3M Delivers Record Second-Quarter Earnings; Sales Increase 10.1 Percent to $4.6 Billion, An All-Time High

July 21, 2003

ST. PAUL, Minn.--(BUSINESS WIRE)--3M (NYSE:MMM) today announced its sales and earnings results for second quarter 2003.

The company reported net income of $619 million, or $1.56 per share, versus $466 million, or $1.18 per share, in the second quarter of 2002. Excluding special items(a) in the second quarter of 2002, net income increased 14.8 percent from $539 million last year, and earnings per share increased 14.7 percent from $1.36 per share in last year's second quarter.

“Clearly, it is prudent to maintain a cautious outlook on global economic growth and to gear our plans accordingly”

"Our employees did a terrific job in the second quarter," said W. James McNerney, Jr., 3M chairman and CEO. "Sales reached an all-time high, and both net income and earnings per share were the highest of any second quarter in 3M's 100-year-plus history. Our corporate initiatives -- aimed at driving higher top-line growth, productivity and free cash flow -- are making a real difference in 2003."

Worldwide sales in the second quarter totaled $4.580 billion, 10.1 percent higher than in the year-earlier quarter. Sales volumes increased 5.6 percent, including a positive 1.8 percent impact from acquisitions. Volumes increased 21.9 percent in Display and Graphics (includes 9 percent from acquisitions), 11.0 percent in Safety, Security and Protection Services, 7.1 percent in Transportation, 5.6 percent in Health Care, 3.0 percent in Consumer and Office and 0.1 percent in Industrial. Volumes declined 6.8 percent in Electro and Communications. Currency effects increased worldwide sales by 4.6 percent while selling prices were down 0.1 percent.

Sales outside the United States totaled $2.655 billion, up 16.9 percent compared to the second quarter of 2002. Volumes increased 8.5 percent, while selling prices declined 0.1 percent. Changes in the value of the U.S. dollar increased international sales by 8.5 percent. Volumes increased almost 18 percent in Asia Pacific driven by a 7 percent increase in Japan and a 28 percent increase in the rest of the region. Volumes increased 9.7 percent in Latin America and 0.6 percent in Europe. In the United States, sales totaled $1.925 billion, up 1.9 percent from the same quarter of 2002. Volumes increased 2.1 percent, while selling prices declined 0.2 percent.

"Clearly, it is prudent to maintain a cautious outlook on global economic growth and to gear our plans accordingly," McNerney said. "At the same time, we remain confident in our ability to improve every aspect of our company. By driving higher and sustainable sales growth, extending productivity improvements and generating cash flow to fuel growth, 3M can continue to deliver high-quality results into the future."

3M also increased its earnings outlook for 2003. For the year, the company now expects reported earnings will be within a range of $5.75 to $5.90 per share. Excluding special items(a), 3M expects 2003 earnings to be between $5.90 and $6.05 per share. Third-quarter earnings are expected to be in the range of $1.56 to $1.60 per share.

Patrick D. Campbell, senior vice president and chief financial officer, will conduct an investor teleconference at 9 a.m. Eastern Time (8 a.m. Central) today. Investors can access a webcast of this conference, along with related charts and materials, at http://investor.3M.com.

(a) During the second quarter of 2002, under its previously announced restructuring plan, 3M incurred pretax charges of $148 million ($73 million after-tax) primarily related to employee separation costs and accelerated depreciation charges. The company incurred similar charges in the first quarter of 2002 that totaled $54 million pre-tax ($35 million after-tax). As previously announced by 3M on March 26, 2003, a court issued an adverse ruling associated with a lawsuit filed against 3M in 1997 by LePage's Inc. During the first quarter of 2003, 3M recorded pretax charges of $93 million ($58 million after-tax) related to this proceeding.

Forward-Looking Statements

This news release contains forward-looking statements that reflect current views and estimates of 3M's management of future economic circumstances, industry conditions, company performance and financial results. The statements are based on many assumptions and factors including: (1) worldwide economic conditions; (2) foreign currency exchange rates and fluctuations in those rates; (3) the timing and acceptance of new product offerings; (4) purchased components and materials, including shortages and increases in the costs of such components and materials; (5) 3M's ability to successfully manage acquisitions, divestitures and strategic alliances; and (6) legal proceedings. Any changes in such assumptions or factors could produce significantly different results.

