Paul Alexander - IR Mark Buthman - SVP and CFO Tom Falk - Chairman and CEO.

Gail Glazerman - UBS Ali Dibadj - Sanford Bernstein Olivia Tong - Bank of America Chris Ferrara - Wells Fargo James Armstrong - Vertical Research Partners Wendy Nicholson - KCC Connie Maneaty - BMO Capital Markets Erin Lash - Morningstar Lauren Lieberman - Barclays Capital Bill Schmitz - Deutsche Bank.

Ladies and gentlemen, thank you for your patience and 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 follow up if you would like to ask an audio question. It is now my pleasure to introduce today's first presenter, Mr. Paul Alexander..

Thank you and good morning, everyone. Welcome to Kimberly-Clark's Third Quarter Earnings Conference Call. Here with me in Dallas today 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.

Mark will begin with a review of third quarter results and give a short update on the health care spin-off. Tom will then discuss our organization restructuring and also our full year outlook. We'll finish with Q&A. We have a presentation of today's materials in the Investors section of our Web-site.

As a reminder, 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 measures. And now, I'll turn it over to Mark..

Thanks, Paul, and good morning. Let's start with the headlines.

First, we achieved organic sales growth of 4%, highlighted by 10% growth in KC International; second, we increased adjusted earnings per share of $1.61 that’s an all time record and up 12% year-on-year; and third, we continue to see strong results from our focus on capital management, including working capital, cash generation, capital spending and returning cash to shareholders.

Now let’s cover the details of our results. Third quarter sales were $5.4, that’s up more than 3% versus last year. Underlying organic sales rose 4%. Adjusted gross margin was 35.1% in the third quarter, up 70 basis points year-on-year.

Adjusted operating profit was up 15% versus year ago with an operating margin of 17.4% that’s up 180 basis points compared to the prior year. Results benefited from organic sales growth $100 million of forced cost savings and lower G&A spending.

I am really encouraged by our team’s continued focus on cost savings and spending discipline that’s helping us improve margins and invest for future growth in areas like advertising which was up $10 million in the quarter. On the other hand, we absorbed $55 million of input cost inflation and negative effects from currency exchange rates.

Moving down to P&L, equity income fell 37% driven by softness at KC de Mexico. In addition, the adjusted effective tax rate was $0.05 drag on the quarter that was mostly offset by a lower share count.

So putting it all together, third quarter adjusted earnings per share were $1.61, up 12% year-on-year and reflects continued topline momentum KC International, broad based margin improvements and forced cost savings.

Now, turning to cash flow, our cash provided by operations in the third quarter was $976 million, that’s up 7% year-on-year driven by improved working capital. We continue to drive down primary working capital.

Our year-to-date cash conversion cycle is down three days compared to full year 2013 so we’re tracking to comfortably exceed our one to two day improvement objective for the year. In terms of capital allocation, third quarter dividend payments and shared repurchases totaled more than $0.5 billion.

As a reminder, on October 7th, we increased our full year share repurchase target to $2 billion. That’s up from our previous estimate of $1.3 billion to $1.5 billion as a result of cash proceeds we expect from Halyard Health in conjunction with the spin-off of our Health Care business.

So this means that full year dividends and share repurchases should be at about $3.3 billion. Now, I’ll highlight a few areas from our segment areas for the quarter. In personal care, organic sales rose 6%, performance was led by KC International with organic sales up 12%.

In terms of highlights for KCI this quarter, in diapers, organic sales were up 25% in China, 25% in Russia and Eastern Europe and 10% in Brazil. Organic sales in KC International were also up double digits in feminine care, led by Brazil, China, Eastern Europe and South Korea.

Finally, our adult care and baby wipes businesses delivered double digit organic sales growth in the quarter. In North America, personal care organic sales were down slightly, volumes were up for our Poise and Depend adult care brands, GoodNites youth pants and Huggies baby wipes.

On the other hand, volumes were down in Huggie diapers and Pull-Ups training pants. Overall personal care operating margins were 19.5% in the quarter, that’s up 160 basis points year-on-year with improvements in North America, KC International and Europe. Moving to consumer tissue, organic sales increased 3%.

In North America, organic sales were up more than 3% behind strong volume performance. That reflects market share gains, innovation and increased promotion activity. KC International, organic sales were up 5%, was driven by higher net selling prices in response to unfavorable currencies and cost inflation.

Consumer tissue operating margins of 16.8% were up 250 basis points year-on-year driven by organic sales growth and cost savings. Now, K-C Professional, organic sales increased 3%, performance was led by 13% growth in K-C International.

We continue to expand our business for industrialization and economic development recurring particularly in North America and China. Elsewhere KCP organic sales were down 2% in North America and up 3% in Europe. Overall, KCP margins were 18.9%, that's up 50 basis points year-on-year.

And lastly healthcare organic sales were off 3% mostly due to lower net selling prices, healthcare operating margins up 13.3% were down compared to a strong performance a year ago, our year-to-date margins remain healthy and up year-on-year.

