3M Third-Quarter Earnings Rise 20.3 percent to $0.83 Per Share; Sales Increase 11.4 Percent to a Record $4.62 Billion

October 20, 2003

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

Net income for the quarter was $663 million, or $0.83 per share, versus $545 million, or $0.69 per share, in the third quarter of 2002. Net income and per-share earnings increased 21.6 percent and 20.3 percent, respectively (a).

"Our employees are connecting with customers like never before," said W. James McNerney, Jr., 3M chairman and CEO, "and those connections are reflected in our third-quarter results. Sales reached an all-time high for the third consecutive quarter, boosted by sales volume increases in 6 of our 7 businesses, and we achieved 20 percent-plus increases in both net income and earnings per share."

Third-quarter worldwide sales totaled $4.616 billion, up 11.4 percent compared to the third quarter of 2002. Sales volumes increased 7.8 percent, including a positive 2.0 percent impact from acquisitions. Volumes increased 33.6 percent in Display and Graphics (includes 12 percent from acquisitions), 9.3 percent in Safety, Security and Protection Services, 6.8 percent in Health Care, 5.0 percent in Consumer and Office, 3.9 percent in Transportation and 0.2 percent in Industrial. Volumes declined 2.6 percent in Electro and Communications. Currency translation effects increased worldwide sales by 3.9 percent while selling prices were down 0.3 percent.

Sales outside the United States totaled $2.629 billion, an increase of 18.0 percent versus last year's comparable quarter. Volumes increased 11.5 percent, while selling prices declined 0.7 percent. Currency translation effects increased international sales by 7.2 percent. Volumes increased 22.3 percent in Asia Pacific, 21.2 percent in Latin America and 0.9 percent in Europe. In the United States, sales totaled $1.987 billion, up 3.7 percent from the same quarter of 2002. Volumes increased 3.6 percent, while selling prices improved by 0.1 percent.

"The collective power of our five corporate initiatives -- Six Sigma, 3M Acceleration, e-Productivity, Global Sourcing and Indirect Cost Reduction -- continues to drive better 3M results," McNerney said. "We're focused on accelerating growth in all of our businesses, and maintaining strict cost discipline throughout the company. We are confident in our ability to sustain sales, earnings and cash momentum despite the ongoing uncertainties in the global marketplace."

3M also provided its earnings outlook for the remainder of 2003. The company expects fourth-quarter earnings to be between $0.73 and $0.75 per share. As a result, 3M raised its expectations for full-year 2003 earnings to a range of $2.98 to $3.00 per share on a reported basis. Excluding special items (b), 3M expects 2003 earnings to be between $3.05 and $3.07 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) On August 11, 2003, 3M's Board of Directors declared a two-for-one split of the company's common stock. Effective with third quarter 2003 reporting, all share and per share data (such as per share amounts, weighted average shares and shares outstanding) has been restated to reflect this split.

(b) During the first quarter of 2003, 3M recorded pretax charges of $93 million ($58 million after-tax) related to an adverse court ruling in a lawsuit filed against 3M in 1997 by LePage's Inc. 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).

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. Changes in such assumptions or factors, including without limitation the outcome of and information derived from pending Congressional action concerning asbestos-related litigation, could produce significantly different results.

About 3M -- A Global, Diversified Technology Company

Every day, 3M people find new ways to make amazing things happen. Wherever they are, whatever they do, the company's customers know they can rely on 3M to help make their lives better. 3M's brands include icons such as Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, Filtrete, Dyneon and O-Cel-O. Serving customers in more than 200 countries around the world, the company's 70,000 people use their expertise, technologies and global strength to lead in major markets including consumer and office; display and graphics; electronics and telecommunications; safety, security and protection services; health care; industrial and transportation. For more information, including the latest product and technology news, visit www.3M.com.

Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, Filtrete, Dyneon and O-Cel-O are trademarks of 3M.

3M Company and Subsidiaries

SALES CHANGE ANALYSIS
(Unaudited)

Third-Quarter 2003


Worldwide U.S. Intl.
Volume - core
5.8 %
2.1 %
9.1 %
Volume - acquisitions
2.0
1.5
2.4
Volume - total
7.8

3.6

11.5
Price
(0.3 )
0.1

(0.7 )
Translation
3.9
--
7.2
Total
11.4 %
3.7 %
18.0 %


Nine-Months 2003


Worldwide
U.S.
Intl.
Volume - core
4.3 %
0.7 %
7.3 %
Volume - acquisitions
1.9
1.7
2.2
Volume - total
6.2

2.4

9.5
Price
(0.1 )
(0.2 )
(0.1 )
Translation
4.7
--
8.7
Total
10.8 %
2.2 %
18.1 %









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

Three-months ended Nine-months ended


September 30

September 30










2003
2002
2003
2002








Net sales
$ 4,616
$ 4,143
$ 13,514
$ 12,194








Operating expenses







Cost of sales

2,322


2,115


6,856


6,382
Selling, general and







administrative expenses

994


913


2,978


2,765
Research, development and







related expenses

270


264


816


797
Other expense
--
--
93
--








Total
3,586
3,292
10,743
9,944








Operating income
1,030
851
2,771
2,250








Interest expense and income







Interest expense

22


19


69


58
Interest income
(6 )
(9 )
(17 )
(27 )








Total
16
10
52
31








Income before income taxes







and minority interest

1,014


841


2,719


2,219
Provision for income taxes

339


274


897


711
Minority interest
12
22
38
45








Net income
$ 663
$ 545
$ 1,784
$ 1,463








Weighted average common







shares outstanding - basic

784.6


779.6


782.2


779.8
Earnings per share - basic
$ 0.85
$ 0.70
$ 2.28
$ 1.88








Weighted average common







shares outstanding - diluted

797.5


790.0


793.4


790.9
Earnings per share - diluted
$ 0.83
$ 0.69
$ 2.25
$ 1.85








Cash dividends paid







per common share
$ 0.33
$ 0.31
$ 0.99
$ 0.93
















Share and per-share data has been restated to reflect the two-for-one stock split effective with third quarter 2003 reporting.

