3M (NYSE:MMM) today announced its sales and earnings results for first quarter 2004.
The company reported net income of $722 million, or $0.90 per share, versus $502 million, or $0.63 per share, in the first quarter of 2003. Excluding special items(a) in the first quarter of 2003, net income increased 29 percent from $560 million last year, and earnings per share increased nearly 27 percent from $0.71 per share in last year's first quarter.
"The 3M team again delivered outstanding results in the first quarter," said W. James McNerney, Jr., 3M chairman and CEO. "Worldwide sales in local currencies increased in all seven of our businesses, and we generated double-digit increases in operating income and earnings per share. We are off to a great start in 2004."
Worldwide sales in the first quarter totaled $4.94 billion, 14.4 percent higher than in the year-earlier quarter, driven by an 8.7 percent increase in sales volume. Currency effects increased sales by 6.1 percent while selling prices declined 0.4 percent. Local-currency sales (which excludes the impact of currency translation on sales) increased 20.4 percent in Display and Graphics, 9.2 percent in Safety, Security and Protection Services, 8.5 percent in Industrial, 8.1 percent in Transportation, 7.4 percent in Consumer and Office, 2.5 percent in Electro and Communications and 2.2 percent in Health Care.
Sales outside the United States totaled $3.06 billion, an increase of 21.6 percent versus last year's comparable quarter. Volumes increased 11.9 percent, while selling prices declined 0.8 percent. Changes in the value of the U.S. dollar increased international sales by 10.5 percent. Local-currency sales increased 22.4 percent in Asia Pacific, 11.5 percent in the combined Latin America, Africa and Canada region and 1.2 percent in Europe.
In the United States, sales totaled $1.88 billion, up 4.2 percent from the same quarter of 2003. Volumes increased 4.0 percent, while selling prices improved by 0.2 percent.
"While the strength of the global economic recovery remains uneven and uncertain," McNerney said, "we continue to work at improving all of our businesses. The combination of a strong and deep leadership team, a broad and diverse business portfolio, continued commitment to sustained operational excellence, and an improving organic growth engine positions us well to deliver sustainable increases in sales, earnings and cash flow."
3M also increased its earnings outlook for 2004. For the year, the company now expects reported earnings will be within a range of $3.60 to $3.70 per share, versus a previous expectation of $3.52 to $3.62 per share. Second-quarter earnings are expected to be in the range of $0.94 to $0.96 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) 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. 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.
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, Command and Dyneon. 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 Dyneon are trademarks of 3M.
| 3M Company and Subsidiaries | |||||||||
| SALES CHANGE ANALYSIS | |||||||||
| (Unaudited) | |||||||||
| First-Quarter 2004 | |||||||||
| Sales Change Analysis | United | Inter- | |||||||
| By Geographic Area | Worldwide | States | national | ||||||
| Volume -- core | 8.4 | % | 3.4 | % | 11.8 | % | |||
| Volume -- acquisitions | 0.3 | 0.6 | 0.1 | ||||||
| Volume -- total | 8.7 | 4.0 | 11.9 | ||||||
| Price | (0.4 | ) | 0.2 | (0.8 | ) | ||||
| Total local-currency sales | 8.3 | 4.2 | 11.1 | ||||||
| Translation | 6.1 | - | 10.5 | ||||||
| Total sales change | 14.4 | % | 4.2 | % | 21.6 | % | |||
| Local- | Total | ||||||||
| Sales Change Analysis | currency | Trans- | Sales | ||||||
| By Business Segment | Sales | lation | Change | ||||||
| Health Care | 2.2 | % | 6.8 | % | 9.0 | % | |||
| Industrial | 8.5 | 6.3 | 14.8 | ||||||
| Display and Graphics | 20.4 | 7.0 | 27.4 | ||||||
| Consumer and Office | 7.4 | 4.7 | 12.1 | ||||||
| Safety, Security and | |||||||||
| Protection Services | 9.2 | 5.9 | 15.1 | ||||||
| Electro and Communications | 2.5 | 4.6 | 7.1 | ||||||
| Transportation | 8.1 | 6.8 | 14.9 | ||||||
| 3M Company and Subsidiaries | ||||||||
| CONSOLIDATED STATEMENT OF INCOME | ||||||||
| (Millions, except per-share amounts) | ||||||||
| (Unaudited) | ||||||||
| Three-months ended | ||||||||
| March 31 | ||||||||
| 2004 | 2003 | |||||||
| Net sales | $ | 4,939 | $ | 4,318 | ||||
