UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 1993 Commission file number 1-3285 MINNESOTA MINING AND MANUFACTURING COMPANY State of Incorporation: Delaware I.R.S. Employer Identification No. 41-0417775 Executive offices: 3M Center, St. Paul, Minnesota 55144 Telephone number: (612) 733-1110 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of each exchange Title of each class on which registered Common Stock, Without Par Value New York Stock Exchange Pacific Stock Exchange Chicago Stock Exchange Note: The common stock of the Registrant is also traded on the Amsterdam Stock Exchange, German stock exchanges, Swiss stock exchanges, the Paris Stock Exchange and the Tokyo Stock Exchange. Securities registered pursuant to section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting stock held by nonaffiliates of the Registrant, based on the closing price of $107.25 per share as reported on the New York Stock Exchange-Composite Index on January 31, 1994, was $23.0 billion. Shares of common stock outstanding at January 31, 1994: 214,001,230. DOCUMENTS INCORPORATED BY REFERENCE Parts of the following documents are incorporated by reference to Parts III and IV of this Form 10-K: (1) Proxy Statement for registrant's 1994 annual meeting, (2) Form 10-Q for period ended June 30, 1987, and (3) Registration Nos. 33-29329, 33-48089 and 33-49842. This document contains 41 pages. MINNESOTA MINING AND MANUFACTURING COMPANY FORM 10-K For the Year Ended December 31, 1993 PART I Item 1. Business. Minnesota Mining and Manufacturing Company was incorporated in 1929 under the laws of the State of Delaware to continue operations, begun in 1902, of a Minnesota corporation of the same name. As used herein, the term "3M" includes Minnesota Mining and Manufacturing Company and subsidiaries unless the context otherwise indicates. 3M employs 86,168 persons. 3M is an integrated enterprise characterized by substantial interdivision and intersector cooperation in research, manufacturing and marketing of products incorporating similar component materials manufactured at common internal sources. Its business has developed from its research and technology in coating and bonding for coated abrasives, its only product in its early years. Coating and bonding is the process of applying one material to another, such as adhesives to a backing (pressure-sensitive tapes), abrasive granules to paper or cloth (coated abrasives), ceramic coating to granular mineral (roofing granules), heat- or light- sensitive materials to paper, film and metal (dry silver paper, photographic film and lithographic plates), iron oxide to plastic backing (magnetic recording tape), glass beads to plastic backing (reflective sheeting), and low tack adhesives to paper (repositionable notes). 3M believes that it is among the leading producers of products for many of the markets it serves. In all cases, 3M products are subject to direct or indirect competition. Generally speaking, most 3M products involve technical competence in development, manufacturing and marketing and are subject to competition with products manufactured and sold by other technically-oriented companies. 3M's three business sectors are: Industrial and Consumer; Information, Imaging and Electronic; and Life Sciences. Each sector brings together common or related 3M technologies and thus provides greater opportunity for the future development of products and services and a more efficient sharing of business strengths. The notes to the financial statements on page 25 and 26 of this Form 10-K provide financial information concerning 3M's three industry segments and 3M's operations in various geographic areas of the world. Industry Segments 3M's operations are organized into three business sectors. These sectors have worldwide responsibility for virtually all 3M product lines. A few miscellaneous and staff-sponsored new products, still in development, are not assigned to the sectors. Industrial and Consumer Sector: This sector is a leader in developing the technologies for pressure-sensitive adhesives, specialty tapes, coated and nonwoven abrasives, and specialty chemicals. These core technologies provide a strong basis for the development of new products. The sector also has strong distribution channels and logistics expertise. The sector is organized into five groups: Abrasive, Chemical and Film Products Group; Automotive Systems Group; Consumer Markets; Office Markets; and Tape Group. Major products in the Abrasive, Chemical and Film Products Group include coated abrasives (such as sandpaper) for grinding, conditioning and finishing a wide range of surfaces; natural and color-coated mineral granules for asphalt shingles; finishing compounds; and flame-retardant materials. This group also markets products for maintaining and repairing vehicles. Major chemical products include protective chemicals for furniture, fabrics and paper products; fire-fighting agents; fluoroelastomers for seals, tubes and gaskets in engines; engineering fluids; and high performance fluids used in the manufacture of computer chips and for electronic cooling and lubricating of computer hard disk drives. This group also serves as a major resource for other 3M divisions, supplying specialty chemicals, adhesives and films used in the manufacture of many 3M products. Major products in the Automotive Systems Group include body side-molding and trim; functional and decorative graphics; corrosion- and abrasion- resistant films; tapes for attaching nameplates, trim and moldings; and fasteners for attaching interior panels and carpeting. Major products in the Consumer and Office Market businesses include Scotch brand tapes; Post-it brand note products including memo pads, labels, stickers, pop-up notes and dispensers; home cleaning products including Scotch-Brite brand scouring products, O-Cel-O brand sponges and Scotchgard brand fabric protectors; energy control products such as window insulation kits; nonwoven abrasive materials for floor maintenance and commercial cleaning; floor matting; and a full range of do-it-yourself products including surface preparation and wood finishing materials, and filters for furnaces and air conditioners. The Tape Group manufactures and markets a wide variety of high- performance and general-use pressure-sensitive tapes and specialty products. Major product categories include industrial application tapes made from a wide variety of materials such as foil, film, vinyl and polyester; specialty tapes and adhesives for industrial applications including Scotch brand VHB brand tapes, lithographic tapes, joining systems, specialty additives, vibration control materials, liquid adhesives, and reclosable fasteners; general-use tapes such as masking, box-sealing and filament; and labels and other materials for identifying and marking durable goods. Information, Imaging and Electronic Sector: This sector serves rapidly changing markets in audio, video and data recording; graphic communications; information storage, output and transfer; telecommunications; electronics and electrical products. The sector has the leading technologies for certain electrical, electronic and fiber-optic applications and a wide variety of graphic imaging technologies. Having these related areas in one operating unit fosters efficient product development and innovation. The sector is also strong in worldwide distribution and service. The sector is organized into three groups: Electro and Communications Systems; Imaging Systems; and Memory Technologies. The Electro and Communication Systems Group includes products in the electronic, electrical, telecommunication and visual communication fields. The electronic and electrical products include packaging and inter-connection devices; insulating materials, including pressure-sensitive tapes and resins; and other related equipment. These products are used extensively by manufacturers of electronic and electrical equipment, as well as the construction and maintenance segments of the electric utility, telephone and other industries. The telecommunication products serve the world's telephone companies with a wide array of products for fiber-optic and copper-based telephone systems. These include many innovative connecting, closure and splicing systems, maintenance products and test equipment. The visual communication products serve the world's office and education markets with overhead projectors and transparency films and materials plus equipment and accessories for computer-based presentations. The Imaging Systems Group offers a complete line of products for printers and graphic arts firms, from the largest commercial printer to the smallest instant printer or in-house facility. These products include a broad line of presensitized lithographic plates and related supplies; a complete line of duplicator press plates and automated imaging systems and related supplies; copy and art preparation materials; pre-press proofing systems; carbonless paper sheets for multiple-part business forms; and a line of light-sensitive dry silver papers and films for electronically recorded images. This group's imaging technologies are used in producing photographic products, including medical X-ray films, graphic arts films and amateur color films. It also is a major supplier of laser imagers and supplies and computerized medical diagnostic systems. This group also offers an array of micrographic systems including readers and printers for engineering graphics and office applications. Related products include dry silver imaging papers and microfilm in aperture card and roll formats. The Memory Technologies Group manufactures and markets a complete line of magnetic and optical recording products for many applications that meet the requirements for complex applications in computers, instrumentation, automation and other fields. Memory Technologies is the world's largest supplier of removable memory media for computers. Products range from computer diskettes, cartridges and tapes to CD-ROM and rewritable optical media. The group markets a wide array of recording products which are used for home video recording, in professional radio and television markets, as well as for commercial and industrial uses. These include reel-to-reel, cartridge and cassette tapes for audio and video recording. Life Sciences Sector: This sector contributes to better health and safety for people around the world. The Life Sciences Sector's major technologies include pressure-sensitive adhesives, substrates, extrusion/coating, nonwoven materials, specialty polymers and resins, optical systems, drug delivery, and electro-mechanical devices. The sector has strong distribution channels in all its major markets. The sector is organized into three groups: Medical Products; Pharmaceuticals, Dental and Disposable Products; and Traffic and Personal Safety Products. The Medical Products Group produces a broad range of medical supplies, devices and equipment. Medical supplies