3M (NYSE: MMM) today reported first-quarter earnings of $1.85 per share,
an increase of 3.4 percent versus the first quarter of 2014. Sales
declined 3.2 percent year-on-year to $7.6 billion. Organic
local-currency sales grew 3.3 percent and foreign currency translation
reduced sales by 6.5 percent year-on-year.
Operating income was $1.7 billion and operating income margins for the
quarter were 22.8 percent, up 0.9 percentage points year-on-year.
First-quarter net income was $1.2 billion and the company converted 66
percent of net income to free cash flow.
3M paid $652 million in cash dividends to shareholders as the company
increased its first-quarter per-share dividend by 20 percent. Also, the
company repurchased $886 million of its own shares during the quarter.
Organic local-currency sales growth was 5.8 percent in Electronics and
Energy, 4.1 percent in Safety and Graphics, 3.0 percent in Health Care,
2.7 percent in Industrial and 2.1 percent in Consumer. On a geographic
basis, organic local-currency sales grew 5.6 percent in Asia Pacific,
3.6 percent in Latin America/Canada, 3.1 percent in the U.S. and 0.3
percent in EMEA (Europe, Middle East and Africa).
"We are executing well against a more challenging economic backdrop in
early 2015," said Inge G. Thulin, 3M's chairman, president and chief
executive officer. "The stronger U.S. dollar negatively impacted sales
and earnings in the first quarter, and global economic growth was mixed.
Despite these near-term challenges, we grew organically in all business
groups and all geographic areas, and expanded operating margins by
nearly a full percentage point."
Thulin continued, "We also continue to invest for long-term success
through research and development, commercialization and acquisitions. In
February, we announced plans to acquire Polypore's Separations Media
business for $1.0 billion, which will enhance our existing filtration
platform and help generate new growth opportunities across the company."
The company noted that foreign currency impacts reduced first-quarter
pre-tax earnings by approximately $90 million or the equivalent of $0.10
per share. For 2015 in total, 3M now expects foreign currency impacts to
reduce earnings by $0.35 to $0.40 per share versus a prior expectation
of negative $0.20 per share.
In light of the stronger U.S. dollar, 3M updated its 2015 financial
expectations. The company now expects earnings to be in the range of
$7.80 to $8.10 per share versus $8.00 to $8.30 per share previously.
Foreign currency translation is expected to reduce 2015 sales by 6 to 7
percent versus a previous expected reduction of 4 to 5 percent. 3M also
estimates its full-year tax rate will be in the range of 28.5 to 29.5
percent versus a previous forecast of 28 to 29 percent.
For the full year, 3M maintained its forecast for organic local-currency
sales growth in the range of 3 to 6 percent. The company also affirmed
its expectation of 90 to 100 percent free cash flow conversion.
First-Quarter Business Group Discussion
Industrial
Sales of $2.7 billion, down 4.3 percent in U.S. dollars. Organic
local-currency sales increased 2.7 percent and foreign currency
translation reduced sales by 7.0 percent.
On an organic local-currency basis:
Sales growth was led by aerospace and commercial transportation,
automotive OEM and 3M Purification.
Sales increased in Latin America/Canada, the U.S. and Asia
Pacific; EMEA sales were flat.
Operating income was $598 million, down 3.3 percent year-on-year;
operating margin of 22.5 percent.
Safety and Graphics
Sales of $1.4 billion, down 3.6 percent in U.S. dollars. Organic
local-currency sales increased 4.1 percent and foreign currency
translation reduced sales by 7.7 percent.
On an organic local-currency basis:
Sales grew in personal safety, commercial solutions, and traffic
safety and security; roofing granules declined year-on-year.
Sales grew across all major geographies led by Asia Pacific, Latin
America/Canada and the U.S.
Operating income was $335 million, an increase of 5.3 percent
year-on-year; operating margin of 24.4 percent.
Health Care
Sales of $1.3 billion, down 3.3 percent in U.S. dollars. Organic
local-currency sales increased 3.0 percent, acquisitions increased
sales by 0.7 percent and foreign currency translation reduced sales by
7.0 percent.
On an organic local-currency basis:
Sales growth was positive in food safety, critical and chronic
care, health information systems, infection prevention and oral
care; drug delivery systems declined year-on-year.
Sales increased in Asia Pacific, Latin America/Canada and the
U.S.; EMEA sales declined year-on-year.
Operating income was $408 million, a decline of 4.3 percent
year-on-year; operating margin of 30.7 percent.
