transportation costs are affected by various market factors including the availability of supplies of particular forms of energy, energy prices and local and national regulatory decisions. As previously discussed under Item 1A, "Risk Factors," there can be no assurance we will be fully protected against substantial changes in the price or availability of energy sources. In addition, we are subject to price risk for utilities and manufacturing inputs, which are used in our manufacturing operations. Derivative instruments are used in accordance with our risk management policy to hedge a limited portion of the price risk.



28
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
 
 
Year Ended December 31
 
2012
 
2011
 
2010
 
(Millions of dollars, except per share amounts)
Net Sales
$
21,063

 
$
20,846

 
$
19,746

Cost of products sold
14,314

 
14,694

 
13,196

Gross Profit
6,749

 
6,152

 
6,550

Marketing, research and general expenses
4,069

 
3,761

 
3,673

Other (income) and expense, net
(6
)
 
(51
)
 
104

Operating Profit
2,686

 
2,442

 
2,773

Interest income
18

 
18

 
20

Interest expense
(284
)
 
(277
)
 
(243
)
Income Before Income Taxes and Equity Interests
2,420

 
2,183

 
2,550

Provision for income taxes
(768
)
 
(660
)
 
(788
)
Income Before Equity Interests
1,652

 
1,523

 
1,762

Share of net income of equity companies
176

 
161

 
181

Net Income
1,828

 
1,684

 
1,943

Net income attributable to noncontrolling interests
(78
)
 
(93
)
 
(100
)
Net Income Attributable to Kimberly-Clark Corporation
$
1,750

 
$
1,591

 
$
1,843

 
 
 
 
 
 
Per Share Basis
 
 
 
 
 
Net Income Attributable to Kimberly-Clark Corporation
 
 
 
 
 
Basic
$
4.45

 
$
4.02

 
$
4.47

Diluted
$
4.42

 
$
3.99

 
$
4.45

 


















See Notes to Consolidated Financial Statements.



29
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 
Year Ended December 31
 
2012
 
2011
 
2010
 
(Millions of dollars)
Net Income
$
1,828

 
$
1,684

 
$
1,943

Other Comprehensive Income, Net of Tax:
 
 
 
 
 
Unrealized currency translation adjustments
215

 
(249
)
 
334

Employee postretirement benefits
(377
)
 
(134
)
 
55

Other
(16
)
 
(30
)
 
(16
)
Total Other Comprehensive Income, Net of Tax
(178
)
 
(413
)
 
373

Comprehensive Income
1,650

 
1,271

 
2,316

Comprehensive income attributable to noncontrolling interests
(93
)
 
(80
)
 
(106
)
Comprehensive Income Attributable to Kimberly-Clark Corporation
$
1,557

 
$
1,191

 
$
2,210











































See Notes to Consolidated Financial Statements.



30
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
 
December 31
 
2012
 
2011
 
(Millions of dollars)
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
1,106

 
$
764

Accounts receivable, net
2,642

 
2,602

Inventories
2,348

 
2,356

Other current assets
493

 
561

Total Current Assets
6,589

 
6,283

Property, Plant and Equipment, Net
8,095

 
8,049

Investments in Equity Companies
355

 
338

Goodwill
3,337

 
3,340

Other Intangible Assets
246

 
265

Long-Term Note Receivable
395

 
394

Other Assets
856

 
704

 
$
19,873

 
$
19,373

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current Liabilities
 
 
 
Debt payable within one year
$
1,115

 
$
706

Trade accounts payable
2,443

 
2,388

Accrued expenses
2,244

 
2,026

Dividends payable
289

 
277

Total Current Liabilities
6,091

 
5,397

Long-Term Debt
5,070

 
5,426

Noncurrent Employee Benefits
1,992

 
1,460

Other Liabilities
884

 
1,014

Redeemable Preferred and Common Securities of Subsidiaries
549

 
547

Stockholders' Equity
 
 
 
Kimberly-Clark Corporation Stockholders' Equity
 
 
 
Preferred stock—no par value—authorized 20.0 million shares, none issued

 

Common stock—$1.25 par value—authorized 1.2 billion shares;
issued 428.6 million shares at December 31, 2012 and 2011
536

 
536

Additional paid-in capital
481

 
440

Common stock held in treasury, at cost—39.3 million and 32.9 million
shares at December 31, 2012 and 2011
(2,796
)
 
(2,105
)
Retained earnings
8,823

 
8,244

Accumulated other comprehensive income (loss)
(2,059
)
 
(1,866
)
Total Kimberly-Clark Corporation Stockholders' Equity
4,985

 
5,249

Noncontrolling interests
302

 
280

Total Stockholders' Equity
5,287

 
5,529

 
$
19,873

 
$
19,373

See Notes to Consolidated Financial Statements.



