3M 2009 Annual Report Download

Download and view the complete annual report

Please find the complete 2009 3M annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

2009 Annual Report
Innovating
Toward
Faster Growth

Table of contents

  • Page 1
    2009 Annual Report Toward Faster Growth Innovating

  • Page 2
    ... key to 2009 was staying on a clear and simple plan: tight control of spending and factories while retaining a focus on generating cash...and working hard to ethically drive sales and market share everywhere. Underpinning that, we stayed the course on our R&D and new business investments. We never...

  • Page 3
    ...real unemployment level. Value is not created by adding more government jobs: they are value destroying. There are five things which affect 3M's sales in any given year: 1) performance of end markets, 2) creation of new markets via new product releases, 3) transient effects in supply chain filling...

  • Page 4
    ...filling in product white spaces at all levels in the market pyramid, using technology to differentiate our products from the competition, and by using market-led pricing to attract customers and then driving service levels up to keep them. We enable this strategy by making our supply chains shorter...

  • Page 5
    ...of our optical business a couple of years ago, our people created new marketing ideas based on energy saving and battery life extension and the products to go along with them. We stuck to our proven recipe of developing new products, reducing manufacturing costs and working closely with customers on...

  • Page 6
    ... and related expenses Other expense (income) Operating income Net income before cumulative effect of accounting change attributable to 3M Total debt to total capital (total capital = debt plus equity) Additional Information Cash dividends paid Per share Stock price at year-end Total assets Long-term...

  • Page 7
    ... OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2009 Commission file number 1-3285 3M COMPANY State of Incorporation: Delaware I.R.S. Employer Identification No. 41-0417775 Principal executive offices: 3M Center, St. Paul, Minnesota 55144 Telephone number: (651) 733...

  • Page 8
    ... 15 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 9
    ... businesses around markets and customers. Segment information presented herein reflects the impact of these changes for all periods presented. 3M continues to manage its operations in six operating business segments: Industrial and Transportation; Health Care; Consumer and Office; Safety, Security...

  • Page 10
    ... protection products, safety and security products (including border and civil security solutions), cleaning and protection products for commercial establishments, track and trace solutions, and roofing granules for asphalt shingles. In April 2008, 3M acquired Aearo Holding Corp., the parent company...

  • Page 11
    ... film solutions for electronic displays; computer screen filters; reflective sheeting for transportation safety; commercial graphics systems; and projection systems, including mobile display technology and visual systems products. The optical film business provides films that serve numerous market...

  • Page 12
    ...the Company's commitment to a plan of action. Environmental expenditures for capital projects that contribute to current or future operations generally are capitalized and depreciated over their estimated useful lives. In 2009, 3M expended about $15 million for capital projects related to protecting...

  • Page 13
    ...Office Business, 2005-2007 Managing Director, 3M Korea, 20032005 Executive Vice President, Electro and Communications Business, 20042009 Division Vice President, Occupational Health and Environmental Safety Division, 2003-2006 Staff Vice President, Human Resources Operations, 2005 Executive Director...

  • Page 14
    ...impacted by the effects of, and changes in, worldwide economic and capital markets conditions. The Company operates in more than 65 countries and derives approximately 63 percent of its revenues from outside the United States. The Company's business may be adversely affected by factors in the United...

  • Page 15
    ... Properties. 3M's general offices, corporate research laboratories, and certain division laboratories are located in St. Paul, Minnesota. The Company operates 72 manufacturing facilities in 28 states. The Company operates 105 manufacturing and converting facilities in 35 countries outside the United...

  • Page 16
    PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Equity compensation plans' information is incorporated by reference from Part III, Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related ...

  • Page 17
    Issuer Purchases of Equity Securities Repurchases of common stock are made to support the Company's stock-based employee compensation plans and for other corporate purposes. In February 2007, 3M's Board of Directors authorized a two-year share repurchase of up to $7.0 billion for the period from ...

  • Page 18
    ... Financial Data. (Dollars in millions, except per share amounts) 2009 2008 2007 2006 2005 Years ended December 31: Net sales...Net income before cumulative effect of accounting change attributable to 3M ...Per share of 3M common stock: Net income before cumulative effect of accounting change...

  • Page 19
    ... performance measures. The financial information presented herein reflects the impact of these changes for all periods presented. 3M manages its operations in six operating business segments: Industrial and Transportation; Health Care; Consumer and Office; Safety, Security and Protection Services...

