- Q3 results reflect strong operational execution,
restructuring actions, and proactive spending discipline
- Progressing Health Care spin with leadership appointments;
expect to complete spin during first half of 2024
- Addressing legal matters with announced Combat Arms
settlement; received preliminary court approval for PFAS Public
Water Systems agreement
ST.
PAUL, Minn., Oct. 24,
2023 /PRNewswire/ -- 3M
(NYSE: MMM) today reported third quarter 2023 results.
"We are building momentum through strong operational execution.
In the third quarter 3M again
delivered for our customers in an uncertain environment,
positioning us for a solid close to 2023. Our actions led to
underlying earnings ahead of our expectations, as well as better
than expected margins and cash flow," said 3M chairman and CEO Mike
Roman. "Our results reflect continued execution of our
priorities -- driving operational performance, spinning off Health
Care, and reducing risk and uncertainty. Our strengths in material
science innovation align with global trends in high-growth markets
and sustainability, enabling us to develop indispensable products
in attractive areas such as automotive electrification, climate
technology, and industrial automation."
Third Quarter Highlights:
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Q3 2023
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Q3 2022
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GAAP earnings (loss)
per share
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$
(3.74)
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$
6.77
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Special items:
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Impact of Combat Arms Earplug
settlement
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5.80
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—
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Other net costs for significant
litigation
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0.33
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0.37
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Other special items,
net
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0.29
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(4.54)
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Adjusted earnings per
share (EPS)
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$
2.68
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$
2.60
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Memo:
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GAAP operating income (loss) margin
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(31.9) %
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48.2 %
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Adjusted operating income margin
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23.2 %
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21.6 %
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- GAAP loss per share of $3.74 and
operating margin of minus 31.9% include the previously announced
settlement for Combat Arms, resulting in a pre-tax charge of
$4.2 billion, negatively impacting
EPS by $5.80.
- Adjusted EPS of $2.68 includes
pre-tax restructuring related charges of $68
million, or negative $0.10 per
share; restructuring program on track including forecasted
full-year 2023 pre-tax restructuring charges and associated
benefits.
- Adjusted EPS up 3 percent year-on-year.
- Adjusted operating income margin of 23.2% includes a 0.8
percentage point headwind from pre-tax restructuring related
charges.
- Adjusted operating income margin expanded 1.6 percentage points
year-on-year.
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GAAP
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Adjusted
(Non-GAAP)
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Net sales
(Millions)
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$8,312
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$8,020
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Sales
change
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Total sales
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(3.6) %
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(3.0) %
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Components of sales change:
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Organic sales1
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(3.7) %
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(3.1) %
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Acquisitions/divestitures
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(0.5) %
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(0.5) %
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Translation
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0.6 %
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0.6 %
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Adjusted sales excludes
manufactured PFAS products.
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1Above
adjusted organic sales decline includes a 1.7 percentage point
headwind from the decline in
disposable respirator demand, along with the 2022 exit of
Russia.
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- Sales of $8.3 billion, down 3.6
percent year-on-year, with organic sales decline of 3.7 percent
year-on-year.
- Adjusted sales of $8.0 billion,
down 3.0 percent year-on-year with adjusted organic sales decline
of 3.1 percent year-on-year.
- Operating cash flow of $1.9
billion, up 25 percent year-on-year; adjusted free cash flow
of $1.9 billion, up 39 percent
year-on-year.
- 3M returned $828 million to shareholders via dividends.
The above includes reference to certain non-GAAP measures. See
the "Supplemental Financial Information Non-GAAP Measures" section
for applicable information.
Full-Year 2023 Outlook
As a result of 3M's year-to-date performance and the continued
strong operational execution, the company is raising its full-year
2023 adjusted EPS2 and adjusted free cash flow
conversion2 expectations.
3M anticipates adjusted
EPS2 to be in the range of $8.95 to $9.15
versus $8.60 to $9.10 prior.
Adjusted operating cash flow2 is estimated in the
range of $6.5 to $6.9 billion, contributing to 100 to 110 percent
adjusted free cash flow conversion2. This compares to a
prior expected range for adjusted operating cash flow2
of $5.9 to $6.3 billion, contributing to an adjusted free
cash flow conversion2 range of 90 to 100 percent.
Adjusted full-year total sales growth2 is forecasted
to decline by approximately -5 percent versus a decline of -5 to -1
percent prior, reflecting a decline in adjusted organic
sales2 of approximately -3 percent versus the lower end
of -3 percent to flat prior.
2As further
discussed at 6 within the "Supplemental Financial
Information Non-GAAP Measures" section, 3M cannot, without
unreasonable effort, forecast certain items required to develop
meaningful comparable GAAP financial measures and, therefore, does
not provide them on a forward-looking basis reflecting these
items.
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Notification and Registration Process Progressing On the
Combat Arms Earplug Agreement
On August 29, 2023, 3M issued a press release announcing that it
reached an agreement with the court-appointed negotiating
plaintiffs' counsel to resolve the Combat Arms Earplug litigation
against Aearo Technologies (Aearo) and 3M. Under the agreement, 3M will contribute consideration totaling
$6.0 billion between 2023 and 2029.
As a result of the agreement, the company recorded a pre-tax charge
of $4.2 billion in the third quarter
of 2023. The charge reflected the $5.3
billion pre-tax present value of contributions under the
agreement net of 3M's then-existing accrual of $1.1 billion related to this matter.
