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3M Reports Record Third-Quarter Sales and Earnings per Share

Friday, October 20, 2006

Company Continues Multi-Quarter Trend of Broad-Based Revenue Growth

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

Third-quarter worldwide sales were a record $5.9 billion, up 8.8 percent compared to the third quarter of 2005. Total local-currency sales increased 7.3 percent, including 1.7 percent from acquisitions. Each business contributed positively to the growth, with local-currency sales increasing 17.1 percent in Safety, Security and Protection Services, 8.2 percent in Display and Graphics, 6.9 percent in Industrial and Transportation, 6 percent in Health Care, 5.8 percent in Consumer and Office and 3.4 percent in Electro and Communications.

Third-quarter net income was $894 million, or $1.18 per share, including net gains of $0.01 per share due to a net benefit from certain income tax adjustments, partially offset by costs related to the company’s current efforts to seek strategic alternatives for its branded pharmaceuticals business. In the third quarter of 2005, net income was $840 million, or $1.08 per share. Included in these results are stock options related costs of $0.04 per share in the third quarter of 2006 and $0.02 per share in the third quarter of 2005(a).

“This was a strong performance by the 3M team with broad sales growth across our portfolio,” said George W. Buckley, 3M chairman of the board, president and CEO. “All six of our businesses posted positive local currency growth for the fifth consecutive quarter, led by Safety, Security and Protection Services at over 17 percent growth. In addition, we continued to drive growth via leveraging our world-class geographic infrastructure.”

Local-currency growth was 9.5 percent in Asia Pacific, 8.4 percent in Europe, 6.3 percent in Latin America and 6.2 percent in the United States. Worldwide sales in dollars increased 8.8 percent, reaching an all-time quarterly high, and earnings per share improved 9.3 percent versus last year’s third quarter.

Buckley also commented on 3M’s LCD films business, which is part of the Display and Graphics segment. “As anticipated, LCD industry inventories have returned to more normal levels and our growth in this business accelerated in the third quarter as consumers purchased more LCD televisions. In addition, we saw continued manufacturing process improvement in this business as the quarter progressed and the new production line is now behaving in line with our expectations.”

Buckley continued, “Looking ahead, we will continue to follow our agenda for accelerating innovation and growth via investments in R&D, sales and marketing, growth-oriented capital investment and selected acquisitions. These investments will be funded over time by productivity improvement efforts, such as global strategic sourcing and lean six sigma, to relentlessly drive out cost, simplify our supply chains and improve customer service.”

For the fourth quarter of 2006, the company expects organic local-currency sales growth of 4 to 8 percent. Acquisitions are expected to add approximately 1.5 percent to fourth-quarter sales growth. The company expects fourth-quarter earnings per share will be in the range of $1.10 to $1.16, excluding an estimated $0.12 to $0.13 per share of one-time acquisition costs related to the purchase of Brontes Technologies Inc.(b). Also included in estimated fourth quarter earnings is $0.04 per share cost from stock options expensing. In the fourth quarter of 2005, before a cumulative effect of accounting change, 3M earned $1.01 per share, including $0.02 per share from stock options expensing.

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 Jan. 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 Jan. 1, 1995.

(b) On Oct. 17, 2006, the company announced its intent to acquire Brontes Technologies Inc., a Lexington, Mass.-based developer of proprietary 3-D imaging technology for $95 million in cash. The transaction will result in an estimated fourth-quarter 2006 charge in the range of $0.12 to $0.13 per share, reflecting the one-time write-off of in-process research and development costs. Financial accounting standards require companies to expense such costs upon acquisition.

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,” “will,” 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 significant developments that could occur in the legal and regulatory proceedings described in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2005 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006 (the “Reports”). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports under Part I, Item 1A (Annual Report) and Part II, Item 1A (Quarterly Report), “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 news 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

Nine-months ended




Sept. 30

Sept. 30




 

2006


 

2005



 

2006


 

2005

Net sales

 

$

 

5,858


 

$

 

5,382



 

$

 

17,141


 

$

 

15,842

Operating expenses









Cost of sales


2,990


2,635



8,551


7,786

 

Selling, general and administrative expenses




1,186


1,166



3,691


3,440

 

