3M Co. (NYSE:MMM)

Goodwill

Goodwill experienced a decrease from 2017 to 2018, dropping from approximately $10.5 billion to $10.1 billion. This was followed by a sharp increase in 2019, reaching about $13.4 billion, and continued growth into 2020 with $13.8 billion. However, a slight decrease occurred in 2021 to around $13.5 billion.

Customer Related Intangible Assets

These assets remained relatively stable between 2017 and 2018 at approximately $2.3 billion. In 2019, there was a significant increase to over $4.3 billion, with a small decline in subsequent years, ending at around $4.2 billion in 2021.

Patents

The value of patents showed a gradual decline over the period, moving down from $561 million in 2017 to $513 million in 2021, indicating possible amortization or impairment of these assets over time.

Other Technology-Based Intangible Assets

There was stability from 2017 to 2018 at about $580 million, followed by a substantial increase in 2019 to over $2.1 billion. Values remained essentially flat for the last three years, signaling a marked acquisition or revaluation event around 2019, followed by stability.

Definite-Lived Tradenames

These assets increased from $678 million in 2017 to about $1.1 billion in 2019, maintaining a relatively stable level through to 2021 with slight fluctuations.

Other Amortizable Intangible Assets

There was an initial decrease from $207 million in 2017 down to $125 million in 2018 and 2019, with a continued minor decline to $104 million in 2020, and a slight increase to $105 million in 2021, indicating some attrition in this category.

Finite-Lived Intangible Assets, Gross Carrying Amount

This metric mirrored the trends of related asset categories, initially decreasing slightly from $4.36 billion in 2017 to $4.2 billion in 2018, then more than doubling to $8.2 billion by 2019, followed by minor decreases through 2021.

Accumulated Amortization

Accumulated amortization consistently increased in absolute value throughout the period, moving from approximately $2.1 billion in 2017 to about $3.5 billion in 2021, reflecting ongoing amortization expenses reducing net intangible asset values.

Finite-Lived Intangible Assets, Net

The net amount showed a decrease from $2.3 billion in 2017 to $2.0 billion in 2018, then more than doubled to $5.7 billion in 2019. Post-2019, there was a downward trend to $4.6 billion in 2021, consistent with rising amortization and possible asset disposals or impairments.

Non-Amortizable Intangible Assets (Primarily Tradenames)

These assets remained relatively stable over the period, fluctuating slightly between $638 million and $653 million, indicating steady valuation with minimal additions or impairments.

Intangible Assets, Net

The net intangible assets followed a pattern similar to finite-lived intangibles, decreasing from $2.9 billion in 2017 to $2.7 billion in 2018, then surging to $6.4 billion in 2019 before gradually declining to $5.3 billion in 2021.

Goodwill and Intangible Assets

This combined figure decreased from $13.4 billion in 2017 to $12.7 billion in 2018, surged significantly to nearly $19.8 billion in 2019, and remained close to this elevated level in 2020 and 2021 with minor contraction noted in the last year.

Overall Trends and Insights

There is a clear pattern of substantial growth in intangible assets and goodwill as of 2019, suggesting significant acquisitions or revaluations during that year. Following this increase, a gradual decline across several categories is observed in subsequent years, particularly in net finite-lived intangibles and goodwill. Accumulated amortization has consistently increased, reflecting ongoing systematic expenses. Stability in non-amortizable assets indicates controlled valuation in certain intangible categories. The data reflects dynamic changes in the company's intangible asset structure, with notable expansion followed by modest contraction or amortization over the five-year span.

The analysis reveals distinct trends in both reported and goodwill-adjusted financial metrics over the five-year period ending December 31, 2021.

Total Assets

The reported total assets initially declined from 37,987 million USD in 2017 to 36,500 million USD in 2018. This was followed by a significant increase to 44,659 million USD in 2019 and further growth in 2020 to 47,344 million USD. In 2021, reported total assets slightly declined to 47,072 million USD but remained substantially higher than the initial years. The adjusted total assets, which exclude goodwill, mirror the general upward trend but at lower absolute values. They decreased from 27,474 million USD in 2017 to 26,449 million USD in 2018, then showed consistent growth through 2021 with values of 31,215 million USD in 2019, 33,542 million USD in 2020, and a slight incremental rise to 33,586 million USD in 2021.

