10-QPeriod: Q1 FY2019

3M CO Quarterly Report for Q1 Ended Mar 31, 2019

Filed April 26, 2019For Securities:MMM

Summary

3M Company (MMM) reported its first-quarter 2019 financial results, indicating a net sales decrease of 5.0% to $7.86 billion compared to the prior year. This decline was primarily driven by slowing growth in key end markets like China, automotive, and electronics, along with channel inventory adjustments. Despite the sales dip, operating income saw a 12.8% increase to $1.14 billion, largely due to a significant reduction in litigation-related charges compared to the prior year's first quarter. Diluted earnings per share increased by 54.1% to $1.51, also heavily influenced by the substantial decrease in legal expenses. The company continued its capital allocation strategy, repurchasing $701 million in stock and increasing its dividend by 6%, marking its 61st consecutive year of dividend increases.

Financial Highlights

54 data points
Beta

Revenue

$7.86B

45.2% Gross Margin

Net Income

$891.00M

11.3% Net Margin

EPS (Diluted)

$1.51

Total Assets

$39.14B

Cash & Equivalents

$2.94B

Free Cash Flow

$657.00M

Financial Statements
Beta
Revenue$7.86B
Cost of Revenue$4.31B
Gross Profit$3.55B
SG&A Expenses$1.95B
Operating Expenses$6.73B
Operating Income$1.14B
Interest Expense$104.00M
Net Income$891.00M
EPS (Basic)$1.54
EPS (Diluted)$1.51
Shares Outstanding (Basic)577.50M
Shares Outstanding (Diluted)588.50M

Key Highlights

  • 1Net sales decreased by 5.0% to $7.86 billion, impacted by slowing end markets and inventory adjustments.
  • 2Operating income increased by 12.8% to $1.14 billion, primarily due to a significant reduction in litigation-related charges compared to Q1 2018.
  • 3Diluted earnings per share (EPS) increased by 54.1% to $1.51, largely driven by lower litigation expenses.
  • 4The company repurchased $701 million of its stock in the quarter, continuing its capital return to shareholders.
  • 53M increased its quarterly dividend by 6% to $1.44 per share, marking 61 consecutive years of dividend increases.
  • 6Significant litigation-related charges, though reduced from the prior year, still impacted results, with $548 million recorded in Q1 2019.
  • 7The company continues to invest in its businesses, with expected capital expenditures between $1.6 billion to $1.7 billion for 2019.

Frequently Asked Questions

Net sales decreased by 5.0% to $7.86 billion. This was primarily attributed to slowing demand in key end markets such as China, automotive, and electronics, coupled with channel inventory adjustments. These factors negatively impacted sales growth across several business segments.

Significant litigation-related charges, particularly concerning historical PFAS manufacturing operations and coal mine dust respirator mask lawsuits, amounted to $548 million in the first quarter of 2019. While this was a reduction from the $897 million recorded in the prior year's first quarter, these charges still represented a substantial impact. The decrease in these charges was a primary driver for the reported increase in operating income and diluted earnings per share.

3M continues to prioritize capital deployment towards investing in its businesses for organic growth, supplemented by complementary acquisitions. The company also remains committed to returning cash to shareholders through dividends and share repurchases. In Q1 2019, $701 million of stock was repurchased, and the quarterly dividend was increased by 6% to $1.44 per share, reflecting 61 consecutive years of dividend increases.

In response to a slower-than-expected 2019, 3M announced in April 2019 that it was initiating restructuring and other actions expected to impact approximately 2,000 positions worldwide, with an anticipated pre-tax charge of $150 million in the remainder of 2019. These actions are aimed at optimizing the corporate structure and addressing under-performing areas of the portfolio to improve productivity and efficiency.