UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
Commission file number:
(Exact name of registrant as specified in its charter)
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(Former Name or Former Address, if Changed Since Last Report) Securities registered pursuant to Section 12(b) of the Act: |
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Note: The common stock of the Registrant is also traded on the SWX Swiss Exchange.
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Accelerated filer ☐ | ||
Non-accelerated filer ☐ | Smaller reporting company | |
Emerging growth company |
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Class | Outstanding at June 30, 2021 | |
Common Stock, $0.01 par value per share |
3M COMPANY
Form 10-Q for the Quarterly Period Ended June 30, 2021
TABLE OF CONTENTS | BEGINNING | |
3 | ||
Index to Financial Statements: | ||
3 | ||
4 | ||
5 | ||
6 | ||
7 | ||
7 | ||
9 | ||
12 | ||
12 | ||
14 | ||
16 | ||
Note 7. Supplemental Equity and Comprehensive Income Information | 16 | |
20 | ||
20 | ||
21 | ||
21 | ||
22 | ||
29 | ||
31 | ||
49 | ||
52 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 54 | |
Index to Management’s Discussion and Analysis: | ||
54 | ||
63 | ||
65 | ||
70 | ||
Cautionary Note Concerning Factors That May Affect Future Results | 76 | |
77 | ||
77 | ||
78 | ||
78 | ||
82 | ||
83 | ||
83 | ||
83 | ||
83 |
2
3M COMPANY
FORM 10-Q
For the Quarterly Period Ended June 30, 2021
PART I. Financial Information
Item 1. Financial Statements.
3M Company and Subsidiaries
Consolidated Statement of Income
(Unaudited)
| Three months ended |
| Six months ended |
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June 30, | June 30, | ||||||||||||
(Millions, except per share amounts) |
| 2021 |
| 2020 |
| 2021 | 2020 |
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Net sales | $ | | $ | | $ | | $ | | |||||
Operating expenses | |||||||||||||
Cost of sales |
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Selling, general and administrative expenses |
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Research, development and related expenses |
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Gain on sale of businesses | — | ( | — | ( | |||||||||
Total operating expenses |
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Operating income |
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Other expense (income), net |
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Income before income taxes |
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Provision for income taxes |
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Income of consolidated group | | | | | |||||||||
Income (loss) from unconsolidated subsidiaries, net of taxes | | — | | — | |||||||||
Net income including noncontrolling interest | | | | | |||||||||
Less: Net income (loss) attributable to noncontrolling interest |
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| ( |
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Net income attributable to 3M | $ | | $ | | $ | | $ | | |||||
Weighted average 3M common shares outstanding — basic |
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Earnings per share attributable to 3M common shareholders — basic | $ | | $ | | $ | | $ | | |||||
Weighted average 3M common shares outstanding — diluted |
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Earnings per share attributable to 3M common shareholders — diluted | $ | | $ | | $ | | $ | |
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
3
3M Company and Subsidiaries
Consolidated Statement of Comprehensive Income
(Unaudited)
| Three months ended |
| Six months ended | |||||||||
June 30, | June 30, | |||||||||||
(Millions) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Net income including noncontrolling interest | $ | | $ | | $ | | $ | | ||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Cumulative translation adjustment |
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Defined benefit pension and postretirement plans adjustment |
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Cash flow hedging instruments |
| ( |
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Total other comprehensive income (loss), net of tax |
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Comprehensive income (loss) including noncontrolling interest |
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Comprehensive (income) loss attributable to noncontrolling interest |
| — |
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| ( |
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Comprehensive income (loss) attributable to 3M | $ | | $ | | $ | | $ | |
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
4
3M Company and Subsidiaries
Consolidated Balance Sheet
(Unaudited)
| June 30, |
| December 31, |
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(Dollars in millions, except per share amount) |
| 2021 |
| 2020 |
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Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | | $ | | |||
Marketable securities — current |
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Accounts receivable — net of allowances of $ |
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Inventories | |||||||
Finished goods |
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Work in process |
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Raw materials and supplies |
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Total inventories |
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Prepaids | | | |||||
Other current assets |
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Total current assets |
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Property, plant and equipment |
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Less: Accumulated depreciation |
| ( |
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Property, plant and equipment — net |
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Operating lease right of use assets | | | |||||
Goodwill |
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Intangible assets — net |
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Other assets |
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Total assets | $ | | $ | | |||
Liabilities | |||||||
Current liabilities | |||||||
Short-term borrowings and current portion of long-term debt | $ | | $ | | |||
Accounts payable |
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Accrued payroll |
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Accrued income taxes |
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Operating lease liabilities — current | | | |||||
Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Pension and postretirement benefits |
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Operating lease liabilities | |
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Other liabilities |
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Total liabilities | $ | | $ | | |||
Commitments and contingencies (Note 14) | |||||||
Equity | |||||||
3M Company shareholders’ equity: | |||||||
Common stock par value, $ | $ | | $ | | |||
Shares outstanding - June 30, 2021: | |||||||
Shares outstanding - December 31, 2020: | |||||||
Additional paid-in capital |
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Retained earnings |
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Treasury stock, at cost: |
| ( |
