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3M Technology Advancing Every Company
3M Products Enhancing Every Home
3M Innovation Improving Every Life
Our Vision
2013 Annual Report

Table of contents

  • Page 1
    Our Vision 3M Technology Advancing Every Company 3M Products Enhancing Every Home 3M Innovation Improving Every Life 2013 Annual Report

  • Page 2
    Inge G. Thulin Chairman of the Board, President and Chief Executive Officer We continued gaining momentum and building the company for the future, finishing the year stronger than ever.

  • Page 3
    ... invest in R&D and increased investments focused on long-term disruptive technologies aimed at opportunities with significant growth potential. In fact, we funded 20 new product platforms in 2013, several of which are expected to be introduced to the market this year. By 2017, our annual investment...

  • Page 4
    ...net฀income฀to฀free฀cash฀flow Net Sales (billions) $35 $30 $25 $20 $1.50 $15 $10 $5 0 2009 2010 2011 2012 2013 $1.00 $.50 0 $23.1 $26.7 $29.6 $29.9 $30.9 $3.00 $2.50 $2.00 Cash Dividends Paid Per Share $2.04 $2.10 $2.20 $2.36 $2.54 2009 2010 2011 2012 2013 Earnings Per Share-Diluted...

  • Page 5
    ...2013. We delivered good broad-based performance while investing and building for long-term success. We continue to be inspired and motivated by our vision: 3M Technology Advancing Every Company 3M Products Enhancing Every Home 3M Innovation Improving Every Life Inge G. Thulin Chairman of the Board...

  • Page 6
    ... plus equity) Additional Information Cash dividends paid Per share Stock price at year-end Total assets Long-term debt (excluding current portion) Capital expenditures Depreciation and amortization Research, development and related expenses Number of employees at year-end Average shares outstanding...

  • Page 7
    ... ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 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...

  • Page 8
    ...Index to Financial Statements ITEM 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ITEM 9A Controls and Procedures ITEM 9B Other Information PART III ITEM 10 Directors, Executive Officers and Corporate Governance ITEM 11 Executive Compensation ITEM 12 Security...

  • Page 9
    ...business segments: Industrial; Safety and Graphics; Electronics and Energy; Health Care; and Consumer. 3M's five business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources...

  • Page 10
    ... eyewear. In traffic safety and security, 3M provides reflective sheeting used on highway signs, vehicle license plates, construction work-zone devices, trucks and other vehicles, and also provides pavement marking systems, in addition to electronic surveillance products, films that protect against...

  • Page 11
    ... skin health and infection prevention products, inhalation and transdermal drug delivery systems, dental and orthodontic products (oral care), health information systems, and food safety products. In the medical and surgical areas, 3M is a supplier of medical tapes, dressings, wound closure products...

  • Page 12
    .... The importance of patents in the Electronics and Energy segment is described in "Performance by Business Segment" - "Electronics and Energy Business" in Part II, Item 7, of this Annual Report on Form 10-K. Raw Materials In 2013, the Company experienced stable to declining costs for most raw...

  • Page 13
    ... Business, 2011-2012 Vice President and General Manager, Occupational Health and Environmental Safety Division, 20072011 Executive Vice President, Electro and Communications Business, 20092012 Vice President and General Manager, Electronics Markets Materials Division, 2007-2009 General Counsel...

  • Page 14
    ... and General Manager, Industrial Adhesives and Tapes Division, 2011-2013 Vice President and General Manager, Renewable Energy Division, 20092011 Vice President, Business Development, Optical Systems Division, Asia, 20082009 Executive Vice President, Health Care Business, 2004-2012 Executive Vice...

  • Page 15
    ..., tax liabilities, information technology security, and • the effects of changes in tax, environmental and other laws and regulations in the United States and other countries in which we operate. The Company assumes no obligation to update or revise any forward-looking statements. Forward-looking...

  • Page 16
    ... of the projected productivity improvements will be realized. * The Company employs information technology systems to support its business, including ongoing phased implementation of an enterprise resource planning (ERP) system on a worldwide basis over the next several years. Security breaches and...

