3M 2015 Annual Report Download - page 92
Download and view the complete annual report
Please find page 92 of the 2015 3M annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.TableofContents
periodduringwhichthehedgedtransactionaffectsearnings.Gainsandlossesonthederivativerepresentingeitherhedge
ineffectivenessorhedgecomponentsexcludedfromtheassessmentofeffectivenessarerecognizedincurrentearnings.
CashFlowHedging-ForeignCurrencyForwardandOptionContracts:TheCompanyentersintoforeignexchangeforwardand
optioncontractstohedgeagainsttheeffectofexchangeratefluctuationsoncashflowsdenominatedinforeigncurrencies.These
transactionsaredesignatedascashflowhedges.Thesettlementorextensionofthesederivativeswillresultinreclassifications(from
accumulatedothercomprehensiveincome)toearningsintheperiodduringwhichthehedgedtransactionsaffectearnings.3Mmay
dedesignatethesecashflowhedgerelationshipsinadvanceoftheoccurrenceoftheforecastedtransaction.Theportionofgainsor
lossesonthederivativeinstrumentpreviouslyaccumulatedinothercomprehensiveincomefordedesignatedhedgesremainsin
accumulatedothercomprehensiveincomeuntiltheforecastedtransactionoccurs.Changesinthevalueofderivativeinstrumentsafter
dedesignationarerecordedinearningsandareincludedintheDerivativesNotDesignatedasHedgingInstrumentssectionbelow.
Beginninginthesecondquarterof2014,3Mbeganextendingthemaximumlengthoftimeoverwhichithedgesitsexposuretothe
variabilityinfuturecashflowsoftheforecastedtransactionsfromaprevioustermof12monthstoalongertermof24months,with
certaincurrenciesbeingextendedfurtherto36monthsstartinginthefirstquarterof2015.
CashFlowHedging-CommodityPriceManagement:TheCompanymanagescommoditypricerisksthroughnegotiatedsupply
contracts,priceprotectionagreementsandforwardcontracts.3Mdiscontinuedtheuseofcommoditypriceswapsascashflow
hedgesofforecastedcommoditytransactionsinthefirstquarterof2015.TheCompanyusedcommoditypriceswapsascashflow
hedgesofforecastedcommoditytransactionstomanagepricevolatility.Therelatedmark-to-marketgainorlossonqualifying
hedgeswasincludedinothercomprehensiveincometotheextenteffective,andreclassifiedintocostofsalesintheperiodduring
whichthehedgedtransactionaffectedearnings.
CashFlowHedging—InterestRateContracts:Inthethirdandfourthquartersof2014,theCompanyenteredintoforwardstarting
interestrateswapswithnotionalamountstotaling500millionEurosasahedgeagainstinterestratevolatilityassociatedwiththe
forecastedissuanceoffixedratedebt.3Mterminatedtheseinterestrateswapsuponissuanceof750millionEurosaggregate
principalamountoftwelve-yearfixedratenotesinconnectionwith3M’s1.250billionEurobondofferinginNovember2014.The
terminationresultedina$8millionpre-tax($5millionafter-tax)losswithinaccumulatedothercomprehensiveincomethatwillbe
amortizedoverthetwelve-yearlifeofthenotes.
Theamortizationofgainsandlossesonforwardstartinginterestrateswapsisincludedinthetablesbelowaspartofthegain/(loss)
recognizedinincomeontheeffectiveportionofderivativesasaresultofreclassificationfromaccumulatedothercomprehensive
income.
AsofDecember31,2015,theCompanyhadabalanceof$124millionassociatedwiththeaftertaxnetunrealizedgainassociated
withcashflowhedginginstrumentsrecordedinaccumulatedothercomprehensiveincome.Thisincludesaremainingbalanceof$5
million(aftertaxloss)relatedtoforwardstartinginterestrateswaps,whichwillbeamortizedovertherespectivelivesofthenotes.
BasedonexchangeratesasofDecember31,2015,3Mexpectstoreclassifyapproximately$98millionoftheafter-taxnetunrealized
foreignexchangecashflowhedginggainstoearningsin2016,approximately$23millionoftheafter-taxnetunrealizedforeign
exchangecashflowhedginggainstoearningsin2017,andapproximately$3millionoftheafter-taxnetunrealizedforeignexchange
cashflowhedginggainstoearningsafter2017(withtheimpactoffsetbyearnings/lossesfromunderlyinghedgeditems).
Thelocationintheconsolidatedstatementsofincomeandcomprehensiveincomeandamountsofgainsandlossesrelatedto
derivativeinstrumentsdesignatedascashflowhedgesareprovidedinthefollowingtable.Reclassificationsofamountsfrom
accumulatedothercomprehensiveincomeintoincomeincludeaccumulatedgains(losses)ondedesignatedhedgesatthetime
earningsareimpactedbytheforecastedtransaction.
92