include tapes, dressings, surgical drapes and masks, biological indicators, orthopedic casting materials and electrodes. Medical devices and equipment include stethoscopes, heart-lung machines, sterilization equipment, blood gas monitors, powered orthopedic instruments, skin staplers, and intravenous infusion pumps. The Medical Products Group also develops hospital information systems. The Pharmaceuticals, Dental and Disposable Products Group serves pharmaceutical and dental markets, as well as manufacturers of disposable diapers. Pharmaceuticals include ethical drugs and drug-delivery systems. Among ethical pharmaceuticals are analgesics, anti-inflammatories and cardiovascular and respiratory products. Drug-delivery systems include metered-dose inhalers, as well as transdermal skin patches and related components. Dental products include dental restoratives, adhesives, impression materials, temporary crowns, infection control products and orthodontic brackets and wires. This group also produces a broad line of tape closures for disposable diapers. The Traffic and Personal Safety Products Group is a leader in the following markets: traffic control materials, commercial graphics, occupational health and safety, and out-of-home advertising. In traffic control materials, 3M is the worldwide leader in reflective sheetings. These materials are used on highway signs, vehicle license plates, construction workzone devices, and trucks and other vehicles. In commercial graphics, 3M supplies a broad line of films, inks and related products used to produce graphics for trucks and signs. Major occupational health and safety products include maintenance-free and reusable respirators plus personal monitoring systems. Out-of-home advertising includes outdoor advertising, advertising displays in shopping centers and local advertising in national magazines. This product group also markets a variety of other products. These include spill-control sorbents, Thinsulate brand and Lite Loft brand insulations, traffic control devices, filtration products, electronic surveillance products, reflective sheetings for personal safety, and films for protection against counterfeiting. Distribution 3M products are sold directly to users and through numerous wholesalers, retailers, jobbers, distributors and dealers in a wide variety of trades in many countries of the world. Management believes that the confidence of wholesalers, retailers, jobbers, distributors and dealers in 3M and its products, developed through long association with trained marketing and sales representatives, has contributed significantly to 3M's position in the marketplace and to its growth. 3M has 322 sales offices and distribution centers worldwide, including 9 major branch offices and warehouses that are located in principal cities throughout the United States. There are 99 sales offices and distribution centers located in the United States. The remaining 223 sales offices and distribution centers are located in 52 countries outside the United States. Research, Patents and Raw Materials Research and product development constitute an important part of 3M's activities, and products resulting from such research and product development have contributed in large measure to its growth. The total amount spent for all research and development activities was $1.030 billion, $1.007 billion, and $914 million in 1993, 1992 and 1991, respectively. The corporate research laboratories are engaged in research which does not relate directly to 3M's existing product lines. They also support the research efforts of division and sector laboratories. Most major operating divisions and domestic subsidiaries, as well as several international subsidiaries, have their own laboratories for improvement of existing products and development of related new products. Engineering research staff groups provide specialized services in instrumentation, engineering and process development. An organization is maintained for technological development not sponsored by other units of the company. 3M is the owner of many domestic and foreign patents derived primarily from its own research activities. 3M does not consider that its business as a whole is materially dependent upon any one patent, license or trade secret or any group of related patents, licenses or trade secrets. The company experienced no significant or unusual problems in the purchase of raw materials during 1993. While 3M has successfully met its demands to date, it is impossible to predict future shortages or their impact. Executive Officers The following is a list of the executive officers of 3M as of March 1, 1994, their present position, their current age, the year first elected to their position and other positions held within 3M during the previous five years. All of these persons have been employed full time by 3M or a subsidiary of 3M for more than five years. All officers are elected by the Board of Directors at its annual meeting, with vacancies and new positions being filled at interim meetings. There are no family relationships between any of the executive officers named, nor is there any arrangement or understanding pursuant to which any person was selected as an officer.
Year Elected to Present Name Age Present Position Position Other Positions Held During 1989-1994 _________________ ___ _________________________ _____________ _____________________________________ L.D. DeSimone 57 Chairman of the Board and 1991 Executive Vice President, Chief Executive Officer Information and Imaging Technologies Sector and Corporate Services, 1989-1991 Executive Vice President, Industrial and Electronic Sector and Corporate Services, 1987-1989 Giulio Agostini 58 Senior Vice President, 1993 Senior Vice President, Finance and Office Finance, 1991-1993 Administration Director, Finance and Administration, 3M Italy, 1972-1991 William E. Coyne 57 Vice President, 1994 President and General Manager, Research and Development 3M Canada, Inc., 1990-1994 Group Vice President, Medical Products Group, 1988-1990 Lawrence E. Eaton 56 Executive Vice President, 1991 Group Vice President, Information, Imaging, Memory Technologies Group, and Electronic Sector 1986-1991 and Corporate Services Harry A. Hammerly 60 Executive Vice President, 1994 Executive Vice President, Life Sciences Sector and International Operations and International Operations Corporate Services, 1991-1994 Executive Vice President, Industrial and Electronic Sector and Corporate Services, 1989-1991 Vice President, Europe, 1987-1989 Robert J. Hershock 60 Vice President, 1994 Group Vice President, Abrasive Marketing Technologies Group, 1990-1993 Division Vice President, Occupational Health and Environmental Safety Division, 1988-1990 Charles E. Kiester 57 Senior Vice President, 1993 Vice President, Engineering, Engineering, Quality and Quality and Manufacturing Services Manufacturing Services 1990-1993 President and General Manager, 3M Canada,Inc., 1988-1990 Richard A. Lidstad 57 Vice President, 1992 Staff Vice President, Human Resource Human Resources Operations, 1987-1992 Ronald A. Mitsch 59 Executive Vice President, 1991 Senior Vice President, Research Industrial and Consumer and Development, 1990-1991 Sector and Corporate Services Group Vice President, Traffic and Personal Safety Products Group,1985-1990 John J. Ursu 54 Vice President, Legal Affairs 1993 General Counsel, 1992-1993 and General Counsel Deputy General Counsel, 1990-1992 Associate General Counsel, 1986-1990
Item 2. Properties. 3M's general offices, corporate research laboratories, most division laboratories and certain manufacturing facilities are located in St. Paul, Minnesota. Within the United States, 3M operates 82 plants in 28 states and has 99 sales offices and distribution centers located in 24 states. Internationally, 3M operates 109 manufacturing and converting facilities in 44 countries. 3M owns substantially all of its physical properties. 3M leases certain facilities that were financed through the issuance of industrial development bonds in the original principal amount of $30 million. 3M has capitalized the construction costs related to these facilities and recorded the related liabilities. Management believes 3M's existing physical facilities are highly suitable for the purposes for which they were designed. Item 3. Legal Proceedings. The company and certain of its subsidiaries are named defendants in a number of actions, governmental proceedings and claims, including product liability claims involving products now or formerly manufactured and sold by the company, many of which relate to silicone gel mammary implants, and some of which claims are purported or tentatively certified class actions. Mammary implant cases and claims are discussed separately below. In some actions, the claimants seek damages as well as other relief which, if granted, would require substantial expenditures. The company is involved in a number of environmental proceedings by governmental agencies asserting liability for past waste disposal and other alleged environmental damage. The company conducts ongoing investigations, assisted by environmental consultants, to determine accruals for the probable, estimable costs of remediation. The remediation accruals are reviewed each quarter and changes are made as appropriate. Some of these matters raise difficult and complex factual and legal issues and are subject to many uncertainties, including, but not limited to, the facts and circumstances of each particular action, the jurisdiction and forum in which each action is proceeding, and differences in applicable law. Accordingly, the company is not able to estimate the nature and amount of any future liability with respect to such matters. Mammary Implant Litigation As of December 31, 1993, the company had been named as a defendant, often with multiple co-defendants, in 3,054 claims and lawsuits in various courts, all seeking damages for personal injuries from allegedly defective breast implants. These claims and lawsuits, including class actions, purport to represent 8,842 individual claimants. These claims and lawsuits are generally in very preliminary stages, and it is not yet certain how many of these lawsuits and claims involve products manufactured and sold by the company, as opposed to other manufacturers. The company entered the business in 1977 by purchasing McGhan Medical and subsequently sold that business in 1984. The company's sales of implants, during the time that it engaged in this business, represent approximately seven percent of the total cumulative mammary implant sales. The company is vigorously defending the individual claims and lawsuits. Given the preliminary state of the proceedings, company's counsel has not yet reached a conclusion on the probability of company liability. Discussions regarding a possible "global settlement" have taken place during the last several months, with the facilitation of a panel of federal judges acting as mediators, between a plaintiffs' steering committee, various plaintiff groups, the mediators, and key defendants. The company was a participant in these mediation efforts. On February 14, 1994, Dow Corning, Bristol-Myers Squibb, and Baxter Healthcare Corp., together with several other defendants, announced an agreement with representatives from the plaintiffs' steering committee on financial terms for a global settlement. The company was not included by the parties in this arrangement. Discussions are now being conducted between the company and representatives of the plaintiffs' steering committee. The company does not know at this time whether these discussions will lead to resolution of all or any portion of the suits and claims against it or whether it will be a participant in such a settlement. With respect to these silicone gel mammary implant claims and lawsuits, the company's general counsel has opined that, based solely on the facts known as of February 25, 1994, date of the opinion and subject to future developments, there is sufficient insurance coverage to recover all liability and costs arising out of these matters. No insurers have denied coverage. Therefore, the company believes that such matters will not pose a material risk to the financial position of the company or its results of operations. Item 4. Submission of Matters to a Vote of Security Holders. None in the quarter ended December 31, 1993. Part II Item 5. Market Price of 3M's Common Stock and Related Security Holder Matters. At January 31, 1994, there were 117,343 shareholders of record. 