ST.
PAUL, Minn., Jan. 24,
2023 /PRNewswire/ -- 3M
(NYSE: MMM) today reported fourth-quarter and full-year 2022
results and provided its 2023 financial outlook.
"3M continues to focus on
delivering for customers and shareholders in a challenging economic
environment," said 3M chairman and
CEO Mike Roman. "We posted organic
growth of 0.4 percent -- versus our expectation of 1 to 3 percent
-- adjusted margins of 19.1 percent, and adjusted earnings of
$2.28 per share. The
slower-than-expected growth was due to rapid declines in
consumer-facing markets – a dynamic that accelerated in December –
along with significant slowing in China due to COVID-related disruptions. As
demand weakened, we adjusted manufacturing output and controlled
costs, which enabled us to improve inventory levels.
"In a year impacted by inflation, global conflicts, and economic
softening, our team took actions to position 3M for future success," said Roman. "We managed
our portfolio – including the divestiture of our Food Safety
business, planned spin-off of our Health Care business, and
commitment to exit PFAS manufacturing by the end of 2025 – while
continuing to work towards a mediated resolution for Combat Arms
litigation. We invested in growth and productivity, while following
through on sustainability commitments.
"We expect macroeconomic challenges to persist in 2023," Roman
continued. "Our focus is executing the actions we initiated in 2022
and delivering the best performance for customers and shareholders.
Based on what we see in our end markets, we will reduce
approximately 2,500 global manufacturing roles – a necessary
decision to align with adjusted production volumes."
Fourth-Quarter Highlights:
- Company reports GAAP earnings per share of $0.98, which included a $1.15 per share pre-tax charge relating to PFAS
manufacturing exit costs adjusted for in special items.
- Adjusted earnings per share of $2.28, excluding the impact of special
items.
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Q4 2022
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Q4 2021
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GAAP EPS
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$
0.98
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$
2.31
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Special
Items
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1.30
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0.14
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Adjusted EPS
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$
2.28
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$
2.45
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Memo:
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GAAP operating income
margin
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7.8 %
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18.8 %
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Adjusted operating
income margin
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19.1 %
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20.0 %
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See the "Supplemental
Financial Information Non-GAAP Measures" section for applicable
information.
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- Sales of $8.1 billion, down 6
percent year-on-year, which included impacts of negative 2 percent
from divestitures and negative 5 percent from foreign currency
translation due to strength of U.S. dollar.
- Organic sales growth of 0.4 percent year-on-year which included
a 2.6 percentage point headwind from the decline in disposable
respirator demand, along with the exit of Russia.
- Operating cash flow was $1.9
billion, down 4 percent year-on-year, while adjusted free
cash flow was $1.7 billion, up 3
percent year-on-year.
- 3M returned $1.4 billion to shareholders via dividends and
gross share repurchases.
Full-Year Highlights:
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Full Year
2022
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Full Year
2021
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GAAP EPS
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$
10.18
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$
10.12
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Special
Items
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(0.08)
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0.61
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Adjusted EPS
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$
10.10
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$
10.73
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Memo:
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GAAP operating income
margin
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19.1 %
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20.8 %
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Adjusted operating
income margin
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20.8 %
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22.2 %
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See the "Supplemental
Financial Information Non-GAAP Measures" section for applicable
information.
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- Sales of $34.2 billion, down 3
percent year-on-year, which included impacts of negative 1 percent
from divestitures and negative 4 percent from foreign currency
translation due to strength of U.S. dollar.
- Organic sales growth of 1.2 percent year-on-year which included
a 2.0 percentage point headwind from the decline in disposable
respirator demand, along with the exit of Russia.
- GAAP earnings per share of $10.18, up 1 percent, while adjusted earnings per
share was $10.10, down 6 percent.
Earnings reflect year-on-year changes in special items, headwinds
from manufacturing productivity, increased raw materials/logistics
costs, investments, and negative foreign exchange impacts. Benefits
to earnings included selling price actions, strong spending
discipline, and lower shares outstanding.
- Operating cash flow was $5.6
billion, down 25 percent year-on-year, while adjusted free
cash flow was $4.7 billion, down 25
percent year-on-year. The declines were primarily due to lower net
income and the cash impact from capitalization of R&D for U.S.
tax purposes.
