3M 2005 Annual Report Download - page 32

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6
specific products extend for varying periods according to the date of patent application filing or patent grant and the
legal term of patents in the various countries where patent protection is obtained. The actual protection afforded by a
patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the
availability of legal remedies in the country.
The Company believes that its patents provide an important competitive advantage in many of its businesses. In
general, no single patent or group of related patents is in itself essential to the Company as a whole or to any of the
Company’s business segments. The importance of patents in the Health Care and Display and Graphics segments is
described in “Performance by Business Segment” – “Health Care Business” and “Display and Graphics Business” in
Part II, Item 7, of this Form 10-K.
Raw Materials
In 2005, the Company experienced both price increases and supply limitations affecting several oil-derived raw
materials, but to date the Company is receiving sufficient quantities of such materials to meet its reasonably
foreseeable production requirements. It is impossible to predict future shortages of raw materials or the impact any
such shortages would have. Hurricanes Katrina and Rita resulted in tight supply conditions and significant
increases in energy costs, fuel surcharges and prices for certain natural gas and petroleum related raw materials.
3M has avoided disruption to its manufacturing operations through careful management of existing raw material
inventories and development and qualification of additional supply sources. 3M manages commodity price risks
through negotiated supply contracts, price protection agreements and forward physical contracts.
Environmental Law Compliance
3M’s manufacturing operations are affected by national, state and local environmental laws around the world. 3M
has made, and plans to continue making, necessary expenditures for compliance with applicable laws. 3M is also
involved in remediation actions relating to environmental matters from past operations at certain sites (refer to
“Environmental Liabilities and Insurance Receivables” in Note 11 Commitments and Contingencies).
Environmental expenditures relating to existing conditions caused by past operations that do not contribute to
current or future revenues are expensed. Liabilities for remediation costs are recorded on an undiscounted basis
when they are probable and reasonably estimable, generally no later than the completion of feasibility studies or
the Company’s commitment to a plan of action. Environmental expenditures for capital projects that contribute to
current or future operations generally are capitalized and depreciated over their estimated useful lives.
In 2005, 3M expended about $26 million for capital projects related to protecting the environment. The comparable
amount in 2004 was about $67 million. These amounts exclude expenditures for remediation actions relating to
existing matters caused by past operations. Capital expenditures for environmental purposes have included
pollution control devices – such as wastewater treatment plant improvements, scrubbers, containment structures,
solvent recovery units and thermal oxidizers – at new and existing facilities constructed or upgraded in the normal
course of business. Consistent with the Company’s policies stressing environmental responsibility, capital
expenditures (other than for remediation projects) for known projects are presently expected to be about
$35 million over the next two years for new or expanded programs to build facilities or modify manufacturing
processes to minimize waste and reduce emissions.
While the Company cannot predict with certainty the future costs of such cleanup activities, capital expenditures or
operating costs for environmental compliance, the Company does not believe they will have a material effect on its
capital expenditures, earnings or competitive position.
Executive Officers
Following is a list of the executive officers of 3M, their ages, present positions, the years elected to their present
positions and other positions held during the past five years. No family relationships exist among any of the executive
officers named, nor is there any undisclosed arrangement or understanding pursuant to which any person was
selected as an officer. This information is presented as of the date of the 10-K filing (February 21, 2006).