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

Nine- months ended Nine- months ended


September 30, 2003


September 30, 2002



Excluding


Excluding



special
Special
Reported
special
Special
Reported


items
items
total
items
items
total
Net sales
$ 13,514
$ --
$ 13,514
$ 12,194
$ --
$ 12,194
Operating











expenses











Cost of sales

6,856


--


6,856


6,261


121


6,382
Selling,











general and











administrative











expenses

2,978


--


2,978


2,688


77


2,765
Research,











development











and related











expenses

816


--


816


793

4


797
Other expense
--
93
93
--
--
--
Total
10,650
93
10,743
9,742
202
9,944
Operating











income (loss)

2,864


(93 )

2,771


2,452


(202 )

2,250
Interest expense











and (income),











net
52
--
52
31
--
31
Income (loss)











before income











taxes and











minority











interest
2,812
(93 )
2,719
2,421
(202 )
2,219
Provision











(benefit) for











income taxes

932


(35 )

897


787


(76 )

711
Effective tax











rate

33.2 %

--


33.0 %

32.5 %

--


32.0 %
Minority











interest
38
--
38
63
(18 )
45
Net income











(loss)
$ 1,842
$ (58 )
$ 1,784
$ 1,571
$ (108 )
$ 1,463
Weighted











average











diluted shares

793.4


793.4


793.4


790.9


790.9


790.9
Net income per











diluted share
$ 2.32
$ (0.07 )
$ 2.25
$ 1.99
$ (0.14 )
$ 1.85
























Share and per-share data has been restated to reflect the two-for-one stock split effective with third quarter 2003 reporting.

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

Sep. 30, Sep. 30, Dec. 31,
ASSETS

2003


2002
2002
Current assets





Cash and cash equivalents
$ 1,279
$ 821
$ 618
Accounts receivable - net

2,791

2,585

2,527
Inventories

1,882

1,945

1,931
Other current assets
1,390
1,205
983
Total current assets

7,342

6,556

6,059
Investments

214

247

238
Property, plant and equipment - net

5,467

5,451

5,621
Other assets
3,774
3,465
3,411
Total assets
$ 16,797
$ 15,719
$ 15,329
LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities





Short-term debt
$ 1,255
$ 1,261
$ 1,237
Accounts payable

969

867

945
Payroll

457

443

411
Income taxes

825

580

518
Other current liabilities
1,462
1,360
1,346
Total current liabilities

4,968

4,511

4,457
Long-term debt

1,738

1,678

2,140
Other liabilities
2,583
2,887
2,739
Total liabilities
9,289
9,076
9,336
Total stockholders' equity - net

7,508

6,643

5,993
Shares outstanding





September 30, 2003: 784,883,033 shares





September 30, 2002: 780,393,288 shares





December 31, 2002: 780,391,362 shares


Total liabilities and stockholders'





equity
$ 16,797
$ 15,719
$ 15,329









Shares data has been restated to reflect the two-for-one stock split effective with third quarter 2003 reporting.

3M Company and Subsidiaries
BUSINESS SEGMENTS (Unaudited)




BUSINESS







SEGMENT
Three-months ended
Nine-months ended
INFORMATION
September 30
September 30
(Millions)
2003
2002
2003
2002
NET SALES







Health Care
$ 1,012
$ 901
$ 2,975
$ 2,642
Industrial

830

797

2,489

2,354
Consumer and Office

673

628

1,922

1,799
Display and Graphics

772

572

2,152

1,659
Electro and Communications

454

460

1,346

1,383
Safety, Security and Protection







Services

482

423

1,458

1,281
Transportation

386

351

1,150

1,039
Corporate and Unallocated
7

11

22

37
Total Company
$ 4,616
$ 4,143
$ 13,514
$ 12,194
OPERATING INCOME







Health Care
$ 272
$ 224
$ 773
$ 657
Industrial

115

130

349

372
Consumer and Office

128

121

346

334
Display and Graphics

251

142

642

405
Electro and Communications

66

67

184

198
Safety, Security and Protection







Services

111

89

347

267
Transportation

106

88

301

253
Corporate and Unallocated

(19)

(10)

(171)

(236)
Total Company
$ 1,030
$ 851
$ 2,771
$ 2,250












During the first quarter of 2003, 3M recorded pretax charges of $93 million related to an adverse court ruling in a lawsuit filed against 3M in 1997 by LePage's Inc. 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 2003 and 2002 charges were recorded in Corporate and Unallocated.

Contact:

3M, St. Paul
Investor Contacts:
Matt Ginter, 651-733-8206
or
Bruce Jermeland, 651-733-1807
or
Media Contact:
John Cornwell, 651-733-7698

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