3M Delivers Record Third-Quarter Earnings of $1.65 per Share; Company Posts Sales of $7.5 Billion an

3M Delivers Record Third-Quarter Earnings of $1.65 per Share; Company Posts Sales of $7.5 Billion and 22.4 Percent Operating Income Margins

ST. PAUL, Minn.--(BUSINESS WIRE)-- 3M (NYS: MMM) today reported record third-quarter earnings of $1.65 per share, an increase of 8.6 percent versus the third quarter of 2011. Operating income was $1.7 billion and operating income margins for the quarter were 22.4 percent.

"The 3M team delivered another strong operating performance in the third quarter," said Inge G. Thulin, 3M chairman, president and chief executive officer. "In the face of the current slow-growth economy, our businesses continued to grow organically and generated record profitability. All six of our businesses posted 21 percent-plus operating margins in the quarter, so we continue to execute well in 2012."


Sales were $7.5 billion, down 0.4 percent year-over-year. Organic local-currency sales grew 2.2 percent and acquisitions added 0.5 percent to sales. Currency impacts reduced sales by 3.1 percent year-on-year.

On a business segment basis, organic local-currency sales increased 4.3 percent in Health Care, 3.3 percent in Industrial and Transportation, 1.4 percent in Consumer and Office, 1.3 percent in Display and Graphics, 0.7 percent in Safety, Security and Protection Services and 0.1 percent in Electro and Communications. On a geographic basis, organic local-currency sales grew 10.5 percent in Latin America/Canada, 2.3 percent in the United States, 0.8 percent in EMEA (Europe, Middle East and Africa) and were down 0.1 percent in Asia Pacific.

Third-quarter net income was $1.2 billion and earnings were $1.65 per share. Total-company operating income margins were 22.4 percent for the quarter, and free cash flow was $987 million.

Thulin continued, "Regardless of economic conditions, we will remain focused on things within our control. 3M's unique combination of technology strength, manufacturing excellence and global capability will enable us to deliver sustainable increases in sales, earnings and cash flow."

3M also updated its 2012 performance expectations. Reflecting current economic realities, the company now expects full-year earnings to be in the range of $6.27 to $6.35 per share, including $0.03 per share of anticipated acquisition-related costs. 3M previously expected a range of $6.35 to $6.50 per share, which did not include acquisition-related costs. The company anticipates full-year organic local-currency sales growth of 2 to 2.5 percent and that currency translation will reduce sales by approximately 2.5 percent for the year. 3M expects that full-year operating income margins will be in the range of 21.5 to 22 percent.

Third-Quarter Business Segment Discussion

Industrial and Transportation

  • Sales of $2.6 billion, down 0.5 percent in U.S. dollars. Organic local-currency sales increased 3.3 percent and foreign currency translation reduced sales by 3.8 percent.

  • On an organic local-currency basis:

    • Sales growth was strongest in automotive OEM, aerospace and automotive aftermarket; renewable energy declined year-on-year.

    • Sales rose in all regions, with strongest growth in the U.S. and Latin America/Canada.

  • Operating income rose 9.4 percent to $575 million; operating income margin of 22.4 percent.

Health Care

  • Sales of $1.3 billion, up 1.4 percent in U.S. dollars. Organic local-currency sales increased 4.3 percent, acquisitions added 0.4 percent and foreign currency translation reduced sales by 3.3 percent.

  • On an organic local-currency basis:

    • Sales growth was led by food safety, health information systems and skin/wound care.

    • Positive sales growth in all major geographies, led by Latin America/Canada and Asia Pacific.

  • Operating income increased 9.0 percent to $400 million; operating income margin of 31.7 percent.

Consumer and Office

  • Sales of $1.1 billion, up 1.6 percent in U.S. dollars. Organic local-currency sales increased 1.4 percent, acquisitions added 2.5 percent and foreign currency translation reduced sales by 2.3 percent.

  • On an organic local-currency basis:

    • Growth was strongest in the DIY and consumer health care businesses; sales declined in stationery and office supplies.

    • Sales rose in Latin America/Canada and Asia Pacific, were flat in the U.S. and declined in EMEA.

  • Operating income was flat year-on-year at $244 million; operating income margin of 21.9 percent.

Display and Graphics

  • Sales of $936 million, flat year-over-year in U.S. dollars. Organic local-currency sales increased 1.3 percent, acquisitions added 0.8 percent and foreign currency translation reduced sales by 2.1 percent.

  • On an organic local-currency basis:

    • Double-digit sales increases in architectural markets; sales also increased in commercial graphics and traffic safety systems.

    • Sales of optical films increased sequentially at a double-digit rate, but declined slightly year-over-year.

    • Sales grew in Latin America/Canada and the U.S., and declined slightly in EMEA and Asia Pacific.

  • Operating income increased 11.2 percent to $199 million; operating margin of 21.2 percent.

Safety, Security and Protection Services

  • Sales of $926 million, down 2.9 percent in U.S. dollars. Organic local-currency sales increased 0.7 percent, divestitures reduced sales by 0.1 percent and foreign currency translation reduced sales by 3.5 percent.

  • On an organic local-currency basis:

    • Sales growth was strongest in infrastructure protection and personal safety; sales declined year-on-year in roofing granules and security systems.

    • Sales increased in Latin America/Canada and EMEA and declined in the U.S. and Asia Pacific.

  • Operating income declined 2.8 percent to $196 million; operating margin of 21.1 percent.

Electro and Communications

  • Sales of $820 million, down 2.1 percent in U.S. dollars. Organic local-currency sales increased 0.1 percent and foreign currency translation reduced sales by 2.2 percent.

  • On an organic local-currency basis:

    • Sales increased in electrical markets and declined year-on-year in both the telecom and consumer electronics-related businesses.

