金百利克拉克 (KMB) 2010 Q4 法說會逐字稿

Ladies and gentlemen, thank you for your patience in holding.

We now have your speakers in conference.

Please be aware that each of your lines is in a listen-only mode.

At the conclusion of today's presentation, we will open the floor for your questions.

At that time, instructions will be given as to the procedure to follow if you would like to ask a question.

It is now my pleasure to introduce Mr.

Paul Alexander.

Mr.

Alexander, you may begin, sir.

Thanks, David, and good morning, everyone.

Welcome to Kimberly-Clark's year-end earnings conference call.

Here in Dallas is Tom Falk, Chairman and CEO; Mark Buthman, Senior VP and CFO; and Mike Azbell, Vice President and Controller.

Here is the agenda for the call today.

Mark will begin with a review of our fourth-quarter results, followed by an overview of the additional actions we announced this morning.

Tom will then provide his perspective on the results and discuss our 2011 outlook.

We will finish with Q&A.

For those wishing to follow along, we have a presentation of today's materials including the key assumptions for our 2011 plan in the investor section of our website which is www.kimberly-clark.com.

Before we begin, let me remind you that we will 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 factor 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 would also like to point out that we will be referring to adjusted results.

For 2010 that excludes the one-time loss in the first quarter for the re-measurement of the local currency balance sheet in Venezuela.

For 2011, our adjusted outlook excludes anticipated costs for the pulp and tissue restructuring.

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 will turn it over to Mark.

Thanks, Paul, and good morning.

Let's start with a few headlines.

First, we delivered on our sales and earnings commitments in a challenging environment.

Second, we had another strong quarter of cost savings and cash flow.

And third, we're taking aggressive actions to improve value for our shareholders.

Now, let's cover the details of the quarter.

Overall, sales increased 2% to $5.1 billion.

Organic sales rose 3% driven by higher net selling prices of 2% and one point of improved product mix.

Volumes were even with year ago levels.

We benefited from innovation and targeted growth initiatives.

On the other hand, we experienced a one point drag from declines in Venezuela and category demand remains soft in North America and Western Europe.

For the full year, organic sales were up 2% and it's in line with what we expected back in October.

Fourth-quarter operating profit fell 3% with an operating margin of 13.8%.

Benefits from topline growth and cost savings mostly offset input cost inflation of $220 million.

Full-year cost inflation was $790 million.

That's toward the high end of our previous estimate.

Turning to cost savings, we finished the year strongly with fourth-quarter savings from FORCE programs of $90 million.

That brings full-year savings to $370 million, an all-time record and a terrific accomplishment by our teams around the world.

Fourth-quarter earnings per share were $1.20 compared to $1.17 last year and included benefits from a decline in the tax rate and a lower share count.

Adjusted earnings per share for the year were $4.68.

That's toward the high end of our previous guidance of $4.60 to $4.70 per share.

Cash provided by operations for the quarter was $948 million as compared to an all-time record of $1 billion in the prior year.

I was really encouraged that our cash generation continued to build sequentially throughout 2010.

Regarding share repurchases, we bought 1.6 million shares of KMB stock in the quarter at a cost of about $100 million.

We repurchased $800 million of our stock for the year.

Now I'll turn to a few highlights of our segment results for the quarter and as usual, further details are in this morning's news release.

In Personal Care, organic sales rose 3%.

Sales volumes were up 2%.

We delivered double-digit growth in feminine care, adult care and baby wipes in North America and high-single-digit growth in K-C International outside of Venezuela.

On the other hand, volumes fell significantly in Venezuela and the baby and child care categories in North America remained relatively soft.

Personal Care operating margins of 19.4% were impacted by input cost inflation, but overall remain very healthy.

Turning to Consumer Tissue, organic sales increased 5%.

Net selling prices were up 5% reflecting actions to increase revenue in most markets and the timing of promotions in North America.

Sales volumes were down 1% as gains across Asia and in our Kleenex facial tissue business in North America were more than offset by declines elsewhere.

Operating margins of 10% improved sequentially from the third quarter and were above prior year levels as higher net selling prices and cost savings more than offset cost inflation driven by higher pulp prices.

Now moving to K-C Professional and Other.

Organic sales were down 1%.

Sales volumes fell 2% as the challenging environment continued to impact washroom sales in North America.

In other areas of the business, volume growth was solid for our high-margin safety and wiper businesses in North America, for our total KCP business in both Europe and K-C International.

Operating margins of 14% were down somewhat mainly due to cost inflation, but they remain solid despite the tough environment.

Lastly, Health Care organic sales were down 7% as volumes were off 5% and net selling prices fell 2 points.

Organic volumes of high-margin medical devices were up high single digits again this quarter.

However, overall volume comparisons were negatively impacted by 5 points as a result of increased demand for face masks in 2009 because of the H1N1 flu virus.

In addition, category demand remained soft in the North American supplies market.

Operating margins were down significantly compared to last year.

That's mostly due to ongoing I-Flow litigation related costs.

So that wraps up the review of the quarter.

But before I turn it over to Tom, I would like to cover some of the details of the actions we announced today to improve shareholder value.

The first two actions further demonstrate our commitment to allocate capital in shareholder friendly ways.

First, we're increasing our dividend by 6% in 2011.

That's our 39th consecutive annual increase, it will help us maintain our top-tier dividend payout.

We continue to believe that our strong dividend distinguishes us among our peers and it's an important part of what makes KMB an attractive investment.

Second, we plan to repurchase $1.5 billion of our stock in 2011 as we leverage our strong cash flow and balance sheet.

$700 million of the repurchases will be funded through incremental debt.

As we take advantage of the current low interest rate environment.

This move will allow us to return cash to shareholders while we maintain plenty of flexibility to fund our global business plan.

We continue to be committed to our current A rating and top-tier access to commercial paper.

The third action is a two-year pulp and tissue restructuring.

Let me spend a bit more time on this initiative.

These actions will allow us to exit our remaining pulp manufacturing operations and improve the profitability and returns of our Consumer Tissue and K-C Professional businesses.

In conjunction with the restructuring, we will streamline, sell or close five to six manufacturing facilities, exit certain nonstrategic products, primarily non-branded offerings, and transfer some production to lower-cost facilities.

Total costs are expected to be $280 million to $420 million after-tax with cash costs being about 25% to 50% of the total amount.

As a result of the restructuring, we expect that by 2013 annual net sales will decrease by $250 million to $300 million, and annual operating profit will increase by at least $75 million.

