REG - 3M Company - 1st Quarter Results <Origin Href="QuoteRef">MMM.N</Origin> - Part 6
05/05/2016 07:06
- Part 6: For the preceding part double click ID:nRSE2988Xe
total debt was $342 million higher at March 31, 2016 when compared to December 31, 2015, with the increase
primarily due to approximately $400 million of commercial paper issuances in the first quarter of 2016. Debt issuances in
2015 included the May 2015 and August 2015 debt issuances (approximately $3.4 billion), in addition to commercial paper
issuances ($800 million). The May 2015 debt issuances had an aggregated principal amount of 1.750 billion Euros, or
approximately $1.9 billion at issuance date exchange rates. The August 2015 debt issuances had an aggregated principal
amount of $1.5 billion. The strength of 3M's capital structure and significant ongoing cash flows provide 3M proven access
to capital markets. Additionally, the Company's maturity profile is staggered to help ensure refinancing needs in any given
year are reasonable in proportion to the total portfolio. 3M currently has an AA- credit rating with a stable outlook from
Standard & Poor's and has an A1 credit rating with a stable outlook from Moody's Investors Service. In March 2016, Moody's
downgraded 3M's rating from Aa3 to A1 and revised 3M's outlook from negative to stable. The Company's short-term rating of
P-1 was affirmed. This ratings action followed 3M's announcement of its new five-year plan for the period 2016 through 2020
in which the Company communicated its intent to further increase financial leverage.
Effective May 16, 2014, the Company updated its "well-known seasoned issuer" shelf registration statement, which registers
an indeterminate amount of debt or equity securities for future sales. This replaced 3M's previous shelf registration dated
August 5, 2011. In June 2014, in connection with the May 16, 2014 shelf registration, 3M re-commenced its medium-term notes
program (Series F) under which 3M may issue, from time to time, up to $9 billion aggregate principal amount of notes.
Included in this $9 billion are $8.17 billion (utilizing the foreign exchange rate applicable at the time of issuance for
the Euro denominated debt) of notes previously issued in 2011, 2012, 2014, and 2015 as part of Series F.
In March 2016, 3M amended and restated its existing $2.25 billion five-year revolving credit facility expiring in August
2019 to a $3.75 billion five-year revolving credit facility expiring in March 2021. This credit agreement includes a
provision under which 3M may request an increase of up to $1.25 billion (at lenders' discretion), bringing the total
facility up to $5.0 billion. This revolving credit facility is undrawn at March 31, 2016. Under the $3.75 billion credit
agreement, 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 March 31, 2016, this
ratio was approximately 51 to 1. Debt covenants do not restrict the payment of dividends. Apart from the committed
facilities, $236 million in stand-alone letters of credit and $17 million in bank guarantees were also issued and
outstanding at March 31, 2016. These lines of credit are utilized in connection with normal business activities.
Balance Sheet:
3M's strong balance sheet and liquidity provide the Company with significant flexibility to take advantage of future
investment opportunities. The Company will continue to invest in its operations to drive both organic growth and
acquisition opportunities.
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
$3.696 billion at March 31, 2016, compared with $3.868 billion at December 31, 2015, a decrease of $172 million. Current
asset balance changes decreased working capital by $112 million, driven by decreases in cash, cash equivalents, and other
current assets, which were partially offset by increases in accounts receivable, inventories, and current marketable
securities. Current liability balance changes decreased working capital by $60 million, largely due to increases in accrued
income taxes and short-term debt, partially offset by decreases in accrued payroll, accounts payable, and other current
liabilities.
The Company uses various working capital measures that place emphasis and focus on certain working capital assets and
liabilities. These measures are not defined under U.S. generally accepted accounting principles and may not be computed the
same as similarly titled measures used by other companies. One of the primary working capital measures 3M uses is a
combined index, which includes accounts receivable, inventories and accounts payable. This combined index (defined as
current quarter net sales multiplied by four, divided by ending net accounts receivable plus inventories less accounts
payable) was 4.5 at March 31, 2016 compared to 4.9 at December 31, 2015. Receivables increased $331 million, or 8.0
percent, compared with December 31, 2015, as higher March 2016 sales compared to December 2015 sales contributed to this
increase. Currency translation impacts increased accounts receivable by $86 million. Inventories increased $109 million
compared with December 31, 2015, or 3.1 percent. Currency translation increased inventories by $74 million. Accounts
payable decreased $113 million when compared with December 31, 2015, with the majority related to changes in business
activity.
