3M Reports Fourth-Quarter and Full-Year 2008 Results.

- Company Posts Record Annual Sales Despite Rapid Fourth-Quarter Economic Deceleration -

- Company Adjusts Earnings Expectations for 2009 -

Full-Year 2008 Highlights:

* Sales of $25.3 billion, up 3.3 percent from 2007 and up 6.5 percent excluding the company's optical systems business

* Local-currency sales, including acquisitions, up 1.4 percent

* Reported operating income of $5.2 billion versus $6.2 billion in 2007; excluding special items (a-i), operating income was $5.5 billion in both years

* Reported earnings per share of $4.89 versus $5.60 in 2007; excluding special items (a-i), earnings were $5.17 per share versus $4.98 in 2007, an increase of 3.8 percent

* Returned $3 billion to shareholders in 2008 through cash dividends and repurchases of shares

Fourth Quarter 2008 Highlights:

* Sales down 11.2 percent to $5.5 billion, or down 8.1 percent excluding optical

* Local-currency sales, including acquisitions, down 6 percent

* Reported operating income of $755 million versus $1.3 billion in 2007; excluding special items (a-i), operating income was $974 million versus $1.3 billion in 2007

* Reported earnings per share of $0.77 versus $1.17 in 2007; excluding special items (a-i), earnings were $0.97 per share versus $1.19 in the prior year

ST. PAUL, Minn. -- 3M (NYSE:MMM) today reported 2008 sales of $25.3 billion, an all-time record for the company. Sales were up 3.3 percent from a year ago. Reported net income for 2008 was $3.5 billion, or $4.89 per share, versus $4.1 billion, or $5.60 per share, in 2007. Excluding special items (a-i), 2008 earnings were $5.17 per share versus $4.98 per share in 2007, up 3.8 percent.

Fourth-quarter sales were $5.5 billion, a decrease of 11.2 percent. Fourth-quarter net income was $536 million, or $0.77 per share, versus $851 million, or $1.17 per share, in the fourth quarter of 2007. Excluding special items (a-i), net income in the fourth quarter of 2008 was $676 million, or $0.97 per share, versus $863 million, or $1.19 per share, in the fourth quarter of 2007.

"3M drove record sales in 2008 despite a dramatic fourth-quarter economic downturn," said George W. Buckley, 3M chairman, president and CEO, "and we are responding to lower demand with aggressive cost management and operational discipline. 3M employees are doing an outstanding job managing through worldwide market challenges and are positioning our company to seize the upside when growth resumes."

Buckley continued, "We streamlined our operations throughout 2008 and we will continue to optimize to protect against the downside throughout 2009. In addition, we plan to reduce capital expenditures by about 30 percent and aggressively attack working capital in order to conserve cash. Finally, we remain focused on gaining share by delighting our current customers and winning new ones. Throughout our 106-year history, we have weathered many economic storms, and expect to emerge from this one stronger and more competitive than ever."

Reflecting the ongoing global economic uncertainty and continued challenges in many of its end-markets, 3M adjusted its 2009 sales and earnings expectations. The company is now planning for organic sales volumes to decline between 5 percent and 9 percent in 2009, versus a previous planning assumption of negative 3 percent to negative 7 percent. As a result, the company is now planning for 2009 earnings to be in the range of $4.30 to $4.70 per share, down from a previous range of $4.50 to $4.95. These estimates exclude any potential special items.

Full-Year Key Financial Highlights

For the full-year 2008, sales increased 3.3 percent to $25.3 billion, driven by a 1.4 percent increase in local-currency sales, including acquisitions. Local-currency sales growth was led by 3M's three largest businesses--with growth of 18.3 percent in Safety, Security and Protection Services; 6.8 percent in Health Care; and 4.6 percent in Industrial and Transportation. Local-currency sales declined in the three remaining businesses, with Consumer and Office down 0.3 percent, Electro and Communications down 1.7 percent and Display and Graphics down 17.9 percent. Sales in 3M's international operations grew 4 percent and now constitute 64 percent of total sales, the highest in 3M's history.

Full-year net income was $3.5 billion, or $4.89 per share, versus $4.1 billion or $5.60 per share in 2007. Excluding special items (a-i), 2008 net income was $3.7 billion, or $5.17 per share, versus $3.6 billion, or $4.98 per share, in 2007. Per-share earnings increased 3.8 percent on this basis.

Fourth Quarter Key Financial Highlights

Fourth-quarter worldwide sales totaled $5.5 billion, down 11.2 percent compared to the fourth quarter of 2007. Local-currency sales including acquisitions decreased 6 percent and foreign exchange impacts were negative 4.9 percent in the quarter. Local-currency sales including acquisitions increased in two businesses during the quarter--up 13.2 percent in Safety, Security and Protection Services and up 4.5 percent in Health Care. Sales in local currencies for the other four 3M business segments dropped during the fourth quarter, with Industrial and Transportation down 6.3 percent, Consumer and Office down 6.5 percent, Electro and Communications down 12.3 percent, and Display and Graphics down 25.8 percent.

