3M News Center

3M Reports Higher Third-Quarter Sales and Earnings; Company Meets Third-Quarter Earnings Guidance of $0.97 Per Share

Monday, October 18, 2004 6:30 am CDT

Dateline:

ST. PAUL, Minn.
"We have achieved strong earnings, cash flow and economic profit growth in 2004 despite increasing raw material price pressure, and are confident in our ability to leverage our corporate initiatives to drive sustainable revenue growth and operational excellence in the future."

ST. PAUL, Minn.--(BUSINESS WIRE)--3M (NYSE:MMM) today announced its third-quarter 2004 sales and earnings results.

The company reported net income of $775 million, or $0.97 per share, versus $663 million, or $0.83 per share, in the third quarter of 2003. Net income and earnings per share increased by nearly 17 percent.

"Broad-based growth among many of our businesses and continued productivity improvement generated another excellent earnings result," said W. James McNerney, Jr., 3M chairman and CEO. "Our employees around the world are driving growth through initiatives like 3M Acceleration and customer-focused Six Sigma projects, and we continue to execute on our aggressive operational goals."

Third-quarter worldwide net sales totaled $4.969 billion, up 7.6 percent compared to the third quarter of 2003. Global sales volumes increased 5.6 percent. Local-currency sales (which excludes the impact of currency translation on sales) increased 10.5 percent in Industrial; 7.7 percent in Consumer and Office; 6.6 percent in Display and Graphics; 6.4 percent in Safety, Security and Protection Services; 3.7 percent in Transportation; 1.5 percent in Electro and Communications; and declined 0.8 percent in Health Care. Currency effects increased sales by 2.5 percent and selling prices declined .5 percent.

Sales outside the United States totaled $2.91 billion, an increase of 10.8 percent versus the third quarter of 2003. Volumes increased 7.5 percent, while selling prices declined 1.1 percent. Currency translation effects increased international sales by 4.4 percent. Local-currency sales increased 12.2 percent in Asia Pacific, 8.4 percent in the combined Latin America, Africa and Canada region, and declined 0.3 percent in Europe.

In the United States, sales totaled $2.06 billion, up 3.5 percent from the third quarter of 2003. Volumes increased 3.2 percent, and selling prices increased by 0.3 percent.

3M's strong balance sheet and cash flow enabled the company to make special contributions of $455 million to its global pension plans in the third quarter as part of a multiyear plan to improve overall pension funding levels.

"We are optimistic about the strength of our diverse business and technology portfolio, but remain cautious on the global economy." McNerney said. "We have achieved strong earnings, cash flow and economic profit growth in 2004 despite increasing raw material price pressure, and are confident in our ability to leverage our corporate initiatives to drive sustainable revenue growth and operational excellence in the future."

3M also provided guidance on its earnings outlook for the remainder of 2004. The company expects fourth-quarter earnings of $0.90 to $0.91 per share, excluding the potential one-time impact of pending legislation to encourage the reinvestment of foreign earnings in the United States and the impact of an anticipated change in an accounting rule related to contingently convertible debt instruments. The combined fourth-quarter unfavorable impact of these items is expected to be $0.06 per share; therefore, including the impact of this pending legislation and anticipated accounting rule change, the company would expect fourth-quarter 2004 earnings of $0.84 to $0.85 per share.

Excluding these potential fourth quarter adjustments, full-year 2004 earnings are expected to be $3.74 to $3.75, an increase of more than 20 percent over 2003 and at the high end of a previous expectation in the range of $3.72 to $3.75 per share. Full-year earnings, including these potential adjustments, are expected to be $3.68 to $3.69. Management expects full-year sales volume growth of approximately 7 percent.

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 Time) today. Investors can access a webcast of this conference, along with related charts and materials, at http://investor.3M.com.

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) foreign currency exchange rates and fluctuations in those rates; (3) the timing and acceptance of new product offerings; (4) the availability and cost of purchased components and materials, including oil-derived compounds; (5) 3M's ability to successfully integrate and obtain the anticipated synergies from acquisitions and strategic alliances; (6) 3M's ability to implement its corporate initiatives effectively; and (7) 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, 2003, and its subsequent periodic reports on Forms 10-Q (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 Nine-months ended

