3M Reports Second-Quarter Sales and Earnings.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 second quarter 2006. Second-quarter worldwide sales totaled $5.7 billion, up 7.5 percent compared to the second quarter of 2005. Total local-currency sales increased 7.2 percent, including 2.6 percent from acquisitions, primarily CUNO. Local-currency sales increased 11 percent in Industrial and Transportation, 8.3 percent in Safety, Security and Protection Services, 6.5 percent in Display and Graphics, 6.1 percent in Electro E`lec´tro n. 1. An electrotype. and Communications, 4.6 percent in Consumer and Office, and 4.1 percent in Health Care. All six businesses posted positive local currency growth for the fourth consecutive quarter. Second-quarter net income was $882 million, or $1.15 per share, including net gains of $0.10 per share due to the combination of positive benefits from income tax adjustments(a), partially offset by settlement costs of a previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. class action(b) and costs related to the company's current efforts to seek strategic alternatives for its branded pharmaceuticals business. In the second quarter of 2005, net income was $754 million, or $0.96 per share, which included a $0.10 per share charge related to the domestic reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. 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(c). Included in these results are stock options related costs of $0.07 per share in the second quarter of 2006 and $0.04 per share in the second quarter of 2005(d). Reported net income and earnings per share increased 16.9 percent and 19.8 percent, respectively. As the company stated in its July July: see month. 7 press release, second-quarter sales and profits were impacted in large part by lower than expected sales volumes and higher than anticipated new capacity start-up Start-up The earliest stage of a new business venture. costs in its Optical Systems Division, which is part of 3M's Display and Graphics business segment. 3M develops and manufactures the world's broadest line of proprietary optical films that enhance the brightness and viewing angle of all types of LCD (Liquid Crystal Display) A display technology that uses rod-shaped molecules (liquid crystals) that flow like liquid and bend light. Unenergized, the crystals direct light through two polarizing filters, allowing a natural background color to show. displays. "The LCD industry experienced an increase in inventory levels, which had a significant and sudden impact on sales of 3M optical films late in the quarter," said James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. B. Stake, executive vice president, Display and Graphics Business. "While forecasting demand in this business is difficult, we anticipate that inventories will return to normal in the second half of the year and sales growth will accelerate as consumer demand for LCD TV A flat panel TV that uses LCD technology or a rear-projection TV that is based on LCD microdisplay panels. See flat panel TV, rear-projection TV and LCD. increases. As a result, we continue to expect record sales of our optical films in 2006. Margins will be somewhat lower due to a shift in mix from monitors to larger format LCD televisions." Stake also addressed the issue of higher start up costs in the company's new multilayer optical film facility. "Our new facility is designed to produce larger-format films for LCD TVs, which is the fastest-growing segment of the LCD market," he noted. "Producing these new highly complex films at the quality levels demanded by our customers and at acceptable yields is a tremendous challenge. We have been manufacturing multilayer optical films for over a decade, and we are confident that we can resolve these issues to meet the expected increase in seasonal demand." The company also noted that gross margins were below expectations, largely a result of the optical film issues, but also due in part to capacity constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. in a handful of its core businesses. "We are wasting no time in our efforts to add capacity in some key areas of the portfolio," 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 chief executive officer, "and in the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified" meantime, meanwhile we are aggressively working to drive out manufacturing cost in the third and fourth quarters." "I am confident that we will manage through these challenges and deliver on our second