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3M Reports Record Fourth-Quarter and Full-Year Sales and Earnings; Company Raises Earnings Estimates For 2004

Tuesday, January 20, 2004 6:29 am CST

Dateline:

ST. PAUL, Minn.
"Sales reached an all-time high for the fourth consecutive quarter and earnings per share were the highest of any fourth quarter in 3M's history. It was a strong finish to the year."

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

Net income for the quarter was $619 million, or $0.77 per share, versus $511 million, or $0.65 per share, in the fourth quarter of 2002. Net income and per-share earnings increased 21.3 percent and 18.5 percent, respectively.

"Solid execution of both growth and productivity plans characterized the fourth quarter," said W. James McNerney, Jr., 3M chairman and CEO. "Sales reached an all-time high for the fourth consecutive quarter and earnings per share were the highest of any fourth quarter in 3M's history. It was a strong finish to the year."

Worldwide sales totaled $4.718 billion, up 14.0 percent compared to the fourth quarter of 2002. Sales volumes increased 7.6 percent, including a positive 1.7 percent impact from acquisitions. Volumes improved in all businesses, with an increase of 38.4 percent in Display and Graphics (includes 11.5 percent from acquisitions), 8.2 percent in Safety, Security and Protection Services, 2.6 percent in Transportation, 2.4 percent in Health Care, 2.2 percent in Industrial, 1.7 percent in Consumer and Office and 1.6 percent in Electro and Communications. Currency translation effects increased worldwide sales by 6.6 percent, while selling prices were down 0.2 percent.

Sales outside the United States totaled $2.849 billion, an increase of 23.9 percent versus last year's comparable quarter. Volumes increased 12.8 percent, while selling prices declined 0.8 percent. Currency translation effects increased international sales by 11.9 percent. Volumes increased 28.7 percent in Asia Pacific and 23.3 percent in Latin America, while European volumes declined 1.4 percent. In the United States, sales totaled $1.869 billion, up 1.6 percent from the same quarter of 2002. Volumes increased 1.1 percent, while selling prices improved by 0.5 percent.

Net income for the 2003 calendar year totaled $2.403 billion, or $3.02 per share, compared with $1.974 billion, or $2.50 per share, in 2002. Excluding special items (a), 2003 net income totaled $2.461 billion, or $3.09 per share; full-year net income and per-share earnings increased 18.2 percent and 17.5 percent, respectively. Full-year 2003 sales totaled $18.232 billion, up 11.6 percent in U.S. dollars. Volumes improved 6.6 percent versus the prior year, while selling prices declined 0.2 percent. Currency effects increased 2003 sales by 5.2 percent.

"Despite economic challenges in many parts of the world, the 3M team delivered a challenging operating plan in 2003," McNerney said, "and we are well-positioned for another successful year in 2004. Our corporate initiatives, now embedded in the 3M fabric, are helping to drive improvements in productivity, cash flow and, most importantly, top-line growth."

3M also raised its full-year 2004 earnings estimates. The company expects earnings to be in the range of $3.46 to $3.52 per share, an increase of 12 to 14 percent excluding special items in 2003. Sales volumes are anticipated to grow between 5 percent and 8 percent in 2004. For the first quarter of 2004, the company expects earnings to be in the range of $0.80 to $0.82 per share.

McNerney and 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 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. 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).

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. Changes in such assumptions or factors, including without limitation the outcome of and information derived from pending Congressional action concerning asbestos-related litigation, could produce significantly different results.

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 icons such as Scotch, Post-it, Scotchgard, Thinsulate, Scotch-Brite, Filtrete, Command and Dyneon. 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 Dyneon are trademarks of 3M.

