REG - 3M Company - Annual Financial Report - Updated by Form 8-K <Origin Href="QuoteRef">MMM.N</Origin> - Part 6
19/05/2016 07:09
- Part 6: For the preceding part double click ID:nRSS6547Ye
2016, with early
adoption permitted. The Company adopted this standard with respect to measurement-period adjustments beginning in the
fourth quarter of 2015. Additional disclosure, as applicable, is included in Note 2, Acquisitions and Divestitures.
In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires entities
to present deferred tax assets (DTAs) and deferred tax liabilities (DTLs), along with any related valuation allowance, as
noncurrent in a balance sheet. This ASU eliminates current guidance requiring deferred taxes for each jurisdiction to be
presented as a net current asset or liability and a net noncurrent asset or liability. As a result, each jurisdiction would
have one net noncurrent DTA or DTL balance. The ASU does not change the existing requirement that only permits offsetting
DTAs and DTLs within a particular jurisdiction. For 3M, this standard is effective January 1, 2017, with early adoption
permitted. In light of the process simplification provided by this ASU, the Company adopted this standard in the fourth
quarter of 2015 with retrospective application to prior periods. As a result, the December 31, 2014 balances of DTAs and
DTLs previously reported were impacted as follows:
December 31, 2014
(Millions) Previously Reported Impact As Adopted
Prepaid expenses and other (within other current assets) $ 595 $ 169 $ 764
Other current tax assets (within other current assets) 444 (444) -
Deferred tax assets (within other assets) 889 241 1,130
Deferred tax liabilities (within other current liabilities) 34 (34) -
In conjunction with the adoption of this ASU, 3M reclassified $169 million of remaining other current tax assets to prepaid
expenses and other to conform to the 2015 presentation.
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial
Liabilities, which revises the accounting related to (1) the classification and measurement of investments in equity
securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU
also amends certain disclosure requirements associated with the fair value of financial instruments. The new guidance
requires the fair value measurement of investments in equity securities and other ownership interests in an entity,
including investments in partnerships, unincorporated joint ventures and limited liability companies (collectively, equity
securities) that do not result in consolidation and are not accounted for under the equity method. Entities will need to
measure these investments and recognize changes in fair value in net income. Entities will no longer be able to recognize
unrealized holding gains and losses on equity securities they classify under current guidance as available for sale in
other comprehensive income (OCI). They also will no longer be able to use the cost method of accounting for equity
securities that do not have readily determinable fair values. Instead, for these types of equity investments that do not
otherwise qualify for the net asset value practical expedient, entities will be permitted to elect a practicability
exception and measure the investment at cost less impairment plus or minus observable price changes (in orderly
transactions). The ASU also establishes an incremental recognition and disclosure requirement related to the presentation
of fair value changes of financial liabilities for which the fair value option (FVO) has been elected. Under this guidance,
an entity would be required to separately present in OCI the portion of the total fair value change attributable to
instrument-specific credit risk as opposed to reflecting the entire amount in earnings. For derivative liabilities for
which the FVO has been elected, however, any changes in fair value attributable to instrument-specific credit risk would
continue to be presented in net income, which is consistent with current guidance. For 3M, this standard is effective
beginning January 1, 2018 via a cumulative-effect adjustment to beginning retained earnings, except for guidance relative
to equity securities without readily determinable fair values which is applied prospectively. The Company is currently
assessing this ASU's impacts on 3M's consolidated results of operations and financial condition.
NOTE 2. Acquisitions and Divestitures
Acquisitions:
3M makes acquisitions of certain businesses from time to time that are aligned with its strategic intent with respect to,
among other factors, growth markets and adjacent product lines or technologies.
The impact on the consolidated balance sheet of the purchase price allocations related to 2015 acquisitions and assigned
weighted-average intangible asset lives, including adjustments relative to other acquisitions within the measurement
period, follows. The allocation of purchase consideration related to the August 2015 Capital Safety and Polypore
Separations Media acquisitions is considered preliminary, primarily with respect to certain tax-related assets and
liabilities. 3M expects to finalize the allocation of purchase price within the one year measurement-period following these
acquisitions. Adjustments to preliminary allocations primarily related to the identification and valuation of certain
indefinite-lived intangible assets (further discussed below). The change to provisional amounts resulted in an immaterial
impact to results of operations in the fourth quarter of 2015, a portion of which relates to earlier quarters in the
measurement period.
