金百利克拉克 (KMB) 2013 Q1 法說會逐字稿

Ladies and gentlemen thank you for your patience in holding.

We now have your presenters 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 ask if you would like to ask a question.

It is now my pleasure to introduce today's first presenter, Mr. Paul Alexander.

Thank, David and good morning everyone.

Welcome to our first-quarter earnings conference call.

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

Here is the agenda for our call.

After an opening comment from Tom, Mark will begin with a review of first-quarter results.

He will also provide an update on the strategic changes we're making in Europe.

Tom will then provide his perspectives on our results and the outlook for the full year, and we'll finish with Q&A.

We have a presentation of today's materials in the investor section of our website, which is www.Kimberly-Clark.com.

We will be making forward-looking statements today.

Please see the risk factors section of our latest annual report on Form 10-K for further discussion of forward-looking statements.

We will also be referring to adjusted results and outlook.

Both exclude certain items described in this morning's news release.

The release has further information on these adjustments and reconciliations to comparable GAAP financial measurement.

Now I'll turn it over to Tom.

Well good morning, everyone.

I just thought it would be appropriate for me to start this morning by commenting that we're well aware that the eyes of the nation are on the events that are unfolding this morning in Boston, and I'd just like to start by offering our condolences regarding the tragic events that happened earlier this week in Boston.

And please know that the thoughts and prayers of everyone at Kimberly-Clark as well as those of the entire nation are with the families of the victims of this terrible event.

I'd also like to let you know that we're sitting down here in Dallas, Texas very close to the small town of West, Texas, and so we would like to also extend our deepest sympathies to our neighbors to the South as they deal with the aftermath of the explosion of the fertilizer plant that happened in that small community this week.

So it's truly been a difficult week for Americans in various places across the country, so I just thought we should start with that and remind everyone what's really important going on around us today.

But with that I will turn it over to Mark Buthman.

Thanks, Tom.

Good morning everyone.

Let me start with the headlines.

First, we achieved organic sales growth of 3%.

That included increases of 6% in our North American Consumer Tissue business and 5% in K-C International.

Second, we delivered adjusted earnings per share of $1.48 as an all-time record and up 19% year on year, boosted by strong cost savings.

And third, we continue to allocate capital and shareholder-friendly ways through dividends and share repurchases.

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

First-quarter sales were $5.3 billion, up 1% versus last year.

Underlying organic sales rose 3% versus a tough comparison of 6% growth a year ago.

Results this quarter were driven by increased volumes of 2%, higher net selling prices of 1%, unfavorable currency rates and lost sales in conjunction with our restructuring activities each reduced sales by 1 point.

First-quarter adjusted gross margin was 34.6%, up 140 basis points from last year.

The increase was driven by organic sales growth and $85 million of FORCE cost savings, partially offset by $35 million of input cost inflation.

We're off to a great start with our FORCE program this year relative to our full-year target of $250 million to $300 million.

Our teams are pushing hard to free up funds to reinvest to build our Business and to drive additional bottom line growth.

Moving down the P&L, between the line spending increased 10 basis points as a percent of sales, and that was driven by small increases in G&A, strategic marketing spending was down slightly mostly due to the timing of innovation launches, which were relative to last year are going to be more toward the latter part of the year.

Other income and expense benefited from a gain on the sale of some non-core assets.

Adjusted operating profit rose 16% with an operating margin of 16%.

That's up 200 basis points compared to prior year, really encouraged by our margin performance to start the year as both our gross and operating margins were the highest we've achieved in 3.5 years.

The first-quarter adjusted effective tax rate was 30.8%.

Now that's up from last year, but it's in line with our full-year target of 30% to 32%.

Equity income was up 36% in the quarter as K-C de Mexico had a great start to the year.

So putting it altogether, first-quarter adjusted earnings per share rose 19% to $1.48, that's well above what we expected three months ago and reflects continued momentum in K-C International, strong FORCE cost savings, and above-plan volume growth in our North American Consumer Tissue Business.

Now turning to cash flow, cash provided by operations in the first quarter was $607 million, that's up 4% year on year.

The improvement was driven by earnings growth, a smaller increase in working capital relative to last year, and that was partially offset by higher cash tax payments.

We continue to allocate capital in shareholder-friendly ways with the first-quarter dividend payments and share repurchases totaling nearly $800 million.

In February we announced our 41st consecutive annual increase in the dividend; the 9.5% increase should help maintain our position as a top tier dividend payer.

In addition, we repurchased $0.5 billion of KMB stock in the quarter.

We continue to expect full-year repurchases to be between $1 billion and $1.2 billion.

Now let me highlight a few areas from our segment results for the quarter.

In Personal Care, organic sales rose 4% with volume growth of 3% and net selling prices up 1 point.

Compared to a tough comparison of the year, our toughest comparison of the year, K-C International had another good quarter with organic sales up 7%.

We continue to make excellent progress with targeted growth initiatives in KCI.

This momentum helped offset volume declines in Venezuela, and in Australia, where heavy diaper promotions last year affected the comparison.

Tom will talk more about KCI in a minute.

Elsewhere in Personal Care, organic sales were flat in North America and up double digits in Europe.

First-quarter Personal Care operating margins of 18.4% rose 150 basis points.

The improvement was driven by organic sales growth, cost savings and higher production volumes, partially offset by increase between the lines investment, cost inflation, and unfavorable currency effects.

Moving to Consumer Tissue, organic sales were up 5%, with volume growth of 4% and slightly higher selling prices.

The volume increase was highlighted by double-digit growth in North America for high-margin Cottonelle Bath Tissue and Kleenex Facial Tissue.

Both brands improved market shares in the quarter.

In addition, Cottonelle benefited from increased promotion support, and a strong cold and flu season helped boost Kleenex volumes.

Consumer Tissue operating margins rose 200 basis points in the quarter.

Margins benefited from organic sales growth, cost savings, and lower between the lines spending, partially offset by cost inflation.

Turning to KC Professional.

Organic sales were even with last year as improved pricing and mix were offset by slightly lower volumes.

Despite a relatively flat top line, our KCP team continues to drive up profitability by delivering cost savings and improving mix.

First-quarter operating margins of 18% were up 230 basis points year on year.

Lastly, healthcare organic sales were down 1%, driven by lower surgical and infection prevention volumes, which were impacted by a slowdown in surgical procedures in the US in the first quarter.

Operating margins were down 200 basis points in the quarter.

Overall healthcare results were behind plan, but our team is focused on improving performance throughout the balance of the year.

Now before I turn it over to Tom, let me update you on the strategic changes we're making in Europe.