- 3M returned $4.8 billion to shareholders via dividends and
gross share repurchases.
- Received approximately $1 billion
in consideration and reduced outstanding shares by 16 million via
exchange offer due to Food Safety divestiture.
2022 Results Based on New 2023 Outlook Basis
In December 2022, 3M announced it will exit per- and
polyfluoroalkyl substance (PFAS) manufacturing by the end of 2025.
Beginning in 2023, 3M expects to
adjust for the results of these manufactured PFAS products in
arriving at non-GAAP results. This expands the current adjustment
for special items in 3M's non-GAAP results to include the sales and
estimates of income, exit costs, and associated activity of PFAS
manufacturing.
Comparable 2022 GAAP sales, earnings, and cash flow amounts are
provided in the highlights section above. For additional clarity,
the impact of further adjusting for 2022 PFAS manufacturing sales
of $1.4 billion, estimated income of
$0.22 per share and related activity
on certain non-GAAP amounts on the existing versus new 2023 outlook
basis is presented below:
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Full Year 2022 —
Certain non-GAAP Amounts
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(Dollars in
millions, except per share amounts)
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Existing
Basis
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New Outlook
Basis
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Adjusted total sales
growth
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(3.2) %
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(3.6) %
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Adjusted organic sales
growth
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1.2 %
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0.8 %
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Adjusted earnings per
share
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$
10.10
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$
9.88
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Adjusted operating cash
flow
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$
6,440
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$
6,404
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Adjusted free cash flow
conversion
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82 %
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86 %
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See the "Supplemental Financial Information Non-GAAP Measures —
New Outlook Basis" section for further information regarding this
change.
Full-Year 2023 Outlook
3M's full-year expectations for 2023 include the following:
- -6 to -2 percent adjusted total sales growth^ reflecting the
following:
-
- -3 percent to flat adjusted organic sales growth^, includes -2
percentage point impact from disposable respirator decline and exit
of Russia
- -2 to -1 percent adjusted foreign currency translation
impact^
- -1 percent adjusted divestiture impact^
- Adjusted earnings per share^ of $8.50 to $9.00,
versus 2022 of $9.88 on a comparable
basis
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- 2023 adjusted earnings per share include -$0.55 to -$0.80 of
combined year-on-year headwinds from the decline in disposable
respirator demand, exit of Russia,
foreign currency translation, and divestitures
- Adjusted operating cash flow^ of $5.8 to $6.3
billion contributing to 90% to 100% adjusted free cash flow
conversion^
These expectations reflect changes in certain of 3M's non-GAAP
measures beginning in 2023 as discussed in the preceding
section.
3M expects to record a pre-tax
restructuring charge of $75 to
$100 million in the first quarter of
2023. This pre-tax charge and associated savings is included in the
company's full-year 2023 outlook.
^ As further discussed at * within the "Supplemental Financial
Information Non-GAAP Measures — New Outlook Basis" section,
3M cannot, without unreasonable
effort, forecast certain items required to develop meaningful
comparable GAAP financial measures and, therefore, does not provide
them on a forward-looking basis reflecting these items.
Conference Call
3M will conduct an investor
teleconference at 9 a.m. EST (8 a.m. CST) today.
Investors can access this conference via the following:
- Live webcast at http://investors.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://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., the access code is
22024173). The telephone replay will be available until
11:30 a.m. EST (10:30 a.m. CST) on January
31, 2023.
