KMB_2011_3Q10Q/A
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q/A
(Amendment No. 1)
 
(Mark One)
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011
OR
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________                     
Commission file number 1-225
 
KIMBERLY-CLARK CORPORATION
(Exact name of registrant as specified in its charter)
 
Delaware
 
39-0394230
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
P. O. Box 619100
Dallas, Texas
75261-9100
(Address of principal executive offices)
(Zip Code)
(972) 281-1200
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
  
Accelerated filer
¨
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
  
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).     Yes  ¨    No  x
As of October 31, 2011, there were 394,097,360 shares of the Corporation’s common stock outstanding.
 

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Explanatory Note

The sole purpose of this Amendment No. 1 on Form 10-Q/A to Kimberly-Clark Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, filed with the Securities and Exchange Commission on November 4, 2011 (the “Form 10-Q”), is to change, on the certifications filed as Exhibits (32)a and (32)b, the date reference contained in section (1) of the certifications from August 5, 2011 to November 4, 2011.

No other changes have been made to the Form 10-Q. This Form 10-Q/A speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the Form 10-Q.


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

 
 
Three Months Ended
September 30
 
Nine Months Ended
September 30
(Millions of dollars, except per share amounts)
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
 
Net Sales
 
$
5,382

 
$
4,979

 
$
15,670

 
$
14,671

Cost of products sold
 
3,794

 
3,365

 
11,062

 
9,766

Gross Profit
 
1,588

 
1,614

 
4,608

 
4,905

Marketing, research and general expenses
 
943

 
909

 
2,804

 
2,719

Other (income) and expense, net
 
(17
)
 
7

 
(27
)
 
112

Operating Profit
 
662

 
698

 
1,831

 
2,074

Interest income
 
5

 
5

 
13

 
16

Interest expense
 
(70
)
 
(59
)
 
(205
)
 
(180
)
Income Before Income Taxes and Equity Interests
 
597

 
644

 
1,639

 
1,910

Provision for income taxes
 
(174
)
 
(195
)
 
(499
)
 
(617
)
Income Before Equity Interests
 
423

 
449

 
1,140

 
1,293

Share of net income of equity companies
 
35

 
40

 
122

 
130

Net Income
 
458

 
489

 
1,262

 
1,423

Net income attributable to noncontrolling interests
 
(26
)
 
(20
)
 
(72
)
 
(72
)
Net Income Attributable to Kimberly-Clark Corporation
 
$
432

 
$
469

 
$
1,190

 
$
1,351

 
 
 
 
 
 
 
 
 
Per Share Basis:
 
 
 
 
 
 
 
 
Net Income Attributable to Kimberly-Clark Corporation
 
 
 
 
 
 
 
 
Basic
 
$
1.10

 
$
1.14

 
$
3.00

 
$
3.27

Diluted
 
1.09

 
1.14

 
2.98

 
3.25

Cash Dividends Declared
 
$
.70

 
$
.66

 
$
2.10

 
$
1.98

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
 
(Millions of dollars)
 
September 30
2011
 
December 31
2010
 
 
 
 
 
ASSETS
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
$
1,232

 
$
876

Accounts receivable, net
 
2,434

 
2,472

Note receivable
 

 
218

Inventories
 
2,421

 
2,373

Other current assets
 
452

 
389

Total Current Assets
 
6,539

 
6,328

Property
 
18,193

 
17,877

Less accumulated depreciation
 
10,146

 
9,521

Net Property
 
8,047

 
8,356

Investments in Equity Companies
 
372

 
374

Goodwill
 
3,321

 
3,403

Long-Term Notes Receivable
 
394

 
393

Other Assets
 
957

 
1,010

 
 
$
19,630

 
$
19,864

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current Liabilities
 
 
 
 
Debt payable within one year
 
$
758

 
$
344

Redeemable preferred securities of subsidiary
 
506

 
506

Trade accounts payable
 
2,262

 
2,206

Accrued expenses
 
1,978

 
1,909

Other current liabilities
 
312

 
373

Total Current Liabilities
 
5,816

 
5,338

Long-Term Debt
 
5,422

 
5,120

Noncurrent Employee Benefits
 
1,394

 
1,810

Long-Term Income Taxes Payable
 
254

 
260

Deferred Income Taxes
 
493

 
369

Other Liabilities
 
247

 
224

Redeemable Preferred and Common Securities of Subsidiaries
 
541

 
541

Stockholders’ Equity
 
 
 
 
Kimberly-Clark Corporation
 
5,179

 
5,917

Noncontrolling interests
 
284

 
285

Total Stockholders’ Equity
 
5,463

 
6,202

 
 
$
19,630

 
$
19,864

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
(Unaudited)
 
 
 
Nine Months Ended
September 30
(Millions of dollars)
 
2011
 
2010
 
 
 
 
 
Operating Activities
 
 
 
 
Net income
 
$
1,262

 
$
1,423

Depreciation and amortization
 
821

 
607

Stock-based compensation
 
37

 
41

Increase in operating working capital
 
(155
)
 
(175
)
Deferred income taxes
 
200

 
20

Net losses on asset dispositions
 
1

 
19

Equity companies’ earnings in excess of dividends paid
 
(46
)
 
(63
)
Postretirement benefits
 
(331
)
 
(145
)
Other
 
(18
)
 
69

Cash Provided by Operations
 
1,771

 
1,796

Investing Activities
 
 
 
 
Capital spending
 
(656
)
 
(611
)
Proceeds from maturity of note receivable
 
220

 

Proceeds from sales of investments
 
21

 
29

Proceeds from dispositions of property
 
23

 
4

Investments in time deposits
 
(122
)
 
(114
)
Maturities of time deposits
 
115

 
168

Other
 
4

 
12

Cash Used for Investing
 
(395
)
 
(512
)
Financing Activities
 
 
 
 
Cash dividends paid
 
(824
)
 
(796
)
Net increase in short-term debt
 
14

 
146

Proceeds from issuance of long-term debt
 
799

 
281

Repayments of long-term debt
 
(20
)
 
(470
)
Cash paid on redeemable preferred securities of subsidiary
 
(40
)
 
(40
)
Proceeds from exercise of stock options
 
294

 
117

Acquisitions of common stock for the treasury
 
(1,246
)
 
(695
)
Other
 
(8
)
 
(49
)
Cash Used for Financing
 
(1,031
)
 
(1,506
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
 
11

 
(43
)
Increase (decrease) in Cash and Cash Equivalents
 
356

 
(265
)
Cash and Cash Equivalents, beginning of year
 
876

 
798

Cash and Cash Equivalents, end of period
 
$
1,232

 
$
533

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
 
 
 
Three Months Ended
September 30
 
Nine Months Ended
September 30
(Millions of dollars)
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
 
Net Income
 
$
458

 
$
489

 
$
1,262

 
$
1,423

Other Comprehensive Income, Net of Tax:
 
 
 
 
 
 
 
 
Unrealized currency translation adjustments
 
(664
)
 
615

 
(224
)
 
264

Employee postretirement benefits
 
45

 
(6
)
 
45

 
47

Other
 
(8
)
 
(44
)
 
(36
)
 
(37
)
Total Other Comprehensive Income, Net of Tax
 
(627
)
 
565

 
(215
)
 
274

Comprehensive Income
 
(169
)
 
1,054

 
1,047

 
1,697

Comprehensive income attributable to noncontrolling interests
 
2

 
36

 
58

 
79

Comprehensive Income Attributable to Kimberly-Clark Corporation
 
$
(171
)
 
$
1,018

 
$
989

 
$
1,618

See Notes to Consolidated Financial Statements.

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KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Accounting Policies
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included.
For further information, refer to the Consolidated Financial Statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2010. The terms “Corporation,” “Kimberly-Clark,” “K-C,” “we,” “our” and “us” refer to Kimberly-Clark Corporation and its consolidated subsidiaries.
Note 2. Fair Value Measurements
The following fair value information is based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels in the hierarchy used to measure fair value are:
Level 1 – Unadjusted quoted prices in active markets accessible at the reporting date for identical assets and liabilities.
Level 2 – Quoted prices for similar assets or liabilities in active markets. Quoted prices for identical or similar assets and liabilities in markets that are not considered active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 – Prices or valuations that require inputs that are significant to the valuation and are unobservable.
During the three months ended September 30, 2011 and 2010, there were no significant transfers among level 1, 2, or 3 fair value determinations.
Set forth below are the assets and liabilities that are measured on a recurring basis at fair value and the inputs used to develop those fair value measurements.