  • Page 17
    ... Financial Statements. Item 1B. Unresolved Staff Comments. None. Item 2. Properties. 3M's general offices, corporate research laboratories, and certain division laboratories are located in St. Paul, Minnesota. The Company operates 89 manufacturing facilities in 29 states. The Company operates...

  • Page 18
    ...payable in March 2014 of $0.855 per share. Cash dividends declared totaled $0.59 per share for each quarter of 2012. Stock price comparisons follow: Stock price comparisons (NYSE composite transactions) (Per share amounts) Second Quarter Fourth Quarter First Quarter Third Quarter Total 2013 High...

  • Page 19
    ...stock are made to support the Company's stock-based employee compensation plans and for other corporate purposes. In February 2011, 3M's Board of Directors authorized the repurchase of up to $7.0 billion of 3M's outstanding common stock, with no pre-established end date. In February 2013, 3M's Board...

  • Page 20
    ... share amounts) 2013 2012 2011 2010 2009 Years ended December 31: Net sales Net income attributable to 3M Per share of 3M common stock: Net income attributable to 3M - basic Net income attributable to 3M - diluted Cash dividends declared per 3M common share Cash dividends paid per 3M common share...

  • Page 21
    ... the Latin America/Canada region. Segment and geographic area information presented herein reflects the impact of these changes for all periods presented. 3M manages its operations in five operating business segments: Industrial; Safety and Graphics; Electronics and Energy; Health Care; and Consumer...

  • Page 22
    ...selling price increases contributing 0.9 percent. Acquisitions added 1.4 percent to sales, driven by the November 2012 acquisition of Ceradyne, Inc. (Industrial), the September 2012 purchase of the net assets that comprised the business of Federal Signal Technologies Group (Safety and Graphics), and...

  • Page 23
    ... from $2.204 billion in 2012 and $2.701 billion in 2011. The Company expects to purchase $3 billion to $5 billion of stock in 2014. In December 2013, 3M's Board of Directors declared a firstquarter 2014 dividend of $0.855 per share, an increase of 34.6 percent. This marked the 56th consecutive year...

  • Page 24
    ... pension plan, the expected long-term rate of return on an annualized basis for 2014 is 7.75%, a decrease of 0.25 percentage points from 2013. The primary U.S. qualified plan year-end 2013 discount rate was 4.98%, up 0.84 percentage points from the year-end 2012 discount rate of 4.14%. The increase...

  • Page 25
    ... selling price declines in 3M's optical systems business, where prices typically decline each year, which is common for the electronics industry. In 2012, organic local-currency sales increased 2.6 percent. Organic local-currency sales growth was led by Latin America/Canada and the United States...

  • Page 26
    ... to 2012. In 2013, SG&A included strategic investments in business transformation, enabled by 3M's global enterprise resource planning (ERP) implementation, in addition to increases from acquired businesses that were largely not in 3M's 2012 spending (Ceradyne, Inc. and Federal Signal Technologies...

  • Page 27
    ... to the corporate reorganization of a wholly owned international subsidiary (which benefited 2011), state income taxes, lower domestic manufacturer's deduction, and the lapse of the U.S. research and development credit. These and other factors, when compared to 2011, increased the 2012 effective tax...

  • Page 28
    ...74 million and $103 million in 2013 and 2012, respectively. These estimates include the effect of translating profits from local currencies into U.S. dollars; the impact of currency fluctuations on the transfer of goods between 3M operations in the United States and abroad; and transaction gains and...

  • Page 29
    ... markets and customers. Segment information presented herein reflects the impacts of these changes for all periods presented. The reportable segments are Industrial; Safety and Graphics; Electronics and Energy; Health Care; and Consumer. Information related to 3M's business segments is presented...

  • Page 30
    ...growth in 2013, led by aerospace, automotive OEM, 3M Purification Inc. (filtration products), and industrial adhesives and tapes. Acquisition growth related to the 2012 acquisition of Ceradyne, Inc. (Ceradyne). As disclosed in Note 2, in November 2012, 3M acquired Ceradyne, which is headquartered in...

  • Page 31
    ... Alpha Beta, a leading manufacturer of box sealing tape and masking tape headquartered in Taipei, Taiwan. Investment: In March 2005, 3M's automotive business completed the purchase of 19 percent of TI&M Beteiligungsgesellschaft mbH (TI&M) for approximately $55 million. TI&M is the parent company of...

