3M Reports Record First-Quarter Sales and Earnings; Company Raises Growth and Earnings Estimates for 2006.ST. PAUL St. Paul as a missionary he fearlessly confronts the “perils of waters, of robbers, in the city, in the wilderness.” [N.T.: II Cor. 11:26] See : Bravery , Minn. -- 3M (NYSE NYSE See: New York Stock Exchange :MMM MMM Myeloid metaplasia with myelofibrosis, see there ) today announced its sales and profit results for the first quarter 2006. First-quarter net income was $899 million, or $1.17 per share, versus $771 million, or $0.97 per share, in the first quarter of 2005. Net income and earnings per share increased 16.6 percent and 20.6 percent, respectively. Included in these results are stock option related costs of $0.02 per share in the first quarter of 2006 and $0.06 per share in the first quarter of 2005(a). "This was an outstanding quarter for 3M, characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by broad-based broad-based Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased growth from our entire portfolio and continued strong leverage to the bottom line. Quarterly sales reached an all-time all-time adj. Exceeding all others up to the present time: an all-time speed skating record. all-time Adjective Informal high with local-currency growth of over 10 percent, and we delivered a double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. net income increase while also investing for the future," said George W. Buckley George W. Buckley is the Chairman, President and Chief Executive of 3M. He was named to these positions on December 7 2005. Buckley came to 3M from Brunswick Corporation where he served as chairman and chief executive officer since June 2000. , 3M chairman, president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "We are off to a very strong start in 2006 which gives me great confidence in the ability of our teams around the world to drive accelerated growth and achieve superior financial results." First-quarter worldwide sales in U.S. dollars totaled $5.6 billion, up 8.3 percent compared to the first quarter of 2005. Total local-currency sales increased 10.4 percent, including 2.3 percent from acquisitions, primarily CUNO. Local-currency sales increased 15.6 percent in Safety, Security and Protection Services, 14.0 percent in Industrial and Transportation (including 7.5 percent due to CUNO), 10.6 percent in Electro E`lec´tro n. 1. An electrotype. and Communications, 9.5 percent in Display and Graphics, 8.4 percent in Consumer and Office, and 4.9 percent in Health Care. "Looking ahead, we expect continued strong sales and earnings growth through the rest of 2006," said Buckley Buck·ley , William Frank, Jr. Born 1925. American writer and editor known especially for his caustic, polysyllabic wit. . "For the longer term, I see tremendous opportunity for the people of 3M to transform our many strengths - innovative technology and products, broad geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. presence and capability, and established positions in many fast growth end-markets - into even greater sustainable growth." 3M also provided revised 2006 sales growth and earnings estimates. The company raised its 2006 revenue growth guidance, and now expects full-year, organic local-currency growth of between 5.5 and 8 percent, up from a previous full-year organic local-currency growth expectation of 4 to 7 percent. The company expects an additional approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 1.5 percent full-year local-currency growth from closed acquisitions. The company also increased its 2006 earnings estimate, and now expects earnings per share to be in the range of $4.55 to $4.65, up from previous full-year guidance of $4.45 to $4.60 per share. Both ranges include an estimated $0.16 per share cost from stock options. For the second quarter of 2006, the company expects organic local-currency sales growth of 5 to 8 percent with an additional approximately 2.5 percent from closed acquisitions. Earnings per share are expected to be in the range of $1.14 to $1.17, including an estimated $0.08 per share cost from stock options expensing. In the second quarter of 2005, 3M earned $1.06 per share including a $0.04 per share cost from stock options expensing and excluding the one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. impact of the American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Jobs Creation Act(b). George W. Buckley, and Patrick D. Campbell Campbell, city, United States Campbell, city (1990 pop. 36,048), Santa Clara co., W Calif., in the fertile Santa Clara valley; founded 1885, inc. 1952. , 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. (a) 3M adopted Statement of Financial Accounting Standards No. 123R effective January January: see month. 1, 2006, using the modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. retrospective LAW, RETROSPECTIVE. A retrospective law is one that is to take effect, in point of time, before it was passed. 2. Whenever a law of this kind impairs the obligation of contracts, it is void. 3 Dall. 391. method, with prior periods adjusted to give effect to the fair-value-based method of accounting for stock option awards granted in fiscal years beginning on or after January 1, 1995. (b) During the quarter ended June June: see month. 