Fourth-Quarter Highlights:
- Organic local-currency sales growth
of 6.3 percent
- Earnings of $1.81 per share, up 11.7
percent
- Operating income margins of 21.5
percent, up 0.6 percentage points year-on-year
- Free cash flow conversion of 144
percent
- Returned $1.8 billion to
shareholders via dividends and gross share repurchases
- Announced Q1 2015 dividend per share
increase of 20 percent
3M (NYSE:MMM) today reported fourth-quarter earnings of $1.81
per share, an increase of 11.7 percent versus the fourth quarter of
2013. Sales grew 2.0 percent year-on-year to $7.7 billion. Organic
local-currency sales grew 6.3 percent with acquisitions adding 0.1
percent to sales. Foreign currency translation reduced sales by 4.4
percent year-on-year.
Operating income was $1.7 billion and operating income margins
for the quarter were 21.5 percent. Fourth-quarter net income was
$1.2 billion and the company converted 144 percent of net income to
free cash flow.
3M paid $544 million in cash dividends to shareholders and
repurchased $1.3 billion of its own shares during the quarter.
Organic local-currency sales growth was 9.2 percent in Safety
and Graphics, 6.4 percent in Health Care, 6.2 percent in
Electronics and Energy, 5.9 percent in Industrial, and 5.8 percent
in Consumer. On a geographic basis, organic local-currency sales
grew 9.0 percent in Latin America/Canada, 6.9 percent in Asia
Pacific, 6.6 percent in the U.S., and 3.3 percent in EMEA (Europe,
Middle East and Africa).
Full-year 2014 earnings were $7.49 per share, an increase of
11.5 percent. Sales increased 3.1 percent to a record $31.8 billion
with organic local-currency growth of 4.9 percent. Foreign currency
translation reduced sales by 1.9 percent. Full-year operating
income margins were 22.4 percent, up 0.8 percentage points versus
2013. 3M converted 104 percent of net income to free cash flow for
the year and generated 22 percent return on invested capital.
For the full year, 3M paid $2.2 billion in cash dividends to
shareholders and repurchased $5.7 billion of its own shares.
“3M delivered strong results in the fourth quarter, which
culminated a solid 2014 performance,” said Inge G. Thulin, 3M’s
chairman, president and chief executive officer. “Organic growth
was positive across all business groups and geographic areas, and
operating margins rose by nearly a full point. We once again
generated substantial free cash flow, which allowed for continued
investment in our businesses and significant return of cash to our
shareholders.”
3M affirmed its 2015 full-year performance expectations. The
company expects 2015 earnings to be in the range of $8.00 to $8.30
per share with organic local-currency sales growth of 3 to 6
percent. 3M also expects free cash flow conversion to be in the
range of 90 to 100 percent.
Fourth-Quarter Business Group Discussion
Industrial
- Sales of $2.6 billion, up 1.4 percent
in U.S. dollars. Organic local-currency sales increased 5.9 percent
and foreign currency translation reduced sales by 4.5 percent.
- On an organic local-currency basis:
- Sales growth was led by advanced
materials, aerospace and commercial transportation, industrial
adhesives and tapes, and automotive aftermarket.
- Sales grew in all major geographies,
led by the U.S., Latin America/Canada and Asia Pacific.
- Operating income was $538 million, down
2.9 percent year-on-year; operating margin of 20.5 percent.
Health Care
- Sales of $1.4 billion, up 2.4 percent
in U.S. dollars. Organic local-currency sales increased 6.4
percent, acquisitions increased sales by 0.6 percent and foreign
currency translation reduced sales by 4.6 percent.
- On an organic local-currency basis:
- Sales growth was led by health
information systems, food safety, infection prevention, and
critical and chronic care.
- Sales increased in all major
geographies, with the strongest growth in Latin America/Canada,
Asia Pacific and the U.S.
- Operating income was $431 million, an
increase of 1.6 percent; operating margin of 31.0 percent.
Electronics and Energy
- Sales of $1.4 billion, up 3.3 percent
in U.S. dollars. Organic local-currency sales increased 6.2 percent
and foreign currency translation reduced sales by 2.9 percent.
- On an organic local-currency basis:
- Electronics-related sales increased 9
percent with strong growth in both electronics materials solutions
and display materials and systems; energy-related sales increased 2
percent year-on-year with solid growth in electrical markets
partially offset by declines in telecom and renewable energy
businesses.
- Positive sales growth in Latin
America/Canada, Asia Pacific and EMEA; U.S. was flat
year-on-year.
- Operating income was $257 million, up
16.1 percent year-on-year; operating margin of 18.7 percent.
Safety and Graphics
- Sales of $1.4 billion, up 3.4 percent
in U.S. dollars. Organic local-currency sales increased 9.2 percent
and foreign currency translation reduced sales by 5.8 percent.