Overall, we're moving quickly to implement the changes.

We're on track with our operating plan for the year.

We've stopped selling Huggies Diapers in 13 countries so far.

We expect to exit the remaining five markets in the second quarter, so the impact on our top line will build over the remaining part of the year.

Our diaper facility in the UK stopped production in mid March, and our Spanish facility is likely to close in May.

We've also reached agreements to sell our Polish consumer tissue business, and that transaction is expected to close in the third quarter.

Given our progress so far, we've narrowed our estimate for cumulative charges by raising the low end of the range by $50 million.

We continue to expect that cash costs will be 50% to 60% of the total charges for the restructuring program.

Now, regarding the brands that we're retaining in Europe, it's solid performance in the first quarter, Andrex Bath Tissue volumes improved and our market share rose into the high 30%s.

In Personal Care, Huggies Baby Wipes volumes grew at a double-digit rate.

So we've got more work ahead of us in the next few quarters.

Will be important as we shed additional sales and overhead costs, but I'm confident that our European team is focused and they will execute the plan very well.

So that wraps up my comments.

To recap, we generated solid organic sales growth, we delivered strong margins, an all-time record adjusted earnings per share, and we continue to allocate capital in shareholder-friendly ways.

Now I'll turn it over to Tom.

Thanks, Mark.

And since Mark has reviewed the quarter in detail I'll just add that our overall results were excellent, so we're only one quarter into the year and we've got more work to do, but I'm pleased with our solid organic sales growth, our strong margin improvement, record earnings per share, and our capital allocation, which was very shareholder-friendly.

So I want to focus my comments this morning on our consumer businesses in North America and K-C International, and then I'll talk about our full-year outlook.

So let me start with North American consumer.

The two primary objectives for this business this year are to improve our brand positions and to increase our operating profit.

Now we're off to a very good start in both areas.

In terms of market positions, we improved or maintained market share in seven of the eight consumer categories that we track.

And that included solid gains in Kleenex Facial Tissue, Pull-Ups Training Pants, Huggies Baby Wipes, U by Kotex feminine care products, and our Poise and Depend brands.

At Huggies Diapers where shares were down about 1 point versus last year quarter, we're currently launching our best ever Snug & Dry Diaper and an improved slip-on diaper.

So regarding the bottom line our North American consumer business had a very good quarter.

It had excellent FORCE savings, improved manufacturing costs, and volume growth in our high-margin brands, including Poise, Depend, and Pull-Ups.

And I was particularly thrilled with Consumer Tissue where volumes in Kleenex and Cottonelle brands were very strong as Mark mentioned, although that level of volume growth will be tough to repeat we're encouraged by our momentum and optimistic about our second-quarter innovation we've got coming on both those brands.

So I'm pleased with our overall performance in our North American consumer business.

Now let's shift to K-C International.

Our first-quarter organic sales growth was more than 5% and that's consistent with our first-quarter plan for the year.

KCI faced its most difficult comparison of the year in the first quarter with 13% organic sales growth in the base period last year, and we continue to expect that KCI will deliver high-single digit organic sales growth for the full year.

Working together with our global brand teams, KCI is making further progress with its growth initiatives.

In diapers, we continue to innovate across our portfolio and we've expanded diaper-pants into more parts of the world.

That strategy continues to deliver strong results in key markets.

In China, where Mark and I were just visiting recently, our diaper volumes increased 50% and they benefited from innovation, market share gains, and category growth.

Huggies are now available in 85 cities in China, and that's up from about 80 cities at the end of last year.

In Russia, our diaper volumes increased by about 10% in the quarter.

And in Brazil, diaper volumes were up by about 5% and were effected as expected by selling price increases that we recently implemented because of the weaker real.

The increased pricing and improved product mix brought total organic sales growth in Brazil for diapers to be about 15%.

And in all three of these markets, we have premium diaper innovation launching in the second quarter.

We also have new manufacturing facilities starting up in China and Brazil to support our growth plans.

At other businesses within K-C International, our feminine care organic sales were up high-single digits and we continue to rollout premium executions that are very similar to the U by Kotex launch in North America.

And finally in adult care and baby wipes, both of these businesses delivered double-digit organic sales growth in the quarter, building on the momentum that we achieved last year, and just like we've done in North America, we're building the adult care category in K-C International with our Poise and Depend brands.

And in baby wipes we have good momentum in South Korea and Latin America and we'll be expanding capacity to support our growth plans.

So overall, we remain very excited about our prospects to drive strong top and bottom line growth in K-C International.

Now let me turn to the outlook.

In terms of our 2013 earnings guidance, we're now targeting adjusted earnings per share in a range of $5.60 to $5.75; that range is about $0.10 higher than our previous outlook, and reflects our strong first-quarter performance and our plans to continue to reinvest back into the business for our long-term success.

We expect to make additional progress on targeted growth initiatives with a particular focus on K-C International, and we have a lot of innovation coming in the balance of the year and we'll support that innovation and these growth initiatives with higher levels of strategic marketing.

We've also got a number of new assets starting up that will support our growth plans later this year.

At the same time we'll continue to focus on generating cost savings to make sure we can fund our investments and improve our profitability.

So far, input costs and currency rates are tracking in the range of our previous assumptions, and we're optimistic about our opportunities and we believe that our prospects to drive profitable growth have never been better.

So to summarize, we're off to an excellent start in 2013.

We're pleased with our progress but we're reaching for more, and we remain convinced that our global business plan will continue to deliver value for our shareholders.

So that wraps up our prepared remarks, and now we'll begin to take your questions.

(Operator Instructions)

Our first question comes from Chip Dillon, Vertical Research Partners.

Hi good morning, Tom and Mark.

Terrific quarter, congratulations.

Thank you.

Wanted to ask you, I noticed you had a pretty accelerated pace of buyback in the first quarter.

I mean more than half of what you plan to do for the year and I was just wondering with the strong results why you might not top that up a little bit given that you've already done so much.

Our plan heading into the year just like we did last year was to be a little bit front-end loaded on share repurchases given the cost of commercial paper.

We're still holding course.

We had $1 billion to $1.2 billion in our outlook for the year.

We still think that's a good plan, so if the year plays out if we have more cash flow, obviously that's one of the options we've got to deploy it.

Got you.

The second question I had was and I might be missing a little something here but on K-C International, I notice that in Tissue, that's not the bigger focus.

It's obviously Personal Care, and you mention that the volumes grew 4% and of course you were coming off a strong 12% gain a year ago.

What should we see that sort of normalize at in Personal Care in the emerging K-C International markets?

