3M Reports Higher First-Quarter Sales and Earnings; Q1 2005 EPS Increases 14.4 Percent

April 18, 2005

ST. PAUL, Minn.--(BUSINESS WIRE)--3M (NYSE:MMM) today announced a 14.4 percent increase in first-quarter earnings per share.

The company reported net income of $809 million, or $1.03 per share, versus $722 million, or $0.90 per share in the first quarter of 2004. Net income increased 12.0 percent.

"Broad-based productivity improvements achieved through our corporate initiatives and solid growth in key areas, like optical films and health care, helped us deliver over 14 percent earnings per share growth in the first quarter," said W. James McNerney, Jr., 3M chairman and CEO. "Improved operational efficiency, sales growth, and pricing were key to overcoming slow economic growth in Western Europe and Japan and continued raw material price pressure."

Worldwide sales in the first quarter totaled $5.17 billion, 4.6 percent higher than in the year-earlier quarter. Local currency sales increased 2.3 percent, with selling prices contributing 0.5 percent. Currency effects increased sales by 2.3 percent. Local-currency sales increased 5.2 percent in Health Care; 4.5 percent in Transportation; 3.0 percent in Safety, Security and Protection Services; 2.6 percent in Industrial; and 0.6 percent in Display and Graphics; and declined 0.5 percent in Consumer and Office, and 1.4 percent in Electro and Communications.

"Looking ahead, we will continue to leverage sales growth and productivity improvements into sustainable earnings growth despite continued slow growth in the mature economies," McNerney said. "We expect to deliver higher organic growth rates the rest of this year through new product sales enabled by our diverse technology platforms; our Acceleration initiative; growth drivers, like LCD films; and our strong presence in fast-growth markets like China and Eastern Europe."

3M also reaffirmed its earnings guidance for 2005. For the year, the company expects earnings to be within a range of $4.15 to $4.25 per share. The company expects full-year local currency growth of 5 to 8 percent. Second-quarter earnings are expected to be in the range of $1.08 to $1.10 per share, with local currency growth of 4 to 7 percent.

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 Time) today. Investors can access a webcast of this conference, along with related charts and materials, at http://investor.3M.com.

Forward-Looking Statements

This news release contains forward-looking information (within the meaning of the Private Securities Litigation Reform Act of 1995) about the company's financial results and estimates, business prospects, and products under development that involve substantial risks and uncertainties. You can identify these statements by the use of words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic conditions; (2) foreign currency exchange rates and fluctuations in those rates; (3) the timing and acceptance of new product offerings; (4) the availability and cost of purchased components and materials, including oil-derived compounds; (5) 3M's ability to successfully integrate and obtain the anticipated synergies from acquisitions and strategic alliances; (6) generating less operating income from its corporate initiatives than estimated; and (7) legal proceedings, including the outcome of and information derived from pending Congressional action concerning asbestos-related litigation and other significant developments that could occur in the legal proceedings described in the company's Annual Report on Form 10-K for the year ended December 31, 2004 (the "Report"). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Report. The information contained in this news release is as of the date indicated. The company assumes no obligation to update any forward-looking statements contained in this release as a result of new information or future events or developments.

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 Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, Filtrete, Command and Vikuiti. Serving customers in more than 200 countries around the world, the company's 67,000 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, Command and Vikuiti are trademarks of 3M.

3M Company and Subsidiaries




CONSOLIDATED STATEMENT OF INCOME
(Millions, except per-share amounts)
(Unaudited)






Three-months ended



March 31



2005

2004
Net sales

$ 5,166

$ 4,939
Operating expenses





Cost of sales


2,537



2,436
Selling, general and administrative





expenses


1,114



1,104
Research, development and related





expenses

291

282
Total

3,942

3,822
Operating income

1,224

1,117
Interest expense and income





Interest expense


20



19
Interest income

(16 )

