3M also releases full-year guidance for
2019
Speaking today at the company’s Investor Day in St. Paul, 3M CEO
Mike Roman will lay out new five-year financial objectives while
introducing his priorities for the future. The four priorities –
focused around Portfolio, Innovation, Transformation, and People
and Culture – are positioning 3M for long-term growth and value
creation.
These priorities are a key component of the 3M value model, and
Roman will detail how that unique model will drive performance
today and into the future. He will discuss 3M’s plans to continue
actively managing its portfolio to maximize value, and how the
company’s transformation initiative will enable greater
productivity and continued margin expansion. The company will also
emphasize how 3M science and technologies are being applied to
high-growth areas such as automotive electrification, advanced
wound care, connected safety, biopharma filtration, and data
centers.
“As we work to deliver a strong close to 2018, we are
positioning our company for success in 2019 and beyond – which
includes taking actions around our four priorities,” said Mike
Roman, 3M chief executive officer. “Our team is focused on growth,
operational execution, and delivering for our customers and
shareholders.”
3M’s new five-year financial objectives – covering 2019 through
2023 – are:
- 3 to 5 percent organic local currency
sales growth
- 8 to 11 percent growth in earnings per
share
- 20 percent return on invested
capital
- 100 percent free cash flow
conversion
In addition to its five-year goals, 3M will also outline its
expectations for 2019:
- 1 to 3 percent total sales growth
- 2 to 4 percent organic local currency
sales growth
- Earnings per share of $10.60 to $11.05
- 20 to 25 percent EPS growth, on a GAAP
basis
- 7 to 11 percent EPS growth, adjusting
for certain 2018 items
- 22 to 25 percent return on invested
capital
- 95 to 105 percent free cash flow
conversion (based on operating cash flow of $7.9 to $8.5
billion).
Refer to section entitled “Supplemental Financial Information,
Non-GAAP Measures” for more detail.
In 2019, 3M plans to invest $2 billion in research and
development – or approximately 6 percent of sales – along with $1.7
to $2 billion in capital expenditures. The company also plans gross
share repurchases in the range of $2 to $4 billion for the
year.
Today’s meeting will be webcast live beginning at 7:30 a.m. CST
and is scheduled to end at noon CST. Investors can access this
meeting via the following:
- Live webcast at
http://investors.3M.com.
- Webcast replay:Go to 3M’s Investor
Relations website at http://investors.3M.com and click on “3M 2018
Investor Day.”
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," "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, and capital markets 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) 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; (10) financial market risks
that may affect the Company’s funding obligations under defined
benefit pension and postretirement plans; and (11) 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, 2017, and
any 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 Reports). 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
SUPPLEMENTAL FINANCIAL INFORMATION NON-GAAP
MEASURES
(Dollars in billions, except per share
amounts)
(Unaudited)
Estimated
Full- Estimated Full-Year 2018 Year 2019
Adjustment for Communication Adjustment
Markets for Division Measurement
Divestiture, Net
Reported
Period Adjustment
of Related
Adjusted Non-
Reported
Adjusted income, earnings per share,
& effective tax rate (non-GAAP measures)
GAAP
Accounting of
for MN NRD Restructuring
GAAP
GAAP Measure
TCJA
Resolution Actions
Measure(a)
Measure Income before taxes $7.0 to $7.1 — $ 0.9
($0.4 ) $7.5 to $7.6 Provision for income taxes $1.6 to $1.7 ($0.2
) $ 0.2 ($0.1 ) $1.5 to $1.6 Effective tax rate 23% to 25% 20% to
21% Net income attributable to 3M $5.3 to $5.5 $ 0.2 $ 0.7
($0.3 ) $5.9 to $6.1 Earnings per diluted share $8.78 to $8.93 $
0.36 $ 1.16 ($0.40 - $0.45 ) $9.90 to $10.00 $10.60 to $11.05
Earnings per diluted share percent change: Estimated 2018 GAAP
Measure to Estimated 2019 GAAP Measure 20% to 25% Estimated 2018
Adjusted Non-GAAP Measure to Estimated 2019 GAAP Measure 7% to 11%
(a)
In February 2018, 3M reached an agreement
with the State of Minnesota that resolved the previously disclosed
Natural Resource Damages (NRD) lawsuit filed by the State against
the Company related to certain PFCs present in the environment.