2015 Acquisition Activity
Finite-Lived
Intangible-Asset
(Millions) Capital Polypore Weighted-Average
Asset (Liability) Safety Separations Media Other Total Lives (Years)
Accounts receivable $ 66 $ 30 $ 7 $ 103
Inventory 63 35 4 102
Other current assets 10 1 1 12
Property, plant, and equipment 36 128 7 171
Purchased finite-lived intangible assets:
Customer related intangible assets 445 270 40 755 16
Patents 44 11 7 62 7
Other technology-based intangible assets 85 42 1 128 7
Definite-lived tradenames 26 6 1 33 16
Other amortizable intangible assets - - 2 2 4
Purchased indefinite-lived intangible assets 520 - - 520
Purchased goodwill 1,764 636 95 2,495
Accounts payable and other liabilities, net of other assets (105) (122) (5) (232)
Interest bearing debt (766) - - (766)
Deferred tax asset/(liability) (464) - (7) (471)
Net assets acquired $ 1,724 $ 1,037 $ 153 $ 2,914
Supplemental information:
Cash paid $ 1,758 $ 1,037 $ 154 $ 2,949
Less: Cash acquired 34 - 1 35
Cash paid, net of cash acquired $ 1,724 $ 1,037 $ 153 $ 2,914
3M completed one acquisition (Treo Solutions, LLC) during 2014, the impact of which on the consolidated balance sheet was
not considered material. Separately, as discussed in Note 6, during 2014, 3M (via Sumitomo 3M Limited) purchased Sumitomo
Electric Industries, Ltd.'s 25 percent interest in 3M's consolidated Sumitomo 3M Limited subsidiary for 90 billion Japanese
Yen. Because 3M already had a controlling interest in this consolidated subsidiary, this transaction was separately
recorded as a financing activity in the statement of cash flows.
There were no acquisitions that closed during 2013.
Goodwill resulting from business combinations is largely attributable to the existing workforce of the acquired businesses
and synergies expected to arise after 3M's acquisition of these businesses. Pro forma information related to acquisitions
was not included because the impact on the Company's consolidated results of operations was not considered to be material.
In addition to business combinations, 3M periodically acquires certain tangible and/or intangible assets and purchases
interests in certain enterprises that do not otherwise qualify for accounting as business combinations. These transactions
are largely reflected as additional asset purchase and investment activity.
2015 acquisitions:
In March 2015, 3M (Health Care Business) purchased all of the outstanding shares of Ivera Medical Corp., headquartered in
San Diego, California. Ivera Medical Corp. is a manufacturer of health care products that disinfect and protect devices
used for access into a patient's bloodstream. In addition, in the first quarter of 2015, 3M (Industrial Business) purchased
the remaining interest in a former equity method investment for an immaterial amount.
In August 2015, 3M (Safety and Graphics Business) acquired all of the outstanding shares of Capital Safety Group S.A.R.L.,
with operating headquarters in Bloomington, Minnesota, from KKR & Co. L.P. for $1.7 billion, net of cash acquired. The net
assets acquired included the assumption of $0.8 billion of debt. Capital Safety is a leading global provider of fall
protection equipment.
In August 2015, 3M (Industrial Business) acquired the assets and liabilities associated with Polypore International, Inc.'s
Separations Media business, headquartered in Wuppertal, Germany, for $1.0 billion. Polypore's Separations Media business is
a leading provider of microporous membranes and modules for filtration in the life sciences, industrial and specialty
segments.
Purchased identifiable finite-lived intangible assets related to acquisition activity in 2015 totaled $1.0 billion. The
associated finite-lived intangible assets acquired in 2015 will be amortized on a systematic and rational basis (generally
straight line) over a weighted-average life of 14 years (lives ranging from two to 20 years). Indefinite-lived intangible
assets of $520 million relate to certain tradenames associated with the Capital Safety acquisition which have been in
existence for over 55 years, have a history of leading market-share positions, have been and are intended to be
continuously renewed, and the associated products of which are expected to generate cash flows for 3M for an indefinite
period of time. Acquired in-process research and development and identifiable intangible assets for which significant
assumed renewals or extensions of underlying arrangements impacted the determination of their useful lives were not
material.
2014 acquisitions:
During 2014, 3M completed one business combination. The purchase price paid for this business combination (net of cash
acquired) and the impact of other matters (net) during 2014 aggregated to $94 million.
