ITEM 1. BUSINESS
Kimberly-Clark Corporation was incorporated in Delaware in 1928. As used in Items 1, 2 and 7 of this Form 10-K, the term "Corporation" refers to Kimberly-Clark Corporation and its consolidated subsidiaries. In the remainder of this Form 10-K, the terms "Kimberly-Clark" or "Corporation" refer only to Kimberly-Clark Corporation. Financial information by business segment and geographic area, and information about principal products and markets of the Corporation, contained under the caption "Management's Discussion and Analysis" and in Note 16 to the Financial Statements contained in the 1996 Annual Report to Stockholders, are incorporated in this Item 1 by reference.
RECENT DEVELOPMENTS. Prior to 1992, the Corporation was a widely diversified enterprise engaged in the manufacture and sale of consumer products, paper and forest products, airline services and various other businesses. In recent years, the Corporation has been undergoing a transition to a global consumer products company based on the strategy of building on its core technologies, well-known trademarks and consumer product franchises. Those businesses that did not, or could not, build on these strengths were candidates for divestiture. Those businesses that fit into the Corporation's strategy were candidates for further investment and support. Outside businesses that were perceived as opportunities consistent with the strategy were candidates for acquisition. As a result, the Corporation has completed a number of recent transactions.
On September 27, 1995, the Corporation sold 80 percent of the outstanding shares of Midwest Express Holdings, Inc. (`MEH''), the parent company of Midwest Express Airlines Inc. and Astral Aviation, Inc., in an initial public offering. The Corporation's remaining 20 percent interest in MEH was sold on May 30, 1996.
On November 30, 1995, Kimberly-Clark distributed to its stockholders all of the outstanding shares of common stock of Schweitzer-Mauduit International, Inc. (`SMI''). SMI was formed in 1995 to facilitate the spin-off of Kimberly-Clark's tobacco related paper and other specialty paper products businesses conducted in the United States, France and Canada.
On December 12, 1995, Scott Paper Company (`Scott'') became a wholly- owned subsidiary of Kimberly-Clark upon consummation of a merger transaction in which each Scott common share outstanding immediately prior to the effective time of the merger (other than shares owned by Kimberly-Clark or Scott, which shares were canceled) was converted into .78 of a share of common stock of Kimberly-Clark. On February 14, 1996, Scott changed its name to Kimberly-Clark Tissue Company.
On June 28, 1996, the Corporation sold the baby and child wipe businesses previously conducted by Scott, consisting of the Baby Fresh, Wash a-Bye Baby and Kid Fresh brands and the Dover, Delaware production facility, to The Procter & Gamble Company. This divestiture was required by the U.S. Justice Department as part of the Scott merger.
On July 31, 1996, the Corporation sold Scott's Fort Edward, New York tissue mill and licensed the Scotties facial tissue brand name to Irving Tissue, Inc., a privately-held Canadian company. This divestiture was required by the U.S. Justice Department as part of the Scott merger.
On September 16, 1996, the Corporation sold its tissue mill in Prudhoe, England and certain consumer tissue businesses in the United Kingdom and Ireland to Svenska Cellulosa Aktiebolaget (SCA) of Sweden. This divestiture was required by the European Commission as part of the Scott merger.
On November 22, 1996, the Corporation sold its Lakeview tissue mill in Neenah, Wisconsin to American Tissue Mills of Neenah, LLC. This divestiture was required by the U.S. Justice Department as part of the Scott merger.
On February 14, 1997, the Corporation signed an agreement with Alliance Forest Products Inc., a publicly held Canadian corporation (`Alliance''), pursuant to which the Corporation agreed to sell its Coosa Pines, Alabama pulp and newsprint operations, and related woodlands, to Alliance for approximately $600 million in cash. The transaction, which is subject to the completion of financing by Alliance, and other customary conditions, is expected to close on March 27, 1997.
On February 25, 1997, the Corporation announced its intention to sell its pulp operations and related woodlands at Terrace Bay, Ontario; New Glasgow, Nova Scotia; and Miranda, Spain by mid-1998 as part of its plan to reduce its exposure to the cyclical, capital-intensive pulp business. Notwithstanding the planned divestitures, the Corporation intends to retain sufficient pulp and recycled fiber capacity in North America to support its away-from-home products and its consumer tissue products in the value category, all of which compete with products from fiber- integrated manufacturers. See `Raw Materials'' and ``Factors That May Affect Future Results - Raw Materials.'
On March 4, 1997, the Corporation announced its intention to sell its 50.1 percent interest in Scott Paper Limited, a publicly-traded Canadian company (`SPL''), to Kruger, Inc. (``Kruger'') as part of a transaction in which Kruger would acquire all of SPL's outstanding common shares. The transaction is subject to approval by holders of 75 percent of the common shares represented at a special meeting of SPL shareholders to be held prior to May 31, 1997, as well as certain regulatory and other approvals.
DESCRIPTION OF THE CORPORATION. The Corporation is principally engaged in the manufacturing and marketing throughout the world of a wide range of products for personal, business and industrial uses. Most of these products are made from natural and synthetic fibers using advanced technologies in absorbency, fibers and nonwovens.
For financial reporting purposes, the Corporation's businesses are separated into three segments: Personal Care Products; Tissue-Based Products; and Newsprint, Paper and Other.
