01—Abstract
Summary
Summary of the 10-K filed February 8, 2018. Cited figures are marked; the original filing is the authoritative source.
3M Company's 2017 10-K filing reveals a robust performance driven by broad-based organic growth across its five key business segments: Industrial, Safety and Graphics, Health Care, Electronics and Energy, and Consumer.
While net sales saw a 5.1% increase year-over-year to $31.7 billiona, operating income grew by 8.3% to $7.8 billion, demonstrating effective operational management and productivity improvements. Diluted earnings per share (EPS) were $7.93, a slight decrease from the prior year's $8.16, primarily due to a significant impact from the Tax Cuts and Jobs Act (TCJA) enacted in late 2017, which resulted in a one-time tax expense. Excluding this TCJA impact, EPS grew by a notable 12.4% on a reported basis.
The company continued its strategic portfolio management, completing several acquisitions, notably Scott Safety, which strengthened its Safety and Graphics segment. Divestitures were also actively pursued to focus on core, higher-value businesses.
3M's financial position remains strong, supported by healthy operating cash flow of $6.2 billionb and a commitment to returning capital to shareholders through dividends and share repurchases, including a 16% increase in the quarterly dividend. The company's diversified business model, global reach, and commitment to innovation position it well for continued growth.
02—Key points
Key Highlights
- 3M reported total net sales of $31.7 billion for the year ended December 31, 2017, a 5.1% increase from 2016.
- Operating income increased by 8.3% to $7.8 billion, resulting in an operating margin of 24.7%.
- Diluted EPS was $7.93, but excluding the impact of the Tax Cuts and Jobs Act (TCJA), adjusted diluted EPS grew by 12.4% to $9.17.
- The company made significant strategic acquisitions, including Scott Safety, enhancing its Safety and Graphics segment.
- 3M generated strong operating cash flow of $6.2 billion, supporting investments in the business and shareholder returns.
- The company announced a 16% increase in its quarterly dividend, marking its 60th consecutive year of dividend increases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, 3M Co kept $0.15.
- Revenue$31.66B100.0%
- Cost of revenue−$16.05B50.7%
- Gross profit$15.60B49.3%
- Operating costs−$7.91B25.0%
- Operating income$7.69B24.3%
- Interest, other & tax−$2.83B9.0%
- Net income$4.86B15.3%
Where FY2017 revenue went
$31.66B- Cost of revenue: $16.05B, 51% of revenue
- SG&A: $6.63B, 21% of revenue
- Net income: $4.86B, 15% of revenue
- R&D: $1.35B, 4.3% of revenue
- Interest, other & tax: $2.83B, 9.0% of revenue
Kept 15% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 8, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $31.66B$30.11B | +5.1% |
| Cost of Revenue | $16.05B$15.12B | +6.2% |
| Gross Profit | $15.60B$14.99B | +4.1% |
| R&D Expenses | $1.35B$1.25B | +8.3% |
| SG&A Expenses | $6.63B$6.31B | +5.0% |
| Operating Expenses | $23.96B$23.08B | +3.8% |
| Operating Income | $7.69B$7.03B | +9.5% |
| Interest Expense | $322.00M$199.00M | +61.8% |
| Net Income | $4.86B$5.05B | −3.8% |
| EPS (Basic) | $8.13$8.35 | −2.6% |
| EPS (Diluted) | $7.93$8.16 | −2.8% |
| Shares Outstanding (Basic) | 597.50M604.70M | −1.2% |
| Shares Outstanding (Diluted) | 612.70M618.70M | −1.0% |
05—Questions
Frequently Asked Questions
What was 3M's overall financial performance in 2017?
In 2017, 3M demonstrated strong financial performance with net sales increasing by 5.1% to $31.7 billion and operating income growing by 8.3% to $7.8 billion. The company achieved broad-based organic growth across all five of its business segments. While reported diluted earnings per share (EPS) decreased slightly to $7.93 from $8.16 in 2016, this was significantly impacted by a one-time tax expense related to the Tax Cuts and Jobs Act (TCJA). On an adjusted basis, excluding the TCJA impact, EPS increased by 12.4%, indicating solid underlying operational performance.
What were the key strategic actions taken by 3M in 2017?
3M continued to strategically manage its portfolio in 2017. A significant event was the acquisition of Scott Safety for $2.0 billion, which strengthened its Safety and Graphics business. The company also actively divested non-core businesses, including safety prescription eyewear, identity management, and electronic monitoring businesses, to focus on higher-value opportunities. These portfolio actions reflect 3M's commitment to enhancing shareholder value through strategic alignment and operational efficiency.
How did the Tax Cuts and Jobs Act (TCJA) impact 3M's financial results?
The enactment of the TCJA in December 2017 had a significant impact on 3M's financial results. The company recorded a one-time net tax expense of $762 million related to the transition tax on previously unremitted foreign earnings and the remeasurement of deferred tax assets and liabilities. This resulted in a $1.25 reduction in diluted EPS for the fourth quarter and a $1.24 reduction for the full year. While this created a year-over-year decrease in reported EPS, management provided adjusted figures excluding the TCJA impact to offer a clearer view of the underlying operational performance, which showed robust growth.
What is 3M's approach to returning capital to shareholders?
3M maintains a strong commitment to returning capital to its shareholders. In 2017, the company repurchased $2.1 billion of its own stock, demonstrating confidence in its value and supporting its share-based compensation plans. Furthermore, 3M's Board of Directors declared a quarterly dividend of $1.36 per share in January 2018, an increase of 16% from the previous year. This marked the 60th consecutive year of dividend increases, highlighting 3M's consistent dedication to shareholder returns and its financial stability.
06—Continue