Consumer Tissue margins are expected to improve as a result of these actions, about 150 basis points, while K-C Professional margins should increase more than 50 basis points.

On a cash basis, the payback on these restructuring actions is about three years.

So it was a difficult decision but one that's necessary to improve our competitive position and make us a stronger company.

It's also further evidence of our focus on making [portfolio choices] and a financial discipline that's a foundation of our global business plan.

So that wraps up my review.

To recap, we achieved our sales and earnings commitments for the fourth quarter.

We delivered significant cost savings and strong cash flow, and we're taking significant actions to improve shareholder returns.

Now, I'll turn it over to Tom.

Thanks, Mark, and good morning, everyone.

Since Mark has already reviewed the fourth quarter, I'll share my perspectives with you on the full year and then I'll talk about our 2011 outlook.

And then of course we'll get to your questions.

In short, we're executing our global business plan strategies even as the environment that we're operating in remains difficult.

So let me begin with our full-year 2010 results.

On the top line, organic sales were up about 2%.

That was on track with the estimate we provided you at the beginning of the year, but it was below our long-range target.

We delivered more selling price benefits that we expected, but volume growth was less than planned, primarily due to soft category demand in North America.

This was also particularly true in K-C Professional washroom, health care supplies and in portions of our consumer businesses such as diapers, training pants and facial tissue.

Now with that said, we made excellent progress in our targeted growth initiatives.

In particular, we had very good performance in 2010 in K-C International.

Setting aside Venezuela, our personal care volumes in K-C International increased 9% in 2010.

That includes mid-teens growth in Latin America and nearly 30% growth in China.

Our growth strategies are taking hold in these markets and we continue to be very excited about the future of our K-C International business.

We also delivered good results with our K-C Professional and our healthcare growth initiatives.

Our North American KCP team grew wiper and safety organic volumes by high single digits.

That's also true for our global healthcare medical device business.

We also executed our brand-building initiative as well this past year.

We launched a number of innovations including U by Kotex, and new Poise and Depend offerings, Huggies Jeans diapers, Kleenex Hand Towels, new K-C Professional wipers and a number of product upgrades across K-C International.

I'm very pleased with how consumers have responded to these innovations.

We supported our brands and growth initiatives with a $100 million increase in strategic marketing as we raised our strategic A&P investments much faster than sales and we also increased R&D spending ahead of sales growth.

These are important investments for our future.

I am encouraged that our marketing and innovation programs are improving our brand market positions.

In the US, our market shares in the second half of the year were ahead of or even with our first half of the year levels in seven out of eight of our consumer product categories, and we're growing ahead of category rates in many areas of K-C International.

On the bottom line, adjusted earnings per share grew 4% in 2010, somewhat below our global business plan target.

That was mostly due to cost inflation and the soft category demand in North America.

In fact, the nearly $800 million of cost inflation we absorbed was an all-time high and more than double our original expectation for the year.

Nonetheless our teams responded to this challenge by delivering record FORCE cost savings in 2010, and we are making good progress in building a continuous improvement capability throughout our Company, backed by the deployment of lean manufacturing practices and our global procurement organization.

Finally as Mark mentioned, we continue to generate strong cash flow and allocate it in shareholder friendly ways.

We raised our top tier dividend early last year by 10%, and we bought back $800 million of Kimberly-Clark stock which was about $200 million to $300 million more than we committed to you a year ago.

All told, we returned $1.9 billion to shareholders in dividends and share repurchases.

That represents a return of about 7% on each outstanding share.

So all in all, while the environment was more difficult than we originally planned, our teams achieved a number of important accomplishments in 2010.

So, now let's talk about 2011.

Let me turn to the outlook.

In short, we will continue to do what's right for the long term and we expect to deliver bottom-line growth in 2011 that's in line with our global business plan.

We will leverage our strong brands, bring innovation to market and pursue targeted growth initiatives.

To support our growth plans, we will continue to increase our marketing investments faster than sales.

At the same time, we will manage our Company with financial discipline, with a strong focus on cost savings and cash generation.

We expect another successful year with our FORCE program and our cost savings target in 2011 is about $200 million to $250 million.

That's also roughly equal to our current outlook for cost inflation in 2011.

In terms of the external environment, we expect it to remain difficult, particularly in the first half of the year.

And while there are signs that some portions of the US economy are recovering, unemployment levels remain high and we don't anticipate a big pickup in market growth in the near term, although we are cautiously optimistic that consumer demand could improve as the year progresses.

Our full-year plan assumes organic sales growth of 2 to 3%, and that is similar to or slightly better than our 2010 performance, and this includes a one point drag from the combined impacts of expected volume declines in Venezuela and the pulp and tissue restructuring that Mark just covered.

On the bottom line, we anticipate adjusted earnings per share of $4.90 to $5.05.

That's up 5 to 8% from 2010 which will put us back on track with our long-term global business plan objectives.

So to summarize, we continue to do what is right for the long term.

We expect bottom-line growth in 2011 in line with our global business plan and we are taking aggressive actions to improve our Company and deliver shareholder value.

That wraps up our prepared remarks and now we will begin to take your questions.

(Operator Instructions) Chris Ferrara, Bank of America.

Wanted to ask about the restructuring.

So obviously it looks like a pretty big deal I guess, $75 million in savings.

But is this kind of a first step or is this a toe in the water, if you will?

It seems like so this is closing some -- maybe to get rid of some private-label distribution, you are going to close down some pulp operations, but what about the core of the rest of the business?

Does this affect the rest of the business?

And do you think there is more potential savings than say 150 basis points through things like restructuring?

Good questions, Chris.

I would read into this exactly as we have pitched it.

We're going to close five to six facilities.

They're primarily not producing branded product.

And so this really won't affect our branded businesses from a volume standpoint anywhere in the world.

And both of these pulp mills were in strong currency environments and that just makes it tough for them to be competitive on a world pulp market.

So exiting this last couple of [own make] pulp operations is really the guts of this and then there's some other facilities that were primarily making either private label or hard rolls, non-branded products.

Okay, thanks.

I guess on a totally different note, just wanted to ask about diapers.

So there have been interesting category dynamics.

I guess pants we've have seen struggle for a while as a category.

Towels were struggling, got better.

Over the last five, six months, diapers seem to have gotten worse.

People seem to be trading down at the private label into Luvs.

Can you kind of diagnose what you think is going on there?

And is there an end in sight to this?

Is there any solution to getting this category to perk up a little bit more?

Because it doesn't seem to be from a lack of innovation or a lack of spending.

