First-Quarter Highlights:
- Sales of $7.7 billion, up 3.7
percent; organic local-currency growth of 4.6 percent
- GAAP EPS of $2.16, up 5.4 percent
year-on-year
- GAAP operating income margins of
23.1 percent, down 100 basis points; includes $136 million, or 180
basis point impact from strategic investments
- Returned $1.4 billion to
shareholders via dividends and gross share repurchases
- Announced pending acquisition of
Scott Safety, a premier safety solutions company
3M (NYSE: MMM) today reported first-quarter earnings of $2.16
per share, an increase of 5.4 percent versus the first quarter of
2016. Sales were $7.7 billion, up 3.7 percent year-on-year in
dollar terms. Organic local-currency sales increased 4.6 percent
while divestitures reduced sales by 0.4 percent. Foreign currency
translation decreased sales by 0.5 percent year-on-year.
Operating income was $1.8 billion and operating income margins
for the quarter were 23.1 percent, down 1.0 percentage point
year-on-year. This result includes an incremental $136 million of
strategic investments in growth, productivity and portfolio
actions. First-quarter net income was $1.3 billion, up 3.7 percent.
The company’s operating cash flow was $1.0 billion, contributing to
conversion of 53 percent of net income to free cash flow, as
referenced in the “Supplemental Financial Information Non-GAAP
Measures” section.
3M paid $702 million in cash dividends to shareholders and
repurchased $690 million of its own shares during the quarter.
Organic local-currency sales growth was 11.5 percent in
Electronics and Energy, 5.7 percent in Industrial, 4.8 percent in
Safety and Graphics, 3.1 percent in Health Care, with a decline of
1.2 percent in Consumer. On a geographic basis, organic
local-currency sales growth was broad-based, led by Asia Pacific at
10.1 percent; growth was 4.0 percent in EMEA (Europe, Middle East
and Africa), 2.3 percent in Latin America/Canada and 1.4 percent in
the U.S.
“The 3M team delivered a strong start to 2017, marked by organic
sales growth of 5 percent – with positive growth in all geographic
areas,” said Inge G. Thulin, 3M’s chairman, president and chief
executive officer. “At the same time, we increased investments
across the enterprise to further accelerate growth and improve
productivity, while increasing our dividend for the 59th
consecutive year. In the first quarter we also announced the
acquisition of Scott Safety, which will bolster 3M’s already strong
position in the personal safety market.”
3M updated its guidance for 2017 due to a strong first-quarter
performance and improved outlook. The company now forecasts organic
local-currency sales growth to be 2 to 5 percent, up from previous
guidance of 1 to 3 percent.
3M expects earnings in the range of $8.70 to $9.05 per share –
up 7 to 11 percent year-on-year – versus a prior expectation of
$8.45 to $8.80. This includes a $0.05 to $0.10 benefit from the
gain on sale of the pending Identity Management divestiture, net of
various investments to drive growth and improve productivity.
The company also anticipates its full-year tax rate will be 26.0
to 27.5 percent, versus a prior range of 28.0 to 29.0 percent.
Finally, 3M affirmed its free cash flow expectation of 95 to 105
percent.
First-Quarter Business Group Discussion
Industrial
- Sales of $2.7 billion, up 4.2 percent
in U.S. dollars. Organic local-currency sales increased 5.7
percent, foreign currency translation reduced sales by 0.8 percent
and divestitures reduced sales by an additional 0.7 percent.
- On an organic local-currency basis:
- Sales grew in all businesses, led by
automotive and aerospace solutions, advanced materials, abrasives,
industrial adhesives and tapes, and automotive aftermarket.
- Sales grew in Asia Pacific, the U.S.,
and EMEA; Latin America/Canada was flat.
- Operating income was $625
million, an increase of 0.5 percent year-on-year; operating
margin of 23.1 percent.
Safety and Graphics
- Sales of $1.5 billion, up 3.4 percent
in U.S. dollars. Organic local-currency sales increased 4.8
percent, while foreign currency translation reduced sales by 0.6
percent and divestitures decreased sales by 0.8 percent.
- On an organic local-currency basis:
- Sales increased in roofing granules,
personal safety, and traffic safety and security; commercial
solutions was flat.