Research, development and related expenses



340
314

1,013
952
Total

4,516
4,115

13,255
12,178
Operating income

1,342
1,267

3,886
3,664
Interest expense and income









Interest expense


37


20



84


59
Interest income

 

(13

 

)


 

(13

 

)



 

(35

 

)


 

(45

 

)

Total

24
7

49
14

 

Income before income taxes and minority interest




1,318


1,260



3,837


3,650











Provision for income taxes


412


407



1,127


1,245
Minority interest

12
13

35
40
Net income

$ 894
$ 840

$ 2,675
$ 2,365











 

Weighted average common shares outstanding - basic




745.2


762.2



751.6


767.3
Earnings per share - basic

$ 1.20
$ 1.10

$ 3.56
$ 3.08

 

Weighted average common shares outstanding - diluted




756.2


777.1



765.1


784.5
Earnings per share - diluted

$ 1.18
$ 1.08

$ 3.50
$ 3.01

 

Cash dividends paid per common share



$ 0.46
$ 0.42

$ 1.38
$ 1.26











3M Company and Subsidiaries
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION
(Millions, except per-share amounts)
(Unaudited)










Three-months ended

Three-months ended



Sept. 30, 2006

Sept. 30, 2005



Excluding





Excluding






special
Special
Reported

special
Special
Reported



items (c)
items (c)
total

items (c)
items (c)
total
Net sales

$ 5,858
$ -
$ 5,858

$ 5,382
$ -
$ 5,382
Operating expenses













Cost of sales


2,990


-


2,990



2,635


-

2,635
Selling, general and administrative expenses


 

1,173




 

13




 

1,186





 

1,166




 

-



 

1,166


Research, development and related expenses

 

340


 

-


 

340



 

314


 

-


 

314

Total

4,503
13
4,516

4,115
-
4,115
Operating income (loss)


1,355


 

(13

 

)



1,342



1,267


-

1,267














Interest expense and (income), net

24
-
24

7
-
7

 

Income (loss) before income taxes and minority interest




1,331


 

(13

 

)



1,318



1,260


-

1,260














Provision (benefit) for income taxes


 

435




 

(23

 

)



 

412





 

407




 

-



 

407


Effective tax rate


 

32.7

%

-


 

31.3

 

%




 

32.3

 

%



-

 

32.3

 

%















Minority interest

12
-
12

13
-
13
Net income (loss)

$ 884
$ 10
$ 894

$ 840
$ -
$ 840
Weighted average diluted shares

 

756.2


 

756.2


 

756.2



 

777.1


 

777.1


 

777.1

 

Net income per diluted share



$ 1.17
$

 

0.01


 

$1.18



$ 1.08
$ -
$ 1.08














(c) 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 third quarter of 2006, net income included net gains of $10 million due to a net benefit from certain income tax adjustments, partially offset by costs related to the company's current efforts to seek strategic alternatives for its branded pharmaceuticals business.

3M Company and Subsidiaries
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION
(Millions, except per-share amounts)
(Unaudited)










Nine-months ended

Nine-months ended



Sept. 30, 2006

Sept. 30, 2005



Excluding





Excluding






special
Special
Reported

special
Special
Reported



items (d)
items (d)
total

items (d)
items (d)
total
Net sales

$ 17,141
$ -
$ 17,141

$ 15,842
$ -
$ 15,842
Operating expenses












Cost of sales


8,551


-


8,551



7,786


-


7,786

 

Selling, general and adminis-trative expenses




 

3,629




62


3,691



3,440


-


3,440

 

Research, development and related expenses



1,013
-
1,013

952
-
952
Total

13,193
62
13,255

12,178
-
12,178
Operating income (loss)


3,948


 

(62

 

)



3,886



3,664


-


3,664














Interest expense and (income), net

49
-
49

14
-
14

 

Income (loss) before income taxes and minority interest




3,899


 

(62

 

)



3,837



3,650


-


3,650














 

Provision (benefit) for income taxes




1,273


 

(146

 

)



1,127



1,170


75


1,245
Effective tax rate


 

32.7

 

%



-


 

29.4

 

%




 

32.0

 

%



-


 

34.1

 

%















Minority interest

35
-
35

40
-
40
Net income (loss)

$ 2,591
$ 84
$ 2,675

$ 2,440

 

$

 

(75

 

)


$ 2,365

 

