Introduction

This MD&A is intended to provide investors with an understanding of our recent performance, financial condition and prospects. The following will be discussed and analyzed:
• Overview of Business

• Overview of 2012 Results

• Results of Operations and Related Information

• Unaudited Quarterly Data

• Liquidity and Capital Resources

• Variable Interest Entities

• Critical Accounting Policies and Use of Estimates

• Legal Matters

• New Accounting Standards

• Business Outlook

• Information Concerning Forward-Looking Statements

Dollar amounts are reported in millions, except per share dollar amounts, unless otherwise noted.

Overview of Business

We are a global company focused on leading the world in essentials for a better life, with manufacturing facilities in 37 countries and products sold in more than 175 countries. Our products are sold under well-known brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend. We have four reportable global business segments: Personal Care, Consumer Tissue, K?C Professional ("KCP") and Health Care. These global business segments are described in greater detail in Item 8, Note 17 to the Consolidated Financial Statements.

In operating our global business, we seek to:
• manage our portfolio to balance growth, margin and cash flow,

• invest in our brands, innovation and growth initiatives,

• deliver sustainable cost reductions, and

• provide disciplined capital management to improve return on invested capital and return cash to shareholders.

Key strategies for our segments include:
• We plan to grow our strong positions in personal care by leveraging our brands and providing innovations.

• For consumer tissue, we seek to bring differentiated, value-added innovations to grow and strengthen our brands while focusing on net realized revenue, improving mix and reducing costs.

• We plan to continue to shift our mix to faster-growing, higher-margin segments within KCP and Health Care, including safety and wiping in KCP and medical devices in Health Care.

We plan to drive growth throughout K?C International ("KCI"), which includes our businesses in Asia, Latin America, the Middle East, Eastern Europe and Africa, with a particular emphasis in China, Russia and Latin America. Our goals for KCI include seeking targeted expansion and growth, taking advantage of attractive market opportunities and deploying our strong brands and innovation capabilities.

Highlights for 2012 include the following:
• We executed our growth strategies in KCI with a focus on markets in China, Russia and Latin America. Net sales in KCI grew mid-single digits in 2012, including a 10 percent increase before taking into account the impact of changes in foreign currency exchange rates. KCI accounted for 37 percent of company net sales in 2012, up from 36 percent in the previous year.

• In North America, we launched a number of new or improved products, including super-premium Depend briefs, New U by Kotex tampons and pads and a number of new products in KCP. In KCI, we launched diaper pants, premium feminine care products and adult care offerings in several markets. These innovations are examples of our translation of consumer insights into solutions that generate growth. Our innovations and supporting marketing programs helped improve our brands' market positions. In the U.S., we improved or maintained market share in 6 of 8 of our consumer categories. We also increased our market share in a number of businesses in KCI.

• We continued to support innovations and growth initiatives with increased spending in strategic marketing of $115 in 2012 over the previous year, and increased research and development spending at a double digit rate. To help fund those investments, we are generating cost savings through several initiatives, including leveraging our global procurement organization and deploying lean principles throughout our company. Full-year cost savings from our ongoing program in 2012 were $295.

• In 2012, we approved strategic changes related to our Western and Central European consumer and professional businesses to focus our resources and investments on stronger market positions and growth opportunities. We will exit the diaper category in that region, with the exception of the Italian market, and divest or exit some lower-margin businesses, mostly in consumer tissue, in certain markets. Restructuring actions related to the strategic changes will involve the sale or closure of five of our European manufacturing facilities and streamlining our administrative organization. The restructuring actions commenced in the fourth quarter of 2012 and are expected to be completed by December 31, 2014. See additional information in Item 8, Note 2 to the Consolidated Financial Statements.

• In 2011, we initiated a pulp and tissue restructuring to exit our remaining integrated pulp manufacturing operations and improve the underlying profitability and return on invested capital of our consumer tissue and KCP businesses. In 2012, we decided to streamline an additional facility in North America to further enhance the profitability of the consumer tissue business. These restructuring actions were substantially completed as of December 31, 2012, including the pending sale of a manufacturing facility that is expected to close in the first half of 2013. See additional information in Item 8, Note 3 to the Consolidated Financial Statements.