- Sales grew in all areas, led by EMEA,
Asia Pacific and the U.S.
- Operating income was $399 million, up
11.2 percent year-on-year; operating margin of 26.1 percent.
Health Care
- Sales of $1.4 billion, up 2.3 percent
in U.S. dollars. Organic local-currency sales increased 3.1 percent
and foreign currency translation reduced sales by 0.8 percent.
- On an organic local-currency basis:
- Sales grew in drug delivery systems,
food safety, oral care, and medical consumables; health information
systems declined.
- Sales grew in all areas, led by Latin
America/Canada, Asia Pacific and the U.S.
- Operating income was $434 million, a
decrease of 5.2 percent year-on-year; operating margin of 30.5
percent.
Electronics and Energy
- Sales of $1.2 billion, up 11.1 percent
in U.S. dollars. Organic local-currency sales increased 11.5
percent, foreign currency translation reduced sales by 0.2 percent
and divestitures decreased sales by 0.2 percent.
- On an organic local-currency basis:
- Electronics-related sales were up 18
percent with growth in both display materials and systems, and
electronics materials solutions; energy-related sales were up 1
percent with growth in electrical markets; telecom was flat.
- Sales grew in Asia Pacific, EMEA and
the U.S.; Latin America/Canada was flat.
- Operating income was $225 million, an
increase of 15.1 percent year-on-year; operating margin of 18.6
percent.
Consumer
- Sales of $1.0 billion, down 0.7 percent
in U.S. dollars. Organic local-currency sales decreased 1.2 percent
and foreign currency translation increased sales by 0.5
percent.
- On an organic local-currency basis:
- Sales grew in home improvement,
consumer health care and home care; stationery and office
declined.
- Sales grew in Asia Pacific and Latin
America/Canada, were flat in EMEA, and declined in the U.S.
- Operating income was $222 million, down
6.8 percent year-on-year; operating margin of 21.3 percent.
3M will conduct an investor teleconference at 9:00 a.m. EDT
(8:00 a.m. CDT) today. Investors can access this conference via the
following:
- Live webcast at
http://investors.3M.com.
- Live telephone:Call 800-762-2596 within
the U.S. or +1 212-231-2916 outside the U.S. Please join the call
at least 10 minutes before the start time.
- Webcast replay:Go to 3M’s Investor
Relations website at http://investors.3M.com and click on
“Quarterly Earnings.”
- Telephone replay:Call 800-633-8284
within the U.S. or +1 402-977-9140 outside the U.S. (for both U.S.
and outside the U.S., the access code is 21841622). The telephone
replay will be available until 11:30 a.m. EDT (10:30 a.m. CDT) on
April 30, 2017.
Forward-Looking StatementsThis news release contains
forward-looking information about 3M's financial results and
estimates and business prospects that involve substantial risks and
uncertainties. You can identify these statements by the use of
words such as "anticipate," "estimate," "expect," "aim," "project,"
"intend," "plan," "believe," "will," "should," "could," "target,"
"forecast" and other words and terms of similar meaning in
connection with any discussion of future operating or financial
performance or business plans or prospects. Among the factors that
could cause actual results to differ materially are the following:
(1) worldwide economic, political, and capital markets conditions
and other factors beyond the Company's control, including natural
and other disasters or climate change affecting the operations of
the Company or its customers and suppliers; (2) the Company's
credit ratings and its cost of capital; (3) competitive conditions
and customer preferences; (4) foreign currency exchange rates and
fluctuations in those rates; (5) the timing and market acceptance
of new product offerings; (6) the availability and cost of
purchased components, compounds, raw materials and energy
(including oil and natural gas and their derivatives) due to
shortages, increased demand or supply interruptions (including
those caused by natural and other disasters and other events); (7)
the impact of acquisitions, strategic alliances, divestitures, and
other unusual events resulting from portfolio management actions
and other evolving business strategies, and possible organizational
restructuring; (8) generating fewer productivity improvements than
estimated; (9) unanticipated problems or delays with the phased
implementation of a global enterprise resource planning (ERP)
system, or security breaches and other disruptions to the Company's
information technology infrastructure; (10) financial market risks
that may affect the Company’s funding obligations under defined
benefit pension and postretirement plans; and (11) legal
proceedings, including significant developments that could occur in
the legal and regulatory proceedings described in the Company's
Annual Report on Form 10-K for the year ended Dec. 31, 2016, and
any subsequent quarterly reports on Form 10-Q (the “Reports”).