3M's stock is listed on the following stock exchanges: New York Stock Exchange, Pacific Stock Exchange, Chicago Stock Exchange, Amsterdam Stock Exchange, German stock exchanges, Swiss stock exchanges, Paris Stock Exchange, and Tokyo Stock Exchange. Stock price comparison information (New York Stock Exchange Composite Transactions) is as follows: Quarter First Second Third Fourth Year 1993 High $111.75 $117.00 $111.25 $113.50 $117.00 Low 97.25 104.88 102.25 101.50 97.25 1992 High 98.75 97.38 103.75 107.00 107.00 Low 87.38 85.50 95.75 97.00 85.50 [TEXT] Item 6. Selected Financial Data. (Dollars in millions except amounts per share)
1993 1992 1991 1990 1989 For the Year Ended December 31: Net Sales ................................ $14,020 $13,883 $13,340 $13,021 $11,990 Net Income ............................... 1,263 1,233* 1,154 1,308 1,244 Per Share of Common Stock: Net Income ............................. 5.82 5.63* 5.26 5.91 5.60 Cash Dividends Declared and Paid ....... 3.32 3.20 3.12 2.92 2.60 Ratio of Earnings to Fixed Charges ....... 15.51 12.81* 11.02 12.42 16.75 At December 31: Total Assets ............................. 12,197 11,955 11,304 11,079 9,741 Long-term Debt (excluding portion due within one year) ....................... 796 687 764 760 885 * Includes a net earnings increase of $6million, or 2 cents per share, from the combination of a legal settlement, special charges and the cumulative effect of accounting changes, which are more fully discussed on page 20.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Operating Results 1993 was a challenging year in several respects. The company faced recessions in Europe and Japan, negative currency effects, a soft U.S. health care market and a highly competitive pricing environment. Worldwide net sales rose 1.0 percent to $14.020 billion. This followed increases of 4.1 percent in 1992 and 2.5 percent in 1991. Sales in the United States were $7.126 billion, up about 3 percent from 1992. Internationally, sales totaled $6.894 billion, a decrease of about 1 percent from 1992. Estimatedcomponents ofsales changefrom prioryears wereasfollows (percents): 1993 1992 _________________________________________________________________ _____________ U.S. Int'l Worldwide U.S. Int'l Worldwide _________________________________________________________________ _____________ Volume 5 7 6 3 5 4 Price (2) (2) (2) --- (1) (1) Translation --- (6) (3) --- 1 1 _________________________________________________________________ _____________ Total 3 (1) 1 3 5 4 _________________________________________________________________ _____________ In the United States volume growth accelerated in 1993, helped by a slight improvement in the domestic economy; however, pricing pressures also increased, mainly in memory technologies product lines. Internationally, sales growth in local currencies was slightly better than in 1992. However, currency fluctuations, which added to international sales in 1992, reduced those sales by about 6 percent in 1993. Cost of goods sold was 60.8 percent of sales, up from 60.1 percent in 1992. The negative impact of lower selling prices and currency was partially offset by improvements due to productivity gains and lower raw material costs. In 1992, cost of goods sold decreased as a percent of sales compared to 1991 due to productivity gains and lower raw material costs which were partially offset by higher R&D spending and lower selling prices. Cost of goods sold includes manufacturing, research and development, and engineering expenses. Selling, general and administrative expenses decreased to 25.2 percent of sales as the result of several cost-reduction programs. This compares with 25.6 percent in 1992 and 24.9 percent in 1991. The 1992 increase was magnified by costs for voluntary separations, higher sales costs and modest volume growth. Worldwide employment decreased by over 1,000 in 1993, even though about 600 people were added to support continued rapid growth in developing countries. This net reduction in employment occurred with little disruption to the company. (Percent of sales) 1993 1992 1991 _________________________________________________________________ _____________ Cost of goods sold 60.8 60.1 60.4 _________________________________________________________________ _____________ Selling, general and administrative expenses 25.2 25.6 24.9 _________________________________________________________________ _____________ In December 1992, 3M recognized $129 million in settlement of a patent lawsuit involving 3M orthopedic casting materials. Operating income in 1992 includes this amount, which is shown on a separate line of the Income Statement titled "legal settlement." Also in 1992, 3M recorded $115 million of special charges to enhance its competitiveness and productivity. These charges relate primarily to asset write-downs, including rationalization of manufacturing operations. Operating income in 1992 includes this amount, which is shown on a separate Income Statement line titled "special charges". Worldwide operating income in 1993 decreased 1.9 percent to $1.956 billion. The positive impact of increased sales volume and cost control was more than offset by negative currency and pricing. Operating income in 1993 included about $53 million for manufacturing rationalizations and voluntary separations. This compared to 1992 costs of about $80 million for voluntary separation programs, in addition to the $115 million of special charges. In 1992, operating income increased 1.7 percent, following a decrease of 10.6 percent in 1991. (Percent of sales) 1993 1992 1991 _________________________________________________________________ _____________ Operating Income 14.0 14.4 14.7 _________________________________________________________________ _____________ Interest expense was $50 million, down from $76 million in 1992 and $97 million in 1991. The declines in both 1993 and 1992 were mainly due to lower interest rates. Investment and other income totaled $96 million in 1993, which includes a $36 million benefit from tax settlements, improved investment results, and other items, many of which were of a non-recurring nature. This compared with investment and other income of $29 million in 1992 and $15 million in 1991. The company's effective tax rate was 35.3 percent of pre-tax income, the same as in 1992 and down from 36.8 percent in 1991. The 1 percent increase in the 1993 U.S. statutory corporate tax rate was offset by lower taxes on 3M International Operations, the extension of the U.S. R&D tax credit and the positive effect of revaluing deferred tax assets. The company's deferred tax assets will reverse over an extended period of time. Net income increased 2.5 percent to $1.263 billion, or $5.82 per share. In 1992, net income increased 6.8 percent to $1.233 billion, or $5.63 per share, compared with $1.154 billion, or $5.26 per share, in 1991. The company estimates that changes in the value of the U.S. dollar decreased 1993 net income by about $62 million, or 29 cents per share. Currency changes increased net income by about $1 million, or 1 cent per share, in 1992, and by $23 million, or 11 cents per share, in 1991. These estimates include the effect of translating profits from local currencies into U.S. dollars, the costs in local currencies of transferring goods between the parent company in the U.S. and international companies, and transaction gains and losses in countries not considered to be highly inflationary. Over the long term, 3M expects to meet its aggressive financial goals. These include a growth in earnings per share averaging 10 percent a year or better; return on stockholders' equity of 20 to 25 percent; return on capital employed of 27 percent or better; and 30 percent of sales from products introduced in the last four years. Earnings per share increased 3.4 percent in 1993. Currency effects reduced earnings by about 5 percent. Return on average stockholders' equity was 19.1 percent, up from 18.8 percent in 1992. This return has averaged 20.5 percent over the past 5 years. Return on capital employed was 19.1 percent, down from 19.7 percent in 1992. This return has averaged 22.1 percent over the past 5 years. In 1993 more than 25 percent of sales came from products introduced within the last 4 years. Performance by Business Sector Industrial and Consumer Sector: In 1993, sales were up 2.6 percent to $5.4 billion. Operating income rose 2.8 percent to $849 million. Excluding special charges of $13 million in 1992, operating income rose 1.2 percent in 1993. Sales and profits showed strong growth in the Asia Pacific area and in Latin America. However, results in Europe were adversely affected by weak economies and the stronger U.S. dollar. This sector expects continued growth in the United States, Asia Pacific area and in Latin America. Information, Imaging and Electronic Sector: In 1993, sales were down 1.7 percent to $4.5 billion. A solid increase in unit volume was more than offset by continued price competition and negative currency translation. Operating income increased 14.0 percent to $271 million. Excluding special charges of $81 million in 1992, operating income decreased 15.0 percent. Operating profit margins were affected by price competition and currency effects, as well as by large investments in new products and efforts to streamline operations. This sector will continue to face significant price pressure