3M Co. (NYSE:MMM)

The analysis of the annual current and deferred income tax expenses reveals notable trends over the five-year period from 2017 to 2021.

Currently Payable Income Tax

The currently payable income tax shows a general decreasing trend from 2017 to 2019, declining from 1803 million US dollars in 2017 to 1266 million in 2019. In 2020, the amount increases to 1476 million and slightly decreases in 2021 to 1457 million. This pattern suggests a reduction in immediate tax liabilities during 2018 and 2019 followed by a partial rebound in the subsequent two years.

Deferred Income Tax

Deferred income tax values are initially positive in 2017 at 253 million, but there is a consistent negative and increasing magnitude trend from 2018 onward, with values of -109 million, -136 million, -158 million, and -172 million in 2018, 2019, 2020, and 2021 respectively. This indicates an increasing deferred tax asset or reduction in deferred tax liabilities over time, which may reflect timing differences in recognizing income tax expenses.

Provision for Income Taxes

The provision for income taxes exhibits a significant decline from 2679 million in 2017 to a low of 1130 million in 2019. After this low point, the provision rises to 1318 million in 2020 before slightly declining to 1285 million in 2021. This mirrors the trend in currently payable tax but the fluctuations are less volatile, suggesting that total tax expense, combining both current and deferred components, decreased sharply during 2018 and 2019 before stabilizing at a higher level in the following years.

Overall, the data indicates a downward trend in both current tax payments and total tax provisions through 2019, accompanied by a transition from positive to negative deferred tax amounts, which implies changing timing differences in tax recognition. The stabilization and slight increase in tax expenses in 2020 and 2021 reflect adjustments in taxable income or changes in tax strategy or legislation.

Statutory U.S. Tax Rate

The statutory U.S. tax rate significantly decreased from 35% in 2017 to 21% in 2018, remaining constant at 21% through to 2021. This reflects a sustained lower federal tax rate environment starting from 2018.

State Income Taxes, Net of Federal Benefit

State income taxes fluctuated moderately around 1% from 2017 to 2021, with a slight increase to 1.2% in 2020, indicating some variability in state tax obligations net of federal benefits over the years.

International Income Taxes, Net

International income taxes exhibited negative values in most years, starting at -6.3% in 2017, then converging near zero in 2018 and 2019 (0.2%), and returning to -1.2% in both 2020 and 2021. This pattern suggests a reduction in international tax expenses with some recovery towards prior negative levels.

Global Intangible Low Taxed Income (GILTI)

Data from 2018 onward shows GILTI contributions starting at 1.1%, increasing to 1.8% in 2019, before declining to 0.8% in 2020 and 0.7% in 2021. This indicates a decreasing impact of GILTI on overall tax rate after peaking in 2019.

Foreign Derived Intangible Income (FDII)

The FDII percentages have been consistently negative from 2018 through 2021, diminishing from -1.3% in 2018 to -3.1% in 2021. This downward trend suggests increasing tax benefits or credits associated with foreign intangible income.

U.S. Research and Development Credit

This credit increased in magnitude from -0.7% in 2017, reaching -1.7% in 2019, before receding to -0.7% in 2021. The fluctuation reflects changes in the recognition or utilization of R&D tax credits over time.

Reserves for Tax Contingencies

Reserves showed variability, peaking at 2.3% in 2019, decreasing sharply to 0.5% in 2020, and slightly rising to 0.6% in 2021. This pattern indicates adjustments in anticipated tax liabilities subject to contingencies.

Employee Share-Based Payments

The impact of employee share-based payments on the tax rate decreased notably from -3.2% in 2017 to -0.5% in 2020, with a minor uptick to -0.6% in 2021. This suggests a diminishing tax effect or recognition related to employee compensation arrangements.

All Other, Net

Miscellaneous tax impacts fluctuated modestly, with a low of -0.6% in 2017, rising to 0.6% in 2018 and 2020, and settling near zero in 2019 and 2021. This indicates minor, variable influences from other tax items.

