Third-Quarter Highlights:
- Sales of $8.0 billion, down 2.0 percent
year-on-year
- Organic local-currency sales declined 1.3 percent
year-on-year
- GAAP EPS of $2.72 vs. $2.58 last year, up 5.4 percent
year-on-year
- Q3 2019 earnings include a $0.14 per share benefit from a
divestiture gain
- Operating cash flow of $2.0 billion; free cash flow of $1.7
billion, with free cash flow conversion of 106 percent
- Returned $1.0 billion to shareholders via dividends and
gross share repurchases
- Updates guidance to reflect market trends and Acelity, Inc.
acquisition
3M (NYSE: MMM) today reported third-quarter 2019 results.
“The 3M team delivered strong operational performance in the
third quarter,” said Mike Roman, 3M chairman and chief executive
officer. “While the macroeconomic environment remains challenging,
we executed well and built on the progress we made in the second
quarter. We continued to effectively manage costs and reduce
inventory levels, while generating strong margins and cash
flow.”
Roman continued, “We also continue to make good progress on our
strategic priorities, including our recently-closed acquisition of
Acelity, which is an exciting addition to 3M’s health care
portfolio. Moving ahead we’ll continue to focus on driving
operational improvements and investing for the future, which will
position us for strong growth and premium returns as our markets
recover.”
Third-Quarter Results
Sales declined 2.0 percent year-on-year to $8.0 billion. Organic
local-currency sales declined 1.3 percent while acquisitions, net
of divestitures, increased sales by 0.6 percent. Foreign currency
translation reduced sales by 1.3 percent year-on-year.
Total sales grew 4.7 percent in Health Care and 1.7 percent in
Consumer, with declines of 4.4 percent in Transportation and
Electronics and 5.7 percent in Safety and Industrial. Organic
local-currency sales increased 2.6 percent in Consumer and 2.0
percent in Health Care, with declines of 3.3 percent in Safety and
Industrial, and 3.4 percent in Transportation and Electronics.
On a geographic basis, total sales grew 0.8 percent in the U.S.
and 0.6 percent in Latin America/Canada, with declines of 4.1
percent in EMEA (Europe, Middle East and Africa) and 5.0 percent in
Asia Pacific. Organic local-currency sales increased 2.8 percent in
Latin America/Canada and 2.0 percent in EMEA, with declines of 1.1
percent in the U.S. and 4.4 percent in Asia Pacific.
Third-quarter GAAP earnings were $2.72 per share, an increase of
5.4 percent year-over-year, which included a benefit of $0.14 per
share from the divestiture of the gas and flame detection
business.
Third-quarter operating income was $2.0 billion including a
benefit of $112 million from the divestiture of the gas and flame
detection business. Operating margins were 25.2 percent which
includes a 1.4 percentage point benefit from the divestiture.
The company’s operating cash flow was $2.0 billion, contributing
to conversion of 106 percent of net income to free cash flow. See
the “Supplemental Financial Information Non-GAAP Measures” section
for applicable information. Free cash flow conversion includes a
negative 27 percentage point combined impact from the divestiture
of the gas and flame detection business and cash payments for
previously accrued respiratory-related legal settlements.
The company paid $828 million in cash dividends to shareholders
and repurchased $142 million of its own shares during the
quarter.
Third-Quarter Business Group Discussion
Safety and Industrial
- Sales of $2.8 billion, down 5.7 percent in U.S. dollars.
Organic local-currency sales decreased 3.3 percent, foreign
currency translation decreased sales by 1.6 percent, and
divestitures decreased sales by 0.8 percent.
- On an organic local-currency basis:
- Sales increased in roofing granules; declined in personal
safety, abrasives, industrial adhesives and tapes, electrical
markets, closure and masking, and automotive aftermarket.
- Sales grew in EMEA and Latin America/Canada; declined in the
U.S. and Asia Pacific.
- Operating income was $765 million, an increase of 9.6 percent
year-on-year, including a $112 million benefit from the divestiture
of the gas and flame detection business; operating margins of 26.8
percent.
Transportation and Electronics
- Sales of $2.5 billion, down 4.4 percent in U.S. dollars.
