3M 2011 Annual Report Download - page 16

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as well as transparency with rating agencies and timeliness of financial reporting. The Company’s current ratings
have served to lower 3M’s borrowing costs and facilitate access to a variety of lenders. Failure to maintain the
current ratings level would adversely affect the Company’s cost of funds and could adversely affect liquidity and
access to capital markets.
* 7KH&RPSDQ\¶VUHVXOWVDUHDIIHFWHGE\FRPSHWLWLYHFRQGLWLRQVDQGFXVWRPHUSUHIHUHQFHV Demand for the
Company’s products, which impacts revenue and profit margins, is affected by (i) the development and timing of the
introduction of competitive products; (ii) the Company’s response to downward pricing to stay competitive;
(iii) changes in customer order patterns, such as changes in the levels of inventory maintained by customers and the
timing of customer purchases which may be affected by announced price changes, changes in the Company’s
incentive programs, or the customer’s ability to achieve incentive goals; and (iv) changes in customers’ preferences
for our products, including the success of products offered by our competitors, and changes in customer designs for
their products that can affect the demand for some of the Company’s products.
* )RUHLJQFXUUHQF\H[FKDQJHUDWHVDQGIOXFWXDWLRQVLQWKRVHUDWHVPD\DIIHFWWKH&RPSDQ\¶VDELOLW\WRUHDOL]H
projected growth rates in its sales and earnings. Because the Company’s financial statements are denominated in
U.S. dollars and approximately two-thirds of the Company’s revenues are derived from outside the United States, the
Company’s results of operations and its ability to realize projected growth rates in sales and earnings could be
adversely affected if the U.S. dollar strengthens significantly against foreign currencies.
* 7KH&RPSDQ\¶VJURZWKREMHFWLYHVDUHODUJHO\GHSHQGHQWRQWKHWLPLQJDQGPDUNHWDFFHSWDQFHRf its new product
offerings, including its ability to continually renew its pipeline of new products and to bring those products to market.
This ability may be adversely affected by difficulties or delays in product development, such as the inability to identify
viable new products, obtain adequate intellectual property protection, or gain market acceptance of new products.
There are no guarantees that new products will prove to be commercially successful.
* 7KH&RPSDQ\¶VIXWXUHUHVXOWVDUHVXEMHFWWRIOXFtuations in the costs and availability of purchased components,
compounds, raw materials and energy, including oil and natural gas and their derivatives, due to shortages,
increased demand, supply interruptions, currency exchange risks, natural disasters and other factors. The Company
depends on various components, compounds, raw materials, and energy (including oil and natural gas and their
derivatives) supplied by others for the manufacturing of its products. It is possible that any of its supplier relationships
could be interrupted due to natural and other disasters and other events, or be terminated in the future. Any
sustained interruption in the Company’s receipt of adequate supplies could have a material adverse effect on the
Company. In addition, while the Company has a process to minimize volatility in component and material pricing, no
assurance can be given that the Company will be able to successfully manage price fluctuations or that future price
fluctuations or shortages will not have a material adverse effect on the Company.
* Acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions
and other evolving business strategies, and possible organizational restructuring could affect future results. The
Company monitors its business portfolio and organizational structure and has made and may continue to make
acquisitions, strategic alliances, divestitures and changes to its organizational structure. With respect to acquisitions,
future results will be affected by the Company’s ability to integrate acquired businesses quickly and obtain the
anticipated synergies.
* 7KH&RPSDQ\¶VIXWXUHUHVXOWVPD\EHDIIHFWHGLIWKH&RPSDQ\JHQHUDWHVIHZHUSURGXFWLYLW\LPSURYHPHQWVWKDQ
estimated. The Company utilizes various tools, such as Lean Six Sigma, to improve operational efficiency and
productivity. There can be no assurance that all of the projected productivity improvements will be realized.
* 6HFXULW\EUHDFKHVDQGRWKHUGLVUXSWLRQVWRWKH&RPSDQ\¶VLnformation technology infrastructure could interfere with
WKH&RPSDQ\¶VRSHUDWLRQVFRPSURPLVHLQIRUPDWLRQEHORQJLQJWRWKH&RPSDQ\DQGLWVFXVWRPHUVDQGVXSSOLHUVDQG
H[SRVHWKH&RPSDQ\WROLDELOLW\ZKLFKFRXOGDGYHUVHO\LPSDFWWKH&RPSDQ\¶VEXVLQHVVDQG reputation. In the
ordinary course of business, the Company relies on information technology networks and systems, some of which
are managed by third parties, to process, transmit and store electronic information, and to manage or support a
variety of business processes and activities. Additionally, the Company collects and stores sensitive data, including
proprietary business information. Despite security measures and business continuity plans, the Company’s
information technology networks and infrastructure may be vulnerable to damage, disruptions or shutdowns due to
attack by hackers or breaches, employee error or malfeasance, power outages, computer viruses,
telecommunication or utility failures, systems failures, natural disasters or other catastrophic events. Any such events
could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in operations, and
damage to the Company’s reputation, which could adversely affect the Company’s business.