3M 2007 Annual Report Download - page 67

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61
efficiently repatriate foreign earnings for U.S. qualifying investments specified in its domestic reinvestment plan. As a
consequence, in 2005, 3M recorded a charge of $75 million.
The Company made discretionary contributions to its U.S. qualified pension plan of $200 million in 2007, $200 million
in 2006, and $500 million in 2005. The current income tax provision includes a benefit for the pension contributions; the
deferred tax provision includes a cost for the related temporary difference.
As a result of certain employment commitments and capital investments made by 3M, income from manufacturing
activities in certain countries is subject to reduced tax rates or, in some cases, is exempt from tax for years through 2014.
The income tax benefits attributable to the tax status of these subsidiaries are estimated to be $47 million (6 cents per
diluted share) in 2007, $20 million (3 cents per diluted share) in 2006, and $23 million (3 cents per diluted share) in 2005.
The Company has not provided deferred taxes on unremitted earnings attributable to international companies that
have been considered to be reinvested indefinitely. These earnings relate to ongoing operations and were
approximately $5.7 billion as of December 31, 2007. Because of the availability of U.S. foreign tax credits, it is not
practicable to determine the income tax liability that would be payable if such earnings were not indefinitely reinvested.
NOTE 9. Marketable Securities
The Company invests in asset-backed securities, agency securities, corporate medium-term note securities, auction
rate securities and other securities. The following is a summary of amounts recorded on the Consolidated Balance
Sheet for marketable securities (current and non-current) at December 31, 2007.
Dec. 31,
(Millions) 2007
Agency securities $ 260
Asset-backed securities 186
Other securities 133
Current marketable securities 579
Asset-backed securities 267
Corporate medium-term notes securities 112
Agency securities 56
Auction rate securities 16
Other securities 29
Non-current marketable securities 480
Total marketable securities $1,059
Classification of marketable securities as current or non-current is dependent upon management’s intended holding
period, the security’s maturity date and liquidity considerations based on market conditions. If management intends to
hold the securities for longer than one year as of the balance sheet date, they are classified as non-current. The fair
value of marketable securities approximates cost, except for certain auction rate securities discussed in the next
paragraph. Gross unrealized gains and losses for marketable securities were not material as of December 31, 2007
and 2006; however, in 2007 the Company did have both realized and unrealized losses associated with auction rate
securities as discussed below. Gross realized gains and losses on sales of marketable securities were not material for
2007, 2006 or 2005, but in 2007 pre-tax gains totaled approximately $7 million. Cost of securities sold or reclassified
use the first in, first out (FIFO) method. Since these marketable securities are classified as available-for-sale
securities, changes in fair value will flow through other comprehensive income, with amounts reclassified out of other
comprehensive income into earnings upon sale or “other-than-temporary” impairment (as discussed below).
3M has a diversified marketable securities portfolio of $1.059 billion as of December 31, 2007. Within this portfolio,
current and long-term asset-backed securities (estimated fair value of $453 million) are primarily comprised of
interests in automobile loans and credit cards, with only $27 million invested in interests in mortgage-backed
securities or home equity loans. 3M’s marketable securities portfolio also includes auction rate securities (estimated
fair value of $16 million) that represent interests in collateralized debt obligations, which are collateralized by pools of
residential and commercial mortgages, and interests in investment grade credit default swaps. During the second half
of 2007, these auction rate securities failed to auction due to sell orders exceeding buy orders. Liquidity for these
auction-rate securities is typically provided by an auction process that resets the applicable interest rate at