3M Co. (MMM)

Long-term Debt and Solvency Analysis

Difficulty: Beginner

Solvency ratios also known as long-term debt ratios measure a company's ability to meet long-term obligations.

3M Co., debt and solvency ratios

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Debt to equity	1.21	1.14	0.93	0.53	0.35
Debt to capital	0.55	0.53	0.48	0.34	0.26
Interest coverage	24.44	36.44	46.79	50.48	46.26

Source: Based on data from 3M Co. Annual Reports

Ratio	Description	The company
Debt-to-equity ratio	A solvency ratio calculated as total debt divided by total shareholders' equity.	3M Co.'s debt-to-equity ratio deteriorated from 2015 to 2016 and from 2016 to 2017.
Debt-to-capital ratio	A solvency ratio calculated as total debt divided by total debt plus shareholders' equity.	3M Co.'s debt-to-capital ratio deteriorated from 2015 to 2016 and from 2016 to 2017.
Interest coverage ratio	A solvency ratio calculated as EBIT divided by interest payments.	3M Co.'s interest coverage ratio deteriorated from 2015 to 2016 and from 2016 to 2017.

3M Co., debt to equity calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Short-term borrowings and current portion of long-term debt	1,853	972	2,044	106	1,683
Long-term debt, excluding current portion	12,096	10,678	8,753	6,731	4,326
Capital lease obligations	60	45	46	59	58
Total debt	14,009	11,695	10,843	6,896	6,067
Total 3M Company shareholders' equity	11,563	10,298	11,708	13,109	17,502
Ratio
Debt to equity¹	1.21	1.14	0.93	0.53	0.35
Benchmarks
Debt to Equity, Competitors
Danaher Corp.	0.40	0.53	0.54	0.15	0.16
General Electric Co.	1.27	1.05	1.05	0.13	0.10
Honeywell International Inc.	1.04	0.81	0.66	0.49	0.51
Debt to Equity, Sector
General Industrials	1.04	0.93	0.92	0.19	0.17
Debt to Equity, Industry
Industrials	1.19	1.10	0.99	0.49	0.42

Source: Based on data from 3M Co. Annual Reports

2017 Calculations

¹ Debt to equity = Total debt ÷ Total 3M Company shareholders' equity
= 14,009 ÷ 11,563 = 1.21

Ratio	Description	The company
Debt-to-equity ratio	A solvency ratio calculated as total debt divided by total shareholders' equity.	3M Co.'s debt-to-equity ratio deteriorated from 2015 to 2016 and from 2016 to 2017.

3M Co., debt to capital calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Short-term borrowings and current portion of long-term debt	1,853	972	2,044	106	1,683
Long-term debt, excluding current portion	12,096	10,678	8,753	6,731	4,326
Capital lease obligations	60	45	46	59	58
Total debt	14,009	11,695	10,843	6,896	6,067
Total 3M Company shareholders' equity	11,563	10,298	11,708	13,109	17,502
Total capital	25,572	21,993	22,551	20,005	23,569
Ratio
Debt to capital¹	0.55	0.53	0.48	0.34	0.26
Benchmarks
Debt to Capital, Competitors
Danaher Corp.	0.29	0.35	0.35	0.13	0.14
General Electric Co.	0.56	0.51	0.51	0.11	0.09
Honeywell International Inc.	0.51	0.45	0.40	0.33	0.34
Debt to Capital, Sector
General Industrials	0.51	0.48	0.48	0.16	0.14
Debt to Capital, Industry
Industrials	0.54	0.52	0.50	0.33	0.29

Source: Based on data from 3M Co. Annual Reports

2017 Calculations

¹ Debt to capital = Total debt ÷ Total capital
= 14,009 ÷ 25,572 = 0.55

Ratio	Description	The company
Debt-to-capital ratio	A solvency ratio calculated as total debt divided by total debt plus shareholders' equity.	3M Co.'s debt-to-capital ratio deteriorated from 2015 to 2016 and from 2016 to 2017.

3M Co., interest coverage calculation, comparison to benchmarks

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Net income attributable to 3M	4,858	5,050	4,833	4,956	4,659
Add: Net income attributable to noncontrolling interest	11	8	8	42	62
Add: Income tax expense	2,679	1,995	1,982	2,028	1,841
Add: Interest expense	322	199	149	142	145
Earnings before interest and tax (EBIT)	7,870	7,252	6,972	7,168	6,707
Ratio
Interest coverage¹	24.44	36.44	46.79	50.48	46.26
Benchmarks
Interest Coverage, Competitors
Danaher Corp.	19.06	15.16	21.42	29.38	25.44
General Electric Co.	-0.06	5.84	2.91	11.72	13.82
Honeywell International Inc.	22.84	20.07	22.25	19.30	17.55
Interest Coverage, Sector
General Industrials	5.07	10.44	9.59	16.38	17.73
Interest Coverage, Industry
Industrials	10.30	11.25	12.98	15.93	16.04

Source: Based on data from 3M Co. Annual Reports

2017 Calculations

¹ Interest coverage = EBIT ÷ Interest expense
= 7,870 ÷ 322 = 24.44

Ratio	Description	The company
Interest coverage ratio	A solvency ratio calculated as EBIT divided by interest payments.	3M Co.'s interest coverage ratio deteriorated from 2015 to 2016 and from 2016 to 2017.