3M 2014 Annual Report Download - page 41

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35
these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax
benefits being recognized in the period when the Company determines the liabilities are no longer necessary.
NEW ACCOUNTING PRONOUNCEMENTS
Information regarding new accounting pronouncements is included in Note 1 to the Consolidated Financial Statements.
FINANCIAL CONDITION AND LIQUIDITY
3M continues to manage towards a better-optimized capital structure by adding balance sheet leverage, which is being
used for two purposes: first, to invest in 3M’s businesses, and second, to increase cash returns to shareholders. The
strength and stability of 3M's business model and strong free cash flow capability, together with proven capital markets
access, enables 3M to implement this strategy while continuing to invest in its businesses. Organic growth remains a high
priority, thus 3M will continue to invest in research and development, capital expenditures, and commercialization
capability. In addition, sources for cash availability in the United States, such as ongoing cash flow from operations and
access to capital markets, have historically been sufficient to fund dividend payments to shareholders and share
repurchases, as well as funding U.S. acquisitions and other items as needed. For those international earnings considered
to be reinvested indefinitely, the Company currently has no plans or intentions to repatriate these funds for U.S.
operations. However, 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 them. See Note 7 for further information on earnings considered to be reinvested
indefinitely.
3M’s primary short-term liquidity needs are met through cash on hand and U.S. commercial paper issuances. 3M
resumed commercial paper funding in July 2013 for the first time since late 2008. 3M expects to maintain a consistent
presence in the market and believes it will have continuous access to the commercial paper market. 3M’s commercial
paper program permits the Company to have a maximum of $3 billion outstanding with a maximum maturity of 397 days
from date of issuance.
Net Debt:
The Company defines net debt as total debt less the total of cash, cash equivalents and current and long-term marketable
securities. 3M considers net debt and its components to be an important indicator of liquidity and a guiding measure of
capital structure strategy. Net debt 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. The following table provides net debt as of
December 31, 2014 and 2013.
At December 31
(Millions)
2014
2013
Total Debt
$
6,837
$
6,009
Less: Cash and cash equivalents and marketable securities
3,351
4,790
Net Debt
$
3,486
$
1,219
In 2014, net debt increased by $2.3 billion to a net debt balance of $3.5 billion (as of December 31, 2014), as 3M
progressed on its capital structure strategy and experienced higher debt levels and lower cash balances in both the U.S.
and internationally. Specific actions related to cash, cash equivalents, and marketable securities, in addition to debt, are
discussed further below.
Cash, cash equivalents and marketable securities:
At December 31, 2014, 3M had $3.4 billion of cash, cash equivalents and marketable securities, of which approximately
$3.3 billion was held by the Company’s foreign subsidiaries and less than $100 million was held by the United States. Of
the $3.3 billion held internationally, U.S. dollar-based cash, cash equivalents and marketable securities totaled $1.9
billion, or 58 percent, which was invested in money market funds, asset-backed securities, agency securities, corporate
medium-term note securities and other high quality fixed income securities. At December 31, 2013, cash, cash
equivalents and marketable securities held by the Company’s foreign subsidiaries and in the United States totaled
approximately $4.3 billion and $0.5 billion, respectively.