Consolidated Financial Statements and Supplemental Financial
Information Non-GAAP Measures
View the Consolidated Financial Statements and Supplemental
Financial Information Non-GAAP Measures on 3M's website:
https://investors.3m.com/Financial-Statements-Q422
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, political,
regulatory, international trade, geopolitical, capital markets and
other external conditions and other factors beyond the Company's
control, including inflation, recession, military conflicts,
natural and other disasters or climate change affecting the
operations of the Company or its customers and suppliers; (2) risks
related to unexpected events such as the public health crises
associated with the coronavirus (COVID-19) global pandemic; (3)
foreign currency exchange rates and fluctuations in those rates;
(4) liabilities related to certain fluorochemicals, including
lawsuits concerning various PFAS-related products and chemistries,
and claims and governmental regulatory proceedings and inquiries
related to PFAS in a variety of jurisdictions; (5) 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 Dec. 31, 2021, as updated by the Company's
Current Report on Form 8-K dated April 26,
2022, and any subsequent quarterly reports on Form 10-Q (the
"Reports"); (6) competitive conditions and customer preferences;
(7) the timing and market acceptance of new product and service
offerings; (8) the availability and cost of purchased components,
compounds, raw materials and energy due to shortages, increased
demand and wages or supply chain interruptions; (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; (10) the impact of acquisitions, strategic
alliances, divestitures, and other strategic events resulting from
portfolio management actions and other evolving business
strategies, and possible organizational restructuring; (11)
operational execution, including scenarios where the Company
generates fewer productivity improvements than planned; (12)
financial market risks that may affect the Company's funding
obligations under defined benefit pension and postretirement plans;
(13) the Company's credit ratings and its cost of capital; (14)
tax-related external conditions, including changes in tax rates,
laws or regulations; (15) matters relating to the proposed spin-off
of the Company's Health Care business, including whether the
transaction will be completed, or if completed, will be on the
expected terms; the risk that the expected benefits will not be
realized; the risk that the costs or dis-synergies will exceed the
anticipated amounts; the ability to satisfy the various closing
conditions; potential business disruption; the diversion of
management time; the impact of the transaction (or its pendency) on
the Company's ability to retain talent; potential impacts on the
Company's relationships with its customers, suppliers, employees,
regulators and other counterparties; the ability to realize the
desired tax treatment (including whether an Internal Revenue
Service private letter ruling will be sought or obtained); the risk
that any consents or approvals required will not be obtained; risks
associated with financings that may be undertaken and indebtedness
that may be incurred in connection with the transaction; (16)
matters relating to the voluntary chapter 11 proceedings of the
Company's subsidiary Aearo Technologies and certain of its
affiliates (the "Aearo Entities"), including legal risks related to
the chapter 11 proceedings; potential impacts to the Company's
reputation and its relationships with customers, suppliers,
employees, regulators and other counterparties and community
members; potential impacts to the Company's liquidity or results of
operations, including risks related to the amount that will be
necessary to fully and finally resolve all of the Company's
obligations to make payments to resolve such claims under the terms
of its funding and indemnification agreement with the Aearo
Entities; and the Aearo Entities' ability to navigate the chapter
11 proceedings to obtain approval and consummation of a plan of
reorganization; and (17) matters relating to the Company's plans to
exit PFAS manufacturing and discontinue use of PFAS across its
product portfolio (the "exit"), including the actual timing, costs
and financial impact of such exit; the Company's ability to
complete such exit, on the anticipated timing or at all; potential
governmental or regulatory actions relating to PFAS manufacturing
and production, or the Company's exit plans; the Company's ability
to identify and manufacture acceptable substitutes for the
discontinued products, and the possibility that such substitutes
will not achieve the anticipated or desired commercial or
operational results; potential litigation relating to the Company's
exit plans; and the possibility that the planned exit will involve
greater costs than anticipated, or otherwise have negative impacts
on the Company's relationships with its customers and other
counterparties. 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 Reports). The Company
assumes no obligation to update any forward-looking statements
discussed herein as a result of new information or future events or
developments.
About 3M
3M (NYSE: MMM) believes science
helps create a brighter world for everyone. By unlocking the power
of people, ideas and science to reimagine what's possible, our
global team uniquely addresses the opportunities and challenges of
our customers, communities, and planet. Learn how we're working to
improve lives and make what's next at 3M.com/news or on Twitter at @3M or @3MNews.
Please note that the company announces material financial,
business and operational information using the 3M investor relations website, SEC filings, press
releases, public conference calls and webcasts. The company also
uses the 3M news center and social
media to communicate with our customers and the public about the
company, products and services and other matters. It is possible
that the information 3M posts on the
news center and social media could be deemed to be material
information. Therefore, the company encourages investors, the media
and others interested in 3M to review
the information posted on 3M's news center and the social media
channels such as Twitter @3M or @3MNews.
Contacts
3M
Investor
Contacts:
Bruce
Jermeland, 651-733-1807
or
Diane Farrow,
612-202-2449
or
Media contact:
Tim
Post, tpost3@mmm.com
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SOURCE 3M