  • Page 20
    ... Credit. 2009 % of Total 2008 % of Total 2009 vs. 2008 % change Net Oper. Sales Income (Dollars in millions) Net Sales Oper. Income Net Sales Oper. Income Business Segments Industrial and Transportation...Health Care ...Consumer and Office .. Safety, Security and Protection Services.. Display...

  • Page 21
    ... sources. 3M manages commodity price risks through negotiated supply contracts, price protection agreements and forward physical contracts. In 2009, 3M changed its annual stock option and restricted stock unit grant date to more closely align the award with the timing of the Company's performance...

  • Page 22
    ...percent was led by the Safety, Security and Protection Services; Health Care; and Industrial and Transportation segments. Acquisitions increased 2008 sales by 3.3 percent, led by the April 2008 acquisition of Aearo. Refer to the sections entitled "Performance by Business Segment" and "Performance by...

  • Page 23
    ... 2008 Restructuring and Other Summary Loss on sale Gain on sale of of real Exit businesses estate activities Total Cost of sales...Selling, general and administrative expenses ...Research, development and related expenses ...Loss from sale of businesses...Total operating income penalty (benefit...

  • Page 24
    ... program, 3M took aggressive actions to reduce general and administrative expenses and also pared back selling and marketing costs in certain businesses. Research, Development and Related Expenses: Research, development and related expenses (R&D) were 5.6 percent of net sales in 2009, 2008...

  • Page 25
    ...primarily related to higher average U.S. and international long-term debt balances, which were partially offset by lower short-term debt balances and interest rates. Interest Income: Interest income declined in 2009 when compared to 2008, primarily due to lower yields on investments. Interest income...

  • Page 26
    ... herein reflects the impact of these changes for all periods presented. The reportable segments are Industrial and Transportation; Health Care; Consumer and Office; Safety, Security and Protection Services; Display and Graphics; and Electro and Communications. Information related to 3M's business...

  • Page 27
    .... In 2009, this business segment recorded charges of $88 million related to restructuring actions, with this charge comprised of employee-related liabilities for severance and benefits of $83 million and fixed asset impairments of $5 million. Including these special items, 2009 operating income was...

  • Page 28
    ... business. 3M also drove strong sales growth in two of its largest divisions, namely abrasives and industrial tapes and adhesives. Closure systems for personal hygiene products also showed good growth. Geographically, all major regions drove positive local-currency sales growth. Strong market...

  • Page 29
    ...and benefits. In 2008, this business segment recorded charges of $60 million related to restructuring and exit activities. Including these charges, full-year operating income in Health Care grew 15 percent to $1.35 billion, with operating income margins of 31.4 percent in 2009. 3M's longer-term plan...

  • Page 30
    ... in the medical products area, specifically in core infection prevention and skin and wound care products. Geographically, the U.S. and Asia Pacific led sales growth. Operating income margins of 24.0 percent in the fourth quarter of 2008 were the highest in the Company, which includes the impact of...

  • Page 31
    .... Drug Delivery Systems Division (part of Health Care without Pharmaceuticals) is a source of supply to the acquiring companies and records sales and operating income related to the pharmaceuticals supply agreements. Consumer and Office Business (15.0% of consolidated sales): 2009 2008 2007 Sales...

  • Page 32
    ...-the-board declines in office retail foot traffic, had a dramatic and negative impact on sales. 3M businesses serving other U.S. retail channels performed well in the fourth quarter despite the tough economic environment. This business posted positive local-currency sales for its home care products...

  • Page 33
    Full-year 2009 sales in Safety, Security and Protection Services totaled $3.2 billion, down 7.8 percent in dollar-terms and 2.7 percent in local currencies. 3M drove positive local-currency growth in personal protection products, but all other businesses posted declines for the full year. The global...

  • Page 34
    ... film solutions for electronic displays; computer screen filters; reflective sheeting for transportation safety; commercial graphics systems; and projection systems, including mobile display technology and visual systems products. The optical film business provides films that serve numerous market...

  • Page 35
    ... optical film business. Second-half 2008 restructuring charges and exit activities of $42 million reduced operating income for total year 2008. These expenses were comprised of severance/related benefits and asset impairments. In 2007, 3M recorded a gain on the sale of its Opticom Priority Control...

