* Global pension plan 82 pct funded
* 3M's long-term liabilities increased by $2.4 billion
* Company expects higher pension expense in 2012
Feb 16 3M Co plans to contribute
about $800 million to $1 billion of cash to global pension and
post-retirement plans in 2012 after a reduced discount rate
severely inflated the size of long-term liabilities on the
company's balance sheet.
The company, in its annual report filed Thursday with the
U.S. Securities and Exchange Commission, said falling discount
rates led to a reduction in the funded status of its pension
As of the end of 2011, the company's worldwide pension plans
were 82 percent funded. U.S. qualified pension plans were
approximately 86 percent funded, international plans were 87
percent funded, and the U.S. nonqualified pension plan is not
U.S. qualified plans make up 71 percent of the entire
worldwide pension obligation.
The St. Paul, Minnesota-based company said long-term
liabilities increased by approximately $2.4 billion as of the
end of last year, in large part because lower discount rates
inflated the size of 3M's $18.7 billion pension obligation by
about 15 percent.
The size of a pension obligation is typically based on two
key assumptions: discount rates and the expected return on plan
assets. Discount rates reflect the ability of the debtor to pay
off the liability based on the performance of assets in the
3M expects a lower long-term rate of return on those assets
than it had previously.
3M plans to pay $300 million in cash to pension funds in
each of the first two quarters of the year. The company had $4.6
billion of liquidity and $5.2 billion of debt as of Dec. 31.
3M has said currency-related headwinds and a higher tax rate
will also hurt 2012 earnings. But the company's expectation for
sales growth, productivity improvements, and higher prices for
its products will help offset those negative factors.
In its filing, 3M said that worldwide employment increased
by 4,141 people in 2011, largely driven by acquisitions and
hiring needs in developing economies.
Very few of those jobs were added in the United States,
where the company is actually looking to slim down. In December,
3M Co started offering early retirement incentives to 4,900
employees, expecting about 15 percent to participate in the
The company also said that it spent more money on capital
investments outside of the United States than it did on home
soil. Of the $1.38 billion spent in 2011, 49.9 percent stayed in
the United States, compared with about 52 percent in the two
years prior. The company has nearly doubled its spending in Asia
Pacific operations, and in the Latin America-Canada unit.
"3M is striving to increase its manufacturing and sourcing
capacity outside the United States in order to more closely
align its production capability with its sales in major
geographic regions," the annual financial report said. "The
initiative is expected to help improve customer service, lower
transportation costs, and reduce working capital requirements."