half expectations, while continuing to invest for the future," Buckley Buck·ley , William Frank, Jr. Born 1925. American writer and editor known especially for his caustic, polysyllabic wit. continued. "There is no doubt whatsoever that our growth agenda is advancing and delivering real results. The near term difficulties with optical in no way diminish my optimism Optimism See also Hope. Bontemps, Roger personification of cheery contentment. [Fr. Lit.: “Roger Bontemps” in Walsh Modern, 66] Candide beset by inconceivable misfortunes, hero indifferently shrugs them off. [Fr. in 3M's prospects. We have injected in·ject·ed adj. 1. Of or relating to a substance introduced into the body. 2. Of or relating to a blood vessel that is visibly distended with blood. injected 1. introduced by injection. 2. congested. much-needed investment into our core businesses, particularly in terms of sales Terms of sale Conditions under which a firm proposes to sell its goods or services for cash or credit. coverage, advertising, merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. and R&D, in order to accelerate our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth capability." As communicated in the previously mentioned July 7 press release, 3M expects calendar year 2006 reported earnings to be in the range of $4.55 to $4.65 per share. Included in this estimate is the combination of previously mentioned net gains of $0.10 per share in the second quarter of 2006, and an estimated annual cost of $0.17 per share due to expensing of stock options. 3M also expects full-year organic local-currency sales growth of between 5.5 and 8 percent, which is unchanged versus its previous expectation. The company estimates that acquisitions will add about 2 percent to 2006 sales growth. For the third quarter of 2006, the company expects organic local-currency sales growth of 4 to 8 percent. Acquisitions are expected to add approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 1.5 percent to third-quarter sales growth. The company expects third-quarter earnings per share will be in the range of $1.10 to $1.15, including an estimated $0.04 per share cost from stock options expensing. In the third quarter of 2005, 3M earned $1.08 per share including $0.02 per share from stock options expensing. 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 web cast of this conference, along with related charts and materials, at http://investor.3M.com.
(a) Second quarter tax adjustments are due to the resolution of
U.S. tax audits through 2001, the substantial resolution of
audits in certain European countries and adjustments to tax
accruals for all other open audit years.
(b) 3M entered into an agreement in principle during the second
quarter to resolve the antitrust class action involving direct
purchasers of transparent tape that as previously disclosed
had been scheduled to start trial at the end of May. The
settlement is conditioned on court approval, which will be
sought promptly upon execution of final settlement documents
and is expected to be granted later this year or early next
year.
(c) In 2005, 3M reinvested $1.7 billion of foreign earnings in the
United States pursuant to the provisions of the American Jobs
Creation Act of 2004. This act provided the company the
opportunity to tax efficiently repatriate foreign earnings for
U.S. qualifying investments specified in its domestic
reinvestment 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.
(d) 3M adopted Statement of Financial Accounting Standards No.
123R effective Jan. 1, 2006, using the modified retrospective
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 Jan. 1, 1995.
The increase in option expense in the second quarter of 2006
is largely due to a requirement under SFAS No. 123R to
immediately expense stock options upon grant date for those
employees who are considered retirement eligible. A 3M
employee is considered to be retirement eligible upon reaching
age 55 with 5 years of service. Approximately 25 percent of
the number of stock-based compensation awards are made to
retirement eligible employees. Since 3M's annual grant of
stock options is in the second quarter, the immediate
expensing of those options resulted in approximately $0.05 per
share of higher stock-option expense in the second quarter of
2006. The accounting rules related to the immediate expensing
of grants to retirement eligible employees applied only to
grants made after Jan. 1, 2006; therefore, the second quarter
of 2005 was not impacted by this requirement.
