Good morning ladies and gentlemen and welcome to the Kimberly-Clark Corporations Fourth Quarter 2008 Earnings Conference Call. We now have Mr. Masseth in conference (Operator Instructions). At the conclusion of Mr. Masseth presentation we will open the floor for questions. I would now like to turn the conference over to Mr. Mike Masseth. Mr. Masseth, you may begin sir.

Thanks David and good morning everyone. We appreciate your interest in Kimberly-Clark. With us today are Tom Faulk, Chairman and CEO, Mark Buthman, Senior VP and CFO and Randy Vest, Vice President and Controller. Here is the agenda for today’s call: Mark will start with a review of our fourth quarter results. Then Tom will provide his perspective on the results for the fourth quarter and the year and also discuss our 2009 outlook. That will leave us plenty of time for Q&A. Now, for those wishing to follow along we have a presentation of today’s materials, including our 2009 planning assumptions, in the investors’ section of our website which is www.kimberlyclark.com. First let me remind you that we will be making forward-looking statements during the call today. There can be no assurance that future events will occur as anticipated, or that the company’s results will be as estimated. Please refer to the risk factors section of our latest annual report on Form 10-K for a description of factors that could cause our future results to differ materially from those expressed in any forward-looking statements. We will also be referring to certain non-GAAP financial measures including adjusted earnings per share, adjusted operating profit, and adjusted operating margin. Management believes that reporting in this manner enables investors to better understand and analyze our on going results of operations. For additional information on why we make these adjustments and reconciliations to comparable financial measures determined in accordance with GAAP see today’s news release and additional information on our website. Now I will turn the call over to Mark.

Thanks Mike and good morning. This morning’s news release includes all the details of our results for the quarter. Adjusted earnings per share were $1.01 compared to our previous guidance range of $1.02 to $1.07. There were a lot of moving which impacted our results versus plans, so I will start with a quick summary. From an operating standpoint weaker than expected sales volumes, predominantly due to deteriorating economic conditions, were mostly offset by lower input costs and expenses. Looking at other key factors, we had a higher than normal level of other expense which is worth $0.04 to $0.05 per share and an approximate $0.04 per share impact from weaker foreign currency exchange rates, particularly at our Mexican affiliate. These two factors were essentially offset by a lower than planned tax rate. Now let me get into the details of the quarter starting with sales: Overall sales decreased by about 3% to $4.6 billion including a currency drag of 8%. Organic growth was solid at nearly 5%. That was driven by our focus on improving net realized revenue which led to a seven-point gain in net selling prices and an additional point of improved product mix. Total sales volumes were down about 3% and were impacted by a generally weak economic environment, particularly in North America and Europe, and our continued emphasis on price realization. A portion of volume weakness experienced in the fourth quarter was related to customers and consumers reducing warehouse and pantry inventories. In addition, consumer trade down affected our market share [inaudible]. Turning to the top line for each of our segments: In personal care sales were down more than 2% including a nine-point currency headwind. Organic growth of more than 6% was driven by higher net selling prices of nearly 6% and somewhat better…

Thanks Mark and good morning everyone. I will give you my perspective on our results and our progress in 2008 and then I will review the outlook for the coming year. My headline today is that we are managing through a very challenging environment. We have a strong near-term focus on improving our margins and maximizing our cash flow. At this time we are doing what is right for our long-term success. Just to recap 2008, we faced a very tough external environment as economic forces caused commodity costs and currency exchange rates to swing wildly and the rapid rise of oil and other costs in the middle of the year took a toll, even though we accelerated our price initiatives during that period. By the end of the year inflation totaled $725 million and that compares with our original estimate for the year of about $400 million. Fortunately inflation moderated in the fourth quarter as commodity costs tumbled from the high they were at earlier in the year. At the same time though, currency exchange rates also plunged and that adversely affected our fourth quarter results by more than $0.20 per share versus the fourth quarter of 2007 and really wiped out all of the currency benefits we had realized for the first three quarters of the year. For the year overall currency was negative by $0.06 per share. Finally, late in the year, as Mark mentioned, we also began to see some consumers and customers scale back purchases in our categories in response to the economic weakness happening around them. So, these unforeseen factors were primarily responsible for our bottom line results falling short of our objectives for the year. Adjusted earnings in 2008 were $4.14 per share and that compares with our original target of $4.45 to…

(Operator Instructions) Your first question comes from Lauren Lieberman with Barclays Capital.

I wanted to talk a little bit about Europe. I know in the release, the way you guys wrote it, it talked about economic weakness in Europe, and frankly, I thought volumes held up really quite well there given the new slow seems to be a lot worse than that. I would have expected there to be maybe more evidence of more trade down in Western Europe in diapers and in tissues. So, can you talk a little about that?

Yes, I think we probably saw less of the inventory correction in Europe. Europe had a weaker third quarter, as you might recall, so they might have gotten some of it a bit earlier. Obviously it is still a competitive environment. The UK in particular is a very important market for us. We have seen a lot of buy one get one free activity, particularly in diapers, from our primary competitor. We haven’t matched all of that, so that accounted for a little bit of our volume weakness in the quarter. Other than that we were down about a point on tissue across the board on share, down a similar amount in diapers, so I would say, again, in this environment we are not going to declare victory or anything, but I would say we are holding our own.

