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TableofContents
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UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549
FORM10-K
ANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHE
SECURITIESEXCHANGEACTOF1934
ForthefiscalyearendedDecember31,2015
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)733-1110
SECURITIESREGISTEREDPURSUANTTOSECTION12(b)OFTHEACT:
Titleofeachclass Nameofeachexchange
onwhichregistered
CommonStock,ParValue$.01PerShare
EUR500MillionNotesdue2018
EUR750MillionNotesdue2026
EUR650MillionNotesdue2020
EUR600MillionNotesdue2023
EUR500MillionNotesdue2030
NewYorkStockExchange,Inc.
ChicagoStockExchange,Inc.
NewYorkStockExchange,Inc.
NewYorkStockExchange,Inc.
NewYorkStockExchange,Inc.
NewYorkStockExchange,Inc.
NewYorkStockExchange,Inc.
Note:ThecommonstockoftheRegistrantisalsotradedontheSWXSwissExchange.
Securitiesregisteredpursuanttosection12(g)oftheAct:None
IndicatebycheckmarkiftheRegistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.YesNo
IndicatebycheckmarkiftheRegistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.YesNo
IndicatebycheckmarkwhethertheRegistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof
1934duringthepreceding12months(orforsuchshorterperiodthattheRegistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfiling
requirementsforthepast90days.YesNo
IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFile
requiredtobesubmittedandpostedpursuanttoRule405ofRegulationS-Tduringthepreceding12months(orforsuchshorterperiodthattheregistrantwas
requiredtosubmitandpostsuchfiles).YesNo
IndicatebycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationS-Kisnotcontainedherein,andwillnotbecontained,to
thebestofRegistrant’sknowledge,indefinitiveproxyorinformationstatementsincorporatedbyreferenceinPartIIIofthisForm10-Koranyamendmentto
thisForm10-K.
IndicatebycheckmarkwhethertheRegistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,orasmallerreportingcompany.
Seethedefinitionsof“largeacceleratedfiler,”“acceleratedfiler”and“smallerreportingcompany”inRule12b-2oftheExchangeAct.
LargeacceleratedfilerAcceleratedfilerNon-acceleratedfilerSmallerreportingcompany
  
IndicatebycheckmarkwhethertheRegistrantisashellcompany(asdefinedinRule12b-2oftheAct).YesNo
TheaggregatemarketvalueofvotingstockheldbynonaffiliatesoftheRegistrant,computedbyreferencetotheclosingpriceandsharesoutstanding,
wasapproximately$91.4billionasofJanuary31,2016(approximately$96.4billionasofJune30,2015,thelastbusinessdayoftheRegistrant’smost
recentlycompletedsecondquarter).
SharesofcommonstockoutstandingatJanuary31,2016:605,038,186
DOCUMENTSINCORPORATEDBYREFERENCE
PartsoftheCompany’sdefinitiveproxystatement(tobefiledpursuanttoRegulation14Awithin120daysafterRegistrant’sfiscalyear-endof
December31,2015)foritsannualmeetingtobeheldonMay10,2016,areincorporatedbyreferenceinthisForm10-KinresponsetoPartIII,Items10,11,
12,13and14.

Table of contents

  • Page 1
    ... For the fiscal year ended December 31, 2015 Commission file number 1-3285 State of Incorporation: Delaware I.R.S. Employer Identification No. 41-0417775 Principal executive offices: 3M Center, St. Paul, Minnesota 55144 Telephone number: (651) 733-1110 SECURITIES REGISTERED PURSUANT...

  • Page 2
    ... Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Exhibits, Financial...

  • Page 3
    ...; Safety and Graphics; Health Care; Electronics and Energy; 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. Financial information and...

  • Page 4
    ... , oral care solutions (dental and orthodontic products), health information systems, and food safety products. In April 2014, 3M purchased all of the outstanding equity interests of Treo Solutions LLC, headquartered in Troy, New York. Treo Solutions LLC is a provider of data analytics and business...

  • Page 5
    ...systems, 3M develops and markets computer software for hospital coding and data classification, and provides related consulting services. 3M provides food safety products that make it faster and easier for food processors to test the microbiological quality of food. Electronics and Energy Business...

  • Page 6
    ... "Performance by Business Segment" - "Electronics and Energy Business" in Part II, Item 7, of this Annual Report on Form 10-K. Raw Materials In 2015 , the Company experienced declining costs for most raw material categories and transportation fuel , due largely to the significant price decreases...

  • Page 7
    ... President and General Manager, Occupational Health and Environmental Safety Division, 2007 2011 5 4 51 Senior Vice President, Legal Affairs and General Counsel Senior Vice President and Chief Financial Officer Business, 2009-2012 Security, 2009-2012 Executive Vice...

  • Page 8
    ..., Consumer Business Group 2012 Executive Vice President, Consumer and Office Business, 2011-2012 Managing Director, 3M Brazil, 2009-2011 President, Health Information Systems, 2015-2016 Senior Vice President, Marketing and Sales, 2014-2015 Vice President and General Manager...

