Michael Masseth - Vice President of Investor Relations Thomas Falk - Executive Chairman, Chief Executive Officer, President and Member of Executive Committee Mark Buthman - Chief Financial Officer and Senior Vice President Paul Alexander - Director of Investor Relations

Constance Maneaty - BMO Capital Markets U.S. Lauren Lieberman - Barclays Capital John Faucher - JP Morgan Chase & Co Ali Dibadj - Bernstein Research William Schmitz - Deutsche Bank AG Jason Gere - RBC Capital Markets Corporation Wendy Nicholson - Citigroup Inc Andrew Sawyer - Goldman Sachs Group Inc. Linda Weiser - Caris & Company Karen Lamark - Federated Investors Chip Dillon - Crédit Suisse AG Gail Glazerman - UBS Investment Bank Christopher Ferrara - BofA Merrill Lynch

Ladies and gentlemen, thank you for your patience in holding. We now have your speakers and conference. [Operator Instructions] It is now my pleasure to introduce Mr. Paul Alexander. Mr. Alexander, you may begin, sir.

Thanks, David, and good morning. Welcome to our Third Quarter Earnings Conference Call. With us today are Tom Falk, Chairman and CEO; Mark Buthman, Senior VP and CFO; and Mike Azbell, Vice President and Controller. Here's the agenda for the call. Mark will begin with a review of our third quarter results, then Tom will provide his perspective on our results and discuss the 2010 outlook and we'll finish with Q&A. For those wishing to follow along, we do have a presentation of today's materials in the Investors section of our website, which is www.kimberly-clark.com. Before we begin, let me remind you we'll be making forward-looking statements during the call. There can be no assurance that future events will occur as anticipated or that our results will be as estimated. Please refer to the Risk Factors section of our latest annual report on Form 10-K for a description of factors that could cause our future results to differ materially from those expressed in any forward-looking statements. I'd also like to point out that we will be referring to our adjusted 2010 outlook. That excludes a one-time loss in the first quarter with a re-measurement of the local currency balance sheet in Venezuela as a result of the move to highly inflationary accounting. Management believes that reporting in this manner enables investors to better understand and analyze our ongoing results of operations. For further information and reconciliations to comparable financial measures determined in accordance with GAAP, please see today's news release and additional information on our website. Now I'll turn it over to Mark.

Thanks, Paul and, good morning. I hope you had a chance to review this morning's news release with the details of our results for the quarter. Let’s start with a few headlines. First, organic sales volumes were up 1%. We generated strong growth in Personal Care and a number of our targeted growth initiatives. Debt performance was mostly offset by softness elsewhere in a weak economic environment. Second, we had another strong quarter of cost savings that helped us to partially offset significant input cost inflation in the quarter. And third, our cash flow remained strong that's allowed us to continue to invest appropriately in the business and return cash to shareholders. Now, let's cover the details of the quarter starting with the top line. Overall sales increased about 1% to $5 billion. Organic sales also rose 1% driven by higher sales volumes. Similar to last quarter, lower volumes in Venezuela were a one point drag on our overall company sales in the third quarter. Now let me turn to the top line for each of our segments. In Personal Care, organic sales rose 3% driven by strong volume growth of 5% at selling prices and product mix were each off 1%. In North America, organic sales increased 3%. Sales volumes were up 5% with broad-based growth in most areas, while product mix and net selling prices were each down one point. Feminine Care volumes increased double digits for the third consecutive quarter as a result of the U by Kotex innovation. Adult Care volumes also grew double digits with excellent performance in both Poise and Depend. Child Care volumes were up 6% in conjunction with market share gains, and Huggies diaper volumes advanced 1%. Moving to Europe. Personal Care organic sales were up 4%. It was driven by mid- single-digit volume growth in diapers and strong performances in Child Care and Baby Wipes. K-C International Personal Care organic sales rose more than 4%. Sales volumes were up nearly 6% with double-digit growth in China and most of Latin America. Net selling prices were down 1%, as increases in Venezuela were more than offset by modest declines elsewhere in response to competitive activity. Now turning to Consumer Tissue. Organic sales increased about 3%. Net selling prices were up 2% and product mix improved 1%, reflecting our actions to increase revenue realization. Sales volumes were even with last year. In North America, organic sales were up more than 1% with product mix up two points and sales volumes higher by 1%. Net selling prices were down 1% as planned increases in promotional activity were mostly offset by sheet count reductions that we took earlier in the year. Volume performance included a 4% increase in bathroom tissue led by COTTONELLE and the benefits from new Kleenex Hand Towels. Paper towel volumes were down and continue to be impacted by consumer trade-down. Facial tissue Kleenex volumes were even with year ago in a soft overall category. Like I said, I was pleased to see market shares advance more than one point behind our best ever base sheet and a strong back-to-school marketing campaign. In Europe, Consumer Tissue organic sales were up about 3% driven by higher net selling prices. For K-C International, Consumer Tissue organic sales increased about 5%. Strategies to increase revenue realization delivered a six-point increase in net selling prices and one point of growth from product mix. Sales volumes fell 2% due to declines in Venezuela. Moving to K-C Professional & Other. Organic sales were down 1%. Net selling prices and product mix each increased 1% as we continue to focus on net realized revenue. However, sales volumes fell 3% in a challenging economic environment. High unemployment and office vacancy levels continue to impact the North American washroom category, where our volumes fell at a double-digit rate. Volume performance also reflects our disciplined pricing strategies in this high-cost environment. On the other hand, volumes advanced nicely in the high-margin Safety and Wiper businesses, although KCP volumes in Europe were down 4% in the quarter. Lastly, Health Care organic sales were down 6% as volumes were off 4% and net selling prices fell two points. Last year's increased demand for face masks because of the H1N1 flu virus had a negative effect on volume comparisons of about 6%. In addition, volumes in our North American Supplies business were impacted by a slowdown on market demand. Meanwhile, organic volumes of high-margin medical devices were up 9%. Now moving to profit margin and cost savings. The third quarter operating profit fell 20% with margins of 14%. Benefits from top line growth, cost savings and lower pension expense partially offset cost inflation of $265 million. That's the highest quarterly cost inflation amount that we've ever faced. Nonetheless, we continue to invest in our brands to support future growth, as strategic marketing and research and development spending each increased about $10 million in the quarter. Additionally, we took production downtime that reduced operating profit by about $20 million as we continue to closely manage our inventory levels. Turning to cost savings. Our strong momentum with FORCE [Focused On Reducing Costs Everywhere] programs continued in the third quarter. With savings of $95 million, we continue to deliver broad-based results across the organization. Given our momentum, we now expect core savings to easily exceed $300 million this year. Now looking at margins by segment. And given the significantly higher input costs and the comparison to our record earnings last year, it's not surprising that margins were down in all segments compared to prior year. Having said that, Personal Care margins continued to be healthy at nearly 20%. Consumer Tissue margins of about 10% were similar to last quarter. They remain pressured by high pulp prices. KCP margins are nearly 15%, remains solid despite the weak economic environment. And lastly, Health Care margins of about 13% were up sequentially as we expected. Now moving to cash flow. Cash provided by operations was $745 million compared to $791 million last year. Decline was driven by lower cash earnings and a smaller improvement in working capital, mostly offset by a lower level of pension plan contributions. Nonetheless, I'm encouraged that our cash generation remains strong, continues to build sequentially as the year progresses. In terms of capital spending, third quarter spending was $248 million. We now expect that full year spending will be between $900 million and $1 billion, that's down slightly from our previous plan. Regarding share repurchases, we bought 3.1 million shares of KMB stock in the quarter at a cost of about $200 million. We've repurchased $700 million of our stock through the first nine months of the year. And given our continued strong cash flow, we now expect to repurchase $800 million of stock for the year. That's at the high end of our previous target. So that wraps up the financial review. To recap the quarter, we delivered healthy volume growth at Personal Care and a number of targeted growth areas, although the soft economic environment weighted on overall demand. We achieve significant cost savings, while we faced all time high cost inflation. We continue to invest to support our brands and future growth opportunities, and we generated strong cash flow. Now I'll turn it over to Tom.