Personal Care Products includes disposable diapers, training and youth pants; feminine care and adult incontinence care products; wet wipes; health care products; and related products. Products in this business segment are for household use and are sold under a variety of well-known brand names, including Huggies, Pull-Ups, GoodNites, Kotex, New Freedom, Lightdays, Depend and Poise.
Tissue-Based Products includes facial and bathroom tissue, paper towels, paper napkins and wipers for household and away-from-home use; pulp; and related products. Products in this business segment are sold under the Kleenex, Scott, Kleenex Cottonelle, Kleenex Viva, Kimwipes, Wypall and other brand names.
Products for household use are sold directly and through wholesalers to supermarkets, mass merchandisers, drugstores, warehouse clubs, home health care, variety and department stores and other retail outlets. Health care products are sold to distributors, converters and end-users. Products for away-from-home use are sold through distributors and directly to manufacturing, lodging, office building, food service and health care establishments and other high volume public facilities.
Newsprint, Paper and Other includes newsprint, printing papers, premium business and correspondence papers, specialty papers, technical papers, and related products; and other products and services. Newsprint and groundwood printing papers are sold directly to newspaper publishers and commercial printers. Other papers and specialty products in this business segment are sold directly to users, converters, manufacturers, publishers and printers, and through paper merchants, brokers, sales agents and other resale agencies.
PATENTS AND TRADEMARKS. The Corporation owns various patents and trademarks registered domestically and in certain foreign countries. The Corporation considers the patents and trademarks which it owns and the trademarks under which it sells certain of its products, in each instance and in the aggregate, to be material to its business. Consequently, the Corporation seeks patent and trademark protection by all available means, including registration. A partial list of the Corporation's trademarks is included under the caption "Trademarks" contained in the 1996 Annual Report to Stockholders and is incorporated herein by reference.
RAW MATERIALS. Cellulose fibers in the form of wood pulp are the primary raw materials for the Corporation's paper and tissue products and are important components in disposable diapers, training pants, feminine pads and incontinence care products. Large amounts of secondary and recycled fibers are also consumed, primarily in tissue products. Superabsorbent materials are important components in disposable diapers, training pants and incontinence care products. Polypropylene and other synthetics and chemicals are primary raw materials for manufacturing nonwoven fabrics which are used in disposable diapers, training pants, feminine pads, incontinence and health care products and away-from-home wipers. Most secondary fibers and all synthetics are purchased. Wood pulp and nonwood cellulose fibers are produced by the Corporation and purchased from others. The Corporation considers the supply of such raw materials to be adequate to meet the needs of its businesses.
Production at the Corporation's pulp mills at Coosa Pines and Mobile, Alabama; Everett, Washington; Terrace Bay, Ontario; New Glasgow, Nova Scotia; and Miranda, Spain supplied approximately 80 percent of the Corporation's 1996 virgin fiber requirements for products other than newsprint. The Corporation's newsprint mill at Coosa Pines produces all of its own fiber requirements, of which virgin fiber represented approximately 70 percent in 1996,
The Corporation owns or controls 6.8 million acres of forestland in North America, principally as a fiber source for pulp production which is consumed internally within the tissue and personal care businesses. In the United States, approximately .9 million acres are owned in Alabama and Mississippi. In Canada, 1.0 million acres in the province of Nova Scotia are owned by the Corporation, and 4.9 million acres, principally in the province of Ontario, are held under long-term Crown rights or leases.
For recent developments related to the Corporation's fiber strategy, including the pending sale of the Coosa Pines, Alabama pulp and newsprint operations and related woodlands, and the Corporation's intention to sell its pulp operations and related woodlands at Terrace Bay, Ontario; New Glasgow, Nova Scotia; and Miranda, Spain, see `Recent Developments'' and `Factors That May Affect Future Results - Raw Materials.''
COMPETITION. For a discussion of the competitive environment in which the Corporation conducts its business, see `Factors That May Affect Future Results - Competitive Environment.'
RESEARCH AND DEVELOPMENT. A major portion of total research and development expenditures is directed toward new or improved personal care, health care and household products, and nonwoven materials. Consolidated research and development expenditures were $207.9 million in 1996, $207.2 million in 1995 and $208.8 million in 1994.
ENVIRONMENTAL MATTERS. Capital expenditures for environmental controls to meet legal requirements and otherwise relating to the protection of the environment at the Corporation's facilities in the United States, excluding those related to the proposed Cluster Rules described in the following paragraph, are estimated to be $83.0 million in 1997 and $122.0 million in 1998. Approximately $8 million and $23 million of such estimated expenditures in 1997 and 1998, respectively, relate to the Coosa Pines, Alabama pulp and newsprint operations which are the subject of a pending sale transaction. See `Recent Developments.'' Such expenditures are not expected to have a material effect on the Corporation's total capital expenditures, consolidated earnings or competitive position; however, these estimates could be modified as a result of changes in the Corporation's plans, changes in legal requirements or other factors.
