Monish Patolawala
President and Chief Financial Officer at 3M
Thank you, Bill, and good morning, everyone. Please turn to Slide 4. I would like to take a moment to briefly remind you of a few items that we highlighted during last quarter's earnings call. Beginning with the second quarter, our results for business segment operating income includes prospectively the impact of dissynergies or stranded costs previously associated with Solventum. Therefore, for historical pre-spin periods presented, the dissynergies are reflected in corporate and unallocated.
In addition, we added a new operating category named Other for Solventum transition service agreement activity. Other includes a Q1 cost associated with supporting the agreements for which 3M started to be reimbursed for in April. And finally, corporate and unallocated incorporates the commercial agreements between 3M and Solventum that started on April 1st and retrospectively picks up certain operations of the former Health Care business retained by 3M.
Turning to our second quarter performance, we posted solid adjusted results, including sales of $6 billion, operating margins of 21.6%, earnings per share of $1.93, and free cash flow of $1.2 billion. We delivered adjusted organic growth of 1.2%, or up 2.4%, excluding geographic prioritization and product portfolio initiatives. These results reflect the trends that we have previously discussed, including strong growth in electronics, mixed industrial end markets and continued softness in consumer retail discretionary spending. We had another strong quarter of execution with adjusted operating margins, expanding 440 basis points year-on-year and delivered adjusted free cash flow of $1.2 billion with conversion of 109%.
Please turn to Slide 5. On an adjusted basis, we delivered operating margins of 21.6%, up 440 basis points and earnings of $1.93 per share, up 39% versus last year's second quarter. Our second quarter year-on-year performance was driven by organic growth, productivity, strong spending discipline and restructuring savings, which combined benefited operating margins by 310 basis points and earnings by $0.31 per share.
In addition, income from the transition services we are providing to Solventum increased margins by 50 basis points and earnings by $0.05 per share. These benefits were partially offset by stock-based compensation, which was shifted into the second quarter due to the spin of Solventum. This was in line with what we discussed during our first quarter earnings call. This change in timing negatively impacted operating margins by 200 basis points and earnings by $0.18 per share versus last year's second quarter.
Lower year-on-year restructuring charges were a benefit of 270 basis points to margins and $0.23 to earnings. For the second quarter, restructuring charges were $44 million, which were lower than anticipated. For the full year, we continue to expect pre-tax restructuring charges in the range of $250 million to $300 million. Foreign currency was a negative $0.04 per share impact as a result of the stronger US dollar. Acquisition and divestitures were a benefit of 10 basis points to margins and $0.03 to earnings year-on-year. This benefit is related to last year's second quarter reconsolidation of Aearo Technologies along with the commercial agreements between 3M and Solventum.
Below the line items benefited earnings by a combined $0.14 per share. This benefit was primarily due to increased interest income year-on-year on a higher cash balance due to in part by cash proceeds received from the spin of Solventum. Taking into account our first half of the year performance, we now expect our full year non-operating expense to be in the range of $50 million to $75 million, versus a prior range of $75 million to $100 million.
A quick comment on Corporate and Unallocated and Other before moving on to cash flow. Q2 Corporate and Unallocated sales were $86 million with a $2 million adjusted operating loss. Year-to-date, Corporate and Unallocated sales were $112 million with an adjusted operating loss of $73 million. This is in line with our full year anticipated sales range of $225 million to $275 million, with a forecasted adjusted operating loss in the range of $125 million to $175 million.
Our Other category had operating income of $37 million, which reflects the level of activity and effort to support the successful spinout of Solventum. Year-to-date, Other had an operating loss of $28 million, which is in line with our full year expectation of flat to a loss of $25 million.
Please turn to Slide 6. Second quarter adjusted free cash flow was $1.2 billion. Our second quarter performance was driven by strong operating income, lower capex spending partially offset by higher working capital. Adjusted capital expenditures were $250 million in the quarter, as we continue to invest in growth, productivity and sustainability. During the quarter, we returned a total of $800 million to shareholders, split equally between dividends and share repurchases. And finally, net debt at the end of Q2 stood at approximately $3 billion. These strong results build on our track record of robust cash generation.