Thanks, Mark, and good morning, everyone. I'll comment on our results and outlook. And then as usual, we'll get to your questions. In summary, we're executing our Global Business Plan in an environment that's more difficult than we thought just three months ago. And while this has dampened our bottom line growth expectations for 2010, we continue to manage the fact as we control in the short term while we do what's right for the long term of our business. Let me begin with our third quarter results, and I'll start with some of the progress that we're making. First, as you heard from Mark, our increased emphasis on innovation and marketing is delivering solid results for many of our brands. And importantly, our market positions are improving. Our third quarter U.S. market shares were ahead of, or even with, the year-ago period in the majority of our consumer businesses. In fact, shares were up between one and three share points for Kotex, Poise, Depend, Kleenex and Pull-Ups. And shares were essentially even for our Huggies Diapers business and our Bathroom Tissue business in a very competitive market. So overall, I'm encouraged with the strength of our brands and our innovation. Second, our targeted growth initiatives continue to take hold. We're growing nicely in the higher-margin portions of both K-C Professional and Health Care, and we're generating strong growth in most of K-C International. In fact, setting aside Venezuela, our Personal Care business in K-C International grew sales volumes nearly 10% in the third quarter. But even though we fine tune pricing strategies in some markets in response to a modest pick-up in competitive activity, I'm very optimistic about the long-run prospects for our K-C International business. And then third, our teams continue to execute with financial discipline. We're delivering strong cost savings, closely managing working capital and allocating our cash flow in shareholder-friendly ways. We continue to be disciplined in these areas going forward. So now let me talk about the challenges that we face. The first is the overall economic environment. With persistently high unemployment, weak consumer spending in a competitive marketplace, overall market demand in many of our categories in North America has been relatively soft and weaker than we expected back in July. This is probably most evident in our K-C Professional Washroom business, Health Care supplies and in portions of our consumer categories, including diapers, training pants and facial tissue. As a result, while organic sales volumes rose 1% in the third quarter, slightly better than the second quarter, this was still below what we'd anticipated. The other major headwind in the quarter was high commodity cost. The $265 million of cost inflation that Mark just mentioned and we experienced was the primary reason that our margins and bottom line earnings were down. And while pulp prices have fallen some from peak levels in July, the overall market has been more resilient than we previously estimated. So all in all, the challenging environment weighed more heavily on our bottom line results in the third quarter than we previously estimated. With that said, our business fundamentals are in good shape overall. So now let me turn to the outlook. We will continue to invest in our brands, pursue our targeted growth initiatives and invest for our future growth. Same time, we'll continue to pursue incremental cost savings opportunities and control our discretionary spending. We remain focused on generating cash and allocating it in shareholder-friendly ways. This is the right strategy to protect and strengthen our company even in the current difficult and economic environment. Key changes to our full year 2010 planning assumptions are included in this morning's news release, but here are the highlights. On the top line, we now expect organic sales growth of about 2% compared to our previous target range of 2% to 4%. That's mostly due to the weaker underlying demand in North America that I just mentioned. The secondary factor is a slightly higher competitive spending level in K-C International. In terms of commodity costs, raw material inflation is expected to be toward the high end of our previously estimated range of $700 million to $800 million, mostly because pulp hasn't fallen as fast as we thought it would. To put that cost inflation in perspective, it represents a full year drag on earnings of about 30%. As a result of our updated assumptions, we're now targeting adjusted earnings per share in the range of $4.60 to $4.70, which represents growth of 2% to 4% compared to 2009 earnings of $4.52 a share. Compared to our previous guidance of $4.80 to $5 a share, about 2/3 of this change is due to the lower sales outlook and about 1/3 is due to the higher cost. Given the significant increase in cost inflation since the beginning of the year, we were unable to overcome the further downsides that have materialized over the last three months despite delivering excellent cost savings. Regardless of the factors that I've just described, all of us at Kimberly-Clark are accountable for our results and are very disappointed with not delivering on our expectations this year, and rest assured we will do what it takes to get back on track with our Global Business Plan. Looking ahead, we expect the fourth quarter earnings per share will be similar to or potentially somewhat higher than third quarter performance. And relative to the third quarter, we expect improved net pricing, mostly because of modestly lower promotional activity. Cost savings should build as we implement additional FORCE programs. And third, pulp costs should be slightly lower, taking into account already announced declines for October. We continue to closely monitor the overall economic environment, particularly market demand in North America. So to summarize, we're executing our plans, we're investing for the future, we got good financial and cost discipline, and we're returning cash to our shareholders. We'll continue to work to improve our performance over time, even though our near-term growth has been impacted by the economic and competitive environment. That wraps up our prepared remarks, and now we'll be happy to open it up for questions.

