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Press release content from Business Wire. The AP news staff was not involved in its creation.

3M Reports Fourth-Quarter and Full-Year 2019 Results; Implements New Global Operating Model and Streamlined Structure; Provides Full-Year 2020 Guidance

January 28, 2020 GMT

ST. PAUL, Minn.--(BUSINESS WIRE)--Jan 28, 2020--

3M (NYSE: MMM) today reported fourth-quarter and full-year 2019 results and provided its 2020 earnings outlook.

“Our team executed well in the fourth quarter and delivered results that were in-line with our expectations,” said Mike Roman, 3M chairman and chief executive officer. “While we continued to manage challenges in certain key end markets, we generated solid underlying margins and robust free cash flow.”

Roman continued, “We also continue to build for the future, including the launch of our new global operating model which represents the next phase of our transformation journey. As a result of our actions, we are well positioned to improve our performance, return to growth and deliver a successful 2020.”

Fourth-Quarter Results

Sales grew 2.1 percent year-on-year to $8.1 billion. Organic local-currency sales declined 2.6 percent while acquisitions, net of divestitures, increased sales by 5.1 percent. Foreign currency translation reduced sales by 0.4 percent year-on-year.

Total sales grew 25.4 percent in Health Care, were flat in Consumer, with declines of 4.8 percent in Safety and Industrial, and 6.2 percent in Transportation and Electronics. Organic local-currency sales increased 0.2 percent in Consumer, with declines of 0.2 percent in Health Care, 2.8 percent in Safety and Industrial, and 5.9 percent in Transportation and Electronics.

On a geographic basis, total sales grew 7.4 percent in the U.S., 1.2 percent in Latin America/Canada, with declines of 1.7 percent in Asia Pacific and 2.0 percent in EMEA (Europe, Middle East and Africa). Organic local-currency sales were flat in Latin America/Canada, with declines of 2.7 percent in both Asia Pacific and EMEA and 2.9 percent in the U.S.

Fourth-quarter GAAP earnings were $1.66 per share, a decrease of 27 percent year-on-year. This result includes the company’s previously mentioned pre-tax restructuring charge of $134 million, or $0.20 per share, and a significant litigation-related pre-tax charge of $214 million, or $0.29 per share. Neither of these items was included in 3M’s prior earnings guidance. Fourth-quarter 2018 GAAP earnings were $2.27 per share which included a net charge for tax adjustments of $0.04 per share related to both the Tax Cuts and Jobs Act (TCJA) and its first-quarter 2018 legal settlement, and a $0.02 per share net benefit from a divestiture gain, net of actions.

Excluding the impact of the significant litigation-related charges, fourth quarter 2019 adjusted earnings were $1.95 per share versus $2.31 per share in the fourth quarter 2018, adjusting for last year’s tax-related items, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.

Fourth-quarter operating income was $1.3 billion with operating margins of 16.3 percent. These results include a combined negative operating income impact of $348 million, or a minus 4.3 percentage point operating margin impact, from the company’s restructuring and significant litigation-related charges.

The company’s operating cash flow was $2.3 billion, contributing to conversion of 186 percent of net income to free cash flow, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.

3M paid $828 million in cash dividends to shareholders and repurchased $164 million of its own shares during the quarter.

Accelerating the Pace of 3M’s Transformation Journey

Today, 3M announced the next step in its transformation journey, which includes a new global operating model and streamlined organizational structure.

As a result of these actions, 3M initiated a restructuring that will reduce approximately 1,500 positions, spanning all business groups, functions and geographies. On a pre-tax basis, 3M took a restructuring charge of $134 million in the fourth quarter of 2019. The company expects annual pre-tax savings of $110 million to $120 million, with $40 million to $50 million in 2020.

3M today issued a separate press release with more details on these changes.

Significant Litigation-Related PFAS Update

During the fourth quarter, 3M updated its evaluation of customer-related PFAS (Per- and polyfluoroalkyl substances) litigation based on continued, productive settlement discussions with multiple parties. As previously disclosed, 3M has been engaged in mediation and resolution negotiations in multiple cases.

