3M 2011 Annual Report Download - page 42

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Operating cash flows were reduced by working capital increases of $447 million in 2010, compared to working capital
decreases of $617 million in 2009. 3M defines working capital as accounts receivable, inventories and accounts
payable. These working capital increases were partially attributable to the rapid increase in demand in 2010. In
addition, operating cash flows in 2009 benefited from changes in deferred and accrued income taxes.
Free Cash Flow (non-GAAP measure):
In addition, to net cash provided by operating activities, 3M uses free cash flow as a useful measure of performance
and as an indication of the strength of the Company and its ability to generate cash. 3M defines free cash flow as net
cash provided by operating activities less purchases of property, plant and equipment (which is classified as an
investing activity). Free cash flow is not defined under U.S. generally accepted accounting principles (GAAP).
Therefore, it 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. It should not be inferred
that the entire free cash flow amount is available for discretionary expenditures. Below find a recap of free cash flow
for 2011, 2010 and 2009.
Y
ears ended December 31
(Millions) 2011 2010 2009
Net cash provided by operating activities ................................ $ 5,284 $ 5,174 $ 4,941
Purchases of property, plant and equipment (PP&E) ............. (1,379 ) (1,091) (903 )
Free Cash Flow ....................................................................... $ 3,905 $ 4,083 $ 4,038
Cash Flows from Investing Activities:
Y
ears ended December 31
(Millions) 2011 2010 2009
Purchases of property, plant and equipment (PP&E) ............. $ (1,379 ) $ (1,091) $ (903 )
Proceeds from sale of PP&E and other assets ....................... 55 25 74
A
cquisitions, net of cash acquired ........................................... (649 ) (1,830) (69 )
Purchases and proceeds from sale or maturities of marketable
securities and investments — net ........................................ (745 ) 273 (839 )
Other investing activities ......................................................... — (3) 5
Net cash used in investing activities ....................................... $ (2,718 ) $ (2,626) $ (1,732 )
Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product
demand and increasing manufacturing efficiency. Capital spending increased to $1.379 billion in 2011, compared to
$1.091 billion in 2010 and $903 million in 2009. The Company expects 2012 capital spending to be approximately
$1.3 to $1.5 billion as 3M continues to invest in capacity for future growth. In 2011, a large portion of this investment
is addressing supply constraints in a number of businesses with significant growth potential, such as renewable
energy, traffic signage in developing economies, and optically clear adhesives and glass bubbles. In addition, some
of the following 2010 capital projects carried forward into 2011. In 2010, in the U.S., 3M invested in film
manufacturing assets for optical systems and other non-optical businesses which use similar technology. Also, in
2010, 3M increased capacity at its multi-purpose manufacturing facility in Singapore and invested in optical film
capacity in Korea. Lastly, in 2010, investments in the Industrial and Transportation business included solar energy in
the U.S. and industrial adhesives and tapes in China. In 2009, in response to then-difficult global economic
conditions, the Company reduced its capital spending significantly.
Refer to Note 2 for information on acquisitions. The Company is actively considering additional acquisitions,
investments and strategic alliances, and from time to time may also divest certain businesses.
Purchases of marketable securities and investments and proceeds from sale (or maturities) of marketable securities
and investments are primarily attributable to asset-backed securities, agency securities, corporate medium-term note
securities and other securities, which are classified as available-for-sale. Interest rate risk and credit risk related to
the underlying collateral may impact the value of investments in asset-backed securities, while factors such as
general conditions in the overall credit market and the nature of the underlying collateral may affect the liquidity of
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