Do you think one of the reasons may be, I am just thinking out loud, is that private label is already so well established in Europe versus in the US where it is sort of an incremental change that consumers are making as they feel cash strapped, but in Europe it is sort of already a known entity and maybe not that much of an opportunity for consumers to trade down?

Well certainly in tissue that is true. Private label shares in personal care in Europe aren’t that different than they are in the US.

Okay and then just since you mentioned it, on the trade destocking in the US, I was a little curious at how much it could be given, how bulky your products are, high turn categories and so on. I mean is it a weaker two and then kind of done? I wouldn’t expect there would be much more trade stock that could still happen.

Well I think there are a couple of things happening. First of all we said it was consumer and customer, so I think you also saw some consumer pantry destocking. If you look at, for example, the Nielson’s three outlook data for bath tissue and towels in the fourth quarter, I think bathroom tissue the category was down 5.5%. Towels I think the category was down nearly 10%. I think what you are seeing is a phenomenon where obviously if the consumer is out of bathroom tissue mom is going to the store, but she might not be buying the big bundle pack, especially late in the month. So, they are going to be buying the smaller count packs. We are seeing much more responsiveness to the consumer around lower price points right now, because they are conserving cash and they don’t want to build any household inventory. Things like household towels and facial tissue which are a little more discretionary, if you run out at home it goes on the list, but if you are out a paycheck it may wait until the next purchase cycle. You saw that in some of the underlying consumer categories, particularly the ones that are a bit more discretionary. On the customer inventory front, whether it was consumer customers, KCP customers, everybody is just really trying to run inventory tighter. In some cases it is not even a week, it is three or four days, but at the margin everyone is trying to conserve cash and run their inventories tighter.

Do you think that the stock for KCP was that similar to the consumer business? It would be sort of a pretty short-lived one-quarter adjustment?

Well I think the question is going to be what happens in the economy. So, you saw in the fourth quarter some of the inventory destocking expecting things to get worse and as you look and see how the economy unfolds, certainly some of the news that was out this morning isn’t good for employment, so we will just see how this gets. I think you may start to see more of the impact of the actual economy slowing down affect KCP volumes early in the year.

Your next question comes from Christopher Ferrara from Bank of America. Christopher Ferrara – Bank of America: It sounds like you guys are sort of conceding that you are being somewhat conservative on your commodities outlook, but you are throwing the caveat in there that maybe you are not being so conservative on pricing. I don’t know if I am reading that right or not. I am wondering if you can give a little color, I mean how would you rate your conservatism and your pricing outlook versus in your commodities outlook?

We have at least three big moving parts: Exchange rates, currency costs, and selling price increases. We tried to look at all three of those together and make sure that our assumptions roughly hang together. You could point at any one of them and say, gee that one looks conservative, but if you changed it you might have to go look at some of the other ones and say, does that have any impact on some of the other assumptions. The question would be, it is not so much whether you would roll the price increase back, but would you have to spend more promotionally? Would you have to do something different on coupon values if you assumed that you are going to have lower commodity costs for an extended period? We think in total those assumptions hang together, we are trying to be transparent on them and I am sure all of you will judge whether we are conservative or not. Christopher Ferrara – Bank of America: That is helpful. I just wanted to also get a sense of, on your assumptions for oil at 70 and gas at 7 or 8 and particularly pulp at 740, is there some particular reason that you guys are forecasting it that way or is it just because they have been such a slippery thing to forecast in the past?

It is maybe even less scientific than that. We rolled the forecast up at the end of December. We did early planning assumptions in early December. We looked at what the futures market said and that is what we used. That is what we typically do every quarter. So, you can see that level of volatility. If you looked out in some of the late ’09 futures in early December for oil, you still saw things it the upper 60’s to lower 70’s. We’re hedged probably 70% of the year at this point with a little bit more in the front half and a little bit less in the back half. It is up pretty close to the rate that is in our assumptions. Christopher Ferrara – Bank of America: Great that’s helpful. Then I just have one other quick question on pricing segments. You guys are seeing +2 to 3 for the year. I guess some of your pricing will roll up after Q1, but can you kind of give a sense sequentially of how that is going to flow, considering the run rate was so high at 7%? Is there an assumption that you are going to see rather significantly negative pricing as you get to the back half of the year or is it smoother than that?

In the consumer markets in the US we had pricing in some of our categories in February. We had, I think, feminine care was in May. We had some things that happened in August and September and then facial tissue was later than that. So, it will kind of break through the year as those roll off. Christopher Ferrara – Bank of America: But, is your pricing assumption assuming that any of the pricing that you have taken actually rolls off at this point?

No. Other than the things that we have talked about with diapers of doing some price and count changes which are pretty modest it the scheme of things.

Your next question comes from Chip Dillon with Dillon Investment Research.

I have a couple of quick questions; this one is alluding to the last question. The second half of the year hopefully better than the first half and yet the price increases, unless there are some this year, will roll off. Are you basically anticipating a more than offset of that from higher volumes?

