3M 2008 Annual Report Download - page 98

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coverage for respirator mask/asbestos claims. These insurers represent approximately $14 million of the $193 million
insurance recovery receivable referenced in the above table. The action was filed in Hennepin County, Minnesota
and names, in addition to the Company, over 60 of the Company’s insurers. This action is similar in nature to an
action filed in 1994 with respect to breast implant coverage, which ultimately resulted in the Minnesota Supreme
Court’s ruling of 2003 that was largely in the Company’s favor. At the Company’s request, the case was transferred
to Ramsey County, over the objections of the insurers. The Minnesota Supreme Court heard oral argument of the
insurers’ appeal of that decision in March 2008 and ruled in May 2008 that the proper venue of that case is Ramsey
County. The Company is awaiting the assignment of a judge to this matter.
Environmental and Other Liabilities and Insurance Receivables: As of December 31, 2008, the Company had
recorded liabilities of $31 million for estimated environmental remediation costs based upon an evaluation of
currently available facts with respect to each individual site and also recorded related insurance receivables of $15
million. The Company records liabilities for remediation costs 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. 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 other potentially responsible parties, the extent of the contamination and the nature of required
remedial actions. The Company adjusts recorded liabilities as further 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 30 years.
As of December 31, 2008, the Company had recorded liabilities of $137 million for estimated other environmental
liabilities based upon an evaluation of currently available facts for addressing trace amounts of perfluorinated
compounds in drinking water sources in the City of Oakdale and Lake Elmo, Minnesota, as well as presence in the
soil and groundwater at the Company’s manufacturing facilities in Decatur, Alabama, and Cottage Grove, Minnesota,
and at two former disposal sites in Minnesota. The Company expects that most of the spending will occur over the
next three to seven years.
It is difficult to estimate the cost of environmental compliance and remediation given the uncertainties regarding the
interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental
contamination and the existence of alternate cleanup methods. Developments may occur that could affect the
Company’s current assessment, including, but not limited to: (i) changes in the information available regarding the
environmental impact of the Company’s operations and products; (ii) changes in environmental regulations, changes
in permissible levels of specific compounds in drinking water sources, or changes in enforcement theories and
policies, including efforts to recover natural resource damages; (iii) new and evolving analytical and remediation
techniques; (iv) success in allocating liability to other potentially responsible parties; and (v) the financial viability of
other potentially responsible parties and third-party indemnitors.
NOTE 15. Employee Savings and Stock Ownership Plans
The Company sponsors employee savings plans under Section 401(k) of the Internal Revenue Code. These plans
are offered to substantially all regular U.S. employees. Employee contributions of up to 6% of eligible compensation
are matched at rates of 35% or 50%, depending on the plan the employee is participating in, with additional
Company contributions depending upon Company performance. All Company contributions initially are invested in
3M common stock, with employee contributions invested in a number of investment funds pursuant to their elections.
Vested employees may diversify their 3M shares into other investment options.
During 2008 the Board of Directors approved various changes to the employee savings plans. Effective January 1,
2009, employer contributions will no longer be based on Company performance; however, the matching contributions
for eligible participants hired before January 1, 2009, will increase from 35% to 60%, or from 50% to 75%, for
employee contributions up to the first 6% of eligible compensation, depending on the plan the employee is
participating in. Eligible participants hired or rehired on or after January 1, 2009, will receive a cash match of 100%
for employee contributions up to the first 6% of eligible compensation and also receive an employer retirement
income account cash contribution of 3% of the participant’s total eligible compensation. Effective January 1, 2010,
the matching contributions for participants hired or rehired prior to January 1, 2009, will be made in cash.
The Company maintains an Employee Stock Ownership Plan (ESOP). This plan was established in 1989 as a cost-
effective way of funding the majority of the Company’s contributions under 401(k) employee savings plans. Total
ESOP shares are considered to be shares outstanding for earnings per share calculations. The ESOP debt
obligation will mature in 2009 (Note 10).