  • Page 9
    ... May Affect Future Results This Annual Report on Form 10-K, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company may...

  • Page 10
    ... structure, financed with additional low-cost debt, could impact 3M's credit rating in the future. Failure to maintain strong investment grade ratings would adversely affect the Company's cost of fund ing and could adversely affect liquidity and access to capital markets. * The Company's results...

  • Page 11
    ... value of plan assets and investment losses on plan assets, and relevant legislative or regulatory changes relating to defined benefit plan funding may increase the Company's funding obligations and adversely impact its results of operations and cash flows. * The Company's future results may be...

  • Page 12
    ...'s general offices, corporate research laboratories, and certain division laboratories are located in St. Paul, Minnesota. The Company operates 8 8 manufacturing facilities in 29 states. The Company operates 12 7 manufacturing and converting facilities in 37 countries outside the United States. 3M...

  • Page 13
    ... Part III, Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," of this document, and should be considered an integral part of Item 5. At January 31, 201 6 , there were 84 , 607 shareholders of record. 3M's stock is listed on the New York Stock...

  • Page 14
    ... 31, 2015 Maximum Approximate Dollar Value of Total Number of Shares that May Shares Purchased Yet Be Purchased Total Number of Average Price as Part of Publicly under the Plans Shares Purchased Paid per Announced Plans or Programs or Programs (2) (1) Share...

  • Page 15
    ... portion due within one year) and long-term capital lease obligations 8,799 6,764 4,367 4,970 4,549 In 2015, 3M's Board of Directors declared a seco nd, third, and fourth quarter dividend of $1.025 per share, which resulted in total year 2015 declared dividends of $ 3.075...

  • Page 16
    ... products and services. As described in Note 16 , effective in the third quarter of 2015, within the Health Care business segment, the Company formed the Oral Care Solutions Division, which combined the former 3M ESPE and 3M Unitek divisions. 3M manages its operations in five operating business...

  • Page 17
    ... volume and selling price impacts) in Health Care, and Consumer, with declines in Industrial, Safety and Graphics, and Electronics and Energy . Organic localcurrency sales increased 4.5 percent in Health Care , led by health information systems, food safety, oral care, drug delivery systems, and...

  • Page 18
    ... combination of selling price increases and raw material cost decreases, lower pension/postretirement benefit costs, and profit leverage on organic volume growth. These factors were partially offset by strategic investments and other factors. Refer to the section entitled "Results of Operations" for...

  • Page 19
    ... own stock in 2016. In February 2016, 3 M's Board of Directors declared a first-quarter 201 6 dividend of $ 1.11 per share, an increase of 8 percent. This marked the 5 8 th consecutive year of dividend increases for 3M. 3M's debt to total capital ratio (total capital defined as debt plus equity) was...

  • Page 20
    ... invests in both growth assets and fixed income matching assets to manage its funded status. For the primary U.S. qualified pension plan, the expected long-term rate of return on an annualized basis for 2016 is 7.50%, down 0.25% from 2015. The primary U.S. qualified pension plan year-end 2015...

  • Page 21
    ... the United States, 4.5 percent in Latin America/Canada, and 3.2 percent in EMEA. Organic local-currency sales gr ew 5.6 percent across developing markets, and 4.5 percent in developed markets. Worldwide organic local-currency sales grew 5.8 percent in Health Care, 5.4 percent in Safety and Graphics...

  • Page 22
    ... of Contents The Company is investing in business transformation. Business transformation is defined as changes in processes and internal/external service delivery across 3M to move to more efficient business model s to improve operational efficiency and productivity, while allowing 3M to serve...

  • Page 23
    ... R&D, business transformation, the supply chain center of expertise in Europe, and portfolio management actions. The Company invested $90 million in 2014 in portfolio management actions to position 3M for greater success. Foreign currency effects and acquisition impacts (Treo) reduced operating...

  • Page 24
    ... to the Consolidated Financial Statements . As described in Note 16, effective in the third quarter of 2015, within the Health Care business segment, the Company formed the Oral Care Solutions Division, which combined the former 3M ESPE and 3M Unitek divisions. 3M manages its operations in five...

  • Page 25
    ...expenses related to yearon-year increases in annual incentive plan expenses and legal accruals. Restructuring Pre-Tax Charge by Business Segment: (Millions) Industrial 42 Safety and Graphics 11 Health Care 9 Electronics and Energy 12 Consumer 3 Corporate and...

  • Page 26
    ... printing, packaging, food and beverage, and construction. Industrial products include tapes, a wide variety of coated, non-woven and bonded abrasives, adhesives, advanced ceramics, sealants, specialty materials, 3M p urification (filtration products), closure systems for personal hygiene products...

  • Page 27
    ...commercial solutions, including commercial graphics sheeting and systems, architectural design solutions for surface s , and cleaning and protection products for commercial establishments; roofing granules for asphalt shingles ; plus fall protection equipment . Year 2015 results: Sales in Safety...