 
September 30
2011
 
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
(Millions of dollars)
Assets
 
 
 
 
 
 
 
Company-owned life insurance (“COLI”)
$
43

 
$

 
$
43

 
$

Available-for-sale securities
14

 
14

 

 

Derivatives
68

 

 
68

 

Total
$
125

 
$
14

 
$
111

 
$

Liabilities
 
 
 
 
 
 
 
Derivatives
$
163

 
$

 
$
163

 
$




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December 31
2010
 
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
 
 
(Millions of dollars)
 
 
Assets
 
 
 
 
 
 
 
Company-owned life insurance (“COLI”)
$
46

 
$

 
$
46

 
$

Available-for-sale securities
15

 
15

 

 

Derivatives
70

 

 
70

 

Total
$
131

 
$
15

 
$
116

 
$

Liabilities
 
 
 
 
 
 
 
Derivatives
$
48

 
$

 
$
48

 
$

The COLI policies are a source of funding primarily for our nonqualified employee benefits and are included in other assets. Available-for-sale securities are included in other assets. The derivative assets and liabilities are included in other current assets, other assets, accrued expenses and other liabilities, as appropriate.
Level 1 Fair Values - The fair values of certain available-for-sale securities are based on quoted market prices in active markets for identical assets. Unrealized losses on these securities aggregating $4 million at September 30, 2011 and $2 million at December 31, 2010 are recorded in Accumulated Other Comprehensive Income ("AOCI") until realized. The unrealized losses have not been recognized in earnings because we have both the intent and ability to hold the securities for a period of time sufficient to allow for an anticipated recovery of fair value to the cost of these securities.
Level 2 Fair Values - The fair value of the COLI policies is derived from investments in a mix of money market, fixed income and equity funds managed by unrelated fund managers. The fair values of derivatives used to manage interest rate risk and commodity price risk are based on LIBOR rates and interest rate swap curves and NYMEX price quotations, respectively. The fair value of hedging instruments used to manage foreign currency risk is based on quotations of spot currency rates and forward points, which are converted into implied forward currency rates. Additional information on our use of derivative instruments is contained in Note 9.
Fair Value Disclosures
The following table includes the fair value of our financial instruments for which disclosure of fair value is required:
 
 
Carrying
Amount
 
Estimated
Fair  Value
 
Carrying
Amount
 
Estimated
Fair  Value
 
September 30, 2011
 
December 31, 2010
 
(Millions of dollars)
Assets
 
 
 
 
 
 
 
Cash and cash equivalents(a)
$
1,232

 
$
1,232

 
$
876

 
$
876

Time deposits(b)
85

 
85

 
80

 
80

Notes receivable(c)
394

 
371

 
611

 
597

Liabilities and redeemable preferred and common securities of subsidiaries
 
 
 
 
 
 
 
Short-term debt(d)
88

 
88

 
79

 
79

Monetization loan(c)
397

 
385

 
397

 
397

Long-term debt(e)
5,695

 
6,666

 
4,988

 
5,556

Redeemable preferred and common securities of subsidiaries(f)
1,047

 
1,117

 
1,047

 
1,127


(a) 
Cash equivalents are comprised of certificates of deposit, time deposits and other interest-bearing investments with original maturity dates of 90 days or less, all of which are recorded at cost, which approximates fair value.

(b) 
Time deposits, included in Other current assets on the Condensed Consolidated Balance Sheet, are comprised of deposits with original maturities of more than 90 days but less than one year, all of which are recorded at cost, which approximates fair value.

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(c) 
Notes receivable represent held-to-maturity securities, which arose from the sale of nonstrategic timberlands and related assets. The notes are backed by irrevocable standby letters of credit issued by money center banks. We collected in cash the $220 million face value of the note receivable that matured on July 7, 2011. The remaining note receivable, with a face value of $397 million, matures in September 2014. At September 30, 2011 a consolidated variable interest entity (“VIE”) has an outstanding long-term monetization loan secured by the remaining note held by this VIE. As of September 30, 2011, the difference between the carrying amount of the remaining note and its fair value represents an unrealized loss position for which an other-than-temporary impairment has not been recognized in earnings because we have both the intent and ability to hold the note for a period of time sufficient to allow for an anticipated recovery of fair value to the carrying amount of the note. Neither the note nor the monetization loan is traded in active markets. Accordingly, their fair values were calculated using a floating rate pricing model that compared the stated spread to the fair value spread to determine the price at which each of the financial instruments should trade. The model used the following inputs to calculate fair values: face value, current LIBOR rate, fair value credit spread, stated spread, maturity date and interest payment dates.

(d) 
Short-term debt is recorded at cost, which approximates fair value.

(e) 
Long-term debt excludes the monetization loan and includes the portion payable within the next twelve months ($670 million at September 30, 2011 and $265 million at December 31, 2010). Fair values were estimated based on quoted prices for financial instruments for which all significant inputs were observable, either directly or indirectly.

(f) 
The redeemable preferred securities are not traded in active markets. Accordingly, their fair values were calculated using a pricing model that compares the stated spread to the fair value spread to determine the price at which each of the financial instruments should trade. The model used the following inputs to calculate fair values: face value, current benchmark rate, fair value spread, stated spread, maturity date and interest payment dates. We determined the fair value and carrying amount of the redeemable common securities were $35 million at September 30, 2011 and December 31, 2010 based on various inputs, including an independent third-party appraisal, adjusted for current market conditions.
Note 3. Pulp and Tissue Restructuring
On January 21, 2011, we initiated a pulp and tissue restructuring plan in order to exit our remaining integrated pulp manufacturing operations and improve the underlying profitability and return on invested capital of our consumer tissue and K-C Professional businesses. The restructuring involves the streamlining, sale or closure of 5 to 6 of our manufacturing facilities around the world. In conjunction with these actions, we have begun to exit certain non-strategic products, primarily non-branded offerings, and transfer some production to lower-cost facilities in order to improve overall profitability and returns. Facilities impacted by the restructuring include our pulp and tissue facility in Everett, Washington and the two facilities in Australia that manufacture pulp and tissue.
The restructuring plan commenced in the first quarter of 2011 and is expected to be completed by December 31, 2012. The restructuring is expected to result in cumulative charges of approximately $400 million to $600 million before tax ($280 million to $420 million after tax) over that period. We anticipate that the charges will fall into the following categories and approximate dollar ranges: workforce reduction costs ($50 million to $100 million); incremental depreciation ($300 million to $400 million); and other associated costs ($50 million to $100 million). Cash costs related to the streamlining of operations, sale or closure, relocation of equipment, severance and other expenses are expected to account for approximately 25 percent to 50 percent of the charges. Noncash charges will consist primarily of incremental depreciation.
As a result of the restructuring, we expect that by 2013 annual net sales will be reduced by $250 million to $300 million and operating profit will increase by at least $75 million. Most of the restructuring will impact the consumer tissue business segment.

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The following charges were incurred in connection with the restructuring:
 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2011
 
September 30, 2011
 
(Millions of dollars)
Incremental depreciation
$
76

 
$
192

Charges for workforce reductions
11

 
54

Asset write-offs
5

 
13

Other exit costs
3

 
3

Cost of products sold
95

 
262

Charges for workforce reductions included in Marketing, research and general expenses

 
5

Provision for income taxes
(29
)
 
(85
)
Net charges
$
66

 
$
182

See Note 10 for additional information on the pulp and tissue restructuring charges by segment.
Pretax charges for the pulp and tissue restructuring relate to activities in the following geographic areas:
 
 
Three Months Ended September 30, 2011
 
North
America
 
Australia
 
Other
 
Total
 
(Millions of dollars)
Incremental depreciation
$
53

 
$
19

 
$
4

 
$
76

Charges for workforce reductions
10

 

 
1

 
11

Asset write-offs
2

 
3

 

 
5

Other exit costs
1

 
2

 

 
3

Total charges
$
66

 
$
24

 
$
5

 
$
95

 
 
Nine Months Ended September 30, 2011
 
North
America
 
Australia
 
Other
 
Total
 
(Millions of dollars)
Incremental depreciation
$
123

 
$
59

 
$
10

 
$
192

Charges for workforce reductions
10

 
46

 
3

 
59

Asset write-offs
8

 
5

 

 
13

Other exit costs
1

 
2

 

 
3

Total charges
$
142

 
$
112

 
$
13

 
$
267

The following summarizes the cash charges recorded and reconciles these charges to accrued expenses:
 
 
 
 
Millions of dollars
Accrued expenses - January 1, 2011
$

Charges for workforce reductions and other exit costs
62

Cash payments
(34
)
Currency and other
15

Accrued expenses - September 30, 2011
$
43


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Note 4. Highly Inflationary Accounting for Venezuelan Operations
The cumulative inflation in Venezuela for the three years ended December 31, 2009 was more than 100 percent, based on the Consumer Price Index/National Consumer Price Index. As a result, effective January 1, 2010, our Venezuelan subsidiary (“K-C Venezuela”) began accounting for its operations as highly inflationary, as required by GAAP. Under highly inflationary accounting, K-C Venezuela’s functional currency became the U.S. dollar, and its income statement and balance sheet are measured into U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on bolivar-denominated monetary assets and liabilities is reflected in earnings in other (income) and expense, net.
As a result of the adoption of highly inflationary accounting, we recorded an after-tax charge of $96 million in first quarter 2010 to remeasure K-C Venezuela’s bolivar-denominated net monetary asset position into U.S. dollars at an exchange rate of approximately 6 bolivars per U.S. dollar. In the Condensed Consolidated Cash Flow Statement, this non-cash charge was included in Other in Cash Provided by Operations. This charge was recorded in the following Consolidated Income Statement line items:
 