  • Page 36
    ... circuits business where a number of product solutions were going end-of-life. Operating income in 2008 was impacted by $7 million in restructuring expenses, while 2007 included $18 million in restructuring expenses, primarily for asset impairment charges related to the Company's decision to close...

  • Page 37
    ... of key information and discussion related to 3M's geographic areas follow: 2009 United States Europe, Middle East and Africa Latin America/ Canada Other Unallocated Asia Pacific Worldwide Net sales (millions) ...$ % of worldwide sales ...Components of net sales change: Volume - organic...Price...

  • Page 38
    ... operations represented approximately 64 percent of 3M's sales. Geographic Area Supplemental Information Employees as of December 31, (Millions, except Employees) 2009 2008 2007 2009 Capital Spending 2008 2007 Property, Plant and Equipment - net 2009 2008 United States...Asia Pacific...Europe...

  • Page 39
    ... 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 Accounting Standard Codification (ASC) 715, Compensation - Retirement Benefits, in measuring plan assets and benefit...

  • Page 40
    ... of the asset or performance of the related asset group. Impairments recorded in 2009, 2008 and 2007 related to restructuring actions and other exit activities are discussed in Note 4. In June 2009, 3M's Security Systems Division (within the Safety, Security and Protection Services business segment...

  • Page 41
    ...related to Optical Systems, and $200 million of goodwill associated with the Security Systems Division. If future non-cash impairment charges are taken, 3M would expect that only a portion of the long-lived assets or goodwill would be impaired. 3M will continue to monitor its reporting units in 2010...

  • Page 42
    ... to build and maintain a cash buffer in the U.S. given the difficult market environment at that point in time. Increases in long-term debt have been used to partially fund share repurchase activities and acquisitions. On April 1, 2008, 3M (Safety, Security and Protection Services Business) completed...

  • Page 43
    ... $1.569 billion in current and long-term marketable securities. 3M's strong balance sheet and liquidity provide the Company with significant flexibility to take advantage of numerous opportunities going forward. The Company will continue to invest in its operations to drive growth, including...

  • Page 44
    ... from Operating Activities: Years ended December 31 (Millions) 2009 2008 2007 Net income including noncontrolling interest ...Depreciation and amortization ...Company pension contributions...Company postretirement contributions ...Company pension expense...Company postretirement expense ...Stock...

  • Page 45
    ... opportunities around the world. In 2008, major facility efforts included completion of production lines in the United States for both Consumer and Office and Health Care, an R&D laboratory in Korea, a tape building in Poland, and numerous tape lines and building expansions in China. In 2008, 3M...

  • Page 46
    ... long-term debt and commercial paper issuances totaling approximately $4 billion. Repurchases of common stock are made to support the Company's stock-based employee compensation plans and for other corporate purposes. In February 2007, 3M's Board of Directors authorized a two-year share repurchase...

  • Page 47
    ... 91 40 10 2,451 $ The Company's $350 million of Dealer Remarketable Securities (classified as current portion of long-term debt) were remarketed for one year in December 2009. Long-term debt payments due in 2010 include these $350 million of Dealer Remarketable Securities, which mature in December...

  • Page 48
    ... calculated by reference to an agreed-upon notional principal amount. The Company manages commodity price risks through negotiated supply contracts, price protection agreements and forward physical contracts. A Monte Carlo simulation technique was used to test the Company's exposure to changes...

  • Page 49
    ... Statements (Long-Term Debt and Short-Term Borrowings, Derivatives, Fair Value Measurements, and the Derivatives and Hedging Activities accounting policy). All derivative activity is governed by written policies, and a value-at-risk analysis is provided for these derivatives. The Company does not...

  • Page 50
    ...Flow Information ...Income Taxes...Marketable Securities...Long-Term Debt and Short-Term Borrowings...Pension and Postretirement Benefit Plans...Derivatives...Fair Value Measurements ...Commitments and Contingencies ...Employee Savings and Stock Ownership Plans ...Stock-Based Compensation...Business...

  • Page 51
    ... is supported by widely communicated written policies, including business conduct policies, which are designed to require all employees to maintain high ethical standards in the conduct of Company affairs. Internal auditors continually review the accounting and control system. 3M Company Management...

  • Page 52
    ... statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain...

