Ladies and gentlemen thank you for your patience in holding. We now have your speakers in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of the presentation, the floor will be open for your questions. At that time instructions will be given as the procedure to follow if you’d like to ask a question. It is now my pleasure to introduce Mr. Paul Alexander. Mr. Alexander you may begin sir.

Thanks David and good morning everyone. Welcome to Kimberly-Clark Second Quarter Earnings Conference Call. With us today are Tom Falk Chairman and CEO, Mark Buthman Senior VP and CFO, and Mike Azbell, Vice President and Controller. Here’s the agenda for this morning's call. Mark will begin with a review of our second quarter results, and then Tom will provide his perspective on the results and discuss our 2010 outlook. Then we'll finish with Q&A. For those wishing to follow along, we have a presentation of today's materials in the investor section of our website, which is www.kimberly-clark.com. Before we begin let me remind you, we’ll be making forward-looking statements during the call 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 factor section of our latest annual report on Form 10-K for description of factors that could cause our future results to differ materially from those expressed in any forward-looking statements. I’d also like to point out that we will be referring to our adjusted 2010 outlook that excludes the one time loss in the first quarter for the re-measurement of the local currency balance sheet in Venezuela as a result of the move to highly inflationary accounting. Management believes that reporting in this manner enables investors to better understand and analyze our ongoing results of operations. For further information and reconciliations to comparable financial measures determined in accordance with GAAP, please see today's news release and additional information on our website. Now, I’ll turn it over to Mark.

Thanks Paul and good morning. I hope you had a chance to review our news release the details of our results for the quarter. Let's start with few headlines. First, organic sales growth was 2% including continued strong results for K-C International. Second, operating margin improved to 170 basis points, leading to a 24% increase in earnings per share and third, we continue to be focused on driving those factors we control, delivering strong cost savings holding down working capital and increasing investments behind our brands. Now, let's cover the details of the quarter starting with the top line. Overall, sales increased to about 3% to $4.9 billion including one point of growth from acquisitions. Organic sales rose 2% driven by higher net selling prices or sales volumes were essentially even with prior year. Before I get into further details on the top line, I’d like to briefly touch on Venezuela. Given recent limitations on the availability of foreign exchange, we are closely managing finished product imports and net realized revenue. Well this has an impacted bottom line results in a material way, it is influencing the components of our top line. In the second quarter, the overall impact from Venezuela and our total sales was roughly a point negative on sales volumes and one point positive on net selling prices. These impacts were more significant than our previous expectations. Going forward, in the near term we are assuming a continued challenging environment and so Venezuela is a factor that’s contributing to our updated organic growth assumptions which are included in our news release. Now, let me turn to the top line for each of our segments. I’ll focus my comments on organic sales, setting aside the impacts of currency and acquisitions. Personal care, organic sales increased approximately 4%. Sales…

Thanks Mark and good morning everyone. I’ll give you my prospective of our results and then I’ll cover the outlook for the rest of the year, and then as usual we’ll move on and get to your questions. So in short, we are delivering solid results from the near term, while we maintain our strong focus on the long term. So let me begin with our second quarter results. Looking at the overall numbers, our organic sales were up about 2%, that was driven all by higher net selling prices and our sales volumes were about even with year ago. So, based on the plans that we have in place, and taking into account some of the factors that Mark talked about, we now expect organic sales volumes in the back half of the year to pick up some what from second quarter levels. On the bottom line, we delivered a 24% increase in earnings per share, and that obviously delivered a very strong margin improvement. Well, comparisons were aided by last year's severance charge, I’d also point out that the headwind we faced this quarter from cost inflation, was more than double the impact of the charge that we took for severance last year. So, cost savings and revenue realization strategies have been very important to our bottom line results. I am also pleased that despite the high commodity costs our gross margins are tracking ahead of our full year 2009 levels, and that’s true for the second quarter and it’s also true for the first half of this year. We also made progress in a number of other important areas in the quarter. First, we continue to further strengthen our brands. Several innovations we brought to market in 2010 including U by Kotex, some new independent products and…

Ladies and gentlemen at this time the floor is now open for your questions. (Operator Instructions). Our first question comes from Ali Dibadj from Sanford Bernstein.

Tom I just got a few things, one is, you clearly over the past several quarters made a decision towards price over volume and I guess I can certainly understand why you do that to keep your pricing level that you have fought for such a long time, still where they are longer term. But if I am trying to get underneath that a little bit, why have you assumed that strategically kind of misguide or silly to go after volume but surely in this environment especially as your competitors have decided differently on that strategic matter?

I’d say if you look at the volume missing the quarter Ali, actually more of it has to do with Venezuela than versus what you are expecting. So, Venezuela by itself was a one point drag on volume in the quarter. It was a one point positive on price, but as we really stopped or slowed down our import level that you are starting to see carry or contraction. On the consumer’s issue front a lot of this is carry over price. So a lot of the (inaudible) Cottonelle, it’s really a trade off between sheet count and price. And if you look at, we are also told you wouldn’t see much swing there. I think if you looked at our sequential shares, back our shares down three times, towels it’s up three times, facial is always sequentially soft in the second quarter and really most of our personal care area you are seeing shares are positive in the second quarter. So, I wouldn’t expect that we are trading off volume for price probably at all.