[Operator Instructions] Our first question comes from Bill Schmitz with the Deutsche Bank. William Schmitz - Deutsche Bank AG: I look at the second quarter versus the third quarter, and a lot of these kind of one-off savings that came through. And it seems like almost across the board, they all came down pretty dramatically. So like FORCE was 105, then went to 95. Pension was a 40 benefit, now it's 20. And then the big change in curtailment. So is this third quarter kind of like the new run rate for these savings? Or was it sort of like a soft anomaly as we kind of model the business going forward?

If you look at our earnings per share second quarter to third quarter, $1.20 to $1.14, about $0.04 was actually effective tax rate. Effective rate in the second quarter, I think, was 27.5 and we were 30.3 in Q3. And then with the – there is about $0.02 of operating earnings drag. And in terms of FORCE, I think between 95 and 105, I would say it's pretty similar. Curtailment is probably reflective a little bit of the weaker categories, where we're just taking it as we need it. And I wouldn't interpret it as more than that. So again, I wouldn't say any big seismic change. Second quarter was probably a little above normal. Third quarter is probably closer to normal. William Schmitz - Deutsche Bank AG: And then just on the Scott Towel business, I know it's a relatively small business, but it seems that there was a lot of lost distribution. I mean, is this going to be like a going concern over the next two or three years?

Actually, Scott Towel's volume was up 4% in the quarter. And all of our towel volume loss was in Viva, which was down double digits. And Viva, a good chunk of that was lost distribution, and we're working hard to get that back. And we've got some good innovation plans coming for Viva in 2011.

Our next question comes from Chris Ferrara with the Bank of America. Christopher Ferrara - BofA Merrill Lynch: Pricing, it sounds like you're saying, I think, that most of the incremental price pressure you felt is emerging markets. And it's a market issue, it's a market growth issue in North America. In other words, the pricing in North America is okay relative to what you felt about pricing in emerging markets. Is that right? And can you talk a little bit about where that's coming from?

I guess I'd say the pricing issue was pretty widespread, so we saw it in North America. And this isn’t list price changes, its more trade spending activities, so we had more promotional events in the third quarter than the second quarter. And so that's part of it. We'd also said the competitive activity is increased. So as category volumes are a little weaker, all the competitors are fighting over that little bit of volume growth. Or in the case of diapers, the category is actually down 1%. And so you did some more competitive activity chasing the consumers that are out there. In international markets, it was spotty. You'd see in a market like Russia, where our primary competitor has taken down Personal Care pricing a couple of times in the first six months. And we've now matched up to that, so we're probably lagging that a bit and took more of the hit in the third quarter. But there are other markets where they have taken price increases. So again, I'd say it's sort of market by market in the fundamentals there, but it was pretty widespread. Christopher Ferrara - BofA Merrill Lynch: In North America Consumer Tissue, pricing went back negative again, if I got that right. I understand volume definitely bounced. But just taking a step back in a broader context of where pulp prices are. I understand that they're coming down. But I mean, you basically have pulp near $900, that you're paying at least through the COGS anyway, and you have pricing that's negative. And I think you said Q4 is getting better. But it sounds like it's maybe even incrementally tougher to price than you would thought, is that right?

So I'd say if you look at percent promoted across most of our tissue categories, you see that slowly creep up. And so that's what's showing up in the pricing numbers. We also had more events with some of the back-to-school activity on facial tissue that was a heavy promotional quarter for us. And we saw facial tissue share pop up four points sequentially, which it typically does second quarter to third quarter because second quarter is usually our weakest facial tissue quarter of the year, and you start to head in to back-to-school and then cold and flu. We'll see that pick up in the back half.

Our next question comes from Gail Glazerman with UBS. Gail Glazerman - UBS Investment Bank: Going back to the paper towel question. Does that mean you're double-digit growth is more of a Kimberly-Clark issue than a category issue at this point? Or is the category overall still deteriorating at pretty steep rates?

No, I mean, basically, we're up slightly on Scott Towels. We were down double digits on Viva. In paper towels, that's probably the one category, where we've seen private label shares grow, so you've seen more or consumer trade-down there in particular. You also have some retailers that have really taken quite a few SKUs out of that overall category. Some of that's starting to come back as they have probably gone a little deeper than they should have. And so that's probably one where the consumer has been willing to take a little bit more risk and trade-down, and the private label has probably been the big beneficiary. Gail Glazerman - UBS Investment Bank: And looking at the K-C Professional weakness, can you give a sense of, I guess, what demand did moving through the quarter? And what is it doing moving into the fourth quarter? And is there any sign of improvement given that macrosentiments [ph] there improved a little bit?

Part of this is also the comparisons to last year were, as you recall, in the first half of last year, you saw major distributor inventory destocking. So our comps were easier. So in markets like KCP in Europe last quarter, we had double-digit volume growth. While, when you look at third quarter, we actually had a volume drag. In part, it was distributor inventory moves. But I also tell you that categories are relatively weak. You're seeing office building, and some of those areas are -- unemployment levels haven't really come back up very much. So you got fewer people in the workforce, and you're not seeing a healthy category growth. We probably also lost a little bit of share in our Washroom business as for some of the really low margin pieces of the business we are willing to walk rather than take further price erosion there. And so we've been disciplined on pricing and took a little bit of a volume hit in the third quarter as a result. Gail Glazerman - UBS Investment Bank: And just last question, can you talk a little bit more about Venezuela? I guess they just expropriated the U.S. companies' operations today. Can you just give us, remind us, I guess, the invested capital there. And what the contribution's been running lately?

Yes, we got a very good business in Venezuela, and we're working hard to try to make sure we can take care of as many of our Venezuelan consumers as we can. So we are, we locally manufacture there. We're trying to manage our exposure to bring in some imported materials as well as look for local materials, where we can, to run those operations. We are getting some small amounts of foreign exchange. The business overall is profitable, and it's one that we're really managing kind of day-to-day down there to make sure we're satisfying as many consumers as we can while managing our overall exposures. And I think the balance sheet exposure from a total corporate standpoint isn't material.

The next question comes from Ali Dibadj with Sanford Bernstein. Ali Dibadj - Bernstein Research: Just a few questions. One is, I see a lot discussion about pricing. Kind of in full candor, how bad is it out there from a pricing perspective, promotional prospective?

