Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

3M Co. (NYSE:MMM)

Analysis of Income Taxes

Advanced level


Income Tax Expense (Benefit)

3M Co., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Federal 534  698  1,022  1,192  1,338 
State 59  109  59  75  101 
International 673  763  722  733  566 
Currently payable 1,266  1,570  1,803  2,000  2,005 
Federal (32) (38) 162  (3) (55)
State (26) (17) 15 
International (78) (54) 76  (11) 26 
Deferred (136) (109) 253  (5) (23)
Tax Cuts and Jobs Act (TCJA) non-current transition tax provision —  176  623  —  — 
Provision for income taxes 1,130  1,637  2,679  1,995  1,982 

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Item Description The company
Currently payable Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. 3M Co.’s currently payable decreased from 2017 to 2018 and from 2018 to 2019.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. 3M Co.’s deferred decreased from 2017 to 2018 and from 2018 to 2019.
Provision for income taxes Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. 3M Co.’s provision for income taxes decreased from 2017 to 2018 and from 2018 to 2019.

Effective Income Tax Rate (EITR)

3M Co., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Statutory U.S. tax rate 21.00% 21.00% 35.00% 35.00% 35.00%
State income taxes, net of federal benefit 0.50% 1.00% 0.80% 0.90% 1.10%
International income taxes, net 0.20% 0.20% -6.30% -2.70% -3.90%
Global Intangible Low Taxed Income (GILTI) 1.80% 1.10% 0.00% 0.00% 0.00%
Foreign Derived Intangible Income (FDII) -2.90% -1.30% 0.00% 0.00% 0.00%
U.S. research and development credit -1.70% -1.50% -0.70% -0.50% -0.50%
Reserves for tax contingencies 2.30% 1.20% 2.20% 0.20% -1.00%
Domestic Manufacturer’s deduction 0.00% 0.00% -1.80% -1.80% -1.80%
Employee share-based payments -1.30% -1.40% -3.20% -2.80% -0.10%
All other, net -0.10% 0.60% -0.60% 0.00% 0.30%
Effective worldwide tax rate, before U.S. TCJA enactment, net impacts 19.80% 20.90% 25.40% 28.30% 29.10%
U.S. TCJA enactment, net impacts 0.00% 2.50% 10.10% 0.00% 0.00%
Effective worldwide tax rate 19.80% 23.40% 35.50% 28.30% 29.10%

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Item Description The company
Effective worldwide tax rate, before U.S. TCJA enactment, net impacts Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. 3M Co.’s effective worldwide tax rate, before U.S. TCJA enactment, net impacts decreased from 2017 to 2018 and from 2018 to 2019.

Components of Deferred Tax Assets and Liabilities

3M Co., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Employee benefit costs 169  187  178  195  175 
Product and other claims 280  228  204  326  146 
Miscellaneous accruals 119  113  98  92  114 
Accruals not currently deductible 568  528  480  613  435 
Pension costs 824  643  760  1,217  1,120 
Stock-based compensation 218  203  210  302  305 
Net operating/capital loss/tax credit carryforwards 150  71  89  93  109 
Foreign tax credits 66  —  32  22  25 
Currency translation —  —  59  —  — 
Inventory 70  54  51  53  46 
Other 113  24  —  —  — 
Gross deferred tax assets 2,009  1,523  1,681  2,300  2,040 
Valuation allowance (158) (67) (81) (47) (31)
Deferred tax assets 1,851  1,456  1,600  2,253  2,009 
Product and other insurance receivables —  (7) (6) (27) (28)
Accelerated depreciation (580) (521) (447) (730) (736)
Intangible amortization (1,021) (799) (784) (903) (1,017)
Currency translation (30) (35) —  (276) (199)
Other —  (8) (87) (40) (70)
Deferred tax liabilities (1,631) (1,370) (1,324) (1,976) (2,050)
Net deferred tax assets (liabilities) 220  86  276  277  (41)

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Item Description The company
Gross deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. 3M Co.’s gross deferred tax assets decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. 3M Co.’s deferred tax assets decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Net deferred tax assets (liabilities) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. 3M Co.’s net deferred tax assets (liabilities) decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.

Deferred Tax Assets and Liabilities, Classification

3M Co., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Deferred tax assets (included in Other assets) 521  365  511  422  510 
Deferred tax liabilities (included in Other liabilities) 301  279  235  145  551 

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Item Description The company
Deferred tax assets (included in Other assets) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. 3M Co.’s deferred tax assets (included in Other assets) decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Deferred tax liabilities (included in Other liabilities) Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. 3M Co.’s deferred tax liabilities (included in Other liabilities) increased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Deferred Taxes

3M Co., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Adjustment to Total Assets
Total assets (as reported) 44,659  36,500  37,987  32,906  32,718 
Less: Noncurrent deferred tax assets, net 521  365  511  422  510 
Total assets (adjusted) 44,138  36,135  37,476  32,484  32,208 
Adjustment to Total Liabilities
Total liabilities (as reported) 34,533  26,652  26,365  22,563  20,971 
Less: Noncurrent deferred tax liabilities, net 301  279  235  145  551 
Total liabilities (adjusted) 34,232  26,373  26,130  22,418  20,420 
Adjustment to Total 3M Company Shareholders’ Equity
Total 3M Company shareholders’ equity (as reported) 10,063  9,796  11,563  10,298  11,708 
Less: Net deferred tax assets (liabilities) 220  86  276  277  (41)
Total 3M Company shareholders’ equity (adjusted) 9,843  9,710  11,287  10,021  11,749 
Adjustment to Net Income Attributable To 3M
Net income attributable to 3M (as reported) 4,570  5,349  4,858  5,050  4,833 
Add: Deferred income tax expense (benefit) (136) (109) 253  (5) (23)
Net income attributable to 3M (adjusted) 4,434  5,240  5,111  5,045  4,810 

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).


