NOTE 11. Derivatives
The Company uses interest rate swaps, currency swaps, commodity price swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations. The information that follows explains the various types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, how such instruments are accounted for, and how such instruments impact 3M's financial position and performance.
Additional information with respect to the impacts on other comprehensive income of nonderivative hedging and derivative instruments is included in Note 5. Additional information with respect to the fair value of derivative instruments is included in Note 12. References to information regarding derivatives and/or hedging instruments associated with the Company's long-term debt are also made in Note 9.
Types of Derivatives/Hedging Instruments and Inclusion in Income/Other Comprehensive Income
Cash Flow Hedges:
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.
Cash Flow Hedging - Foreign Currency Forward and Option Contracts: The Company enters into foreign exchange forward and option contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactions are designated as cash flow hedges. The settlement or extension of these derivatives will result in reclassifications (from accumulated other comprehensive income) to earnings in the period during which the hedged transactions affect earnings. Generally, 3M dedesignates these cash flow hedge relationships in advance of the occurrence of the forecasted transaction. The portion of gains or losses on the derivative instrument previously accumulated in other comprehensive income for dedesignated hedges remains in accumulated other comprehensive income until the forecasted transaction occurs. Changes in the value of derivative instruments after dedesignation are recorded in earnings and are included in the Derivatives Not Designated as Hedging Instruments section below. Hedge ineffectiveness and the amount excluded from effectiveness testing recognized in income on cash flow hedges were not material for 2013, 2012 and 2011. The maximum length of time over which 3M hedges its exposure to the variability in future cash flows for a majority of the forecasted transactions is 12 months and, accordingly, at December 31, 2013, the majority of the Company's open foreign exchange forward and option contracts had maturities of one year or less. The dollar equivalent gross notional amount of the Company's foreign exchange forward and option contracts designated as cash flow hedges at December 31, 2013 was approximately $1.7 billion.
Cash Flow Hedging - Commodity Price Management: The Company manages commodity price risks through negotiated supply contracts, price protection agreements and forward physical contracts. The Company uses commodity price swaps relative to natural gas as cash flow hedges of forecasted transactions to manage price volatility. The related mark-to-market gain or loss on qualifying hedges is included in other comprehensive income to the extent effective, and reclassified into cost of sales in the period during which the hedged transaction affects earnings. Generally, the length of time over which 3M hedges its exposure to the variability in future cash flows for its forecasted natural gas transactions is 12 months. No significant commodity cash flow hedges were discontinued and hedge ineffectiveness was not material for 2013, 2012 and 2011. The dollar equivalent gross notional amount of the Company's natural gas commodity price swaps designated as cash flow hedges at December 31, 2013 was $19 million.
Cash Flow Hedging – Forecasted Debt Issuance: In August 2011, in anticipation of the September 2011 issuance of $1 billion in five-year fixed rate notes, 3M executed a pre-issuance cash flow hedge on a notional amount of $400 million by entering into a forward-starting five-year floating-to-fixed interest rate swap. Upon debt issuance in September 2011, 3M terminated the floating-to-fixed interest rate swap. The termination of the swap resulted in a $7 million pre-tax loss ($4 million after-tax) that will be amortized over the five-year life of the note and, when material, is included in the tables below as part of the loss recognized in income on the effective portion of derivatives as a result of reclassification from accumulated other comprehensive income.
As of December 31, 2013, the Company had a balance of $8 million associated with the after tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income. This includes a $2 million balance (loss) related to a floating-to-fixed interest rate swap (discussed in the preceding paragraph), which will be amortized over the five-year life of the note. 3M expects to reclassify a majority of the remaining balance to earnings over the next 12 months (with the impact offset by cash flows from underlying hedged items).
The location in the consolidated statements of income and comprehensive income and amounts of gains and losses related to derivative instruments designated as cash flow hedges are provided in the following table. Reclassifications of amounts from accumulated other comprehensive income into income include accumulated gains (losses) on dedesignated hedges at the time earnings are impacted by the forecasted transaction.