  • Page 32
    ... safety and security systems. Acquisition growth related to the September 2012 purchase of net assets that comprised the business of Federal Signal Technologies Group. Organic local-currency sales increased 9 percent in both Latin America/Canada and Asia Pacific, and 2 percent in the United States...

  • Page 33
    ... packaging and interconnection technology; and the touch systems business, which includes touch screens, touch monitors, and touch sensor components. This segment's energy solutions include pressure sensitive tapes and resins; electrical insulation; a wide array of fiber-optic and copper-based...

  • Page 34
    ... sales increased 4.7 percent, led by food safety, health information systems, and critical and chronic care solutions. Sales declined yearon-year in drug delivery systems. Acquisitions added 0.3 percent, as 3M further strengthened its health information systems business in April 2012 by acquiring...

  • Page 35
    ... of GPI's products expands 3M's product portfolio in core and complementary categories in the construction and home improvement markets. On a geographic basis, organic local-currency sales increased 10 percent in Latin America/Canada, and 4 percent in both Asia Pacific and the United States. EMEA...

  • Page 36
    .... For 2013, international operations represented 63.9 percent of 3M's sales. 2012 United States Asia Pacific Europe, Middle East & Africa Latin America/ Canada Other Unallocated Worldwide Net sales (millions) % of worldwide sales Components of net sales change: Volume - organic Price Organic local...

  • Page 37
    ... signage in developing economies, and optically clear adhesives and glass bubbles. In addition, certain 2010 capital projects carried forward into 2011. 3M is striving to increase its manufacturing and sourcing capacity in developing economies in order to more closely align its production capability...

  • Page 38
    ... all U.S. employees and many employees outside the United States. The primary U.S. defined-benefit pension plan was closed to new participants effective January 1, 2009. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance...

  • Page 39
    ... ten reporting units were comprised of the following divisions: 3M Purification Inc., Personal Safety, Optical Systems, Traffic Safety and Security Systems, Infection Prevention, 3M ESPE, Advanced Materials, Industrial Adhesives and Tapes, Communication Markets, and Health Information Systems. The...

  • Page 40
    ..., in part, to repurchase shares and to pay dividends on 3M common stock. In addition, 3M's liquidity and cash flow enable it to meet currently anticipated growth plans, including funds for capital expenditures, working capital investments and acquisitions. As discussed in Note 2, in 2012 3M acquired...

  • Page 41
    ... of proceeds is for general corporate purposes. Sources for cash availability in the United States, such as ongoing cash flow from operations and 3M's reliable access to capital markets, have historically been sufficient to fund dividend payments to shareholders and share repurchases, in addition to...

  • Page 42
    ... of acquisition opportunities. 3M paid dividends of $1.730 billion in 2013, and has a long history of dividend increases. In December 2013, 3M's Board of Directors declared a dividend of 85.5 cents per share for the first-quarter of 2014, an increase of 34.6 percent. This is equivalent to an annual...

  • Page 43
    ... and accounts payable increased working capital by $312 million in 2012, compared to increases of $484 million in 2011. Free Cash Flow (non-GAAP measure): In addition, to net cash provided by operating activities, 3M uses free cash flow as a useful measure of performance and as an indication of...

  • Page 44
    ... economies, and optically clear adhesives and glass bubbles. In addition, certain 2010 capital projects carried forward into 2011. 3M is striving to increase its manufacturing and sourcing capacity, particularly in developing economies, in order to more closely align its production capability with...

  • Page 45
    ...per share) in 2012 and $1.555 billion ($2.20 per share) in 2011. 3M has paid dividends since 1916. In December 2013, 3M's Board of Directors declared a first-quarter 2014 dividend of $0.855 per share, an increase of 34.6 percent. This is equivalent to an annual dividend of $3.42 per share and marked...

  • Page 46
    ... ongoing purchase obligations with terms of less than one year. Many of these commitments relate to take or pay contracts, in which 3M guarantees payment to ensure availability of products or services that are sold to customers. The Company expects to receive consideration (products or services) for...