Shareholders’ Equity

Reported total shareholders’ equity displays an initial decrease from 11,563 million USD in 2017 to 9,796 million USD in 2018, followed by a moderate increase in 2019 to 10,063 million USD. A pronounced rise is observed in 2020 and 2021, reaching 12,867 million USD and 15,046 million USD, respectively. Conversely, the adjusted shareholders’ equity (excluding goodwill) presents a markedly different pattern, starting at 1,050 million USD in 2017 before decreasing into negative territory in 2018 and 2019, with values of -255 million USD and -3,381 million USD respectively. This indicates that goodwill and other intangible assets have a significant impact on reported equity. There was an improvement in adjusted equity in 2020 to -935 million USD and a recovery to a positive 1,560 million USD in 2021, though still far lower relative to reported figures.

Overall, the divergence between reported and adjusted figures, particularly in shareholders’ equity, underscores the substantial influence of goodwill and intangible assets on the company’s financial position. The steady increase in both reported and adjusted total assets from 2018 onward indicates asset growth, while the adjusted equity’s volatility suggests underlying challenges in asset quality or valuation beyond goodwill adjustments during the earlier years. The recovery seen in the adjusted equity in the final year signals potential improvement in these underlying factors.

The financial data exhibits distinct trends in both reported and goodwill-adjusted metrics over the five-year period ending December 31, 2021.

Total Asset Turnover

The reported total asset turnover ratio declined from 0.83 in 2017 to a low of 0.68 in 2020, before recovering slightly to 0.75 in 2021. This indicates a reduction in the efficiency of asset use in generating revenue during most of the period, with a modest rebound in the final year. The adjusted total asset turnover, which excludes goodwill, follows a similar trend but at higher levels, starting at 1.15 in 2017, decreasing to 0.96 in 2020, and improving to 1.05 in 2021. The adjusted figures suggest that excluding goodwill provides a clearer picture of asset utilization, with consistently better turnover ratios than reported metrics, though the overall trend of decline and partial recovery persists.

Financial Leverage

Reported financial leverage increased from 3.29 in 2017 to a peak of 4.44 in 2019, then decreased significantly to 3.13 by 2021. This pattern suggests the company was increasing financial leverage up to 2019, potentially taking on more debt or other liabilities relative to equity, before reducing leverage in subsequent years. The adjusted financial leverage is notably higher at 26.17 in 2017 and 21.53 in 2021, though data for intermediate years are missing. The elevated adjusted leverage implies that when goodwill is excluded, the firm appears more leveraged, which could indicate a substantial impact of intangible assets on reported equity levels. The reduction from 26.17 to 21.53 may denote deleveraging or changes in asset composition.

Return on Equity (ROE)

Reported ROE shows a fluctuating decline from a high of 54.6% in 2018 to 39.35% in 2021, despite a peak in 2018. This decline indicates diminishing profitability relative to shareholder equity over the latter years. Adjusted ROE, available only for 2017 and 2021, presents extremely high values (462.67% and 379.55%, respectively), underlining the substantial distortion goodwill adjustments can have on equity returns. The drop in adjusted ROE from 2017 to 2021, despite remaining very elevated, aligns directionally with the decline observed in reported ROE, suggesting some underlying reduction in equitable profitability even after adjustments.

Return on Assets (ROA)

Reported ROA increased from 12.79% in 2017 to 14.65% in 2018, followed by a decline to 10.23% in 2019, then rising steadily to 12.58% in 2021. This pattern indicates variable asset profitability, with recovery after a dip in 2019. Adjusted ROA also exhibits a similar cyclical trend but at consistently higher levels: from 17.68% in 2017, increasing to 20.22% in 2018, dipping to 14.64% in 2019, and then climbing to 17.63% in 2021. These elevated figures after goodwill adjustment indicate stronger asset efficiency and better operational returns when intangible assets are excluded.