Now a quick update on the healthcare spin-off, we’re in the final stages of completing the transaction, the form 10 registration statement has been deemed effective by the SEC. Halyard’s Board of Directors has been fully established and debt financing for the company is in place.

The spin-off has set to occur at the end of the day on Friday, October 31st and Halyard Health will begin trading under the ticker symbol HYH on Monday, November 3rd. So that wraps up my comments.

To recap, we achieve solid organic sales growth, we delivered significant cost savings on all time record adjusted earnings per share and we continue to allocate capital and shareholder friendly ways. Now I’ll turn it over to Tom. .

Thanks, Mark and good morning everyone. Since Mark has reviewed our third quarter results, I’ll just add that I am encourage with our performance and a challenging environment.

While we certainly have opportunities to further improve our growth initiatives are on track and our financial discipline is generating strong cost savings, margin improvements and cash flow. Now let me turn the comment on our organizational restructuring.

As we have said all along, since we announced the healthcare spin-off, we’re committing to offsetting the impact of the stranded overhead cost that result from the spin. This restructuring program will do that and will make us more efficient at the same time.

Restructuring program will also give us more flexibility to invest in our brands, to invest in our targeted growth initiatives and to build the capabilities that will help us win in the marketplace.

This restructuring is a result of a global assessment by our functions and by our business teams that identified the ways that we could streamline the organization structure, simplify the way we work and make our overhead spending even more competitive with the best-in-class companies.

Our organizations in all major geographies will be effected by this program. Workforce reductions are expected to be in a range of 1,100 to 1,300 people and primarily affect salaried employees. Majority of the reductions are expected to occur by the end of next year.

The financial details for the restructuring are included in this morning’s news release, but to recap this whole cost for the program were expected to be $130 million to $160 million after tax, charges will begin in the fourth quarter of this year and it will be wrapped up by the end of 2016.

Savings will begin in earnest next year and should total 120 million to 140 million pre-tax by the end of 2017 that’s nicely above the stranded overhead cost from the spin which are about $85 million. Cash cost will be about 80% of the total charge, so the cash payback on the restructuring is less than one and a half years.

This restructuring effort is further evidence of how we manage our company with financial and cost discipline. Now let me move to the outlook for the full year.

Although the macroeconomic environment remains volatile, there have been no significant changes to our full year input cost or currency rate assumptions from the outlook that we provided to you in July. Still most currencies have weakened relative to the U.S.

dollars just the last month, as a result we expect that currency overall will be a sequential headwind in the fourth quarter as compared with our third quarter results. We also continue to closely monitor the environment in Venezuela. Access to letters of credit to pay for imported raw materials there continue to be inconsistent.

Going forward if we don’t receive adequate amounts of letters of credit, we could curtail some of our production as necessary rather than further increase our U.S. dollar exposure. Now in terms of our business overall, we have good top-line momentum with more than 4% organic sales growth of the first nine months of the year.

We expect the full year to be at least at the midpoint of our 3% to 5% target. On the bottom line, our guidance for the year is consistent with our previous outlook adjusted for the healthcare spin-off. We expect to adjusted earnings per share will be between $5.93 to $6.03 assuming the spin-off occurs at the end of October.

This guidance includes a $0.10 per share impact from the spin-off of the last two months of healthcare's 2014 earnings. Our previous guidance was between $6 and $6.15 a share and included a full year of healthcare results. So adjusted for the spin-off, the midpoint of our current outlook is equivalent to the midpoint of our previous guidance.

Following the spin historical results for healthcare business will be reported that earnings from discontinued operations so included in our 2014 outlook is $0.47 of adjusted earnings per share from discontinued operations. That means our outlook for adjusted earnings per share from continuing operations is $5.46 to $5.56 a share.

So summary, we continue to deliver good financial results and we’re on track with our plans for the year, we’re taking further steps to improve our business and we are convinced that successful execution of our global business plan will continue to result in strong returns for our shareholders.

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

Ladies and gentlemen, at this time the floor is now open for your questions. [Operator Instructions] Our first question comes from Gail Glazerman with UBS..

Just starting on the restructuring program, do you think the benefits you could see next year can at least offset the stranded costs? I know you’re not looking for much impact, but can they at least offset that?.

I think between the combinations of the benefits we’re going to get plus we’ll have some transition services agreement income, we should be able to cover the stranded cost hit next year. We’ll give you more guidance on specifics on that in our January fourth quarter release when we’ll have more specific guidance for 2015..

Okay, and just turning to Personal Care, can you talk a little bit about both the adult incontinence market and the strength that you saw particularly in light of P&G's reentry into the market, as well as diapers? And is there something strategic and big that you need to do to start to get that growing again?.

