Pulp and Tissue Restructuring Actions

On January 21, 2011, we initiated a pulp and tissue restructuring plan ("The Restructuring") 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 K-C Professional ("KCP") businesses. The Restructuring involves the streamlining, sale or closure of six of our manufacturing facilities around the world. In conjunction with these actions, we 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 addition, on January 24, 2012, we announced our decision to streamline an additional manufacturing facility in North America ("Additional Streamlining") to further enhance the profitability of our consumer tissue business.

Both restructuring actions are anticipated to be substantially completed by the end of 2012. The restructuring actions are expected to result in cumulative pre-tax charges of approximately $550 to $600 million ($385 to $420 million after tax) over 2011 and 2012. Cash costs related to the streamlining of operations, sale or closure, relocation of equipment, severance and other expenses are expected to account for approximately 30 to 40 percent of the charges. Noncash charges consist primarily of incremental depreciation.

Through September 30, 2012, cumulative pre-tax charges for the restructuring actions were $500 million ($345 million after tax), including cumulative pre-tax cash charges of $135 million. On a geographic basis, these cumulative pre-tax charges were incurred as follows: North America - $262 million; Australia - $160 million and Other - $78 million. On a business segment basis, these cumulative pre-tax charges were incurred as follows: Consumer Tissue - $437 million; K-C Professional & other - $61 million and Other (income) and expense, net - $2 million.

The following charges were incurred in connection with the restructuring actions:



	Three Months Ended September 30
	2012									2011
	The Restructuring			Additional Streamlining			Total			The Restructuring
	(Millions of dollars)
Incremental depreciation	$	—		$	6		$	6		$	76
Charges for workforce reductions	—			—			—			11
Asset write-offs	—			—			—			5
Other exit costs	22			2			24			3
Cost of products sold	22			8			30			95
Charges for workforce reductions included in Marketing, research and general expenses	1			—			1			—
Provision for income taxes	(12		)	(3		)	(15		)	(29		)
Net charges	$	11		$	5		$	16		$	66



	Nine Months Ended September 30
	2012									2011
	The Restructuring			Additional Streamlining			Total			The Restructuring
	(Millions of dollars)
Incremental depreciation	$	7		$	18		$	25		$	192
Charges for workforce reductions	—			3			3			54
Asset write-offs	11			—			11			13
Other exit costs	42			2			44			3
Cost of products sold	60			23			83			262
Charges for workforce reductions included in Marketing, research and general expenses	2			—			2			5
Provision for income taxes	(20		)	(9		)	(29		)	(85		)
Net charges	$	42		$	14		$	56		$	182

See Note 10 for additional information on the pulp and tissue restructuring charges by segment.

Pre-tax charges for the restructuring actions relate to activities in the following geographic areas:



	Three Months Ended September 30, 2012
	North America		Australia		Other			Total
	(Millions of dollars)
Incremental depreciation	$	6	$	—	$	—		$	6
Charges for workforce reductions	1		—		—			1
Other exit costs	3		22		(1		)	24
Total charges	$	10	$	22	$	(1	)	$	31



	Nine Months Ended September 30, 2012
	North America		Australia		Other		Total
	(Millions of dollars)
Incremental depreciation	$	24	$	1	$	—	$	25
Charges for workforce reductions	5		—		—		5
Asset write-offs	11		—		—		11
Other exit costs	18		26		—		44
Total charges	$	58	$	27	$	—	$	85



	Three Months Ended September 30, 2011
	North America		Australia		Other		Total
	(Millions of dollars)
Incremental depreciation	$	53	$	19	$	4	$	76
Charges for workforce reductions	10		—		1		11
Asset write-offs	2		3		—		5
Other exit costs	1		2		—		3
Total charges	$	66	$	24	$	5	$	95



	Nine Months Ended September 30, 2011
	North America		Australia		Other		Total
	(Millions of dollars)
Incremental depreciation	$	123	$	59	$	10	$	192
Charges for workforce reductions	10		46		3		59
Asset write-offs	8		5		—		13
Other exit costs	1		2		—		3
Total charges	$	142	$	112	$	13	$	267

The following summarizes the cash charges recorded and reconciles these charges to accrued expenses for the restructuring actions at September 30:



(Millions of dollars)	2012			2011

Accrued expenses - beginning of year	$	37		$	—
Charges for workforce reductions and other exit costs	49			62
Cash payments	(65		)	(34		)
Currency and other	2			15
Accrued expenses - September 30	$	23		$	43