3M 2004 Annual Report Download - page 59

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Debt securities, including the Company’s shelf registration, its medium-term notes program, dealer remarketable
securities and Convertible Note are all discussed in more detail in Note 9 to the Consolidated Financial
Statements. 3M has a shelf registration and medium-term notes program through which $1.5 billion of medium-
term notes may be offered. In 2004, the Company issued approximately $62 million in debt securities under its
medium-term notes program. The medium-term notes program and shelf registration have remaining capacity of
approximately $1.438 billion. The Company’s $350 million of dealer remarketable securities (classified as current
portion of long-term debt) were remarketed for one year in December 2004. In addition, the Company has a
Convertible Note with a book value of $556 million at December 31, 2004. At December 31, 2004, the dealer
remarketable securities, Convertible Note and $62 million of medium-term notes are classified as current portion
of long-term debt as the result of put provisions associated with these debt instruments. However, the Company
does not anticipate redemption of these securities in 2005. For a discussion of accounting pronouncements that
will affect accounting treatment for the Convertible Note, refer to Note 1 to the Consolidated Financial Statements
for discussion of EITF Issue No. 04-08, “The Effect of Contingently Convertible Debt on Diluted Earnings per
Share” and proposed SFAS No. 128R, “Earnings per Share”.
Repurchases of common stock are made to support the Company’s stock-based employee compensation plans and
for other corporate purposes. On November 10, 2003, the Board of Directors authorized the purchase of up to
$1.5 billion of the Company’s common stock between January 1, 2004 and December 31, 2004. In November 2004,
3M’s Board of Directors authorized the repurchase of an additional $200 million of the Company’s common stock in
2004 and also authorized the repurchase of up to $2.0 billion of the Company’s common stock between January 1,
2005 and January 31, 2006. Refer to the table captioned “Issuer Purchases of Equity Securities” in Part II, Item 5, for
more information.
Cash dividends paid to stockholders totaled $1.125 billion ($1.44 per share) in 2004, $1.034 billion ($1.32 per share)
in 2003 and $968 million ($1.24 per share) in 2002. 3M has paid dividends since 1916. In February 2005, the Board
of Directors increased the quarterly dividend on 3M common stock to 42 cents per share, equivalent to an annual
dividend of $1.68 per share. This marks the 47th consecutive year of dividend increases.
Other cash flows from financing activities include distributions to minority interests, changes in cash overdraft
balances, and principal payments for capital leases.
Liquidity:
The Company’s liquidity remains strong. Primary short-term liquidity needs are provided through U.S. commercial
paper and euro commercial paper issuances. As of December 31, 2004, outstanding total commercial paper
issued totaled $671 million and averaged approximately $387 million during 2004. Medium-term note shelf
borrowing capacity totaled $1.438 billion as of December 31, 2004. Credit support for outstanding commercial
paper is provided by a $565 million, 364-day credit agreement among a group of primary relationship banks. This
facility provides up to $115 million in letters of credit ($86 million of which was utilized at December 31, 2004). In
2005, it is anticipated that the 364-day credit agreement will be replaced by a five-year agreement with terms
substantially the same as that of the current agreement. Committed credit facilities of $53 million are in place across
several international subsidiary locations. The Company also has uncommitted lines of credit outside the United
States totaling $637 million.
The Company believes it is unlikely that its access to the commercial paper market will be restricted. Cash and cash
equivalents and certain other current assets could provide additional liquidity to meet near term obligations, if
necessary. At year-end 2004, certain debt agreements ($350 million of dealer remarketable securities and
$202 million of ESOP debt) had ratings triggers (BBB-/Baa3 or lower) that would require repayment of debt. The
Company currently has AA/Aa1 debt ratings. In addition, the $565 million, 364-day credit agreement requires 3M
to maintain a capitalization ratio at no more than 0.60 to 1 at the end of each quarter. This ratio is calculated as
funded debt (including all borrowed money and letters of credit utilized) to the sum of funded debt and equity. At
December 31, 2004, this ratio was approximately 0.22 to 1.
3M’s cash balance at December 31, 2004 totaled $2.757 billion. 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. 3M paid
dividends of more than $1.1 billion in 2004, and has a long history of dividend increases. 3M’s Board of Directors
authorized the purchase of up to $2.0 billion of the Company’s common stock between January 1, 2005 and January
31, 2006. The Company may also make additional contributions to its pension plan in the future, but exact amounts
are uncertain and will depend on market conditions.