3M Reports Record Third-Quarter Sales and Operating Income; Board Increases Share Repurchase Authorization by $300 Million.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 results for the third quarter 2005. The company reported third-quarter net income of $853 million, or $1.10 per share, versus $775 million, or $0.97 per share, in the third quarter of 2004, a per share increase of 13.4 percent. Acquisition related costs for CUNO Inc., which closed Aug. 2, were $.02 per share. "3M employees around the world delivered an outstanding quarter," said Robert S Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. . Morrison Mor·ris·on , Toni Originally Chloe Anthony Wofford. Born 1931. American writer who won the 1993 Nobel Prize for literature. Her novels, such as Sula (1973) and Beloved (1987), examine the experiences of African Americans. , 3M interim chairman 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 demonstrated once again that 3M's business model, combining innovation with operating discipline, can drive solid sales growth and consistent double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. earnings per share increases." Worldwide sales in the third quarter totaled $5.4 billion, 8.3 percent higher than in the year-earlier quarter. Local-currency sales increased 7.0 percent, with selling prices contributing 0.9 percent. Local-currency sales increased 12.0 percent in Industrial (including 8.3 percent due to CUNO), 7.9 percent in Display and Graphics, 7.8 percent in Safety, Security and Protection Services, 6.9 percent in Consumer and Office, 6.0 percent in Electro E`lec´tro n. 1. An electrotype. and Communications, 5.6 percent in Transportation, and 2.8 percent in Health Care. The CUNO acquisition contributed 1.4 percent to total company third-quarter local currency sales growth. "Looking ahead to the fourth quarter, we expect 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 sales growth throughout our diverse portfolio and another double-digit earnings per share increase," said 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. , 3M senior vice president and CFO See Chief Financial Officer. . "We expect global demand for our products to remain strong, and our productivity and pricing initiatives to help offset raw material and energy cost pressure." The company also announced that 3M's Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of an additional $300 million of the company's stock through the period ending Jan. 31, 2006. This increases the total repurchase authorization The right or permission to use a system resource; the process of granting access. See access control. to $2.3 billion for the period Jan. 1, 2005 to Jan. 31, 2006. Of that $2.3 billion, more than $500 million remains. "This increase in the stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. authorization demonstrates our strong balance sheet, continued confidence in our ability to generate significant growth in the future, and our commitment to shareholders," said Morrison. The company also provided guidance for the remainder of 2005. For the year, the company now expects reported earnings to be $4.15 to $4.16 per share. Excluding previously reported non-recurring items(a), 3M expects earnings of $4.24 to $4.25 per share, raising the bottom end of a previous expectation range of $4.20 to $4.25 per share. Fourth-quarter earnings are expected to be $1.02 to $1.03 per share with organic local currency sales growth of 4 to 7 percent. 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 re·in·vest tr.v. re·in·vest·ed, re·in·vest·ing, re·in·vests To invest (capital or earnings) again, especially to invest (income from securities or funds) in additional shares. approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.7 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 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 of 2004. This act provides the company the opportunity to tax-efficiently repatriate repatriate To bring home assets that are currently held in a foreign country. Domestic corporations are frequently taxed on the profits that they repatriate, a factor inducing the firms to leave overseas the profits earned there. foreign earnings for US qualifying investments specified spec·i·fy tr.v. spec·i·fied, spec·i·fy·ing, spec·i·fies 1. To state explicitly or in detail: specified the amount needed. 2. To include in a specification. 3. by its 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 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-derived compounds) due to shortages, increased demand or supply interruptions (including those caused by natural and other disasters and other events); (6) 3M's ability to successfully integrate and obtain the anticipated synergies from acquisitions and strategic alliances; (7) generating less operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. from its corporate initiatives 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 and information derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from 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 proceedings described in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended Dec. 31, 2004 and the Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. for the quarters ended March 31, 2005 and June June: see month. 30, 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 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 company's 69,000 people 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 Nine-months ended
