01.26.16
3M reported its fourth-quarter and full-year 2015 results.
Fourth-quarter GAAP earnings were $1.66 per share, a decrease of 8.3% versus the fourth quarter of 2014. Sales declined 5.4% year-on-year to $7.3 billion. Organic local-currency sales declined 1.1% while acquisitions, net of divestitures, added 1.5% to sales. Foreign currency translation reduced sales by 5.8% year-on-year.
Full-year 2015 GAAP earnings were $7.58 per share, an increase of 1.2%, or up 3.1% excluding the fourth-quarter restructuring. Sales decreased 4.9% to $30.3 billion with organic local-currency growth of 1.3%. Acquisitions, net of divestitures, increased sales 0.6%. Foreign currency translation reduced sales by 6.8%.
“The fourth quarter capped off a year of disciplined execution from our global team with solid margin and cash flow performance,” said Inge G. Thulin, 3M’s chairman, president and CEO. “Throughout 2015 we controlled the controllable, while investing in the business and also returning significant cash to shareholders.
“2015 was an important year as we prepared and positioned our company for long-term success,” Thulin continued. “We strengthened and focused our portfolio, made significant investments in the business to support growth, and made good progress in moving toward a more efficient business model through business transformation and our corporate restructuring. We are building an even stronger and more competitive company for 2016 and beyond.”
During the fourth quarter the company incurred a pre-tax charge of $114 million ($88 million after-tax), or $0.14 per share, related to the corporate restructuring it announced in October. The restructuring was primarily focused on structural overhead, largely in the U.S., along with slower-growing markets with particular emphasis on EMEA (Europe, Middle East and Africa) and Latin America. Excluding restructuring, fourth-quarter earnings were $1.80 per share, a decrease of 0.6% versus the prior year.
Operating income was $1.5 billion and operating income margins for the quarter were 20.5%, down 1.0 percentage point year-on-year. Excluding restructuring, operating income was $1.6 billion in the quarter and operating margins were 22.1%, up percentage points year-on-year. Fourth-quarter net income was $1.0 billion and the company converted 182% of net income to free cash flow.
3M paid $628 million in cash dividends to shareholders and repurchased $1.1 billion of its own shares during the quarter.
Organic local-currency sales growth was 4.5% in Health Care and 2.7% in Consumer with declines of 1.8% in Industrial, 2.5% in Safety and Graphics, and 7.7% in Electronics and Energy.
Full-year operating income margins were 22.9%, up 50 basis points versus 2014, or up 90 basis points excluding the fourth-quarter restructuring. 3M converted 103% of net income to free cash flow for the year and generated 22.5% return on invested capital.
For the full year, 3M paid $2.6 billion in cash dividends to shareholders and repurchased $5.2 billion of its own shares.
3M affirmed its 2016 full-year performance expectations. The company expects 2016 earnings to be in the range of $8.10 to $8.45 per share with organic local-currency sales growth of 1% to 3%. 3M also expects free cash flow conversion to be in the range of 95% to 105%.
Fourth-Quarter Business Group Discussion:
• Industrial: Sales of $2.5 billion, down 6.3% in U.S. dollars. Sales growth in 3M purification and automotive OEM was offset by declines in industrial adhesives and tapes, abrasives, and advanced materials. Operating income was $476 million, a decrease of 11.6% year-on-year.
• Safety and Graphics: Sales of $1.3 billion, down 5.3% in U.S. dollars. Sales grew in roofing granules and commercial solutions; traffic safety and security was flat; personal safety declined. Operating income was $282 million, a decrease of 1.1% year-on-year; operating margin was 21.8%.
• Health Care: Sales of $1.4 billion, down 0.8% in U.S. dollars. Sales grew in health information systems, food safety, oral care, drug delivery systems and critical and chronic care. Operating income was $444 million, an increase of 2.7% year-on-year.
• Electronics and Energy: Sales of $1.2 billion, down 11.7% in U.S. dollars. Electronics-related sales declined 8% as electronics materials solutions and display materials and systems declined; energy-related sales declined 6% as renewable energy, telecom and electrical markets declined. Operating income was $200 million, a decrease of 22.4% year-on-year.
• Consumer: Sales of $1.1 billion, down 2.4% in U.S. dollars. Sales grew in home improvement, stationery and office supplies, and home care; consumer health care declined. Operating income was $254 million, up 0.5% year-on-year.