Yes. We would expect to see a better volume environment in the back half of the year.

Okay and then could you talk a little bit about the balance sheet, in particular the shareholders equity. If you look quarter by quarter it really fell off. I know you guys are buying back stock, but it normally would not fall off. Specifically, it went from like $5.6 billion at the end of the second quarter to $5 billion at the end of the third, to under $4 at the end of the fourth. Maybe Mark could tell us what is going on there?

I am kind of a rusty old accountant, but I will give you my insight and then let Mark answer in more detail. Two big factors are the change in the pension obligation goes through other comprehensive income and its stockholders equity and then the other is the translation effect on the balance sheet of foreign currency swings goes through UTA. Mark, I don’t know if you want to add any more detail to that.

It is great to have a boss who is a former accountant.

I guess that sort of is inferring, because I know that if you made a rough assumption and said, I know everybody had a rough year last year in the market. It would like if the $4.6 billion in assets went down say 25% and you are paying out the normal $300 plus million in benefits, that actually the shortfall could have grown I don’t know, to $3 billion?

You will get all the pension stuff in the footnotes. I mean the pension swing was roughly $700 million, I think, and the UTA swing was roughly $900 million. That should come pretty close to reconciling your stockholders equity for you.

I got it. Then the last thing you mentioned is you mentioned the hedge being about 70% gas. Do you hedge any of your oil?

No because almost all of our oil is secondary. It is adhesives. It is packaging material. Probably the only one that comes close is diesel which is a direct pass through. We don’t hedge it at this point.

Okay so one way of looking at your outlook is that this is sort of an insurance in your pocket a little bit, whereas maybe the UK pound being a bit weaker than what you have assumed, would go the other way and hopefully it all evens out.

Well you know, Chip, having come into the last four years thinking we had inflation figured out, and it always did thing we didn’t expect. I don’t know which pocket it is in, but it feels like we tried to call it the best we could and again all of these assumptions together, we think, are linked and make sense and so we think this is a pretty realistic plan for us.

Your next question comes from Ali Debonis from Sanford Bernstein.

If I look by segment, this is kind of your first quarter since roughly ’04 that consumer tissue has shown current improvement in margins. On the flip side, this is the third quarter in a row where personal care is actually showing a negative margin change. How should we think about that given that you had been certainly, most recently, leaning more and more on personal care. How should we think about that going forward? Are you switching strategies where you are spending? Is it all really just commodities and pricing that are coming through, etc…?

No. I mean, first of all personal care margins have hung in there around 20%, give or take, for awhile. So, I would say if you look at what happened to them in the fourth quarter they probably took a little bit more down time. That affected them. They still had the impact of not getting their price increase fully affected. They had to spend back on some of the larger count packs to meet competition. In tissue we got a little bit more benefit from the lower commodity costs flowing through in natural gas and pulp and distribution costs. We were obviously very focused on realizing more revenue in tissue and we took a little bit more volume risk. We needed to get our margins back above 10% and we are hopefully headed higher than that here in the next year.

Ali, keep in mind that the personal care margins were lower in the third quarter and improved sequentially from 18.8% to 19.9 in the fourth quarter.

Okay that’s helpful. You mentioned down time and being a little bit more aggressive on pricing. I mean you look at 5% organic growth, which is good, 7% pricing, net of two volumes. I would like to address the price in question just before, but that algorhythm obviously has the effect that you mentioned which is around down times, a little bit of margin pressure certainly as you do that. And, now in the context of, as you guys say, fine tuning, pricing and promotional plans, and I’m always concerned when people say fine tuning, because I really don’t know what that means. How should we think about the effect on your margins from down time from volumes going forward?

I think as we go into this weaker economy I think we will just have to see how it goes. Our goal is to make what we sell. If the categories are declining we will obviously have to take adjustments in our production schedule to account for that. It is not our goal to go into the year losing share in an of our key categories, so we are certainly going to try to make sure we are competitive on shelf and have got a fair share promotion in our spending strategic marketing money behind our innovations. We have got a good innovation program coming in ’09, so we would expect to drive volume behind that. But, if the consumer continues to be weak and if retailers continue to pull back on inventory we will have to make adjustments in our production schedule.

Okay and two really short quick questions. On the FX side, you know the top line this quarter is about -8%, you said in the release and you mentioned earlier. If you then go to the bottom line impact it was certainly north of that, so -11% once you kind of roll in both translational and transactional; so 1¼, roughly, amplification between the top line and the bottom line. Is that the ratio we should expect going forward?

Well the big swing this quarter, as we talked about in the third quarter, was Mexico and the impact of the US dollar debt and the pretty market depreciation of the peso this quarter.

If I include Mexico it is still – my 11% on bottom line this quarter is excluding Mexico.

Yes, I think the transactional amount is going to be more difficult to predict, because it is going to depend on the level of hedging and which market we are able to hedge and what the currency does in that particular market. So, we had a bit more than normal this quarter than we have had in prior quarters, but that one is going to be harder to predict going forward.

But is there going to be at least an amplification between the top line and the bottom line on a sustainable basis? Is that how you are structured?

