3M Company Reports Operating Results (10-Q)
3m Co has a market cap of $63.64 billion; its shares were traded at around $90.005 with a P/E ratio of 15 and P/S ratio of 2.2. The dividend yield of 3m Co stocks is 2.6%. 3m Co had an annual average earning growth of 8.4% over the past 10 years. GuruFocus rated 3m Co the business predictability rank of 3.5-star.
Highlight of Business Operations:Reclassification adjustments are made to avoid double counting in comprehensive income items that are also recorded as part of net income. Reclassifications to earnings from accumulated other comprehensive income including noncontrolling interest that related to pension and postretirement expense in the income statement were $154 million pre-tax ($98 million after-tax) for the three months ended June 30, 2012, $307 million pre-tax ($195 million after-tax) for the six months ended June 30, 2012, $119 million pre-tax ($54 million after-tax) for the three months ended June 30, 2011, and $238 million pre-tax ($130 million after-tax) for the six months ended June 30, 2011. These pension and postretirement expense pre-tax amounts are shown in the table in Note 8 as amortization of transition (asset) obligation, amortization of prior service cost (benefit) and amortization of net actuarial (gain) loss. Cash flow hedging instruments reclassifications are provided in Note 9. Reclassifications to earnings from accumulated other comprehensive income that related to realized losses due to sales or impairments (net of realized gains) for debt and equity securities were not material for the three months ended June 30, 2012 and $1 million pre-tax ($1 million after-tax) for the six months ended June 30, 2012. Reclassifications to earnings from accumulated other comprehensive income that related to realized gains due to sales of debt and equity securities were $2 million pre-tax ($1 million after-tax) for the three months ended June 30, 2011 and $2 million pre-tax ($1 million after-tax) for the six months ended June 30, 2011. Income taxes are not provided for foreign translation relating to permanent investments in international subsidiaries, but tax effects within cumulative translation does include impacts from items such as net investment hedge transactions.
Net income attributable to 3M was $1.167 billion, or $1.66 per diluted share in the second quarter of 2012, compared to $1.160 billion, or $1.60 per diluted share, in the second quarter of 2011. Average diluted shares outstanding declined 3.3 percent year-on-year to 702.6 million, which increased earnings by approximately 5 cents per diluted share. The income tax rate was 30.1 percent in the second quarter, up 3 percentage points versus last years second quarter, which
Net income attributable to 3M was $2.292 billion, or $3.25 per diluted share in the first six months of 2012, compared to $2.241 billion, or $3.09 per diluted share, in the first six months of 2011. In addition to the second-quarter 2012 restructuring actions discussed above, 3M incurred early retirement/restructuring costs of approximately 4 cents per diluted share in the first quarter of 2012. Of this amount, approximately 3 cents per diluted share related to special termination benefits for a voluntary early retirement incentive program in the United States (discussed in Note 8). The remainder related to selective restructuring in a few developed countries. These actions, in aggregate, are expected to be neutral to full-year 2012 earnings, with the costs incurred in the first quarter of 2012, and the associated benefits realized over the remainder of 2012.
In the first six months of 2012, cash flows provided by operating activities increased $33 million compared to the first six months of 2011. 3M was able to achieve this growth in operating cash flow despite investing an additional $547 million in its pension and postretirement plans when compared to the same period last year. 3M also invested in working capital (which includes accounts receivable, inventories and accounts payable), but at a lower level than in the first six months of 2011. Working capital increased $671 million in the first six months of 2012, with higher June 2012 sales compared to December 2011 sales contributing to this increase. This compared to working capital increases of $862 million in the first six months of 2011.
Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency. Capital expenditures were $619 million in the first six months of 2012, an increase of $93 million when compared to the first six months of 2011. 3Ms capital spending is increasingly shifting toward international markets and, in particular, fast-growing developing economies, as 3M continues to migrate manufacturing to better balance sales with manufacturing capability. The Company expects 2012 capital spending to be approximately $1.3 to $1.5 billion.
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