In addition, during the fourth quarter the company updated its assessment of environmental matters and litigation related to its historical PFAS manufacturing operations and expanded its evaluation of other 3M sites that may have used certain PFAS-containing material and locations at which they were disposed.

As a result of these actions during the fourth quarter, the company recorded a significant litigation-related pre-tax charge of $214 million, or $0.29 cents per share.

Fourth-Quarter Business Group Discussion

Safety and Industrial

Transportation and Electronics

Health Care

Consumer

Full-Year 2019 Results

Full-year 2019 GAAP earnings were $7.81 per share, a decrease of 12 percent. During the year, the company recorded charges totaling $1.29 per share for significant litigation-related charges and the deconsolidation of the company’s Venezuelan subsidiary. Full-year 2018 GAAP earnings were $8.89 per share, which included charges totaling $1.57 per share for significant litigation-related charges and measurement period accounting for the Tax Cuts and Jobs Act (TCJA).

Excluding the above items, 2019 adjusted earnings were $9.10 per share versus 2018 adjusted earnings of $10.46, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section. During 2019, the company recorded an earnings benefit of $0.21 per share from the divestiture of its gas and flame detection business. In 2018, the company recorded an earnings benefit of $0.50 per share from the divestiture of its communication markets business, net of related restructuring actions.

Sales declined 1.9 percent to $32.1 billion with an organic local-currency sales decline of 1.5 percent. The combination of acquisitions and divestitures increased sales 1.3 percent. Foreign currency translation decreased sales 1.7 percent. Full-year operating income margins were 19.2 percent, while adjusted operating margins were 21.6 percent.

The company’s operating cash flow was $7.1 billion, contributing to conversion of 118 percent of net income to free cash flow for the year. In addition, 3M generated 17.5 percent return on invested capital. Refer to the “Supplemental Financial Information Non-GAAP Measures” section. The net impact from significant litigation-related charges, Venezuela deconsolidation, and gas and flame detection business divestiture gain increased full-year free cash flow conversion by 9 percentage points and reduced return on invested capital by 2 percentage points.

For the full year, 3M paid $3.3 billion in cash dividends to shareholders and repurchased $1.4 billion of its own shares.

Full-Year 2020 Outlook

3M initiated its full-year 2020 guidance with earnings expected to be in the range of $9.30 to $9.75 per share. The company expects its full-year organic local-currency growth in the range of flat to 2 percent. 3M also expects its full-year free cash flow conversion to be in the range of 95 to 105 percent and return on invested capital of 18 to 21 percent, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.

3M will conduct an investor teleconference at 9:00 a.m. EST (8:00 a.m. CST) today. Investors can access this conference via the following:

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) 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) operational execution, including scenarios where the Company generates 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, 2018, 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 Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

(Millions, except per-share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Year ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net sales

 

$

8,111

 

$

7,945

 

 

$

32,136

 

 

$

32,765

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Cost of sales

 

 

4,325

 

 

4,060

 

 

 

17,136

 

 

 

16,682

 

Selling, general and administrative expenses

 

 

1,940

 

 

1,682

 

 

 

7,029

 

 

 

7,602

 

Research, development and related expenses

 

 

521

 

 

437

 

 

 

1,911

 

 

 

1,821

 

Gain on sale of businesses

 

 

 

(17

)

 

 

(114

)

 

 

(547

)

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

6,786

 

 

6,162

 

 

 

25,962

 

 

 

25,558

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

1,325

 

 

1,783

 

 

 

6,174

 

 

 

7,207

 

 

 

 

 

 

 

 

 

 

Other expense (income), net

 

 

113

 

 

63

 

 

 

462

 

 

 

207

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

1,212

 

 

1,720

 

 

 

5,712

 

 

 

7,000

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

242

 

 

371

 

 

 

1,130

 

 

 

1,637

 

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interest

 

$

970

 

$

1,349

 

 

$

4,582

 

 

$

5,363

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interest

 