The Company revised amounts previously presented in the tables below for the pretax gain (loss) recognized in other comprehensive income on effective portion of derivative (“Gain Recognized in OCI”) and the pretax gain (loss) recognized in income on effective portion of derivative as a result of reclassification from accumulated other comprehensive income (“Gain Reclassified into Income”) for the years ended December 31, 2012 and 2011 relative to foreign currency forward contracts. These immaterial corrections increased both the previously presented amounts of the Gain Recognized in OCI and the Gain Reclassified into Income in the disclosure tables below by $13 million and $11 million in 2012 and 2011, respectively. The revisions had no impact on the Company's consolidated results of operations or financial condition.
| Year Ended December 31, 2013 | |||||||||||||
| (Millions) | Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective Portion of Derivative | Pretax Gain (Loss) Recognized in Income on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Income | Ineffective Portion of Gain (Loss) on Derivative and Amount Excluded from Effectiveness Testing Recognized in Income | ||||||||||
| Derivatives in Cash Flow Hedging Relationships | Amount | Location | Amount | Location | Amount | ||||||||
| Foreign currency forward/option contracts | $ | 9 | Cost of sales | $ | (11) | Cost of sales | $ | ― | |||||
| Foreign currency forward contracts | (108) | Interest expense | (108) | Interest expense | ― | ||||||||
| Commodity price swap contracts | 1 | Cost of sales | (2) | Cost of sales | ― | ||||||||
| Interest rate swap contracts | ― | Interest expense | (1) | Interest expense | ― | ||||||||
| Total | $ | (98) | $ | (122) | $ | ― | |||||||
| Year Ended December 31, 2012 | |||||||||||||
| (Millions) | Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective Portion of Derivative | Pretax Gain (Loss) Recognized in Income on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Income | Ineffective Portion of Gain (Loss) on Derivative and Amount Excluded from Effectiveness Testing Recognized in Income | ||||||||||
| Derivatives in Cash Flow Hedging Relationships | Amount | Location | Amount | Location | Amount | ||||||||
| Foreign currency forward/option contracts | $ | (35) | Cost of sales | $ | 41 | Cost of sales | $ | ― | |||||
| Foreign currency forward contracts | 42 | Interest expense | 42 | Interest expense | ― | ||||||||
| Commodity price swap contracts | (4) | Cost of sales | (10) | Cost of sales | ― | ||||||||
| Interest rate swap contracts | ― | Interest expense | (1) | Interest expense | ― | ||||||||
| Total | $ | 3 | $ | 72 | $ | ― | |||||||
| Year Ended December 31, 2011 | |||||||||||||
| (Millions) | Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective Portion of Derivative | Pretax Gain (Loss) Recognized in Income on Effective Portion of Derivative as a Result of Reclassification from Accumulated Other Comprehensive Income | Ineffective Portion of Gain (Loss) on Derivative and Amount Excluded from Effectiveness Testing Recognized in Income | ||||||||||
| Derivatives in Cash Flow Hedging Relationships | Amount | Location | Amount | Location | Amount | ||||||||
| Foreign currency forward/option contracts | $ | 3 | Cost of sales | $ | (87) | Cost of sales | $ | ― | |||||
| Foreign currency forward contracts | (31) | Interest expense | (30) | Interest expense | ― | ||||||||
| Commodity price swap contracts | (4) | Cost of sales | (6) | Cost of sales | ― | ||||||||
| Interest rate swap contracts | (7) | Interest expense | ― | Interest expense | ― | ||||||||
| Total | $ | (39) | $ | (123) | $ | ― | |||||||
Fair Value Hedges:
For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivatives as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.
Fair Value Hedging - Interest Rate Swaps: The Company manages interest expense using a mix of fixed and floating rate debt. To help manage borrowing costs, the Company may enter into interest rate swaps. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The mark-to-market of these fair value hedges is recorded as gains or losses in interest expense and is offset by the gain or loss of the underlying debt instrument, which also is recorded in interest expense. These fair value hedges are highly effective and, thus, there is no impact on earnings due to hedge ineffectiveness. The dollar equivalent (based on inception date foreign currency exchange rates) gross notional amount of the Company's interest rate swaps at December 31, 2013 was $745 million.
At December 31, 2013, the Company had interest rate swaps designated as fair value hedges of underlying fixed rate obligations. In July 2007, in connection with the issuance of a seven-year Eurobond for an amount of 750 million Euros, the Company completed a fixed-to-floating interest rate swap on a notional amount of 400 million Euros as a fair value hedge of a portion of the fixed interest rate Eurobond obligation. In August 2010, the Company terminated 150 million Euros of the notional amount of this swap. As a result, a gain of 18 million Euros, recorded as part of the balance of the underlying debt, will be amortized as an offset to interest expense over this debt's remaining life. Prior to termination of the applicable portion of the interest rate swap, the mark-to-market of the hedge instrument was recorded as gains or losses in interest expense and was offset by the gain or loss on carrying value of the underlying debt instrument. Consequently, the subsequent amortization of the 18 million Euros recorded as part of the underlying debt balance is not part of gains on hedged items recognized in income in the tables below.
