3M 2013 Annual Report Download - page 43

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37
Cash Flows from Operating Activities:
Years Ended December 31
(Millions)
2013
2012
2011
Net income including noncontrolling interest
$
4,721
$
4,511 $
4,357
Depreciation and amortization
1,371
1,288 1,236
Company pension contributions
(476)
(1,079)
(517)
Company postretirement contributions
(6)
(67)
(65)
Company pension expense
446
534 449
Company postretirement expense
107
116 106
Stock-based compensation expense
240
223 253
Income taxes (deferred and accrued income taxes)
39
123 132
Excess tax benefits from stock-based compensation
(92)
(62)
(53)
Accounts receivable
(337)
(133)
(205)
Inventories
(86)
(251)
(196)
Accounts payable
16
72
(83)
Product and other insurance receivables and claims
41
(32)
9
Other — net
(167)
57
(139)
Net cash provided by operating activities
$
5,817
$
5,300 $
5,284
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 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. Additional discussion on working capital changes is provided earlier in the
“Financial Condition and Liquidity” section.
In 2012, cash flows provided by operating activities increased $16 million compared to 2011. The main positive
contribution to operating cash flows related to year-on-year increases in net income including noncontrolling interest. 3M
was able to achieve this growth in operating cash flow despite contributing an additional $564 million in its pension and
postretirement plans when compared to 2011. The combination of accounts receivable, inventories and accounts payable
increased working capital by $312 million in 2012, compared to increases of $484 million in 2011.
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 2013, 2012 and 2011.
Years ended December 31
(Millions)
2013
2012
2011
Net cash provided by operating activities
$
5,817
$
5,300 $
5,284
Purchases of property, plant and equipment (PP&E)
(1,665)
(1,484)
(1,379)
Free Cash Flow
$
4,152
$
3,816 $
3,905