Search Site

news

3M Reports Record First-Quarter Sales and Earnings; Company Raises Growth and Earnings Estimates for 2006

Friday, April 21, 2006

ST. PAUL, Minn.--(BUSINESS WIRE)--3M (NYSE:MMM) today announced its sales and profit results for the first quarter 2006.

First-quarter net income was $899 million, or $1.17 per share, versus $771 million, or $0.97 per share, in the first quarter of 2005. Net income and earnings per share increased 16.6 percent and 20.6 percent, respectively. Included in these results are stock option related costs of $0.02 per share in the first quarter of 2006 and $0.06 per share in the first quarter of 2005(a).

"This was an outstanding quarter for 3M, characterized by broad-based growth from our entire portfolio and continued strong leverage to the bottom line. Quarterly sales reached an all-time high with local-currency growth of over 10 percent, and we delivered a double-digit net income increase while also investing for the future," said George W. Buckley, 3M chairman, president and CEO. "We are off to a very strong start in 2006 which gives me great confidence in the ability of our teams around the world to drive accelerated growth and achieve superior financial results."

First-quarter worldwide sales in U.S. dollars totaled $5.6 billion, up 8.3 percent compared to the first quarter of 2005. Total local-currency sales increased 10.4 percent, including 2.3 percent from acquisitions, primarily CUNO. Local-currency sales increased 15.6 percent in Safety, Security and Protection Services, 14.0 percent in Industrial and Transportation (including 7.5 percent due to CUNO), 10.6 percent in Electro and Communications, 9.5 percent in Display and Graphics, 8.4 percent in Consumer and Office, and 4.9 percent in Health Care.

"Looking ahead, we expect continued strong sales and earnings growth through the rest of 2006," said Buckley. "For the longer term, I see tremendous opportunity for the people of 3M to transform our many strengths - innovative technology and products, broad geographic presence and capability, and established positions in many fast growth end-markets - into even greater sustainable growth."

3M also provided revised 2006 sales growth and earnings estimates. The company raised its 2006 revenue growth guidance, and now expects full-year, organic local-currency growth of between 5.5 and 8 percent, up from a previous full-year organic local-currency growth expectation of 4 to 7 percent. The company expects an additional approximately 1.5 percent full-year local-currency growth from closed acquisitions. The company also increased its 2006 earnings estimate, and now expects earnings per share to be in the range of $4.55 to $4.65, up from previous full-year guidance of $4.45 to $4.60 per share. Both ranges include an estimated $0.16 per share cost from stock options.

For the second quarter of 2006, the company expects organic local-currency sales growth of 5 to 8 percent with an additional approximately 2.5 percent from closed acquisitions. Earnings per share are expected to be in the range of $1.14 to $1.17, including an estimated $0.08 per share cost from stock options expensing. In the second quarter of 2005, 3M earned $1.06 per share including a $0.04 per share cost from stock options expensing and excluding the one-time impact of the American Jobs Creation Act(b).

George W. Buckley, and 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.

(a) 3M adopted Statement of Financial Accounting Standards No. 123R effective January 1, 2006, using the modified retrospective method, with prior periods adjusted to give effect to the fair-value-based method of accounting for stock option awards granted in fiscal years beginning on or after January 1, 1995.

(b) During the quarter ended June 30, 2005, the company completed its evaluation of the repatriation provision of the American Jobs Creation Act of 2004 (Jobs Act) and recognized $75 million, net of available foreign tax credits, of related tax liability. The company reinvested approximately $1.8 billion of foreign earnings in the United States pursuant to the provisions of the Jobs Act in 2005.