• We continued to focus on generating cash flow and allocating capital to shareholders. In 2012, we generated $3.3 billion in cash provided by operations, up 44 percent from the prior year. We repurchased $1.3 billion of Kimberly?Clark common stock in 2012, and expect to repurchase $1.0 billion to $1.2 billion of our common stock in 2013, subject to market conditions. In addition, we raised our dividend in 2012 by 6 percent, the 40th consecutive annual increase in our dividend. Altogether, share repurchases and dividends in 2012 amounted to $2.5 billion.

We are subject to risks and uncertainties, which can affect our business operations and financial results. See Item 1A, "Risk Factors" in this Form 10-K for additional information.

Overview of 2012 Results
• Net sales increased 1 percent due to increases in net selling prices and volumes, partially offset by unfavorable currency effects.

• Operating profit and net income attributable to Kimberly?Clark Corporation each increased 10 percent and diluted earnings per share increased 11 percent.

• Results in 2012 include pre-tax charges of $299, $242 after tax, related to the strategic changes in Western and Central Europe. Additionally, comparisons are impacted by $135 in pre-tax charges, $86 after tax, for the pulp and tissue restructuring actions in 2012 versus $415 in pre-tax charges, $289 after tax, in 2011.

• Cash provided by operations was $3.3 billion compared to $2.3 billion last year, with the increase primarily due to higher earnings, improved working capital and lower defined benefit pension contributions ($110 in 2012 versus $679 in 2011).

Results of Operations and Related Information This section presents a discussion and analysis of net sales, operating profit and other information relevant to an understanding of 2012 results of operations. This discussion and analysis compares 2012 results to 2011, and 2011 results to 2010.
Analysis of Net Sales
By Business Segment
Year Ended December 31

                    2012        2011        2010
Personal Care     $  9,576    $  9,128    $  8,670
Consumer Tissue      6,527       6,770       6,497
K-C Professional     3,283       3,294       3,110
Health Care          1,622       1,606       1,460
Corporate & Other       55          48           9
Consolidated      $ 21,063    $ 20,846    $ 19,746


By Geographic Area
                                     Year Ended December 31
                                 2012         2011         2010
United States                 $ 10,512     $ 10,463     $ 10,480
Canada                             718          726          684
Intergeographic sales             (453 )       (443 )       (445 )
Total North America             10,777       10,746       10,719
Europe                           3,247        3,401        3,179
Asia, Latin America and other    7,851        7,467        6,561
Intergeographic sales             (812 )       (768 )       (713 )
Consolidated                  $ 21,063     $ 20,846     $ 19,746


Commentary:
2012 versus 2011
                     Percent Change in Net Sales Versus Prior Year
                                          Changes Due To
                             Volume        Net       Mix/
                  Total      Growth       Price      Other    Currency
Consolidated       1.0          1           2          1        (3)
Personal Care      4.9          5           3          -        (3)
Consumer Tissue   (3.6)        (3)          2         (1)       (2)
K-C Professional  (0.3)         1           1          -        (2)
Health Care        1.0          2           -          -        (1)

• Personal care net sales in North America increased 2 percent. Net selling prices rose 3 percent, driven by improved revenue realization for Huggies diapers and baby wipes. Overall volumes were down 1 percent as infant care volumes decreased mid-single digits, primarily reflecting category declines. This decrease was mostly offset by improvements in adult care volumes of mid-single digits and feminine care of low-single digits, primarily due to innovations in Depend and U by Kotex brands.

In KCI, personal care net sales increased 8 percent despite a 5 percent decrease from unfavorable changes in currency rates. Sales volumes were up 9 percent, with high-single digit to low-double digit growth in each major region. Volume performance was strong in a number of markets, including Brazil, China, Russia, South Africa, South Korea, Vietnam and Venezuela. Overall net selling prices improved 3 percent compared to the year-ago period, driven by increases in Latin America.
In Europe, personal care net sales increased 2 percent, despite an unfavorable currency impact of 6 percent. Sales volumes rose 10 percent, mostly due to growth in non-branded offerings, Huggies baby wipes and child care offerings.
• Consumer tissue net sales in North America were down 3 percent compared to the prior year, including a 5 percent decrease from lost sales in conjunction with pulp and tissue restructuring actions. Organic sales volumes (i.e., sales volume impacts other than lost sales from restructuring actions) were essentially flat with 2011, as gains in paper towels were offset by lower volumes in facial tissue. Overall net selling prices increased 3 percent and changes in product mix reduced net sales 1 percent.

