REG - 3M Company - Half-year Report <Origin Href="QuoteRef">MMM.N</Origin> - Part 2
03/08/2017 07:06
- Part 2: For the preceding part double click ID:nRSC9629Ma
of restricted cash in the statement of cash flows. Under the ASU, changes in restricted cash and restricted
cash equivalents would be included along with those of cash and cash equivalents in the statement of cash flows. As a
result, entities would no longer present transfers between cash/equivalents and restricted cash/equivalents in the
statement of cash flows. In addition, a reconciliation between the balance sheet and the statement of cash flows would be
disclosed when the balance sheet includes more than one line item for cash/equivalents and restricted cash/equivalents. For
3M, this ASU is effective January 1, 2018, with early adoption permitted. The Company early adopted ASU No. 2016-18 as of
January 1, 2017. Due to the immaterial use of restricted cash and restricted cash equivalents, no impact was reflected in
the Company's pre-2017 consolidated results of operations and financial condition presented.
In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which narrows the existing
definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an
acquisition (or disposal) of assets or a business. The ASU requires an entity to evaluate if substantially all of the fair
value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable
assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a
business, the set would need to include an input and a substantive process that together significantly contribute to the
ability to create outputs. The standard also narrows the definition of outputs. The definition of a business affects areas
of accounting such as acquisitions, disposals and goodwill. Under the new guidance, fewer acquired sets are expected to be
considered businesses. For 3M, this ASU is effective January 1, 2018 on a prospective basis with early adoption permitted.
3M would apply this guidance to applicable transactions after the adoption date.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. Under the new standard,
goodwill impairment would be measured as the amount by which a reporting unit's carrying value exceeds its fair value, not
to exceed the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine
goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a
reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination.
For 3M, this ASU is effective prospectively to impairment tests beginning January 1, 2020, with early adoption permitted.
3M currently plans to apply this ASU in the fourth quarter of 2017 in conjunction with its annual goodwill impairment
testing.
In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for
Partial Sales of Nonfinancial Assets. This ASU addresses scope-related questions that arose after the FASB issued its
revenue guidance in ASU No. 2014-09, Revenue from Contracts with Customers. The new standard clarifies the accounting for
derecognition of nonfinancial assets and defines what is considered an in substance nonfinancial asset. Nonfinancial assets
largely relate to items such as real estate, ships and intellectual property that do not constitute a business. The new ASU
impacts entities derecognizing (e.g. selling) nonfinancial assets (or in substance nonfinancial assets), including partial
interests therein, when the purchaser is not a customer. Under the new guidance, the seller would apply certain recognition
and measurement principles of ASU No. 2014-09, Revenue from Contracts with Customers, even though the purchaser is not a
customer. For 3M, this new standard is effective coincident with the Company's January 1, 2018 adoption of ASU No. 2014-09.
The Company is currently assessing this ASU's impact on 3M's consolidated results of operations and financial condition.
In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost. This ASU changes how employers that sponsor defined benefit pension and/or other
postretirement benefit plans present the net periodic benefit cost in the income statement. Under the new standard, only
the service cost component of net periodic benefit cost would be included in operating expenses and only the service cost
component would be eligible for capitalization into assets such as inventory. All other net periodic benefit costs
components (such as interest, expected return on plan assets, prior service cost amortization and actuarial gain/loss
amortization) would essentially be reported outside of operating income. For 3M, this ASU is effective January 1, 2018 on a
retrospective basis; however, guidance limiting the capitalization to only the service cost component is applied on
prospective basis. The components of 3M's net periodic defined benefit pension and postretirement benefit costs are
presented in Note 9. These include components totaling a benefit of $32 million and $54 million for the three months ended
June 30, 2017 and 2016, respectively, and $64 million and $106 million for the six months ended June 30, 2017 and 2016,
respectively, that would no longer be included within operating expenses and instead would be reported outside of income
from operations under the new standard.
