3M 2015 Annual Report Download - page 102

TableofContents
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NOTE14.CommitmentsandContingencies
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CapitalandOperatingLeases:
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Rentalexpenseunderoperatingleaseswas$316millionin2015,$332millionin2014and$330millionin2013.Itis3M’spractice
tosecurerenewalrightsforleases,therebygiving3Mtheright,butnottheobligation,tomaintainapresenceinaleasedfacility.3M
hasthreeprimarycapitalleases.First,3Mhasacapitallease,whichbecameeffectiveinApril2003,thatinvolvesabuildinginthe
UnitedKingdom(withaleasetermof22years).Duringthesecondquarterof2003,3Mrecordedacapitalleaseassetandobligation
ofapproximately33.5millionBritishPound(GBP),orapproximately$50millionatDecember31,2015,exchangerates.Second,
duringthefourthquarterof2009,3Mrecordedacapitalleaseassetandobligationofapproximately$50millionrelatedtoanIT
investmentwithanamortizationperiodofsevenyears.Third,inthefourthquarterof2014,3Mrecordedacapitalleaseassetand
obligationofapproximately$15million,whichisdiscussedinmoredetailinNote7.
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Minimumleasepaymentsundercapitalandoperatingleaseswithnon-cancelabletermsinexcessofoneyearasofDecember31,
2015,wereasfollows:
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   Operating 
(Millions) CapitalLeases Leases 
2016  $ 11  $ 234 
2017   6   191 
2018   4   134 
2019   3   86 
2020   3   72 
After2020   32   226 
Total  $ 59  $ 943 
Less:Amountsrepresentinginterest   5   
Presentvalueoffutureminimumleasepayments   54   
Less:Currentobligationsundercapitalleases   8   
Long-termobligationsundercapitalleases  $ 46   
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UnconditionalPurchaseObligations:
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Unconditionalpurchaseobligationsaredefinedasanagreementtopurchasegoodsorservicesthatisenforceableandlegallybinding
(non-cancelable,orcancelableonlyincertaincircumstances).TheCompanyestimatesitstotalunconditionalpurchaseobligation
commitment(forthosecontractswithtermsinexcessofoneyear)asofDecember31,2015,at$596million.Paymentsbyyearare
estimatedasfollows:2016($193million),2017($160million),2018($102million),2019($54million),2020($56million)and
after2020($31million).Manyofthesecommitmentsrelatetotakeorpaycontracts,inwhich3Mguaranteespaymenttoensure
availabilityofproductsorservicesthataresoldtocustomers.TheCompanyexpectstoreceiveconsideration(productsorservices)
fortheseunconditionalpurchaseobligations.Thepurchaseobligationamountsdonotrepresenttheentireanticipatedpurchasesin
thefuture,butrepresentonlythoseitemsforwhichtheCompanyiscontractuallyobligated.Themajorityof3M’sproductsand
servicesarepurchasedasneeded,withnounconditionalcommitment.Forthisreason,theseamountswillnotprovideanindication
oftheCompany’sexpectedfuturecashoutflowsrelatedtopurchaseobligations.
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Warranties/Guarantees:
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3M’saccruedproductwarrantyliabilities,recordedontheConsolidatedBalanceSheetaspartofcurrentandlong-termliabilities,are
estimatedatapproximately$28millionatDecember31,2015,and$30millionatDecember31,2014.3Mdoesnotconsiderthis
amounttobematerial.Thefairvalueof3Mguaranteesofloanswiththirdpartiesandotherguaranteearrangementsarenotmaterial.
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