Fourth-quarter GAAP earnings were $1.66 per share, a decrease of 8.3% versus the fourth quarter of 2014. Sales declined 5.4% year-on-year to $7.3 billion. Organic local-currency sales declined 1.1% while acquisitions, net of divestitures, added 1.5% to sales. Foreign currency translation reduced sales by 5.8% year-on-year.
Full-year 2015 GAAP earnings were $7.58 per share, an increase of 1.2%, or up 3.1% excluding the fourth-quarter restructuring. Sales decreased 4.9% to $30.3 billion with organic local-currency growth of 1.3%. Acquisitions, net of divestitures, increased sales 0.6%. Foreign currency translation reduced sales by 6.8%.
“The fourth quarter capped off a year of disciplined execution from our global team with solid margin and cash flow performance,” said Inge G. Thulin, 3M’s chairman, president and CEO. “Throughout 2015 we controlled the controllable, while investing in the business and also returning significant cash to shareholders.
“2015 was an important year as we prepared and positioned our company for long-term success,” Thulin continued. “We strengthened and focused our portfolio, made significant investments in the business to support growth, and made good progress in moving toward a more efficient business model through business transformation and our corporate restructuring. We are building an even stronger and more competitive company for 2016 and beyond.”
During the fourth quarter the company incurred a pre-tax charge of $114 million ($88 million after-tax), or $0.14 per share, related to the corporate restructuring it announced in October. The restructuring was primarily focused on structural overhead, largely in the U.S., along with slower-growing markets with particular emphasis on EMEA (Europe, Middle East and Africa) and Latin America. Excluding restructuring, fourth-quarter earnings were $1.80 per share, a decrease of 0.6% versus the prior year.
Operating income was $1.5 billion and operating income margins for the quarter were 20.5%, down 1.0 percentage point year-on-year. Excluding restructuring, operating income was $1.6 billion in the quarter and operating margins were 22.1%, up percentage points year-on-year. Fourth-quarter net income was $1.0 billion and the company converted 182% of net income to free cash flow.
3M paid $628 million in cash dividends to shareholders and repurchased $1.1 billion of its own shares during the quarter.
Organic local-currency sales growth was 4.5% in Health Care and 2.7% in Consumer with declines of 1.8% in Industrial, 2.5% in Safety and Graphics, and 7.7% in Electronics and Energy.
Full-year operating income margins were 22.9%, up 50 basis points versus 2014, or up 90 basis points excluding the fourth-quarter restructuring. 3M converted 103% of net income to free cash flow for the year and generated 22.5% return on invested capital.
For the full year, 3M paid $2.6 billion in cash dividends to shareholders and repurchased $5.2 billion of its own shares.
3M affirmed its 2016 full-year performance expectations. The company expects 2016 earnings to be in the range of $8.10 to $8.45 per share with organic local-currency sales growth of 1% to 3%. 3M also expects free cash flow conversion to be in the range of 95% to 105%.
Fourth-Quarter Business Group Discussion:
• Industrial: Sales of $2.5 billion, down 6.3% in U.S. dollars. Sales growth in 3M purification and automotive OEM was offset by declines in industrial adhesives and tapes, abrasives, and advanced materials. Operating income was $476 million, a decrease of 11.6% year-on-year.
• Safety and Graphics: Sales of $1.3 billion, down 5.3% in U.S. dollars. Sales grew in roofing granules and commercial solutions; traffic safety and security was flat; personal safety declined. Operating income was $282 million, a decrease of 1.1% year-on-year; operating margin was 21.8%.
• Health Care: Sales of $1.4 billion, down 0.8% in U.S. dollars. Sales grew in health information systems, food safety, oral care, drug delivery systems and critical and chronic care. Operating income was $444 million, an increase of 2.7% year-on-year.
• Electronics and Energy: Sales of $1.2 billion, down 11.7% in U.S. dollars. Electronics-related sales declined 8% as electronics materials solutions and display materials and systems declined; energy-related sales declined 6% as renewable energy, telecom and electrical markets declined. Operating income was $200 million, a decrease of 22.4% year-on-year.
• Consumer: Sales of $1.1 billion, down 2.4% in U.S. dollars. Sales grew in home improvement, stationery and office supplies, and home care; consumer health care declined. Operating income was $254 million, up 0.5% year-on-year.