In March 2017, the FASB issued ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities, which amends
the amortization period for certain purchased callable debt securities held at a premium. Under existing standards,
entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. The new
guidance shortens the amortization period to the earliest call date for certain callable debt securities that have
explicit, noncontingent call features and are callable at a fixed price and preset date. The amendments do not require an
accounting change for securities held at a discount. For 3M, this ASU is effective January 1, 2019 with a modified
retrospective transition resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first
reporting period in which the guidance is adopted. Early adoption is permitted. 3M's marketable security portfolio includes
very limited instances of callable debt securities held at a premium. As a result, the Company does not expect this ASU to
have a material impact on 3M's consolidated results of operations and financial condition.
In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting, that clarifies when changes to the terms or
conditions of a share-based payment award must be accounted for as a modification. The general model for accounting for
modifications of share-based payment awards is to record the incremental value arising from the changes as additional
compensation cost. Under the new standard, fewer changes to the terms of an award would require accounting under this
modification model. For 3M, this ASU is effective January 1, 2018, with early adoption permitted. Because the Company does
not typically make changes to the terms or conditions of its issued share-based payment awards, 3M does not expect this ASU
to have a material impact on its consolidated results of operations and financial condition.
In May 2017, the FASB issued ASU No. 2017-10, Determining the Customer of the Operation Services, that clarifies how an
operating entity determines the customer of the operation services for transactions within the scope of a service
concession arrangement. Service concession arrangements are typically agreements between a grantor and an operating entity
whereby the operating entity will operate the grantor's infrastructure (i.e. airports, roadways, bridges, and prisons) for
a specified period of time. The operating entity also may be required to maintain the infrastructure and provide
capital-intensive maintenance to enhance or extend its life. In such arrangements, typically the operation services (i.e.
operation and maintenance of a roadway) would be used by third parties (i.e. drivers). The ASU clarifies that the grantor,
not the third party, is the customer of the operation services in such arrangements. For 3M, this new standard is effective
coincident with the Company's January 1, 2018 adoption of ASU No. 2014-09. Because the Company is not typically a party to
agreements within the scope of accounting for service concession arrangements, 3M does not expect this ASU to have a
material impact on its consolidated results of operations and financial condition.
In July 2017, the FASB issued ASU No. 2017-11, (Part I) Accounting for Certain Financial Instruments with Down Round
Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain
Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The new standard
applies to issuers of financial instruments with down-round features. A down-round provision is a term in an equity-linked
financial instrument (i.e. a freestanding warrant contract or an equity conversion feature embedded within a host debt or
equity contract) that triggers a downward adjustment to the instrument's strike price (or conversion price) if equity
shares are issued at a lower price (or equity-linked financial instruments are issued at a lower strike price) than the
instrument's then-current strike price. The purpose of the feature is typically to protect the instrument's counterparty
from future issuances of equity shares at a more favorable price. The ASU amends (1) the classification of such instruments
as liabilities or equity by revising the certain guidance relative to evaluating if they must be accounted for as
derivative instruments and (2) the guidance on recognition and measurement of freestanding equity-classified instruments.
For 3M, this ASU is effective January 1, 2019, with early adoption permitted. Because the Company has not issued financial
instruments with down-round features, 3M does not expect this ASU to have a material impact on its consolidated results of
operations and financial condition.
NOTE 2. Acquisitions and Divestitures
Acquisitions:
3M makes acquisitions of certain businesses from time to time that are aligned with its strategic intent with respect to,
among other factors, growth markets and adjacent product lines or technologies.
There were no business combinations that closed during the six months ended June 30, 2017.
In March 2017, 3M announced that it entered into an agreement to acquire Scott Safety, which is headquartered in Monroe,
North Carolina, from Johnson Controls for $2.0 billion, subject to closing and other adjustments. Scott Safety is a premier
manufacturer of innovative products, including self-contained breathing apparatus systems, gas and flame detection
instruments, and other safety devices that complement 3M's personal safety portfolio. The business had revenues of
approximately $570 million in 2016. This transaction is expected to close in the second half of 2017 and will be reflected
within the Company's Safety and Graphics business, subject to customary closing conditions, regulatory approvals, and
information or consultation requirements with relevant works councils.
Divestitures:
3M may divest certain businesses from time to time based upon reviews of the Company's portfolio considering, among other
items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in
addition to considering if selling the businesses results in the greatest value creation for the Company and for
shareholders.