Overall, trends suggest that the company's operational efficiency and profitability have experienced volatility with temporary declines mainly around 2019-2020, followed by signs of recovery through 2021. The impact of goodwill adjustment is significant across most ratios, generally raising turnover, leverage, and return metrics, highlighting the influence of intangible assets on the financial structure and performance evaluation. The decline in reported financial leverage and ROE in later years may reflect strategic deleveraging and challenges to maintaining high profitability levels.

Total Assets

The reported total assets showed an initial decline from 37,987 million US dollars in 2017 to 36,500 million in 2018, followed by a significant increase reaching 44,659 million in 2019. The upward trend continued in 2020 with assets rising to 47,344 million, before experiencing a slight decrease to 47,072 million in 2021. The adjusted total assets followed a similar pattern but at consistently lower levels, decreasing from 27,474 million in 2017 to 26,449 million in 2018. Subsequently, the adjusted assets increased to 31,215 million in 2019, then to 33,542 million in 2020, and stabilized around 33,586 million in 2021.

Total Asset Turnover

The reported total asset turnover ratio experienced fluctuations over the years. Starting at 0.83 in 2017, it increased to 0.90 in 2018, indicating improved efficiency. This was followed by a decline to 0.72 in 2019 and further to 0.68 in 2020, suggesting decreasing asset utilization. In 2021, there was a recovery to 0.75. The adjusted total asset turnover ratios were higher than the reported figures in each year, starting at 1.15 in 2017 and rising to 1.24 in 2018. This was followed by a decline to 1.03 in 2019 and 0.96 in 2020, with an improvement to 1.05 in 2021, mirroring the trend observed in reported data but indicating relatively better asset efficiency when adjusted for goodwill.

The data reveals several notable trends over the five-year period ending December 31, 2021, concerning both reported and goodwill adjusted financial metrics.

Total Assets

Reported total assets displayed an overall increasing trajectory from 37,987 million US$ in 2017 to a peak of 47,344 million US$ in 2020, followed by a slight decrease to 47,072 million US$ in 2021. Adjusted total assets, which account for goodwill adjustments, followed a similar upward trend but at lower absolute values, rising from 27,474 million US$ in 2017 to 33,586 million US$ in 2021. This indicates that while asset base expanded, a significant portion of reported assets is likely attributable to goodwill.

Shareholders’ Equity

Reported shareholders’ equity consistently increased from 11,563 million US$ in 2017 to 15,046 million US$ in 2021. In contrast, the adjusted shareholders’ equity showed substantial volatility and negative values for much of the period: starting at 1,050 million US$ in 2017, dropping to negative figures from 2018 through 2020, and recovering to a positive 1,560 million US$ in 2021. This volatility suggests that after removing goodwill, the company experienced periods where adjusted equity was under pressure, potentially indicating impairments or other accounting adjustments affecting net asset value.

Financial Leverage

Reported financial leverage ratios exhibited fluctuation, starting at 3.29 in 2017, rising to a peak of 4.44 in 2019, decreasing in the subsequent years to 3.13 by 2021. This pattern reflects changing capital structure dynamics and possibly fluctuating debt levels relative to equity. Adjusted financial leverage was notably high at 26.17 in 2017 and, despite missing data for intermediate years, returned to a high value of 21.53 in 2021. The significantly higher adjusted leverage ratios emphasize the impact of goodwill adjustments, whereby reduced equity bases dramatically increase leverage measures.

In summary, the company shows asset growth and strengthening in reported equity, yet goodwill adjustments reveal significant volatility and decreased equity levels, implying underlying asset quality or valuation concerns. The leverage ratios further corroborate this divergence, with adjusted leverage greatly exceeding reported figures, highlighting the importance of considering goodwill in financial assessments.

