Third-Quarter Highlights:
- Sales of $8.4 billion, up 4.5 percent year-on-year
- Organic local-currency sales growth of 0.9 percent
year-on-year
- Both GAAP and adjusted EPS of $2.43
- Operating cash flow of $2.5 billion, up 23 percent
year-on-year; adjusted free cash flow of $2.2 billion, up 13
percent year-on-year
- Strengthened capital structure: reduced total debt by $1.2
billion, down 6 percent, and net debt by $1.3 billion, or 8
percent, since June 30, 2020
- Company will continue to provide monthly sales updates
through year-end 2020
3M (NYSE: MMM) today reported third-quarter 2020 results.
“Our third-quarter performance demonstrated once again the
strength of the 3M model as we executed well, served customers and
continued to fight the pandemic,” said Mike Roman, 3M chairman and
chief executive officer. “Though economic uncertainty and
challenges due to the COVID-19 pandemic remain, we returned to
positive organic sales growth with sequential improvement across
businesses and geographies. We posted another quarter of robust
cash flow, aggressively managed costs and further strengthened our
balance sheet.
“We continue to take actions to transform 3M and position us to
deliver strong results as our end markets recover,” Roman
continued. “We will invest where demand is strong, aggressively
manage our cost structure, and create new innovations that address
customer needs and global market trends.”
Third-Quarter Results
The COVID-19 pandemic continues to evolve and affect 3M’s
businesses in a number of ways. The company saw sequential
improvements across businesses, end markets and geographies. During
the third quarter, end-market demand remained strong in personal
safety, home improvement, general cleaning, semiconductor, data
center and biopharma filtration. At the same time, several other
end markets, while improving, continued to experience year-on-year
declines primarily driven by COVID-19-related headwinds, including
healthcare and oral care elective procedures, auto OEM, general
industrial, consumer electronics, hospitality, office supplies,
healthcare IT, and traffic safety.
Third-quarter sales grew 4.5 percent year-on-year to $8.4
billion. Organic local-currency sales grew 0.9 percent, while
acquisitions, net of divestitures, increased sales by 3.0 percent.
Foreign currency translation increased sales by 0.6 percent
year-on-year.
Total sales grew 25.5 percent year-on-year in Health Care, 6.9
percent in Safety and Industrial, and 5.6 percent in Consumer, with
a decline of 7.4 percent in Transportation and Electronics. Organic
local-currency sales increased 8.1 percent year-on-year in Health
Care, 6.9 percent in Safety and Industrial, and 5.5 percent in
Consumer, with a decrease of 7.1 percent in Transportation and
Electronics.
On a geographic basis, total sales grew 7.7 percent year-on-year
in the Americas, 4.4 percent in EMEA (Europe, Middle East, and
Africa), with a decline of 0.6 percent in Asia Pacific. Organic
local-currency sales grew 3.4 percent year-on-year in the Americas,
and declined 0.3 percent in EMEA and 2.6 percent in Asia
Pacific.
Both third-quarter GAAP and adjusted earnings were $2.43 per
share, resulting in year-on-year declines of 10.7 percent and 5.8
percent on a GAAP- and adjusted-basis, respectively. Third-quarter
operating income was $1.9 billion with operating margins of 22.9
percent, as referenced in the “Supplemental Financial Information
Non-GAAP Measures” section.
The company’s operating cash flow was $2.5 billion with adjusted
free cash flow of $2.2 billion contributing to adjusted free cash
flow conversion of 153 percent. 3M paid $847 million in cash
dividends to shareholders during the third quarter. The company
reduced total debt by $1.2 billion, down 6 percent, and net debt by
$1.3 billion, or 8 percent, sequentially. See the “Supplemental
Financial Information Non-GAAP Measures” section for applicable
information.
Third-Quarter Business Group Discussion
Safety and Industrial
- Sales of $3.0 billion, up 6.9 percent year-on-year in U.S.
dollars. Organic local-currency sales increased 6.9 percent,
foreign currency translation increased sales by 0.4 percent, and
divestitures decreased sales by 0.4 percent.
- On an organic local-currency basis:
- Sales increased in personal safety, roofing granules, and
automotive aftermarket; sales declined in electrical markets,
industrial adhesives and tapes, closure and masking systems, and
abrasives.
- Sales grew in the Americas and EMEA; sales declined in Asia
Pacific.
- Segment operating income was $823 million, an increase of 27.2
percent year-on-year; operating margins of 27.2 percent.
Transportation and Electronics
- Sales of $2.3 billion, down 7.4 percent year-on-year in U.S.
dollars. Organic local-currency sales decreased 7.1 percent,
foreign currency translation increased sales by 0.9 percent, and
divestitures decreased sales by 1.2 percent.
