Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
3M Co., solvency ratios
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The solvency profile exhibits a distinct cyclical pattern characterized by a significant increase in leverage peaking in 2019, followed by a consistent deleveraging phase through 2021. By the end of the analyzed period, most capital structure ratios returned to or improved upon their 2017 baseline levels.
- Debt-to-Equity and Capitalization Ratios
- A marked increase in debt reliance occurred between 2017 and 2019, with the debt-to-equity ratio rising from 1.21 to a peak of 2.03. This trend was mirrored in the debt-to-capital and debt-to-assets ratios, which reached their highest points in 2019 at 0.67 and 0.46, respectively. From 2020 onward, a reversal is observed, as the debt-to-equity ratio declined to 1.16 by December 31, 2021, indicating a reduction in the proportion of debt relative to shareholders' equity.
- Financial Leverage
- Financial leverage followed a trajectory consistent with the debt ratios, expanding from 3.29 in 2017 to a peak of 4.44 in 2019. A subsequent contraction occurred over the next two years, resulting in a final ratio of 3.13 in 2021, which represents the lowest level of financial leverage within the five-year period.
- Coverage Ratios
- The ability to service obligations experienced a downward trend during the initial years of the period. The interest coverage ratio declined from 24.44 in 2017 to a low of 13.68 in 2020. Similarly, the fixed charge coverage ratio dropped from 12.35 in 2017 to 8.56 in 2019. While both metrics showed a moderate recovery in 2021—with interest coverage rising to 15.78 and fixed charge coverage to 9.94—they remained substantially lower than the 2017 levels, suggesting a tighter margin for debt service despite the overall reduction in total debt.
- Impact of Operating Lease Liabilities
- The inclusion of operating lease liabilities consistently elevated all debt-related ratios across the period. The variance between standard debt ratios and those including leases peaked in 2019, particularly in the debt-to-equity metric, which reached 2.12 compared to the standard 2.03, indicating that lease obligations contributed to the overall solvency pressure during the peak leverage year.
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Debt Ratios
Coverage Ratios
Debt to Equity
3M Co., debt to equity calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current portion of long-term debt | 1,307) | 806) | 2,795) | 1,211) | 1,853) | |
| Current obligations of finance leases | 7) | 22) | 21) | 17) | 13) | |
| Long-term debt, excluding current portion | 16,056) | 17,989) | 17,518) | 13,411) | 12,096) | |
| Finance leases, net of current obligations | 93) | 93) | 111) | 75) | 60) | |
| Total debt | 17,463) | 18,910) | 20,445) | 14,714) | 14,022) | |
| Total 3M Company shareholders’ equity | 15,046) | 12,867) | 10,063) | 9,796) | 11,563) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 1.16 | 1.47 | 2.03 | 1.50 | 1.21 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.29 | — | — | — | — | |
| Eaton Corp. plc | 0.52 | — | — | — | — | |
| GE Aerospace | 0.87 | — | — | — | — | |
| Honeywell International Inc. | 1.06 | — | — | — | — | |
| Lockheed Martin Corp. | 1.07 | — | — | — | — | |
| RTX Corp. | 0.43 | — | — | — | — | |
| Debt to Equity, Sector | ||||||
| Capital Goods | 1.26 | — | — | — | — | |
| Debt to Equity, Industry | ||||||
| Industrials | 1.37 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to equity = Total debt ÷ Total 3M Company shareholders’ equity
= 17,463 ÷ 15,046 = 1.16
2 Click competitor name to see calculations.
The solvency profile of the organization underwent significant volatility between 2017 and 2021, characterized by a sharp increase in leverage followed by a period of consistent deleveraging and equity growth. The debt-to-equity ratio reflects a peak in financial risk in 2019, succeeded by a strengthening of the balance sheet through 2021.
- Debt Accumulation and Reduction
- Total debt exhibited an upward trajectory from 2017 to 2019, rising from 14,022 million USD to a peak of 20,445 million USD. This represents a substantial increase in borrowed capital over a two-year period. Following the 2019 peak, a steady downward trend is observed, with total debt decreasing to 18,910 million USD in 2020 and further declining to 17,463 million USD by the end of 2021.
