3M Reports Higher Second-Quarter Sales and Earnings

July 18, 2005

ST. PAUL, Minn.--(BUSINESS WIRE)--3M (NYSE:MMM) today announced its results for second quarter 2005.

The company reported net income of $776 million, or $1.00 per share in the second quarter, versus $773 million, or $0.97 per share in the second quarter of 2004. Excluding a previously announced non-recurring tax charge related to the domestic reinvestment provisions of the American Jobs Creation Act of 2004(a), 3M earned $851 million or $1.09 per share in the second quarter, a 12.4 percent increase in earnings per share over the comparable quarter.

"The 3M team delivered another solid quarter, characterized by broad-based sales growth and a continued commitment to operational efficiency," said Robert S. Morrison, 3M interim chairman and CEO. "3M has an outstanding leadership team, a time-tested business model and deep commitment to delivering on its objectives. I am excited about the opportunity to lead the company during this period of transition."

Worldwide sales in the second quarter totaled $5.3 billion, 5.6 percent higher than in the year-earlier quarter. Local currency sales increased 3.5 percent, with selling prices contributing 0.8 percent. Local-currency sales increased 7.0 percent in Safety, Security and Protection Services, 6.7 percent in Transportation, 6.7 percent in Consumer and Office, 4.1 percent in Industrial, 3.8 percent in Health Care, and 1.5 percent in Electro and Communications, but declined 2.5 percent in Display and Graphics.

"For the rest of the year, we expect top-line growth to continue to accelerate," said Patrick D. Campbell, senior vice president and CFO. "We anticipate that increased global demand for flat panel displays, particularly LCD televisions, will improve second-half sales of LCD enhancement films and fuel higher growth in our Display and Graphics business. We also expect solid second-half sales and earnings growth across the rest of our broad portfolio as our employees continue to leverage 3M's outstanding customer relationships, product and technology platforms, extensive geographic presence, and, as always, operational discipline."

3M also provided an update on the pending acquisition of CUNO Inc., a leader in the global liquid filtration and purification market, announced May 12, 2005. The companies have obtained all regulatory approvals and CUNO Inc. has scheduled a shareholder meeting Aug. 2 to vote on the acquisition. Pending shareholder approval, the acquisition is expected to close shortly thereafter.

For the year, the company now expects reported earnings to be within a range of $4.10 to $4.15 per share. Excluding non-recurring items(a), 3M expects earnings of $4.20 to $4.25 per share, raising the low end of a previous expectation of $4.15 to $4.25 per share. This expectation includes approximately $0.04 per share of earnings dilution from the CUNO acquisition. Third-quarter earnings are expected to be in the range of $1.06 to $1.08 per share, including $0.03 per share of CUNO-related earnings dilution. The company expects local currency growth of 4 to 7 percent in the third-quarter and full-year local currency growth of 4 to 6 percent, excluding acquisitions.

Patrick D. Campbell 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.

(a) 3M plans to reinvest approximately $1.7 billion of foreign earnings in the United States pursuant to the provisions of the American Jobs Creation Act of 2004. This act provides the company the opportunity to tax efficiently repatriate foreign earnings for U.S. qualifying investments specified in its domestic reinvestment plan. As a consequence, in the second quarter of 2005, 3M recorded a non-recurring charge of $75 million dollars, net of available foreign tax credits.

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) competitive conditions and customer preferences; (3) foreign currency exchange rates and fluctuations in those rates; (4) the timing and acceptance of new product offerings; (5) the availability and cost of purchased components and materials, including oil-derived compounds; (6) 3M's ability to successfully integrate and obtain the anticipated synergies from acquisitions and strategic alliances; (7) generating less operating income from its corporate initiatives than estimated; and (8) 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 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (the "Reports"). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports. 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 Six-months ended


June 30

June 30



2005 2004
2005 2004
Net sales
$5,294
$5,012
$10,460
$9,951
Operating expenses











Cost of sales
2,594

2,452

5,131

4,888
Selling, general and











administrative expenses
1,121

1,084

2,235

2,188
Research, development and











related expenses
296
290
587
572
Total
4,011
3,826
7,953
7,648
Operating income
1,283
1,186
2,507
2,303
Interest expense and income