Good questions.

A couple of factors, the birthrate has stayed negative a lot longer than we would have thought, causing the category to be down about a percent, where we would've expected the category to be up about a percent.

In the fourth quarter, we saw some trade-down as both private label and Luvs picked up share.

P&G probably lost more share from their top tier product.

We actually gained some share in our top tier products and lost some share in our mainline Huggies product.

And so we've got some pretty aggressive innovation coming behind that.

You may recall in second quarter our jeans diaper popped our diaper share up and we wound up essentially giving most of that back in the back half of the year which is part of the sequential comparison.

But we expect the category trends to moderate a bit in 2011, probably toward the back half of the year, and we've got a lot of innovation coming to make sure that we maintain our share levels at the level a brand leader should.

Wendy Nicholson, Citi Investment Research.

My first question had to do with the 150 basis points of savings that you think you will get from the restructuring on the tissue margins, because tissue margins clearly now are well below where they were even three or four years ago.

So I'm just thinking about long term with the bump up, the 150 basis point bump up, are we saying, hey, our run rate for Consumer Tissue margins is only going to be about 12%?

Or is there a chance we ever get back to the 13, 14, 15% we had a few years ago?

Well, that's certainly our goal.

Obviously, this restructuring won't close all of that margin gap.

If we look at where we are with pulp price, just last year we had nearly $0.5 billion of pulp price increase and recovered less than half of that in selling prices in our tissue segment.

So we have still got some room to recover price and margin in this category.

So pulp prices moderate a bit, hopefully we'll be able to see some margin improvement from that standpoint.

In the meantime, we're driving mix and price wherever we can.

And you saw some of that in the tissue segment in the fourth quarter with about 5 points of net price.

And your outlook though for that business just for 2011 in terms of price, I guess your outlook for the overall price impact for next year surprised me that it wasn't a little bit higher.

But I assume in Consumer Tissue with pulp prices still relatively high, pricing will be more than just up 1%?

Is that fair?

Yes, I think that's probably right.

I think the other factor is that as we look at what's going on in Venezuela, are we able to see price in markets like that as well.

Okay, terrific.

My very last question is is there any guidance you can give us in terms of the timing or the pace of the buyback programs?

Or should we think about that being spread evenly across the year?

Is there any particular quarter that we're going to see more of that?

I'll let Mark touch on that one.

It will be weighted heavily toward the first half of the year, Wendy.

Okay, terrific.

Thanks so much, appreciate it.

Thanks, Wendy.

Gail Glazerman, UBS.

Can you just talk a little bit about what you have been seeing in pulp costs lately and (inaudible) opportunity?

Because it seems like there is a gap building between hardwood and softwood; if you have any opportunity to take advantage of that?

Sure, first of all, everybody I think had expected pulp to start to come down even in the back half of last year and it's been pretty sticky at surprisingly high levels.

In the fourth quarter, I think inventories in pulp came down another couple of days, so the pulp market is still relatively tight, and you're seeing pricing being fairly firm as we entered the first quarter here.

Certainly, the gap between softwood and hardwood is one that we try to exploit.

So to the extent that we can substitute more eucalyptus for Northern softwood, that's a strategy that we will continue to employ while making sure we don't make any trade-offs on tissue quality.

Okay, list prices have held up pretty well, but there has been some talk of discounts widening.

Is that something you've seen in your experience?

I would say not substantially.

The market has been fairly tight.

And you're also seeing it in other markets.

Secondary fiber is usually another way to look at the tension in the pulp market, and secondary fiber has been pretty tight and availability has been even a challenge in some parts of the world.

So, yes, there is not an abundance of fiber around at this point and that makes for a good pricing environment for the sellers, not so good for the buyers.

Okay, and just switching gears, can you talk a little bit more about what you're seeing in the North American paper towel business?

I mean, you're still posting kind of double-digit declines.

At some point, you should be I presume cycling past the slowdown and the economic impact there?

Yes, there's a couple of things going on there.

Private label has been the big winner and then probably to a lesser extent, BOUNTY BASIC.

So the category has shifted down.

I think private label shares were up a couple of points in towels last year, and we lost share and so did many of the other minor brands.

So, that's then been the challenge.

We lost some distribution last year, we got some of that back in 2011.

And so our momentum sequentially should be a little better from a distribution standpoint.

And we've got an aggressive product and promotion plan to make sure that we stem the share losses and start to get those back on a more positive foot.

We saw a little bit of share uptick in the fourth quarter in our towel business which is a positive sign, but we've got to keep that going.

Okay, and then just last question.

On the curtailments in the fourth quarter, were those focused in any one segment?

And is it something that would probably continue in the first quarter or we would start to see that ease up?

If you can give the -- I don't know if, Paul, if you've got the details on curtailments in the fourth quarter?

Yes, it was spread fairly evenly through all the businesses.

It wasn't isolated to one individual one.

One of the things you are seeing is that -- and maybe Mark can talk a little bit about this -- is we are much more focused on targeting cash conversion cycle and making sure we're keeping our inventories in line.

Yes, you know, our inventories are down about -- I think our total cash conversion cycle is down about three weeks from the start of 2009.

We ended the year about where we wanted to be in inventories with soft demand.

We are working hard through lean and continuous improvement to keep our inventories in line, and we are much more attuned to taking downtime when demand doesn't support production.

So I think you're going to see that more as just an ongoing normal part of our business going forward.

Gail, I think for the full year of 2011, if our volumes come in like we are expecting, you shouldn't see curtailment be a big mover one way or the other.

It should be pretty neutral for the full year.

Okay, thank you.

Andrew Sawyer, Goldman Sachs.

I was hoping to follow up a little bit on the pulp price side.

In light of the tight demand dynamics, supply/demand dynamics, I was wondering if you could explain why you're looking for some deflation across the year and how that impacts your planning assumptions and budgeting for price and promotion.

Good question.

We tend to buy all the industry pricing forecasts, and so we took -- there's three or four of them that we look at.

We average those and that's what we plug into our model.

So we tend to try not to think that we're smarter than the market.

We rely on others that are looking at these things for a living.

So that's basically what all the forecasters are calling for is for the pulp to soften a bit in the back half of the year.

And so we factor that into our pricing and promotion assumptions.

And I think -- keep in mind, Andrew, we are at near all-time record prices.

So I think that the relative value of the dollar drives that, demand from Asia drives that, production capacity drives it.

So our outlook isn't for a dramatic decrease, but more a slight downtick consistent with what industry experts would say off a pretty high base.

