3M 2007 Annual Report Download - page 34

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Geographic Area Supplemental Information
(Millions, except Employees as of Capital Property, Plant and
Employees) December 31, Spending Equipment – net
2007 2006 2005 2007 2006 2005 2007 2006 2005
United States 34,138 34,553 33,033 $ 841 $ 692 $532 $3,668 $3,382 $3,291
Asia Pacific 12,970 12,487 11,574 299 252 228 1,116 959 865
Europe, Middle East
and Africa 17,675 17,416 16,722 203 134 120 1,308 1,162 1,076
Latin America and Canada 11,456 10,877 9,898 79 90 63 490 404 361
Total Company 76,239 75,333 71,227 $1,422 $1,168 $943 $6,582 $5,907 $5,593
Employment:
Employment increased by approximately 900 people since year-end 2006, with acquisitions adding approximately 2,500
employees, while restructuring and the pharmaceuticals divestiture reduced employment. Employment increased by
approximately 4,100 people in 2006 compared with 2005, partially due to acquisitions, with more than 750 people added
by 3M’s three largest 2006 acquisitions alone. In addition, 3M has increased employees in faster-growing areas of the
world, such as Brazil, India, Russia, China and Poland, where on a local-currency basis sales increased more than 15%
in both 2007 and 2006.
Capital Spending/Net Property, Plant and Equipment:
The bulk of 3M capital spending historically has been in the United States, resulting in higher net property, plant and
equipment balances in the United States. The Company is striving to more closely align its manufacturing and sourcing
with geographic market sales, and because approximately 63% of sales are outside the United States, this would
increase production outside the United States, helping to improve customer service and reduce working capital
requirements. Capital expenditures were $1.422 billion in 2007 and are expected to total $1.3 billion to $1.4 billion in
2008.
CRITICAL ACCOUNTING ESTIMATES
Information regarding significant accounting policies is included in Note 1. As stated in Note 1, the preparation of financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its
estimates on historical experience and on various assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates.
The Company believes its most critical accounting estimates relate to legal proceedings, the Company’s pension and
postretirement obligations, asset impairments and income taxes. Senior management has discussed the development,
selection and disclosure of its critical accounting estimates with the Audit Committee of 3M’s Board of Directors.
Legal Proceedings:
The categories of claims for which the Company has estimated its probable liability, the amount of its liability accruals,
and the estimates of its related insurance receivables are critical accounting estimates related to legal proceedings.
Please refer to the section entitled “Accrued Liabilities and Insurance Receivables Related to Legal Proceedings”
(contained in “Legal Proceedings” in Note 13) for additional information about such estimates.
Pension and Postretirement Obligations:
3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees
outside the United States. The Company accounts for its defined benefit pension and postretirement health care and
life insurance benefit plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87,
“Employers' Accounting for Pensions,” SFAS No. 106, “Employer’s Accounting for Postretirement Benefits Other than
Pensions,” in measuring plan assets and benefit obligations and in determining the amount of net periodic benefit
cost, and SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans
an amendment of FASB Statements No. 87, 88, 106 and 132(R),” which was issued in September 2006 and effective
as of December 31, 2006. SFAS No. 158 requires employers to recognize the underfunded or overfunded status of a
defined benefit postretirement plan as an asset or liability in its statement of financial position and recognize changes
in the funded status in the year in which the changes occur through accumulated other comprehensive income, which
is a component of stockholders’ equity.