3M 2014 Annual Report Download - page 44

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38
Cash Flows from Operating Activities:
Years En
ded December 31
(Millions)
2014
2013
2012
Net income including noncontrolling interest
$
4,998
$
4,721 $
4,511
Depreciation and amortization
1,408
1,371 1,288
Company pension contributions
(210)
(476)
(1,079)
Company postretirement contributions
(5)
(6)
(67)
Company pension expense
310
446 534
Company postretirement expense
81
107 116
Stock-based compensation expense
280
240 223
Income taxes (deferred and accrued income taxes)
60
39 123
Excess tax benefits from stock-based compensation
(167)
(92)
(62)
Accounts receivable
(268)
(337)
(133)
Inventories
(113)
(86)
(251)
Accounts payable
75
16
72
Other — net
177
(126)
25
Net cash provided by operating activities
$
6,626
$
5,817 $
5,300
Cash flows from operating activities can fluctuate significantly from period to period, as pension funding decisions, tax
timing differences and other items can significantly impact cash flows.
In 2014, cash flows provided by operating activities increased $809 million compared to 2013. Operating cash flows
benefited year-on-year from increases in net income including noncontrolling interest, lower pension and postretirement
plans contributions, and lower year-on-year working capital requirements. The combination of accounts receivable,
inventories and accounts payable increased working capital by $306 million in 2014, compared to increases of $407
million in 2013, with the year-on-year improvement related to higher receivable and inventory turns. Additional discussion
on working capital changes is provided earlier in the “Financial Condition and Liquidity” section.
In 2013, cash flows provided by operating activities increased $517 million compared to 2012. Operating cash flows
benefited year-on-year from $664 million of lower pension and postretirement plans contributions and increases in net
income including noncontrolling interest, which were partially offset by higher year-on-year working capital requirements.
The combination of accounts receivable, inventories and accounts payable increased working capital by $407 million in
2013, compared to increases of $312 million in 2012, primarily driven by year-on-year increases in working capital
requirements due to increasing sales.
Free Cash Flow (non-GAAP measure):
In addition, to net cash provided by operating activities, 3M believes free cash flow and free cash flow conversion are
useful measures of performance and uses these measures as an indication of the strength of the Company and its ability
to generate cash. Free cash flow and free cash flow conversion are not defined under U.S. generally accepted accounting
principles (GAAP). Therefore, they 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. 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). It should not be inferred that the entire free cash flow amount is available for
discretionary expenditures. 3M defines free cash flow conversion as free cash flow divided by net income attributable to
3M. Below find a recap of free cash flow and free cash flow conversion for 2014, 2013 and 2012.
Years ended December 31
(Millions)
2014
2013
2012
Net cash provided by operating activities
$
6,626
$
5,817 $
5,300
Purchases of property, plant and equipment (PP&E)
(1,493)
(1,665)
(1,484)
Free Cash Flow
$
5,133
$
4,152 $
3,816
Free Cash Flow Conversion
104
%
89 % 86
%