  • Page 53
    ... of Income 3M Company and Subsidiaries Years ended December 31 (Millions, except per share amounts) 2009 2008 2007 Net sales ...Operating expenses Cost of sales ...Selling, general and administrative expenses ...Research, development and related expenses ...(Gain)/loss from sale of businesses...

  • Page 54
    ... Balance Sheet 3M Company and Subsidiaries At December 31 (Dollars in millions, except per share amount) 2009 2008 Assets Current assets Cash and cash equivalents ...Marketable securities - current...Accounts receivable - net of allowances of $109 and $85...Inventories Finished goods...Work...

  • Page 55
    ... Years Ended December 31 Consolidated Statement of Changes in Equity 3M Company Shareholders Common Stock and Additional Paid-in Capital Accumulated Other Comprehensive Unearned Compensation Income (Loss) Noncontrolling Interest (Millions) Total Retained Earnings Treasury Stock Balance...

  • Page 56
    ...10,397) $ 2009 51 (13) (5) - 81 $ 3,162 $ - $ 2008 (3,754) $ 2007 538 Supplemental share information (Millions): Treasury stock Beginning balance ...Reacquired stock ...Issuances pursuant to stock options and benefit plans...Issuances pursuant to acquisitions...Ending balance...Consolidated...

  • Page 57
    ......Accounts payable...Accrued income taxes (current and long-term)...Product and other insurance receivables and claims ...Other - net ...Net cash provided by operating activities...Cash Flows from Investing Activities Purchases of property, plant and equipment (PP&E) ...Proceeds from sale...

  • Page 58
    ...exchange prevailing during the year. Cumulative translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in shareholders' equity. The Company has a Venezuelan subsidiary with net sales and operating income representing less than one percent of 3M's related...

  • Page 59
    ... assets include deferred income taxes, product and other insurance receivables, the cash surrender value of life insurance policies, and other long-term assets. Investments in life insurance are reported at the amount that could be realized under contract at the balance sheet date, with any changes...

  • Page 60
    ...economic data and historical sales returns. The Company reviews the allowance for doubtful accounts monthly. The Company does not have any significant off-balance-sheet credit exposure related to its customers. Advertising and merchandising: These costs are charged to operations in the year incurred...

  • Page 61
    ... expense for both its General Employees' Stock Purchase Plan (GESPP) and the Long-Term Incentive Plan (LTIP). Under applicable accounting standards, the fair value of share-based compensation is determined at the grant date and the recognition of the related expense is recorded over the period in...

  • Page 62
    ... nonfinancial long-lived asset groups measured at fair value for an impairment assessment. These remaining aspects of the fair value measurement standard were adopted by the Company prospectively beginning January 1, 2009 and did not have a material impact on 3M's consolidated results of operations...

  • Page 63
    ... for intangible assets acquired after December 31, 2008. The adoption of this standard did not have a material impact on 3M's consolidated results of operations or financial condition. In May 2008, the FASB issued an accounting standard which addresses convertible debt securities that, upon...

  • Page 64
    ... to measure fair value and information with respect to classification of plan assets in terms of the hierarchy of the source of information used to determine their value. For 3M, the disclosures under this standard are required beginning with the annual period ended December 31, 2009. The additional...

  • Page 65
    ... a material impact on 3M's consolidated results of operations or financial condition. In September 2009, the FASB issued ASU No. 2009-12, Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), that amends ASC 820 to provide guidance on measuring the fair value...

  • Page 66
    ... investments within the scope of ASU No. 2009-12, but certain plan assets of the Company's benefit plans are valued based on NAV as indicated in Note 11. For 3M, this ASU was effective October 1, 2009. The adoption of this ASU did not have a material impact on 3M's consolidated results of operations...

  • Page 67
    ... 3M (Industrial and Transportation Business) purchased the assets of Compac Corp.'s pressure sensitive adhesive tape business, a global leader in providing custom solutions in coating, laminating and converting flexible substrates headquartered in Hackettstown, N.J. (3) In April 2009, 3M (Industrial...

  • Page 68
    ... the April 2008 purchase of 100 percent of the outstanding shares of Aearo Holding Corp. (Safety, Security and Protection Services Business), the parent company of Aearo Technologies Inc. (hereafter referred to as Aearo), a manufacturer of personal protection and energy absorbing products. Cash paid...

