3M Reports First-Quarter 2020 Results

First-Quarter Highlights:

  • Sales of $8.1 billion, up 2.7 percent year-on-year
  • Organic local-currency sales grew 0.3 percent year-on-year
  • GAAP EPS of $2.22; adjusted EPS of $2.16
  • Operating cash flow of $1.2 billion, up 16 percent year-on-year; adjusted free cash flow of $0.9 billion, up 40 percent year-on-year
  • Withdraws full-year 2020 guidance due to COVID-19 impact and end-market uncertainty

ST. PAUL, Minn.–(BUSINESS WIRE)–3M (NYSE: MMM) today reported first-quarter 2020 results.

“In this unprecedented time, I could not be more proud of how our 96,000 people have stepped up to help fight COVID-19, and I thank all 3Mers for their incredible efforts,” said Mike Roman, 3M chairman and chief executive officer. “We are attacking the pandemic from all angles, which includes mobilizing all of our resources and rapidly increasing output of critical supplies to healthcare workers and first responders.”

“Given the breadth and diversity of our businesses, the financial impact of COVID-19 is varying across 3M,” Roman continued. “In the first quarter we saw strong growth in personal safety, as well as in other areas of our portfolio experiencing high demand due to the pandemic. At the same time, we experienced weak demand in several end markets that were more severely impacted by actions taken around the world to slow the pandemic. Looking ahead, 3M is taking action that will help us navigate near-term uncertainty, generate strong cash flow, and lead out of the slowdown by delivering for employees, customers and shareholders.”

COVID-19 Response & Business Impact

3M has been aggressively responding to the COVID-19 pandemic given its critical role as a provider of personal protective equipment in the U.S. and across the world. Since the beginning of the year, 3M has continued to:

  • Lead in pandemic response

    • Accelerated respirator production, including ramped up idle respirator lines
    • Doubled global respirator output to 100 million/month (U.S. ~35 million/month)
    • Increasing capital investment to double respirator output again
    • Partnering to create innovative solutions to protect healthcare workers
  • Prioritize supplies to the most critical areas

    • Immediately redirected vast majority of global respirators output to healthcare
    • Uniting with governments and distribution partners to expedite products to healthcare workers
    • Closely collaborating with U.S. Administration, FDA, HHS, DoD and FEMA to import 166.5 million respirators into the U.S.
  • Fight fraud and price gouging

    • Working with distributors and governments to ensure secure supply chains
    • 3M has not increased respirator prices as a result of the pandemic
    • Published N95 respirator prices; created hotline for fraud and price gouging
    • Working with national and local legal authorities to bring lawsuits in multiple states and Canada
  • Support communities through aid for relief and recovery efforts

    • Contributing $20 million in financial support to frontline healthcare workers, vulnerable populations disproportionately affected by the virus and medical research initiatives

The COVID-19 pandemic is affecting 3M’s businesses in a number of ways. 3M has experienced strong end-market demand, specifically in personal safety, home improvement, general cleaning, food safety and biopharma filtration. At the same time, several other end markets have experienced significant weakness due to social distancing and shelter-in-place mandates. These end markets include oral care, automotive OEM and aftermarket, general industrial, commercial solutions, and stationery and office.

The company is continuing to adapt quickly to the current environment, with a focus on mitigating the near-term impact while positioning 3M’s businesses for success coming out of the crisis. Actions being taken include:

  • Protecting our employees

    • Mobilized global crisis action team in January
    • Updated safe workplace protocols globally, including work-from-home where possible
    • Implemented pandemic support programs
  • Ensuring business continuity

    • Maintaining strong customer service with new global Enterprise Operations organization
    • Ongoing adjustments to operations, including targeted shutdowns due to weak customer/market demand or government mandates
    • Targeted paid short-term furloughs in businesses most impacted
  • Protecting financial flexibility

    • Taking aggressive cost reductions while minimizing employee impact—estimated cost savings of $350 to $400 million in the second quarter of 2020
    • Adjusting capital allocation plans—prioritizing organic investments and the dividend, and suspended share repurchase program
    • Reduced full-year 2020 cap-ex plan to approximately $1.3 billion versus $1.6 to $1.8 billion, previously
    • Added $1.75 billion of cash via March 2020 debt issuance
    • Continue to expect after-tax proceeds of $0.4 billion from closing of drug delivery divestiture in second quarter 2020

Withdrawing Full-Year Outlook

Due to the evolving and uncertain impact of the COVID-19 pandemic, 3M currently is not able to estimate the full duration, magnitude and pace of recovery across its diverse end markets with reasonable accuracy. Therefore, 3M believes it is prudent to withdraw its previously communicated full-year 2020 outlook, which was provided on January 28, 2020. The company will begin reporting monthly sales information starting in May to provide transparency on 3M’s ongoing business performance.