- On an organic local-currency basis:
- Sales increased in electronics; sales declined in
transportation safety, commercial solutions, automotive and
aerospace, and advanced materials.
- Sales declined in Asia Pacific, the Americas, and EMEA.
- Segment operating income was $552 million, a decline of 13.2
percent year-on-year; operating margins of 23.9 percent.
Health Care
- Sales of $2.2 billion, up 25.5 percent year-on-year in U.S.
dollars. Organic local-currency sales increased 8.1 percent,
foreign currency translation increased sales by 1.1 percent and
acquisitions, net of divestitures, increased sales by 16.3
percent.
- On an organic local-currency basis:
- Sales grew in medical solutions, separation and purification,
and oral care; sales declined in food safety and health information
systems.
- Sales increased in the Americas and EMEA; sales declined in
Asia Pacific.
- Segment operating income was $508 million, an increase of 10.6
percent year-on-year; operating margins of 23.5 percent.
Consumer
- Sales of $1.4 billion, up 5.6 percent year-on-year in U.S.
dollars. Organic local-currency sales increased 5.5 percent and
foreign currency translation increased sales by 0.1 percent.
- On an organic local-currency basis:
- Sales grew in home care, and home improvement; were flat in
consumer health care and declined in stationery and office
supplies.
- Sales increased in the Americas and EMEA; sales declined in
Asia Pacific.
- Segment operating income was $358 million, up 14.7 percent
year-on-year; operating margins of 25.3 percent.
Outlook
Due to the continued evolving and uncertain impact of the
COVID-19 pandemic, 3M is not able to estimate the full duration,
magnitude and pace of recovery across its diverse end markets with
reasonable accuracy. Therefore, 3M continues to believe it is
prudent to not provide guidance. 3M will maintain its monthly
reporting of sales information during the fourth-quarter to
continue to provide transparency on its ongoing business
performance.
The company estimates total sales for October to be flat to up
low-single digits year-on-year. This estimate includes the
anticipated impact of one fewer business day in October 2020 versus
October 2019.
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 21930639). The telephone replay will be
available until 11:30 a.m. EST (10:30 a.m. CST) on November 3,
2020.
Forward-Looking Statements This 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, regulatory, capital markets and
other external 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) risks related to public health crises such as the
global pandemic associated with the coronavirus (COVID-19); (3)
liabilities related to certain fluorochemicals, including lawsuits
concerning various PFAS-related products and chemistries, and
claims and governmental regulatory proceedings and inquiries
related to PFAS in a variety of jurisdictions; (4) 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, 2019, and
any subsequent quarterly reports on Form 10-Q (the “Reports”); (5)
competitive conditions and customer preferences; (6) foreign
currency exchange rates and fluctuations in those rates; (7) the
timing and market acceptance of new product offerings; (8) 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); (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) 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; (11) operational execution, including scenarios
where the Company generates fewer productivity improvements than
estimated; (12) financial market risks that may affect the
Company’s funding obligations under defined benefit pension and
postretirement plans; and (13) the Company's credit ratings and its
cost of capital. 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), as updated by
applicable Current Reports on Form 8-K. 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
Nine months ended
September 30,
September 30,
2020
2019
2020
2019
Net sales
$
8,350
$
7,991
$
23,601
$
24,025
Operating expenses
Cost of sales
4,303
4,188
12,217
12,811
Selling, general and administrative
expenses
1,677
1,455
5,039
5,089
Research, development and related
expenses
461
443
1,422
1,390
Gain on sale of businesses
—
(106
)
(389
)
(114
)
Total operating expenses
6,441
5,980
18,289
19,176
Operating income
1,909
2,011
5,312
4,849
Other expense (income), net
104
45
311
349
Income before income taxes
1,805
1,966
5,001
4,500
Provision for income taxes
387
378
1,002
888
Income of consolidated group
1,418
1,588
3,999
3,612
Income (loss) from unconsolidated
subsidiaries, net of taxes
(1
)
—
(1
)
—
Net income including noncontrolling
interest
1,417
1,588
3,998
3,612
Less: Net income (loss) attributable to
noncontrolling interest
4
5
3
11
Net income attributable to 3M
$
1,413
$
1,583
$
3,995
$
3,601
Weighted average 3M common shares
outstanding – basic
577.8
576.5
577.2
577.2
Earnings per share attributable to 3M
common shareholders – basic
$
2.45
$
2.75
$
6.92
$
6.24
