3M 2008 Annual Report Download - page 42

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investments in asset-backed securities. The coupon interest rates for asset-backed securities are either fixed rate or
floating. Floating rate coupons reset monthly or quarterly based upon the corresponding monthly or quarterly LIBOR
rate. Each individual floating rate security has a coupon based upon the respective LIBOR rate +/- an amount
reflective of the credit risk of the issuer and the underlying collateral on the original issue date. Terms of the reset are
unique to individual securities. Fixed rate coupons are established at the time the security is issued and are based
upon a spread to a related maturity treasury bond. The spread against the treasury bond is reflective of the credit risk
of the issuer and the underlying collateral on the original issue date. 3M does not currently expect risk related to its
holdings in asset-backed securities to materially impact its financial condition or liquidity. Refer to Note 9 for more
details about 3M’s diversified marketable securities portfolio, which totaled $725 million as of December 31, 2008.
Proceeds from sales or maturities of marketable securities, net of purchases, total approximately $282 million in
2008. Purchases of marketable securities, net of sales and maturities, totaled $429 million in 2007 and $637 million
in 2006. In 2005, 3M purchased 19 percent of TI&M Beteiligungsgesellschaft mbH for approximately $55 million. In
2007, the recovery of approximately $25 million reduced “Investments” and is shown in cash flows within “Proceeds
from sale of marketable securities and investments.” This investment is discussed in more detail under the preceding
section entitled Industrial and Transportation Business. Additional purchases of investments include additional
survivor benefit insurance and equity investments.
Cash Flows from Financing Activities:
Years ended December 31
(Millions) 2008 2007 2006
Change in short-term debt — net.......................... $ 361 $ (1,222 ) $ 882
Repayment of debt (maturities greater than 90 days) (1,080 ) (1,580 ) (440 )
Proceeds from debt (maturities greater than 90 days) 1,756 4,024 693
Total cash change in debt ..................................... $ 1,037 $ 1,222 $ 1,135
Purchases of treasury stock.................................. (1,631 ) (3,239 ) (2,351 )
Reissuances of treasury stock .............................. 289 796 523
Dividends paid to stockholders ............................. (1,398 ) (1,380 ) (1,376 )
Excess tax benefits from stock-based compensation 21 74 60
Distributions to minority interests and other — net (84 ) (20 ) (52 )
Net cash used in financing activities ..................... $ (1,766 ) $ (2,547 ) $ (2,061 )
Total debt at December 31, 2008, was $6.718 billion, up from $4.920 billion at year-end 2007. Total debt was 40
percent of total capital (total capital is defined as debt plus equity), compared with 30 percent at year-end 2007. The
net change in short-term debt is primarily due to commercial paper activity. In 2008, the repayment of debt for
maturities greater than 90 days primarily represents debt acquired upon the acquisition of Aearo that was
immediately repaid and repayment of commercial paper with maturities greater than 90 days. Proceeds from debt
primarily include a five-year, $850 million, fixed rate note issued in August 2008 with a coupon rate of 4.375%, and a
three-year, $800 million, fixed rate note issued in October 2008 with a coupon rate of 4.5% (refer to Note 10 for more
information).
Total debt at December 31, 2007, was $4.920 billion, up from $3.553 billion at year-end 2006. The net change in
short-term debt is primarily due to commercial paper activity. In 2007, the repayment of debt for maturities greater
than 90 days is primarily comprised of commercial paper repayments of approximately $1.15 billion and the
November 2007 redemption of approximately $322 million in Convertible Notes. In 2007, proceeds from debt
included long-term debt and commercial paper issuances totaling approximately $4 billion. This was comprised of
Eurobond issuances in December 2007 and July 2007 totaling approximately $1.5 billion in U.S. dollars, a
March 2007 long-term debt issuance of $750 million and a December 2007 fixed rate note issuance of $500 million,
plus commercial paper issuances (maturities greater than 90 days) of approximately $1.25 billion. Increases in long-
term debt were used, in part, to fund share repurchase activities.
Repurchases of common stock are made to support the Company’s stock-based employee compensation plans and
for other corporate purposes. 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. In 2008, the Company purchased $1.6
billion in shares. In 2007, the Company accelerated purchases of treasury stock when compared to prior years,
buying back $3.2 billion in shares. As of December 31, 2008, approximately $2.6 billion remained available for
repurchase. In February 2009, 3M’s Board of Directors extended this share repurchase authorization until the
remaining $2.6 billion is fully utilized. For more information, refer to the table titled “Issuer Purchases of Equity
Securities” in Part II, Item 5.