10-QPeriod: Q3 FY2010

3M CO Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 5, 2010For Securities:MMM

Summary

3M Company reported strong financial performance for the nine months ended September 30, 2010, with net sales increasing by 17.4% to $20.0 billion. This growth was primarily driven by a 16% increase in organic volumes across all business segments and major geographic areas. The company saw particular strength in emerging markets and key end-markets like electronics and automotive. Net income attributable to 3M increased significantly to $3.157 billion for the nine-month period, up from $2.258 billion in the prior year, translating to diluted EPS of $4.36. The company's financial condition remains robust, with a strong balance sheet, ample liquidity, and a debt-to-capital ratio of 27%. 3M also demonstrated its commitment to shareholders by increasing its dividend for the 52nd consecutive year and continuing its share repurchase program. The company made several strategic acquisitions in October 2010, anticipating some near-term dilution but highlighting long-term growth potential.

Financial Highlights

52 data points
Beta

Revenue

$6.87B

47.9% Gross Margin

Net Income

$1.11B

16.1% Net Margin

EPS (Diluted)

$1.53

Total Assets

$30.07B

Cash & Equivalents

$4.47B

Free Cash Flow

$1.09B

Financial Statements
Beta
Revenue$6.87B
Cost of Revenue$3.58B
Gross Profit$3.29B
SG&A Expenses$1.36B
Operating Expenses$5.30B
Operating Income$1.58B
Net Income$1.11B
EPS (Basic)$1.55
EPS (Diluted)$1.53
Shares Outstanding (Basic)714.00M
Shares Outstanding (Diluted)725.20M

Key Highlights

  • 1Net sales grew 17.4% year-over-year to $20.0 billion for the first nine months of 2010, driven by a 16% increase in organic volume.
  • 2Net income attributable to 3M reached $3.157 billion for the nine-month period, a significant increase from $2.258 billion in the prior year.
  • 3Diluted EPS rose to $4.36 for the nine months ended September 30, 2010, up from $3.21 in the comparable period of 2009.
  • 4The company's balance sheet remains strong with a debt-to-total capital ratio of 27% as of September 30, 2010.
  • 53M increased its quarterly dividend by 2.9% and has a history of 52 consecutive annual dividend increases.
  • 6Several strategic acquisitions were completed in October 2010, including Arizant Inc., Attenti Holdings S.A., and a controlling interest in Cogent Inc., aimed at strengthening specific business segments.
  • 7Operating income margins remained strong, exceeding 20% across all six business segments in the first nine months of 2010.

Frequently Asked Questions

Sales growth was primarily driven by a significant increase in organic volume (16%), across all business segments and geographic regions. Growth was particularly strong in emerging markets and key industries like electronics, automotive OEM, and general industrial.

Profitability saw substantial improvement. Net income attributable to 3M increased by over 39% to $3.157 billion for the first nine months of 2010, leading to a corresponding rise in diluted EPS from $3.21 to $4.36.

3M maintains a strong financial position. As of September 30, 2010, the company had $6.3 billion in cash, cash equivalents, and marketable securities against $5.8 billion in debt, resulting in a net debt position of -$538 million. The debt-to-total capital ratio was 27%, indicating a healthy balance sheet and ample liquidity to fund growth, capital expenditures, and acquisitions.

In October 2010, 3M completed significant acquisitions: Arizant Inc. (patient warming solutions for healthcare), Attenti Holdings S.A. (remote people-monitoring technologies for safety and security), and a controlling interest in Cogent Inc. (biometric systems for safety and security). While these were expected to dilute Q4 2010 earnings, they represent strategic investments for long-term growth.