Monish Patolawala
Executive Vice President, Chief Financial and Transformation Officer at 3M
Thank you, Mike, and I wish you all a very good morning. Please turn to slide 6. As I look back on the quarter, the 3M team demonstrated the resilience of our business model and the relevance of our technologies as we executed well in a very challenging environment effectively navigating the supply chain disruptions while serving and innovating for our customers. Though manufacturing, raw materials and logistics challenges persisted throughout the quarter, we continue to invest in the business while driving operating rigor and managing costs.
Turning to the third quarter financial results; sales were $8.9 billion, up 7.1% year-on-year or an increase of 6.3% on an organic basis. Operating income was $1.8 billion, down 6% with operating margins of 20%, coming in at the top end of the range, which we had previously communicated in mid-September. Third quarter earnings per share were $2.45, which was similar to last year. On this slide, you can see the components that impacted both operating margins and earnings per share as compared to Q3 last year. Our strong year-on-year organic volume growth was more than offset by the headwinds resulting from the global supply chain challenges, investments in growth and sustainability and litigation-related costs.
Combined, these impacts lowered operating margins by 1.4 percentage points and earnings per share by $0.02 year-on-year. The restructuring program we announced in Q4 of last year remains on track. As part of this program, we incurred a pretax restructuring charge of $50 million in the third quarter. This charge was offset by the benefits we achieved this quarter. Moving to price and raw materials, as expected, increases in selling price gained traction as we went through the quarter with year-on-year selling prices up 140 basis points in Q3 versus 10 basis points in Q2. However, we continued to experience higher costs for raw materials, logistics and outsourced manufacturing which outpaced the increase in selling prices.
Thus, third quarter net selling price and raw materials performance reduced both operating margins and earnings by 130 basis points and $0.12 per share respectively versus Q3 last year. Looking at Q4, we expect our selling price actions to continue to gain tractions as we work to mitigate the raw material and logistics inflationary pressures we have experienced throughout the year. Next, foreign currency net of hedging impacts, reduced margins 20 basis points and earnings by $0.01 per share. Also, three other non-operating items impacted our year-on-year earnings per share performance. First, lower other expenses resulted in an $0.08 earnings benefit.
Consistent with prior quarters, non-operating pension was a $0.05 benefit, along with a $0.02 benefit from net interest due to a proactive early redemption of debt. Secondly, a lower tax rate versus last year provided a $0.09 benefit to earnings per share. The tax rate was lower due to favorable adjustments this year related to impacts of U.S. international tax provisions. Our year-to-date tax rate is 18.8%. Therefore, we now expect our full year tax rate in the range of 18.5% to 19.5% versus 20% to 21% previously. And finally, average diluted shares outstanding increased 1% versus Q3 last year, lowering per share earnings by $0.02.
Please turn to slide 7 for a discussion of our cash flow and balance sheet. Third quarter adjusted free cash flow of $1.5 billion was down 29% year-on-year, with conversion of 107%. Adjusted free cash flow year-to-date was $4.5 billion, which was similar to last year with free cash flow conversion of 98%. The decline in our year-on-year free cash flow performance was primarily driven by higher inventory balances due to strong customer demand along with raw material inflation and more goods in transit as a result of the ongoing global supply chain challenges. Third quarter capital expenditures were $343 million and $1 billion year-to-date.
For the full year, we now expect capex investments in the range of $1.5 billion to $1.6 billion versus being at the low end of our prior range of $1.8 billion to $2 billion. We continue to step up investments in growth, productivity and sustainability. However, the pace of projects continues to be impacted by supply chain and vendor constraints. During the quarter we returned $1.4 billion to shareholders through the combination of cash dividends of $856 million and share repurchases of $527 million. Year-to-date, we have returned $3.8 billion to shareholders in the form of dividends and share repurchases.
Our net debt position, strong cash flow generation capability and disciplined capital allocation continues to provide us financial flexibility to invest in our business, pursue strategic opportunities and return cash to shareholders while maintaining a strong capital structure. Please turn to slide 8 where I will summarize the business group performance for Q3. I will start with our Safety and Industrial business, which posted organic growth of 6.1% year-on-year in the third quarter. Organic growth was driven by continued robust Industrial manufacturing activity along with prior-year pandemic-related impacts.
First, our Personal Safety business declined 4% organically, up against a 40% pandemic-driven comparison a year ago. Third quarter disposable respirator sales decreased 7% organically year-on-year and 15% sequentially. Looking ahead, we anticipate continued deceleration in disposable respirator demand through the balance of this year and into 2022. Turning to the rest of Safety and Industrial, organic growth was led by double-digit increases in adhesives and tapes, abrasives and electrical markets. In addition, closure and masking systems was up high single digits, Automotive Aftermarket up low single-digits, while roofing granules declined against a strong comparison from last year.
Safety and Industrial's third quarter operating income was $620 million, down 20% versus last year. Operating margins were 19.2%, down 650 basis points year-on-year, as leverage on sales growth was more than offset by ongoing increases in raw materials, logistics and litigation-related costs along with manufacturing productivity impacts. Moving to Transportation and Electronics, which grew 5.1% organically despite the continued impact of semiconductor supply chain constraints. Our Auto OEM business was flat year-on-year compared to the 20% decline in global car and light truck builds.
