3M 2011 Annual Report Download - page 98

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92
In September 2006, the Company entered into a three-year floating-to-floating cross currency swap with a notional
amount of $300 million. This transaction was a partial hedge of the Company’s net investment in its Japanese
subsidiaries. This swap converted U.S. dollar-based variable interest payments to yen-based variable interest
payments associated with the notional amount. This swap matured in September 2009.
3M uses foreign currency denominated debt as nonderivative hedging instruments in certain net investment hedges.
In July and December 2007, the Company issued seven-year fixed rate Eurobond securities for amounts of 750
million Euros and 275 million Euros, respectively. 3M designated each of these Eurobond issuances as hedging
instruments of the Company’s net investment in its European subsidiaries.
The location in the consolidated statements of income and comprehensive income and amounts of gains and losses
related to derivative and nonderivative instruments designated as net investment hedges are as follows. There were
no reclassifications of the effective portion of net investment hedges out of accumulated other comprehensive
income into income for the periods presented in the table below.
Year ended December 31, 2011
(Millions)
Derivative and Nonderivative Instruments in
Pretax Gain (Loss) Recognized as
Cumulative Translation within Other
Comprehensive Income on Effective
Portion of Instrument
Ineffective Portion of Gain (Loss) on
Instrument and Amount Excluded
from Effectiveness Testing
Recognized in Income
Net Investment Hedging Relationships Amount Location Amount
Foreign currency denominated debt ............. $ 41 N/A $ —
Total ........................................................ $ 41 $ —
Year ended December 31, 2010
(Millions)
Derivative and Nonderivative Instruments in
Pretax Gain (Loss) Recognized as
Cumulative Translation within Other
Comprehensive Income on Effective
Portion of Instrument
Ineffective Portion of Gain (Loss) on
Instrument and Amount Excluded
from Effectiveness Testing
Recognized in Income
Net Investment Hedging Relationships Amount Location Amount
Foreign currency denominated debt ............. 111 N/A —
Total ........................................................ $ 111 $ —
Year ended December 31, 2009
(Millions)
Derivative and Nonderivative Instruments in
Pretax Gain (Loss) Recognized as
Cumulative Translation within Other
Comprehensive Income on Effective
Portion of Instrument
Ineffective Portion of Gain (Loss) on
Instrument and Amount Excluded
from Effectiveness Testing
Recognized in Income
Net Investment Hedging Relationships Amount Location Amount
Cross currency swap contracts .................... $ (12 ) Interest expense $ —
Foreign currency denominated debt ............. (27 ) N/A —
Total ........................................................ $ (39 ) $ —
Derivatives Not Designated as Hedging Instruments:
Derivatives not designated as hedging instruments include dedesignated foreign currency forward and option
contracts that formerly were designated in cash flow hedging relationships (as referenced in the Cash Flow Hedges
section above). In addition, 3M enters into foreign currency forward contracts and commodity price swaps to offset, in
part, the impacts of certain intercompany activities (primarily associated with intercompany licensing arrangements)
and fluctuations in costs associated with the use of certain precious metals, respectively. These derivative
instruments are not designated in hedging relationships; therefore, fair value gains and losses on these contracts are
recorded in earnings. The dollar equivalent gross notional amount of these forward, option and swap contracts not
designated as hedging instruments totaled $1.1 billion as of December 31, 2011. The Company does not hold or
issue derivative financial instruments for trading purposes.
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:
Year ended December 31, 2011 Year ended December 31, 2010
Gain (Loss) on Derivative Gain (Loss) on Derivative
(Millions) Recognized in Income Recognized in Income
Derivatives Not Designated as Hedging Instruments Location Amount Location Amount
Foreign currency forward/option contracts .................... Cost of sales $ 13 Cost of sales $ (24 )
Foreign currency forward contracts ............................... Interest expense 9 Interest expense (19 )
Commodity price swap contracts .................................. Cost of sales — Cost of sales 1
Total ......................................................................... $ 22 $ (42 )