Okay. Let’s talk about your volume shares and I think those numbers are probably driving our value shares. You are not I think gaining volume share, is that the case? Those numbers I think were value share, correct?

Yes, those are all dollar shares; I don't think you’d see a big swing because we line up pretty competitively what everybody else has done in the market place. So I don't think you’d see a big divergence in trend there from what we are seeing. If you look at it broadly internationally, I think as Mark said in the personal care front, you generally saw a negative price constant personal care in those markets. It was kind of dwarfed by the impact of price increases in Venezuela. So we are spending competitively. We talked about the 25% volume growth so far this year in China, so I think we are driving the business in strategic ways where it makes sense to do that, and we are not generally trading off volume for price in most cases.

Okay I guess it's tough for me to drive given that your working capital, particularly your inventories are up so much, so it sounds, unless it’s all Venezuela right to your point a moment ago.

I’d say inventories; we probably had a cyclical low last year. We rebuilt them just a little bit this year, but I would say broadly our cash conversion cycle is better than we had expected year-over-year. So I think inventories, they aren’t out of line with where we would expect them to be at this point.

Just as you look at your EPS guidance, looks like a much faster deceleration at the back half of this year, and clearly commodities is in there, it sounds like competitive actions don't bother you or pricing doesn't bother you, but want to get underneath the deceleration that we should expect certainly year-over-year and at the back half of the year. Is it all commodities or are there other stuff going on?

Certainly commodity costs will be in our guidance, will be higher in the second half of the year than they were in the first half, and because of the strong third quarter we had last year where you really had the low point of the commodity swing. We are always been have tough second half comparisons. So I don’t think anything has changed from that standpoint. I would say you really expect to have a slightly better earnings second half and the first half, that's implied in our guidance despite the fact that commodity costs will be a little higher in the second half than the first half. So we’d expect volume to be a little bit better in the second half than the first half. We’d expect our cost savings to be a little bit better second half to first half and the combination of that will deliver the guidance that we have given you today.

Our next question comes from Bill Schmitz with Deutsche Bank.

Can you just talk about US diaper category trends broadly and also in all other terms. I don’t think we are going back to split (inaudible) here in this country but it seems like some of the trends are pretty awful. Especially if we look at the Wal-Mart panel data, which may or may not be right. But some of these numbers are down 10% to 15% in the quarter. So it's clearly a share shift. So is there anything driving that and when do you think it starts to accelerate again?

In our business we had a pretty solid second quarter. We saw good healthy growth in the super premium segment with the Jeans Diaper launch as well as in our Little Walkers areas. So, we actually saw decent improvements in terms of a mixed standpoint in diapers. We are seeing those with the recession, the decline in the birth rate, that’s still affecting the overall category in the first half. We are seeing signs that birth rates should pick up and you should start to see a little healthier category from a volume standpoint in the second half. I would say if you looked at P&G share numbers and you all have a chance to add some more questions about it, they actually probably had a little bit more of their share shift from their top performing products into their mid-performing product.

Some of these declines in the sales are lot more than just talk at least in recent trends. Are people changing their usage habits also, so are they using less diapers.

We looked at the overall category, it was down like a percent for something like that, it wasn't huge. Sometimes panel data on diapers in particular is difficult to interpret because they don’t have enough diapering households in the panel to make it really be relevant.

Okay, got you and this might be knitpicking, but wasn’t the big step change innovation at Kleenex was supposed to drive volume. I know it’s a soft quarter but it was a soft quarter last year also. So, you surprised that Kleenex didn’t get a bigger lift from the innovation change?

Well it's the softest Kleenex ever and we are driving that. You’re seeing more promotional activity generally in audit, but the second quarter is typically the seasonal low point. We have had the big cold and flu season in the first quarter. We got back-to-school plans coming in the third quarter. So you tend to see private label share pick up, both Kleenex and Puffs were down year-over-year in the second quarter. The category was a little bit soft in the second quarter as well Bill and that’s probably carry-over from that a pretty light cold and flu season.

I would also add, this is a pretty big technology change. So the transition at bay sheet continues to roll out over the line up. So it continues, we’re not quite fully national yet, but further along as that gets fully national, I think you will see some benefit.

Next question comes from Chris Ferrara with Bank of America

I just wanted to understand a little bit better the increase in marketing and research and general administrative, I guess it was up $90 million year-on-year, extra severance charge in the year ago. I’m just having a hard time getting to why that increase is so big. I know I-Flow is running at a loss when you got it, I know marketing was up $40 million but even excluding those, it still seems like you have some more to bump up in there. Can you give a little bit of color on that?