  • Page 47
    ... price swaps, and forward and option contracts. However, the Company's risk is limited to the fair value of the instruments. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial...

  • Page 48
    ... had the following effects on net income attributable to 3M: 2013 ($12 million decrease) and 2012 ($49 million increase). An analysis of the global exposures related to purchased components and materials is performed at each year-end. A one percent price change would result in a pre-tax cost or...

  • Page 49
    ... Cash Flows for the years ended December 31, 2013, 2012 and 2011 Notes to Consolidated Financial Statements Note 1. Significant Accounting Policies Note 2. Acquisitions and Divestitures Note 3. Goodwill and Intangible Assets Note 4. Supplemental Balance Sheet Information Note 5. Supplemental Equity...

  • Page 50
    ...in accordance with accounting principles generally accepted in the United States of America. Where necessary, the financial statements reflect estimates based on management's judgment. Management has established and maintains a system of internal accounting and other controls for the Company and its...

  • Page 51
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was...

  • Page 52
    Consolidated Statement of Income 3M Company and Subsidiaries Years ended December 31 (Millions, except per share amounts) 2013 2012 2011 Net sales Operating expenses Cost of sales Selling, general and administrative expenses Research, development and related expenses Total operating expenses ...

  • Page 53
    ... Income 3M Company and Subsidiaries Years ended December 31 (Millions) 2013 2012 2011 Net income including noncontrolling interest Other comprehensive income (loss), net of tax: Cumulative translation adjustment Defined benefit pension and postretirement plans adjustment Debt and equity securities...

  • Page 54
    ... Long-term debt Pension and postretirement benefits Other liabilities Total liabilities Commitments and contingencies (Note 13) Equity 3M Company shareholders' equity: Common stock, par value $.01 per share Shares outstanding - 2013: 663,296,239 Shares outstanding - 2012: 687,091,650 Additional paid...

  • Page 55
    ...adjustment Defined benefit pension and post-retirement plans adjustment Debt and equity securities - unrealized gain (loss) Cash flow hedging instruments - unrealized gain (loss) Total other comprehensive income (loss), net of tax Dividends declared ($2.36 per share) Stock-based compensation, net of...

  • Page 56
    ... per share amounts) Total Noncontrolling Interest Balance at December 31, 2012 Net income Other comprehensive income (loss), net of tax: Cumulative translation adjustment Defined benefit pension and post-retirement plans adjustment Debt and equity securities - unrealized gain (loss) Cash flow...

  • Page 57
    ... benefits from stock-based compensation Changes in assets and liabilities Accounts receivable Inventories 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...

  • Page 58
    ... refers to 3M Company and subsidiaries unless the context indicates otherwise. Foreign currency translation: Local currencies generally are considered the functional currencies outside the United States. Assets and liabilities for operations in local-currency environments are translated at month-end...

  • Page 59
    ... 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 in cash surrender value or contract value during the period accounted for as an adjustment of premiums paid...

  • Page 60
    ... date such benefits were communicated to the applicable employees and recognized as expense over the employees' remaining service periods. Contract termination and other charges primarily reflect costs to terminate a contract before the end of its term (measured at fair value at the time the Company...

  • Page 61
    ... acquired in-process research and development; and gains/losses associated with certain corporate approved investments in R&D-related ventures, such as equity method effects and impairments. Internal-use software: The Company capitalizes direct costs of services used in the development of internal...

  • Page 62
    ... include stock options, restricted stock, restricted stock units, performance shares, and the General Employees' Stock Purchase Plan (GESPP). Under applicable accounting standards, the fair value of share-based compensation is determined at the grant date and the recognition of the related expense...

  • Page 63
    ... paid in a business combination (including contingent consideration) and the exclusion of transaction and acquisition-related restructuring costs from acquisition accounting. New Accounting Pronouncements In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update...

  • Page 64
    ...its adoption did not have a material impact on 3M's consolidated results of operations or financial condition. In March 2013, the FASB issued ASU No. 2013-05, Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign...

  • Page 65
    ... Company feels align with its strategic intent with respect to, among other factors, growth markets and adjacent product lines or technologies. There were no acquisitions that closed during 2013. The impact on the consolidated balance sheet of the purchase price allocations related to 2012 and 2011...