  • Page 28
    ... benefited from organic volume leverage plus selling price increases, partially offset by incremental investments related to business transformation, enabled by 3M's global ERP implementation , plus certain portfolio management actions. Health Care Business ( 17.9 % of consolidated sales): Sales...

  • Page 29
    ... food safety , health information systems, critical and chronic care, oral care solutions, and infection prevention. S ales declined in drug delivery systems . · · On a geographic basis, s ales increased 8 percent in Asia Pacific, 6 percent in Latin America/Canada, 4 percent in the United States...

  • Page 30
    ... renewable energy all declined. · On a geographic basis, sales increased 1 percent in Europe, were flat in the United States, and declined 3 percent in both Latin America /Canada and A sia Pacific . Divestitures: · 3M completed the sale of its static control business in January 2015 (discussed...

  • Page 31
    ... and office suppl i es , and home care. 3M also posted positive growth in its consumer health care business . · On a geographic basis, organic local-currency sales increased 5 percent in the United States and 3 percent in Asia Pacific, while sales in both EMEA and Latin America/Canada were...

  • Page 32
    ...health care and home care business es. Sales in the stationery and office supplies business were flat. · On a geographic basis, organic local-currency sales increased 6 percent in Asia Pacific , 4 percent in the United States, 3 percent in Latin America/Canada , and 1 percent in EMEA. In developing...

  • Page 33
    Table of Contents A summary of key information and discussion related to 3M's geographic areas follow: 2015 Europe, Latin United Asia Middle East America/ Other States Pacific & Africa Canada Unallocated Worldwide Net sales (millions) $ 12,049 $ ...

  • Page 34
    ... decreased employment in 2015 related to fourth-quarter 2015 restructuring actions that impacted approximately 1,700 positions worldwide. The 2015 acquisitions of Ivera Medical Corp., Polypore International Inc.'s Separations Media business and Capital Safety Group S.A.R.L. increased 2015 headcount...

  • Page 35
    ...-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 with Accounting Standard Codification (ASC) 715, Compensation - Retirement Benefits...

  • Page 36
    ... post-retirement benefit plans are calculated on a plan-by-plan basis using plan asset allocations and expected long-term rate of return assumptions. The weighted average expected return for the international pension plan is 5.77% for 2016, compared to 5.90% for 2015. For the year ended December...

  • Page 37
    ... Media acquisition), Advanced Materials, Communication Markets, Display Materials and Systems, Health Information Systems, Industrial Adhesives and Tapes, Infection Prevention, Oral Care Solutions, Personal Safety (which includes the Capital Safety acquisition), and Traffic Safety and Security...

  • Page 38
    .... 3M will also continue to return cash to shareholders through dividends and share repurchases. Sources for cash availability in the United States, such as ongoing cash flow from operations and access to capital markets, have historically been sufficient to fund dividend payments to shareholders and...

  • Page 39
    ...'s Investors Service. The Company's ongoing transition to a better- optimized capital structure, financed with additional low-cost debt, could impact 3M's credit rating in the future. Effective May 16, 2014, the Company updated its "well-known seasoned issuer" shelf registration statement, which...

  • Page 40
    ... currency translation impacts reduced accounts payable by $76 million . Return on Invested Capital (non-GAAP measure): The Company uses non-GAAP measures to focus on shareholder value creation. 3M uses return on invested capital (ROIC), defined as annualized after-tax operating income (including...

  • Page 41
    ... 2015 included a new state-of-theart, four story, 400,000 square foot research facility at 3M Center in St. Paul, Minnesota. In addition, 3M continued its investments it IT systems and infrastructure, particularly the ongoing multi-year phased implementation of an ERP system. In 2014, investments...

  • Page 42
    ...year-end 2013 . In both 2015 and 2014, the change in short-term debt primarily related to bank borrowings by international subsidiaries, primarily Japan and Korea in 2015. In 2015, repayment of debt primarily related to debt assumed (and paid off) as part of the Capital Safety acquisition (refer...

  • Page 43
    ... the Company's stock-based employee compensation plans and for other corporate purposes. In February 201 6 , 3M's Board of Directors auth orized the repurchase of up to $10 billion of 3M's outstanding common stock, which replaced the Company's February 201 4 repurchase program. This authorization...

  • Page 44
    ... 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 these...

  • Page 45
    ... (based on inception date foreign currency exchange rates) gross notional amount of the Company's interest rate swaps at December 31, 2015 was $ 1.8 billion. Additional details about 3M's long-term debt can be found in Note 10 , including references to information regarding derivatives and/or...

  • Page 46
    ... on pre-tax income: 2015 ($ 180 million increase) and 2014 ($ 10 million in crease). 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 savings of approximately $ 70...

  • Page 47
    ...Marketable Securities Note 10 . Long-Term Debt and Short-Term Borrowings Note 1 1 . Pension and Postretirement Benefit Plans Note 1 2 . Derivatives Note 1 3 . Fair Value Measurements Note 14. Commitments and Contingencies Note 1 5 . Stock-Based Compensation Note 1 6 . Business Segments...