Consumer tissue net sales decreased 1 percent in KCI. Currency rates were unfavorable by 4 percent and lost sales in conjunction with pulp and tissue restructuring actions reduced sales volumes by 1 percent. Net selling prices increased 3 percent and changes in product mix increased net sales by 1 percent. These benefits were partially offset by decreases in organic sales volumes of 1 percent.
In Europe, consumer tissue net sales decreased 8 percent, including an unfavorable currency impact of 5 percent. Changes in product mix, net selling prices and volumes each decreased net sales by 1 percent.
• Net sales of KCP products in North America were essentially even with the prior year. Although washroom product volumes increased, these gains were offset by lower volumes in other areas, including safety products and wipers.

KCP net sales increased 5 percent in KCI, despite a 4 percent decrease from unfavorable changes in currency rates. Sales volumes increased 6 percent, driven by double-digit growth in Latin America, and net selling prices rose 3 percent. In Europe, KCP net sales decreased 9 percent. Currency rates were unfavorable by 6 percent and lost sales in conjunction with pulp and tissue restructuring actions reduced sales volumes by 4 percent. Organic sales volumes were essentially flat with 2011 and net selling prices increased 1 percent.
• Net sales of health care products increased 1 percent as sales volumes increased 2 percent and unfavorable currency effects reduced net sales by 1 percent. Medical device volumes increased 3 percent and surgical and infection prevention volumes increased 2 percent.

Commentary:
2011 versus 2010
Percent Change in Net Sales Versus Prior Year

                                          Changes Due To
                  Total       Volume       Net       Mix/
                  Change      Growth      Price      Other    Currency
Consolidated       5.6          1           2          -         3
Personal Care      5.3          2           1         (1)        3
Consumer Tissue    4.2         (2)          3          -         3
K-C Professional   5.9          2           2         (1)        3
Health Care        10.0         8           -          -         2

• Personal care net sales in North America decreased about 2 percent due to lower net selling prices and unfavorable product mix of 2 percent and 1 percent, respectively, partially offset by favorable currency effects. Volumes were essentially flat as

improvements in Huggies baby wipes, adult incontinence products and feminine care, including benefits from product innovation in the Poise, Depend and U by Kotex brands, were mostly offset by lower sales of Huggies diapers and Pull-Ups training pants.
In Europe, personal care net sales increased about 4 percent due to favorable currency effects of 5 percent and increases in sales volumes of 2 percent, partially offset by lower net selling prices of 2 percent.
In KCI, personal care net sales increased about 14 percent, driven by increases in sales volumes of 5 percent, higher net selling prices of 5 percent, primarily in Latin America, and favorable currency effects of 5 percent. The growth in sales volumes was broad-based, with particular strength in South Korea, China and Latin America, excluding Venezuela.
• Consumer tissue net sales in North America increased 2 percent due to higher net selling prices of 2 percent, partially offset by a sales volume decline of about 1 percent. Sales volumes were up high single-digits in paper towels but were more than offset by low single-digits decreases in both bath and facial tissue.

In Europe, consumer tissue net sales increased 5 percent due to favorable currency effects of 6 percent, partially offset by a 1 percent decrease in sales volumes.
In KCI, consumer tissue net sales increased 8 percent due to higher net selling prices of 7 percent, primarily in Latin America, favorable currency effects of 5 percent and improvements in product mix of 2 percent, partially offset by a decrease in sales volumes of 6 percent. Sales volumes were negatively impacted by revenue realization strategies and lost sales from a divestiture of a non-core business in Latin America and exiting non-strategic products in conjunction with the pulp and tissue restructuring actions.
• KCP's net sales in North America increased 3 percent due to higher net selling prices of 2 percent and an increase in sales volumes of 1 percent driven by the safety and wiper categories, while washroom product volumes declined in a continued challenging economic environment. In Europe, sales of KCP products increased 7 percent due to favorable currency effects of 6 percent and increased sales volumes of about 2 percent. Net sales in KCI of KCP products increased 14 percent due to favorable currency effects of 6 percent, higher sales volumes of 5 percent and higher net selling prices of 3 percent.