    • Sales rose in Latin America/Canada, the U.S. and EMEA, and were down year-on-year in Asia Pacific.

  • Operating income of $186 million, up 2.5 percent; operating margin of 22.7 percent.

3M will conduct an investor teleconference at 9:00 a.m. EDT (8:00 a.m. CDT) today. Investors can access this conference via the following:

  • Live webcast at http://investor.3M.com.

  • Live telephone:
    Call 800-762-2596 within the U.S. or +1 212-231-2916 outside the U.S. Please join the call at least 10 minutes before the start time.

  • Webcast replay:
    Go to 3M's Investor Relations website at http://investor.3M.com and click on "Quarterly Earnings."

  • Telephone replay:
    Call 800-633-8284 (for both U.S. and outside the U.S.; access code is 21538622).
    The telephone replay will be available until 10:00 a.m. CDT on October 28, 2012.

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 and other factors beyond the Company's control, including natural and other disasters affecting the operations of the Company or its customers and suppliers; (2) the Company's credit ratings and its cost of capital; (3) competitive conditions and customer preferences; (4) foreign currency exchange rates and fluctuations in those rates; (5) the timing and market acceptance of new product offerings; (6) 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); (7) 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; (8) generating fewer productivity improvements than estimated; (9) security breaches and other disruptions to the Company's information technology infrastructure; and (10) 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, 2011 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 "Cautionary Note Concerning Factors That May Affect Future Results" and "Risk Factors" in Part I, Items 1 and 1A (Annual Report) and in Part I, Item 2 and 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.

3M Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

(Millions, except per-share amounts)

(Unaudited)

Three-months ended

Nine-months ended

September 30,

September 30,

2012

2011

2012

2011

Net sales

$

7,497

$

7,531

$

22,517

$

22,522

Operating expenses

Cost of sales

3,935

4,027

11,694

11,869

Selling, general and administrative expenses

1,487

1,534

4,567

4,648

Research, development and related expenses

397

389

1,216

1,191

Total operating expenses

5,819

5,950

17,477

17,708

Operating income

1,678

1,581

5,040

4,814

Interest expense and income

Interest expense

44

48

127

141

Interest income

(10

)

(10

)

(29

)

(29

)

Total interest expense - net

34

38

98

112

Income before income taxes

1,644

1,543

4,942

4,702

Provision for income taxes

464

440

1,435

1,319

Net income including noncontrolling interest

$

1,180

$

1,103

$

3,507

$

3,383

Less: Net income attributable to

noncontrolling interest

19

15

54

54

Net income attributable to 3M

$

1,161

$

1,088

$

3,453

$

3,329

Weighted average 3M common shares

outstanding - basic

693.0

707.7

694.7

710.9

Earnings per share attributable to

3M common shareholders - basic

$

1.68

$

1.54

$

4.97

$

4.68

Weighted average 3M common shares

outstanding - diluted

703.1

715.5

703.9

722.8

Earnings per share attributable to

3M common shareholders - diluted

$

1.65

$

1.52

$

4.91

$

4.61

Cash dividends paid per 3M common share

$

0.59

$

0.55

$

1.77

$

1.65

3M Company and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEET

(Dollars in millions)

(Unaudited)

Sep. 30,

Dec. 31,

Sep. 30,

2012

2011

2011

ASSETS

Current assets

Cash and cash equivalents

$

3,029

$

2,219

$

3,376

Marketable securities - current

1,989

1,461

1,486

Accounts receivable - net

4,409

3,867

4,259

Inventories

3,842

3,416

3,604

Other current assets

1,225

1,277

944

Total current assets

14,494

12,240

13,669

Marketable securities - non-current

1,400

896

443

Investments

142

155

162

Property, plant and equipment - net

7,939

7,666

7,509

Goodwill and intangible assets - net

9,063

8,963

9,092

Prepaid pension benefits

47

40

87

Other assets (a)

1,394

1,656

1,153

Total assets

$

34,479

$

31,616

$

32,115

LIABILITIES AND EQUITY

Current liabilities

Short-term borrowings and

current portion of long-term debt

$

1,506

$

682

$

1,204

Accounts payable

1,805

1,643

1,689

Accrued payroll

684

676

654

Accrued income taxes

301

355

421

Other current liabilities

2,299

2,085

2,197

Total current liabilities

6,595

5,441

6,165

Long-term debt

4,852

4,484

4,955

Pension and postretirement benefits (a)

3,114

3,972

1,704

Other liabilities

1,777

1,857

1,879

Total liabilities

$

16,338

$

15,754

$

14,703

Total equity (a)

$

18,141

$

15,862

$

17,412

Shares outstanding

September 30, 2012: 691,931,278 shares

December 31, 2011: 694,970,041 shares

September 30, 2011: 700,844,681 shares

Total liabilities and equity

$

34,479

$

31,616

$

32,115

(a)

The changes in 3M's defined-benefit pension and postretirement plans' funded status as of December 31, 2011 (primarily due to a decrease in discount rates) significantly impacted several balance sheet lines. These changes increased long-term liabilities by approximately $2.4 billion and decreased stockholders' equity by approximately $1.6 billion, with the other major impact primarily related to increased deferred taxes within other assets. Other pension and postretirement changes during the year, such as contributions and amortization, also impacted these balance sheet captions.

3M Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in millions)

(Unaudited)

Nine-months ended

September 30,

2012

2011

NET CASH PROVIDED BY

OPERATING ACTIVITIES

$

3,562

$

3,546

Cash flows from investing activities:

Purchases of property, plant

and equipment

(977

)

(862

)

Acquisitions, net of cash acquired

(248

)

(531

)

Purchases and proceeds from sale or maturities of

marketable securities and investments - net

(938

)

(197

)

Other investing activities

29

6