Electronics and Energy
Sales of $1.3 billion, up 0.8 percent in U.S. dollars. Organic
local-currency sales increased 5.8 percent, divestitures reduced sales
by 0.9 percent and foreign currency translation reduced sales by 4.1
percent.
On an organic local-currency basis:
Electronics-related sales increased 12 percent with strong growth
in both electronics materials solutions, and display materials and
systems; energy-related sales declined 3 percent, with electrical
markets flat while telecom and renewable energy both declined.
Sales grew in all major geographies led by Asia Pacific, EMEA and
Latin America/Canada.
Operating income was $283 million, up 24.3 percent year-on-year;
operating margin of 21.4 percent.
Consumer
Sales of $1.0 billion, down 2.9 percent in U.S. dollars. Organic
local-currency sales increased 2.1 percent and foreign currency
translation reduced sales by 5.0 percent.
On an organic local-currency basis:
Sales grew in all businesses led by DIY and home care.
Sales increased in the U.S. and Asia Pacific; EMEA and Latin
America/Canada sales declined slightly year-on-year.
Operating income was $240 million, up 5.2 percent year-on-year;
operating margin of 22.9 percent.
3M will conduct an investor teleconference at 9:00 a.m. EDT (8:00 a.m.
CDT) today. Investors can access this conference via the following:
Live telephone: Call 800-762-2596 within the U.S. or +1
212-231-2916 outside the U.S. Please join the call at least 10 minutes
before the start time.
Webcast replay: Go to 3M's Investor Relations website at http://investors.3M.com
and click on "Quarterly Earnings."
Telephone replay:
Call 800-633-8284 within the U.S. or +1 402-977-9140 outside the U.S.
(for both U.S. and outside the U.S. access code is 21735067). The
telephone replay will be available until 10:30 a.m. CDT on April 28,
2015.
Forward-Looking Statements This news release contains
forward-looking information about 3M's financial results and estimates
and business prospects that involve substantial risks and uncertainties.
You can identify these statements by the use of words such as
"anticipate," "estimate," "expect," "aim," "project," "intend," "plan,"
"believe," "will," "should," "could," "target," "forecast" and other
words and terms of similar meaning in connection with any discussion of
future operating or financial performance or business plans or
prospects. Among the factors that could cause actual results to differ
materially are the following: (1) worldwide economic and capital markets
conditions and other factors beyond the Company's control, including
natural and other disasters affecting the operations of the Company or
its customers and suppliers; (2) the Company's credit ratings and its
cost of capital; (3) competitive conditions and customer preferences;
(4) foreign currency exchange rates and fluctuations in those rates; (5)
the timing and market acceptance of new product offerings; (6) the
availability and cost of purchased components, compounds, raw materials
and energy (including oil and natural gas and their derivatives) due to
shortages, increased demand or supply interruptions (including those
caused by natural and other disasters and other events); (7) the impact
of acquisitions, strategic alliances, divestitures, and other unusual
events resulting from portfolio management actions and other evolving
business strategies, and possible organizational restructuring; (8)
generating fewer productivity improvements than estimated; (9)
unanticipated problems or delays with the phased implementation of a
global enterprise resource planning (ERP) system, or security breaches
and other disruptions to the Company's information technology
infrastructure; and (10) legal proceedings, including significant
developments that could occur in the legal and regulatory proceedings
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 2014. Changes in such assumptions or factors could produce
significantly different results. A further description of these factors
is located in the Annual Report under "Cautionary Note Concerning
Factors That May Affect Future Results" and "Risk Factors" in Part I,
Items 1 and 1A. The information contained in this news release is as of
the date indicated. The Company assumes no obligation to update any
forward-looking statements contained in this news release as a result of
new information or future events or developments.