The acquisitions, both I-Flow and Jackson are a part of that and I-Flow has got a pretty big SG&A load because they’ve got a very significant sales organization, but those are probably the two bigger factors. I don’t know, Paul, if there is anything else to speak to in there.

Those are definitely the two biggest factors, Chris, and then on top of that we did have higher R&D spending in the quarter, and then also continue to increases to support K-C International growth, which I think we talked about last quarter also.

Underlying G&A management, Chris, continues to be very tight given the environment we are in.

And the just on CapEx, I guess at Analyst Day you lowered the CapEx assumption by 50 basis points and now you’re taking the 2010 target down. Did you not lower the long-term target enough that Analyst Day?

Well, I think this continues to trend below our expectations honestly. So, we felt like sitting here in the beginning of the year and we’re spending about $750 million rate and we had $1 billion to $1.1 billion guidance out there. I think we have enough projects in the pipeline that we will accelerate in the second half of the year, but we still won’t get to the upper limits. So, we are just trying to be transparent on that.

And volume growth in K-C International has been strong enough for, we’re starting to have to. It’s been a few years since we’ve added incremental capacity, particularly in personal books. Our CapEx is going to follow the trends of the business which are pretty good.

And even in North America, if you looked at our adult care and feminine care business, those things grew double-digit again in the quarter. So we’re actually looking at some capacity expansions there as well.

So you think it’s more timing than anything that the 2010 number is lower than you thought?

Yes

And then finally, just on FORCE, I mean, look obviously, that’s a great result right in raising the number by a third is pretty impressive, but where do you find that? I mean, over a course of three months, you raised that target by a third. Should we think of that as pulling some of that forward or maybe you’re being a little bit conservative originally, like how do I think about that big an increase?

Yeah, I think a part of it was easier comps, we talked a lot about this, we had a lot of downtime in the first half of last year and while we strip downtime out separately, but when your machines are down you also tend to do more maintenance spending which we count against our FORCE. So, the fact that we had less downtime in the first half helps us a bit there, so on the other cost of sales area was positive. We put a global procurement team in, so we are pushing more aggressively on that front. We are also driving a lean continuous improvement process. We are at the very front end of that. And so, we’ve got programs running in North America and in our international markets. And those are delivering quiet frankly more faster than we would have expected and we’ve still got a long way to got to really built that into our culture, but the combination of all those things have delivered that. We still think there is a huge opportunity to continue to deliver going forward, but we are pleased we are ahead in this tough commodity cost environment.

Our next question comes from Lauren Lieberman with Barclays Capital.

I just wondered if you could talk a little bit about the role of volume growth in your tissue margins and profitability, obviously, pulp is an enormous challenge, but when you contract you’ve been able to deal with margins in K-C Professional. I know there is a lot of stuff that would stop your tissue. There seems that the revenue realization strategy has worked is working, and in tissue, it feels a little bit like we are going in circles. So can you talk a little bit about that and how you are thinking about that over next year or two exclusive of what happens with pulp?

So, Lauren was there some kind of tissue joke in there with bathroom tissue and polythene on a roll that we are going in circles.

I don’t mean it but it just keeps happening, I keep doing that.

No, I think, as you compare it to K-C Professional, we have done a better job actually of diversifying the K-C Professional portfolio in getting more of our business into the high-margin wipers and safety products that are less pulp price dependent. In tissue, consumer tissue is still, bathroom tissue, towels and facial tissue, and those are still heavily affected by the price of pulp. So, I’d say we aren’t happy with shares being down or in those categories we want to at least hold share and grow with the category. Some of it was affected by desheeting, some of it was affected by sequential weakness, but other cases its private label and towels in particular has been growing at everybody’s expense. And so, we got to make sure we are still on the right value equation in that market and so obviously we continue to focus on earning the cost to capital in our tissue business and believe we have seen the worst of it, as pulp price start to ease particularly in the fourth quarter. We will start to see a little bit better volume trends and see a little bit better margins as pulp prices come down.

Are you anywhere near being able to think about taking out capacity incurred volumes and consumer tissue has now been down for nine quarters now?

We still really forecast review with our tissue team and we talked about that exact subject and we would expect to be pretty fully loaded. Now in some cases we had actually been outside buying in tissue to supplement our manufacturing base and we’ve used that over a number of years as a way to make sure that we ran full. So we’ve been able to pull back a little bit on some of those outside commitments which actually helps us from a cost standpoint and allows us to continue to run our assets full.

Okay and then just one other thing which is on personal care in the DNE markets. You read a volume growth, is it your sense that today you are growing inline with the market as 5% or 7% volume I guess it’s the last two quarters numbers there. Is that enough to begin share or is it sort of inline with the market?

I think it’s a very diverse pool of markets as you look at China, I’d say with the 25% growth we are seeing, we are probably still growing ahead of the market because we are building distribution in those markets. Latin America, we’ve seen solid personal care growth care, there I’d say we are probably picking up a little bit of share particularly in Fem Care and diapers. Russia is a more competitive battles, so there I’d say we are battling it out with Procter and it’s a share battle everyday there and so, it is mix bag, but I would say in most markets, we are holding shares and in some of them we are picking up a bit.