30, 2005, the company completed its evaluation of the repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. provision of the American Jobs Creation Act of 2004 (Jobs Act) and recognized $75 million, net of available foreign tax credits, of related tax liability. The company reinvested approximately $1.8 billion of foreign earnings in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. pursuant to the provisions of the Jobs Act in 2005. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This news release contains forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information (within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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, compounds, raw materials and energy (including oil and natural gas and their derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. ) 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 restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). ; (7) generating less productivity improvements than estimated; and (8) legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. , including the outcome of pending Congressional action concerning asbestos-related litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and other significant developments that could occur in the legal and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. proceedings described in the company's Annual Report on Form 10K for the year-ended Dec. 31, 2005 (the "Report"). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Report under Part I, Item 1A "Risk Factors." 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 diversified (di·verˑ·s Technology Company Every day, 3M people find new ways to make amazing a·maze v. a·mazed, a·maz·ing, a·maz·es v.tr. 1. To affect with great wonder; astonish. See Synonyms at surprise. 2. Obsolete To bewilder; perplex. v.intr. 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 scotch 1 tr.v. scotched, scotch·ing, scotch·es 1. To put an abrupt end to: The prime minister scotched the rumors of her illness with a public appearance. 2. , Post-it, Scotchgard Scotchgard is a 3M brand of products used to protect fabric, furniture, and carpets. Like other fluorochemicals, Scotchgard is mostly inert, so by applying it to fabric, the fabric can be protected from stains and soiling. , Thinsulate Thinsulate is a synthetic fibre used for thermal insulation in clothing. The word is a portmanteau of thin and insulate, and is a trademark of the 3M Corporation. The material was first sold in about 1980. , Scotch-Brite, Filtrete, Command and Vikuiti. Serving customers in more than 200 countries around the world, the people of 3M use their expertise, technologies and global strength to lead in major markets including consumer and office; display and graphics; electronics and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. ; 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
March 31
------------------
2006 2005
--------- --------
Net sales $5,595 $5,166
--------- --------
Operating expenses
Cost of sales 2,721 2,549
Selling, general and
administrative expenses 1,183 1,145
Research, development and
related expenses 322 319
--------- --------
Total 4,226 4,013
--------- --------
Operating income 1,369 1,153
--------- --------
Interest expense and income
Interest expense 22 20
Interest income (8) (16)
--------- --------
Total 14 4
--------- --------
Income before income taxes and
minority interest 1,355 1,149
Provision for income taxes 443 363
Minority interest 13 15
--------- --------
Net income $899 $771
========= ========
Weighted average common shares
outstanding - basic 754.4 771.7
Earnings per share - basic $1.19 $1.00
========= ========
Weighted average common shares
outstanding - diluted 768.6 791.4
Earnings per share - diluted $1.17 $0.97
========= ========
Cash dividends paid
per common share $0.46 $0.42
========= ========
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
Mar. 31, Dec. 31, Mar. 31,
ASSETS 2006 2005 2005
-------- -------- --------
Current assets
Cash and cash equivalents $912 $1,072 $2,669
Accounts receivable - net 3,105 2,838 2,899
Inventories 2,379 2,162 1,980
Marketable securities 384 -- 35
Other current assets 1,141 1,043 1,339
-------- -------- --------
Total current assets 7,921 7,115 8,922
Investments 284 272 280
Property, plant and equipment - net 5,574 5,593 5,624
Prepaid pension and postretirement
benefits 2,859 2,951 2,551
Goodwill, intangible assets and other
assets (c) 4,975 4,877 3,672
-------- -------- --------
Total assets $21,613 $20,808 $21,049
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and
current portion of long-term debt $1,343 $1,072 $2,201
Accounts payable 1,342 1,256 1,201
Accrued payroll 492 469 492
Accrued income taxes 932 989 950
Other current liabilities 1,348 1,452 1,393
-------- -------- --------
Total current liabilities 5,457 5,238 6,237
Long-term debt 1,291 1,309 707
Other liabilities 3,876 3,866 3,521
-------- -------- --------
Total liabilities 10,624 10,413 10,465
-------- -------- --------
Total stockholders' equity - net 10,989 10,395 10,584
Shares outstanding
March 31, 2006: 753,931,681 shares
December 31, 2005: 754,538,387 shares
March 31, 2005: 769,570,205 shares
-------- -------- --------
Total liabilities and stockholders'
equity $21,613 $20,808 $21,049
======== ======== ========
(c) The acquisition of CUNO in the third quarter of 2005 increased the
"Goodwill, intangible assets and other assets" balance by $1.3
billion.