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, compounds, raw materials and energy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply interruptions (including those caused by natural and other disasters and other events); (6) the impact of acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring; (7) generating less productivity improvements than estimated; and (8) legal proceedings, including the outcome of pending Congressional action concerning asbestos-related litigation and other significant developments that could occur in the legal and regulatory proceedings described in the company's Annual Report on Form 10K for the year-ended Dec. 31, 2005 (the "Report"). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Report under Part I, Item 1A "Risk Factors." 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 people of 3M 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




2006 2005
Net sales

$ 5,595

$ 5,166
Operating expenses





Cost of sales


2,721



2,549
Selling, general and





administrative expenses


1,183



1,145
Research, development and





related expenses

322

319
Total

4,226

4,013
Operating income

1,369

1,153
Interest expense and income





Interest expense


22



20
Interest income

(8 )

(16 )
Total

14

4
Income before income taxes and





minority interest


1,355



1,149
Provision for income taxes


443



363
Minority interest

13

15
Net income

$ 899

$ 771
Weighted average common shares





outstanding - basic


754.4



771.7
Earnings per share - basic

$ 1.19

$ 1.00
Weighted average common shares





outstanding - diluted


768.6



791.4
Earnings per share - diluted

$ 1.17

$ 0.97
Cash dividends paid





per common share

$ 0.46

$ 0.42








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

Mar. 31, Dec. 31, Mar. 31,
ASSETS

2006

2005

2005
Current assets








Cash and cash equivalents

$ 912

$ 1,072

$ 2,669
Accounts receivable - net


3,105


2,838


2,899
Inventories


2,379


2,162


1,980
Marketable securities


384


--


35
Other current assets

1,141

1,043

1,339
Total current assets


7,921


7,115


8,922
Investments


284


272


280
Property, plant and equipment - net


5,574


5,593


5,624
Prepaid pension and postretirement








benefits


2,859


2,951


2,551
Goodwill, intangible assets and other








assets (c)

4,975

4,877

3,672
Total assets

$ 21,613

$ 20,808

$ 21,049
LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities








Short-term borrowings and








current portion of long-term debt

$ 1,343

$ 1,072

$ 2,201
Accounts payable


1,342


1,256


1,201
Accrued payroll


492


469


492
Accrued income taxes


932


989


950
Other current liabilities

1,348

1,452

1,393
Total current liabilities


5,457


5,238


6,237
Long-term debt


1,291


1,309


707
Other liabilities

3,876

3,866

3,521
Total liabilities

10,624

10,413

10,465
Total stockholders' equity - net


10,989


10,395


10,584
Shares outstanding








March 31, 2006: 753,931,681 shares








December 31, 2005: 754,538,387 shares








March 31, 2005: 769,570,205 shares








Total liabilities and stockholders'








equity

$ 21,613

$ 20,808

$ 21,049












(c) The acquisition of CUNO in the third quarter of 2005 increased the "Goodwill, intangible assets and other assets" balance by $1.3 billion.

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

Three-months ended



March 31




2006 2005
SUMMARY OF CASH FLOWS:





NET CASH PROVIDED BY





OPERATING ACTIVITIES

$ 625

$ 971
Cash flows from investing activities:





Purchases of property, plant





and equipment


(190 )


(235 )
Acquisitions, net of cash acquired


(22 )


--
Other investing activities

(376 )

(67 )
NET CASH USED IN





INVESTING ACTIVITIES

(588 )

(302 )
Cash flows from financing activities:





Change in debt


269



107
Purchases of treasury stock


(251 )


(671 )
Reissuances of treasury stock


100



195
Dividends paid to stockholders


(347 )


(324 )
Other financing activities

(6 )

(25 )
NET CASH USED IN





FINANCING ACTIVITIES

(235 )

(718 )
Effect of exchange rate





changes on cash

38

(39 )
Net increase (decrease) in cash





and cash equivalents


(160 )


(88 )
Cash and cash equivalents at





beginning of period

1,072

2,757
Cash and cash equivalents at





end of period

$ 912

$ 2,669








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

Three-months ended



March 31




2006 2005
NON-GAAP MEASURES





Free Cash Flow:





Net cash provided by





operating activities

$ 625


$ 971
Purchases of property, plant





and equipment

(190 )

(235 )
Free Cash Flow (d)

$ 435

$ 736
OTHER NON-GAAP MEASURES:





Net Working Capital Turns (e)


5.4



5.6










(d) Free cash flow is not defined under U.S. generally accepted accounting principles (GAAP). Therefore, it 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.