The next question comes from Gail Glazerman with UBS.

Can you give a little more color on what's going on with U by Kotex, If I remember correctly the stronger last quarter was really kind of volume ahead of the rollout is what you saw in the second quarter something more sustainable or is that still related to the rollout?

Yeah. I mean the launch has gone very, very well. It exceeded our expectations and we had pretty high expectations for it. It really seems to resonate very well with young women. Quarter average picked up about four share points and U buy Kotex, our overall Kotex or fem care business in total was up about 2.5 share points, so most of it has been incremental. We continue to see strong interest and have gotten aggressive plan to continue to drive it and bring innovation to that brand in that consumer space. So, we are pretty enthusiastic about what we are seeing so far. So, obviously our competitors had a lot of activity ahead of our launch and we assume that they are going to continue to be competitive, so we are not expecting it’s going to be easy going forward either.

Okay. And on the paper front, is there anything you can say about, I guess the trend in the competitive activity moving forward given the issues that P&G has had with the Dry Max rollout. Is that getting more intent less intent?

I’d say broadly P&G has executed a lot of their plan on Dry Max and they have gotten with distribution they wanted. They have gotten the promotion space that they wanted. They are going to stick with it and continue to drive, but I think they are through most of the PR issues they were facing and so I think obviously we feel pretty good about our innovation plan in diapers. So we had a very good quarter with jeans diapers, we’ve got more improvements on Huggies coming in the back half of the year. So I think the great news for mom is that both the premium brands Huggies and Pampers are driving a lot of innovation and that’s good for moms and for branded diapers generally.

Okay and can you give us some color on looking at your away-from-home business, I guess you are kind of saying both of this flat underlying trend, the economy has started to turn off at the low base. Have you been holding share or do you think that maybe the markets been recovering at your end or and is giving up new share and just broadly speaking when do you think they’ll be more economically sensitive businesses as what are you seeing?

Yes, it’s really an interesting math as you look around the world, K-C Professional. In the US I’d say certain segments like lodging, are still kind of depressed you are not seeing those come back office building, there is another, we’ve got particular strength, put the vacancy rates you can see those kind of numbers not coming back, manufacturing starting to come back. We are seeing that in our safety business and some of our wiper business. So you have talked about the volume growth there. But you are not seeing a lot of net employment increase. So, we don’t see it as much in our washroom side of our business. So, broadly that’s kind of the US market, particularly Europe on the other hand. We had double digit volume growth in Europe and good improvements in markets like Germany where you are actually starting to see pretty good pick up in industrial output. And so, that was a positive for us in the quarter and then internationally we had solid double digit volume growth in the international markets for K-C Professional. Mostly in Asia, there was about five points of volume and about 13 points of price roughly in that price and mix and so. So again, pretty good volume growth starting to show up in those markets as well.

Okay, just last question. Are you seeing any changes in consumer buying patterns, is it still kind of hand to mouth by the end of the month or is there any census strength there?

All the consumer survey information we’ve seen would say, consumer confidence is not getting better at this point in time. It’s kind of going sideways. And so, you are still seeing some up ticks in some categories in private label shares, not as much as you saw at the beginning of last year. And then some categories, it’s actually starting to trend down a little bit, but things like paper towels and facial tissues still see consumer’s time private label and if you talk to key accounts, they would say that moms are still pretty squeezed. Percentage of consumers that are end using food stamps continues to increase. And so, the consumer generally is feeling pressure out there in the US in particular.

Our next question from Alice Longley with Buckingham Research.

Could you tell us you how much in the US Huggies were up in dollar terms both for diapers and then separately for childcare?

In dollar shares were up sequentially or year-over-year you are looking for?

Year-over-year?

Year-over-year our Huggies shares was down slightly versus Q2 last year. I think we were about almost 38 shares which was a recent high watermark. And in this quarter, we are right around 37, so we were up from 35 and change in the first quarter. So we are up about nearly a point or a little over a point sequentially and down about a point year-over-year. PULL-UPS would be up both sequentially and over prior year, up about almost three points over prior year.

Really what I was asking but I wanted hear that too, is your shipments, so were your Huggies diaper shipments down and your childcare shipments up in dollar terms?

Yes, Huggies was down slightly in volume for the quarter year-over-year and PULL-UPS was up 2% year-over-year, so pretty much tracking share trends.

So just to repeat your childcare volume shipments were up 2% and your Huggies diaper shipments were maybe down 2% volume?

That's Ballpark, yes.

Okay, but then pricing was positive I guess for both?

Yes. For pricing it had more to do with levels of coupon drops that were spent against it in prior year versus this year as well.

How much did that add, so Huggies diapers sales in dollars were up?

Well they are up, we don’t get to that level of detail, but for the total North American personal care business price was up about 2%, and that was primarily coming from Huggies. So overall you should think about Huggies diaper sales being up and the same would be true for childcare.

