XML 37 R20.htm IDEA: XBRL DOCUMENT
v3.24.1.u1

Derivatives | 3 Months Ended
--- | ---
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | NOTE 14. Derivatives The Company uses interest rate swaps and forward and option contracts to manage risks generally associated with foreign exchange rate and interest rate fluctuations. Note 16 to the Consolidated Financial Statements in 3M's 2023 Annual Report on Form 10-K explains the types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, and how such instruments are accounted for. It also contains information regarding previously initiated contracts or instruments. Additional information with respect to derivatives is included elsewhere as follows: •Impact on other comprehensive income of nonderivative hedging and derivative instruments is included in Note 7. •Fair value of derivative instruments is included in Note 15. •Derivatives and/or hedging instruments associated with the Company’s long-term debt are described in Note 13 to the Consolidated Financial Statements in 3M's 2023 Annual Report on Form 10-K. Refer to the section below titled Statement of Income (Loss) Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments for details on the location within the consolidated statements of income (loss) for amounts of gains and losses related to derivative instruments designated as cash flow or fair value hedges (along with similar information relative to the hedged items) and derivatives not designated as hedging instruments. Additional information relative to cash flow hedges, fair value hedges, net investment hedges and derivatives not designated as hedging instruments is included below as applicable. As of March 31, 2024, the Company had a balance of $28 million associated with the after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income (loss). This includes a remaining balance of $85 million (after-tax loss) related to forward starting interest rate swap and treasury rate lock contracts terminated in 2019 concurrent with associated debt issuances, which is being amortized over the respective lives of the underlying notes. Based on exchange rates as of March 31, 2024 of the total after-tax net unrealized balance as of March 31, 2024, 3M expects to reclassify approximately $44 million after-tax net unrealized gain over the next 12 months (with the impact offset by earnings/losses from underlying hedged items). The amount of pretax gain (loss) recognized in other comprehensive income (loss) related to derivative instruments designated as cash flow hedges is provided in the following table.
|  | Pretax Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative
|  | Three months ended March 31, |  |  |  |
(Millions) |  | 2024 |  | 2023 |  |  |  |  |  |  |  |  |  |
Foreign currency forward/option contracts |  | $ | 61 |  |  | $ | 6 |  |  |  |  |  |  |  |  |  |  |
The following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for active fair value hedges, as well as remaining amounts for discontinued fair value hedges:
Location on the Consolidated Balance Sheet (Millions) |  | Carrying Value of the Hedged Liabilities |  | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Liabilities
| March 31, 2024 |  | December 31, 2023 |  | March 31, 2024 |  | December 31, 2023
Long-term debt |  | $ | 907 |  | $ | 918 |  | $ | (96) |  | $ | (84)
At March 31, 2024, the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 150 million euros, along with a principal amount of long-term debt instruments designated in net investment hedges totaling 1.8 billion euros. The maturity dates of these derivative and nonderivative instruments designated in net investment hedges range from 2024 to 2031. The amount of gain (loss) excluded from effectiveness testing recognized in income relative to instruments designated in net investment hedge relationships is not material. The amount of pre-tax gain (loss) recognized in other comprehensive income (loss) related to derivative and nonderivative instruments designated as net investment hedges are as follows.
|  | Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income (Loss)
|  | Three months ended March 31, |  |  |  |
(Millions) |  | 2024 |  | 2023 |  |  |  |  |  |  |  |  |  |
Foreign currency denominated debt |  | $ | 43 |  |  | $ | (43) |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | 3 |  |  | (2) |  |  |  |  |  |  |  |  |  |  |
Total |  | $ | 46 |  |  | $ | (45) |  |  |  |  |  |  |  |  |  |  |
Derivatives Not Designated as Hedging Instruments: Derivatives not designated as hedging instruments include de-designated 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 contracts that are not designated in hedging relationships to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances. These derivative instruments are not designated in hedging relationships; therefore, fair value gains and losses on these contracts are recorded in earnings. The Company does not hold or issue derivative financial instruments for trading purposes. Statement of Income (Loss) Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments:
|  | Three months ended March 31, |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Cost of sales |  | Other expense (income), net |  |  |  |  |  |  |  |
(Millions) |  | 2024 |  | 2023 |  | 2024 |  | 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total consolidated financial statement line item amount |  | $ | 4,329 |  |  | $ | 4,613 |  |  | $ | 264 |  |  | $ | 52 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pre-tax amounts recognized in income related to derivative instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Information regarding cash flow and fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(Gain) or loss on cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward/option contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of (gain) or loss reclassified from accumulated other comprehensive income (loss) into income |  | (29) |  |  | (43) |  |  | — |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amount of (gain) or loss reclassified from accumulated other comprehensive income (loss) into income |  | — |  |  | — |  |  | 2 |  |  | 2 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(Gain) or loss on fair value hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedged items |  | — |  |  | — |  |  | (11) |  |  | 12 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives designated as hedging instruments |  | — |  |  | — |  |  | 11 |  |  | (12) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Information regarding derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(Gain) or loss on derivatives not designated as instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward/option contracts |  | 5 |  |  | (8) |  |  | 2 |  |  | 26 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Location, Fair Value, and Gross Notional Amounts of Derivative Instruments: The following tables summarize the fair value of 3M’s derivative instruments, excluding nonderivative instruments used as hedging instruments, and their location in the consolidated balance sheet. Notional amounts below are presented at period end foreign exchange rates, except for certain interest rate swaps, which are presented using the inception date’s foreign exchange rate.