Effective Worldwide Tax Rate, Before U.S. TCJA Enactment, Net Impacts

This rate exhibited a gradual decline from 25.4% in 2017 to 17.8% in 2021, demonstrating a consistent reduction in the effective tax burden globally before considering the U.S. Tax Cuts and Jobs Act effects.

U.S. TCJA Enactment, Net Impacts

The U.S. Tax Cuts and Jobs Act (TCJA) had a significant one-time positive impact in 2017 (10.1%) and a smaller impact in 2018 (2.5%), with no recorded effects afterward, signifying the initial adjustment period to the new tax legislation.

Effective Worldwide Tax Rate

There was a marked decrease in the effective worldwide tax rate from 35.5% in 2017 to 17.8% in 2021. Most of this change occurred between 2017 and 2018, aligning with the statutory tax rate reduction and TCJA enactment, while the following years showed marginal rate reductions.

The analysis reveals multiple trends and shifts in the financial elements over the five-year period.

Employee benefit costs

These costs fluctuated slightly but generally increased from 178 million US$ in 2017 to 237 million US$ in 2021, with a notable peak of 232 million US$ in 2020.

Product and other claims

Claims increased steadily from 204 million US$ in 2017 to a high of 338 million US$ in 2020, followed by a decline to 257 million US$ in 2021.

Miscellaneous accruals

There was a gradual rise from 98 million US$ in 2017 to 157 million US$ in 2021, indicating growing miscellaneous liabilities or reserves.

Accruals not currently deductible

This category showed a rising trend from 480 million US$ in 2017, peaking at 723 million US$ in 2020, then decreased to 651 million US$ in 2021.

Pension costs

These costs were volatile, starting at 760 million US$ in 2017, decreasing in 2018, spiking to 849 million US$ in 2020, and dropping sharply to 351 million US$ in 2021.

Stock-based compensation

Compensation expenses showed a consistent upward trend, increasing from 210 million US$ in 2017 to 249 million US$ in 2021.

Advanced payments

Data is only available for 2021, showing a significant amount of 286 million US$ indicating new prepayments or deposits recorded in that year.

Net operating/capital loss/state tax credit carryforwards

These assets fluctuated over time, peaking at 150 million US$ in 2019, followed by a slight decline toward 120 million US$ by 2021.

Foreign tax credits

Foreign tax credits were inconsistent in availability but rose when reported, reaching 115 million US$ in 2021 from 32 million US$ in 2017.

Currency translation

Amounts reported under this item show irregularity, with positive amounts in 2017 and 2020, and negative adjustments in 2018 and 2019.

Lease liabilities

Reported data begins in 2020 showing a value of 219 million US$, reflecting the adoption of lease accounting standards likely impacting liabilities recognition.

Product and other insurance receivables

This item appears only in later years with a value of 48 million US$ in 2021, offset by earlier small negative entries, suggesting changes in insurance-related receivables.

Inventory

Inventory levels have been relatively stable, varying between 51 million US$ and 70 million US$, with no clear upward or downward trend.

Other

Reported inconsistently, there was a large increase to 113 million US$ in 2019-2020 before declining sharply to 31 million US$ in 2021, indicating volatility or reclassification effects.

Gross deferred tax assets

These assets showed a general upward trend, increasing from 1,681 million US$ in 2017 to a peak of 2,307 million US$ in 2020, then slightly decreasing to 2,138 million US$ in 2021.

Valuation allowance

The allowance fluctuated but generally remained in a negative range, with the largest negative figure of -158 million US$ in 2019 and a slight increase in the negative balance by 2021.

Deferred tax assets

Reflecting gross assets net of valuation allowances, deferred tax assets increased over time, peaking at 2,172 million US$ in 2020 before dropping to 1,996 million US$ in 2021.