I would say it depends on the market. If you look at Europe where we don’t have very high margins, then sometimes the translation impact hurts you a lot worse on the top line than it does on the bottom line. Other markets, like Korea and Australia, which have probably seen some of the biggest evaluations, where we have above company average margins, the translation impact is pretty significant for us. It is a difficult question to answer, but the currencies that matter the most to us are the Mexican peso, the Australian dollar, the Korean won, the UK sterling and the euro. Not necessarily in that order, but the ones that have a bigger impact on our bottom line are the peso, the A dollar and the Korean won.

Okay and my last question is just on the other expense line. It is clearly higher this time. What should we expect on that? It looks like you are playing a little bit of catch-up. How should we expect that? We know that it is for the $0.04 to $0.05 in the release that you say is normal. You haven’t been normal recently, so how should we think about that and what is really in there?

Yes, it is $4 to $5 million was the number that should flow through there as opposed to $0.04 to $0.04, but yes this quarter there was a bunch of stuff that happened late in the year. We mentioned the litigation settlement that happened in the last two weeks of December, and we had an issue in Brazil that went the other way that was positive near the end of the quarter; so there was a number of things that happened near year end that flowed through there and collectively along wound up being a much bigger negative than we were expecting. There wasn’t any judgment on any of those. They happened and that is where they get recorded.

In 2009 that is where the currency transaction expenses will be recorded.

Okay, in that line.

That is right.

Your next question comes from Gail Glazerman with UBS.

I am trying to get a little more sense of the volume trends. Is there anything you can say, I guess, separating the developing and developed market trends as you kind of move through the fourth quarter and into 2009? Did you see this kind of a flat stable down trend or any sort of shifts?

I would say in emerging markets the core volume and category growth held up better in the fourth quarter. I would say it is slowing somewhat, but still growing, whereas I would say most of the categories in the US were flat to negative in the quarter. You are certainly seeing a little bit of slowing in emerging markets, but they is still pretty robust growth there for us.

Just to give you some number around that Gail, organic growth was strong through out and there was strong through out and there was perhaps more pricing that made up for a little slower volumes. So, when you look at developing and emerging markets in the fourth quarter organic growth for the quarter was 15% and for the year it was 15%. Now there are, again, different components there, price and mix were stronger in the fourth quarter than they were for the year.

Yes, I was just trying to get a sense of volume trends and I guess it makes sense that there was that inventory pantry destocking issue, if you are past that or is that something that is continuing into ’09, looking at the sequential trend?

It is early days yet. We don’t have a lot of new Nielson data for ’09, so we will have to watch and see what happens.

Okay and Mike, do you have any detail on private label shares and what they did in the quarter?

Yes. If you look at them sequentially, the only category where private label did not go up was facial tissue. If you look year-over-year it is similar trends, but not as many categories were private label shares up. Gail Glazerman – UBS: Okay and was it up significantly, one point a hundred…

A couple of categories and when you are looking sequential were below a percent. In the 1% to 2% towels was the most significant, close to 3%.

Okay. After you make the $530 million pension contribution in ’09 will you be fully funded?

Nope.

Okay, can you give me any sense of the funding?

All of that will be in the K, but basically your contributions are defined by the pension protection act as to how quickly you have to fund it. Typically you are going to fund any short fall over three to four years.

Your next question comes from Wendy Nicholson with Citi Investment Research.

My first question has to do with your pricing outlook. Assuming you’re not planning on rolling back any pricing in the US, I am actually surprised that the target for the year the 2% to 3% increase isn’t higher, because I would have expected you to take pricing overseas to offset some of the devaluations. Are you not doing that?

Well the calculus you are looking at overseas, if you look at last year you had very strong currencies and very strong commodities early I the year; so from a local currency standpoint, because the currency had gone up so much, they weren’t actually seeing a lot of the cost in put. Now you have totally flipped it around where their currencies are weaker, but the commodities are weaker. So everybody is going through that calculus market-by-market as to, has the currency weakened more than the commodity cost and is there a need for pricing. I think the encouraging thing in the fourth quarter was we actually improved our margins just a bit in developing emerging markets. So, even though the size of the P&L is changing we are trying to improve the shape of it as we go through this big swing here.

So in a market like Brazil today with the devaluation having been as sharp as it has, you haven’t taken significantly more pricing down there, let’s call it over the last 90 days?

We took some pretty healthy tissue price increases in Brazil this year, which was a big factor. Now that you see pulp weakening the question will be how much farther can you push that value equation and what is happening in the local marketplace.

Okay, but fair to say that even with private label having gained some share here in North America, Wal Mart hasn’t called and said hey you’ve got to roll back 5% or 10% of those price increases you took in ’07 and ’08?

I think it is fair to say that all of our customers are sensitive to what is happening in the commodity cost environment and they are trying to make sure they understand the consumer value equation. So, our elasticity is better than ever in terms of where does the consumer trade down, is it absolute price point, is it price per unit, what is the critical variable and try to get that right and try to get the right packings and distribution to really make sure we have got a relevant offering on shelf.