Changes in such assumptions or factors could produce significantly
different results. A further description of these factors is
located in the Reports under "Cautionary Note Concerning Factors
That May Affect Future Results" and "Risk Factors" in Part I, Items
1 and 1A (Annual Report) and in Part I, Item 2 and Part II, Item 1A
(Quarterly Reports). The information contained in this news release
is as of the date indicated. The Company assumes no obligation to
update any forward-looking statements contained in this news
release as a result of new information or future events or
developments.
3M Company and SubsidiariesCONSOLIDATED
STATEMENT OF INCOME(Millions, except per-share
amounts)(Unaudited)
Three months ended March 31, 2017
2016 Net sales $ 7,685 $ 7,409
Operating expenses Cost of sales 3,869 3,678 Selling, general and
administrative expenses 1,571 1,493 Research, development and
related expenses 471 450 Total
operating expenses 5,911 5,621
Operating income 1,774 1,788
Interest expense and income Interest expense 45 47 Interest income
(8 ) (5 ) Total interest expense – net
37 42 Income before income taxes 1,737
1,746 Provision for income taxes 411
468 Net income including noncontrolling interest $
1,326 $ 1,278 Less: Net income attributable to
noncontrolling interest 3 3 Net
income attributable to 3M $ 1,323 $ 1,275
Weighted average 3M common shares outstanding – basic 598.1 607.4
Earnings per share attributable to 3M common shareholders – basic $
2.21 $ 2.10 Weighted average 3M common shares
outstanding – diluted 612.0 621.3 Earnings per share attributable
to 3M common shareholders – diluted $ 2.16 $ 2.05
Cash dividends paid per 3M common share $ 1.175 $
1.11
3M Company and SubsidiariesCONDENSED
CONSOLIDATED BALANCE SHEET(Dollars in millions)(Unaudited)
March 31, December 31, 2017 2016
ASSETS Current assets Cash and cash equivalents $ 2,173 $
2,398 Marketable securities – current 141 280 Accounts receivable –
net 4,722 4,392 Inventories 3,612 3,385 Other current assets
1,253 1,271 Total current assets 11,901
11,726 Marketable securities – non-current 17
17 Investments 133 128 Property, plant and equipment – net 8,551
8,516 Goodwill and intangible assets – net 11,527 11,486 Other
assets 1,163 1,033 Total assets $
33,292 $ 32,906
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current
portion of long-term debt
$ 909 $ 972 Accounts payable 1,701 1,798 Accrued payroll 532 678
Accrued income taxes 433 299 Other current liabilities 2,420
2,472 Total current liabilities 5,995
6,219 Long-term debt 10,802 10,678 Other
liabilities 5,455 5,666 Total
liabilities $ 22,252 $ 22,563 Total equity $
11,040 $ 10,343 Shares outstanding March 31, 2017: 597,239,576
shares December 31, 2016: 596,726,278 shares
Total liabilities and equity $ 33,292 $ 32,906
3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
(Dollars in millions)
(Unaudited)
Three months ended March 31, 2017
2016 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 988
$ 1,260 Cash flows from investing activities:
Purchases of property, plant and equipment (287 ) (314 )
Acquisitions, net of cash acquired — (4 ) Purchases and proceeds
from sale or maturities of marketable securities and investments –
net 138 (61 ) Other investing activities 59 99
NET CASH USED IN INVESTING ACTIVITIES (90 )
(280 ) Cash flows from financing activities: Change
in debt (68 ) 138 Purchases of treasury stock (690 ) (1,227 )
Proceeds from issuances of treasury stock pursuant to stock option
and benefit plans 315 357 Dividends paid to shareholders (702 )
(672 ) Other financing activities (6 ) (22 )
NET CASH USED IN FINANCING ACTIVITIES (1,151 ) (1,426
) Effect of exchange rate changes on cash and cash
equivalents 28 (15 ) Net increase