Accelerated depreciation and intangible amortization

Both accumulated depreciation and amortization exhibited a steady increase in their negative balances, indicating ongoing asset depreciation and amortization expenses. Accelerated depreciation moved from -447 million US$ in 2017 to -665 million US$ in 2021, while intangible amortization varied, peaking around -1,023 million US$ in 2020 then slightly improving to -985 million US$ in 2021.

Right-of-use asset

Data appears only for 2021, showing a negative balance of -222 million US$, consistent with new accounting standards for leases impacting asset recognition.

Deferred tax liabilities

These liabilities increased steadily from -1,324 million US$ in 2017 to -1,872 million US$ in 2021, reflecting higher deferred tax obligations.

Net deferred tax assets (liabilities)

There was a notable fluctuation here, starting at 276 million US$ in 2017, dropping to 86 million US$ in 2018, rebounding to 538 million US$ in 2020, and then declining sharply to 124 million US$ in 2021, indicating changing net tax positions over the years.

The analysis of deferred tax assets and liabilities over the five-year period reveals notable fluctuations and an overall upward tendency in certain years followed by a decline.

Deferred Tax Assets

Deferred tax assets exhibit variability with an initial decrease from 511 million US dollars in 2017 to 365 million in 2018. This is followed by a rebound to 521 million in 2019 and a significant increase reaching a peak of 871 million in 2020. However, the value then declines noticeably to 581 million in 2021.

Deferred Tax Liabilities

Deferred tax liabilities demonstrate a generally consistent upward trend throughout the period. Starting at 235 million in 2017, the liabilities progressively increased each year to reach 279 million in 2018, 301 million in 2019, 333 million in 2020, and ultimately 458 million in 2021. This indicates a steady rise in liabilities over the assessed timeframe.

In summary, deferred tax assets show more volatility and no clear long-term upward or downward trend, experiencing both substantial growth and decline during the timeframe. In contrast, deferred tax liabilities consistently increase, nearly doubling from 2017 to 2021. This suggests changes in tax positions impacting asset recognition were more variable, whereas liabilities accumulated progressively over the years.

The financial data reveals several notable trends over the five-year period ending December 31, 2021. Total assets, both reported and adjusted, exhibit an overall upward trend with some fluctuation. Reported total assets increased from approximately $38.0 billion in 2017 to nearly $47.1 billion in 2021, peaking in 2020 at about $47.3 billion. Similarly, adjusted total assets follow a comparable pattern, rising from about $37.5 billion to $46.5 billion, with a slight dip from 2019 to 2020.

Total liabilities also show an increasing trend up to 2019, followed by a decline. Reported liabilities rose from approximately $26.4 billion in 2017 to $34.5 billion in 2019, then marginally decreased to about $31.9 billion by 2021. Adjusted liabilities mirror this path, increasing through 2019 from $26.1 billion to $34.2 billion, then decreasing to around $31.5 billion in 2021. This pattern suggests a reduction in obligations in recent years following a peak in 2019.

Shareholders’ equity presents an overall strengthening trend. Reported equity declined from approximately $11.6 billion in 2017 to $9.8 billion in 2018, then gradually increased to $15.0 billion by 2021. Adjusted equity follows a similar trajectory, dipping slightly in 2018 but then growing consistently to nearly $14.9 billion in 2021. The growth in equity after 2018 indicates improving financial foundation and retained earnings.

Net income attributable to the company displays some variability across the period, with both reported and adjusted figures showing a peak in 2018 and 2021, and a dip around 2019 and 2020. Reported net income increased from approximately $4.9 billion in 2017 to $5.3 billion in 2018, decreased to $4.6 billion in 2019, then recovered to $5.9 billion in 2021. Adjusted net income follows a similar trend but generally reports slightly lower figures than the reported income, indicating some adjustments that reduce earnings variability.

Assets and Liabilities

Both showed growth until around 2019, after which liabilities decreased slightly while assets stabilized at a high level, reflecting possible deleveraging or asset reallocation strategies.