About 3M

3M is a $16 billion diversified technology company with leading positions in consumer and office; display and graphics; electronics and telecommunications; health care; industrial; safety, security and protection services; transportation and other businesses. Headquartered in St. Paul, Minnesota, the company has operations in more than 60 countries and serves customers in nearly 200 countries. 3M is one of the 30 stocks that make up the Dow Jones Industrial Average and also is a component of the Standard & Poor's 500 Index. For more information about 3M, go to www.3M.com/profile/pressbox/index.jhtml.

3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)

Second-Quarter 2003


Worldwide U.S. Intl.
Volume - core
3.8 %
0.4 %
6.6 %
Volume - acquisitions





and divestitures
1.8

1.7

1.9
Price
(0.1 )
(0.2 )
(0.1 )
Translation
4.6
--
8.5
Total
10.1 %
1.9 %
16.9 %


Six-Months 2003


Worldwide
U.S.
Intl.
Volume - core
3.6 %
0.0 %
6.7 %
Volume - acquisitions





and divestitures
1.9

1.7

2.0
Price
(0.1 )
(0.3 )
0.1
Translation
5.1
--
9.4
Total
10.5 %
1.4 %
18.2 %









3M Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Amounts in millions, except per-share amounts)
(Unaudited)

Three- months ended Six-months ended


June 30
June 30









2003
2002
2003
2002








Net sales
$ 4,580
$ 4,161
$ 8,898
$ 8,051








Operating expenses







Cost of sales

2,323


2,231


4,534


4,267
Selling, general and







administrative expenses

1,021


975


1,984


1,852
Research, development and







related expenses

276


269


546


533
Other expense
--
--
93
--








Total
3,620
3,475
7,157
6,652








Operating income
960
686
1,741
1,399








Interest expense and income







Interest expense

24


20


47


39
Interest income
(5 )
(9 )
(11 )
(18 )








Total
19
11
36
21








Income before income taxes







and minority interest

941


675


1,705


1,378
Provision for income taxes

310


210


558


437
Minority interest
12
(1 )
26
23








Net income
$ 619
$ 466
$ 1,121
$ 918








Weighted average common







shares outstanding - basic

390.9


390.0


390.5


390.0
Earnings per share - basic
$ 1.58
$ 1.19
$ 2.87
$ 2.35








Weighted average common







shares outstanding - diluted

396.2


396.1


395.7


395.7
Earnings per share - diluted
$ 1.56
$ 1.18
$ 2.83
$ 2.32








Cash dividends paid







per common share
$ 0.66
$ 0.62
$ 1.32
$ 1.24
















3M Company and Subsidiaries
Supplemental Unaudited Consolidated Statement of Income Information
(Dollars in millions, except per-share amounts)

Three-months ended Three-months ended


June 30, 2003
June 30, 2002


Excluding


Excluding



Special
Special
Reported
special
Special
Reported


items
items
total
items
items
total
Net sales
$ 4,580
$ --
$ 4,580
$ 4,161
$ --
$ 4,161
Operating











expenses











Cost of sales

2,323


--

2,323


2,140


91


2,231
Selling, general











and











administrative











expenses

1,021


--

1,021


919


56


975
Research,











development and











related











expenses
276
--
276
268
1
269
Total
3,620
--
3,620
3,327
148
3,475
Operating











income (loss)

960


--

960


834


(148 )

686
Interest expense











and (income),











net
19
--
19
11
--
11
Income (loss)











before income











taxes and











minority











interest

941


--

941


823


(148 )

675
Provision











(benefit)











for income taxes

310


--

310


267


(57 )

210
Effective tax











rate

33.0 %



33.0 %

32.5 %



31.2 %
Minority interest
12
--
12
17
(18 )
(1 )
Net income (loss)
$ 619
$ --
$ 619
$ 539
$ (73 )
$ 466
Weighted average











diluted shares

396.2


--

396.2


396.1


396.1


396.1
Net income per











diluted share
$ 1.56
$ --
$ 1.56
$ 1.36
$ (0.18 )
$ 1.18























3M Company and Subsidiaries
Supplemental Unaudited Consolidated Statement of Income Information
(Dollars in millions, except per-share amounts)

Six-months ended Six-months ended


June 30, 2003
June 30, 2002


Excluding


Excluding



special
Special
Reported
special
Special
Reported


items
items
total
items
items
total
Net sales
$ 8,898
$ --
$ 8,898
$ 8,051
$ --
$ 8,051
Operating











expenses











Cost of sales

4,534

--

4,534

4,146

121

4,267
Selling, general











and











administrative











expenses

1,984

--

1,984

1,775

77

1,852
Research,











development and











related











expenses

546

--

546

529
4

533
Other expense
--
93
93
--
--
--
Total
7,064
93
7,157
6,450
202
6,652
Operating











income (loss)

