3M 2007 Annual Report Download - page 37

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31
3M’s cash and cash equivalents balance at December 31, 2007 totaled $1.896 billion, with an additional $1.059 billion in
current and long-term marketable securities. 3M’s strong balance sheet and liquidity provide the Company with significant
flexibility to take advantage of numerous opportunities going forward. The Company will continue to invest in its
operations to drive growth, including continual review of acquisition opportunities. As previously discussed, 3M expects
to complete the acquisition of Aearo Holding Corp. for approximately $1.2 billion in 2008. 3M paid dividends of $1.380
billion in 2007, and has a long history of dividend increases. In February 2008, the Board of Directors increased the
quarterly dividend on 3M common stock by 4.2% to 50 cents per share, equivalent to an annual dividend of $2.00 per
share. In February 2007, 3M’s Board of Directors authorized a two-year share repurchase of up to $7.0 billion for the
period from February 12, 2007 to February 28, 2009. At December 31, 2007, the Company has $4.1 billion remaining
under this authorization, which the Company does not currently expect to fully utilize by February 28, 2009.
In 2008, the Company expects to contribute an amount in the range of $100 million to $400 million to its U.S. and
international pension plans. The Company does not have a required minimum pension contribution obligation for its
U.S. plans in 2008. Therefore, the amount of the anticipated discretionary contribution could vary significantly
depending on the U.S.-plans funding status as of the 2008 measurement date and the anticipated tax deductibility of
the contribution. Future contributions will also depend on market conditions, interest rates and other factors. 3M
believes its strong cash flow and balance sheet will allow it to fund future pension needs without compromising growth
opportunities.
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, inventory and accounts payable. This combined index (defined
as quarterly net sales – fourth quarter at year-end – multiplied by four, divided by ending net accounts receivable plus
inventory less accounts payable) was 5.3 at December 31, 2007, down from 5.4 at December 31, 2006. Receivables
increased $260 million, or 8.4%, compared with December 31, 2006. Currency translation increased accounts receivable
by $159 million year-on-year, as the U.S. dollar weakened in aggregate against a multitude of currencies. Inventories
increased $251 million, or 9.7%, compared with December 31, 2006. Currency translation increased inventories by $132
million year-on-year. Accounts payable increased $103 million compared with December 31, 2006, with $65 million of this
year-on-year increase related to currency translation.
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,
which are presented separately in the 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:
Years ended December 31
(Millions) 2007 2006 2005
Net income $4,096 $3,851 $3,111
Depreciation and amortization 1,072 1,079 986
Company pension contributions (376) (348) (654)
Company postretirement contributions (3) (37) (134)
Company pension expense 190 347 331
Company postretirement expense 65 93 106
Stock-based compensation expense 228 200 155
Gain from sale of businesses (849) (1,074) –
Income taxes (deferred and accrued income taxes) (34) (178) 402
Excess tax benefits from stock-based compensation (74) (60) (54)
Accounts receivable (35) (103) (184)
Inventories (54) (309) (294)
Accounts payable (4) 68 113
Product and other insurance receivables and claims 158 58 122
Other – net (105) 252 198
Net cash provided by operating activities $4,275 $3,839 $4,204