Shareholders’ Equity

After a decline in 2018, equity rebounded strongly, suggesting improved profitability and accumulation of retained earnings.

Net Income

Demonstrated cyclical fluctuations with peaks in 2018 and 2021, and declines in 2019 and 2020, possibly influenced by market conditions or operational factors; adjusted net income is slightly lower and less volatile than reported figures.

The analysis of the financial data over the period from 2017 to 2021 reveals several notable trends in profitability, efficiency, leverage, and return metrics.

Net Profit Margin

The reported net profit margin shows a generally stable pattern with a slight increase from 15.35% in 2017 to 16.75% in 2021, peaking at 16.73% in 2020. The adjusted net profit margin follows a similar trend but remains marginally lower than the reported figures throughout the period, declining from 16.14% in 2017 to 13.8% in 2019 before recovering to 16.26% by 2021. This suggests consistent profitability with minor adjustments primarily impacting earlier years.

Total Asset Turnover

The total asset turnover ratios, both reported and adjusted, indicate a decline in asset efficiency from 2017 to 2020, dropping from 0.83 and 0.84 to 0.68 and 0.69, respectively. However, a modest improvement is observed in 2021, with ratios increasing to 0.75 and 0.76. This pattern reflects a temporary reduction in asset utilization capacity, potentially influenced by market or operational conditions, with a recovery phase in the final year.

Financial Leverage

Financial leverage exhibits significant variability, rising substantially from 3.29 (reported) and 3.32 (adjusted) in 2017 to a peak of approximately 4.44 and 4.48 in 2019, before decreasing to 3.13 and 3.12 in 2021. This indicates an initial increase in reliance on debt or financial obligations, followed by a strategic reduction in leverage over the latter period.

Return on Equity (ROE)

ROE demonstrates a peak in 2018, reaching as high as 54.6% (reported) and 53.96% (adjusted), followed by a gradual decline through 2021, where figures fall to 39.35% and 38.53%, respectively. The adjusted ROE closely mirrors the reported values, suggesting that adjustments for income tax have a limited impact on equity returns. The declining trend post-2018 may reflect changes in profitability, leverage, or asset management.

Return on Assets (ROA)

ROA mirrors asset turnover trends, with a high of 14.65% (reported) and 14.5% (adjusted) in 2018, a dip to approximately 10% in 2019, and a partial recovery in subsequent years reaching 12.58% and 12.37% by 2021. The narrowing gap between reported and adjusted ROA indicates consistent asset profitability after accounting for deferred tax effects.

Overall, the data reflects a company experiencing fluctuations in operational efficiency and capital structure, with strong but variable profitability maintained through the period. The adjustments for deferred income tax appear to have a moderate impact, primarily affecting margins but leaving return measures largely consistent.

Net Income Trends

Reported net income attributable to the company exhibited fluctuations over the five-year period. It increased from $4,858 million in 2017 to $5,349 million in 2018, followed by a decline to $4,570 million in 2019. Subsequently, it rebounded to $5,384 million in 2020 and further increased to $5,921 million in 2021.

Adjusted net income followed a similar pattern but with some differences in magnitude. It rose slightly from $5,111 million in 2017 to $5,240 million in 2018, then decreased more noticeably to $4,434 million in 2019. Thereafter, it increased to $5,226 million in 2020 and reached $5,749 million in 2021.

Net Profit Margin Patterns

The reported net profit margin showed a general upward trend, starting at 15.35% in 2017 and peaking at 16.75% in 2021. The margin dipped in 2019 to 14.22% but recovered strongly in the following years to approximately 16.73% in 2020 and maintained a similar level in 2021.

Adjusted net profit margin showed a slightly different trajectory. It began at 16.14% in 2017, experienced a decline to 15.99% in 2018 and further to 13.8% in 2019. After 2019, the margin improved significantly to 16.24% in 2020 and slightly decreased but remained strong at 16.26% in 2021.