- On an organic local-currency basis:
- Sales growth was led by the personal
safety and commercial solutions businesses; sales in traffic safety
and security systems were down slightly year-on-year.
- Sales grew across all areas, led by
Asia Pacific, Latin America/Canada and EMEA.
- Operating income was $285 million, an
increase of 12.3 percent year-on-year; operating margin of 20.8
percent.
Consumer
- Sales of $1.1 billion, up 2.2 percent
in U.S. dollars. Organic local-currency sales increased 5.8 percent
and foreign currency translation reduced sales by 3.6 percent.
- On an organic local-currency basis:
- Sales growth was led by DIY, consumer
health care, and home care.
- Sales increased in Latin
America/Canada, the U.S. and Asia Pacific; EMEA sales declined
year-on-year.
- Operating income was $254 million, up
12.4 percent year-on-year; operating margin of 22.5 percent.
3M will conduct an investor teleconference at 9:00 a.m. EST
(8:00 a.m. CST) today. Investors can access this conference via the
following:
- Live webcast at
http://investor.3M.com.
- 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://investor.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 21728433). The telephone replay
will be available until 10:30 a.m. CST on February 1, 2015.
Forward-Looking StatementsThis 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," "project,"
"intend," "plan," "believe," "will," "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, 2013, and its subsequent
quarterly reports on Form 10-Q (the “Reports”). Changes in such
assumptions or factors could produce significantly different
results. A further description of these factors is located in the
Reports under "Cautionary Note Concerning Factors That May Affect
Future Results" and "Risk Factors" in Part I, Items 1 and 1A
(Annual Report) and in Part I, Item 2 and Part II, Item 1A
(Quarterly Report). 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
Twelve-months ended
December 31, December 31, 2014 2013 2014 2013 Net sales $
7,719 $ 7,569 $ 31,821 $ 30,871
Operating expenses Cost of sales 4,027 3,976 16,447 16,106 Selling,
general and administrative expenses 1,594 1,576 6,469 6,384
Research, development and related expenses 436
438 1,770 1,715 Total
operating expenses 6,057 5,990
24,686 24,205 Operating income
1,662 1,579 7,135 6,666
Interest expense and income Interest expense 32 32
142 145 Interest income (8 ) (11 ) (33 )
(41 ) Total interest expense – net 24
21 109 104 Income
before income taxes 1,638 1,558 7,026 6,562 Provision for
income taxes 459 442 2,028
1,841 Net income including
noncontrolling interest $ 1,179 $ 1,116 $ 4,998
$ 4,721
Less: Net income attributable to
noncontrolling interest
― 13 42 62 Net
income attributable to 3M $ 1,179 $ 1,103 $ 4,956
$ 4,659
Weighted average 3M common shares
outstanding – basic
637.9 668.5 649.2 681.9
Earnings per share attributable to 3M
common shareholders – basic
$ 1.85 $ 1.65 $ 7.63 $ 6.83
Weighted average 3M common shares
outstanding – diluted
650.9 681.3 662.0 693.6
Earnings per share attributable to 3M
common shareholders – diluted
$ 1.81 $ 1.62 $ 7.49 $ 6.72 Cash
dividends paid per 3M common share $ 0.855 $ 0.635 $
3.42 $ 2.54 3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in millions)
(Unaudited)
Dec. 31,
Dec. 31,
2014 2013
ASSETS Current assets Cash and cash equivalents $
1,897 $ 2,581 Marketable securities – current 626 756 Accounts
receivable – net 4,238 4,253 Inventories 3,706 3,864 Other current
assets 1,298 1,279 Total current assets 11,765
12,733 Marketable securities – non-current 828 1,453
Investments 102 122 Property, plant and equipment – net 8,489 8,652
Goodwill and intangible assets – net 8,485 9,033 Prepaid pension
benefits (a) 46 577 Other assets (a) 1,554 980 Total
assets $ 31,269 $ 33,550
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and current portion
of long-term debt
$ 106 $ 1,683 Accounts payable 1,807 1,799 Accrued payroll 732 708
Accrued income taxes 435 417 Other current liabilities 2,918
2,891 Total current liabilities 5,998 7,498
Long-term debt 6,731 4,326 Pension and postretirement benefits (a)
3,843 1,794 Other liabilities 1,555 1,984 Total
liabilities $ 18,127 $ 15,602 Total equity (a) $ 13,142 $
17,948 Shares outstanding December 31, 2014: 635,134,594 shares
December 31, 2013: 663,296,239 shares Total
liabilities and equity $ 31,269 $ 33,550 (a) 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)
Twelve-months
ended
December 31, 2014 2013
NET CASH PROVIDED BY OPERATING