Sept. 30 Sept. 30
------------------ -----------------
2005 2004 2005 2004
--------- -------- -------- --------
Net sales $5,382 $4,969 $15,842 $14,920
--------- -------- -------- --------
Operating expenses
Cost of sales 2,632 2,457 7,763 7,345
Selling, general and
administrative expenses 1,165 1,047 3,400 3,235
Research, development and
related expenses 295 282 882 854
--------- -------- -------- --------
Total 4,092 3,786 12,045 11,434
--------- -------- -------- --------
Operating income 1,290 1,183 3,797 3,486
--------- -------- -------- --------
Interest expense and income
Interest expense 20 17 59 52
Interest income (13) (12) (45) (32)
--------- -------- -------- --------
Total 7 5 14 20
--------- -------- -------- --------
Income before income taxes and
minority interest 1,283 1,178 3,783 3,466
Provision for income taxes 417 389 1,305 1,144
Minority interest 13 14 40 52
--------- -------- -------- --------
Net income $853 $775 $2,438 $2,270
========= ======== ======== ========
Weighted average common shares
outstanding - basic 762.2 780.6 767.3 782.0
Earnings per share - basic $1.12 $0.99 $3.18 $2.90
========= ======== ======== ========
Weighted average common shares
outstanding - diluted 772.3 796.2 779.8 798.5
Earnings per share - diluted $1.10 $0.97 $3.13 $2.84
========= ======== ======== ========
Cash dividends paid per common
share $0.42 $0.36 $1.26 $1.08
========= ======== ======== ========
3M Company and Subsidiaries
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION
(Millions, except per-share amounts)
(Unaudited)
Nine-months ended
Sept. 30, 2005
------------------------------------
Excluding
special Special Reported
items (b) items (b) total
------------ ----------- -----------
Net sales $15,842 $- $15,842
------------ ----------- -----------
Operating expenses
Cost of sales 7,763 - 7,763
Selling, general and
administrative expenses 3,400 - 3,400
Research, development and
related expenses 882 - 882
------------ ----------- -----------
Total 12,045 - 12,045
------------ ----------- -----------
Operating income 3,797 - 3,797
Interest expense and (income),
net 14 - 14
------------ ----------- -----------
Income before income taxes and
minority interest 3,783 - 3,783
Provision for income taxes 1,230 75 1,305
Effective tax rate 32.5% - 34.5%
Minority interest 40 - 40
------------ ----------- -----------
Net income (loss) $2,513 $(75) $2,438
============ =========== ===========
Weighted average diluted shares 779.8 779.8 779.8
Net income (loss) per diluted
share $3.22 $(0.09) $3.13
============ =========== ===========
(b) 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)
Sep. 30, Sep. 30, Dec. 31,
ASSETS 2005 2004 2004
-------- -------- --------
Current assets
Cash and cash equivalents $1,848 $2,200 $2,757
Accounts receivable - net 3,061 2,853 2,792
Inventories 2,098 1,953 1,897
Other current assets 1,160 1,291 1,274
-------- -------- --------
Total current assets 8,167 8,297 8,720
Investments 275 217 227
Property, plant and equipment - net 5,604 5,468 5,711
Prepaid pension and postretirement
benefits (c) 2,775 693 2,591
Goodwill, intangible assets and other
assets (d) 4,545 3,389 3,459
-------- -------- --------
Total assets $21,366 $18,064 $20,708
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current portion
of long-term debt $2,582 $1,377 $2,094
Accounts payable 1,249 1,116 1,168
Accrued payroll 520 516 487
Accrued income taxes 1,008 877 867
Other current liabilities 1,520 1,387 1,455
-------- -------- --------
Total current liabilities 6,879 5,273 6,071
Long-term debt 688 1,284 727
Other liabilities (c) 3,552 2,811 3,532
-------- -------- --------
Total liabilities 11,119 9,368 10,330
-------- -------- --------
Total stockholders' equity - net (c) 10,247 8,696 10,378
Shares outstanding
Sept. 30, 2005: 759,932,466 shares
Sept. 30, 2004: 788,533,778 shares
Dec. 31, 2004: 773,518,281 shares
-------- -------- --------
Total liabilities and stockholders'
equity $21,366 $18,064 $20,708
======== ======== ========
(c) Accounting rules require that if the Accumulated Benefit
Obligation (ABO) exceeds the fair value of pension plan assets the
employer must recognize a liability that is at least equal to the
unfunded ABO. Thus, in December 2002, 3M recorded a substantial
minimum pension liability adjustment. However, at year-end 2004, 3M's
U.S. qualified pension plan ABO was less than assets, resulting in an
adjustment to previously recorded amounts. When comparing Dec. 31,
2004 to Sept. 30, 2004, this adjustment increased "Prepaid pension and
postretirement benefits" by approximately $1.9 billion, increased the
long-term deferred tax liability (part of "Other liabilities") by
approximately $700 million, and increased other comprehensive income
within "Total stockholders' equity-net" by approximately $1.2 billion.
(d) The acquisition of CUNO in the third quarter of 2005 increased the
"Goodwill, intangible assets and other assets balance" by
approximately $1.25 billion.