  • Page 66
    ... 2012, 3M (Safety and Graphics Business) purchased the net assets of Federal Signal Technologies Group from Federal Signal Corp., for a total purchase price of approximately $104 million. This business focuses on electronic toll collection and parking management hardware and software services...

  • Page 67
    ... for the mobile hand-held, touch-screen panel and display markets. (6) In April 2011, 3M (Safety and Graphics Business) purchased all of the outstanding shares of Original Wraps Inc., a company specializing in the creative business development, technology and design of personalization platforms for...

  • Page 68
    ... Dec. 31, 2011 Balance 2012 acquisition activity 2012 translation and other Dec. 31, 2012 Balance 2013 acquisition activity 2013 translation and other Dec. 31, 2013 Balance (Millions) Industrial Safety and Graphics Electronics and Energy Health Care Consumer Total Company $ $ 1,972 1,713...

  • Page 69
    Amortization expense for the years ended December 31 follows: (Millions) 2013 2012 2011 Amortization expense $ 236 $ 233 $ 235 Expected amortization expense for acquired amortizable intangible assets recorded as of December 31, 2013 follows: (Millions) 2014 2015 2016 2017 2018 After 2018 ...

  • Page 70
    ...value of life insurance policies Other assets Total other assets Other current liabilities Accrued trade payables Deferred income Derivative liabilities Dividends payable Employee benefits and withholdings Product and other claims Property and other taxes Pension and postretirement benefits Deferred...

  • Page 71
    ...is authorized but unissued. 3M has historically declared and paid dividends in the same quarter. In December 2013, 3M's Board of Directors declared a first-quarter 2014 dividend of $0.855 per share (payable in March 2014). This reduced 3M's stockholders equity and increased other current liabilities...

  • Page 72
    ... as of the business acquisition date to 100 percent as of December 31, 2011. The $57 million of cash paid in 2011 as a result of these additional purchases of Winterthur shares was classified as other financing activity in the consolidated statement of cash flows. These additional purchases did not...

  • Page 73
    ... fourth quarter, 3M's Board of Directors declared a first-quarter 2014 dividend of $0.855 per share (payable in March 2014). This reduced 3M's stockholders equity and increased other current liabilities as of December 31, 2013 by $567 million. 3M has historically declared and paid dividends in the...

  • Page 74
    ... 51 861 181 12 138 1,674 $ $ $ 2013 2012 Deferred tax assets: Accruals not currently deductible Employee benefit costs Product and other claims Miscellaneous accruals Pension costs Stock-based compensation Net operating/capital loss carryforwards Foreign tax credits Inventory Other - net Gross...

  • Page 75
    ... includes a cost for the related temporary difference. Reconciliation of Effective Income Tax Rate 2013 2012 2011 Statutory U.S. tax rate State income taxes - net of federal benefit International income taxes - net U.S. research and development credit Reserves for tax contingencies Domestic...

  • Page 76
    ...2013 relating to the 2006 tax year. Currently, the Company is under examination by the IRS for its U.S. federal income tax returns for the years 2011, 2012, and 2013. It is anticipated that the IRS will complete its examination of the Company for 2011 and 2012 by the end of the first quarter of 2014...

  • Page 77
    ...unremitted earnings attributable to international companies that have been considered to be reinvested indefinitely. These earnings relate to ongoing operations and were approximately $9.7 billion as of December 31, 2013. Because of the availability of U.S. foreign tax credits, it is not practicable...

  • Page 78
    ... Securities The Company invests in agency securities, corporate securities, asset-backed securities and other securities. The following is a summary of amounts recorded on the Consolidated Balance Sheet for marketable securities (current and non-current). December 31, 2013 December 31, 2012...

  • Page 79
    ... 31, 2013. Within this portfolio, current and long-term asset-backed securities (estimated fair value of $907 million) primarily include interests in automobile loans, credit cards and equipment leases. 3M's investment policy allows investments in asset-backed securities with minimum credit ratings...

  • Page 80
    ... 2013 2012 Current portion of long-term debt U.S. dollar commercial paper Other borrowings Total short-term borrowings and current portion of long-term debt 3.05 % ―% 5.35 % $ $ 1,586 ― 97 1,683 $ $ 986 ― 99 1,085 The following weighted-average effective interest rate table reflects...