Sure, I’ll cover both of those. In Adult Care, we probably would say that we’ve done a pretty good job of preparing for the entrance of Procter into the category, so we’ve been able to launch a lot of innovations. We’ve actually strengthened our distribution in the face of their launch.

So we feel like we’re on track with our plan for the year, and yes, I am sure you’ll hear from Procter later this week. My guess is they’ll say they got the distribution they were looking for and their launch it on track.

And so it could be that both those statements are true and the rest of the category is feeling the tension in terms of ten on private labels is where most of the share gain that Procter’s got and so far has come from, but good strong growth there. On the diaper front, what you’re seeing is, is a trading up trading down phenomenon.

Our super premium segment of our category grew double digits in the quarter picked up a couple of share points, but we’ve lost more than that in Huggies main line and Love’s picked up a fair amount of share.

And so there is some product performance things we’ll be addressing and we’re going to make sure we’re watching the value gaps with Love’s to try to stabilize that business and deliver a better performance. But you can rest assured that we’re not happy with the U.S. diaper business at this point in time..

Okay and just lastly on K-C Professional, I guess there is a way from home increase in the market can you just give us an update on how that’s proceeding?.

Yes, we’ve probably had limited benefit from that and as you saw in the quarter, we had negative price in KCP in North America.

So you’re seeing some price erosion in the low end of that business and so any net price gain has been pretty minimal at this point in time, and I think you’re seeing a fairly stagnant economy is probably not helping much on that front..

Our next question comes from Ali Dibadj with Sanford Bernstein..

So a couple of things, first one to push a little bit more on diapers and as a broader category because in North America, because you talk a little about price mix improving slightly but then in North America in particular clearly the Huggies volumes were down and I am trying to understand whether you’re seeing any resurgence into Pull-Ups versus what used to be any improvement from the consumer trade up there? And also any birth rate changes, we’re starting hear rumblings of positivity there?.

Tom Falk:.

Yes, we'd say in the birth has been very slight positive signals so far, which in a sense is good, it’s not falling anymore. So that’s probably good news. I wouldn’t say it has turned into a baby boomlet yet on that front.

And then in the Pull-Ups category, we really aren’t seeing much traction yet and so still moms staying in diapers a little longer, still seeing size six growing as moms are choosing to stay at that level, so those things we’re working on to make sure we’re driving the right innovation in Pull-Ups.

We did have a very good, GoodNites quarter as we launched some new innovation on GoodNites and so our total childcare volumes were pretty flat in the quarter, but Pull-Ups was down and GoodNites was up, and didn’t show up in the share number because there is a lot of GoodNites stuff as pipeline fill..

Okay and then on North America consumer tissue looked like volumes were good, price mix was down three, can you talk about the effect of de-sheeting on that price mix (obviously) [ph] it might have rolled off? And in particular how much of that is related to what we’ve been hearing for years now, but sounds like it’s down in the ground and producing the private label pad technology trying to compare with Europe pad? And moreover what do you think the price volume equation looks going forward?.

Tom Falk:.

I think the -- good question. So, I’ll say on consumer tissue, we’ve rolled off most of the de-sheeting impact, so there wasn’t much in the quarter on that front at all. We did step up promotional activity from second quarter where we were not competitive in the marketplace.

It was competing with other branded activity in the market where some of our competitors have stepped things up in the second quarter.

We picked it up in the third quarter and you saw that show up in the volume growth so business that response well that we were more competitive we were not leading the price down but we were trying to make sure we’re matching up to the future pricing in the marketplace and saw a good volume growth across the board and a good back to school season on facial and saw high single digit growth there.

Good growth on Cottonelle and a solid growth on Scott Tissue, Viva Vantage’s launch is pretty much on track and towel growth was up mid-single digits overall. So, just good execution and making sure you’re competitive on shelf every day..

Okay. And the last one if I can just throw in is on Halyard in your health care business. So, is it fair to think about the overall dilution I mean we mentioned and we talked about it about 9% on a full year basis excluding any adjustments.

But then if you go through and look at the transition services agreement you look at the share repurchases that you’re getting from the payments they’re giving you, and then this incremental cost cutting.

Is it fair to think about the net dilution of something like 4% to 5% on an annual basis is that the right way to think about it?.

Tom Falk:.

Yes, I think you’re probably in the ballpark. We’ll give you a little bit more specific guidance on that in January. But I’d say, we’d expect to try to minimize that as much as possible.

And we’ll be looking in our January guidance to give you on a continuing ops basis a plan that looks like our global business plan with consistent top line and high single digit bottom line, a mid to high single digit bottom line as we’ve done in the past..

Our next question comes from Olivia Tong with Bank of America Merrill Lynch..

Good morning. Thanks.

Can you talk a little bit about the drivers behind international growth because that continues to be quite robust first half past for the categories growing now have seen any changes in the categories since the quarter ended? And are you gaining more share in existing retailers how much of that is incremental distribution?.