Maybe reframing it, I guess we ended the year ago and it wound up surprising due to the upside and you guys did a nice job of kind of midcourse correcting.

How should we think about the flexibility to midcourse correct if pulp does remain at or above what you are thinking for the year?

Yes, that's a good question.

Every one of our teams is really focused on what opportunities we have from a pricing standpoint, what opportunities do we have from accelerated cost savings, are there other things that we can do to manage our risk on commodities differently.

So each team is focused on what happens if pulp doesn't come down or what opportunities do we have to adjust and still deliver our results.

Maybe just a quick follow-up on the emerging market side, it looks like you've gotten some nice pricing through on the tissue portion of the business.

How are you seeing the consumers react from a demand perspective to the inflation they're seeing in their basket?

You're seeing inflation in a lot of markets around the world these days.

So if you go to a market like China or Vietnam, I mean, there is quite a bit of inflation in those local economies broadly, and so we're not out of step with everybody else.

And you're seeing that kind of pressure flow through lots of places these days.

Well, I guess I'm just asking are you seeing abnormal elasticities or anything you wouldn't expect out of [the basket] inflation?

From a volume standpoint, you could see the kind of category growth we are still experiencing.

So categories still seem to be pretty robust.

And their consumer -- their purchasing power is improving as well.

You're getting lots of wage inflation in those markets as well.

Their purchasing power isn't taking as big of a hit here as you would expect in another market that was experiencing cost increases without wage increases.

Alright, well thanks a lot, Tom.

Thanks, Andrew.

Ali Dibadj, Sanford Bernstein.

Wanted to follow up actually a little bit on that question about the emerging market pricing but with a twist which is not about the Consumer Tissue business, but the rest of the business, particularly Personal Care, as you look forward.

You're saying about 1% price going forward, Consumer Tissue prices sound like they're going to be up just kind of as you described it earlier.

So Personal Care prices, what should we expect there?

And in particular in the emerging markets ex Venezuela price increases, what should we expect there for Personal Care?

And I guess in that context, if you could describe the competitive environment there for the Personal Care business outside the US, that would be helpful.

If you looked at our Personal Care pricing in the fourth quarter, ex Venezuela, there was not a lot going on there.

They're pretty -- very, very minor swings.

It's much more of a volume story.

And so our opportunity in most of the emerging markets is to drive mix where we can by offering improved products and continuing to drive the consumer up the product performance scale.

But beyond that, there isn't a huge amount of price.

There were some areas where we took some temporary price reductions to match up with competitive activity.

That may ease a little bit in 2011, and that's about I think the extent of what you would see on Personal Care.

So I guess that the reason I call it a follow-up, because it's odd to me in an inflationary environment elsewhere.

Are you unable to take pricing in line with inflation on Personal Care?

It sounds like you might be.

And if so, why?

Well in some cases in the emerging markets where their currencies have strengthened, they've been able to handle the material cost increases better.

It's that pulp is up so much that that has overwhelmed the benefit of their currency appreciation.

No, but in Personal Care?

I guess in Personal Care, it sounds like you can't take pricing in line with inflation, and it's my understanding that your last questioner is right -- in the emerging markets.

No, I'm just saying -- more the pricing in international markets is probably going to be on the tissue side than on the Personal Care side in 2011.

And it's not that you don't have the elasticity, it's that you're more focused on driving category growth and then making sure you're priced right and relative to competition in the marketplace.

So is the competition getting tougher in the emerging markets in Personal Care?

It was in 2010.

Okay, and you're projecting going forward for 1% for the year pricing with Consumer Tissue being up and pricing in Venezuela for example, that would suggest that continues.

Is that a fair assessment?

That sounds reasonable, yes.

Okay, cool.

Another longer-term question.

Just trying to get underneath kind of your long-term growth algorithm using 2011 as a jumping point, I mean, 2% to 3% organic sales growth which actually sounds like 3% to 4% organic sales growth if you exclude the restructuring and kind of Venezuela, and you are taking that and you're turning that into 5 to 8% EPS growth.

How should we think about that going forward given that you can't continue -- one can't continue to buy back $1.5 billion of shares forever?

So what improves to get to your long-term EPS growth rate?

The biggest gap in 2011 verses our long-term model is we're not bringing as much of the gross margin improvement that we expect down to operating margin improvement.

So instead of seeing 30 to 40 basis points of operating margin improvement in 2011, it's more like 0 to 10 basis points, in that range.

And so part of that is we're still investing at a bit more of an aggressive rate on A&P.

We're investing more in R&D.

We've also got a little bit of a drag in 2011 where our incentive comp didn't pay out that target in 2010, we're planning in 2011 that it will.

So that is probably a drag that in a normal year-on-year situation you won't have as much of.

I think, Ali, too, the general economic outlook is for continued relatively high unemployment, generally weak sort of packaged goods category demand, particularly in North America and Western Europe.

And as the economy starts to recover, I think some of our products and some of our categories will kind of rebound with that.

So our focus near term is to try to do all we can to drive margins through cost savings, improve product mix, get pricing where we can, leverage our balance sheet for support.

And as the economy turns, I think you are going to see us get back on track for our long-range business algorithm.

And if you can indulge me with one last question, I apologize, you know, just around the restructuring.

Very laudable, appreciate it that you're doing a structuring, makes sense, I like it.

I guess the question I have is you are saving $75 million, it's costing you call it 350, so the ROI, just very basic (inaudible) ROI (inaudible) to one, is this the best place you could've spent your money from a restructuring perspective?

Or were there other places that you think you could have done -- I guess why were there not other places where you could've gotten a better return on that restructuring?

Yes, I mean, I think that these were the right decisions for our tissue business at this point in time.

These were facilities that -- and businesses that we didn't think would earn our cost of capital over the long term and that we needed to exit.

The asset cost on pulp mills, they tend to be asset intensive complex operations which makes it a bit more expensive to exit them because they were essentially producing pulp at costs that were not that far off market rate.

The savings are a little lighter as you exit them.

So while we would say it's not as good of a payback as other restructurings that we've done, it was the right thing to do from a shareholder standpoint.

It's about a three-year cash payback under the midpoint of our assumptions here.

Bill Schmitz, Deutsche Bank.

Can we just get a little bit more color on the price and promotion environment in the fourth quarter?

You know, I know we kind of talked about it ad nauseum so far on the call, but is there a cease-fire going on right now or was it kind of the year-ago comparison was difficult?

