10-QPeriod: Q3 FY2019

3M CO Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 25, 2019For Securities:MMM

Summary

3M Company reported net sales of $7.991 billion for the third quarter of 2019, a slight decrease of 2.0% compared to the same period last year. Net income attributable to 3M was $1.583 billion, or $2.72 per diluted share, representing a 5.4% increase on a per diluted share basis. This growth was primarily driven by benefits from restructuring actions and a lower effective tax rate, which offset weaker sales in key segments like Safety and Industrial and Transportation and Electronics. These segments experienced softness in end markets such as China, automotive, and electronics, compounded by channel inventory adjustments. Despite these headwinds, 3M's Health Care and Consumer segments showed resilience with modest sales growth. Financially, the company ended the quarter with a strong balance sheet, reporting $7.7 billion in cash and cash equivalents. However, total debt increased due to significant debt issuances, primarily in anticipation of the Acelity acquisition. The company continued its commitment to returning capital to shareholders through dividends, increasing its quarterly dividend by 6% to $1.44 per share. 3M is also actively managing its portfolio through divestitures, including the sale of its gas and flame detection business, while investing in strategic acquisitions like M*Modal and planning for future growth initiatives.

Financial Highlights

54 data points
Beta

Revenue

$7.99B

47.6% Gross Margin

Net Income

$1.58B

19.8% Net Margin

EPS (Diluted)

$2.72

Total Assets

$42.55B

Cash & Equivalents

$7.73B

Free Cash Flow

$1.67B

Financial Statements
Beta
Revenue$7.99B
Cost of Revenue$4.19B
Gross Profit$3.80B
SG&A Expenses$1.46B
Operating Expenses$5.98B
Operating Income$2.01B
Interest Expense$109.00M
Net Income$1.58B
EPS (Basic)$2.75
EPS (Diluted)$2.72
Shares Outstanding (Basic)576.50M
Shares Outstanding (Diluted)583.00M

Key Highlights

  • 1Third quarter 2019 net sales were $7.991 billion, down 2.0% year-over-year.
  • 2Net income attributable to 3M increased by 5.4% to $1.583 billion, and diluted EPS grew by 5.4% to $2.72.
  • 3The Safety and Industrial and Transportation & Electronics segments saw sales declines, impacted by market softness and inventory adjustments.
  • 4The Health Care segment reported a 4.7% increase in sales, driven by organic growth and acquisitions, while the Consumer segment saw a modest 1.7% sales increase.
  • 53M's operating cash flow for the first nine months of 2019 increased to $4.732 billion.
  • 6The company announced a new share repurchase program authorizing up to $10 billion and continued its dividend growth, marking the 61st consecutive year of increases.
  • 7Significant litigation-related charges and restructuring actions impacted results, with the company actively managing these costs and their ongoing effects.

Frequently Asked Questions

Net sales decreased by 2.0% year-over-year to $7.991 billion. This decline was primarily driven by weaker performance in the Safety and Industrial and Transportation and Electronics segments, which were affected by market softness and channel inventory adjustments in areas like China, automotive, and electronics. Offsetting these declines, the Health Care segment experienced a 4.7% sales increase, boosted by organic growth and acquisitions, and the Consumer segment saw a modest 1.7% sales increase.

3M implemented restructuring actions during the second quarter of 2019 impacting approximately 2,000 positions, which resulted in a $148 million pre-tax charge. Despite these actions and other significant charges (like those related to litigation and the deconsolidation of its Venezuelan subsidiary), net income attributable to 3M increased by 5.4% to $1.583 billion, and diluted EPS rose by 5.4% to $2.72. This profitability improvement was supported by benefits from these restructuring efforts, a lower effective tax rate, and gains from property sales.

3M maintains a strong financial position with $7.7 billion in cash, cash equivalents, and marketable securities at the end of Q3 2019. The company's debt level increased due to significant issuances, including in anticipation of the Acelity acquisition. 3M remains committed to returning capital to shareholders, having increased its quarterly dividend by 6% and continuing its share repurchase program, with $8.2 billion remaining under authorization. The company expects full-year 2019 capital expenditures to be between $1.6 billion and $1.7 billion.

The Safety and Industrial segment saw a 5.7% decrease in sales, largely due to softness across its portfolio. The Transportation and Electronics segment's sales fell 4.4%, impacted by declines in automotive and electronics, particularly in Asia Pacific. The Health Care segment performed well with a 4.7% sales increase, driven by growth in health information systems and medical solutions. The Consumer segment's sales increased by 1.7%, supported by strong performance in home improvement and consumer health care brands.