I think part of it is expectations, we were expecting it to get better. And in some cases, it's been about the same. In some cases, it's slightly worse. And so you're seeing promotion price points that are sticky. They're not really going down significantly but are not coming up as much as we would've hoped. And so that means you wind up spending a bit more trade to get the same promotion or same volume. You are seeing some selected retailers, even in other categories with some deep discounts. I know in Dallas, Aldi was selling a gallon of milk for any $0.99. So you saw some really hot feature prices out there. You're seeing some of that in some of our categories, but most of that is retailers investing their own funds, not other competitors. Ali Dibadj - Bernstein Research: And how does that change your expectations going forward then?

Well, we were expecting to get a bit more price this year. We said we thought we'd get one to two points of price this year. We now say we're going to get about a point of price this year and so. Ali Dibadj - Bernstein Research: It's more like next year and kind of from a forward-looking perspective. We're not looking for guidance, just how you see dynamics playing out.

Typically, Ali, as you know, we don't assume we're going to get a lot of price. So we try to drive mix with our innovation. But other than that, we'd expect to recover broad shifts in commodity costs over time. But we're expecting, we'll give you more guidance in January. But based on our -- as we call pulp today, we'd say pulp's probably going to look pretty similar to where we expect to end 2010 in 2011. Ali Dibadj - Bernstein Research: And my other question which was on the one hand, you have competitive dynamics and pricing. Other hand, you have commodities. And I guess I just don't get something and was looking from some clarification which is, you guys and many of the other companies out there seem to be surprised by inflation, even though on the same hand, by the same token, we hear that there's a three to six months lag between spot prices and the impact on your P&L. So three months ago, you knew what you're going to have to deal with. So I don't get what the element of surprise is.

Yes, I mean, I think we're talking about our outlook. So if you look forward-looking for the rest of the year, pulp's going to be roughly $20 a ton, higher than we thought it would be. So it's probably more like a three-month change where you've got FIFO-based inventories, where you got LIFO inventories that flows through a little quicker. It's probably more like a month on those so... Ali Dibadj - Bernstein Research: But I guess three months ago, you knew what price would flow through your P&L because of the three months lag. So when you give us the last guidance for this quarter that we you just reported, you kind of knew what the spot price was than, i.e. what you're going to feel in your P&L.

Ali, as you know, we don't give quarterly earnings guidance. We'll give you full year earnings guidance. So we had a call for what we thought pulp was going to average for the year, and this is actually the only quarter that we'll give you guidance for one quarter.

And Ali, I would say that it's fair that most of the higher than expected inflation for the year will hit us in the fourth quarter compared to what we told you in July. Ali Dibadj - Bernstein Research: The commodities for this quarter were not in line with what you expected three months ago, were they?

They were modestly higher than expected. Ali Dibadj - Bernstein Research: So commodity was not the big issue?

I say this quarter, more of the miss versus our expectations was top line. Volume was weaker generally across the board, and price recovery was a little weaker. [indiscernible] were better, and material costs were a little higher. Ali Dibadj - Bernstein Research: And just a last question about inventory days still being up obviously impacted by top line, and you're doing some curtailment on production. It sounds like continuing. How should we think about what type of curtailment you're going to have to do and what the impact is on margin as you go forward given the environment? And I guess to get this aggregate what the inventory is coming from, how much of it is from outsourced production and how much was insource or different categories, that'd be helpful.

Yes, if you look at working capital on a local currency basis, it's not as big of an issue as you'd think because the foreign currency strengthened right at the end of the quarter, that had more to do with the mathematical days of inventory calculation. And so if you look that on a constant currency basis, actually working capital improved slightly during the quarter. So we're trying to place a curtailment as we need it, and we wouldn't see that we built up a big pile of inventory anywhere that we're that worried about.

Next question comes from Chip Dillon with Credit Suisse. Chip Dillon - Crédit Suisse AG: In terms of looking at the private-label tissue situation, it seems like a couple of the private-label guys are building through air dry technology plants. And do you know whether they are aiming more for the towel space or would through air dry be basically just for bathroom tissue?

TAD is a technology that builds bulk and would work well for bath or towels, and it's a little easier to build a through air dried poly machine. It's still tougher to make through air dried bath and get it soft enough to really make a premium type claim. And so, obviously, both Procter and us have some substantial intellectual property in those areas. But we were aware of some of what's going on, some of them are in construction, some of them are announced but haven't started yet. Chip Dillon - Crédit Suisse AG: And then I guess looking more near term, now that this -- it's looking like pulp is holding up higher than, I think, was believed earlier. Do you see any window for getting some pricing here? It seems like list prices or at least maybe a bit aggressive short sheeting, but you are getting some of that outside of the U.S. Certainly, it seems like that was the case in Europe from what we've heard from others. Do you think there's a window to get pricing here in tissue over the next, I know it takes several months to implement it, but as you look out the next few quarters?

Yes, I mean, it's tough to speculate what might happen there, Chip. And it really probably depends on what the relatively modest moves that we've seen where pulp is trending down. It's a total tougher to go into a customer and say pulp's down, we're going to take a price increase. So I think what you'll see is a continued innovation. And with innovation and some product change, you may have some opportunity for sheet count change at that point. But at this stage, from what we're seeing, I think stability in price for a while would be an improvement. Chip Dillon - Crédit Suisse AG: And then lastly, just again not to stay too focused on tissue, but I was just noticing how this year's operating income will probably be in both tissue-related segments below where it was even in, say, 2000. And seeing that level of decline, is there anything as you look out maybe more longer-term that you think you guys can do to maybe arrest that and not approach the growth that you see in Personal Care but certainly arrest that decline?

Sure. That's certainly our strategy, and we've got some good innovation programs coming for most of our tissue businesses in key markets where we’ve got a margin structure. But in other markets, we are trying to manage that business for margin more aggressively. And so we're being careful with where we're going to put assets down on the ground, and you'll expect to see us continue to be aggressive in areas where we've got good opportunities to grow. Chip Dillon - Crédit Suisse AG: And after this one, in the Dry Max product that you're competitor has in the diaper arena. It seems like this is one innovation that you don't feel strongly about having to come out and respond to directly. Is that still a fair statement?