- Shareholders' Equity Dynamics
- Equity experienced an initial decline from 11,563 million USD in 2017 to 9,796 million USD in 2018. However, a robust recovery trend began in 2019 and accelerated through 2021. Shareholders' equity grew from 10,063 million USD in 2019 to 15,046 million USD in 2021, indicating a significant increase in the company's internal funding and net asset value.
- Debt-to-Equity Ratio Analysis
- The debt-to-equity ratio mirrored the opposing movements of debt and equity. The ratio rose from 1.21 in 2017 to 2.03 in 2019, signaling a period of increased financial leverage where debt grew at a much faster rate than equity. Subsequently, the ratio declined sharply to 1.47 in 2020 and reached 1.16 by December 31, 2021. The final ratio is lower than the initial 2017 level, suggesting an overall improvement in the long-term solvency position and a reduced reliance on external debt relative to equity.
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Debt to Equity (including Operating Lease Liability)
3M Co., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current portion of long-term debt | 1,307) | 806) | 2,795) | 1,211) | 1,853) | |
| Current obligations of finance leases | 7) | 22) | 21) | 17) | 13) | |
| Long-term debt, excluding current portion | 16,056) | 17,989) | 17,518) | 13,411) | 12,096) | |
| Finance leases, net of current obligations | 93) | 93) | 111) | 75) | 60) | |
| Total debt | 17,463) | 18,910) | 20,445) | 14,714) | 14,022) | |
| Current operating lease liabilities | 263) | 256) | 247) | —) | —) | |
| Noncurrent operating lease liabilities | 591) | 609) | 607) | —) | —) | |
| Total debt (including operating lease liability) | 18,317) | 19,775) | 21,299) | 14,714) | 14,022) | |
| Total 3M Company shareholders’ equity | 15,046) | 12,867) | 10,063) | 9,796) | 11,563) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 1.22 | 1.54 | 2.12 | 1.50 | 1.21 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.33 | — | — | — | — | |
| Eaton Corp. plc | 0.55 | — | — | — | — | |
| GE Aerospace | 0.94 | — | — | — | — | |
| Honeywell International Inc. | 1.11 | — | — | — | — | |
| Lockheed Martin Corp. | 1.19 | — | — | — | — | |
| RTX Corp. | 0.46 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 1.32 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Industrials | 1.54 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Total 3M Company shareholders’ equity
= 18,317 ÷ 15,046 = 1.22
2 Click competitor name to see calculations.
The solvency profile exhibits a period of increased leverage peaking in 2019, followed by a consistent deleveraging trend through 2021. The interaction between rising equity and decreasing debt in the latter years of the period resulted in a significant improvement in the overall solvency position.
- Total Debt Trends
- Total debt, including operating lease liabilities, increased from US$ 14,022 million in 2017 to a peak of US$ 21,299 million in 2019. This expansion of liabilities was followed by a steady contraction, with debt levels falling to US$ 19,775 million in 2020 and further declining to US$ 18,317 million by December 31, 2021.
- Shareholders' Equity Evolution
- Equity experienced an initial decline from US$ 11,563 million in 2017 to US$ 9,796 million in 2018. Following a period of relative stability in 2019, a strong upward trajectory was observed, with equity increasing to US$ 12,867 million in 2020 and reaching US$ 15,046 million in 2021. This growth suggests a strengthening of the capital base.
- Debt to Equity Ratio Analysis
- The debt to equity ratio rose from 1.21 in 2017 to a high of 2.12 in 2019, reflecting a period of intensified financial leverage. This trend reversed sharply over the following two years, with the ratio decreasing to 1.54 in 2020 and returning to 1.22 in 2021. The return to 2017 levels indicates a restoration of the balance between borrowed capital and equity funding.