Cash Flows:
Cash flows from operating, investing and financing activities are provided in the tables that follow. Individual amounts in
the Consolidated Statement of Cash Flows exclude the effects of acquisitions, divestitures and exchange rate impacts on
cash and cash equivalents, which are presented as separate line items within the statement of cash flows. Thus, the amounts
presented in the following operating, investing and financing activities tables reflect changes in balances from period to
period adjusted for these effects.
As discussed in Note 1, 3M adopted ASU No. 2016-09 effective January 1, 2016, on a prospective basis. The new guidance
impacts classifications within the statement of cash flows by no longer requiring inclusion of excess tax benefits as both
a hypothetical cash outflow within cash flows from operating activities and hypothetical cash inflow within cash flows from
financing activities. Instead, excess tax benefits would be classified in operating activities in the same manner as other
cash flows related to income taxes.
Cash Flows from Operating Activities:
Three months ended
March 31,
(Millions) 2016 2015
Net income including noncontrolling interest $ 1,278 $ 1,201
Depreciation and amortization 356 339
Company pension contributions (55) (90)
Company postretirement contributions (1) (1)
Company pension expense 47 99
Company postretirement expense 12 35
Stock-based compensation expense 144 138
Income taxes (deferred and accrued income taxes) 296 144
Excess tax benefits from stock-based compensation - (101)
Accounts receivable (245) (296)
Inventories (37) (131)
Accounts payable (116) 56
Other - net (419) (313)
Net cash provided by operating activities $ 1,260 $ 1,080
Cash flows from operating activities can fluctuate significantly from period to period, as pension funding decisions, tax
timing differences and other items can significantly impact cash flows.
In the first three months of 2016, cash flows provided by operating activities increased $180 million compared to the same
period last year, with this increase primarily due to lower cash taxes, plus a year-on-year improvement in inventories and
accounts receivable, with these impacts partially offset by declines in accounts payable. The combination of accounts
receivable, inventories and accounts payable increased working capital by $398 million in the first three months of 2016,
similar to the working capital increases of $371 million in the first three months of 2015. Additional discussion on
working capital changes is provided earlier in the "Financial Condition and Liquidity" section.
Free Cash Flow (non-GAAP measure):
In addition to net cash provided by operating activities, the Company believes free cash flow and free cash flow conversion
are useful measures of performance. 3M uses these measures as an indication of the strength of the Company and its ability
to generate cash. Free cash flow and free cash flow conversion are not defined under U.S. generally accepted accounting
principles (GAAP). Therefore, they should not be considered a substitute for income or cash flow data prepared in
accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. 3M defines free
cash flow as net cash provided by operating activities less purchases of property, plant and equipment (which is classified
as an investing activity). It should not be inferred that the entire free cash flow amount is available for discretionary
expenditures. 3M defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The first
quarter of each year is typically 3M's seasonal low for free cash flow and free cash flow conversion. Below find a recap of
free cash flow for the three months ended March 31, 2016 and 2015.
Three months ended
March 31,
(Millions) 2016 2015
Net cash provided by operating activities $ 1,260 $ 1,080
Purchases of property, plant and equipment (PP&E) (314) (291)
Free Cash Flow $ 946 $ 789
Free Cash Flow Conversion 74 % 66 %
Cash Flows from Investing Activities:
Three months ended
March 31,
(Millions) 2016 2015
Purchases of property, plant and equipment (PP&E) $ (314) $ (291)
Proceeds from sale of PP&E and other assets 18 4
Acquisitions, net of cash acquired (4) (150)
Purchases and proceeds from maturities and sale of marketable securities and investments, net (61) 414
Proceeds from sale of businesses 56 19
Other investing activities 25 4
Net cash used in investing activities $ (280) $ -
Capital spending was $314 million in the first three months of 2016, compared to $291 million in the first three months of
2015. The Company expects 2016 capital spending to be approximately $1.3 billion to $1.5 billion.
Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product demand and
increasing manufacturing efficiency. 3M invests in renewal and maintenance programs, which pertain to cost reduction, cycle
time, maintaining and renewing current capacity, pollution reduction, and compliance. Costs related to maintenance,
ordinary repairs, and certain other items are expensed. 3M also invests in new growth capacity, both through expansion of
current facilities and by building new facilities. 3M also invests in corporate laboratory facilities and information
technology (IT).
