3M 2010 Annual Report Download - page 105

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99
There were no long-lived asset impairments for 2010. Long-lived asset impairments for 2009 included the portion of
2009 restructuring actions related to long-lived asset impairments as discussed in Note 4, with the complete carrying
amount of such assets written off and included in operating income results. In addition to the restructuring activities,
in June 2009 the Company recorded a $13 million impairment of certain long-lived assets associated with the UK
passport production activity of 3M’s Security Systems Division (within the Safety, Security and Protection Services
business segment). In June 2009, 3M was notified that the UK government decided to award the production of its
passports to a competitor upon the expiration of 3M’s existing UK passport contracts in October 2010. Accordingly,
3M tested the long lived assets associated with the UK passport activity for recoverability which indicated that the
asset grouping’s carrying amount exceeded the remaining expected cash flows. As a result, associated assets were
written down to a fair value of $41 million in June 2009. 3M primarily uses a discounted cash flow model that uses
inputs such as interest rates and cost of capital, to determine the fair value of such assets. 3M considers these level
3 inputs.
Year ended December 31, 2009
Fair Value Measurements Using
(Millions)
Quoted Prices in
Significant
Description
Fair value
Active
Markets
for Identical
Assets (Level 1)
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Total Gains
(Losses)
Long-lived assets held and used
$
41
$
—
$
—
$
41
$
(32
)
Fair Value of Financial Instruments:
The Company’s financial instruments include cash and cash equivalents, marketable securities, accounts receivable,
certain investments, accounts payable, borrowings, and derivative contracts. The fair values of cash and cash
equivalents, accounts receivable, accounts payable, and short-term borrowings and current portion of long-term debt
approximated carrying values because of the short-term nature of these instruments. Available-for-sale marketable
securities and investments, in addition to certain derivative instruments, are recorded at fair values as indicated in the
preceding disclosures. The Company utilized third-party quotes to estimate fair values for its long-term debt.
Information with respect to the carrying amounts and estimated fair values of these financial instruments follow:
December 31, 2010
December 31, 2009
(Millions)
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Long-term debt, excluding current portion ..........
$
4,183
$
4,466
$
5,097
$
5,355
The fair values reflected above consider the terms of the related debt absent the impacts of derivative/hedging
activity. The carrying amount of long-term debt referenced above is impacted by certain fixed-to-floating interest rate
swaps that are designated as fair value hedges and by the designation of fixed rate Eurobond securities issued by
the Company as hedging instruments of the Company’s net investment in its European subsidiaries. 3M’s fixed-rate
bonds were trading at a premium at December 31, 2010 and 2009 due to the low interest rates and tightening of
3M’s credit spreads.