Comparative Insights

Both reported and adjusted figures suggest that the year 2019 was a challenging period, with declines in net income and profit margins. The recovery in 2020 and sustained improvement into 2021 indicate enhanced profitability and possibly effective management of expenses or tax adjustments during this time.

The differences between reported and adjusted metrics imply some tax-related or exceptional items impacting the reported results, especially noticeable in 2019 where adjusted net income and margin are lower relative to reported figures.

The financial data reveals several key trends related to the total assets and asset turnover ratios over the period from 2017 to 2021.

Total Assets

Both the reported and adjusted total assets show a general upward trend from 2017 through 2020, increasing from approximately $37.9 billion and $37.5 billion respectively in 2017 to about $47.3 billion and $46.5 billion in 2020. However, in 2021, both reported and adjusted totals exhibit a slight decline, with reported assets decreasing marginally to $47.1 billion and adjusted assets to $46.5 billion. This indicates a stabilization or minor contraction in asset base after a period of growth.

Total Asset Turnover

The reported total asset turnover ratio begins at 0.83 in 2017, increasing to 0.90 in 2018, indicating improved efficiency in generating sales from assets. From 2018 onwards, the ratio declines to 0.72 in 2019 and further to 0.68 in 2020, suggesting a reduction in asset utilization efficiency during these years. A rebound occurs in 2021, with the ratio rising to 0.75, signaling a partial recovery in asset turnover.

The adjusted total asset turnover ratio follows a similar pattern, slightly higher than the reported figures in each period. It peaks at 0.91 in 2018 before declining to 0.73 in 2019 and 0.69 in 2020, then recovers to 0.76 in 2021. This consistency between reported and adjusted ratios reinforces the observed trends in operational efficiency.

Overall, the data suggests that the company's asset base expanded significantly until 2020, then leveled off. Concurrently, asset turnover ratios improved initially but deteriorated sharply during 2019 and 2020, possibly reflecting operational challenges or market conditions during that timeframe. The partial recovery in turnover ratios in 2021 indicates efforts to enhance asset utilization were yielding positive outcomes by the end of the period analyzed.

Over the period from December 31, 2017, to December 31, 2021, total assets exhibited a general upward trend with some fluctuations. Reported total assets increased from approximately $37.99 billion in 2017 to a peak of about $47.34 billion in 2020, before a slight decrease to around $47.07 billion in 2021. The adjusted total assets follow a similar pattern, moving from $37.48 billion in 2017 to $46.49 billion by 2021, reflecting consistent adjustments to the reported figures but maintaining the same overall trajectory.

Shareholders’ equity, both reported and adjusted, displayed a notable increase over the period. Reported equity rose from $11.56 billion in 2017 to $15.05 billion by the end of 2021, with a dip observed in 2018 and 2019 before a significant recovery in 2020 and 2021. The adjusted equity figures mirror this trend closely, starting at $11.29 billion in 2017 and reaching $14.92 billion in 2021. The adjustments tend to slightly reduce the equity values, but the increasing trend remains consistent.

Financial leverage ratios indicate volatility within the period. The reported financial leverage increased from 3.29 in 2017 to a peak of 4.44 in 2019, suggesting increased reliance on debt relative to equity. Subsequently, the leverage declined to 3.68 in 2020 and further decreased to 3.13 in 2021, indicating a strategy toward de-leveraging or strengthening equity positions. The adjusted financial leverage follows a similar path, peaking slightly higher at 4.48 in 2019 and falling thereafter to 3.12 in 2021.

Overall, the data suggests a phase of asset growth combined with an initial increase in financial leverage, followed by a period of equity strengthening and leverage reduction. The adjustments to the reported figures show minor quantitative differences but do not materially alter the observed trends. This pattern may reflect strategic shifts in capital structure and asset management over the five-year timeframe.

