UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
 
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of report (Date of earliest event reported): October 23, 2018
 
3M COMPANY
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of Incorporation)

File No. 1-3285	 	41-0417775	
(Commission File Number)	 	(IRS Employer Identification No.)	

3M Center, St. Paul, Minnesota	 	55144-1000	
(Address of Principal Executive Offices)	 	(Zip Code)	
 
(651) 733-1110
(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 
Item 2.02.  Results of Operations and Financial Condition
 
On October 23, 2018, 3M Company issued a press release reporting third-quarter 2018 financial results and updating full-year 2018 expectations (attached hereunder as Exhibit 99 and incorporated herein by reference).
 
Item 9.01.  Financial Statements and Exhibits
 
(d) Exhibits

Exhibit Number	 	Description	
99	 	Press Release, dated as of October 23, 2018, of 3M Company (furnished pursuant to Item 2.02 hereof)	
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 	3M COMPANY	
 	 	
 	By:	 /s/ Gregg M. Larson	
 	 	Gregg M. Larson,	
 	 	Deputy General Counsel and Secretary	
 
Dated: October 23, 2018
 
2 

Exhibit 99 
 
For Immediate Release
 
3M Reports Third-Quarter 2018 Results
 
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. — October 23, 2018 - 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
CONSOLIDATED STATEMENT OF INCOME
(Millions, except per-share amounts)
(Unaudited)

 	 	Three months ended 	 	Nine months ended 	 	
 	 	September 30,	 	September 30,	 	
 	 	2018	 	2017	 	2018	 	2017	 	
 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	8,152	 	$	8,172	 	$	24,820	 	$	23,667	 	
 	 	 	 	 	 	 	 	 	 	
Operating expenses	 	 	 	 	 	 	 	 	 	
Cost of sales	 	4,159	 	4,059	 	12,622	 	11,961	 	
Selling, general and administrative expenses	 	1,547	 	1,637	 	5,920	 	4,871	 	
Research, development and related expenses	 	430	 	468	 	1,384	 	1,422	 	
Gain on sale of businesses	 	—	 	—	 	(530	)	(490	)	
 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	6,136	 	6,164	 	19,396	 	17,764	 	
 	 	 	 	 	 	 	 	 	 	
Operating income	 	2,016	 	2,008	 	5,424	 	5,903	 	
 	 	 	 	 	 	 	 	 	 	
Other expense (income), net	 	51	 	11	 	144	 	27	 	
 	 	 	 	 	 	 	 	 	 	
Income before income taxes	 	1,965	 	1,997	 	5,280	 	5,876	 	
 	 	 	 	 	 	 	 	 	 	
Provision for income taxes	 	419	 	564	 	1,266	 	1,532	 	
 	 	 	 	 	 	 	 	 	 	
Net income including noncontrolling interest	 	$	1,546	 	$	1,433	 	$	4,014	 	$	4,344	 	
 	 	 	 	 	 	 	 	 	 	
Less: Net income attributable to noncontrolling interest	 	3	 	4	 	12	 	9	 	
 	 	 	 	 	 	 	 	 	 	
Net income attributable to 3M	 	$	1,543	 	$	1,429	 	$	4,002	 	$	4,335	 	
 	 	 	 	 	 	 	 	 	 	
Weighted average 3M common shares outstanding — basic	 	585.6	 	597.6	 	591.1	 	597.9	 	
Earnings per share attributable to 3M common shareholders — basic	 	$	2.64	 	$	2.39	 	$	6.77	 	$	7.25	 	
 	 	 	 	 	 	 	 	 	 	
Weighted average 3M common shares outstanding — diluted	 	598.4	 	612.7	 	605.1	 	612.5	 	
Earnings per share attributable to 3M common shareholders — diluted	 	$	2.58	 	$	2.33	 	$	6.61	 	$	7.08	 	
 	 	 	 	 	 	 	 	 	 	
Cash dividends paid per 3M common share	 	$	1.36	 	$	1.175	 	$	4.08	 	$	3.525	 	

As discussed in note (c), results of operations for the first quarter of 2018 were impacted by an $897 million pre-tax charge related to settlement of a previously disclosed lawsuit with the State of Minnesota and a $217 million measurement period adjustment relative to the accounting for the 2017 enactment of the Tax Cuts and Jobs Act. Results of operations for the second quarter of 2018 reflected the net $389 million pre-tax impact of the Communication Markets divestiture gain, net of restructuring actions. In addition, as discussed in 3M’s Form 8-K dated May 8, 2018, (which updated 3M’s 2017 Annual Report on Form 10-K) the Company adopted Accounting Standards Update (ASU) No. 2017-07 relative to the presentation of pension and postretirement benefit costs in the first quarter of 2018 with retroactive impact to prior periods.