Okay and with that in mind, the planned downtime, the negative operating leverage, I think you said it was 50 basis points in the third quarter, 80 in the fourth quarter. With inventory levels, I know you can’t really tell what inventories are at consumer’s pantries, but given what you know about where inventories are today at the retail customers, what should we be looking for from a kind of “downtime” pit to margins?

I think you should expect us to be aggressive in continuing to manage our inventories down. I mean our absolute inventory was relatively flat, but when you look at the sales decline it winds up our inventory metrics weren’t where we wanted them to be. So we are going to continue to watch and see what happens with our sales with the first quarter and take more downtime if needed. It could be as much or more as we did in the fourth quarter though. h:

Your next question comes from John Faucher with J.P. Morgan.

Yes, I would say first of all if you look at margin of our segments even at current pricing levels we still haven’t fully repaired margins from where they were several years ago, particularly in consumer tissue. So, the fact that there was a big swing in commodities, if you look back over three years we have seen kind of consistent margin decline and we are finally starting to get some commodity relief where we can get margins back to where they were three years ago or close to it. So that is sort of the nature of the dialogue is that yes commodities have pulled back, but we never got full realization of the commodity cost increases on the way up. So that is sort of where the discussion starts and then it is looking at what is the right promotion strategy, what is the right pack count by channel and what are their objectives, what are their private label strategies. I would say changing list price is a very blunt instrument, that there are a lot of other things that you do from a marketing standpoint and a strategic marketing standpoint before you got to that.

Okay and you feel like there is pretty good agreement between yourself and your customers that, as you said, there are a couple of other instruments that you can use before you just simply go ahead and lower the list price.

I mean the biggest instrument is innovation. We are bringing more news to the category. For example, we rolled out a new, improved, Kleenex Ultra facial tissue. It is much easier to couple a price change with a significantly better product in this market. Then the consumer gets it, the retailer gets is. So, as we have got very robust innovation plans in ’09, part of that justifies the value that we are bringing to the retailer end of the consumer.

Okay so not to be a dead horse, but you feel like the retailer understand that concept and agrees with you, at least at this point.

Yes, I mean are they going to stand up and say gee – what they really want is to be advantaged. So they would like you to lower their price and leave it the same for everybody else, right? Because, you know, in the end if you take price down you are just taking dollars out of the category, so search their same store sales. It is more about what is the relevant value you are bringing to the consumer. Do we have the right level of innovation? Because if you look at the super premium segment in a lot of our categories it has actually held up very well I this environment, so the areas that have been picked off by private label tend to be the lower end of the category.

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

Can you tell us what percentage of pension expense is going to hit cost of goods and what percent will hit SG&A?

Yes. I think about 70% of the pension expense increase hits cost of sales and the balance hits SG&A. Mark and company are all nodding their heads, so I think that is about right.

Okay great. On the P&L I understand where the transaction expense is going to hit, but when we get to your quarterly segment break downs after you have the operating profits by segment we have other unallocated and charges. Which of these three sections is going to get the transaction expense or does it go into the segments themselves?

I think to the best we can we will try to put it into the appropriate segment. Where we can’t then it will wind up in unallocated.

Okay. Also, in the quarter, in the segment section, charges went to zero for the first time in I don’t know how many quarters. Is that a reflection of the ending of the restructuring or were there charges and gains that were offset in that particular line?

So basically we wrapped up the restructuring program within the fourth quarter. I think we actually had a small gain on the sale of an asset that offset some of the remaining charges, but we have completed the charges that we are going to take against the competitive improvement initiative program with the fourth quarter of 2008 results. We will continue to talk about the benefits as those continue to roll out through the end of 2009, but then we would expect to have that entire program behind us.

So in that, I guess it was an expense of about $50 or $55 million for the full year; is that essentially excluding maybe one time items go to zero in 2009?

It does.

How does your arrangement with Costco and Huggies and private labels diapers work? Is that by contract? Does it come up for bid soon? Is there a time frame on here?

We really don’t disclose any of the details of any of the relationships that we have with our key customers. We have a very good relationship with Costco and we expect to continue moving that forward for some time to come.

But does the business come up for bid? How doe the arrangement work?

They talk to us on a regular basis about what they want to accomplish and we have the same discussion with them about what we want to accomplish and as long as we are aligned we move forward together. So far it has been a good relationship for both of us.

Your next question comes from Linda Weiser with Caris & Company. Linda Weiser - Caris & Company: I was a little bit curious about K-C Professional, the volume decline of think it was 8% in North America. It got worse since last quarter. Can you remind us what the volume decline, what the worse point was like after 911? I mean can we expect this volume decline to get a lot worse? Also, is it in the tissue part or is it in the non-tissue more equipment type stuff that you are doing in K-C Professional where you are seeing the declines?

Well we saw some softness across the board in K-C Professional in the quarter. A lot of it was inventory pull back, but then some of it was just fewer people working. You are also seeing end users really pulling back on spending and carrying less inventory in their operations as well. If you go back to 911, my recollection, which is a little rusty, was that we saw double digit volume declines for a period, but it was shorter and sharper and it came back quicker. We will see what happens here. I think we are preparing for this to be a longer, deeper, recession than we had the last time. Linda Weiser - Caris & Company: So is your projection for ’09 including a continuation of this volume decline?