3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Nine-months ended
Sept. 30
2005 2004
--------- --------
SUMMARY OF CASH FLOW:
NET CASH PROVIDED BY OPERATING ACTIVITIES $3,087 $2,959
--------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (660) (613)
Acquisitions, net of cash acquired (1,264) (73)
Other investing activities (40) 39
--------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,964) (647)
--------- --------
Cash flows from financing activities:
Change in debt 408 (271)
Purchases of treasury stock (1,809) (1,235)
Reissuances of treasury stock 467 423
Dividends paid to stockholders (968) (845)
Other financing activities (17) (31)
--------- --------
NET CASH USED IN FINANCING ACTIVITIES (1,919) (1,959)
Effect of exchange rate changes on cash (113) 11
--------- --------
Net increase (decrease) in cash and cash
equivalents (909) 364
Cash and cash equivalents at beginning of period 2,757 1,836
--------- --------
Cash and cash equivalents at end of period $1,848 $2,200
========= ========
3M Company and Subsidiaries
SUPPLEMENTAL CASH FLOW AND
OTHER SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in millions)
(Unaudited)
Nine-months ended
Sept. 30
2005 2004
-------- --------
NON-GAAP MEASURES
Free Cash Flow:
Net cash provided by operating activities $3,087 $2,959
Purchases of property, plant and equipment (660) (613)
-------- --------
Free Cash Flow (e) $2,427 $2,346
======== ========
Net Working Capital Turns (f) 5.5 5.4
======== ========
(e) 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.
(f) 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 Sept. 30, 2005
Sales Change Analysis United Inter-
By Geographic Area States national Worldwide
----------- ---------- ----------
Volume - organic 2.1% 6.5% 4.7%
Volume - acquisitions 1.8 1.2 1.4
----------- ---------- ----------
Volume - total 3.9 7.7 6.1
Price 2.9 (0.6) 0.9
----------- ---------- ----------
Total local-currency sales 6.8 7.1 7.0
Translation - 2.3 1.3
----------- ---------- ----------
Total sales change 6.8% 9.4% 8.3%
=========== ========== ==========
Local- Total
Sales Change Analysis currency Trans- Sales
By Business Segment Sales lation Change
----------- ---------- ----------
Health Care 2.8% 1.0% 3.8%
Industrial (g) 12.0 1.8 13.8
Display and Graphics 7.9 1.2 9.1
Consumer and Office 6.9 1.4 8.3
Safety, Security and Protection
Services 7.8 1.3 9.1
Electro and Communications 6.0 1.3 7.3
Transportation 5.6 1.4 7.0
(g) Industrial includes an 8.3% benefit due to the CUNO acquisition.
3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)
Nine-Months Ended Sept. 30, 2005
Sales Change Analysis United Inter-
By Geographic Area States national Worldwide
----------- ---------- ----------
Volume - organic 1.9% 3.7% 3.0%
Volume - acquisitions 0.8 0.5 0.6
----------- ---------- ----------
Volume - total 2.7 4.2 3.6
Price 2.2 (0.3) 0.7
----------- ---------- ----------
Total local-currency sales 4.9 3.9 4.3
Translation - 3.1 1.9
----------- ---------- ----------
Total sales change 4.9% 7.0% 6.2%
=========== ========== ==========
Local- Total
Sales Change Analysis currency Trans- Sales
By Business Segment Sales lation Change
----------- ---------- ----------
Health Care 3.9% 2.0% 5.9%
Industrial (h) 6.3 2.5 8.8
Display and Graphics 1.9 1.0 2.9
Consumer and Office 4.4 2.0 6.4
Safety, Security and Protection
Services 5.9 2.2 8.1
Electro and Communications 2.0 2.0 4.0
Transportation 5.6 2.3 7.9
(h) Industrial includes a 2.8% benefit due to the CUNO acquisition.
3M Company and Subsidiaries
BUSINESS SEGMENTS
(Dollars in millions)
(Unaudited)
BUSINESS
SEGMENT Three-months ended Nine-months ended
INFORMATION Sept. 30 Sept. 30
(Millions) 2005 2004 2005 2004
--------- -------- -------- --------
NET SALES
Health Care $1,074 $1,035 $3,299 $3,115
Industrial 971 852 2,802 2,575
Display and Graphics 920 843 2,646 2,572
Consumer and Office 798 737 2,232 2,098
Safety, Security and Protection
Services 573 525 1,729 1,599
Electro and Communications 597 557 1,748 1,680
Transportation 438 409 1,352 1,253
Corporate and Unallocated 11 11 34 28
--------- -------- -------- --------
Total Company $5,382 $4,969 $15,842 $14,920
--------- -------- -------- --------
OPERATING INCOME
Health Care $292 $277 $911 $813
Industrial 174 157 547 469
Display and Graphics 315 287 878 893
Consumer and Office 171 150 433 395
Safety, Security and Protection
Services 139 123 423 384
Electro and Communications 127 92 348 258
Transportation 114 104 361 328
Corporate and Unallocated (42) (7) (104) (54)
--------- -------- -------- --------
Total Company $1,290 $1,183 $3,797 $3,486
--------- -------- -------- --------
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