 
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)

 	 	September 30,	 	December 31,	 	
 	 	2018	 	2017	 	
ASSETS	 	 	 	 	 	
Current assets	 	 	 	 	 	
Cash and cash equivalents	 	$	3,185	 	$	3,053	 	
Marketable securities — current	 	338	 	1,076	 	
Accounts receivable — net	 	5,329	 	4,911	 	
Inventories	 	4,437	 	4,034	 	
Prepaids	 	745	 	937	 	
Other current assets	 	385	 	266	 	
Total current assets	 	14,419	 	14,277	 	
Property, plant and equipment — net	 	8,630	 	8,866	 	
Goodwill and intangible assets — net	 	12,849	 	13,449	 	
Other assets	 	1,377	 	1,395	 	
Total assets	 	$	37,275	 	$	37,987	 	
 	 	 	 	 	 	
LIABILITIES AND EQUITY	 	 	 	 	 	
Current liabilities	 	 	 	 	 	
Short-term borrowings and	 	 	 	 	 	
current portion of long-term debt	 	$	1,307	 	$	1,853	 	
Accounts payable	 	2,029	 	1,945	 	
Accrued payroll	 	783	 	870	 	
Accrued income taxes	 	186	 	310	 	
Other current liabilities	 	3,031	 	2,709	 	
Total current liabilities	 	7,336	 	7,687	 	
Long-term debt	 	13,539	 	12,096	 	
Other liabilities	 	6,089	 	6,582	 	
Total liabilities	 	$	26,964	 	$	26,365	 	
 	 	 	 	 	 	
Total equity	 	$	10,311	 	$	11,622	 	
Shares outstanding	 	 	 	 	 	
September 30, 2018: 582,287,135 shares	 	 	 	 	 	
December 31, 2017: 594,884,237 shares	 	 	 	 	 	
Total liabilities and equity	 	$	37,275	 	$	37,987	 	

 
3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)

 	 	Nine months ended	 	
 	 	September 30,	 	
 	 	2018	 	2017	 	
NET CASH PROVIDED BY OPERATING ACTIVITIES	 	$	4,181	 	$	4,380	 	
 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	
Purchases of property, plant and equipment	 	(1,046	)	(914	)	
Acquisitions, net of cash acquired	 	13	 	(12	)	
Purchases and proceeds from sale or maturities of marketable securities and investments — net	 	714	 	(310	)	
Proceeds from sale of businesses, net of cash sold	 	806	 	862	 	
Other investing activities	 	151	 	20	 	
 	 	 	 	 	 	
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	 	638	 	(354	)	
 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	
Change in debt	 	1,093	 	(590	)	
Purchases of treasury stock	 	(3,601	)	(1,564	)	
Proceeds from issuances of treasury stock pursuant to stock option and benefit plans	 	401	 	582	 	
Dividends paid to shareholders	 	(2,406	)	(2,104	)	
Other financing activities	 	(36	)	(23	)	
 	 	 	 	 	 	
NET CASH USED IN FINANCING ACTIVITIES	 	(4,549	)	(3,699	)	
 	 	 	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	 	(138	)	106	 	
 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	132	 	433	 	
Cash and cash equivalents at beginning of year	 	3,053	 	2,398	 	
 	 	 	 	 	 	
Cash and cash equivalents at end of period	 	$	3,185	 	$	2,831	 	

 
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL INFORMATION
NON-GAAP MEASURES
(Dollars in millions, except full-year 2018 forecast)
(Unaudited)