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Debt to Capital
3M Co., debt to capital calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current portion of long-term debt | 1,307) | 806) | 2,795) | 1,211) | 1,853) | |
| Current obligations of finance leases | 7) | 22) | 21) | 17) | 13) | |
| Long-term debt, excluding current portion | 16,056) | 17,989) | 17,518) | 13,411) | 12,096) | |
| Finance leases, net of current obligations | 93) | 93) | 111) | 75) | 60) | |
| Total debt | 17,463) | 18,910) | 20,445) | 14,714) | 14,022) | |
| Total 3M Company shareholders’ equity | 15,046) | 12,867) | 10,063) | 9,796) | 11,563) | |
| Total capital | 32,509) | 31,777) | 30,508) | 24,510) | 25,585) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.54 | 0.60 | 0.67 | 0.60 | 0.55 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Boeing Co. | 1.35 | — | — | — | — | |
| Caterpillar Inc. | 0.70 | — | — | — | — | |
| Eaton Corp. plc | 0.34 | — | — | — | — | |
| GE Aerospace | 0.47 | — | — | — | — | |
| Honeywell International Inc. | 0.51 | — | — | — | — | |
| Lockheed Martin Corp. | 0.52 | — | — | — | — | |
| RTX Corp. | 0.30 | — | — | — | — | |
| Debt to Capital, Sector | ||||||
| Capital Goods | 0.56 | — | — | — | — | |
| Debt to Capital, Industry | ||||||
| Industrials | 0.58 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to capital = Total debt ÷ Total capital
= 17,463 ÷ 32,509 = 0.54
2 Click competitor name to see calculations.
The solvency profile from 2017 to 2021 is characterized by a distinct cycle of leverage expansion followed by a consistent deleveraging trend. Total capital exhibited a general upward trajectory over the analyzed period, increasing from US$ 25,585 million in 2017 to US$ 32,509 million by the end of 2021.
- Total Debt Trends
- Total debt experienced a significant increase between 2018 and 2019, rising from US$ 14,714 million to a peak of US$ 20,445 million. Following this peak, a downward trend was observed, with debt levels decreasing to US$ 18,910 million in 2020 and further declining to US$ 17,463 million in 2021.
- Debt to Capital Ratio Analysis
- The debt to capital ratio mirrored the volatility of the total debt figures, ascending from 0.55 in 2017 to a high of 0.67 in 2019. This peak represents the period of highest financial leverage. Subsequently, the ratio declined to 0.60 in 2020 and reached 0.54 by 2021, indicating that the company returned to a capital structure similar to, and slightly more conservative than, its 2017 position.
- Capital Structure Dynamics
- A divergence is observable between 2019 and 2021, where total debt decreased while total capital continued to grow. This relationship suggests that the reduction in the debt to capital ratio was driven not only by the repayment of debt but also by an increase in the non-debt components of the company's capital base.
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Debt to Capital (including Operating Lease Liability)
3M Co., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current portion of long-term debt | 1,307) | 806) | 2,795) | 1,211) | 1,853) | |
| Current obligations of finance leases | 7) | 22) | 21) | 17) | 13) | |
| Long-term debt, excluding current portion | 16,056) | 17,989) | 17,518) | 13,411) | 12,096) | |
| Finance leases, net of current obligations | 93) | 93) | 111) | 75) | 60) | |
| Total debt | 17,463) | 18,910) | 20,445) | 14,714) | 14,022) | |
| Current operating lease liabilities | 263) | 256) | 247) | —) | —) | |
| Noncurrent operating lease liabilities | 591) | 609) | 607) | —) | —) | |
| Total debt (including operating lease liability) | 18,317) | 19,775) | 21,299) | 14,714) | 14,022) | |
| Total 3M Company shareholders’ equity | 15,046) | 12,867) | 10,063) | 9,796) | 11,563) | |
| Total capital (including operating lease liability) | 33,363) | 32,642) | 31,362) | 24,510) | 25,585) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.55 | 0.61 | 0.68 | 0.60 | 0.55 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 1.34 | — | — | — | — | |
| Caterpillar Inc. | 0.70 | — | — | — | — | |
| Eaton Corp. plc | 0.36 | — | — | — | — | |
| GE Aerospace | 0.49 | — | — | — | — | |
| Honeywell International Inc. | 0.53 | — | — | — | — | |
| Lockheed Martin Corp. | 0.54 | — | — | — | — | |
| RTX Corp. | 0.31 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.57 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.61 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 18,317 ÷ 33,363 = 0.55