Under the terms of the settlement, 3M agreed to provide an $850
million grant to the State for a special “3M Water Quality and
Sustainability Fund.” This Fund will enable projects that support
water sustainability in the Twin Cities East Metro region, such as
continued delivery of water to residents and enhancing groundwater
recharge to support sustainable growth. The projects will also
result in habitat and recreation improvements, such as fishing
piers, trails, and open space preservation. 3M recorded a pre-tax
charge of $897 million, inclusive of legal fees and other related
obligations, in the first quarter of 2018 associated with the
resolution of this matter. Also, during the first quarter of 2018,
3M recorded a tax expense of $217 million related to a measurement
period adjustment to the provisional amounts recorded in December
2017, from the enactment of the Tax Cuts and Jobs Act (TCJA). 3M’s
provisional accounting continues to be subject to adjustment during
the measurement period of up to one year following the December
2017 enactment of TCJA. In the second quarter of 2018, 3M completed
the sale of substantially all of its Communication Markets Division
and reflected a pre-tax gain of $494 million as a result of this
divestiture. During the second quarter of 2018, management approved
and committed to undertake certain restructuring actions related to
addressing corporate functional costs following the Communication
Markets Division divestiture. These actions resulted in a second
quarter 2018 pre-tax charge of $105 million.
In addition to providing full-year
estimated 2018 financial results in accordance with U.S. GAAP, the
Company also provides non-GAAP measures that adjust for the impacts
of the NRD resolution, measurement period adjustment to the impact
of enactment of the TCJA, and the impact of the Communication
Markets Division divestiture gain, net of restructuring actions.
These items represent significant charges/benefits that impacted
the Company’s financial results. Income before taxes, provision for
income taxes, net income, earnings per share, and the effective tax
rate are all measures for which 3M provides the estimated GAAP
measure and an adjusted measure. 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 this item 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)
(Dollars in millions, except full-year
2018 and 2019 estimates)
(Unaudited)
Full-Year Major
GAAP Cash Flow Categories 2017 Results Net cash
provided by operating activities $ 6,240 Net cash used in investing
activities (3,086 ) Net cash used in financing activities (2,655 )
Full-Year
Full-Year
2018 Estimate
2019 Estimate
Free Cash Flow (non-GAAP measure) (Billions)
(Billions) Net cash provided by operating activities
$ 6,240 $6.4 to $6.8 $7.9 to $8.5 Purchases of property, plant and
equipment (1,373 ) ($1.6) ($1.7 to $2.0) Free cash flow (b)
4,867 $4.8 to $5.2 $5.9 to $6.8 Net income
attributable to 3M $ 4,858 $5.3 to $5.5 $6.2 to $6.5 Free cash flow
conversion (b) 100 % 90% to 95% 95% to 105% (b)
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 meaningful to investors as they
function as 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.
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL
INFORMATION
NON-GAAP MEASURES – (CONTINUED)
(Dollars in millions, except full-year
2018 and 2019 estimates)
(Unaudited)
Full-Year
Full-Year Estimated Estimated Full-Year
2018 (in 2019 (in Return on Invested Capital
(non-GAAP measure) (in millions) 2017 billions)
billions) Net income including non-controlling
interest $ 4,869 $5.3 to $5.5 $6.2 to $6.5 Interest expense
(after-tax) (1) 208 $0.3 $0.4 Adjusted net income (Return) $
5,077 $5.6 to $5.8 $6.6 to $6.9 Average shareholders' equity
(including non-controlling interest) (2) $ 11,627 $10.5 to $11.5
$12.0 to $13.0 Average short-term and long-term debt (3)
12,156 $14.5 to $15.5 $15.5 to $17.0 Average invested capital $
23,783 $25.0 to $27.0 $27.5 to $30.0 Return on invested
capital (non-GAAP measure) (c) 21.3 % 20% + 22% to 25% (1)
Effective income tax rate used for interest expense 35.5 % 23% to
25% 20% to 22% (2) Calculation of average equity (includes
non-controlling interest) Ending total equity as of: March 31 $
11,040 June 30 11,644 September 30 12,202 December 31 11,622
Average total equity $ 11,627 (3) Calculation of average
debt Ending short-term and long-term debt as of: March 31 $ 11,711
June 30 11,301 September 30 11,663 December 31 13,949
Average short-term and long-term debt $ 12,156 (c)
Return on Invested Capital (ROIC) is not defined under U.S.
generally accepted accounting principles. Therefore, ROIC should
not be considered a substitute for other measures prepared in
accordance with U.S. GAAP and may not be comparable to similarly
titled measures used by other companies. The Company defines ROIC
as adjusted net income (net income including non-controlling
interest plus after-tax interest expense) divided by average
invested capital (equity plus debt). The Company believes ROIC is
meaningful to investors as it focuses on shareholder value
creation.
About 3MAt 3M, we apply science in collaborative ways to
improve lives daily. With $32 billion in sales, our 91,000
employees connect with customers all around the world. Learn more
about 3M’s creative solutions to the world’s problems at www.3M.com
or on Twitter @3M or @3MNews.
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version on businesswire.com: https://www.businesswire.com/news/home/20181115005431/en/
3MInvestor Contacts:Bruce Jermeland,
651-733-1807orTony Riter, 651-733-1141orMedia Contact:Lori
Anderson, 651-733-0831
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