  • Page 48
    ... that published financial statements are properly prepared and fairly presented. The Company's system of internal control over financial reporting is supported by widely communicated written policies, including business conduct policies, which are designed to require all employees to maintain high...

  • Page 49
    ...for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31...

  • Page 50
    ... Consolidated Statement of Incom e 3M Company and Subsidiaries Years ended December 31 Net sales $ 30,274 $ Operating expenses Cost of sales 15,383 Selling, general and administrative expenses 6,182 Research, development and related expenses 1,763...

  • Page 51
    ...(6) Comprehensive income (loss) attributable to 3M $ 4,763 $ The accompanying Notes to Consolidated Financial Statements are an integral part of this statement. Consolidated Statement of Comprehensive Incom e 3M Company and Subsidiaries Years ended December 31 2014 4,998 (942...

  • Page 52
    ...Long-term debt Pension and postretirement benefits Other liabilities Total liabilities Commitments and contingencies (Note 14) Equity 3M Company shareholders' equity: Common stock, par value $.01 per share Shares outstanding - 2015: 609,330,124 Shares outstanding - 2014: 635,134,594 Additional paid...

  • Page 53
    ... ($3.075 per share, Note 6) Stock-based compensation, net of tax impacts Reacquired stock Issuances pursuant to stock option and benefit plans Balance at December 31, 2015 3M Company Shareholders Common Accumulated Stock and Other Additional Comprehensive Non Paid-in...

  • Page 54
    ... income taxes 395 Excess tax benefits from stock-based compensation (154) Changes in assets and liabilities Accounts receivable (58) Inventories 3 Accounts payable 9 Accrued income taxes (current and long-term) (744) Other - net 128 Net...

  • Page 55
    ...have material impacts on 3M's consolidated results of operations or financial condition. The Company continues to monitor circumstances relative to its Venezuelan subsidiary. Changes in applicable exchange rates or exchange mechanisms may continue in the future. These changes could impact the rate...

  • Page 56
    ... comprehensive income (loss) in shareholders' equity. Other assets: Other 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...

  • Page 57
    ... securities and investments," respectively. Inventories: Inventories are stated at the lower of cost or market, with cost generally determined on a first-in, first-out basis. Property, plant and equipment: Property, plant and equipment, including capitalized interest and internal engineering...

  • Page 58
    ... 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 59
    ... 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-use software. Amounts capitalized are amortized over a period of three to seven years, generally...

  • Page 60
    ... 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 is recorded over the period in which the share...

  • Page 61
    ...do not qualify as discontinued operations. For 3M, this ASU was effective prospectively beginning January 1, 2015. This ASU was applied to the 2015 divestiture information discussed in Note 2 and had no material impact on consolidated results of operations and financial condition. In May 2014, the...

  • Page 62
    ... prior periods. As a result, Note 11, Pension and Postretirement Benefit Plans, reflects the modified disclosures with respect to applicable plan assets. As this ASU only relates to certain disclosures, it did not impact the Company's consolidated results of operations and financial condition. In...

  • Page 63
    ... Company is currently assessing this ASU's impacts on 3M's consolidated results of operations and financial condition. In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments , that eliminates the requirement for an acquirer in a business...

  • Page 64
    ... is applied prospectively. The Company is currently assessing this ASU's impacts on 3M's consolidated results of operations and financial condition. NOTE 2. Acquisitions and Divestitures Acquisitions: 3M makes acquisitions of certain businesses from time to time that are aligned with its...

  • Page 65
    ... reflected as additional asset purchase and investment activity. 2015 acquisitions: In March 2015, 3M (Health Care Business) purchased all of the outstanding shares of Ivera Medical Corp., headquartered in San Diego, California. Ivera Medical Corp. is a manufacturer of health care products...

  • Page 66
    ... of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders. In January 2015, 3M (Electronics and Energy Business) completed the sale of its global...

  • Page 67
    ... effective in the third quarter of 2015, within the Health Care business segment, the Company formed the Oral Care Solutions Division, which combined the former 3M ESPE and 3M Unitek divisions. For any product moves that resulted in reporting unit changes, the Company applied the relative fair value...

  • Page 68
    ... Africa (EMEA) and Latin America. This impacted approximately 1,700 positions worldwide and resulted in a fourth-quarter 2015 pre-tax charge of $114 million. Components of these restructuring charges are summarized by business segment as follows: Year ended December 31, 2015 Employee...

  • Page 69
    ... long-lived assets. Remaining activities related to the restructuring are expected to be completed in 2016. 69 (Millions) Components of these restructuring actions, including cash and non-cash impacts, follow: Year ended December 31, 2015 Employee-Related Asset-Related...

  • Page 70
    ... and postretirement benefits Other Total other current liabilities Other liabilities Long term income taxes payable Employee benefits Contingent liability claims and other Capital lease obligations Deferred income Deferred income taxes Other Total other liabilities $ $ 2015...

  • Page 71
    ...id in March 2015), which when added to second, third and fourth quarter 2014 declared dividends of $0.855 per share, resulted in total year 2014 declared dividends of $ 3.59 per share. In December 2013, 3M's Board of Directors declared a first-quarter 2014 dividend of $0.855 per share (paid in March...

