Third-Quarter Highlights:

• Sales of $8.2 billion, down 0.2 percent year-on-year
• Organic local-currency sales growth of 1.3 percent
• GAAP EPS of $2.58 vs. $2.33 last year, up 10.7 percent year-on-year
• Returned $1.9 billion to shareholders via dividends and gross share repurchases

ST. PAUL, Minn.--(BUSINESS WIRE)-- 3M (NYSE: MMM) today reported third-quarter 2018 results.

“In the third quarter, 3M delivered a double-digit increase in cash flow and earnings-per-share, along with strong margins despite slower growth,” said Mike Roman, 3M chief executive officer. “We also continued to deploy capital to invest in our future and return cash to our shareholders.

“Through nine months of the year, our global team posted organic growth of more than 3 percent, and we are positioned to deliver a solid 2018,” Roman continued. “Going forward, we remain focused on innovating for our customers and driving growth, while continuing to transform our enterprise.”

Third-quarter sales were $8.2 billion with organic local-currency sales up 1.3 percent while acquisitions, net of divestitures, increased sales by 0.2 percent. Foreign currency translation decreased sales by 1.7 percent year-on-year.

Total sales grew 7.0 percent in Safety and Graphics; Industrial was flat; sales declined 2.8 percent in Health Care, 3.4 percent in Consumer and 4.8 percent in Electronics and Energy. Organic local-currency sales increased 2.3 percent in Electronics and Energy, 2.2 percent in Industrial, and 2.2 percent in Safety and Graphics; organic local-currency sales declined 1.1 percent in Health Care and 2.0 percent in Consumer.

On a geographic basis, total sales grew 1.6 percent in Asia Pacific and 1.3 percent in the U.S.; total sales declined 3.9 percent in EMEA (Europe, Middle East and Africa) and 5.5 percent in Latin America/Canada. Organic local-currency sales increased 3.2 percent in Asia Pacific, 2.1 percent in Latin America/Canada, and 0.5 percent in the U.S.; organic local-currency sales declined 0.9 percent in EMEA.

Third-quarter GAAP earnings were $2.58 per share, an increase of 10.7 percent year-over-year. Operating income was $2.0 billion with operating margins of 24.7 percent.

The company’s operating cash flow was $2.1 billion, contributing to conversion of 114 percent of net income to free cash flow, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.

3M paid $794 million in cash dividends to shareholders and repurchased $1.1 billion of its own shares during the quarter.

The company updated its 2018 GAAP earnings expectations to be in the range of $8.78 to $8.93 per share versus $9.08 to $9.38 previously. Excluding the full-year impacts from the communication markets business divestiture gain and related actions, a first-quarter legal settlement, and the Tax Cuts and Jobs Act-related expense, 3M now expects its adjusted 2018 earnings to be in the range of $9.90 to $10.00 per share versus prior expectation of $10.20 to $10.45. The update to the ranges reflects an estimated full-year earnings headwind of $0.05 per share from foreign currency versus a prior expectation of a benefit of $0.10 per share.

3M also updated its full-year organic local-currency sales growth guidance to approximately 3 percent from 3 to 4 percent and free cash flow conversion to 90 to 95 percent from 90 to 100 percent, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.

Third-Quarter Business Group Discussion

Industrial

• Sales were $3.0 billion, flat in U.S. dollars. Organic local-currency sales increased 2.2 percent, foreign currency translation decreased sales by 2.1 percent, and divestitures decreased sales by 0.1 percent.
• On an organic local-currency basis:
  • Sales growth was led by advanced materials, automotive and aerospace, and industrial adhesives and tapes; automotive aftermarket declined.
  • Sales grew in all geographic areas led by Asia Pacific and the U.S.

• Operating income was $667 million, a decrease of 0.7 percent year-on-year; operating margins were 22.1 percent.

Safety and Graphics

• Sales were $1.7 billion, up 7.0 percent in U.S. dollars. Organic local-currency sales increased 2.2 percent, foreign currency translation decreased sales by 2.2 percent, and acquisitions, net of divestitures, increased sales by 7.0 percent.
• On an organic local-currency basis:
  • Sales grew in personal safety, transportation safety, and commercial solutions; roofing granules declined.
  • Sales grew in all geographic areas led by Asia Pacific and the U.S.