Refer to Note 2 for information on acquisitions and divestitures. The Company is actively considering additional
acquisitions, investments and strategic alliances, and from time to time may also divest certain businesses. Proceeds from
sale of businesses in the first three months of 2016 relate to the divestiture of the assets of the pressurized
polyurethane foam adhesives business (formerly known as Polyfoam) business within the Industrial business segment and the
completion of the divestiture of the Library business within the Safety and Graphics business segment.
Purchases of marketable securities and investments and proceeds from maturities and sale of marketable securities and
investments are primarily attributable to asset-backed securities, certificates of deposit/time deposits, commercial paper,
and other securities, which are classified as available-for-sale. Refer to Note 7 for more details about 3M's diversified
marketable securities portfolio. Purchases of investments include additional survivor benefit insurance, plus cost method
and equity investments.
Cash Flows from Financing Activities:
Three months ended
March 31,
(Millions) 2016 2015
Change in short-term debt - net $ 138 $ (4)
Repayment of debt (maturities greater than 90 days) - -
Proceeds from debt (maturities greater than 90 days) - -
Total cash change in debt $ 138 $ (4)
Purchases of treasury stock (1,227) (886)
Proceeds from issuances of treasury stock pursuant to stock option and benefit plans 357 309
Dividends paid to stockholders (672) (652)
Excess tax benefits from stock-based compensation - 101
Other - net (22) (22)
Net cash used in financing activities $ (1,426) $ (1,154)
Total debt at March 31, 2016 was $11.1 billion, up from $10.8 billion at year-end 2015, with the increase primarily due to
commercial paper issuances (approximately $400 million) partially offset by repayments and borrowings by international
subsidiaries. Total debt was 49 percent of total capital (total capital is defined as debt plus equity) at March 31, 2016,
compared to 48 percent of total capital at year-end 2015.
Repurchases of common stock are made to support the Company's stock-based employee compensation plans and for other
corporate purposes. In February 2016, 3M's Board of Directors authorized the repurchase of up to $10 billion of 3M's
outstanding common stock, with no pre-established end date. In the first three months of 2016, the Company purchased $1.227
billion of its own stock, compared to $886 million in the first three months of 2015. The Company expects full-year 2016
gross share repurchases will be in the range of $4 billion to $6 billion. For more information, refer to the table titled
"Issuer Purchases of Equity Securities" in Part II, Item 2. The Company does not utilize derivative instruments linked to
the Company's stock.
Cash dividends paid to shareholders totaled $672 million in the first three months of 2016, compared to $652 million in the
first three months of 2015. 3M has paid dividends each year since 1916. In February 2016, 3M's Board of Directors declared
a first-quarter 2016 dividend of $1.11 per share, an increase of 8 percent. This is equivalent to an annual dividend of
$4.44 per share and marked the 58th consecutive year of dividend increases for 3M.
Other cash flows from financing activities may include various other items, such as distributions to or sales of
noncontrolling interests, changes in cash overdraft balances, and principal payments for capital leases.
CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part I, Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The Company may also make forward-looking statements in other reports filed with the Securities and
Exchange Commission, in materials delivered to shareholders and in press releases. In addition, the Company's
representatives may from time to time make oral forward-looking statements.
Forward-looking statements relate to future events and typically address the Company's expected future business and
financial performance. Words such as "plan," "expect," "aim," "believe," "project," "target," "anticipate," "intend,"
"estimate," "will," "should," "could," "forecast" and other words and terms of similar meaning, typically identify such
forward-looking statements. In particular, these include, among others, statements relating to:
· the Company's strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of
financial performance, and market position,
· worldwide economic and capital markets conditions, such as interest rates, foreign currency exchange rates,
financial conditions of our suppliers and customers, and natural and other disasters or climate change affecting the
operations of the Company or its suppliers and customers,
· new business opportunities, product development, and future performance or results of current or anticipated
products,
· the scope, nature or impact of acquisitions, strategic alliances and divestitures,
· the outcome of contingencies, such as legal and regulatory proceedings,
· future levels of indebtedness, common stock repurchases and capital spending,
· future availability of and access to credit markets,
· pension and postretirement obligation assumptions and future contributions,
· asset impairments,
· tax liabilities,
· information technology security, and
· the effects of changes in tax, environmental and other laws and regulations in the United States and other countries
in which we operate.