Weighted average 3M common shares
outstanding – diluted
582.4
583.0
581.6
585.9
Earnings per share attributable to 3M
common shareholders – diluted
$
2.43
$
2.72
$
6.87
$
6.15
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE
SHEET
(Dollars in millions)
(Unaudited)
September 30,
December 31,
2020
2019
ASSETS
Current assets
Cash and cash equivalents
$
4,121
$
2,353
Marketable securities – current
440
98
Accounts receivable – net
4,623
4,791
Inventories
3,984
4,134
Prepaids
516
704
Other current assets
426
891
Total current assets
14,110
12,971
Property, plant and equipment – net
9,216
9,333
Operating lease right of use assets
844
858
Goodwill and intangible assets – net
19,461
19,823
Other assets
1,759
1,674
Total assets
$
45,390
$
44,659
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and
current portion of long-term debt
$
1,169
$
2,795
Accounts payable
2,208
2,228
Accrued payroll
721
702
Accrued income taxes
220
194
Operating lease liabilities – current
252
247
Other current liabilities
2,840
3,056
Total current liabilities
7,410
9,222
Long-term debt
18,429
17,518
Other liabilities
7,608
7,793
Total liabilities
$
33,447
$
34,533
Total equity
$
11,943
$
10,126
Shares outstanding
September 30, 2020: 576,821,878 shares
December 31, 2019: 575,184,835 shares
Total liabilities and equity
$
45,390
$
44,659
3M Company and Subsidiaries
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Nine months ended
September 30,
2020
2019
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
$
5,598
$
4,732
Cash flows from investing activities:
Purchases of property, plant and
equipment
(1,079
)
(1,161
)
Acquisitions, net of cash acquired
(25
)
(704
)
Purchases and proceeds from sale or
maturities of marketable securities and investments – net
170
348
Proceeds from sale of businesses, net of
cash sold
576
236
Other investing activities
37
136
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES
(321
)
(1,145
)
Cash flows from financing activities:
Change in debt
(870
)
4,779
Purchases of treasury stock
(366
)
(1,243
)
Proceeds from issuances of treasury stock
pursuant to stock option and benefit plans
325
437
Dividends paid to shareholders
(2,540
)
(2,488
)
Other financing activities
(47
)
(158
)
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
(3,498
)
1,327
Effect of exchange rate changes on cash
and cash equivalents
(11
)
(36
)
Net increase (decrease) in cash and cash
equivalents
1,768
4,878
Cash and cash equivalents at beginning of
year
2,353
2,853
Cash and cash equivalents at end of
period
$
4,121
$
7,731
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION
NON-GAAP MEASURES
(Unaudited)
(Dollars in millions, except per share
amounts)
Operating Income
Operating Income
Margin
Income Before Taxes
Provision for Income
Taxes
Effective Tax Rate
Net Income Attributable to
3M
Earnings Per Diluted
Share
Earnings per diluted share
percent change
Q3 2019 GAAP
$
2,011
25.2
%
$
1,966
$
378
19.3
%
$
1,583
$
2.72
Adjustments for special items:
(Gain)/loss on sale of businesses
(106
)
(106
)
(27
)
(79
)
(0.14
)
Q3 2019 adjusted amounts (non-GAAP
measures) (a)
$
1,905
23.8
%
$
1,860
$
351
19.0
%
$
1,504
$
2.58
Q3 2020 GAAP
$
1,909
22.9
%
$
1,805
$
387
21.4
%
$
1,413
$
2.43
(10.7
)%
Adjustments for special items:
None
Q3 2020 adjusted amounts (non-GAAP
measures) (a)
$
1,909
22.9
%
$
1,805
$
387
21.4
%
$
1,413
$
2.43
(5.8
)%
(Dollars in millions, except per share
amounts)
Operating Income
Operating Income
Margin
Income Before Taxes
Provision for Income
Taxes
Effective Tax Rate
Net Income Attributable to
3M
Earnings Per Diluted
Share
Earnings per diluted share
percent change
First nine months 2019 GAAP
$
4,849
20.2
%
$
4,500
$
888
19.7
%
$
3,601
$
6.15
Adjustments for special items:
Significant litigation-related
charges/benefits
548
548
124
424
0.72
Loss on deconsolidation of Venezuelan
subsidiary
—
162
—
162
0.28
(Gain)/loss on sale of businesses
(114
)
(114
)
15
(129
)
(0.22
)
First nine months 2019 adjusted amounts
(non-GAAP measures) (a)
$
5,283
22.0
%
$
5,096
$
1,027
20.2
%
$
4,058
$
6.93
First nine months 2020 GAAP
$
5,312
22.5
%
$
5,001
$
1,002
20.0
%
$
3,995
$
6.87
11.7
%
Adjustments for special items:
Significant litigation-related
charges/benefits
17
17
56
(39
)
(0.07
)
(Gain)/loss on sale of businesses
(389
)
(389
)
(86
)
(303
)
(0.52
)
Divestiture-related restructuring
actions
55
55
9
46
0.08
First nine months 2020 adjusted amounts
(non-GAAP measures) (a)
$
4,995
21.2
%
$
4,684
$
981
21.0
%
$
3,699
$
6.36
(8.2
)%
(a)
In addition to reporting financial results
in accordance with U.S. GAAP, the Company also provides non-GAAP
measures that adjust for the impact of special items. Special items
for the periods presented include the items described in the
section entitled “Description of Special Items”. Beginning in 2020,
the Company includes gain/loss on sale of businesses and
divestiture-related restructuring actions as special items due to
their potential distortion of underlying operating results.
