REG - 3M Company - Half-year Report <Origin Href="QuoteRef">MMM.N</Origin> - Part 7
03/08/2017 07:06
- Part 7: For the preceding part double click ID:nRSC9629Mf
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 8 in 3M's Current Report on Form 8-K dated May
4, 2017, 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 believes it
will have continuous access to the commercial paper market. 3M's commercial paper program permits the Company to have a
maximum of $5 billion outstanding with a maximum maturity of 397 days from date of issuance. At June 30, 2017, there was
approximately $50 million in commercial paper issued and outstanding.
Total Debt:
The Company's total debt was approximately $11.3 billion and $11.7 billion at June 30, 2017 and December 31, 2016,
respectively. In May 2016, 3M issued 500 million Euro aggregate principal amount of 5.75-year fixed rate medium-term notes
due February 2022 with a coupon rate of 0.375% and 500 million Euro aggregate principal amount of 15-year fixed rate
medium-term notes due 2031 with a coupon rate of 1.50%. In September 2016, 3M issued $600 million aggregate principal
amount of five-year fixed rate medium-term notes due 2021 with a coupon rate of 1.625%, $650 million aggregate principal
amount of 10-year fixed rate medium-term notes due 2026 with a coupon rate of 2.250%, and $500 million aggregate principal
amount of 30-year fixed rate medium-term notes due 2046 with a coupon rate of 3.125%. All of these 2016 issuances were
under the medium-term notes program (Series F). In June 2017, 3M repaid $650 million aggregate principal amount of fixed
rate medium-term notes. As of June 30, 2017, the total amount of debt issued as part of the medium-term notes program
(Series F), inclusive of debt issued in 2011, 2012, 2014, 2015 and the 2016 debt referenced above, is approximately $11.1
billion (utilizing the foreign exchange rates applicable at the time of issuance for the Euro denominated debt).
Information with respect to long-term debt issuances and maturities for the periods presented is included in Note 10 of
3M's Current Report on Form 8-K dated May 4, 2017 (which updated 3M's 2016 Annual Report on Form 10-K) .
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. The Company's ongoing transition to a
more optimized capital structure, financed with additional low-cost debt, could impact 3M's credit rating in the future.
Effective February 24, 2017, the Company updated its "well-known seasoned issuer" (WKSI) shelf registration statement,
which registers an indeterminate amount of debt or equity securities for future issuance and sale. This replaced 3M's
previous shelf registration dated May 16, 2014. In May 2016, in connection with the WKSI shelf, 3M entered into an amended
and restated distribution agreement relating to the future issuance and sale (from time to time) of the Company's
medium-term notes program (Series F), up to the aggregate principal amount of $18 billion, which was an increase from the
previous aggregate principal amount up to $9 billion of the same Series.
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 June 30, 2017. 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 June 30, 2017, this
ratio was approximately 43 to 1. Debt covenants do not restrict the payment of dividends. Apart from the committed
facilities, $291 million in stand-alone letters of credit and bank guarantees were also issued and outstanding at June 30,
2017. These lines of credit are utilized in connection with normal business activities.
Cash, Cash Equivalents and Marketable Securities:
At June 30, 2017, 3M had $2.8 billion of cash, cash equivalents and marketable securities, of which approximately $2.7
billion was held by the Company's foreign subsidiaries and approximately $130 million was held by the United States. These
balances are invested in bank instruments and other high-quality fixed income securities. At December 31, 2016, cash, cash
equivalents and marketable securities held by the Company's foreign subsidiaries and by the United States totaled
approximately $2.35 billion and $350 million, respectively.
Net Debt (non-GAAP measure):
Net debt is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other
companies. The Company defines net debt as total debt less the total of cash, cash equivalents and current and long-term
marketable securities. 3M believes net debt is meaningful to investors as 3M considers net debt and its components to be
important indicators of liquidity and financial position. The following table provides net debt as of June 30, 2017, and
December 31, 2016.