  • Page 72
    ... trade on a public exchange in India. This sale of shares complied with an amendment to Indian securities regulations that required 3M India Limited, as a listed company, to achieve a minimum public shareholding of at least 25 percent. As a result of this transaction, 3M's ownership in 3M India...

  • Page 73
    ... reflected in other investing activity in the consolidated statement of cash flows for the year ended December 31, 2013. · During the second quarter of 2013, the Company's Sumitomo 3M Limited subsidiary moved its administrative headquarters to a new leased location and sold the former site under...

  • Page 74
    ... deductible Employee benefit costs $ 175 $ 148 Product and other claims 146 152 Miscellaneous accruals 114 137 Pension costs 1,120 1,312 Stock-based compensation 305 290 Net operating/capital loss carryforwards 109 175 Foreign tax credits...

  • Page 75
    ... Factors which increased the Company's effective tax rate included a one-time international tax impact related to the establishment of the supply chain center of expertise in Europe, decreased U.S. research and development credit in 2014 compared to 2013 due to two years inclusion as a result of the...

  • Page 76
    ...disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. As a result of certain employment commitments and capital investments made by 3M, income from certain manufacturing...

  • Page 77
    ... attributable to 3M for the applicable accounting period because the loss is not viewed as other-than-temporary. The factors evaluated to differentiate between temporary and other-than-temporary include the projected future cash flows, credit ratings actions, and assessment of the credit quality of...

  • Page 78
    ... such as general conditions in the overall credit market and the nature of the underlying collateral may affect the liquidity of investments in asset-backed securities. 3M does not currently expect risk related to its holding in asset-backed securities to materially impact its financial condition or...

  • Page 79
    ...Less: current portion of long-term debt 1,125 55 Long-term debt (excluding current portion 8,753 $ 6,705 Post-Swap Borrowing (Long-Term Debt, Including Current Portion) 2015 2014 Fixed-rate debt Floating-rate debt Total long-term debt, including current portion Short...

  • Page 80
    ... in connection with normal business activities. Long-Term Debt Issuances The principal amounts, interest rates and maturity dates of individual long-term debt issuances can be found in the long-term debt table found at the beginning of this note. In May 2015, 3M issued 1.750 billion Euros...

  • Page 81
    ... generally are based on each participant's years 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...

  • Page 82
    ... that can be applied to any Pension Protection Act funding requirements. As a result of changes made to its U.S. postretirement health care benefit plans in 2010, the Company has transitioned all current and future retirees to a savings account benefits-based plan. These changes became effective...

  • Page 83
    ... of Minnesota against five insurers seeking insurance coverage for the WG Trading Company claim. In September 2015, the court ruled in favor of the defendant insurance companies on a motion for summary judgment and dismissed the lawsuit. In October 2015, 3M and the 3M benefit plans filed a notice...

  • Page 84
    ... present value 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 $14.834 billion and $15.335 billion at December 31, 2015 and 2014...

  • Page 85
    ... over the next fiscal year $ 330 $ 76 $ 7 The Company primarily amortizes amounts recognized as prior service cost (benefit) over the average future service period of active employees at the date of the amendment. 85 (Millions) United States International Benefits

  • Page 86
    ... current and future retirees in the U.S. postretirement health care benefit plans to a savings account benefits-based plan. The contributions provided by the Company to the health savings accounts increase 3 percent per year for employees who retired prior to January 1, 2016 and increase 1.5 percent...

  • Page 87
    ... years has been 7.8% and 10.0% , respectively. Return on assets assumptions for international pension and other post-retirement benefit plans are calculated on a plan-by-plan basis using plan asset allocations and expected long-term rate of return assumptions. During 2015, the Company contributed...

  • Page 88
    ... corporate bonds Non-U.S. corporate bonds Derivative instruments Other* Total Fixed Income Private Equity Derivative instruments Growth equity Partnership investments* Total Private Equity Absolute Return Derivative instruments Fixed income and other Hedge fund/fund of funds* Partnership investments...

  • Page 89
    ... plan assets. Publicly traded equities are valued at the closing price reported in the active market in which the individual securities are traded. Fixed income includes derivative instruments such as credit default swaps, interest rate swaps and futures contracts. Corporate debt includes bonds...

  • Page 90
    ...asset allocation policy from country to country. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment allocation process in each country. The Company provides standard funding and investment guidance to all international plans with...

  • Page 91
    ... liquidity risks. Private equity funds consist of partnership interests in a variety of funds. Real estate consists of property funds and REITS (Real Estate Investment Trusts). REITS are valued at the closing price reported in the active market in which it is traded. Absolute return consists of...

  • Page 92
    ... future cash flows of the forecasted transactions from a previous term of 12 months to a longer term of 24 months, with certain currencies being extended further to 36 months starting in the first quarter of 2015 . Cash Flow Hedging - Commodity Price Management: The Company manages commodity price...