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 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, 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 Six-months ended
June 30 June 30
------------------ ------------------
2006 2005 2006 2005
--------- -------- --------- --------
Net sales $5,688 $5,294 $11,283 $10,460
--------- -------- --------- --------
Operating expenses
Cost of sales 2,840 2,602 5,561 5,151
Selling, general and
administrative expenses 1,322 1,130 2,505 2,274
Research, development and
related expenses 351 318 673 638
--------- -------- --------- --------
Total 4,513 4,050 8,739 8,063
--------- -------- --------- --------
Operating income 1,175 1,244 2,544 2,397
--------- -------- --------- --------
Interest expense and income
Interest expense 25 19 47 39
Interest income (14) (16) (22) (32)
--------- -------- --------- --------
Total 11 3 25 7
--------- -------- --------- --------
Income before income taxes and
minority interest 1,164 1,241 2,519 2,390
Provision for income taxes 272 475 715 838
Minority interest 10 12 23 27
--------- -------- --------- --------
Net income $882 $754 $1,781 $1,525
========= ======== ========= ========
Weighted average common shares
outstanding - basic 755.1 768.0 754.7 769.8
Earnings per share - basic $1.17 $0.98 $2.36 $1.98
========= ======== ========= ========
Weighted average common shares
outstanding - diluted 770.4 785.0 769.5 788.2
Earnings per share - diluted $1.15 $0.96 $2.31 $1.94
========= ======== ========= ========
Cash dividends paid
per common share $0.46 $0.42 $0.92 $0.84
========= ======== ========= ========
3M Company and Subsidiaries
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION
(Millions, except per-share amounts)
(Unaudited)
Three-months ended Three-months ended
June 30, 2006 June 30, 2005
-------------------------- --------------------------
Excluding Excluding
special Special Reported special Special Reported
items (e) items total items items total
(e) (e) (e)
--------- ------- -------- --------- ------- --------
Net sales $5,688 $- $5,688 $5,294 $- $5,294
--------- ------- -------- --------- ------- --------
Operating
expenses
Cost of sales 2,840 - 2,840 2,602 - 2,602
Selling,
general and
admini-
strative
expenses 1,273 49 1,322 1,130 - 1,130
Research,
development
and related
expenses 351 - 351 318 - 318
--------- ------- -------- --------- ------- --------
Total 4,464 49 4,513 4,050 - 4,050
--------- ------- -------- --------- ------- --------
Operating income
(loss) 1,224 (49) 1,175 1,244 - 1,244
Interest expense
and (income),
net 11 - 11 3 - 3
--------- ------- -------- --------- ------- --------
Income (loss)
before income
taxes and
minority
interest 1,213 (49) 1,164 1,241 - 1,241
Provision
(benefit) for
income taxes 395 (123) 272 400 75 475
Effective tax
rate 32.5% - 23.3% 32.2% - 38.2%
Minority
interest 10 - 10 12 - 12
--------- ------- -------- --------- ------- --------
Net income
(loss) $808 $74 $882 $829 $(75) $754
========= ======= ======== ========= ======= ========
Weighted
average
diluted shares 770.4 770.4 770.4 785.0 785.0 785.0
Net income per
diluted share
(f) $1.05 $0.10 $1.15 $1.06 $(0.10) $0.96
========= ======= ======== ========= ======= ========
(e) 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 2006, net income included net gains of
$74 million due to the combination of positive benefits from
income tax adjustments, partially offset by settlement costs of a
previously disclosed antitrust class action and costs related to
the company's current efforts to seek strategic alternatives for
its branded pharmaceuticals business.
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.
(f) Refer to the preceding Note (d) for discussion of SFAS No.
123R. Included in both reported and excluding special items
results are stock options related costs of $0.07 per share in the
second quarter of 2006 and $0.04 per share in the second quarter
of 2005.