 
Millions of dollars
Cost of products sold
$
19

Other (income) and expense, net
79

Provision for income taxes
(2
)
Net charge
$
96

For the first quarter 2010, we determined that, under highly inflationary accounting, the unregulated parallel market exchange rate was the appropriate exchange rate to measure K-C Venezuela’s bolivar-denominated transactions into U.S. dollars as this was the rate at which K-C Venezuela had substantially converted the bolivars it generated from its operations into U.S. dollars to pay for its significant imports of U.S. dollar-denominated finished goods, raw materials and services to support its operations.
On May 18, 2010, the Venezuelan government enacted reforms to its currency exchange regulations to close the parallel market. On June 9, 2010, the Central Bank of Venezuela began a regulated currency exchange system (the “central bank system”) that replaced the previous unregulated parallel market. As a result of the currency exchange regulations imposed on May 18, 2010, we determined that the central bank system rate of 5.4 bolivars per U.S. dollar was the appropriate exchange rate to measure K‑C Venezuela’s bolivar-denominated transactions into U.S. dollars during the period May 18, 2010 through September 30, 2011.
In July 2011, K-C Venezuela paid a dividend related to its 2008 dividend remittance request that was approved in June 2011 by the Venezuelan government at an exchange rate of 4.3 bolivars per U.S. dollar. This dividend represented less than 5 percent of K-C Venezuela’s bolivar-denominated net assets, which totaled approximately $130 million at September 30, 2011. We believe that these bolivar-denominated net assets, primarily cash, should continue to be measured at the central bank system rate of 5.4 bolivars per U.S. dollar given the uncertainty of accessing more significant future dividend remittances or other mechanisms of repatriating the cash at the rate of 4.3 bolivars per U.S. dollar.
For the full year 2010 and for the nine months ended September 30, 2011, K-C Venezuela represented 1 percent of Consolidated Net Sales. At September 30, 2011, our net investment in K-C Venezuela was approximately $220 million, valued at 5.4 bolivars per U.S. dollar.

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Note 5. Inventories
The following schedule presents a summary of inventories by major class:
 
 
 
September 30, 2011
 
December 31, 2010
(Millions of dollars)
 
LIFO
 
Non-
LIFO
 
Total
 
LIFO
 
Non-
LIFO
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
At the lower of cost, determined on the FIFO or weighted-average cost methods, or market:
 
 
 
 
 
 
 
 
 
 
 
 
Raw materials
 
$
175

 
$
335

 
$
510

 
$
154

 
$
350

 
$
504

Work in process
 
242

 
142

 
384

 
195

 
144

 
339

Finished goods
 
769

 
769

 
1,538

 
715

 
763

 
1,478

Supplies and other
 

 
302

 
302

 

 
298

 
298

 
 
1,186

 
1,548

 
2,734

 
1,064

 
1,555

 
2,619

Excess of FIFO or weighted-average cost over LIFO
cost
 
(313
)
 

 
(313
)
 
(246
)
 

 
(246
)
Total
 
$
873

 
$
1,548

 
$
2,421

 
$
818

 
$
1,555

 
$
2,373

We use the LIFO method of valuing inventory for financial reporting purposes for most U.S. inventories. Interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and costs at that time.
Note 6. Employee Postretirement Benefits
The table below presents benefit cost information for defined benefit plans and other postretirement benefit plans:
 
 
 
Defined
Benefit Plans
 
Other Postretirement
Benefit Plans
 
 
Three Months Ended September 30
(Millions of dollars)
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
 
Service cost
 
$
14

 
$
14

 
$
3

 
$
3

Interest cost
 
77

 
77

 
10

 
11

Expected return on plan assets
 
(87
)
 
(84
)
 

 

Recognized net actuarial loss
 
23

 
25

 

 

Other
 
4

 
1

 

 
1

Net periodic benefit cost
 
$
31

 
$
33

 
$
13

 
$
15


 
 
Defined
Benefit Plans
 
Other Postretirement
Benefit Plans
 
 
Nine Months Ended September 30
(Millions of dollars)
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
 
Service cost
 
$
42

 
$
41

 
$
10

 
$
10

Interest cost
 
231

 
231

 
32

 
32

Expected return on plan assets
 
(260
)
 
(251
)
 

 

Recognized net actuarial loss
 
70

 
74

 

 

Other
 
6

 
5

 
2

 
3

Net periodic benefit cost
 
$
89

 
$
100

 
$
44

 
$
45


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Table of Contents


We made cash contributions to our pension trusts as follows:
 
 
Nine Months Ended September 30
 
 
2011
 
2010
 
 
(Millions of dollars)
First Quarter
 
$
265

 
$
176

Second Quarter
 
150

 
52

Third Quarter
 
1

 
2

Total
 
$
416

 
$
230


We plan to accelerate additional pension contributions into 2011. As a result, we plan to contribute an aggregate of $680 to $760 million in 2011 (increased from our prior estimate of $420 to $500 million).
Various derivative instruments are utilized in the management of K-C’s defined benefit plan assets. These derivative instruments are used to manage risk or achieve a target asset allocation. For the U.S. pension plan, equity volatility is managed by entering into exchange-traded puts and over-the-counter calls to create equity collars with a zero net premium at initiation. The equity collar strategy is designed to reduce potential equity losses and limit gains, resulting in lower equity volatility for the plan. As of September 30, 2011, equity collars are in place on approximately 45 percent of the plan’s $1.3 billion equity allocation. In addition to the equity collars, as of September 30, 2011, long-dated Treasury futures contracts to maintain a target asset allocation are in place with a notional value of about $580 million.
Note 7. Earnings Per Share
There are no adjustments required to be made to net income for purposes of computing basic and diluted EPS. The average number of common shares outstanding is reconciled to those used in the basic and diluted EPS computations as follows:
 
 
 
Average Common Shares Outstanding
 
 
Three Months Ended
September 30
 
Nine Months Ended
September 30
(Millions of shares)
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
 
Average shares outstanding
 
392.1

 
409.0

 
395.7

 
412.6

Participating securities
 
.1

 
.9

 
.4

 
1.1

Basic
 
392.2

 
409.9

 
396.1

 
413.7

Dilutive effect of stock options
 
1.6

 
1.5

 
1.5

 
1.1

Dilutive effect of restricted share and restricted share unit awards
 
1.4

 
1.2

 
1.2

 
1.1

Diluted
 
395.2

 
412.6

 
398.8

 
415.9

Options outstanding during the three and nine month periods ended September 30, 2011 to purchase 3.2 million and 4.8 million shares of common stock, respectively, were not included in the computation of diluted EPS mainly because the exercise prices of the options were greater than the average market price of the common shares during the periods.
Options outstanding during the three and nine month periods ended September 30, 2010 to purchase 6.1 million and 13.7 million shares of common stock, respectively, were not included in the computation of diluted EPS mainly because the exercise prices of the options were greater than the average market price of the common shares during the periods.
The number of common shares outstanding as of September 30, 2011 and 2010 was 393.3 million and 408.0 million, respectively.

14

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Note 8. Stockholders’ Equity
Set forth below are reconciliations for the nine months ended September 30, 2011 and 2010 of the carrying amount of total stockholders’ equity from the beginning of the period to the end of the period. In addition, each of the reconciliations displays the amount of net income allocable to redeemable preferred securities of subsidiaries.

 
 
 
 
Stockholders’  Equity
Attributable to
 
 
(Millions of dollars)
 
Comprehensive
Income
 
The
Corporation
 
Noncontrolling
Interests
 
Redeemable
Securities
 of
Subsidiaries
 
 
 
 
 
 
 
 
 
Balance at December 31, 2010
 
 
 
$
5,917

 
$
285

 
$
1,047

Comprehensive Income:
 
 
 
 
 
 
 
 
Net income
 
$
1,262

 
1,190

 
30

 
42

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Unrealized translation
 
(224
)
 
(209
)
 
(15
)
 

Employee postretirement benefits
 
45

 
44

 
1

 

Other
 
(36
)
 
(36
)
 

 

Total Comprehensive Income
 
$
1,047

 
 
 
 
 
 
Stock-based awards exercised or vested
 
 
 
306

 

 

Income tax benefits on stock-based compensation
 
 
 
7

 

 

Shares repurchased
 
 
 
(1,246
)
 

 

Recognition of stock-based compensation
 
 
 
37

 

 

Dividends declared
 
 
 
(830
)
 
(17
)
 
(1
)
Other
 
 
 
(1
)
 
1

 
(1
)
Return on redeemable preferred securities and noncontrolling
interests
 
 
 

 
(1
)
 
(40
)
Balance at September 30, 2011
 
 
 
$
5,179

 
$
284

 
$
1,047

The net unrealized currency translation adjustments for the nine months ended September 30, 2011 are primarily due to a strengthening of the U.S. dollar against most foreign currencies, partially offset by a weakening of the U.S. dollar against the Euro.
In the nine months ended September 30, 2011, we repurchased 19 million shares for a total cost of $1.24 billion. We do not expect to repurchase any additional shares in the fourth quarter of 2011.
 