Is 4% kind of the number we should go with as we look ahead, or I think based on Tom's comments should we look for something maybe a little bigger than that going forward?

Well I think, Chip, in K-C International, the volumes were pretty flat on Consumer Tissue.

We did pick up some price and mix on that front, and ex-Venezuela I think the volumes were down 1%.

So again, we're not adding a ton of additional capacity there and are focusing on driving mix and revenue realization and getting our margins up, and you saw some of that improvement in the quarter.

Right, and I was really talking more about Personal Care.

Oh, on the Personal Care front, I'd say it's the toughest comp in the first quarter, and so we would expect to see with the innovation picking up in the last three quarters of the year that we'll see a little bit better growth from Personal Care going forward.

If you look at relative to our 3% to 5% top line, Chip, obviously Personal Care and KCI is going to be higher as part of our mix.

Got you.

Okay, thank you.

Thanks, Chip.

Our next question comes from Gail Glazerman with UBS.

Hi, good morning.

Good morning, Gail.

I just wondered if you could talk a little bit more about exactly what surprised you in the first quarter, and I guess just trying to reconcile that with the guidance for the rest of the year.

Last call you talked about actually expecting the second half to be improved relative to the first, and it doesn't feel like that's consistent with the current guidance, and you were just talking about the innovation pipeline that will flow through the next few quarters.

So can you give a little bit of color there?

Yes, that's a fair push, Gail, so I'd say two things.

One is Consumer Tissue in North America was really way ahead of expectations, and so Cottonelle volumes were up double digits, Kleenex Facial Tissue was up double digits.

On the facial tissue front, that's probably more of a strong cold and flu season phenomena.

On the Cottonelle front, one of our primary branded competitors that's not a public company has had some product supply problems, and they sent a note out to their customers that indicated they were going to have trouble supplying.

And that certainly helped our business and it showed up in their share loss and our volume gain in the first quarter.

So we ran everything full and tried to take advantage of as much of those business opportunities as we could, so that certainly helped us.

We assume they will work their way out of that problem later in the year, and so that's where -- we don't expect that level of volume growth in Cottonelle to continue at that kind of a rate.

So that was one thing, and then I think the other thing that was a big positive for us was cost savings, so we had a very strong start to the year on FORCE.

Now you could say gosh, you were over $80 million in FORCE in the third quarter and fourth quarter of last year, so why were you surprised, but it was a stronger start to the year than we probably forecast.

And that should bode well for our results in the balance of the year.

Okay, and just looking at the European restructuring a little bit, you commented that you weren't selling Huggies in I guess 13 countries and moving out of the remainder, but I presume you're still selling diapers with the comment about I think 14% private label growth, and I'm just wondering when would you expect to see that trail off?

Yes, we will honor all of the private label contract commitments we have with our customers in Europe, and so when we signed those contracts they had a certain date at which they would renew and we'll fulfill the terms of the contract.

We'll also -- we are continuing to sell diapers in Italy as we noted in the restructuring and there may be some other private label contracts that we'll retain post the shut down of some of the facilities in the UK and Spain.

So I think the good news on the European front is in our other Personal Care categories and in Consumer Tissue, we saw good growth in the retained portfolio and we're investing in those, and things like Andrex Washlets in the UK, our Pull-Ups business had a nice improvement in Europe, our Baby Wipes business is growing like crazy.

So the strategy that we've had of focusing more on those growth opportunities in that market, very early days but we're encouraged by the first-quarter performance.

Okay, thanks very much.

Thanks, Gail.

Our next question comes from Wendy Nicholson with Citi Research.

Hi.

Good morning.

My first question is on China specifically.

I know you said you'd gone into five new cities but can you comment on the competitive environment in China and how your strategy is unfolding in terms of going down market a little bit in pricing?

And then second question, and I really apologize if I missed it, but did you give us guidance for the year like volumes, price mix, sales growth?

If that's in the press release I didn't see it.

Yes, okay, the first question on China, Mark and I were just in China so we did the grand opening of our new mill in Nanjing and got to meet with the China team again, and they're doing pretty well.

And so our strategy in Huggies of going to the mid tier has gone well and so we're not going all the way down to the lowest tiers in China.

We're staying in the mid to premium tiers, and in fact, they are just launching a new Huggies Platinum, which is a super premium tier on top of our existing premium tier so we'll have three product offerings in China in the very near future, which we will think will appeal to the moms in China that want the very best product for their babies.

I'd say the competition from Unicharm is probably the toughest, and to a lesser extent, Kao, P&G is a factor in every segment over there, but we probably see the toughest competition from Unicharm and Kao at this point in time, but it's an exciting market and the team is very energized by success and they're reaching for more.

On the guidance front, our primary assumptions didn't change from our full-year estimates that we gave you earlier, so the organic volume for the year we're looking at overall 3% to 5% organic sales growth, 2% to 3% volume, 1% to 2% price and mix, currency is going to be about 1 point drag for the year, and then we'll have 2 points of restructuring drag for the year, and so that hasn't changed since January, which is why we didn't say anything about it in the release.

So the $0.10 lift to the estimates is maybe a little bit from KC Mexico, it's a little bit on the margin side but it sounds like most of your assumptions are kind of the same as they were.

Well it's probably we're a little bit ahead in Consumer Tissue in the beginning of the year.

Cost savings are tracking a little ahead, and obviously Mexico is part of it, but we'd expect that Mexico to have a good year just based on where the peso was trading when we put the plan together.

Got it.

Okay, thank you very much.

Thanks, Wendy.

The next question comes from Ali Dibadj with Sanford Bernstein.

Good morning.

Wanted to dig a little bit deeper in terms of the kind of dichotomy between all other segments and Consumer Tissue, because without the Consumer Tissue success, I think top line at least would have somewhat of a disappointing top line results for most folks, so I'm trying to understand as Consumer Tissue was successful I think you explained that through flu and Cottonelle in particular.

What was a little bit more disappointing I guess on the other end of things whether it be Personal Care or in particular KCP or healthcare?

Yes, that's a good question.

I'd say start with healthcare.

We were surprised and a little disappointed.

In fact we started out the year with healthcare with a little bit of flu pandemic scare and sold a bunch of face masks in January, so we started out pretty strong, but then actually, and you've seen this from some other healthcare companies that have reported, surgical admissions are down about 4% in the first quarter and nobody can figure out why.

And so everybody has got a hypothesis as to what's going on, but we haven't got a good read on that.

And so I'd say as the quarter played out, just the underlying category volumes in healthcare were a little disappointing.

And then in KC Professional our washroom business in North America we saw kind of low-single digit top line which would be about as expected but the safety business was off.