 	 	Three months ended 	 	Nine months ended 	 	
 	 	September 30,	 	September 30,	 	
Major GAAP Cash Flow Categories	 	2018	 	2017	 	2018	 	2017	 	
 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	$	2,139	 	$	1,750	 	$	4,181	 	$	4,380	 	
Net cash provided by (used in) investing activities	 	(269	)	(781	)	638	 	(354	)	
Net cash used in financing activities	 	(1,453	)	(843	)	(4,549	)	(3,699	)	

Free Cash Flow (non-GAAP measure)	 	 	 	 	 	 	 	 	 	Full-Year
2018 Forecast
(Billions)	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	$	2,139	 	$	1,750	 	$	4,181	 	$	4,380	 	$	6.4 to $6.8	 	
Purchases of property, plant and equipment	 	(377	)	(325	)	(1,046	)	(914	)	$	(1.6	)	
Free cash flow (a)	 	1,762	 	1,425	 	3,135	 	3,466	 	$	4.8 to $5.2	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to 3M	 	$	1,543	 	$	1,429	 	$	4,002	 	$	4,335	 	$	5.3 to $5.5	 	
Free cash flow conversion (a)	 	114	%	100	%	78	%	80	%	90% to 95%	 	

(a)                      Free cash flow and free cash flow conversion are not defined under U.S. generally accepted accounting principles (GAAP). Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion are meaningful to investors as they function as useful measures of performance and the Company uses these measures as an indication of the strength of the company and its ability to generate cash.

 	 	September 30,	 	December 31,	 	
Net Debt (non-GAAP measure)	 	2018	 	2017	 	
 	 	 	 	 	 	
Total debt	 	$	14,846	 	$	13,949	 	
Less: Cash, cash equivalents and marketable securities	 	3,550	 	4,156	 	
 	 	 	 	 	 	
Net debt (b)	 	$	11,296	 	$	9,793	 	

(b)                      Net debt is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. The Company defines net debt as total debt less the total of cash, cash equivalents and current and long-term marketable securities. 3M believes net debt is meaningful to investors as 3M considers net debt and its components to be an important indicator of liquidity and a guiding measure of capital structure strategy.

 
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL INFORMATION
NON-GAAP MEASURES — (CONTINUED)
(Dollars in billions, except per share amounts)
(Unaudited)

 	 	Estimated Full-Year 2018	 	
Adjusted income, earnings per share, &
effective tax rate (non-GAAP measures)	 	GAAP
Measure	 	Adjustment
for
Measurement
Period
Accounting
of TCJA	 	Adjustment
for MN
NRD
Resolution	 	Adjustment for
Communication
Markets
Division
Divestiture, Net
of Related
Restructuring
Actions	 	Adjusted Non-
GAAP Measure
(c)	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Income before taxes	 	$	7.0 to 7.1	 	$	—	 	$	0.9	 	$	(0.4	)	$	7.5 to 7.6	 	
Provision for income taxes	 	$	1.6 to 1.7	 	$	(0.2	)	$	0.2	 	$	(0.1	)	$	1.5 to 1.6	 	
Effective tax rate	 	23 to 25	%	 	 	 	 	 	 	20 to 21	%	
 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to 3M	 	$	5.3 to 5.5	 	$	0.2	 	$	0.7	 	$	(0.3	)	$	5.9 to 6.1	 	
Earnings per diluted share	 	$	8.78 to 8.93	 	$	0.36	 	$	1.16	 	$	(0.40 - 0.45	)	$	9.90 to 10.00	 	

(c)                       In February 2018, 3M reached an agreement with the State of Minnesota that resolved the previously disclosed Natural Resource Damages (NRD) lawsuit filed by the State against the Company related to certain PFCs present in the environment. Under the terms of the settlement, 3M agreed to provide an $850 million grant to the State for a special “3M Water Quality and Sustainability Fund.” This Fund will enable projects that support water sustainability in the Twin Cities East Metro region, such as continued delivery of water to residents and enhancing groundwater recharge to support sustainable growth. The projects will also result in habitat and recreation improvements, such as fishing piers, trails, and open space preservation. 3M recorded a pre-tax charge of $897 million, inclusive of legal fees and other related obligations, in the first quarter of 2018 associated with the resolution of this matter. Also during the first quarter of 2018, 3M recorded a tax expense of $217 million related to a measurement period adjustment to the provisional amounts recorded in December 2017, from the enactment of the Tax Cuts and Jobs Act (TCJA). 3M’s provisional accounting continues to be subject to adjustment during the measurement period of up to one year following the December 2017 enactment of TCJA. In the second quarter of 2018, 3M completed the sale of substantially all of its Communication Markets Division and reflected a pre-tax gain of $494 million as a result of this divestiture. During the second quarter of 2018, management approved and committed to undertake certain restructuring actions related to addressing corporate functional costs following the Communication Markets Division divestiture. These actions resulted in a second quarter 2018 pre-tax charge of $105 million.
 
