3M News Center

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

Monday, July 21, 2003 6:29 am CDT

Dateline:

ST. PAUL, Minn.
"Our employees did a terrific job in the second quarter"

ST. PAUL, Minn.--(BUSINESS WIRE)--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.

Contact:

3M, St. Paul
Investor Contacts:
Matt Ginter, 651-733-8206
or
Dan Colvin, 651-736-2637
or
Media Contact:
John Cornwell, 651-733-7698

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