In April 2014, 3M (Health Care Business) purchased all of the outstanding equity interests of Treo Solutions LLC,
headquartered in Troy, New York. Treo Solutions LLC is a provider of data analytics and business intelligence to healthcare
payers and providers.
Purchased identifiable finite-lived intangible assets related to acquisition activity in 2014 totaled $34 million. The
associated finite-lived intangible assets acquired in 2014 will be amortized on a systematic and rational basis (generally
straight line) over a weighted-average life of six years (lives ranging from three to 10 years). Acquired in-process
research and development and identifiable intangible assets for which significant assumed renewals or extensions of
underlying arrangements impacted the determination of their useful lives were not material.
Divestitures:
3M may divest certain businesses from time to time based upon review of the Company's portfolio considering, among other
items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in
addition to considering if selling the businesses results in the greatest value creation for the Company and for
shareholders.
In January 2015, 3M (Electronics and Energy Business) completed the sale of its global Static Control business to Desco
Industries Inc., based in Chino, California. 2014 sales of this business were $46 million. This transaction was not
considered material.
In the fourth quarter of 2015, 3M (Safety and Graphics Business) entered into agreements with One Equity Partners Capital
Advisors L.P. (OEP) to sell the assets of 3M's library systems business. The sales of the North American business and the
majority of the business outside of North America closed in October and November 2015, respectively. The sale of the
remainder of the library systems business is expected to close in the first quarter of 2016. In December 2015, 3M (Safety
and Graphics Business) also completed the sale of Faab Fabricauto, a wholly-owned subsidiary of 3M, to Hills Numberplates
Limited. The library systems business, part of the Traffic Safety and Security Division, delivers circulation management
solutions to library customers with on-premise hardware and software, maintenance and service, and an emerging cloud-based
digital lending platform. Faab Fabricauto, also part of the Traffic Safety and Security Division, is a leading French
manufacturer of license plates and signage solutions. The aggregate cash proceeds relative to the 2015 global library
systems and Faab Fabricauto divestiture transactions was $104 million. The Company recorded a net pre-tax gain of $40
million (approximately $10 million after tax) in 2015 as a result of the sale and any adjustment of carrying value.
In January 2016, 3M (Industrial Business Group) entered into an agreement to sell to Innovative Chemical Products Group, a
portfolio company of Audax Private Equity, the assets of 3M's pressurized polyurethane foam adhesives business (formerly
known as Polyfoam). This business is a provider of pressurized polyurethane foam adhesive formulations and systems into the
residential roofing, commercial roofing and insulation and industrial foam segments in the United States with annual sales
of approximately $20 million. The transaction is expected to close in the first quarter of 2016, subject to customary close
conditions.
In June 2013, 3M (Consumer Business) completed the sale of its Scientific Anglers and Ross Reels businesses to The Orvis
Company, Inc. based in Manchester, Vermont. This transaction was not considered material.
The aggregate operating income of these businesses included in the Company's operating results for the periods presented
and the amounts of major assets and liabilities of any associated disposal groups classified as held-for-sale as of
December 31, 2015 were not material.
NOTE 3. Goodwill and Intangible Assets
Purchased goodwill from acquisitions totaled $2.5 billion in 2015, $636 million of which is deductible for tax purposes.
Purchased goodwill from acquisitions totaled $65 million in 2014, none of which is deductible for tax purposes. The amounts
in the "Translation and other" column in the following table primarily relate to changes in foreign currency exchange
rates. The goodwill balance by business segment follows:
Goodwill
Dec. 31, 2014 2014 Dec. 31, 2015 2015 Dec. 31,
2013 acquisition translation 2014 acquisition translation 2015
(Millions) Balance activity and other Balance activity and other Balance
Industrial $ 2,171 $ - $ (129) $ 2,042 $ 637 $ (106) $ 2,573
Safety and Graphics 1,740 - (90) 1,650 1,764 (72) 3,342
Health Care 1,596 65 (72) 1,589 94 (59) 1,624
Electronics and Energy 1,607 - (53) 1,554 - (44) 1,510
Consumer 231 - (16) 215 - (15) 200
Total Company $ 7,345 $ 65 $ (360) $ 7,050 $ 2,495 $ (296) $ 9,249
As described in Note 16, effective in the third quarter of 2015, within the Health Care business segment, the Company
formed the Oral Care Solutions Division, which combined the former 3M ESPE and 3M Unitek divisions. As also described in
Note 16, effective in the first quarter of 2016, the Company changed its business segment reporting in its continuing
effort to improve the alignment of its businesses around markets and customers. For any product changes that resulted in
reporting unit changes, the Company applied the relative fair value method to determine the impact on goodwill of the
associated reporting units. During the third quarter of 2015 and the first quarter of 2016, the Company completed its
assessment of any potential goodwill impairment for reporting units impacted by these changes and determined that no
impairment existed. The Company also completed its annual goodwill impairment test in the fourth quarter of 2015 for all
reporting units and determined that no impairment existed. In addition, the Company had no impairments of goodwill in prior
years.