Capital expenditures at the Corporation's U.S. facilities for 1998 through 2001 are expected to be affected by finalization of the U.S. Environmental Protection Agency's (`EPA'') proposed Cluster Rules. If finalized as proposed, these rules would require significant additional expenditures for environmental controls at the Corporation's Coosa Pines and Mobile, Alabama and Everett, Washington pulp mills and at various other tissue and paper production facilities in the United States. Based on currently available information, total capital expenditures required to meet the Cluster Rule requirements over the three-year period following their planned finalization in 1997-1998 are estimated at between $370 million and $400 million. Included in this range is $65 million of estimated expenditures for the Coosa Pines, Alabama pulp and newsprint operations which are the subject of a pending sale transaction. See `Recent Developments.' If the sale occurs, the Corporation's estimated total capital expenditures required to meet the Cluster Rules will be reduced to between $305 million and $335 million. However, the nature, amount and timing of these expenditures could change significantly based on the provisions of the EPA's final rules. Neither the Cluster Rule expenditures nor other anticipated environmental capital spending at the Corporation's U.S. facilities during this time period are expected to have a material adverse effect on the Corporation's business or results of operations.
EMPLOYEES. In its worldwide consolidated operations, the Corporation had 54,800 employees as of December 31, 1996.
INSURANCE. The Corporation maintains coverage consistent with industry practice for most risks that are incident to its operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain matters discussed in this Form 10-K, or documents a portion of which are incorporated herein by reference, concerning the business outlook, anticipated financial results, contingencies, contemplated transactions of the Corporation, and the adequacy of the 1995 charge for estimated costs of the merger with Scott Paper Company, for restructuring the combined operations and for other unusual charges, constitute forward-looking statements and are based upon management's expectations and beliefs concerning future events impacting the Corporation. There can be no assurance that these events will occur or that the Corporation's results will be as estimated.
The following factors, as well as factors described elsewhere in this Form 10-K, or in other Securities and Exchange Commission filings, among others, could cause the Corporation's future results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Corporation.
Such factors are described in accordance with the provisions of the Private Securities Litigation Reform Act of 1995, which encourages companies to disclose such factors.
COMPETITIVE ENVIRONMENT. The Corporation experiences intense competition for sales of its principal products in its major markets, both domestically and internationally. The Corporation's products compete with both widely advertised, well-known, branded products and private label products which are typically sold at lower prices. The Corporation has several major competitors in most of its markets, some of which are larger and more diversified than the Corporation. The principal methods and elements of competition include brand recognition and loyalty, product quality and performance, price, marketing and distribution capabilities. Inherent risks in the Corporation's competitive strategy include uncertainties concerning trade and consumer acceptance and competitive reaction. Aggressive competitive reaction may lead to increased advertising and promotional spending by the Corporation in order to maintain market share. Increased competition with respect to pricing would reduce revenue and could have an adverse impact on the Corporation's financial results. In addition, the Corporation relies on the development and introduction of new products and line extensions as a means of achieving and/or maintaining category leadership. In order to maintain its competitive position, the Corporation must develop technological innovation with respect to its products.
COST SAVING STRATEGY. A significant portion of the Corporation's anticipated cost savings are expected to result from operating efficiencies and other synergies realized from the Scott merger. However, such savings will require the continued consolidation and integration of facilities, functions, systems and procedures, all of which present significant management challenges. There can be no assurance that such actions will be successfully accomplished as rapidly as expected or of the extent to which such cost savings and efficiencies will be achieved.
RAW MATERIALS. The Corporation uses a variety of raw materials in its manufacturing processes, including wood pulp, secondary and recycled fibers, polypropylene and other synthetics and chemicals. Wood based raw materials are subject to significant price variations due to the cyclical nature of the market. On a worldwide basis, the Corporation currently supplies approximately 80 percent of its virgin fiber needs internally, but has recently announced its intention to sell all of its non- integrated pulp operations. Such divestitures, if consummated, will result in the Corporation's worldwide pulp integration level being reduced to below 30 percent. This could help insulate the Corporation from the dramatic price and profit fluctuations inherent in the pulp market, or it could have no impact at all. However, following the consummation of such strategy, increases in pulp prices could adversely affect the Corporation's earnings if selling prices are not adjusted or if such adjustments significantly trail the increases in pulp prices. If the Corporation is not successful in consummating such divestitures, the Corporation's level of pulp integration will remain relatively high and, accordingly, its financial results could be subject to fluctuations in the market price of pulp.
ACQUISITION AND DIVESTITURE STRATEGY. The Corporation's anticipated financial results and business outlook are dependent in part upon the consummation of projected divestitures on terms advantageous to the Corporation and the availability of suitable acquisition candidates. Because the Corporation has only recently announced plans for certain future divestitures of pulp assets, and negotiations with potential purchasers have not yet commenced, there can be no assurance that such divestitures will be consummated, or, if consummated, that the terms of such divestitures will be as advantageous to the Corporation as expected. In addition, the Corporation could encounter significant challenges in locating suitable acquisition candidates that are consistent with its strategic objectives and will contribute to its long-term success. Therefore, there can be no assurance that such acquisitions will be consummated, or, if consummated, that the acquired businesses will be successfully integrated with the Corporation in order to provide anticipated earnings growth.
VOLUME FORECASTING. The Corporation's anticipated financial results reflect forecasts of future volume increases in the sales of its products. Challenges in such forecasting include anticipating consumer preferences, estimating sales of new products, estimating changes in population characteristics (such as birth rates and changes in per capita income) and estimating the acceptance of the Corporation's products in new markets. As a result, there can be no assurance that the Corporation's volume increases will be as estimated.