(e) The company uses various working capital 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, 2006

Sales Change Analysis United Inter-
By Geographic Area

States
national
Worldwide
Volume - organic

5.3 %
9.8 %
8.1 %
Volume - acquisitions

3.4
1.7
2.3
Volume - total

8.7

11.5

10.4
Price

2.1
(1.2 )
--
Total local-currency sales

10.8

10.3

10.4
Translation

-
(3.5 )
(2.1 )
Total sales change

10.8 %
6.8 %
8.3 %
Worldwide

Local-


Total
Sales Change Analysis

currency
Trans-
Sales
By Business Segment

Sales
lation
Change
Industrial Transportation (f)

14.0 %
(2.4 )%
11.6 %
Health Care

4.9

(3.0 )
1.9
Display and Graphics

9.5

(1.4 )
8.1
Consumer and Office

8.4

(1.2 )
7.2
Electro and Communications

10.6

(2.2 )
8.4
Safety, Security and Protection






Services

15.6
(2.2 )
13.4
Total sales change

10.4 %
(2.1 )%

8.3

%








(f) Industrial Transportation includes a 7.5% benefit due to the CUNO acquisition.

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

SEGMENT

Three-months ended
INFORMATION

March 31
(Millions)

2006

2005
NET SALES





Industrial Transportation

$ 1,702


$ 1,524
Health Care


966



948
Display and Graphics


915



846
Consumer and Office


761



710
Electro and Communications


604



557
Safety, Security and Protection Services


631



557
Corporate and Unallocated

16

24
Total Company

$ 5,595

$ 5,166
OPERATING INCOME





Industrial Transportation

$ 381


$ 308
Health Care


298



272
Display and Graphics


296



285
Consumer and Office


136



114
Electro and Communications


127



95
Safety, Security and Protection Services


164



126
Corporate and Unallocated

(33 )

(47 )
Total Company

$ 1,369

$ 1,153








SFAS 123R Stock Option Expense Impact
(Dollars in millions, except per share amounts)
(Unaudited)

Three months ended



March 31



2006 2005 Difference
Cost of sales

$ 2


$ 12


$ 10
% to Sales

0.0 %

0.2 %

0.2 %
Selling, general and








administrative expenses

$ 19


$ 46


$ 27
% to Sales

0.3 %

0.9 %

0.6 %
Research, development and








related expenses

$ 4


$ 13


$ 9
% to Sales

0.1 %

0.3 %

0.2 %
Operating Income

$ 25


$ 71


$ 46
% to Sales

0.4 %

1.4 %

1.0 %
Earnings per share - diluted

$ 0.02

$ 0.06

$ 0.04












Business Segment Stock Option Expense

(Dollars in millions)

(Unaudited)

Three-months ended March 31




2006 % to Sales 2005 % to Sales
Industrial Transportation

$ 7

0.4 %

$ 20

1.3 %
Health Care

6

0.6 %


17

1.8 %
Display and Graphics

3

0.4 %


10

1.2 %
Consumer and Office

3

0.4 %


10

1.3 %
Electro and Communications

3

0.4 %

7

1.3 %
Safety, Security and











Protection Services

3

0.4 %

7

1.3 %
Total Company

$ 25

0.4 %

$ 71

1.4 %
















Quarterly DilutedEarnings Per Share Stock Option Expense
(Unaudited)
2004 Reported Q1 Q2 Q3 Q4 Total
















EPS as originally














reported

$ 0.90


$ 0.97


$ 0.97


$ 0.91


$ 3.75
SFAS 123R impact

$ (0.03 )

$ (0.04 )

$ (0.06 )

$ (0.06 )

$ (0.19 )
EPS with SFAS123R














impact

$ 0.87


$ 0.93


$ 0.91


$ 0.85


$ 3.56
2005 Reported

Q1

Q2

Q3

Q4

Total
















EPS as originally














reported

$ 1.03


$ 1.00


$ 1.10


$ 0.99


$ 4.12
SFAS 123R impact

$ (0.06 )

$ (0.04 )

$ (0.02 )

$ (0.02 )

$ (0.14 )
EPS with SFAS123R














impact

$ 0.97


$ 0.96


$ 1.08


$ 0.97


$ 3.98
2005 - Excluding














Special Items(h)

Q1

Q2

Q3

Q4

Total
















EPS as originally














reported

$ 1.03


$ 1.09


$ 1.10


$ 1.04


$ 4.26
SFAS 123R impact

$ (0.06 )

$ (0.04 )

$ (0.02 )

$ (0.02 )

$ (0.14 )
EPS with SFAS123R














impact

$ 0.97


$ 1.06


$ 1.08


$ 1.01


$ 4.12



Q1

Q2

Q3

Q4

Total
2006














Diluted














EPS/Guidance

$ 1.17 $1.