In November 2013, 3M issued an eight-year 1.875% fixed rate Eurobond for a face amount of 600 million Euros. Upon debt issuance, 3M completed a fixed-to-floating interest rate swap on a notional amount of 300 million Euros as a fair value hedge of a portion of the fixed interest rate Eurobond obligation.
The Company also had two fixed-to-floating interest rate swaps with an aggregate notional amount of $800 million designated as fair value hedges of the fixed interest rate obligation under the $800 million, three-year, 4.50% notes issued in October 2008. These swaps and underlying note matured in the fourth quarter of 2011.
The location in the consolidated statements of income and amounts of gains and losses related to derivative instruments designated as fair value hedges and similar information relative to the hedged items are as follows:
| Year ended December 31, 2013 | Gain (Loss) on Derivative | Gain (Loss) on Hedged Item | ||||||||
| (Millions) | Recognized in Income | Recognized in Income | ||||||||
| Derivatives in Fair Value Hedging Relationships | Location | Amount | Location | Amount | ||||||
| Interest rate swap contracts | Interest expense | $ | (21) | Interest expense | $ | 21 | ||||
| Total | $ | (21) | $ | 21 | ||||||
| Year ended December 31, 2012 | Gain (Loss) on Derivative | Gain (Loss) on Hedged Item | ||||||||
| (Millions) | Recognized in Income | Recognized in Income | ||||||||
| Derivatives in Fair Value Hedging Relationships | Location | Amount | Location | Amount | ||||||
| Interest rate swap contracts | Interest expense | $ | (5) | Interest expense | $ | 5 | ||||
| Total | $ | (5) | $ | 5 | ||||||
| Year ended December 31, 2011 | Gain (Loss) on Derivative | Gain (Loss) on Hedged Item | ||||||||
| (Millions) | Recognized in Income | Recognized in Income | ||||||||
| Derivatives in Fair Value Hedging Relationships | Location | Amount | Location | Amount | ||||||
| Interest rate swap contracts | Interest expense | $ | (10) | Interest expense | $ | 10 | ||||
| Total | $ | (10) | $ | 10 | ||||||
Net Investment Hedges:
As circumstances warrant, the Company uses cross currency swaps, forwards and foreign currency denominated debt to hedge portions of the Company's net investments in foreign operations. For hedges that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within other comprehensive income. The remainder of the change in value of such instruments is recorded in earnings. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. At December 31, 2013, there were no cross currency swaps and foreign currency forward contracts designated as net investment hedges.
In addition to the derivative instruments used as hedging instruments in net investment hedges, 3M also uses foreign currency denominated debt as nonderivative hedging instruments in certain net investment hedges. In July and December 2007, the Company issued seven-year fixed rate Eurobond securities for amounts of 750 million Euros and 275 million Euros, respectively. In November 2013, the Company issued eight-year fixed rate Eurobond securities for 600 million Euros. 3M designated each of these Eurobond issuances as hedging instruments of the Company's net investment in its European subsidiaries.
In anticipation of the November 2013 Eurobond issuance, the Company entered into foreign currency forward contracts with notional amounts totaling 594 million Euros. These forward contracts were designated as hedging instruments of the Company's net investment in its European subsidiaries. These contracts matured in November 2013.
The location in the consolidated statements of income and comprehensive income and amounts of gains and losses related to derivative and nonderivative instruments designated as net investment hedges are as follows. There were no reclassifications of the effective portion of net investment hedges out of accumulated other comprehensive income into income for the periods presented in the table below.