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Table of Contents

 
 
 
 
Stockholders’ Equity
Attributable to
 
 
(Millions of dollars)
 
Comprehensive
Income
 
The
Corporation
 
Noncontrolling
Interests
 
Redeemable
Securities
of
Subsidiaries
 
 
 
 
 
 
 
 
 
Balance at December 31, 2009
 
 
 
$
5,406

 
$
284

 
$
1,052

Comprehensive Income:
 
 
 
 
 
 
 
 
Net income
 
$
1,423

 
1,351

 
30

 
42

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Unrealized translation
 
264

 
257

 
6

 
1

Employee postretirement benefits
 
47

 
47

 

 

Other
 
(37
)
 
(37
)
 

 

Total Comprehensive Income
 
$
1,697

 
 
 
 
 
 
Stock-based awards exercised or vested
 
 
 
115

 

 

Income tax benefits on stock-based compensation
 
 
 
1

 

 

Shares repurchased
 
 
 
(706
)
 

 

Recognition of stock-based compensation
 
 
 
41

 

 

Dividends declared
 
 
 
(816
)
 
(47
)
 
(1
)
Other
 
 
 
1

 
1

 
(2
)
Return on redeemable preferred securities and noncontrolling
interests
 
 
 

 

 
(40
)
Balance at September 30, 2010
 
 
 
$
5,660

 
$
274

 
$
1,052

Net unrealized currency gains or losses resulting from the translation of assets and liabilities of non-U.S. subsidiaries, except those in highly inflationary economies, are accumulated in a separate section of stockholders’ equity. For these operations, changes in exchange rates generally do not affect cash flows; therefore, unrealized translation adjustments are recorded in stockholders’ equity rather than income. Upon the sale or substantially complete liquidation of any of these subsidiaries, the applicable unrealized translation adjustment would be removed from stockholders’ equity and reported as part of the gain or loss on the sale or liquidation.
Also included in stockholders’ equity are the effects of foreign exchange rate changes on intercompany balances of a long-term investment nature and transactions designated as hedges of net foreign investments.
Note 9. Objectives and Strategies for Using Derivatives
As a multinational enterprise, we are exposed to financial risks, such as changes in foreign currency exchange rates, interest rates, commodity prices and the value of investments of our defined benefit pension plans. We employ a number of practices to manage these risks, including operating and financing activities and, where deemed appropriate, the use of derivative instruments. Our policies allow the use of derivatives for risk management purposes and prohibit their use for speculation. Our policies also prohibit the use of any leveraged derivative instrument. Consistent with our policies, foreign currency derivative instruments, interest rate swaps and locks, equity collars and the majority of commodity hedging contracts are entered into with major financial institutions.
On the date a derivative contract is entered into, we formally designate certain derivatives as cash flow, fair value or net investment hedges and establish how the effectiveness of these hedges will be assessed and measured. This process links the derivatives to the transactions or financial balances they are hedging. Changes in the fair value of derivatives not designated as hedging instruments are recorded in earnings as they occur.

16

Table of Contents

Set forth below is a summary of the fair values of our derivative instruments classified by the risks they are used to manage:
 
 
 
September 30
2011
 
December 31
2010
(Millions of dollars)
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
 
 
 
 
 
 
 
Interest rate risk
 
$
13

 
$
63

 
$
24

 
$
2

Foreign currency exchange risk
 
55

 
93

 
46

 
39

Commodity price risk
 

 
7

 

 
7

Total
 
$
68

 
$
163

 
$
70

 
$
48

Foreign Currency Exchange Risk Management
We have a centralized U.S. dollar functional currency international treasury operation (“In-House Bank”) that manages foreign currency exchange risks by netting, on a daily basis, our exposures to recorded non-U.S. dollar assets and liabilities and entering into derivative instruments with third parties whenever our net exposure in any single currency exceeds predetermined limits. These derivative instruments are not designated as hedging instruments. Changes in the fair value of these instruments are recorded in earnings when they occur. The In-House Bank also records the gain or loss on the remeasurement of its non-U.S. dollar-denominated monetary assets and liabilities in earnings. Consequently, the net effect on earnings from the use of these non-designated derivatives is substantially neutralized by transactional gains and losses recorded on the underlying liabilities. The In-House Bank’s daily notional derivative positions with third parties averaged $1.4 billion in the first nine months of 2011 and its average net exposure for the period was $1.2 billion. The In-House Bank used nine counterparties for its foreign exchange derivative contracts.
We enter into derivative instruments to hedge a portion of the net foreign currency exposures of our non-U.S. operations, principally for their forecasted purchases of pulp, which are priced in U.S. dollars, and imports of intercompany finished goods and work-in-process priced predominately in U.S. dollars and euros. The derivative instruments used to manage these exposures are designated and qualify as cash flow hedges. As of September 30, 2011, outstanding derivative contracts of $865 million notional value were designated as cash flow hedges for the forecasted purchases of pulp and intercompany finished goods and work-in-process.
The foreign currency exposure on non-functional currency denominated monetary assets and liabilities managed outside the In-House Bank, primarily intercompany loans, is hedged with derivative instruments with third parties. At September 30, 2011, the notional amount of these predominantly undesignated derivative instruments was $550 million.

Foreign Currency Translation Risk Management
Translation adjustments result from translating foreign entities’ financial statements to U.S. dollars from their functional currencies. Translation exposure, which results from changes in translation rates between functional currencies and the U.S. dollar, generally is not hedged. However, consistent with other years, a portion of our net investment in our Mexican affiliate has been hedged. At September 30, 2011, we had in place net investment hedges of $67 million for a portion of our investment in our Mexican affiliate. Changes in the fair value of net investment hedges are recognized in other comprehensive income to offset the change in value of the net investment being hedged. There was no significant ineffectiveness related to net investment hedges as of September 30, 2011 and 2010.
Interest Rate Risk Management
Interest rate risk is managed using a portfolio of variable- and fixed-rate debt composed of short- and long-term instruments and interest rate swaps. From time to time, interest rate swap contracts, which are derivative instruments, are entered into to facilitate the maintenance of the desired ratio of variable- and fixed-rate debt. These derivative instruments are designated and qualify as fair value hedges or, to a lesser extent, cash flow hedges.
From time to time, we hedge the anticipated issuance of fixed-rate debt, using forward-starting swaps or “treasury locks” (e.g., a 10-year “treasury lock” hedging the anticipated underlying U.S. Treasury interest rate related to issuance of 10-year debt at a future date). These contracts are designated as cash flow hedges.
At September 30, 2011, the aggregate notional values of outstanding interest rate contracts designated as fair value hedges and cash flow hedges were $700 million and $580 million, respectively.

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Table of Contents

Commodity Price Risk Management
We use derivative instruments to hedge a portion of our exposure to market risk arising from changes in the price of natural gas. Hedging of this risk is accomplished by entering into forward swap contracts, which are designated as cash flow hedges of specific quantities of natural gas expected to be purchased in future months.
As of September 30, 2011, outstanding commodity forward contracts were in place to hedge forecasted purchases of about 25 percent of our estimated natural gas requirements for the next twelve months and a lesser percentage for future periods.
Effect of Derivative Instruments on Results of Operations and Other Comprehensive Income
Fair Value Hedges
Derivative instruments that are designated and qualify as fair value hedges are predominantly used to manage interest rate risk and foreign currency exchange risk. The fair values of these instruments are recorded as an asset or liability, as appropriate, with the offset recorded in current earnings. The offset to the change in fair values of the related hedged items also is recorded in current earnings. Any realized gain or loss on the derivatives that hedge interest rate risk is amortized to interest expense over the life of the related debt.
Fair value hedges resulted in no significant ineffectiveness in the nine months ended September 30, 2011 and 2010. For the nine months ended September 30, 2011 and 2010, no gain or loss was recognized in earnings as a result of a hedged firm commitment no longer qualifying as a fair value hedge.

Cash Flow Hedges
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is initially recorded in AOCI, net of related income taxes, and recognized in earnings in the same period that the hedged exposure affects earnings.
Cash flow hedges resulted in no significant ineffectiveness in the nine months ended September 30, 2011 and 2010. For the nine months ended September 30, 2011 and 2010, no gains or losses were reclassified into earnings as a result of the discontinuance of cash flow hedges due to the original forecasted transaction no longer being probable of occurring. At September 30, 2011, $2 million of after-tax gains are expected to be reclassified from AOCI primarily to cost of sales during the next twelve months, consistent with the timing of the underlying hedged transactions. The maximum maturity of cash flow hedges in place at September 30, 2011 is October 2013.
Quantitative Information about Our Use of Derivative Instruments
The following tables display the classification and amount of pretax gains and losses reported in the Consolidated Income Statement and Consolidated Statement of Other Comprehensive Income (“OCI”) and the classification and fair values of derivative instruments presented in the Condensed Consolidated Balance Sheet.
For the three months ended September 30 (Millions of dollars):
 
 
Income Statement Classifications
 
(Gain) or Loss
Recognized  in Income
 
 
 
2011
 
2010
Undesignated foreign exchange hedging instruments
Other (income) and expense, net(a)
 
$
92

 
$
(115
)
 
 
 
 
 
 
Fair Value Hedges
 
 
 
 
 
Interest rate swap contracts
Interest expense
 
$
8

 
$
(2
)
Hedged debt instruments
Interest expense
 
$
(8
)
 
$
2

 

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Table of Contents

 
Amount of (Gain) or
Loss Recognized In
AOCI
 
Income Statement
Classification of Gain or Loss
Reclassified from AOCI
 
(Gain) or Loss Reclassified
from AOCI into Income
 
2011
 
2010
 
 
 
2011
 
2010
Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Interest rate contracts
$
61