In addition to providing full-year estimated 2018 financial results in accordance with U.S. GAAP, the Company also provides non-GAAP measures that adjust for the impacts of the NRD resolution, measurement period adjustment to the impact of enactment of the TCJA, and the impact of the Communication Markets Division divestiture gain, net of restructuring actions. These items represent significant charges/benefits that impacted the Company’s financial results. Income before taxes, provision for income taxes, net income, earnings per share, and the effective tax rate are all measures for which 3M provides the estimated GAAP measure and an adjusted measure. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. The Company considers these non-GAAP measures in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for this item is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. The determination of these items may not be comparable to similarly titled measures used by other companies.

 
3M Company and Subsidiaries
SALES CHANGE ANALYSIS (d)
(Unaudited)

 	 	Three months ended September 30, 2018	 	
 	 	 	 	 	 	Europe,	 	 	 	 	 	
 	 	 	 	 	 	Middle	 	Latin	 	 	 	
Sales Change Analysis	 	United	 	Asia-	 	East and	 	America/	 	World-	 	
By Geographic Area	 	States	 	Pacific	 	Africa	 	Canada	 	Wide	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Volume — organic	 	(0.9	)%	3.0	%	(2.5	)%	(0.1	)%	0.1	%	
Price	 	1.4	 	0.2	 	1.6	 	2.2	 	1.2	 	
Organic local-currency sales	 	0.5	 	3.2	 	(0.9	)	2.1	 	1.3	 	
Acquisitions	 	2.3	 	0.5	 	2.9	 	0.8	 	1.7	 	
Divestitures	 	(1.5	)	(0.6	)	(2.9	)	(1.5	)	(1.5	)	
Translation	 	—	 	(1.5	)	(3.0	)	(6.9	)	(1.7	)	
Total sales change	 	1.3	%	1.6	%	(3.9	)%	(5.5	)%	(0.2	)%	

 	 	Three months ended September 30, 2018	 	
Worldwide Sales Change	 	Organic local-	 	 	 	 	 	 	 	Total sales	 	
By Business Segment	 	currency sales	 	Acquisitions	 	Divestitures	 	Translation	 	change	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Industrial	 	2.2	%	—	%	(0.1	)%	(2.1	)%	—	%	
Safety and Graphics	 	2.2	 	8.9	 	(1.9	)	(2.2	)	7.0	 	
Health Care	 	(1.1	)	—	 	—	 	(1.7	)	(2.8	)	
Electronics and Energy	 	2.3	 	—	 	(6.1	)	(1.0	)	(4.8	)	
Consumer	 	(2.0	)	—	 	—	 	(1.4	)	(3.4	)	
Total Company	 	1.3	%	1.7	%	(1.5	)%	(1.7	)%	(0.2	)%	

 	 	Nine months ended September 30, 2018	 	
 	 	 	 	 	 	Europe,	 	 	 	 	 	
 	 	 	 	 	 	Middle	 	Latin	 	 	 	
Sales Change Analysis	 	United	 	Asia-	 	East and	 	America/	 	World-	 	
By Geographic Area	 	States	 	Pacific	 	Africa	 	Canada	 	Wide	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Volume — organic	 	1.6	%	4.4	%	0.2	%	2.1	%	2.3	%	
Price	 	1.1	 	0.2	 	1.6	 	1.7	 	1.0	 	
Organic local-currency sales	 	2.7	 	4.6	 	1.8	 	3.8	 	3.3	 	
Acquisitions	 	2.6	 	0.6	 	3.0	 	0.9	 	1.9	 	
Divestitures	 	(1.4	)	(0.6	)	(2.4	)	(1.4	)	(1.4	)	
Translation	 	—	 	1.8	 	4.0	 	(2.8	)	1.1	 	
Total sales change	 	3.9	%	6.4	%	6.4	%	0.5	%	4.9	%	