Yes, I mean there is a lot going on in emerging markets and they’re pretty exciting place from a lot of dimensions this year with a lot of volatility and a lot of some political instability mixed in. So, it’s been a pretty exciting place and our teams there have done an awesome job of executing, driving innovation in the market.

And so, if you think about Russia and Eastern Europe, we’re up 25% in the quarter done a great job of launching diaper pants in boy/girl there and have really taken off a fairly tough currency environment, managed to get price to offset a lot of the currency hit. So, we’d say we’re growing ahead of the category there.

But the category is probably growing high single low double digits and we’re -- as you look at the broad Russia and Eastern Europe markets together, Russia is probably a little slower than that but good execution from our team on the ground. China again 25% growth in the quarter that’s on a 45% comp last year, so very strong growth.

We’re in the 100 cities now that was our goal to be in a 100 cities by the end of the year. So, we’ve picked up distribution which is part of it. We’ve done well in e-commerce which is the fastest growing segment in China.

And so we’d say the Nielsen data would looked at the categories not doing much, our guess would be that China diaper category is probably growing high single or low double digit at this point. And we have not seen a big shift since the end of the quarter that I know of.

And moving to Latin America, good execution in Brazil with the launch of boy/girl diaper pants there as well in the face of a Unicharm launch and a pretty aggressive Proctor investment and so our business there performed pretty well.

And we’d say we’re going to again, probably growing a little faster than the category in Brazil and across Latin America. Argentina would be another market where a lot of economic turmoil but the team has done a great job of delivering price increases and volume increases in the market.

So, it’s been an exciting year in international with good innovation, good execution in the market and it’s shown up in good results..

Thanks. Appreciate the comprehensive review. And just following up on that, you talked a little bit about the dollar strengthening and where you got price in Russia.

How do you think about profitability for KCI going forward obviously with the dollar strengthening beyond just Russia?.

No, I think that it will be a headwind in the fourth quarter for sure, we guess that probably sequentially it’s much of $0.10 headwind on currency third quarter to fourth quarter.

And we’ll pull a plan together for 2015 that continues to look at preserving the shape of that P&L and continuing to drive growth in local currency and we’ll be transparent with you on how that shapes up in terms of dollars..

Would you expect KCI margins to be up year-over-year next quarter?.

They make good progress this quarter, and they had a good cost savings quarter. They’ve done a great job of getting price where we’ve had currency weakness. And so I’d expect certainly margin stability sequentially. We had terrific margins across our segments in the third quarter so that’s maybe a tougher comp.

But I would say if you look at our year-to-date averages in the segments, that's certainly a good predictor of what we’re capable of, and would expect that to continue..

Got it, thanks.

Just if I could add one last question, I know you’re right now not ready yet to give fiscal '15 EPS outlook but on raw materials with crude and natural gas down pretty dramatically recently would you expect raw materials in places to decelerate next year or does the stronger dollar and still higher pulp and resin more than offset that? Thanks..

Tom Falk:.

I think this recent move hasn’t floated its way into the supply chains yet. So, if you looked at pulp outlook it was still it looked like its trending higher in ’15, but I don’t think that’s the recent moves in the dollar are fully baked into that yet.

If you looked at polymer, polymer is going up right now, not down like oil has done but I would expect if oil stays where it is that the polymer supply chain would start to reflect some of that. And so we hopefully have a bit more clarity on that when we talk next in January..

Our next question comes from Chris Ferrara with Wells Fargo..

Hey, good morning.

Tom, I hate to get into ’15 again, but I am only doing it because you said a couple of things that I just want to make sure I can pull together correctly, right so you said that this synergy was 85 million, I think you said that you think you could offset that in 2015, I want to also understand how that works with your 2014 continuing operations base of 546 to 556.

So that fine 546 to 556 includes all of this synergy, right so you will be offsetting 85 million or call it $0.15 plus a share in ’15 if you can offset that, is that the right way to think about it?.

Tom Falk:.

Yes, so we’re going to get some transition services in common and in ’15 it will lost a portion of the 85 million and then we should get the additional restructuring benefits that we think should have a shot at offsetting the rest of it. So, I think the answer to your question is yes, to the extent I understand it..

No, that’s helpful, I guess I am just trying to understand what the growth rate will be offered.

So that 546 to 556 should have a deflated date, if you were to have sort of a long-term planning algorithm EPS growth rate that you just cited sort of mid to high single-digits in ’15 it would be above and beyond that 85 million of cost offsets, is that right?.

Tom Falk:.

Yes, I think that’s directionally right, on the other hand we’ll have other investment opportunities, currency, commodity cost issues and so that’s the rest of the picture that we need to bring together into a plan and share that with you in January..

Okay. And then I guess on SG&A, the 2014 levels were, I mean even in dollars below 2013, below 2012 levels even. I know you’ve said you’re pretty pleased with cost savings and that’s a good number.

But is there anything specific that was going on this quarter in SG&A that we should think about and the sustainability of that sort of trend?.

Tom Falk:.