3M Company and Subsidiaries
SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION
(Millions, except per-share amounts)
(Unaudited)
Six-months ended Six-months ended
June 30, 2006 June 30, 2005
-------------------------- --------------------------
Excluding Excluding
special Special Reported special Special Reported
items (g) items total items items total
(g) (g) (g)
--------- ------- -------- --------- ------- --------
Net sales $11,283 $- $11,283 $10,460 $- $10,460
--------- ------- -------- --------- ------- --------
Operating
expenses
Cost of sales 5,561 - 5,561 5,151 - 5,151
Selling,
general and
admini-
strative
expenses 2,456 49 2,505 2,274 - 2,274
Research,
development
and related
expenses 673 - 673 638 - 638
--------- ------- -------- --------- ------- --------
Total 8,690 49 8,739 8,063 - 8,063
--------- ------- -------- --------- ------- --------
Operating
income (loss) 2,593 (49) 2,544 2,397 - 2,397
Interest expense
and (income),
net 25 - 25 7 - 7
--------- ------- -------- --------- ------- --------
Income (loss)
before income
taxes and
minority
interest 2,568 (49) 2,519 2,390 - 2,390
Provision
(benefit) for
income taxes 838 (123) 715 763 75 838
Effective tax
rate 32.6% - 28.4% 31.9% - 35.0%
Minority
interest 23 - 23 27 - 27
--------- ------- -------- --------- ------- --------
Net income
(loss) $1,707 $74 $1,781 $1,600 $(75) $1,525
========= ======= ======== ========= ======= ========
Weighted
average
diluted shares 769.5 769.5 769.5 788.2 788.2 788.2
Net income per
diluted share $2.22 $0.09 $2.31 $2.03 $(0.09) $1.94
========= ======= ======== ========= ======= ========
(g) 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. Refer to the preceding
Note (e) for discussion of the special items that impacted the six
months ended June 30, 2006 and 2005.
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
June 30, Dec. 31, June 30,
ASSETS 2006 2005 2005
-------- -------- --------
Current assets
Cash and cash equivalents $987 $1,072 $1,765
Marketable securities - current 259 -- 8
Accounts receivable - net 3,171 2,838 2,951
Inventories 2,557 2,162 2,020
Other current assets 1,127 1,043 1,204
-------- -------- --------
Total current assets 8,101 7,115 7,948
Marketable securities - non-current 63 -- --
Investments 280 272 274
Property, plant and equipment - net 5,643 5,593 5,516
Prepaid pension and postretirement
benefits 2,809 2,905 2,510
Goodwill, intangible assets and other
assets (h) 5,137 4,923 3,614
-------- -------- --------
Total assets $22,033 $20,808 $19,862
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current portion
of long-term debt $1,458 $1,072 $1,103
Accounts payable 1,343 1,256 1,201
Accrued payroll 489 469 475
Accrued income taxes 741 989 1,187
Other current liabilities 1,395 1,452 1,340
-------- -------- --------
Total current liabilities 5,426 5,238 5,306
Long-term debt 1,253 1,309 706
Other liabilities 3,832 3,866 3,445
-------- -------- --------
Total liabilities 10,511 10,413 9,457
-------- -------- --------
Total stockholders' equity - net 11,522 10,395 10,405
Shares outstanding
June 30, 2006: 753,234,766 shares
December 31, 2005: 754,538,387
shares
June 30, 2005: 765,071,989 shares
-------- -------- --------
Total liabilities and stockholders'
equity $22,033 $20,808 $19,862
======== ======== ========
(h) 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)
Six-months ended
June 30
2006 2005
-------- -------
SUMMARY OF CASH FLOWS:
NET CASH PROVIDED BY OPERATING ACTIVITIES $1,418 $2,125
-------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment (451) (452)
Acquisitions, net of cash acquired (88) --
Other investing activities (300) (31)
-------- -------
NET CASH USED IN INVESTING ACTIVITIES (839) (483)
-------- -------
Cash flows from financing activities:
Change in debt 341 (991)
Purchases of treasury stock (778) (1,185)
Reissuances of treasury stock 375 287
Dividends paid to stockholders (695) (647)
Other financing activities 6 10
-------- -------
NET CASH USED IN FINANCING ACTIVITIES (751) (2,526)
-------- -------
Effect of exchange rate changes on cash 87 (108)
-------- -------
Net increase (decrease) in cash and cash equivalents (85) (992)
Cash and cash equivalents at beginning of period 1,072 2,757
-------- -------
Cash and cash equivalents at end of period $987 $1,765
======== =======
3M Company and Subsidiaries
SUPPLEMENTAL CASH FLOW AND
OTHER SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in millions)
(Unaudited)
Six-months ended
June 30
2006 2005
-------- -------
NON-GAAP MEASURES
Free Cash Flow:
Net cash provided by operating activities $1,418 $2,125
Purchases of property, plant and equipment (451) (452)
-------- -------
Free Cash Flow (i) $967 $1,673
======== =======
OTHER NON-GAAP MEASURES:
Net Working Capital Turns (j) 5.2 5.6
(i) 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.
