01—Abstract
Summary
Summary of the 10-K filed February 7, 2019. Cited figures are marked; the original filing is the authoritative source.
3M Company's 2018 10-K filing reveals a diversified global technology company with five core business segments: Industrial, Safety and Graphics, Health Care, Electronics and Energy, and Consumer.
The company reported net sales of $32.765 billiona for the year ended December 31, 2018, an increase from $31.657 billion in 2017. Diluted earnings per share were $8.89, up from $7.93 in the prior year, reflecting strong operational performance and the positive impact of the Tax Cuts and Jobs Act. The company demonstrated solid operating cash flow of $6.4 billion, supported by robust free cash flow generation, which it utilized for significant share repurchases ($4.9 billion) and dividend payments, marking its 61st consecutive year of dividend increases.
Management highlighted organic sales growth across all segments, driven by innovation and market penetration, particularly in advanced materials, personal safety, and health care solutions. Despite facing raw material price inflation and foreign currency headwinds, 3M's strategic focus on productivity initiatives and portfolio management, including the divestiture of certain businesses like the Communication Markets Division, contributed to its financial results.
The company remains committed to investing in R&D, with $1.821 billionb allocated in 2018, to fuel future growth and maintain its competitive edge. Key risk factors include global economic conditions, foreign currency fluctuations, and competitive pressures, which the company actively manages through its diversified operations and financial strategies.
02—Key points
Key Highlights
- 3M reported net sales of $32.765 billion for fiscal year 2018, an increase from $31.657 billion in 2017.
- Diluted earnings per share increased to $8.89 in 2018, compared to $7.93 in 2017.
- The company generated $6.439 billion in cash from operating activities.
- 3M repurchased $4.870 billion of its common stock in 2018, demonstrating a strong commitment to returning capital to shareholders.
- The Health Care segment showed consistent growth, with sales up 2.9% year-over-year, and operating income margins of 29.9%.
- The Industrial segment, the largest contributor to sales at 37.4%, grew by 3.4% in U.S. dollars, driven by organic local-currency sales growth.
- The company continues to invest in Research & Development, with $1.821 billion spent in 2018, reflecting a commitment to innovation across its five business segments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, 3M Co kept $0.16.
- Revenue$32.77B100.0%
- Cost of revenue−$16.68B50.9%
- Gross profit$16.08B49.1%
- Operating costs−$8.88B27.1%
- Operating income$7.21B22.0%
- Interest, other & tax−$1.86B5.7%
- Net income$5.35B16.3%
Where FY2018 revenue went
$32.77B- Cost of revenue: $16.68B, 51% of revenue
- SG&A: $7.60B, 23% of revenue
- Net income: $5.35B, 16% of revenue
- R&D: $1.25B, 3.8% of revenue
- Interest, other & tax: $1.86B, 5.7% of revenue
Kept 16% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 7, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $32.77B$31.66B | +3.5% |
| Cost of Revenue | $16.68B$16.05B | +3.9% |
| Gross Profit | $16.08B$15.60B | +3.1% |
| R&D Expenses | $1.25B$1.35B | −7.3% |
| SG&A Expenses | $7.60B$6.63B | +14.7% |
| Operating Expenses | $25.56B$23.96B | +6.6% |
| Operating Income | $7.21B$7.69B | −6.3% |
| Interest Expense | $350.00M$322.00M | +8.7% |
| Net Income | $5.35B$4.86B | +10.1% |
| EPS (Basic) | $9.09$8.13 | +11.8% |
| EPS (Diluted) | $8.89$7.93 | +12.1% |
| Shares Outstanding (Basic) | 588.50M597.50M | −1.5% |
| Shares Outstanding (Diluted) | 602.00M612.70M | −1.7% |
05—Questions
Frequently Asked Questions
What were 3M's main sources of revenue in 2018?
3M's revenue in 2018 was primarily generated from its five business segments: Industrial ($12.3 billion), Safety and Graphics ($6.8 billion), Health Care ($6.0 billion), Electronics and Energy ($5.5 billion), and Consumer ($4.8 billion). The Industrial segment represented the largest portion of net sales.
How did the Tax Cuts and Jobs Act (TCJA) impact 3M's financial results in 2018?
The TCJA, enacted in December 2017, led to a reduction in 3M's effective tax rate from 35.5% in 2017 to 23.4% in 2018. This was primarily due to the lower U.S. federal corporate tax rate and other provisions. While the company recorded a net tax expense related to the TCJA in 2017, adjusted results for 2018 showed a positive impact from the tax reform.
What significant litigation or legal matters did 3M disclose in its 2018 10-K?
3M disclosed significant legal matters including ongoing litigation related to respirator mask/asbestos claims, environmental litigation concerning perfluorinated compounds (PFAS) across various states, and product liability claims related to its Bair Hugger patient warming system. The company also noted a settlement with the State of Minnesota for $850 million related to natural resource damages concerning PFAS.
How did 3M manage its raw material costs and supply chain challenges in 2018?
3M experienced raw material price inflation across most global markets in 2018. In response, the company implemented productivity projects, including input management, reformulations, and multi-sourcing activities, which helped to partially offset these headwinds. Careful management of existing raw material inventories and strategic supplier relationships were also key.
What is 3M's approach to returning capital to shareholders?
3M demonstrates a strong commitment to returning capital to shareholders through consistent dividend payments and share repurchases. In 2018, the company paid $3.193 billion in dividends ($5.44 per share) and repurchased $4.870 billion of its own stock. This was supported by its strong operating cash flow and an authorization for up to $10 billion in future share repurchases.
06—Continue