3M 2012 Annual Report Download - page 106

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NOTE 13. Commitments and Contingencies
Capital and Operating Leases:
Rental expense under operating leases was $300 million in 2012, $279 million in 2011 and $262 million in 2010. 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 British Pound (GBP), or approximately $54 million at
December 31, 2012 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, 2012, were as follows:
Capital Leases
Operating
Leases
(Millions)
2013
$
22
$
194
2014
21
158
2015
8
119
2016
7
77
2017
4
68
After 2017
34
119
Total
$
96
$
735
Less: Amounts representing interest
6
Present value of future minimum lease payments
90
Less: Current obligations under capital leases
19
Long-term obligations under capital leases
$
71
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 $28 million at both December 31, 2012 and December 31, 2011. 3M does not
consider this amount to be material. The fair value of 3M guarantees of loans with third parties and other guarantee
arrangements are not material.
Related Party Activity:
3M does not have any material 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. Unless otherwise stated, the Company is vigorously defending
all such litigation.
Process for Disclosure and Recording of Liabilities and Insurance Receivables Related to Legal Proceedings
Many lawsuits and claims involve highly complex issues relating to causation, scientific evidence, and whether there are
actual damages and are otherwise subject to substantial uncertainties. Assessments of lawsuits and claims can involve a
series of complex judgments about future events and can rely heavily on estimates and assumptions. The Company
complies with the requirements of ASC Topic 450, Contingencies, and related guidance, and records liabilities for legal
proceedings in those instances where it can reasonably estimate the amount of the loss and where liability is probable.
Where the reasonable estimate of the probable loss is a range, the Company records the most likely estimate of the loss,
or the low end of the range if there is no one best estimate. The Company either discloses the amount of a possible loss
or range of loss in excess of established accruals if estimable, or states that such an estimate cannot be made. The
Company discloses significant legal proceedings even where liability is not probable or the amount of the liability is not
estimable, or both, if the Company believes there is at least a reasonable possibility that a loss may be incurred.