3M News Center

3M Reports Higher First-Quarter Sales and Earnings; Revenues Increase 11.0 Percent to a Record $4.32 Billion

Monday, April 21, 2003 6:30 am CDT

Dateline:

ST. PAUL, Minn.
"Management's Discussion and Analysis of Financial Condition and Results of Operations"

ST. PAUL, Minn.--(BUSINESS WIRE)--3M (NYSE:MMM) today announced its sales and earnings results for first quarter 2003.

The company reported net income of $502 million, or $1.27 per share, versus $452 million, or $1.14 per share, in the first quarter of 2002. Excluding special items(a), 3M earned $1.42 per share, up 15.4 percent from $1.23 per share in last year's first quarter. Net income, excluding special items(a), was $560 million versus $487 million in the comparable quarter.

"The entire 3M team is energized by this quarter's results," said W. James McNerney, Jr., 3M chairman and CEO. "3Mers everywhere are driving our global corporate initiatives across the company and achieving both improved productivity and accelerated top-line growth."

Worldwide sales in the first quarter totaled $4.318 billion, 11.0 percent higher than in the year-earlier quarter. Sales volumes increased 5.4 percent, including a positive 2.0 percent impact from acquisitions. Volumes increased 24.4 percent in Display and Graphics (includes 12 percent from acquisitions), 5.0 percent in Safety, Security and Protection Services, 4.7 percent in Health Care, 3.9 percent in Industrial, 3.3 percent in Consumer and Office and 1.7 percent in Transportation. Volumes declined 5.1 percent in Electro and Communications. Currency effects increased worldwide sales by 5.6 percent, while selling prices were flat.

Sales in the United States totaled $1.800 billion, up 1.0 percent from the same quarter of 2002. Volumes increased 1.4 percent, including a positive 1.8 percent impact from acquisitions, while selling prices declined 0.4 percent.

Sales outside the United States totaled $2.518 billion. Volumes increased 8.7 percent versus the comparable quarter, which includes a positive 2.2 percent impact from acquisitions. Changes in the value of the U.S. dollar increased international sales by 10.4 percent and selling prices increased 0.4 percent. Volumes increased 19 percent in Asia Pacific driven by an 8 percent increase in Japan and a 30 percent increase in the rest of the region. Volumes also increased in Latin America by 17.5 percent, whereas volumes declined 1.1 percent in Europe.

"As everyone knows, geo-political and economic conditions remain highly uncertain," McNerney said. "Despite these conditions, we remain committed to achieving our top-line and profitability goals while driving higher cash flow and preserving a strong and healthy balance sheet."

3M also reaffirmed its earnings outlook for 2003. For the year, the company expects reported earnings will be within a range of $5.65 to $5.85 per share. Excluding special items, 3M expects 2003 earnings to be between $5.80 and $6.00 per share. Second-quarter earnings are expected to be in the range of $1.47 to $1.53 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) 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. During the first quarter of 2002, under its previously announced restructuring plan, 3M incurred pretax charges of $54 million ($35 million after-tax) primarily related to employee separation costs and accelerated depreciation charges.

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)
 
  First-Quarter 2003
 
Worldwide   U.S.   Intl.
 
Volume - core 3.4 % (0.4 )% 6.5 %
 
Volume - acquisitions
and divestitures 2.0 1.8 2.2
 
Price -- (0.4 ) .4
 
Translation 5.6   --   10.4  
 
Total 11.0 % 1.0 % 19.5 %
 
3M Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Amounts in millions, except per-share amounts)
(Unaudited)
 
  Three-months ended
March 31
 
2003 2002
 
Net sales $ 4,318   $ 3,890  
 
Operating expenses
Cost of sales 2,211 2,036
Selling, general and
administrative expenses 963 877
Research, development and
related expenses 270 264
Other expense   93     --  
 
Total   3,537     3,177  
 
Operating income   781     713  
 
Interest expense and income
Interest expense 23 19
Interest income   (6 )   (9 )
 
Total   17     10  
 
Income before income taxes
and minority interest 764 703
 
Provision for income taxes 248 227
 
Minority interest   14     24  
 
Net income $ 502   $ 452  
 
Weighted average common
shares outstanding - basic 390.0 389.9
Earnings per share - basic $ 1.29   $ 1.16  
 
Weighted average common
shares outstanding - diluted 395.3 395.2
Earnings per share - diluted $ 1.27   $ 1.14  
 
3M Company and Subsidiaries
Supplemental Unaudited Consolidated Statement of Income Information
(Dollars in millions, except per-share amounts)
 
  Three-months ended   Three-months ended
March 31, 2003 March 31, 2002
 
Excluding     Excluding    
special Special Reported special Special Reported
items items total items items total
 