  • Page 69
    ... of car care products for cleaning and protecting automotive surfaces, which is headquartered in Irvine, California. (13) In November 2008, 3M (Health Care Business) purchased certain assets of Food Diagnostics AS, a provider of food diagnostics products and services for the food safety industry...

  • Page 70
    ... loss of $23 million (recorded in the Safety, Security and Protection Services segment) in 2008. In June 2007, 3M completed the sale of its Opticom Priority Control Systems and Canoga Traffic Detection businesses to TorQuest Partners Inc., a Toronto-based investment firm. 3M received proceeds of $80...

  • Page 71
    .... 31, 2008 Balance 2009 acquisition activity 2009 translation and other Dec. 31, 2009 Balance (Millions) Industrial and Transportation...Health Care ...Consumer and Office ...Safety, Security and Protection Services...Display and Graphics ...Electro and Communications ...Total Company ... $ 1,524...

  • Page 72
    .... Balances are also impacted by changes in foreign currency exchange rates. The gross carrying amount and accumulated amortization of acquired intangible assets as of December 31 follow: (Millions) 2009 2008 Patents ...Other amortizable intangible assets (primarily tradenames and customer-related...

  • Page 73
    ... accounting policies in Note 1, asset impairment charges related to intangible assets and property, plant and equipment reflect the excess of the assets' carrying values over their fair values. The following provides information, respectively, concerning the Company's 2009/2008 restructuring actions...

  • Page 74
    ... in 2008 related to these actions were not material. EmployeeRelated Items/ Benefits and Other (Millions) Asset Impairments Total Expenses incurred in 2008: Industrial and Transportation...Health Care...Consumer and Office...Safety, Security and Protection Services ...Display and Graphics...

  • Page 75
    ... (credits) incurred in 2007 associated with the restructuring actions are reflected in the Company's business segments as follows: (Millions) 2007 Industrial and Transportation...Health Care...Safety, Security and Protection Services ...Display and Graphics ...Electro and Communications...Corporate...

  • Page 76
    ...$ - Non-cash employee-related changes in 2007 primarily relate to special termination pension and medical benefits granted to certain U.S. eligible employees. These pension and medical benefits were reflected as a component of the benefit obligation of the Company's pension and medical plans as of...

  • Page 77
    ... to employee-related liabilities for second and third-quarter 2008 exit activities. In total for 2008, these actions resulted in pre-tax charges for Industrial and Transportation ($26 million); Display and Graphics ($18 million); Health Care ($9 million); Safety, Security and Protection Services...

  • Page 78
    NOTE 5. Supplemental Balance Sheet Information (Millions) 2009 2008 Other current assets Prepaid expenses and other ...Deferred income taxes ...Derivative assets-current ...Product and other insurance receivables...Total other current assets...Investments Equity-method ...Available-for-sale...Real ...

  • Page 79
    ... comprehensive income (loss) attributable to 3M follow. Accumulated Other Comprehensive Income (Loss) Attributable to 3M (Millions) Dec. 31, 2009 Dec. 31, 2008 Cumulative translation adjustment ...Defined benefit pension and postretirement plans adjustment...Debt and equity securities, unrealized...

  • Page 80
    ... period of seven years and contributed $600 million to its U.S. defined benefit pension plan in shares of the Company's common stock. In 2007, 3M purchased certain assets of Diamond Productions, Inc. for approximately 150 thousand shares of 3M common stock, which has a market value of approximately...

  • Page 81
    ... $ 2009 2008 Accruals not currently deductible Employee benefit costs ...Product and other claims...Pension costs ...Stock-based compensation...Product and other insurance receivables...Accelerated depreciation...Other ...Net deferred tax asset ...Reconciliation of Effective Income Tax Rate 2009...

  • Page 82
    ... The current income tax provision includes a benefit for the pension contributions; the deferred tax provision includes a cost for the related temporary difference. As a result of certain employment commitments and capital investments made by 3M, income from manufacturing activities in Taiwan, China...

  • Page 83
    ... The Company invests in asset-backed securities, agency securities, corporate medium-term note securities and other securities. The following is a summary of amounts recorded on the Consolidated Balance Sheet for marketable securities (current and non-current). (Millions) Dec. 31, 2009 Dec. 31, 2008...