in 1994. Life Sciences Sector: In 1993, sales increased 2.6 percent to $4.1 billion. Sales growth was constrained by the stronger U.S. dollar and by the slowdown in the U.S. health care market due to uncertainty over health care reform. Operating income decreased 8.6 percent to $846 million. Excluding a net benefit of $108 million from a legal settlement and special charges, operating income increased by 3.4 percent. This sector will continue to be impacted by the uncertainty over U.S. health care reform. Financial Position 3M's financial condition remained strong in 1993, despite a sluggish worldwide economy. Balance sheet amounts did not vary significantly from 1992. Various items, such as cash and short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs. Substantially all of the vested and earned benefits under 3M's employee retirement plans, and about half of the other postretirement benefit obligations, were funded as of December 31, 1993. The company's key inventory index, which represents the number of months of inventory, was 4.0 months, up from 3.8 months in 1992. Accounts receivable days' sales outstanding were 66 days, up one day from 1992. The company's current ratio was 1.9, unchanged from the end of 1992. Of the long-term debt outstanding at the end of 1993, $469 million was a guarantee of debt of the 3M Employee Stock Ownership Plan. Total debt was 23 percent of stockholders' equity at the end of 1993. This compared with 22 percent at year-end 1992. The company's borrowings continued to maintain AAA long-term ratings. Legal proceedings, including the silicone gel mammory prosthesis situation and environmental liabilities, are discussed in the legal proceedings section on page 8. The company believes that such matters will not pose a material risk to the financial position of the company. Liquidity Due to a change in the financial reporting period for 3M's international companies, the 1992 Consolidated Statement of Cash Flows includes the cash provided or used by 3M's international companies for a 14-month period (November 1, 1991, to December 31, 1992). The following table is presented on a comparative basis, whereby 1992 excludes the November 1 to December 31, 1991, period for our international companies. (Millions) 1993 1992 1991 _________________________________________________________________ _____________ Net cash provided by operating activities $2,091 $2,218 $1,909 Net cash used in investing activities (1,092) (1,139) (1,197) Net cash used in financing activities (1,128) (1,027) (686) Effect of exchange rate changes on cash 21 (20) (62) _________________________________________________________________ _____________ Net increase (decrease) in cash and cash equivalents $ (108) $ 32 $ (36) _________________________________________________________________ _____________ Capital expenditures $1,112 $1,225 $1,326 Depreciation 976 950 884 _________________________________________________________________ _____________ The company met its cash requirements primarily from operating activities. During 1993, cash flows provided by operating activities totaled $2.091 billion. This more than covered capital expenditures and dividend payments of $1.833 billion. The company's superior credit rating provides easy and ample access to global capital markets. As part of our efforts to control overall spending, capital expenditures declined 9.3 percent to $1.112 billion in 1993. This followed a decline of 7.5 percent in calendar year 1992. Stockholder dividends increased 3.8 percent to $3.32 per share in 1993. Cash dividend payments totaled $721 million. 3M has paid dividends for 78 consecutive years. On February 14, 1994 the 3M Board of Directors boosted the quarterly dividend on 3M common stock 6 percent to 88 cents a share, declared a two-for-one stock split to shareholders of record on March 15, 1994 and authorized the repurchase of up to 12 million of the company's (pre-split) shares. This share-repurchase authorization runs through February 10, 1995. The company repurchased all of the six million shares available under a previous authorization. Repurchases of 3M common stock totaled $706 million in 1993, compared with $247 million in 1992 and $240 million in 1991. Increased share repurchases in 1993 reduced the total number of shares outstanding by more than 4 million. Repurchases were made to support employee stock purchase plans and for other corporate purposes. Future Outlook Most economists expect slightly better global economic growth this year, with the improvement coming in the second half. This combined with continued emphasis on productivity improvement and new products should help our results; however, the pricing environment is likely to remain quite competitive and currency fluctuations could have a significant, negative effect on our results again this year. Spending on research and development and capital equipment is expected to remain around 1993 levels. Employment levels should continue to decline slightly in 1994. In 1992, the Financial Accounting Standards Board issued Statement No. 112, "Employers' Accounting for Postemployment Benefits." Postemployment benefits include, but are not limited to, disability, severance and health care benefits. 3M will adopt this standard in the first quarter of 1994. This adoption will have a diminimus effect on the company's results of operations. Item 8. Financial Statements and Supplementary Data. Index to Financial Statements Reference (pages) Form 10-K Data submitted herewith: Report of Independent Accountants............... 15 Consolidated statements of income for the years ended December 31, 1993, 1992 and 1991 ............. 16 Consolidated balance sheets as of December 31, 1993 and 1992 ........................................... 17 Consolidated statements of cash flows for the years ended December 31, 1993, 1992 and 1991........................... 18 Notes to financial statements .................. 19-30 Report of Independent Accountants We have audited the consolidated financial statements and the financial statement schedules of Minnesota Mining and Manufacturing Company and subsidiaries (the company) as listed in Item 8 and Item 14(a) of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Minnesota Mining and Manufacturing Company and subsidiaries as of December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. As discussed in the Notes to the Financial Statements, the company changed the fiscal year-end of its international companies in 1992. The company also adopted in 1992 Statements of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and No. 109, "Accounting for Income Taxes." /s/COOPERS & LYBRAND COOPERS & LYBRAND St. Paul, Minnesota February 14, 1994 20
Consolidated Statement of Income Minnesota Mining and Manufacturing Company and Subsidiaries _________________________________________________________________ _________________________________ For the Years Ended December 31, 1993, 1992 and 1991 1993 1992 1991 _______________________________________________________ (Amounts in millions, except per-share data) _________________________________________________________________ _________________________________ Net Sales $14,020 $13,883 $13,340 _________________________________________________________________ ______________________________ Operating Expenses Cost of goods sold 8,529 8,346 8,058 Selling, general and administrative expenses 3,535 3,557 3,323 Legal settlement --- (129) --- Special charges --- 115 --- _________________________________________________________________ ______________________________ Total 12,064 11,889 11,381 _________________________________________________________________ ______________________________ Operating Income 1,956 1,994 1,959 _________________________________________________________________ ______________________________ Other Income and Expense Interest expense 50 76 97 Investment and other income - net (96) (29) (15) _________________________________________________________________ ______________________________ Total (46) 47 82 _________________________________________________________________ ______________________________ Income Before Income Taxes, Minority Interest and Cumulative Effect of Accounting Changes 2,002 1,947 1,877 Provision for Income Taxes 707 687 691 Minority Interest 32 24 32 _________________________________________________________________ ______________________________ Income Before Cumulative Effect of Accounting Changes 1,263 1,236 1,154 Cumulative Effect of Accounting Changes --- (3) --- _________________________________________________________________ ______________________________ Net Income $ 1,263 $ 1,233 $ 1,154 _________________________________________________________________ ______________________________ Per-Share Amounts: Income Before Cumulative Effect of Accounting Changes $ 5.82 $ 5.65 $ 5.26 Cumulative Effect of Accounting Changes --- (0.02) --- _________________________________________________________________ ______________________________ Net Income $ 5.82 $ 5.63 $ 5.26 _________________________________________________________________ ______________________________ Average Shares Outstanding 217.2 219.1 219.6 _________________________________________________________________ ______________________________ The accompanying Notes to Financial Statements are an integral part of this statement.
Consolidated Balance Sheet Minnesota Mining and Manufacturing Company and Subsidiaries _________________________________________________________________ ______________________ As of December 31, 1993 and 1992 1993 1992 _____________________________________________ (Dollars in millions) _________________________________________________________________ _______________________ Assets Current Assets Cash and cash equivalents $ 274 $ 382 Other securities 382 340 Accounts receivable - net 2,610 2,394 Inventories 2,401 2,315 Other current assets 696 778 _________________________________________________________________ __________ Total current assets 6,363 6,209 Investments 455 452 Property, Plant and Equipment - net 4,830 4,792 Other Assets 549 502 _________________________________________________________________ __________ Total $12,197 $11,955 _________________________________________________________________ __________ Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 878 $ 836 Payroll 331 310 Income taxes 290 299 Short-term debt 697 739 Other current liabilities 1,086 1,057 _________________________________________________________________ __________ Total current liabilities 3,282 3,241 Other Liabilities 1,607 1,428 Long-Term Debt 796 687 Stockholders' Equity - net 6,512 6,599 Shares outstanding - 1993: 214,739,319; 1992: 219,034,050 _________________________________________________________________ __________ Total $12,197 $11,955 _________________________________________________________________ __________ The accompanying Notes to Financial Statements are an integral part of this statement.