In January 2017, 3M sold the assets of its safety prescription eyewear business, with annual sales of approximately $45
million, to HOYA Vision Care. The Company recorded a pre-tax gain of $29 million in the first quarter of 2017 as a result
of this sale, which was reported within the Company's Safety and Graphics business.
In May 2017, 3M completed the related sale or transfer of control, as applicable of its identity management business to
Gemalto N.V. This business, with 2016 sales of approximately $205 million, is a leading provider in identity management
solutions, including biometric hardware and software that enable identity verification and authentication, as well as
secure materials and document readers. In June 2017, 3M also completed the sale of its tolling and automated license/number
plate recognition business, with annual sales of approximately $40 million, to Neology, Inc. 3M's tolling and automated
license/number plate recognition business includes RFID readers and tags, automatic vehicle classification systems, lane
controller and host software, and back office software and services. It also provides mobile and fixed cameras, software,
and services in automated license/number plate recognition. 3M received proceeds of $833 million, or $809 million net of
cash sold, and reflected a pre-tax gain of $461 million in the second quarter of 2017 as a result of these two
divestitures, which was reported within the Company's Safety and Graphics business.
In June 2017, 3M agreed to sell its electronic monitoring business to an affiliate of Apax Partners, for $200 million, net
of cash sold and subject to closing and other adjustments. This business, with annual sales of approximately $95 million,
is a provider of electronic monitoring technologies, serving hundreds of correctional and law enforcement agencies around
the world. This sale is expected to close in the second half of 2017, subject to customary closing conditions, regulatory
approvals and consultation or information requirements with relevant works councils. The Company expects a pre-tax gain of
approximately $100 million as a result of this divestiture that will be reported within the Company's Safety and Graphics
business.
The aggregate operating income of these four preceding divested businesses was less than $20 million in 2016. The
approximate amounts of major assets and liabilities associated with disposal groups classified as held-for-sale as of June
30, 2017 were not significant and, as of December 31, 2016, included the following:
December 31,
(Millions) 2016
Accounts receivable $ 25
Property, plant and equipment (net) 25
Intangible assets 35
Deferred revenue (other current liabilities) 35
In addition, approximately $50 million and $270 million of goodwill was estimated to be attributable to disposal groups
classified as held-for-sale as of June 30, 2017 and December 31, 2016, respectively, based upon relative fair value. The
amounts above have not been segregated and are classified within the existing corresponding line items on the Company's
consolidated balance sheet.
Refer to Note 2 in 3M's Current Report on Form 8-K dated May 4, 2017 (which updated 3M's 2016 Annual Report on Form 10-K)
for more information on 3M's acquisitions and divestitures.
NOTE 3. Goodwill and Intangible Assets
There were no acquisitions that closed during the first six month of 2017. The amounts in the "Translation and other"
column in the following table primarily relate to changes in foreign currency exchange rates. The goodwill balances by
business segment as of December 31, 2016 and June 30, 2017, follow:
Goodwill
December 31, 2016 Acquisition Divestiture Translation June 30, 2017
(Millions) Balance activity activity and other Balance
Industrial $ 2,536 $ - $ - $ 93 $ 2,629
Safety and Graphics 3,324 - (276) 54 3,102
Health Care 1,609 - - 41 1,650
Electronics and Energy 1,489 - - 26 1,515
Consumer 208 - - 1 209
Total Company $ 9,166 $ - $ (276) $ 215 $ 9,105
Accounting standards require that goodwill be tested for impairment annually and between annual tests in certain
circumstances such as a change in reporting units or the testing of recoverability of a significant asset group within a
reporting unit. At 3M, reporting units generally correspond to a division.
As described in Note 14, effective in the first quarter of 2017, the Company changed its business segment reporting in its
continuing effort to improve the alignment of its businesses around markets and customers. For any product changes that
resulted in reporting unit changes, the Company applied the relative fair value method to determine the impact on goodwill
of the associated reporting units. During the first quarter of 2017, the Company completed its assessment of any potential
goodwill impairment for reporting units impacted by this new structure and determined that no impairment existed.