First-Quarter Results

Sales were up 2.7 percent year-on-year to $8.1 billion. Organic local-currency sales grew 0.3 percent while acquisitions, net of divestitures, increased sales by 4.2 percent. Foreign currency translation reduced sales by 1.8 percent year-on-year.

Total sales grew 21.0 percent in Health Care and 4.6 percent in Consumer, with declines of 1.0 percent in Safety and Industrial and 5.0 percent in Transportation and Electronics. Organic local-currency sales increased 6.1 percent in Consumer, 2.2 percent in Safety and Industrial and 1.2 percent in Health Care, with a decline of 3.0 percent in Transportation and Electronics.

On a geographic basis, total sales grew 10.1 percent in the Americas, with declines of 2.1 percent in EMEA (Europe, Middle East and Africa) and 5.4 percent in Asia Pacific. Organic local-currency sales increased 4.2 percent in the Americas, with declines of 1.7 percent in EMEA and 4.4 percent in Asia Pacific.

First-quarter GAAP earnings were $2.22 per share, an increase of 47 percent year-on-year, with operating income of $1.7 billion and operating margins of 20.6 percent.

Excluding special items, first-quarter adjusted earnings were $2.16 per share, a decline of 2.7 percent year-on-year, with operating income of $1.7 billion and operating margins of 20.8 percent, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.

The company’s operating cash flow was $1.2 billion with adjusted free cash flow of $0.9 billion contributing to adjusted free cash flow conversion of 74 percent. See the “Supplemental Financial Information Non-GAAP Measures” section for applicable information.

The company paid $847 million in cash dividends to shareholders and repurchased $365 million of its own shares during the quarter.

First-Quarter Business Group Discussion

Safety and Industrial

  • Sales of $2.9 billion, down 1.0 percent in U.S. dollars. Organic local-currency sales increased 2.2 percent, foreign currency translation decreased sales by 2.2 percent, and divestitures decreased sales by 1.0 percent.
  • On an organic local-currency basis:

    • Sales increased in personal safety, roofing granules, and industrial adhesives and tapes; sales declined in closure and masking, electrical markets, automotive aftermarket, and abrasives.
    • Sales grew in the Americas and EMEA; sales declined in Asia Pacific.
  • Operating income was $726 million, an increase of 14.0 percent year-on-year; operating margins of 24.7 percent.

Transportation and Electronics

  • Sales of $2.2 billion, down 5.0 percent in U.S. dollars. Organic local-currency sales decreased 3.0 percent, foreign currency translation decreased sales by 1.3 percent, and divestitures decreased sales by 0.7 percent.
  • On an organic local-currency basis:

    • Sales increased in electronics and were flat in advanced materials, and transportation safety; sales declined in commercial solutions, and automotive and aerospace.
    • Sales declined in the Americas, Asia Pacific and EMEA.
  • Operating income was $484 million, a decline of 7.3 percent year-on-year; operating margins of 21.6 percent.
  • Adjusted operating income was $482 million, a decline of 7.1 percent year-on-year; adjusted operating margins of 21.5 percent.

Health Care

  • Sales of $2.1 billion, up 21.0 percent in U.S. dollars. Organic local-currency sales increased 1.2 percent, foreign currency translation decreased sales by 1.8 percent, and acquisitions increased sales by 21.6 percent.
  • On an organic local-currency basis:

    • Sales grew in drug delivery, food safety, medical solutions, and separation and purification, and were flat in health information systems; sales declined in oral care.
    • Sales grew in the Americas; sales declined in EMEA and Asia Pacific.
  • Both GAAP and adjusted operating income was $456 million, a decline of 1.7 percent year-on-year on a GAAP basis; or a decline of 0.7 percent on an adjusted basis; operating margins of 21.7 percent.

Consumer

  • Sales of $1.3 billion, up 4.6 percent in U.S. dollars. Organic local-currency sales increased 6.1 percent and foreign currency translation decreased sales by 1.5 percent.
  • On an organic local-currency basis:

    • Sales grew in home improvement, home care and consumer health care; sales declined in stationery and office supplies.
    • Sales grew in the Americas; sales declined in Asia Pacific and EMEA.
  • Operating income was $269 million, up 14.5 percent year-on-year; operating margins of 21.4 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 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 21930637). The telephone replay will be available until 11:30 a.m. EDT (10:30 a.m. CDT) on May 5, 2020.

