3M Third-Quarter Earnings Rise 20.3 percent to $0.83 Per Share; Sales Increase 11.4 Percent to a Record $4.62 Billion

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

Net income for the quarter was $663 million, or $0.83 per share, versus $545 million, or $0.69 per share, in the third quarter of 2002. Net income and per-share earnings increased 21.6 percent and 20.3 percent, respectively (a).

"Our employees are connecting with customers like never before," said W. James McNerney, Jr., 3M chairman and CEO, "and those connections are reflected in our third-quarter results. Sales reached an all-time high for the third consecutive quarter, boosted by sales volume increases in 6 of our 7 businesses, and we achieved 20 percent-plus increases in both net income and earnings per share."

Third-quarter worldwide sales totaled $4.616 billion, up 11.4 percent compared to the third quarter of 2002. Sales volumes increased 7.8 percent, including a positive 2.0 percent impact from acquisitions. Volumes increased 33.6 percent in Display and Graphics (includes 12 percent from acquisitions), 9.3 percent in Safety, Security and Protection Services, 6.8 percent in Health Care, 5.0 percent in Consumer and Office, 3.9 percent in Transportation and 0.2 percent in Industrial. Volumes declined 2.6 percent in Electro and Communications. Currency translation effects increased worldwide sales by 3.9 percent while selling prices were down 0.3 percent.

Sales outside the United States totaled $2.629 billion, an increase of 18.0 percent versus last year's comparable quarter. Volumes increased 11.5 percent, while selling prices declined 0.7 percent. Currency translation effects increased international sales by 7.2 percent. Volumes increased 22.3 percent in Asia Pacific, 21.2 percent in Latin America and 0.9 percent in Europe. In the United States, sales totaled $1.987 billion, up 3.7 percent from the same quarter of 2002. Volumes increased 3.6 percent, while selling prices improved by 0.1 percent.

"The collective power of our five corporate initiatives -- Six Sigma, 3M Acceleration, e-Productivity, Global Sourcing and Indirect Cost Reduction -- continues to drive better 3M results," McNerney said. "We're focused on accelerating growth in all of our businesses, and maintaining strict cost discipline throughout the company. We are confident in our ability to sustain sales, earnings and cash momentum despite the ongoing uncertainties in the global marketplace."

3M also provided its earnings outlook for the remainder of 2003. The company expects fourth-quarter earnings to be between $0.73 and $0.75 per share. As a result, 3M raised its expectations for full-year 2003 earnings to a range of $2.98 to $3.00 per share on a reported basis. Excluding special items (b), 3M expects 2003 earnings to be between $3.05 and $3.07 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) On August 11, 2003, 3M's Board of Directors declared a two-for-one split of the company's common stock. Effective with third quarter 2003 reporting, all share and per share data (such as per share amounts, weighted average shares and shares outstanding) has been restated to reflect this split.

(b) During the first quarter of 2003, 3M recorded pretax charges of $93 million ($58 million after-tax) related to an adverse court ruling in a lawsuit filed against 3M in 1997 by LePage's Inc. 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).

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. Changes in such assumptions or factors, including without limitation the outcome of and information derived from pending Congressional action concerning asbestos-related litigation, could produce significantly different results.

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 icons such as Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, Filtrete, Dyneon and O-Cel-O. Serving customers in more than 200 countries around the world, the company's 70,000 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, Dyneon and O-Cel-O are trademarks of 3M.

3M Company and Subsidiaries

SALES CHANGE ANALYSIS
(Unaudited)
 
 
    Third-Quarter 2003
 
    Worldwide   U.S.   Intl.
 
Volume - core   5.8 %   2.1 %   9.1 %
 
Volume - acquisitions   2.0     1.5     2.4  
 
Volume - total   7.8     3.6     11.5  
 
Price   (0.3 )   0.1     (0.7 )
 
Translation   3.9     --     7.2  
 
Total   11.4 %   3.7 %   18.0 %
 
 
 
    Nine-Months 2003
 
    Worldwide   U.S.   Intl.
 
Volume - core   4.3 %   0.7 %   7.3 %
 
Volume - acquisitions   1.9     1.7     2.2  
 
Volume - total   6.2     2.4     9.5  
 
Price   (0.1 )   (0.2 )   (0.1 )
 
Translation   4.7     --     8.7  
 
Total   10.8 %   2.2 %   18.1 %
                   
 
3M Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Amounts in millions, except per-share amounts)
(Unaudited)
 
    Three-months ended   Nine-months ended
    September 30  

September 30

                 
    2003   2002   2003   2002
                 
Net sales   $ 4,616     $ 4,143     $ 13,514     $ 12,194  
                 
Operating expenses                
Cost of sales     2,322       2,115       6,856       6,382  
Selling, general and                
administrative expenses     994       913       2,978       2,765  
Research, development and                
related expenses     270       264       816       797  
Other expense     --       --       93       --  
                 
Total     3,586       3,292       10,743       9,944  
                 
Operating income     1,030       851       2,771       2,250  
                 
Interest expense and income                
Interest expense     22       19       69       58  
Interest income     (6 )     (9 )     (17 )     (27 )
                 
Total     16       10       52       31  
                 
Income before income taxes                
and minority interest     1,014       841       2,719       2,219  
Provision for income taxes     339       274       897       711  
Minority interest     12       22       38       45  
                 
Net income   $ 663     $ 545     $ 1,784     $ 1,463  
                 
Weighted average common                
shares outstanding - basic     784.6       779.6       782.2       779.8  
Earnings per share - basic   $ 0.85     $ 0.70     $ 2.28     $ 1.88  
                 
Weighted average common                
shares outstanding - diluted     797.5       790.0       793.4       790.9  
Earnings per share - diluted   $ 0.83     $ 0.69     $ 2.25     $ 1.85  
                 
Cash dividends paid                
per common share   $ 0.33     $ 0.31     $ 0.99     $ 0.93  
                                 
 

Share and per-share data has been restated to reflect the two-for-one stock split effective with third quarter 2003 reporting.