The analysis of the financial data reveals notable trends in both reported and goodwill-adjusted figures over the five-year period ending in 2021.

Total reported shareholders’ equity

This metric showed an overall upward trend, starting at US$11,563 million in 2017 and ultimately rising to US$15,046 million in 2021. Despite a decline from 2017 to 2018, where equity fell to US$9,796 million, the following years exhibited a steady recovery and growth, particularly from 2019 onwards. This suggests strengthening financial position as the company expanded its equity base after the dip.

Total adjusted shareholders’ equity

The adjusted equity values, which account for goodwill and potential impairment adjustments, demonstrated high volatility and significant negative values in certain years. In 2017, adjusted equity was relatively low compared to reported equity at US$1,050 million. It then became negative in both 2018 (-US$255 million) and 2019 (-US$3,381 million), indicating considerable write-downs or impairments affecting the company’s net tangible assets. The negative adjustment persisted in 2020 (-US$935 million), but in 2021, a positive adjustment of US$1,560 million indicates a partial reversal or reassessment improving the adjusted equity position.

Reported Return on Equity (ROE)

The reported ROE remained robust throughout the period, though it fluctuated. The highest ROE was observed in 2018 at 54.6%, following a peak of 42.01% in 2017. Subsequently, the ROE declined gradually to 41.84% in 2020 and further to 39.35% in 2021. Despite this downward trend, the ROE figures remained strong, suggesting effective profitability relative to shareholder equity in reported terms.

Adjusted Return on Equity (ROE)

The adjusted ROE figures appear incomplete but show extraordinary values where reported. In 2017, the adjusted ROE was exceptionally high at 462.67%, reflecting the very low adjusted equity base that amplified this profitability measure. Adjusted ROE data for 2018 through 2020 is missing, but in 2021, adjusted ROE was reported at 379.55%, again indicating very high returns when considering adjusted equity. These elevated ratios highlight volatility arising from adjustments, which likely decrease the equity denominator and inflate the return on equity metric.

Overall, the company’s reported financial position and profitability appear solid and improving over time, despite some fluctuations. The adjustments for goodwill and related items introduce significant variability in both equity and returns, reflecting impairment-related risks or changes in asset valuations. The reconciliation of reported and adjusted measures points to a need for cautious interpretation of profitability ratios, given the impact of these accounting adjustments on the underlying equity base.

Total Assets

The reported total assets decreased from 37,987 million USD in 2017 to 36,500 million USD in 2018, followed by a significant increase to 44,659 million USD in 2019. This upward trend continued into 2020 with reported assets reaching 47,344 million USD, before slightly declining to 47,072 million USD in 2021. Adjusted total assets show a similar pattern but on a lower scale, dropping from 27,474 million USD in 2017 to 26,449 million USD in 2018, then rising steadily to 31,215 million USD in 2019, 33,542 million USD in 2020, and marginally increasing to 33,586 million USD in 2021.

Return on Assets (ROA)

Reported ROA exhibited variability over the five-year period. It increased from 12.79% in 2017 to 14.65% in 2018, subsequently declined to 10.23% in 2019, then improved to 11.37% in 2020 and further increased to 12.58% in 2021. Adjusted ROA consistently remained higher than reported ROA each year, starting at 17.68% in 2017, peaking at 20.22% in 2018, then decreasing to 14.64% in 2019. Thereafter, it rose again to 16.05% in 2020 and 17.63% in 2021.

Overall Trends and Insights

The data indicates that the company experienced fluctuations in asset size, with a notable asset base growth from 2018 through 2020, which largely stabilized through 2021. The adjusted figures, which exclude goodwill, present a more conservative asset base but follow a similar trend to the reported totals. The returns on assets, both reported and adjusted, reflect operational profitability trends, with adjusted ROA consistently outperforming reported ROA, implying that the exclusion of goodwill improves the perceived efficiency of asset use. The decline in both ROA metrics in 2019 suggests a temporary dip in profitability or asset efficiency during that year, followed by recovery in the subsequent years.