3M Co., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

3M Co., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net Profit Margin
Reported net profit margin 14.22% 16.33% 15.35% 16.77% 15.96%
Adjusted net profit margin 13.80% 15.99% 16.14% 16.76% 15.89%
Total Asset Turnover
Reported total asset turnover 0.72 0.90 0.83 0.92 0.93
Adjusted total asset turnover 0.73 0.91 0.84 0.93 0.94
Financial Leverage
Reported financial leverage 4.44 3.73 3.29 3.20 2.79
Adjusted financial leverage 4.48 3.72 3.32 3.24 2.74
Return on Equity (ROE)
Reported ROE 45.41% 54.60% 42.01% 49.04% 41.28%
Adjusted ROE 45.05% 53.96% 45.28% 50.34% 40.94%
Return on Assets (ROA)
Reported ROA 10.23% 14.65% 12.79% 15.35% 14.77%
Adjusted ROA 10.05% 14.50% 13.64% 15.53% 14.93%

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. 3M Co.’s adjusted net profit margin ratio deteriorated from 2017 to 2018 and from 2018 to 2019.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. 3M Co.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
3M Co.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. 3M Co.’s adjusted ROE improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. 3M Co.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

3M Co., Financial Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to 3M 4,570  5,349  4,858  5,050  4,833 
Net sales 32,136  32,765  31,657  30,109  30,274 
Profitability Ratio
Net profit margin1 14.22% 16.33% 15.35% 16.77% 15.96%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to 3M 4,434  5,240  5,111  5,045  4,810 
Net sales 32,136  32,765  31,657  30,109  30,274 
Profitability Ratio
Adjusted net profit margin2 13.80% 15.99% 16.14% 16.76% 15.89%

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

2019 Calculations

1 Net profit margin = 100 × Net income attributable to 3M ÷ Net sales
= 100 × 4,570 ÷ 32,136 = 14.22%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to 3M ÷ Net sales
= 100 × 4,434 ÷ 32,136 = 13.80%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. 3M Co.’s adjusted net profit margin ratio deteriorated from 2017 to 2018 and from 2018 to 2019.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net sales 32,136  32,765  31,657  30,109  30,274 
Total assets 44,659  36,500  37,987  32,906  32,718 
Activity Ratio
Total asset turnover1 0.72 0.90 0.83 0.92 0.93
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales 32,136  32,765  31,657  30,109  30,274 
Adjusted total assets 44,138  36,135  37,476  32,484  32,208 
Activity Ratio
Adjusted total asset turnover2 0.73 0.91 0.84 0.93 0.94

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

2019 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 32,136 ÷ 44,659 = 0.72

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 32,136 ÷ 44,138 = 0.73

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. 3M Co.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Total assets 44,659  36,500  37,987  32,906  32,718 
Total 3M Company shareholders’ equity 10,063  9,796  11,563  10,298  11,708 
Solvency Ratio
Financial leverage1 4.44 3.73 3.29 3.20 2.79
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets 44,138  36,135  37,476  32,484  32,208 
Adjusted total 3M Company shareholders’ equity 9,843  9,710  11,287  10,021  11,749 
Solvency Ratio
Adjusted financial leverage2 4.48 3.72 3.32 3.24 2.74

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

2019 Calculations

1 Financial leverage = Total assets ÷ Total 3M Company shareholders’ equity
= 44,659 ÷ 10,063 = 4.44

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total 3M Company shareholders’ equity
= 44,138 ÷ 9,843 = 4.48

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
3M Co.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to 3M 4,570  5,349  4,858  5,050  4,833 
Total 3M Company shareholders’ equity 10,063  9,796  11,563  10,298  11,708 
Profitability Ratio
ROE1 45.41% 54.60% 42.01% 49.04% 41.28%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to 3M 4,434  5,240  5,111  5,045  4,810 
Adjusted total 3M Company shareholders’ equity 9,843  9,710  11,287  10,021  11,749 
Profitability Ratio
Adjusted ROE2 45.05% 53.96% 45.28% 50.34% 40.94%

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

2019 Calculations

1 ROE = 100 × Net income attributable to 3M ÷ Total 3M Company shareholders’ equity
= 100 × 4,570 ÷ 10,063 = 45.41%

2 Adjusted ROE = 100 × Adjusted net income attributable to 3M ÷ Adjusted total 3M Company shareholders’ equity
= 100 × 4,434 ÷ 9,843 = 45.05%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. 3M Co.’s adjusted ROE improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to 3M 4,570  5,349  4,858  5,050  4,833 
Total assets 44,659  36,500  37,987  32,906  32,718 
Profitability Ratio
ROA1 10.23% 14.65% 12.79% 15.35% 14.77%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to 3M 4,434  5,240  5,111  5,045  4,810 
Adjusted total assets 44,138  36,135  37,476  32,484  32,208 
Profitability Ratio
Adjusted ROA2 10.05% 14.50% 13.64% 15.53% 14.93%

Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).

2019 Calculations

1 ROA = 100 × Net income attributable to 3M ÷ Total assets
= 100 × 4,570 ÷ 44,659 = 10.23%

2 Adjusted ROA = 100 × Adjusted net income attributable to 3M ÷ Adjusted total assets
= 100 × 4,434 ÷ 44,138 = 10.05%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. 3M Co.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.