Acquired Intangible Assets
For 2015, the intangible assets (excluding goodwill) acquired through business combinations increased the gross carrying
amount. Balances are also impacted by changes in foreign currency exchange rates. The gross carrying amount and accumulated
amortization of acquired intangible assets as of December 31, follow:
(Millions) 2015 2014
Customer related intangible assets $ 1,973 $ 1,348
Patents 616 581
Other technology-based intangible assets 525 407
Definite-lived tradenames 421 401
Other amortizable intangible assets 216 221
Total gross carrying amount $ 3,751 $ 2,958
Accumulated amortization - customer related (668) (597)
Accumulated amortization - patents (481) (472)
Accumulated amortization - other technology based (252) (215)
Accumulated amortization - definite-lived tradenames (215) (195)
Accumulated amortization - other (169) (167)
Total accumulated amortization $ (1,785) $ (1,646)
Total finite-lived intangible assets - net $ 1,966 $ 1,312
Non-amortizable intangible assets (primarily tradenames) 635 123
Total intangible assets - net $ 2,601 $ 1,435
Certain tradenames acquired by 3M are not amortized because they have been in existence for over 55 years, have a history
of leading-market share positions, have been and are intended to be continuously renewed, and the associated products of
which are expected to generate cash flows for 3M for an indefinite period of time.
Amortization expense for the years ended December 31 follows:
(Millions) 2015 2014 2013
Amortization expense $ 229 $ 228 $ 236
Expected amortization expense for acquired amortizable intangible assets recorded as of December 31, 2015 follows:
After
(Millions) 2016 2017 2018 2019 2020 2020
Amortization expense $ 252 $ 226 $ 205 $ 192 $ 183 $ 908
The preceding expected amortization expense is an estimate. Actual amounts of amortization expense may differ from
estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment
of intangible assets, accelerated amortization of intangible assets and other events. 3M expenses the costs incurred to
renew or extend the term of intangible assets.
NOTE 4. Restructuring Actions
2015 Restructuring Actions:
During the fourth quarter of 2015, management approved and committed to undertake certain restructuring actions primarily
focused on structural overhead, largely in the U.S. and slower-growing markets, with particular emphasis on Europe, Middle
East, and Africa (EMEA) and Latin America. This impacted approximately 1,700 positions worldwide and resulted in a
fourth-quarter 2015 pre-tax charge of $114 million.
Components of these restructuring charges are summarized by business segment as follows:
Year ended December 31, 2015
(Millions) Employee-Related Asset-Related Total
Industrial $ 30 $ 12 $ 42
Safety and Graphics 11 - 11
Health Care 9 - 9
Electronics and Energy 8 4 12
Consumer 3 - 3
Corporate and Unallocated 37 - 37
Total Expense $ 98 $ 16 $ 114
The preceding restructuring charges were recorded in the income statement as follows:
(Millions) 2015
Cost of sales 40
Selling, general and administrative expenses 62
Research, development and related expenses 12
Total $ 114
Components of these restructuring actions, including cash and non-cash impacts, follow:
Year ended December 31, 2015
(Millions) Employee-Related Asset-Related Total
Expense incurred $ 98 $ 16 $ 114
Non-cash changes (8) (16) (24)
Cash payments (27) - (27)
Accrued 2015 restructuring action balances as of December 31, 2015 $ 63 $ - $ 63
Non-cash changes include certain pension settlements and special termination benefits recorded in accrued pension and
postretirement benefits and accelerated deprecation resulting from the cessation of use of certain long-lived assets.
Remaining activities related to the restructuring are expected to be completed in 2016.