You have to put more focused attention, I think as people were getting ready for the restructuring they were already starting to cut cost in many areas, good management of the control levels things like travel and other things were lower in the quarter than normal.

And so, I think that’s part of it and if you looked at the comp versus third quarter last year, we had more compensation increases last year and we had a little bit of compensation decreases as we adjusted some of our long-term plans in the quarter that might be the only thing that might qualify as a little unusual although those things get adjusted every quarter up or down.

Third quarter last year was on the up note and this year was a little bit a little bit lower as we reflected some of the currency implications and other things and on our sales impact on the three year count that’s rolling every year..

That’s right.

Can you just one last quick one, can you just say where the Venezuela growth was for the quarter?.

Tom Falk:.

Volume growth was pretty flat and so I don't know if Paul has looked at total top-line, but…..

Yes, we did have a little bit of price benefit, but you’re right Tom there was no volume growth in the quarter in Venezuela..

Thank you..

Our next question comes from a Chip Dillon with Vertical Research Partners..

Hi, this is James Armstrong for Chip. How are you today? The first one is going back a little bit to the cost overhead reduction charge that’s taking place in the fourth quarter.

If we’re seeing most of that charge in the fourth quarter, why aren't we seeing the full benefits until 2017, could you help walk us through a little bit of timing behind that?.

Tom Falk:.

Yes. Sure, we’ll book the severance so we made the decision even though of the separations won't occur and will roll out over all of ’15 and even some in the ’16..

That helps.

And then switching to tissue, is tissue volume strength coming at the expense of the other national branded players or do you think you’re gaining share versus private label?.

Tom Falk:.

If you look at the share charge, private label shares were pretty stable sequentially and actually are up a bit year-to-date and our shares are up a bit year-to-date as well. So with the primarily taking share from other player, other branded players..

And then lastly as you look at the demographic trends and coming back to this a little, with millennial households forming, what’s your forecast in births in the coming year? And how do you expect that to impact diaper demand as we go out into the 2015, ‘16, ‘17 timeframe?.

Tom Falk:.

I’d say our -- we talked about birth rate in a couple of earlier questions and our prediction is relatively flat, very slow growth in the U.S. birth rate. So, we can quote you a number offline but we’re not seeing much at this point. I would say that’s going to be a big driver of category growth in the next couple of years.

But I’d say, we’re also continuing to tinker with the model to be better at predicating at our more recent models looking at household formation.

And unemployment levels have been reasonable coming out of the crisis, I am not sure they’re going to be as useful as we move into a more stable economy and find the next driver of growth rate is something that we continue to look for..

Our next question comes from Wendy Nicholson with KCC..

Hi, my question has to do with Venezuela, in light of sort of how long that’s been as difficult as it’s been for you and others; is there a scenario where you would exit Venezuela like Clorox has decided to?.

Tom Falk:.

Wendy, at this point, I don’t think that’s an option for us. We’ve been consistently profitable in Venezuela, which is I think different from the situation that was there at Clorox. We have substantial Bolivar reserves in the country in cash to continue to finance our operation. Our issue is access to U.S.

dollars to import raw materials and so Mark and I have set an overall U.S. dollar cap that we’ve reached for that business. And so as long as we continue to get foreign exchange, we’ll be able to find ways to continue to run the operations there.

We’re also looking at more local sourcing, can we find more raw material that we can buy with the Bolivars that we have to run that business. And at end of the day, we’re trying to make sure we’re serving the moms in Venezuela that need diapers and need bathroom tissue every day to care of their families.

We’re trying to provide the employment in a stable way for our employees that are there, and as long as we can do that and operate ethically, we’ll continue to operate in Venezuela..

Got it and your market shares there are stable or strong?.

Tom Falk:.

Our market shares have been stable although because we have been limiting our exposure. We know we’re not in full throttle of growth there, so we’ve walked away from business because we didn’t have foreign exchange to bring products in.

And as you know from probably reading about that place, there is shortages all over the place, so market share is in a relative driver. I mean, our driver of that business is access to U.S dollars..

Got it and then just back on the U.S.

business, obviously to the extent commodities come down as we expect them to and that flows into the market place, I mean it seems like there should be or could be a lot of more flexibility on both your part as well as your competitors' part, just simply get more promotional? And is that a concern for the category, I mean I know you got to be frustrated by your market share trends, but is your plan really to bring innovation to market or is it more marketing or is there a risk that we get into some sort of down and dirty price competition like we’ve seen in some other categories in the U.S.?.

Tom Falk:.

At this point, you’re not seeing the commodity wave flow our direction, in fact if anything, I think polymer went up $0.08 a pound this month or something, so you’re not seeing the benefit flow through that would support the first part of your statement and pulp has been sticky.

You’ve seen eucalyptus come down, but it’s still at the high end or even slightly above our full year outlook. Northern softwood hasn’t come down and it is above our full year outlook. So you’re not seeing the commodity underpinnings of that that would lead to more price competition.