Information provided herein reflects the impact of this change for
all periods presented. Operating income, income before taxes, net
income, earnings per share, and effective tax rate are all measures
for which 3M provides the reported GAAP measure and a measure
adjusted for special items. The adjusted measures are not in
accordance with, nor are they a substitute for, GAAP measures. The
Company considers these non-GAAP measures in evaluating and
managing the Company’s operations. The Company believes that
discussion of results adjusted for these items is meaningful to
investors as it provides a useful analysis of ongoing underlying
operating trends. The determination of these items may not be
comparable to similarly titled measures used by other
companies.
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION
NON-GAAP MEASURES –
(CONTINUED)
(Unaudited)
Three months ended
Nine months ended
September 30,
September 30,
Major GAAP Cash Flow Categories
(dollars in millions)
2020
2019
2020
2019
Net cash provided by (used in) operating
activities
$
2,480
$
2,022
$
5,598
$
4,732
Net cash provided by (used in) investing
activities
(523
)
90
(321
)
(1,145
)
Net cash provided by (used in) financing
activities
(2,097
)
2,804
(3,498
)
1,327
Adjusted Free Cash Flow (non-GAAP
measure) (dollars in millions)
Net cash provided by (used in) operating
activities
$
2,480
$
2,022
$
5,598
$
4,732
Purchases of property, plant and
equipment
(368
)
(349
)
(1,079
)
(1,161
)
Free cash flow
$
2,112
$
1,673
$
4,519
$
3,571
Adjustments for special items:
Significant litigation-related after-tax
payment impacts
$
10
$
229
$
74
$
260
TCJA transition tax payments
33
—
33
—
Divestiture-related restructuring
after-tax payment impacts
6
9
6
54
Adjusted free cash flow (b)
$
2,161
$
1,911
$
4,632
$
3,885
Net income attributable to 3M
$
1,413
$
1,583
$
3,995
$
3,601
Adjustments for special items:
Significant litigation-related
charges/benefits
—
—
(39
)
424
Loss on deconsolidation of Venezuelan
subsidiary
—
—
—
162
(Gain)/loss on sale of businesses
—
(79
)
(303
)
(129
)
Divestiture-related restructuring
actions
—
—
46
—
Adjusted net income attributable to 3M
(a)
$
1,413
$
1,504
$
3,699
$
4,058
Adjusted free cash flow conversion (b)
153
%
127
%
125
%
96
%
(b)
Adjusted free cash flow and adjusted free
cash flow conversion are not defined under U.S. 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 adjusted free cash flow as net cash provided by
operating activities, adjusted for special items, less purchases of
property, plant and equipment. Cash payments associated with
special items in the determination of adjusted free cash flow are
reflected net of applicable tax using the U.S. statutory corporate
tax rate during the period of payment. It should not be inferred
that the entire adjusted free cash flow amount is available for
discretionary expenditures. The Company defines adjusted free cash
flow conversion as adjusted free cash flow divided by net income
attributable to 3M, adjusted for special items. Special items for
the periods presented include the items described in section
entitled “Description of Special Items”. The Company believes
adjusted free cash flow and adjusted free cash flow conversion are
meaningful to investors as they are 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.