| Year ended December 31, 2013 | ||||||||
| Derivative and Nonderivative Instruments in Net Investment Hedging Relationships | Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income on Effective Portion of Instrument | Ineffective Portion of Gain (Loss) on Instrument and Amount Excluded from Effectiveness Testing Recognized in Income | ||||||
| (Millions) | Amount | Location | Amount | |||||
| Foreign currency denominated debt | $ | (82) | N/A | $ | ― | |||
| Foreign currency forward contracts | 12 | N/A | ― | |||||
| Total | $ | (70) | $ | ― | ||||
| Year ended December 31, 2012 | ||||||||
| Derivative and Nonderivative Instruments in Net Investment Hedging Relationships | Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income on Effective Portion of Instrument | Ineffective Portion of Gain (Loss) on Instrument and Amount Excluded from Effectiveness Testing Recognized in Income | ||||||
| (Millions) | Amount | Location | Amount | |||||
| Foreign currency denominated debt | $ | (29) | N/A | $ | ― | |||
| Total | $ | (29) | $ | ― | ||||
| Year ended December 31, 2011 | ||||||||
| Derivative and Nonderivative Instruments in Net Investment Hedging Relationships | Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income on Effective Portion of Instrument | Ineffective Portion of Gain (Loss) on Instrument and Amount Excluded from Effectiveness Testing Recognized in Income | ||||||
| (Millions) | Amount | Location | Amount | |||||
| Foreign currency denominated debt | $ | 41 | N/A | $ | ― | |||
| Total | $ | 41 | $ | ― | ||||
Derivatives Not Designated as Hedging Instruments:
Derivatives not designated as hedging instruments include dedesignated 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 forward contracts and commodity price swaps to offset, in part, the impacts of certain intercompany activities (primarily associated with intercompany licensing arrangements) and fluctuations in costs associated with the use of certain precious metals, respectively. These derivative instruments are not designated in hedging relationships; therefore, fair value gains and losses on these contracts are recorded in earnings. The dollar equivalent gross notional amount of these forward, option and swap contracts not designated as hedging instruments totaled $7.5 billion as of December 31, 2013. The Company does not hold or issue derivative financial instruments for trading purposes.
The location in the consolidated statements of income and amounts of gains and losses related to derivative instruments not designated as hedging instruments are as follows:
| Derivatives Not Designated as Hedging Instruments | Year ended December 31, 2013 | Year ended December 31, 2012 | ||||||||
| Gain (Loss) on Derivative Recognized in Income | Gain (Loss) on Derivative Recognized in Income | |||||||||
| (Millions) | Location | Amount | Location | Amount | ||||||
| Foreign currency forward/option contracts | Cost of sales | $ | 20 | Cost of sales | $ | (24) | ||||
| Foreign currency forward contracts | Interest expense | (43) | Interest expense | 22 | ||||||
| Commodity price swap contracts | Cost of sales | (1) | Cost of sales | ― | ||||||
| Total | $ | (24) | $ | (2) | ||||||
| Derivatives Not Designated as Hedging Instruments | Year ended December 31, 2011 | |||||||||
| Gain (Loss) on Derivative Recognized in Income | ||||||||||
| (Millions) | Location | Amount | ||||||||
| Foreign currency forward/option contracts | Cost of sales | $ | 13 | |||||||
| Foreign currency forward contracts | Interest expense | 9 | ||||||||
| Total | $ | 22 | ||||||||
Location and Fair Value Amount 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. Additional information with respect to the fair value of derivative instruments is included in Note 12.
| December 31, 2013 | |||||||||||
| (Millions) | Assets | Liabilities | |||||||||
| Fair Value of Derivative Instruments | Location | Amount | Location | Amount | |||||||
| Derivatives designated as hedging instruments | |||||||||||
| Foreign currency forward/option contracts | Other current assets | $ | 24 | Other current liabilities | $ | 35 | |||||
| Commodity price swap contracts | Other current assets | 1 | Other current liabilities | ― | |||||||
| Interest rate swap contracts | Other assets | 8 | Other liabilities | 7 | |||||||
| Total derivatives designated as | |||||||||||
| hedging instruments | $ | 33 | $ | 42 | |||||||
| Derivatives not designated as hedging instruments | |||||||||||
| Foreign currency forward/option contracts | Other current assets | $ | 51 | Other current liabilities | $ | 68 | |||||
| Total derivatives not designated as | |||||||||||
| hedging instruments | $ | 51 | $ | 68 | |||||||
| Total derivative instruments | $ | 84 | $ | 110 | |||||||
| December 31, 2012 | |||||||||||
| (Millions) | Assets | Liabilities | |||||||||
| Fair Value of Derivative Instruments | Location | Amount | Location | Amount | |||||||
| Derivatives designated as hedging instruments | |||||||||||