 

1

 

 

2

 

 

 

12

 

 

 

14

 

 

 

 

 

 

 

 

 

 

Net income attributable to 3M

 

$

969

 

$

1,347

 

 

$

4,570

 

 

$

5,349

 

 

 

 

 

 

 

 

 

 

Weighted average 3M common shares outstanding – basic

 

 

576.3

 

 

580.7

 

 

 

577.0

 

 

 

588.5

 

Earnings per share attributable to 3M common shareholders – basic

 

$

1.68

 

$

2.32

 

 

$

7.92

 

 

$

9.09

 

 

 

 

 

 

 

 

 

 

Weighted average 3M common shares outstanding – diluted

 

 

582.7

 

 

592.6

 

 

 

585.1

 

 

 

602.0

 

Earnings per share attributable to 3M common shareholders – diluted

 

$

1.66

 

$

2.27

 

 

$

7.81

 

 

$

8.89

 

 

3M Company and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEET

(Dollars in millions)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

 

2019

 

2018

 

ASSETS

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,353

 

$

2,853

 

Marketable securities – current

 

 

98

 

 

380

 

Accounts receivable – net

 

 

4,791

 

 

5,020

 

Inventories

 

 

4,134

 

 

4,366

 

Prepaids

 

 

704

 

 

741

 

Other current assets

 

 

891

 

 

349

 

Total current assets

 

 

12,971

 

 

13,709

 

Property, plant and equipment – net

 

 

9,333

 

 

8,738

 

Operating lease right of use assets

 

 

858

 

 

 

Goodwill and intangible assets – net

 

 

19,823

 

 

12,708

 

Other assets

 

 

1,674

 

 

1,345

 

Total assets

 

$

44,659

 

$

36,500

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Short-term borrowings and

 

 

 

 

 

 

 

current portion of long-term debt

 

$

2,795

 

$

1,211

 

Accounts payable

 

 

2,228

 

 

2,266

 

Accrued payroll

 

 

702

 

 

749

 

Accrued income taxes

 

 

194

 

 

243

 

Operating lease liabilities – current

 

 

247

 

 

 

Other current liabilities

 

 

3,056

 

 

2,775

 

Total current liabilities

 

 

9,222

 

 

7,244

 

Long-term debt

 

 

17,518

 

 

13,411

 

Other liabilities

 

 

7,793

 

 

5,997

 

Total liabilities

 

$

34,533

 

$

26,652

 

 

 

 

 

 

 

 

 

Total equity

 

$

10,126

 

$

9,848

 

Shares outstanding

 

 

 

 

 

 

 

December 31, 2019: 575,184,835 shares

 

 

 

 

 

 

 

December 31, 2018: 576,575,168 shares

 

 

 

 

 

 

 

Total liabilities and equity

$

44,659

$

36,500

 

3M Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in millions)

(Unaudited)

 

 

 

 

 

 

 

Year ended

 

 

December 31,

 

 

2019

 

2018

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

$

7,070

 

 

$

6,439

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property, plant and equipment

 

 

(1,699

)

 

 

(1,577

)

Acquisitions, net of cash acquired

 

 

(4,984

)

 

 

13

 

Purchases and proceeds from sale or maturities of marketable securities and investments – net

 

 

(192

)

 

 

669

 

Proceeds from sale of businesses, net of cash sold

 

 

236

 

 

 

846

 

Other investing activities

 

 

195

 

 

 

271

 

 

 

 

 

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

 

 

(6,444

)

 

 

222

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Change in debt

 

 

3,249

 

 

 

933

 

Purchases of treasury stock

 

 

(1,407

)

 

 

(4,870

)

Proceeds from issuances of treasury stock pursuant to stock option and benefit plans

 

 

547

 

 

 

485

 

Dividends paid to shareholders

 

 

(3,316

)

 

 

(3,193

)

Other financing activities

 

 

(197

)

 

 

(56

)

 

 

 

 

 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

 

(1,124

)

 

 

(6,701

)

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(2

)