14-$1.17







$

4.55-$4.65


Estimated














SFAS123R impact

$ (0.02 )

$ (0.08 )

$ (0.03 )

$ (0.03 )

$ (0.16 )
included in














EPS/guidance





























(h) 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 (reconciliations for the second and fourth quarter of 2005 were provided in Form 8-K's filed on July 18, 2005 and January 24, 2006, respectively). 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. During the quarter ended June 30, 2005, the Company completed its evaluation of the repatriation provision of the American Jobs Creation Act of 2004 (Jobs Act) and recognized $75 million, net of available foreign tax credits, of related tax liability. The Company reinvested approximately $1.8 billion of foreign earnings in the United States pursuant to the provisions of the Jobs Act in 2005. In March 2005, the FASB issued Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations--an interpretation of FASB Statement No.143" ("FIN 47"). In adopting FIN 47 in the fourth quarter of 2005, 3M recorded a non-cash charge of $35 million after-tax, as a cumulative effect of change in accounting principle. This charge represents conditional retirement obligations associated with 3M's long-lived assets.

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

Please note that you are now entering a website directly or indirectly maintained by a third party (the "External Site") and that you do so at your own risk.

3M has no control over the External Site, any data or other content contained therein or any additional linked websites. The link to the External Site is provided for convenience purposes only.

By entering this site you acknowledge and agree that neither 3M nor the third party provider, Virtua Research, Inc. (“Virtua”), is responsible, or accepts or assumes any responsibility or liability whatsoever for, the content, the data or the technical operation of the External Site. Further, by entering the External Site, you also acknowledge and agree that you completely and irrevocably waive any and all rights and claims against 3M and Virtua and further acknowledge and agree that in no event shall 3M or Virtua, its officers, employees, directors and agents be liable for any (i) indirect, consequential, incidental, special, compensatory or punitive damages, (ii) damages for loss of income, loss of business profits, business interruption, loss of data or business information, loss of or damage to property, (iii) claims of third parties, or (iv) other pecuniary loss, arising out of or related to Legal, this disclaimer or the External Site.

By entering the External Site, you further acknowledge and agree that the disclaimer of warranties and limitations of liability set out in this disclaimer shall apply regardless of the causes, circumstances or form of action giving rise to the loss, damage, claim or liability, even if such loss, damage, claim or liability is based upon breach of contract (including, without limitation, a claim of fundamental breach or breach of a fundamental term), tort (including, without limitation, negligence), strict liability or any other legal or equitable theory, and even if 3M and Virtua are advised of the possibility of the loss, damage, claim or liability. The waiver and release specifically includes, without limitation, any and all rights and claims pertaining to the processing of personal data, including but not limited to any rights under any applicable data protection statute(s).

If in any jurisdiction, any part of this disclaimer is held to be unenforceable by a court of competent jurisdiction, such part of this disclaimer shall be restricted or eliminated to the minimum extent and the remaining disclaimer shall otherwise remain in full force and effect.

The reports of 3M contained on the External Site contain forward-looking information about 3M’s financial results and estimates and business prospect 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,” “will,” “target,” “forecast” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or business plans or prospects. Among the factors that could cause actual results to differ materially are factors described in 3M’s most recent Annual Report on Form 10-K under “Cautionary Note Concerning Factors That May Affect Future Results” in Part I, Item 1. Additional factors that could cause 3M’s results to differ materially from those described in the forward-looking statements can be found under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in 3M’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are filed with the SEC. 3M assumes no obligation to update any forward-looking statements contained in the reports contained on the External Site as a result of new information or future events or developments.

The reports contained on the External Site were, to the best of 3M’s knowledge, timely and accurate on the date they were issued. The passage of time can render information stale. You should not rely on the continued accuracy of any information beyond the date it was issued. 3M has no responsibility to update any information contained in any report on the External Site. You should note the date any report on the External Site was issued.