Well, I think we feel very good about our overall diaper performance, and we are excited about our product innovation plans that we've been executing and that we'll continue to execute. I mean, in the face of the Dry Max launch in the second quarter, to do our jeans-type renovation and really pick up a share point, I would say has been a big hit. And I think the good news for mom is that both of the major branded players, both Huggies and Pampers are innovating, and that's just making it tougher for private label in that space. Chip Dillon - Crédit Suisse AG: Right, but you don't see the need to get that thin?

If you look at the history of diapers, they've continued to get thinner, better fitting. It's to what end, to make it fit better and leak less. We're all working on all those types of objectives so...

Our next question comes from Andrew Sawyer with Goldman Sachs. Andrew Sawyer - Goldman Sachs Group Inc.: Just a quick one, just following up on that last question. You said, Tom, that you look to manage profitability outside the U.S. in tissue. I was wondering if you could talk us through the thinking on the bit more aggressive promotional activity we saw from you guys this quarter in the U.S. on the bath tissue front and how you guys are balancing the need to kind of drive volume and avoid curtailment and depending share versus maximizing price and margin in that business?

As Mark mentioned, we had about $20 million of curtailment cost in the third quarter versus prior year, and most of that was in our Consumer Tissue business broadly around the world with a fair amount of that in North America. And so we're taking it as we need it. And I think we had an aggressive promotional plan put together with a lot of our key retailers tied into other events, that they want us to be a part of. And so that's been a part of our plan for the year. We'd expected to have a heavier third quarter with some of the back-to-school events that we are running. And so I'd say that that was basically executing the plan as opposed to out chasing incremental volume to keep your machines full. Andrew Sawyer - Goldman Sachs Group Inc.: So that's just how the calendar will sell this year.

Yes read relatively less in the first half because of some other things that we are working on and had a relatively heavier calendar in the second half. Andrew Sawyer - Goldman Sachs Group Inc.: So it would have been wrong to interpret it as pulp coming down and you got more promotion? Or is it just something that was always there?

We had expected to have a heavier third quarter, and that we also said we don't think the fourth quarter at this point will be as heavy from a promotional calendar standpoint as the third quarter was. Andrew Sawyer - Goldman Sachs Group Inc.: And on the tissue front, I mean, how are your returns on promotional spending as volume supposedly with the promotion versus normal?

Well, I mean, with more promoted dollars in the category, everybody's ROI is probably not what it was. But we've got terrific activity around COTTONELLE and had some success with facial tissue. Both of those are very high margin of return products. Scott tissue is really more of a base volume story, where it fulfills a very high percentage of the households that are loyal Scott users. So the need to promote as deep and as frequent isn't as great there. And so it's balancing that portfolio with what our retailers want to accomplish, to make sure we're the kind of partner that they want in the tissue category. Andrew Sawyer - Goldman Sachs Group Inc.: Then just a quick one on the diaper side. Is this category weakness you think reflective of the lower birthrate starting to flow through the category? Is there something else going on?

Absolutely, and we've got live births this year, they're going to be lower in the U.S. by 1% to 2%. I was having dinner with the CEO of a private hospital chain a couple of weeks ago and he said their live births are actually down double digits this year. Now he's got a little higher end consumer base, so that's not reflective of the overall national number. We think the 1% to 2% is probably right, but that flows directly into a lower category volume. Andrew Sawyer - Goldman Sachs Group Inc.: And then just a kind of back end yet [ph] Pull-Ups strength in this quarter, so you're not seeing the down trading out of Pull-Ups into large diapers anymore, but the category's weak case of birthrate, is that the way to think about it?

I think there still is an economic factor here because -- so we'd say the Pull-Ups category was a little weaker than the overall diaper category, so it's a combination of by the time to get the Pull-Ups, those kids were born before the downturn probably. So it's more a function of economics than the birthrate affecting that at this stage.

The next question comes from Laura Lieberman with Barclays Capital. Lauren Lieberman - Barclays Capital: I just wanted to focus a little bit again on K-C Professional and the Health Care business because actually when I look across retail, I looked at the quarter. That really seems to be the two businesses where the shortfall was in sales growth. Tissue, you stabilize volumes and pricing was still positive. And you plan on promotion kind of stepping up by your own doing sequentially. Personal Care, little bit more negative on pricing, but you clearly got the payback in volume. So it really feels like Health Care and K-C Professional were the two big surprises in the quarter. K-C Professional, what I'm not understanding is it doesn't really feel like -- unemployment didn't spike this quarter. The business had seemingly stabilized for two quarters, and now volumes are down and there's less pricing. So did you lose contract? I mean, separate from the walking away from business, I just don't understand what suddenly happened there.

Yes, I'd say a part of it, as we talked about, was the year-over-year comps. There was such a big inventory draw down in the first half of last year. And those inventories got built back up in the second half of last year, and we had easier comps in the first half than we're going to have in the second half, particularly for KCP. I also think at the end of the quarter, we saw both businesses really have a weak finish. So I think distributors are getting much more aggressive about managing cash near end of the quarter. So orders that we thought were going to go out in the last week of the month got pushed back and shift back into the early part of October. So again, as we look at the higher margin segments, Medical Devices and Health Care were up 9%. Our Safety and Work Place business and KCP was up nicely, but Washroom is down double digits. Part of that is the category is down, part of this distributor inventory pullback and part of it as we walked away from some business. Lauren Lieberman - Barclays Capital: But still, I mean, last year, volumes were still down pretty significantly in the second half, so you think distributors were actually building inventory last year even with the volumes down 7% in the third quarter of '09?

Yes, I mean, just looking at -- we've gotten more visibility in some of our suppliers inventories, probably more so in the Health Care front to really understand what's going on with the H1N1. And we're actually seeing them take days out of what their normal long-term target would be in trying to operate even leaner in this kind of an environment. And I think everybody's doing that. Most of our customers are very focused on cash management and still treating this very much like a soft economic situation. Lauren Lieberman - Barclays Capital: But have they become optimistic in the way that they were purchasing in the first six months?

Well, I think it was that the first six months of last year, when we are in the heart of the crisis, was even a worse situation. So the comp in the first six months of this year was much easier. Lauren Lieberman - Barclays Capital: And then in terms of your Personal Care, so this quarter was great. Great, great volume performance in European Personal Care. But volume is really quite volatile when you look at the results over several quarters. I rarely feel like I have any understanding of the connection between one quarter and the next. It doesn't really feel like it's either positive or negative momentum, it's sort of choppy. So can you really talk a little bit about that business and what's really driving your shipments in Europe in any given quarter because, again, this sort of lumpiness that I feel like is there.

