10-QPeriod: Q1 FY2009

3M CO Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 1, 2009For Securities:MMM

Summary

3M Company's first-quarter 2009 report reflects a challenging economic environment, with net sales decreasing by 21.3% year-over-year to $5.1 billion. This decline was primarily driven by significant end-market contractions in sectors like automotive, consumer electronics, and general manufacturing. Despite the substantial sales drop, the company demonstrated strong operational discipline, leading to robust operating income margins. Net income attributable to 3M was $518 million, or $0.74 per diluted share, down from $988 million, or $1.38 per diluted share in the prior year's first quarter. The company also announced restructuring actions impacting its cost structure and rationalizing facilities. Liquidity remains a key focus, with 3M maintaining ample cash reserves and access to capital markets. The company suspended share repurchases to preserve liquidity but maintained its commitment to returning capital to shareholders through a 2% dividend increase, marking the 51st consecutive annual increase. Management is actively managing expenses and operational efficiency in response to the ongoing economic slowdown.

Financial Highlights

29 data points
Beta

Revenue

$5.09B

45.5% Gross Margin

Net Income

$518.00M

10.2% Net Margin

EPS (Diluted)

$0.74

Cash & Equivalents

$1.63B

Free Cash Flow

$451.00M

Financial Statements
Beta
Revenue$5.09B
Cost of Revenue$2.77B
Gross Profit$2.32B
SG&A Expenses$1.19B
Operating Expenses$4.29B
Operating Income$803.00M
Net Income$518.00M
EPS (Basic)$0.75
EPS (Diluted)$0.74
Shares Outstanding (Basic)693.50M
Shares Outstanding (Diluted)695.90M

Key Highlights

  • 1Net sales for the first quarter of 2009 declined 21.3% to $5.1 billion compared to the same period in 2008, reflecting the severe global economic downturn.
  • 2Net income attributable to 3M decreased to $518 million ($0.74 per diluted share) from $988 million ($1.38 per diluted share) in Q1 2008.
  • 3The company implemented significant cost-saving measures and restructuring actions, including the elimination of approximately 1,200 positions, resulting in a $67 million pre-tax charge.
  • 4Operating income margins remained strong at 15.8% despite the sales decline, showcasing operational efficiency.
  • 53M maintained a strong liquidity position, with $2.1 billion in cash, cash equivalents, and marketable securities, and $6.0 billion in total debt.
  • 6The company's Board of Directors authorized a 2% dividend increase, continuing its 51-year streak of consecutive annual dividend hikes.
  • 7Share repurchase activity was suspended to conserve cash, though the existing authorization was extended.

Frequently Asked Questions

The primary driver for the significant decrease in sales was the severe global economic slowdown. This led to substantial end-market declines and inventory reductions in key industries such as automotive, consumer electronics, and general manufacturing, impacting the company's performance across most segments.

3M responded by aggressively reducing its cost structure, lowering manufacturing output, and rationalizing facilities. These restructuring actions resulted in a pre-tax charge of $67 million for the quarter, primarily related to employee severance and fixed asset impairments. While impacting net income, these measures are expected to yield significant annualized savings.

The company's financial condition and liquidity remain strong. 3M maintained $2.1 billion in cash, cash equivalents, and marketable securities, and has consistent access to capital markets. Share repurchases were suspended to preserve liquidity, but the company continued to return capital to shareholders through a dividend increase, underscoring management's focus on financial stability and operational efficiency amidst economic uncertainty.

Effective in the first quarter of 2009, 3M realigned its business segments to better align with markets and customers, including the creation of a Renewable Energy Division and the integration of certain acquired businesses. Additionally, the company introduced dual credit reporting for U.S. sales and operating income to further incentivize U.S. sales growth. Segment information for all periods presented has been reclassified to reflect these changes.