Conference Call
3M will conduct an investor
teleconference at 9 a.m. EDT (8 a.m. CDT) today.
Investors can access this conference via the following:
- Live webcast at https://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
at https://investors.3m.com/financials/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
22024176). The telephone replay will be available until
11:30 a.m. EDT (10:30 a.m. CDT) on October
31, 2023.
Consolidated Financial Statements and Supplemental Financial
Information Non-GAAP Measures
View the Financial Statement Information on 3M's
website: https://investors.3m.com/financials/quarterly-earnings
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 "plan," "expect," "aim,"
"believe," "project," "target," "anticipate," "intend," "estimate,"
"will," "should," "could," "would," "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, international trade, geopolitical, capital
markets and other external conditions and other factors beyond the
Company's control, including inflation, recession, military
conflicts, natural and other disasters or climate change affecting
the operations of the Company or its customers and suppliers; (2)
risks related to unexpected events such as the public health crises
associated with the coronavirus (COVID-19) global pandemic; (3)
foreign currency exchange rates and fluctuations in those rates;
(4) risks related to certain fluorochemicals, including liabilities
related to claims, lawsuits, and government regulatory proceedings
concerning various PFAS-related products and chemistries, as well
as risks related to the Company's plans to exit PFAS manufacturing
and discontinue use of PFAS across its product portfolio; (5) risks
related to the proposed class-action settlement ("PWS Settlement")
to resolve claims by public water systems in the United States regarding PFAS, including
whether court approval of the PWS Settlement will be obtained,
whether the number of plaintiffs that opt out of the PWS Settlement
will exceed current expectations or will exceed the level that
would permit 3M to terminate the PWS
Settlement (and whether 3M will elect
to terminate the PWS Settlement if this occurs), whether the PWS
Settlement is appealed, the timing and amount of payments made
under the PWS Settlement, and the impact of the PWS Settlement on
other PFAS-related matters; (6) 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,
2022 and any subsequent quarterly reports on Form 10-Q (the
"Reports"); (7) competitive conditions and customer preferences;
(8) the timing and market acceptance of new product and service
offerings; (9) the availability and cost of purchased components,
compounds, raw materials and energy due to shortages, increased
demand and wages, supply chain interruptions, or natural or other
disasters; (10) 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; (11) the impact of
acquisitions, strategic alliances, divestitures, and other
strategic events resulting from portfolio management actions and
other evolving business strategies; (12) operational execution,
including the extent to which the Company can realize the benefits
of planned productivity improvements, as well as the impact of
organizational restructuring activities; (13) financial market
risks that may affect the Company's funding obligations under
defined benefit pension and postretirement plans; (14) the
Company's credit ratings and its cost of capital; (15) tax-related
external conditions, including changes in tax rates, laws or
regulations; (16) matters relating to the proposed spin-off of the
Company's Health Care business; and (17) matters relating to Combat
Arms Earplugs ("CAE"), including those relating to the voluntary
chapter 11 proceedings of the Company's subsidiary Aearo
Technologies and certain of its affiliates ("Aearo Entities"), as
well as those related to the August
2023 settlement that is intended to resolve, to the fullest
extent possible, all litigation and alleged claims
involving the CAE sold or manufactured by the Aearo Entities and/or
3M ("CAE Settlement"), including, but
not limited to, whether the anticipated participation by plaintiffs
in the CAE Settlement will be achieved, whether the number of
plaintiffs that participate in the CAE Settlement will meet current
expectations or will fall below the level that would permit
3M to terminate the CAE Settlement
(and whether 3M will elect to
terminate the CAE Settlement if this occurs), whether there will be
a significant number of future claims by plaintiffs that decline to
participate in the CAE Settlement, whether the CAE Settlement is
appealed or challenged, whether the requirements applicable to the
issuance of the equity securities that are contemplated to be part
of the CAE Settlement will be met, the filing of additional, or the
outcome of any other pending or future, litigation relating to the
products that are the subject of the CAE Settlement, or changes in
related laws or regulations. 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
Company assumes no obligation to update any forward-looking
statements discussed herein as a result of new information or
future events or developments.
About 3M
3M (NYSE: MMM) believes science
helps create a brighter world for everyone. By unlocking the power
of people, ideas and science to reimagine what's possible, our
global team uniquely addresses the opportunities and challenges of
our customers, communities, and planet. Learn how we're working to
improve lives and make what's next at 3M.com/news or at @3M or @3MNews.
Please note that the company announces material financial,
business and operational information using the 3M investor relations website, SEC filings, press
releases, public conference calls and webcasts. The company also
uses the 3M News Center and social
media to communicate with our customers and the public about the
company, products and services and other matters. It is possible
that the information 3M posts on the
News Center and social media could be deemed to be material
information. Therefore, the company encourages investors, the media
and others interested in 3M to review
the information posted on 3M's news center and the social media
channels such as @3M or @3MNews.
Contacts
3M
Investor
Contacts:
Bruce Jermeland,
651-733-1807
or
Diane Farrow, 612-202-2449
or
Eric Herron, 651-233-0043
Media Contact:
Sean Lynch,
slynch2@mmm.com
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SOURCE 3M Company