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION
NON-GAAP MEASURES –
(CONTINUED)
(Unaudited)
Adjusted EBITDA (non-GAAP
measure) (c)
Adjusted EBITDA Margin
(non-GAAP measure) (c)
Three months ended September
30,
Three months ended September
30,
(Dollars in millions)
2020
2019
2020
2019
Safety and Industrial
$
956
$
753
31.6
%
26.6
%
Transportation and Electronics
643
716
27.8
28.6
Health Care
644
512
29.8
29.8
Consumer
383
337
27.0
25.1
Corporate and Unallocated
(91
)
77
Elimination of Dual Credit
(145
)
(111
)
Total Company
$
2,390
$
2,284
28.6
%
28.6
%
Adjusted EBITDA (non-GAAP
measure) (c)
Adjusted EBITDA Margin
(non-GAAP measure) (c)
Nine months ended September
30,
Nine months ended September
30,
(Dollars in millions)
2020
2019
2020
2019
Safety and Industrial
$
2,542
$
2,243
29.5
%
25.7
%
Transportation and Electronics
1,673
1,982
25.8
27.1
Health Care
1,667
1,564
27.4
29.6
Consumer
981
892
25.1
23.1
Corporate and Unallocated
(71
)
40
Elimination of Dual Credit
(384
)
(308
)
Total Company
$
6,408
$
6,413
27.2
%
26.7
%
Three months ended
Nine months ended
Adjusted EBITDA (non-GAAP measure)
(dollars in millions)
September 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Net sales
$
8,350
$
7,991
$
23,601
$
24,025
Net income attributable to 3M
1,413
1,583
3,995
3,601
Add/(subtract):
Net income/(loss) attributable to
noncontrolling interest
4
5
3
11
(Income)/Loss from unconsolidated
subsidiaries, net of taxes
1
—
1
—
Provision for income taxes
387
378
1,002
888
Other expense/(income):
Interest (Income)/expense
123
83
364
260
Pension & OPEB non-service cost
(benefit)
(19
)
(38
)
(53
)
(73
)
Loss on deconsolidation of Venezuelan
subsidiary
—
—
—
162
Depreciation and amortization expense
481
379
1,413
1,130
Adjustments for special items:
Significant litigation-related
charges/benefits
—
—
17
548
(Gain)/loss on sale of businesses
—
(106
)
(389
)
(114
)
Divestiture-related restructuring
actions
—
—
55
—
Adjusted EBITDA (c)
$
2,390
$
2,284
$
6,408
$
6,413
Adjusted EBITDA margin (c)
28.6
%
28.6
%
27.2
%
26.7
%
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION
NON-GAAP MEASURES –
(CONTINUED)
(Unaudited)
Adjusted EBITDA (non-GAAP measure)
Three months ended September 30, 2020 (dollars in millions)
Safety and Industrial
Transportation and
Electronics
Health Care
Consumer
Corporate and
Unallocated
Elimination of Dual
Credit
Total Company
Net sales
$
3,024
$
2,314
$
2,160
$
1,417
$
—
$
(565
)
$
8,350
Business segment operating income (measure
of segment operating performance)
823
552
508
358
(187
)
(145
)
1,909
Add/(subtract):
Depreciation and amortization
133
91
136
25
96
481
Adjustments for special items:
None
Adjusted EBITDA (non-GAAP measure) (c)
$
956
$
643
$
644
$
383
$
(91
)
$
(145
)
$
2,390
Adjusted EBITDA margin (non-GAAP measure)
(c)
31.6
%
27.8
%
29.8
%
27.0
%
28.6
%
Adjusted EBITDA (non-GAAP measure)
Three months ended September 30, 2019 (dollars in millions)
Safety and Industrial
Transportation and
Electronics
Health Care
Consumer
Corporate and
Unallocated
Elimination of Dual
Credit
Total Company
Net sales
$
2,829
$
2,500
$
1,721
$
1,342
$
28
$
(429
)
$
7,991
Business segment operating income (measure
of segment operating performance)
647
637
459
313
66
(111
)
2,011
Add/(subtract):
Depreciation and amortization
106
79
53
24
117
379
Adjustments for special items:
(Gain)/loss on sale of businesses
(106
)
(106
)
Adjusted EBITDA (non-GAAP measure) (c)
$
753
$
716
$
512
$
337
$
77
$
(111
)
$
2,284
Adjusted EBITDA margin (non-GAAP measure)
(c)
26.6
%
28.6
%
29.8
%
25.1
%
28.6
%
Adjusted EBITDA (non-GAAP measure) Nine
months ended September 30, 2020 (dollars in millions)
Safety and Industrial
Transportation and
Electronics
Health Care
Consumer
Corporate and
Unallocated
Elimination of Dual
Credit
Total Company
Net sales
$
8,627
$
6,489
$
6,088
$
3,911
$
(1
)
$
(1,513
)
$
23,601
Business segment operating income (measure
of segment operating performance)
2,185
1,416
1,270
914
(89
)
(384
)
5,312
Add/(subtract):
Depreciation and amortization
357
257
397
67
335
1,413
Adjustments for special items:
Significant litigation-related
charges/benefits
17
17
(Gain)/loss on sale of businesses
(389
)
(389
)
Divestiture-related restructuring
actions
55
55
Adjusted EBITDA (non-GAAP measure) (c)
$
2,542
$
1,673
$
1,667
$
981
$
(71
)
$
(384
)
$
6,408
Adjusted EBITDA margin (non-GAAP measure)
(c)
29.5
%
25.8
%
27.4
%
25.1
%
27.2
%
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION
NON-GAAP MEASURES –
(CONTINUED)
(Unaudited)
Adjusted EBITDA (non-GAAP measure) Nine
months ended September 30, 2019 (dollars in millions)
Safety and Industrial
Transportation and
Electronics
Health Care
Consumer
Corporate and
Unallocated
Elimination of Dual
Credit
Total Company
Net sales
$
8,729
$
7,305
$
5,290
$
3,862
$
98
$
(1,259
)
$
24,025
Business segment operating income (measure
of segment operating performance)
1,931
1,747
1,401
821
(743
)
(308
)
4,849
Add/(subtract):
Depreciation and amortization
312
235
163
71
349
1,130
Adjustments for special items:
Significant litigation-related
charges/benefits
548
548
(Gain)/loss on sale of businesses
(114
)
(114
)
Adjusted EBITDA (non-GAAP measure) (c)
$
2,243
$
1,982
$
1,564
$
892
$
40
$
(308
)
$
6,413
Adjusted EBITDA margin (non-GAAP measure)
(c)
25.7
%
27.1
%
29.6
%
23.1
%
26.7
%
(c)
Adjusted EBITDA and adjusted EBITDA margin
are not defined under U.S. GAAP. Therefore, adjusted EBITDA and
adjusted EBITDA margin should not be considered a substitute for
other measures prepared in accordance with U.S. GAAP and may not be
comparable to similarly titled measures used by other companies.
The Company defines adjusted EBITDA as net income attributable to
3M, adjusted for net income/(loss) attributable to noncontrolling
interest, (income)/loss from unconsolidated subsidiaries, provision
for income taxes, other expense/(income), depreciation and
amortization expense, and special items. For business segments, the
Company defines adjusted EBITDA as business segment operating
income (3M’s measure of segment operating performance) adjusted for
depreciation and amortization expense. The Company defines adjusted
EBITDA margin as adjusted EBITDA divided by net sales. Special
items for the periods presented include the items described in the
section entitled “Description of Special Items”. The Company
considers these non-GAAP measures in evaluating and managing the
Company’s operations. The Company believes adjusted EBITDA and
adjusted EBITDA margin are meaningful to investors as they provide
useful analyses of ongoing underlying operating trends.
September 30,
December 31,
Net Debt (non-GAAP measure)
2020
2019
Total debt
$
19,598
$
20,313
Less: Cash, cash equivalents and
marketable securities
4,595
2,494
Net debt (d)
$
15,003
$
17,819
(d)
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 Subsidiaries SUPPLEMENTAL
FINANCIAL INFORMATION NON-GAAP MEASURES – (CONTINUED)
(Unaudited)
Description of Special Items:
In addition to reporting financial results in accordance with
U.S. GAAP, the Company also provides various non-GAAP measures that
incorporate adjustments for the impacts of special items. Special
items incorporated in the preparation of these non-GAAP measures
for the periods presented include the items described below:
Significant litigation-related charges/benefits:
- In the first quarter of 2020, 3M recorded a net pre-tax charge
of $17 million ($13 million after tax) related to PFAS (certain
perfluorinated compounds) matters. The charge was more than offset
by a reduction in tax expense of $52 million related to resolution
of tax treatment with authorities regarding the previously
disclosed 2018 agreement reached with the State of Minnesota that
resolved the Natural Resources Damages (NRD) lawsuit. These items,
in aggregate, resulted in a $39 million after tax benefit. In the
third quarter and first nine months of 2020, 3M made payments of
approximately $13 million and $94 million, respectively, related to
significant litigation-related matters.
- In the first quarter of 2019, 3M recorded significant
litigation-related charges of $548 million ($424 million after tax)
related to historical PFAS manufacturing operations and coal mine
dust respirator mask lawsuits. In the third quarter and first nine
months of 2019, 3M made payments of approximately $290 million and
$329 million, respectively, related to significant
litigation-related matters.
Loss on deconsolidation of Venezuelan subsidiary:
- In the second quarter of 2019, 3M recorded a pre-tax charge of
$162 million related to the deconsolidation of the Company’s
Venezuelan subsidiary.
Enactment/measurement period adjustments related to the Tax Cuts
and Jobs Act (TCJA)
- In the third quarter of 2020, 3M made payments of approximately
$33 million related to the transition tax expense incurred as a
result of the 2017 enactment of the TCJA.