  • Page 84
    ... through five years...Due after five years ...Total marketable securities ... $ 487 960 88 34 1,569 $ 3M has a diversified marketable securities portfolio of $1.569 billion as of December 31, 2009. Within this portfolio, current and long-term asset-backed securities (estimated fair value of $705...

  • Page 85
    ...% 2044 - 2009 1.37% 2010-2040 $ $ $ $ Short-Term Borrowings and Current Portion of Long-Term Debt (Millions) Effective Interest Rate* 2009 2008 Current portion of long-term debt ...U.S. dollar commercial paper...Other borrowings...Total short-term borrowings and current portion of long-term debt...

  • Page 86
    ... expense, but were reported as an employee benefit expense in the Consolidated Statement of Income. Refer to Note 15 for more detail on the ESOP. Other borrowings included debt held by 3M's international companies and floating rate notes in the United States, with the long-term portion of this debt...

  • Page 87
    ..., there was no impact on 3M's diluted earnings per share. In December 2009, the Company's $350 million of Dealer Remarketable Securities were remarketed. They were reissued with a fixed coupon rate of 5.61%. These securities, which are classified as current portion of long-term debt, were originally...

  • Page 88
    ... no plan assets in the non-qualified plan due to its nature. For its U.S. postretirement health care and life insurance benefit plans, the Company has set aside amounts at least equal to annual benefit payments with an independent trustee. In August 2006, the Pension Protection Act (PPA) was signed...

  • Page 89
    ... and the fair value of plan assets as of December 31: Qualified and Non-qualified Pension Benefits United States International 2009 2008 2009 2008 Postretirement Benefits 2009 2008 (Millions) Change in benefit obligation ...Benefit obligation at beginning of year ...Acquisitions...Service cost...

  • Page 90
    ... relate to pension plans with accumulated benefit obligations in excess of plan assets as of December 31: Qualified and Non-qualified Pension Plans United States International 2009 2008 2009 2008 (Millions) Projected benefit obligation...Accumulated benefit obligation ...Fair value of plan assets...

  • Page 91
    ...plan assets was 8.50% in 2009. Projected returns are based primarily on broad, publicly traded equity and fixed-income indices and forwardlooking estimates of active portfolio and investment management. As of December 31, 2009, the Company's 2010 expected long-term rate of return on U.S. plan assets...

  • Page 92
    ... management of the funds, the plans may indirectly buy, sell or hold 3M stock. The aggregate amount of the shares would not be considered to be material relative to the aggregate fund percentages. The discussion that follows references the fair value measurements of certain assets in terms of levels...

  • Page 93
    ... contracts that are used to help manage risks. U.S. government and government agency bonds and notes are valued at the closing price reported in the active market in which the individual security is traded. Corporate and other bonds and notes are valued at either the yields currently available...

  • Page 94
    .... The following table sets forth a summary of changes in the fair values of the U.S. pension plans' level 3 assets for the year ended December 31, 2009: Fair Value Measurement Using Significant Unobservable Inputs (Level 3) Global Fixed Private Absolute Commequity income equity return odities Total...

  • Page 95
    ... price reported in the active market in which it is traded. Insurance consists of insurance contracts, which are valued using cash surrender values which is the amount the plan would receive if the contract was cashed out at year end. Other consists primarily of interests in hedge funds. Hedge funds...

  • Page 96
    ... contracts that are used to help manage risks. U.S. government and government agency bonds and notes are valued at the closing price reported in the active market in which the individual security is traded. Corporate and other bonds and notes are valued at either the yields currently available...

  • Page 97
    ... sets forth a summary of changes in the fair values of the postretirement plans' level 3 assets for the year ended December 31, 2009: Fair Value Measurement Using Significant Unobservable Inputs (Level 3) Fixed Private Absolute Commoincome equity return dities Total (Millions) Beginning balance...

  • Page 98
    ...price protection agreements and forward physical contracts. The Company uses commodity price swaps relative to natural gas as cash flow hedges of forecasted transactions to manage price volatility. The related mark-to-market gain or loss on qualifying hedges is included in other comprehensive income...

  • Page 99
    ...of these contracts in 2009 through their maturity were not material. The location in the consolidated statements of income and amounts of gains and losses related to derivative instruments designated as fair value hedges and similar information relative to the hedged items are as follows: Year ended...

