3M Delivers Record Second-Quarter Earnings; Sales Increase 10.1 Percent to $4.6 Billion, An All-Time High

3M (NYSE:MMM) today announced its sales and earnings results for second quarter 2003.

The company reported net income of $619 million, or $1.56 per share, versus $466 million, or $1.18 per share, in the second quarter of 2002. Excluding special items(a) in the second quarter of 2002, net income increased 14.8 percent from $539 million last year, and earnings per share increased 14.7 percent from $1.36 per share in last year's second quarter.

“Clearly, it is prudent to maintain a cautious outlook on global economic growth and to gear our plans accordingly”

"Our employees did a terrific job in the second quarter," said W. James McNerney, Jr., 3M chairman and CEO. "Sales reached an all-time high, and both net income and earnings per share were the highest of any second quarter in 3M's 100-year-plus history. Our corporate initiatives -- aimed at driving higher top-line growth, productivity and free cash flow -- are making a real difference in 2003."

Worldwide sales in the second quarter totaled $4.580 billion, 10.1 percent higher than in the year-earlier quarter. Sales volumes increased 5.6 percent, including a positive 1.8 percent impact from acquisitions. Volumes increased 21.9 percent in Display and Graphics (includes 9 percent from acquisitions), 11.0 percent in Safety, Security and Protection Services, 7.1 percent in Transportation, 5.6 percent in Health Care, 3.0 percent in Consumer and Office and 0.1 percent in Industrial. Volumes declined 6.8 percent in Electro and Communications. Currency effects increased worldwide sales by 4.6 percent while selling prices were down 0.1 percent.

Sales outside the United States totaled $2.655 billion, up 16.9 percent compared to the second quarter of 2002. Volumes increased 8.5 percent, while selling prices declined 0.1 percent. Changes in the value of the U.S. dollar increased international sales by 8.5 percent. Volumes increased almost 18 percent in Asia Pacific driven by a 7 percent increase in Japan and a 28 percent increase in the rest of the region. Volumes increased 9.7 percent in Latin America and 0.6 percent in Europe. In the United States, sales totaled $1.925 billion, up 1.9 percent from the same quarter of 2002. Volumes increased 2.1 percent, while selling prices declined 0.2 percent.

"Clearly, it is prudent to maintain a cautious outlook on global economic growth and to gear our plans accordingly," McNerney said. "At the same time, we remain confident in our ability to improve every aspect of our company. By driving higher and sustainable sales growth, extending productivity improvements and generating cash flow to fuel growth, 3M can continue to deliver high-quality results into the future."

3M also increased its earnings outlook for 2003. For the year, the company now expects reported earnings will be within a range of $5.75 to $5.90 per share. Excluding special items(a), 3M expects 2003 earnings to be between $5.90 and $6.05 per share. Third-quarter earnings are expected to be in the range of $1.56 to $1.60 per share.

Patrick D. Campbell, senior vice president and chief financial officer, will conduct an investor teleconference at 9 a.m. Eastern Time (8 a.m. Central) today. Investors can access a webcast of this conference, along with related charts and materials, at http://investor.3M.com.

(a) During the second quarter of 2002, under its previously announced restructuring plan, 3M incurred pretax charges of $148 million ($73 million after-tax) primarily related to employee separation costs and accelerated depreciation charges. The company incurred similar charges in the first quarter of 2002 that totaled $54 million pre-tax ($35 million after-tax). As previously announced by 3M on March 26, 2003, a court issued an adverse ruling associated with a lawsuit filed against 3M in 1997 by LePage's Inc. During the first quarter of 2003, 3M recorded pretax charges of $93 million ($58 million after-tax) related to this proceeding.

Forward-Looking Statements

This news release contains forward-looking statements that reflect current views and estimates of 3M's management of future economic circumstances, industry conditions, company performance and financial results. The statements are based on many assumptions and factors including: (1) worldwide economic conditions; (2) foreign currency exchange rates and fluctuations in those rates; (3) the timing and acceptance of new product offerings; (4) purchased components and materials, including shortages and increases in the costs of such components and materials; (5) 3M's ability to successfully manage acquisitions, divestitures and strategic alliances; and (6) legal proceedings. Any changes in such assumptions or factors could produce significantly different results.

About 3M

3M is a $16 billion diversified technology company with leading positions in consumer and office; display and graphics; electronics and telecommunications; health care; industrial; safety, security and protection services; transportation and other businesses. Headquartered in St. Paul, Minnesota, the company has operations in more than 60 countries and serves customers in nearly 200 countries. 3M is one of the 30 stocks that make up the Dow Jones Industrial Average and also is a component of the Standard & Poor's 500 Index. For more information about 3M, go to www.3M.com/profile/pressbox/index.jhtml.