3M Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Millions, except per-share amounts)
(Unaudited)
Three-months ended
March 31,
2015
2014
Net sales
$
7,578
$
7,831
Operating expenses
Cost of sales
3,821
4,031
Selling, general and administrative expenses
1,564
1,632
Research, development and related expenses
463
452
Total operating expenses
5,848
6,115
Operating income
1,730
1,716
Interest expense and income
Interest expense
31
37
Interest income
(4
)
(9
)
Total interest expense – net
27
28
Income before income taxes
1,703
1,688
Provision for income taxes
502
463
Net income including noncontrolling interest
$
1,201
$
1,225
Less: Net income attributable to noncontrolling interest
2
18
Net income attributable to 3M
$
1,199
$
1,207
Weighted average 3M common shares outstanding – basic
636.2
661.5
Earnings per share attributable to 3M common shareholders – basic
$
1.88
$
1.83
Weighted average 3M common shares outstanding – diluted
649.2
674.5
Earnings per share attributable to 3M common shareholders – diluted
$
1.85
$
1.79
Cash dividends paid per 3M common share
$
1.025
$
0.855
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
Mar. 31,
Dec. 31,
Mar. 31,
2015
2014
2014
ASSETS
Current assets
Cash and cash equivalents
$
1,791
$
1,897
$
1,954
Marketable securities – current
1,018
626
860
Accounts receivable – net
4,408
4,238
4,598
Inventories
3,704
3,706
3,972
Other current assets
1,597
1,298
1,378
Total current assets
12,518
11,765
12,762
Marketable securities – non-current
13
828
1,360
Investments
102
102
120
Property, plant and equipment – net
8,286
8,489
8,630
Goodwill and intangible assets – net
8,330
8,485
8,988
Prepaid pension benefits (b)
56
46
624
Other assets (b)
1,338
1,554
1,063
Total assets
$
30,643
$
31,269
$
33,547
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and
current portion of long-term debt
$
132
$
106
$
2,176
Accounts payable
1,801
1,807
1,866
Accrued payroll
446
732
491
Accrued income taxes
464
435
481
Other current liabilities (a)
2,239
2,918
2,436
Total current liabilities
5,082
5,998
7,450
Long-term debt
6,459
6,731
4,401
Pension and postretirement benefits (b)
3,764
3,843
1,809
Other liabilities
1,386
1,555
1,963
Total liabilities
$
16,691
$
18,127
$
15,623
Total equity (a)(b)
$
13,952
$
13,142
$
17,924
Shares outstanding
March 31, 2015: 634,340,975 shares
December 31, 2014: 635,134,594 shares
March 31, 2014: 654,278,447 shares
Total liabilities and equity
$
30,643
$
31,269
$
33,547
(a)
In December 2014, 3M's Board of Directors declared a first-quarter
2015 dividend of $1.025 per share (paid in March 2015). This
reduced 3M's stockholders equity and increased other current
liabilities as of December 31, 2014, by approximately $0.6 billion.
(b)
The changes in 3M's defined benefit pension and postretirement
plans' funded status, which is required to be measured as of each
year-end, significantly impacted several balance sheet amounts. In
the fourth quarter of 2014, these required annual measurements
decreased prepaid pension benefits by $0.7 billion, increased
deferred taxes within other assets by $0.8 billion, increased
pension and postretirement benefits' long-term liabilities by $1.9
billion, and decreased stockholders' equity by $1.8 billion. Other
pension and postretirement changes during the year, such as
contributions and amortization, also impacted these balance sheet
amounts.
3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Three-months ended
March 31,
2015
2014
NET CASH PROVIDED BY OPERATING ACTIVITIES
$
1,080
$
1,092
Cash flows from investing activities:
Purchases of property, plant and equipment
(291
)
(293
)
Acquisitions, net of cash acquired
(150
)
—
Purchases and proceeds from sale or maturities of
marketable securities and investments – net
414
(2
)
Other investing activities
27
8
NET CASH USED IN INVESTING ACTIVITIES
—
(287
)
Cash flows from financing activities:
Change in debt
(4
)
574
Purchases of treasury stock
(886
)
(1,708
)
Proceeds from issuances of treasury stock pursuant to stock option
and benefit plans
309
267
Dividends paid to shareholders
(652
)
(566
)
Other financing activities
79
34
NET CASH USED IN FINANCING ACTIVITIES
(1,154
)
(1,399
)
Effect of exchange rate changes on cash and cash equivalents
(32
)
(33
)
Net increase (decrease) in cash and cash equivalents
(106
)
(627
)
Cash and cash equivalents at beginning of year
1,897
2,581
Cash and cash equivalents at end of period
$
1,791
$
1,954
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL INFORMATION
NON-GAAP MEASURES
(Dollars in millions)
(Unaudited)
Three-months ended
March 31,
Free Cash Flow
2015
2014
Net cash provided by operating activities
$
1,080
$
1,092
Purchases of property, plant and equipment
(291
)
(293
)
Free Cash Flow (c)
$
789
$
799
Free Cash Flow Conversion (c)
66
%
66
%
(c)
Free cash flow and free cash flow conversion are not defined under
U.S. generally accepted accounting principles (GAAP). Therefore,
they should not be considered a substitute for income or cash flow
data prepared in accordance with U.S. GAAP and may not be comparable
to similarly titled measures used by other companies. The Company
defines free cash flow as net cash provided by operating activities
less purchases of property, plant and equipment. It should not be
inferred that the entire free cash flow amount is available for
discretionary expenditures. The Company defines free cash flow
conversion as free cash flow divided by net income attributable to
3M. The Company believes free cash flow and free cash flow
conversion are useful measures of performance and uses these
measures as an indication of the strength of the company and its
ability to generate cash.