31
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
 
Common Stock
Issued
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Shares
 
Amount
 
Shares
 
Amount
 
 
(Millions of dollars, shares in thousands)
Balance at December 31, 2009
478,597

 
$
598

 
$
399

 
61,649

 
$
(4,087
)
 
$
10,329

 
$
(1,833
)
 
$
284

Net income in stockholders' equity

 

 

 

 

 
1,843

 

 
44

Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized translation

 

 

 

 

 

 
326

 
7

Employee postretirement benefits,
net of tax

 

 

 

 

 

 
57

 
(2
)
Other

 

 

 

 

 

 
(16
)
 

Stock-based awards exercised or vested

 

 
(37
)
 
(2,862
)
 
170

 

 

 

Income tax benefits on stock-based compensation

 

 
2

 

 

 

 

 

Shares repurchased

 

 

 
12,954

 
(809
)
 

 

 

Recognition of stock-based compensation

 

 
52

 

 

 

 

 

Dividends declared ($2.64 per share)

 

 

 

 

 
(1,085
)
 

 
(47
)
Other

 

 
9

 

 

 
(1
)
 

 
(1
)
Balance at December 31, 2010
478,597

 
598

 
425

 
71,741

 
(4,726
)
 
11,086

 
(1,466
)
 
285

Net income in stockholders' equity

 

 

 

 

 
1,591

 

 
39

Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized translation

 

 

 

 

 

 
(236
)
 
(13
)
Employee postretirement benefits, net of tax

 

 

 

 

 

 
(133
)
 
(1
)
Other

 

 

 

 

 

 
(31
)
 
1

Stock-based awards exercised or vested

 

 
(47
)
 
(7,924
)
 
490

 

 

 

Income tax benefits on stock-based compensation

 

 
10

 

 

 

 

 

Shares repurchased

 

 

 
19,120

 
(1,247
)
 

 

 

Shares retired
(50,000
)
 
(62
)
 

 
(50,000
)
 
3,378

 
(3,316
)
 

 

Recognition of stock-based compensation

 

 
48

 

 

 

 

 

Dividends declared ($2.80 per share)

 

 

 

 

 
(1,107
)
 

 
(29
)
Other

 

 
4

 

 

 
(10
)
 

 
(2
)
Balance at December 31, 2011
428,597

 
536

 
440

 
32,937

 
(2,105
)
 
8,244

 
(1,866
)
 
280

Net income in stockholders' equity

 

 

 

 

 
1,750

 

 
47

Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized translation

 

 

 

 

 

 
195

 
20

Employee postretirement benefits, net of tax

 

 

 

 

 

 
(372
)
 
(5
)
Other

 

 

 

 

 

 
(16
)
 

Stock-based awards exercised or vested

 

 
(78
)
 
(10,492
)
 
643

 

 

 

Income tax benefits on stock-based compensation

 

 
43

 

 

 

 

 

Shares repurchased

 

 

 
16,877

 
(1,333
)
 

 

 

Recognition of stock-based compensation

 

 
67

 

 

 

 

 

Dividends declared ($2.96 per share)

 

 

 

 

 
(1,163
)
 

 
(38
)
Other

 

 
9

 

 
(1
)
 
(8
)
 

 
(2
)
Balance at December 31, 2012
428,597

 
$
536

 
$
481

 
39,322

 
$
(2,796
)
 
$
8,823

 
$
(2,059
)
 
$
302

See Notes to Consolidated Financial Statements.



32
KIMBERLY-CLARK CORPORATION - 2012 Annual Report


KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENT

 
Year Ended December 31
 
2012
 
2011
 
2010
 
(Millions of dollars)
Operating Activities
 
 
 
 
 
Net income
$
1,828

 
$
1,684

 
$
1,943

Depreciation and amortization
857

 
1,091

 
813

Asset impairments
171

 
58

 

Stock-based compensation
67

 
48

 
52

Deferred income taxes
224

 
274

 
(12
)
Net losses (gains) on asset dispositions
35

 
(6
)
 
26

Equity companies' earnings in excess of dividends paid
(27
)
 
(23
)
 
(48
)
Decrease (increase) in operating working capital
119

 
(262
)
 
24

Postretirement benefits
7

 
(574
)
 
(125
)
Other
7

 
(2
)
 
71

Cash Provided by Operations
3,288

 
2,288

 
2,744

Investing Activities
 
 
 
 
 
Capital spending
(1,093
)
 
(968
)
 
(964
)
Proceeds from maturity of note receivable

 
220

 

Proceeds from sales of investments
23