3M 2014 Annual Report Download - page 43

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37
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 (defined as current assets minus current liabilities) totaled
$5.767 billion at December 31, 2014, compared with $5.235 billion at December 31, 2013, an increase of $532 million.
Current asset balance changes decreased working capital by $968 million, driven by decreases in cash, cash equivalents
and marketable securities, plus inventory decreases. Current liability balance changes increased working capital by $1.5
billion, largely due to decreases in short-term debt.
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, inventories 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 inventories less accounts payable) was 5.0 at December 31, 2014 compared to 4.8 at December 31,
2013. Receivables decreased $15 million, or 0.4 percent, compared with December 31, 2013, with higher December 2014
sales compared to December 2013 sales contributing to this increase. Currency translation impacts decreased accounts
receivable by $292 million. Inventories decreased $158 million, or 4.1 percent, compared with December 31, 2013. The
inventory decrease was attributable to currency translation, which decreased inventories by $271 million, partially offset
by an increase in demand. Accounts payable had a minimal change when compared with December 31, 2013.
Return on Invested Capital (non-GAAP measure):
The Company uses non-GAAP measures to focus on shareholder value creation. 3M uses return on invested capital
(ROIC), defined as annualized after-tax operating income (including interest income) divided by average operating capital.
Operating capital is defined as net assets (total assets less total liabilities) excluding debt. This measure is not recognized
under U.S. GAAP and may not be comparable to similarly titled measures used by other companies. ROIC was 22.0
percent for 2014, and 20.0 percent for 2013.
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 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.