Organic local-currency sales decreased 3.4 percent, foreign
currency translation decreased sales by 1.0 percent.
- On an organic local-currency basis:
- Sales increased in advanced materials, transportation safety,
and commercial solutions; declined in automotive and aerospace, and
electronics.
- Sales grew in Latin America/Canada and EMEA; declined in Asia
Pacific and the U.S.
- Operating income was $631 million, a decrease of 13.1 percent
year-on-year; operating margins of 25.2 percent.
Health Care
- Sales of $1.7 billion, up 4.7 percent in U.S. dollars. Organic
local-currency sales increased 2.0 percent, foreign currency
translation decreased sales by 1.7 percent, and acquisitions
increased sales by 4.4 percent.
- On an organic local-currency basis:
- Sales grew in health information systems, food safety, medical
solutions, and oral care, while drug delivery was flat; declined in
separation and purification.
- Sales increased in the U.S., EMEA, Asia Pacific, and Latin
America/Canada.
- Operating income was $459 million, a decrease of 3.2 percent
year-on-year; operating margins of 26.7 percent.
Consumer
- Sales of $1.3 billion, up 1.7 percent in U.S. dollars. Organic
local-currency sales increased 2.6 percent and foreign currency
translation decreased sales by 0.9 percent.
- On an organic local-currency basis:
- Sales grew in home improvement and consumer health care;
declined in stationery and office supplies and home care.
- Sales grew in EMEA, Latin America/Canada, and the U.S.;
declined in Asia Pacific.
- Operating income was $308 million, up 2.3 percent year-on-year;
operating margins of 23.2 percent.
Fourth-Quarter and Full-Year 2019 Outlook
3M provided its fourth-quarter 2019 GAAP earnings guidance to be
in the range of $2.05 to $2.15 per share. This earnings range
includes an estimated $0.15 per share negative impact from the
recently closed acquisition of Acelity, Inc., which was previously
not included in guidance. Fourth-quarter organic local-currency
sales is expected to decline between 1 to 3 percent.
3M updated its full-year 2019 GAAP earnings to be in the range
of $8.20 to $8.30 per share versus a prior expectation of $8.25 to
$8.75 per share. Excluding the full-year 2019 impacts from the
first-quarter significant litigation-related charges of $0.72 per
share, the second-quarter deconsolidation of its Venezuelan
subsidiary charge of $0.28 per share, and the gas and flame
detection divestiture gain of $0.21 per share, 3M now expects its
2019 earnings to be in the range of $8.99 to $9.09 per share versus
prior expectation of $9.25 to $9.75. This updated earnings range
includes an estimated $0.15 per share negative impact from the
recently closed acquisition of Acelity, Inc., which was previously
not included in full-year guidance.
3M also updated its full-year organic local-currency sales
guidance to decline between 1 to 1.5 percent versus a prior
expectation of minus 1 to plus 2 percent. In addition, the company
updated its range for return on invested capital to 18.5 to 19.5
percent versus a prior expecation of 20 to 22 percent to include
the impact of the Acelity, Inc. acquisition. Lastly, free cash flow
conversion is now expected to be in the range of 105 to 110 percent
versus a prior expectation of 95 to 105 percent. See the
“Supplemental Financial Information Non-GAAP Measures” section for
applicable information.
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 21900595). The telephone replay will be
available until 11:30 a.m. EDT (10:30 a.m. CDT) on October 31,
2019.
