3M 2012 Annual Report Download - page 23
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minerals, metals and wood pulp based products. To date the Company is receiving sufficient quantities of all raw
materials to meet its reasonably foreseeable production requirements. It is impossible to predict future shortages of raw
materials or the impact any such shortages would have. 3M has avoided disruption to its manufacturing operations
through careful management of existing raw material inventories and development and qualification of additional supply
sources. 3M manages commodity price risks through negotiated supply contracts, price protection agreements and
forward physical contracts.
On a worldwide basis, 3M’s pension and postretirement plans were 87 percent funded at year-end 2012. The U.S.
qualified plans, which are approximately 67 percent of the worldwide pension obligation, were 96 percent funded, the
international pension plans were 81 percent funded, and the U.S. non-qualified pension plan is not funded. Asset returns
in 2012 for the U.S. qualified plan were 13.6%. For the U.S. qualified pension plan, the expected long-term rate of return
on an annualized basis for 2013 is 8.00%, a decrease of 0.25 percentage points from 2012. The U.S. qualified plan year-
end 2012 discount rate was 4.14%, down 0.01 percentage points from the year-end 2011 discount rate of 4.15%.
3M expects to contribute approximately $400 million to $600 million of cash to its global pension and postretirement plans
in 2013. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2013.
3M expects pension and postretirement benefit expense in 2013 to decrease by approximately $100 million pre-tax, or
approximately 10 cents per diluted share, when compared to 2012. Refer to “Critical Accounting Estimates” within MD&A
and Note 10 (Pension and Postretirement Benefit Plans) for additional information concerning 3M’s pension and post-
retirement plans.
There are a few major items that will impact earnings in 2013. As discussed further above, 3M expects that a decrease in
pension and postretirement expense will increase 2013 earnings, when compared to 2012, by approximately 10 cents per
diluted share. 3M currently expects that its effective tax rate for 2013 will be approximately 29.5 to 30.0 percent,
compared to 29.0 percent for 2012. 3M expects to incur restructuring and one-time acquisition costs of approximately $30
million in the first quarter of 2013. Currency effects are not expected to have a material impact on earnings in 2013.
Considering these items, 3M currently expects that sales growth and related incremental income, in addition to other
benefits, should more than offset the items that will negatively impact earnings.
Forward-looking statements in Item 7 may involve risks and uncertainties that could cause results to differ materially from
those projected (refer to the section entitled “Cautionary Note Concerning Factors That May Affect Future Results” in
Item 1 and the risk factors provided in Item 1A for discussion of these risks and uncertainties).
Special Items:
Special items represent significant charges or credits that are important to understanding changes in the Company’s
underlying operations.
In 2010, 3M recorded a one-time, non-cash income tax charge of $84 million, or 12 cents per diluted share, resulting from
the March 2010 enactment of the Patient Protection and Affordable Care Act, including modifications made in the Health
Care and Education Reconciliation Act of 2010 (collectively, the “Act”). The charge is due to a reduction in the value of the
company’s deferred tax asset as a result of the Act’s change to the tax treatment of Medicare Part D reimbursements.
This item is discussed in more detail in Note 7 (Income Taxes).