Net sales $ 4,318   $ --   $ 4,318   $ 3,890   $ --   $   3,890  
 
Operating
expenses
Cost of sales 2,211 -- 2,211 2,006 30   2,036
Selling,
general and
administrative
expenses 963 -- 963 856 21 877
Research,
development
and related
expenses 270 -- 270 261 3 264
Other expense   --     93     93     --     --       --  
 
Total   3,444     93     3,537     3,123     54       3,177  
 
Operating
income (loss) 874 (93 ) 781 767 (54 ) 713
 
Interest expense
and (income),
net   17     --     17     10     --       10  
 
Income (loss)
before income
taxes and
minority
interest 857 (93 ) 764 757 (54 ) 703
 
Provision
(benefit) for
income taxes 283 (35 ) 248 246 (19 ) 227
Effective tax
rate 33.1 % 32.5 % 32.5 % 32.2 %
 
Minority
interest   14     --     14     24     --       24  
 
Net income
(loss) $ 560   $ (58 ) $ 502   $ 487   $ (35 ) $   452  
 
Weighted
average
diluted shares 395.3 395.3 395.3 395.2 395.2 395.2
Net income per
diluted share $ 1.42   $ (.15 ) $ 1.27   $ 1.23   $ (.09 ) $   1.14  
 
3M Company and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in millions, except per-share amounts)
(Unaudited)
 
  Mar. 31,   Mar. 31,   Dec. 31,
ASSETS 2003 2002 2002
Current assets
Cash and cash equivalents $ 561 $ 590 $ 618
Accounts receivable - net 2,643 2,610 2,527
Inventories 1,957 2,000 1,931
Other current assets   1,303   1,073   983
 
Total current assets 6,464 6,273 6,059
Investments 221 262 238
Property, plant and equipment - net 5,550 5,488 5,621
Other assets   3,610   2,408   3,411
 
Total assets $ 15,845 $ 14,431 $ 15,329
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt $ 1,200 $ 984 $ 1,237
Accounts payable 963 781 945
Payroll 409 531 411
Income taxes 652 595 518
Other current liabilities   1,468   1,121   1,346
 
Total current liabilities 4,692 4,012 4,457
Long-term debt 2,119 1,891 2,140
Other liabilities   2,718   2,526   2,739
 
Total liabilities   9,529   8,429   9,336
 
 
Total stockholders' equity - net 6,316 6,002 5,993
Shares outstanding
March 31, 2003: 390,833,851 shares
March 31, 2002: 389,347,924 shares
December 31, 2002: 390,195,681 shares      
 
Total liabilities and stockholders'
equity $ 15,845 $ 14,431 $ 15,329
 

3M Company and Subsidiaries

BUSINESS SEGMENTS (Unaudited)

As more fully described in 3M's 2002 Annual Report on Form 10-K, in September 2002, 3M announced it would strategically realign its organization for faster growth and a closer focus on markets and customers. This realignment resulted in seven reportable business segments compared to the previous structure of six reportable business segments. These structural changes were driven by 3M's strategic planning process and represent an important step toward access to its larger and faster-growing markets. Internal management reporting for the new reportable business segments commenced January 1, 2003. 3M provided in its "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in its 2002 Annual Report on Form 10-K supplemental financial information related to these new business segments on an annual basis. This information was provided on a supplemental basis as the company did not operate under this new structure for these periods, and has only operated under this new structure since January 1, 2003. 3M filed a Current Report on Form 8-K on April 4, 2003, that provided supplemental unaudited financial information on both an annual and quarterly basis for the years ended December 31, 2002, 2001 and 2000 reflecting the historical realigned segments. This supplemental financial information was provided for the respective years to show the results on an interim basis for the realigned segments. Results under the new structure for the quarter ended March 31, 2003 and 2002 follow.

3M Company and Subsidiaries    
BUSINESS SEGMENTS (Unaudited)
 
BUSINESS
SEGMENT Three-months ended
INFORMATION March 31
(Millions) 2003 2002
 
NET SALES
Health Care $ 946 $ 845
Industrial 821 753
Consumer and Office 612 569
Display and Graphics 661 505
Electro and Communications 434 444
Safety, Security and Protection Services 458 413
Transportation 381 349
Corporate and Unallocated 5     12  
 
Total Company $ 4,318   $ 3,890  
 
 
OPERATING INCOME
Health Care $ 238 $ 220
Industrial 132 111
Consumer and Office 110 105
Display and Graphics 182 117
Electro and Communications 47 52
Safety, Security and Protection Services 105 86
Transportation 100 85
Corporate and Unallocated $ (133 ) $ (63 )
 
Total Company $ 781   $ 713  

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 pre-tax charges of $93 million ($58 million after-tax) related to this proceeding (recorded in Corporate and Unallocated). During the first quarter of 2002, under its previously announced restructuring plan, 3M incurred pre-tax charges of $54 million ($35 million after-tax) primarily related to employee separation costs and accelerated depreciation charges (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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