A big part of it is you got much more concentrated retail trade in Europe, where in every market, your top three or four customers are about 70% of your business. And so if you're on deal with that customer more than normal in the quarter, you're going to drive it. And so it does tend to be a little lumpier. And you tend to find more deep discount promotions in Europe generally than you do in other markets, so in Andrex, you will find more 12 for 9 or you've even seen in diapers some buy one, get one free or Baby Wipes we've seen some even recently by one competitor, a buy one, get two free. And so when you have that kind of deep discount, you're going to drive a much choppier volume performance. As we look at share overall, our shares have been generally trending in the 14 to 15 range, which is more consistent. And we're just trying to make sure we're competitive in the market. But obviously, having less volatility is better for everybody, but that's not necessarily the way the customer wants to drive their business in the short term. Lauren Lieberman - Barclays Capital: So as we look forward to not in just 2011, but let's call it '11 and '12. A lot of the things that you guys have done, revenue realization emphasizing mix, the great innovation with Kotex and the marketing around adult incontinence, how does the good stuff that you guys have been doing the successes, how does that add up to being the real driver of your business versus cost inflation versus deep discounting in Europe? The negative seem to consistently outweigh the positive even when you're doing a lot of great stuff. So when you look at 2011, when you look at 2012, how do you get that balance to shift?

Well, I mean, we're trying to manage the portfolio, Lauren, as best we can. We got some great innovation coming. We want to make sure we're fully investing in that, we’re investing behind our brands. I mean, if you look year to date, we've invested about $110 million in strategic marketing despite $800 million in cost inflation. So we believe we're doing the right thing for the long-term health of the franchise and that over time, the commodity cycle will at least normalize to the point where we can take enough cost out and deliver on the key goals of our overall [ph] business plan. So we know we got to prove that to you and we're up for that challenge.

Our next question comes from Connie Maneaty with BMO Capital Markets. Constance Maneaty - BMO Capital Markets U.S.: I was hoping you could also give a little bit more perspective on the trend in inventories. As I look back in the quarters of 2009, your inventories declined every quarter 19% or 20%. And then in the first quarter, they also declined about 4% and then they were up 9% and 19% in the last two quarters. I guess I'm wondering if you could just explain what changed so much this year and also how your inventories could be rising if you have so much production downtime.

Yes, sure. I'll give you a quick answer. I may ask Mark to give a little more color. But basically, we took inventories down aggressively last year, as you know, and we generated about $1 billion for working capital reduction in 2009 and probably, in some cases, took them down a little lower than we should have to be able to really maintain customer service until we build up some of our supply chain capabilities a little bit more. And so in the first half of this year, we returned some inventory in a couple of areas to make sure we had adequate customer service capability. In the third quarter, what you saw was broadly more of a currency effect on inventory than a physical quantity effect on inventory, as we discussed earlier. So the fact that the foreign currency strengthened right of the end of the quarter had more of an impact on those inventories. If you looked at it on an absolute currency basis, inventory was actually down slightly in the third quarter. Mark, is there anything you want to add to that or?

Yes, and I would say there's no lack of emphasis of inventory across the businesses, and we're trying to balance in a relatively weak demand environment managing our stock. So you see a commitment to take machines down rather than producing product that we don't have good outlook to sell. So actually think our inventory performance in a weak demand environment, has been very good this year. And we've done a great job managing payables where overall cash conversion cycle is going to end up the year well ahead of our original plan for the year.

I think from a curtailment front, overall, we're still positive because we took so much downtime in the first half of 2009. For the third quarter, it was $20 million negative, but we'll still be broadly positive for the year. Constance Maneaty - BMO Capital Markets U.S.: Could you tell us what your capacity utilization is and if you think your manufacturing footprint is the right size for what you believe demand to be not only now but over the next few years?

Well, as you know, as we're growing in emerging markets, we're still expanding so we've opened our first plant in Russia, we've expanded in China, we're adding capacity in Latin America, so I would say we're operating at near full capacity and don't have any big areas where we've got excess capacity that we're concerned about at this point in time.

In fact, as we bring on capacity, some of our supply-chains have gotten stretched pretty far as it seems to have done a really good job managing capital. But as we put assets on the ground closer to the consumer, we're actually going to see, we could see some benefit over the next couple of years of lower inventories just by having production in a more favorable place.

Our next question comes from Wendy Nicholson with Citi Investment Research. Wendy Nicholson - Citigroup Inc: I have just a handful of kind of follow-ups, and the first one is back on Lauren's question on the K-C Professional business. That business has been trending well below the peak margins of several years ago. And I'm just wondering, first of all, can you tell how much of that business is in the U.S.? And on the capacity question, maybe the U.S. business is never going to be the growth economy it once was and maybe there's incremental capacity that ought to come there so we can get those margins back again higher. Is that a long way to think about that business?

Yes, and I guess a couple of things I'd say. First of all in the overall margins for that business overtime, given the secondary fiber has been at least as severe a swing as pulp, have been actually held up better than our Consumer Tissue margins. We've been consistently in 13% of 15% range throughout the cycle. So you saw a little bit more downward pressure. This time, we'd expect to see some improvement and they're aiming at those kind of mid-teens margins long-term. I don't see a big capacity issues that we're worried about there. And in some areas, both our Scott tissue business and the consumer side and our KCP business, can share assets so we've got some opportunity to manager overall footprint there and get some benefit from that. But I know, Paul, you got the data about what percentage in the USC.

Yes, it's roughly 50% on the global business. Wendy Nicholson - Citigroup Inc: And then second question, Venezuela, are you growing the Venezuelan business in local currency both on the top line and on the bottom line?

I don't know in local currency because -- I mean, basically, if you look in volume, it's down substantially in both tissue and Personal Care in Venezuela, pricing is up substantially in both tissue and Personal Care. And basically, we're running it more like a cash drawer business where as we get foreign exchange, we bring materials then, keep the machines running, try to keep shelves stocked with as much as we can. Wendy Nicholson - Citigroup Inc: But isn't it fair to say that come whatever, January, when we anniversary a big devaluation, that the drag, the overall drag on your business going forward into 2011 ought to be mitigated?