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, capital markets and other external conditions and other factors beyond the Company’s control, including natural and other disasters or climate change affecting the operations of the Company or its customers and suppliers; (2) risks related to public health crises such as the global pandemic associated with the coronavirus (COVID-19); (3) 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; (4) 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, 2019, and any subsequent quarterly reports on Form 10-Q (the “Reports”); (5) competitive conditions and customer preferences; (6) foreign currency exchange rates and fluctuations in those rates; (7) the timing and market acceptance of new product offerings; (8) 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); (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 unusual 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 estimated; (12) financial market risks that may affect the Company’s funding obligations under defined benefit pension and postretirement plans; and (13) the Company’s credit ratings and its cost of capital. 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), as updated by applicable Current Reports on Form 8-K. 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,

 

 

 

2020

 

2019

 

Net sales

 

$

8,075

 

 

$

7,863

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Cost of sales

 

 

4,109

 

 

 

4,310

 

 

Selling, general and administrative expenses

 

 

1,768

 

 

 

1,948

 

 

Research, development and related expenses

 

 

537

 

 

 

477

 

 

Gain on sale of businesses

 

 

(2

)

 

 

(8

)

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

6,412

 

 

 

6,727

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

1,663

 

 

 

1,136

 

 

 

 

 

 

 

 

 

 

Other expense (income), net

 

 

96

 

 

 

48

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

1,567

 

 

 

1,088

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

273

 

 

 

195

 

 

 

 

 

 

 

 

 

 

Net income including noncontrolling interest

 

$

1,294

 

 

$

893

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interest

 

 

2

 

 

 

2

 

 

 

 

 

 

 

 

 

 

Net income attributable to 3M

 

$

1,292

 

 

$

891

 

 

 

 

 

 

 

 

 

 

Weighted average 3M common shares outstanding – basic

 

 

576.8

 

 

 

577.5

 

 

Earnings per share attributable to 3M common shareholders – basic

 

$

2.24

 

 

$

1.54

 

 

 

 

 

 

 

 

 

 

Weighted average 3M common shares outstanding – diluted

 

 

581.5

 

 

 

588.5

 

 

Earnings per share attributable to 3M common shareholders – diluted

 

$

2.22

 

 

$

1.51

 

 

 

3M Company and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEET

(Dollars in millions)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

2020

 

2019

 

ASSETS

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,253

 

$

2,353

 

Marketable securities – current

 

 

224

 

 

98

 

Accounts receivable – net

 

 

4,821

 

 

4,791

 

Inventories

 

 

4,217

 

 

4,134

 

Prepaids

 

 

604

 

 

704

 

Other current assets

 

 

971

 

 

891

 

Total current assets

 

 

15,090

 

 

12,971

 

Property, plant and equipment – net

 

 

9,165

 

 

9,333

 

Operating lease right of use assets

 

 

849

 

 

858

 

Goodwill and intangible assets – net

 

 

19,503

 

 

19,823

 

Other assets

 

 

1,605

 

 

1,674

 

Total assets

 

$

46,212

 

$

44,659

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Short-term borrowings and

 

 

 

 

 

 

 

current portion of long-term debt

 

$

3,248

 

$

2,795

 

Accounts payable

 

 

2,207

 

 

2,228

 

Accrued payroll

 

 

523

 

 

702

 

Accrued income taxes

 

 

136

 

 

194

 

Operating lease liabilities – current

 

 

244

 

 

247

 

Other current liabilities

 

 

2,776

 

 

3,056

 

Total current liabilities

 

 

9,134

 

 

9,222

 

Long-term debt

 

 

19,247

 

 

17,518

 

Other liabilities

 

 

7,622

 

 

7,793

 

Total liabilities

 

$

36,003

 

$

34,533

 

 

 

 

 

 

 

 

 

Total equity

 

$

10,209

 

$

10,126

 

Shares outstanding

 

 

 

 

 

 

 

March 31, 2020: 575,196,371 shares

 

 

 

 

 

 

 

December 31, 2019: 575,184,835 shares

 

 

 

 

 

 

 

Total liabilities and equity

$

46,212

$

44,659

 

3M Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in millions)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2020

 

2019

 

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

$

1,213

 

 

$

1,048

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(332

)

 

 

(391

)

 

Acquisitions, net of cash acquired

 

 

(25

)

 

 

(704

)

 

Purchases and proceeds from sale or maturities of marketable securities and investments – net

 

 

(111

)