| Operating expenses | ||||||||
| Cost of sales | 2,436 | 2,211 | ||||||
| Selling, general and administrative | ||||||||
| expenses | 1,104 | 963 | ||||||
| Research, development and related | ||||||||
| expenses | 282 | 270 | ||||||
| Other expense | - | 93 | ||||||
| Total | 3,822 | 3,537 | ||||||
| Operating income | 1,117 | 781 | ||||||
| Interest expense and income | ||||||||
| Interest expense | 19 | 23 | ||||||
| Interest income | (10 | ) | (6 | ) | ||||
| Total | 9 | 17 | ||||||
| Income before income taxes and minority | ||||||||
| interest | 1,108 | 764 | ||||||
| Provision for income taxes | 366 | 248 | ||||||
| Minority interest | 20 | 14 | ||||||
| Net income | $ | 722 | $ | 502 | ||||
| Weighted average common shares | ||||||||
| outstanding -- basic | 782.9 | 780.1 | ||||||
| Earnings per share -- basic | $ | 0.92 | $ | 0.64 | ||||
| Weighted average common shares | ||||||||
| outstanding -- diluted | 799.5 | 790.6 | ||||||
| Earnings per share -- diluted | $ | 0.90 | $ | 0.63 | ||||
| Cash dividends paid per common share | $ | 0.36 | $ | 0.33 | ||||
| 3M Company and Subsidiaries | ||||||||||||||||||
| SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION | ||||||||||||||||||
| (Millions, except per-share amounts) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Three-months ended | Three-months ended | |||||||||||||||||
| March 31, 2004 | March 31, 2003 | |||||||||||||||||
| Excluding | Excluding | |||||||||||||||||
| special | Special | Reported | special | Special | Reported | |||||||||||||
| items | items | total | items | items | total | |||||||||||||
| Net sales | $ | 4,939 | $ | -- | $ | 4,939 | $ | 4,318 | $ | -- | $ | 4,318 | ||||||
| Operating | ||||||||||||||||||
| expenses | ||||||||||||||||||
| Cost of sales | 2,436 | -- | 2,436 | 2,211 | -- | 2,211 | ||||||||||||
| Selling, | ||||||||||||||||||
| general and | ||||||||||||||||||
| administrative | ||||||||||||||||||
| expenses | 1,104 | -- | 1,104 | 963 | -- | 963 | ||||||||||||
| Research, | ||||||||||||||||||
| development | ||||||||||||||||||
| and related | ||||||||||||||||||
| expenses | 282 | -- | 282 | 270 | -- | 270 | ||||||||||||
| Other expense | -- | -- | -- | -- | 93 | 93 | ||||||||||||
| Total | 3,822 | -- | 3,822 | 3,444 | 93 | 3,537 | ||||||||||||
| Operating | ||||||||||||||||||
| income (loss) | 1,117 | -- | 1,117 | 874 | (93) | 781 | ||||||||||||
| Interest expense | ||||||||||||||||||
| and (income), | ||||||||||||||||||
| net | 9 | -- | 9 | 17 | -- | 17 | ||||||||||||
| Income (loss) | ||||||||||||||||||
| before income | ||||||||||||||||||
| taxes and | ||||||||||||||||||
| minority | ||||||||||||||||||
| interest | 1,108 | -- | 1,108 | 857 | (93) | 764 | ||||||||||||
| Provision | ||||||||||||||||||
| (benefit) for | ||||||||||||||||||
| income taxes | 366 | -- | 366 | 283 | (35) | 248 | ||||||||||||
| Effective tax | ||||||||||||||||||
| rate | 33.0% | -- | 33.0% | 33.1% | -- | 32.5% | ||||||||||||
| Minority interest | 20 | -- | 20 | 14 | -- | 14 | ||||||||||||
| Net income (loss) | $ | 722 | $ | -- | $ | 722 | $ | 560 | $ | (58) | $ | 502 | ||||||
| Weighted average | ||||||||||||||||||
| diluted shares | 799.5 | -- | 799.5 | 790.6 | 790.6 | 790.6 | ||||||||||||
| Net income per | ||||||||||||||||||
| diluted share | $ | .90 | $ | -- | $ | .90 | $ | 0.71 | $ | (0.08) | $ | 0.63 | ||||||
| 3M Company and Subsidiaries | |||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||
| (Dollars in millions) | |||||||||
| (Unaudited) | |||||||||
| Mar. 31, | Mar. 31, | Dec. 31, | |||||||
| ASSETS |
2004 |
2003 | 2003 | ||||||
| Current assets |
|
|
|
||||||
| Cash and cash equivalents | $ | 1,818 | $ | 561 | $ | 1,836 | |||
| Accounts receivable -- net | 2,904 | 2,643 | 2,714 | ||||||
| Inventories | 1,880 | 1,957 | 1,816 | ||||||
| Other current assets | 1,461 | 1,303 | 1,354 | ||||||
| Total current assets | 8,063 | 6,464 | 7,720 | ||||||
| Investments | 211 | 221 | 218 | ||||||
| Property, plant and equipment -- net | 5,512 | 5,550 | 5,609 | ||||||
| Goodwill, intangible assets and other | |||||||||
| assets | 4,192 | 3,610 | 4,053 | ||||||
| Total assets | $ | 17,978 | $ | 15,845 | $ | 17,600 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities | |||||||||
| Short-term borrowings and | |||||||||
| current portion of long-term debt | $ | 1,106 | $ | 1,200 | $ | 1,202 | |||
| Accounts payable | 1,066 | 963 | 1,087 | ||||||