 

 

(160

)

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(500

)

 

 

(200

)

Cash and cash equivalents at beginning of year

 

 

2,853

 

 

 

3,053

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

2,353

 

 

$

2,853

 

 

3M Company and Subsidiaries

SUPPLEMENTAL FINANCIAL INFORMATION

NON-GAAP MEASURES

(Dollars in millions, except full-year 2020 forecast)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Year ended

 

 

 

 

 

 

December 31,

 

 

December 31,

 

 

 

 

Major GAAP Cash Flow Categories

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

2,338

 

 

 

$

2,258

 

 

 

$

7,070

 

 

 

$

6,439

 

 

 

 

 

Net cash provided by (used in) investing activities

 

 

(5,299

)

 

 

 

(416

)

 

 

 

(6,444

)

 

 

 

222

 

 

 

 

 

Net cash provided by (used in) financing activities

 

 

(2,451

)

 

 

 

(2,152

)

 

 

 

(1,124

)

 

 

 

(6,701

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow (non-GAAP measure)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full-Year 2020
Forecast
(Billions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

2,338

 

 

 

$

2,258

 

 

 

$

7,070

 

 

 

$

6,439

 

 

 

$6.9 to $7.6

 

Purchases of property, plant and equipment

 

 

(538

)

 

 

 

(531

)

 

 

 

(1,699

)

 

 

 

(1,577

)

 

 

($1.6 to $1.8)

 

Free cash flow (a)

 

 

1,800

 

 

 

 

1,727

 

 

 

 

5,371

 

 

 

 

4,862

 

 

 

$5.1 to $6.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to 3M

 

$

969

 

 

 

$

1,347

 

 

 

$

4,570

 

 

 

$

5,349

 

 

 

$5.4 to $5.7

 

Free cash flow conversion (a)

 

 

186

 

%

 

 

128

 

%

 

 

118

 

%

 

 

91

 

%

 

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.

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

Net Debt (non-GAAP measure)

 

2019

 

2018

 

Total debt

 

$

20,313

 

$

14,622

 

Less: Cash, cash equivalents and marketable securities

 

 

2,494

 

 

3,270

 

Net debt (b)

 

$

17,819

 

$

11,352

 

 (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 Subsidiaries

SUPPLEMENTAL FINANCIAL INFORMATION

NON-GAAP MEASURES – (CONTINUED)

(Dollars in millions, except full-year 2020 forecast)

(Unaudited)

  

 

 

Twelve months
ended

 

 

Twelve months
ended

 

 

Full Year
Estimated

 

Return on Invested Capital (non-GAAP measure)

 

December 31, 2019

 

 

December 31, 2018

 

 

2020 (in billions)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income including non-controlling interest

 

$

4,582

 

 

$

5,363

 

 

$5.4 to $5.7

 

Interest expense (after-tax) (1)

 

 

359

 

 

 

268

 

 

~$0.4

 

Adjusted net income (Return)

 

$

4,941

 

 

$

5,631

 

 

$5.8 to $6.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shareholders' equity (including non-controlling interest) (2)

 

$

10,198

 

 

$

10,407

 

 

$11.0 to $12.0

 

Average short-term and long-term debt (3)

 

 

17,982

 

 

 

14,912

 

 

$18.0 to $20.0

 

Average invested capital

 

$

28,180

 

 

$

25,318

 

 

$29.0 to $32.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on invested capital (non-GAAP measure) (c)

 

 

17.5

%

 

 

22.2

%

 

18% to 21%

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Effective income tax rate used for interest expense

 

 

19.8

%

 

 

23.4

%

 

20% to 21%

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Calculation of average equity (includes non-controlling interest)

 

 

 

 

 

 

 

 

 

 

 

Ending total equity as of:

 

 

 

 

 

 

 

 

 

 

 

March 31

 

$

9,757

 

 

$

11,039

 

 

 

 

June 30

 

 

10,142

 

 

 

10,428

 

 

 

 

September 30

 

 

10,764

 

 

 

10,311

 