I know you only (inaudible) 1% pricing going forward, but to do sort of 5 points of pricing in Consumer Tissue and only have negative 1% volume, that is amazing inelasticity.

So maybe you could just comment on that broadly and also just in the short term.

Gee, Bill, we're not feeling sick yet, so you can hold the ad nauseum, I guess.

I think the -- you probably saw more with timing of promotions year over year.

There was a little bit more activity last year than this year, there wasn't a lot of other competitive noise.

It's still a competitive marketplace out there.

I don't know, Paul, if there's any other (multiple speakers)

Yes, I think maybe, Bill, if you just look at the third and fourth quarter and average them, that's more reflective of the marketplace.

Okay, yes, that makes good sense.

But like, so what level of inflation is great for the industry?

You know, like when is too much and when is it too little?

Because, you know, everyone kind of wrings their hands about inflation, but if you correlate your stock price, it's actually pretty correlated to some modest inflation is when it does best.

So can you just -- is there a way to kind of benchmark that?

Yes, I mean, I think we would say what environment we would like to operate in, probably more price stability and relatively predictable economic growth.

I think our challenge is probably more that we have had a lot of volatility and the economies haven't been -- and categories haven't been growing particularly well.

Okay, no, that's fair.

Alright, thanks very -- just one last one quickly.

Do you have a metric on what percentage of your branded business is holding or taking market share?

Do you have that number handy?

Yes, we tend to look at it by each of our portfolio [roles], where are we gaining share, where we attempted to gain share and where are we holding share.

I think we commented that in the -- for the year, about half of -- in the fourth quarter, seven out of eight were up versus the first half.

So I don't know if there's a specific question that you're looking for there.

Well as I look at some of the [all outlook] data in the US with the exception of U by Kotex business which has been great, it seems like there's still quite a bit of market share friction happening.

You're looking at the three outlook data (multiple speakers)

Exactly.

(multiple speakers) not the all outlook data.

Right, what am I missing?

Well the three outlook would exclude Wal-Mart costs (multiple speakers)

No, no, I have Wal-Mart in there.

SO I have the Wal-Mart panel, but I don't have a club in there.

The panel data for some of our categories isn't that representatives because it doesn't have that many diapering households in it.

But I don't know, Paul, you've got the share chart in front of you (multiple speakers)

Bill, if you just looked at the full year for 2010, we are up or flat in about half our categories, and that would be fem care as you mentioned, adult care is up strongly, and then child care is up as well.

We are flat in facial tissue, although improving in the second half of the year very nicely, and then where we've lost a little bit of share is in bath tissue and towels and then diapers is down about 1 point for the year.

John San Marco, Janney Capital.

Can you talk about the advertising and research investments that you referenced in an earlier question?

It looks like 2011 will be the fourth straight year of increasing those investments as a percentage of sales.

What is your long-term target for those spend levels and how do you target them and what is the long-term plan there?

Yes, it's a good question.

We focus on -- we would say that a healthy P&L would have gross margins improving every year.

We would invest a portion of that in innovation, both in marketing spend to launch the innovation as well as R&D to help develop the innovation, and still bring some of that gross margin improvement down to an operating margin improvement.

And so as you think about our global business plan, that is how we're working it.

As the business grows, you should get some efficiencies in the SG&A area, and so the combination of that would see gross margin growing 30 to 40 basis points, a little bit faster growth in A&P and innovation, some leverage from SG&A, and translate into operating margin improvement.

And so, I would say in these last couple of years, we've been increasing strategic marketing spending at a little bit faster pace, so that rate of growth will probably tail off, but I hope we're in a position where we've got great innovation coming that improves our margins and we keep that good growth flywheel turning.

Okay, thank you.

And then just in helping me model this upcoming year, can you bridge the substantial margin decline we saw in Health Care?

How much of that was litigation related and your outlook on that versus how much of it was related to deleveraging from volumes?

Really virtually all of the margin decline was litigation related, and we would expect that the litigation related costs in 2011 should be pretty similar to or perhaps slightly higher than what we experienced in 2010.

So that should help you with your model from that standpoint.

Lauren Lieberman, Barclays Capital.

Just wanted to talk again about the restructuring.

So first thing was is it correct then to assume that this work is sort of unrelated to any need to take downtime or curtailment as the year goes through, that this is not related necessarily to the volume declines you see in tissue over the last two, three years?

That would be correct.

These are basically non-branded products that -- in many cases, we will be selling the mill with the related non-branded business that would go with it.

Okay, so why when you spun out Neenah, why did you hang onto those integrated mills versus the decision to move on from them today?

Well, because they're integrated is the challenge.

I mean, the two that we named, the one in Australia [that feeds us less pulp] into a tissue mill, and so we're going to shut down a couple of assets in the tissue mill, but it's also the site of our Australian tissue capacity that feeds the rest of the Australian business with all of our branded products, and so we couldn't in the timeframe that we're doing that come up with a way to carve those things out.

At the time we did that spin-off, the A dollar was probably closer to a [$0.50 dollar] than it is today, and that makes a big difference in the global competitiveness of that pulp asset.

Everett is somewhat the same story where Everett has been a facility we have had since the Scott merger and the pulp from that pulp mill has gone into that tissue making facility and we made the decision now that we're going to pursue a sale of that facility.

Okay, and so the businesses that you are exiting, if we think about the consumer tissue piece and about a 150 basis point benefit, so that we should think of -- that's a structural change in profitability of the business that would exist whether pulp is high or pulp is low.

Yes.

Okay, and then where are if you can share it sort of utilization rates on I guess the -- your current manufacturing infrastructure today in tissue versus where it will be after this process?

They'll be pretty similar.

We will wind up moving a little bit of product loading around out of some of these facilities that we're exiting.

But I would say broadly our utilization rate will be pretty similar.

We're also buying some tissue on the outside and bringing that in and converting it.

So there may be an opportunity to do less of that and load up some of our existing facilities to a greater level.

Then just turning to K-C Professional, I know it's not been very long since you last reported, but last quarter you kind of mentioned that there has been some business that you lost.

You decided to price and sort of walked away or lost some business that wasn't able to happen.

Has there been any progress there or improvement or change in strategy on what you're doing from a pricing -- and what contracts you want to hold onto standpoint?

Yes, I mean, I would say we are -- the marketplace is aggressive.

We're stepping up our game to make sure that we're strategic in staying with the pieces of business that we are excited about and you're seeing our salesforce be probably a little bit more aggressive in the marketplace today.

