3M 2009 Annual Report Download - page 106

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100
NOTE 14. Commitments and Contingencies
Capital and Operating Leases:
Rental expense under operating leases was $244 million in 2009, $247 million in 2008 and $226 million in 2007. It is
3M’s practice to secure renewal rights for leases, thereby giving 3M the right, but not the obligation, to maintain a
presence in a leased facility. 3M has two primary capital leases. First, 3M has a capital lease, which became
effective in April 2003, that involves a building in the United Kingdom (with a lease term of 22 years). During the
second quarter of 2003, 3M recorded a capital lease asset and obligation of approximately 33.5 million United
Kingdom pounds (approximately $53 million at December 31, 2009 exchange rates). Second, during the fourth
quarter of 2009, 3M recorded a capital lease asset and obligation of approximately $50 million related to an IT
investment with an amortization period of seven years.
Minimum lease payments under capital and operating leases with non-cancelable terms in excess of one year as of
December 31, 2009, were as follows:
(Millions)
Capital
Leases
Operating
Leases
2010 ..........................................................................................................................
.
$ 16 $ 125
2011 ..........................................................................................................................
.
18 95
2012 ..........................................................................................................................
.
18 76
2013 ..........................................................................................................................
.
18 38
2014 ..........................................................................................................................
.
18 23
After 2014..................................................................................................................
.
40 91
Total.......................................................................................................................
.
$ 128 $ 448
Less: Amounts representing interest.........................................................................
.
8
Present value of future minimum lease payments ....................................................
.
120
Less: Current obligations under capital leases .........................................................
.
13
Long-term obligations under capital leases ..............................................................
.
$ 107
Warranties/Guarantees:
3M’s accrued product warranty liabilities, recorded on the Consolidated Balance Sheet as part of current and long-
term liabilities, are estimated at approximately $25 million as of December 31, 2009 and 2008. 3M does not consider
this amount to be material. The fair value of 3M guarantees of loans with third parties and other guarantee
arrangements, except for the guarantee discussed below, are not material.
3M Security Printing and Systems Limited, a subsidiary of 3M, has provided a guarantee through 3M United Kingdom
Holdings PLC (another subsidiary of 3M) to The Identity and Passport Service (IPS). 3M has guaranteed default on
performance and payment of liabilities under a contract with IPS. The amount guaranteed is 45 million Great British
Pounds (approximately $71 million U.S. dollars at December 31, 2009). The contract expires on October 4, 2010. 3M
does not expect 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, and regulatory proceedings worldwide. These include various products liability (involving products that the
Company now or formerly manufactured and sold), intellectual property, and commercial claims and lawsuits,
including those brought under the antitrust laws, and environmental proceedings. The following sections first describe
the significant legal proceedings in which the Company is involved, and then describe the liabilities and associated
insurance receivables the Company has accrued relating to its significant legal proceedings. Unless otherwise
stated, the Company is vigorously defending all such litigation.
Shareholder Derivative Litigation
As previously reported, in July 2007, a shareholder derivative lawsuit was filed in the U.S. District Court for the
District of Delaware against the Company as nominal defendant and against each then current member of the Board
of Directors and the officers named in the Summary Compensation Table of the 2007 Proxy Statement. The suit
alleged that the Company’s 2007 Proxy Statement contained false and misleading statements concerning the tax