ACTIVITIES
$ 6,626 $ 5,817 Cash flows from investing
activities:
Purchases of property, plant and
equipment
(1,493 ) (1,665 ) Acquisitions, net of cash acquired (94 ) ―
Purchases and proceeds from sale or
maturities of marketable securities and investments – net
754 627 Other investing activities 237 182
NET CASH USED IN INVESTING ACTIVITIES (596 )
(856 ) Cash flows from financing activities: Change
in debt 1,010 (37 ) Purchases of treasury stock (5,652 ) (5,212 )
Proceeds from issuances of treasury stock
pursuant to stock option and benefit plans
968 1,609 Dividends paid to shareholders (2,216 ) (1,730 ) Purchase
of noncontrolling interest (b) (861 ) ― Other financing activities
148 124 NET CASH USED IN
FINANCING ACTIVITIES (6,603 ) (5,246 )
Effect of exchange rate changes on cash
and cash equivalents
(111 ) (17 )
Net increase (decrease) in cash and cash
equivalents
(684 ) (302 )
Cash and cash equivalents at beginning of
year
2,581 2,883
Cash and cash equivalents at end of
period
$ 1,897 $ 2,581 (b) This primarily
related to the purchase of the remaining noncontrolling interest of
Sumitomo 3M Limited from Sumitomo Electric Industries, Ltd. for 90
billion Japanese Yen. The transaction closed on September 1, 2014.
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION NON-GAAP MEASURES (Dollars in millions)
(Unaudited) Three-months ended
Twelve-months ended December 31, December 31,
Free Cash Flow
2014 2013 2014 2013 Net cash provided by operating
activities $ 2,183 $ 1,993 $ 6,626 $ 5,817 Purchases of property,
plant and equipment (490 ) (543 ) (1,493 )
(1,665 ) Free Cash Flow (c) $ 1,693 $ 1,450
$ 5,133 $ 4,152
(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.
December 31,
Net Debt 2014 2013 Total Debt $ 6,837 $ 6,009
Less: Cash and Cash Equivalents and
Marketable Securities
3,351 4,790 Net Debt (d) $ 3,486
$ 1,219 (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.
December 31,
Working Capital Index 2014 2013 Net Working Capital
Turns (e) 5.0 4.8 (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.
Twelve-months ended
December 31,
Return on Invested Capital 2014 2013
Return on Invested Capital (f) 22.0 % 20.0 % (f) The Company
uses non-GAAP measures to focus on shareholder value creation. 3M
uses Return on Invested Capital (ROIC), defined as annualized
after-tax operating income (including interest income) divided by
average operating capital. Operating capital is defined as net
assets (total assets less total liabilities) excluding debt. 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 December 31, 2014
Europe,
Middle
Latin
Sales Change Analysis United Asia-
East and
America/
World-
By Geographic Area States
Pacific
Africa
Canada Wide Volume – organic 6.3 % 7.2 % 1.9 % 6.0 % 5.6 %
Price 0.3 (0.3 ) 1.4 3.0 0.7 Organic
local-currency sales 6.6 6.9 3.3 9.0 6.3 Acquisitions 0.3 – – – 0.1
Translation – (3.8 ) (9.7 ) (9.0 ) (4.4 ) Total sales change
6.9 % 3.1 % (6.4
) %
– % 2.0 % Three-months ended December 31, 2014
Organic
Worldwide local- Total
Sales Change Analysis currency
Acqui- Divest- Trans- sales
By Business Segment sales
sitions itures lation change Industrial 5.9 % – % – % (4.5
) %
1.4 % Safety and Graphics 9.2 % – % – % (5.8
) %
3.4 % Electronics and Energy 6.2 % – % – % (2.9
) %
3.3 % Health Care 6.4 % 0.6 % – % (4.6
) %
2.4 % Consumer 5.8 % – % – % (3.6
) %
2.2 % Twelve-months ended December 31, 2014
Europe,
Middle
Latin
Sales Change Analysis United Asia-
East and
America/ World-
By Geographic Area States Pacific
Africa
Canada Wide Volume – organic 4.4 % 6.2 % 2.1 % 0.2 % 3.9 %
Price 0.5 0.1 1.1 4.3 1.0
Organic local-currency sales 4.9 6.3 3.2 4.5 4.9 Acquisitions 0.2 –
– – 0.1 Divestitures (0.1 ) – – – – Translation – (2.2 )
(1.6 ) (7.5 ) (1.9 ) Total sales change 5.0 % 4.1 % 1.6 % (3.0
) %
3.1 % Twelve-months ended December 31, 2014 Organic
Worldwide local- Total
Sales Change Analysis currency
Acqui- Divest- Trans- sales
By Business Segment sales
sitions itures lation change Industrial 4.9 % – % – % (1.8
) %
3.1 % Safety and Graphics 5.4 % – % – % (2.7
) %
2.7 % Electronics and Energy 5.2 % – % – % (1.3
) %
3.9 % Health Care 5.8 % 0.4 % – % (1.7
) %
4.5 % Consumer 3.9 % – % (0.1
) %
(1.8
) %
2.0 %
BUSINESS SEGMENTS(Dollars in
millions)(Unaudited)
Effective in the first quarter of 2014, 3M transferred a product
line between divisions within different business segments and made
other changes within business segments in its continuing effort to
improve the alignment of its businesses around markets and
customers.