 

 

 

December 31

 

 

10,126

 

 

 

9,848

 

 

 

 

Average total equity

 

$

10,198

 

 

$

10,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3) Calculation of average debt

 

 

 

 

 

 

 

 

 

 

 

Ending short-term and long-term debt as of:

 

 

 

 

 

 

 

 

 

 

 

March 31

 

$

16,370

 

 

$

15,660

 

 

 

 

June 30

 

 

15,806

 

 

 

14,519

 

 

 

 

September 30

 

 

19,439

 

 

 

14,846

 

 

 

 

December 31

 

 

20,313

 

 

 

14,622

 

 

 

 

Average short-term and long-term debt

 

$

17,982

 

 

$

14,912

 

 

 

 

 (c)

 

Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles. Therefore, ROIC 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 ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation.

 

3M Company and Subsidiaries

SUPPLEMENTAL FINANCIAL INFORMATION

NON-GAAP MEASURES – (CONTINUED)

(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 

Q4 2018 GAAP

 

$

1,783

 

22.4

%

 

$

1,720

 

$

371

 

 

21.6

%

 

$

1,347

 

 

$

2.27

 

 

 

Adjustment for significant litigation-related charges

 

 

 

 

 

 

 

 

(60

)

 

 

 

 

60

 

 

 

0.11

 

 

 

Adjustment for measurement period accounting of TCJA

 

 

 

 

 

 

 

 

41

 

 

 

 

 

(41

)

 

 

(0.07

)

 

 

Q4 2018 adjusted amounts (non-GAAP measures) (d)

 

$

1,783

 

22.4

%

 

$

1,720

 

$

352

 

 

20.5

%

 

$

1,366

 

 

$

2.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q4 2019 GAAP

 

$

1,325

 

16.3

%

 

$

1,212

 

$

242

 

 

19.9

%

 

$

969

 

 

$

1.66

 

 

(26.9

)%

Adjustment for significant litigation-related charges

 

 

214

 

 

 

 

214

 

 

48

 

 

 

 

 

166

 

 

 

0.29

 

 

 

Q4 2019 adjusted amounts (non-GAAP measures) (d)

 

$

1,539

 

19.0

%

 

$

1,426

 

$

290

 

 

20.3

%

 

$

1,135

 

 

$

1.95

 

 

(15.6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 

Full-year 2018 GAAP

 

$

7,207

 

22.0

%

 

$

7,000

 

$

1,637

 

 

23.4

%

 

$

5,349

 

 

$

8.89

 

 

 

Adjustment for significant litigation-related charges

 

 

897

 

 

 

 

897

 

 

127

 

 

 

 

 

770

 

 

 

1.28

 

 

 

Adjustment for measurement period accounting of TCJA

 

 

 

 

 

 

 

 

(176

)

 

 

 

 

176

 

 

 

0.29

 

 

 

Full-year 2018 adjusted amounts (non-GAAP measures) (d)

 

$

8,104

 

24.7

%

 

$

7,897

 

$

1,588

 

 

20.1

%

 

$

6,295

 

 

$

10.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full-year 2019 GAAP

 

$

6,174

 

19.2

%

 

$

5,712

 

$

1,130

 

 

19.8

%

 

$

4,570

 

 

$

7.81

 

 

(12.1

)%

Adjustment for significant litigation-related charges

 

 

762

 

 

 

 

762

 

 

172

 

 

 

 

 

590

 

 

 

1.01

 

 

 

Adjustment for loss on deconsolidation of Venezuelan subsidiary

 

 

 

 

 

 

162

 

 

 

 

 

 

162

 

 

 

0.28

 

 

 

Full-year 2019 adjusted amounts (non-GAAP measures) (d)

 

$

6,936

 

21.6

%

 

$

6,636

 

$

1,302

 

 

19.6

%

 

$

5,322

 

 

$

9.10

 

 

(13.0

)%

(d)

 