Weighted average diluted shares




765.1


765.1


765.1



784.5


784.5


784.5

 

Net income per diluted share



$ 3.39
$ 0.11
$ 3.50

$ 3.11

 

$

 

(0.10

 

)


$ 3.01


























(d) 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 2006, net income included net gains of $74 million due to a net benefit from certain income tax adjustments, partially offset by settlement costs of a previously disclosed class action and costs related to the company's current efforts to seek strategic alternatives for its branded pharmaceuticals business. Refer to 3M's Form 10-Q for the quarterly period ended June 30, 2006 for further discussion of these items. Reference the preceding Note (c) for discussion of the net gains of $10 million included in net income that impacted the third quarter of 2006.

In the second quarter of 2005, the company announced its intent to reinvest $1.7 billion of foreign earnings in the United States pursuant to the American Jobs Creation Act of 2004. As a consequence, in the second quarter of 2005, 3M recorded a charge of $75 million after-tax.

CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)







Sept. 30,
Dec. 31,
Sept. 30,
ASSETS

2006
2005
2005
Current assets






Cash and cash equivalents

$ 999
$ 1,072
$ 1,848
Marketable securities - current


130

--

25
Accounts receivable - net


3,332

2,838

3,061
Inventories


2,632

2,162

2,098
Other current assets

1,216
1,043
1,135
Total current assets


8,309

7,115

8,167
Marketable securities - noncurrent


112

--

--
Investments


287

272

275
Property, plant and equipment - net


5,782

5,593

5,604
Prepaid pension and postretirement benefits


2,959

2,905

2,775
Goodwill, intangible assets and other assets

5,234
4,656
4,560
Total assets

$ 22,683
$ 20,541
$ 21,381
LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities






 

Short-term borrowings and current portion of long-term debt



$ 2,570
$ 1,072
$ 2,582
Accounts payable


1,373

1,256

1,249
Accrued payroll


535

469

520
Accrued income taxes


848

989

1,008
Other current liabilities

1,537
1,452
1,520
Total current liabilities


6,863

5,238

6,879
Long-term debt


1,230

1,309

688
Other liabilities

3,607
3,599
3,271
Total liabilities

11,700
10,146
10,838
Total stockholders' equity - net


10,983

10,395

10,543
Shares outstanding






Sept. 30, 2006: 736,366,111 shares






Dec. 31, 2005: 754,538,387 shares






Sept. 30, 2005: 759,932,466 shares



Total liabilities and stockholders' equity

$ 22,683
$ 20,541
$ 21,381










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





Nine-months ended



Sept. 30



2006 2005
SUMMARY OF CASH FLOWS:











NET CASH PROVIDED BY





OPERATING ACTIVITIES

$ 2,517

$ 3,038
Cash flows from investing activities:





 

Purchases of property, plant and equipment




 

(763

 

)




 

(660

 

)

Acquisitions, net of cash acquired


 

(468

 

)




 

(1,264

 

)

Other investing activities

 

(198

 

)



 

(40

 

)

NET CASH USED IN





INVESTING ACTIVITIES

 

(1,429

 

)



 

(1,964

 

)

Cash flows from financing activities:





Change in debt


1,419



408
Purchases of treasury stock


 

(2,021

 

)




 

(1,809

 

)

Reissuances of treasury stock


426



467
Dividends paid to stockholders


 

(1,037

 

)




 

(968

 

)

Other financing activities

 

(25

 

)



32
NET CASH USED IN





FINANCING ACTIVITIES

 

(1,238

 

)



 

(1,870

 

)

 

Effect of exchange rate changes on cash



77

 

(113

 

)

 

Net increase (decrease) in cash and cash equivalents




 

(73

 

)




 

(909

 

)

 

Cash and cash equivalents at beginning of period



1,072

2,757

 

Cash and cash equivalents at end of period



$ 999

$ 1,848






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

Nine-months ended


Sept. 30


 

2006

2005
NON-GAAP MEASURES



 





 

Free Cash Flow:





 

Net cash provided by operating activities


$ 2,517

$ 3,038
Purchases of property, plant and equipment






 

(763

 

)



 

(660

 

)

Free Cash Flow (e)
$ 1,754

$ 2,378




OTHER NON-GAAP MEASURES:



Net Working Capital Turns (f)

5.1


5.5








(e) 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.