Consolidated Statement of Cash Flows Minnesota Mining and Manufacturing Company and Subsidiaries _________________________________________________________________ ____________________________ For the Years Ended December 31, 1993, 1992 and 1991 1993 1992* 1991 ____________________________________________________ (Dollars in millions) _________________________________________________________________ ________________________ Cash Flows from Operating Activities Net income $1,263 $1,233 $1,154 Adjustments to reconcile net income to net cash provided by operating activities: Legal settlement 129 (129) --- Special charges (29) 115 --- Cumulative effect of accounting changes- SFAS Nos. 106 and 109 103 --- Depreciation 976 1,004 884 Amortization 100 83 85 Deferred income taxes (86) (111) (117) Accounts receivable (327) (142) (155) Inventories (161) (78) (21) Other working capital changes 226 199 79 _________________________________________________________________ ___________________________ Net cash provided by operating activities 2,091 2,277 1,909 Cash Flows from Investing Activities Capital expenditures (1,112) (1,318) (1,326) Disposals of property, plant and equipment 53 78 76 Acquisitions and other investments (71) (59) (35) Proceeds from divestitures and investments 38 63 88 _________________________________________________________________ ___________________________ Net cash used in investing activities (1,092) (1,236) (1,197) Cash Flows from Financing Activities Net change in short-term debt 48 (83) 57 Repayment of long-term debt (80) (187) (162) Proceeds from long-term debt 150 139 140 Purchases of treasury stock (706) (247) (240) Reissuances of treasury stock 181 177 139 Payment of dividends (721) (701) (685) Other - - --- --- 65 _________________________________________________________________ ___________________________ Net cash used in financing activities (1,128) (902) (686) Effect of exchange rate changes on cash 21 (15) (62) _________________________________________________________________ ___________________________ Net increase (decrease) in cash and cash equivalents (108) 124 (36) Cash and cash equivalents at beginning of year 382 258 294 _________________________________________________________________ ___________________________ Cash and cash equivalents at end of year $ 274 $ 382 $ 258 _________________________________________________________________ ___________________________ *Includes cash flows of international companies for a 14-month period November 1, 1991 to December 31, 1992. See accounting changes note on page 20 for details. The accompanying Notes to Financial Statements are an integral part of this statement.
Notes to Financial Statements Accounting Policies Consolidation: All significant subsidiaries are consolidated. Unconsolidated subsidiaries and affiliates are included on the equity basis. Cash and Cash Equivalents: Cash and cash equivalents consist of cash and temporary investments with maturities of three months or less when purchased. Other Securities: Other securities consist of marketable securities and interest-bearing bank deposits with varied maturity dates. These securities are employed in the company's banking, captive insurance and cash management operations. The securities are stated at cost, which approximates fair value. Inventories: Inventories are stated at lower of cost or market, with cost generally determined on a first-in, first-out basis. Investments: Investments primarily include assets from captive insurance and banking operations and from venture capital investments. These investments are stated at cost, which approximates fair value. Other Assets: Other assets include goodwill, patents, other intangibles, deferred taxes and other noncurrent assets. Other assets are periodically reviewed for impairment to ensure that they are appropriately valued. Goodwill is generally amortized on a straight-line basis over 10 years. Other intangible items are amortized on a straight-line basis over their estimated economic lives. Deferred Income Taxes: Deferred income taxes arise from differences in basis for tax and financial-reporting purposes. Revenue Recognition: Revenue is recognized upon shipment of goods to customers and upon performance of services. Depreciation: Depreciation of property, plant and equipment is generally computed on a straight-line basis over the estimated useful lives of these assets. Research and Development: Research and development costs are charged to operations as incurred and totaled $1.030 billion in 1993, $1.007 billion in 1992 and $914 million in 1991. Foreign Currency Translation: Local currencies are generally considered the functional currencies outside the United States, except in countries with highly inflationary economies. Assets and liabilities are translated at year- end exchange rates for operations in local currency environments. Income and expense items are translated at average rates of exchange prevailing during the year. Translation adjustments are recorded as a component of stockholders' equity. For operations in countries with highly inflationary economies, certain financial statement amounts are translated at historical exchange rates, with all other assets and liabilities translated at year-end exchange rates. These translation adjustments are reflected in the results of operations. They decreased net income by $12 million in 1993, increased net income by $10 million in 1992 and decreased net income by $6 million in 1991. 24 Accounting Changes Effective January 1, 1992, 3M's international companies changed their reporting period from a fiscal year ending October 31 to a calendar year ending December 31. The change was made to aid worldwide business planning, increase efficiency and reflect the global nature of the company's business. The international companies' results of operations for the period November 1 to December 31, 1991, are shown in the 1992 Consolidated Statement of Income as a cumulative effect of an accounting change. The cash flows of the international companies for the 14-month period November 1, 1991, to December 31, 1992, are reflected in the 1992 Consolidated Statement of Cash Flows. Effective January 1, 1992, the company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." This statement requires that the cost of providing postretirement benefits be accrued over an employee's service period. In implementing this standard, the company was required to accrue the unfunded obligation. The company had accrued and funded - under a different actuarial methodology - a substantial amount of these benefits since 1977. In implementing this standard, the company elected to record the transition obligation using the immediate recognition option. Also effective January 1, 1992, the company adopted SFAS No. 109, "Accounting for Income Taxes." This statement requires an asset and liability approach for financial accounting and reporting of income taxes. Under this approach, deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax law. Changes in enacted tax rates will be reflected in the tax provision as they occur. Adoption of these accounting changes, in aggregate, did not have a material impact on 1992 results of operations. The table below shows the components of the cumulative effect of accounting changes. _________________________________________________________________ _____________ (Millions, except per-share data) 1992 _________________________________________________________________ _____________ Amount Per Share _________________________________________________________________ _____________ Cumulative effect of change in: Reporting period for international companies, net of $25 million in taxes (including tax benefits from revaluation of certain fixed assets in Italy) $ 100 $ 0.46 Accounting for other postretirement benefits, net of $107 million in taxes (183) (0.84) Accounting for income taxes 80 0.36 _________________________________________________________________ _____________ Total $ (3) $(0.02) _________________________________________________________________ _____________ Legal Settlement and Special Charges In December 1992, Johnson & Johnson agreed to pay 3M $129 million in settlement of a patent lawsuit involving 3M orthopedic casting materials. 3M received payment in January 1993. In 1992, 3M recorded $115 million of special charges designed to enhance competitiveness and productivity. About 75 percent of these charges related to asset write-downs, including rationalization of manufacturing operations. 25 Supplemental Balance Sheet Information _________________________________________________________________ _____________ (Millions) 1993 1992 _________________________________________________________________ _____________ Accounts receivable _________________________________________________________________ _____________ Accounts receivable $ 2,730 $ 2,506 Less allowances 120 112 _________________________________________________________________ _____________ Accounts receivable - net $ 2,610 $ 2,394 _________________________________________________________________ _____________ Inventories _________________________________________________________________ _____________ Finished goods $ 1,246 $ 1,224 Work in process 604 586 Raw materials and supplies 551 505 _________________________________________________________________ _____________ Total inventories $ 2,401 $ 2,315 _________________________________________________________________ _____________ Property, plant and equipment - at cost _________________________________________________________________ _____________ Land $ 258 $ 241 Buildings and leasehold improvements 2,572 2,463 Machinery and equipment 8,305 7,732 Construction in progress 353 392 _________________________________________________________________ _____________ $11,488 $10,828 Less accumulated depreciation 6,658 6,036 _________________________________________________________________ _____________ Property, plant and equipment - net $ 4,830 $ 4,792 _________________________________________________________________ _____________ Short-term debt _________________________________________________________________ _____________ Commercial paper $ 193 $ 165 Long-term debt - current portion 79 148 Other borrowings 425 426 _________________________________________________________________ _____________ Total short-term debt $ 697 $ 739 _________________________________________________________________ _____________ Other current liabilities _________________________________________________________________ _____________ Deposits - banking operations $ 291 $ 259 Other current liabilities 795 798 _________________________________________________________________ _____________ Total other current liabilities $ 1,086 $ 1,057 _________________________________________________________________ _____________ Other liabilities _________________________________________________________________ _____________ Minority interest in subsidiaries $ 376 $ 314 Nonpension postretirement benefits 386 366 Other liabilities 845 748 _________________________________________________________________ _____________ Total other liabilities $ 1,607 $ 1,428 _________________________________________________________________ _____________ The carrying amount of short-term debt approximates fair value. Deposits - banking