(decrease) in cash and cash equivalents (225 ) (461 ) Cash and cash
equivalents at beginning of year 2,398 1,798
Cash and cash equivalents at end of period $ 2,173
$ 1,337
3M Company and SubsidiariesSUPPLEMENTAL
FINANCIAL INFORMATIONNON-GAAP MEASURES(Dollars in
millions, except full-year 2017 forecast)(Unaudited)
Three months ended March 31, Major GAAP
Cash Flow Categories 2017 2016 Net cash
provided by operating activities $ 988 $ 1,260 Net cash used in
investing activities (90 ) (280 ) Net cash used in financing
activities (1,151 ) (1,426 )
Free Cash Flow (non-GAAP
measure)
Full-Year
2017Forecast(Billions)
Net cash provided by operating activities $ 988 $ 1,260 $6.3
to $7.3 Purchases of property, plant and equipment (287 )
(314 ) $1.3 to $1.5 Free cash flow (a) 701
946 $5.0 to $5.8
Net income attributable to 3M $ 1,323 $ 1,275 $5.3 to $5.5 Free
cash flow conversion (a) 53 % 74 % 95% to 105%
___________________
(a) Free cash flow and free
cash flow conversion are not defined under U.S. generally accepted
accounting principles (GAAP). Therefore, they 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. The Company defines free
cash flow as net cash provided by operating activities less
purchases of property, plant and equipment. It should not be
inferred that the entire free cash flow amount is available for
discretionary expenditures. The Company defines free cash flow
conversion as free cash flow divided by net income attributable to
3M. The Company believes free cash flow and free cash flow
conversion are meaningful to investors as they function as useful
measures of performance, and the Company uses these measures as an
indication of the strength of the company and its ability to
generate cash.
March 31, December 31, Net Debt (non-GAAP
measure) 2017 2016 Total debt $ 11,711 $
11,650 Less: Cash and cash equivalents and marketable securities
2,331 2,695 Net debt (b) $ 9,380 $
8,955
___________________
(b) Net debt is not defined
under U.S. GAAP and may not be computed the same as similarly
titled measures used by other companies. The Company defines net
debt as total debt less the total of cash, cash equivalents and
current and long-term marketable securities. 3M believes net debt
is meaningful to investors as 3M considers net debt and its
components to be an important indicator of liquidity and a guiding
measure of capital structure strategy.
3M Company and SubsidiariesSALES CHANGE
ANALYSIS (c)(Unaudited)
Three months ended March 31,
2017 Europe, Middle Latin Sales Change
Analysis United Asia- East and
America/ World- By Geographic Area
States Pacific Africa Canada
Wide Volume – organic 1.7 % 10.1 % 3.7 % 0.4 % 4.5 %
Price (0.3 ) — 0.3 1.9 0.1 Organic
local-currency sales 1.4 10.1 4.0 2.3 4.6 Divestitures (0.9 ) (0.1
) (0.1 ) (0.5 ) (0.4 ) Translation — (0.1 ) (4.0 ) 4.3
(0.5 ) Total sales change 0.5 % 9.9 % (0.1 ) %
6.1 % 3.7 %
Three months ended March 31, 2017 Organic
Worldwide local- Total Sales Change
Analysis currency sales By Business
Segment sales Divestitures Translation
change Industrial 5.7 % (0.7 ) % (0.8 ) % 4.2 %
Safety and Graphics 4.8 % (0.8 ) % (0.6 ) % 3.4 % Health Care 3.1 %
— % (0.8 ) % 2.3 % Electronics and Energy 11.5 % (0.2 ) % (0.2 ) %
11.1 % Consumer (1.2 ) % — % 0.5 % (0.7 ) % Total
Company 4.6 % (0.4 ) % (0.5 ) % 3.7 %
___________________
(c) Total sales change is
calculated based on reported sales results. The components of sales
change include organic local-currency sales, acquisitions,
divestitures and translation. Organic local-currency sales includes
both organic volume impacts (which excludes acquisition and
divestiture impacts), plus selling price changes. Acquisition
and divestiture impacts are measured separately for the first 12
months post-transaction.