• Higher sales volumes for health care products were driven by increases in exam gloves and medical devices.

Analysis of Operating Profit
By Business Segment
                                     Year Ended December 31
                                  2012        2011        2010
Personal Care                   $ 1,660     $ 1,526     $ 1,764
Consumer Tissue                     887         775         660
K-C Professional                    545         487         468
Health Care                         229         219         174
Other (income) and expense, net      (6 )       (51 )       104
Corporate & Other                  (641 )      (616 )      (189 )
Consolidated                    $ 2,686     $ 2,442     $ 2,773

 16 KIMBERLY-CLARK CORPORATION - 2012 Annual Report


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By Geographic Area
                                     Year Ended December 31
                                  2012        2011        2010
United States                   $ 1,915     $ 1,754     $ 1,901
Canada                              138         161         125
Europe                              227         170         222
Asia, Latin America and other     1,041         922         818
Other (income) and expense, net      (6 )       (51 )       104
Corporate & Other                  (641 )      (616 )      (189 )
Consolidated                    $ 2,686     $ 2,442     $ 2,773

Charges related to European strategic changes of $299 in 2012 and pulp and tissue restructuring charges of $134 and $413 in 2012 and 2011, respectively, are included in Corporate & Other. Additionally, a non-deductible business tax charge of $32 related to a law change in Colombia is included in Corporate & Other in 2011. See Item 8, Notes 2 and 3 to the Consolidated Financial Statements for additional information. In 2010, Other (income) and expense, net includes a $79 charge and Corporate & Other includes a $19 charge related to the adoption of highly inflationary accounting in Venezuela. Commentary:
2012 versus 2011
Percentage Change in Operating Profit Versus Prior Year

                                                 Change Due To
                 Total              Net     Input      Cost      Currency
                 Change   Volume   Price   Costs(a)   Savings   Translation   Other(b)
Consolidated      10.0      5       17        4         12          (2)         (26)
Personal Care     8.8       8       16       (2)        13          (2)         (24)
Consumer Tissue   14.5     (5)      19        8          9          (2)         (15)
K-C Professional  11.9      5        6        7         10          (3)         (13)
Health Care       4.6       6       (1)       12        (7)          1          (6)

(a) Includes inflation/deflation in raw materials, energy and distribution costs.

(b) Consolidated includes the impact of the charges in 2012 related to the European strategic changes, in 2012 and 2011 related to pulp and tissue restructuring actions and a 2011 non-deductible business tax charge related to a law change in Colombia.

Consolidated operating profit increased $244 compared to the prior year. Operating profit benefited from increases in net sales, cost savings of $295 and deflation in input costs of $90. These benefits were partially offset by increased marketing, research and general expenses, including $115 in higher strategic marketing spending. Administrative and research spending also increased, in part to build further capabilities and support future growth. Foreign currency translation effects reduced operating profit by $55 as a result of the weakening of several currencies relative to the U.S. dollar. A lower level of income in other (income) expense, net adversely impacted the operating profit comparison by $45.
• Operating profit for the personal care segment increased due to higher net sales and cost savings, partially offset by inflation in input costs, increases in marketing, research and general expenses and manufacturing costs and unfavorable currency effects. In North America, operating profit increased as higher net sales, cost savings and deflation in input costs were partially offset by increased marketing, research and general expenses. Operating profit in KCI increased due to higher net sales and cost savings, partially offset by increases in marketing, research and general expenses and manufacturing costs, inflation in input costs and unfavorable currency effects. In Europe, operating profit increased primarily due to cost savings.

• Consumer tissue segment operating profit increased due to higher net selling prices, cost savings and deflation in input costs, partially offset by increased marketing, research and general expenses and lower sales volumes. Operating profit in North America increased due to deflation in input costs, cost savings and higher net selling prices, partially offset

by the impact of lower sales volumes and increases in marketing, research and general expenses. Operating profit in KCI increased as higher net selling prices and cost savings were partially offset by increased marketing, research and general expenses and unfavorable currency effects. In Europe, operating profit decreased due to higher marketing, research and general expenses, lower net sales and the negative impact of lower production volumes, partially offset by cost savings and deflation in input costs.
• Operating profit for KCP increased due to higher sales volumes and net selling prices, cost savings and deflation in input costs, partially offset by increased marketing, research and general expenses, unfavorable currency effects and increased manufacturing costs.