operations - are primarily demand deposits and, as such, the carrying amount approximates fair value. Leases Rental expense under operating leases was $141 million in 1993, $140 million in 1992 and $141 million in 1991. The table below sets forth minimum payments under operating leases with noncancelable terms in excess of one year as of year-end 1993. _________________________________________________________________ ______________ After (Millions) 1994 1995 1996 1997 1998 1998 Total _________________________________________________________________ ______________ Minimum lease payments $70 $53 $39 $21 $16 $88 $287 _________________________________________________________________ ______________ Long-Term Debt Employee Stock Ownership Plan: In 1989, the company established an Employee Stock Ownership Plan (ESOP). The ESOP borrowed $548 million. Because the company has guaranteed repayment of the ESOP debt, the debt and related unearned compensation are recorded on the Consolidated Balance Sheet. Medium-Term Notes: 3M maintains a shelf registration with the Securities and Exchange Commission that provides the means to offer medium-term notes not to exceed $601 million. As of December 31, 1993, $502 million was available for future financial needs. The company entered into interest rate swap agreements to achieve variable interest rates below U.S. commercial paper rates for notes outstanding. The effective rate of these agreements approximated 2.5 percent at year-end 1993. Other Borrowings: These are primarily borrowings of 3M's international companies and municipal bond issues in the United States. Interest rates range mainly from 2.3 to 11.0 percent. _________________________________________________________________ _____________ (Millions) 1993 1992 _________________________________________________________________ _____________ ESOP debt guarantee, 8.13-8.27%, due 1995-2004 $469 $490 Eurobond, 4.81%, due 1998 114 - - --- Medium-term notes, due 1995 75 115 Other borrowings, due 1995-2025 138 82 _________________________________________________________________ _____________ Total long-term debt $796 $687 _________________________________________________________________ _____________ Maturities of long-term debt for the next five years are as follows: 1994, $79 million; 1995, $168 million; 1996, $44 million; 1997, $41 million; and 1998, $159 million. Interest payments included in the Consolidated Statement of Cash Flows totaled $53 million in 1993, $88 million in 1992 and $118 million in 1991. For the calendar year 1992, interest payments were $79 million. The company estimates that the fair value of long-term debt is not materially different than the carrying amount of this debt. Other Financial Instruments The company has entered into interest rate and currency swaps, as well as forward interest rate agreements, with face amounts of $605 million and $308 million, respectively, as of December 31, 1993, and 1992. The company uses 27 these instruments to manage risk from interest rate and currency fluctuations and to lower its cost of borrowing. The unrealized gains and losses are deferred until the underlying transactions are realized. As of December 31, 1993, the unrealized gains and losses were not material. The company also had foreign exchange forward and option contracts with face amounts of $704 million and $785 million, respectively, at December 31, 1993, and 1992. The company uses these financial instruments primarily to hedge transactions denominated in foreign currencies, thereby reducing risk from exchange rate fluctuations in the regular course of its global business. The net unrealized gain on these contracts as of December 31, 1993, was not material. Income Taxes _________________________________________________________________ ______________ Income Before Income Taxes _________________________________________________________________ ______________ (Millions) 1993 1992 1991 _________________________________________________________________ ______________ U.S. $1,390 $1,301 $1,136 International 612 646 741 _________________________________________________________________ ______________ Total $2,002 $1,947 $1,877 _________________________________________________________________ ______________ Provision for Income Taxes _________________________________________________________________ ______________ (Millions) 1993 1992 1991 _________________________________________________________________ ______________ Currently payable Federal $430 $371 $396 State 74 78 74 International 292 339 343 Deferred Federal (66) (63) (110) State (5) (6) (9) International (18) (32) (3) _________________________________________________________________ ______________ Total $707 $687 $691 _________________________________________________________________ ______________ Net deferred tax assets totaled $439 million ($293 million current) and net deferred tax liabilities totaled $98 million ($6 million current) at year-end 1993. The major components of deferred taxes include benefit costs not currently deductible of $336 million and accelerated depreciation for tax purposes of $362 million. Income tax payments included in the Consolidated Statement of Cash Flows totaled $802 million in 1993, $743 million in 1992 and $867 million in 1991. For calendar year 1992, income tax payments were $714 million. At December 31, 1993, there were approximately $2.850 billion of retained earnings attributable to our international companies that are considered to be permanently invested. No provision has been made for taxes that might be payable if these earnings were remitted to the United States. It is not practical to determine the amount of incremental tax that might arise should these earnings be remitted.
_________________________________________________________________ ______________________ Reconciliation of Effective Income Tax Rate 1993 1992 1991 _________________________________________________________________ ______________________ Statutory U.S. tax rate 35.0% 34.0% 34.0% State income taxes - net 2.2 2.5 2.3 International taxes 3.0 4.4 4.7 All other - net (4.9) (5.6) (4.2) _________________________________________________________________ ______________________ Effective worldwide tax rate 35.3% 35.3% 36.8% _________________________________________________________________ ______________________
[TEXT] Stockholders' Equity Common stock, without par value, of 500,000,000 shares is authorized, with 236,008,264 shares issued in 1993, 1992 and 1991. Treasury shares at year-end totaled 21,268,945 in 1993, 16,974,214 in 1992 and 16,867,905 in 1991. This stock is reported at cost. Preferred stock, without par value, of 10,000,000 shares is authorized but unissued. A two-for-one stock split will be distributed on or aboutApril 8, 1994to shareholders of recordon March 15,1994.
_________________________________________________________________ ___________________________________________ ESOP Common Retained Cumulative Unearned Treasury (Dollars in millions) Stock Earnings Translation Compensation Stock Total _________________________________________________________________ ___________________________________________ Balance, December 31, 1990 $296 $7,106 $ 175 $(530) $ (937) $6,110 Net income 1,154 1,154 Dividends paid ($3.12 per share) (685) (685) Reacquired stock (2,733,416 shares) (240) (240) Issuances pursuant to stock option and benefit plans (2,040,372 shares) (39) 178 139 Amortization of unearned compensation 14 14 Translation adjustments (199) (199) _________________________________________________________________ ___________________________________________ Balance, December 31, 1991 $296 $7,536 $ (24) $(516) $ (999) $6,293 Net income 1,233 1,233 Dividends paid ($3.20 per share) (701) (701) Reacquired stock (2,561,689 shares) (247) (247) Issuances pursuant to stock option and benefit plans (2,455,380 shares) (56) 233 177 Amortization of unearned compensation 18 18 Translation adjustments (174) (174) _________________________________________________________________ ___________________________________________ Balance, December 31, 1992 $296 $8,012 $(198) $(498) $(1,013) $6,599 Net income 1,263 1,263 Dividends paid ($3.32 per share) (721) (721) Reacquired stock (6,580,868 shares) (706) (706) Issuances pursuant to stock option and benefit plans (2,286,137 shares) (54) 245 191 Amortization of unearned compensation 19 19 Translation adjustments (133) (133) _________________________________________________________________ ___________________________________________ Balance, December 31, 1993 $296 $8,500 $(331) $(479) $(1,474) $6,512 _________________________________________________________________ ___________________________________________
[TEXT] Business Sectors Financial information relating to the company's business sectors for the years ended December 31, 1993, 1992 and 1991 appears below. 3M is an integrated enterprise characterized by substantial intersector cooperation, cost allocations and inventory transfers. Therefore, management does not represent that these sectors, if operated independently, could earn the operating income shown.
_________________________________________________________________ ___________________________________ Information, Industrial Imaging and Life Eliminations Total (Millions) and Consumer Electronic Sciences and Other Company _________________________________________________________________ ____________________________________ Net Sales 1993 $5,350 $4,520 $4,132 $ 18 $14,020 1992 5,215 4,599 4,026 43 13,883 1991 5,003 4,544 3,748 45 13,340 _________________________________________________________________ ____________________________________ Operating Income 1993 849 271 846 (10) 1,956 1992 826 238 926 4 1,994 1991 852 383 769 (45) 1,959 _________________________________________________________________ ____________________________________ Identifiable Assets 1993 3,776 3,460 2,854 144 10,234 1992 3,734 3,264 2,712 172 9,882 1991 3,592 3,414 2,603 127 9,736 _________________________________________________________________ ____________________________________ Depreciation 1993 341 366 249 20 976 1992 323 356 238 33 950 1991 307 329 224 24 884 _________________________________________________________________ ____________________________________ Capital Expenditures 1993 399 388 327 (2) 1,112 1992 437 444 327 17 1,225 1991 462 477 369 18 1,326 _________________________________________________________________ ____________________________________ 1 Includes a legal settlement that increased operating income for the Life Sciences Sector by $129 million. Also includes special charges of $115 million, of which$81 millionwas in theInformation, Imaging andElectronic Sector. 2 Excludes certaincorporate assets,primarilycash andcash equivalents,other securities, deferred income taxes, certain other current assets and investments. 3 Excludes $93 millionof capitalexpenditures and $54million ofdepreciation for international companies from November 1 to December 31, 1991. See accounting changes note on page 20 for details.
[TEXT] Geographic Areas Information in the table below is presented on the same basis as utilized by the Company to manage the business. Export sales and certain income and expense items are reported in the geographic area where the final sale to customers is made rather than where the transaction originates.