We are also seeing really good growth in our wipers and safety business and that is carrying some pieces of washroom business with it which is good to see.

So it didn't show up in the volume trends in the fourth quarter, but we are expecting to see that pick up as we enter 2011.

Okay, great, thanks.

And just final question was for clarification.

When you guys talk about strategic marketing, is that all in SG&A or does it include any of the promotional spending?

It's all between the lines.

It's all in the SG&A line.

Okay, great.

Thank you very much.

Thanks, Lauren.

Chip Dillon, Credit Suisse.

Listen, on the restructuring -- I apologize if I missed some of the last question -- but the two mills I think you said in North America where you still are integrated where I think you mentioned Everett, is the other one Huntsville, Ontario?

No, we only have one integrated mill in North America which is Everett.

The other was the mill in Australia.

Okay, gotcha.

And your goal is to sell actually, because I would imagine with where pulp prices are, there might be interest in these?

Well, certainly Everett, we will be pursuing a sale.

I think the -- and the mill in Australia is probably more likely that it will wind up as a closure, but you never know.

Okay, and with the Everett sale, are you concerned that someone might actually buy that mill and compete with you in the tissue area or is your intention to sort of dismantle the tissue portion and just sell the pulp assets?

No, we would look at selling the mill in its entirety as an operating facility.

Gotcha, okay, that's very helpful.

And I guess the last thing on the whole restructuring, if your revenue drops 250 million to 300 million, it looks to me just in a very rough sense that this could represent, you know, I don't know, either 300,000-ish tons as a way to measure it just sort of given where I've seen prices in the past.

And that I guess you know one-third -- I guess 200 of that would be in Everett and the other 100 or so would be Australia.

Is that kind of a way to look at it?

You are talking about the pulp tons?

Well, no, the actual tissue tons.

That's probably in the ballpark I would say across the -- there's five or six facilities involved.

We've only named two of them.

But we've named the two largest, and so you're probably in the ballpark.

Okay, alright, that's helpful.

And then on the first quarter, just so we kind of get a feel for the year, and you might have mentioned this and I apologize if I missed it, but often you give us a guidance for the quarter we're about to -- that we're in.

Do you see Q1 2011 being similar to the first quarter of 2010?

Or do you think you are going to start out above or behind and ramp in one way or the other from there?

No, we kind of quit giving quarterly guidance last year, so we're giving you the annual guidance.

I guess all I would say is that I would expect that the year will be a little bit back end loaded.

We would expect to see some better category growth from a consumer standpoint as well as some modestly lower commodity costs in the back half, and then our cost savings should build as we go through the year.

So we would expect to see a stronger finish to the year at this stage.

Okay and then last question, you mentioned in North America the 2% volume decline in Consumer Tissue, and I know that it's a very strong quarter for facial, but was there more going on?

Because you mentioned within the context of that decline, mid single digits down in bathroom and double digits in paper towels, was just the mid-single-digit growth in facial enough to create the overall 2% decline?

Was there more going on there?

Probably more the decline was towel related, but the facial category has been a little bit weak because of a weak cold and flu season.

So even though we picked up share sequentially, the category has not been that robust, so we're seeing a little bit better symptomatology in the first quarter and so we may wind up with a little later cold and flu season, we'll have to see.

Gotcha, thank you.

John Faucher, JPMorgan.

Quick question on the capital use here.

So you're obviously making a little bit of a shift in terms of your willingness to take on debt ub terms of buying back stock.

I think if we marry this with some of the performance on the Health Care side, I think what we would say is investors have struggled to figure out the strategy behind Health Care.

Are you telling us now that look, there's going to be fewer acquisitions going forward and it's going to be much more about returning capital to shareholders?

Or do you view this as more of an opportunistic thing given where interest rates are and given where your current debt levels are?

Really more the latter, John.

We just see with what you can borrow long-term money for today relative to our dividend yield, it's a no-brainer.

We have sized this to leave us with some financial flexibility within our A credit rating to still take advantage of opportunistic tuck-in M&A.

And so while we are disappointed with some of the litigation related costs that we took in the Health Care business, the I-Flow deal was still a very good acquisition for us.

The business is performing well ex the litigation costs.

The volume is there, the margin is there.

We're seeing good momentum with the sales team.

And so yes, we still obviously wish the litigation results were a little better, but we still are pretty bullish about that acquisition long term for us.

Okay and sort of continuing with the use of proceeds theme, as you look at some of these asset disposals, any thoughts in terms of what the capital usage will be?

And is that factored into any of your savings numbers in terms of selling off facilities, what have you?

The proceeds should be probably fairly modest in this -- I don't think it will affect our cash outlook.

I think the pulp mills are somewhat capital intensive to keep running, so that will probably help us deploy the capital spending that would've been spent on these facilities to some of our higher margin opportunities.

Okay, great.

And then finally, one more sort of housekeeping question.

A couple years ago, you guys had talked about making a switch to GAAP, and I don't think it's a big deal one way or the other, and obviously as you look at the charges etc.

you've moved away from that.

Sort of I'm assuming this is, okay, look.

We tried going to GAAP, turns out there's just so much volatility, what have you.

Should we just assume that you guys have moved away from that whole GAAP concept at least for the foreseeable future?

No, I mean, I would say my preference is to have cleaner earnings without a lot of one-time charges.

On the other hand, I do want to try to be as transparent as I can.

We're not going to shy away from taking decisions that we think can create shareholder value if it will result in an unusual item.

So we're going to try to balance that and give you as much transparency as we can on what's in the numbers and things that are big that we think may distract investors from understanding what's actually happening in the underlying business we will call out separately.

But our long-range goal is to have reported GAAP numbers.

I think the only other add is this is going to take a couple of years to play out.

So it's not a calendar year, it's not something we can complete within 12 months.

It's sizable enough, so there's an element of time that goes into that decision as well.

Alice Longley, Buckingham Research.

My question is about Personal Care in North America.

Are you expecting child and infant care volumes to continue being down low to mid single digits in 2011?

And also do you think in the category there will continue to be downward shift in mix?

No, we would expect to see a modest volume improvement in 2011.

We think the category is probably going to be fairly flat which would be an improvement from where it was in 2010.

So just the category getting a little healthier will help us.

But we've also got a pretty good innovation plan coming in 2011 that we think will help from that standpoint.

So are you assuming you gain share this year?

Yes, we lost about a point of share in 2010 in diapers, so we would expect to get that back.

We picked up share in training pants.

Our momentum on baby wipes was positive in the back half of the year.