2 Click competitor name to see calculations.
The solvency profile from 2017 to 2021 reflects a period of increased leverage followed by a deliberate deleveraging process. The debt-to-capital ratio experienced a significant peak in 2019 before returning to its 2017 baseline by the end of the period.
- Total Debt Trends
- Total debt, including operating lease liabilities, exhibited a sharp upward trajectory between 2017 and 2019, rising from 14,022 million US$ to a peak of 21,299 million US$. Following this peak, a consistent downward trend is observed, with debt levels decreasing to 19,775 million US$ in 2020 and further to 18,317 million US$ by December 31, 2021.
- Total Capital Evolution
- Total capital showed a general expansion over the five-year horizon. After a slight contraction in 2018 to 24,510 million US$, capital increased substantially, reaching 31,362 million US$ in 2019 and continuing a steady climb to 33,363 million US$ in 2021. This growth in the capital base occurred concurrently with the reduction of total debt in the latter two years of the period.
- Debt to Capital Ratio Analysis
- The debt-to-capital ratio rose from 0.55 in 2017 to 0.60 in 2018, peaking at 0.68 in 2019. This indicates a period of increased financial leverage. However, a subsequent reversal is noted, with the ratio declining to 0.61 in 2020 and returning to 0.55 in 2021. The convergence of decreasing debt and increasing total capital effectively restored the solvency ratio to its initial 2017 level.
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Debt to Assets
3M Co., debt to assets calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current portion of long-term debt | 1,307) | 806) | 2,795) | 1,211) | 1,853) | |
| Current obligations of finance leases | 7) | 22) | 21) | 17) | 13) | |
| Long-term debt, excluding current portion | 16,056) | 17,989) | 17,518) | 13,411) | 12,096) | |
| Finance leases, net of current obligations | 93) | 93) | 111) | 75) | 60) | |
| Total debt | 17,463) | 18,910) | 20,445) | 14,714) | 14,022) | |
| Total assets | 47,072) | 47,344) | 44,659) | 36,500) | 37,987) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.37 | 0.40 | 0.46 | 0.40 | 0.37 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Boeing Co. | 0.42 | — | — | — | — | |
| Caterpillar Inc. | 0.46 | — | — | — | — | |
| Eaton Corp. plc | 0.25 | — | — | — | — | |
| GE Aerospace | 0.18 | — | — | — | — | |
| Honeywell International Inc. | 0.30 | — | — | — | — | |
| Lockheed Martin Corp. | 0.23 | — | — | — | — | |
| RTX Corp. | 0.20 | — | — | — | — | |
| Debt to Assets, Sector | ||||||
| Capital Goods | 0.28 | — | — | — | — | |
| Debt to Assets, Industry | ||||||
| Industrials | 0.30 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to assets = Total debt ÷ Total assets
= 17,463 ÷ 47,072 = 0.37
2 Click competitor name to see calculations.
The solvency profile of the organization exhibits a cyclical trend in leverage between 2017 and 2021, characterized by a significant increase in debt and assets mid-period followed by a return to baseline levels.
- Total Debt Trends
- Total debt levels remained relatively stable between 2017 and 2018 before experiencing a substantial increase in 2019, peaking at 20,445 million US$. This represents a sharp escalation in borrowing. Following this peak, a consistent downward trend was observed, with debt decreasing to 18,910 million US$ in 2020 and further to 17,463 million US$ by 2021.
- Total Asset Growth
- Total assets showed a slight contraction in 2018 but grew significantly in 2019, rising from 36,500 million US$ to 44,659 million US$. This growth continued into 2020, reaching a peak of 47,344 million US$, before remaining largely stable at 47,072 million US$ in 2021.