September 30

September 30
2004 2003 2004 2003
Net sales $ 4,969   $ 4,616   $ 14,920   $ 13,514  
Operating expenses
Cost of sales 2,457 2,322 7,345 6,856
Selling, general and
administrative expenses 1,047 994 3,235 2,978
Research, development and
related expenses 282 270 854 816
Other expense   -     -     -     93  
Total   3,786     3,586     11,434     10,743  
Operating income   1,183     1,030     3,486     2,771  
Interest expense and income
Interest expense 17 22 52 69
Interest income   (12 )   (6 )   (32 )   (17 )
Total   5     16     20     52  
Income before income taxes
and minority interest 1,178 1,014 3,466 2,719
Provision for income taxes 389 339 1,144 897
Minority interest   14     12     52     38  
Net income $ 775   $ 663   $ 2,270   $ 1,784  
Weighted average common
shares outstanding - basic 780.6 784.6 782.0 782.2
Earnings per share - basic $ 0.99   $ 0.85   $ 2.90   $ 2.28  
Weighted average common
shares outstanding - diluted 796.2 797.5 798.5 793.4
Earnings per share - diluted $ 0.97   $ 0.83   $ 2.84   $ 2.25  
Cash dividends paid per common
share $ 0.36   $ 0.33   $ 1.08   $ 0.99  
 
 
3M Company and Subsidiaries
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION
(Millions, except per-share amounts)
(Unaudited)
                       
Nine-months ended Nine-months ended

September 30, 2004

September 30, 2003

Excluding Excluding
special Special Reported special Special Reported
items items total items (a) items (a) total
Net sales $ 14,920   $ - $ 14,920   $ 13,514   $ -   $ 13,514  
Operating
expenses
Cost of
sales 7,345 - 7,345 6,856 - 6,856
Selling,
general and
admini-
strative
expenses 3,235 - 3,235 2,978 - 2,978
Research,
development
and related
expenses 854 - 854 816 - 816
Other
expense   -     -   -     -     93     93  
Total   11,434     -   11,434     10,650     93     10,743  
Operating
income (loss) 3,486 - 3,486 2,864 (93 ) 2,771
 
Interest
expense and
(income), net   20     -   20     52     -     52  
Income (loss)
before income
taxes and
minority
interest 3,466 - 3,466 2,812 (93 ) 2,719
 
Provision
(benefit) for
income taxes 1,144 - 1,144 932 (35 ) 897
Effective tax
rate 33.0 % - 33.0 % 33.2 % - 33.0 %
 
Minority
interest   52     -   52     38     -     38  
Net income
(loss) $ 2,270   $ - $ 2,270   $ 1,842   $ (58 ) $ 1,784  
Weighted
average

 

diluted
shares 798.5 - 798.5 793.4 793.4 793.4
Net income
per diluted
share $ 2.84   $ - $ 2.84   $ 2.32   $ (0.07 ) $ 2.25  
 

(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.

 
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
 
    Sep. 30,     Sep. 30,     Dec. 31,
ASSETS 2004 2003 2003
Current assets

 

 

 

Cash and cash equivalents $ 2,200 $ 1,279 $ 1,836
Accounts receivable - net 2,853 2,791 2,714
Inventories 1,953 1,882 1,816
Other current assets   1,291   1,390   1,354
Total current assets 8,297 7,342 7,720
Investments 217 214 218
Property, plant and equipment - net 5,468 5,467 5,609
Goodwill, intangible assets and other
assets   4,082   3,774   4,053
Total assets $ 18,064 $ 16,797 $ 17,600
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current portion
of long-term debt $ 1,377 $ 1,255 $ 1,202
Accounts payable 1,116 969 1,087
Accrued payroll 516 457 436
Accrued income taxes 877 825 880
Other current liabilities   1,387   1,462   1,477
Total current liabilities 5,273 4,968 5,082
Long-term debt 1,284 1,738 1,735
Other liabilities   2,811   2,583   2,898
Total liabilities   9,368   9,289   9,715
Total stockholders' equity - net 8,696 7,508 7,885
Shares outstanding
September 30, 2004: 778,533,778 shares
September 30, 2003: 784,883,033 shares
December 31, 2003: 784,117,360 shares
Total liabilities and stockholders'      
equity $ 18,064 $ 16,797 $ 17,600
 
 
3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
       
Nine-months ended
September 30
2004 2003
SUMMARY OF CASH FLOW:
 
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,959   $ 2,507  
Cash flows from investing activities:
Purchases of property, plant and
equipment (613 ) (416 )
Acquisitions, net of cash acquired (73 ) (428 )
Other investing activities   39     108  
NET CASH USED IN INVESTING ACTIVITIES   (647 )   (736 )
Cash flows from financing activities:
Change in debt (271 ) (372 )
Purchases of treasury stock (1,235 ) (394 )
Reissuances of treasury stock 423 425
Dividends paid to stockholders (845 ) (775 )
Other financing activities   (31 )   (19 )
NET CASH USED IN FINANCING ACTIVITIES   (1,959 )   (1,135 )
Effect of exchange rate changes on cash   11     25  
Net increase in cash and cash equivalents 364 661
Cash and cash equivalents at beginning of
period   1,836     618  
Cash and cash equivalents at end of period $ 2,200   $ 1,279  
 