(f) 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 Sept. 30, 2006
Sales Change Analysis By Geographic Area United Inter-


States
national
Worldwide
Volume - organic

 

3.4

 

%


 

8.6

 

%


 

6.5

 

%







Volume - acquisitions
1.8
1.7
1.7
Volume - total
5.2

10.3

8.2






Price
1.0

 

(2.2

 

)


 

(0.9

 

)

Total local-currency sales
6.2

8.1

7.3






Translation
-
2.5
1.5
Total sales change

 

6.2

 

%


 

10.6

 

%


 

8.8

 

%













Worldwide Sales Change Analysis By Business Segment
Local-


Total


currency
Trans-
Sales


Sales
lation
Change
Industrial and Transportation

 

6.9

 

%


 

1.8

 

%


 

8.7

 

%







Health Care
6.0

1.9

7.9






Display and Graphics
8.2

0.7

8.9






Consumer and Office
5.8

1.2

7.0






Electro and Communications
3.4

1.7

5.1






Safety, Security and Protection





Services
17.1
2.1
19.2
Total sales change

 

7.3

 

%


 

1.5

 

%


 

8.8

 

%







Note: Industrial and Transportation includes a 2.4 percent benefit from acquisitions, primarily CUNO. Safety, Security and Protection Services includes a 6.0 percent benefit from acquisitions, primarily Security Printing and Systems Limited.

3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)
Nine-months ended Sept. 30, 2006
Sales Change Analysis By Geographic Area United Inter-


States
national
Worldwide
Volume - organic

 

3.9%


 

8.2%


 

6.5%







Volume - acquisitions
2.9
1.8
2.2
Volume - total
6.8
10.0
8.7






Price
1.6

 

(1.7)


 

(0.4)

Total local-currency sales
8.4
8.3
8.3






Translation
--

 

(0.2)


 

(0.1)

Total sales change

 

8.4%


 

8.1%


 

8.2%













Worldwide Sales Change Analysis By Business Segment
Local-


Total


currency
Trans-
Sales


Sales
lation
Change
Industrial and Transportation

 

10.6%


 

0.0%


 

10.6%







Health Care
5.0

 

(0.3)


4.7






Display and Graphics
8.1

 

(0.1)


8.0






Consumer and Office
6.3
0.2
6.5






Electro and Communications
6.6
0.0
6.6






Safety, Security and Protection





Services
13.5
0.2
13.7
Total sales change

 

8.3%


 

(0.1)%


 

8.2%







Note: Industrial and Transportation includes a 5.9 percent benefit from acquisitions, primarily CUNO. Safety, Security and Protection Services includes a 2.0 percent benefit from acquisitions, primarily Security Printing and Systems Limited.

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

SEGMENT

Three-months ended

Nine-months ended
INFORMATION

Sept. 30

Sept. 30
(Millions)

2006 2005

2006 2005
NET SALES









Industrial and Transportation

$ 1,679

$ 1,544


$ 5,071

$ 4,586
Health Care


998


926



2,964


2,831
Display and Graphics


992


910



2,819


2,610
Consumer and Office


867


810



2,414


2,268
Electro and Communications


628


597



1,864


1,748
Safety, Security and Protection Services


682


573



1,966


1,729
Corporate and Unallocated

12
22

43
70
Total Company

$ 5,858
$ 5,382

$ 17,141
$ 15,842










OPERATING INCOME









Industrial and Transportation

$ 340

$ 293


$ 1,042

$ 913
Health Care


287


273



846


829
Display and Graphics


300


314



837


876
Consumer and Office


181


169



438


419
Electro and Communications


124


124



374


334
Safety, Security and Protection Services


148


137



457


410
Corporate and Unallocated

 

(38

 

)


 

(43

 

)



 

(108

 

)


 

(117

 

)

Total Company

$ 1,342
$ 1,267

$ 3,886
$ 3,664


















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

Three months ended



Sept. 30



2006 2005 Difference
Cost of sales

$ 10

$ 3

$ 7
% to Sales

 

0.2

 

%


 

0.1

 

%


 

0.1

 

%

 

Selling, general and administrative expenses



$ 25

$ 15

$ 10
% to Sales

 

0.4

 

%


 

0.2

 