June 30, December 31,
(Millions) 2017 2016
Total debt $ 11,301 $ 11,650
Less: Cash and cash equivalents and marketable securities 2,811 2,695
Net debt (non-GAAP measure) $ 8,490 $ 8,955
In the first six months of 2017, net debt decreased by $465 million to a net debt balance of $8.5 billion, impacted by the
June 2017 repayment of $650 million aggregate principal amount of medium-term notes.
Balance Sheet:
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.
The Company uses working capital measures that place emphasis and focus on certain working capital assets. These measures
include working capital, accounts receivable turns, and inventory turns.
Working Capital (non-GAAP measure):
(Millions) June 30, 2017 December 31, 2016 Change
Current assets $ 12,641 $ 11,726 $ 915
Less: Current liabilities (5,697) (6,219) 522
Working capital (non-GAAP measure) $ 6,944 $ 5,507 $ 1,437
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 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 Company defines working capital
as current assets minus current liabilities. Working capital increased $1.437 billion compared to December 31, 2016.
Current asset balance changes increased working capital by $915 million, driven by increases in accounts receivable, and
inventories (discussed further below), plus increases in cash. Current liability balance changes increased working capital
by $522 million, largely due to decreases in short-term debt, partially offset by increases in accrued income taxes. 3M
believes working capital is meaningful to investors as a measure of operational efficiency and short-term financial
health.
Accounts Receivable and Inventory Turns (non-GAAP measures):
Accounts receivable and inventory turns 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. 3M defines accounts receivable turns as quarterly
net sales multiplied by 4 divided by ending accounts receivable - net, and defines inventory turns as quarterly
manufacturing cost multiplied by 4 divided by ending inventory. 3M believes accounts receivable turns is meaningful to
investors as a measure of how efficiently the Company manages credit and collects from its customers. For inventory turns
calculation purposes, manufacturing cost is defined as cost of sales less freight and engineering costs. 3M believes
inventory turns is meaningful to investors as a measure of how quickly inventory is sold. Details of these calculations
follow.
Accounts receivable turns (non-GAAP measure)
(Millions, except turns) June 30, 2017 December 31, 2016
Quarterly net sales $ 7,810 $ 7,329
Ending accounts receivable - net $ 4,919 $ 4,392
Accounts receivable turns 6.35 6.67
Inventory turns (non-GAAP measure)
(Millions, except turns) June 30, 2017 December 31, 2016
Quarterly cost of sales $ 4,007 $ 3,716
Less: Freight and engineering $ 166 $ 160
Manufacturing cost $ 3,841 $ 3,556
Ending inventory $ 3,838 $ 3,385
Inventory turns 4.00 4.20
Concerning accounts receivable, higher June 2017 sales compared to December 2016 sales contributed to the accounts
receivable increase. On a seasonal basis, both accounts receivable and inventory turns are usually higher at year-end,
driven by typically lower year-end accounts receivable and inventory balances.
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.
Cash Flows from Operating Activities:
Six months ended
June 30,
(Millions) 2017 2016
Net income including noncontrolling interest $ 2,911 $ 2,571
Depreciation and amortization 818 722
Company pension contributions (277) (95)
Company postretirement contributions (2) (2)
Company pension expense 138 94
Company postretirement expense 24 24
Stock-based compensation expense 206 193
Gain on sale of businesses (490) (40)
Income taxes (deferred and accrued income taxes) 137 (236)
Accounts receivable (412) (419)
Inventories (347) (42)
Accounts payable (60) (57)
Other - net (16) (168)
Net cash provided by operating activities $ 2,630 $ 2,545
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 six months of 2017, cash flows provided by operating activities increased $85 million compared to the same
period last year, with this increase primarily due to lower cash taxes, partially offset by the timing of pension
contributions. For total year 2017, the Company expects to contribute approximately $300 million to $500 million of cash to
its global defined benefit pension and postretirement plans, similar to the $383 million contributed for total year 2016.