FOREIGN MARKET RISKS. Because the Corporation and its equity companies have manufacturing facilities in 35 countries and its products are sold in approximately 150 countries, the Corporation's results may be substantially affected by foreign market risks. The Corporation is subject to the impact of economic and political instability in developing countries. Economic uncertainty in Mexico (following the 1994 peso devaluation) has and may continue to have an adverse impact on the Corporation's earnings. Also, the extremely competitive and challenging economic environments in developing countries in eastern Europe, Latin America and Asia may slow the Corporation's sales growth and earnings potential. In addition, the Corporation is subject to (i) foreign exchange translation risk associated with the strengthening or weakening of various currencies against each other and local currencies versus the U.S. dollar, and (ii) foreign currency risk arising from transactions and commitments denominated in non-local currencies. See `Management's Discussion and Analysis - Foreign Currency Risks, Hedging Activities and Inflation Risks' contained in the 1996 Annual Report to Stockholders, which is incorporated herein by reference. Translation exposure for the Corporation's balance sheet with respect to foreign operations is not hedged. Although the Corporation uses instruments to hedge its foreign currency risks (through forward contracts, currency swaps and, to a lesser extent, option contracts), these instruments are used selectively to manage risk and there can be no assurance that the Corporation will be fully protected against substantial foreign currency fluctuations.
TAX RATE. The Corporation's projected 1997 tax rate is based upon estimates of many factors, and such rate could be increased by higher earnings in countries with relatively higher tax rates or lower earnings in countries with relatively lower tax rates. In addition, changes in tax legislation could have an adverse impact on the Corporation's tax rate.
CONTINGENCIES. The costs and other effects of pending litigation and administrative actions against the Corporation cannot be determined with certainty. Although management believes that no such proceedings will have a material adverse effect on the Corporation, there can be no assurance that the outcome of such proceedings will be as expected. See `Item 3. Legal Proceedings,'' below.
ITEM 2.

ITEM 2. PROPERTIES
Management believes that the Corporation's production facilities are suitable for their purpose and adequate to support its businesses. The extent of utilization of individual facilities varies, but they operate at or near capacity, except in certain instances such as when new products or technology are being introduced. New facilities of the Corporation are under construction and others are being expanded. Various facilities contain pollution control, solid waste disposal and other equipment which have been financed through the issuance of industrial revenue or similar bonds and are held by the Corporation under lease or installment purchase agreements.
The principal facilities of the Corporation (including the Corporation's equity companies) and the products or groups of products made at such facilities are as follows:
HEADQUARTERS LOCATIONS Dallas, Texas Roswell, Georgia Neenah, Wisconsin Reigate, United Kingdom Bangkok, Thailand
ADMINISTRATIVE CENTER Knoxville, Tennessee
WORLDWIDE PRODUCTION AND SERVICE FACILITIES
UNITED STATES
ALABAMA Coosa Pines - pulp and newsprint (1) Mobile - tissue products and pulp (2) ARIZONA Tucson - nonwovens Yucca - tissue products (1) ARKANSAS Conway - feminine care, incontinence care, nonwovens Maumelle - wet wipes, nonwovens CALIFORNIA Fullerton - tissue products CONNECTICUT New Milford - diapers, feminine care, tissue products GEORGIA LaGrange - nonwovens KENTUCKY Owensboro - tissue products MAINE Winslow - tissue products (3) MASSACHUSETTS Westfield - aircraft maintenance, finishing and refurbishing MICHIGAN Munising - printing and base papers MISSISSIPPI Corinth - nonwovens, away-from-home wipers and towels Hattiesburg - tissue products NORTH CAROLINA Hendersonville - nonwovens Lexington - nonwovens OKLAHOMA Jenks - tissue products PENNSYLVANIA Chester - tissue products SOUTH CAROLINA Beech Island - diapers, tissue products TENNESSEE Loudon - tissue products TEXAS Cleburne - away-from-home products Dallas - aircraft maintenance, finishing and refurbishing Italy - away-from-home products Paris - diapers, training and youth pants San Antonio - personal cleansing products and systems UTAH Ogden - diapers VERMONT East Ryegate - technical papers WASHINGTON Everett - tissue products, pulp WISCONSIN Appleton - aircraft maintenance, finishing and refurbishing Marinette - tissue products Neenah - diapers, feminine care, incontinence care, business and correspondence papers, industrial wipers, nonwovens Oconto Falls - tissue products Whiting - business and correspondence papers
OUTSIDE THE UNITED STATES
ARGENTINA Cordoba - diapers Pilar - feminine care, incontinence care San Luis - diapers AUSTRALIA * Albury - nonwovens * Ingleburn - diapers * Lonsdale - diapers, incontinence care, feminine care * Millicent - pulp, tissue products * Tantanoola - pulp * Warwick Farm - tissue products BAHRAIN * East Riffa - tissue products
*Equity company production facility
