3M(US:MMM)2024-10-22 15:48Business 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 $3.06 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 $1.7 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), impacted by net costs for significant litigation of $20.64 and divestiture costs of $0.02[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 $6,270 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 $5,978 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 $934 million, with adjusted earnings per diluted share of $1.68[126] - Total Company GAAP net income was $(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 $1,801 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 $6,294 million in Q3 2024, while operating income was $1,316 million compared to a loss of $3,096 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 $389 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 $494 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 $666 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 $708 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 $2,751 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 $2,139 million in Q3 2024, but operating income increased by 11.8% to $436 million[139] - Consumer segment net sales decreased by 1.2% to $1,299 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 $178 million, compared to $310 million in the same period last year[120] - Net costs for significant litigation amounted to $4,312 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 $4.2 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 $1,096 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 $2.9 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 $5.8 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 $1.8 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 $4.5 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 $8.4 billion in debt in Q1 2024, partially offset by $2.9 billion in debt maturities, including $1.8 billion in commercial paper repayments[175] - 3M declared dividends of $1.51 per share in Q1 2024, followed by $0.70 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 $1.8 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 $1,783 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 $148 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 $210 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 $3 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 $4 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]