• Operating profit for the health care segment increased as higher net sales, deflation in input costs and lower marketing, research and general expenses were partially offset by increased manufacturing costs.

European Strategic Changes
On October 23, 2012, we approved strategic changes related to our Western and Central European consumer and professional businesses to focus our resources and investments on stronger market positions and growth opportunities. We will be exiting the diaper category in that region, with the exception of the Italian market, and divesting or exiting some lower-margin businesses, mostly in consumer tissue, in certain markets. The changes will primarily affect our consumer businesses, with a modest impact on KCP. The businesses that will be exited or divested generate annual net sales of approximately $500 and negligible operating profit.
Restructuring actions related to the strategic changes will involve the sale or closure of five of our European manufacturing facilities and a streamlining of our administrative organization. In total, these actions will result in reducing our European workforce by approximately 1,300 to 1,500 positions. The restructuring actions commenced in the fourth quarter of 2012 and are expected to be completed by December 31, 2014. The restructuring is expected to result in cumulative charges of approximately $250 to $350 after tax ($300 to $400 pre-tax) over that period. Cash costs related to severance and other expenses are expected to account for approximately 50 to 60 percent of the charges. Noncash charges will consist primarily of asset impairment charges and incremental depreciation.
During 2012, $299 of pre-tax charges were recognized for the strategic changes, including $250 recorded in Cost of products sold and $49 recorded in Marketing, research and general expenses. A related benefit of $57 was recorded in Provision for income taxes. On a segment basis, $66, $213 and $20 of the charges were related to consumer tissue, personal care and KCP, respectively. Non-cash charges totaled $165 in 2012, and $4 of the $134 cash charges recorded in 2012 have been paid as of December 31, 2012.
For additional information on the European strategic changes, see Item 8, Note 2 to the Consolidated Financial Statements. Pulp and Tissue Restructuring Actions
In 2011, we initiated a pulp and tissue restructuring plan in order to exit our remaining integrated pulp manufacturing operations and improve the underlying profitability and return on invested capital of our consumer tissue and KCP businesses. The restructuring involved the streamlining, sale or closure of six of our manufacturing facilities around the world. In conjunction with these actions, we have exited certain non-strategic products, primarily non-branded offerings, and transferred some production to lower-cost facilities in order to improve overall profitability and returns. In 2012, we announced our decision to streamline an additional manufacturing facility in North America to further enhance the profitability of our consumer tissue business. Both restructuring actions were substantially complete as of December 31, 2012, including the pending sale of one facility expected to close in the first half of 2013. As a result of the restructuring activities, versus the 2010 baseline, we expect that by 2013 annual net sales will decrease by $250 to $300, and operating profit will increase by at least $75 in 2013 and at least $100 in 2014. Through December 31, 2012, we have recognized cumulative operating profit benefits of $60 from the restructuring actions.
During 2012, $135 of charges were recognized for the restructuring actions, including $128 recorded in Cost of products sold, $6 recorded in Marketing, research and general expenses, and $1 recorded in Other (income) and expense, net. A related benefit of $49 was recorded in Provision for income taxes. On a segment basis, $125 and $9 of the charges were related to consumer tissue

and KCP, respectively. On a geographic basis, $97 of the charges were recorded in North America, $35 in Australia, and $3 elsewhere.
Non-cash charges of $44 were recorded in 2012. Cash payments of $91 were made in 2012.
For additional information on the pulp and tissue restructuring actions, see Item 8, Note 3 to the Consolidated Financial Statements. Other (income) and expense, net
Other (income) and expense, net for 2012 includes $19 in asset impairment charges, as well as currency transaction gains of $14. In 2011, other (income) and expense, net includes gains from the divestiture of a small non-core business in Latin America and the sale of a venture investment in a health care start-up company, as well as currency transaction gains of $27. Commentary:
2011 versus 2010
Percentage Change in Operating Profit Versus Prior Year

                                                 Change Due To
                  Total              Net     Input      Cost
                 Change    Volume   Price   Costs(a)   Savings   Currency   Other(b)
Consolidated     (11.9)      3       13       (21)       10         5         (22)
. . .