3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Three-months ended
March 31
2006 2005
---------- ----------
SUMMARY OF CASH FLOWS:
NET CASH PROVIDED BY
OPERATING ACTIVITIES $625 $971
---------- ----------
Cash flows from investing activities:
Purchases of property, plant
and equipment (190) (235)
Acquisitions, net of cash acquired (22) --
Other investing activities (376) (67)
---------- ----------
NET CASH USED IN
INVESTING ACTIVITIES (588) (302)
---------- ----------
Cash flows from financing activities:
Change in debt 269 107
Purchases of treasury stock (251) (671)
Reissuances of treasury stock 100 195
Dividends paid to stockholders (347) (324)
Other financing activities (6) (25)
---------- ----------
NET CASH USED IN
FINANCING ACTIVITIES (235) (718)
---------- ----------
Effect of exchange rate
changes on cash 38 (39)
---------- ----------
Net increase (decrease) in cash
and cash equivalents (160) (88)
Cash and cash equivalents at
beginning of period 1,072 2,757
---------- ----------
Cash and cash equivalents at
end of period $912 $2,669
========== ==========
3M Company and Subsidiaries
SUPPLEMENTAL CASH FLOW AND
OTHER SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in millions)
(Unaudited)
Three-months ended
March 31
2006 2005
---------- ----------
NON-GAAP MEASURES
Free Cash Flow:
Net cash provided by
operating activities $625 $971
Purchases of property, plant
and equipment (190) (235)
---------- ----------
Free Cash Flow (d) $435 $736
========== ==========
OTHER NON-GAAP MEASURES:
Net Working Capital Turns (e) 5.4 5.6
(d) Free cash flow is not defined under U.S. generally accepted
accounting principles (GAAP). Therefore, it 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.
(e) The company uses various working capital 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 March 31, 2006
Sales Change Analysis United Inter-
By Geographic Area States national Worldwide
----------- ---------- ----------
Volume - organic 5.3% 9.8% 8.1%
Volume - acquisitions 3.4 1.7 2.3
----------- ---------- ----------
Volume - total 8.7 11.5 10.4
Price 2.1 (1.2) --
----------- ---------- ----------
Total local-currency sales 10.8 10.3 10.4
Translation - (3.5) (2.1)
----------- ---------- ----------
Total sales change 10.8% 6.8% 8.3%
=========== ========== ==========
Worldwide Local- Total
Sales Change Analysis currency Trans- Sales
By Business Segment Sales lation Change
----------- ---------- ----------
Industrial & Transportation (f) 14.0% (2.4)% 11.6%
Health Care 4.9 (3.0) 1.9
Display and Graphics 9.5 (1.4) 8.1
Consumer and Office 8.4 (1.2) 7.2
Electro and Communications 10.6 (2.2) 8.4
Safety, Security and Protection
Services 15.6 (2.2) 13.4
----------- ---------- ----------
Total sales change 10.4% (2.1)% 8.3%
=========== ========== ==========
(f) Industrial & Transportation includes a 7.5% benefit due to the
CUNO acquisition.