%


 

0.2

 

%

 

Research, development and related expenses



$ 9

$ 5

$ 4
% to Sales

 

0.2

 

%


 

0.1

 

%


 

0.1

 

%








Operating Income

$ 44

$ 23

$ 21
% to Sales


 

0.8

 

%



 

0.4

 

%



 

0.4

 

%








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

Nine months ended



Sept. 30



2006 2005 Difference
Cost of sales

$ 33

$ 23

$ 10
% to Sales

 

0.1

 

%


 

0.1

 

%


--

 

Selling, general and administrative expenses



$ 98

$ 83

$ 15
% to Sales

 

0.6

 

%


 

0.5

 

%


 

0.1

 

%

 

Research, development and related expenses



$ 31

$ 27

$ 4
% to Sales

 

0.2

 

%


 

0.2

 

%


--







Operating Income

$ 162

$ 133

$ 29
% to Sales

 

0.9

 

%


 

0.8

 

%


 

0.1

 

%














Business Segment Stock Option Expense
(Dollars in millions)
(Unaudited)

Three-months ended Sept. 30



 

2006

% to Sales

 

2005

% to Sales
Industrial and Transportation

$ 10

 

0.6

 

%



$ 7

 

0.5

 

%

Health Care


8

 

0.8

 

%




5

 

0.5

 

%

Display and Graphics


6

 

0.5

 

%




3

 

0.3

 

%

Consumer and Office


5

 

0.6

 

%




3

 

0.4

 

%

Electro and Communications


4

 

0.6

 

%




2

 

0.4

 

%

Safety, Security and Protection Services


3

 

0.6

 

%




3

 

0.4

 

%

Corporate


8
--



--
--
Total Company

$ 44

 

0.8

 

%



$ 23

 

0.4

 

%

















 



 

Business Segment Stock Option Expense

 



 

(Dollars in millions)

 



 

(Unaudited)







 

Nine months ended September 30




 

2006

% to Sales

 

2005

% to Sales
Industrial & Transportation

$ 40

 

0.8

 

%



$ 40

 

0.9

 

%

Health Care


34

 

1.1

 

%




30

 

1.1

 

%

Display and Graphics


22

 

0.8

 

%




17

 

0.6

 

%

Consumer and Office


19

 

0.8

 

%




18

 

0.8

 

%

Electro and Communications


16

 

0.9

 

%




14

 

0.8

 

%

Safety, Security and Protection Services


16

 

0.8

 

%




14

 

0.8

 

%

Corporate


15

--



--

--
Total Company

$ 162

 

0.9

 

%



$ 133

 

0.8

 

%

















Quarterly Diluted Earnings 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 (g)

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











2006 - Reported

Q1
Q2
Q3
Q4
Total
Diluted EPS/Guidance

$ 1.17

$ 1.15

$ 1.18

$0.97 to
$4.47 to









$ 1.04

$ 4.54

 

Estimated SFAS 123R impact included in EPS/guidance



 

$

 

(0.02

 

)


 

$

 

(0.07

 

)


 

$

 

(0.04

 

)


 

$

 

(0.04

 

)


 

$

 

(0.17

 

)












2006 - Excluding










Special Items (g)

Q1
Q2
Q3
Q4
Total
Diluted EPS/Guidance

$ 1.17

$ 1.05

$ 1.17

$1.10 to
$4.49 to









$ 1.16

$ 4.55

 

Estimated SFAS 123R impact included in EPS/guidance



 

$

 

(0.02

 

)


 

$

 

(0.07

 

)


 

$

 

(0.04

 

)


 

$

 

(0.04

 

)


 

$

 

(0.17

 

)






















(g) 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 Jan. 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. Refer to the preceding Note (b) for discussion of an acquisition that will impact fourth quarter 2006 results. The fourth quarter 2006 estimates exclude any potential costs related to efforts to seek strategic alternatives for the branded pharmaceuticals business and associated restructuring actions. Refer to the preceding Notes (c) and (d) for discussion of the special items that impacted the three months ended September 30, 2006, June 30, 2006 and June 30, 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 noncash 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
Investor Contacts:
Matt Ginter, 651-733-8206
or
Bruce Jermeland, 651-733-1807
or
Media Contact:
Jacqueline Berry, 651-733-3611

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