1,834

(93)

1,741

1,601

(202)

1,399
Interest expense











and (income),











net
36
--
36
21
--
21
Income (loss)











before income











taxes and











minority











interest

1,798

(93)

1,705

1,580

(202)

1,378
Provision











(benefit) for











income taxes

593

(35)

558

513

(76)

437
Effective tax











rate

33.0%

--

32.8%

32.5%

--

31.7%
Minority interest
26
--
26
41
(18)
23
Net income (loss)
$ 1,179
$ (58)
$ 1,121
$ 1,026
$ (108)
$ 918
Weighted average











diluted shares

395.7

395.7

395.7

395.7

395.7

395.7
Net income per











diluted share
$ 2.98
$ (0.15)
$ 2.83
$ 2.59
$ (0.27)
$ 2.32


















3M Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in millions, except per-share amounts)
(Unaudited)

Jun. 30, Jun. 30, Dec. 31,
ASSETS
2003
2002
2002
Current assets





Cash and cash equivalents
$ 974
$ 665
$ 618
Accounts receivable - net

2,771

2,795

2,527
Inventories

1,990

1,998

1,931
Other current assets
1,302
1,165
983
Total current assets

7,037

6,623

6,059
Investments

233

250

238
Property, plant and equipment - net

5,555

5,552

5,621
Other assets
3,741
2,536
3,411
Total assets
$ 16,566
$ 14,961
$ 15,329
LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities





Short-term debt
$ 1,059
$ 806
$ 1,237
Accounts payable

972

835

945
Payroll

438

476

411
Income taxes

813

678

518
Other current liabilities
1,545
1,391
1,346
Total current liabilities

4,827

4,186

4,457
Long-term debt

1,962

1,838

2,140
Other liabilities
2,822
2,557
2,739
Total liabilities
9,611
8,581
9,336
Total stockholders' equity - net

6,955

6,380

5,993
Shares outstanding





June 30, 2003: 391,503,430 shares





June 30, 2002: 390,014,808 shares





December 31, 2002: 390,195,681 shares





Total liabilities and stockholders'


equity
$ 16,566
$ 14,961
$ 15,329









3M Company and Subsidiaries



BUSINESS SEGMENTS (Unaudited)















BUSINESS







SEGMENT

Three-months ended


Six-months ended

INFORMATION
June 30
June 30
(Millions)
2003
2002
2003
2002
NET SALES







Health Care
$ 1,017

$ 896

$ 1,963

$ 1,741
Industrial

838


804


1,659


1,557
Consumer and Office

637


602


1,249


1,171
Display and Graphics

719


582


1,380


1,087
Electro and Communications

458


479


892


923
Safety, Security and Protection







Services

518


445


976


858
Transportation

383


339


764


688
Corporate and Unallocated

10


14


15


26
Total Company
$ 4,580

$ 4,161

$ 8,898

$ 8,051
OPERATING INCOME







Health Care
$ 263

$ 213

$ 501

$ 433
Industrial

102


131


234


242
Consumer and Office

108


108


218


213
Display and Graphics

209


146


391


263
Electro and Communications

71


79


118


131
Safety, Security and Protection







Services

131


92


236


178
Transportation

95


80


195


165
Corporate and Unallocated

(19 )

(163 )

(152 )

(226 )
Total Company
$ 960

$ 686

$ 1,741

$ 1,399
















As previously announced by 3M on March 26, 2003, a court issued an adverse ruling associated with a lawsuit filed against 3M in 1997 by LePage's Inc. During the first quarter of 2003, 3M recorded pretax charges of $93 million related to this proceeding (recorded in Corporate and Unallocated). During the second quarter of 2002, under its previously announced restructuring plan, 3M incurred pretax charges of $148 million primarily related to employee separation costs and accelerated depreciation charges. The company incurred similar charges in the first quarter of 2002 that totaled $54 million pre-tax. These 2002 charges were recorded in Corporate and Unallocated.

Contact:

3M, St. Paul
Investor Contacts:
Matt Ginter, 651-733-8206
or
Dan Colvin, 651-736-2637
or
Media Contact:
John Cornwell, 651-733-7698

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Categories: Press Releases