 
3M Company and Subsidiaries
SUPPLEMENTAL CASH FLOW AND
NET WORKING CAPITAL TURNS INFORMATION
(Dollars in millions)
(Unaudited)
       
Nine-months ended
September 30
2004 2003
FREE CASH FLOW (Non-GAAP measure):
Net cash provided by operating activities $ 2,959 $ 2,507
Purchases of property, plant and equipment   (613 )   (416 )
Free Cash Flow (a) $ 2,346   $ 2,091  
 
NET WORKING CAPITAL TURNS (Non-GAAP measure):
 
Net Working Capital Turns (b)   5.4     5.0  
 

(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 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 September 30, 2004
 
Sales Change Analysis United Inter-
By Geographic Area States national Worldwide
Volume - core 2.3 % 7.2 % 5.0 %
 
Volume - acquisitions 0.9   0.3   0.6  
Volume - total 3.2 7.5 5.6
 
Price 0.3   (1.1 ) (0.5 )
Total local-currency sales 3.5 6.4 5.1
 
Translation -   4.4   2.5  
Total sales change 3.5 % 10.8 % 7.6 %
 
 
Local- Total
Sales Change Analysis currency Trans- Sales
By Business Segment Sales lation Change
Health Care (0.8 )% 3.0 % 2.2 %
 
Industrial 10.5 2.7 13.2
 
Display and Graphics 6.6 2.4 9.0
 
Consumer and Office 7.7 1.8 9.5
 
Safety, Security and Protection
Services 6.4 2.5 8.9
 
Electro and Communications 1.5 2.0 3.5
 
Transportation 3.7 2.8 6.5
 
 
3M Company and Subsidiaries
SALESCHANGE ANALYSIS
(Unaudited)
           
Nine-Months Ended September 30, 2004
 
Sales Change Analysis United Inter-
By Geographic Area States national Worldwide
Volume - core 2.7 % 9.8 % 6.8 %
 
Volume - acquisitions 0.7   0.3   0.5  
Volume - total 3.4 10.1 7.3
 
Price 0.0   (1.1 ) (0.6 )
Total local-currency sales 3.4 9.0 6.7
 
Translation -   6.5   3.7  
Total sales change 3.4 % 15.5 % 10.4 %
 
 
Local- Total
Sales Change Analysis currency Trans- Sales
By Business Segment Sales lation Change
Health Care 0.6 % 4.1 % 4.7 %
 
Industrial 9.9 3.9 13.8
 
Display and Graphics 14.7 4.5 19.2
 
Consumer and Office 6.4 2.7 9.1
 
Safety, Security and Protection
Services 6.2 3.5 9.7
 
Electro and Communications 3.0 2.8 5.8
 
Transportation 5.4 4.2 9.6
 
 
3M Company and Subsidiaries
BUSINESS SEGMENTS
(Dollars in millions)
(Unaudited)
               
BUSINESS

SEGMENT

Three-months ended

Nine-months ended
INFORMATION September 30 September 30
(Millions) 2004 2003 2004 2003
NET SALES
Health Care $ 1,035 $ 1,012 $ 3,115 $ 2,975
Industrial 940 830 2,832 2,489
Display and Graphics 841 772 2,564 2,152
Consumer and Office 737 673 2,098 1,922
Safety, Security and Protection
Services 525 482 1,599 1,458
Electro and Communications 470 454 1,424 1,346
Transportation 411 386 1,260 1,150
Corporate and Unallocated   10     7     28     22  
Total Company $ 4,969   $ 4,616   $ 14,920   $ 13,514  
 
OPERATING INCOME
Health Care $ 277 $ 272 $ 813 $ 773
Industrial 170 115 503 349
Display and Graphics 286 251 891 642
Consumer and Office 150 128 395 346
Safety, Security and Protection
Services 123 111 384 347
Electro and Communications 79 66 223 184
Transportation 105 106 330 301
Corporate and Unallocated (a)   (7 )   (19 )   (53 )   (171 )
Total Company $ 1,183   $ 1,030   $ 3,486   $ 2,771  
 

(a) The following charges were recorded in Corporate and Unallocated. First quarter 2004 includes $16 million in expense related to a reduction in breast implant receivables, primarily related to an arbitration ruling in the first quarter that rejected the Company's claims for recovery under certain of its claims-made policies. Third quarter 2003 includes respirator mask/asbestos litigation expenses and implant litigation expenses. 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.

Contact:

3M, St. Paul
Investor Contacts:
Mark Colin, 651-733-8206
or
Bruce Jermeland, 651-733-1807
or
Media Contact:
John Cornwell, 651-733-7698

Related Materials

Follow Us
The brands listed above are trademarks of 3M.
Change Location
United States - English
Business Wire NewsHQsm