  • Page 81
    ... credit rating, with a stable outlook, from Moody's Investors Service. In September 2012, 3M entered into a $1.5 billion, five-year multicurrency revolving credit agreement, which amended the existing agreement that was entered into in August 2011. This amended agreement extended the expiration date...

  • Page 82
    ...of service, compensation, and age at retirement or termination. The primary U.S. defined-benefit pension plan was closed to new participants effective January 1, 2009. The Company also provides certain postretirement health care and life insurance benefits for substantially all of its U.S. employees...

  • Page 83
    ... added to the schedules below as of December 31, 2013. Qualified and Non-qualified Pension Benefits United States International 2013 2012 2013 2012 (Millions) Postretirement Benefits 2013 2012 Change in benefit obligation Benefit obligation at beginning of year Acquisitions/Transfers in Service...

  • Page 84
    ... of benefits based on employee service and compensation as of the measurement date and does not include an assumption about future compensation levels. The accumulated benefit obligation of the U.S. pension plans was $13.357 billion and $14.127 billion at December 31, 2013 and 2012, respectively...

  • Page 85
    ... the years ended December 31 follow: Qualified and Non-qualified Pension Benefits United States International 2012 2011 2013 2012 2011 Postretirement Benefits 2013 2012 2011 (Millions) 2013 Net periodic benefit cost (benefit) Service cost Interest cost Expected return on plan assets Amortization...

  • Page 86
    ...savings accounts increase three percent per year. Therefore, the Company no longer has material exposure to health care cost inflation. Weighted-average assumptions used to determine net cost for years ended Qualified and Non-qualified Pension Benefits United States International 2012 2011 2013 2012...

  • Page 87
    ...of its own stock as a direct investment for its pension and other postretirement benefit funds. However, due to external investment management of the funds, the plans may indirectly buy, sell or hold 3M stock. The aggregate amount of shares are not considered to be material relative to the aggregate...

  • Page 88
    ... U.S. pension plans by asset class are as follows: Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Level 3 2013 2012 2013 2012 2013 2012 Fair Value at Dec. 31, 2013 2012 (Millions) Asset Class Equities U.S. equities Non-U.S. equities Derivatives EAFE index funds Index funds Long...

  • Page 89
    ... at closing prices determined by calculation agents for outstanding transactions. Other items to reconcile to fair value of plan assets include the net of insurance receivables for WG Trading Company, interest receivables, amounts due for securities sold, amounts payable for securities purchased and...

  • Page 90
    ... of changes in the fair values of the U.S. pension plans' level 3 assets for the years ended December 31, 2013 and 2012: Fair Value Measurement Using Significant Unobservable Inputs (Level 3) (Millions) Equities Fixed Income Private Equity Absolute Return Commodities Total Beginning balance at Jan...

  • Page 91
    ...the international pension plans by asset class are as follows: Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Level 3 2013 2012 2013 2012 2013 2012 Fair Value at Dec. 31, 2013 2012 (Millions) Asset Class Equities Growth equities Value equities Core equities Total Equities Fixed...

  • Page 92
    ...values of the international pension plans' level 3 assets for the years ended December 31, 2013 and 2012: Fair Value Measurement Using Significant Unobservable Inputs (Level 3) (Millions) Equities Fixed Income Private Equity Absolute Return Total Beginning balance at Jan. 1, 2012 Net transfers into...

  • Page 93
    ... benefit plans by asset class are as follows: Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Level 3 2013 2012 2013 2012 2013 2012 Fair Value at Dec. 31, 2013 2012 (Millions) Asset Class Equities U.S. equities Non-U.S. equities EAFE index funds Index funds Long/short equity...

  • Page 94
    ...for securities purchased and interest payable. The following table sets forth a summary of changes in the fair values of the postretirement plans' level 3 assets for the years ended December 31, 2013 and 2012: Fair Value Measurement Using Significant Unobservable Inputs (Level 3) (Millions) Equities...

  • Page 95
    ...ineffectiveness and the amount excluded from effectiveness testing recognized in income on cash flow hedges were not material for 2013, 2012 and 2011. The maximum length of time over which 3M hedges its exposure to the variability in future cash flows for a majority of the forecasted transactions is...

