3M 2011 Annual Report Download - page 39

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NEW ACCOUNTING PRONOUNCEMENTS
Information regarding new accounting pronouncements is included in Note 1 to the Consolidated Financial
Statements.
FINANCIAL CONDITION AND LIQUIDITY
As indicated in the following table, at December 31, 2011, 3M had $4.576 billion of cash, cash equivalents, and
marketable securities and $5.166 billion of debt. Debt included $4.484 billion of long-term debt, $563 million related
to the current portion of long-term debt and short-term borrowings of $119 million. The strength of 3M’s capital
structure and consistency of its cash flows provide 3M reliable access to capital markets. Additionally, the Company’s
maturity profile is staggered to ensure refinancing needs in any given year are reasonable in proportion to the total
portfolio. The Company has an AA- credit rating, with a stable outlook, from Standard & Poor’s and an Aa2 credit
rating, with a stable outlook, from Moody’s Investors Service.
The Company generates significant ongoing cash flow, which has been used, in part, to pay dividends on 3M
common stock, for acquisitions, and to fund share repurchase activities. As discussed in Note 2, in 2011 3M acquired
Winterthur Technologie AG and other acquisitions for approximately $700 million (including purchases of
noncontrolling interest). In addition, in the fourth quarter of 2010, the Company purchased Arizant Inc., Attenti
Holdings S.A. and Cogent Inc. As a result, cash outflows (including repayment of acquired debt, but net of cash and
marketable securities acquired) for these three acquisitions totaled approximately $1.4 billion. 3M was able to
complete these acquisitions without increasing debt balances, while maintaining a strong cash, cash equivalents and
marketable securities position.
At December 31
(Millions) 2011 2010
Total Debt .................................................................................. $ 5,166 $ 5,452
Less: Cash, cash equivalents and marketable securities ......... 4,576 5,018
Net Debt .................................................................................... $ 590 $ 434
The Company defines net debt as total debt less cash, cash equivalents and marketable securities. 3M considers net
debt to be an important measure of liquidity and its ability to meet ongoing obligations. This measure is not defined
under U.S. generally accepted accounting principles and may not be computed the same as similarly titled measures
used by other companies.
Cash, cash equivalents and marketable securities at December 31, 2011 totaled approximately $4.6 billion, helped
by cash flows from operating activities of $5.3 billion. The Company has sufficient liquidity to meet currently
anticipated growth plans, including capital expenditures, working capital investments and acquisitions. At
December 31, 2011 and 2010, cash and current marketable securities internationally totaled $2.4 billion and $2.3
billion, respectively, and in the United States totaled $1.3 billion and $2.2 billion, respectively. Cash available in the
United States has historically been sufficient to fund dividend payments to shareholders and share repurchases, in
addition to funding U.S. acquisitions, U.S. capital spending, U.S. pension/other postemployment benefit
contributions, and other items as needed. For those international earnings considered to be reinvested indefinitely,
the Company currently has no intention to repatriate these funds. If these international funds are needed for
operations in the U.S., 3M would be required to accrue and pay U.S. taxes to repatriate these funds. However, for
the international funds considered to be reinvested indefinitely, 3M’s current plans do not indicate a need to
repatriate these funds for U.S. operations. Refer to Note 8 for additional information on unremitted earnings
attributable to international companies that have been considered to be reinvested indefinitely.
The Company’s financial condition and liquidity are strong. Various assets and liabilities, including cash and short-
term debt, can fluctuate significantly from month to month depending on short-term liquidity needs. Working capital
(defined as current assets minus current liabilities) totaled $6.799 billion at December 31, 2011, compared with
$6.126 billion at December 31, 2010, an increase of $673 million. Working capital increases were primarily
attributable to a decrease in the current portion of long-term debt ($622 million), as increases in short-term
marketable securities, accounts receivables, inventories and other current assets were largely offset by decreases in
cash and cash equivalents.
Primary short-term liquidity needs are met through cash on hand, U.S. commercial paper and euro commercial paper
issuances. The Company maintains a commercial paper program that allows 3M to have a maximum of $3 billion
outstanding with a maximum maturity of 397 days from date of issuance. As of December 31, 2011 and 2010, 3M