3M 2004 Annual Report Download - page 60

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Off-Balance Sheet Arrangements and Contractual Obligations:
As of December 31, 2004, the Company had not utilized special purpose entities to facilitate off-balance sheet
financing arrangements. 3M’s accrued product warranty liabilities, recorded on the Consolidated Balance Sheet as
part of current and long-term liabilities, are estimated at approximately $22 million. 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.
In addition to guarantees, 3M, in the normal course of business, periodically enters into agreements that require
3M to indemnify either major customers or suppliers for specific risks, such as claims for injury or property
damage arising out of 3M products or the negligence of 3M personnel, or claims alleging that 3M products infringe
third party patents or other intellectual property. While 3M’s maximum exposure under these indemnification
provisions cannot be estimated, these indemnifications are not expected to have a material impact on the
Company’s consolidated financial position or results of operations.
A summary of the Company’s significant contractual obligations as of December 31, 2004, follows:
Contractual Obligations
Payments due by year
(Millions) Total 2005 2006 2007 2008 2009
After
2009
Long-term debt
(including current portion) $2,132 $1,405 $ 39 $ 40 $42 $44 $562
Operating leases 340 93 56 39 19 15 118
Capital leases 106 5 5 4 5 5 82
Unconditional purchase
obligations 368 154 70 46 17 11 70
Total contractual cash
obligations $2,946 $1,657 $170 $129 $83 $75 $832
Long-term debt payments due in 2005 include $350 million of dealer remarketable securities (final maturity 2010),
$62 million of medium-term notes (final maturity 2044), and $556 million of convertible notes (final maturity 2032).
These securities are classified as current portion of long-term debt as the result of put provisions associated with
these debt instruments.
Unconditional purchase obligations are defined as an agreement to purchase goods or services that is
enforceable and legally binding on the Company. Included in the unconditional purchase obligations category
above are certain obligations related to take or pay contracts, capital commitments, service agreements and
utilities. These estimates include both unconditional purchase obligations with terms in excess of one year and
normal ongoing purchase obligations with terms of less than one year. 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
numbers will not provide a reliable indicator of the Company’s expected future cash outflows on a stand-alone
basis.
As discussed in Note 11 to the Consolidated Financial Statements, the Company does not have a required minimum
pension contribution obligation for its U.S. plans in 2005. Thus, Company contributions to its U.S. and international
pension plans are expected to be largely discretionary in 2005 and future years. Contractual capital commitments are
also included in the preceding table, but these commitments represent a small part of the Company’s expected
capital spending in 2005 and beyond. For 2005, the Company expects to spend approximately $950 million on
purchases of property, plant and equipment.