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Shares at June 30, 2021: | |||||||
Shares at December 31, 2020: | |||||||
Accumulated other comprehensive income (loss) |
| ( |
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Total 3M Company shareholders’ equity |
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Noncontrolling interest |
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Total equity | $ | | $ | | |||
Total liabilities and equity | $ | | $ | |
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
5
3M Company and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
| Six months ended | |||||
June 30, | ||||||
(Millions) |
| 2021 |
| 2020 | ||
Cash Flows from Operating Activities | ||||||
Net income including noncontrolling interest | $ | | $ | | ||
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities | ||||||
Depreciation and amortization |
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Company pension and postretirement contributions |
| ( |
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Company pension and postretirement expense |
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Stock-based compensation expense |
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Gain on sale of businesses | — | ( | ||||
Deferred income taxes |
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Changes in assets and liabilities | ||||||
Accounts receivable |
| ( |
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Inventories |
| ( |
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Accounts payable |
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Accrued income taxes (current and long-term) |
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Other — net |
| ( |
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Net cash provided by (used in) operating activities |
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Cash Flows from Investing Activities | ||||||
Purchases of property, plant and equipment (PP&E) |
| ( |
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Proceeds from sale of PP&E and other assets |
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Acquisitions, net of cash acquired |
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Purchases of marketable securities and investments |
| ( |
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Proceeds from maturities and sale of marketable securities and investments |
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Proceeds from sale of businesses, net of cash sold |
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Other — net |
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Net cash provided by (used in) investing activities |
| ( |
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Cash Flows from Financing Activities | ||||||
Change in short-term debt — net |
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Repayment of debt (maturities greater than 90 days) |
| ( |
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Proceeds from debt (maturities greater than 90 days) |
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Purchases of treasury stock |
| ( |
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Proceeds from issuance of treasury stock pursuant to stock option and benefit plans |
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Dividends paid to shareholders |
| ( |
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Other — net |
| ( |
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Net cash provided by (used in) financing activities |
| ( |
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Effect of exchange rate changes on cash and cash equivalents |
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Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents at beginning of year |
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Cash and cash equivalents at end of period | $ | | $ | |
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
6
3M Company and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1. Significant Accounting Policies
Basis of Presentation
The interim consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair statement of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. These adjustments consist of normal, recurring items. The results of operations for any interim period are not necessarily indicative of results for the full year. The interim consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Annual Report on Form 10-K.
Effective in the first quarter of 2021, 3M made the following changes. Information provided herein reflects the impact of these changes for all periods presented.
● | Change in accounting principle for net periodic pension and postretirement plan cost. See below for additional information. |
● | Change in measure of segment operating performance used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income). See additional information in Note 16. |
● | Change in alignment of certain products within 3M’s Consumer business segment—creating the Consumer Health and Safety Division. See additional information in Note 16. |
Change in Accounting Principle for Determining Net Periodic Pension and Postretirement Plan Cost
In the first quarter of 2021, 3M changed the method it uses to calculate the market-related value of fixed income securities included in its pension and other postretirement plan assets. The market-related value is used to determine the expected return on plan assets and the amortization of net unamortized actuarial gains or losses expense components of net periodic benefit cost. The Company previously used the calculated value approach for all plan assets, deferring over three years the impact on these amounts of asset gains or losses that differed from expected returns. 3M changed to the fair value approach for calculating market-related value for the fixed income class of plan assets, which does not involve deferring the impact of excess plan asset gains or losses in the determination of these two components of net periodic benefit cost. 3M considers the use of the fair value approach preferrable to the calculated value approach as it results in a more current reflection of impacts of changes in value of these plan assets in the determination of net periodic benefit cost. Additionally, given the plans’ liability-driven investment strategy whereby the changes in value of the fixed income plan assets should offset changes in the value of the plans’ liabilities, this approach more closely aligns the expected return on plan assets expense component with the value reflected in the plans’ funded status. This change was applied retrospectively to all periods presented within 3M’s financial statements. The change did not impact consolidated operating income or net cash provided by operating activities but did impact the previously reported portion of pension and postretirement net periodic benefit cost (benefit) that was included within non-operating other expense (income) along with related consolidated income items such as net income and earnings per share. Other impacts included related changes to previously reported consolidated other comprehensive income, retained earnings, accumulated other comprehensive income (loss), and associated line items within the determination of net cash provided by operating activities. For classes of plan assets other than fixed income investments, the Company continues to use the calculated value approach to determine their market-related value.
7