Acquired Intangible Assets
The carrying amount and accumulated amortization of acquired finite-lived intangible assets, in addition to the balance of
non-amortizable intangible assets, as of June 30, 2017, and December 31, 2016, follow:
June 30, December 31,
(Millions) 2017 2016
Customer related intangible assets $ 1,900 $ 1,939
Patents 585 602
Other technology-based intangible assets 475 524
Definite-lived tradenames 392 420
Other amortizable intangible assets 209 211
Total gross carrying amount $ 3,561 $ 3,696
Accumulated amortization - customer related (818) (797)
Accumulated amortization - patents (494) (497)
Accumulated amortization - other technology based (284) (302)
Accumulated amortization - definite-lived tradenames (231) (236)
Accumulated amortization - other (173) (173)
Total accumulated amortization $ (2,000) $ (2,005)
Total finite-lived intangible assets - net $ 1,561 $ 1,691
Non-amortizable intangible assets (primarily tradenames) 640 629
Total intangible assets - net $ 2,201 $ 2,320
Certain tradenames acquired by 3M are not amortized because they have been in existence for over 55 years, have a history
of leading-market share positions, have been and are intended to be continuously renewed, and the associated products of
which are expected to generate cash flows for 3M for an indefinite period of time.
Amortization expense for acquired intangible assets for the three and six months ended June 30, 2017 and 2016 follows:
Three months ended Six months ended
June 30, June 30,
(Millions) 2017 2016 2017 2016
Amortization expense $ 47 $ 66 $ 111 $ 132
Expected amortization expense for acquired amortizable intangible assets recorded as of June 30, 2017:
Remainder
of After
(Millions) 2017 2018 2019 2020 2021 2022 2022
Amortization expense $ 118 $ 190 $ 181 $ 172 $ 160 $ 147 $ 593
The preceding expected amortization expense is an estimate. Actual amounts of amortization expense may differ from
estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment
of intangible assets, accelerated amortization of intangible assets and other events. 3M expenses the costs incurred to
renew or extend the term of intangible assets.
NOTE 4. Restructuring Actions and Exit Activities
2017 Restructuring Actions:
During the second quarter of 2017, management approved and committed to undertake certain restructuring actions primarily
focused on portfolio and footprint optimization. These actions affected approximately 1,300 positions worldwide and
resulted in a second quarter 2017 pre-tax charge of $99 million. Remaining activities related to restructuring are expected
to be completed by the end of 2018.
Components of these restructuring charges are summarized by business segment as follows:
Second Quarter 2017
(Millions) Employee-Related
Industrial $ 39
Safety and Graphics 9
Health Care 2
Electronics and Energy 7
Consumer 36
Corporate and Unallocated 6
Total Expense $ 99
The preceding restructuring charges were recorded in the income statement as follows:
(Millions) Second Quarter 2017
Cost of sales 86
Selling, general and administrative expenses 5
Research, development and related expenses 8
Total $ 99
Components of these restructuring actions, follow:
(Millions) Employee-Related
Expense incurred $ 99
Accrued restructuring action balances as of June 30, 2017 $ 99
2017 Exit Activities:
In the first quarter of 2017, the Company recorded net pre-tax charges of $24 million related to exit activities. These
charges related to employee reductions, primarily in Western Europe.