 
$
12

 
Interest expense
 
$

 
$
(1
)
Foreign exchange contracts
(34
)
 
40

 
Cost of products sold
 
15

 
(6
)
Foreign exchange contracts
(8
)
 

 
Other (income) and expense, net
 
(8
)
 

Commodity contracts
5

 
8

 
Cost of products sold
 
1

 
2

Total
$
24

 
$
60

 
 
 
$
8

 
$
(5
)
Net Investment Hedges
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
(7
)
 
$
2

 
 
 
$

 
$


For the nine months ended September 30 (Millions of dollars):
 
 
Income Statement Classifications
 
(Gain) or Loss
Recognized in
Income
 
 
 
2011
 
2010
Undesignated foreign exchange hedging instruments
Other (income) and expense, net(a)
 
$
(7
)
 
$
(34
)
 
 
 
 
 
 
Fair Value Hedges
 
 
 
 
 
Interest rate swap contracts
Interest expense
 
$
3

 
$
(16
)
Hedged debt instruments
Interest expense
 
$
(3
)
 
$
16

Foreign exchange contracts
Other (income) and expense, net
 
$

 
$
(1
)

 
 
Amount of (Gain)  or
Loss Recognized In
AOCI
 
Income Statement
Classification of Gain or Loss
Reclassified from AOCI
 
(Gain) or Loss Reclassified
from AOCI into Income
 
2011
 
2010
 
 
 
2011
 
2010
Cash Flow Hedges
 
 
 
 
 
 
 
 
 
Interest rate contracts
$
69

 
$
42

 
Interest expense
 
$
(2
)
 
$
(2
)
Foreign exchange contracts
11

 
7

 
Cost of products sold
 
36

 
2

Foreign exchange contracts
(3
)
 

 
Other (income) and expense, net
 
(3
)
 

Commodity contracts
6

 
15

 
Cost of products sold
 
6

 
8

Total
$
83

 
$
64

 
 
 
$
37

 
$
8

Net Investment Hedges
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
(4
)
 
$
4

 
 
 
$

 
$


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

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Table of Contents

Fair Values of Derivative Instruments
 
 
Balance Sheet
Location
 
September 30
2011
 
December 31
2010
 
 
 
(Millions of dollars)
Assets
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
Interest rate contracts
Other current assets
 
$
2

 
$

Interest rate contracts
Other assets
 
11

 
24

Foreign exchange contracts
Other current assets
 
19

 
4

Foreign exchange contracts
Other assets
 
4

 
1

Total
 
 
36

 
29

Undesignated derivatives:
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
32

 
41

Total asset derivatives
 
 
$
68

 
$
70

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
 
Interest rate contracts
Accrued expenses
 
$
37

 
$

Interest rate contracts
Other liabilities
 
26

 
2

Foreign exchange contracts
Accrued expenses
 
5

 
16

Foreign exchange contracts
Other liabilities
 

 
3

Commodity contracts
Accrued expenses
 
6

 
7

Commodity contracts
Other liabilities
 
1

 

Total
 
 
75

 
28

Undesignated derivatives:
 
 
 
 
 
Foreign exchange contracts and other
Accrued expenses
 
88

 
20

Total liability derivatives
 
 
$
163

 
$
48


Note 10. Description of Business Segments
We are organized into operating segments based on product groupings. These operating segments have been aggregated into four reportable global business segments: Personal Care, Consumer Tissue, K-C Professional & Other, and Health Care. The reportable segments were determined in accordance with how our executive managers develop and execute global strategies to drive growth and profitability. These strategies include global plans for branding and product positioning, technology, research and development programs, cost reductions including supply chain management, and capacity and capital investments for each of these businesses. Segment management is evaluated on several factors, including operating profit. Segment operating profit excludes other (income) and expense, net and income and expense not associated with the business segments, including the charges related to the pulp and tissue restructuring described in Note 3.

The principal sources of revenue in each global business segment are described below:

The Personal Care segment manufactures and markets disposable diapers, training and youth pants, swimpants, baby wipes, feminine and incontinence care products, and related products. Products in this segment are primarily for household use and are sold under a variety of brand names, including Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays, Depend, Poise and other brand names.

The Consumer Tissue segment manufactures and markets facial and bathroom tissue, paper towels, napkins and related products for household use. Products in this segment are sold under the Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Hakle, Page and other brand names.

The K-C Professional & Other segment manufactures and markets facial and bathroom tissue, paper towels, napkins, wipers

20

Table of Contents

and a range of safety products for the away-from-home marketplace. Products in this segment are sold under the Kimberly-Clark, Kleenex, Scott, WypAll, Kimtech, KleenGuard, Kimcare and Jackson brand names.

The Health Care segment manufactures and markets health care products such as surgical drapes and gowns, infection control products, face masks, exam gloves, respiratory products, pain management products primarily sold through I-Flow, and other disposable medical products. Products in this segment are sold under the Kimberly-Clark, Ballard, ON-Q and other brand names.
The following schedules present information concerning consolidated operations by business segment:
 
 
 
Three Months Ended
September 30
 
Nine Months Ended
September 30
(Millions of dollars)
 
2011
 
2010
 
2011
 
2010
 
 
 
 
 
 
 
 
 
NET SALES:
 
 
 
 
 
 
 
 
Personal Care
 
$
2,390

 
$
2,183

 
$
6,918

 
$
6,501

Consumer Tissue
 
1,711

 
1,643

 
5,054

 
4,778

K-C Professional & Other
 
863

 
781

 
2,477

 
2,312

Health Care
 
407

 
367

 
1,186

 
1,078

Corporate & Other
 
11

 
5

 
35

 
2

Consolidated
 
$
5,382

 
$
4,979

 
$
15,670

 
$
14,671

 
 
 
 
 
 
 
 
 
OPERATING PROFIT (reconciled to income before
  income taxes):
 
 
 
 
 
 
 
 
Personal Care
 
$
396

 
$
428

 
$
1,185

 
$
1,343

Consumer Tissue
 
206

 
156

 
529

 
488

K-C Professional & Other
 
127

 
116

 
360

 
356

Health Care
 
56

 
49

 
159

 
148

Other (income) and expense, net(a)
 
(17
)
 
7

 
(27
)
 
112

Corporate & Other(b)
 
(140
)
 
(44
)
 
(429
)
 
(149
)
Total Operating Profit
 
662

 
698

 
1,831

 
2,074

Interest income
 
5

 
5

 
13

 
16

Interest expense
 
(70
)
 
(59
)
 
(205
)
 
(180
)
Income Before Income Taxes and Equity Interests
 
$
597

 
$
644

 
$
1,639

 
$
1,910


(a) 
For the nine months ended September 30, 2010, Other (income) and expense, net included a $79 million charge for the adoption of highly inflationary accounting in Venezuela effective January 1, 2010. See additional information in Note 4.

(b) 
For the three months ended September 30, 2011, pulp and tissue restructuring charges of $95 million are included in Corporate & Other. See additional information in Note 3. For the nine months ended September 30, 2011, pulp and tissue restructuring charges of $267 million and a non-deductible business tax charge of $32 million related to a law change in Colombia are included in Corporate & Other. The restructuring charges related to the business segments are as follows:
 
Three Months Ended
September 30, 2011
 
Nine Months Ended
September 30, 2011
Consumer Tissue
$
81

 
$
233

K-C Professional & Other
14

 
34

Total
$
95

 
$
267


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Table of Contents

Also included in Corporate & Other for the nine months ended September 30, 2010, is a $19 million charge related to the adoption of highly inflationary accounting in Venezuela. The charges related to the business segments are as follows:
 
 
 
 
Millions of dollars
Personal Care
$
11

Consumer Tissue
6

K-C Professional & Other
2

Total
$
19


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Table of Contents

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Introduction
This management’s discussion and analysis of financial condition and results of operations is intended to provide investors with an understanding of our recent performance, financial condition and prospects.  The following will be discussed and analyzed:
Overview of Third Quarter 2011 Results
Results of Operations and Related Information
Liquidity and Capital Resources
Legal Matters
Business Outlook
Overview of Third Quarter 2011 Results
Net sales increased 8.1 percent primarily due to the positive impact of foreign currency rates and increases in net selling prices.
Operating profit and net income attributable to Kimberly-Clark Corporation decreased 5.2 percent and 7.9 percent, respectively.
Results were negatively impacted by $95 million in pre-tax charges, $66 million after tax, for the pulp and tissue restructuring.
Cash provided by operations was $750 million, an increase of 1 percent compared to last year.
Results of Operations and Related Information
This section presents a discussion and analysis of our third quarter and first nine months of 2011 net sales, operating profit and other information relevant to an understanding of the results of operations.

