Kimberly-Clark 2010 Annual Report Download - page 32

PART II
(Continued)
liabilities arising from higher discount rates used to calculate pension obligations, or (iii) other actuarial gains,
including whether such accumulated actuarial losses at each measurement date exceed the “corridor” as required.
The discount (or settlement) rate used to determine the present value of our future U.S. pension obligation at
December 31, 2010 was based on a portfolio of high quality corporate debt securities with cash flows that largely
match the expected benefit payments of the plan. For the U.K. and Canadian plans, the discount rate was
determined based on yield curves constructed from a portfolio of high quality corporate debt securities. Each
year’s expected future benefit payments were discounted to their present value at the appropriate yield curve rate
to determine the pension obligations. The weighted-average discount rate for the Principal Plans decreased to
5.58 percent at December 31, 2010 from 5.88 percent at December 31, 2009.
Consolidated pension expense for defined benefit pension plans is estimated to approximate $130 million in
2011 compared to $133 million incurred in 2010. The 2011 estimate is based on an expected weighted-average
long-term rate of return on assets in the Principal Plans of 7.35 percent, a weighted-average discount rate for the
Principal Plans of 5.58 percent and various other assumptions. Pension expense beyond 2011 will depend on
future investment performance, our contributions to the pension trusts, changes in discount rates and various
other factors related to the covered employees in the plans.
If the expected long-term rates of return on assets for the Principal Plans were lowered by 0.25 percent, our
annual pension expense would increase by approximately $11 million in 2011. If the discount rate assumptions
for these same plans were reduced by 0.25 percent, annual pension expense would increase by approximately
$7 million and the December 31, 2010 pension liability would increase by about $163 million.
The fair value of the assets in our defined benefit plans was $4.6 billion and $4.2 billion at December 31,
2010 and December 31, 2009, respectively. The projected benefit obligations of the defined benefit plans
exceeded the fair value of plan assets by approximately $1.1 billion and $1.2 billion at December 31, 2010 and
December 31, 2009, respectively. On a consolidated basis, we contributed about $245 million to our pension
plans in 2010 compared with $845 million in 2009. In addition, we made direct benefit payments of $24 million
in 2010 compared to $25 million in 2009. We currently anticipate contributing $400 million to $500 million to
our pension plans in 2011.
The methodology for determining the discount rate used for each country’s pension obligation is the same as
the methodology used to determine the discount rate used for that country’s other postretirement obligation. The
discount rates displayed for the two types of obligations for our consolidated operations may appear different due
to the weighting used in the calculation of the two weighted-average discount rates.
Other Postretirement Benefits
Substantially all U.S. retirees and employees are covered by unfunded health care and life insurance benefit
plans. Certain benefits are based on years of service and/or age at retirement. The plans are principally
noncontributory for employees who were eligible to retire before 1993, contributory for most employees who
retire after 1992, and we provide no subsidized benefits to most employees hired after 2003.
We made benefit payments of $64 million in 2010 compared with $71 million in 2009. The determination of
the discount rates used to calculate the benefit obligations of the plans is discussed in the pension benefit section
above. If the discount rate assumptions for these plans were reduced by 0.25 percent, 2011 other postretirement
benefit expense would increase by less than $1 million and the December 31, 2010 benefit liability would
increase by about $17 million.
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