  • Page 96
    ...disclosure tables below by $13 million and $11 million in 2012 and 2011, respectively. The revisions had no impact on the Company's consolidated results of operations or financial condition. Year Ended December 31, 2013 Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective Portion...

  • Page 97
    ..., 4.50% notes issued in October 2008. These swaps and underlying note matured in the fourth quarter of 2011. 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...

  • Page 98
    ... Euros and 275 million Euros, respectively. In November 2013, the Company issued eight-year fixed rate Eurobond securities for 600 million Euros. 3M designated each of these Eurobond issuances as hedging instruments of the Company's net investment in its European subsidiaries. In anticipation of the...

  • Page 99
    ..., 2013. The Company does not hold or issue derivative financial instruments for trading purposes. The location in the consolidated statements of income and amounts of gains and losses related to derivative instruments not designated as hedging instruments are as follows: Year ended December 31, 2013...

  • Page 100
    ... 3M's derivative instruments, excluding nonderivative instruments used as hedging instruments, and their location in the consolidated balance sheet. Additional information... currency forward/option contracts Other current assets Commodity price swap contracts Other current assets Interest rate swap ...

  • Page 101
    ...2013, 3M has International Swaps and Derivatives Association (ISDA) agreements with 11 applicable banks and financial institutions which contain netting provisions. In addition to a master agreement with 3M supported by a primary counterparty's parent guarantee, 3M also has associated credit support...

  • Page 102
    ...74 million and $103 million in 2013 and 2012, respectively. These estimates include the effect of translating profits from local currencies into U.S. dollars; the impact of currency fluctuations on the transfer of goods between 3M operations in the United States and abroad; and transaction gains and...

  • Page 103
    ... models that utilize inputs such as current/forward interest rates, current market conditions and credit default swap spreads. 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...

  • Page 104
    ... Commercial paper Asset-backed securities: Automobile loan related Credit card related Equipment lease related Other U.S. treasury securities U.S. municipal securities Auction rate securities Investments Derivative instruments - assets: Foreign currency forward/option contracts Commodity price...

  • Page 105
    ... fair value, but are recognized and disclosed at fair value on a nonrecurring basis in periods subsequent to initial recognition. For 3M, such measurements of fair value relate primarily to long-lived asset impairments. There were no material long-lived asset impairments for 2013, 2012 and 2011. 99

  • Page 106
    ...of fixed rate Eurobond securities issued by the Company as hedging instruments of the Company's net investment in its European subsidiaries. Many of 3M's fixed-rate bonds were trading at a premium at December 31, 2013 and 2012 due to the low interest rates and tightening of 3M's credit spreads. 100

  • Page 107
    ... 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...

  • Page 108
    ... the Company has recorded accruals and the related insurance receivables: Liability and Receivable Balances At December 31 (Millions) 2013 2012 2011 Respirator mask/asbestos liabilities Respirator mask/asbestos insurance receivables Environmental remediation liabilities Environmental remediation...

  • Page 109
    ... of the Company's mask or respirator products and alleging exposure to each of asbestos, silica, coal or other occupational dusts, and claims pleading use of asbestos-containing products allegedly manufactured by the Company), (v) the number of current claims and a projection of the number of future...

  • Page 110
    ... December 31, 2013, the Company's receivable for insurance recoveries related to the respirator mask/asbestos litigation was $58 million. The Company estimates insurance receivables based on an analysis of its numerous policies, including their exclusions, pertinent case law interpreting comparable...

  • Page 111
    ..., and periodically updates, policies relating to environmental standards of performance for its operations worldwide. Under certain environmental laws, including the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state laws, the Company may be...

  • Page 112
    ... to be monitored during the period 2013-2015 by public water system suppliers to determine the extent of their occurrence. The Company is continuing to make progress in its work, under the supervision of state regulators, to address its historic disposal of PFC-containing waste associated with...

  • Page 113
    ... of the class certification issues in the first case filed there. In December 2010, the State of Minnesota, by its Attorney General Lori Swanson, acting in its capacity as trustee of the natural resources of the State of Minnesota, filed a lawsuit in Hennepin County District Court against 3M to...