In 2019, the Company recorded significant litigation-related charges of $762 million ($590 million after tax) related to PFAS (certain perfluorinated compounds) matters and coal mine dust respirator mask lawsuits of which $214 million ($166 million after tax) occurred in the fourth quarter. In 2018, 3M recorded significant litigation-related charges of $897 million ($770 million after tax) related to PFAS matters of which a tax expense of $60 million occurred in the fourth quarter. In the second quarter of 2019, 3M recorded a pre-tax charge of $162 million related to deconsolidation of the Company’s Venezuelan subsidiary. During 2018, the Company recorded a net tax expense of $176 related to measurement period adjustments to the provisional amounts recorded in 2017 from the enactment of the Tax Cuts and Jobs Act (TCJA), of which a tax benefit of $41 million occurred in the fourth quarter.

   
  

In addition to reporting financial results in accordance with U.S. GAAP, the Company also provides non-GAAP measures that adjust for the impacts of significant litigation-related charges, deconsolidation of the Company’s Venezuelan subsidiary and measurement period adjustments to the enactment of the TCJA. These items represent significant amounts that impacted the Company’s financial results. 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 an adjusted measure. 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

SALES CHANGE ANALYSIS (e)

(Unaudited)

 

 

 

    

 

 

 

 Three months ended December 31, 2019

 

 

         

 

     

 

Europe,

 

     

 

  

 

 

   

 

  

 

Middle

 

Latin

 

  

Sales Change Analysis

 

 United

 

Asia-

 

East and

 

America/

 

World-

By Geographic Area

 

 States

 

Pacific

 

Africa

 

Canada

 

Wide

 

 

 

    

 

Volume – organic

 

(4.6

)%

 

(2.0

)%

 

(4.2

)%

 

(0.2

)%

 

(3.4

)%

Price

 

1.7

 

 

(0.7

)

 

1.5

 

 

0.2

 

 

0.8

 

Organic local-currency sales

 

(2.9

)

 

(2.7

)

 

(2.7

)

 

 

 

(2.6

)

Acquisitions

 

10.6

 

 

1.0

 

 

4.0

 

 

2.9

 

 

5.6

 

Divestitures

 

(0.3

)

 

(0.1

)

 

(1.8

)

 

(0.1

)

 

(0.5

)

Translation

 

 

 

0.1

 

 

(1.5

)

 

(1.6

)

 

(0.4

)

Total sales change

 

7.4

%

 

(1.7

)%

 

(2.0

)%

 

1.2

%

 

2.1

%

 

 

    

 

 

 

Three months ended December 31, 2019

Worldwide Sales Change

 

Organic local-

 

  

 

  

 

  

 

Total sales

By Business Segment

 

currency sales

 

Acquisitions

 

Divestitures

 

Translation

 

change

 

 

    

 

Safety and Industrial

 

(2.8

)%

 

%

 

(1.4

)%

 

(0.6

)%

 

(4.8

)%

Transportation and Electronics

 

(5.9

)

 

 

 

 

 

(0.3

)

 

(6.2

)

Health Care

 

(0.2

)

 

26.0

 

 

 

 

(0.4

)

 

25.4

 

Consumer

 

0.2

 

 

 

 

 

 

(0.2

)

 

 

Total Company

 

(2.6

)%

 

5.6

%

 

(0.5

)%

 

(0.4

)%

 

2.1

%

 

 

    

 

 

 

Year ended December 31, 2019

 

    

     

 

     

 

Europe,

 

     

 

  

 

 

  

 

  

 

Middle

 

Latin

 

  

Sales Change Analysis

 

United

 

Asia-

 

East and

 

America/

 

World-

By Geographic Area

 

States

 

Pacific

 

Africa

 

Canada

 

Wide

 

 

    

 

Volume – organic

 

(1.9

)%

 

(2.8

)%

 

(2.2

)%

 

0.3

%

 

(2.1

)%

Price

 

0.8

 

 

(0.1

)

 

1.3

 

 

0.8

 

 

0.6

 

Organic local-currency sales

 

(1.1

)

 

(2.9

)

 

(0.9

)