March 31,
December 31,
March 31,
Net Debt
2015
2014
2014
Total Debt
$
6,591
$
6,837
$
6,577
Less: Cash and Cash Equivalents and
Marketable Securities
2,822
3,351
4,174
Net Debt (d)
$
3,769
$
3,486
$
2,403
(d)
The Company defines net debt as total debt less the total of cash,
cash equivalents and current and long-term marketable securities. 3M
considers net debt and its components to be an important indicator
of liquidity and a guiding measure of capital structure strategy.
Net debt is not defined under U.S. GAAP and may not be computed the
same as similarly titled measures used by other companies.
March 31,
December 31,
March 31,
Working Capital Index
2015
2014
2014
Net Working Capital Turns (e)
4.8
5.0
4.7
(e)
The Company uses various working capital measures that place
emphasis and focus on certain working capital assets and
liabilities. 3M's net working capital index is defined as quarterly
net sales multiplied by four, divided by ending net accounts
receivable plus inventory less accounts payable. This measure is not
recognized under U.S. GAAP and may not be comparable to similarly
titled measures used by other companies.
3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)
Three-months ended March 31, 2015
Europe,
Middle
Latin
Sales Change Analysis
United
Asia-
East and
America/
World-
By Geographic Area
States
Pacific
Africa
Canada
wide
Volume – organic
2.5
%
5.4
%
(1.2
)
%
(0.2
)
%
2.3
%
Price
0.6
0.2
1.5
3.8
1.0
Organic local-currency sales
3.1
5.6
0.3
3.6
3.3
Acquisitions
0.4
–
–
–
0.1
Divestitures
(0.3
)
(0.1
)
–
(0.1
)
(0.1
)
Translation
–
(4.3
)
(16.2
)
(12.3
)
(6.5
)
Total sales change
3.2
%
1.2
%
(15.9
)
%
(8.8
)
%
(3.2
)
%
Three-months ended March 31, 2015
Organic
Worldwide
local-
Total
Sales Change Analysis
currency
Acqui-
Divest-
Trans-
sales
By Business Segment
sales
sitions
itures
lation
change
Industrial
2.7
%
–
%
–
%
(7.0
)
%
(4.3
)
%
Safety and Graphics
4.1
%
–
%
–
%
(7.7
)
%
(3.6
)
%
Electronics and Energy
5.8
%
–
%
(0.9
)
%
(4.1
)
%
0.8
%
Health Care
3.0
%
0.7
%
–
%
(7.0
)
%
(3.3
)
%
Consumer
2.1
%
–
%
–
%
(5.0
)
%
(2.9
)
%
3M Company and Subsidiaries
BUSINESS SEGMENTS
(Dollars in millions)
(Unaudited)
BUSINESS SEGMENT INFORMATION
Three-months ended
NET SALES
March 31,
2015
2014
Industrial
$
2,658
$
2,776
Safety and Graphics
1,372
1,423
Electronics and Energy
1,322
1,311
Health Care
1,329
1,374
Consumer
1,048
1,079
Corporate and Unallocated
2
3
Elimination of Dual Credit
(153
)
(135
)
Total Company
$
7,578
$
7,831
BUSINESS SEGMENT INFORMATION
Three-months ended
OPERATING INCOME
March 31,
2015
2014
Industrial
$
598
$
618
Safety and Graphics
335
318
Electronics and Energy
283
227
Health Care
408
427
Consumer
240
228
Corporate and Unallocated
(100
)
(72
)
Elimination of Dual Credit
(34
)
(30
)
Total Company
$
1,730
$
1,716
About 3M
At 3M, we apply science in collaborative ways to improve lives daily.
With $32 billion in sales, our 90,000 employees connect with customers
all around the world. Learn more about 3M's creative solutions to the
world's problems at www.3M.com
or on Twitter @3M or @3MNewsroom.
3M Investor Contacts: Matt Ginter, 651-733-8206 or Bruce
Jermeland, 651-733-1807 or Mike Kronebusch, 651-733-1141 or Media
Contact: Lori Anderson, 651-733-0831