Additional factors that decreased operating cash flows were increases in accounts receivable and inventories. The
combination of accounts receivable, inventories and accounts payable increased working capital by $819 million in the first
six months of 2017, compared to the working capital increases of $518 million in the first six months of 2016. Additional
discussion on working capital changes is provided earlier in the "Financial Condition and Liquidity" section.
Cash Flows from Investing Activities:
Six months ended
June 30,
(Millions) 2017 2016
Purchases of property, plant and equipment (PP&E) $ (589) $ (637)
Proceeds from sale of PP&E and other assets 13 18
Acquisitions, net of cash acquired - (4)
Purchases and proceeds from maturities and sale of marketable securities and investments, net 136 (61)
Proceeds from sale of businesses, net of cash sold 862 56
Other - net 5 (2)
Net cash provided by (used in) investing activities $ 427 $ (630)
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). The Company expects 2017 capital spending to be in the range of $1.3 billion to $1.5 billion.
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 six months of 2017 relate to the divestiture of the assets of the prescription safety
eyewear, identity management, and tolling and automated license/number plate recognition businesses 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:
Six months ended
June 30,
(Millions) 2017 2016
Change in short-term debt - net $ (113) $ (337)
Repayment of debt (maturities greater than 90 days) (650) -
Proceeds from debt (maturities greater than 90 days) - 1,112
Total cash change in debt $ (763) $ 775
Purchases of treasury stock (1,184) (2,055)
Proceeds from issuances of treasury stock pursuant to stock option and benefit plans 496 612
Dividends paid to shareholders (1,403) (1,344)
Other - net (2) (16)
Net cash used in financing activities $ (2,856) $ (2,028)
Total debt was approximately $11.3 billion at June 30, 2017 and $11.7 billion at year-end 2016, with the decrease driven by
repayment of $650 million aggregate principal amount of fixed rate medium-term notes.
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. The Company expects full-year 2017 gross share repurchases will
be in the range of $2.0 billion to $3.5 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.
3M has paid dividends each year since 1916. In February 2017, 3M's Board of Directors declared a first-quarter 2017
dividend of $1.175 per share, an increase of 6 percent. This is equivalent to an annual dividend of $4.70 per share and
marked the 59th consecutive year of dividend increases for 3M. In May 2017, 3M's Board of Directors declared a
second-quarter 2017 dividend of $1.175 per share.
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.
Free Cash Flow (non-GAAP measure):
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. The Company defines free cash flow as net
cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the
entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as
free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion
are meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication
of the strength of the company and its ability to generate cash. 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 six months ended June
30, 2017 and 2016.
Six months ended
June 30,
(Millions) 2017 2016
Major GAAP Cash Flow Categories
Net cash provided by operating activities $ 2,630 $ 2,545
Net cash provided by (used in) investing activities 427 (630)
Net cash used in financing activities (2,856) (2,028)
Free Cash Flow (non-GAAP measure)
Net cash provided by operating activities $ 2,630 $ 2,545
Purchases of property, plant and equipment (PP&E) (589) (637)
Free cash flow $ 2,041 $ 1,908
Net income attributable to 3M $ 2,906 $ 2,566
Free cash flow conversion 70 % 74 %
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, political, 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 Current Report on Form 8-K
dated May 4, 2017 (which updated 3M's 2016 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 June 30, 2017. 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 June 30, 2017
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. 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 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.
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, 2017 1,245,580 $ 177.61 1,245,347 $ 6,835
February 1-28, 2017 1,038,362 $ 182.41 1,037,719 $ 6,645
March 1-31, 2017 1,168,893 $ 190.75 1,168,893 $ 6,422
Total January 1-March 31, 2017 3,452,835 $ 183.50 3,451,959 $ 6,422
April 1-30, 2017 934,900 $ 191.64 933,463 $ 6,244
May 1-31, 2017 1,017,290 $ 197.80 1,017,000 $ 6,042
June 1-30, 2017 396,770 $ 208.83 396,770 $ 5,960
Total April 1-June 30, 2017 2,348,960 $ 197.21 2,347,233 $ 5,960
Total January 1-June 30, 2017 5,801,795 $ 189.05 5,799,192 $ 5,960
(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.
