3M 2009 Annual Report Download - page 87
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81
May 22, 2007 and November 22, 2007 to holders of record on the 15th calendar day preceding each such interest
payment date. Effective November 22, 2007, the effective interest rate reverted back to the original yield of 0.50%.
3M originally sold $639 million in aggregate face amount of these “Convertible Notes” on November 15, 2002, which
are convertible into shares of 3M common stock. The gross proceeds from the offering, to be used for general
corporate purposes, were $550 million ($540 million net of issuance costs). As discussed in Note 1, 3M adopted
changes to accounting for convertible debt instruments that may be settled in cash upon conversion (including partial
cash settlement), effective January 1, 2009, with retrospective application to all periods presented. As such,
additional interest expense essentially equivalent to the portion of issuance proceeds retroactively allocated to the
instrument’s equity component was recognized over the period from the Convertible Notes’ issuance on
November 15, 2002 through November 15, 2005 (the first date holders of these Notes had the ability to put them
back to 3M). Debt issuance costs were amortized on a straight-line basis over a three-year period beginning in
November 2002. Debt issue costs allocated to the Notes’ equity component were not material. On February 14,
2003, 3M registered these Convertible Notes in a registration statement filed with the Securities and Exchange
Commission. The terms of the Convertible Notes include a yield to maturity of 0.50% and an initial conversion
premium of 40 percent over the $65.00 (split-adjusted) closing price of 3M common stock on November 14, 2002. If
certain conditions for conversion (relating to the closing common stock prices of 3M exceeding the conversion trigger
price for specified periods) are met, holders may convert each of the 30-year zero-coupon senior notes into 9.4602
shares of 3M common stock in any calendar quarter commencing after March 31, 2003. The conversion trigger price
for the fourth quarter of 2009 was $122.42 per share. If the conditions for conversion are met, and 3M elects not to
settle in cash, the 30-year zero-coupon senior notes will be convertible in the aggregate into approximately 2.4
million shares of 3M common stock. The conditions for conversion related to the Company’s Convertible Notes have
never been met. If the conditions for conversion are met, 3M may choose to pay in cash and/or common stock;
however, if this occurs, the Company has the intent and ability to settle this debt security in cash. Accordingly, there
was no impact on 3M’s diluted earnings per share.
In December 2009, the Company’s $350 million of Dealer Remarketable Securities were remarketed. They were
reissued with a fixed coupon rate of 5.61%. These securities, which are classified as current portion of long-term debt,
were originally issued in December 2000 and have a final maturity date of December 2010.