(10 )
Total

4

9
Income before income taxes and minority





interest


1,220



1,108
Provision for income taxes


396



366
Minority interest

15

20
Net income

$ 809


$ 722
Weighted average common shares





outstanding - basic


771.7



782.9
Earnings per share - basic

$ 1.05

$ 0.92
Weighted average common shares





outstanding - diluted


787.0



799.5
Earnings per share - diluted

$ 1.03

$ 0.90
Cash dividends paid per common share

$ 0.42

$ 0.36










3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)







Mar. 31,

Dec. 31,

Mar. 31,
ASSETS

2005

2004

2004
Current assets





Cash and cash equivalents

$ 2,669

$ 2,757

$ 1,818
Accounts receivable - net


2,899


2,792


2,904
Inventories


1,980


1,897


1,880
Other current assets

1,374

1,274

1,461
Total current assets


8,922


8,720


8,063
Investments


280


227


211
Property, plant and equipment - net


5,624


5,711


5,512
Goodwill, intangible assets and other








assets

5,929

6,050

4,192
Total assets

$ 20,755

$ 20,708

$ 17,978


















LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities








Short-term borrowings and current








portion of long-term debt

$ 2,201

$ 2,094

$ 1,106
Accounts payable


1,201


1,168


1,066
Accrued payroll


492


487


471
Accrued income taxes


950


867


986
Other current liabilities

1,393

1,455

1,534
Total current liabilities


6,237


6,071


5,163
Long-term debt


707


727


1,718
Other liabilities

3,521

3,532

2,996
Total liabilities

10,465

10,330

9,877
Total stockholders' equity - net

10,290

10,378

8,101
Shares outstanding








March 31, 2005: 769,570,205 shares








December 31, 2004: 773,518,281 shares








March 31, 2004: 782,114,154 shares





Total liabilities and stockholders'








equity

$ 20,755

$ 20,708

$ 17,978









3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)






Three-months ended



March 31



2005

2004
SUMMARY OF CASH FLOW:











NET CASH PROVIDED BY OPERATING ACTIVITIES

$ 1,003

$ 942
Cash flows from investing activities:





Purchases of property, plant and equipment


(235)


(158)
Acquisitions, net of cash acquired


-


(80)
Other investing activities

(67)

19
NET CASH USED IN INVESTING ACTIVITIES

(302)

(219)
Cash flows from financing activities:





Change in debt


107


(133)
Purchases of treasury stock


(671)


(438)
Reissuances of treasury stock


195


134
Dividends paid to stockholders


(324)


(282)
Other financing activities

(57)

(12)
NET CASH USED IN FINANCING ACTIVITIES

(750)

(731)
Effect of exchange rate changes on cash

(39)

(10)
Net increase (decrease) in cash and cash equivalents


(88)


(18)
Cash and cash equivalents at beginning of period

2,757

1,836
Cash and cash equivalents at end of period

$ 2,669

$ 1,818






3M Company and Subsidiaries
SUPPLEMENTAL CASH FLOW AND
OTHER SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in millions)
(Unaudited)






Three-months ended



March 31




2005

2004
NON-GAAP MEASURES











Free Cash Flow:





Net cash provided by operating activities

$ 1,003


$ 942
Purchases of property, plant and equipment

(235 )

(158 )
Free Cash Flow (a)

$ 768

$ 784






Net Working Capital Turns (b)

5.6

5.3










(a) Free cash flow is not defined under GAAP. Therefore, it is considered a non-GAAP measure. Non-GAAP measures should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The company believes free cash flow is a useful measure of performance and uses this measure as an indication of the strength of the company and its ability to generate cash. (b) The company uses non-GAAP measures that place emphasis and focus on certain working capital assets and liabilities. 3M's net working capital index is defined as quarterly net sales multiplied by four, divided by ending net accounts receivable plus inventory less accounts payable. This measure is not recognized under U.S. generally accepted accounting principles and may not be comparable to similarly titled measures used by other companies.

(b) The company uses non-GAAP measures that place emphasis and focus on certain working capital assets and liabilities. 3M's net working capital index is defined as quarterly net sales multiplied by four, divided by ending net accounts receivable plus inventory less accounts payable. This measure is not recognized under U.S. generally accepted accounting principles and may not be comparable to similarly titled measures used by other companies.