So we would expect that to continue, and the combination of all those should help our baby/child care volumes in 2011.

Alice, the only other thing I would mention is that we're watching the category closely.

It's still likely to be down in the first half of 2011.

Okay, and I think you did say that you think you will gain share a little bit in diapers this year in volume terms?

Yes, but if you ask me that every year, Alice, I would tell you that that is our plan.

So we don't ever have a plan that says we lose share in diapers.

Okay, but even in your plan, maybe you'll do it more in the second half than the first?

Yes, we have got a fair amount of innovation coming, so I think we're focused on getting the share back that we lost in the fourth quarter.

Okay, and then over in Consumer Tissue in North America, you got 2 points from favorable product mix?

What was that?

Were getting good trade-ups in bathroom tissue and particularly Cottonelle.

So it's basically trade-ups to Cottonelle?

Yes, trade-up (multiple speakers) Cottonelle like Aloe and E or Ultra.

Within -- so, okay, trade-ups within Cottonelle to the more value-added versions.

Right.

Do you think that indicates stronger consumer or is that just you're doing a better job marketing or something?

Well probably a little bit of both.

I think in some categories you're seeing this trading up/trading down phenomena where you see the super premium segment growing and the value segment growing and kind of the mainline segment shrinking.

And bath tissue is one where we have seen that a bit lately.

Excellent, thank you very much.

Thanks, Alice.

Priya Ohri-Gupta, Barclays Capital.

Thank you so much for your commentary on the credit ratings.

I just wanted to see if you could give some color on the timing of your debt issuance, whether you are going utilize some of your CP at first and then term it out or just come straight to the market.

And if you could sort of elaborate on what leverage target you have, thank you.

Priya, I guess maybe to answer the second part of your question first, we're targeting solid A credit metrics and access to top-tier commercial paper.

So that's kind of -- there's a whole range of metrics within there and we would like to be solidly in that space and think post this move, we will do that.

In terms of timing and nature of the debt issuance, we've got to see how the markets play out.

So we've got plenty of CT capacity that we can utilize and obviously long-term rates are pretty low relative to historic terms.

So our treasury team has taken a look at both timing and nature of it and as soon as we make a decision and go to market, you will know.

Linda Bolton Weiser, Caris & Co.

Back when Wal-Mart made some of their strategic changes and kind of reduced a lot of the SKUs on the shelf, it seemed like the tissue towel section did kind of become simplified, not as many iterations, different SKUs.

What are the changes going on now, now that Wal-Mart is doing some things different?

Are you finding there's more opportunity now to get more iterations of things on the shelf?

And also, we thought we saw at Wal-Mart fewer facings for Viva paper towels on the shelf, really very reduced.

Is that the case and can you just comment on what is going on there?

Yes, we lost some distribution in towels at Wal-Mart in 2010.

We got some of it back later in the year.

And as it relates to Viva specifically, there could be some regional differences depending on where you shop, where we've got more distribution in some parts of the country than in others.

So overall I would say we have seen some improvements in our distribution on a sequential basis, but we've still got some work to do to get where we want to be.

Can I also ask a question about the dividend?

Sure.

In terms of the 6% increase, it seemed like other than the recession year where I think it was up only 3%, it's been more of an 8% to 9% dividend growth rate.

So should we think of that as more 6% going forward or is it just because you did more share repurchase or can you explain that policy?

Sure, what we tend to do is we are targeting a real increase in dividend growth over time or growing at a faster rate than our earnings growth.

And so for me, it tends to kind of follow the prior year earnings growth rate.

So if you go back to 2009, we had a very good earnings growth performance.

We had a higher dividend increase in 2010.

In 2010 we had a little bit weaker earnings performance, so we had a little bit lower dividend increase in 2011?

So I would look at the prior year earnings growth as an indicator for what we might be thinking about from a dividend increase.

Okay, thanks very much.

Jason Gere, RBC Capital Markets.

Good morning, guys.

Just a quick question.

I guess thinking about just the timing and the magnitude of some of the innovation that you're doing, the diapers, on Consumer Tissue, I'm just trying to think about it in perspective of what you did in 2010.

Clearly U by Kotex was a success.

The marketing spending, you got great ROI.

So I'm just trying to think about how should we think about what changes might come in those categories, especially when you're seeing softer growth right now and probably need some good innovation coming to the market.

I think we've got a very solid lineup again in 2011.

I think that is an expectation you should have for us going forward and not just in the US market, but in international markets as well.

So there -- we are setting increasingly higher innovation targets for ourselves around the world to make sure we are building our brands and improving our margins and mix going forward.

So U by Kotex was great.

We're supporting it again with more launch activity and new items in 2011.

Jeans diaper was great in 2010, expect to see good innovation coming from Huggies in 2011.

Our Kleenex hand towel launch met its objectives in 2010, expect to see more coming from that in 2011.

And so all of our teams are continuing to raise the bar in innovation every year.

In terms of on the diaper side, I guess you are saying look at -- I think one of the earlier questions -- watch the category, expect it to be down the first half.

So should we imply that maybe your innovation could be more back half weighted?

Yes, I would expect to see some launch activity in the first half of the year in our diaper space.

And so -- as you look at those businesses, we typically are having one to two product improvements a year across both the premium and the mainline business.

So expect to see some news consistently coming from Huggies in 2011.

Can you just talk about maybe the consumers' willingness to try new products?

Obviously, again, U BY Kotex performed well.

But when you look at the hand towels, this is I think the first time you guys have actually called it out in your press release that you're seeing success.

So was there kind of delayed reaction?

Did you have to step up spending in there to get the consumer -- the behavioral change?

Can you just kind of go through that?

And then how does that play into the magnitude of the innovation that you're bringing to the market over the course of this year, and maybe even into next year?

Yes, I think the hand towel one, you are changing consumer behavior.

It also -- we got the distribution we were looking for at launch and then we've basically delivered the movement with our retail customers that we were expecting.

Part of the reason we probably waited to talk about it a little bit was we wanted to see repeat.

So you can often get trial when you're getting a consumer to try something new, but we wanted to see did mom come back and buy another package.

So we wanted to kind of see that play out in the back half of the year, and we started to see some repeat numbers that were consistent with our expectation, and we have got a long way to go before we will say we've really changed habits and we have built a long-term successful new category for us and for the retail customer.

But we think we are on the right track and we're going to keep investing in it.

I think that's maybe the other change is that we stay with our investments and our innovation a little bit longer to make sure that it's not just a one-year, one-hit wonder.

