10-QPeriod: Q2 FY2011

3M CO Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 4, 2011For Securities:MMM

Summary

3M Company reported a solid second quarter of 2011, with net sales increasing by 14.1% to $7.68 billion year-over-year. This growth was broad-based across most of its business segments and geographic regions, driven by a combination of organic volume, acquisitions, and favorable currency effects. The Industrial and Transportation segment, and Safety, Security and Protection Services segment showed particularly strong performance. Despite the overall positive sales trend, operating income margins saw a slight decrease due to factors such as increased pension and postretirement expenses, foreign currency impacts, and the net effect of selling price changes versus raw material inflation. The company also noted headwinds from the natural disaster in Japan, which impacted sales growth and operating margins. Nevertheless, net income attributable to 3M rose to $1.16 billion, or $1.60 per diluted share, up from $1.12 billion, or $1.54 per diluted share, in the prior year's quarter. The company reiterated its full-year sales outlook and continued its commitment to shareholder returns through dividends and share repurchases.

Financial Highlights

52 data points
Beta

Revenue

$7.68B

47.4% Gross Margin

Net Income

$1.16B

15.1% Net Margin

EPS (Diluted)

$1.60

Total Assets

$32.28B

Cash & Equivalents

$3.38B

Free Cash Flow

$1.16B

Financial Statements
Beta
Revenue$7.68B
Cost of Revenue$4.04B
Gross Profit$3.64B
SG&A Expenses$1.58B
Operating Expenses$6.03B
Operating Income$1.66B
Net Income$1.16B
EPS (Basic)$1.63
EPS (Diluted)$1.60
Shares Outstanding (Basic)713.40M
Shares Outstanding (Diluted)726.50M

Key Highlights

  • 1Net sales increased by 14.1% to $7.68 billion in Q2 2011, compared to $6.73 billion in Q2 2010, with strong performance across most segments and geographies.
  • 2Net income attributable to 3M increased to $1.16 billion ($1.60 per diluted share) in Q2 2011, from $1.12 billion ($1.54 per diluted share) in Q2 2010.
  • 3The Industrial and Transportation segment led growth with a 24.6% increase in net sales, followed by Safety, Security and Protection Services (19.7%) and Health Care (14.3%).
  • 4Acquisitions contributed 4.0% to worldwide sales growth, while favorable currency effects added 6.1% in the second quarter.
  • 5Operating income margins decreased to 21.6% from 23.7% year-over-year, impacted by increased pension/postretirement expenses and foreign currency effects.
  • 6The company experienced headwinds from the natural disaster in Japan, which reduced second-quarter 2011 sales growth by an estimated 2.4 percentage points.
  • 73M repurchased $1.358 billion of treasury stock in the first six months of 2011, demonstrating a commitment to shareholder returns.

Frequently Asked Questions

3M reported a strong second quarter of 2011 with net sales of $7.68 billion, a 14.1% increase from the same period last year. Net income attributable to 3M was $1.16 billion, or $1.60 per diluted share, up from $1.12 billion, or $1.54 per diluted share, in Q2 2010. This growth was driven by broad-based increases across most business segments and geographic regions.

The Industrial and Transportation segment saw strong sales growth of 24.6%, followed by Safety, Security and Protection Services (19.7%) and Health Care (14.3%). The Display and Graphics segment experienced a sales decline of 7.1%, primarily due to fewer orders for optical films for LCD TVs.

Sales growth was driven by a combination of organic volume (3.2%), acquisitions (4.0%), and favorable currency effects (6.1%). Profitability was impacted by increased pension and postretirement expenses, foreign currency effects, and raw material inflation. The natural disaster in Japan also negatively affected sales growth and operating margins.

3M maintained a strong financial position with $4.9 billion in cash, cash equivalents, and marketable securities at June 30, 2011. The company generated $2.184 billion in operating cash flow for the first six months of 2011, which was used for dividends, share repurchases, capital expenditures, and acquisitions. 3M also continued its share repurchase program, authorizing up to $7.0 billion in stock repurchases.