3M 2015 Annual Report Download - page 39

TableofContents
Total D ebt:
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TheCompany’stotaldebtwas$4.0billionhigheratDecember31,2015whencomparedtoDecember31,2014.Thestrengthof
3M’scapitalstructureandsignificantongoingcashflowsprovide3Mprovenaccesstocapitalmarkets.Additionally,theCompany’s
maturityprofileisstaggeredtohelpensurerefinancingneedsinanygivenyeararereasonableinproportiontothetotalportfolio.T
heCompanyhasanAA-creditrating,withastableoutlook,fromStandard&Poor’sandanAa3creditrating,withanegative
outlook,fromMoody’sInvestorsService.TheCompany’songoingtransitiontoabetter-optimizedcapitalstructure,financedwith
additionallow-costdebt,couldimpact3M’screditratinginthefuture.
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EffectiveMay16,2014,theCompanyupdatedits“well-knownseasonedissuer”shelfregistrationstatement,whichregistersan
indeterminateamountofdebtorequitysecuritiesforfuturesales.Thisreplaced3M’spreviousshelfregistrationdatedAugust5,
2011.InJune2014,inconnectionwiththeMay16,2014shelfregistration,3Mre-commenceditsmedium-termnotesprogram
(SeriesF)underwhich3Mmayissue,fromtimetotime,upto$9billionaggregateprincipalamountofnotes.Includedinthis$9
billionare$8.17billion(utilizingtheforeignexchangerateapplicableatthetimeofissuancefortheEurodenominateddebt)of
notespreviouslyissuedin2011,2012,2014,and2015aspartofSeriesF.Informationwithrespecttolong-termdebtissuancesand
maturitiesfortheperiodspresentedisincludedinNote10.
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InAugust2014,3Mamendedandextendeditsexisting$1.5billionfive-yearmulti-currencyrevolvingcreditagreementtoa$2.25
billionfive-yearmulti-currencyrevolvingcreditagreement,withanexpirationdateofAugust2019.Thiscreditagreementincludes
aprovisionunderwhich3Mmayrequestanincreaseofupto$2.25billion,bringingthetotalfacilityupto$4.5billion(atthe
lenders’discretion).ThisfacilitywasundrawnatDecember31,2015.Underthe$2.25billioncreditagreement,theCompanyis
requiredtomaintainitsEBITDAtoInterestRatioasoftheendofeachfiscalquarteratnotlessthan3.0to1.Thisiscalculated(as
definedintheagreement)astheratioofconsolidatedtotalEBITDAforthefourconsecutivequartersthenendedtototalinterest
expenseonallfundeddebtforthesameperiod.AtDecember31,2015,thisratiowasapproximately56to1.Debtcovenantsdonot
restrictthepaymentofdividends.Apartfromthecommittedfacilities,anadditional$241millioninstand-alonelettersofcredit
and$18millioninbankguaranteeswerealsoissuedandoutstandingatDecember31,2015.Theselinesofcreditareutilizedin
connectionwithnormalbusinessactivities.
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Balance Sheet:
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3M’sstrongbalancesheetandliquidityprovidetheCompanywithsignificantflexibilitytotakeadvantageofnumerousopportunities
goingforward.TheCompanywillcontinuetoinvestinitsoperationstodrivegrowth,includingcontinualreviewofacquisition
opportunities.
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Variousassetsandliabilities,includingcashandshort-termdebt,canfluctuatesignificantlyfrommonthtomonthdependingon
short-termliquidityneeds.Workingcapital(definedascurrentassetsminuscurrentliabilities)totaled$3.868billionatDecember
31,2015,comparedwith$6.339billionatDecember31,2014,adecreaseof$2.471billion.Currentassetbalancechanges
decreasedworkingcapitalby$1.317billion,drivenbydecreasesinmarketablesecurities.Currentliabilitybalancechangesde
creasedworkingcapitalby$1.154billion,drivenbyincreasesinshort-termdebt.
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TheCompanyusesvariousworkingcapitalmeasuresthatplaceemphasisandfocusoncertainworkingcapitalassetsandliabilities.
ThesemeasuresarenotdefinedunderU.S.generallyacceptedaccountingprinciplesandmaynotbecomputedthesameassimilarly
titledmeasuresusedbyothercompanies.Oneoftheprimaryworkingcapitalmeasures3Musesisacombinedindex,whichincludes
accountsreceivable,inventoriesandaccountspayable.Thiscombinedindex(definedasquarterlynetsales—fourthquarteratyear-
end—multipliedbyfour,dividedbyendingnetaccountsreceivableplusinventorieslessaccountspayable)was4.9atDecember31,
2015comparedto5.0atDecember31,2014.Receivablesdecreased$84million,or2.0percent,comparedwithDecember31,2014
,ascurrencytranslationimpactsdecreasedaccountsreceivableby$239million,partiallyoffsetby2015acquisitionsthatadded
$103million.Inventoriesdecreased$188million,or5.1percent,comparedwithDecember31,2014.Theinventorydecreasewas
attributabletocurrencytranslation,whichdecreasedinventoriesby$272million,partiallyoffsetby2015acquisitionsthatadded
$102million.
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