And at the end of the day in every category, the value that mom gets as a combination of price and performance, and we got to make sure we’re delivering the right product performance at a competitive price, and that’s probably true the world over..

Our next question comes from Connie Maneaty with BMO Capital..

I am wondering about the restructuring you’re now undertaking, so it looks like it is bigger than the stranded overhead, so my question is excluding the savings that you’re going to get from it, do you think you have enough money to spend defending and growing your categories in diapers and adult incontinence or did you need this program in order to be able to invest more?.

Tom Falk:.

No, I think that’s the right way to think about this is that -- we started out looking at the restructuring program saying first priority is we've got to cover the stranded cost because those are not going away and we’ve got to make sure we do no harm with the spend that we protect the core business.

Second priority then is to say what else can we do to create more capacity, to invest in our business to invest in growth ideas, to invest in innovation.

And our business teams around the company really rallied to that and came up with an aggressive plan and it's never easy to do these things, and these are people’s jobs and employees' lives that are effective by it but it is something that we need to do to allow us to invest and grow the business.

And actually the question is, is it enough, it’s probably never enough. And we’ve also had a great quarter of cost savings in our forced program and we need more from there as well.

And so we’re continuing to look at opportunities to get more productive in every aspect of the business to make every P&L line item work for us to allow us to compete and invest and grow our business wherever we’ve got opportunities to do that..

Okay. So are the restructuring programs, you said something I found interesting.

Are the restructuring programs essentially designed by the business units or are they more top-down directed?.

Well it was a little bit of both. And the functions that had the most stranded cost there we had a clear target and each of the teams went and worked for that target.

On the business unit side they did a lot of competitive benchmarking and said we’re the best in class companies operating in each of the major functional areas that serve each of the businesses and came above up with a list of ideas and initiatives that we supported and decided to go forward with.

So like every good plan it’s a mix of top-down and bottom up..

Okay. If I could just ask one final question on Venezuela, I mean, assuming that the three official exchange rates converged to one over time, it’s not going to be towards the stronger end of the currency rates it will be towards the weaker end.

So, if these levels converged to say like 30 boulevards or 40 boulevard to the dollar, what’s the impact on you since you’re still at the official 6.3?.

So several things, first of all, the balance sheet would get re-priced so we’ve got little over $400 million I think $435 million will be disclosed in the Q today of exposure that will get re-priced that whatever that new rate is so that’s mostly in cash but it’s -- so that will be effect on that line.

And then the next question is again what price are you allowed to sell at so when you have that level of currency devaluation typically there is particularly for imported products finished product price adjustments all those prices are controlled by the Venezuelan government so there would be application for price increases depending on how those go and what level of prices you’re able to charge would determine on whether you’re going to be able to bring in imported products or not or even bringing imported raw materials and convert it to finished products.

And so we take a look at that environment and try to come up with a business plan that made sense. But again you kind of come back to the key driver of it is whatever rate they pick, are you going to get exposure or access to U.S. dollars to be able to pay for the materials and products that you need to sell in that market.

And so we’ll work through that whenever those decisions are made by the Venezuelan government..

Okay, thank you so much..

Our next question comes from Erin Lash with Morningstar..

Good morning. Thanks for taking the question. I was wondering if you could speak to the acquisition environment obviously the step up in the share repurchase expectations for this year is fairly pronounced.

And so I just wondered if that indicated anything about what you’re seeing in terms of valuations for potential acquisitions?.

We are a big acquirer, we’ve done some tuck-ins and [indiscernible] actually most of the tuck-ins we’ve done over the years have been in healthcare. Quite honestly our corporate team has been full consumed with the spend this year and with the -- as well as getting ready for the restructuring.

So we’re out of capacity of human capitals to go look at very many deals. But we haven’t seen much likely that was of interest to us..

Thank you, that’s helpful.

And then just in light of the competitive environment, I wondered if you could speak to just the kind of your assessment of your overall distribution? And if there are areas of opportunity to further extend distribution of your products into specific channels that would be helpful?.

Sure, and the interesting thing is around the world they’re all different kinds of channel migrations occurring so you continue to see the traditional retailers for our consumer products but we’re also seeing more ecommerce in markets like China and Korea, that’s growing very rapidly and is taking a bigger and bigger share of the category.

In markets like Argentina there are small panulerras neighborhood diaper stores that are growing rapidly in China, there is these baby stores with a high end diaper baby clothing, baby formula kind of a store that’s a very prolific channel.

So one of our key focus points is to make sure our products are available wherever mom wants to buy them and make sure that we get the right offer and the right mix of products on sale and really is tracking those channels and staying connected to mom digitally and finding out where she wants to buy, how she wants to buy has been a key opportunity for us and been a lot of fun for our marketing teams to be able to work on that..

Our next question comes from Lauren Lieberman with Barclays..