3M Company and Subsidiaries
Supplemental Unaudited Consolidated Statement of Income Information
(Dollars in millions, except per-share amounts)
 
    Nine- months ended   Nine- months ended
   

September 30, 2003

 

September 30, 2002

    Excluding           Excluding        
    special   Special   Reported   special   Special   Reported
    items   items   total   items   items   total
Net sales   $ 13,514     $ --     $ 13,514     $ 12,194     $ --     $ 12,194  
Operating                        
expenses                        
Cost of sales     6,856       --       6,856       6,261       121       6,382  
Selling,                        
general and                        
administrative                        
expenses     2,978       --       2,978       2,688       77       2,765  
Research,                        
development                        
and related                        
expenses     816       --       816       793     4       797  
Other expense     --       93       93       --       --       --  
Total     10,650       93       10,743       9,742       202       9,944  
Operating                        
income (loss)     2,864       (93 )     2,771       2,452       (202 )     2,250  
 
Interest expense                        
and (income),                        
net     52       --       52       31       --       31  
Income (loss)                        
before income                        
taxes and                        
minority                        
interest     2,812       (93 )     2,719       2,421       (202 )     2,219  
 
Provision                        
(benefit) for                        
income taxes     932       (35 )     897       787       (76 )     711  
Effective tax                        
rate     33.2 %     --       33.0 %     32.5 %     --       32.0 %
 
Minority                        
interest     38       --       38       63       (18 )     45  
Net income                        
(loss)   $ 1,842     $ (58 )   $ 1,784     $ 1,571     $ (108 )   $ 1,463  
Weighted                        
average                        
diluted shares     793.4       793.4       793.4       790.9       790.9       790.9  
Net income per                        
diluted share   $ 2.32     $ (0.07 )   $ 2.25     $ 1.99     $ (0.14 )   $ 1.85  
                                                 
 

Share and per-share data has been restated to reflect the two-for-one stock split effective with third quarter 2003 reporting.

3M Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in millions, except per-share amounts)
(Unaudited)
 
    Sep. 30,   Sep. 30,   Dec. 31,
ASSETS  

2003

  2002   2002
Current assets    

 

   

 

   

 

Cash and cash equivalents   $ 1,279   $ 821   $ 618
Accounts receivable - net     2,791     2,585     2,527
Inventories     1,882     1,945     1,931
Other current assets     1,390     1,205     983
Total current assets     7,342     6,556     6,059
Investments     214     247     238
Property, plant and equipment - net     5,467     5,451     5,621
Other assets     3,774     3,465     3,411
Total assets   $ 16,797   $ 15,719   $ 15,329
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities            
Short-term debt   $ 1,255   $ 1,261   $ 1,237
Accounts payable     969     867     945
Payroll     457     443     411
Income taxes     825     580     518
Other current liabilities     1,462     1,360     1,346
Total current liabilities     4,968     4,511     4,457
Long-term debt     1,738     1,678     2,140
Other liabilities     2,583     2,887     2,739
Total liabilities     9,289     9,076     9,336
 
Total stockholders' equity - net     7,508     6,643     5,993
Shares outstanding            
September 30, 2003: 784,883,033 shares            
September 30, 2002: 780,393,288 shares            
December 31, 2002: 780,391,362 shares            
Total liabilities and stockholders'            
equity   $ 16,797   $ 15,719   $ 15,329
                   
 

Shares data has been restated to reflect the two-for-one stock split effective with third quarter 2003 reporting.

3M Company and Subsidiaries
BUSINESS SEGMENTS (Unaudited)
 
                 
BUSINESS                
SEGMENT   Three-months ended   Nine-months ended
INFORMATION   September 30   September 30
(Millions)   2003   2002   2003   2002
 
NET SALES                
Health Care   $ 1,012   $ 901   $ 2,975   $ 2,642
Industrial     830     797     2,489     2,354
Consumer and Office     673     628     1,922     1,799
Display and Graphics     772     572     2,152     1,659
Electro and Communications     454     460     1,346     1,383
Safety, Security and Protection                
Services     482     423     1,458     1,281
Transportation     386     351     1,150     1,039
Corporate and Unallocated   7     11     22     37
 
Total Company   $ 4,616   $ 4,143   $ 13,514   $ 12,194
 
 
OPERATING INCOME                
Health Care   $ 272   $ 224   $ 773   $ 657
Industrial     115     130     349     372
Consumer and Office     128     121     346     334
Display and Graphics     251     142     642     405
Electro and Communications     66     67     184     198
Safety, Security and Protection                
Services     111     89     347     267
Transportation     106     88     301     253
Corporate and Unallocated     (19)     (10)     (171)     (236)
 
Total Company   $ 1,030   $ 851   $ 2,771   $ 2,250
                         
 

During the first quarter of 2003, 3M recorded pretax charges of $93 million related to an adverse court ruling in a lawsuit filed against 3M in 1997 by LePage's Inc. 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 2003 and 2002 charges were recorded in Corporate and Unallocated.

3M, St. PaulInvestor Contacts:Matt Ginter, 651-733-8206orBruce Jermeland, 651-733-1807orMedia Contact:John Cornwell, 651-733-7698

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