| Accrued payroll | 471 | 409 | 436 | ||||||
| Accrued income taxes | 986 | 652 | 880 | ||||||
| Other current liabilities | 1,534 | 1,468 |
|
1,477 | |||||
| Total current liabilities | 5,163 | 4,692 | 5,082 | ||||||
| Long-term debt | 1,718 | 2,119 | 1,735 | ||||||
| Other liabilities | 2,996 | 2,718 | 2,898 | ||||||
| Total liabilities | 9,877 | 9,529 | 9,715 | ||||||
| Total stockholders' equity -- net | 8,101 | 6,316 | 7,885 | ||||||
| Shares outstanding | |||||||||
| March 31, 2004: 782,114,154 shares | |||||||||
| March 31, 2003: 781,667,702 shares | |||||||||
| December 31, 2003: 784,117,360 shares | |||||||||
| Total liabilities and stockholders' | |||||||||
| equity | $ | 17,978 | $ | 15,845 | $ | 17,600 | |||
| 3M Company and Subsidiaries | ||||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||
| (Dollars in millions) | ||||||||
| (Unaudited) | ||||||||
| Three-months ended | ||||||||
| March 31 | ||||||||
| 2004 | 2003 | |||||||
| SUMMARY OF CASH FLOW: | ||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | $ | 942 | $ | 764 | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property, plant and equipment | (158 | ) | (120 | ) | ||||
| Acquisitions, net of cash acquired | (80 | ) | (416 | ) | ||||
| Other investing activities | 19 | 71 | ||||||
| NET CASH USED IN | ||||||||
| INVESTING ACTIVITIES | (219 | ) |
|
(465 | ) | |||
| Cash flows from financing activities: | ||||||||
| Change in debt | (133 | ) | (38 | ) | ||||
| Purchases of treasury stock | (438 | ) | (173 | ) | ||||
| Reissuances of treasury stock | 134 | 160 | ||||||
| Dividends paid to stockholders | (282 | ) | (257 | ) | ||||
| Other financing activities | (12 | ) | (14 | ) | ||||
| NET CASH USED IN | ||||||||
| FINANCING ACTIVITIES | (731 | ) | (322 | ) | ||||
| Effect of exchange rate | ||||||||
| changes on cash | (10 | ) | (34 | ) | ||||
| Net increase (decrease) in cash and | ||||||||
| cash equivalents | (18 | ) | (57 | ) | ||||
| Cash and cash equivalents at | ||||||||
| beginning of period | 1,836 | 618 | ||||||
| Cash and cash equivalents at | ||||||||
| end of period | $ | 1,818 | $ | 561 | ||||
| FREE CASH FLOW (Non-GAAP measure): | ||||||||
| Net cash provided by | ||||||||
| operating activities | $ | 942 | $ | 764 | ||||
| Purchases of property, plant | ||||||||
| and equipment | (158 | ) | (120 | ) | ||||
| Free Cash Flow(a) | $ | 784 | $ | 644 | ||||
| NET WORKING CAPITAL TURNS (Non-GAAP measure): | ||||||||
| Net Working Capital Turns(b) | 5.3 | 4.7 | ||||||
(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 also 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, fourth quarter at year-end, 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 | ||||||||
| BUSINESS SEGMENTS | ||||||||
| (Dollars in millions) | ||||||||
| (Unaudited) | ||||||||
| BUSINESS | ||||||||
| SEGMENT | Three-months ended | |||||||
| INFORMATION | March 31 | |||||||
| (Millions) | 2004 | 2003 | ||||||
| NET SALES | ||||||||
| Health Care | $ | 1,031 | $ | 946 | ||||
| Industrial | 943 | 821 | ||||||
| Display and Graphics | 842 | 661 | ||||||
| Consumer and Office | 686 | 612 | ||||||
| Safety, Security and Protection Services | 527 | 458 | ||||||
| Electro and Communications | 465 | 434 | ||||||
| Transportation | 438 | 381 | ||||||
| Corporate and Unallocated | 7 | 5 | ||||||
| Total Company | $ | 4,939 | $ | 4,318 | ||||
| OPERATING INCOME | ||||||||
| Health Care | $ | 262 | $ | 238 | ||||
| Industrial | 166 | 132 | ||||||
| Display and Graphics | 294 | 182 | ||||||
| Consumer and Office | 122 | 110 | ||||||
| Safety, Security and Protection Services | 125 | 105 | ||||||
| Electro and Communications | 65 | 47 | ||||||
| Transportation | 119 | 100 | ||||||
| Corporate and Unallocated | (36 | ) | (133 | ) | ||||
| Total Company | $ | 1,117 | $ | 781 | ||||
The following 2004 and 2003 charges were recorded in Corporate and Unallocated. First quarter 2004 includes $16 million in expense related to a reduction in breast implant receivables following an arbitration panel ruling in the first quarter that rejected the company's claims for recovery under certain of its claims-made policies. 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. First quarter 2003 also includes certain acquisition-related costs and respirator mask/asbestos litigation expenses.
3M, St. PaulInvestor Contacts:Matt Ginter, 651-733-8206orBruce Jermeland, 651-733-1807orMedia Contact:John Cornwell, 651-733-7698
