3M (NYSE:MMM) today announced its results for second quarter 2005.
The company reported net income of $776 million, or $1.00 per share in the second quarter, versus $773 million, or $0.97 per share in the second quarter of 2004. Excluding a previously announced non-recurring tax charge related to the domestic reinvestment provisions of the American Jobs Creation Act of 2004(a), 3M earned $851 million or $1.09 per share in the second quarter, a 12.4 percent increase in earnings per share over the comparable quarter.
"The 3M team delivered another solid quarter, characterized by broad-based sales growth and a continued commitment to operational efficiency," said Robert S. Morrison, 3M interim chairman and CEO. "3M has an outstanding leadership team, a time-tested business model and deep commitment to delivering on its objectives. I am excited about the opportunity to lead the company during this period of transition."
Worldwide sales in the second quarter totaled $5.3 billion, 5.6 percent higher than in the year-earlier quarter. Local currency sales increased 3.5 percent, with selling prices contributing 0.8 percent. Local-currency sales increased 7.0 percent in Safety, Security and Protection Services, 6.7 percent in Transportation, 6.7 percent in Consumer and Office, 4.1 percent in Industrial, 3.8 percent in Health Care, and 1.5 percent in Electro and Communications, but declined 2.5 percent in Display and Graphics.
"For the rest of the year, we expect top-line growth to continue to accelerate," said Patrick D. Campbell, senior vice president and CFO. "We anticipate that increased global demand for flat panel displays, particularly LCD televisions, will improve second-half sales of LCD enhancement films and fuel higher growth in our Display and Graphics business. We also expect solid second-half sales and earnings growth across the rest of our broad portfolio as our employees continue to leverage 3M's outstanding customer relationships, product and technology platforms, extensive geographic presence, and, as always, operational discipline."
3M also provided an update on the pending acquisition of CUNO Inc., a leader in the global liquid filtration and purification market, announced May 12, 2005. The companies have obtained all regulatory approvals and CUNO Inc. has scheduled a shareholder meeting Aug. 2 to vote on the acquisition. Pending shareholder approval, the acquisition is expected to close shortly thereafter.
For the year, the company now expects reported earnings to be within a range of $4.10 to $4.15 per share. Excluding non-recurring items(a), 3M expects earnings of $4.20 to $4.25 per share, raising the low end of a previous expectation of $4.15 to $4.25 per share. This expectation includes approximately $0.04 per share of earnings dilution from the CUNO acquisition. Third-quarter earnings are expected to be in the range of $1.06 to $1.08 per share, including $0.03 per share of CUNO-related earnings dilution. The company expects local currency growth of 4 to 7 percent in the third-quarter and full-year local currency growth of 4 to 6 percent, excluding acquisitions.
Patrick D. Campbell 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 plans to reinvest approximately $1.7 billion of foreign earnings in the United States pursuant to the provisions of the American Jobs Creation Act of 2004. This act provides the company the opportunity to tax efficiently repatriate foreign earnings for U.S. qualifying investments specified in its domestic reinvestment plan. As a consequence, in the second quarter of 2005, 3M recorded a non-recurring charge of $75 million dollars, net of available foreign tax credits.
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 and materials, including oil-derived compounds; (6) 3M's ability to successfully integrate and obtain the anticipated synergies from acquisitions and strategic alliances; (7) generating less operating income from its corporate initiatives than estimated; and (8) legal proceedings, including the outcome of and information derived from pending Congressional action concerning asbestos-related litigation and other significant developments that could occur in the legal proceedings described in the company's Annual Report on Form 10-K for the year ended December 31, 2004 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (the "Reports"). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports. 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 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 Vikuiti are trademarks of 3M.
