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Marketable Securities
9 Months Ended
Sep. 30, 2015
Marketable Securities  
Marketable Securities

NOTE 6.  Marketable Securities

 

The Company invests in agency securities, corporate securities, asset-backed securities, treasury securities and other securities. The following is a summary of amounts recorded on the Consolidated Balance Sheet for marketable securities (current and non-current).

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

(Millions)

 

2015

 

2014

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

 —

 

$

67

 

Foreign government agency securities

 

 

10

 

 

75

 

Corporate debt securities

 

 

11

 

 

241

 

Commercial paper

 

 

25

 

 

 —

 

Certificates of deposit/time deposits

 

 

34

 

 

41

 

U.S. municipal securities

 

 

3

 

 

 —

 

Asset-backed securities:

 

 

 

 

 

 

 

Automobile loan related

 

 

38

 

 

122

 

Credit card related

 

 

10

 

 

59

 

Equipment lease related

 

 

3

 

 

21

 

Other

 

 

19

 

 

 —

 

Asset-backed securities total

 

 

70

 

 

202

 

 

 

 

 

 

 

 

 

Current marketable securities

 

$

153

 

$

626

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

1

 

$

41

 

Foreign government agency securities

 

 

 —

 

 

20

 

Corporate debt securities

 

 

 —

 

 

378

 

Certificates of deposit/time deposits

 

 

 —

 

 

 —

 

U.S. treasury securities

 

 

 —

 

 

38

 

U.S. municipal securities

 

 

12

 

 

15

 

Asset-backed securities:

 

 

 

 

 

 

 

Automobile loan related

 

 

 —

 

 

160

 

Credit card related

 

 

 —

 

 

103

 

Equipment lease related

 

 

 —

 

 

27

 

Other

 

 

 —

 

 

46

 

Asset-backed securities total

 

 

 —

 

 

336

 

 

 

 

 

 

 

 

 

Non-current marketable securities

 

$

13

 

$

828

 

 

 

 

 

 

 

 

 

Total marketable securities

 

$

166

 

$

1,454

 

 

Classification of marketable securities as current or non-current is dependent upon management’s intended holding period, the security’s maturity date and liquidity considerations based on market conditions. If management intends to hold the securities for longer than one year as of the balance sheet date, they are classified as non-current. The lower balance of marketable securities as of September 30, 2015, was driven by the 2015 acquisitions of Polypore’s Separations Media business and Capital Safety, as discussed in Note 2.

 

At September 30, 2015, both gross unrealized gains and losses were immaterial. At December 31, 2014, gross unrealized losses totaled approximately $1 million (pre-tax), while gross unrealized gains totaled approximately $1 million (pre-tax). Refer to Note 4 for a table that provides the net realized gains (losses) related to sales or impairments of debt and equity securities, which includes marketable securities. The gross amounts of the realized gains or losses were not material. Cost of securities sold use the first in, first out (FIFO) method. Since these marketable securities are classified as available-for-sale securities, changes in fair value will flow through other comprehensive income, with amounts reclassified out of other comprehensive income into earnings upon sale or “other-than-temporary” impairment.

 

3M reviews impairments associated with its marketable securities in accordance with the measurement guidance provided by ASC 320, Investments-Debt and Equity Securities, when determining the classification of the impairment as “temporary” or “other-than-temporary”. A temporary impairment charge results in an unrealized loss being recorded in the other comprehensive income component of shareholders’ equity. Such an unrealized loss does not reduce net income attributable to 3M for the applicable accounting period because the loss is not viewed as other-than-temporary. The factors evaluated to differentiate between temporary and other-than-temporary include the projected future cash flows, credit ratings actions, and assessment of the credit quality of the underlying collateral, as well as other factors.

 

The balances at September 30, 2015 for marketable securities by contractual maturity are shown below. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

 

 

 

 

 

 

(Millions)

    

September 30, 2015

 

 

 

 

 

 

Due in one year or less

 

$

71

 

Due after one year through five years

 

 

78

 

Due after five years through ten years

 

 

2

 

Due after ten years

 

 

15

 

 

 

 

 

 

Total marketable securities

 

$

166

 

 

3M has a diversified marketable securities portfolio of $166 million as of September 30, 2015. Within this portfolio, current and long-term asset-backed securities (estimated fair value of $70 million) primarily include interests in automobile loans, credit cards and equipment leases. 3M’s investment policy allows investments in asset-backed securities with minimum credit ratings of Aa2 by Moody’s Investors Service or AA by Standard & Poor’s or Fitch Ratings or DBRS. Asset-backed securities must be rated by at least two of the aforementioned rating agencies, one of which must be Moody’s Investors Service or Standard & Poor’s. At September 30, 2015, all asset-backed security investments were in compliance with this policy. Approximately 80.5 percent of all asset-backed security investments were rated AAA or A-1+ by Standard & Poor’s and/or Aaa or P-1 by Moody’s Investors Service and/or AAA or F1+ by Fitch Ratings. Interest rate risk and credit risk related to the underlying collateral may impact the value of investments in asset-backed securities, while factors such as general conditions in the overall credit market and the nature of the underlying collateral may affect the liquidity of investments in asset-backed securities. 3M does not currently expect risk related to its holding in asset-backed securities to materially impact its financial condition or liquidity.