3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)




Three-Months Ended March 31, 2005









Sales Change Analysis

United

Inter-


By Geographic Area

States

national

Worldwide
Volume - core

1.1 %

1.8 %

1.5 %
Volume - acquisitions

0.4

0.2

0.3
Volume - total

1.5


2.0


1.8
Price

1.7

(0.2 )

0.5
Total local-currency sales

3.2


1.8


2.3
Translation

-

3.7

2.3
Total sales change

3.2 %

5.5 %

4.6 %



























Worldwide

Local-




Total
Sales Change Analysis

currency

Trans-

Sales
By Business Segment

Sales

lation

Change
Health Care

5.2 %

2.7 %

7.9 %
Industrial

2.6


2.9


5.5
Display and Graphics

0.6


1.4


2.0
Consumer and Office

(0.5 )

2.3


1.8
Safety, Security and








Protection Services

3.0


2.6


5.6
Electro and Communications

(1.4 )

2.4


1.0
Transportation

4.5


2.8


7.3












3M Company and Subsidiaries
BUSINESS SEGMENTS
(Dollars in millions)
(Unaudited)

Effective January 1, 2005, as part of the continuing effort to drive growth by aligning businesses around markets and customers, the Electronics Markets Materials Division and certain high temperature and display tapes (2004 sales of approximately $350 million) within the Industrial Business transferred to the Electro and Communications Business, and the converter markets product line (2004 sales of approximately $10 million) within the Transportation Business transferred to the Display and Graphics Business. Internal management reporting for these business segment transfers commenced January 1, 2005, with segment information for all periods presented adjusted to reflect the new segment structure.




BUSINESS





SEGMENT

Three-months ended
INFORMATION

March 31
(Millions)

2005

2004






NET SALES





Health Care

$ 1,113


$ 1,031
Industrial


904



856
Display and Graphics


862



845
Consumer and Office


699



686
Safety, Security and Protection Services


557



527
Electro and Communications


557



551
Transportation


467



435
Corporate and Unallocated

7

8
Total Company

$ 5,166

$ 4,939






OPERATING INCOME





Health Care

$ 309


$ 262
Industrial


184



154
Display and Graphics


286



294
Consumer and Office


122



122
Safety, Security and Protection Services


133



125
Electro and Communications


103



77
Transportation


126



119
Corporate and Unallocated

(39 )

(36 )
Total Company

$ 1,224

$ 1,117






3M Company and Subsidiaries
SUPPLEMENTAL UNAUDITED BUSINESS SEGMENT INFORMATION
(Dollars in millions)
(Unaudited)

3M is also including supplemental unaudited business segment information on both an annual and quarterly basis for the years ended December 31, 2004, 2003 and 2002 reflecting adjusted historical information for the new segment structure. The company has begun reporting results under this new structure effective January 1, 2005.

Supplemental Unaudited Annual Business Segment Information Based on Structure Effective January 1, 2005:








Business Segment













Depr.

Capital
Information




Net

Operating




and

Expendi-
(Millions)




Sales

Income

Assets

Amort.

tures
Health Care

2004

$4,230

$1,123

$2,636

$179

$165



2003

3,995

1,027

2,544

169

144



2002

3,560

900

2,409

166

183
Industrial

2004

3,444

610

2,451

181

154



2003

3,070

425

2,390

185

139



2002

2,943

478

2,447

168

154
Display and Graphics

2004

3,416

1,133

2,647

178

261



2003

2,970

886

2,570

159

126



2002

2,237

535

2,476

135

84
Consumer and Office

2004

2,861

542

1,468

104

106



2003

2,607

460

1,378

108

86



2002

2,444

448

1,354

108

90
Safety, Security and

2004

2,125

491

1,317

101

99
Protection Services

2003

1,928

437

1,139

100

46



2002

1,686

338

1,097

97

105
Electro and

2004

2,224

342

1,801

163

95
Communications

2003

2,101

288

1,833

165

65



2002

2,034

262

1,871

158

81
Transportation

2004

1,674

426

887

63

56



2003

1,531

388

872

68

64



2002

1,380

331

846

66

58
Corporate and

2004

37

(89)