- Debt to Assets Ratio Analysis
- The debt to assets ratio mirrors the fluctuations in total debt and assets, moving from 0.37 in 2017 to a peak of 0.46 in 2019. This peak indicates a period of higher financial leverage where a larger portion of assets was financed through debt. Subsequently, the ratio declined to 0.40 in 2020 and returned to 0.37 by 2021, signaling a normalization of the solvency position to levels consistent with the 2017 baseline.
Overall, the data indicates a period of aggressive balance sheet expansion in 2019, which was subsequently tempered by a deleveraging process over the following two years, resulting in a stabilized debt-to-asset relationship by the end of the analyzed period.
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Debt to Assets (including Operating Lease Liability)
3M Co., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Short-term borrowings and current portion of long-term debt | 1,307) | 806) | 2,795) | 1,211) | 1,853) | |
| Current obligations of finance leases | 7) | 22) | 21) | 17) | 13) | |
| Long-term debt, excluding current portion | 16,056) | 17,989) | 17,518) | 13,411) | 12,096) | |
| Finance leases, net of current obligations | 93) | 93) | 111) | 75) | 60) | |
| Total debt | 17,463) | 18,910) | 20,445) | 14,714) | 14,022) | |
| Current operating lease liabilities | 263) | 256) | 247) | —) | —) | |
| Noncurrent operating lease liabilities | 591) | 609) | 607) | —) | —) | |
| Total debt (including operating lease liability) | 18,317) | 19,775) | 21,299) | 14,714) | 14,022) | |
| Total assets | 47,072) | 47,344) | 44,659) | 36,500) | 37,987) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.39 | 0.42 | 0.48 | 0.40 | 0.37 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 0.43 | — | — | — | — | |
| Caterpillar Inc. | 0.46 | — | — | — | — | |
| Eaton Corp. plc | 0.27 | — | — | — | — | |
| GE Aerospace | 0.19 | — | — | — | — | |
| Honeywell International Inc. | 0.32 | — | — | — | — | |
| Lockheed Martin Corp. | 0.26 | — | — | — | — | |
| RTX Corp. | 0.21 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.29 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.34 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 18,317 ÷ 47,072 = 0.39
2 Click competitor name to see calculations.
The analysis of the solvency position from 2017 to 2021 reveals a period of increased leverage followed by a gradual deleveraging process.
- Total Debt (Including Operating Lease Liability)
- A significant escalation in total debt is observed between 2018 and 2019, where obligations rose from US$ 14,714 million to a peak of US$ 21,299 million. Following this peak, a consistent downward trend occurred, with debt levels reducing to US$ 18,317 million by the end of 2021.
- Total Assets
- The asset base experienced a notable expansion beginning in 2019, increasing from US$ 36,500 million in 2018 to US$ 44,659 million in 2019. Assets peaked in 2020 at US$ 47,344 million before remaining relatively stable at US$ 47,072 million in 2021.
- Debt to Assets Ratio
- The solvency ratio exhibits a bell-shaped trajectory over the five-year period. The ratio increased from 0.37 in 2017 to a maximum of 0.48 in 2019, indicating a higher proportion of assets financed by debt. Subsequently, the ratio declined to 0.42 in 2020 and 0.39 in 2021, suggesting a strengthened solvency position and a reduction in financial leverage toward pre-2019 levels.
Overall, the evidence indicates that while there was a sharp increase in debt-funded financing in 2019, the subsequent years were characterized by a reduction in total liabilities and a simultaneous expansion of the asset base, resulting in a lower debt-to-asset ratio by 2021.