And up in the mid single digits, putting them both together?

Yes low to mid singles would be fair.

Okay and then looking at your emerging market, organic sales of 6%, can you break that down into volume and price?

Yes, it was split evenly between volume and price.

Okay and then obviously if I take out Venezuela, it was more volume, right?

Correct, yes

How much was emerging markets up if you take Venezuela out?

Well you should think about is that Venezuela had a point impact on volume for the company, negative in a point, positive on price and emerging markets is about a third of the company.

So you could roughly multiply those by three.

So since Venezuela had one point negative on volume and one point positive on price I guess emerging markets excluding Venezuela were also up six?

That’s right

Okay and then the last piece is on US sales overall, once I throw in healthcare, I am going to assume your shipments were flattish in the quarter?

We really look at geographic lens at this point, so I would be guessing.

Our next question comes from Wendy Nicholson with Citigroup

First question on the diaper category, I was actually surprised that the press release said that your promotional spending was down year-over-year. I would have thought been up with the Jeans Diaper, but is that just a function of timing and maybe more advertising. So overall investment spending, I assume is still strong in diapers?

Yes, absolutely. We were launching Pure & Natural last year in the second quarter, and so its part of the comp to that and Jeans Diaper were really in and out. So it was one that you didn’t need to spend quite as much on. It also has such obvious appeal and with such great support from our retailers that actually it was a good vehicle to build and drive that in a very efficient way.

And to your point about being in and out, it goes off the shelves in September or whatever, is that right?

Yes. It actually, it’s probably little earlier than that. I mean some customers blew through it very quickly. So it will probably give us a little bit of boost still in the third quarter but I guess late July or early August, most retailers are going to have work through the inventory.

But you are just replacing that spot on the shelf with regular PULL-UPS. Right, if not like a shift in the number of facings you have or anything like that?

And this is a Huggies diaper promotion, but yes it will absolutely be tied in with our regular Huggies business. So a lot of the stuff, it’s promoted off either end cap displays or other in-store floor displays, so that it wasn’t all cut into the shelf either.

Okay and then my second question on the healthcare business, due to a sharp decline in the profits and the 12% operating margin, how much of that do you think is associated with just the sort of negative operating leverage from the weak top line? In other words, if the top line was kind of a one-time event, I mean is a 12% operating margin on one-time event, are we confident that’s going to back up?

I’d say if you look at our first half average margin in that business which is even more in the 13% to 14% range. That is probably a good average to look at for the year at this point, given that we’ve got some of the one-time cost from I-Flow coming through. And then we would expect to see a nice sequential pickup in 2011 as you work through some of that stuff.

And then last question, just guidance on tax rate for the year, could you say?

It hasn’t really changed, so Mark will give you a little bit more color on it.

29 to 31 at this point. It looks like we might be in the upper half of that.

Our next question comes from Andrew Sawyer with Goldman Sachs.

I just had a quick one on this lower tier diaper launch you talked about in China and I was wondering if you could kind of scoop that out strategically and we haven’t seen you guys as aggressive in the low price tiers across there in the US and Europe. And I was wondering if this is something that we are more likely to see more of an emerging market, is there something you’d consider in the developed market as well?

Well, actually in costs, in many of the emerging markets we participate in, in tier 3 very broadly which is kind of the mid segment of the category. And in some markets we actually compete in tier 2 and down even into our very lowest tiers depending on the market make-up, and it depends on the competitive side obviously, in what you are trying to accomplish there and what your scale is. So in China, we just felt that as we have had success with Huggies and the super premium that adding the value tier was a logical next step, and so as we continue to build our portfolio there, that’s the place to go. Again, I look at it more country-by-country, what’s the category structure, what’s the competitive set and where are you going to make your mark.

This is a tier 3 offering then?

Yes.

And then just quickly follow-up on the…

That’s probably not a tier 1 or anything like that.

On Wendy’s question on the promo spending, I was explaining it differently. I would have thought you would have been a little more aggressive with promo spending to counter what Procter was doing this quarter. Is that just not something that was ever in the planning?

Well, I mean, we felt that all this strategy is part of how good do you feel about your innovation and what you need to do to deliver on your volume objectives. And we felt strongly enough with what we had planned that we were spending as an appropriate level. We’ve got some great advertising, spending behind our Huggies brand. And if I look at our share trends sequentially, it looked like it worked reasonably well. So, I think we’d rather do it with innovation and great marketing and continue to drive it that way than doing it with price off coupons if you can avoid that.

If I can ask one last quick one. Thinking about the pulp curve potentially going down, what is your assumption for the pulp price exiting the year and then secondarily, how should we think about industry pricing and promotional activity as that happens?

