3M Co. (MMM)

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread
Economic Profit Margin

3M Co., economic profit calculation

USD $ in millions

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

2017 Calculations

¹ NOPAT. See Details »

² Cost of capital. See Details »

³ Invested capital. See Details »

⁴ Economic profit = NOPAT – Cost of capital × Invested capital
= hidden – hidden × hidden = hidden

Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	3M Co.'s economic profit increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.

3M Co., NOPAT calculation

USD $ in millions

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Net income attributable to 3M
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowances²
	Increase (decrease) in deferred income³
	Increase (decrease) in product warranty liabilities⁴
	Increase (decrease) in accrued restructuring action balances⁵
	Increase (decrease) in equity equivalents⁶
	Interest expense
	Interest expense, operating lease obligations⁷
	Adjusted interest expense
	Tax benefit of interest expense⁸
	Adjusted interest expense, after taxes⁹
	(Gain) loss on marketable securities
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income¹⁰
	Investment income, after taxes¹¹
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

2017 Calculations

¹ Elimination of deferred tax expense. See Details »

² Addition of increase (decrease) in allowances.

³ Addition of increase (decrease) in deferred income.

⁴ Addition of increase (decrease) in product warranty liabilities.

⁵ Addition of increase (decrease) in accrued restructuring action balances.

⁶ Addition of increase (decrease) in equity equivalents to net income attributable to 3M.

⁷ Addition of interest expense on capitalized operating leases. See Details »

⁸ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 35% = hidden

⁹ Addition of after taxes interest expense to net income attributable to 3M.

¹⁰ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 35% = hidden

¹¹ Elimination of after taxes investment income.

Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	3M Co.'s NOPAT increased from 2015 to 2016 and from 2016 to 2017.

3M Co., cash operating taxes calculation

USD $ in millions

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Provision for income taxes
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest expense
	Less: Tax imposed on investment income
	Cash operating taxes

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	3M Co.'s cash operating taxes increased from 2015 to 2016 and from 2016 to 2017.

3M Co., invested capital calculation (financing approach)

USD $ in millions

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Short-term borrowings and current portion of long-term debt
	Long-term debt, excluding current portion
	Capital lease obligations
	PV of operating lease payments¹
	Total reported debt & leases
	Total 3M Company shareholders' equity
	Net deferred tax (assets) liabilities²
	Allowances³
	Deferred income⁴
	Product warranty liabilities⁵
	Accrued restructuring action balances⁶
	Equity equivalents⁷
	Accumulated other comprehensive (income) loss, net of tax⁸
	Noncontrolling interest
	Adjusted total 3M Company shareholders' equity
	Construction in progress⁹
	Marketable securities¹⁰
	Invested capital

Based on: 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12), 10-K (filing date: 2014-02-13).

¹ Addition of capitalized operating leases. See Details »

² Elimination of deferred taxes from assets and liabilities. See Details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred income.

⁵ Addition of product warranty liabilities.

⁶ Addition of accrued restructuring action balances.

⁷ Addition of equity equivalents to total 3M Company shareholders' equity.

⁸ Removal of accumulated other comprehensive income.

⁹ Subtraction of construction in progress.

¹⁰ Subtraction of marketable securities.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	3M Co.'s invested capital declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

3M Co., cost of capital calculations


Equity²	÷	=	×		=
Debt³	÷	=	×	× (1 – 35%)	=
PV of operating lease payments⁴	÷	=	×	× (1 – 35%)	=
Total:

Based on: 10-K (filing date: 2018-02-08).

¹ USD $ in millions

² Equity. See Details »

³ Debt. See Details »