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Table of Contents

Third Quarter of 2011 Compared With Third Quarter of 2010
Analysis of Net Sales
By Business Segment
(Millions of dollars)
 
Net Sales
 
2011
 
2010
 
 
 
 
 
Personal Care
 
$
2,390

 
$
2,183

Consumer Tissue
 
1,711

 
1,643

K-C Professional & Other
 
863

 
781

Health Care
 
407

 
367

Corporate & Other
 
11

 
5

 
 
 
 
 
Consolidated
 
$
5,382

 
$
4,979

Commentary:
 
 
Percent Change in Net Sales Versus Prior Year
 
Total
Change
 
Changes Due To
 
Volume
Growth
 
Net
Price
 
Mix/
Other
 
Currency
 
 
 
 
 
 
 
 
 
 
 
Consolidated
8.1
 

 
3

 
1

 
4
Personal Care
9.5
 
3

 
3

 
(1
)
 
4
Consumer Tissue
4.1
 
(6
)
 
4

 
1

 
5
K-C Professional & Other
10.5
 
3

 
2

 

 
5
Health Care
10.9
 
9

 
(1
)
 

 
3

Personal care net sales in North America decreased 1 percent. Changes in net selling prices and product mix each reduced sales by 1 percent, while favorable currency rates added 1 percent to sales. Overall sales volumes were even with the year-ago period. Volumes increased double-digits in adult care and baby wipes, with market share gains in both categories. New Poise Hourglass Shape pads were introduced in the third quarter and contributed to the volume growth in adult care. Feminine care volumes increased high-single digits, with continued momentum in the U by Kotex brand. Although new Huggies Little Movers Slip-On diapers had solid initial sales, infant care volumes declined low-single digits, and child care volumes fell at a double-digit rate. Category declines, competitive promotional activity, reductions in customer inventory levels in diapers and some consumer trade-down in child care accounted for the volume decline.
In Europe, personal care net sales increased 8 percent, including an 11 percent benefit from changes in currency rates. Sales volumes fell 1 percent, as lower diaper volumes were mostly offset by growth in other product areas, including baby wipes and child care. In addition, changes in net selling prices and product mix each reduced sales 1 percent.
In our international operations in Asia, Latin America, the Middle East, Eastern Europe and Africa (“K-C International”), personal care net sales increased 21 percent, including a 7 percent benefit from changes in currency rates. Sales volumes were up 6 percent, including double-digit growth in China, South Korea and Vietnam. In addition, volumes rose high-single digits in Latin America, with broad-based improvements throughout the region. Overall net selling prices rose 9 percent compared to the year-ago period, driven by increases in Latin America.
In North America, net sales of consumer tissue products decreased 1 percent compared to the year-ago period. Net selling prices rose 6 percent, while sales volumes fell 7 percent due to lower sales of bathroom tissue and facial tissue. The declines reflect the near-term impact of sheet count reductions, along with the company's focus on revenue realization and strong year-ago promotion support. By product category, bathroom tissue volumes fell double-digits and Kleenex facial tissue volumes were off high single-digits. In other product areas, paper towel volumes rose at a double-digit rate and benefited from improved distribution levels and promotion activity.

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In Europe, consumer tissue net sales increased 8 percent, including a favorable currency benefit of 11 percent. Sales volumes and net selling prices each declined 2 percent as market conditions worsened somewhat over the last three months.
In K-C International, consumer tissue net sales increased 11 percent, including an 8 percent benefit from changes in currency rates. Net selling prices increased 6 percent, driven by improvements in Latin America, and changes in product mix benefited sales by 3 percent. Sales volumes declined 7 percent, including a 2 percent negative impact from exiting certain non-strategic products in conjunction with the pulp and tissue restructuring.
Net sales of K-C Professional (“KCP”) & other products in North America increased 4 percent. Net selling prices rose 2 percent, while changes in product mix and currency rates each benefited sales by 1 percent. Sales volumes were even with year-ago levels. Although safety product volumes advanced mid-single digits, washroom product volumes were even with year-ago levels, as high unemployment and office vacancy levels continued to impact demand, and wiper volumes declined low-single digits. Net sales in Europe increased 20 percent, driven by stronger currency rates that benefited sales by 13 percent. In addition, sales volumes advanced 6 percent compared to a relatively soft year-ago performance. Net sales increased 19 percent in K-C International, including a 9 percent benefit from favorable currency rates. Sales volumes were up 7 percent, with particular strength in Latin America and South Asia, and net selling prices rose 3 percent.
Net sales of health care products increased 11 percent in the third quarter. Sales volumes rose 9 percent and changes in currency rates increased sales 3 percent, while net selling prices were off 1 percent. Medical supply volumes rose double-digits, led by growth in exam gloves and surgical products, reflecting improved North American market demand. In other areas of the business, global medical device volumes increased high-single digits, including strong growth in Europe and Asia.
By Geography
(Millions of dollars)
 
Net Sales
 
2011
 
2010
 
 
 
 
 
North America
 
$
2,740

 
$
2,741

Outside North America
 
2,838

 
2,429

Intergeographic sales
 
(196
)
 
(191
)
 
 
 
 
 
Consolidated
 
$
5,382

 
$
4,979

Commentary:
Net sales in North America were essentially even with the prior year, primarily due to higher net selling prices and favorable currency effects, offset by lower sales volumes, primarily in infant care and child care.
Net sales outside North America increased 16.8 percent due to favorable currency effects, higher net selling prices, higher sales volumes, primarily in personal care, in a number of markets including most of Latin America, South Korea, China, and Vietnam, and improvement in product mix.

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Analysis of Operating Profit
By Business Segment
(Millions of dollars)
 
Operating Profit
 
2011
 
2010
 
 
 
 
 
Personal Care
 
$
396

 
$
428

Consumer Tissue
 
206

 
156

K-C Professional & Other
 
127

 
116

Health Care
 
56

 
49

Corporate & Other(a)
 
(140
)
 
(44
)
Other (income) and expense, net
 
(17
)
 
7

 
 
 
 
 
Consolidated
 
$
662

 
$
698

(a) 
Corporate & Other in 2011 includes pulp and tissue restructuring charges of $95 million.
Commentary:
 
 
Percentage Change in Operating Profit Versus Prior Year
 
 
 
Change Due To
 
Total
Change
 
Volume
 
Net
Price
 
Input
Costs(a)
 
Cost
Savings
 
Currency
 
Other(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
(5.2
)
 

 
22

 
(21
)
 
13
 
5
 
(24
)
Personal Care
(7.5
)
 
2

 
17

 
(18
)
 
8
 
2
 
(18
)
Consumer Tissue
32.1

 
(16
)
 
46

 
(14
)
 
19
 
4
 
(7
)
K-C Professional & Other
9.5

 
3

 
14

 
(27
)
 
20
 
9
 
(10
)
Health Care
14.3

 
28

 
(7
)
 
(39
)
 
13
 
3
 
16

(a) 
Includes inflation in raw materials, energy and distribution costs.
(b) 
Consolidated includes the impact of the 2011 charges related to the pulp and tissue restructuring.
Consolidated operating profit decreased compared to the prior year. The benefits of higher net sales, cost savings of $90 million, and favorable currency effects were more than offset by inflation in input costs of $150 million, including $110 million for raw materials other than fiber, primarily polymer resin and other oil-based materials, $20 million for energy, $15 million in distribution costs, and $5 million in higher fiber costs. Current year results were also impacted by $95 million of charges related to the pulp and tissue restructuring. Lower production volumes in 2011, to manage inventory levels, adversely affected operating profit comparisons by $30 million. Marketing, research and general expenses in the third quarter of 2011 increased slightly compared to 2010, but fell as a percent of net sales, reflecting our focus on reducing overhead spending, along with significant year-ago marketing spending.
Personal care segment operating profit decreased as the benefits from sales growth and cost savings were more than offset by input cost inflation, the negative impact of lower production volumes and increases in marketing, research and general expenses. In North America, operating profit decreased as inflation in input costs, unfavorable product mix, lower net selling prices and the negative impact of lower production volumes were partially offset by a lower level of marketing, research and general expenses. Operating profit in Europe decreased slightly due to inflation in input costs mostly offset by cost savings. In K-C International, operating profit increased as higher net selling prices, cost savings, higher sales volumes and favorable currency effects were partially offset by inflation in input costs, the negative effects of lower production volumes and higher marketing, research and general expenses.
Consumer tissue segment operating profit increased as sales growth, cost savings, and lower marketing, research and general expenses were partially offset by inflation in input costs and the negative impact of lower production volumes. Operating profit in North America increased as higher net selling prices, lower marketing, research and general expenses and cost savings were partially offset by lower sales volumes. In Europe, operating profit decreased as cost savings were

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more than offset by inflation in input costs, lower net selling prices and the negative effects of lower production volumes. Operating profit in K-C International increased as higher net selling prices and cost savings were partially offset by inflation in input costs and the negative effects of lower production volumes.
Operating profit for KCP products increased due to sales growth and cost savings, partially offset by input cost inflation and higher marketing, research and general expenses.
Health care segment operating profit increased as sales growth, cost savings and the positive impact from higher production volumes were partially offset by inflation in input costs.
By Geography
(Millions of dollars)
 
Operating Profit
 
2011
 
2010
 
 
 
 
 
North America
 
$
492

 
$
499

Outside North America
 
293

 
250

Corporate & Other(a)
 
(140
)
 
(44
)
Other (income) and expense, net
 
(17
)
 
7

 
 
 
 
 
Consolidated
 
$
662

 
$
698

(a) 
Corporate & Other in 2011 includes pulp and tissue restructuring charges of $95 million.
Commentary:
Operating profit in North America decreased 1.4 percent as higher net selling prices, cost savings and lower marketing, research and general expenses were more than offset by inflation in input costs, unfavorable product mix and lower sales volumes.
Operating profit outside North America increased 17.2 percent as higher net selling prices, cost savings and favorable currency effects were partially offset by inflation in input costs, the negative effects of lower production volumes and higher marketing, research and general expenses.
Additional Income Statement Commentary
Interest expense for the third quarter of 2011 was $11 million higher than the prior year due to a higher level of debt.
Our effective tax rate for the third quarter of 2011 was 29.1 percent compared to 30.3 percent in the prior year.
Our share of net income of equity companies in the third quarter was $5 million lower than the prior year. Kimberly-Clark de Mexico, S.A.B. de C.V. 's ("KCM") sales increased double-digits, but earnings comparisons were negatively impacted by input cost inflation. In addition, foreign currency transaction losses as a result of the weakening of the Mexican peso reduced KCM's earnings in the quarter.

