3M 2015 Annual Report Download - page 20

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TableofContents
Raw materials:
In2015,theCompanyexperienceddecliningcostsformostrawmaterialcategoriesandtransportationfuel,duelargelytothe
significantpricedecreasesincrudeoil.Thisinturndroveyear-on-yearcostdecreasesinmanyfeedstockcategories,including
petroleumbasedmaterials,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contracts.
Pension and postretirement defined benefit /contribution plans:
Onaworldwidebasis,3M’spensionandpostretirementplanswere86percentfundedatyear-end2015.TheprimaryU.S.qualified
pensionplan,whichisapproximately69percentoftheworldwidepensionobligation,was91percentfundedandtheinternational
pensionplanswere90percentfunded.TheU.S.non-qualifiedpensionplanisnotfundedduetotaxconsiderationsandotherfactors.
Assetreturnsin2015fortheprimaryU.S.qualifiedpensionplanwas0.7%,as3Mstrategicallyinvestsinbothgrowthassetsand
fixedincomematchingassetstomanageitsfundedstatus.FortheprimaryU.S.qualifiedpensionplan,theexpectedlong-termrateof
returnonanannualizedbasisfor2016is7.50%,down0.25%from2015.TheprimaryU.S.qualifiedpensionplanyear-end2015
discountratewas4.47%,up0.37percentagepointsfromtheyear-end2014discountrateof4.10%.TheincreaseinU.S.discount
ratesresultedinadecreasedvaluationoftheprojectedbenefitobligation(PBO),howevertheplan’sfundedstatusdecreasedslightly
in2015asthegrowthinthePBOincreasedatagreaterratethantheplanassetsreturnedin2015.Additionaldetailanddiscussionof
internationalplanassetreturnsanddiscountratesisprovidedinNote11(PensionandPostretirementBenefitPlans).
3Mexpectstocontributeapproximately$100millionto$200millionofcashtoitsglobaldefinedbenefitpensionandpostretirement
plansin2016.TheCompanydoesnothavearequiredminimumcashpensioncontributionobligationforitsU.S.plansin2016.3M
expectsglobaldefinedbenefitpensionandpostretirementexpensein2016(beforesettlements,curtailments,specialtermination
benefitsandother)todecreasebyapproximately$320millionpre-taxwhencomparedto2015.Referto“CriticalAccounting
Estimates”withinMD&AandNote11(PensionandPostretirementBenefitPlans)foradditionalinformationconcerning3M’s
pensionandpost-retirementplans.
BeginningonJanuary1,2016,withrespecttodefinedcontributionplans,theCompanyreduceditsmatchonemployee
401(k)contributionsforU.S.employees.Previously,basedonthedatetheemployeewashired,upto6%ofeligiblecompensation
wasmatchedincashatratesof60%,75%or100%.Beginningin2016,5%ofeligiblecompensationwillbematchedatratesof
45%,60%or100%,respectively.Thereductioninthecompany’smatchisanticipatedtoreduce2016definedcontributionpension
expensebyapproximately$35million.
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