3M Company and Subsidiaries
BUSINESS SEGMENTS
(Dollars in millions)
(Unaudited)
BUSINESS
SEGMENT Three-months ended
INFORMATION March 31
(Millions) 2006 2005
-------- ---------
NET SALES
Industrial & Transportation $1,702 $1,524
Health Care 966 948
Display and Graphics 915 846
Consumer and Office 761 710
Electro and Communications 604 557
Safety, Security and Protection Services 631 557
Corporate and Unallocated 16 24
-------- ---------
Total Company $5,595 $5,166
-------- ---------
OPERATING INCOME
Industrial & Transportation $381 $308
Health Care 298 272
Display and Graphics 296 285
Consumer and Office 136 114
Electro and Communications 127 95
Safety, Security and Protection Services 164 126
Corporate and Unallocated (33) (47)
-------- ---------
Total Company $1,369 $1,153
-------- ---------
SFAS 123R Stock Option Expense Impact
(Dollars in millions, except per share amounts)
(Unaudited)
Three months ended
March 31
2006 2005 Difference
---------- ---------- ----------
Cost of sales $2 $12 $10
% to Sales 0.0% 0.2% 0.2%
---------- ---------- ----------
Selling, general and
administrative expenses $19 $46 $27
% to Sales 0.3% 0.9% 0.6%
---------- ---------- ----------
Research, development and
related expenses $4 $13 $9
% to Sales 0.1% 0.3% 0.2%
---------- ---------- ----------
Operating Income $25 $71 $46
% to Sales 0.4% 1.4% 1.0%
---------- ---------- ----------
Earnings per share - diluted $0.02 $0.06 $0.04
========== ========== ==========
Business Segment Stock Option Expense
(Dollars in millions)
(Unaudited)
Three-months ended March 31
------------------------------------------
2006 % to Sales 2005 % to Sales
--------- ---------- ---------- ----------
Industrial & Transportation $7 0.4% $20 1.3%
Health Care 6 0.6% 17 1.8%
Display and Graphics 3 0.4% 10 1.2%
Consumer and Office 3 0.4% 10 1.3%
Electro and Communications 3 0.4% 7 1.3%
Safety, Security and
Protection Services 3 0.4% 7 1.3%
--------- ---------- ---------- ----------
Total Company $25 0.4% $71 1.4%
========= ========== ========== ==========
Quarterly Diluted Earnings Per Share Stock Option Expense
(Unaudited)
2004 Reported Q1 Q2 Q3 Q4 Total
-- -- -- -- -----
EPS as originally
reported $0.90 $0.97 $0.97 $0.91 $3.75
SFAS 123R impact $(0.03) $(0.04) $(0.06) $(0.06) $(0.19)
EPS with SFAS123R
impact $0.87 $0.93 $0.91 $0.85 $3.56
2005 Reported Q1 Q2 Q3 Q4 Total
-- -- -- -- -----
EPS as originally
reported $1.03 $1.00 $1.10 $0.99 $4.12
SFAS 123R impact $(0.06) $(0.04) $(0.02) $(0.02) $(0.14)
EPS with SFAS123R
impact $0.97 $0.96 $1.08 $0.97 $3.98
2005 - Excluding
Special Items(h) Q1 Q2 Q3 Q4 Total
-- -- -- -- -----
EPS as originally
reported $1.03 $1.09 $1.10 $1.04 $4.26
SFAS 123R impact $(0.06) $(0.04) $(0.02) $(0.02) $(0.14)
EPS with SFAS123R
impact $0.97 $1.06 $1.08 $1.01 $4.12
Q1 Q2 Q3 Q4 Total
2006 -- -- -- -- -----
Diluted
EPS/Guidance $1.17 $1.14-$1.17 $4.55-$4.65
Estimated
SFAS123R impact $(0.02) $(0.08) $(0.03) $(0.03) $(0.16)
included in
EPS/guidance
(h) 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 (reconciliations for the second
and fourth quarter of 2005 were provided in Form 8-K's filed on July
18, 2005 and January 24, 2006, respectively). 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 quarter ended June
30, 2005, the Company completed its evaluation of the repatriation
provision of the American Jobs Creation Act of 2004 (Jobs Act) and
recognized $75 million, net of available foreign tax credits, of
related tax liability. The Company reinvested approximately $1.8
billion of foreign earnings in the United States pursuant to the
provisions of the Jobs Act in 2005. In March 2005, the FASB issued
Interpretation No. 47, "Accounting for Conditional Asset Retirement
Obligations--an interpretation of FASB Statement No.143" ("FIN 47").
In adopting FIN 47 in the fourth quarter of 2005, 3M recorded a
non-cash charge of $35 million after-tax, as a cumulative effect of
change in accounting principle. This charge represents conditional
retirement obligations associated with 3M's long-lived assets.
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