| Foreign currency forward/option contracts | Other current assets | $ | 39 | Other current liabilities | $ | 85 | |||||
| Commodity price swap contracts | Other current assets | ― | Other current liabilities | 1 | |||||||
| Interest rate swap contracts | Other assets | 23 | Other liabilities | ― | |||||||
| Total derivatives designated as | |||||||||||
| hedging instruments | $ | 62 | $ | 86 | |||||||
| Derivatives not designated as hedging instruments | |||||||||||
| Foreign currency forward/option contracts | Other current assets | $ | 10 | Other current liabilities | $ | 20 | |||||
| Total derivatives not designated as | |||||||||||
| hedging instruments | $ | 10 | $ | 20 | |||||||
| Total derivative instruments | $ | 72 | $ | 106 | |||||||
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, commodity price 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. As of December 31, 2013, 3M has International Swaps and Derivatives Association (ISDA) agreements with 11 applicable banks and financial institutions which contain netting provisions. In addition to a master agreement with 3M supported by a primary counterparty's parent guarantee, 3M also has associated credit support agreements in place with 10 of its primary derivative counterparties which, among other things, provide the circumstances under which either party is required to post eligible collateral (when the market value of transactions covered by these agreements exceeds specified thresholds or if a counterparty's credit rating has been downgraded to a predetermined rating). 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. As of the applicable dates presented below, no cash collateral had been received or pledged related to these derivative instruments.
| Offsetting of Financial Assets/Liabilities under Master Netting Agreements with Derivative Counterparties | |||||||||||||
| December 31, 2013 | |||||||||||||
| Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements | |||||||||||||
| (Millions) | Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet | Gross Amount of Eligible Offsetting Recognized Derivative Liabilities | Cash Collateral Received | Net Amount of Derivative Assets | |||||||||
| Derivatives subject to master | |||||||||||||
| netting agreements | $ | 83 | $ | 51 | $ | ― | $ | 32 | |||||
| Derivatives not subject to master | |||||||||||||
| netting agreements | 1 | 1 | |||||||||||
| Total | $ | 84 | $ | 33 | |||||||||
| December 31, 2013 | |||||||||||||
| Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements | |||||||||||||
| (Millions) | Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet | Gross Amount of Eligible Offsetting Recognized Derivative Assets | Cash Collateral Pledged | Net Amount of Derivative Liabilities | |||||||||
| Derivatives subject to master | |||||||||||||
| netting agreements | $ | 110 | $ | 51 | $ | ― | $ | 59 | |||||
| Derivatives not subject to master | |||||||||||||
| netting agreements | ― | ― | |||||||||||
| Total | $ | 110 | $ | 59 | |||||||||
| December 31, 2012 | |||||||||||||
| Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements | |||||||||||||
| (Millions) | Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet | Gross Amount of Eligible Offsetting Recognized Derivative Liabilities | Cash Collateral Received | Net Amount of Derivative Assets | |||||||||
| Derivatives subject to master | |||||||||||||
| netting agreements | $ | 67 | $ | 25 | $ | ― | $ | 42 | |||||
| Derivatives not subject to master | |||||||||||||
| netting agreements | 5 | 5 | |||||||||||
| Total | $ | 72 | $ | 47 | |||||||||
| December 31, 2012 | |||||||||||||
| Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements | |||||||||||||
| (Millions) | Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet | Gross Amount of Eligible Offsetting Recognized Derivative Assets | Cash Collateral Pledged | Net Amount of Derivative Liabilities | |||||||||
| Derivatives subject to master | |||||||||||||
| netting agreements | $ | 106 | $ | 25 | $ | ― | $ | 81 | |||||
| Derivatives not subject to master | |||||||||||||
| netting agreements | ― | ― | |||||||||||
| Total | $ | 106 | $ | 81 | |||||||||
Currency Effects
Currency Effects: 3M estimates that year-on-year currency effects, including hedging impacts, decreased net income attributable to 3M by approximately $74 million and $103 million in 2013 and 2012, respectively. These estimates include the effect of translating profits from local currencies into U.S. dollars; the impact of currency fluctuations on the transfer of goods between 3M operations in the United States and abroad; and transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks and the negative impact of swapping Venezuelan bolivars into U.S. dollars. 3M estimates that year-on-year derivative and other transaction gains and losses decreased net income attributable to 3M by approximately $12 million in 2013 and increased net income attributable to 3M by $49 million in 2012.