My first question actually follows on just what you were discussing in terms of distribution and ecommerce. I feel like I’d love to get some color on what efforts you're making in the U.S.

because I feel like a cross both baby care and also the tissue business, you’re probably bit under exposed in ecommerce channels, could you discuss what you are doing if anything to sort of to change that?.

Yes, sure, I'd say while ecommerce is certainly -- we were a little bit late to the party in the U.S., we’re probably ahead of the curve in markets like China and Brazil and Argentina and others, fully competitive in Korea and places like that. So, we’re catching up in the U.S.

and have got a good relationship with many of the large ecom players both in the traditional brick and mortar retailers that are going in that space, the Wal-Mart’s and Targets and Sam’s Clubs and Costcos of the world as well as Amazon and diapers.com and places like that.

And clearly all of the ecom retailers just like our traditional retailers want the young family as a loyal customer and because of the basket size that those shopper suddenly begin to buy and the lifetime value of that is really important to them and so, we worked a lot on that front.

Tissue and -- we’re present the logistics of that and the cost of distribution a higher bulk lower value item, the last mile to a consumer home isn't as obvious although there is some activity going on in that space and we’re working with our ecommerce partners to try to figure out where does that make sense and how do we do it most efficiently.

We’re interestingly doing probably more work now with adult care and so depends and poise are probably areas where you would see a little bit more consumer discretion and you might have a desire to send the product as a care giver to a family member and so there is a kind of a natural opportunity for us to be able to use that and make it easy for consumers to get the products that they need in that market online.

Still very small and early days but there is a lot of activity happening there..

Okay, great.

And then also on adult care, also small and early days, I was hoping you could discuss the impressive test market and I am guessing also very early but anything you can share on that would be really interesting?.

Yes, I mean we think that’s an interesting idea and could be a very exciting product, it's very early days in the test so we don’t have a lot of data to even read yet. But we’ll see what happens and hopefully we’ll have something to talk about as it comes through the test next year sometime..

And how are you going about just spreading word of mouth on that because I think new --not necessarily new to world but new to the over the counter consumer market and I think education and awareness is a huge piece of it, has that even being viable.

So, what are the plans?.

We have a long tradition of talking about new categories in different ways as you look at coming out. We were the first to talk about feminine protection with Kotex back in the 1920s and then depend and talking about incontinence in the 1980s. And so, I think you’ll expect to see with all the new digital tools that we got available opportunities.

There we were also connecting with the appropriate medical community as well that with the logical recommenders of product forms like this. So they are exploring some of those different avenues in the test and we’ll see which of those have the biggest return and move the needle and then we’ll try to do more of that as we think about launching.

This maybe a product that takes a bit of time to build and we’ll see how that plays out in terms of consumer behavior change..

Okay, great.

And last thing is just very subtle, and I think I picked this up correctly, that you talked about Russia and Eastern Europe as a bucket rather than just being Russia and why the change?.

Well we've actually, whenever we’ve said Russia before it always included Eastern Europe, it's just Eastern Europe was pretty small and has gotten bigger, that we thought we should get them into headline so our business in the Ukraine has actually also doing really well.

Our business in the stans, the Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan, Azerbaijan all those countries that none of us have visited very often those -- that part of the world has also grown nicely and it's new geography for us and so we’re going in and building a good business there on the collection of that is actually delivered quite a bit of growth this year..

Okay. So those numbers are comparable, it's just giving Eastern Europe..

Yes..

Okay. Thank you so much..

(Multiple speakers) to talk about a little bit more. .

Okay. Thanks, Tom..

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

Hello. Good morning, everyone. I have a follow up on China, Russia and Brazil. You mentioned that category growth is still at least high single-digit.

So, if you could tell us whether this is actual volume growth or is it inflationary pricing, whether you are seeing still trade up, I mean what part of, if you can help us understand in these three markets whether you are seeing a still consumers trading up or is it trade down because of the difficult economies.

Could you give us a little bit more of a view of the customer in these three markets?.

Yes, I think a good way to think about all of these markets is that you are still seeing GDP per capital go up in all of these markets.

As the middle class builds and builds and more people are employed and are able to enter the middle class and afford our products, so even if they have a downtick in their GDP growth rate, the GDP per capita is still increasing at a descent rate and that’s fueling the expansion of consumable categories.

And so I'd say the three markets are pretty different and that's since China there hasn’t been much price. You typically are seeing consumers’ trade ups, so the lower tiers are moving up into the upper tiers.

The golden baby phenomenon is still very much alive or mom wants the very best products for her baby, and so you’re seeing more rapid growth in e-Commerce in China.

So, if you looked at Nielsen numbers, you wouldn’t see that kind of category growth rate, but if you -- it's in precise data in China is difficult to get but our guess is that you’d see high single low double digit growth in the category with very little price.

In the case of Russia and Brazil both, there was some price this year and so Paul, I don’t if you’ve got any more detailed numbers, but in the high single double digit -- double digit growth in both in Russia, you probably had half of that was price, I'd guess in the period and not everybody took it, not at the same time.