Part of that was we decided to shed some business in that segment which we knew about, but I'd also say that may be reflective of kind of a weaker manufacturing environment than maybe we would have hoped going into the year and that probably is tracking somewhat with what you're hearing in markets around the world.

And in KCP, obviously we look at that as a global deal and so yes, we were slower in Europe than we thought we were going to be.

We were a little slower in other parts of the emerging markets than we thought we were going to be, and so the B2B businesses were generally a little slower on the top line than we would have thought in plan.

And Ali, this is Paul.

I'd just add overall Personal Care was right on track with our plan; that obviously was the segment that had really strong results last year in the quarter, so you probably want to take a look at the comparisons before you -- or take that into account as you reflect on what Personal Care did this quarter.

Okay, and if you think about the margin story here so early in the quarter, net-net top line I think was roughly in line with where folks had it, but the margin was really the big surprise.

And can you talk a little bit more in detail about disaggregating that?

So how much of it was volume leverage, how much of it was non-leverage cost cutting within FORCE?

I think you include volume leverage in FORCE.

And how much was price realization or something else I'm missing?

We don't include volume leverage in FORCE, and so FORCE is about $85 million so FORCE, if you net that against the input, cost increases was certainly a big driver of that.

Better volume was just all by itself was about $30 million, and if you look at the change in unabsorbed fixed costs, which we track, that was another $15 million, so you could look at it and say cost savings is about 50% of our gross margin improvement, and volume including down-time related volume effects was about the other 50% of it.

And certainly those you feel are sustainable it sounds like the way you're talking through it?

Yes, you say on the fixed cost absorption front, you may recall that we took most of our down time in late 2011, early 2012 to get inventories in line, so the comps will be much easier on that front in the first half of this year.

So that will start to abate a bit in the second half of the year.

But again, we would expect with some of the innovation that we have coming that we'll have decent volume growth in the last nine months.

Okay.

And my last quick question is on KCI, because it's such an important piece of your business and growingly so.

Certainly it looks like it slowed a little bit, you can discuss comps et cetera, but one thing that I want to get your perspective on is this continued seemingly difficulty of taking pricing in KCI Personal Care, and that might be a competitive issue, that may be a mix issue.

But trying to understand that outside Latin America, pricing in that category, KCI PC.

Yes, we typically have taken a lot of price where you've got either cost issues or currency swings, and so if you look at the markets where you had that this quarter, really the two big markets, Brazil and Argentina is where there's been the most currency movement is where we got the most price.

And in the balance of KCI, you look at like China for example, there hasn't been a lot of currency movement, there hasn't been a lot of commodity cost hit really in the Personal Care space, and so we're really focused on driving innovation, driving mix.

And so launching a tier six diaper in China is going to do more from us from a margin and putting revenue in the category standpoint than trying to drive a list price change.

Okay, thanks a lot.

Thanks, Ali.

Our next question comes from Linda Bolton-Weiser with B Riley & Company.

Good morning, Linda.

Hi.

Just maybe you could give a little more information just to help me understand, because in terms of your organic sales growth, I assume you're still kind of thinking 3% to 5% for the year, the previous guidance, and it was at the low end in this first quarter, but you have more innovation coming later, but you had some stuff that kind of helped it, like the flu season.

But I don't see the comparisons actually getting that much easier.

You were pretty strong through all of the quarters of last year, just the third quarter was up 3% but the other quarters were up 4%, 5%, 6%.

So how do we have confidence really that you can do a little better than 3% later or is this going to be 3% for the year?

Can you give a little more color on the comparisons issues?

Yes, I think that's fair.

We said our organic target for the year is 3% to 5%.

We said organic volume was 2% to 3% and price mix is 1% to 2%, and so we kind of came in at the low end of that in the first quarter, but we really got a lot, most of our heavy-up innovation coming in the last nine months of the year, and we're pretty bullish on what we're going to be doing there.

So I think to move from the bottom end of the range to the top end of the range on organic volume is very doable.

And so I think the plan is unfolding about as we thought it would and we look for that to deliver; the things we worry about a little bit is the continued weakness in healthcare surgeries, if that will be a drag, and we would like to see a little bit of an economic improvement benefit KCP, but on the consumer front we would feel pretty good about what we've got coming in KCI, and in North America.

Okay.

And then can you just give an update, because it's been awhile since the feminine care, the new brand U was launched, and can you give us an update on how that's doing, like what market share it has achieved, maybe in the different categories of pads and tampons and all that.

And then secondly, can you give an update on the slip-on diaper, because you said there will be innovation coming on that.

Is that an innovation because you need to improve it because it wasn't working or is it just an innovation to just drive it further in terms of market share gains?

Yes, sure.

On U by Kotex, we've made steady share progress in the US, I think it's a little up to over 7% share of the category now, and our total Kotex share is trending around 18%, which is up several points from when we started the U launch.

And so we had a little bit of softness on volume in our Kotex Natural Balance in the first quarter and made up for that with continued growth in U by Kotex, and have more innovation coming on that brand as the year progresses.

And what was your second question, Linda?

Just an update on slip-ons.

Slip-on diapers is just continuing to work on improving the product, and so I would say as you know we normally do, we consistently launch renovation improvements to our diaper and pant lines around the world, and so it's a nice improvement to the slip-on diaper line.

Again, it's one that we would like that to pick up a little bit from a share standpoint.

It's a big idea around the world, and so it will be a good improvement for mom.

Okay, and just one last thing.

On the -- you said you're going to sell a business in the third quarter, the Polish tissue business I think.

Does your guidance for the year include a potential gain on sale that might be included in your earnings then or would that be--

If it was a gain in any of the stuff it would all go through the restructuring line, and so -- but no, there won't be any, there's nothing related to that that would be in our guidance.

Okay.

And then the restructuring cost savings in the quarter, are you including that in FORCE savings, or is that separate?

And I'm projecting restructuring savings of $40 million for the year.

Is that about right?

In the first quarter we had about $5 million related to the tissue restructuring that was not included in FORCE, so that would have brought the total to $90 million including that.

Paul, you want to comment on the full year?

Linda, the $40 million would be right between 2013 and 2014.

That would get us to our full-year $100 million run rate at the end of 2014.

For 2013 it will only be about $15 million.

So we got $5 million of it already.

Great.

Thanks a lot.

Thanks Linda.

Our next question comes from Bill Schmitz with Deutsche Bank.

Good morning, Bill.

Good morning.

Do you think this is the peak gross margin quarter for the year?

I'm just kind of looking at the year-over-year comparison.

Well, I hope not.