NOTE 5. Supplemental Balance Sheet Information
Accounts payable (included as a separate line item in the Consolidated Balance Sheet) includes drafts payable on demand of
$79 million at December 31, 2015, and $1 million at December 31, 2014. Accumulated depreciation for capital leases totaled
$98 million and $87 million as of December 31, 2015, and 2014, respectively. Additional supplemental balance sheet
information is provided in the table that follows.
(Millions) 2015 2014
Other current assets
Prepaid expenses and other $ 1,081 $ 764
Derivative assets-current 211 182
Insurance related receivables, prepaid expenses and other 106 77
Total other current assets $ 1,398 $ 1,023
Investments
Equity method $ 56 $ 58
Cost method 59 41
Other investments 2 3
Total investments $ 117 $ 102
Property, plant and equipment - at cost
Land $ 354 $ 368
Buildings and leasehold improvements 7,120 6,943
Machinery and equipment 14,743 14,684
Construction in progress 723 679
Capital leases 158 167
Gross property, plant and equipment 23,098 22,841
Accumulated depreciation (14,583) (14,352)
Property, plant and equipment - net $ 8,515 $ 8,489
Other assets
Deferred income taxes $ 510 $ 1,130
Insurance related receivables and other 49 89
Cash surrender value of life insurance policies 241 245
Other 253 305
Total other assets $ 1,053 $ 1,769
Other current liabilities
Accrued trade payables $ 566 $ 533
Deferred income 518 541
Derivative liabilities 65 39
Dividends payable - 648
Employee benefits and withholdings 148 172
Contingent liability claims and other 147 157
Property and other taxes 89 90
Pension and postretirement benefits 60 60
Other 811 644
Total other current liabilities $ 2,404 $ 2,884
Other liabilities
Long term income taxes payable $ 154 $ 519
Employee benefits 254 262
Contingent liability claims and other 295 300
Capital lease obligations 46 59
Deferred income 19 21
Deferred income taxes 551 141
Other 261 253
Total other liabilities $ 1,580 $ 1,555
NOTE 6. Supplemental Equity and Comprehensive Income Information
Common stock ($.01 par value per share) of 3.0 billion shares is authorized, with 944,033,056 shares issued. Treasury stock
is reported at cost, with 334,702,932 shares at December 31, 2015, 308,898,462 shares at December 31, 2014, and 280,736,817
shares at December 31, 2013. Preferred stock, without par value, of 10 million shares is authorized but unissued.
In 2015, 3M's Board of Directors declared a second, third, and fourth quarter dividend of $1.025 per share, which resulted
in total year 2015 declared dividends of $3.075 per share. In December 2014, 3M's Board of Directors declared a
first-quarter 2015 dividend of $1.025 per share (paid in March 2015), which when added to second, third and fourth quarter
2014 declared dividends of $0.855 per share, resulted in total year 2014 declared dividends of $3.59 per share. In December
2013, 3M's Board of Directors declared a first-quarter 2014 dividend of $0.855 per share (paid in March 2014). This
resulted in total year 2013 declared dividends of $3.395 per share.
Changes in Accumulated Other Comprehensive Income (Loss) Attributable to 3M by Component
Defined Benefit Debt and Cash Flow Accumulated
Pension and Equity Hedging Other
Cumulative Postretirement Securities, Instruments, Comprehensive
Translation Plans Unrealized Unrealized Income
(Millions) Adjustment Adjustment Gain (Loss) Gain (Loss) (Loss)
Balance at December 31, 2012, net of tax: $ 230 $ (4,955) $ (2) $ (23) $ (4,750)
Other comprehensive income (loss), before tax:
Amounts before reclassifications (462) 1,361 - (98) 801
Amounts reclassified out - 569 - 122 691
Total other comprehensive income (loss), before tax (462) 1,930 - 24 1,492
Tax effect 44 (690) - (9) (655)
Total other comprehensive income (loss), net of tax (418) 1,240 - 15 837
Balance at December 31, 2013, net of tax: $ (188) $ (3,715) $ (2) $ (8) $ (3,913)
Other comprehensive income (loss), before tax:
Amounts before reclassifications (856) (2,638) 2 171 (3,321)
Amounts reclassified out - 360 1 (4) 357
Total other comprehensive income (loss), before tax (856) (2,278) 3 167 (2,964)
Tax effect (92) 716 (1) (60) 563
Total other comprehensive income (loss), net of tax (948) (1,562) 2 107 (2,401)
Impact from purchase of subsidiary shares 41 (16) - - 25
Balance at December 31, 2014, net of tax $ (1,095) $ (5,293) $ - $ 99 $ (6,289)
Other comprehensive income (loss), before tax:
Amounts before reclassifications (447) 367 - 212 132
Amounts reclassified out - 537 - (174) 363
Total other comprehensive income (loss), before tax (447) 904 - 38 495
Tax effect (137) (415) - (13) (565)
Total other comprehensive income (loss), net of tax (584) 489 - 25 (70)
Balance at December 31, 2015, net of tax: $ (1,679) $ (4,804) $ - $ 124 $ (6,359)
Income taxes are not provided for foreign translation relating to permanent investments in international subsidiaries, but
tax effects within cumulative translation does include impacts from items such as net investment hedge transactions.