The product move between business segments was as follows:
- The movement of the Fire Protection
product line from the Building and Commercial Services Division
(Safety and Graphics business segment) to the Industrial Adhesives
and Tapes Division (Industrial business segment). This product move
resulted in an increase in net sales for total year 2013 of $73
million in the Industrial business segment offset by a
corresponding decrease in the Safety and Graphics business
segment.
In addition, other changes within business segments were as
follows:
- The combination of certain existing
divisions/departments into new divisions. Within the Electronics
and Energy business segment, the new divisions include the
Electrical Markets Division (which includes the former
Infrastructure Protection Division), and the Electronic Solutions
Division (which includes the former 3M Touch Systems, Inc.). Within
the Safety and Graphics business segment, the new Commercial
Solutions Division was created from the combination of the former
Architectural Markets Department, the former Building and
Commercial Services Division and the former Commercial Graphics
Division. None of these combinations crossed business
segments.
- The renaming of the former Aerospace
and Aircraft Maintenance Division within the Industrial business
segment to the Aerospace and Commercial Transportation
Division.
- The movement of certain product lines
between various divisions within the same business segment.
Effective in the second quarter of 2014, within the Electronics
and Energy business segment, 3M combined three existing divisions
into two new divisions. A large portion of both the Electronics
Markets Materials Division and the Electronic Solutions Division
were combined to form the Electronics Materials Solutions Division,
which focuses on semiconductor and electronics materials and
assembly solutions. The Optical Systems Division, the remaining
portion of the Electronic Solutions Division and a portion of the
Electronics Markets Materials Division were combined to form the
Display Materials and Systems Division, which focuses on delivering
light, color and user interface solutions.
Effective in the fourth quarter of 2014, within the Industrial
business segment, the Personal Care Division, which focuses on
tapes and attachment systems for infant and adult hygiene, was
combined with the Industrial Adhesives and Tapes Division.
The financial information presented herein reflects, for all
periods presented, the impact of these realignments. Refer to 3M's
Current Report on Form 8-K furnished on March 5, 2014, and 3M's
Current Report on Form 8-K filed on May 15, 2014, for additional
information concerning the business segment realignments effective
in the first quarter of 2014.
BUSINESS SEGMENT INFORMATION
Three-months ended
Twelve-months ended
NET SALES December 31, December 31, (Millions) 2014
2013 2014 2013 Industrial $ 2,627 $
2,589 $ 10,990 $ 10,657 Safety and Graphics 1,367 1,322 5,732 5,584
Electronics and Energy 1,371 1,327 5,604 5,393 Health Care 1,392
1,359 5,572 5,334 Consumer 1,128 1,103 4,523 4,435 Corporate and
Unallocated (1 ) 2 4 8 Elimination of Dual Credit (165 )
(133 ) (604 ) (540 ) Total Company $
7,719 $ 7,569 $ 31,821 $ 30,871
BUSINESS SEGMENT INFORMATION
Three-months ended
Twelve-months ended
OPERATING INCOME December 31, December 31, (Millions) 2014
2013 2014 2013 Industrial $ 538 $ 554 $ 2,389 $ 2,307 Safety
and Graphics 285 254 1,296 1,227 Electronics and Energy 257 221
1,115 954 Health Care 431 425 1,724 1,672 Consumer 254 226 995 945
Corporate and Unallocated (67 ) (72 ) (251 ) (321 ) Elimination of
Dual Credit (36 ) (29 ) (133 ) (118 )
Total Company $ 1,662 $ 1,579 $ 7,135 $
6,666
About 3M3M captures the spark of new ideas and transforms
them into thousands of ingenious products. Our culture of creative
collaboration inspires a never-ending stream of powerful
technologies that make life better. 3M is the innovation company
that never stops inventing. With $32 billion in sales, 3M employs
90,000 people worldwide and has operations in more than 70
countries.
3MInvestor Contacts:Matt Ginter,
651-733-8206orBruce Jermeland, 651-733-1807orMedia
Contact:Fanna Haile-Selassie, 651-736-0876
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