 

 

(142

)

 

Proceeds from sale of businesses, net of cash sold

 

 

86

 

 

 

6

 

 

Other investing activities

 

 

7

 

 

 

6

 

 

 

 

 

 

 

 

 

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

 

 

(375

)

 

 

(1,225

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Change in debt

 

 

2,207

 

 

 

1,591

 

 

Purchases of treasury stock

 

 

(365

)

 

 

(701

)

 

Proceeds from issuances of treasury stock pursuant to stock option and benefit plans

 

 

149

 

 

 

215

 

 

Dividends paid to shareholders

 

 

(847

)

 

 

(830

)

 

Other financing activities

 

 

(36

)

 

 

(17

)

 

 

 

 

 

 

 

 

 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

 

1,108

 

 

 

258

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(46

)

 

 

4

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

1,900

 

 

 

85

 

 

Cash and cash equivalents at beginning of year

 

 

2,353

 

 

 

2,853

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

4,253

 

 

$

2,938

 

 

 

3M Company and Subsidiaries

SUPPLEMENTAL FINANCIAL INFORMATION

NON-GAAP MEASURES

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in millions, except per share amounts)

 

 

Operating

Income

 

Operating

Income

Margin

 

 

Income

Before

Taxes

 

 

Provision

for

Income

Taxes

 

Effective

Tax

Rate

 

 

Net Income

Attributable

to 3M

 

 

Earnings

Per

Diluted

Share

 

Earnings

per

diluted

share

percent

change

 

Q1 2019 GAAP

 

$

1,136

 

 

14.4

%

$

1,088

 

 

$

195

 

 

17.9

%

$

891

 

 

$

1.51

 

 

 

 

Adjustments for special items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Significant litigation-related charges/benefits

 

 

548

 

 

 

 

 

548

 

 

 

124

 

 

 

 

 

424

 

 

 

0.72

 

 

 

 

(Gain)/loss on sale of businesses

 

 

(8

)

 

 

 

 

(8

)

 

 

(1

)

 

 

 

 

(7

)

 

 

(0.01

)

 

 

 

Q1 2019 adjusted amounts (non-GAAP measures) (a)

 

$

1,676

 

 

21.3

%

$

1,628

 

 

$

318

 

 

19.5

%

$

1,308

 

 

$

2.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1 2020 GAAP

 

$

1,663

 

 

20.6

%

$

1,567

 

 

$

273

 

 

17.4

%

$

1,292

 

 

$

2.22

 

 

47.0

%

Adjustments for special items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Significant litigation-related charges/benefits

 

 

17

 

 

 

 

 

17

 

 

 

56

 

 

 

 

 

(39

)

 

 

(0.06

)

 

 

 

(Gain)/loss on sale of businesses

 

 

(2

)

 

 

 

 

(2

)

 

 

(3

)

 

 

 

 

1

 

 

 

 

 

 

 

Q1 2020 adjusted amounts (non-GAAP measures) (a)

 

$

1,678

 

 

20.8

%

$

1,582

 

 

$

326

 

 

20.6

%

$

1,254

 

 

$

2.16

 

 

(2.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2020

(dollars in millions)

 

 

Safety and

Industrial

 

 

Transportation

and Electronics

 

 

Health Care

 

 

Consumer

 

 

Corporate

and

Unallocated

 

 

Elimination of

Dual Credit

 

 

Total

Company

 

Operating income (measure of segment operating performance)

 

$

726

 

 

$

484

 

 

$

456

 

 

$

269

 

 

$

(156

)

 

$

(116

)

 

$

1,663

 

 

Operating income margin

 

 

24.7

%

 

21.6

%

 

21.7

%

 

21.4

%

 

 

 

 

 

 

 

20.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments for special items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Significant litigation-related charges/benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

$

17

 

 

 

 

 

$

17

 

 

(Gain)/loss on sale of businesses

 

 

 

 

$

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

Adjusted operating income (non-GAAP measures) (a)

 

$

726

 

 

$

482

 

 

$

456

 

 

$

269

 

 

$

(139

)

 

$

(116

)

 

$

1,678

 

 

Adjusted operating income margin (non-GAAP measures) (a)

 

 

24.7

%

 

21.5

%

 

21.7

%

 

21.4

%

 

 

 

 

 

 

 

20.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2019

(dollars in millions)

 

 

Safety and

Industrial

 

Transportation

and Electronics

 

 

Health Care

 

 

Consumer

 

Corporate

and

Unallocated

 

 

Elimination of

Dual Credit

 

 

Total

Company

 