In K-C Professional, yes.

Your next question comes from Andrew Sawyer with Goldman Sachs. ndrew Sawyer - Goldman Sachs : I was wondering if you could talk a little bit more about this idea of getting your tissue margins back to a more historical norm. Obviously you have some commodity relief coming through. How should we think about your willingness to perhaps maybe give us some volume in order to drive tissue margins back towards the teens which has been kind of the multi-year average? And, where do you think your private label tissue competitors stand in terms of generating adequate margins to get adequate returns on invested capital?

Well it really depends, across the board if you look at, Europe is probably the biggest private label market. It is probably one of the lowest tissue margin markets in the world as well for everybody. So our margins in Europe aren’t where they want to be. I mean SEA has a lot of public information around. You can see what their margins look like and they are a big tissue producer on both the branded and private label front. In the US, I think if you look at big the commodity costs, I think we buy pulp as cheap as anybody does. I think we are buying natural gas and our distribution costs are pretty similar to everybody else. We get some scale advantages because of the size of our assets. We are typically in the premium end of the segments that we operate in and that helps us as well. Those are all the things that we focus on as we go forward. If you look at some of the other big players, I mean Georgia-Pacific cook is obviously pretty highly leveraged in this environment still, I think, from their acquisitions. Some of the smaller private label guys as well. So we will see what happens. I think the big question is what is pulp going to do in this environment and we will just have to watch that and see. ndrew Sawyer - Goldman Sachs : If you think about oil staying down in the 45 range and pulp going lower than your 740 number, under that type of scenario are some of the private label competitors in cook in North America leveraged enough and have enough margin destruction over the past few years that perhaps you wouldn’t see the price points go down or is that too optimistic a thesis?

Well even if you look at tissue today, a lot of the promoted price points haven’t gone up yet; so there is the list price change at the shelf, but what you are seeing is not a full reflection yet promotionally across all channels of the selling price increase. We are being competitive as well, so it is not everybody else and not us. We are all, I think, trying to find where this is going to settle out. ndrew Sawyer - Goldman Sachs : Do you guys have a tolerance for share losses to drive margins back into the teens in tissue?

In key categories we are going to be focused on holding share.

Your next question comes from Alex Pederson with RCM. Alex Pederson – RCM: I am just trying to get a little more clarity on the transactional impact you guys have highlighted from foreign exchange, upward of $0.20 a share and trying to separate it out between what, if I understand correctly are things like Kimberly-Clark to make it go where it is at a balance sheet issue and translation and maybe more of a P&L issue in other markets where input costs, in dollar terms, have sustained higher because of the devaluation. Can you give me just a little more color on what is behind that $0.20? Is it more the inputs on commodities and dollar terms that are up or is it more balance sheet driven items?

It is a mix of both. Maybe Mark can give you a little bit more color on that, but…

Yes, I think one of the things we have highlighted is we have had a great run of our business. We have generated a ton of cash in Latin America and there are some markets that we are planning on pulling cash back to the US in 2009, so we have called that out as something that is a little different year-on-year. Transactions are basically buying commodities in different currencies than we are selling in the local market. Some of those we have hedged and some of those either we can’t hedge or the exposures are so small that we don’t.

Yes in places like Korea and Australia, for example, the currencies have fallen farther than most of the commodities have fallen. So, you will see a bit of an income statement transactional drag there, but then we will also have some balance sheet exposure coming out in Latin America as we are going to try to bring some cash out. Alex Pederson – RCM: Okay, so the cash out is that, so to speak, a one time impact of that initiative?

Well it is not just one transaction so. Alex Pederson – RCM: Okay and then in the other markets like Korea and Australia, you are talking about basically a gross margin drag from the inputs not falling as fast as the currencies?

Yes. Alex Pederson – RCM: Okay it looks like you had a fair amount of pricing though in your D&E markets. Are you holding pat on the pricing or are you looking to potentially take more as the industry is probably experiencing a similar dollar denominated commodity impact?

I think it is going to be a market-by-market event. Part of it is you are also seeing some slowing in some of the more developed, emerging markets. So, as you look at places like Korea and Australia where the economy is slow, your ability to take more price there is probably pretty limited in many categories. There will still be other markets, though, where you are able to get price to offset the higher commodity costs. Markets like Viet Nam where they have had huge inflation, everybody is taking price just to keep up with the inflation in the local market. Alex Pederson – RCM: So you would describe it as an industry wide or category wide phenomena as opposed to you guys specifically, because you are based in the US?

Yes. I think every multi-national is going to be facing some element of this. As you look at what happened to commodities and currencies in the last year it is a pretty unprecedented amount of volatility. Alex Pederson – RCM: Right and then just on your destocking comments, North America in particular, how do you differentiate between destocking and channel shifting? Because you said if like Nielson data, which is obviously the unfavored channels in this environment, are you seeing a similar level of category slow down in some of the more value-oriented channels?