  • Page 93
    ... help manage borrowing costs, the Company may enter into interest rate swaps. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The mark-to...

  • Page 94
    ... three-month LIBOR index . 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 December 31, 2015 Gain (Loss...

  • Page 95
    ...Total Year ended December 31, 2014 (Millions) amount of long-term debt instruments designated in net investment hedges totaling 3.6 billion Euros. The maturity dates of these derivative and nonderivative instruments designated in net investment hedges range from 201 6 to 2030. The location...

  • Page 96
    ... of Contents 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: Gain (Loss) on Derivative Recognized in Income Year ended Year ended Year ended December 31...

  • Page 97
    ... to net settle amounts owed between a 3M entity and the counterparty as a result of multiple, separate derivative transactions. As of December 31, 2015, 3M has International Swaps and Derivatives Association (ISDA) agreements with 1 6 applicable banks and financial institutions which contain netting...

  • Page 98
    ... relate to available-for-sale marketable securities, available-for-sale investments (included as part of investments in the Consolidated Balance Sheet) and certain derivative instruments. Derivatives include cash flow hedges, interest rate swaps and most net investment hedges. The information...

  • Page 99
    ...considerations related to the direction of interest rates and the health of the overall municipal bond market, and as such will be classified as a level 3 security. Available-for-sale investments: Investments include equity securities that are traded in an active market. Closing stock prices are...

  • Page 100
    ... Corporate debt securities Commercial paper Certificates of deposit/time deposits Asset-backed securities: Automobile loan related Credit card related Equipment lease related Other U.S. municipal securities Derivative instruments - assets: Foreign currency forward/option contracts Interest rate...

  • Page 101
    ...relate primarily to long-lived asset impairments. There were no material long-lived asset impairments for 2015, 2014 and 2013. Fair Value of Financial Instruments: The Company's financial instruments include cash and cash equivalents, marketable securities, accounts receivable, certain investments...

  • Page 102
    ...these amounts will not provide an indication of the Company's expected future cash outflows related to purchase obligations. 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...

  • Page 103
    ... 3M does not have any material related party activity. 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...

  • Page 104
    ... and healthcare benefits provided to all workers with occupational pneumoconiosis and unspecified punitive damages. The case has been inactive since the fourth quarter of 2007, other than a case management conference in March 2011. In November 2013, the State filed a motion to bifurcate the lawsuit...

  • Page 105
    ... in the law and procedure applicable to these claims, and (vii) the financial viability of other co-defendants and insurers. As a result of the Company's cost of resolving claims of persons who claim more serious injuries, including mesothelioma and other malignancies, the Company increased its...

  • Page 106
    ..., 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...

  • Page 107
    ..., the Company works to find alternatives for such materials. Regulatory activities concerning PFOA and/or PFOS continue in the United States, Europe and elsewhere, and before certain international bodies. These activities include gathering of exposure and use information, risk assessment...

  • Page 108
    ... of any such actions. Environmental Litigation As previously reported, a former employee filed a purported class action lawsuit in 2002 in the Circuit Court of Morgan County, Alabama (the "St. John" case), seeking unstated damages and alleging that the plaintiffs suffered fear, increased risk...

  • Page 109
    ...rule against representing a client (here the State of Minnesota) in the same or substantially related matter where that person's interests are materially adverse to the interests of a former client (3M). The district court, however, denied 3M's motion to disqualify Covington because it further found...

  • Page 110
    ... information develops or circumstances change. The Company expects that it will pay the amounts recorded over the periods of remediation for the applicable sites, currently ranging up to 20 years. As of December 31, 2015, the Company had recorded liabilities of $35 million for "other environmental...

  • Page 111
    ... steps. The impact of the appellate court's decision is not material to the Company's consolidated results of operations or financial condition. Product Liability Litigation Électricité de France (EDF) filed a lawsuit against 3M France in the French courts in 2006 claiming commercial loss and...

  • Page 112
    ...of their annual stock compensation grants. The grant to eligible employees uses the closing stock price on the grant date. Accounting rules require recognition of expense under a nonsubstantive vesting period approach, requiring compensation expense recognition when an employee is eligible to retire...

  • Page 113
    ... tax benefits realized for the tax deductions related to the exercise of employee stock options for 2015, 2014 and 2013 was $172 million, $226 million and $208 million, respectively. The Company does not have a specific policy to repurchase common shares to mitigate the dilutive impact of options...

  • Page 114
    ... earnings per share. Performance Shares Instead of restricted stock units, the Company makes annual grants of performance shares to members of its executive management. The 2015 performance criteria for these performance shares (organic volume growth, return on invested capital, free cash flow...

  • Page 115
    ...Safety and Graphics; Health Care; Electronics and Energy; 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. Transactions among reportable...

  • Page 116
    ... Safety and Graphics Health Care Electronics and Energy Consumer Business Segment Information Tapes, coated, nonwoven and bonded abrasives, adhesives, advanced ceramics, sealants, specialty materials, filtration products, closure systems for personal hygiene products...