We feel pretty good about the momentum and a lot of things working well, and you'd say on the gross margin front we should see a little bit of increased cost inflation, although in the first quarter we had $35 million, which is not too far off our annualized rate of the guidance that we said $150 million to $250 million, so I think that we'll see how that plays out.

But we're encouraged by our progress.

As we've launched more innovation, we are aiming for it to be margin accretive, so that should give us a little bit of an upward bump on gross margin as well.

So we are focused on building that over time, Bill, and we hope the first quarter was a good step in that direction.

Okay and then are you tempted to change your sort of long-term growth algorithm?

Maybe not in the sales line, but it seems like the business mix has shifted so much and a lot of lower no-margin stuff is out of the business.

So should there be a catch up period in terms of EBIT growth, which maybe kind of gets you to lift that mid-single digit operating profit growth targets you that have in the long term?

I think the other thing we're looking for is particularly with the strong start this year is where can we accelerate investments that will benefit our future growth?

And are we making sure we're investing in the brands at the right level to fully take advantage of the innovation opportunities that we have.

So our strategic marketing in the first quarter was that it was at a little bit lower growth rate than past quarters, but we think for the full year, we're still going to be increasing that and that will be another area that we'll look for investment.

I would say, Bill over the long term, 6% to 9% bottom line we like to hit that consistently, and it's going to require gross margin improvement, continued investment in the business to do that, and so that consistently hitting our algorithm is really our goal.

Okay, great.

And then just the private label, the big private label boost in Europe, is there a change in strategy there?

So are you guys going to open yourselves up to more of those private label contracts in some of the smaller markets?

No, I think that was kind of a tactical move a couple of years ago to fill up existing capacity, and as we've exited facilities, I think that that will be a smaller player in the private label market in Europe overall.

Okay, so it was a big move, right?

I think you said organic sales were up 14% in Personal Care in Europe, but that's just getting rid some of the old diaper stuff as you close the factories down?

These were contracts that we entered into last year, so you saw moves like that in the last couple of quarters of 2012, and it's really just contracts that we picked up last year that were roughly a year long that will roll off in the second and third quarter.

And remember, Bill, baby wipes volumes were also up strong double digits also and we're keeping that business.

Okay, great.

Thanks guys, I appreciate it.

Thanks Bill.

Our next question comes from Jason Gere with RBC Capital Markets.

Thanks.

Good morning, guys.

Good morning, Jason.

Just I guess two questions.

One I was wondering if on the US side, and both questions are on the US, if you could talk about the retail environment.

Over the course of this quarter we heard comments on some of your big retailers out there about some pressure that we're seeing.

So I guess one, I was just wondering if you could just talk about the competitive landscape, what you're seeing out there.

I know on the food side it looks like it's getting a little bit more promotional, so I was just wondering what you might be seeing out there on the HPC side, Personal Care, and Tissue.

And then I have a follow-up question I'll ask afterwards.

Yes, it has been a tougher quarter in retail generally, just when you look at some of the comps.

But I would also say that our categories in consumables they've generally done much better than food and some of the other categories, and so we are more of an essential product line and we're also encouraged to see that consumers are still responsive to innovation.

So when we look at how our new Depend products and Poise products are performing in the market, some of the new Baby Wipes products that are in the market, these are premium-priced line extensions and they're doing pretty well from a category standpoint, which says that the consumer is still willing to pay for a better product.

Okay, that makes sense.

And then I guess the more specific question is on just US diaper, and help me with math right now.

I guess US diaper is what about 15% of your total sales?

Is that right?

Globally?

Yes, US diaper, so about 15% of your total Company sales after all of the adjustments?

Yes, we normally don't get into that level of detail, but if you can look at our market shares in the mid 30%s, I think you could get a pretty good approximation.

So I guess what I'm trying to figure out is that can you talk about where the category trends are now?

Because I know last year they were still down I think at least mid-single digit, and if birth rates are starting to stabilize, there should be like a nice swing I guess to your organic sales calculation, so of you go from negative 6% to maybe over the next two years 2% there's like 800 basis point kind of swing I guess on the organic sales calculation.

You multiply that by 15%, that's over 100 basis points of organic sales.

So I guess can you just talk me through where we are right now, what are you seeing out there?

And do you expect over the next maybe two years that you actually see that migration from significantly negative category trends to modestly positive?

Can you just kind of walk me through some math here?

Yes, sure.

If you look at the diaper category last year it was probably down 2 points, and our expectation for this year is that it will be down about 1 point, and the training pant category last year was down more than that.

And that was more the three years of low birth rates piling up in the category as kids tend to be start toilet training around age three, so training pants was down mid-single digits last year.

And it's encouraging to see our training pant business is modestly positive and that's partly because there's some penetration opportunity still in that category, and we've driven things like Good Nights and Little Swimmers, which we count in that metric and those are doing better than the overall training pant category would have performed.

So I would say you're probably a little high on your estimate of diapers as a percent of sales and you're probably a little more negative in terms of where the comp was last year and where it's going, so I wouldn't expect you're going to see as much top line lift.

At this point, we would say the birth rate seems to have bottomed out.

We hope that it will turn slightly positive later this year, but it will be -- the category will still be down 1 point for the year and then hopefully we'll see a flatter category in 2014.

Okay, that's good.

Thanks for the reconciliation.

Thanks guys.

Our next question comes from Lauren Lieberman with Barclays.

Hello, Lauren.

Hi thanks, good morning.

Morning.

Just on the Consumer Tissue margins because this was just north of 15%, the best they've been since 2004.

I know there was a benefit, a little bit of help from flu season this quarter, just wanted to get some perspective on whether you think 15%-ish, obviously give and take quarter to quarter is sustainable, and whether you think Consumer Tissue margins could be higher than mid teens over time.

Well you may have recalled when Tissue margins were down in the high-single digits that we weren't happy with that and we were aiming to get back to the mid teens, and so now we're back in the mid teens you can imagine that we're not totally happy with that and we want it to go higher still.

But so it's been a good focus on mix and revenue generation and driving premiumization, launching innovation.

And so as you look around the Company, things like we'll have a lot of flushable moist wipe launches this year in North America and all over the world, and we're starting to look at other things that we can do with our great tissue brands that bring more margin and revenue into the category.

And so that's I think just starting to take hold, and so we do have more opportunity to drive margin north in the future, and rest assured the team is not stopping at 15%.

Let me just on the topic of innovation then with the flushable wipes example, maybe not a terribly nice question, but sometimes ideas you guys have had that strike you as big ideas haven't been quite as successful as hoped, whether it's the hand towel or past efforts at flushable wipes.