The Company assumes no obligation to update or revise any forward-looking statements.
Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject
to risks and uncertainties. Actual future results and trends may differ materially from historical results or those
reflected in any such forward-looking statements depending on a variety of factors. Important information as to these
factors can be found in this document, including, among others, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" under the headings of "Overview," "Financial Condition and Liquidity" and annually in
"Critical Accounting Estimates." Discussion of these factors is incorporated by reference from Part II, Item 1A, "Risk
Factors," of this document, and should be considered an integral part of Part I, Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations." For additional information concerning factors that may cause
actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 10-K, 10-Q
and 8-K filed with the SEC from time to time.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
In the context of Item 3, 3M is exposed to market risk due to the risk of loss arising from adverse changes in foreign
currency exchange rates, interest rates and commodity prices. Changes in those factors could impact the Company's results
of operations and financial condition. For a discussion of sensitivity analysis related to these types of market risks,
refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in 3M's 2015 Annual Report on Form
10-K. There have been no material changes in information that would have been provided in the context of Item 3 from the
end of the preceding year until March 31, 2016. However, the Company does provide risk management discussion in various
places in this Quarterly Report on Form 10-Q, primarily in the Derivatives note.
Item 4. Controls and Procedures.
a. The Company carried out an evaluation, under the supervision and with the participation of its management, including the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's
"disclosure controls and procedures" (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by
this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective.
b. There was no change in the Company's internal control over financial reporting that occurred during the Company's most
recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
The Company is implementing an enterprise resource planning ("ERP") system on a worldwide basis, which is expected to
improve the efficiency of certain financial and related transaction processes. The gradual implementation is expected to
occur in phases over the next several years. The implementation of a worldwide ERP system will likely affect the processes
that constitute our internal control over financial reporting and will require testing for effectiveness.
The Company completed implementation with respect to elements of certain processes/sub-processes in limited
subsidiaries/locations and will continue to roll out the ERP system over the next several years. As with any new
information technology application we implement, this application, along with the internal controls over financial
reporting included in this process, was appropriately considered within the testing for effectiveness with respect to the
implementation in these instances. We concluded, as part of its evaluation described in the above paragraphs, that the
implementation of the ERP system in these circumstances has not materially affected our internal control over financial
reporting.
3M COMPANY
FORM 10-Q
For the Quarterly Period Ended March 31, 2016
PART II. Other Information
Item 1. Legal Proceedings.
Discussion of legal matters is incorporated by reference from Part I, Item 1, Note 12, "Commitments and Contingencies" of
this document, and should be considered an integral part of Part II, Item 1, "Legal Proceedings."
Item 1A. Risk Factors.
Provided below is a cautionary discussion of what we believe to be the most important risk factors applicable to the
Company. Discussion of these factors is incorporated by reference into and considered an integral part of Part I, Item 2,
"Management's Discussion and Analysis of Financial Conditions and Results of Operations."
* Results are impacted by the effects of, and changes in, worldwide economic, political, and capital markets conditions.
The Company operates in more than 70 countries and derives approximately 60 percent of its revenues from outside the United
States. The Company's business is subject to global competition and geopolitical risks and may be adversely affected by
factors in the United States and other countries that are beyond its control, such as slower economic growth, disruptions
in financial markets, economic downturns in the form of either contained or widespread recessionary conditions, inflation,
elevated unemployment levels, sluggish or uneven recovery, government deficit reduction and other austerity measures in
specific countries or regions, or in the various industries in which the Company operates; social, political or labor
conditions in specific countries or regions; natural and other disasters or climate change affecting the operations of the
Company or its customers and suppliers; or adverse changes in the availability and cost of capital, interest rates, tax
rates, tax laws, or exchange control, ability to expatriate earnings and other regulations in the jurisdictions in which
the Company operates.
