3M 2012 Annual Report Download - page 83
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rate notes due in 2027, 2040, and 2041, holders have put options that commence ten years after the date of issuance and
each third anniversary thereafter until final maturity. 3M would be required to repurchase these securities at various
prices, ranging from 99 percent to 100 percent of par value according to the redemption schedules for each security. In
2011, 2010, 2009 and 2008, 3M was required to repurchase an immaterial amount of principal on the aforementioned
floating rate notes.
The Company has a “well-known seasoned issuer” shelf registration statement, effective August 5, 2011, which registers
an indeterminate amount of debt or equity securities for future sales. In September 2011, in connection with this August 5,
2011 shelf registration statement, 3M established a $3 billion medium-term notes program (Series F), from which 3M
issued $1 billion aggregate principal amount of five-year fixed rate medium-term notes with a coupon rate of 1.375%. In
June 2012, 3M issued $650 million aggregate principal amount of five-year fixed rate medium-notes due 2017 with a
coupon rate of 1.000% and $600 million aggregate principal amount of ten-year fixed rate medium-term notes due 2022
with a coupon rate of 2.000%, which were both issued from this $3 billion medium-term notes program (Series F). The
designated use of these proceeds is for general corporate purposes.
In connection with a prior “well-known seasoned issuer” shelf registration, in June 2007 the Company established a $3
billion medium-term notes program. Three debt securities were issued under this medium-term notes program. First, in
December 2007, 3M issued a five-year, $500 million, fixed rate note with a coupon rate of 4.65%, which matured in
December 2012. Second, in August 2008, 3M issued a five-year, $850 million, fixed rate note with a coupon rate of
4.375%. Third, in October 2008, the Company issued a three-year $800 million, fixed rate note with a coupon rate of
4.50%. The Company entered into interest rate swaps to convert this $800 million note to a floating rate. This three-year
fixed rate note and related interest rate swaps matured in the fourth quarter of 2011.
The Company also issued notes under a $1.5 billion medium-term note program established in December 2003. In
March 2007, the Company issued a 30-year, $750 million, fixed rate note with a coupon rate of 5.70%. In November 2006,
3M issued a three-year, $400 million, fixed rate note. The Company entered into an interest rate swap to convert this to a
rate based on a floating LIBOR index. Both the note and related swap matured in November 2009. In December 2004, 3M
issued a 40-year, $60 million floating rate note, with the rate based on a floating LIBOR index. This $1.5 billion medium
term note program was replaced by the $3 billion program established in June 2007.
In July 2007, 3M issued a seven-year 5.0% fixed rate Eurobond for an amount of 750 million Euros (book value of
approximately $1.017 billion in U.S. Dollars at December 31, 2012). In addition, in December 2007, 3M reopened its
existing seven year 5.0% fixed rate Eurobond for an additional amount of 275 million Euros (book value of approximately
$366 million in U.S. Dollars at December 31, 2012). This security was issued at a premium and was subsequently
consolidated with the original security in January 2008. Upon the initial debt issuance in July 2007, 3M 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, the notional amount remaining after the partial termination is 250 million Euros. The termination of
a portion of this swap did not impact the terms of the remaining portion. After these swaps, the fixed rate portion of the
Eurobond totaled 775 million Euros and the floating rate portion totaled 250 million Euros.
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. In September 2012, 3M entered into a $1.5 billion, five-year multi-
currency revolving credit agreement, which amended the existing agreement that was entered into in August 2011. This
amended agreement extended the expiration date from August 2016 to September 2017. This credit agreement includes
a provision under which 3M may request an increase of up to $500 million, bringing the total facility up to $2 billion (at the
lenders’ discretion). This facility was undrawn at December 31, 2012. In August 2012, 3M entered into a $150 million,
one-year committed letter of credit facility with HSBC Bank USA, which replaced the one-year $200 million committed
credit facility that was entered into in August 2011. As of December 31, 2012, 3M letters of credit issued under this $150
million committed facility totaled $121 million. In December 2012, 3M entered into a three-year 66 million British Pound
(approximately $106 million) committed credit facility agreement with JP Morgan Chase Bank, which is fully drawn as of
December 31, 2012. Apart from the committed facilities, an additional $100 million in stand-alone letters of credit are also
issued and outstanding at December 31, 2012. The Company also utilized $37 million in international lines of credit and
$6 million in U.S. lines of credit with other banking partners as of December 31, 2012. These letters of credit are utilized in
connection with normal business activities. Under both the $1.5 billion and $150 million credit agreements, the Company
is required to maintain its EBITDA to Interest Ratio as of the end of each fiscal quarter at not less than 3.0 to 1. This is
calculated (as defined in the agreement) as the ratio of consolidated total EBITDA for the four consecutive quarters then
ended to total interest expense on all funded debt for the same period. At December 31, 2012, this ratio was
approximately 45 to 1. Debt covenants do not restrict the payment of dividends.