Interest expense
19

16

39

35
Interest income
(16 )
(10 )
(32 )
(20 )
Total
3
6
7
15
Income before income taxes and











minority interest
1,280

1,180

2,500

2,288
Provision for income taxes
492

389

888

755
Minority interest
12
18
27
38
Net income
$776
$773
$1,585
$1,495
Weighted average common shares











outstanding - basic
768.0

782.5

769.8

782.7
Earnings per share - basic
$1.01
$0.99
$2.06
$1.91
Weighted average common shares











outstanding - diluted
780.2

799.7

783.6

799.6
Earnings per share - diluted
$1.00
$0.97
$2.02
$1.87
Cash dividends paid











per common share
$0.42
$0.36
$0.84
$0.72

3M Company and Subsidiaries

SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION

(Millions, except per-share amounts)

(Unaudited)

Three-months ended



June 30, 2005


Excluding





special
Special
Reported


items (a)
items (a)
total
Net sales
$5,294
$-
$5,294
Operating expenses








Cost of sales
2,594

-

2,594
Selling, general and








administrative expenses
1,121

-

1,121
Research, development and








related expenses
296
-
296
Total
4,011
-
4,011
Operating income (loss)
1,283

-

1,283
Interest expense and (income),








net
3
-
3
Income (loss) before income taxes








and minority interest
1,280

-

1,280
Provision (benefit) for income








taxes
417

75

492
Effective tax rate
32.5 %
-

38.4 %
Minority interest
12
-
12
Net income (loss)
$851
$(75 )
$776
Weighted average diluted shares
780.2

780.2

780.2
Net income per diluted share
$1.09
$(0.09 )
$1.00


Six-months ended


June 30, 2005


Excluding







special
Special
Reported


items (a)
items (a)
total
Net sales
$10,460
$-
$10,460
Operating expenses








Cost of sales
5,131

-

5,131
Selling, general and








administrative expenses
2,235

-

2,235
Research, development and








related expenses
587
-
587
Total
7,953
-
7,953
Operating income (loss)
2,507

-

2,507
Interest expense and (income),








net
7
-
7
Income (loss) before income taxes








and minority interest
2,500

-

2,500
Provision (benefit) for income








taxes
813

75

888
Effective tax rate
32.5 %
-

35.5 %
Minority interest
27
-
27
Net income (loss)
$1,660
$(75 )
$1,585
Weighted average diluted shares
783.6

783.6

783.6
Net income per diluted share
$2.12
$(0.10 )
$2.02









(a) In addition to disclosing results that are determined in
accordance with U.S. generally accepted accounting principles
(GAAP), the company also discloses non-GAAP results that exclude
special items. Special items represent significant charges or
credits that are important to an understanding of the company's
ongoing operations. The company provides reconciliations of its
non-GAAP financial reporting to the most comparable GAAP
reporting. The company believes that discussion of results
excluding special items provides a useful analysis of ongoing
operating trends. Earnings per share and other amounts before
special items are not measures recognized under GAAP. The
determination of special items may not be comparable to similarly
titled measures used by other companies. In the second quarter of
2005, 3M recorded a charge of $75 million, net of available
foreign tax credits, related to its plans to reinvest
approximately $1.7 billion of foreign earnings in the United
States pursuant to the provisions of the American Jobs Creation
Act of 2004. No special items were recorded in 2004.
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)

Jun. 30, Jun. 30, Dec. 31,
ASSETS
2005
2004
2004
Current assets








Cash and cash equivalents
$1,765

$2,314

$2,757
Accounts receivable - net
2,951

2,913

2,792
Inventories
2,020

1,940

1,897
Other current assets
1,212
1,460
1,274
Total current assets
7,948

8,627

8,720
Investments
274

211

227
Property, plant and equipment - net
5,516

5,456

5,711
Goodwill, intangible assets and other








assets
5,819
4,068
6,050
Total assets
$19,557
$18,362
$20,708
LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities








Short-term borrowings and current portion








of long-term debt
$1,103

$1,358

$2,094
Accounts payable
1,201

1,108

1,168
Accrued payroll
475

487

487
Accrued income taxes
1,187

1,094

867
Other current liabilities
1,340
1,547
1,455
Total current liabilities
5,306

5,594

6,071
Long-term debt
706

1,303

727
Other liabilities
3,445
3,008
3,532
Total liabilities
9,457
9,905
10,330
Total stockholders' equity - net
10,100

8,457

10,378
Shares outstanding








June 30, 2005: 765,071,990 shares








June 30, 2004: 782,703,301 shares








December 31, 2004: 773,518,281








shares


Total liabilities and stockholders'








equity
$19,557
$18,362
$20,708
3M Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in millions)
(Unaudited)

Six-months ended


June 30



2005 2004
SUMMARY OF CASH FLOW:





NET CASH PROVIDED BY OPERATING ACTIVITIES
$2,171
$2,237
Cash flows from investing activities:





Purchases of property, plant and equipment
(452 )
(378 )
Acquisitions, net of cash acquired
-

(86 )
Other investing activities
(31 )
29
NET CASH USED IN INVESTING ACTIVITIES
(483 )
(435 )
Cash flows from financing activities:





Change in debt
(991 )
(286 )
Purchases of treasury stock
(1,185 )
(792 )
Reissuances of treasury stock
287

352
Dividends paid to stockholders
(647 )
(564 )
Other financing activities
(36 )
(23 )
NET CASH USED IN FINANCING ACTIVITIES
(2,572 )
(1,313 )
Effect of exchange rate changes on cash
(108 )
(11 )
Net increase (decrease) in cash and cash





equivalents
(992 )
478
Cash and cash equivalents at beginning of period
2,757
1,836
Cash and cash equivalents at end of period
$1,765
$2,314
3M Company and Subsidiaries
SUPPLEMENTAL CASH FLOW AND
OTHER SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in millions)
(Unaudited)

Six-months ended


June 30



2005 2004
NON-GAAP MEASURES





Free Cash Flow:





Net cash provided by operating activities
$2,171

$2,237
Purchases of property, plant and equipment
(452 )
(378 )
Free Cash Flow (a)
$1,719
$1,859
Net Working Capital Turns (b)
5.6
5.4






(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.







3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)
Three-Months Ended June 30, 2005
Sales Change Analysis
United
Inter-


By Geographic Area
States
national
Worldwide
Volume - core
2.4 %
2.9 %
2.7 %
Volume - acquisitions
0.1
0.0
0.0
Volume - total
2.5

2.9

2.7
Price
2.0
0.0
0.8
Total local-currency sales
4.5

2.9

3.5
Translation
-
3.4
2.1
Total sales change
4.5 %
6.3 %
5.6 %


Local-



Total
Sales Change Analysis
currency
Trans-
Sales
By Business Segment
Sales
lation
Change
Health Care
3.8 %
2.3 %
6.1 %
Industrial
4.1

2.9

7.0
Display and Graphics
(2.5 )
0.3

(2.2 )
Consumer and Office
6.7

2.3

9.0
Safety, Security and Protection








Services
7.0

2.6

9.6
Electro and Communications
1.5

2.3

3.8
Transportation
6.7

2.9

9.6
3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)

Six-Months Ended June 30, 2005

Sales Change Analysis United Inter-

By Geographic Area
States
national
Worldwide
Volume - core
1.8 %
2.3 %
2.0 %
Volume - acquisitions
0.3
0.1
0.2
Volume - total
2.1

2.4

2.2
Price
1.8
(0.1 )
0.7
Total local-currency sales
3.9

2.3

2.9
Translation
-
3.6
2.2
Total sales change
3.9 %
5.9 %
5.1 %


Local-



Total
Sales Change Analysis
currency
Trans-
Sales
By Business Segment
Sales
lation
Change
Health Care
4.5 %
2.5 %
7.0 %
Industrial
3.4

2.9

6.3
Display and Graphics
(0.9 )
0.8

(0.1 )
Consumer and Office
3.1

2.3

5.4
Safety, Security and Protection Services
5.1

2.6

7.7
Electro and Communications
-

2.4

2.4
Transportation
5.6

2.8

8.4
3M Company and Subsidiaries

BUSINESS SEGMENTS

(Dollars in millions)

(Unaudited)
BUSINESS







SEGMENT
Three-months ended
Six-months ended
INFORMATION

June 30


June 30

(Millions)
2005
2004
2005
2004
NET SALES











Health Care
$1,112

$1,049

$2,225

$2,080
Industrial
927

867

1,831

1,723
Display and Graphics
864

884

1,726

1,729
Consumer and Office
735

675

1,434

1,361
Safety, Security and Protection











Services
599

547

1,156

1,074
Electro and Communications
594

572

1,151

1,123
Transportation
447

409

914

844
Corporate and Unallocated
16
9
23
17
Total Company
$5,294
$5,012
$10,460
$9,951
OPERATING INCOME











Health Care
$310

$274

$619

$536
Industrial
189

158

373

312
Display and Graphics
277

312

563

606
Consumer and Office
140

123

262

245
Safety, Security and Protection











Services
151

136

284

261
Electro and Communications
118

89

221

166
Transportation
121

105

247

224
Corporate and Unallocated
(23 )
(11 )
(62 )
(47 )
Total Company
$1,283
$1,186
$2,507
$2,303

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

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