3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)
 
 
  Fourth-Quarter 2003
 
Worldwide   U.S.   Intl.
Volume - core 5.9 % 0.0 % 10.7 %
 
Volume - acquisitions 1.7   1.1   2.1  
 
Volume - total 7.6 1.1 12.8
 
Price (0.2 ) 0.5 (0.8 )
 
Translation 6.6   --   11.9  
 
Total 14.0 % 1.6 % 23.9 %
 
 
Twelve-Months 2003
 
Worldwide U.S. Intl.
Volume - core 4.7 % 0.6 % 8.2 %
 
Volume - acquisitions 1.9   1.5  

 

2.2  
 
Volume - total 6.6 2.1 10.4
 
Price (0.2 ) 0.0 (0.3 )
 
Translation 5.2   --   9.5  
 
Total 11.6 % 2.1 % 19.6 %
 
3M Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Amounts in millions, except per-share amounts)

(Unaudited)

 
  Three-months ended   Twelve-months ended
December 31 December 31
2003   2002 2003   2002
Net sales $ 4,718   $ 4,138   $ 18,232   $ 16,332  
 
Operating expenses
Cost of sales 2,429 2,114 9,285 8,496
Selling, general and
administrative expenses 1,061 955 4,039 3,720
Research, development
and related expenses 286 273 1,102 1,070
Other expense   --     --     93     --  
 
Total   3,776     3,342     14,519     13,286  
 
Operating income   942     796     3,713     3,046  
 
Interest expense and
income
Interest expense 15 22 84 80
Interest income   (11 )   (12 )   (28 )   (39 )
 
Total 4     10     56     41  
 
Income before income taxes
and minority interest 938 786 3,657 3,005
Provision for income taxes 305 255 1,202 966
Minority interest   14     20     52     65  
 
Net income $ 619   $ 511   $ 2,403   $ 1,974  
 
Weighted average common
shares outstanding -
basic 784.6 780.6 782.8 780.0
Earnings per share -
basic $ 0.79   $ 0.65   $ 3.07   $ 2.53  
 
Weighted average common
shares outstanding -
diluted 800.9 791.3 795.3 791.0
Earnings per share -
diluted $ 0.77   $ 0.65   $ 3.02   $ 2.50  
 
Cash dividends paid
per common share $ 0.33   $ 0.31   $ 1.32   $ 1.24  
 

Share and per-share data have been adjusted to reflect the two-for-one stock split effective with third quarter 2003 reporting.

3M Company and Subsidiaries
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION
(Dollars in millions, except per-share amounts)
(Unaudited)
 
 

Twelve-months ended

 

Twelve-months ended

December 31, 2003 December 31, 2002
Excluding     Excluding    
special Special Reported special Special Reported
items   items   total   items   items   total
Net sales $ 18,232     $ --     $ 18,232     $ 16,332     $ --     $ 16,332  
Operating
expenses
Cost of sales 9,285 -- 9,285 8,375 121 8,496
Selling,
general and
administrative
expenses 4,039 -- 4,039 3,643 77 3,720
Research,
development
and related
expenses 1,102 -- 1,102 1,066 4 1,070
Other expense   --       93       93       --       --       --  
Total   14,426       93       14,519       13,084       202       13,286  
Operating
income (loss) 3,806 (93 ) 3,713 3,248 (202 ) 3,046
 
Interest expense
and (income),
net   56       --       56       41       --       41  
Income (loss)
before income
taxes and
minority
interest 3,750 (93 ) 3,657 3,207 (202 ) 3,005
 
Provision
(benefit) for
income taxes 1,237 (35 ) 1,202 1,042 (76 ) 966
Effective tax
rate 33.0 % -- 32.9 % 32.5 % -- 32.1 %
 
Minority
interest   52       --       52       83       (18 )     65  
Net income
(loss) $ 2,461     $ (58 )   $ 2,403     $ 2,082     $ (108 )   $ 1,974  
Weighted
average
diluted shares 795.3 795.3 795.3 791.0 791.0 791.0
Net income per
diluted share $ 3.09 $ (0.07 ) $ 3.02 $ 2.63 $ (0.13 ) $ 2.50
 

Share and per-share data have been adjusted to reflect the two-for-one stock split effective with third quarter 2003 reporting.