I think our forecast is pulp gets down around $900 a ton, something like that, it exits the year and which is dipped down a little from I guess our previous expectation but it also got a little higher than our previous expectation in the second quarter. So the average for the year is probably going to be a little bit a higher than we were overall. I think the other thing to remember, if you look at price realization in our consumer tissue business overall, just this quarter, we’ve only recovered about a third of the fiber price increase in the form of net realized revenue. So, pulp could fall by a lot and you wouldn’t really feel the need to do something from a price promotion standpoint. And if you even look back to the last price increase that was taken at the end of 2008, a fair amount of that has been spent back already in terms of higher promotion spending. So, I guess our expectation is that you won't see as much softness in promoted prices in the back half of the year, but we will have to wait and see what happens.

Our next question from Chip Dillon with Credit Suisse

Just one quick clarification on the tax rate. It would seem like and it’s just to make some of the rate page mark, about 28 to 28.5% is what we should use in the back half to get to that upper end of the 29 to 31?

That’s about right,

Yeah, that’s about right. We had expected it to be a little bit favorable in the back half of the year relative to the first half.

And then one thing that I was interested in is, you mentioned in the K-C International area that the tissue volumes overall were flat, and as you think about that part of the business consumer tissue versus personal care, it would seem to me that, that maybe a sign of things to come where you’re basically going to get the lion share of your growth in Personal Care, just given some of the dynamics in some of those countries. Could you talk about that?

Yeah, I think that’s probably right, you know we are in personal care in a lot more countries in a bigger way. And so, in many cases there is a big opportunity to drive category penetration to a greater extent in personal care, because the categories are much less penetrated than for example bathroom tissue which should be pretty highly penetrated everywhere. So, you’ll tend to see more innovation and growth opportunities, but I would also tell you there are things like facial tissue, which there maybe category growth opportunities. We’ve got something we are launching in Australia around some household cleaning wipes, that is the way to expand our tissue brand into some new spaces. We are doing some of the same things in markets like Israel. So, there will be some selected growth opportunities with our tissue brands and our international markets that we‘ll take advantage of well.

And then I guess lastly, just sticking on tissue, SCA said the other day that they were getting 4 or 5 percentage type price increases in the back half in European consumer tissue. And it seems like just about everywhere you’re seeing pricing except here. You just basically saw some sheet count help in the first quarter, as you mentioned. And I just wonder to what extent is some of the aggressive behavior on the part of the private label producers, especially some new ones to try to add Clean-Dry Technology. To what extent do you think that’s holding down pricing in the marketplace here?

I think that there is a lot of other levers that you pull on tissue besides list price. So list price is one of them but promotional depth and frequency is another. And sheet size, sheet count is another. Package count and how you bundle it, is it 24 rolls or 20 rolls. So there’s a lot of different ways to get that price realization in tissue, and we’re using all of those tools. And I think we’re far more sophisticated in our outlook and approach to pricing around the world than maybe we would have been even several years ago. And so, understanding the consumer dynamics and how they buy their category and how they react to strategic price points, all plays into it. And so, our challenge is to optimize net realizable revenue and still be competitive in the local market.

I think it’s almost unbelievable how well you’ve done in this pulp environment. Congratulations. That’s basically a thank you.

Next question comes from Jason Gere with RBC Capital Markets.

I guess just a couple of questions. One, thinking about the volume acceleration in the back half, can you kind of just summarize? They are leaning a little bit more on the emerging markets as you’ll see a little bit more of an acceleration there, because obviously it sounds like you’re doing a lot of great things there. And that’s more macro-driven. Or two, is it more the innovation that you’ve launched, the spending behind it that you do think. And I know you had some comments that the consumer is going to sideways right now. So I guess I’m just thinking about the back half of the year. Is it the former or the latter, or is it just really a mix of the two that you think will kind of accelerate the back half?

Yeah, I think it’s in a lots of spots. Certainly, innovation is working fairly. We’ll have a full six months of U by Kotex in some of the incontinence products where we only had really a quarter or so of those in the first half. So we’d expect to see continued volume growth there. That’s very solid. We’ve got some great innovation coming with our Huggies brands, and we’d expect to see continued strong share results. We had Pull-Ups and GoodNites, so that will be positive. Our tissue, we should be past some of the big sheeting impact and start to annualize some of that in the second half. And so, we would expect to see stronger volume comparisons on tissue. We’ve also got more promotional activity, which was our plan, behind some of the innovation that’s coming in tissue. We’d expect to see that help our tissue volumes, particularly in North America in the second half. But I’d also say, in healthcare, we think we’re past all the inventory adjustments by our distributors and end-use customers related to H1N1, so we should be back with more of a normal growth trajectory there. So I’d say lots of those areas that would add up to our stronger second half than first half.

And then, I think in the press release you talked about and, hopefully, you didn’t answer this already. But there were some issues that were kind of one quarter with KCP that affected volumes. How much was that and how do we put, I know you kind of quantified Venezuela as kind of 1% hit to volume. I was wondering if the KCP, how that materialized? What the impact was there?