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
Nine months ended
September 30,
September 30,
2019
2018
2019
2018
Net sales
$
7,991
$
8,152
$
24,025
$
24,820
Operating expenses
Cost of sales
4,188
4,159
12,811
12,622
Selling, general and administrative
expenses
1,455
1,547
5,089
5,920
Research, development and related
expenses
443
430
1,390
1,384
Gain on sale of businesses
(106)
—
(114)
(530)
Total operating expenses
5,980
6,136
19,176
19,396
Operating income
2,011
2,016
4,849
5,424
Other expense (income), net
45
51
349
144
Income before income taxes
1,966
1,965
4,500
5,280
Provision for income taxes
378
419
888
1,266
Net income including noncontrolling
interest
$
1,588
$
1,546
$
3,612
$
4,014
Less: Net income attributable to
noncontrolling interest
5
3
11
12
Net income attributable to 3M
$
1,583
$
1,543
$
3,601
$
4,002
Weighted average 3M common shares
outstanding – basic
576.5
585.6
577.2
591.1
Earnings per share attributable to 3M
common shareholders – basic
$
2.75
$
2.64
$
6.24
$
6.77
Weighted average 3M common shares
outstanding – diluted
583.0
598.4
585.9
605.1
Earnings per share attributable to 3M
common shareholders – diluted
$
2.72
$
2.58
$
6.15
$
6.61
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE
SHEET
(Dollars in millions)
(Unaudited)
September 30,
December 31,
2019
2018
ASSETS
Current assets
Cash and cash equivalents
$
7,731
$
2,853
Marketable securities – current
30
380
Accounts receivable – net
5,020
5,020
Inventories
4,007
4,366
Prepaids
717
741
Other current assets
515
349
Total current assets
18,020
13,709
Property, plant and equipment – net
8,891
8,738
Operating lease right of use assets
834
—
Goodwill and intangible assets – net
13,257
12,708
Other assets
1,548
1,345
Total assets
$
42,550
$
36,500
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and
current portion of long-term debt
$
1,960
$
1,211
Accounts payable
2,079
2,266
Accrued payroll
669
749
Accrued income taxes
137
243
Operating lease liabilities – current
241
—
Other current liabilities
2,735
2,775
Total current liabilities
7,821
7,244
Long-term debt
17,479
13,411
Other liabilities
6,486
5,997
Total liabilities
$
31,786
$
26,652
Total equity
$
10,764
$
9,848
Shares outstanding
September 30, 2019: 575,050,655 shares
December 31, 2018: 576,575,168 shares
Total liabilities and equity
$
42,550
$
36,500
3M Company and Subsidiaries
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Nine months ended
September 30,
2019
2018
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
$
4,732
$
4,181
Cash flows from investing activities:
Purchases of property, plant and
equipment
(1,161
)
(1,046
)
Acquisitions, net of cash acquired
(704
)
13
Purchases and proceeds from sale or
maturities of marketable securities and investments – net
348
714
Proceeds from sale of businesses, net of
cash sold
236
806
Other investing activities
136
151
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES
(1,145
)
638
Cash flows from financing activities:
Change in debt
4,779
1,093
Purchases of treasury stock
(1,243
)
(3,601
)
Proceeds from issuances of treasury stock
pursuant to stock option and benefit plans
437
401
Dividends paid to shareholders
(2,488
)
(2,406
)
Other financing activities
(158
)
(36
)
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
1,327
(4,549
)
Effect of exchange rate changes on cash
and cash equivalents
(36
)
(138
)
Net increase (decrease) in cash and cash
equivalents
4,878
132
Cash and cash equivalents at beginning of
year
2,853
3,053
Cash and cash equivalents at end of
period
$
7,731
$
3,185
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION
NON-GAAP MEASURES
(Dollars in millions, except
full-year 2019 forecast)
(Unaudited)
Three months ended
Nine months ended
September 30,
September 30,
Major GAAP Cash Flow Categories
2019
2018
2019
2018
Net cash provided by (used in) operating
activities
$
2,022
$
2,139
$
4,732
$
4,181
Net cash provided by (used in) investing
activities
90
(269
)
(1,145
)
638
Net cash provided by (used in) financing
activities
2,804
(1,453
)
1,327
(4,549
)
Free Cash Flow (non-GAAP
measure)
Full-Year 2019 Forecast
(Billions)
Net cash provided by (used in) operating
activities
$
2,022
$
2,139
$
4,732
$
4,181
$6.7 to $6.9
Purchases of property, plant and
equipment
(349
)
(377
)
(1,161
)
(1,046
)
($1.6 to $1.7)
Free cash flow (a)
1,673
1,762
3,571
3,135
$5.0 to $5.3
Net income attributable to 3M
$
1,583
$
1,543
$
3,601
$
4,002
$4.8 to $4.9
Free cash flow conversion (a)
106
%
114
%
99
%
78
%
105% to 110%
(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.