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3M Company and Subsidiaries |
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|
CONSOLIDATED STATEMENT OF INCOME |
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| (Millions, except per-share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three-months ended | Six-months ended | |||||||||||
|
June 30 |
June 30 |
|||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||
| Net sales | $5,294 | $5,012 | $10,460 | $9,951 | ||||||||
| Operating expenses | ||||||||||||
| Cost of sales | 2,594 | 2,452 | 5,131 | 4,888 | ||||||||
| Selling, general and | ||||||||||||
| administrative expenses | 1,121 | 1,084 | 2,235 | 2,188 | ||||||||
| Research, development and | ||||||||||||
| related expenses | 296 | 290 | 587 | 572 | ||||||||
| Total | 4,011 | 3,826 | 7,953 | 7,648 | ||||||||
| Operating income | 1,283 | 1,186 | 2,507 | 2,303 | ||||||||
| Interest expense and income | ||||||||||||
| Interest expense | 19 | 16 | 39 | 35 | ||||||||
| Interest income | (16 | ) | (10 | ) | (32 | ) | (20 | ) | ||||
| Total | 3 | 6 | 7 | 15 | ||||||||
| Income before income taxes and | ||||||||||||
| minority interest | 1,280 | 1,180 | 2,500 | 2,288 | ||||||||
| Provision for income taxes | 492 | 389 | 888 | 755 | ||||||||
| Minority interest | 12 | 18 | 27 | 38 | ||||||||
| Net income | $776 | $773 | $1,585 | $1,495 | ||||||||
| Weighted average common shares | ||||||||||||
| outstanding - basic | 768.0 | 782.5 | 769.8 | 782.7 | ||||||||
| Earnings per share - basic | $1.01 | $0.99 | $2.06 | $1.91 | ||||||||
| Weighted average common shares | ||||||||||||
| outstanding - diluted | 780.2 | 799.7 | 783.6 | 799.6 | ||||||||
| Earnings per share - diluted | $1.00 | $0.97 | $2.02 | $1.87 | ||||||||
| Cash dividends paid | ||||||||||||
| per common share | $0.42 | $0.36 | $0.84 | $0.72 | ||||||||
|
3M Company and Subsidiaries |
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|
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION |
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|
(Millions, except per-share amounts) |
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| (Unaudited) | |||||||||
|
Three-months ended |
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| June 30, 2005 | |||||||||
| Excluding | |||||||||
| special | Special | Reported | |||||||
| items (a) | items (a) | total | |||||||
| Net sales | $5,294 | $- | $5,294 | ||||||
| Operating expenses | |||||||||
| Cost of sales | 2,594 | - | 2,594 | ||||||
| Selling, general and | |||||||||
| administrative expenses | 1,121 | - | 1,121 | ||||||
| Research, development and | |||||||||
| related expenses | 296 | - | 296 | ||||||
| Total | 4,011 | - | 4,011 | ||||||
| Operating income (loss) | 1,283 | - | 1,283 | ||||||
| Interest expense and (income), | |||||||||
| net | 3 | - | 3 | ||||||
| Income (loss) before income taxes | |||||||||
| and minority interest | 1,280 | - | 1,280 | ||||||
| Provision (benefit) for income | |||||||||
| taxes | 417 | 75 | 492 | ||||||
| Effective tax rate | 32.5 | % | - | 38.4 | % | ||||
| Minority interest | 12 | - | 12 | ||||||
| Net income (loss) | $851 | $(75 | ) | $776 | |||||
| Weighted average diluted shares | 780.2 | 780.2 | 780.2 | ||||||
| Net income per diluted share | $1.09 | $(0.09 | ) | $1.00 | |||||
| Six-months ended | |||||||||
| June 30, 2005 | |||||||||
| Excluding | |||||||||
| special | Special | Reported | |||||||
| items (a) | items (a) | total | |||||||
| Net sales | $10,460 | $- | $10,460 | ||||||
| Operating expenses | |||||||||
| Cost of sales | 5,131 | - | 5,131 | ||||||
| Selling, general and | |||||||||
| administrative expenses | 2,235 | - | 2,235 | ||||||
| Research, development and | |||||||||
| related expenses | 587 | - | 587 | ||||||
| Total | 7,953 | - | 7,953 | ||||||
| Operating income (loss) | 2,507 | - | 2,507 | ||||||
| Interest expense and (income), | |||||||||
| net | 7 | - | 7 | ||||||
| Income (loss) before income taxes | |||||||||
| and minority interest | 2,500 | - | 2,500 | ||||||
| Provision (benefit) for income | |||||||||
| taxes | 813 | 75 | 888 | ||||||
| Effective tax rate | 32.5 | % | - | 35.5 | % | ||||
| Minority interest | 27 | - | 27 | ||||||
| Net income (loss) | $1,660 | $(75 | ) | $1,585 | |||||