  • Page 114
    ... studies or the Company's commitment to a plan of action. Liabilities for estimated costs of environmental remediation, depending on the site, are based primarily upon internal or third-party environmental studies, and estimates as to the number, participation level and financial viability of any...

  • Page 115
    ...and the Company paid the holders of the approximately 5.8 million shares the fair value determined by the Delaware Chancery Court (plus pre-judgment interest). In October 2012, four plaintiffs filed purported class actions against Ceradyne, Inc., its directors, 3M, and Cyborg Acquisition Corporation...

  • Page 116
    ... for the same issue. Another customer filed a lawsuit against 3M Deutschland GmbH (a German subsidiary) in the German courts in March 2012 seeking commercial loss and property damage allegedly caused by the same 3M filters used in that customer's manufacturing process. The Company has resolved on...

  • Page 117
    ... stock options, restricted stock, restricted stock units, performance shares, and the General Employees' Stock Purchase Plan (GESPP), are provided in the following table. Capitalized stock-based compensation amounts were not material for the years ended 2013, 2012 and 2011. Stock-Based Compensation...

  • Page 118
    ... value at the date of grant was calculated using the Black-Scholes option-pricing model and the assumptions that follow. Stock Option Assumptions Annual 2013 2012 2011 2013 Progressive (Reload) 2012 2011 Exercise price Risk-free interest rate Dividend yield Volatility Expected life (months) Black...

  • Page 119
    ... stock units for the years ended December 31, 2013, 2012 and 2011 was $43 million, $86 million and $36 million, respectively. Restricted stock units granted under the 3M 2008 Long-Term Incentive Plan generally vest three years following the grant date assuming continued employment. Dividend...

  • Page 120
    ... distribution of performance shares for the years ended December 31, 2013 and 2011 was $16 million and $5 million, respectively. There were no performance shares distributed or related tax benefits realized during the year ended December 31, 2012. General Employees' Stock Purchase Plan (GESPP): As...

  • Page 121
    ...business segments: Industrial; Safety and Graphics; Electronics and Energy; Health Care; and Consumer. 3M's five business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources...

  • Page 122
    ...products, automotive components, abrasion-resistant films, structural adhesives and paint finishing and detailing products Safety and Graphics Personal protection products, traffic safety and security products, commercial graphics systems, commercial cleaning and protection products, floor matting...

  • Page 123
    ... of 2013, 3M realigned its geographic area reporting to include Puerto Rico in the United States, rather than in the Latin America/Canada region. The financial information presented herein reflects this geographic area change for all periods presented. Net Sales 2012 Operating Income 2013 2012 2011...

  • Page 124
    .../locations and will continue to roll-out the ERP system over the next several years. As with any new information technology application we implement, this application, along with the internal controls over financial reporting included in this process, was appropriately considered within the testing...

  • Page 125
    ... ethics, at no cost, by writing to us at the following address: 3M Company 3M Center, Building 220-11W-09 St. Paul, MN 55144-1000 Attention: Vice President, Compliance and Business Conduct Item 11. Executive Compensation. The information required by Item 402 of Regulation S-K is contained under the...

  • Page 126
    ...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 as of December 31, 2013 follows: Equity Compensation Plans Information (1) A Number of securities...

  • Page 127
    ... financial statements filed as part of this report are listed in the index to financial statements on page 43 as follows: Page Number Report of Independent Registered Public Accounting Firm Consolidated Statement of Income for the years ended December 31, 2013, 2012 and 2011 Consolidated Statement...

  • Page 128
    ...31, 2009. 3M Board resolution dated February 7, 2012 extending for three additional one-year periods the General Employees' Stock Purchase Plan, is incorporated by reference from our Form 10-K for the year ended December 31, 2011. 3M 2012 Amended and Restated General Employees Stock Purchase Plan is...

  • Page 129
    ... information from 3M Company's Annual Report on Form 10-K for the period ended December 31, 2013, filed with the SEC on February 13, 2014, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statement of Income for the years ended December 31, 2013, 2012 and 2011...

  • 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
    ... should contact: 3M Investor Relations 3M Center, Building 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...

  • Page 132
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