3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)
 
 
    Second-Quarter 2003
 
    Worldwide   U.S.   Intl.
Volume - core   3.8 %   0.4 %   6.6 %
 
Volume - acquisitions            
and divestitures   1.8     1.7     1.9  
 
Price   (0.1 )   (0.2 )   (0.1 )
 
Translation   4.6     --     8.5  
Total   10.1 %   1.9 %   16.9 %
 
 
    Six-Months 2003
 
    Worldwide   U.S.   Intl.
Volume - core   3.6 %   0.0 %   6.7 %
 
Volume - acquisitions            
and divestitures   1.9     1.7     2.0  
 
Price   (0.1 )   (0.3 )   0.1  
 
Translation   5.1     --     9.4  
Total   10.5 %   1.4 %   18.2 %
                   
 
3M Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Amounts in millions, except per-share amounts)
(Unaudited)
 
 
    Three- months ended   Six-months ended
    June 30   June 30
                 
    2003   2002   2003   2002
                 
Net sales   $ 4,580     $ 4,161     $ 8,898     $ 8,051  
                 
Operating expenses                
Cost of sales     2,323       2,231       4,534       4,267  
Selling, general and                
administrative expenses     1,021       975       1,984       1,852  
Research, development and                
related expenses     276       269       546       533  
Other expense     --       --       93       --  
                 
Total     3,620       3,475       7,157       6,652  
                 
Operating income     960       686       1,741       1,399  
                 
Interest expense and income                
Interest expense     24       20       47       39  
Interest income     (5 )     (9 )     (11 )     (18 )
                 
Total     19       11       36       21  
                 
Income before income taxes                
and minority interest     941       675       1,705       1,378  
 
Provision for income taxes     310       210       558       437  
 
Minority interest     12       (1 )     26       23  
                 
Net income   $ 619     $ 466     $ 1,121     $ 918  
                 
Weighted average common                
shares outstanding - basic     390.9       390.0       390.5       390.0  
Earnings per share - basic   $ 1.58     $ 1.19     $ 2.87     $ 2.35  
                 
Weighted average common                
shares outstanding - diluted     396.2       396.1       395.7       395.7  
Earnings per share - diluted   $ 1.56     $ 1.18     $ 2.83     $ 2.32  
                 
Cash dividends paid                
per common share   $ 0.66     $ 0.62     $ 1.32     $ 1.24  
                                 
 
3M Company and Subsidiaries
Supplemental Unaudited Consolidated Statement of Income Information
(Dollars in millions, except per-share amounts)
 
 
    Three-months ended   Three-months ended
    June 30, 2003   June 30, 2002
    Excluding           Excluding        
    Special   Special   Reported   special   Special   Reported
    items   items   total   items   items   total
Net sales   $ 4,580     $ --   $ 4,580     $ 4,161     $ --     $ 4,161  
Operating                        
expenses                        
Cost of sales     2,323       --     2,323       2,140       91       2,231  
Selling, general                        
and                        
administrative                        
expenses     1,021       --     1,021       919       56       975  
Research,                        
development and                        
related                        
expenses     276       --     276       268     1       269  
Total     3,620       --     3,620       3,327       148       3,475  
Operating                        
income (loss)     960       --     960       834       (148 )     686  
 
Interest expense                        
and (income),                        
net     19       --     19       11       --       11  
Income (loss)                        
before income                        
taxes and                        
minority                        
interest     941       --     941       823       (148 )     675  
 
Provision                        
(benefit)                        
for income taxes     310       --     310       267       (57 )     210  
Effective tax                        
rate     33.0 %         33.0 %     32.5 %         31.2 %
 
Minority interest     12       --     12       17       (18 )     (1 )
Net income (loss)   $ 619     $ --   $ 619     $ 539     $ (73 )   $ 466  
Weighted average                        
diluted shares     396.2       --     396.2       396.1       396.1       396.1  
Net income per                        
diluted share   $ 1.56     $ --   $ 1.56     $ 1.36     $ (0.18 )   $ 1.18  
                                               
 
3M Company and Subsidiaries
Supplemental Unaudited Consolidated Statement of Income Information
(Dollars in millions, except per-share amounts)
 
 
    Six-months ended   Six-months ended
    June 30, 2003   June 30, 2002
    Excluding           Excluding        
    special   Special   Reported   special   Special   Reported
    items   items   total   items   items   total
Net sales   $ 8,898   $ --   $ 8,898   $ 8,051   $ --   $ 8,051
Operating                        
expenses                        
Cost of sales     4,534     --     4,534     4,146     121     4,267
Selling, general                        
and                        
administrative                        
expenses     1,984     --     1,984     1,775     77     1,852
Research,                        
development and                        
related                        
expenses     546     --     546     529   4     533
Other expense     --     93     93     --     --     --
Total     7,064     93     7,157     6,450     202     6,652
Operating                        
income (loss)     1,834     (93)     1,741     1,601     (202)     1,399
 