| Weighted average diluted shares | 783.6 | 783.6 | 783.6 | ||||||
| Net income per diluted share | $2.12 | $(0.10 | ) | $2.02 | |||||
| (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. In the second quarter of | |||||||||
| 2005, 3M recorded a charge of $75 million, net of available | |||||||||
| foreign tax credits, related to its plans to reinvest | |||||||||
| approximately $1.7 billion of foreign earnings in the United | |||||||||
| States pursuant to the provisions of the American Jobs Creation | |||||||||
| Act of 2004. No special items were recorded in 2004. | |||||||||
| 3M Company and Subsidiaries | |||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||
| (Dollars in millions) | |||||||||
| (Unaudited) | |||||||||
| Jun. 30, | Jun. 30, | Dec. 31, | |||||||
| ASSETS | 2005 | 2004 | 2004 | ||||||
| Current assets | |||||||||
| Cash and cash equivalents | $1,765 | $2,314 | $2,757 | ||||||
| Accounts receivable - net | 2,951 | 2,913 | 2,792 | ||||||
| Inventories | 2,020 | 1,940 | 1,897 | ||||||
| Other current assets | 1,212 | 1,460 | 1,274 | ||||||
| Total current assets | 7,948 | 8,627 | 8,720 | ||||||
| Investments | 274 | 211 | 227 | ||||||
| Property, plant and equipment - net | 5,516 | 5,456 | 5,711 | ||||||
| Goodwill, intangible assets and other | |||||||||
| assets | 5,819 | 4,068 | 6,050 | ||||||
| Total assets | $19,557 | $18,362 | $20,708 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities | |||||||||
| Short-term borrowings and current portion | |||||||||
| of long-term debt | $1,103 | $1,358 | $2,094 | ||||||
| Accounts payable | 1,201 | 1,108 | 1,168 | ||||||
| Accrued payroll | 475 | 487 | 487 | ||||||
| Accrued income taxes | 1,187 | 1,094 | 867 | ||||||
| Other current liabilities | 1,340 | 1,547 | 1,455 | ||||||
| Total current liabilities | 5,306 | 5,594 | 6,071 | ||||||
| Long-term debt | 706 | 1,303 | 727 | ||||||
| Other liabilities | 3,445 | 3,008 | 3,532 | ||||||
| Total liabilities | 9,457 | 9,905 | 10,330 | ||||||
| Total stockholders' equity - net | 10,100 | 8,457 | 10,378 | ||||||
| Shares outstanding | |||||||||
| June 30, 2005: 765,071,990 shares | |||||||||
| June 30, 2004: 782,703,301 shares | |||||||||
| December 31, 2004: 773,518,281 | |||||||||
| shares | |||||||||
| Total liabilities and stockholders' | |||||||||
| equity | $19,557 | $18,362 | $20,708 | ||||||
| 3M Company and Subsidiaries | ||||||
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
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| (Dollars in millions) | ||||||
| (Unaudited) | ||||||
| Six-months ended | ||||||
|
June 30 |
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| 2005 | 2004 | |||||
| SUMMARY OF CASH FLOW: | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | $2,171 | $2,237 | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property, plant and equipment | (452 | ) | (378 | ) | ||
| Acquisitions, net of cash acquired | - | (86 | ) | |||
| Other investing activities | (31 | ) | 29 | |||
| NET CASH USED IN INVESTING ACTIVITIES | (483 | ) | (435 | ) | ||
| Cash flows from financing activities: | ||||||
| Change in debt | (991 | ) | (286 | ) | ||
| Purchases of treasury stock | (1,185 | ) | (792 | ) | ||
| Reissuances of treasury stock | 287 | 352 | ||||
| Dividends paid to stockholders | (647 | ) | (564 | ) | ||
| Other financing activities | (36 | ) | (23 | ) | ||
| NET CASH USED IN FINANCING ACTIVITIES | (2,572 | ) | (1,313 | ) | ||
| Effect of exchange rate changes on cash | (108 | ) | (11 | ) | ||
| Net increase (decrease) in cash and cash | ||||||
| equivalents | (992 | ) | 478 | |||
| Cash and cash equivalents at beginning of period | 2,757 | 1,836 | ||||
| Cash and cash equivalents at end of period | $1,765 | $2,314 | ||||
| 3M Company and Subsidiaries | ||||||
| SUPPLEMENTAL CASH FLOW AND | ||||||
| OTHER SUPPLEMENTAL FINANCIAL INFORMATION | ||||||
| (Dollars in millions) | ||||||
| (Unaudited) | ||||||
| Six-months ended | ||||||
|
June 30 |
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| 2005 | 2004 | |||||
| NON-GAAP MEASURES | ||||||
| Free Cash Flow: | ||||||
| Net cash provided by operating activities | $2,171 | $2,237 | ||||
| Purchases of property, plant and equipment | (452 | ) | (378 | ) | ||