 	 	Nine months ended September 30, 2018	 	
Worldwide Sales Change	 	Organic local-	 	 	 	 	 	 	 	Total sales	 	
By Business Segment	 	currency sales	 	Acquisitions	 	Divestitures	 	Translation	 	change	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Industrial	 	3.4	%	—	%	(0.1	)%	1.3	%	4.6	%	
Safety and Graphics	 	5.8	 	9.8	 	(4.2	)	1.2	 	12.6	 	
Health Care	 	1.7	 	0.1	 	—	 	1.2	 	3.0	 	
Electronics and Energy	 	3.0	 	—	 	(3.2	)	1.0	 	0.8	 	
Consumer	 	1.3	 	—	 	—	 	0.5	 	1.8	 	
Total Company	 	3.3	%	1.9	%	(1.4	)%	1.1	%	4.9	%	

(d)                      Total sales change is calculated based on reported sales results. The components of sales change include organic local-currency sales, acquisitions, divestitures, and translation. Organic local-currency sales includes both organic volume impacts (which excludes acquisition and divestiture impacts), plus selling price changes. Acquisition and divestiture impacts are measured separately for the first 12 months post-transaction.

 
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.

 

BUSINESS SEGMENT INFORMATION	 	Three months ended	 	Nine months ended	 	
NET SALES	 	September 30,	 	September 30,	 	
(Millions)	 	2018	 	2017	 	2018	 	2017	 	
 	 	 	 	 	 	 	 	 	 	
Industrial	 	$	3,023	 	$	3,023	 	$	9,315	 	$	8,905	 	
Safety and Graphics	 	1,660	 	1,551	 	5,258	 	4,670	 	
Health Care	 	1,445	 	1,485	 	4,501	 	4,369	 	
Electronics and Energy	 	1,443	 	1,515	 	4,130	 	4,096	 	
Consumer	 	1,235	 	1,279	 	3,585	 	3,521	 	
Corporate and Unallocated	 	35	 	3	 	47	 	6	 	
Elimination of Dual Credit	 	(689	)	(684	)	(2,016	)	(1,900	)	
 	 	 	 	 	 	 	 	 	 	
Total Company	 	$	8,152	 	$	8,172	 	$	24,820	 	$	23,667	 	

BUSINESS SEGMENT INFORMATION	 	Three months ended	 	Nine months ended	 	
OPERATING INCOME	 	September 30,	 	September 30,	 	
(Millions)	 	2018	 	2017	 	2018	 	2017	 	
 	 	 	 	 	 	 	 	 	 	
Industrial	 	$	667	 	$	672	 	$	2,110	 	$	1,910	 	
Safety and Graphics	 	412	 	411	 	1,375	 	1,661	 	
Health Care	 	446	 	467	 	1,341	 	1,304	 	
Electronics and Energy	 	457	 	430	 	1,659	 	1,011	 	
Consumer	 	291	 	311	 	770	 	732	 	
Corporate and Unallocated (e)	 	(77	)	(112	)	(1,329	)	(256	)	
Elimination of Dual Credit	 	(180	)	(171	)	(502	)	(459	)	
 	 	 	 	 	 	 	 	 	 	
Total Company	 	$	2,016	 	$	2,008	 	$	5,424	 	$	5,903	 	

(e)                       Corporate and Unallocated operating income was impacted of certain restructuring actions related to addressing corporate functional costs following the Communication Markets Division divestiture recorded in the second quarter of 2018. These actions, in addition to the legal settlement recorded in the first quarter of 2018, impacted operating income for the first nine months of 2018, as further discussed in note (c).

 
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.
 
Contacts
 
3M
Investor Contact:
Bruce Jermeland, 651-733-1807
or
Tony Riter, 651-733-1141
or
Media Contact:
Lori Anderson, 651-733-0831