  • Page 100
    ... debt to hedge portions of the Company's net investments in foreign operations. For hedges that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within other comprehensive income. The remainder of the...

  • Page 101
    ...: Year ended Dec. 31, 2009 (Millions) Derivatives Not Designated as Hedging Instruments Gain (Loss) on Derivative Recognized in Income Location Amount Foreign currency forward/option contracts...Foreign currency forward contract ...Commodity price swap contracts ...Total... Cost of sales Interest...

  • Page 102
    ...bid levels in markets that are not active. 3M classifies these securities as level 3. Available-for-sale investments: Investments include equity securities that are traded in an active market. Closing stock prices are readily available from active markets and are used as being representative of fair...

  • Page 103
    ... to changes in spot foreign currency exchange rates and not with respect to other factors that may impact fair value. 3M has determined that foreign currency forwards and commodity price swaps will be considered level 1 measurements as these are traded in active markets which have identical asset or...

  • Page 104
    ... to the restructuring activities, in June 2009 the Company recorded a $13 million impairment of certain long-lived assets associated with the UK passport production activity of 3M's Security Systems Division (within the Safety, Security and Protection Services business segment). In June 2009, 3M was...

  • Page 105
    .... Refer to Note 1 ("Property, plant and equipment" and "Intangible Assets") for further discussion of accounting policies related to long-lived asset impairments. The following table provides information by level for nonfinancial assets and liabilities that were measured at fair value during 2009...

  • Page 106
    ... to pay out any funds under this guarantee. Related Party Activity: 3M does not have any related party activity that is not in the ordinary course of business. Legal Proceedings: The Company and some of its subsidiaries are involved in numerous claims and lawsuits, principally in the United States...

  • Page 107
    ... new claims filed annually by apparently unimpaired claimants. The Company attributes this decline to several factors, including certain changes enacted in several states in recent years of the law governing asbestos-related claims, and the highly-publicized decision in mid-2005 of the United States...

  • Page 108
    ... are not a meaningful factor in any assessment of the Company's potential liability. As previously reported, the State of West Virginia, through its Attorney General, filed a complaint in 2003 against the Company and two other manufacturers of respiratory protection products in the Circuit Court...

  • Page 109
    ... claims could be significantly larger than the reserved amount. Employment Litigation Whitaker lawsuit: As previously reported, in December, 2004, one current and one former employee of the Company filed a purported class action in the District Court of Ramsey County, Minnesota, seeking to represent...

  • Page 110
    ... of a class of all current and certain former salaried employees who worked in California. In January 2009, two former employees filed age discrimination charges against the Company with the U.S. Equal Employment Opportunity Commission and the pertinent state agency in Minnesota. The filings include...

  • Page 111
    ... employees, shows that no human health effects are caused by PFCs at current levels of exposure. This research has been published in peer-reviewed scientific journals and shared with the EPA and global scientific-community. The Company continues to work with the Minnesota Pollution Control Agency...

  • Page 112
    ... in Minnesota. The Company cannot predict what regulatory actions arising from the foregoing proceedings and activities, if any, may be taken regarding such compounds or the consequences of any such actions. Litigation: As previously reported, a former employee filed a purported class action lawsuit...

  • Page 113
    ... of operations or cash flows in the period in which they are recorded. The Company currently believes that such future charges, if any, would not have a material adverse effect on the consolidated financial position of the Company, taking into account its significant available insurance coverage...

  • Page 114
    ... against current and future claims. Because of the inherent difficulty in projecting the number of claims that have not yet been asserted, particularly with respect to the Company's respiratory products that themselves did not contain any harmful materials (which makes the various published studies...

  • Page 115
    ... Company's current assessment, including, but not limited to: (i) changes in the information available regarding the environmental impact of the Company's operations and products; (ii) changes in environmental regulations, changes in permissible levels of specific compounds in drinking water sources...

  • Page 116
    ...less dividends. The Company contributed treasury shares (accounted for at fair value) and cash (in 2009) to employee savings plans to cover obligations not funded by the ESOP (reported as an employee benefit expense). Employee Savings and Stock Ownership Plans (Millions) 2009 2008 2007 Dividends on...

  • Page 117
    ... General Employees' Stock Purchase Plan (GESPP), are as follows: Stock-Based Compensation Expense (Millions, except per share amounts) 2009 Years ended December 31 2008 2007 Cost of sales...Selling, general and administrative expenses...Research, development and related expenses...Operating income...