• Operating income was $412 million, up 0.4 percent year-on-year; operating margins were 24.8 percent.

Health Care

• Sales were $1.4 billion, down 2.8 percent in U.S. dollars. Organic local-currency sales decreased 1.1 percent and foreign currency translation decreased sales by 1.7 percent.
• On an organic local-currency basis:
  • Sales grew in food safety, health information systems, and oral care; drug delivery declined.
  • Sales grew in Asia Pacific and Latin America/Canada; sales declined in EMEA and the U.S.
• Operating income was $446 million, a decrease of 4.4 percent year-on-year; operating margins were 30.9 percent.

Electronics and Energy

• Sales were $1.4 billion, down 4.8 percent in U.S. dollars. Organic local-currency sales increased 2.3 percent, foreign currency translation decreased sales by 1.0 percent and divestitures decreased sales by 6.1 percent.
• On an organic local-currency basis:
  • Energy-related sales grew by 6 percent; electronics-related sales grew 1 percent.
  • Sales grew in the U.S., Asia Pacific, and Latin America/Canada; sales declined in EMEA.
• Operating income was $457 million, an increase of 6.2 percent year-on-year; operating margins were 31.7 percent.

Consumer

• Sales were $1.2 billion, down 3.4 percent in U.S. dollars. Organic local-currency sales decreased 2.0 percent and foreign currency translation decreased sales by 1.4 percent.
• On an organic local-currency basis:
  • Sales grew in home improvement; stationery and office supplies, home care, and consumer health care declined.
  • Sales grew in Latin America/Canada; the U.S., EMEA, and Asia Pacific declined.
• Operating income was $291 million, down 6.7 percent year-on-year; operating margins were 23.5 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 21863183). The telephone replay will be available until 11:30 a.m. EDT (10:30 a.m. CDT) on Oct. 31, 2018.

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, 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
BUSINESS SEGMENTS
(Dollars in millions)
(Unaudited)

As part of 3M’s continuing effort to improve the alignment of its businesses around markets and customers, the Company made the following changes, effective in the first quarter of 2018, and other revisions impacting business segment reporting:

Consolidation of customer account activity within international countries – expanding dual credit reporting

• The Company consolidated its customer account activity in each country into centralized sales districts for certain countries that make up approximately 70 percent of 3M’s 2017 international net sales. Expansion of these initiatives, which previously had been deployed only in the U.S., reduces the complexity for customers when interacting with multiple 3M businesses. 3M business segment reporting measures include dual credit to business segments for certain sales and related operating income. This dual credit is based on which business segment provides customer account activity with respect to a particular product sold in a specific country. The expansion of alignment of customer accounts within additional countries increased the attribution of dual credit across 3M’s business segments. Additionally, certain sales and operating income results for electronic bonding product lines that were previously equally divided between the Electronics and Energy business segment and the Industrial business segment are now reported similarly to dual credit.

Centralization of manufacturing and supply technology platforms

• Certain shared film manufacturing and supply technology platform resources formerly reflected within the Electronics and Energy business segment were combined with other shared and centrally managed material resource centers of expertise within Corporate and Unallocated.

In addition, 3M adopted ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, effective Jan. 1, 2018, on a retrospective basis. As a result, operating income for 3M’s business segments has been revised to reflect non-service cost components of pension and postretirement net periodic benefit costs within other expense (income) net.

The financial information presented herein reflects the impact of the preceding changes for all periods presented. Refer to 3M’s Current Report on Form 8-K furnished on March 15, 2018, for additional supplemental unaudited historical business segment net sales and operating income information. In addition, these business segment changes were reflected in 3M’s Current Report on Form 8-K dated May 8, 2018, (which updated 3M’s 2017 Annual Report on Form 10-K) and 3M’s Quarterly Report on Form 10-Q for the periods ended March 31, 2018, and June 30, 2018.

About 3M
At 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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3M
Investor Contact:
Bruce Jermeland, 651-733-1807
or
Tony Riter, 651-733-1141
or
Media Contact:
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Source: 3M