Interest expense                        
and (income),                        
net     36     --     36     21     --     21
Income (loss)                        
before income                        
taxes and                        
minority                        
interest     1,798     (93)     1,705     1,580     (202)     1,378
 
Provision                        
(benefit) for                        
income taxes     593     (35)     558     513     (76)     437
Effective tax                        
rate     33.0%     --     32.8%     32.5%     --     31.7%
 
Minority interest     26     --     26     41     (18)     23
Net income (loss)   $ 1,179   $ (58)   $ 1,121   $ 1,026   $ (108)   $ 918
Weighted average                        
diluted shares     395.7     395.7     395.7     395.7     395.7     395.7
Net income per                        
diluted share   $ 2.98   $ (0.15)   $ 2.83   $ 2.59   $ (0.27)   $ 2.32
                                     
 
3M Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in millions, except per-share amounts)
(Unaudited)
 
    Jun. 30,   Jun. 30,   Dec. 31,
ASSETS   2003   2002   2002
Current assets    

 

   

 

   

 

Cash and cash equivalents   $ 974   $ 665   $ 618
Accounts receivable - net     2,771     2,795     2,527
Inventories     1,990     1,998     1,931
Other current assets     1,302     1,165     983
Total current assets     7,037     6,623     6,059
Investments     233     250     238
Property, plant and equipment - net     5,555     5,552     5,621
Other assets     3,741     2,536     3,411
Total assets   $ 16,566   $ 14,961   $ 15,329
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities            
Short-term debt   $ 1,059   $ 806   $ 1,237
Accounts payable     972     835     945
Payroll     438     476     411
Income taxes     813     678     518
Other current liabilities     1,545     1,391     1,346
Total current liabilities     4,827     4,186     4,457
Long-term debt     1,962     1,838     2,140
Other liabilities     2,822     2,557     2,739
Total liabilities     9,611     8,581     9,336
 
Total stockholders' equity - net     6,955     6,380     5,993
Shares outstanding            
June 30, 2003: 391,503,430 shares            
June 30, 2002: 390,014,808 shares            
December 31, 2002: 390,195,681 shares            
Total liabilities and stockholders'            
equity   $ 16,566   $ 14,961   $ 15,329
                   
 
3M Company and Subsidiaries                
BUSINESS SEGMENTS (Unaudited)                
                 
BUSINESS                
SEGMENT  

Three-months ended

 

Six-months ended

INFORMATION   June 30   June 30
(Millions)   2003   2002   2003   2002
 
NET SALES                
Health Care   $ 1,017     $ 896     $ 1,963     $ 1,741  
Industrial     838       804       1,659       1,557  
Consumer and Office     637       602       1,249       1,171  
Display and Graphics     719       582       1,380       1,087  
Electro and Communications     458       479       892       923  
Safety, Security and Protection                
Services     518       445       976       858  
Transportation     383       339       764       688  
Corporate and Unallocated     10       14       15       26  
 
Total Company   $ 4,580     $ 4,161     $ 8,898     $ 8,051  
 
 
OPERATING INCOME                
Health Care   $ 263     $ 213     $ 501     $ 433  
Industrial     102       131       234       242  
Consumer and Office     108       108       218       213  
Display and Graphics     209       146       391       263  
Electro and Communications     71       79       118       131  
Safety, Security and Protection                
Services     131       92       236       178  
Transportation     95       80       195       165  
Corporate and Unallocated     (19 )     (163 )     (152 )     (226 )
 
Total Company   $ 960     $ 686     $ 1,741     $ 1,399  
                                 
 

As previously announced by 3M on March 26, 2003, a court issued an adverse ruling associated with a lawsuit filed against 3M in 1997 by LePage's Inc. During the first quarter of 2003, 3M recorded pretax charges of $93 million related to this proceeding (recorded in Corporate and Unallocated). During the second quarter of 2002, under its previously announced restructuring plan, 3M incurred pretax charges of $148 million primarily related to employee separation costs and accelerated depreciation charges. The company incurred similar charges in the first quarter of 2002 that totaled $54 million pre-tax. These 2002 charges were recorded in Corporate and Unallocated.

3M, St. PaulInvestor Contacts:Matt Ginter, 651-733-8206orDan Colvin, 651-736-2637orMedia Contact:John Cornwell, 651-733-7698

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