(12) Calculation of ratio of earnings to fixed charges.
(15) A letter from the Company's independent registered public accounting firm regarding unaudited interim consolidated financial statements.
(31.1) Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
(31.2) Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
(32.1) Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
(32.2) Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
(95) Mine Safety Disclosures.
(101.INS) XBRL Instance Document.
(101.SCH) XBRL Taxonomy Extension Schema Document.
(101.CAL) XBRL Taxonomy Extension Calculation Linkbase Document.
(101.DEF) XBRL Taxonomy Extension Definition Linkbase Document.
(101.LAB) XBRL Taxonomy Extension Label Linkbase Document.
(101.PRE) XBRL Taxonomy Extension Presentation Linkbase Document.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
3M COMPANY
(Registrant)
Date: August 1, 2017
Senior Vice President and Chief Financial Officer
(Mr. Gangestad is the Principal Financial Officer and has
been duly authorized to sign on behalf of the Registrant.)
Senior Vice President and Chief Financial Officer
(Mr. Gangestad is the Principal Financial Officer and has
been duly authorized to sign on behalf of the Registrant.)
EXHIBIT 12
3M COMPANY AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions)
Six months
ended
June 30, Year Year Year Year Year
2017 2016 2015 2014 2013 2012
EARNINGS
Income before income taxes $ 3,879 $ 7,053 $ 6,823 $ 7,026 $ 6,562 $ 6,351
Add:
Interest expense (including amortization of capitalized interest) 109 219 171 164 166 191
Portion of rent under operating leases representative of the interest component 53 100 101 104 103 92
Less:
Equity in undistributed income of 20-50% owned companies 5 9 5 (1) (1) 3
TOTAL EARNINGS AVAILABLE FOR FIXED CHARGES $ 4,036 $ 7,363 $ 7,090 $ 7,295 $ 6,832 $ 6,631
FIXED CHARGES
Interest on debt (including capitalized interest) 105 208 162 159 166 194
Portion of rent under operating leases representative of the interest component 53 100 101 104 103 92
TOTAL FIXED CHARGES $ 158 $ 308 $ 263 $ 263 $ 269 $ 286
RATIO OF EARNINGS TO FIXED CHARGES 25.5 23.9 27.0 27.7 25.4 23.2
EXHIBIT 15
August 1, 2017
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Commissioners:
We are aware that our report dated August 1, 2017 on our review of interim financial information of 3M Company and its
subsidiaries for the three and six month periods ended June 30, 2017 and 2016 and included in the Company's quarterly
report on Form 10-Q for the quarter ended June 30, 2017 is incorporated by reference in its Registration Statements on Form
S-8 (Registration Nos. 333-30689, 333-30691, 333-44760, 333-73192, 333-101727, 333-109282, 333-128251, 333-130150,
333-151039, 333-156626, 333-156627, 333-166908, 333-174562, 333-181269, 333-181270 and 333-211431) and Form S-3
(Registration Nos. 333-216219, 33-48089, 333-42660, and 333-109211) dated August 1, 2017.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
EXHIBIT 31.1
SARBANES-OXLEY SECTION 302 CERTIFICATION
I, Inge G. Thulin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of 3M Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as
of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred
during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over
financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
Registrant's internal control over financial reporting.
/s/ Inge G. Thulin
- More to follow, for following part double click ID:nRSC9629MhRecent news on 3M Co
See all newsREG - Stock Exch Notice - Admission to ISM - 30/11/2023
AnnouncementRCS - 3M Company - StageZero Announces COC Protocol in Europe
AnnouncementREG - Official List - Removal: 3M Company
AnnouncementREG - Stock Exch Notice - Cancellation - 3M Company
AnnouncementREG - 3M Company - 3rd Quarter Results
Announcement