I think if you looked at an estimate of the all outlet that would moderate the Nielson category declines a bit, but you would still see some net decreases across the board. Really every customer is looking to run with less inventory, so you are seeing across every channel customers looking to pull back on inventory levels.

Your next question comes from Bill Schmitz with Deutsche Bank Securities.

Can you talk a little bit more about the pace of sales as the quarter progressed? I mean was October great, November soft and then December got terrible? I know you kind of called it out. Another question along those lines is how much of that is related to lack of credit for some distributors in emerging markets. Then kind of what you are seeing sort of January to date in terms of what are levels that have bounced back because the credit markets kind have unfroze a little bit.

Yes, I mean I guess I would probably decline to give you monthly sales data. I would say typically December is a bigger month, because it has more shipping days in it than November. That was the case again. I would say in the US on diapers we were probably a little weaker early in the quarter, because of some of the competitive promotion pricing that was happening in certain channels that we responded to in December, so things picked up a bit from there. January, it is early days yet, so we watch daily sales. I would say all signs are the economy is not getting better, but I can’t say that it is getting progressively worse either at this point.

A lot of retailers have a January 31 year-end so they are obviously very focused on that is when their balance sheet date gets measured for their working capital metrics. I am sure you will see them push that hard to try to make sure that they have their balance sheet looking the way that they want it before the end of the year.

Okay great. Then if you look at, operating margins in Europe this year I know will be in the 10-K, but I wondered if you could just give it to us now.

They will be down, so basically we are going to probably wind up giving back a good bit of the progress we have made over the last several years in the restructuring with some of the impact of what’s happened in Europe this year. I would say if you look at the shape of it all of our businesses are profitable there. We have generated a lot of cash in Europe again this year, but it is not as profitable as we would like it to be overall.

Okay and that, like you said, should probably help the currency transaction translation piece as well, right?

Sure.

Okay and then I was just looking at your currency assumptions in the footnotes. It looks like everything is sort of realistic with spot prices, except for the [regal] and the pound. Is there any magic to the 159-pound estimate, because that is a big business for you guys? Then if you look at the [regal] it also assumes, I think it is at a 0.3 now. I think it was 0.48 in your assumptions.

We set those all the same way as we set the commodity costs. We set this stuff up in early December before roll up of forecast at the end of December and that is basically where the forwards were for all of those rates.

Yes, I would say in the last six weeks the pound and the euro separated a little bit. I think it is just a reflection of that.

We will continue to look at it and one that we never get right.

Well I think that is basically taking how much of each of those commodities we buy and pricing it at its US dollar equivalent.

The transaction is an offset to that.

Okay so it is $300 million less that [interposing].

Okay if we buy 2 ½ million tons of pulp and pulp is going to cost us $20.00 a ton less next year, that is $50 million or there about.

Your next question comes from Ann Lamar from Federated Investors.

Can you talk philosophically about pricing and volumes? I know you have talked about continued focus on price realization, but can see there is obvious some economic sensitivity and you have been aggressive on price. So, as we see with the volumes there is some response. I am just wondering if you are comfortable with this heightened level of mid-single digit or single digit volume declines given that you are losing some share and consumers are trading down in light of the economy. I understand the destocking, but what if it is more or more persistent then that? Could you just talk about in general volumes versus pricing?

Sure. Our goal is not to lose share in key categories, so the question is how long and how far, if you lose a share point, how quickly do you have to work to get that back. If you look at our planning assumptions for our businesses for the year, we are really not assuming we are going to lose share in any of our key categories. We deal with innovation, which we have a robust innovation plan coming forward in each of our major businesses so that is a key element. But, you also have to keep an eye on what is happening with the competition and make sure that you are competitive. We are trying to do an even better job of understanding what consumers want in this type of environment, because they are conserving cash and making sure we get the right promotional offerings that fit their paycheck is a key element of our strategy as well.

When you speak of share you are speaking more dollar share though. Is that a fair statement?

That’s a fair statement.

Okay. Do you want to comment more specifically on volume?

I would say given that most of our premium competitors have followed, and there has even been some private label movement on price, you are not going to see big, big shifts at this time between unit volume share and dollar share.

Your next question comes from Frederick Searby with EverKey Global.

You had I think it was an $0.08 cent, a pretty big hit from Kimberly-Clark de Mexico, which is obviously non-cash relate to the dollar debt translation. What are you assuming in your guidance for ‘-0, because that would flow off the Mexican peso, would be the hit there? It seems like a big swing factor, even though it is somewhat deceptive.

I think Mexico is assuming a relatively flat year overall with some of the decline in peso translation year-over-year being offset in progress elsewhere in the business. I think we are pegging the peso for the year at around 13, so that would actually assume a little bit of appreciation from what we saw at the end of the year; so that is something that we will have to watch closely. We have probably got a little bit of downside there if the peso gets appreciably worse.

Your next question comes from Alice Longley with Buckingham Research. Alice Longley – Buckingham Research: Have ad-marketing rates gone down? In other words, to make a consumer impression is it now less expensive than you might have thought two months ago?