September 30,
December 31,
Net Debt (non-GAAP measure)
2019
2018
Total debt
$
19,439
$
14,622
Less: Cash, cash equivalents and
marketable securities
7,807
3,270
Net debt (b)
$
11,632
$
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 2019 forecast)
(Unaudited)
Twelve months ended
Full Year Estimated
Return on Invested Capital (non-GAAP
measure)
December 31, 2018
2019 (in billions)
Net income including non-controlling
interest
$
5,363
$4.8 to $4.9
Interest expense (after-tax) (1)
268
$0.4
Adjusted net income (Return)
$
5,631
$5.2 to $5.3
Average shareholders' equity (including
non-controlling interest) (2)
$
10,407
$9.0 to $9.5
Average short-term and long-term debt
(3)
14,912
$18.0 to $18.5
Average invested capital
$
25,318
$27.0 to $28.0
Return on invested capital (non-GAAP
measure) (c)
22.2
%
18.5% to 19.5%
(1) Effective income tax rate used for
interest expense
23.4
%
20% to 21%
(2) Calculation of average equity
(includes non-controlling interest)
Ending total equity as of:
March 31
$
11,039
June 30
10,428
September 30
10,311
December 31
9,848
Average total equity
$
10,407
(3) Calculation of average debt
Ending short-term and long-term debt as
of:
March 31
$
15,660
June 30
14,519
September 30
14,846
December 31
14,622
Average short-term and long-term debt
$
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)
Estimated Full Year
2019
Adjusted income, earnings per share,
& effective tax rate (non-GAAP measures) (Dollars in billions,
except per share amounts) Note: Totals impacted by rounding
GAAP Measure
Adjustment for Significant
Litigation related Charges
Adjustment for Loss on
Deconsolidation of Venezuelan Subsidiary
Adjustment for Divestiture
Gain from Sale of Gas and Flame Detection Business
Adjusted Non-GAAP Measure
(d)
Income before taxes
$
6.0 to 6.1
$
0.5
$
0.2
$
(0.1)
$
6.6 to 6.7
Provision for income taxes
$
1.2 to 1.3
$
0.1
$
—
$
(0.0)
$
1.3 to 1.4
Effective tax rate
20.0 to 21.0
%
20.0 to 21.0
%
Net income attributable to 3M
$
4.8 to 4.9
$
0.4
$
0.2
$
(0.1)
$
5.2 to 5.3
Earnings per diluted share
$
8.20 to 8.30
$
0.72
$
0.28
$
(0.21)
$
8.99 to 9.09
(d)
In the first quarter of 2019, the Company
recorded significant litigation-related charges of $548 million
($424 million after tax) related to historical PFAS (certain
perfluorinated compounds) manufacturing operations and coal mine
dust respirator mask lawsuits. 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. In the
third quarter of 2019, 3M completed the sale of its gas and flame
detection business and reflected a pre-tax gain of $112 million as
a result of this divestiture.
