First-Quarter Highlights:
- Company adopts new FASB accounting
standard, which added $0.10, net, to EPS
- Operating income margins up 1.3
percentage points year-on-year to 24.1 percent
- Organic local-currency sales growth
declined 0.8 percent
- Increased free cash flow 20 percent
year-on-year to $946 million
- Increased first-quarter per share
dividend by 8 percent, 58th consecutive year of
increases
3M (NYSE: MMM) today reported first-quarter earnings of $2.05
per share, an increase of 10.8 percent versus the first quarter of
2015. Sales declined 2.2 percent year-on-year to $7.4 billion.
Organic local-currency sales declined 0.8 percent while
acquisitions, net of divestitures, added 1.6 percent to sales.
Foreign currency translation reduced sales by 3.0 percent
year-on-year.
Operating income was $1.8 billion and operating income margins
for the quarter were 24.1 percent, up 1.3 percentage points
year-on-year. First-quarter net income was $1.3 billion and the
company converted 74 percent of net income to free cash flow.
On March 30, 2016, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) 2016-09 for the
accounting of employee share-based payments. 3M elected to adopt
this new guidance ahead of the mandatory 2017 effective date for
all U.S. public companies. The adoption of this ASU resulted
in a first-quarter tax benefit to earnings of $0.10 per share, net
of tax cost related to global cash optimization actions. Over the
remainder of 2016, the company is planning to take further such
actions, and as a result its full-year tax rate and earnings per
share guidance remains unchanged.
3M paid $672 million in cash dividends to shareholders and
repurchased $1.2 billion of its own shares during the quarter.
Organic local-currency sales growth was 6.2 percent in Health
Care, 2.8 percent in Consumer and 2.4 percent in Safety and
Graphics, with declines of 1.9 percent in Industrial and 11.7
percent in Electronics and Energy. On a geographic basis, organic
local-currency sales growth was 4.2 percent in Latin
America/Canada, 1.7 percent in EMEA (Europe, Middle East and
Africa) and 0.3 percent in the U.S., with a decline of 5.6 percent
in Asia Pacific.
“Our team continued to execute the 3M playbook and delivered
another solid operational performance in the first quarter,” said
Inge G. Thulin, 3M’s chairman, president and chief executive
officer. “We expanded 3M’s profitability, improved our cash flow
generation, and increased margins over a full percentage point. At
the same time, we continued to invest in the business – including
opening a new, world-class laboratory in the United States – while
returning cash to our shareholders.”
For full-year 2016, 3M maintained its forecast for earnings per
share in the range of $8.10 to $8.45 with organic local-currency
sales growth of 1 to 3 percent. 3M also continues to expect its tax
rate to be in the range of 29.5 to 30.5 percent and free cash flow
conversion in the range of 95 to 105 percent.
First-Quarter Business Group Discussion
Industrial
- Sales of $2.6 billion, down 3.0 percent
in U.S. dollars. Organic local-currency sales declined 1.9 percent
while foreign currency translation reduced sales by 3.0 percent and
acquisitions, net of divestitures, increased sales by 1.9
percent.
- On an organic local-currency basis:
- Sales growth in automotive OEM,
automotive aftermarket and 3M Purification was offset by declines
across the rest of the portfolio.
- Sales increased in Latin America/Canada
and EMEA, and declined in Asia Pacific and the U.S.
- Operating income was $617 million, up
3.6 percent year-on-year; operating margin of 23.9 percent.
Safety and Graphics
- Sales of $1.4 billion, up 2.9 percent
in U.S. dollars. Organic local-currency sales increased 2.4 percent
and acquisitions, net of divestitures, increased sales by 4.5
percent while foreign currency translation reduced sales by 4.0
percent.
- On an organic local-currency basis:
- Sales grew in roofing granules,
commercial solutions and personal safety; sales declined in traffic
safety and security.
- Sales grew across all geographic areas
led by Asia Pacific and the U.S.
- Operating income was $345 million, an
increase of 3.1 percent year-on-year; operating margin of 24.5
percent.
Health Care
- Sales of $1.4 billion, up 4.0 percent
in U.S. dollars. Organic local-currency sales increased 6.2
percent, acquisitions increased sales by 0.9 percent and foreign
currency translation reduced sales by 3.1 percent.
- On an organic local-currency basis:
- Strong sales growth across all
businesses.
- Sales grew in all geographic areas led
by Asia Pacific and Latin America/Canada.
- Operating income was $455 million, an
increase of 11.5 percent year-on-year; operating margin of 32.9
percent.
Electronics and Energy
- Sales of $1.1 billion, down 13.6
percent in U.S. dollars. Organic local-currency sales declined 11.7
percent and foreign currency translation reduced sales by 1.9
percent.
- On an organic local-currency basis:
- Electronics-related sales decreased 18
percent with declines in both electronics materials solutions, and
display materials and systems; energy-related sales declined 1
percent as growth in electrical markets was offset by declines in
renewable energy and telecom.
- Sales declined in Asia Pacific and were
flat in the other geographic areas.
- Operating income was $208 million, down
26.8 percent year-on-year; operating margin of 18.2 percent.