Gain/loss on sale of businesses:
- In the first quarter of 2020, 3M recorded a pre-tax gain of $2
million ($1 million loss after tax) related to the sale of its
advanced ballistic-protection business and recognition of certain
contingent consideration. In the second quarter of 2020, 3M
recorded a pre-tax gain of $387 million ($304 million after tax)
related to the sale of its drug delivery business.
- In the first quarter of 2019, 3M recorded a gain related to the
sale of certain oral care technology comprising a business in
addition to reflecting an earnout on a previous divestiture, which
together resulted in a net gain of $8 million ($7 million after
tax). In the second quarter of 2019, as a result of a “held for
sale” tax benefit related to the legal entities associated with the
pending divestiture of the Company’s gas and flame detection
business, 3M recorded an after tax gain of $43 million. In the
third quarter of 2019, 3M recorded a gain related to the
divestiture of the Company’s gas and flame detection business and
an immaterial impact as a result of measuring a disposal group at
the lower of its carrying amount or fair value less cost to sell,
which in aggregate resulted in a pre-tax gain of $106 million ($79
million after tax).
Divestiture-related restructuring actions:
- In the second quarter 2020, following the divestiture of
substantially all of the drug delivery business, management
approved and committed to undertake certain restructuring actions
addressing corporate functional costs and manufacturing footprint
across 3M in relation to the magnitude of amounts previously
allocated/burdened to the divested business. As a result, 3M
recorded a pre-tax charge of $55 million ($46 million after tax).
In both the third quarter and first nine months of 2020, 3M made
payments of approximately $7 million associated with these
restructuring charges.
- In the third quarter and first nine months of 2019, 3M made
payments of approximately $11 million and $68 million,
respectively, associated with restructuring charges taken in 2018
related to addressing corporate functional costs following the 2018
Communication Markets Division divestiture.
3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(e)
(Unaudited)
Three months ended September
30, 2020
Europe,
Middle
Sales Change Analysis
Asia-
East and
World-
By Geographic Area
Americas
Pacific
Africa
Wide
Volume – organic
2.3
%
(1.8
)%
(1.8
)%
0.3
%
Price
1.1
(0.8
)
1.5
0.6
Organic local-currency sales
3.4
(2.6
)
(0.3
)
0.9
Acquisitions
7.5
1.0
4.1
4.8
Divestitures
(1.8
)
(0.6
)
(4.0
)
(1.8
)
Translation
(1.4
)
1.6
4.6
0.6
Total sales change
7.7
%
(0.6
)%
4.4
%
4.5
%
Three months ended September
30, 2020
Worldwide Sales Change
Organic local-
Total sales
By Business Segment
currency sales
Acquisitions
Divestitures
Translation
change
Safety and Industrial
6.9
%
—
%
(0.4
)%
0.4
%
6.9
%
Transportation and Electronics
(7.1
)
—
(1.2
)
0.9
(7.4
)
Health Care
8.1
23.4
(7.1
)
1.1
25.5
Consumer
5.5
—
—
0.1
5.6
Total Company
0.9
%
4.8
%
(1.8
)%
0.6
%
4.5
%
Nine months ended September
30, 2020
Europe,
Middle
Sales Change Analysis
Asia-
East and
World-
By Geographic Area
Americas
Pacific
Africa
Wide
Volume – organic
(3.8
)%
(4.5
)%
(6.7
)%
(4.6
)%
Price
0.9
(0.5
)
1.1
0.5
Organic local-currency sales
(2.9
)
(5.0
)
(5.6
)
(4.1
)
Acquisitions
7.1
0.9
3.6
4.5
Divestitures
(1.5
)
(0.2
)
(2.7
)
(1.3
)
Translation
(1.4
)
(0.5
)
(0.2
)
(0.9
)
Total sales change
1.3
%
(4.8
)%
(4.9
)%
(1.8
)%
Nine months ended September
30, 2020
Worldwide Sales Change
Organic local-
Total sales
By Business Segment
currency sales
Acquisitions
Divestitures
Translation
change
Safety and Industrial
0.9
%
—
%
(0.8
)%
(1.3
)%
(1.2
)%
Transportation and Electronics
(9.8
)
—
(1.0
)
(0.4
)
(11.2
)
Health Care
(1.3
)
20.9
(3.7
)
(0.8
)
15.1
Consumer
2.1
—
—
(0.8
)
1.3
Total Company
(4.1
)%
4.5
%
(1.3
)%
(0.9
)%
(1.8
)%
(e)
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), and selling price changes. Acquisition and divestiture
impacts are measured separately for the first 12 months
post-transaction.