Operating income (measure of segment operating performance)

 

$

637

 

$

522

 

 

$

464

 

 

$

235

 

$

(625

)

 

$

(97

)

 

$

1,136

 

 

Operating income margin

 

 

21.5

%

 

22.2

%

 

26.7

%

 

19.6

%

 

 

 

 

 

 

 

14.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments for special items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Significant litigation-related charges/benefits

 

 

 

 

 

 

 

 

 

 

 

$

548

 

 

 

 

 

$

548

 

 

(Gain)/loss on sale of businesses

 

 

 

$

(3

)

 

$

(5

)

 

 

 

 

 

 

 

 

 

 

(8

)

 

Adjusted operating income (non-GAAP measures) (a)

 

$

637

 

$

519

 

 

$

459

 

 

$

235

 

$

(77

)

 

$

(97

)

 

$

1,676

 

 

Adjusted operating income margin (non-GAAP measures) (a)

 

 

21.5

%

 

22.1

%

 

26.4

%

 

19.6

%

 

 

 

 

 

 

 

21.3

%

 

(a)

In addition to reporting financial results in accordance with U.S. GAAP, the Company also provides non-GAAP measures that adjust for the special items. Special items for the periods presented include the items described in the section entitled “Description of Special Items”. Beginning in 2020, the Company includes gain/loss on sale of businesses and divestiture-related restructuring actions as special items due to their potential distortion of underlying operating results. Information provided herein reflects the impact of this change for all periods presented. Operating income (measure of segment operating performance), income before taxes, net income, earnings per share and effective tax rate are all measures for which 3M provides the reported GAAP measure and a measure adjusted for special items. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. The Company considers these non-GAAP measures in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for these items is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. The determination of these items may not be comparable to similarly titled measures used by other companies.

 

3M Company and Subsidiaries

SUPPLEMENTAL FINANCIAL INFORMATION

NON-GAAP MEASURES – (CONTINUED)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

 

March 31,

 

Major GAAP Cash Flow Categories (dollars in millions)

 

2020

 

2019

 

Net cash provided by (used in) operating activities

 

$

1,213

 

 

$

1,048

 

 

Net cash provided by (used in) investing activities

 

 

(375

)

 

 

(1,225

)

 

Net cash provided by (used in) financing activities

 

 

1,108

 

 

 

258

 

 

 

 

 

 

 

 

 

 

Adjusted Free Cash Flow (non-GAAP measure) (dollars in millions)

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

1,213

 

 

$

1,048

 

 

Purchases of property, plant and equipment

 

 

(332

)

 

 

(391

)

 

Free cash flow

 

$

881

 

 

$

657

 

 

Adjustments for special items:

 

 

 

 

 

 

 

Significant litigation-related after-tax payment impacts

 

$

50

 

 

$

 

 

Divestiture-related restructuring after-tax payment impacts

 

 

 

 

 

10

 

 

Adjusted free cash flow (b)

 

$

931

 

 

$

667

 

 

 

 

 

 

 

 

 

 

Net income attributable to 3M

 

$

1,292

 

 

$

891

 

 

Adjustments for special items:

 

 

 

 

 

 

 

Significant litigation-related charges/benefits

 

 

(39

)

 

 

424

 

 

(Gain)/loss on sale of businesses

 

 

1

 

 

 

(7

)

 

Adjusted net income attributable to 3M (a)

 

$

1,254

 

 

$

1,308

 

 

Adjusted free cash flow conversion (b)

 

 

74

 

%

 

51

 

%

 

(b)

Adjusted free cash flow and adjusted free cash flow conversion are not defined under U.S. 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 adjusted free cash flow as net cash provided by operating activities, adjusted for special items, less purchases of property, plant and equipment. Cash payments associated with special items in the determination of adjusted free cash flow are reflected net of applicable tax using the U.S. statutory corporate tax rate during the period of payment. It should not be inferred that the entire adjusted free cash flow amount is available for discretionary expenditures. The Company defines adjusted free cash flow conversion as adjusted free cash flow divided by net income attributable to 3M, adjusted for special items. Special items for the periods presented include the items described in section entitled “Description of Special Items”. The Company believes adjusted free cash flow and adjusted free cash flow conversion are meaningful to investors as they are useful measures of performance, and the Company uses these measures as an indication of the strength of the company and its ability to generate cash.

Contacts

3M
Investor Contacts:
Bruce Jermeland, 651-733-1807

or

Tony Riter, 651-733-1141

or

Media Contact:
Fanna Haile-Selassie, 651-736-0876

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