Kimberly-Clark Reports Fourth Quarter and Full Year 2002 Results in Line with Previous Guidance

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1 Kimberly-Clark Reports Fourth Quarter and Full Year 2002 Results in Line with Previous Guidance Cash Flow for the Year Sets New Records DALLAS, January 27, 2003 Kimberly-Clark Corporation (NYSE: KMB) today reported that sales for the fourth quarter of 2002 were $3.3 billion, essentially flat versus Diluted net income for the fourth quarter was 72 cents per share in 2002 compared with 65 cents per share in the prior year, an increase of nearly 11 percent. Fourth quarter earnings before unusual items were 76 cents per share in 2002, a decline of approximately 7 percent from 82 cents per share in Sales and operating profit in the fourth quarter of 2002 improved for the company s consumer tissue, feminine care and adult care businesses in North America, its global health care business and operations in Australia and Korea. However, lower sales and operating profit in personal care reflect the impact of intense competitive activity in the diaper and training pant categories in North America. As previously announced, weak sales in parts of Latin America and Asia also had an adverse effect on fourth quarter results. During the quarter, cash provided by operations was $549 million, bringing the total for the year to a record $2.4 billion, up about 8 percent compared with Share repurchases in the fourth quarter of 2002 totaled 4.4 million shares, a step up from 2.5 million shares repurchased in each of the first three quarters of the year. Thomas J. Falk, president and chief executive officer of Kimberly-Clark, said, Our 2002 results were below our expectations. We re taking decisive action in 2003 to get our performance back on track, focusing on two key priority areas: aggressively reducing costs and driving volume growth. Specifically, in 2003, we expect to reduce costs by $175 million to $200 million, or 24 to 28 cents per share. Beyond cost cutting, we are determined to drive sales volumes higher by 3 to 5 percent with strong product plans. We ll support new and improved products and defend and grow our market share with appropriate, well-targeted promotional spending. Meanwhile, we are entering 2003 in a strong financial position, having generated record cash from operations last year. We carefully managed capital spending to a level of $871 million in 2002 versus our original plan of $1 billion. This enabled us to contribute $100 million to our U.S. pension plan late in the year and still improve our free cash flow year over year by 67 percent to $941 million, the highest level in K-C s history. Management believes that investors understanding of the performance of the company is enhanced by disclosing operating profit, earnings and diluted earnings per share excluding certain items deemed to be unusual in nature, as more fully described in the following paragraphs. Unusual items in the fourth quarter of 2002 consisted of pretax charges totaling nearly $32 million that reduced net income by approximately 4 cents per share. Charges of $21 million related to the settlement of securities and shareholder derivative litigation involving Safeskin Corporation. As previously disclosed, the litigation predated the company s February 2000 acquisition of Safeskin. The remainder of the charges was primarily for costs associated with previously announced plans to streamline manufacturing and administrative operations in Latin America and Europe. In the fourth quarter of 2001, unusual items reduced operating profit by $145 million and net income by 17 cents per share. More than two-thirds of the total related to the streamlining of manufacturing operations in Latin America, including the shutdown of four small, older plants, as well as the closure of a Technical Paper mill in the U.S. and the write off of excess manufacturing equipment and a one-time payment under a contract settlement agreement in North America. The balance was made up of pretax charges of approximately $43 million, equivalent to 5 cents per share, pursuant to arbitration rulings that resolved disputes related to the closure of the company s Mobile, Ala., pulp mill in 1999 and the supply of energy to the company s Mobile tissue mill through December Review of fourth quarter sales Worldwide sales volumes were 2 percent above the prior year while net selling prices declined approximately 2 percent, primarily due to competitive promotional activity. Consumer tissue sales improved 3 percent compared with the fourth quarter of 2001, driven by higher sales in North America