Net Income Trends

Reported net income showed an overall increasing trend from 2017 to 2021, rising from 4,858 million US dollars to 5,921 million US dollars. However, there was a noticeable dip in 2019, where reported net income decreased to 4,570 million US dollars before rebounding in the subsequent years. Adjusted net income followed a similar pattern, starting at 5,111 million US dollars in 2017 and ending at 5,749 million US dollars in 2021, with a decline visible in 2019 and a recovery thereafter.

Shareholders' Equity Performance

Reported total shareholders’ equity exhibited a general upward trend, increasing from 11,563 million US dollars in 2017 to 15,046 million US dollars by the end of 2021. Despite a drop in 2018, the equity base progressively expanded each subsequent year. Adjusted shareholders’ equity also followed this pattern, increasing from 11,287 million US dollars in 2017 to 14,922 million US dollars in 2021, with a slight dip in the years 2018 and 2019 before strengthening.

Return on Equity (ROE) Analysis

Reported ROE percentages demonstrated a declining trend over the period observed, starting at a high of 42.01% in 2017, peaking in 2018 at 54.6%, and then progressively decreasing to 39.35% by 2021. Adjusted ROE mirrored this pattern, with values starting at 45.28% in 2017, reaching 53.96% in 2018, and subsequently diminishing to 38.53% by 2021. This reduction in ROE despite increasing shareholders’ equity suggests a potential decrease in profitability efficiency relative to equity base during the later years.

Overall Insights

The data indicates growth in net income and shareholders' equity over the five-year period, although profitability as measured by ROE showed a declining trend after peaking in 2018. The dip in net income in 2019 appears temporary, followed by recovery, yet the decreasing ROE implies that the company’s net income growth did not keep pace proportionally with the growth in equity. Adjusted figures closely align with reported values, reinforcing the observed trends. These patterns may warrant a closer examination of factors influencing profitability efficiency and capital utilization in recent years.

Net Income Trends

The reported net income attributable to the company showed variability over the five-year period, increasing from 4,858 million USD in 2017 to 5,921 million USD in 2021, with a slight dip in 2019 to 4,570 million USD before recovering in subsequent years. The adjusted net income follows a similar pattern, starting at 5,111 million USD in 2017, showing a decrease to 4,434 million USD in 2019, and then rising again to 5,749 million USD by 2021. Overall, the adjusted net income is consistently close to the reported net income but tends to be slightly higher in the earlier years and somewhat lower or close in the later years.

Total Assets Analysis

The reported total assets exhibited an upward trend overall, increasing from 37,987 million USD in 2017 to a peak of 47,344 million USD in 2020, followed by a slight decrease to 47,072 million USD in 2021. Adjusted total assets follow a similar trajectory, starting at 37,476 million USD in 2017, peaking at 46,473 million USD in 2020, and marginally decreasing to 46,491 million USD in 2021. The adjusted asset values remain slightly lower than reported figures throughout the period, indicating some adjustments reducing asset totals.

Return on Assets (ROA) Observations

Reported ROA values indicate a peak in 2018 at 14.65%, followed by a significant decline in 2019 to 10.23%. Thereafter, ROA improved steadily to reach 12.58% in 2021. Adjusted ROA exhibits a parallel pattern, with a high of 14.5% in 2018 and a drop to 10.05% in 2019, recovering to 12.37% in 2021. Both reported and adjusted ROA demonstrate the company's profitability relative to assets declined substantially in 2019 and partially recovered in subsequent years but did not reach the earlier peak levels.

General Insights

The data indicates a period of volatility in net income and profitability metrics around 2019, potentially linked to broader market or company-specific factors. Despite fluctuations, both reported and adjusted figures show a recovery trend by 2021. The adjusted figures being close to reported ones suggest that deferred income tax adjustments have a moderate impact on the company's financial presentation but do not significantly alter the overall financial performance trends.