What, if anything is different now, is it just keep trying until the consumer catches up?

Well I think we're better marketers than we probably were when we tried it in the past.

We're listening better to the consumer.

As you see some of the flushable moist executions there, actually this category has been growing.

It's just finally getting on the radar screen and we're getting it in more markets.

So we've had terrific launch in the UK, for example, behind Andrex Washlets, and we'll take some of that learning and take that into other markets.

And so I think there is a consumer need there and we've got better and better product executions and we're talking to the consumer about it in ways that are memorable and are starting to drive some new habits.

I think it is fair to say it takes longer, but one of our learning is when you're trying to change habits, it just takes longer versus a product where you're improving that the consumer uses every day, so that's probably a fair critique.

Okay.

And then just final question on this.

Just your outlook in general for pricing in tissue in North America, much has been talked about in terms of the private label capacity and improving quality and so on and so forth.

So it really sounds like this quarter was a large competitor not publicly traded having some challenges you're a bit protected for now, but is your outlook with pricing in the tissue category -- pricing not mix, but a straight price can remain as positive and strong as it's been?

Yes, I would say generally, tissue pricing broadly follows big moves in pulp pricing, and so our outlook for pulp is pretty stable.

We're talking about $20 a ton or something like that for the year, and I think given that, you're unlikely to see big swings in tissue pricing.

That doesn't mean it won't be promotional activity at the edges, but if we do a great job of driving innovation we should be hopefully less promotional, which winds up with more revenue at the end of the day.

Okay, thank you.

And one just like more housekeeping question.

You mentioned that if there was any gain on the Polish sale it wouldn't be part of your numbers, but in the release this quarter you mentioned there were some gains on asset sales in the numbers.

So I don't know what's the difference or was it just that it was --

We sold some real estate in North America that we didn't need, and so that goes into other income and expense, so it wasn't related to any of the restructuring activities.

That was the difference.

If it was related to restructuring, it would have been excluded.

Yes.

If we sell a facility that we took a write-off on and has a gain, we don't take the write-off as an excluded item and then take the gain through operations.

We play it straight down the middle.

Okay, thank you so much.

Thank you.

Our next question comes from Chris Ferrara with Bank of America.

Hi, Chris.

Hi good morning.

So it was kind of striking when you were talking about diapers in China that I guess you called out Unicharm and Kao as the biggest competitors and not so much Procter, and for probably the largest share player in the market.

Just wondering why that is.

Well, we look at the best performing product in the market and test against that product to make sure we can make competitive claims.

And so Unicharm and Kao both make some terrific products, particularly in the diaper pants area where we're growing in many of those markets, and they have the strongest product offer that we're aiming at, and so we test against those.

And they also make terrific open diapers that we've tested against.

So Procter has been there for awhile, and Unicharm and Kao are aggressively trying to grow those parts of the business, so we feel like we're in a share battle with them as much as anybody.

Great.

And I guess on another note, in Europe I hear you're out of 13 countries, exited.

Can you give an update on the cadence of cost coming out?

So I know you're saying for the full year that the costs are going to come out as fast as the sales have, but was that the case for Q1 as well?

Was there a net profitability impact of the European fees this quarter?

Europe had a very solid start to the quarter, so overall, their profit was up versus prior year and tracking with their plan, even a little bit ahead of their plan.

And second and third quarter is going to be the key turning point for the cost, the back office cost in particular, to exit.

And the team in Europe is monitoring execution of that plan very carefully and I'm confident they are going to deliver on their goals for the year.

Great.

Thanks a lot.

Thanks.

Our next question comes from Alice Longley with Buckingham Research.

Hi, good morning.

My question is about the hikes in your commodity costs.

They were up $35 million in the first quarter, which seems pretty low versus your annual guidance.

Can you -- why are you lowering your guidance for the year for commodity cost hikes?

I don't think we are.

We said $150 million to $250 million is what we think we're going to see in inflation, and we had $35 million in the first quarter, so if you annualize that we would be bumping up against the low end of the range.

And in the first quarter I think it was about $15 million was pulp, about $10 million was polymer, and about $10 million was distribution cost, and so I'd say those are the -- probably pulp for the full year we expect will be two-thirds of the inflation, with the balance being, the other big chunk being distribution, and that's both diesel rate as well as carrier rate increases, including some in Latin America where there's been some big carrier rate increases in Latin America.

Okay, but maybe the bottom end of your range we should -- it's more likely been the top end, right?

Well I mean certainly, with the commodity pullback that's happened in the last week or so, that wasn't probably fully reflected in our guidance.

You can see in the assumptions we're assuming oil is going to be in the $90 to $100 a barrel range, and natural gas we're assuming $4 to $4.50 and that's pretty much tracking; oil is probably the one that's maybe got a little bit more upside than what we share with you.

Pulp, we still think if you look at northern softwood, $8.90 to $9.10 price range is about right.

Secondary fiber we're assuming is around $2.60 to $2.65 and there may be a little bit of upside on that, but we'll see how the year plays out.

I think the cost analysis is, especially with oil, it's on the bottom of the CNBC news screen every day.

It's just too easy, we've learned to focus on current day pricing, so I think our range of $150 million to $250 million for the year is still a good call, and gives us some flexibility in the guidance of oil or natural gas or fiber run up on us in the middle of the year.

And currency rates are also obviously a key factor here, a lot of times they move in opposite direction with input cost.

Okay.

And the follow-up to this is you never really give us the base off of which we can run these commodity cost increases.

Let's say your commodity costs are up $150 million for the year.

Is that an increase below let's say 3% organic sales growth we might get, 3% to 4%?

What kind of an increase is the $150 million year over year?

It would be low-single digits.

So you're getting leverage from that from costs going up less than organic sales growth; correct?

Yes.

Okay.

So the $150 million would be up like 1% to 2% year over year?

Yes, it's low-single digits, Alice.

Excellent.

Thank you.

Thank you.

Our next question comes from Javier Escalante with Consumer Edge Research.

Hello.

Good morning everyone.

How are you?

Question for you, I have two questions, but I would like to start both in KCI, so I would like to start with China.

So you grew 50%, right?

And certainly I don't think that the market is growing 50%, so if you can give us a sense of if you can split China basically in tier 1 and tier 2 cities where you were up to last year, and then the new cities, the tier 3 cities which you are penetrating right now.

If you can let us know your best guess what is the market growth in tier 1, tier 2 cities versus tier 3 cities, and also what is the market structure?

What is your market share in tier 1 and tier 2 cities versus your market share in the new cities that you are competing, entering?

And also if you can tell us Unicharm and Procter and Gamble diaper share as well divided between tier 1 and tier 2 versus the rest, which is your rollout that you started last year.