2 and Europe. Sales volumes rose 5 percent and currency effects added 2 percent. Net selling prices were nearly 4 percent lower due to increased promotional spending. In North America, sales volumes of consumer tissue products grew at a double-digit rate, highlighted by strong gains for Cottonelle and Scott bathroom tissue and Scott towels. Net selling prices were down 6 percent, partially offsetting the volume growth. In Europe, sales increased about 6 percent, but were 3 percent below the prior year before currency effects. Sales volumes declined slightly compared with a solid increase in the fourth quarter of 2001 and prices were nearly 3 percent lower. Consumer tissue sales in Latin America and Asia were essentially flat. In the latter geography, continued double-digit growth in Australia and Korea was offset by a sharp decline in sales in the weak Taiwan market. Sales of personal care products decreased more than 6 percent versus the fourth quarter of 2001 and were down about 4 percent before currency effects. Global sales volumes were approximately 2 percent lower and net selling prices declined about 1 percent. Although pricing in North America was well below prior year levels, the impact was tempered by price increases implemented in Latin America to partially offset currency devaluations. In North America, sales volumes of personal care products rose about 1 percent, highlighted by a double-digit gain for Depend and Poise adult incontinence care products, while shipments of Huggies diapers and Pull-Ups training pants were somewhat lower. Price reductions and promotional activity primarily to defend market share in diapers and training pants resulted in a 7 percent falloff in net selling prices. Approximately 40 percent of this decline was attributable to incremental costs associated with package count changes made in the fourth quarter of Personal care sales in Europe increased approximately 5 percent in the quarter, but were off about 5 percent before currency effects on lower sales volumes due to competition in the diaper category. In Latin America, sales of personal care products dropped significantly, mainly because of the continuing recession in Argentina and economic turmoil in Venezuela and Colombia. Sales for the quarter were down slightly in Asia, as continued double-digit growth in Korea was offset by weakness in the Philippines and Taiwan. Sales of business-to-business products increased approximately 5 percent in the fourth quarter and were nearly 3 percent higher before currency effects. Sales volumes rose about 4 percent, driven by gains of 8 percent for Health Care and 6 percent for K-C Professional s away-from-home products in North America. Selling prices declined approximately 1 percent versus the fourth quarter of Other fourth quarter operating results Operating profit in the fourth quarter of 2002 was $529.8 million, about 9 percent greater than the prior year. Before unusual items, however, operating profit declined 11 percent to $561.5 million in the fourth quarter of 2002 compared with $632.1 million in Higher sales volumes along with productivity gains and other cost reductions, primarily in the company s consumer tissue, feminine care and adult care businesses in North America and in K-C Professional and Health Care globally, contributed positively. However, the increase in promotional spending had a more significant effect, depressing gross profit and operating profit. In addition, production curtailments and a rise in wastepaper costs resulted in higher manufacturing costs for certain of the company s operations in the fourth quarter. Although the elimination of noncash goodwill amortization expense benefited results by 4 cents per share, it was partially offset by an increase in noncash pension expense of 2 cents per share. Other income and expense, before unusual items, was a net expense of $21.4 million in the fourth quarter of 2002 compared with $11.1 million in Foreign currency transaction losses comprised the majority of the net expense in In the prior year, a charge of approximately $33 million for sales tax credits in Latin America that were determined to have a realizable value lower than originally estimated was partially offset by foreign currency transaction gains. Kimberly-Clark s share of net income of equity companies in the fourth quarter decreased from $32.1 million in 2001 to $31.3 million in 2002 due to lower net income at Kimberly-Clark de Mexico, S.A. de C.V. (KCM), mostly offset by higher net income at the company s equity affiliates in Argentina and Brazil. At KCM, although sales volumes rose more than 8 percent, higher raw material costs stemming from the depreciation of the Mexican peso pressured margins, causing operating profit to decline. Currency effects and a higher effective tax rate due to changes in Mexican tax law also reduced KCM s net income in comparison with the fourth quarter of Full year results For the full year of 2002, sales of $13.6 billion were up 2.1 percent from $13.3 billion in the prior year. Excluding currency effects, sales were about 3 percent higher. Operating profit increased more than 5 percent to $2,463.8 million in 2002 versus $2,338.2 million in Before unusual items, year-to-date operating profit increased slightly to $2,557.6 million from $2,551.1 million in Diluted earnings per share for 2002 were $3.22 versus $3.02 in 2001, a gain of about 7 percent. Earnings per share before unusual items were $3.36 in 2002 compared with $3.27 in 2001, an improvement of approximately 3 percent. At December 31, 2002, net debt and preferred securities totaled $3.9 billion, compared with $3.8 billion at the end of For the year, the company repurchased 11.9 million shares of its common stock at a cost of approximately $675 million.

3 Outlook Commenting on the outlook, Mr. Falk said, In 2003, we are committed to offsetting the challenges of continued competition in diapers and training pants, as well as higher pension expense, through a combination of volume growth and cost reduction. The increase in pension expense alone is equivalent to approximately 20 cents per share, or 6 percentage points of earnings growth. As we announced in December, we expect earnings per share before unusual items in 2003 will be, at a minimum, equal to Given our recent results and the current competitive environment, we expect first quarter earnings per share before unusual items to be similar to or slightly better than the fourth quarter of Current external estimates for both the quarter and the year are generally in line with this guidance. We will also focus on further strengthening our cash flow in 2003, which will support continued share repurchases and a healthy increase in our dividend. Conference call A conference call to discuss this news release and other matters of interest to investors and analysts will be held at 9 a.m. (CST) today. The conference call will be simultaneously broadcast over the World Wide Web. Stockholders and others are invited to listen to the live broadcast or a playback, which can be accessed by following the instructions set out in the Investors section of the company s Web site ( About Kimberly-Clark Kimberly-Clark Corporation is a leading global consumer products company. Its tissue, personal care and health care products are manufactured in 42 countries and sold in more than 150. Kimberly-Clark is home to some of the world s most trusted and recognized brands, including Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend. Nearly one-quarter of the world s population, or 1.3 billion people, use Kimberly-Clark products each year. Kimberly-Clark has been among Fortune magazine s Most Admired corporations since 1983 and was named to its 2003 list of 100 Best Companies to Work For. For more information about Kimberly-Clark s well-known brands, visit the Kimberly-Clark Web site at Certain matters contained in this news release concerning the business outlook, including new product introductions, cost savings and acquisitions, anticipated financial and operating results, strategies, contingencies and transactions of the company constitute forward-looking statements and are based upon management s expectations and beliefs concerning future events impacting the company. There can be no assurance that these future events will occur as anticipated or that the company s results will be as estimated. For a description of certain factors that could cause the company s future results to differ materially from those expressed in any such forward-looking statements, see the section of Part I, Item 1 of the company s Annual Report on Form 10-K for the year ended December 31, 2001 entitled Factors That May Affect Future Results. Kimberly-Clark Web site:

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