 

1.1

 

 

(1.5

)

Acquisitions

 

4.1

 

 

0.3

 

 

1.0

 

 

0.8

 

 

2.0

 

Divestitures

 

(0.5

)

 

(0.2

)

 

(1.9

)

 

(0.6

)

 

(0.7

)

Translation

 

 

 

(1.7

)

 

(4.6

)

 

(3.3

)

 

(1.7

)

Total sales change

 

2.5

%

 

(4.5

)%

 

(6.4

)%

 

(2.0

)%

 

(1.9

)%

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2019

Worldwide Sales Change

 

Organic local-

 

  

 

  

 

  

 

Total sales

By Business Segment

 

currency sales

 

Acquisitions

 

Divestitures

 

Translation

 

change

 

 

 

 

 

 

 

 

 

 

Safety and Industrial

 

(3.3

)%

 

%

 

(1.7

)%

 

(2.1

)%

 

(7.1

)%

Transportation and Electronics

 

(3.5

)

 

 

 

 

 

(1.5

)

 

(5.0

)

Health Care

 

1.6

 

 

9.4

 

 

(0.1

)

 

(2.0

)

 

8.9

 

Consumer

 

1.3

 

 

 

 

 

 

(1.2

)

 

0.1

 

Total Company

 

(1.5

)%

 

2.0

%

 

(0.7

)%

 

(1.7

)%

 

(1.9

)%

(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
(Dollars in millions)
(Unaudited)

Effective in the second quarter of 2019, to enable the Company to better serve global customers and markets, the Company made the following changes to its business segments:

Realignment of the Company’s business segments from five to four

The Company realigned its former five business segments into four: Safety and Industrial; Transportation and Electronics; Health Care; and Consumer. Existing divisions were largely realigned to this new structure. In addition, certain retail auto care product lines formerly in the Automotive Aftermarket Division (now within the Safety and Industrial business segment) were moved to the Construction and Home Improvement Division (within the Consumer business segment). Also, product lines relating to the refrigeration filtration business, formerly included in the Separation and Purification Sciences Division (now within the Health Care business segment) were moved to Other Safety and Industrial (within the Safety and Industrial business segment). 3M business segment reporting measures include dual credit to business segments for certain sales and operating income. Dual credit, which is based on which business segment provides customer account activity with respect to a particular product sold in a specific country, was reduced as a result of the closer alignment between customer account activity and their respective markets. The four business segments are as follows:

Safety and Industrial: This segment includes businesses that serve the global industrial, electrical and safety markets. This business segment consists of personal safety, industrial adhesives and tapes, abrasives, closure and masking systems, electrical markets, automotive aftermarket, and roofing granules. This segment also includes the Communication Markets Division (which was substantially sold in 2018) and the refrigeration filtration product lines (within Other Safety and Industrial).

Transportation and Electronics: This segment includes businesses that serve global transportation and electronic original equipment manufacturer (OEM) customers. This business segment consists of electronics (display materials and systems, electronic materials solutions), automotive and aerospace, commercial solutions, advanced materials, and transportation safety.

Health Care: This business segment serves the global healthcare industry and includes medical solutions, oral care, separation and purification sciences, health information systems, drug delivery systems, and food safety.

Consumer: This business serves global consumers and consists of home improvement, stationery and office supplies, home care, and consumer health care. This segment also includes, within the Construction and Home Improvement Division, certain retail auto care product lines.

In addition, as part of 3M’s continuing effort to improve the alignment of its businesses around markets and customers, the Company made the following changes, effective in the first quarter of 2019, and other revisions impacting business segment reporting:

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.

Creation of Closure and Masking Systems Division and Medical Solutions Division

3M created the Closure and Masking Systems Division, which combines the masking tape, packaging tape and personal care portfolios formerly within Industrial Adhesives and Tapes Division in the former Industrial business segment into a separate division also within the former Industrial business segment. 3M created the Medical Solutions Division in the Health Care business segment, which combines the former Critical and Chronic Care Division and Infection Prevention Division (which were also both within the Health Care business segment).