Consumer
- Sales of $1.0 billion, up 0.1 percent
in U.S. dollars. Organic local-currency sales increased 2.8 percent
and foreign currency translation reduced sales by 2.7 percent.
- On an organic local-currency basis:
- Sales grew in three of four businesses
led by home improvement and consumer health care.
- Sales grew in Asia Pacific and the U.S.
while declined in Latin America/Canada and EMEA.
- Operating income was $238 million, down
1.1 percent year-on-year; operating margin of 22.7 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. access code is 21776139). The telephone replay
will be available until 10:30 a.m. CDT on April 29, 2016.
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 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, 2015. Changes in such
assumptions or factors could produce significantly different
results. A further description of these factors is located in the
Annual Report under "Cautionary Note Concerning Factors That May
Affect Future Results" and "Risk Factors" in Part I, Items 1 and
1A. 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 Subsidiaries
CONSOLIDATED STATEMENT OF
INCOME
(Millions, except per-share amounts)
(Unaudited)
Three months ended March 31,
2016 2015 Net sales $ 7,409 $ 7,578
Operating expenses Cost of sales 3,678 3,821 Selling,
general and administrative expenses 1,493 1,564 Research,
development and related expenses 450 463
Total operating expenses 5,621
5,848 Operating income 1,788
1,730 Interest expense and income Interest expense 47
31 Interest income (5 ) (4 ) Total interest
expense – net 42 27 Income
before income taxes 1,746 1,703 Provision for income taxes
468 502 Net income including
noncontrolling interest $ 1,278 $ 1,201 Less:
Net income attributable to noncontrolling interest 3
2 Net income attributable to 3M $ 1,275
$ 1,199 Weighted average 3M common shares outstanding
– basic 607.4 636.2 Earnings per share attributable to 3M common
shareholders – basic $ 2.10 $ 1.88 Weighted
average 3M common shares outstanding – diluted 621.3 649.2 Earnings
per share attributable to 3M common shareholders – diluted $ 2.05
$ 1.85 Cash dividends paid per 3M common share
$ 1.11 $ 1.025
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE
SHEET
(Dollars in millions)
(Unaudited)
March 31, December 31, March
31, 2016 2015 2015 ASSETS Current
assets Cash and cash equivalents $ 1,337 $ 1,798 $ 1,791 Marketable
securities – current 176 118 1,018 Accounts receivable – net 4,485
4,154 4,408 Inventories 3,627 3,518 3,704 Other current assets
1,249 1,398 1,395 Total current assets
10,874 10,986 12,316 Marketable securities –
non-current 15 9 13 Investments 115 117 102 Property, plant and
equipment – net 8,614 8,515 8,286 Goodwill and intangible assets –
net (a) 11,926 11,850 8,330 Prepaid pension benefits 226 188 56
Other assets 1,212 1,053 1,466 Total assets $
32,982 $ 32,718 $ 30,569
LIABILITIES AND EQUITY
Current liabilities Short-term borrowings and current portion of
long-term debt $ 2,212 $ 2,044 $ 132 Accounts payable 1,581 1,694
1,801 Accrued payroll 468 644 446 Accrued income taxes 590 332 464
Other current liabilities 2,327 2,404 2,186
Total current liabilities 7,178 7,118 5,029
Long-term debt 8,927 8,753 6,434 Pension and postretirement
benefits 3,454 3,520 3,764 Other liabilities 1,649
1,580 1,390 Total liabilities $ 21,208 $ 20,971 $ 16,617
Total equity $ 11,774 $ 11,747 $ 13,952 Shares outstanding
March 31, 2016: 606,514,530 shares December 31, 2015: 609,330,124
shares March 31, 2015: 634,340,975 shares
Total liabilities and equity $ 32,982 $ 32,718
$ 30,569 (a)
In August 2015, 3M completed the
acquisitions of Capital Safety and Polypore’s Separations Media
(Membrana) business. The combination of these acquisitions
increased goodwill and intangible assets – net by approximately
$3.8 billion when compared to March 31, 2015, balances.
3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
(Dollars in millions)
(Unaudited)
Three months ended March 31,
2016 2015 NET CASH PROVIDED BY OPERATING ACTIVITIES $
1,260 $ 1,080 Cash flows from investing
activities: Purchases of property, plant and equipment (314 ) (291
) Acquisitions, net of cash acquired (4 ) (150 ) Purchases and
proceeds from sale or maturities of marketable securities and
investments – net (61 ) 414 Other investing activities 99
27 NET CASH USED IN INVESTING
ACTIVITIES (280 ) — Cash flows from
financing activities: Change in debt 138 (4 ) Purchases of treasury
stock (1,227 ) (886 ) Proceeds from issuances of treasury stock
pursuant to stock option and benefit plans 357 309 Dividends paid
to shareholders (672 ) (652 ) Other financing activities (22
) 79 NET CASH USED IN FINANCING ACTIVITIES
(1,426 ) (1,154 ) Effect of exchange rate
changes on cash and cash equivalents (15 ) (32 )
Net increase (decrease) in cash and cash equivalents (461 )
(106 ) Cash and cash equivalents at beginning of year 1,798
1,897 Cash and cash equivalents at end
of period $ 1,337 $ 1,791
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION
NON-GAAP MEASURES
(Dollars in millions)
(Unaudited)
Three months ended March 31, Free Cash
Flow 2016 2015 Net cash provided by
operating activities $ 1,260 $ 1,080
Purchases of property, plant and
equipment
(314 ) (291 ) Free Cash Flow (b) $ 946
$ 789 Free Cash Flow Conversion (b) 74 % 66 %
(b) 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 useful measures of performance and
uses these measures as an indication of the strength of the company
and its ability to generate cash.