Okay, and then just a housekeeping question.

As we think about the cost inflation, clearly what you're forecasting for 2011 is almost in aggregate what you saw in the fourth quarter.

So should it be logically that the first quarter is where you see the biggest pressure and then maybe decelerating [there out]?

And then in terms of the buckets, you usually call out between fiber, polymers and kind of the distribution energy.

Can you just talk about maybe rank order just where the greatest impact will be?

In 2011, I think your assumption on phasing is probably about right.

In 2011 virtually all of the cost increase is oil related.

So whether that is polymer, adhesives, nonwovens, materials as well as the diesel fuel to move the product around, you would expect to see really virtually all the cost increase in 2011 in those areas.

Tom, just one last question.

Just on the marketing spending, considering that the Super Bowl is in Dallas this year, is there going to be a bigger involvement with Kimberly-Clark when we're watching TV?

The Super Bowl is in Dallas this year?

Oh, that's right.

I have heard that.

The funny thing is, Jason, I don't even have tickets and the Green Bay Packers are playing, my favorite team.

So, no, we will not be running a Super Bowl ad, but we have got a lot of great advertising and digital marketing spend coming in 2011 that you'll be able to watch on TV the rest of the year.

Thanks, guys.

Thanks.

Connie Maneaty, BMO Capital Markets.

Since the blue jean diaper was so popular last year, is it coming back this year and could it become a year-long product?

I think fashion is certainly an area in our Personal Care arena that we're trying to drive in lots of different ways, and doing that with better design across our various platforms has been key.

And so I think the jeans diaper was an example of that.

We've done that in a bunch of different markets around the world, so expect us to continue to do some things with that whole idea of bringing an element of fashion to diapers which mom loves.

She wants her baby to look good and Huggies can provide that.

You also saw it with some of our Depend products where we brought a more underwear like look to it and created kind of a super premium space in Depend.

And then U by Kotex, when you look at the design and the packaging and the graphics, we're doing a lot in those areas to drive innovation across those platforms.

I noticed it doesn't mean much anymore, but can you just describe the business environment in Venezuela?

Is the -- is it still having an effect on your sales because the business is contracting because you can't get currency or because demand is down?

And also, are you accessing the parallel markets?

Okay, good questions.

I think the -- Venezuela what you'd say is that it probably was a point drag of volume but we also got some price in that market.

So the net of the two didn't have that much of an impact on our overall sales in the fourth quarter or for the full year, for that matter.

And what you are seeing is that particularly for any -- for products that are imported that use a high level of imported materials, it's just tough to get supply and to be able to bring product in and put it on the shelf.

And so I think you are seeing continued pressure across lots of categories that are facing those same challenges.

And from a currency exchange standpoint, there really is no parallel market any longer, so the only exchange that is available is through the government programs.

And so we are participating in those to the extent that we can, but the amount that flows out of those programs isn't enough to be able to support a lot of the imports that we would like to bring into the country.

Chris Ferrera, Bank of America.

Thanks for the follow-up.

So real quick, and I'm sorry if you said this already -- why does the tax rate move higher year on year next year?

I think Mark can give you more detailed answer, but it seems like every government in the world has got a budget problem and wants to solve it by taxing corporations is kind of the short answer, but maybe Mark's got a more scientific answer for you.

No, I think that's about it.

It's just a general kind of upward flow of the tax rate, and some of the things you could do with your effective tax rate planning say 10 years ago just aren't available to you.

So we're doing the best we can to manage our underlying structural rate.

I would say maybe the one thing that is changing, and you'd see any business that's growing outside of North America as we look to repatriate cash to North America, that tends to put a little upward pressure on our rate.

So if there is kind of something that internally that is (technical difficulty) the higher US rate on it.

And then also -- and again, sorry if you answered this already.

Are we past the tough H1N1 comps?

First quarter 2011 should be the last of that and then it should turn significantly positive in Q2 and Q3 as we had some more inventory reductions and distributors in the middle of 2010.

Ali Dibadj, Stanford Bernstein.

Thanks for taking the follow-up.

Two quick questions.

One is you do mention strategic marketing up $100 million for the year.

I apologize if I missed this, but can you tell us how much it was up or down on the quarter both dollar and as a percent of sales?

Yes, I think we were up $110 million through the third quarter, so that would make us down $10 million in the fourth quarter.

Down 10, okay.

And reason being the typical timing of launchers and such or --?

Yes, we basically we executed our plan for the year, and so this was the timing that we had laid out.

Okay.

And then separate question on Wal-Mart.

We've been hearing a little bit more about [factory gate] pricing, customer pickup, whatever you want to call it.

Are you in those types of discussions with them?

Do you think that is a theme that we're going to hear more and more about going forward?

We have done a lot of work with Wal-Mart's logistics teams over the years, and we have a customer pickup program that is available to all of our customers that Wal-Mart has taken advantage of for many, many years.

And so that's not really new for us, probably because we're such [high cube high velocity] categories.

That is one that maybe we were -- we've worked on maybe a little bit before.

We haven't pushed to the end point that I think some customers are going to with Wal-Mart where they're doing all of their volume that way.

I think we are really looking at it with them opportunistically to see which lanes would that make sense for them and for us.

That was the question I was going to ask.

So what percentage of volume are you doing now?

I'd be guessing, Ali, but we do have a pretty robust pickup program with them.

They're obviously our largest pickup customer at this point.

And do you think 100% is like some other folks have done in the industry, do you think that's unrealistic for you guys?

I think that probably will be for a variety of reasons not having to do with Wal-Mart or us, may not be where they will ultimately wind up because in some lanes, there's such good low-cost carrier options with good backhaul that it's probably going to make more sense for us to use carriers in those situations.

And I think what we are doing with them is we're both working on ways to take logistics costs out of the system and make the inventory flow to the shelf faster.

And that's in the end what creates value for both of us.

Connie Maneaty, BMO Capital Markets.

Thanks for the follow-up.

When the restructuring is completed, by what percentage will it change the amount of pulp you buy?

Well, we are about 8% integrated today, and so that will go basically to zero.

So we consume about 2.5 million tons of pulp.

So that's just under 200,000 tons of pulp production at those two facilities.

At this time, we have no further questions.

Okay, thanks.

We'll turn it over to Tom for closing comments.

Okay, well once again, we are on track with executing our plan in 2011 to deliver on our earnings growth expectations.

We are deploying cash in shareholder friendly ways and as usual, we appreciate your support of Kimberly-Clark.

Thank you.

Thank you.