3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions, except per-share amounts)
(Unaudited)
 
  Dec. 31,   Dec. 31,
ASSETS 2003 2002
Current assets
Cash and cash equivalents $ 1,836 $ 618
Accounts receivable - net 2,714 2,527
Inventories 1,816 1,931
Other current assets   1,347   983
 
Total current assets 7,713 6,059
Investments 218 238
Property, plant and equipment - net 5,609 5,621
Other assets   4,053   3,411
 
Total assets $ 17,593 $ 15,329
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt $ 1,202 $ 1,237
Accounts payable 1,087 945
Payroll 436 411
Income taxes payable 880 518
Other current liabilities   1,477   1,346
 
Total current liabilities 5,082 4,457
Long-term debt 1,735 2,140
Other liabilities   2,910   2,739
 
Total liabilities   9,727   9,336
 
 
Total stockholders' equity - net 7,866 5,993
Shares outstanding
December 31, 2003: 784,117,360 shares
December 31, 2002: 780,391,362 shares    
 
Total liabilities and stockholders' equity
$ 17,593 $ 15,329
 

Shares outstanding have been adjusted to reflect the two-for-one stock split effective with third quarter 2003 reporting.

3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
 
  Three-months ended   Twelve-months ended
December 31 December 31
2003   2002 2003   2002
SUMMARY OF CASH FLOW:
 
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 1,286   $ 999   $ 3,793   $ 2,992  
 
Cash flows from investing
activities:
Purchases of property, plant
and equipment (261 ) (233 ) (677 ) (763 )
Acquisitions of businesses (11 ) (1,170 ) (439 ) (1,258 )
Other investing activities   19     42     127     94  
 
NET CASH USED IN
INVESTING ACTIVITIES   (253 )   (1,361 )   (989 )   (1,927 )
 
Cash flows from financing
activities:
Change in debt (68 ) 427 (440 ) 445
Purchases of treasury stock (291 ) (129 ) (685 ) (942 )
Reissuances of treasury
stock 130 96 555 522
Dividends paid to
stockholders (259 ) (243 ) (1,034 ) (968 )
Other financing activities   (4 )   --     (23 )   (78 )
 
NET CASH USED IN
FINANCING ACTIVITIES   (492 )   151     (1,627 )   (1,021 )
 
Effect of exchange rate
changes on cash   16   8     41     (42 )
 
Net increase (decrease) in
cash and cash equivalents 557 (203 ) 1,218 2
Cash and cash equivalents at
beginning of period   1,279     821     618     616  
 
Cash and cash equivalents at
end of period   1,836     618     1,836     618  
 

FREE CASH FLOW (Non-GAAP measure):

Net cash provided by
operating activities 1,286 999 3,793 2,992
Purchases of property, plant
and equipment   (261 )   (233 )   (677 )   (763 )
 
FREE CASH FLOW   1,025     766     3,116     2,229  
 
3M Company and Subsidiaries
BUSINESS SEGMENTS
(Dollars in millions)
(Unaudited)
 
 
BUSINESS        
SEGMENT Three-months ended Twelve-months ended
INFORMATION December 31 December 31
(Millions) 2003 2002 2003 2002
 
NET SALES
Health Care $ 1,020 $ 918 $ 3,995 $ 3,560
Industrial 865 793 3,354 3,147
Display and Graphics 810 569 2,962 2,228
Consumer and Office 685 645 2,607 2,444
Safety, Security and
Protection Services 470 405 1,928 1,686
Electro and Communications 472 448 1,818 1,831
Transportation 388 349 1,538 1,388
Corporate and Unallocated 8     11     30     48  
 
Total Company $ 4,718   $ 4,138   $ 18,232   $ 16,332  
 
OPERATING INCOME
Health Care $ 254 $ 243 $ 1,027 $ 900
Industrial 109 115 458 487
Display and Graphics 243 129 885 534
Consumer and Office 114 114 460 448
Safety, Security and
Protection Services 90 71 437 338
Electro and Communications 71 55 255 253
Transportation 88 80 389 333
Corporate and Unallocated   (27 )   (11 )   (198 )   (247 )
 
Total Company $ 942   $ 796   $ 3,713   $ 3,046  

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. During the second quarter of 2002, under it's 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 2003 and 2002 charges were recorded in Corporate and Unallocated.

Contact:

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

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