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First Nine Months of 2011 Compared With First Nine Months of 2010
Analysis of Net Sales
By Business Segment
(Millions of dollars)
 
Net Sales
 
2011
 
2010
 
 
 
 
 
Personal Care
 
$
6,918

 
$
6,501

Consumer Tissue
 
5,054

 
4,778

K-C Professional & Other
 
2,477

 
2,312

Health Care
 
1,186

 
1,078

Corporate & Other
 
35

 
2

 
 
 
 
 
Consolidated
 
$
15,670

 
$
14,671

Commentary:
 
 
Percent Change in Net Sales Versus Prior Year
 
 
 
Changes Due To
 
Total
Change
 
Volume
Growth
 
Net
Price
 
Mix/
Other
 
Currency
 
 
 
 
 
 
 
 
 
 
Consolidated
6.8
 
1

 
2
 

 
4
Personal Care
6.4
 
2

 
1
 
(1
)
 
4
Consumer Tissue
5.8
 
(2
)
 
3
 
1

 
4
K-C Professional & Other
7.1
 
2

 
2
 
(1
)
 
4
Health Care
10.0
 
8

 
 

 
2
Personal care net sales increased due to favorable currency effects, primarily in Australia, Brazil, Europe and South Korea, higher net selling prices and higher sales volumes.
Consumer tissue net sales increased due to favorable currency effects, higher net selling prices and favorable product mix, partially offset by lower sales volumes. The favorable currency effects primarily occurred in the same countries as personal care.
Net sales of KCP products increased due to favorable currency effects, higher net selling prices and higher sales volumes.
Health care net sales increased due to higher sales volumes and favorable currency effects.
By Geography
(Millions of dollars)
 
Net Sales
 
2011
 
2010
 
 
 
 
 
North America
 
$
8,080

 
$
8,055

Outside North America
 
8,154

 
7,170

Intergeographic sales
 
(564
)
 
(554
)
 
 
 
 
 
Consolidated
 
$
15,670

 
$
14,671


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Commentary:
Net sales in North America increased 0.3 percent due to higher sales volumes and favorable currency effects mostly offset by lower net selling prices.
Net sales outside North America increased 13.7 percent due to favorable currency effects, primarily in Europe, Australia, Brazil and South Korea, higher net selling prices, higher sales volumes and favorable product mix.
Analysis of Operating Profit
By Business Segment
(Millions of dollars)
 
Operating Profit
 
2011
 
2010
 
 
 
 
 
Personal Care
 
$
1,185

 
$
1,343

Consumer Tissue
 
529

 
488

K-C Professional & Other
 
360

 
356

Health Care
 
159

 
148

Corporate & Other(a)(b)
 
(429
)
 
(149
)
Other (income) and expense, net(b)
 
(27
)
 
112

 
 
 
 
 
Consolidated
 
$
1,831

 
$
2,074

(a) 
Corporate & Other in 2011 includes pulp and tissue restructuring charges of $267 million and a non-deductible business tax charge of $32 million related to a law change in Colombia.
(b) 
In 2010, Corporate & Other includes a $19 million charge, and Other (income) and expense, net includes a $79 million charge related to the adoption of highly inflationary accounting in Venezuela.
Commentary:
 
 
Percentage Change in Operating Profit Versus Prior Year
 
 
 
Change Due To
 
Total
Change
 
Volume
 
Net
Price
 
Input
Costs(a)
 
Cost
Savings
 
Currency
 
Other(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
(11.7
)
 
4

 
12

 
(25
)
 
9
 
7
 
(19
)
Personal Care
(11.8
)
 
3

 
6

 
(19
)
 
4
 
3
 
(9
)
Consumer Tissue
8.4

 
(3
)
 
25

 
(29
)
 
17
 
3
 
(5
)
K-C Professional & Other
1.1

 
3

 
14

 
(23
)
 
12
 
7
 
(12
)
Health Care
7.4

 
22

 
(3
)
 
(30
)
 
10
 
3
 
5

(a) 
Includes inflation in raw materials, energy and distribution costs.
(b) 
Consolidated includes the impact of the 2011 pulp and tissue restructuring charges and a non-deductible business tax charge related to a law change in Colombia, and the charge in 2010 related to the adoption of highly inflationary accounting in Venezuela.
Consolidated operating profit decreased as sales growth and cost savings were more than offset by inflation in input costs and the negative effects of lower production volumes. Comparisons with the prior year were also impacted in 2011 by $267 million of charges related to the pulp and tissue restructuring and a $32 million business tax charge related to a law change in Colombia, and a $98 million charge recorded in first quarter of 2010 related to the adoption of highly inflationary accounting in Venezuela.
Personal care segment operating profit decreased due to inflation in input costs, the negative impact of lower production volumes and unfavorable product mix, partially offset by higher net selling prices, cost savings, favorable currency effects, higher sales volumes and a lower level of marketing, research and general expenses.
Consumer tissue segment operating profit increased due to higher net selling prices, cost savings, a lower level of marketing,

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research and general expenses and favorable currency effects, partially offset by inflation in input costs and the negative impact of lower production volumes.
Operating profit for KCP products increased as higher net selling prices, cost savings, favorable currency effects and higher sales volumes offset inflation in input costs and higher marketing, research and general expenses.
Health care segment operating profit increased due to higher sales volumes and cost savings, partially offset by inflation in input costs and increased marketing, research and general expenses.
By Geography
(Millions of dollars)
 
Operating Profit
 
2011
 
2010
 
 
 
 
 
North America
 
$
1,445

 
$
1,560

Outside North America
 
788

 
775

Corporate & Other(a)(b)
 
(429
)
 
(149
)
Other (income) and expense, net(b)
 
(27
)
 
112

 
 
 
 
 
Consolidated
 
$
1,831

 
$
2,074

(a) 
Corporate & Other in 2011 includes pulp and tissue restructuring charges of $267 million and a non-deductible business tax charge of $32 million related to a law change in Colombia.
(b) 
In 2010, Corporate & Other includes a $19 million charge and Other (income) and expense, net includes a $79 million charge related to the adoption of highly inflationary accounting in Venezuela.
Commentary:
Operating profit in North America decreased 7.4 percent as inflation in input costs and unfavorable product mix were partially offset by cost savings, lower marketing, research and general expenses, higher sales volumes and favorable currency effects.
Operating profit outside North America increased 1.7 percent as higher net selling prices, favorable currency effects, cost savings, higher sales volumes and favorable product mix were partially offset by inflation in input costs and the negative effects of lower production volumes.
Pulp and Tissue Restructuring:
On January 21, 2011, we initiated a pulp and tissue restructuring plan in order to exit our remaining integrated pulp manufacturing operations and improve the underlying profitability and return on invested capital of our consumer tissue and KCP businesses. The restructuring involves the streamlining, sale or closure of 5 to 6 of our manufacturing facilities around the world. In conjunction with these actions, we have begun to exit certain non-strategic products, primarily non-branded offerings, and transfer some production to lower-cost facilities in order to improve overall profitability and returns. Facilities impacted by the restructuring include our pulp and tissue facility in Everett, Washington and the two facilities in Australia that manufacture pulp and tissue.
The restructuring plan commenced in the first quarter of 2011 and is expected to be completed by December 31, 2012. The restructuring is expected to result in cumulative charges of approximately $400 million to $600 million before tax ($280 million to $420 million after tax) over that period. Cash costs related to the streamlining of operations, sale or closure, relocation of equipment, severance and other expenses are expected to account for approximately 25 percent to 50 percent of the charges. Noncash charges will consist primarily of incremental depreciation.
As a result of the restructuring, we expect that by 2013 annual net sales will be reduced by $250 million to $300 million and operating profit will increase by at least $75 million. Most of the restructuring will impact the consumer tissue business segment.
Third quarter 2011 charges of $95 million were recorded in Cost of products sold and a related benefit of $29 million was recorded in Provision for income taxes. On a segment basis, $81 million and $14 million of the charges related to the consumer