Reclassification adjustments are made to avoid double counting in comprehensive income items that are also recorded as part
of net income.
Reclassifications out of Accumulated Other Comprehensive Income Attributable to 3M
Amounts Reclassified from
Accumulated Other Comprehensive Income
(Millions) Year ended Year ended Year ended
Details about Accumulated Other December 31, December 31, December 31, Location on Income
Comprehensive Income Components 2015 2014 2013 Statement
Gains (losses) associated with, defined benefit pension and postretirement plans amortization
Transition asset $ 1 $ 1 $ 1 See Note 11
Prior service benefit 79 59 77 See Note 11
Net actuarial loss (626) (420) (647) See Note 11
Curtailments/Settlements 9 - - See Note 11
Total before tax (537) (360) (569)
Tax effect 176 122 197 Provision for income taxes
Net of tax $ (361) $ (238) $ (372)
Debt and equity security gains (losses)
Sales or impairments of securities $ - $ (1) $ - Selling, general and administrative expenses
Total before tax - (1) -
Tax effect - - - Provision for income taxes
Net of tax $ - $ (1) $ -
Cash flow hedging instruments gains (losses)
Foreign currency forward/option contracts $ 178 $ 3 $ (11) Cost of sales
Foreign currency forward contracts - - (108) Interest expense
Commodity price swap contracts (2) 2 (2) Cost of sales
Interest rate swap contracts (2) (1) (1) Interest expense
Total before tax 174 4 (122)
Tax effect (63) (1) 45 Provision for income taxes
Net of tax $ 111 $ 3 $ (77)
Total reclassifications for the period, net of tax $ (250) $ (236) $ (449)
Purchase and Sale of Subsidiary Shares
On September 1, 2014, 3M (via Sumitomo 3M Limited) purchased Sumitomo Electric Industries, Ltd.'s 25 percent interest in
3M's consolidated Sumitomo 3M Limited subsidiary for 90 billion Japanese Yen. Upon completion of the transaction, 3M owned
100 percent of Sumitomo 3M Limited. This transaction was recorded as a financing activity (Purchase of noncontrolling
interest) in the statement of cash flows.
In April 2014, 3M purchased the remaining noncontrolling interest in a consolidated 3M subsidiary for an immaterial amount,
which was classified as a financing activity (Purchase of noncontrolling interest) in the consolidated statement of cash
flows.
The following table summarizes the effects of these 2014 transactions on equity attributable to 3M Company shareholders:
Year ended
(Millions) December 31, 2014
Net income attributable to 3M $ 4,956
Impact of purchase of subsidiary shares (409)
Change in 3M Company shareholders' equity from net income
attributable to 3M and impact of purchase of subsidiary shares $ 4,547
In March 2013, 3M sold shares in 3M India Limited, a subsidiary of the Company, in return for $8 million. The
noncontrolling interest shares of this subsidiary trade on a public exchange in India. This sale of shares complied with an
amendment to Indian securities regulations that required 3M India Limited, as a listed company, to achieve a minimum public
shareholding of at least 25 percent. As a result of this transaction, 3M's ownership in 3M India Limited was reduced from
76 percent to 75 percent. The $8 million received in the first quarter of 2013 was classified as other financing activity
in the consolidated statement of cash flows. Because the Company retained its controlling interest, the sale resulted in an
increase in 3M Company shareholder's equity of $7 million and an increase in noncontrolling interest of $1 million.
