3M 2012 Annual Report Download - page 40
Download and view the complete annual report
Please find page 40 of the 2012 3M annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.34
Cash, cash equivalents and marketable securities at December 31, 2012 totaled approximately $5.7 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, 2012 and
2011, cash, cash equivalents and marketable securities held internationally totaled $3.7 billion and $2.7 billion,
respectively, and in the United States totaled $2.0 billion and $1.9 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 planned 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 7 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 $7.430 billion at December 31, 2012, compared with $6.799 billion at
December 31, 2011, an increase of $631 million. Working capital increases in cash, cash equivalents, current marketable
securities, inventories and accounts receivable were partially offset by increases in all major current liability accounts,
especially short-term borrowings and current portion of long-term debt.
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, 2012 and 2011, 3M had no
outstanding commercial paper. The Company believes it is unlikely that its access to the commercial paper market will be
restricted.
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 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.
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.
3M’s cash and cash equivalents balance at December 31, 2012 totaled $2.883 billion, with an additional $2.810 billion in
current and long-term marketable securities. 3M’s strong balance sheet and liquidity provide the Company with significant
flexibility to take advantage of numerous opportunities going forward. The Company will continue to invest in its
operations to drive growth, including continual review of acquisition opportunities. 3M paid dividends of $1.635 billion in
2012, and has a long history of dividend increases. In February 2013, 3M’s Board of Directors increased the quarterly