That will be my first question.

I think you might have dialed the wrong number.

You might be thinking I'm Nielsen or something, but I'm probably not going to give you that level of detail.

I guess I will say that in the large cities, and we almost look at a share on a customer by customer basis, so in the large cities in the modern trade customers, we would have much stronger share than we would on a national basis.

So it's not uncommon to have shares for us, north of 20% in the large modern trade, and even though our national share in China is probably 50% of that.

And so as you go into new cities obviously your share is a lot smaller.

You're trying to build it with some of the new customers as you go into those markets.

And then we're also doing quite well in eCommerce in China, which is a growing channel which isn't very accurately measured.

And so it's a very dynamic complex market.

I'd also tell you quite honestly in many cases because the Nielsen coverage is still a little spotty, that anybody that's quoting you accurate market shares in China is probably pulling your leg.

So Procter is still the share leader.

Unicharm has probably got a share that's higher than ours overall, but we would be competitive in the tier 1 cities with both of those companies kind of vying for share leadership, certainly in our segments.

In the super premium segment we would be the share leader.

In the mid tier you typically would see P&G and Unicharm with a little stronger shares than we have because we're the newcomer to that segment.

But the good news is the category overall we think is growing at least mid-single digits, maybe high-single digits, and so it's still a pretty exciting diaper market for us.

But the mid-single digit, if you grew volumes at 50%, somebody must have been losing share.

So if you can help us understand who is losing share, because growing at 50% in the market is growing only mid-single digits, somebody must be losing share.

Do we have any idea what player is losing share from you?

I would say probably if you look at the Nielsen data that I've seen it's probably been P&G and Hengan have been the biggest share of losers.

On the other hand you could still lose share in China and grow volume, just given the overall growth of the market.

Yes, but you said that it was mid-single digits and you grew 50%, so that's why I was asking the share losses.

And the other question that I have is that you mentioned China growing at 50%, Russia growing at 10%, and the slowdown was in Brazil to 5%, but still you have very strong growth in these big markets.

So which markets went negative could be related -- and to what extent this is related to a Kimberly-specific issue, or was it broader-market issue that would be the case if one of the negative markets as I think you flagged it was Venezuela.

So if you can let us know, if you can explain which markets were negative and whether this is a Kimberly-specific issue and that will be very helpful.

Thank you.

Yes, the two big negative markets, one is Australia and had more to do with the timing of promotions.

So we had more promotional shipments in first quarter '12 than typical and that's a big holiday period in Australia, so usually those promotions take place late in the year; for whatever reason they happened in first quarter '12, and they also happened in fourth quarter '12, so we're were a little light in Australia, and that was probably the biggest comp change.

And then Venezuela was a little weak and Latin America overall just related probably more to our ability to get foreign exchange to pay for important products, or as you know, we're disciplined in terms of how we manage that part of the world.

And so those are the two biggest volume drags in KCI, and I guess you could say at least Australia was probably KC-specific and that it was more around timing of promotional shipments, and Venezuela, I don't know who you want to give credit to that one for.

But in terms of Venezuela, how weak is weak?

You're talking -- because last quarter, [Colgate] mentioned that their volumes were down 30%.

Could it be that kind of magnitude in Venezuela for you?

No, it wasn't that big.

Australia, because of the size of the Australian business within KCI, that probably had a much bigger impact on the overall comps than anything else.

Okay, thank you very much.

Thank you.

Next question comes from Jason English with Goldman Sachs.

Hi good morning guys.

Thanks for the question.

Good morning Jason.

Congratulations on a good start to the year.

Thank you.

Lots of questions already are thrown out there so I guess I'll close it out with some housekeeping items.

First, to follow up to Lauren's question, on the Polish tissue business exit, how large was that gain this quarter?

It wasn't a gain, so basically we took --

Sorry, not the Polish tissue.

I was referring to the non-core asset sale in the quarter.

The non-core real estate sale.

Oh, it was I don't remember.

It's the majority of the other income, which on an adjusted basis was $24 million, so it's the majority of that.

I guess the other point there, Jason is that was in our plan for the year.

Okay, that's helpful.

One more follow-up.

Back to KCI in Brazil, there's been some chatter out of the market of the government trying to temper the inflation rate by partnering with your retailers, giving them some tax relief in exchange for some price cuts.

Have you seen or heard about this, if so, what's the status and what are the potential implications for you?

It has not had a big impact on us at this point, and I think most of those initiatives have been focused more on food inflation and less so on our categories up to this point.

Thanks, that's helpful guys.

I'll pass it on.

Thank you.

The next question comes from Connie Maneaty with BMO Capital Markets.

Good morning.

I just have one question.

You were talking about new assets starting up in the second quarter and maybe for the rest of the year.

What kind of assets are they and what's the cost of starting them up and when are they fully operational?

Yes, we'll be adding as I mentioned Mark and I dedicated a new diaper plant in China so that's under start up.

We'll be adding some Baby Wipes capacity in a couple of markets around the world, so that will be the co-form assets and converting assets will be starting up.

We're adding some adult care capacity in different markets around the world.

And so I'd say none of them will have the start up impact like a new tissue plant would have, and all of the start up costs were baked into our plan for the year, but it will be a bit of an impact as the year progresses.

That's all I had, thanks.

Thank you.

Our next question comes from Caroline Levy with CLSA.

Thank you.

Good morning.

Just a little more specific, you're in 85 cities really in China.

Do you think you're going to be raising your goal?

Because it looks like you're moving pretty quickly there.

And the second part of the China question is how quickly would you get a margin benefit from manufacturing the lion's share of your product locally versus importing?

Yes, so certainly adding capacity in China will give us a margin boost.

We've already got a couple of diaper lines running in China at an existing facility in Nanjing, and we manufacture quite a bit of feminine care products in China and we enjoy the margin benefits from that.

So that by adding the diaper capacity, will give us a boost probably starting later this year and certainly in 2014.

Now once we get past the start up.

And in terms of raising our goal, our China team is certainly aggressive and is developing stretch growth plans.

They were very enthusiastic when Mark and I were with them earlier this year, and it's our job to make sure that we can make all their dreams come true, so we think that will be a good thing for Kimberly-Clark long term.

Just in terms of the consumer in China since you just got back, any sense of a major shift one way or the other, or obviously your business has been growing, but there's a lot of concern about the consumer there.

Well, you know you're still seeing good GDP per capita growth even though the overall GDP growth rate has slowed a bit, and boy, Chinese moms are like moms anywhere else.