(j) 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 June 30, 2006
Sales Change Analysis United Inter-
By Geographic Area States national Worldwide
-------- -------- ---------
Volume - organic 3.1% 6.0% 4.8%
Volume - acquisitions 3.5 1.9 2.6
-------- -------- ---------
Volume - total 6.6 7.9 7.4
Price 1.8 (1.6) (0.2)
-------- -------- ---------
Total local-currency sales 8.4 6.3 7.2
Translation - 0.6 0.3
-------- -------- ---------
Total sales change 8.4% 6.9% 7.5%
======== ======== =========
Worldwide Local- Total
Sales Change Analysis currency Trans- Sales
By Business Segment Sales lation Change
-------- -------- ---------
Industrial & Transportation (k) 11.0% 0.4% 11.4%
Health Care 4.1 0.3 4.4
Display and Graphics 6.5 0.4 6.9
Consumer and Office 4.6 0.5 5.1
Electro and Communications 6.1 0.4 6.5
Safety, Security and Protection
Services 8.3 0.6 8.9
-------- -------- ---------
Total sales change 7.2% 0.3% 7.5%
======== ======== =========
(k) Industrial & Transportation includes a 7.9% benefit from
acquisitions, primarily CUNO.
3M Company and Subsidiaries
SALES CHANGE ANALYSIS
(Unaudited)
Six-Months Ended June 30, 2006
Sales Change Analysis United Inter-
By Geographic Area States national Worldwide
-------- -------- ---------
Volume - organic 4.2% 7.8% 6.5%
Volume - acquisitions 3.5 1.8 2.4
-------- -------- ---------
Volume - total 7.7 9.6 8.9
Price 1.9 (1.4) (0.1)
-------- -------- ---------
Total local-currency sales 9.6 8.2 8.8
Translation -- (1.4) (0.9)
-------- -------- ---------
Total sales change 9.6% 6.8% 7.9%
======== ======== =========
Worldwide Local- Total
Sales Change Analysis currency Trans- Sales
By Business Segment Sales lation Change
-------- -------- ---------
Industrial & Transportation (l) 12.5% (1.0)% 11.5%
Health Care 4.6 (1.4) 3.2
Display and Graphics 8.0 (0.5) 7.5
Consumer and Office 6.4 (0.3) 6.1
Electro and Communications 8.2 (0.8) 7.4
Safety, Security and Protection
Services 11.8 (0.8) 11.0
-------- -------- ---------
Total sales change 8.8% (0.9)% 7.9%
======== ======== =========
(l) Industrial & Transportation includes a 7.7% benefit from
acquisitions, primarily CUNO.