BELGIUM Duffel - tissue products BRAZIL Porto Alegre - diapers, feminine care Suzano- diapers, feminine care CANADA Crabtree, Quebec - tissue products (4) Hull, Quebec - tissue products (4) Huntsville, Ontario - tissue products, away-from-home wipers Lennoxville, Quebec - tissue products (4) New Glasgow, Nova Scotia - pulp (1) New Westminster, British Columbia - tissue products (4) St. Hyacinthe, Quebec - feminine care, diapers Terrace Bay, Ontario - pulp (1) CHINA (5) Beijing - feminine care Changchun - feminine care Chengdu - feminine care Guangzhou - tissue products Handan - feminine care Harbin - feminine care Kunming - feminine care Nanjing - feminine care Shanghai - tissue products Shenyang - feminine care Taiyuan - feminine care Wuhan - feminine care COLOMBIA * Barbosa - away-from-home products, specialty products, fine papers, notebooks * Guarne - tissue products * Pereira - tissue products, feminine care, incontinence care, diapers * Tocancipa - diapers COSTA RICA Cartago - diapers San Jose - tissue products CZECH REPUBLIC Jaromer-diapers, incontinence care Litovel - feminine care EL SALVADOR Sitio del Nino - tissue products, feminine care FRANCE Orleans - tissue products Rouen - tissue products Villey-Saint-Etienne - tissue products GERMANY Flensburg - tissue products Forchheim - feminine care, incontinence care Koblenz - tissue products Reisholz - tissue products
*Equity company production facility
HONDURAS Cortes - nonwovens San Pedro Sula - tissue products, feminine care HONG KONG Hong Kong - tissue products (6) INDIA * Pune - feminine care, diapers Pune - tissue products INDONESIA Jogjakarta - tissue products * Medan - specialty products ISRAEL * Afula - diapers, feminine care, incontinence care * Hadera - tissue products * Nahariya - tissue products ITALY Alanno - tissue products Romagnano - tissue products Villanovetta - tissue products KOREA Anyang - feminine care, diapers, tissue products Kimcheon - feminine care, tissue products, nonwovens Taejon - feminine care, diapers MALAYSIA Kluang - tissue products Petaling Jaya - feminine care, tissue products MEXICO * Bajio - tissue products * Cepamisa - tissue products * Cuautitlan - feminine care, diapers, nonwovens * Ecatepec - tissue products Empalme - nonwovens Magdalena - nonwovens * Naucalpan - tissue products, diapers, feminine care Nogales - nonwovens * Orizaba - tissue products * Ramos Arizpe - tissue products, diapers * San Juan - tissue products * San Rafael - tissue products, fine papers Santa Ana - nonwovens * Tlaxcala - diapers NETHERLANDS Gennep - tissue products PANAMA Panama City - tissue products, feminine care PERU Lima - tissue products, feminine care PHILIPPINES San Pedro, Laguna - feminine care, diapers, tissue products, specialty papers SAUDI ARABIA * Al-Khobar - diapers, feminine care, tissue products
*Equity company production facility
SLOVAKIA Piestany - nonwovens SOUTH AFRICA Cape Town - tissue products, feminine care Springs - tissue products, feminine care, diapers, incontinence care SPAIN Aranguren - tissue products Arceniega - tissue products, personal cleansing products and systems Canary Islands - tissue products Miranda del Ebro - pulp (1) Salamanca - tissue products TAIWAN Hsin-Ying - tissue products (7) Ta-Yuan - tissue products THAILAND Pathumthanee - feminine care, diapers, tissue products Samut Prakarn - tissue products UNITED KINGDOM Barrow - tissue products Barton-upon-Humber - diapers Flint - tissue products, nonwovens Larkfield - tissue products Northfleet - tissue products Sealand - feminine care VENEZUELA Guacara - diapers Maracay - tissue products
(1) The Corporation has announced its intention to close or sell this facility.
(2) Portions of the land under this facility are held under various long-term operating leases, the more significant of which contain options to purchase the land.
(3) The fiber recycling facility at this mill is held under an operating lease expiring in 2008 under which the Corporation has the option of renewing the lease for terms not exceeding nine additional years or purchasing the facility for its then fair market value.
(4) The Corporation has announced its intention to sell its 50.1 percent interest in SPL, the owner of the facility.
(5) The land on which these facilities are located is held under long-term leases.
(6) This facility is held under a short-term renewable lease.
(7) The land and a portion of this facility are subject to a mortgage.
*Equity company production facility
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The following is a brief description of potentially material legal proceedings to which the Corporation or any of its subsidiaries is a party or of which any of its properties is subject:
Litigation
A. Since 1990, numerous lawsuits, related to exposure to asbestos, have been filed in state and federal courts by thousands of plaintiffs against multiple defendants, including, in some cases, the Corporation. After the settlement of several matters in 1995, there remain three consolidated multiple plaintiff asbestos actions in Texas state courts that include less than 250 claims against the Corporation. The plaintiffs allege, with respect to the Corporation, that they sustained personal injuries and/or emotional distress from alleged exposure to asbestos-containing materials while working at the Corporation's Coosa Pines, Alabama mill as employees of independent contractors at various times since the mill's construction and that, in its capacity as a premises owner, the Corporation is responsible, in part, for these injuries. The complaints do not specify the amount of damages demanded.
The Corporation believes that its defenses to these asbestos claims are meritorious and that the final results of such claims, while they cannot be predicted with certainty, will not have a material adverse effect on the Corporation's business or results of operations.