Well, we won't have a onetime hit. But I mean, about every month, basically the process is more of a question of, can we enough get foreign exchange to pay our bills. And so obviously, there's lots of it. Every CPG company we talk to is in the same situation. We're trying to do as much local manufacturing as we can. We're trying to find as many as local material sources as we can, so we can use the bolivars that are generated in the country to pay our bills. And then where we have to bring in dollar base materials, we're trying to get foreign exchange available to continue to operate there and then ultimately make money. Wendy Nicholson - Citigroup Inc: And then just one last question. As you look towards 2011. You know you're talking about big innovations and plans to spend more money but. And I know you talk about being committed to investing in the business, but the incremental investment in the business, the extra $10 million on strategic marketing like it doesn't sound like that much. And I guess if there are big innovations to come and I don't we know what they are, how big are they and is there a chance that you come out in January the next time you report and say, "Oh, 2011, we've got these innovations. We're going to see strategic marketing up, whatever 2x, 3x," And so therefore, we're not going to be in that Target 6% to 9% EPS growth for 2011. Is there anything at this point that you see such a drain from an investment perspective that we shouldn't expect that kind earnings growth next year?

I think the short answer is, no. But I'd say we're up $110 million in strategic marketing so far this year, as we would describe a healthy business going forward where we're driving innovation. We're able to the increase gross margin with that. We're able to increase our strategic marketing a bit. And so you're making the portfolio healthier over time with good innovation and higher margin segments of categories with a bit more brand investments. So I don't see a seismic shift in strategic marketing. But if you look at this year and say "Wow, U by Kotex was a major A launch." We spent a significant amount of money that a good chunk of the increased marketing. Our Kleenex Hand Towel was a solid launch, and we've made some investments there. We didn't cut those short. We spend what we said we'd spent in the plan, and we're delivering in the marketplace what we expected to be get out of those. And so I think you'd be looking from us consistently hitting lost of singles and maybe very once in a while we get a double or triple or even at a homerun every once in a while. But lots of singles is a good way to win baseball games.

The next question comes from John Faucher with the JPMorgan Chase. John Faucher - JP Morgan Chase & Co: So I think you said the curtailment piece was in tissue towel and you talked a little bit about distributor inventories being too high on the professional side. Were the retail inventories too high on the tissue towel coming out of the second quarter as well?-

No, I mean, I think in the K-C Professional Health Care side, we're just seeing distributors being more aggressive on managing inventory levels generally. And in the Consumer business, because those are pretty high velocity categories, I wouldn't say there was this inventory swing there other than every customer is much more focused on cash flow and managing inventory type as best they can. John Faucher - JP Morgan Chase & Co: So that would be sort of a modest, just a modest impact, then, if there was any sort of deloading on the tissue towel business.

And so the curtailment was broadly across our total tissue machine system to make sure that we were managing our inventories to target overall. John Faucher - JP Morgan Chase & Co: So I guess maybe going back, so that volume number again, and I know you discussed this a little bit, which is sort of slightly lower than what you were thinking, in terms of not just related to the impact there coming from the promotional spending?

The facial tissue category, we picked up four share points sequentially. We had a very successful back-to-school, but it was still -- the category is still pretty weak. You're actually seeing in towels private label growing, the overall category as flat to down slightly. And so just the categories themselves were a little weaker than we thought. You get a little bit less lift from the promotional activity as a result. And so while you had very successful events, it didn't produce as much as we thought it would. John Faucher - JP Morgan Chase & Co: And then quickly on the Viva side, a couple of years ago, there was a lot of upside from expanding the distribution of Viva. And now you're saying losing from distribution here and I guess how do you feel about sort of the temporary nature of that? Is that just related to the price points? Or do you think there is something where maybe the brand didn't have as much of an ability to increase distribution longer-term versus what you previously thought.

Well, Viva's kind of a niche product. I mean, it's a super premium towel. It's a fantastic product. It's got a very loyal consumer following, but if you're a retailer in making tough category decisions. There are some where we lost certain SKUs of Viva. We didn't lose the whole brand in those places. And so it’s just trying to make sure we build that back and can have the right SKUs on the shelf. We've got to do a better job of driving innovation there as well, and so we've got more plans coming for that in 2011.

The next question comes from Jason Gere from RBC Capital Markets. Jason Gere - RBC Capital Markets Corporation: My big question here goes back to the fourth quarter, the implied organic sales. It just seems a little bit aggressive. As we look at the year, the sales have come down. I guess can you just really talk through the comfort level that your volumes can accelerate, that the organic sales can accelerate when there's still a lot of headwind that you've kind of pointed out there?

Yes, I mean, we feel pretty comfortable with the plan at this point in time. We're not calling for a huge amount of acceleration. I mean, essentially, it's more or less tracking about where we were in the third quarter, perhaps slightly better than that. We should be past most of the Health Care H1N1 inventory destocking, so Health Care should be a little bit more positive. We've actually got some plans in place to try to stabilize our KCP business so we'd expect that a little better volume quarter in the fourth quarter. And K-C International continues to do well. We've had good consistent growth in China and expect to see good progress in Latin America. So there's a lot of things that are working well and on track that we'd expect to continue. Jason Gere - RBC Capital Markets Corporation: And then just on Venezuela, the second quarter impact on volumes versus the third, what was the change there if you haven't discussed that?

We haven't. But I'd say it's pretty similar as it's pretty significant category pullback versus prior year in both periods. So it's a very difficult economic environment as I'm sure you're aware.

Jason, it was a little bit worse in the third quarter than on the second quarter comparison. Jason Gere - RBC Capital Markets Corporation: So within your guidance, how are you looking at that fourth quarter? Are you expecting that to lessen? Usually with pricing, it takes a little time for the volumes to come. But obviously, this is going to be a unique situation.

No, I think it will continue with us for the foreseeable future. Jason Gere - RBC Capital Markets Corporation: And then just turning to the low -- you guys talked about a little bit lower promotional activity. Just wondering what you're seeing from your competition out there who are pretty hell-bent on taking some market share. Just, I guess, I was a little surprised that it would come down. I don’t know if that was sequentially from the third quarter where I know you stepped it up versus the second. But just can you maybe talk about the shifts between gross to net and kind of the marketing that's in the SG&A line and how we see that shift from the third quarter to the fourth quarter?