  • Page 118
    ... the amount by which a stock price is expected to fluctuate during a period. For the 2009, 2008 and 2007 annual grant date, the Company estimated the expected volatility based upon the average of the most recent one year volatility, the median of the term of the expected life rolling volatility, the...

  • Page 119
    ...the date of grant. There are no GESPP shares under option at the beginning or end of each year because options are granted on the first business day and exercised on the last business day of the same month. General Employees' Stock Purchase Plan 2009 Shares Exercise Price* Shares 2008 Exercise Price...

  • Page 120
    ... sales for Safety, Security and Protection Services. 3M acquired Aearo Holding Corp., the parent company of Aearo Technologies Inc. (hereafter referred to as Aearo), in April 2008. Aearo manufactures and sells personal protection and energy absorbing products through the industrial retail channels...

  • Page 121
    ... screens and touch monitors Business Segment Information (Millions) 2009 Net Sales 2008 2007 2009 Operating Income 2008 2007 Industrial and Transportation Health Care ...Consumer and Office ...Safety, Security and Protection Services...Display and Graphics ...Electro and Communications Corporate...

  • Page 122
    ... information is used by the Company as a secondary performance measure to manage its businesses. Export sales and certain income and expense items are generally reported within the geographic area where the final sales to 3M customers are made. Net Sales 2008 Operating Income 2009 2008 2007 Property...

  • Page 123
    ... Quarter Fourth Quarter Year 2009 Net sales ...Cost of sales...Net income attributable to 3M ...Earnings per share attributable to 3M common shareholders - basic ...Earnings per share attributable to 3M common shareholders - diluted...(Millions, except per-share amounts) 2008 $ 5,089 2,772 518...

  • Page 124
    ...At the same website, any future amendments to the code of ethics will also be posted. Any person may request a copy of the code of ethics, at no cost, by writing to us at the following address: 3M Company 3M Center, Building 220-9E-02 St. Paul, MN 55144-1000 Attention: Director, Business Conduct and...

  • Page 125
    ... on Stock Ownership of Directors and Executive Officers" and "Security Ownership of More Than 5 Percent Stockholders" in the 3M Proxy Statement and such information is incorporated by reference herein. Equity compensation plans information follows: Equity Compensation Plans Information (1) A Number...

  • Page 126
    ...statements filed as part of this report are listed in the index to financial statements on page 44 as follows: Page Number Report of Independent Registered Public Accounting Firm ...Consolidated Statement of Income for the years ended December 31, 2009, 2008 and 2007...Consolidated Balance Sheet at...

  • Page 127
    ... granted to Executive Officers under the 3M Long-Term Incentive Plan, effective February 9, 2010, is filed herewith. Form of Stock Option Agreement for U.S. Employees under 3M 2008 Long-Term Incentive Plan is incorporated by reference from our Form 10-K for the year ended December 31, 2008. Form of...

  • Page 128
    ..., 2008. Five-year credit agreement as of April 30, 2007, is incorporated by reference from our Form 8-K dated May 3, 2007. Registration Rights Agreement as of August 4, 2009, between 3M Company and State Street Bank and Trust Company as Independent Fiduciary of the 3M Employee Retirement Income Plan...

  • Page 129
    ... financial information from 3M Company's Annual Report on Form 10-K for the period ended December 31, 2009, filed with the SEC on February 16, 2010, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statement of Income for the years ended December 31, 2009, 2008 and...

  • Page 130
    ...hereby sign this document pursuant to powers of attorney duly executed by the other persons named, filed with the Securities and Exchange Commission on behalf of such other persons, all in the capacities and on the date stated, such persons constituting a majority of the directors of the Company. By...

  • Page 131
    ...225-01-S-15 St. Paul, MN 55144-1000 Phone: (651) 737-8503 Fax: (651) 737-2901 Corporate News and Reports Corporate news releases, 3M's Annual Report, and Forms 10-K and 10-Q are available online at: http://investor.3M.com Product Information Information about 3M products and services is available at...

  • Page 132
    www.3M.com Corporate Headquarters 3M Center St. Paul, MN 55144-1000 U.S.A. (651) 733-1110 www.3M.com C Please recycle Printed in U.S.A. © 3M 2010. All rights reserved.