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 deconsolidation of the
Company’s Venezuelan subsidiary, significant litigation-related
charges and the impact of the gas and flame detection business
divestiture gain. These items represent significant charges that
impacted the Company’s financial results. Income before taxes, net
income, earnings per share, and the 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 September
30, 2019
Europe,
Middle
Latin
Sales Change Analysis
United
Asia-
East and
America/
World-
By Geographic Area
States
Pacific
Africa
Canada
Wide
Volume – organic
(1.5
)
%
(4.0
)
%
0.6
%
2.3
%
(1.6
)
%
Price
0.4
(0.4
)
1.4
0.5
0.3
Organic local-currency sales
(1.1
)
(4.4
)
2.0
2.8
(1.3
)
Acquisitions
2.1
0.1
—
0.1
0.9
Divestitures
(0.2
)
—
(1.3
)
—
(0.3
)
Translation
—
(0.7
)
(4.8
)
(2.3
)
(1.3
)
Total sales change
0.8
%
(5.0
)
%
(4.1
)
%
0.6
%
(2.0
)
%
Three months ended September
30, 2019
Worldwide Sales Change
Organic local-
Total sales
By Business Segment
currency sales
Acquisitions
Divestitures
Translation
change
Safety and Industrial
(3.3
)
%
—
%
(0.8
)
%
(1.6
)
%
(5.7
)
%
Transportation and Electronics
(3.4
)
—
—
(1.0
)
(4.4
)
Health Care
2.0
4.4
—
(1.7
)
4.7
Consumer
2.6
—
—
(0.9
)
1.7
Total Company
(1.3
)
%
0.9
%
(0.3
)
%
(1.3
)
%
(2.0
)
%
Nine months ended September
30, 2019
Europe,
Middle
Latin
Sales Change Analysis
United
Asia-
East and
America/
World-
By Geographic Area
States
Pacific
Africa
Canada
Wide
Volume – organic
(1.0
)
%
(3.1
)
%
(1.8
)
%
0.4
%
(1.7
)
%
Price
0.5
0.1
1.3
1.0
0.6
Organic local-currency sales
(0.5
)
(3.0
)
(0.5
)
1.4
(1.1
)
Acquisitions
2.0
—
0.1
0.1
0.8
Divestitures
(0.6
)
(0.2
)
(1.9
)
(0.7
)
(0.7
)
Translation
—
(2.2
)
(5.5
)
(3.8
)
(2.2
)
Total sales change
0.9
%
(5.4
)
%
(7.8
)
%
(3.0
)
%
(3.2
)
%
Nine months ended September
30, 2019
Worldwide Sales Change
Organic local-
Total sales
By Business Segment
currency sales
Acquisitions
Divestitures
Translation
change
Safety and Industrial
(3.5
)
%
—
%
(1.8
)
%
(2.5
)
%
(7.8
)
%
Transportation and Electronics
(2.7
)
—
—
(1.9
)
(4.6
)
Health Care
2.0
3.8
—
(2.5
)
3.3
Consumer
1.7
—
—
(1.6
)
0.1
Total Company
(1.1
)
%
0.8
%
(0.7
)
%
(2.2
)
%
(3.2
)
% (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, 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
Nine months ended
NET SALES
September 30,
September 30,
(Millions)
2019
2018
2019
2018
Safety and Industrial
$
2,849
$
3,021
$
8,796
$
9,542
Transportation and Electronics
2,503
2,619
7,312
7,665
Health Care
1,721
1,643
5,290
5,118
Consumer
1,324
1,302
3,821
3,819
Corporate and Unallocated
28
35
98
47
Elimination of Dual Credit
(434
)
(468
)
(1,292
)
(1,371
)
Total Company
$
7,991
$
8,152
$
24,025
$
24,820
BUSINESS SEGMENT INFORMATION
Three months ended
Nine months ended
OPERATING INCOME
September 30,
September 30,
(Millions)
2019
2018
2019
2018
Safety and Industrial
$
765
$
697
$
2,062
$
2,753
Transportation and Electronics
631
726
1,746
2,051
Health Care
459
475
1,406
1,443
Consumer
308
300
809
811
Corporate and Unallocated (f)
(40
)
(57
)
(858
)
(1,293
)
Elimination of Dual Credit
(112
)
(125
)
(316
)
(341
)
Total Company
$
2,011
$
2,016
$
4,849
$
5,424
(f)
Corporate and Unallocated operating income
was impacted by significant litigation-related charges in the first
quarter of 2019 related to historical PFAS (certain perfluorinated
compounds) manufacturing operations and coal mine dust respirator
mask lawsuits. Corporate and Unallocated operating income was also
impacted by significant litigation-related charges in the first
quarter of 2018 related to the previously disclosed agreement
reached with the State of Minnesota that resolved the Natural
Resource Damages lawsuit.
About 3M At 3M, we apply science in collaborative ways to
improve lives daily. With $33 billion in sales, our 93,000
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/20191024005423/en/
3M Investor Contacts: Bruce Jermeland,
651-733-1807 or Tony Riter, 651-733-1141 or Media Contact:
Stephen Sanchez, 651-737-5967 or Jennifer Ehrlich, 651-736-9430
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