B.Kimberly-Clark Tissue Company, formerly named Scott Paper Company, is a defendant in numerous actions in state and federal courts seeking damages relating to breast implants. The actions allege that the plaintiffs' breast implants were covered by polyurethane foam manufactured by Scott's former Foam Division, which was sold in 1983, and that the foam caused physical and/or psychological harm to the plaintiffs. Under a ruling covering federal multi-district litigation, all federal cases have been consolidated in the Northern District of Alabama for pre-trial purposes. In April 1995, the court granted Scott's motion for summary judgment and dismissed with prejudice all claims pending against Scott and the purchaser of Scott's Foam Division. Scott's similar motion for summary judgment was granted in the consolidated California state actions. Actions in other state courts have not reached the stage in the litigation process where similar summary judgment motions can be filed.
In the consolidated federal suit, the plaintiffs initially appealed the summary judgment but then agreed, in January 1996, to dismiss the appeal against Scott and its related entities. In the consolidated California actions, the plaintiffs never filed an appeal. Therefore, the summary judgment in Scott's favor in the federal multi-district litigation and in California are final and no new legal claims can be filed in either any United States district court or in California. In the hundreds of actions pending in other state courts, the actions are in various stages of early discovery.
The Corporation believes that it has meritorious defenses to the remaining breast implant claims and that the final results of such claims, while they cannot be predicted with certainty, will not have a material adverse effect on the Corporation's business or results of operations.
C. In June and November 1996, the Corporation was served with amended complaints in the action originally filed on September 20, 1994 by the Attorney General of the state of West Virginia in the Circuit Court of Kanawha County seeking to recover from certain tobacco companies and other defendants, including the Corporation, monies which West Virginia allegedly has spent and will spend on medical care for its citizens with alleged tobacco-related illnesses. Among other things, the amended complaints alleged that the Corporation aided, abetted and participated in the manufacture of cigarettes by supplying reconstituted tobacco sheets to the tobacco company defendants and advertising that the use of such sheets would allow the tobacco companies to manipulate the level of nicotine in their cigarettes.
The Attorney General amended the original complaints in the action to add Public Employees Insurance Agency and the Department of Health and Human Services as plaintiffs in an effort to reinstate eight common law counts which had been dismissed against the Corporation and the other defendants on June 6, 1995 on the basis that the Attorney General lacked the authority to bring the suit in his own name. The Corporation filed a motion to dismiss the amended complaints on several grounds. On February 13, 1997, the reinstated common law claims were again dismissed, leaving only antitrust and consumer protection claims arising under state law.
The Corporation believes that its defenses to these remaining claims are meritorious.
D. The Corporation also is subject to routine litigation from time to time which, individually or in the aggregate, is not expected to have a material adverse effect on the Corporation's business or results of operations.
Environmental Matters
The information set forth under the "Environmental Matters" section of "Management's Discussion and Analysis" contained in the 1996 Annual Report to Stockholders is incorporated in this Item 3 by reference.
The Corporation has been named a potentially responsible party under the provisions of the federal Comprehensive Environmental Response, Compensation and Liability Act, or analogous state statute, at a number of waste disposal sites, none of which, individually or in the aggregate, in management's opinion, is likely to have a material adverse effect on the Corporation's business or results of operations.
Notwithstanding its opinion, management believes it appropriate to discuss the following matters concerning two of these sites where the Corporation's estimated share of total site remediation costs, if any, cannot be established on the basis of currently available information:
A. In 1993, Scott received a request for information from the EPA regarding the Saco Landfill Superfund Site in Saco, Maine. Following an internal investigation, Scott responded that Scott had no knowledge of any arrangement for the disposal of waste materials at the site. However, Scott had provided sludge and fly ash to the City of Saco and its contractors for use in the construction of the landfill cap. The City of Saco and the Maine Department of Environmental Protection previously had approved the utilization of the sludge and ash in construction of the topsoil cap. In 1994, the EPA served Scott with a second request for information regarding Scott's nexus to the site. Scott again responded that it had never disposed of hazardous waste at the site.
B. In 1994, Scott received a notice of responsibility from the Massachusetts Department of Environmental Protection regarding the South Hadley Site in South Hadley, Massachusetts. The notice implicated Scott Graphics, Inc., a former Scott subsidiary, as having disposed of hazardous waste at the site. There have been no significant developments since the date the Corporation received the notice.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of the executive officers of the Corporation as of March 1, 1997, together with certain biographical information, are as follows:
ROBERT E. ABERNATHY, 42, was elected Group President effective January 1, 1997. He is responsible for the professional health care business, nonwovens manufacturing and research, the technical papers business, K-C Aviation Inc. and the World Support Group. Mr. Abernathy joined the Corporation in 1982. His past responsibilities in the Corporation have included operations and major project management in North America. He was appointed Vice President-North American Diaper Operations in 1992 and Managing Director of Kimberly-Clark Australia Pty. Limited in 1994.
JOHN W. DONEHOWER, 50, was elected Senior Vice President and Chief Financial Officer in 1993. Mr. Donehower joined the Corporation in 1974. He was appointed Director of Finance - Europe in 1978, Vice President, Marketing and Sales - Nonwovens in 1981, Vice President, Specialty Papers in 1982, Managing Director, Kimberly-Clark Australia Pty. Limited in 1982, and Vice President, Professional Health Care, Medical and Nonwoven Fabrics in 1985. He was appointed President, Specialty Products - U.S. in 1987, and President - World Support Group in 1990.