3M Company and SubsidiariesBUSINESS
SEGMENTS(Dollars in millions)(Unaudited)
Effective in the first quarter of 2017, as part of 3M’s
continuing effort to improve the alignment of its businesses around
markets and customers the Company made the following changes:
- Integrated the former Renewable Energy
Division into existing divisions;
- Combined two divisions to form the
Automotive and Aerospace Solutions Division; and
- Consolidated U.S. customer account
activity - impacting dual credit reporting
Integration of former Renewable Energy Division
- The (a) solar and wind and (b) energy
product lines (along with certain technology previously included in
Corporate and Unallocated) of the former Renewable Energy Division
(RED) were integrated into the existing Electrical Markets Division
and Electronics Materials and Solutions Division, respectively,
within the Electronics and Energy business segment. In addition,
the former RED window film products were moved into the Commercial
Solutions Division within the Safety and Graphics business segment.
This change resulted in a decrease in previously reported net sales
and operating income for total year 2016 of $203 million and $38
million, respectively, in the Electronics and Energy segment. These
decreases were offset by a $207 million and $29 million increase in
previously reported total year 2016 net sales and operating income,
respectively, in the Safety and Graphics business segment, and a $4
million decrease and $9 million increase in previously reported net
sales and operating income, respectively, in Corporate and
Unallocated.
Creation of Automotive and Aerospace Solutions
Division
- The former Automotive Division and
Aerospace and Commercial Transportation Division (both within the
Industrial business segment) were combined to create the Automotive
and Aerospace Solutions Division. Because this realignment was
within the Industrial business segment, it had no impact on
business segment reporting.
Consolidation of U.S. customer account activity - impacting
dual credit reporting
- The Company consolidated its customer
account activity in the U.S. into more centralized sales districts
to better serve customers. 3M business segment reporting measures
include dual credit to business segments for certain U.S. sales and
related operating income. This dual credit is based on which
business segment provides customer account activity (“sales
district”) with respect to a particular product sold in the U.S.
Previously, a customer in the U.S. may have been aligned to several
sales districts associated with multiple divisions or segments
based on the individual products the customer purchased across 3M’s
portfolio. The alignment of U.S. customer accounts to fewer, more
focused sales districts therefore changed the attribution of dual
credit across 3M’s business segments. As a result, previously
reported aggregate business segment net sales and operating income
for total year 2016 increased $163 million and $36 million,
respectively, offset by similar increases in the elimination of
dual credit net sales and operating income amounts.
The financial information presented herein reflects the impact
of the preceding product line reporting change between business
segments for all periods presented. Refer to 3M’s Current Report on
Form 8-K furnished on March 9, 2017, for additional supplemental
unaudited historical business segment net sales and operating
income information.
BUSINESS SEGMENT INFORMATION Three months
ended NET SALES March 31, (Millions)
2017 2016 Industrial $ 2,709 $ 2,599 Safety
and Graphics 1,527 1,477 Health Care 1,423 1,391 Electronics and
Energy 1,210 1,089 Consumer 1,042 1,050 Corporate and Unallocated 2
— Elimination of Dual Credit (228 ) (197 )
Total Company $ 7,685 $ 7,409
BUSINESS SEGMENT INFORMATION Three months ended
OPERATING INCOME March 31, (Millions)
2017 2016 Industrial $ 625 $ 622 Safety and
Graphics 399 359 Health Care 434 457 Electronics and Energy 225 195
Consumer 222 238 Corporate and Unallocated (81 ) (40 ) Elimination
of Dual Credit (50 ) (43 ) Total Company $
1,774 $ 1,788
About 3MAt 3M, we apply science in collaborative ways to
improve lives daily. With $30 billion in sales, our 90,000
employees connect with customers all around the world. Learn more
about 3M’s creative solutions to the world’s problems at www.3M.com
or on Twitter @3M or @3MNewsroom.
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version on businesswire.com: http://www.businesswire.com/news/home/20170425005832/en/
3MInvestor Contact:Bruce
Jermeland, 651-733-1807orMedia Contact:Lori
Anderson, 651-733-0831
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