And there has some innovation in launching diaper pants that is a premium price offering that the consumer has traded up into and so you are seeing some mix improvements in both Brazil and Russia. But both also got some price to offset currency that was a factor in the category growth..

And when it comes to -- that is very helpful, Tom, actually when it comes to what Unicharm is doing in Brazil, is it similar to what it is in China? Is it super premium product? Or is it different?.

It's a super-premium product and it’s actually priced quite a bit higher than everything else in the market, and so far hasn’t gotten much traction at least in the measured shared data.

Both Procter launched aggressively as did we every kind of diaper pant, we know how to make and occupied I think all of the [indiscernible] positioning that Unicharm might want to go do and so we never take them for granted or underestimate them, but so far our defense plans in Brazil have been working pretty well..

And finally if I may on Mexico which is completely different from the dynamics in Russia, China and Brazil, could you explain us a little bit of what’s happening? Why the JV income profits are down by some much? What is it pricing environment, could you explain that better? Thank you..

Those -- Pablo Gonzalez will be hosting a call on Thursday, we'll then go in more detail on their numbers. So I don’t want to scoop in too much.

But I’d say it’s been a continuation of the trend where it’s been a slower growing economy than was predicted, that’s showed up in slower growth in lots of categories, and more investment in price to try to simulate category growth and I think that hasn’t been fully effective.

So we’ve invested in price which has hurt the top line and hurt profitability to hold and stabilize share positions, which we’ve been successful at doing.

But it’s been a much more challenging economic environment, I think they’ve had commodity cost inflation as well and a little weaker peso, so it’s been -- they’ve had a number of factors that have combined to suppress their results from what they’re hoping for this year. But Pablo can give you more color on that on Thursday..

Our next question comes from Bill Schmitz with Deutsche Bank. .

My favorite topic, toilet paper in the U.S., it seems like there is a price war that’s kind of emerging, I mean how problematic do you see that being because I know your pricing has been negative at least in the scan channels for a while, but it seems like P&G has finally kind of bit the bullet and taken their pricing down pretty substantially in the last three or four months, so do these trends continue and kind of where does it end because like the latest round of data was actually pretty damming in terms of substantial sequential price cuts, so any commentary there would be appreciated?.

I mean the investment level certainly picked up in the late second and early third quarter and we matched up to it in the third quarter, and you saw that in our price numbers.

We also saw it in pretty good volume performance, when I look at the overall margins in our consumer tissue business and the uptick that we got in the quarter, this is a kind of near-term high watermark for us.

So I’d say we’re balancing the marketing mix and driving the premium variance where we can and investing in price to make sure we’re competitive on future price points. And that’s kept the momentum going in that business which obviously we’re watching what P&G and GP cope to in this environment, but we’re weathering the strong reasonably well..

Great thanks and then just the 45% of KCI that’s not LATAM, Russia and China, it looks its growing low single digits and I am assuming that those three are up like 17% or something at quarter, so what’s the story there? I mean it’s an opportunity to accelerate growth in those markets.

I know Australia is kind of slowing growing, market in South Korea is probably the same, but is there anything else there that is perhaps an opportunity or threat?.

I’d say Korea is actually on track with their plan this year. Again, but it is a slower growth market than a lot of the rest of Asia. Australia, you paint that one correctly and now we’ll have some big currency headwinds in the fourth quarter as they roll forward.

The rest of Latin America is mixed bag and in Costa Rica and Central America is a little bit more developed, had a little bit more competition in the quarter so we’re working on some things on that front. But I’d say Australia and Korea are by far the two big players in the balance of KCI that we talked about..

Great, thanks so much. And then one last final, the call has gone a long time, the growth rate in diapers in Brazil is like half in the latest periods.

Do you know what’s driving that because it was sort of like pretty substantial like 20%-ish range and I fell to like 10%, 11%? Do you know if it’s like a temporary spiders or something more sinister going on there?.

No, I mean it’s a more competitive environment. So everybody is spending money like crazy, Proctor is spending aggressively, we are as well, Unicharm is launching.

And so I would say delivering double digit growth in that environment has been a pretty solid performance especially against a weaker economic backdrop which probably hasn’t helped on that front. And we’ve had a terrific performance in fem care in Brazil.

And so, there is a lot of good things happening in that business overall that we’re pretty happy with..

Mr. Paul, at this time, we have no other questioners..

All right, thanks for all the questions today. And we’ll wrap up with quick comment from Tom..

Once again solid execution with greater results in K-C International lots of opportunities as we spin Halyard, so congratulations to the Halyard team. And we look forward to the successful transaction completed in the end of next week. And once again thank you all for your support at Kimberly-Clark..

Thank you very much..

Ladies and gentlemen, that concludes this morning’s presentation. You may disconnect your phone lines, and thank you for joining us..