March 31, December 31, March 31, Net
Debt 2016 2015 2015 Total Debt $
11,139 $ 10,797 $ 6,566
Less: Cash and Cash Equivalents and
Marketable Securities
1,528 1,925 2,822 Net Debt (c) $ 9,611
$ 8,872 $ 3,744 (c) The Company defines net debt as
total debt less the total of cash, cash equivalents and current and
long-term marketable securities. 3M considers net debt and its
components to be an important indicator of liquidity and a guiding
measure of capital structure strategy. Net debt is not defined
under U.S. GAAP and may not be computed the same as similarly
titled measures used by other companies.
March 31, December 31, March 31,
Working Capital Index 2016 2015 2015
Net Working Capital Turns
(d)
4.5 4.9 4.8 (d) The Company uses various working
capital measures that place emphasis and focus on certain working
capital assets and liabilities. 3M’s net working capital index is
defined as quarterly net sales multiplied by four, divided by
ending net accounts receivable plus inventory less accounts
payable. This measure is not recognized under U.S. GAAP and may not
be comparable to similarly titled measures used by other companies.
3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)
Three months ended March 31,
2016 Europe, Middle Latin Sales Change
Analysis United Asia- East and
America/ World- By Geographic Area
States Pacific Africa Canada
Wide Volume – organic
0.3
% (5.4) %
0.5
% (2.6) % (1.7) % Price
—
(0.2)
1.2
6.8
0.9
Organic local-currency sales
0.3
(5.6)
1.7
4.2
(0.8) Acquisitions
2.6
1.0
2.8
2.2
2.1
Divestitures (0.6) (0.2) (0.7) (0.3) (0.5) Translation
—
(2.6) (2.9) (15.7) (3.0) Total sales change
2.3
% (7.4) %
0.9
% (9.6) % (2.2) %
Three months ended March 31, 2016
Organic Worldwide local- Total Sales
Change Analysis currency sales By Business
Segment sales Acquisitions Divestitures
Translation change Industrial
(1.9)
%
2.0
% (0.1) % (3.0) % (3.0) % Safety and Graphics
2.4
%
6.9
% (2.4) % (4.0) %
2.9
% Health Care
6.2
%
0.9
%
—
% (3.1) %
4.0
% Electronics and Energy (11.7) %
—
%
—
% (1.9) % (13.6) % Consumer
2.8
%
—
%
—
% (2.7) %
0.1
%
3M Company and SubsidiariesBUSINESS
SEGMENTS(Dollars in millions)(Unaudited)
Effective in the first quarter of 2016, 3M made a product line
reporting change involving two of its business segments in its
continuing effort to improve the alignment of its businesses around
markets and customers.
The change between business segments was as follows:
- Elements of the electronic bonding
product lines were previously separately reflected in the
Electronics Materials Solutions Division (Electronics and Energy
business segment) and the Industrial Adhesives and Tapes Division
(Industrial business segment). Effective in the first quarter of
2016, certain sales and operating income results for these
electronic bonding product lines in aggregate were equally divided
between the Electronics and Energy business segment and Industrial
business segment. This change resulted in a decrease in net sales
for total year 2015 of $33 million in the Industrial business
segment offset by a corresponding increase in the Electronics and
Energy business segment.
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 15, 2016, for additional supplemental
unaudited historical business segment net sales and operating
income information.
BUSINESS SEGMENT INFORMATION Three months
ended NET SALES March 31, (Millions)
2016 2015 Industrial $ 2,576 $ 2,656 Safety
and Graphics 1,412 1,372 Health Care 1,383 1,329 Electronics and
Energy 1,144 1,324 Consumer 1,049 1,048 Corporate and Unallocated 1
2 Elimination of Dual Credit (156 ) (153 )
Total Company $ 7,409 $ 7,578
BUSINESS
SEGMENT INFORMATION Three months ended OPERATING
INCOME March 31, (Millions) 2016
2015 Industrial $ 617 $ 596 Safety and Graphics 345
335 Health Care 455 408 Electronics and Energy 208 285 Consumer 238
240 Corporate and Unallocated (41 ) (100 ) Elimination of Dual
Credit (34 ) (34 ) Total Company $ 1,788
$ 1,730
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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160426005922/en/
3MInvestor Contacts:Bruce Jermeland,
651-733-1807orMike Kronebusch, 651-733-1141orMedia
Contact:Lori Anderson, 651-733-0831
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