* Change in the Company's credit ratings could increase cost of funding. The Company's credit ratings are important to 3M's
cost of capital. The major rating agencies routinely evaluate the Company's credit profile and assign debt ratings to 3M.
This evaluation is based on a number of factors, which include financial strength, business and financial risk, as well as
transparency with rating agencies and timeliness of financial reporting. 3M currently has an AA- credit rating with a
stable outlook from Standard & Poor's and has an A1 credit rating with a stable outlook from Moody's Investors Service. In
March 2016, Moody's downgraded 3M's rating from Aa3 to A1 and revised 3M's outlook from negative to stable. The Company's
short-term rating of P-1 was affirmed. This ratings action followed 3M's announcement of its new five-year plan for the
period 2016 through 2020 in which the Company communicated its intent to further increase financial leverage. The Company's
credit ratings have served to lower 3M's borrowing costs and facilitate access to a variety of lenders. The Company's
ongoing transition to a better-optimized capital structure, financed with additional low-cost debt, could impact 3M's
credit rating in the future. Failure to maintain strong investment grade ratings would adversely affect the Company's cost
of funding and could adversely affect liquidity and access to capital markets.
* The Company's results are affected by competitive conditions and customer preferences. 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.
* Foreign currency exchange rates and fluctuations in those rates may affect the Company's ability to realize projected
growth rates in its sales and earnings. Because the Company's financial statements are denominated in U.S. dollars and
approximately 60 percent 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.
* The Company's growth objectives are largely dependent on the timing and market acceptance of 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.
* The Company's future results are subject to fluctuations 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.
* The Company's future results may be affected if the Company generates fewer productivity improvements than estimated. The
Company utilizes various tools, such as Lean Six Sigma, and engages in ongoing global business transformation. Business
transformation is defined as changes in processes and internal/external service delivery across 3M to move to more
efficient business models to improve operational efficiency and productivity, while allowing 3M to serve customers with
greater speed and efficiency. This is enabled by the ongoing multi-year phased implementation of an enterprise resource
planning (ERP) system on a worldwide basis. There can be no assurance that all of the projected productivity improvements
will be realized.
* The Company employs information technology systems to support its business, including ongoing phased implementation of an
ERP system as part of business transformation on a worldwide basis over the next several years. Security breaches and other
disruptions to the Company's information technology infrastructure could interfere with the Company's operations,
compromise information belonging to the Company and its customers, suppliers, and employees, exposing the Company to
liability which could adversely impact the Company's business and 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 certain data, including proprietary business information, and may have access
to confidential or personal information in certain of our businesses that is subject to privacy and security laws,
regulations and customer-imposed controls. Despite our cybersecurity measures (including employee and third-party training,
monitoring of networks and systems, and maintenance of backup and protective systems) which are continuously reviewed and
upgraded, the Company's information technology networks and infrastructure may still 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, service providers including cloud services, natural disasters or
other catastrophic events. It is possible for such vulnerabilities to remain undetected for an extended period, up to and
including several years. While we have experienced, and expect to continue to experience, these types of threats to the
Company's information technology networks and infrastructure, none of them to date has had a material impact to the
Company. There may be other challenges and risks as the Company upgrades and standardizes its ERP system on a worldwide
basis. 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. Although the
Company maintains insurance coverage for various cybersecurity risks, there can be no guarantee that all costs or losses
incurred will be fully insured.
* The Company's defined benefit pension and postretirement plans are subject to financial market risks that could adversely
impact our results. The performance of financial markets and discount rates impact the Company's funding obligations under
its defined benefit plans. Significant changes in market interest rates, decreases in the fair value of plan assets and
investment losses on plan assets, and relevant legislative or regulatory changes relating to defined benefit plan funding
may increase the Company's funding obligations and adversely impact its results of operations and cash flows.
* The Company's future results may be affected by various legal and regulatory proceedings and legal compliance risks,
including those involving product liability, antitrust, intellectual property, environmental, the U.S. Foreign Corrupt
Practices Act and other anti-bribery, anti-corruption, or other matters. The outcome of these legal proceedings may differ
from the Company's expectations because the outcomes of litigation, including regulatory matters, are often difficult to
reliably predict. Various factors or developments can lead the Company to change current estimates of liabilities and
related insurance receivables where applicable, or make such estimates for matters previously not susceptible of reasonable
estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory developments
or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in future charges
that could have a material adverse effect on the Company's results of operations or cash flows in any particular period.