O. GEORGE EVERBACH, 58, was elected Senior Vice President - Law and Government Affairs in 1988. Mr. Everbach joined the Corporation in 1984. His responsibilities have included direction of legal, human resources and administrative functions. He was elected Vice President and General Counsel in 1984; Vice President, Secretary and General Counsel in 1985; and Senior Vice President and General Counsel in 1986.
THOMAS J. FALK, 38, was elected Group President - Tissue, Pulp and Paper effective January 1, 1996. He is responsible for the Family Care, Wet Wipes, Away From Home, Neenah Paper and Pulp and Paper Sectors, as well as the Consumer Business Services, Environment and Energy and Human Resources organizations. Mr. Falk joined the Corporation in 1983. His responsibilities have included internal audit, financial and strategic analysis, and operations management. Mr. Falk was appointed Vice President - - Operations Analysis and Control in 1990. He was elected Senior Vice President - Analysis and Administration in 1992, Group President - Infant and Child Care in 1993, Group President - North American Consumer Products effective January 1, 1995, and Group President - North American Tissue Products effective July 21, 1995.
PAUL S. GEISLER, 55, was elected Group President - Asia/Pacific in April 1996. He was appointed President - Asia in 1994. Mr. Geisler joined the Corporation in 1982 as Marketing Director - Facial Tissue and Table Napkins. He was appointed Vice-President - DEPENDR Absorbent Products and New Technology Products in 1984, and Vice-President - Home Health Care in 1985. In 1990, Mr. Geisler was appointed President - U.S. Infant Care Sector, and in 1992, he was elected Group President - North American Feminine Care and Adult Care Sectors.
WAYNE R. SANDERS, 49, was elected Chief Executive Officer in 1991 and Chairman of the Board in 1992. He previously had been elected President and Chief Operating Officer in 1990. Employed by the Corporation in 1975, Mr. Sanders was appointed Vice President of Kimberly-Clark Canada Inc., a wholly owned subsidiary of the Corporation, in 1981 and was appointed Director and President in 1984. Mr. Sanders was elected Senior Vice President of Kimberly-Clark Corporation in 1985 and was appointed President - - Infant Care Sector in 1987, President - Personal Care Sector in 1988 and President - World Consumer, Nonwovens and Service and Industrial Operations in 1990. Mr. Sanders is a director of Adolph Coors Company, Coors Brewing Company and Texas Commerce Bank, National Association. He also is a member of the Marquette University Board of Trustees and is a national trustee of the Boys and Girls Clubs of America. He has been a director of the Corporation since 1989.
KATHI P. SEIFERT, 47, was elected Group President - North American Personal Care Products effective July 21, 1995. She is responsible for the Infant and Child Care and Feminine and Adult Care Sectors, as well as the U.S. and Canadian Consumer Sales and Safety and Quality Assurance organizations. Ms. Seifert joined Kimberly-Clark in 1978. Her responsibilities in the Corporation have included various marketing positions within the Away From Home, Consumer Tissue and Feminine Products business sectors. She was appointed President - Feminine Care Sector in 1991 and was elected Group President - Feminine and Adult Care in 1994 and Group President - North American Consumer Products effective January 1, 1995. Ms. Seifert is a member of the Board of Directors of Eli Lilly and Company and the Aid Association for Lutherans.
JOHN A. VAN STEENBERG, 49, was elected President - European Consumer and Service & Industrial Operations effective January 1, 1994. He is responsible for the Household Products, Infant and Child Care, Feminine and Adult Care and Away From Home Sectors in Europe, as well as the European Consumer Sales and Distribution organizations, and the Central and Eastern Europe Consumer and Away From Home businesses. Mr. Van Steenberg joined the Corporation in 1978. His responsibilities have included operations and major project management in North America. He was appointed Managing Director of Kimberly-Clark Australia Pty. Limited in 1990.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The dividend and market price data included in Note 15 to the Financial Statements, and the information set forth under the captions "Dividends and Dividend Reinvestment Plan" and "Stock Exchanges" contained in the 1996 Annual Report to Stockholders are incorporated in this Item 5 by reference.
As of March 14,1997, the Corporation had 55,800 stockholders of record.
(1)Certain promotional costs have been reclassified from advertising, promotion and selling expenses to a reduction in net sales for all years presented to conform to the presentation of such data for the year ended December 31, 1996.
(2)Results for 1995 include a pretax charge of $1,440.0 million or $1,070.9 million after income taxes and minority interests ($3.83 per share) for the estimated costs of the merger with Scott, for restructuring the combined operations, and for other unusual charges. Results for 1993 include a pretax charge of $378.9 million or $283.2 million after-tax ($1.02 per share) for planned restructuring and productivity improvement programs. Results for 1992 include a pretax charge of $250.0 million or $172.0 million after-tax ($.62 per share) related to the restructuring of the consumer and service products operations in Europe and certain operations in North America.
