3M News Center

3M Reports Higher Second-Quarter Sales and Earnings

Monday, July 18, 2005 6:30 am CDT

Dateline:

ST. PAUL, Minn.
"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."

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

 

3M Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

(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

SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION

(Millions, except per-share amounts)

(Unaudited)
 
 

Three-months ended

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

(Dollars in millions)
(Unaudited)
 
  Six-months ended

June 30

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

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

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

 
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

(Dollars in millions)

(Unaudited)
 
 
BUSINESS        
SEGMENT Three-months ended Six-months ended
INFORMATION

June 30

June 30

(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  

Contact:

3M, St. Paul
Investor Contacts:
Mark Colin, 651-733-8206
or
Bruce Jermeland, 651-733-1807
or
Media Contact:
Jacqueline Berry, 651-733-3611

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