  • Page 117
    ...related operating income. Management evaluates each of its five business segments based on net sales and operating income performance, including dual credit U.S. reporting to further incentivize U.S. sales growth. As a result, 3M provides additional ("dual") credit to those business segments selling...

  • Page 118
    ... of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's "disclosure controls and procedures" (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based upon...

  • Page 119
    ... the 3M Proxy Statement and such information is incorporated by reference herein. Code of Ethics. All of our employees, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer and Controller, are required to abide by 3M's long-standing business conduct policies...

  • Page 120
    ... section "Corporate Governance at 3M" under the captions "Director Independence" and "Related Person Transaction Policy and Procedures" of the 3M Proxy Statement and such information is incorporated by reference herein. Item 14. Principal Accounting Fees and Services. The information relating to...

  • Page 121
    ... through February 2, 2016) is filed herewith . Form of Agreement for Stock Option Grants to Executive Officers under 3M 2008 Long-Term Incentive Plan is incorporated by reference from our Form 8-K dated May 13, 2008. 121 (10) Material contracts and management compensation plans and arrangements...

  • Page 122
    ... Awards Deferred Compensation Plan is incorporated by reference from our Form 10-K for the year ended December 31, 2009. 3M Executive Annual Incentive Plan is incorporated by reference from our Form 8-K dated May 14, 2007. Description of changes to 3M Compensation Plan for Non-Employee Directors...

  • Page 123
    ..., between 3M Company and State Street Bank and Trust Company as Independent Fiduciary of the 3M Employee Retirement Income Plan, is incorporated by reference from our Form 8K dated August 5, 2009. Calculation of ratio of earnings to fixed charges. Preferability letter regarding change in accounting...

  • Page 124
    ...of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 1 1 , 201 6 . Signature Title Inge G. Thulin Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer and Director) Eric...

  • Page 125
    ...dividend payable on shares of Common Stock as declared by 3M's Board of Directors with respect to such dividend record date. (i) "Fair Market Value" means the closing price for a share of Common Stock as reported on the New York Stock Exchange Composite Transactions. (j) "Full Value Award" means...

  • Page 126
    ... shares of Common Stock at a specified price for a specified period of time. (o) "Participant" means an employee of the Company or an Affiliate whose participation in the Plan has been approved by the Committee, or a nonemployee member of 3M's Board of Directors. (p) "Performance Criteria" means...

  • Page 127
    ...of shares of Common Stock following a Restricted Stock Period, subject to such terms and conditions as the Committee may establish. (z) "Retires" or "Retirement" means: (i) with respect to Awards granted under the Plan prior to January 1, 2016, the termination of a Participant's employment with...

  • Page 128
    ..., that nonemployee members of the 3M Board of Directors shall not be eligible to receive Incentive Stock Options, Progressive Stock Options, Performance Units or Performance Shares. The following types of Awards may be granted under this Plan: (a) Incentive Stock Options - Incentive Stock Options...

  • Page 129
    ...Restricted Stock shall be transferred to the Company without further action by the Participant. (f) Restricted Stock Units - At the time a grant of Restricted Stock Units is made, the Committee, in its sole discretion, shall establish a Restricted Period and such additional terms and conditions as...

  • Page 130
    ... Plan or any other employee benefit or compensation plan of the Company, then the Participant shall not have any rights under such Stock Award until the grants or rights exchanged have been fully and effectively surrendered or forfeited. (h) Performance Units and Performance Shares - At the time...

  • Page 131
    ... ninety (90)-day period following the date of the Participant's termination of employment and all of the Participant's other Awards shall automatically be forfeited at the time of his or her termination of employment. If a Participant Retires, terminates employment with the Company or an Affiliate...

  • Page 132
    ...of the Code. If a Participant Retires or changes employment status as a result of a physical or mental disability as recognized under a benefit plan maintained by the Participant's employer prior to the payment date for an Award of Performance Shares or Performance Units, such Retirement or change...

  • Page 133
    ... cash, vested shares of Common Stock or other property as a result of Awards granted under this Plan, other than Options and Stock Appreciation Rights, having a value exceeding $30,000,000 in any calendar year. No Participant who is a nonemployee member of 3M's Board of Directors may be granted...

  • Page 134
    ... opinion of the Company is required by law. The Company or any Affiliate shall have the right to deduct applicable taxes from any Award payment, to withhold from the shares of Common Stock being issued or delivered in connection with an Award an appropriate number of shares for the payment of taxes...

  • Page 135
    ... means the Securities Exchange Act of 1934. (d) "Continuing Directors" shall have the meaning assigned to such term in Article Thirteenth of the Restated Certificate of Incorporation of 3M Company. (e) "Cause" means (i) a material violation of any policy of the Company or the Affiliate employing...

  • Page 136
    ... of such fraction is the total number of months in such Performance Period, multiplied by the largest of: â- the value of such Performance Shares or Performance Units computed as if the Company's performance during the remainder of the Performance Period following the Change in Control equaled...

  • Page 137
    ... with respect to such Awards granted under this Plan will be deemed a part of any Participant's compensation for purposes of determining such Participant's payments or benefits under any benefit plan or severance program of the Company or any Affiliate or under the severance pay law of any country...