3M Company and Subsidiaries BUSINESS
SEGMENTS (Unaudited)
Effective in the second quarter of 2020, the measure of segment
operating performance used by 3M’s chief operating decision maker
(CODM) changed and, as a result, 3M’s disclosed measure of segment
profit/loss (business segment operating income) has been updated
for all periods presented. The change to business segment operating
income aligns with the update to how the CODM assesses performance
and allocates resources for the Company’s business segments.
3M discloses business segment operating income as its measure of
segment profit/loss, reconciled to both total 3M operating income
and income before taxes. Business segment operating income includes
dual credit for certain related operating income (as described
below in “Elimination of Dual Credit”). Business segment operating
income excludes certain expenses and income that are not allocated
to business segments (as described below in “Corporate and
Unallocated”). Additionally, the following special items are
excluded from business segment operating income and, instead, are
included within Corporate and Unallocated: significant
litigation-related charges/benefits, gain/loss on sale of
businesses, and divestiture-related restructuring actions.
In addition, effective in the first quarter of 2020, in a
continuing effort to improve the alignment of its businesses around
customers and markets, the Company made the following changes:
Continued alignment of customer account activity
- As part of 3M’s regular customer-focus initiatives, the Company
realigned certain customer account activity (“sales district”) to
correlate with the primary divisional product offerings in various
countries and reduce complexity for customers when interacting with
multiple 3M businesses. This largely impacted the amount of dual
credit certain business segments receive as a result of sales
district attribution. 3M business segment reporting measures
include dual credit to business segments for certain sales and
operating income. This dual credit is based on which business
segment provides customer account activity with respect to a
particular product sold in a specific country.
Additional actions impacting product line alignments
- The remaining retail auto care product lines formerly in the
Automotive Aftermarket Division (within the Safety and Industrial
business segment) were realigned to the Construction and Home
Improvement Division (within the Consumer business segment).
- In addition, certain product lines were realigned within
business segments. The transdermal drug delivery components
business, formerly included in the Drug Delivery Systems Division
was realigned to the Medical Solutions Division (both of which are
within the Health Care business segment) and the paint protection
film business, formerly included in the Automotive and Aerospace
Division was realigned to the Commercial Solutions Division (both
of which are within the Transportation and Electronics business
segment).
The financial information presented herein reflects the impact
of these changes for all periods presented.
BUSINESS SEGMENT INFORMATION
Three months ended
Nine months ended
NET SALES
September 30,
September 30,
(Millions)
2020
2019
2020
2019
Safety and Industrial
$
3,024
$
2,829
$
8,627
$
8,729
Transportation and Electronics
2,314
2,500
6,489
7,305
Health Care
2,160
1,721
6,088
5,290
Consumer
1,417
1,342
3,911
3,862
Corporate and Unallocated
—
28
(1
)
98
Elimination of Dual Credit
(565
)
(429
)
(1,513
)
(1,259
)
Total Company
$
8,350
$
7,991
$
23,601
$
24,025
3M Company and Subsidiaries
BUSINESS SEGMENTS –
(CONTINUED)
(Unaudited)
BUSINESS SEGMENT INFORMATION
Three months ended
Nine months ended
OPERATING INCOME
September 30,
September 30,
(Millions)
2020
2019
2020
2019
Safety and Industrial
$
823
$
647
$
2,185
$
1,931
Transportation and Electronics
552
637
1,416
1,747
Health Care
508
459
1,270
1,401
Consumer
358
313
914
821
Elimination of Dual Credit
(145
)
(111
)
(384
)
(308
)
Total business segment operating
income
$
2,096
$
1,945
$
5,401
$
5,592
Corporate and Unallocated
Special items:
Significant litigation-related
(charges)/benefits
—
—
(17
)
(548
)
Gain/(loss) on sale of businesses
—
106
389
114
Divestiture-related restructuring
actions
—
—
(55
)
—
Other corporate expense - net
(187
)
(40
)
(406
)
(309
)
Total Corporate and Unallocated
$
(187
)
$
66
$
(89
)
$
(743
)
Total Company operating income
$
1,909
$
2,011
$
5,312
$
4,849
Other expense/(income), net
$
104
$
45
$
311
$
349
Income before income taxes
$
1,805
$
1,966
$
5,001
$
4,500
About 3M At 3M, we apply science in collaborative ways to
improve lives daily. With $32 billion in sales, our 96,000
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 @3MNews.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201027005466/en/
3M Investor Contacts: Bruce Jermeland,
651-733-1807 or Tony Riter, 651-733-1141 or Media Contact:
Stephen Sanchez, 651-737-5967
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