NOTE 7. Supplemental Cash Flow Information
(Millions) 2015 2014 2013
Cash income tax payments, net of refunds $ 2,331 $ 1,968 $ 1,803
Cash interest payments 134 178 169
Capitalized interest 13 15 21
Cash interest payments include interest paid on debt and capital lease balances, including net interest payments/receipts
related to accreted debt discounts/premiums, payment of debt issue costs, as well as net interest payments/receipts
associated with interest rate swap contracts.
Individual amounts in the Consolidated Statement of Cash Flows exclude the impacts of acquisitions, divestitures and
exchange rate impacts, which are presented separately.
Transactions related to investing and financing activities with significant non-cash components are as follows:
· During the fourth quarter of 2014, 3M sold and leased-back, under a capital lease, certain recently constructed
machinery and equipment in return for a municipal bond with the City of Nevada, Missouri valued at approximately $15
million as of the transaction date.
· During the third quarter of 2013, 3M sold its equity interest in a non-strategic investment in exchange for a note
receivable of approximately $24 million, which is considered non-cash investing activity. As a result of this transaction,
in the third quarter of 2013, 3M recorded a pre-tax gain of $18 million in its Health Care business segment. In October
2013, cash was received for the note receivable and is reflected in other investing activity in the consolidated statement
of cash flows for the year ended December 31, 2013.
· During the second quarter of 2013, the Company's Sumitomo 3M Limited subsidiary moved its administrative
headquarters to a new leased location and sold the former site under an installment sale arrangement. As a result, at the
time of the closing of the sale transaction, the Company received certain cash proceeds (included in proceeds from sale of
property, plant and equipment in the consolidated statement of cash flows) and recorded a note receivable (due in quarterly
installments through the first quarter of 2016) of $78 million and deferred profit of $49 million (both based on the
foreign currency exchange rate at the time of closing). Remaining quarterly installments are due through the first quarter
of 2016 and will be included in other investing activities in the consolidated statement of cash flows. Deferred profit is
reduced and recognized into income in connection with such quarterly installments.
In addition, as discussed in Note 6, in the fourth quarter of 2014, 3M's Board of Directors declared a first-quarter 2015
dividend of $1.025 per share (paid in March 2015), which reduced 3M's stockholders equity and increased other current
liabilities as of December 2014 by $648 million. In the fourth quarter of 2013, 3M's Board of Directors declared a
first-quarter 2014 dividend of $0.855 per share (paid in March 2014). This reduced 3M's stockholders equity and increased
other current liabilities as of December 31, 2013 by $567 million.
NOTE 8. Income Taxes
Income Before Income Taxes
(Millions) 2015 2014 2013
United States $ 4,399 $ 3,815 $ 3,194
International 2,424 3,211 3,368
Total $ 6,823 $ 7,026 $ 6,562
Provision for Income Taxes
(Millions) 2015 2014 2013
Currently payable
Federal $ 1,338 $ 1,103 $ 948
State 101 108 91
International 566 1,008 901
Deferred
Federal (55) (171) (123)
State 6 (9) (2)
International 26 (11) 26
Total $ 1,982 $ 2,028 $ 1,841
Components of Deferred Tax Assets and Liabilities
(Millions) 2015 2014
Deferred tax assets:
Accruals not currently deductible
Employee benefit costs $ 175 $ 148
Product and other claims 146 152
Miscellaneous accruals 114 137
Pension costs 1,120 1,312
Stock-based compensation 305 290
Net operating/capital loss carryforwards 109 175
Foreign tax credits 25 360
Inventory 46 52
Other - 30
Gross deferred tax assets 2,040 2,656
Valuation allowance (31) (22)
Total deferred tax assets $ 2,009 $ 2,634
Deferred tax liabilities:
Product and other insurance receivables $ (28) $ (31)
Accelerated depreciation (736) (804)
Intangible amortization (1,017) (719)
Currency translation (199) (91)
Other (70) -
Total deferred tax liabilities $ (2,050) $ (1,645)
Net deferred tax assets (liabilities) $ (41) $ 989
The net deferred tax assets are included as components of Other Assets and Other Liabilities within the Consolidated
Balance Sheet. See Note 5 "Supplemental Balance Sheet Information" for further details.
As of December 31, 2015, the Company had tax effected operating losses, capital losses, and tax credit carryovers for
federal (approximately $31 million), state (approximately $2 million), and international (approximately $76 million), with
all amounts before valuation allowances. The
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