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3M(MMM) - 2024 Q3 - Quarterly Report
MMM3M(MMM)2024-10-22 15:48
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Business Separation and Solventum Impact - 3M completed the separation of its Health Care business on April 1, 2024, distributing 80.1% of Solventum Corporation shares to 3M stockholders, resulting in Solventum becoming an independent public company[116] - The company reported a Solventum ownership benefit from the change in value of 3.06persharefortheninemonthsendedSeptember30,2024[119]−Solventum′sseparationfrom3MinApril2024resultedinayear−on−yearbenefitof3.06 per share for the nine months ended September 30, 2024[119] - Solventum's separation from 3M in April 2024 resulted in a year-on-year benefit of 0.6 billion in Q3 2024 and 1.7billioninthefirstninemonthsof2024[147]−Netcashof1.7 billion in the first nine months of 2024[147] - Net cash of 0.6 billion was transferred to Solventum as part of the separation process in 2024[177] Financial Performance and Earnings - Earnings (loss) from continuing operations per diluted share for the nine months ended September 30, 2024, was (16.32),impactedbynetcostsforsignificantlitigationof(16.32), impacted by net costs for significant litigation of 20.64 and divestiture costs of 0.02[119]−3Mrecordedagainonbusinessdivestituresof0.02[119] - 3M recorded a gain on business divestitures of (0.05) per share for the nine months ended September 30, 2024[119] - Net sales for the three months ended September 30, 2024, were 6,270million,withanoperatinglossof6,270 million, with an operating loss of 3,096 million and an operating loss margin of 49.4%[126] - Adjusted net sales for the three months ended September 30, 2024, were 5,978million,withadjustedoperatingincomeof5,978 million, with adjusted operating income of 1,292 million and an adjusted operating income margin of 21.6%[126] - Adjusted net income from continuing operations for the three months ended September 30, 2024, was 934million,withadjustedearningsperdilutedshareof934 million, with adjusted earnings per diluted share of 1.68[126] - Total Company GAAP net income was (11,588)million,butadjustednetincome(non−GAAP)improvedto(11,588) million, but adjusted net income (non-GAAP) improved to 3,215 million, a 18.2% increase[132] - Net income from continuing operations attributable to 3M was 1,801million,withadjustednetincome(non−GAAP)at1,801 million, with adjusted net income (non-GAAP) at 1,884 million, reflecting a 22.7% margin[131] - Total company net sales increased by 0.4% to 6,294millioninQ32024,whileoperatingincomewas6,294 million in Q3 2024, while operating income was 1,316 million compared to a loss of 3,096millioninQ32023[139]SegmentPerformance−NetsalesfortheTransportationandElectronicssegmentforthethreemonthsendedSeptember30,2024,were3,096 million in Q3 2023[139] Segment Performance - Net sales for the Transportation and Electronics segment for the three months ended September 30, 2024, were 2,171 million, with an operating income of 389millionandanoperatingincomemarginof17.9389 million and an operating income margin of 17.9%[126] - Adjusted net sales for the Transportation and Electronics segment for the three months ended September 30, 2024, were 1,879 million, with adjusted operating income of 494millionandanadjustedoperatingincomemarginof26.3494 million and an adjusted operating income margin of 26.3%[126] - Net sales for the Safety and Industrial segment for the three months ended September 30, 2024, were 666 million, with an operating income of 666millionandanoperatingincomemarginof24.2666 million and an operating income margin of 24.2%[126] - Adjusted net sales for the Safety and Industrial segment for the three months ended September 30, 2024, were 708 million, with adjusted operating income of 708millionandanadjustedoperatingincomemarginof25.7708 million and an adjusted operating income margin of 25.7%[126] - Transportation and Electronics segment sales declined by 1.5%, but adjusted sales (non-GAAP) grew by 1.8% after removing the impact of manufactured PFAS products[131] - Safety and Industrial segment operating income margin was 23.2% on a GAAP basis, improving to 23.7% on an adjusted (non-GAAP) basis[135] - Transportation and Electronics segment adjusted operating income margin (non-GAAP) increased to 24.4%, up from 21.1% on a GAAP basis[135] - Net sales for the Safety and Industrial segment increased by 0.5% to 2,767 million in Q3 2024 compared to 2,751millioninQ32023,whileoperatingincomedecreasedby2.42,751 million in Q3 2023, while operating income decreased by 2.4% to 650 million[139] - Transportation and Electronics segment net sales decreased by 1.5% to 2,139millioninQ32024,butoperatingincomeincreasedby11.82,139 million in Q3 2024, but operating income increased by 11.8% to 436 million[139] - Consumer segment net sales decreased by 1.2% to 1,299millioninQ32024,withoperatingincomedecliningby2.51,299 million in Q3 2024, with operating income declining by 2.5% to 263 million[139] - Sales in Safety and Industrial segment increased by 0.5% in U.S. dollars for the three months ended September 2024[155] - Business segment operating income margins for Safety and Industrial decreased by 2.4% year-on-year for the three months ended September 2024[155] - Sales in Transportation and Electronics segment decreased by 1.5% in U.S. dollars for the three months ended September 2024[157] - Adjusted sales in Transportation and Electronics segment increased by 1.8% in U.S. dollars for the three months ended September 2024[157] - Business segment operating income margins for Transportation and Electronics increased by 11.8% year-on-year for the three months ended September 2024[157] - Sales in Transportation and Electronics decreased by 0.4% in U.S. dollars, but adjusted for special items (non-GAAP), sales increased by 3.7%[159] - Consumer sales decreased by 1.2% in U.S. dollars in Q3 2024 and by 2.6% in the first nine months of 2024[161][162] Restructuring and Litigation Costs - Restructuring pre-tax charges for the first nine months of 2024 were 178million,comparedto178 million, compared to 310 million in the same period last year[120] - Net costs for significant litigation amounted to 4,312millionforthethreemonthsendedSeptember30,2024,impactingoperatingincome[126]−Thecompanyfacedsignificantlegalandenvironmentalliabilities,including4,312 million for the three months ended September 30, 2024, impacting operating income[126] - The company faced significant legal and environmental liabilities, including 10.3 billion related to the PWS Settlement and 4.2billionrelatedtotheCAEsettlement[172]−Corporatespecialitemnetcostsdecreasedyear−over−yearinQ3andthefirstninemonthsof2024,primarilyduetolowernetcostsforsignificantlitigation[163]TaxandCurrencyImpacts−Theeffectivetaxrateforthefirstninemonthsof2024was19.04.2 billion related to the CAE settlement[172] - Corporate special item net costs decreased year-over-year in Q3 and the first nine months of 2024, primarily due to lower net costs for significant litigation[163] Tax and Currency Impacts - The effective tax rate for the first nine months of 2024 was 19.0%, compared to 24.3% in the prior year, primarily due to litigation settlements and the tax rate associated with the Solventum ownership benefit[121] - 3M's adjusted effective tax rate for the first nine months of 2024 was 20.1%, a decrease of 1.1 percentage points compared to the same period last year[121] - Foreign currency impacts decreased operating income by approximately 91 million year-on-year for the first nine months of 2024[120] - Effective tax rate for the three months ended September 2024 was 20.3%, down from 23.5% in the same period last year[148] Cash Flow and Liquidity - The company repurchased 1,096millionofitscommonstockinthefirstninemonthsof2024,comparedto1,096 million of its common stock in the first nine months of 2024, compared to 31 million in the same period of 2023[142] - Total debt decreased by 2.9billionfromDecember31,2023,toSeptember30,2024,duetodebtmaturitiesandrepayments[166]−Cash,cashequivalents,andmarketablesecuritiesincreasedto2.9 billion from December 31, 2023, to September 30, 2024, due to debt maturities and repayments[166] - Cash, cash equivalents, and marketable securities increased to 7.3 billion as of September 30, 2024, up from 5.8billionattheendof2023[166]−Netdebt(non−GAAP)decreasedby5.8 billion at the end of 2023[166] - Net debt (non-GAAP) decreased by 4.356 billion from December 31, 2023, to September 30, 2024[169] - The company maintains a strong liquidity profile with no commercial paper outstanding as of September 30, 2024, compared to 1.8billionattheendof2023[166]−Cashflowsfromoperatingactivitiesdecreasedby1.8 billion at the end of 2023[166] - Cash flows from operating activities decreased by 4.7 billion in the first nine months of 2024, driven by 4.5billioninpaymentsrelatedtoPFASliabilitiesandtheCAElegalsettlement[172]−Thecompanyinvested4.5 billion in payments related to PFAS liabilities and the CAE legal settlement[172] - The company invested 890 million in property, plant, and equipment (PP&E) in the first nine months of 2024 to support growth and manufacturing efficiency[173] - Solventum issued 8.4billionindebtinQ12024,partiallyoffsetby8.4 billion in debt in Q1 2024, partially offset by 2.9 billion in debt maturities, including 1.8billionincommercialpaperrepayments[175]−3Mdeclareddividendsof1.8 billion in commercial paper repayments[175] - 3M declared dividends of 1.51 per share in Q1 2024, followed by 0.70pershareinQ2andQ32024post−Solventumspin−off[176]−3M′scommercialpaperoutstandingdecreasedto0.70 per share in Q2 and Q3 2024 post-Solventum spin-off[176] - 3M's commercial paper outstanding decreased to 0 at September 30, 2024, from 1.8billionatDecember31,2023[175]RegionalSalesPerformance−Americasregionaccountedfor55.41.8 billion at December 31, 2023[175] Regional Sales Performance - Americas region accounted for 55.4% of worldwide sales in Q3 2024, with net sales of 3,484 million and a total sales change of 0.7%[141] - Asia Pacific region net sales increased by 1.4% to 1,783millioninQ32024,drivenbya71,783 million in Q3 2024, driven by a 7% increase in organic sales in China[141][142] Cost Management and Productivity - Cost of sales as a percentage of net sales decreased by 1.4 percentage points to 57.9% in Q3 2024 compared to 59.3% in Q3 2023[144] - SG&A expenses as a percentage of net sales decreased significantly to 16.9% in Q3 2024 from 86.4% in Q3 2023, primarily due to settlement charges in 2023[144] - Organic growth, productivity, and restructuring contributed a net year-on-year increase of 0.79 per share for the first nine months of 2024[120] - Business segment operating income margins increased year-on-year, driven by productivity actions and strong spending discipline, partially offset by cost inefficiencies due to the spin of Solventum[159][162] Pension and Postretirement Expenses - Defined benefit pension and postretirement service cost expense for the first nine months of 2024 was 148million,downfrom148 million, down from 167 million in the same period last year[151] - Total estimated continuing operations consolidated defined benefit pre-tax pension and postretirement expense for 2024 is approximately 1,025 million[151] Credit Ratings and Working Capital - 3M's credit ratings include A3 (stable) from Moody's, BBB+ (negative) from S&P, and A- (stable) from Fitch[166] - Working capital increased by 3.8 billion compared to December 31, 2023, primarily due to lower current liabilities, including discontinued operations and short-term borrowings[171] PFAS and Legal Risks - Manufactured PFAS products sales estimates for the three months ended September 30, 2024, were 210million,withcostsofsalesat210 million, with costs of sales at 210 million[124] - The company continues to face risks related to PFAS liabilities, legal proceedings, and the impact of the Solventum spin-off on its operations and financial performance[179] Other Financial Metrics - Income from unconsolidated subsidiaries, net of taxes, was 3millionforthethreemonthsendedSeptember2024,comparedto3 million for the three months ended September 2024, compared to 2 million in the same period last year[149] - Net income attributable to noncontrolling interest was 4millionforthethreemonthsendedSeptember2024,unchangedfromthesameperiodlastyear[150]−ThecompanyincurredRussiaexitcharges(benefits)of4 million for the three months ended September 2024, unchanged from the same period last year[150] - The company incurred Russia exit charges (benefits) of (0.04) per share for the nine months ended September 30, 2024[119]