  • Page 138
    ...time to designate any person, persons or entity as the beneficiary or beneficiaries to whom payment of the Participant's outstanding Awards shall be made in the event of the Participant's death. Any designation filed under the Plan may be revoked or changed by written instrument so signed and filed...

  • Page 139
    ... paid upon Common Stock subject to any Awards under the 2005 Program, prior to such time as the Participant otherwise becomes entitled thereto as a holder of record. (j) "Fair Market Value" shall mean the closing price for a share of Common Stock as reported on the New York...

  • Page 140
    ... makes payment for all or part of the purchase price and withholding taxes in shares of Common Stock. (t) "Restricted Period" shall mean that period of time determined by the Committee during which a Participant shall not be permitted to sell or transfer shares of...

  • Page 141
    ... of the Board of Directors from authorized but unissued shares, treasury shares, or shares reacquired by the Company under corporate repurchase programs. The payment of stock dividends and dividend equivalents settled in Common Stock in conjunction with outstanding Awards shall not...

  • Page 142
    ... be transferred to the Company without further action by the Participant. (f) Restricted Stock Units - At the time a grant of Restricted Stock Units is made, the Committee, in its sole discretion, shall establish a Restricted Period and such additional Conditions as...

  • Page 143
    ... Administrator for credit to the account of the Participant. Payment of the purchase price or applicable withholding taxes, if any, may be made in whole, or in part, in shares of Common Stock, pursuant to such terms and conditions as may be established from time to time by the...

  • Page 144
    ... the opinion of the Company is required by law. The Company shall have the right to deduct applicable taxes from any Award payment, to withhold from the shares of Common Stock being issued or delivered in connection with an Award an appropriate number of shares for the payment of taxes required by...

  • Page 145
    ...(a)(2)(C) of the Code, and has not yet received the stock certificate for the shares of Common Stock represented by a grant of Restricted Stock, Restricted Stock Units or other Stock Award, then all restrictions imposed during the Restricted Period and any other Conditions prescribed by...

  • Page 146
    ... Awards with purchase prices lower than those specified in Section 6, or (iii) be a material amendment for which stockholder approval is required by applicable law, regulation or stock exchange rule. SECTION 14 CHANGE IN CONTROL (a) For purposes of this Section 14, the following words...

  • Page 147
    ..., settlements of Awards received by Participants under the 2005 Program shall not be deemed a part of any Participant's compensation for purposes of determining such Participant's payments or benefits under any Company benefit plan, severance program, or severance pay law of any country...

  • Page 148
    3M COMPANY AND SUBSIDIARIES CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES (Millions Year Year Year 2015 EXHIBIT 12 EARNINGS Income before income taxes Add: Interest expense (including amortization of capitalized interest) Portion of rent under operating leases representative of...

  • Page 149
    ... financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 and issued our report thereon dated February 11, 2016. Note 1 to the financial statements describes a change in accounting principle from a method which classifies marketable securities...

  • Page 150
    ... Services, Inc. 3M Innovative Properties Company 3M Investment Management Co rporation 3M Occupational Safety LLC 3M Purification Inc. Aearo Holding LLC Aearo Technologies LLC Capital Safety North America Holdings, Inc. Ceradyne, Inc. 3M Unitek Corporation Ivera Medical LLC Meguiar's, Inc. 3M Health...

  • Page 151
    ... Limited 3M India Limited 3M Electronic Monitoring Ltd 3M I TALIA srl 3M Japan Limited 3M Japan Holdings Company 3M Japan Products Limited 3M Korea Health and Safety Limited 3M Korea High Technology Limited 3M Korea Limited 3M Asset Management S.a.r.l. 3M Attenti Holdings S.a.r.l. 3M Global Capital...

  • Page 152
    ...) of 3M Company of our report dated February 11, 2016 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Minneapolis, Minnesota February 1 1 , 201...

  • Page 153
    ...Directors and the Principal Executive , Principal Financial and Principal Accounting Officers of 3M COMPANY, a Delaware corporation (the "Company...capacities, to sign one or more Annual Reports for the Company's fiscal year ended December 31, 201 5 , on Form 10-K under the Securities Exchange Act ...

  • Page 154
    ... and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the...

  • Page 155
    ... and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the...

  • Page 156
    ... 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Inge G. Thulin Inge G. Thulin Chief Executive Officer February 1 1 , 201...

  • Page 157
    ...In connection with the Annual Report of 3M Company (the "Company") on Form 10-K for the period ended December 31, 201 5 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Nicholas C. Gangestad, Chief Financial Officer of the Company, certify, pursuant to 18...

  • Page 158
    ... 110(b)(2) 107(a) Related Under Section 104(e) Last Day of Initiated During During Period Identification Proposed Orders (#) Orders (#) Violations (#) Orders (#) Fatalities (#) 104(e) (yes/no) (yes/no) Period (#) Period (#) Number 3M Pittsboro ID: 1 551...