For a more detailed discussion of the legal proceedings involving the Company and the associated accounting estimates, see
the discussion in Note 12 "Commitments and Contingencies" within the Notes to Consolidated Financial Statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
Repurchases of 3M common stock are made to support the Company's stock-based employee compensation plans and for other
corporate purposes. In February 2014, 3M's Board of Directors authorized the repurchase of up to $12 billion of 3M's
outstanding common stock, with no pre-established end date. In February 2016, 3M's Board of Directors replaced the
Company's February 2014 repurchase program with a new program. This new program authorizes the repurchase of up to $10
billion of 3M's outstanding common stock, with no pre-established end date.
Issuer Purchases of Equity
Securities (registered pursuant to
Section 12 of the Exchange Act)
Maximum
Approximate
Dollar Value of
Total Number of Shares that May
Shares Purchased Yet Be Purchased
Total Number of Average Price as Part of Publicly under the Plans
Shares Purchased Paid per Announced Plans or Programs
Period (1) Share or Programs (2) (Millions)
January 1-31, 2016 4,867,209 $ 141.70 4,867,019 $ 777
February 1-29, 2016 1,593,234 $ 153.47 1,590,500 $ 9,756
March 1-31, 2016 1,094,083 $ 162.58 1,091,293 $ 9,578
Total January 1-March 31, 2016 7,554,526 $ 147.21 7,548,812 $ 9,578
(1) The total number of shares purchased includes: (i) shares purchased under the Board's authorizations described above,
and (ii) shares purchased in connection with the exercise of stock options.
(2) The total number of shares purchased as part of publicly announced plans or programs includes shares purchased under
the Board's authorizations described above.
Item 3. Defaults Upon Senior Securities. - No matters require disclosure.
Item 4. Mine Safety Disclosures. Pursuant to Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the "Act"), the Company is required to disclose, in connection with the mines it operates, information concerning mine
safety violations or other regulatory matters in its periodic reports filed with the SEC. The information concerning mine
safety violations or other regulatory matters required by Section 1503(a) of the Act is included in Exhibit 95 to this
quarterly report.
Item 5. Other Information. - No matters require disclosure.
Item 6. Exhibits.
Exhibits. These exhibits are either incorporated by reference into this report or filed herewith with this report. Exhibit
numbers 10.1 through 10.29 are management contracts or compensatory plans or arrangements.
Index to Exhibits:
(3) Articles of Incorporation and bylaws
(3.1) Certificate of incorporation, as amended as of May 11, 2007, is incorporated by reference from our Form 8-K dated May 14, 2007.
(3.2) Amended and Restated Bylaws, as adopted as of November 10, 2015, are incorporated by reference from our Form 8-K dated November 10, 2015.
(4) Instruments defining the rights of security holders, including indentures:
(4.1) Indenture, dated as of November 17, 2000, between 3M and The Bank of New York Mellon Trust Company, N.A., as successor trustee, with respect to 3M's senior debt
securities, is incorporated by reference from our Form 8-K dated December 7, 2000.
(4.2) First Supplemental Indenture, dated as of July 29, 2011, to Indenture dated as of November 17, 2000, between 3M and The Bank of New York Mellon Trust Company, N.A., as
successor trustee, with respect to 3M's senior debt securities, is incorporated by reference from our Form 10-Q for the quarter ended June 30, 2011.
(10) Material contracts and management compensation plans and arrangements:
(10.1) 3M 2008 Long-Term Incentive Plan (including amendments through February 2, 2016) is incorporated by reference from our Form 10-K for the year ended December 31, 2015.
(10.2) Form of Agreement for Stock Option Grants to Executive Officers under 3M 2008 Long-Term Incentive Plan is incorporated by reference from our Form 8-K dated May 13, 2008.
(10.3) Form of Stock Option Agreement for options granted to Executive Officers under the 3M 2008 Long-Term Incentive Plan, commencing February 9, 2010, is incorporated by
reference from our Form 10-K for the year ended December 31, 2009.