Yes, I think there is some weakness in ad spending. If I just judge it by watching prime time TV and how many times they tell me I need to get a digital box to get my TV service to work after February 17. I am sure that is ad space they couldn’t sell any other way; so I am guessing you are going to see a bit of weakness there. What we are seeing is we should be able to get even better coverage for what we are planning on spending in ’09 and if there is opportunities to trim it a bit and still hit our strategic marketing objectives we will absolutely take advantage of that. I would say at this point it hasn’t fallen as much as everybody thought it would. Alice Longley – Buckingham Research: Okay, so you haven’t put any improved rates in your estimates yet?

We think we were realistic but there is probably some upside there depending on how slow the economy gets. Alice Longley – Buckingham Research: Okay and then back to the question. I am trying to get a handle on the magnitude of this pantry deloading. Just to on diapers if I were to look at them plus Wal Mart, is the volume in terms of consumer purchasing in the fourth quarter down 2% something like that?

I think the category itself overall was pretty flat. You would say normally it would be up a percent or so in a normal environment. Alice Longley – Buckingham Research: And this is in volume terms?

Yes. So what we would see typically is some, we saw the shift to the larger pack format, but it was in part driven by some of the price roll backs in some channels on the larger pack format. Alice Longley – Buckingham Research: Okay, so that is really not every much of a disparity.

Not as much in diapers. The closer you are to a product that, you know if you run out of diapers or you run out of bathroom tissue that is a trip to the store for somebody. If you run out of some of our other categories it may go on the list, but it may not make this repurchase cycle. Alice Longley – Buckingham Research: If I were to look at tissue and include Wal Mart in the fourth quarter, was the category volume also sort of flat?

I would say bath tissue was down about probably low to mid single digits. Towels were down mid potentially high single digits. Some of that in bath tissue is an impact of desheating. We measure the category in tens of thousands of sheets and so as some of the competitors and us have taken sheets out over the year that is a part of it, but a part of it is also consumers trending towards buying smaller count packs and less towards buying the large bundle count packs. Alice Longley – Buckingham Research: And what would the comparable number be for childcare category?

Childcare, there you are seeing the category in some ways shift more into diapers; so some of the strength in diapers is the effect that consumers, rather than pay the higher per piece price for training pants are just leaving them in diapers a little longer and training in diapers. Alice Longley – Buckingham Research: So the childcare category might have been including Wal Mart down…

Oh probably mid to high singles. Alice Longley – Buckingham Research: Okay and that is volume.

That is right. Alice Longley – Buckingham Research: Excellent, then I have one final question. Did you give a CapEx projection for ’09?

Yes. I think we said $800 to $850 million.

Your next question comes from Lauren Lieberman from Barclays Capital.

One of my questions is on the cost outlook. One piece that wasn’t discussed was just on recycled fiber. Prices there have just completely plummeted, so I think would think that that is a relatively large positive at least than away from home margins?

Yes, it should be. That is sort of a recent phenomenon. We went from a shortage last fall to a glut and you are actually finding some municipalities now are land filling recycled fiber because they have nowhere to go with it. The export market to China has almost completely dried up as some of the Chinese companies have pulled back on their purchasing, so that is starting to flow through at this point in time and so we are seeing prices that were up over $200 a ton for an extended period and now you are seeing pricing in the high 100’s and in some cases even a bit lower than that, so there could be some more upside there for us. But again, we are in the process of implementing a number of price increases and so if in fact your input costs come down it will probably be a little bit more difficult to pass along as much price as we have assumed in that business.

Okay great and then the final question would be do you have anything specific on goals for ’09 inventory levels?

Yes. If you look at working capital overall, we are going to look to take three days out of the cash conversion cycle and so most of that is going to be coming out of inventory.

Your last question comes from Chip Dillon from Dillon Investment Research.

Just to follow up earlier, in light of the decline in shareholders equity and if you add the under funded pension of about $2 billion to the debt, is that something that you feel, I think you are comfortable with it and certainly I am, but do you feel you need to approach the ratings agencies or have they approached you just in order to talk that out and protect their credit rating?

Well we have an ongoing dialogue with the rating agencies, as you would expect. We have been talking to them all year about what is going on and we will continue to have discussions with them. The credit rating is very important to us, so maintaining that solidly rated credit, especially in a market like this where access to credit isn’t as robust as it was just a year ago is something that is every important to us. We will be talking with the rating agencies about the positives from our cash flow standpoint, from our margin improvement in the fourth quarter, and how we are going to manage through some of the pension funding issues.

You are not buying back stock either this year as well?

Yes, we generate quite a bit of cash and pensions become a higher priority for funding requirements. The good thing is we generate healthy cash flow and we have got opportunities to meet that obligation.

And obviously if we have a recovery like we have always had, eventually that might actually open up quite a bit of free cash flow in future years as well.

That would be great; we look forward to that.

Folks we will end the call here. Tom I will ask you for a couple of wrap-up comments please.

Well once again, this has been a challenging environment. We are doing all of the things you would want us to do as shareholders of Kimberly-Clark to run the company for your benefit. So, expect us to continue to drive innovation to invest in our brands and to manage our costs aggressively as we go through this process. Thank you for your interest in Kimberly-Clark.