| Free Cash Flow (a) | $1,719 | $1,859 | ||||
| Net Working Capital Turns (b) | 5.6 | 5.4 | ||||
| (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 uses non-GAAP measures that place emphasis and focus |
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| 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 June 30, 2005 | |||||||||
| Sales Change Analysis | United | Inter- | |||||||
| By Geographic Area | States | national | Worldwide | ||||||
| Volume - core | 2.4 | % | 2.9 | % | 2.7 | % | |||
| Volume - acquisitions | 0.1 | 0.0 | 0.0 | ||||||
| Volume - total | 2.5 | 2.9 | 2.7 | ||||||
| Price | 2.0 | 0.0 | 0.8 | ||||||
| Total local-currency sales | 4.5 | 2.9 | 3.5 | ||||||
| Translation | - | 3.4 | 2.1 | ||||||
| Total sales change | 4.5 | % | 6.3 | % | 5.6 | % | |||
| Local- | Total | ||||||||
| Sales Change Analysis | currency | Trans- | Sales | ||||||
| By Business Segment | Sales | lation | Change | ||||||
| Health Care | 3.8 | % | 2.3 | % | 6.1 | % | |||
| Industrial | 4.1 | 2.9 | 7.0 | ||||||
| Display and Graphics | (2.5 | ) | 0.3 | (2.2 | ) | ||||
| Consumer and Office | 6.7 | 2.3 | 9.0 | ||||||
| Safety, Security and Protection | |||||||||
| Services | 7.0 | 2.6 | 9.6 | ||||||
| Electro and Communications | 1.5 | 2.3 | 3.8 | ||||||
| Transportation | 6.7 | 2.9 | 9.6 | ||||||
| 3M Company and Subsidiaries | |||||||||
| SALES CHANGE ANALYSIS | |||||||||
| (Unaudited) | |||||||||
|
Six-Months Ended June 30, 2005 |
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| Sales Change Analysis | United | Inter- | |||||||
| By Geographic Area | States | national | Worldwide | ||||||
| Volume - core | 1.8 | % | 2.3 | % | 2.0 | % | |||
| Volume - acquisitions | 0.3 | 0.1 | 0.2 | ||||||
| Volume - total | 2.1 | 2.4 | 2.2 | ||||||
| Price | 1.8 | (0.1 | ) | 0.7 | |||||
| Total local-currency sales | 3.9 | 2.3 | 2.9 | ||||||
| Translation | - | 3.6 | 2.2 | ||||||
| Total sales change | 3.9 | % | 5.9 | % | 5.1 | % | |||
| Local- | Total | ||||||||
| Sales Change Analysis | currency | Trans- | Sales | ||||||
| By Business Segment | Sales | lation | Change | ||||||
| Health Care | 4.5 | % | 2.5 | % | 7.0 | % | |||
| Industrial | 3.4 | 2.9 | 6.3 | ||||||
| Display and Graphics | (0.9 | ) | 0.8 | (0.1 | ) | ||||
| Consumer and Office | 3.1 | 2.3 | 5.4 | ||||||
| Safety, Security and Protection Services | 5.1 | 2.6 | 7.7 | ||||||
| Electro and Communications | - | 2.4 | 2.4 | ||||||
| Transportation | 5.6 | 2.8 | 8.4 | ||||||
| 3M Company and Subsidiaries | ||||||||||||
|
BUSINESS SEGMENTS |
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|
(Dollars in millions) |
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| (Unaudited) | ||||||||||||
| BUSINESS | ||||||||||||
| SEGMENT | Three-months ended | Six-months ended | ||||||||||
| INFORMATION |
June 30 |
June 30 |
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| (Millions) | 2005 | 2004 | 2005 | 2004 | ||||||||
| NET SALES | ||||||||||||
| Health Care | $1,112 | $1,049 | $2,225 | $2,080 | ||||||||
| Industrial | 927 | 867 | 1,831 | 1,723 | ||||||||
| Display and Graphics | 864 | 884 | 1,726 | 1,729 | ||||||||
| Consumer and Office | 735 | 675 | 1,434 | 1,361 | ||||||||
| Safety, Security and Protection | ||||||||||||
| Services | 599 | 547 | 1,156 | 1,074 | ||||||||
| Electro and Communications | 594 | 572 | 1,151 | 1,123 | ||||||||
| Transportation | 447 | 409 | 914 | 844 | ||||||||
| Corporate and Unallocated | 16 | 9 | 23 | 17 | ||||||||
| Total Company | $5,294 | $5,012 | $10,460 | $9,951 | ||||||||
| OPERATING INCOME | ||||||||||||
| Health Care | $310 | $274 | $619 | $536 | ||||||||
| Industrial | 189 | 158 | 373 | 312 | ||||||||
| Display and Graphics | 277 | 312 | 563 | 606 | ||||||||
| Consumer and Office | 140 | 123 | 262 | 245 | ||||||||
| Safety, Security and Protection | ||||||||||||
| Services | 151 | 136 | 284 | 261 | ||||||||
| Electro and Communications | 118 | 89 | 221 | 166 | ||||||||
| Transportation | 121 | 105 | 247 | 224 | ||||||||
| Corporate and Unallocated | (23 | ) | (11 | ) | (62 | ) | (47 | ) | ||||
| Total Company | $1,283 | $1,186 | $2,507 | $2,303 | ||||||||
3M, St. PaulInvestor Contacts:Mark Colin, 651-733-8206orBruce Jermeland, 651-733-1807orMedia Contact:Jacqueline Berry, 651-733-3611