3M Company and Subsidiaries
BUSINESS SEGMENTS
(Dollars in millions)
(Unaudited)
BUSINESS
SEGMENT Three-months ended Six-months ended
INFORMATION June 30 June 30
(Millions) 2006 2005 2006 2005
--------- -------- -------- --------
NET SALES
Industrial & Transportation $1,690 $1,518 $3,392 $3,042
Health Care 1,000 957 1,966 1,905
Display and Graphics 912 854 1,827 1,700
Consumer and Office 786 748 1,547 1,458
Electro and Communications 632 594 1,236 1,151
Safety, Security and Protection
Services 653 599 1,284 1,156
Corporate and Unallocated 15 24 31 48
--------- -------- -------- --------
Total Company $5,688 $5,294 $11,283 $10,460
--------- -------- -------- --------
OPERATING INCOME
Industrial & Transportation $321 $312 $702 $620
Health Care 261 284 559 556
Display and Graphics 241 277 537 562
Consumer and Office 121 136 257 250
Electro and Communications 123 115 250 210
Safety, Security and Protection
Services 145 147 309 273
Corporate and Unallocated (37) (27) (70) (74)
--------- -------- -------- --------
Total Company $1,175 $1,244 $2,544 $2,397
--------- -------- -------- --------
SFAS 123R Stock Option Expense Impact
(Dollars in millions, except per share amounts)
(Unaudited)
Three months ended
June 30
2006 2005 Difference
---------------- --------------- --------------
Cost of sales $21 $8 $13
% to Sales 0.4% 0.1% 0.3%
---------------- --------------- --------------
Selling, general and
administrative
expenses $54 $23 $31
% to Sales 0.9% 0.5% 0.4%
---------------- --------------- --------------
Research, development
and related expenses $18 $8 $10
% to Sales 0.3% 0.1% 0.2%
---------------- --------------- --------------
Operating Income $93 $39 $54
% to Sales 1.6% 0.7% 0.9%
---------------- --------------- --------------
SFAS 123R Stock Option Expense Impact
(Dollars in millions, except per share amounts)
(Unaudited)
Six months ended
June 30
2006 2005 Difference
---------------- --------------- --------------
Cost of sales $23 $20 $3
% to Sales 0.2% 0.2% 0.0%
---------------- --------------- --------------
Selling, general and
administrative
expenses $73 $68 $5
% to Sales 0.6% 0.7% 0.1%
---------------- --------------- --------------
Research, development
and related expenses $22 $22 $0
% to Sales 0.2% 0.2% 0.0%
---------------- --------------- --------------
Operating Income $118 $110 $8
% to Sales 1.0% 1.1% 0.1%
---------------- --------------- --------------
Business Segment Stock Option Expense
(Dollars in millions)
(Unaudited)
Three-months ended June 30
-------------------------------------------
2006 % to Sales 2005 % to Sales
---------- ---------- ---------- ----------
Industrial &
Transportation $23 1.4% $13 0.8%
Health Care 20 2.0% 8 0.9%
Display and Graphics 13 1.4% 4 0.5%
Consumer and Office 11 1.4% 5 0.7%
Electro and Communications 9 1.5% 5 0.7%
Safety, Security and
Protection Services 10 1.5% 4 0.7%
Corporate 7 -- -- --
---------- ---------- ---------- ----------
Total Company $93 1.6% $39 0.7%
========== ========== ========== ==========
Business Segment Stock Option Expense
(Dollars in millions)
(Unaudited)
Six months ended June 30
-------------------------------------------
2006 % to Sales 2005 % to Sales
---------- ---------- ---------- ----------
Industrial &
Transportation $30 0.9% $33 1.1%
Health Care 26 1.3% 25 1.3%
Display and Graphics 16 0.9% 14 0.8%
Consumer and Office 14 0.9% 15 1.0%
Electro and Communications 12 1.0% 12 1.0%
Safety, Security and
Protection Services 13 1.0% 11 1.0%
Corporate 7 -- -- --
---------- ---------- ---------- ----------
Total Company $118 1.0% $110 1.1%
========== ========== ========== ==========
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 (m) 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
2006 Q1 Q2 Q3 Q4 Total
------- ------- -------- ------- --------
Diluted EPS/Guidance $1.17 $1.15 $1.10 to $4.55 to
$1.15 $4.65
Estimated SFAS 123R impact
included in EPS/guidance $(0.02) $(0.07) $(0.04) $(0.04) $(0.17)
2006 - Excluding
Special Items (m) Q1 Q2 Q3 Q4 Total
------- ------- -------- ------- --------
Diluted EPS/Guidance $1.17 $1.05 $1.10 to $4.45 to
$1.15 $4.55
Estimated SFAS 123R impact
included in EPS/guidance $(0.02) $(0.07) $(0.04) $(0.04) $(0.17)
(m) 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. Refer to the preceding
Note (e) for discussion of the special items that impacted the
three months ended June 30, 2006 and 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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