They want the very best product for their babies, and they talk a lot about the little emperors in China where parents really sacrifice a lot to provide the very best for their children, and that hasn't backed off a bit.

Those children are their future and they are going to invest in them to make sure that they can be as well educated and as healthy and as strong as they can possibly be, and that certainly is a trend that's not abating at all in China.

Right.

And then if you could talk Company overall, your price mix outlook, because you had pretty strong price mix growth in the first quarter last year, much more modest this year.

Is that what we saw in the first quarter kind of what you would expect for the balance of the year for price mix?

Yes, we said our goal was 1% to 2%.

We were 1% in the quarter.

We should get a little bit of additional mix as the innovation rolls out, but we've got relatively benign cost inflation and currency rate swings in the plan and so those are usually bigger drivers of the price line.

If you saw a big spike in commodities or a big swing in currency rates than an individual market you'd see more pricing offsets there.

Right.

And then if you could just talk a little bit about Mexico, because you have great growth in your equity income line, and was it volume driven?

Whatever you can share about that market.

KC de Mexico had a very solid quarter, and really every component of the equity income line this quarter had a very solid result.

So we don't talk about them often but our business in India had a nice profit improvement.

Our business in Saudi Arabia had a nice profit improvement as well, and so those are in that line but they are obviously much smaller than the KC de Mexico numbers.

And Mexico had good executions, decent top line, and great cost savings, and that translated into a nice improvement.

And I was talking to Pablo Gonzalez earlier in the week and they're pretty bullish on their outlook.

In fact I think their call is going as we speak.

So Pablo is probably out talking to his shareholder group about the good news at KC de Mexico.

That's great.

A final question just on the US environment, again a similar question about the consumer, because there's a lot of fear that private label or lower-price brands are kind of here to stay in the new reality even if the economy gets better.

Do you have any thoughts on that?

Well it's interesting.

We track private label shares as you would expect, and basically, in every single category that we track, this quarter shares were down versus the prior quarter, either flat or down.

And in many of them, were down versus the year-ago quarter.

And so to the one that's up year over year is dry bath tissue and so that's probably the one that you've seen the most competitive pressure.

We talked a little bit about that.

I think our non-public competitor that had some supply problems in the first quarter created a little bit of a window for some private label improvement as well.

But overall we are not seeing anything at least in the recent quarter that would indicate that the consumer is feeling more squeezed and down shifting into private label.

Thank you so much.

Thank you, Caroline.

Our next question comes from Leigh Ferst with Wellington Shields.

Good morning.

I was wondering if you could tell us some more about the surgical numbers that were down 4% in the quarter.

How were they trending towards the end of last year, and also is there any remarkable difference between elective and non-elective?

Well, it's one that you saw a dip in the third and fourth quarter of last year, and I would tell you we don't have the data yet to be able to tell.

You would think that it's got to be elective right, because if you need surgery, you're probably not able to postpone it as much as you would think.

But I think everyone is trying to unpack this data and get a better look at it.

When you look at our surgical supplies business, and in the fourth quarter it was down 1%.

It was flattish in the third quarter.

We're also exiting some lower margin exam glove business which affected those numbers a little bit, but we expected a little bit better underlying environment for surgeries in the first quarter than we saw, and we're still trying to figure it out along with a lot of other companies I would guess.

Thank you.

And did you say you're now expecting US births to be down this year?

Well they've been down every year for the last three years and we're expecting the birth rate to flatten out this year.

Category will be down.

Category will be down 1% just because the babies that weren't born last year won't be wearing diapers this year.

So flat is what you were forecasting recently, so that's no change.

Correct.

Thank you.

Our next question comes from Chip Dillon with Vertical Research.

Thanks, I'll be brief.

Appreciate the time.

First question is I notice the minority interest is creeping up over to about $80 million a year, and yet it looks like your dividends to them are only like one-third of that or 25% of that.

Is that correct, or how does that generally work for you?

I don't know.

Let us think about that one, Chip, and get back to you.

The minority owners interest includes some other stuff related to one of our financing subsidiaries, that's probably part of what's going on in that.

We've got this offshore financing thing that's on the balance sheet that's probably doing more to drive that; that's somewhat unrelated to the dividend flow.

Beyond that, I would tell you the other big minority interest is in Korea and that business continues to do very well and also continues to pay a healthy dividend.

Got you.

And then second question is on that financing, I noticed there's a note $395 million, I think that actually winds up next year.

And the question is, is that note which is in sort of your long-term assets, is that offset by -- in your debt section somewhere or does it just sort of hang there?

In other words, if we're trying to compute your net debt should we include that note in your cash because you have an offsetting liability on the debt side?

Yes, there's an offset.

Okay, that's great.

And last question it looked like to us that the corporate expense when you look at just in a pure sense was a little elevated versus a year ago.

We get $62 million I think.

And should we expect that to be higher than it was a year ago or was the first quarter just an anomaly?

Yes, so Chip, that would include some higher incentive compensation expenses, which are related to our increased outlook for the year, so for the full year, we'll probably be up year on year in that line, but I wouldn't assume that the first quarter would be a normal run rate.

Okay, and then lastly, Mark you mentioned the gain on the real estate that caused the other income line to be normalized at $24 million.

What should we expect that on a normal basis to be?

I always thought it was always more or less a small, like $10 million expense.

Is that fair or should it be just near zero or what would you guide us to?

It's normally very slight positive or very slight negative.

Plus or minus $10 million and every once in awhile you have something like we had this quarter where it's a little lumpier.

Terrific, thank you.

Our next question comes from Linda Bolton-Weiser with B. Riley & Company.

Hi.

Hi Linda.

I think in the past when we had the bird flu outbreak, you actually saw the face mask lift.

Are you seeing of that yet due to what's going on in China or not?

Not yet.

And the other thing we tried to be better at is managing pandemics, because what has happened to us in the past is that everybody orders everything and panics and if they needed 10 cases, they order 100 cases, and then if we ship it to them then they want to ship it all back to us two months later.

So we actually have -- once we have evidence that there's a demand surge like that coming, we go into instant allocation mode and limit the ability of them to buy out-sized amounts.

So we're trying to do a better job of managing that for everybody's supply chain in these kinds of situations, but we haven't seen much happen yet at this point.

Great.

Thanks a lot.

Thanks Linda.

At this time we have no other questioners in the queue.

Thank you, David.

We'll wrap up with a closing comment from Tom.

Well once again, we're off to a good start at Kimberly-Clark and we appreciate your support.

And once again, our thoughts and prayers go out to the folks in Boston that are affected by the events that have unfolded this week.

Thank you very much for being with us today.

Thank you very much.