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tissue and KCP segments, respectively. On a geographic area basis, $66 million of the charges were recorded in North America, $24 million in Australia, and $5 million elsewhere.
Of the $267 million charges recorded in the first nine months of 2011, $205 million were non-cash. Of the $62 million in cash charges, $34 million have been paid.
See additional information on the pulp and tissue restructuring in Note 3 to the Condensed Consolidated Financial Statements.
Additional Income Statement Commentary
Interest expense for the first nine months of 2011 was $25 million higher than the prior year because of higher debt levels, partially offset by lower interest rates.
Our effective tax rate for the first nine months of 2011 was 30.4 percent compared to 32.3 percent in the prior year.  The reduction in the tax rate was driven by nondeductible currency losses resulting from the adoption of highly inflationary accounting in Venezuela and changes in tax law related to U.S. health care reform legislation, both in 2010, partially offset by a nondeductible charge in 2011 related to a business tax law change in Colombia.
Liquidity and Capital Resources
Cash provided by operations for the first nine months of 2011 was $1,771 million, compared to $1,796 million in the prior year. Tax payments declined in 2011 compared to 2010, while contributions to our defined benefit pension plans totaled $416 million in 2011 versus $230 million in 2010.
During the third quarter of 2011, we repurchased approximately 600,000 shares of our common stock at a cost of approximately $40 million. Year-to-date, we have repurchased approximately 19 million shares at a total cost of $1.24 billion. We plan to accelerate additional pension contributions into 2011 and reduce our 2011 share repurchase target by a similar amount. As a result, we plan to contribute an aggregate of $680 to $760 million (increased from our prior estimate of $420 to $500 million), and share repurchases are expected to total approximately $1.24 billion (previous target $1.5 billion). 
Capital spending for the first nine months was $656 million compared with $611 million last year. We anticipate that full year 2011 capital spending will be between $950 million and $1,050 million.
Total debt and redeemable securities was $7.2 billion at September 30, 2011 compared with $6.5 billion at December 31, 2010.
Our short-term debt as of September 30, 2011 was $88 million (included in Debt payable within one year on the Condensed Consolidated Balance Sheet) and consisted of short-term bank financing by certain affiliates. The average month-end balance of short-term debt for the third quarter of 2011 was $150 million. These short-term borrowings provide supplemental funding for supporting our operations.  The level of short-term debt during a quarter generally fluctuates depending upon the business operating cash flows and the timing of customer receipts and payments for items such as dividends and income taxes.
At December 31, 2010, we had a $1.33 billion unused revolving credit facility that was scheduled to expire in September 2012.  In October 2011, we renegotiated this facility, resulting in (1) a 5 year facility of $1.5 billion scheduled to expire in October 2016, (2) an additional $500 million facility scheduled to expire in October 2012, and (3) an option to increase either (but not both) the $1.5 billion facility or the $500 million facility by an additional $500 million.  Each facility remained unused at October 31, 2011.
On July 7, 2011, we collected $220 million in cash related to a note receivable on its maturity date. See Note 2 of the Condensed Consolidated Financial Statements.
We believe that our ability to generate cash from operations and our capacity to issue short-term and long-term debt are adequate to fund operations, capital spending, payment of dividends and other needs in 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 in the foreseeable future.
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 K-C Venezuela’s operations. In this environment, we are managing our U.S. dollar payables exposure in Venezuela, principally related to imports of finished products and raw materials. For the full year 2010 and first nine months of 2011, K-C Venezuela represented 1 percent of Consolidated Net Sales. At September 30, 2011, K-C Venezuela had a bolivar-denominated net monetary asset position of $130 million and our net investment in K-C Venezuela was $220 million, both valued at 5.4 bolivars per U.S. dollar.

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See Note 4 to the Condensed Consolidated Financial Statements for more details about the accounting for K-C Venezuela’s financial results and the previously discussed charge resulting from the January 1, 2010 adoption of highly inflationary accounting in Venezuela.
Legal Matters
We are subject to various lawsuits and claims pertaining to issues such as contract disputes, product liability, patents and trademarks, advertising, employee 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 waste disposal sites. None of our compliance obligations with environmental protection laws and regulations, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition, results of operations or liquidity.
Business Outlook
We will continue to focus on revenue realization and our targeted growth initiatives, as well as delivering cost savings, controlling overhead spending and generating cash flow.  As the commodity cost environment has improved over the last three months, and the U.S. dollar has recently strengthened, we are anticipating less commodity cost inflation and less benefit from foreign currency exchange rates in 2011 than previously expected.  In addition, we plan to accelerate additional pension contributions into 2011 and reduce our 2011 share repurchase target by a similar amount.  As a result, we plan to contribute an aggregate of $680 to $760 million (increased from our prior estimate of $420 to $500 million) to our pensions in 2011, and to repurchase an aggregate of approximately $1.24 billion (a decrease from our prior plan of $1.5 billion) of our shares in 2011. 
Information Concerning Forward-Looking Statements
Certain matters contained in this report concerning the business outlook, including revenue realization, cost savings and reductions, cash flow and uses of cash, raw material, energy and other input costs, anticipated currency rates and exchange risk, sales volumes, market demand and economic conditions, changes in finished product selling prices, the anticipated costs, scope, timing and effects of the pulp and tissue restructuring, anticipated financial and operating results, contingencies and anticipated transactions of Kimberly-Clark, including pension contributions and share repurchases, constitute forward-looking statements 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. For a description of certain factors that could cause our future results to differ from those expressed in these forward-looking statements, see Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2010 entitled “Risk Factors.”

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Item 4.
Controls and Procedures.
As of September 30, 2011, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of September 30, 2011. There were no changes in our internal control over financial reporting during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.
– OTHER INFORMATION
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We repurchase shares of Kimberly-Clark common stock from time to time pursuant to publicly announced share repurchase programs. During 2011, we anticipate purchasing $1.24 billion of our common stock. All our share repurchases during the third quarter of 2011 were made through a broker in the open market.
The following table contains information for shares repurchased during the third quarter of 2011. None of the shares in this table was repurchased directly from any of our officers or directors.
 
Period
(2011)
Total Number
of Shares
Purchased(a)
 
Average
Price Paid
Per Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
 
Maximum
Number of
Shares
That May
Yet Be
Purchased
Under the
Plans or
Programs(b)
July 1 to 31
598,000

 
$
66.91

 
49,814,411

 
50,185,589

August 1 to 31

 

 
49,814,411

 
50,185,589

September 1 to 30

 
$

 
49,814,411

 
50,185,589

Total
598,000

 
 
 
 
 
 
(a) 
Share repurchases were made pursuant to a share repurchase program authorized by our Board of Directors on July 27, 2003 that allows for the repurchase of 50 million shares in an amount not to exceed $5 billion (the “2007 Program”).
(b) 
Includes shares available under the 2007 Program, as well as shares available under a share repurchase program authorized by our Board of Directors on January 21, 2011 that allows for the repurchase of 50 million shares in an amount not to exceed $5 billion (the "2011 Program").

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Table of Contents

Item 6.
Exhibits.

(a)
Exhibits.
Exhibit No. (3)a. Amended and Restated Certificate of Incorporation, dated April 30, 2009, incorporated by reference to Exhibit No. (3)a of the Corporation’s Current Report on Form 8-K dated May 1, 2009.
Exhibit No. (3)b. By-Laws, as amended April 30, 2009, incorporated by reference to Exhibit No. (3)b of the Corporation’s Current Report on Form 8-K dated May 1, 2009.
Exhibit No. (4). Copies of instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission on request.
Exhibit No. (31)a. Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), filed herewith.
Exhibit No. (31)b. Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, filed herewith.
Exhibit No. (32)a. Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, furnished herewith.
Exhibit No. (32)b. Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, furnished herewith.
Exhibit No. (101).INS XBRL Instance Document
Exhibit No. (101).SCH XBRL Taxonomy Extension Schema Document
Exhibit No. (101).CAL XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit No. (101).DEF XBRL Taxonomy Extension Definition Linkbase Document
Exhibit No. (101).LAB XBRL Taxonomy Extension Label Linkbase Document
Exhibit No. (101).PRE XBRL Taxonomy Extension Presentation Linkbase Document


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
KIMBERLY-CLARK CORPORATION
(Registrant)
 
 
By:
 
/s/ Mark A. Buthman
 
 
Mark A. Buthman
 
 
Senior Vice President and
 
 
Chief Financial Officer
 
 
(principal financial officer)
 
 
By:
 
/s/ Michael T. Azbell
 
 
Michael T. Azbell
 
 
Vice President and Controller
 
 
(principal accounting officer)
November 4, 2011

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Table of Contents

EXHIBIT INDEX
 
 
 
 
Exhibit No.
  
Description
 
 
(3)a.
  
Amended and Restated Certificate of Incorporation, dated April 30, 2009, incorporated by reference to Exhibit No. (3)a of the Corporation’s Current Report on Form 8-K dated May 1, 2009.
 
 
(3)b.
  
By-Laws, as amended April 30, 2009, incorporated by reference to Exhibit No. (3)b of the Corporation’s Current Report on Form 8-K dated May 1, 2009.
 
 
(4).
  
Copies of instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission on request.
 
 
(31)a.
  
Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), filed herewith.
 
 
(31)b.
  
Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, filed herewith.
 
 
(32)a.
  
Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, furnished herewith.
 
 
(32)b.
  
Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, furnished herewith.
 
 
(101).INS
  
XBRL Instance Document
 
 
(101).SCH
  
XBRL Taxonomy Extension Schema Document
 
 
(101).CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
(101).DEF
  
XBRL Taxonomy Extension Definition Linkbase Document
 
 
(101).LAB
  
XBRL Taxonomy Extension Label Linkbase Document
 
 
(101).PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document



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