As for KCP, the Venezuela impact was across the whole corporation. KCP actually broadly had pretty decent volume results in the quarter from a volume standpoint. I think we’ve got the number here. It was roughly, I guess it was flat for the second quarter but it was up double-digit in Europe. It was up about mid single-digits in the rest of international, including Asia, US was down just a little bit but we still saw decent growth in our wiper business and safety products.

Healthcare was… yeah

Healthcare was the biggest drag from H1N1.

And then, it seems like the biggest pushback on the stock has been on pulp. And I know in your talking about, hopefully, these pulp prices just don’t go any higher. But can you just give a little bit of context to what you’re seeing in terms of supply sign out there? Where around the world are you seeing actually capacity being expanded? Time put into shape, the demand has been a little bit softer globally but the supply seems to be picking up. Can you talk about like what you’re seeing in China, what happened in Chile, Canada? Some of that context that can actually put a little more context around that, yes, pulp seems to be kind of peaking and it should start to come down?

I think there are a lot of factors in the first half that led to a tight supply situation. So there were some strikes in Scandinavia that wound up with either closed ports or closed mills that constrained supply. The Chilean earthquake took kind of a good chunk of the world pulp capacity offline for a period of time, while really all of Chile was idle for six weeks or so. And then, Chinese buying was at a pretty high level in the first half. So, as we head into the second half Chinese buying, at least, in the last couple of months seems to have slowed down quite a bit. The Chilean capacity is now back online. The Scandinavian capacity is back online. The US dollar is a little bit stronger than it was in the first half, which helped some of the European and Canadian producers a little bit. So I would say those factors would tend to point to a little bit weaker health market in the back half but we’ll have to wait and see how that plays out.

And there is early signs that prices are indeed going down in China in July. Nothing in the US market at this point but it would seem that, it wouldn’t be surprising if it would follow into North America as early as August.

And then just last question, more I think for Mark. If you could just think about or talk about the back half of the year and then how should we think about the gross margin outlook for the year? I think initially at the first quarter maybe it was, gross margins would be up about 50 basis points, would still grow a little bit faster than operating margins. Can you just give us a little bit more color on that? Thanks guys.

I think the cost savings are going to continue to ramp up through the back half. Price realization will continue to grow. At this point, we our expectations, we're pretty pleased with the gross margin performance in the second quarter, and continuous to be. It will grow faster than operating margin. Operating margin, we are kind of maintaining our 10 to 70 basis points guidance, its likely year-on-year. We’re going to end up at the lower end of that range. So we feel good about the results in the quarter and sort of support for our expectations for the balance of the year.

Yes, we've had seven consecutive quarters of gross margin improvement and we like to deliver an improved gross margin overall for the full year.

Next question comes from Connie Maneaty with BMO Capital Markets.

Just to follow up on that last question. Looking at last year’s third quarter gross margin which it stands at about 590 basis points, is it reasonable to expect that the third quarter 2010 margins should decline while peak prices are as high as they are or did the FORCE saving offset that?

I am not going to give you a quarterly gross margin forecast. All I would tell you is last year's third quarter gross margin was 35.2, a pretty tough comp from where we are going be averaging in the first half. So I think it would be better to look at the full year average and we would expect to see improved gross margin on that basis.

Okay. You gave us some indication of what business is like in Venezuela, what pricing up but you are reducing imports and the cost of company, a point on volume, could you just frame that a little bit and describe what business conditions are like, what the demand, what local currency demand is like, and how you see the situation there unfolding over the next six to 12 months?

Yes, I wish I had a better crystal ball on that one. I think obviously, everyone that we talk to that does business down there has got some of the same issues. If you import any kind of a product or a raw material, and it's difficult to get foreign exchange. We are getting some foreign exchange, so you are able to pay some of your bills for imported materials. My sense is that the more local production that you have, the easier it tends to be to get foreign exchange, but that’s just anecdotal from our view. And so, there will start to be shortages and there already are big empty spots on shelves on the stores down there, and so, I think how the government and policy makers work through that is yet to be seen. And there isn't a lot of clear guidance coming out of Venezuela as to how it’s going to resolve itself. But obviously, if they continue to have shortages on key items like diapers and fem care, where there really isn’t a lot of local production that will be a challenge for that country. And so, our goal is to do the best job we can to take care of moms and families in Venezuela and make sure they have the bathroom tissue and diapers and feminine care products that they need, and we will do the best job of that we can in the environment that we are operating in.

Are you accessing the government, the federal bank floating rate or have you had to go to the new parallel market? And what’s the rate on that market?

There is no new parallel market at this point in time. The government has decided that any transactions that were to occur on market like that are illegal, so there is no parallel market that we are aware of. And yes, we have gotten some exchange at the government official rate but it's not enough to be able to fund all of the needs that we would have to bring in imported products. We make a lot of tissue in Venezuela so we've got good manufacturing capability. We have also got some capacity to make personal care products like fem care and diapers, so there, we are buying raw materials in dollars then we're also using some local materials, and then we also bring in finished products like diapers and fem care from countries like Peru, like Costa Rica, some from Columbia, and so making sure we can pay those bills with a currency other than the bolivar is the challenge

Okay. When would you expect consumer to, volumes to increase? Do your comments today suggest a volume increase in the second half or declines that are not as severe as they have been?

I’d expect to see some positive comparisons in the second half and some positive volume results from consumer tissue, so that would be based on our planning, that’s what we’d be looking for in the second half.

Our next question comes from Linda Bolton Weiser with Caris & Co. Linda Bolton Weiser - Caris & Co.: I just was wondering if in the same way you talked about pulp, just you could comment on polymer or plastic resins and that seems to have come up at its peak as well. Do you have a forecast for that and will then help the fourth quarter as well?

Well it’s still a lot higher than it was a year ago and so that was another part of our uptake in the inflation assumption for the year. I don’t know Paul if you got any other color on that?

It did move up pretty rapidly in the second quarter. We would expect it to be a bit lower in the back half of the year so that would start to help sequentially later in the year Linda Bolton Weiser - Caris & Co.: Can you just comment, I know a lot of companies have talked about sort of cutbacks they need or freezing in salaries and compensation and other measures when things were pretty bad a year ago. Is there anything that you did like that, that might comeback that you have to start increasing compensation or are there any cost like that that can creep back upon you that would offset some of the FORCE savings?

I mean in 2010 we had more of a normal comp year where we have benchmarked what other companies are doing, but having said that, I mean it’s still a pretty low inflation environment. So it’s a fairly low percentage increases everywhere. We continue to encourage all of our teams to be disciplined about how they spend money, so whether that’s still in vacant positions, we are using a lot of our lean approach to avoid hiring where we can and continue to be disciplined about that. We are staying focused on controlling our travel costs and our other discretionary G&A to make sure that we don't go back and increase our spending at a higher rate. We are budgeting our G&A to be flat in most of our business areas or to grow at a slower rates than sales and so we don't want take our foot off the brake on cost and make sure we got the money to invest in our innovation and strategic brand building. So it's been working so far and our teams are doing a great job of delivering that as you saw with our FORCE cost savings.

Our next question comes from Chip Dillion with Credit Suisse

I just had a quick follow-up actually just as a tag along to that FORCE question, you are getting the big number this year, would it be however reasonable to expect it to be more of a normal type FORCE goal for 2011, down in the 200 range.

We’ll give you more guidance until ‘11 probably early next year, but I’ll probably tell you in some way we had some favorable comps on FORCE to last year, because we had so much downtime we probably did a little bit more on the maintenance front last year so that could be a part of why this year is a little better than we would have expected .But I also think we’ve got good momentum going with our lean and continuous improvement activity and we should see continued momentum from that into 2011.

I don't know if you all saw but two of the big pulp players Ken Ford and West Fraser did officially lower in North America $30 dollars for August in pulp so that should help you.

We've heard, we weren't sure what was public and what wasn't at this point but thanks for sharing that.

The next question from Andrew Feinman with Iridian Asset Management

Yes, that's right. I just wanted to ask you if, I think one of your preferred issues is coming through or you have the once in seven year opportunity to pay it. So I was wondering if you could tell us what your plans are there. And then, I also wanted to ask, you probably won’t answer it, but this year you said the pension expense was 160 and the funding was 240, so I was wondering if you could give us any guidance for those two numbers for next year.

I'll let Mark probably take both of those. I think on the preferred issue, we really treat that as debt and I would expect that to stay in place at this point even though it does have a maturity date of mark. I don’t know if you got anything else to add to that.

Andy, that’s been on the horizon, its part of our normal funding plan. We are going to go to the market at the end of this month, in fact, next week, with the debt issue. It’s not related to that particular item, but I would guess my expectations will be back in the market, we’ll fund that in the normal course. It’s not an outsized amount, so we should be fully able to fund that either with a long term debt issue or commercial paper.

Pension funding?

Yes, pension funding, again, it's too early to predict. I think you said, over time, you’re going to have I guess funding of $200 million to $250 million. Let’s see how the equity markets and our returns play out what the discount rate looks like.

And the biggest single variable is what’s the AA Corporate bond rate going to be on December 31st, that sort of triggers what you’re funding requirement will be. I will tell you this though, we have now frozen our defined benefit plan in the US and so we hadn’t let any new entrants into the plan since 1997, and then we froze all remaining participants' balances as of the end of 2009 and have shifted them all into defined contribution plan. So we’re doing everything that we can to try to manage that liability and yet still provide a competitive benefit program to our employees.

And I think it’s fair to say, if you think about the next five years, you should see less volatility, get eliminated, but you will see less volatility than you might have experienced in the past.

At this time we have no further questions.

All right, thanks David, we’ll finish with our closing comments by Tom.

So once again, we feel good about the innovation that we’ve delivered this quarter and we're pleased to be able to deliver on our global business plan objectives. And thank you again for your support at Kimberly-Clark.

Ladies and gentlemen that conclude today’s conference. You may now disconnect.