(3)Share of net income of equity companies and net income for 1995 include a nonoperating charge of $38.5 million ($.14 per share) for foreign currency losses incurred by the Corporation's Mexican affiliates on the translation of the net exposure of U.S. dollar-denominated liabilities into pesos. In 1994, peso losses charged to net income of equity companies and net income was $39.2 million ($.14 per share). The translation losses are related to the devaluation of the Mexican peso in December 1994 and subsequent periods.
(4)Results for 1994 include income of a discontinued operation, net of taxes, of $48.4 million ($.17 per share) related to S.D. Warren Company, a former printing and publishing papers subsidiary, which was sold on December 20, 1994. Results for 1993 and 1992 include a loss of a discontinued operation, net of taxes, of $46.6 million ($.17 per share) and $30.9 million ($.11 per share), respectively.
(5)Results for 1994 and 1993 include an extraordinary loss related to the early extinguishment of debt of $61.1 million ($.22 per share) and $9.6 million ($.03 per share), respectively.
(6)Net income for 1992 includes net after-tax charges of $311.0 million ($1.12 per share) for the cumulative effects of adopting the required accounting rules for postretirement health care and life insurance benefits and for income taxes.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information set forth under the caption "Management's Discussion and Analysis" contained in the 1996 Annual Report to Stockholders is incorporated in this Item 7 by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Corporation and its consolidated subsidiaries and the independent auditors' report thereon contained in the 1996 Annual Report to Stockholders are incorporated in this Item 8 by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section of the 1997 Proxy Statement captioned "Certain Information Regarding Directors and Nominees" under "Proposal 1. Election of Directors" identifies members of the board of directors of the Corporation and nominees, and is incorporated in this Item 10 by reference.
See also "EXECUTIVE OFFICERS OF THE REGISTRANT" appearing in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information in the section of the 1997 Proxy Statement captioned "Executive Compensation" under "Proposal 1. Election of Directors" is incorporated in this Item 11 by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information in the section of the 1997 Proxy Statement captioned "Security Ownership of Management" under "Proposal 1. Election of Directors" is incorporated in this Item 12 by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in the section of the 1997 Proxy Statement captioned "Certain Transactions and Business Relationships" under "Proposal 1. Election of Directors' is incorporated in this Item 13 by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS PART OF THIS REPORT.
1. Financial statements:
The Consolidated Balance Sheet as of December 31, 1996 and 1995, and the related Consolidated Income Statement and Consolidated Cash Flow Statement for the years ended December 31, 1996, 1995 and 1994, and the related Notes thereto, and the Independent Auditors' Report of Deloitte & Touche LLP thereon are incorporated in Part II, Item 8 of this Form 10-K by reference to the financial statements contained in the 1996 Annual Report to Stockholders. In addition, related reports of Deloitte & Touche LLP and other auditors are included herein.
2. Financial statement schedule:
The following information is filed as part of this Form 10-K and should be read in conjunction with the financial statements contained in the 1996 Annual Report to Stockholders.
Independent Auditors' Reports
Schedule for Kimberly-Clark Corporation and Subsidiaries: Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted because they were not applicable or because the required information has been included in the financial statements or notes thereto.
3. Exhibits:
Exhibit No. (3)a. Restated Certificate of Incorporation, dated December 12, 1995, incorporated by reference to Exhibit No. (3) to the Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
Exhibit No. (3)b. By-Laws, as amended November 22, 1996, incorporated by reference to Exhibit No. 4.2 of the Corporation's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on December 6, 1996 (File No. 33-17367).
Exhibit No. (4). Copies of instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission on request.
Exhibit No. (10)a. Management Achievement Award Program, as amended as of January 1, 1997.
Exhibit No. (10)b. Executive Severance Plan, incorporated by reference to Exhibit No. (10)c of the Corporation's Annual Report on Form 10-K for the year ended December 31, 1992.
Exhibit No. (10)c. Fourth Amended and Restated Deferred Compensation Plan for Directors.
Exhibit No. (10)d. 1986 Equity Participation Plan, as amended effective November 1, 1996.
Exhibit No. (10)e. 1992 Equity Participation Plan, as amended effective November 1, 1996 (subject to stockholder approval at the Corporation's 1997 Annual Meeting of Stockholders).
Exhibit No. (10)f. Deferred Compensation Plan, effective as of October 1, 1994, incorporated by reference to Exhibit No. (10)g of the Corporation's Annual Report on Form 10-K for the year ended December 31, 1994.
Exhibit No. (10)g. First Amendment to Deferred Compensation Plan, effective as of November 22, 1996.
Exhibit No. (10)h. Outside Directors' Stock Compensation Plan, incorporated by reference to Exhibit No. 4.5 to the Corporation's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on April 18, 1996 (File No. 33-02607).
Exhibit No. (10)i. Supplemental Benefit Plan to Salaried Employees' Retirement Plan, effective as of November 17, 1994.
Exhibit No. (10)j. Second Supplemental Benefit Plan to Salaried Employees' Retirement Plan, effective as of November 17, 1994.
Exhibit No. (10)k. Retirement Contribution Excess Benefit Program, effective as of January 1, 1997, incorporated by reference to Exhibit No. 4.5 to the Corporation's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on December 6, 1996 (File No. 33-17367).
Exhibit No. (11). The net income per share of common stock computations for each of the periods included in Part II, Item 6