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Financial Leverage
3M Co., financial leverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Total assets | 47,072) | 47,344) | 44,659) | 36,500) | 37,987) | |
| Total 3M Company shareholders’ equity | 15,046) | 12,867) | 10,063) | 9,796) | 11,563) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 3.13 | 3.68 | 4.44 | 3.73 | 3.29 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 5.02 | — | — | — | — | |
| Eaton Corp. plc | 2.07 | — | — | — | — | |
| GE Aerospace | 4.93 | — | — | — | — | |
| Honeywell International Inc. | 3.47 | — | — | — | — | |
| Lockheed Martin Corp. | 4.64 | — | — | — | — | |
| RTX Corp. | 2.21 | — | — | — | — | |
| Financial Leverage, Sector | ||||||
| Capital Goods | 4.55 | — | — | — | — | |
| Financial Leverage, Industry | ||||||
| Industrials | 4.52 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Financial leverage = Total assets ÷ Total 3M Company shareholders’ equity
= 47,072 ÷ 15,046 = 3.13
2 Click competitor name to see calculations.
Between 2017 and 2021, the balance sheet exhibited a period of expansion followed by a strategic deleveraging phase. Total assets grew from 37,987 million USD in 2017 to a peak of 47,344 million USD in 2020, before stabilizing at 47,072 million USD in 2021. This growth was accompanied by fluctuations in shareholders' equity, which declined in 2018 before entering a consistent growth trajectory through 2021, reaching 15,046 million USD.
- Financial Leverage Trajectory
- The financial leverage ratio followed a non-linear trend, increasing from 3.29 in 2017 to a peak of 4.44 in 2019. This upward trend indicates a period of increased reliance on debt or liabilities to fund asset growth. Following this peak, a significant downward trend is observed, with the ratio falling to 3.68 in 2020 and further decreasing to 3.13 by 2021, representing the lowest level of leverage within the analyzed five-year period.
- Asset and Equity Correlation
- The peak leverage in 2019 corresponds with a sharp increase in total assets—rising from 36,500 million USD in 2018 to 44,659 million USD in 2019—while shareholders' equity remained relatively stagnant at 10,063 million USD. This suggests that the asset expansion during this period was primarily financed through liabilities rather than equity.
- Solvency Improvement
- The reduction in the financial leverage ratio from 2019 to 2021 is driven by the substantial growth in shareholders' equity, which rose by approximately 49% between 2019 and 2021. This increase in the equity base, combined with stabilized asset levels, resulted in a strengthened solvency position and a reduced financial risk profile by the end of the period.
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Interest Coverage
3M Co., interest coverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to 3M | 5,921) | 5,384) | 4,570) | 5,349) | 4,858) | |
| Add: Net income attributable to noncontrolling interest | 8) | 4) | 12) | 14) | 11) | |
| Add: Income tax expense | 1,285) | 1,318) | 1,130) | 1,637) | 2,679) | |
| Add: Interest expense | 488) | 529) | 448) | 350) | 322) | |
| Earnings before interest and tax (EBIT) | 7,702) | 7,235) | 6,160) | 7,350) | 7,870) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 15.78 | 13.68 | 13.75 | 21.00 | 24.44 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Boeing Co. | -0.88 | — | — | — | — | |
| Caterpillar Inc. | 17.88 | — | — | — | — | |
| Eaton Corp. plc | 21.11 | — | — | — | — | |
| GE Aerospace | -0.96 | — | — | — | — | |
| Honeywell International Inc. | 22.09 | — | — | — | — | |
| Lockheed Martin Corp. | 14.27 | — | — | — | — | |
| RTX Corp. | 4.71 | — | — | — | — | |
| Interest Coverage, Sector | ||||||
| Capital Goods | 3.98 | — | — | — | — | |
| Interest Coverage, Industry | ||||||
| Industrials | 5.14 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Interest coverage = EBIT ÷ Interest expense
= 7,702 ÷ 488 = 15.78
2 Click competitor name to see calculations.
The company's ability to service its debt obligations experienced a notable contraction between 2017 and 2020, followed by a moderate recovery in 2021. This trend is characterized by a simultaneous decline in operating profitability and an increase in financing costs during the initial period.