This outperformance was due to a few factors. First, we continue to grow our penetration by driving 3M innovation onto new automotive platforms. Second, we saw notable increase in channel inventories at tier suppliers, given the dramatic reductions in OEMs build forecast through the quarter. Lastly, we benefited from a vehicle model mix standpoint as auto OEMs produced more premium vehicles, which tend to have higher 3M content. Our Electronics related business declined low single-digits organically with declines across Consumer Electronics, particularly smartphones and TVs as OEMs face production challenges due to ongoing semiconductor constraints and COVID-related impacts.
These declines were partially offset by continued strong demand for our products and solutions in semiconductor and factory automation end markets. Turning to the rest of Transportation and Electronics, Advanced Materials and Commercial Solutions each grew double digits year-on-year while Transportation Safety grew low single-digits. Third quarter operating income was $465 million, down 9% year-on-year; operating margins were 19%, down 320 basis points year-on-year driven by strong leverage on sales growth, which was more than offset by increases in raw materials and logistics costs along with manufacturing productivity impacts.
Turning to our Healthcare business which delivered third quarter organic sales growth of 3.3%. Our Medical Solutions business declined low single-digits organically impacted by the continued decline in demand for disposable respirators along with the pace of hospital elective procedure volumes which came at the low end of industry expectations of 90% to 95% for the quarter. Sales in our Oral Care business grew low double digits year-on-year as dental procedures continued to be near pre-COVID levels. The Separation and Purification business increased high single-digits year-on-year due to ongoing demand for Biopharma Filtration Solutions for COVID-related vaccines and therapeutics.
Health Information Systems grew low double-digits driven by strong growth in Clinician Solutions. And, finally, food safety increased double digits as food service activity returns. Healthcare's third quarter operating income was $529 million, up 7% year-on-year. Operating margins were 23.5%, up 70 basis points. Third quarter margins were driven by leverage on sales growth, which was partially offset by the increasing raw materials and logistics costs, manufacturing productivity impacts along with increased investments in growth. Lastly, third quarter organic growth for our Consumer business was 7.6% year-on-year, with continued strong sell-in and sell-out trends across most retail channels.
Our Home Improvement business continues to perform well, up high single-digits on top of a strong comparison from a year ago. This business continued to experience strong demand, particularly in our Command and Filtrate category leading franchises. Stationery and Office grew double-digit organically in Q3 as this business laps last year's COVID-related comparisons. We also had strong back-to-school Consumer demand and holiday related sell-in for Scotch-branded packaging and shipping products, Post-it Solutions and Scotch branded home and office tapes. Our Home Care business was up low single digits versus last year's strong COVID driven comparison.
And, finally, our Consumer Health and Safety business was up high single-digits as we lap COVID-related impacts from a year ago. Consumer's operating income was $332 million, down 3% year-on-year. Operating margins were 21.7% down 260 basis points as increased costs for raw materials, logistics and outsourced hard goods manufacturing more than offset leverage from sales growth. Please turn to slide 9 for a discussion of our full year 2021 guidance. As we reflect on the macroeconomic environment, we expect demand to remain strong across most end markets.
However, uncertainty persists given the ongoing impacts of the pandemic along with a well-known global supply chain, raw materials and logistics challenges that all companies are working through. Looking ahead, we remain focused on our customers and doing what is necessary to serve them as we continue to navigate the fluid environment. Turning to guidance, we are increasing the bottom end of our expectations for organic growth. We now project our full year organic growth to be in the range of 8% to 9% versus a prior range of 6% to 9%.
With respect to earnings, we anticipate a range of $9.70 to $9.90 per share as compared to a prior range of $9.70 to $10.10. And, finally, we expect to continue to generate strong free cash flow therefore we are maintaining our free cash flow conversion range of 90% to 100%. This updated outlook implies a wider than normal fourth quarter range, accounting for ongoing impacts of COVID and the uncertain supply chain environment. For example, from a growth perspective, the well-known constraints in semiconductor chip supply are impacting more and more end markets, most notably Automotive and Consumer Electronics as reflected in the lower production forecasts for the year.
We anticipate global elective healthcare procedure volumes to stabilize with recent trends. Relative to disposable respirators, we expect continued impacts from decline in healthcare-related demand along with elevated inventory levels in the industrial channel. And finally, we expect our pricing actions to continue to gain traction as we work to mitigate raw material and logistics cost pressures. Turning to operations; as we have discussed, we are actively managing inefficiencies in global supply chains with a relentless focus on customer service.
Therefore, we are adjusting demand plans with greater frequency and, as a result, incurring more manufacturing production changeovers along with expediting shipments. All of these actions are impacting both costs and productivity but we are taking the necessary steps to ensure we meet the most critical need of our customers. We continue to make progress relative to December 2020 restructuring announcement. To-date, we have incurred over $240 million in pretax restructuring charges and anticipate an additional $25 million to $50 million in Q4.
We now expect total pretax restructuring charges of $300 million to $325 million versus our original expectations of $250 million to $300 million. We expect the remaining actions under this program to be initiated by the first quarter of 2022. In addition, we expect to incur higher costs related to our ongoing litigation matters along with increases in other indirect related costs like travel expense. And, finally, we continued to invest in the business for the long term and, therefore, anticipate increased investments in growth, productivity and sustainability.
To close, I would like to take a moment to thank our customers who have placed their faith in us, our vendors who are tirelessly working with us to ensure continuity of supply, and most importantly, our 90,000 plus 3Mers who continue to deliver for our customers. We have a very steady eye on the long-term to deliver growth, margin and cash through strong operating rigor while continuing to navigate the uncertainty in the short run.
With that, I thank you for your attention and we will now take your questions.