_________________________________________________________________ ____________________________ United Asia Other Elimin- Total (Millions) States Europe Pacific Areas ations Company _________________________________________________________________ ____________________________ Net Sales to 1993 $7,126 $3,646 $2,154 $1,094 $14,020 Customers 1992 6,922 4,068 1,847 1,046 13,883 1991 6,738 3,889 1,718 995 13,340 _________________________________________________________________ ____________________________ Transfers 1993 1,393 172 28 146 $(1,739) --- Between 1992 1,273 176 31 119 (1,599) --- Geographic Areas 1991 1,135 156 37 105 (1,433) --- _________________________________________________________________ ____________________________ Operating 1993 940 376 429 211 1,956 Income 1992 945 489 368 192 1,994 1991 802 618 362 177 1,959 _________________________________________________________________ ____________________________ Identifiable 1993 5,875 2,633 1,531 710 (515) 10,234 Assets 1992 5,634 2,824 1,333 660 (569) 9,882 1991 5,548 2,912 1,214 555 (493) 9,736 _________________________________________________________________ ____________________________ 1 Includes Canada, Latin America and Africa. 2 Includesa legal settlement that increased operating income in the United Statesby $129 million. Also includesspecial charges of $115 million, of which $74 million was in Europe. 3 Excludescertain corporateassets, primarilycash andcash equivalents,other securities, deferred income taxes, certain other current assets and investments. [TEXT] At year-end,net assetsof companiesoutside the UnitedStates totaled$2.963 billion in 1993, $2.998 billion in 1992 and $2.835 billion in 1991. In1993, thecompany changed thebasis ofpresenting exportsales and certain income andexpense items in theabove table. Operating income in1993 under the prior methodology would have been $1,341 million, $205 million, $277 million and $133 million, respectively.
Retirement Plans 3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. Pension benefits are based principally on an employee's years of service and compensation near retirement. Plan assets are invested in common stocks, fixed-income securities, real estate and other investments. The company's funding policy is to deposit with an independent trustee amounts at least equal to those required by law. A trust fund is maintained to provide pension benefits to plan participants and their beneficiaries. In addition, a number of plans are maintained by deposits with insurance companies. The charge to income relating to these plans was $203 million in 1993, $178 million in 1992 and $133 million in 1991.
_________________________________________________________________ ________________________________________________________ Net Pension Cost U.S. Plan International Plans _________________________________________________________________ ________________________________________________________ (Millions) 1993 1992 1991 1993 1992 1991 _________________________________________________________________ ________________________________________________________ Service cost (employee benefits earned during the year) $ 110 $ 108 $ 89 $ 86 $73 $65 Interest cost on projected benefit obligation 276 252 228 80 78 73 Return on assets - actual (430) (221) (602) (185) (73) (112) Net amortization and deferral 154 (38) 347 112 (1) 45 _________________________________________________________________ ________________________________________________________ Net pension cost $ 110 $ 101 $ 62 $ 93 $77 $71 _________________________________________________________________ ________________________________________________________ Assumptions: Discount rate at year-end 7.25% 8.00% 8.00% 7.26% 7.91% 8.07% Rate of increase in compensation levels 5.00% 6.25% 6.25% 5.31% 6.40% 6.60% Long-term rate of return on assets 9.00% 9.00% 9.00% 7.64% 8.23% 8.44% _________________________________________________________________ ________________________________________________________ _________________________________________________________________ ________________________________________________________ Funded Status of Pension Plans U.S. Plan International Plans _________________________________________________________________ ________________________________________________________ (Millions) 1993 1992 1993 1992 _________________________________________________________________ ________________________________________________________ Actuarial present value of: Vested benefit obligation $2,797 $2,490 $ 875 $790 Non-vested benefit obligation 435 372 65 58 _________________________________________________________________ ________________________________________________________ Accumulated benefit obligation $3,232 $2,862 $ 940 $848 _________________________________________________________________ ________________________________________________________ Projected benefit obligation $3,921 $3,442 $1,279 $1,179 Plan assets at fair value 3,473 3,141 1,207 996 _________________________________________________________________ ________________________________________________________ Plan assets less than the projected benefit obligation $ (448) $ (301) $ (72) $(183) Unrecognized net transition asset (224) (261) 10 10 Other adjustments and unrecognized items 492 435 (16) 80 Accrued pension expense recognized in the Consolidated Balance Sheet $ (180) $ (127) $ (78) $(93) _________________________________________________________________ ________________________________________________________
Other Postretirement Benefits The company provides health care and life insurance benefits for substantially all of its U.S. employees who reach retirement age while employed by the company. The company has set aside funds with an independent trustee for these postretirement benefits and makes periodic contributions to the plan. The assets held by the trustee are invested in common stocks and fixed-income securities. Employees outside the United States are covered principally by government-sponsored plans and the cost of company-provided plans for these employees is not material. The table below sets forth the components of the net periodic postretirement benefit cost and a reconciliation of the funded status of the postretirement benefit plan for U.S. employees. Net Periodic Postretirement Benefit Cost _________________________________________________________________ _____________ (Millions) 1993 1992 _________________________________________________________________ _____________ Service cost $ 23 $ 21 Interest cost 53 49 Return on plan assets - actual (23) (20) Net amortization and deferral 1 --- _________________________________________________________________ _____________ Total $ 54 $ 50 _________________________________________________________________ _____________ Funded Status of Postretirement Benefits Plan _________________________________________________________________ _____________ (Millions) 1993 1992 _________________________________________________________________ _____________ Fair value of plan assets $335 $314 _________________________________________________________________ _____________ Accumulated postretirement benefit obligation: Retirees 248 193 Fully eligible active plan participants 153 139 Other active plan participants 378 348 _________________________________________________________________ _____________ Benefit obligation 779 680 _________________________________________________________________ _____________ Plan assets less benefit obligation (444) (366) Adjustments and unrecognized items 58 --- Accrued postretirement expense recognized in the Consolidated Balance Sheet $(386) $(366) The accumulated postretirement benefit obligation and related benefit cost are determined through the application of relevant actuarial assumptions. The company anticipates its health care cost trend rate to slow from 7.5 percent in 1994 to 5.0 percent in 2003, after which the trend rate is expected to stabilize. The effect of a one percentage point increase in the assumed health care cost trend rate for each future year would increase the benefit obligation by $57 million and the current year benefit expense by $4 million. Other actuarial assumptions include an expected long-term rate of return on plan assets of 9.0 percent (before taxes applicable to a portion of the return on plan assets), and a discount rate of 7.25 percent. The charge to income relating to these plans was $54 million in 1993, $50 million in 1992 and $51 million in 1991. Other Postemployment Benefits In 1992, the Financial Accounting Standards Board issued Statement No. 112, "Employers' Accounting for Postemployment Benefits." Postemployment benefits include, but are not limited to, disability, severance and health care benefits. 3M will adopt this standard in the first quarter of 1994. This adoption will have a diminimus effect on the company's results of operations. Employee Stock Ownership Plan The company maintains an Employee Stock Ownership Plan (ESOP) for substantially all full-time U.S. employees. This plan was established in 1989 as a cost-effective way of funding certain employee retirement savings benefits, including the company's matching contributions under its 401(k) employee savings plan. The ESOP borrowed $548 million and used the proceeds to purchase 7.7 million shares of the company's common stock, previously held in treasury. The debt is being serviced by dividends on stock held by the ESOP and by company contributions. These contributions are reported as a benefit expense. Employee Savings Plan The company sponsors an employee savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all full-time U.S. employees. The company matches employee contributions of up to 6 percent of compensation at rates ranging from 35 to 85 percent, depending upon company performance. Amounts charged against income were $29 million in 1993 and 1992, and $28 million in 1991. General Employees' Stock Purchase Plan Participants in the General Employees' Stock Purchase Plan are granted options at 85 percent of market value at the date of grant. At December 31, 1993, there were 23,216 participants in the plan, with 58,058 employees eligible to participate. Options must be exercised within 27 months from date of grant. Shares Price Range _________________________________________________________________ _____________ Under Option- January 