|  | Gross Notional Amount |  | Assets |  | Liabilities
(Millions) |  |  | Location |  | Fair Value Amount |  | Location |  | Fair Value Amount
| March 31, 2024 |  | December 31, 2023 |  |  | March 31, 2024 |  | December 31, 2023 |  |  | March 31, 2024 |  | December 31, 2023
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward/option contracts |  | $ | 2,070 |  |  | $ | 2,109 |  |  | Other current assets |  | $ | 80 |  |  | $ | 68 |  |  | Other current liabilities |  | $ | 7 |  |  | $ | 27 |
Foreign currency forward/option contracts |  | 253 |  |  | 342 |  |  | Other assets |  | 11 |  |  | 11 |  |  | Other liabilities |  | 2 |  |  | 5 |
Interest rate contracts |  | 800 |  |  | 800 |  |  | Other assets |  | — |  |  | — |  |  | Other liabilities |  | 99 |  |  | 88 |
Total derivatives designated as hedging instruments |  |  |  |  |  |  |  | 91 |  |  | 79 |  |  |  |  | 108 |  |  | 120 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward/option contracts |  | 861 |  |  | 1,023 |  |  | Other current assets |  | 2 |  |  | 5 |  |  | Other current liabilities |  | 6 |  |  | 7 |
Total derivatives not designated as hedging instruments |  |  |  |  |  |  |  | 2 |  |  | 5 |  |  |  |  | 6 |  |  | 7 |
Total derivative instruments |  |  |  |  |  | $ | 93 |  |  | $ | 84 |  |  |  |  | $ | 114 |  |  | $ | 127 |
Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments: The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency swaps, and forward and option contracts. However, the Company’s risk is limited to the fair value of the instruments. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial institutions as counterparties. 3M enters into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions. A master netting arrangement may allow each counterparty to net settle amounts owed between a 3M entity and the counterparty as a result of multiple, separate derivative transactions. The Company does not anticipate nonperformance by any of these counterparties. 3M has elected to present the fair value of derivative assets and liabilities within the Company’s consolidated balance sheet on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. However, the following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties. For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period based on the 3M entity that is a party to the transactions. Derivatives not subject to master netting agreements are not eligible for net presentation. For the periods presented, 3M has not received cash collateral from derivative counterparties. Offsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties
|  | Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet |  | Gross Amount of Eligible Offsetting Recognized Derivative Liabilities |  |  |  | Net Amount of Derivative Assets
(Millions) |  | March 31, 2024 |  | December 31, 2023 |  | March 31, 2024 |  | December 31, 2023 |  |  |  |  |  | March 31, 2024 |  | December 31, 2023
Derivatives subject to master netting agreements |  | $ | 93 |  |  | $ | 84 |  |  | $ | 15 |  |  | $ | 30 |  |  |  |  |  |  | $ | 78 |  |  | $ | 54 |
Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties
|  | Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet |  | Gross Amount of Eligible Offsetting Recognized Derivative Assets |  |  |  | Net Amount of Derivative Liabilities
(Millions) |  | March 31, 2024 |  | December 31, 2023 |  | March 31, 2024 |  | December 31, 2023 |  |  |  |  |  | March 31, 2024 |  | December 31, 2023
Derivatives subject to master netting agreements |  | $ | 114 |  |  | $ | 127 |  |  | $ | 15 |  |  | $ | 30 |  |  |  |  |  |  | $ | 99 |  |  | $ | 97 |
3M estimates that year-on-year foreign currency transaction effects, including hedging impacts, decreased pre-tax income by approximately $26 million and increased pre-tax income by approximately $36 million for the three months ended March 31, 2024 and 2023, respectively. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration