Mark Buthman
Senior Vice President and Chief Financial Officer

K-C has had a solid balance sheet and capital structure throughout its 136-year history. This has served us well in both good times and bad, and will continue to do so in the current uncertain environment.

Despite volatility in markets around the world, our financial position remains stable. K-C generated more than $1.8 billion in cash provided by operations through the first nine months of the year—that’s up 5 percent compared to last year. It has never been more apparent that healthy cash flow is a key ingredient to succeeding in a challenging business environment.

We think it’s prudent in this environment to be somewhat more conservative with our balance sheet and deployment of capital. In keeping with this approach:

• In October we scaled back our share repurchase plan for 2008, setting a new target of $600 to $650 million. Even so, this represents about 2 to 2.5 percent of our stock, in line with our 2 to 3 percent long-term target. Given the dramatic downturn in the equity markets this year, we anticipate making a $50 million contribution to our U.S. defined benefit pension plan in the fourth quarter of 2008, and are likely to make more significant contributions in 2009 to improve the plan’s funding level.

• Toward the end of October we chose to enter the credit markets. We issued $500 million of 10-year fixed rate debt with a yield of 7.55 percent. I was pleased that the strength of K-C’s financial position and our company reputation led to favorable market pricing compared to other deals that occurred at the same time. Moreover, demand was quite strong—in fact, the offering was over-subscribed immediately.

• Proceeds from this long-term financing were used to reduce commercial paper. We chose this route because we thought it was appropriate to be somewhat more conservative with the duration of our debt portfolio. In addition, we expect our commercial paper needs to increase in the first half of 2009, as we make the anticipated U.S. pension fund contribution and purchase the remaining ownership of our Andean partner (you can read more about this terrific transaction—which is modestly accretive for K-C from day one—in the News Brief in this issue)

Our businesses are diligently focused on cash generation and cash deployment to preserve flexibility and strong liquidity. How so?

First, we’re intent on improving working capital. Even though we’ve made some progress over the past few quarters, we have opportunities to improve further. Next, we are redoubling our efforts with regard to G&A spending. We are already very efficient in managing our overhead costs but are taking further steps to focus our spending. Third, we are making sure that capital projects provide solid returns, with an eye toward near-term margin-improvement opportunities.

Although the environment has changed dramatically this year, one thing that has not changed is our commitment to protect and strengthen our brands. We are home to some of the world’s most trusted brands, and we’ve increased strategic marketing spending behind them by more than $70 million through the first nine months of 2008. These brands are the lifeblood of our company, and improving them for the long haul through superior innovation, marketing and customer activities is the key to delivering sustainable growth and returns to shareholders.

We will continue to improve our brands and pursue our targeted growth initiatives, even in this uncertain time and difficult economy. Two clear examples of how we’re doing this – in our Adult Care business in North America and in our business in Brazil – are discussed elsewhere in this issue of IR Quarterly.

Thank you for your support and interest in Kimberly-Clark.