(10.4) Form of Restricted Stock Unit Agreement for restricted stock units granted to Executive Officers under the 3M Long-Term Incentive Plan, effective February 9, 2010, is
incorporated by reference from our Form 10-K for the year ended December 31, 2009.
(10.5) Form of 3M 2010 Performance Share Award under the 3M 2008 Long-Term Incentive Plan is incorporated by reference from our Form 8-K dated March 4, 2010.
(10.6) Form of Stock Option Agreement for U.S. Employees under 3M 2008 Long-Term Incentive Plan is incorporated by reference from our Form 10-K for the year ended December 31,
2008.
(10.7) Form of Restricted Stock Unit Agreement for U.S. Employees under 3M 2008 Long-Term Incentive Plan is incorporated by reference from our Form 10-K for the year ended
December 31, 2008.
(10.8) 3M 2005 Management Stock Ownership Program (including amendments through February 2, 2016) is incorporated by reference from our Form 10-K for the year ended December 31,
2015.
(10.9) Form of award agreement for non-qualified stock options granted under the 2005 Management Stock Ownership Program, is incorporated by reference from our Form 8-K dated
May 16, 2005.
(10.10) 3M VIP Excess Plan is incorporated by reference from our Form 8-K dated November 14, 2008.
(10.11) Amendment of 3M VIP Excess Plan is incorporated by reference from our Form 8-K dated November 24, 2009.
(10.12) 3M VIP (Voluntary Investment Plan) Plus is incorporated by reference from Registration Statement No. 333-73192 on Form S-8, filed on November 13, 2001.
(10.13) Amendment of 3M VIP Plus is incorporated by reference from our Form 8-K dated November 14, 2008.
(10.14) 3M Deferred Compensation Plan, as amended through February 2008, is incorporated by reference from our Form 8-K dated February 14, 2008.
(10.15) Amendment of 3M Deferred Compensation Plan is incorporated by reference from our Form 8-K dated November 14, 2008.
(10.16) 3M Deferred Compensation Excess Plan is incorporated by reference from our Form 10-K for the year ended December 31, 2009.
(10.17) 3M Performance Awards Deferred Compensation Plan is incorporated by reference from our Form 10-K for the year ended December 31, 2009.
(10.18) 3M Executive Annual Incentive Plan is incorporated by reference from our Form 8-K dated May 14, 2007.
(10.19) Description of changes to 3M Compensation Plan for Non-Employee Directors is incorporated by reference from our Form 8-K dated August 8, 2005.
(10.20) 3M Compensation Plan for Non-Employee Directors, as amended, through November 8, 2004, is incorporated by reference from our Form 10-K for the year ended December 31,
2004.
(10.21) Amendment of 3M Compensation Plan for Non-Employee Directors is incorporated by reference from our Form 8-K dated November 14, 2008.
(10.22) Amendment of 3M Compensation Plan for Non-Employee Directors as of August 12, 2013, is incorporated by reference from our Form 10-Q for the quarter ended September 30,
2013.
(10.23) 3M Executive Life Insurance Plan, as amended, is incorporated by reference from our Form 10-K for the year ended December 31, 2003.
(10.24) Summary of Personal Financial Planning Services for 3M Executives is incorporated by reference from our Form 10-K for the year ended December 31, 2003.
(10.25) 3M policy on reimbursement of incentive payments is incorporated by reference from our Form 10-K for the year ended December 31, 2006.
(10.26) Amended and Restated 3M Nonqualified Pension Plan I is incorporated by reference from our Form 8-K dated December 23, 2008.
(10.27) Amended and Restated 3M Nonqualified Pension Plan II is incorporated by reference from our Form 8-K dated December 23, 2008.
(10.28) 3M Nonqualified Pension Plan III is incorporated by reference from our Form 8-K dated November 14, 2008.
(10.29) Policy on Reimbursement of Incentive Compensation (effective May 11, 2010) is incorporated by reference from our Form 10-Q dated August 4, 2010.
(10.30) Amended and restated five-year credit agreement as of March 9, 2016, is incorporated by reference from our Form 8-K dated March 11, 2016.
(10.31) Registration Rights Agreement as of August 4, 2009, between 3M Company and State Street Bank and Trust Company as Independent Fiduciary of the 3M Employee Retirement
Income Plan, is incorporated by reference from our Form 8-K dated August 5, 2009.
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