3M 2015 Annual Report Download - page 10

TableofContents
conditions,inflation,elevatedunemploymentlevels,sluggishorunevenrecovery,governmentdeficitreductionandotherausterity
measuresinspecificcountriesorregions,orinthevariousindustriesinwhichtheCompanyoperates;social,politicalorlabor
conditionsinspecificcountriesorregions;naturalandotherdisastersorclimatechangeaffectingtheoperationsoftheCompanyor
itscustomersandsuppliers;oradversechangesintheavailabilityandcostofcapital,interestrates,taxrates,taxlaws,orexchange
control,abilitytoexpatriateearningsandotherregulationsinthejurisdictionsinwhichtheCompanyoperates.
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*ChangeintheCompany’screditratingscouldincreasecostoffunding.TheCompany’screditratingsareimportantto3M’s
costofcapital.ThemajorratingagenciesroutinelyevaluatetheCompany’screditprofileandassigndebtratingsto3M.The
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.Thisevaluationisbasedonanumberoffactors,whichincludefinancialstrength,businessand
financialrisk,aswellastransparencywithratingagenciesandtimelinessoffinancialreporting.TheCompany’screditratingshave
servedtolower3M’sborrowingcostsandfacilitateaccesstoavarietyoflenders.TheCompany’songoingtransitiontoamore
optimizedcapitalstructure,financedwithadditionallow-costdebt,couldimpact3M’screditratinginthefuture.Failuretomaintain
stronginvestmentgraderatingswouldadverselyaffecttheCompany’scostoffundingandcouldadverselyaffectliquidityand
accesstocapitalmarkets.
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*TheCompany’sresultsareaffectedbycompetitiveconditionsandcustomerpreferences.DemandfortheCompany’sproducts,
whichimpactsrevenueandprofitmargins,isaffectedby(i)thedevelopmentandtimingoftheintroductionofcompetitiveproducts;
(ii)theCompany’sresponsetodownwardpricingtostaycompetitive;(iii)changesincustomerorderpatterns,suchaschangesinthe
levelsofinventorymaintainedbycustomersandthetimingofcustomerpurchaseswhichmaybeaffectedbyannouncedprice
changes,changesintheCompany’sincentiveprograms,orthecustomer’sabilitytoachieveincentivegoals;and(iv)changesin
customers’preferencesforourproducts,includingthesuccessofproductsofferedbyourcompetitors,andchangesincustomer
designsfortheirproductsthatcanaffectthedemandforsomeoftheCompany’sproducts.
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*ForeigncurrencyexchangeratesandfluctuationsinthoseratesmayaffecttheCompany’sabilitytorealizeprojectedgrowthrates
initssalesandearnings.BecausetheCompany’sfinancialstatementsaredenominatedinU.S.dollarsandapproximately60percent
oftheCompany’srevenuesarederivedfromoutsidetheUnitedStates,theCompany’sresultsofoperationsanditsabilitytorealize
projectedgrowthratesinsalesandearningscouldbeadverselyaffectediftheU.S.dollarstrengthenssignificantlyagainstforeign
currencies.
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*TheCompany’sgrowthobjectivesarelargelydependentonthetimingandmarketacceptanceofitsnewproductofferings,
includingitsabilitytocontinuallyrenewitspipelineofnewproductsandtobringthoseproductstomarket.Thisabilitymaybe
adverselyaffectedbydifficultiesordelaysinproductdevelopment,suchastheinabilitytoidentifyviablenewproducts,obtain
adequateintellectualpropertyprotection,orgainmarketacceptanceofnewproducts.Therearenoguaranteesthatnewproductswill
provetobecommerciallysuccessful.
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*TheCompany’sfutureresultsaresubjecttofluctuationsinthecostsandavailabilityofpurchasedcomponents,compounds,raw
materialsandenergy,includingoilandnaturalgasandtheirderivatives,duetoshortages,increaseddemand,supplyinterruptions,
currencyexchangerisks,naturaldisastersandotherfactors.TheCompanydependsonvariouscomponents,compounds,raw
materials,andenergy(includingoilandnaturalgasandtheirderivatives)suppliedbyothersforthemanufacturingofitsproducts.It
ispossiblethatanyofitssupplierrelationshipscouldbeinterruptedduetonaturalandotherdisastersandotherevents,orbe
terminatedinthefuture.AnysustainedinterruptionintheCompany’sreceiptofadequatesuppliescouldhaveamaterialadverse
effectontheCompany.Inaddition,whiletheCompanyhasaprocesstominimizevolatilityincomponentandmaterialpricing,no
assurancecanbegiventhattheCompanywillbeabletosuccessfullymanagepricefluctuationsorthatfuturepricefluctuationsor
shortageswillnothaveamaterialadverseeffectontheCompany.
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*Acquisitions,strategicalliances,divestitures,andotherunusualeventsresultingfromportfoliomanagementactionsandother
evolvingbusinessstrategies,andpossibleorganizationalrestructuringcouldaffectfutureresults.TheCompanymonitorsits
businessportfolioandorganizationalstructureandhasmadeandmaycontinuetomakeacquisitions,strategicalliances,divestitures
andchangestoitsorganizationalstructure.Withrespecttoacquisitions,
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