3M Company and Subsidiaries
BUSINESS SEGMENTS – (CONTINUED)
(Dollars in millions)
(Unaudited)

Additional actions impacting business segment reporting

The business associated with certain safety products sold through retail channels in the Asia Pacific region was realigned from the Personal Safety Division within the former Safety and Graphics business segment to the Construction and Home Improvement Division within the Consumer business segment. In addition, certain previously non-allocated costs related to manufacturing and technology of centrally managed material resource centers of expertise within Corporate and Unallocated are now reflected as being allocated to the business segments.

The financial information presented herein reflects the impact of these changes for all periods presented. Refer to 3M’s Current Reports on Form 8-K furnished on March 8, 2019 and May 30, 2019, for additional supplemental unaudited historical business segment net sales and operating income information.

 

 

 

 

 

 

 

 

 

BUSINESS SEGMENT INFORMATION

 

Three months ended 

 

Year ended  

NET SALES

 

December 31,

 

December 31,  

(Millions)

    

2019

    

2018

    

2019

    

2018 

 

 

 

 

 

 

 

 

 

Safety and Industrial

 

$

2,811

 

 

$

2,952

 

 

$

11,607

 

 

$

12,494

 

Transportation and Electronics

 

 

2,290

 

 

 

2,441

 

 

 

9,602

 

 

 

10,106

 

Health Care

 

 

2,141

 

 

 

1,708

 

 

 

7,431

 

 

 

6,826

 

Consumer

 

 

1,268

 

 

 

1,267

 

 

 

5,089

 

 

 

5,086

 

Corporate and Unallocated

 

 

12

 

 

 

3

 

 

 

110

 

 

 

50

 

Elimination of Dual Credit

 

 

(411

)

 

 

(426

)

 

 

(1,703

)

 

 

(1,797

)

 

 

 

 

 

 

 

 

 

Total Company

 

$

8,111

 

 

$

7,945

 

 

$

32,136

 

 

$

32,765

 

 

 

 

 

 

 

 

 

 

BUSINESS SEGMENT INFORMATION

 

Three months ended 

 

Year ended  

OPERATING INCOME

 

December 31,

 

December 31,  

(Millions)

    

2019

    

2018

    

2019

    

2018 

 

 

 

 

 

 

 

 

 

Safety and Industrial

 

$

586

 

 

$

670

 

 

$

2,648

 

 

$

3,423

 

Transportation and Electronics

 

 

475

 

 

 

598

 

 

 

2,221

 

 

 

2,649

 

Health Care

 

 

457

 

 

 

478

 

 

 

1,863

 

 

 

1,921

 

Consumer

 

 

296

 

 

 

260

 

 

 

1,105

 

 

 

1,071

 

Corporate and Unallocated (f)

 

 

(385

)

 

 

(116

)

 

 

(1,243

)

 

 

(1,409

)

Elimination of Dual Credit

 

 

(104

)

 

 

(107

)

 

 

(420

)

 

 

(448

)

 

 

 

 

 

 

 

 

 

Total Company

 

$

1,325

 

 

$

1,783

 

 

$

6,174

 

 

$

7,207

 

(f)

 

Corporate and Unallocated operating income was impacted by significant litigation-related charges in both 2019 and 2018 as described in note (d).

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/20200128005376/en/

CONTACT: 3M

Investor Contacts:

Bruce Jermeland, 651-733-1807

or

Tony Riter, 651-733-1141

or

Media Contact:

Jennifer Ehrlich, 651-736-9430

KEYWORD: UNITED STATES NORTH AMERICA MINNESOTA

INDUSTRY KEYWORD: PROFESSIONAL SERVICES PACKAGING ENGINEERING CHEMICALS/PLASTICS MANUFACTURING FINANCE OTHER MANUFACTURING

SOURCE: 3M

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PUB: 01/28/2020 06:30 AM/DISC: 01/28/2020 06:30 AM

http://www.businesswire.com/news/home/20200128005376/en