1, 1993 223,179 $66.94-88.30 Granted 818,005 83.57-96.59 Exercised (777,102) 66.94-96.59 Cancelled (27,633) 66.94-96.59 _________________________________________________________________ _____________ Under Option- December 31, 1993 236,449 $73.90-96.59 _________________________________________________________________ _____________ Shares available for grant- December 31, 1993 8,803,215 _________________________________________________________________ _____________ Management Stock Ownership Program Management stock options are granted at market value at the date of grant. At December 31, 1993, there were 4,238 participants in the plan. All outstanding options expire between May 1994 and May 2003. Shares Price Range _________________________________________________________________ _____________ Under Option- January 1, 1993 9,400,910 $38.73-103.60 Granted 2,138,014 97.85-116.15 Exercised (1,361,733) 38.73-103.60 Cancelled (85,844) 38.73-113.25 _________________________________________________________________ _____________ Under Option- December 31, 1993 10,091,347 $38.73-116.15 _________________________________________________________________ _____________ Options Exercisable- December 31, 1993 8,133,231 $38.73-115.45 _________________________________________________________________ _____________ Shares available for grant- December 31, 1993 10,869,705 _________________________________________________________________ _____________ Quarterly Data (Unaudited) _________________________________________________________________ __________ (Millions, except per-share data) First Second Third Fourth Year _________________________________________________________________ _________ Net Sales 1993 $3,517 $3,540 $3,481 $3,482 $14,020 1992 3,438 3,519 3,551 3,375 13,883 _________________________________________________________________ _________ Cost of Goods Sold 1993 $2,112 $2,131 $2,167 $2,119 $8,529 1992 2,058 2,115 2,134 2,039 8,346 _________________________________________________________________ _________ Income Before Cumulative Effect of Accounting Changes 1993 $330 $331 $316 $286 $1,263 1992 306 317 324 289 1,236 Per Share 1993 $1.51 $1.51 $1.47 $1.33 $5.82 1992 1.40 1.45 1.48 1.32 5.65 _________________________________________________________________ _________ Net Income 1993 $330 $331 $316 $286 $1,263 1992 303 317 324 289 1,233 Per Share 1993 $1.51 $1.51 $1.47 $1.33 $5.82 1992 1.38 1.45 1.48 1.32 5.63 _________________________________________________________________ _________ Stock Price Comparisons (New York Stock Exchange Composite Transactions) 1993 High $111.75 $117.00 $111.25 $113.50 $117.00 Low 97.25 104.88 102.25 101.50 97.25 1992 High 98.75 97.38 103.75 107.00 107.00 Low 87.38 85.50 95.75 97.00 85.50 _________________________________________________________________ _________ [FN] 1 Includes a legal settlement and special charges, which together added $9 million, or 4 cents a share, to net income. Item 9. Disagreements on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. Item 11. Executive Compensation. Item 12. Security Ownership of Certain Beneficial Owners and Management. Item 13. Certain Relationships and Related Transactions. The information called for by Items 10 through 13 are omitted pursuant to general instruction G(3). The registrant will file with the Commission a definitive proxy statement pursuant to Regulation 14A before April 30, 1994. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) The financial statements filed as part of this report are listed in the index to financial statements on page 14. Index to Financial Statement Schedules Reference(pages) Form 10-K ________________ Financial Statement Schedules for the years ended December 31, 1993, 1992 and 1991: V Property, Plant and Equipment.......................33 VI Accumulated Depreciation of Property, Plant and Equipment ......................................34 IX Short-Term Borrowings .............................35 X Supplementary Income Statement Information ..........................................35 All other schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements or the notes thereto. (b) Reports on Form 8-K: 3M was not required to file any reports on Form 8-K for the quarter ended December 31, 1993. (c) Exhibits: Incorporated by Reference: Incorporated by Reference in the Report From (3) Restated certificate of incorporation Exhibit (3) to and bylaws, amended to and Report Form 10-Q including amendments of for period ended May 12, 1987. June 30, 1987. (4) Instruments defining the rights of security holders, including debentures: (a) common stock. Exhibit (3) above (b) medium term notes. Registration Nos. 33-29329 and 33-48089 on Form S-3. (10) Management contracts, management remuneration: (a) management stock ownership program. Exhibit 4 of Registration No. 33-49842 on Form S-8 (b) profit sharing plan, performance Written description unit plan and other compensation contained in issuer's arrangements. proxy statement for the 1994 annual shareholders meeting. Reference (pages) Form 10-K Submitted herewith: (11) Computation of per share earnings. 36 (12) Calculation of ratio of earnings to fixed charges. 37 (22) Subsidiaries of the registrant. 38 (24) Consent of experts. 39 (25) Power of attorney. 40
MINNESOTA MINING AND MANUFACTURING COMPANY AND CONSOLIDATED SUBSIDIARIES SCHEDULES (Dollars in Millions) SCHEDULE V PROPERTY, PLANT AND EQUIPMENT COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F BALANCE AT BALANCE BEGINNING ADDITIONS OTHER AT END OF CLASSIFICATION OF YEAR AT COST RETIREMENTS CHANGES* YEAR ______________________________________ __________ __________ ___________ _________ _________ For the Year Ended December 31, 1993: Land ................................ $ 241 $ 18 $ 4 $ 3 $ 258 Buildings and Leasehold Improvements ...................... 2,463 145 24 (12) 2,572 Machinery and Equipment ............. 7,732 988 330 (85) 8,305 Construction in Progress............. 392 (39) ** --- --- 353 Total ............................. $10,828 $ 1,112 $ 358 $ (94) $11,488 For the Year Ended December 31, 1992: Land ................................ $ 196 $ 20 $ 2 $ 27 $ 241 Buildings and Leasehold Improvements ...................... 2,250 261 21 (27) 2,463 Machinery and Equipment ............. 7,182 1,078 387 (141) 7,732 Construction in Progress ............ 452 (41)** - (19) 392 Total ............................. $10,080 $ 1,318 *** $ 410 $ (160) $10,828 For the Year Ended December 31, 1991: Land ................................ $ 189 $ 11 $ 2 $ (2) $ 196 Buildings and Leasehold Improvements ..................... 2,031 274 22 (33) 2,250 Machinery and Equipment ............. 6,708 1,026 403 (149) 7,182 Construction in Progress ............ 455 15** 1 (17) 452 Total ............................. $ 9,383 $ 1,326 $ 428 $ (201) $10,080 _________________________________________________________________ ________ *Translation adjustments, acquisitions, and transfers between accounts. **Net increase (decrease) in construction in progress. ***Includes $93 million of capital expenditures for the international companies from November 1 to December 31, 1991. Included in the retirements column are asset write-downs relating to special charges.
41 MINNESOTA MINING AND MANUFACTURING COMPANY AND CONSOLIDATED SUBSIDIARIES SCHEDULES (Dollars in Millions) SCHEDULE VI ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F BALANCE AT ADDITIONS BALANCE BEGINNING CHARGED OTHER AT END OF CLASSIFICATION OF YEAR TO EXPENSE RETIREMENTS CHANGES* YEAR _____________________________________ ___________ ___________ ___________ _________ _________ For the Year Ended December 31, 1993: Buildings and Leasehold Improvements ................ $ 1,034 $ 121 $ 15 $ (5) $ 1,135 Machinery and Equipment ....... 5,002 855 289 (45) 5,523 Total ...................... $ 6,036 $ 976 $ 304 $ (50) $ 6,658 For the Year Ended December 31, 1992: Buildings and Leasehold Improvements ............... $ 934 $ 122 $ 15 $ (7) $ 1,034 Machinery and Equipment ...... 4,480 882 293 (67) 5,002 Total ....................... $ 5,414 $ 1,004** $ 308 $ (74) $ 6,036 For the Year Ended December 31, 1991: Buildings and Leasehold Improvements ............... $ 866 $ 98 $ 13 $ (17) $ 934 Machinery and Equipment ....... 4,128 786 333 (101) 4,480 Total ...................... $ 4,994 $ 884 $ 346 $ (118) $ 5,414 * Translation adjustments and transfers between accounts. ** Includes $54 million of depreciation for the international companies from November 1 to December 31, 1991. NOTE: Estimated useful lives range from two to forty years.
MINNESOTA MINING AND MANUFACTURING COMPANY AND CONSOLIDATED SUBSIDIARIES SCHEDULES (Dollars in Millions) SCHEDULE IX SHORT-TERM BORROWINGS* COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F WEIGHTED MAXIMUM AVERAGE AMOUNT WEIGHTED AVERAGE BALANCE AVERAGE MONTH-END BALANCE OUTSTANDING INTEREST RATE AT END OF INTEREST OUTSTANDING DURING DURING THE DURING THE DESCRIPTION PERIOD RATE THE PERIOD PERIOD** PERIOD*** ________________________ _________ _________ __________________ ___________ _____________ 1993: Short-Term Debt (U.S.).. $317 3.5% $510 $326 3.9% Short-Term Debt (International).. $301 7.4% $446 $245 7.2% 1992: Short-Term Debt (U.S.) .......... $189 4.5% $387 $278 4.4% Short-Term Debt (International)****.. $402 6.5% $514 $326 11.6% 1991: Short-Term Debt (U.S.) .......... $229 4.6% $470 $287 6.1% Short-Term Debt (International).. $343 11.6% $407 $345 10.7% The company does not maintain formal lines of credit, however, the company believes it has sufficient borrowing sources should the need arise. * Excluding current portion of long-term debt. ** Average of month-end balances outstanding during each year. *** Interest expense for the year on short-term borrowings divided by average short-term borrowings outstanding during the year. **** Includes short-term borrowings for international companies for the 14-month period November 1, 1991 to December 31, 1992.
[TEXT] SCHEDULE X SUPPLEMENTARY INCOME STATEMENT INFORMATION COLUMN A COLUMN B _________________________________________________________________ ____ CHARGED TO COSTS AND EXPENSES ITEM 1993 1992* 1991 __________________________________ ____ ____ ____ Maintenance and Repairs ................ $463 $456 $420 Advertising Costs ...................... $161 $172 $152 * Includes expenses for the 12-month period ending December 31, 1992.