Fourth-quarter net income was $536 million, or $0.77 per share, versus $851 million, or $1.17 per share, in the fourth quarter of 2007. Included in these results is a net loss from special items (a-i) of $140 million, or $0.20 per share, in the fourth quarter of 2008, and a net loss of $12 million, or $0.02 per share, in last year's fourth quarter. Excluding special items (a-i), fourth-quarter 2008 net income was $676 million, or $0.97 per share, versus $863 million, or $1.19 per share, in last year's fourth quarter.

Fourth Quarter Business Segment Discussion (Operating income and margin figures exclude special items)

Industrial and Transportation

* Sales down 11.3 percent to $1.7 billion

* Local-currency sales declined 6.3 percent, including a 3.2 percent benefit from acquisitions

* Volume declines were heavily influenced by customer plant shut-downs across the manufacturing sector, along with customer inventory reduction efforts

* Automotive aftermarket business posted positive sales growth for the quarter; most other businesses and geographic regions posted negative sales and operating income growth

* Profits of $239 million with operating margins of 14.3 percent

Health Care

* Sales of $1 billion, down 2.1 percent

* Local-currency sales growth of 4.5 percent including 2.2 percent from acquisitions

* Solid growth in core infection prevention and skin and wound care products

* Positive sales growth in both the U.S. and Asia Pacific

* Operating income of $298 million, up 4.5 percent, with company-leading margins of 28.9 percent

Safety, Security and Protection Services

* Sales increased 2.9 percent to $769 million

* Local-currency sales up 13.2 percent, including 15.7 percent from acquisitions, primarily Aearo Technologies

* The 2008 divestiture of HighJump Software, Inc. hurt sales growth by 2.9 percent

* Overall sales growth led by personal protection equipment

* Regional sales growth led by the U.S. and Asia Pacific

* Profits down 3.5 percent to $128 million; operating margins of 16.7 percent

Consumer and Office

* Sales down 11.2 percent to $765 million

* Local-currency sales down 6.5 percent, hurt by the poorest fourth-quarter retail industry sales performance in recent memory

* Positive local-currency sales growth in home care and do-it-yourself businesses; sales declined in all major geographies

* Operating margins of 15.5 percent, with profits of $119 million

Display and Graphics

* Sales of $685 million, down 28.4 percent, with local-currency sales down 25.8 percent

* Optical systems' sales down 48 percent, driven by weak consumer demand for electronics and OEM customer plant shutdowns; optical diluted overall Display and Graphics' sales growth by 21 percentage points in the quarter

* Local-currency sales in traffic safety systems up nearly 3 percent as highway infrastructure projects continue to grow steadily

* Operating margins of 10.2 percent on profits of $70 million

Electro and Communications

* Sales declined 15.3 percent to $590 million

* Local-currency sales down 12.3 percent, driven by weak demand and customer inventory reduction in the electronics, residential construction and telecommunications industries

* Electrical markets won another contract from a major utility for its ACCR overhead power cable solution

* Profits of $86 million, with margins at 14.5 percent

Buckley 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 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 about 3M's financial results and estimates and business prospects 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," "will," "target," "forecast" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or business plans or prospects. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic and capital markets 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, compounds, raw materials and energy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply interruptions (including those caused by natural and other disasters and other events); (6) the impact of acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring; (7) generating fewer productivity improvements than estimated; and (8) legal proceedings, including significant developments that could occur in the legal and regulatory proceedings described in the company's Annual Report on Form 10-K for the year ended December 31, 2007 and its subsequent Quarterly Reports on Form 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 under "Risk Factors" in Part I, Item 1A (Annual Report) and in Part II, Item 1A (Quarterly Report). 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 news release as a result of new information or future events or developments.

About 3M

A recognized leader in research and development, 3M produces thousands of innovative products for dozens of diverse markets. 3M's core strength is applying its more than 40 distinct technology platforms - often in combination - to a wide array of customer needs. With $25 billion in sales, 3M employs 79,000 people worldwide and has operations in more than 60 countries.

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The reconciliation provided below reconciles the non-GAAP operating income measure by business segment with the most directly comparable GAAP financial measure for the three-months and twelve-months ended December 31, 2008.

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The reconciliation provided below reconciles the non-GAAP financial measures with the most directly comparable GAAP financial measures for the three-months and twelve-months ended December 31, 2007.

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Refer to 3M's Current Report on Form 8-K dated May 19, 2008, which updated 3M's Annual Report on Form 10-K dated February 15, 2008, for further discussion of these previously disclosed 2007 items.

The reconciliation provided below reconciles the non-GAAP operating income measure by business segment with the most directly comparable GAAP financial measure for the three-months and twelve-months ended December 31, 2007.

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For the three-months and twelve-months ended December 31, 2008 and December 31, 2007, refer to the preceding notes (a) through (i) and the preceding reconciliations of operating income by business segment for a discussion and summary of items that impacted reported business segment operating income.