For the first half of the year, we have generated $2 billion of adjusted free cash flow. Our strong capital structure continues to provide us the financial flexibility to invest in our business, return capital to shareholders and meet the cash flow needs related to legal matters. Please note that in the month of July, we will make total combined payments of $3.7 billion related to the Public Water Suppliers [Phonetic] and Combat Arms settlements.
Before I move on to our business segment performance, I want to highlight a couple of items for your awareness that were excluded in arriving at our Q2 adjusted results. First, note that we reached settlements of approximately $120 million with insurance carriers related to Combat Arms. We remain in discussion with multiple carriers and anticipate additional future recoveries. Second, during the quarter we incurred a non-cash charge of approximately $800 million related to a $2.5 billion pension risk transfer on a portion of our US-defined pension obligation with Met Tower Life. This action helps us to reduce risk and administrative fees related to our US pension plan.
Please turn to Slide 7. Starting with our Safety and Industrial business, which posted sales of $2.8 billion, up 1.1% organically. Industrial adhesives and tapes posted mid-single-digit organic growth driven by strength in bonding solutions for consumer electronic devices. Personal safety and automotive aftermarket grew low-single-digits. Electrical markets was up slightly while roofing granules was flat due to unplanned customer manufacturing challenges. And finally, we experienced year-on-year organic sales declines in abrasives and industrial specialties.
Geographically, industrial markets grew low-single-digits in the US and Asia Pacific, while EMEA was down low-single-digits. Overall, industrial end-market demand continued to be mixed in the quarter as end user and channel remain cautious. Adjusted operating income was $623 million with adjusted operating margins of 22.6%, up 40 basis points year-on-year. This performance was driven by higher sales volume, benefits from ongoing productivity and restructuring actions, and lower year-on-year restructuring charges. These benefits were partially offset by the timing of stock-based compensation and cost inefficiencies due to the spin of Solventum.
Moving to Transportation and Electronics on Slide 8, which posted adjusted sales of $1.9 billion, or up 3.3% organically. Our electronics business outperformed the market, up low-double-digits organically as we continued to gain spec in wins on consumer electronic devices and in semiconductor manufacturing. Our auto OEM business increased nearly 5% in Q2 versus a 0.5-point decrease in global car and light truck builds. Looking at the first half of the year, our auto OEM business was up 9% organically versus a flat global build rate of cars and light trucks as we continue to gain penetration on new platforms.
Looking at the rest of Transportation and Electronics, advanced materials grew mid-single-digits organically, and commercial branding and transportation was down low-single-digits year-on-year. Transportation and Electronics delivered $426 million in adjusted operating income, up 16% year-on-year. Adjusted operating margins were 22.3%, up 250 basis points year-on-year. The team achieved this result through strong leverage on electronics volumes, ongoing benefits from productivity and restructuring actions, and lower year-on-year restructuring charges. Partially offsetting these benefits were the timing of stock-based compensation grants and cost inefficiencies due to the spin of Solventum.
Turning to Slide 9, the Consumer business posted second quarter sales of $1.3 billion. Organic sales declined 1.4% year-on-year with continued softness in consumer discretionary spending. This included a 2.7 percentage point impact from portfolio and geographic prioritization. Home improvement grew mid-single-digits. Consumer safety and well-being grew low-single-digits. Packaging and expression declined low-single-digits, while home and auto care declined mid-single-digits organically. Geographically, the US was up slightly, Asia Pacific was down mid-single-digits and EMEA was down high-single-digits.
Consumer's second quarter operating income was $219 million, down 7% compared to last year with operating margins of 17.4%, down 80 basis points year-on-year. Operating margin performance was driven by lower volume and timing of stock-based compensation grants along with the cost inefficiencies due to the spin of Solventum. Partially offsetting these headwinds were benefits from lower restructuring charges.
Before I turn it back over to Bill, I want to take a moment to thank the 3M team for the tremendous progress they have made positioning the company for success. I am very proud of the relentless focus our teams have brought to create value by driving performance through our improved productivity and efficiency, spinning out of our Health Care business and reducing risk and uncertainty by managing legal matters.
I am confident that under Bill's leadership, the team will continue to build on this momentum to create consistent value for our people, our customers and our shareholders in the years to come. I would also like to thank all the analysts and investors for our rich discussions and engagements over the last four years.
With that, please turn to Slide 10, and I will turn it back over to Bill for an update on our guidance. Bill?