NOTE 5. Supplemental Equity and Comprehensive Income Information
Consolidated Statement of Changes in Equity
Three months ended June 30, 2017
3M Company Shareholders
Common Accumulated
Stock and Other
Additional Comprehensive Non-
Paid-in Retained Treasury Income controlling
(Millions) Total Capital Earnings Stock (Loss) Interest
Balance at March 31, 2017 $ 11,040 $ 5,198 $ 38,094 $ (25,354) $ (6,949) $ 51
Net income 1,585 1,583 2
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment (67) (67) -
Defined benefit pension and post-retirement plans adjustment 78 78 -
Cash flow hedging instruments - unrealized gain (loss) (51) (51) -
Total other comprehensive income (loss), net of tax (40)
Dividends declared (701) (701)
Stock-based compensation 55 55
Reacquired stock (475) (475)
Issuances pursuant to stock option and benefit plans 180 (183) 363
Balance at June 30, 2017 $ 11,644 $ 5,253 $ 38,793 $ (25,466) $ (6,989) $ 53
Six months ended June 30, 2017
3M Company Shareholders
Common Accumulated
Stock and Other
Additional Comprehensive Non-
Paid-in Retained Treasury Income controlling
(Millions) Total Capital Earnings Stock (Loss) Interest
Balance at December 31, 2016 $ 10,343 $ 5,070 $ 37,907 $ (25,434) $ (7,245) $ 45
Net income 2,911 2,906 5
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment 225 222 3
Defined benefit pension and post-retirement plans adjustment 161 161 -
Cash flow hedging instruments - unrealized gain (loss) (127) (127) -
Total other comprehensive income (loss), net of tax 259
Dividends declared (1,403) (1,403)
Stock-based compensation 183 183
Reacquired stock (1,153) (1,153)
Issuances pursuant to stock option and benefit plans 504 (617) 1,121
Balance at June 30, 2017 $ 11,644 $ 5,253 $ 38,793 $ (25,466) $ (6,989) $ 53
Three months ended June 30, 2016
3M Company Shareholders
Common Accumulated
Stock and Other
Additional Comprehensive Non-
Paid-in Retained Treasury Income controlling
(Millions) Total Capital Earnings Stock (Loss) Interest
Balance at March 31, 2016 $ 11,495 $ 4,925 $ 36,506 $ (23,716) $ (6,261) $ 41
Net income 1,293 1,291 2
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment 37 37 -
Defined benefit pension and post-retirement plans adjustment 67 67 -
Cash flow hedging instruments - unrealized gain (loss) (27) (27) -
Total other comprehensive income (loss), net of tax 77
Dividends declared (672) (672)
Stock-based compensation 47 47
Reacquired stock (837) (837)
Issuances pursuant to stock option and benefit plans 255 (210) 465
Balance at June 30, 2016 $ 11,658 $ 4,972 $ 36,915 $ (24,088) $ (6,184) $ 43
Six months ended June 30, 2016
3M Company Shareholders
Common Accumulated
Stock and Other
Additional Comprehensive Non-
Paid-in Retained Treasury Income controlling
(Millions) Total Capital Earnings Stock (Loss) Interest
Balance at December 31, 2015 $ 11,468 $ 4,800 $ 36,296 $ (23,308) $ (6,359) $ 39
Net income 2,571 2,566 5
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment 175 176 (1)
Defined benefit pension and post-retirement plans adjustment 136 136 -
Cash flow hedging instruments - unrealized gain (loss) (137) (137) -
Total other comprehensive income (loss), net of tax 174
Dividends declared (1,344) (1,344)
Stock-based compensation 172 172
Reacquired stock (2,000) (2,000)
Issuances pursuant to stock option and benefit plans 617 (603) 1,220
Balance at June 30, 2016 $ 11,658 $ 4,972 $ 36,915 $ (24,088) $ (6,184) $ 43
Changes in Accumulated Other Comprehensive Income (Loss) Attributable to 3M by Component
Three months ended June 30, 2017
Total
Defined Benefit Cash Flow Accumulated
Pension and Hedging Other
Cumulative Postretirement Instruments, Comprehensive
Translation Plans Unrealized Income
(Millions) Adjustment Adjustment Gain (Loss) (Loss)
Balance at March 31, 2017, net of tax: $ (1,719) $ (5,245) $ 15 $ (6,949)
Other comprehensive income (loss), before tax:
Amounts before reclassifications (167) - (74) (241)
Amounts reclassified out - 119 (5) 114
Total other comprehensive income (loss), before tax (167) 119 (79) (127)
Tax effect 100 (41) 28 87
Total other comprehensive income (loss), net of tax (67) 78 (51) (40)
Balance at June 30, 2017, net of tax: $ (1,786) $ (5,167) $ (36) $ (6,989)
Six months ended June 30, 2017
Total
Defined Benefit Cash Flow Accumulated