- Earnings Before Interest and Tax (EBIT) Trend
- Operating earnings exhibited volatility over the five-year period, decreasing from 7,870 million in 2017 to a low of 6,160 million in 2019. A recovery phase followed, with EBIT increasing to 7,235 million in 2020 and reaching 7,702 million by the end of 2021, effectively returning to near-2017 levels.
- Interest Expense Analysis
- Interest costs showed a consistent upward trajectory from 2017 to 2020, rising from 322 million to a peak of 529 million. This growth in expenses exerted downward pressure on solvency metrics until a slight reduction was observed in 2021, when costs decreased to 488 million.
- Interest Coverage Ratio Interpretation
- The interest coverage ratio declined significantly from 24.44 in 2017 to 13.68 in 2020. This decline was the result of the dual impact of contracting EBIT and expanding interest obligations. In 2021, the ratio improved to 15.78, supported by strengthened operating performance and reduced interest outlays. Despite the overall decrease from the 2017 peak, the ratio remains high, indicating a substantial margin of safety and a strong capacity to meet interest payments from operating profits.
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Fixed Charge Coverage
3M Co., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to 3M | 5,921) | 5,384) | 4,570) | 5,349) | 4,858) | |
| Add: Net income attributable to noncontrolling interest | 8) | 4) | 12) | 14) | 11) | |
| Add: Income tax expense | 1,285) | 1,318) | 1,130) | 1,637) | 2,679) | |
| Add: Interest expense | 488) | 529) | 448) | 350) | 322) | |
| Earnings before interest and tax (EBIT) | 7,702) | 7,235) | 6,160) | 7,350) | 7,870) | |
| Add: Operating lease cost | 319) | 348) | 308) | 393) | 343) | |
| Earnings before fixed charges and tax | 8,021) | 7,583) | 6,468) | 7,743) | 8,213) | |
| Interest expense | 488) | 529) | 448) | 350) | 322) | |
| Operating lease cost | 319) | 348) | 308) | 393) | 343) | |
| Fixed charges | 807) | 877) | 756) | 743) | 665) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 9.94 | 8.65 | 8.56 | 10.42 | 12.35 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Boeing Co. | -0.64 | — | — | — | — | |
| Caterpillar Inc. | 12.73 | — | — | — | — | |
| Eaton Corp. plc | 10.40 | — | — | — | — | |
| GE Aerospace | -0.22 | — | — | — | — | |
| Honeywell International Inc. | 13.67 | — | — | — | — | |
| Lockheed Martin Corp. | 9.95 | — | — | — | — | |
| RTX Corp. | 3.66 | — | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Capital Goods | 3.06 | — | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Industrials | 3.44 | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 8,021 ÷ 807 = 9.94
2 Click competitor name to see calculations.
The analysis of solvency ratios reveals a fluctuating trend in the ability to meet fixed obligations over the five-year period from 2017 to 2021. While the fixed charge coverage ratio experienced a notable decline in the first three years, a recovery phase is evident in the final two years of the period.
- Earnings Before Fixed Charges and Tax
- Earnings exhibited a downward trajectory between 2017 and 2019, decreasing from US$ 8,213 million to a period low of US$ 6,468 million. This contraction reduced the primary funding source available for servicing fixed obligations. A subsequent recovery is observed, with earnings rising to US$ 7,583 million in 2020 and further increasing to US$ 8,021 million by 2021.
- Fixed Charges
- Fixed charges showed a consistent upward trend from 2017 to 2020, rising from US$ 665 million to a peak of US$ 877 million. This increase in fixed obligations compounded the impact of the earnings decline observed during the same timeframe. A reduction occurred in 2021, with fixed charges decreasing to US$ 807 million.
- Fixed Charge Coverage Ratio
- The coverage ratio declined from 12.35 in 2017 to 8.56 in 2019, reflecting the dual pressure of falling earnings and rising fixed costs. The ratio stabilized at 8.65 in 2020 before improving to 9.94 in 2021. Although the ratio remains below the 2017 peak, the values throughout the period indicate a substantial margin of safety, as the earnings remained significantly higher than the required fixed charges.
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