3M 2014 Annual Report Download - page 115

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has not been recorded, the Company believes such liability is not probable and estimable and the Company is not able to
estimate a possible loss or range of loss at this time, with the exception of the Passaic River litigation, where the
Company’s potential exposure, if any, is likely to be a fraction of one percent of the total costs.
Environmental Liabilities and Insurance Receivables
As of December 31, 2014, the Company had recorded liabilities of $28 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 $11 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
20 years.
As of December 31, 2014, the Company had recorded liabilities of $43 million for “other environmental liabilities” based upon
an evaluation of currently available facts to implement the Settlement Agreement and Consent Order with the MPCA, the
remedial action agreement with ADEM, and to address trace amounts of perfluorinated compounds in drinking water
sources in the City of Oakdale, 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 Washington County,
Minnesota (Oakdale and Woodbury). The Company expects that most of the spending will occur over the next four years.
As of December 31, 2014, the Company’s receivable for insurance recoveries related to “other environmental liabilities”
was $15 million.
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 alternative 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. For sites included in both “environmental remediation liabilities” and “other environmental liabilities,” at which
remediation activity is largely complete and remaining activity relates primarily to operation and maintenance of the remedy,
including required post-remediation monitoring, the Company believes the exposure to loss in excess of the amount accrued
would not be material to the Company’s consolidated results of operations or financial condition. However, for locations at
which remediation activity is largely ongoing, the Company cannot estimate a possible loss or range of loss in excess of the
associated established accruals for the reasons described above.
Other Matters
Commercial Litigation
In October 2012, four plaintiffs filed purported class actions against Ceradyne, Inc., its directors, 3M, and Cyborg Acquisition
Corporation (a direct wholly owned subsidiary of 3M) in connection with 3M’s proposed acquisition of Ceradyne. Two suits
were filed in California Superior Court for Orange County, and two were filed in the Delaware Chancery Court. The suits
alleged that the defendants breached and/or aided and abetted the breach of their fiduciary duties to Ceradyne by seeking to
sell Ceradyne through an allegedly unfair process and for an unfair price and on unfair terms, and/or by allegedly failing to
make adequate disclosures to Ceradyne stockholders regarding the acquisition of Ceradyne. 3M completed its acquisition of
Ceradyne in November 2012. In November 2012, the parties reached a settlement with the California plaintiffs for an amount
that is not material to the Company, while the Delaware plaintiffs dismissed their complaints without prejudice. The
settlement will bind all former Ceradyne shareholders and has received preliminary approval from the California court. A final
approval hearing was held in July 2013, and the California court denied approval of the settlement. The plaintiffs filed a
motion for reconsideration of the denial of approval of the settlement, which motion was denied by the California court. The
plaintiffs then filed a motion for leave to amend their complaint, which motion was denied without prejudice in January 2014.
By stipulation in February 2014, plaintiffs agreed to voluntarily dismiss claims against 3M and Cyborg Acquisition Corporation
without prejudice. In March 2014, the court entered its Order dismissing 3M and Cyborg Acquisition Corporation from the
action without prejudice. The lawsuit against Ceradyne, Inc., and its directors is proceeding. These defendants moved to
dismiss plaintiffs’ amended complaint, which motion was denied in January 2015.