Pension and Hedging Other
Cumulative Postretirement Instruments, Comprehensive
Translation Plans Unrealized Income
(Millions) Adjustment Adjustment Gain (Loss) (Loss)
Balance at December 31, 2016, net of tax: $ (2,008) $ (5,328) $ 91 $ (7,245)
Other comprehensive income (loss), before tax:
Amounts before reclassifications 59 - (175) (116)
Amounts reclassified out - 238 (23) 215
Total other comprehensive income (loss), before tax 59 238 (198) 99
Tax effect 163 (77) 71 157
Total other comprehensive income (loss), net of tax 222 161 (127) 256
Balance at June 30, 2017, net of tax: $ (1,786) $ (5,167) $ (36) $ (6,989)
Three months ended June 30, 2016
Total
Defined Benefit Cash Flow Accumulated
Pension and Hedging Other
Cumulative Postretirement Instruments, Comprehensive
Translation Plans Unrealized Income
(Millions) Adjustment Adjustment Gain (Loss) (Loss)
Balance at March 31, 2016, net of tax: $ (1,540) $ (4,735) $ 14 $ (6,261)
Other comprehensive income (loss), before tax:
Amounts before reclassifications 59 - (15) 44
Amounts reclassified out - 101 (28) 73
Total other comprehensive income (loss), before tax 59 101 (43) 117
Tax effect (22) (34) 16 (40)
Total other comprehensive income (loss), net of tax 37 67 (27) 77
Balance at June 30, 2016, net of tax: $ (1,503) $ (4,668) $ (13) $ (6,184)
Six months ended June 30, 2016
Total
Defined Benefit Cash Flow Accumulated
Pension and Hedging Other
Cumulative Postretirement Instruments, Comprehensive
Translation Plans Unrealized Income
(Millions) Adjustment Adjustment Gain (Loss) (Loss)
Balance at December 31, 2015, net of tax: $ (1,679) $ (4,804) $ 124 $ (6,359)
Other comprehensive income (loss), before tax:
Amounts before reclassifications 119 - (136) (17)
Amounts reclassified out - 204 (80) 124
Total other comprehensive income (loss), before tax 119 204 (216) 107
Tax effect 57 (68) 79 68
Total other comprehensive income (loss), net of tax 176 136 (137) 175
Balance at June 30, 2016, net of tax $ (1,503) $ (4,668) $ (13) $ (6,184)
Income taxes are not provided for foreign translation relating to permanent investments in international subsidiaries, but
tax effects within cumulative translation does include impacts from items such as net investment hedge transactions.
Reclassification adjustments are made to avoid double counting in comprehensive income items that are also recorded as part
of net income.
Reclassifications out of Accumulated Other Comprehensive Income Attributable to 3M
Amount Reclassified from
Details about Accumulated Other Accumulated Other Comprehensive Income
Comprehensive Income Components Three months ended June 30, Six months ended June 30, Location on Income
(Millions) 2017 2016 2017 2016 Statement
Gains (losses) associated with, defined benefit pension and postretirement plans amortization
Transition asset $ - $ 1 $ - $ 1 See Note 9
Prior service benefit 22 24 44 47 See Note 9
Net actuarial loss (141) (126) (282) (252) See Note 9
Total before tax (119) (101) (238) (204)
Tax effect 41 34 77 68 Provision for income taxes
Net of tax $ (78) $ (67) $ (161) $ (136)
Cash flow hedging instruments gains (losses)
Foreign currency forward/option contracts $ 5 $ 28 $ 23 $ 81 Cost of sales
Interest rate swap contracts - - - (1) Interest expense
Total before tax 5 28 23 80
Tax effect (2) (11) (8) (29) Provision for income taxes
Net of tax $ 3 $ 17 $ 15 $ 51
Total reclassifications for the period, net of tax $ (75) $ (50) $ (146) $ (85)
NOTE 6. Income Taxes
The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With
few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by
tax authorities for years before 2005.
The IRS has completed its field examination of the Company's U.S. federal income tax returns for the years 2005 through
2014. The Company protested certain IRS positions within these tax years and entered into the administrative appeals
process with the IRS. In December 2012, the Company received a statutory notice of deficiency for the 2006 year. The
Company filed a petition in Tax Court in the first quarter of 2013 relating to the 2006 tax year.
Currently, the Company is under examination by the IRS for its U.S. federal income tax returns for the years 2015, 2016,
and 2017. It is anticipated that the
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