7,501

30

1
Unallocated

2003

30

(198)

4,874

10

7



2002

48

(246)

2,829

56

8
Total Company

2004

$20,011

$4,578

$20,708

$999

$937



2003

18,232

3,713

17,600

964

677



2002

16,332

3,046

15,329

954

763


















Segment assets for the seven operating business segments (excluding Corporate and Unallocated) primarily include accounts receivable; inventory; property, plant and equipment - net; goodwill and intangible assets; and other miscellaneous assets. Assets included in Corporate and Unallocated principally are cash and cash equivalents; insurance receivables; deferred income taxes; certain investments and other assets, including prepaid pension assets; and certain unallocated property, plant and equipment. Corporate and Unallocated assets increased approximately $2.6 billion in 2004, primarily due to increases in prepaid pension assets ($2.0 billion) and increases in cash and cash equivalents ($0.9 billion), with partial offsets in other asset accounts. Corporate and Unallocated assets increased approximately $2.0 billion in 2003 due to increases in cash and cash equivalents ($1.2 billion), increases in other current assets and other assets primarily related to higher insurance receivables and prepaid items ($500 million), and goodwill increases related to the 2003 acquisition of an additional 25% of Sumitomo 3M ($300 million). For management reporting purposes, corporate goodwill (which at December 31, 2004, totaled approximately $360 million), is not allocated to the seven operating business segments. Corporate goodwill has been allocated to the respective market segments as required by SFAS No. 142 for impairment testing.

Corporate and Unallocated operating income principally includes corporate investment gains and losses, certain derivative gains and losses, insurance-related gains and losses, certain litigation expenses, corporate restructuring program charges and other miscellaneous items. Because this category includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis. In 2004, Corporate and Unallocated operating income includes increases of $40 million in the respirator mask/asbestos litigation reserves, partially offset by a $20 million increase in the associated receivables resulting in a net cost of $20 million, and also includes a $6 million increase in implant litigation reserves and a $10 million decrease in implant receivables resulting in a net cost of $16 million. In 2003, this includes a pre-tax charge of $93 million recorded during the first quarter related to an adverse ruling associated with a lawsuit filed against 3M in 1997 by LePage's Inc. Corporate and unallocated operating income in 2003 also includes increases of $231 million in the respirator mask/asbestos litigation reserves, partially offset by a $205 million increase in the associated receivables, resulting in a net cost of $26 million. In 2002, Corporate and Unallocated operating income includes charges of $202 million related to the 2001/2002 corporate restructuring program. Depreciation and amortization of $954 million included accelerated depreciation (shortened lives) of $47 million related to the restructuring plan (recorded in Corporate and Unallocated).

Supplemental Unaudited Quarterly Business Segment Information Based on Structure Effective January 1, 2005:









NET SALES




First

Second

Third

Fourth


Total
(Millions)




Quarter

Quarter

Quarter

Quarter


Year
Health Care

2004

$ 1,031

$ 1,049

$ 1,035

$

1,115



$

4,230



2003


946


1,017


1,012


1,020


3,995



2002


845


896


901


918


3,560
Industrial

2004


856


867


852


869


3,444



2003


756


764


759


791


3,070



2002


707


750


743


743


2,943
Display and Graphics

2004


845


884


843


844


3,416



2003


663


721


774


812


2,970



2002


507


585


574


571


2,237
Consumer and Office

2004


686


675


737


763


2,861



2003


612


637


673


685


2,607



2002


569


602


628


645


2,444
Safety, Security and

2004


527


547


525


526


2,125
Protection Services

2003


458


518


482


470


1,928



2002


413


445


423


405


1,686
Electro and

2004


551


572


557


544


2,224
Communications

2003


500


532


524


545


2,101



2002


490


532


513


499


2,034
Transportation

2004


435


409


409


421


1,674



2003


379


381


384


387


1,531



2002


347


337


350


346


1,380
Corporate and

2004

8

9


11

9


37
Unallocated

2003

4


10

8

8


30



2002


12


14


11


11


48
Total Company

2004

$ 4,939

$ 5,012

$ 4,969

$

5,091



$

20,011




2003


4,318


4,580


4,616


4,718




18,232




2002


3,890


4,161


4,143


4,138




16,332
























Supplemental Unaudited Quarterly Business Segment Information Based on Structure Effective January 1, 2005:








OPERATING INCOME




First

Second

Third

Fourth

Total
(Millions)




Quarter

Quarter

Quarter

Quarter

Year
Health Care

2004

$ 262

$ 274

$ 277

$ 310

$ 1,123



2003


238


263


272


254


1,027



2002


220


213


224


243


900
Industrial

2004


154


158


157


141


610



2003


122


96


106


101


425



2002


112


129


126


111


478
Display and Graphics

2004


294


312


287


240


1,133



2003


182


210


251


243


886



2002


118


147


141


129


535
Consumer and Office

2004


122


123


150


147


542



2003


110


108


128


114


460



2002


105


108


121


114


448
Safety, Security and

2004


125


136


123


107


491
Protection Services

2003


105


131


111


90


437



2002


86


92


89


71


338
Electro and

2004


77


89


92


84


342
Communications

2003


58


77


75


78


288



2002


51


82


70


59


262
Transportation

2004


119


105


104


98


426



2003


100


94


106


88


388



2002


85


79


87


80


331
Corporate and

2004


(36)


(11)


(7)


(35)


(89)
Unallocated

2003


(134)


(19)


(19)


(26)


(198)



2002


(64)


(164)


(7)


(11)


(246)
Total Company

2004

$ 1,117

$ 1,186

$ 1,183 $


1,092

$ 4,578



2003


781


960


1,030


942


3,713



2002


713


686


851


796


3,046























3M Company and Subsidiaries
SUPPLEMENTAL UNAUDITED GEOGRAPHIC AREA INFORMATION
(Dollars in millions)
(Unaudited)

Effective January 1, 2005, the company realigned its reporting for the African Region, which previously was included in the Latin America/Canada Region, to the Europe and Middle East Region. 3M is including below supplemental unaudited segment information on an annual basis for the years ended December 31, 2004, 2003 and 2002 reflecting adjusted historical information for its new geographic area structure. Reporting for this new geographic area structure commenced January 1, 2005. Geographic area information, which the company uses as a secondary performance measure to manage its businesses, follows. Export sales and certain income and expense items are reported within the geographic area where the final sales to 3M customers are made.

Supplemental Unaudited Annual Geographic Area Information Based on Structure Effective January 1, 2005:







Geographic Area Information


Europe,

















Middle




Latin














East




America

Other








United

and

Asia

and

Unallo-

Total
(Millions)




States

Africa

Pacific

Canada

cated

Company
Net sales to

2004

$ 7,878

$ 5,183

$ 5,168

$ 1,731

$ 51

$ 20,011
customers

2003


7,581


4,718


4,335


1,556


42


18,232



2002


7,426


4,111


3,431


1,316


48


16,332
Operating




















income

2004

$ 1,200

$ 1,014

$ 1,874

$ 483

$ 7

$ 4,578



2003


1,213


809


1,373


427


(109)


3,713



2002


1,180


704


1,009


370


(217)


3,046
Property,




















plant and

2004

$ 3,290

$ 1,288

$ 810

$ 323

$ -

$ 5,711
equipment -




















net

2003


3,342


1,235


724


308

-


5,609



2002


3,523


1,139


676


283

-


5,621


























In 2003, operating income for other unallocated includes pre-tax charges of $93 million related to an adverse ruling in a lawsuit filed against 3M in 1997 by LePage's Inc. In 2002, operating income for other unallocated includes losses totaling $202 million related to the 2001/2002 corporate restructuring program.

Contact:

3M, St. Paul
Investor Contacts:
Mark Colin, 651-733-8206
or
Bruce Jermeland, 651-733-1807
or
Media Contact:
Jacqueline Berry, 651-733-3611

Multimedia Files:

Categories: Press Releases