Yes, and I guess I'd say first of all, we're not planning on losing share. And so it's more around scheduled events. We have a little heavier promotional calendar in the third quarter, so it was trial generation around some innovation. We'd still expect to have a competitive program. In the fourth quarter, we'd expect to see continued stable shares to slightly improving shares in most places. I mean,I'd say broadly the competitive environment isn't getting easier and there are places where it's still tough, but we're not expecting it to significantly worse in the fourth quarter either so. Jason Gere - RBC Capital Markets Corporation: And then just a last question on the cost savings. The near hundred million and again that's the assumption there were really kind of no bring forward, from the 2011 to '13 plan?

That's correct. Jason Gere - RBC Capital Markets Corporation: And any updates there? Are there more opportunities to come through than what you've kind of laid out?

We're really just getting started in many of our lean activities. And also as we talked about earlier, we've just launched the global procurement office, and we're setting aggressive savings goals in both those areas and would expect to have that be a major part of our FORCE program going forward. So we've got good activity, and we're very early in the start up curve on both those initiatives.

Our next question comes from Karen Lamark with Federated Investors. Karen Lamark - Federated Investors: On the K-C Professional. How seasonal or lumpy is that business from quarter to quarter? And maybe if you can share sort of what percentage of your annual contracts come up each quarter?

Yes, it's a little seasonal and that attends to typically have -- historically has had a stronger third quarter and fourth quarter, and then have a slower start to the year. And part of that has to do historically with how distributor incentives are structured so that they're often volume based. And the distributors, if they hit their volume number, they get a rebate at the end of the year and we're trying to over time stabilize more of that to have it be flatter. But I think the behavior's pretty well engrained in the distributor community. And what was the second question? Karen Lamark - Federated Investors: What percentage in your annual contracts might come up each quarter?

Yes, I mean, we've got, as you can imagine, thousands and thousands of contracts. And so they are pretty well-balanced. There isn't any that I would say skewed to a particular time of year. Karen Lamark - Federated Investors: And when you talk about Q4, you had some plans to stabilize the business. Does it really come back to the incentives that you just referenced? Or is there something else that you're planning on?

I think the team's saying where have we got business in the pipeline that we need to close and get those contracts in place and where have we lost business that we want to go, make a pitch to get that business back. And so obviously, we'll do that within our pricing guidelines, but we’ve got some great innovation in our business and a great story to tell our customers and we're out selling the heck out of it. Karen Lamark - Federated Investors: And then separately, on the cost cutting, are all of your plans, including what you just suggested, is incremental. Are they all sort of back office and manufacturing related as it -- instead of a top line or sales have an impact on sales?

I'd say broadly, what we talked about in FORCE are the things that we measure that flow-through cost of sales. So we'd measure our productivity in terms of waste and efficiency of our production assets. We would measure our cost of purchased materials, so where we get savings in those areas, we will measure our overhead absorption and we'll talk about that separately if where we've taken downtime. But a lot of the lean work that we're doing, getting at more efficient selling processes are some great examples of where that actually increases the effectiveness of your sales team by giving them more efficient tools to use. That's tougher to measure. It shows up in the results, but it's hard to tell what the value of taking an hour administration off the sales rep and giving you more time to sell marketplace. But we think there are clearly benefits there. Karen Lamark - Federated Investors: And on gross margins, can you remind us how much outside buying or outsourcing you were doing say last year and then this year in Q3?

It really varies significantly by business. In our Health Care business, we do a fair amount of outside purchasing. We also make a good bit of the medical devices in-house, so there's a blend there that's probably got the biggest percentage of outside purchase of any of our businesses. Typically, in our Consumer Tissue business in the U.S., we'll have some outside purchases of tissue, and I would say the broad level is pretty similar year-over-year. We haven't seen any big changes. We did bring that down a bit last year and haven't increased the outsourcing this year at all. Karen Lamark - Federated Investors: And then lastly, I think you mentioned that competitive pressures were pretty broad-based and implied I think that you needed to catch up a bit at least in some business units. Do you feel like you're competitive on price now?

Yes, I think broadly, in many cases, we're the industry leader. And so if there was price going up, we are going to lead it. And so we did that and obviously some competitors followed, some didn't. And so that's a normal market reaction, where everybody meets in the marketplace and you get to decide the price at that point in time. So the customers let us know if we're not competitive, then we have a discussion on price at that stage. But we typically hung out there a bit to try to make sure the pricing gets established. And in most cases, competitors follow, but in some, they haven't.

The next question comes from Linda Bolton Weiser. [Caris & Company] Linda Weiser - Caris & Company: I was just wondering if you could comment on the M&A environment. You've done a couple of deals in the last year or so. Do you foresee that there is more possible opportunities over the next year?

I'd like to think so, and I would say some of the private equity guys seem to have found bankers again. So there is more deals being done with some of that group than maybe we've seen. So nothing big on the radar screen at this point in time.

Our next question comes from Chris Ferrara with Bank of America. Christopher Ferrara - BofA Merrill Lynch: So currency, how did it go -- so I see the top line effect obviously. Can you talk about what the bottom line effect was of currency this quarter and in the context of I guess how miserable it was in a year ago quarter. And then as you've seen the euro turn around, can you just talk about as you look forward what we can expect with respect to the transaction effect, the local currency cost of raw materials on the ground. I mean, it should be pretty favorable as you move forward, I would think. Does that make sense?

I mean, actually for the quarter, currency was about a push, so there really wasn't that much impact on net earnings because where we had positives in some areas, we have negatives in Venezuela. And so overall, it wasn't much of a factor in the earnings for the quarter.

Yes, that's right. And you're right, though, Chris, sequentially, the transaction effect should start to look better for us assuming current spot rates hold.

Our next question comes from Connie Maneaty with the BMO Capital Markets. Constance Maneaty - BMO Capital Markets U.S.: I also just had a follow-up question on currency. What rate are you getting in Venezuela? Are you at the nonessential rate or are you having to access the central bank floating rate and what is that rate?

I think the only exchange that's out there is for us at this point is the nonessential rate, which is the 5.4%. And so we're not getting anything at the essentials rate. They do periodic bond offerings and those are -- there was just one recently, and that rate's going to be in the six something, 6.3, 6.4. But there is no other parallel market. So you can only get what you get through the official government exchange sources.

At this time, we have no further questions.

All right. Thanks, David. we'll wrap up with a closing comment from Tom.

Once again, obviously, we've adjusted our outlook for the year, but we're on the right track of getting this business in shape with our global business plan. And we really appreciate your support at Kimberly-Clark. Thank you very much.

Thank you.