3M Reports Record Second-Quarter Results; Company Posts Sales of $7.8 Billion and Earnings per Share

3M Reports Record Second-Quarter Results; Company Posts Sales of $7.8 Billion and Earnings per Share of $1.71

ST. PAUL, Minn.--(BUSINESS WIRE)-- 3M (NYS: MMM) today reported second-quarter earnings of $1.71 per share, an increase of 3.0 percent versus the second quarter of 2012. Sales grew 2.9 percent year-on-year to a record $7.8 billion. Organic local-currency sales grew 2.3 percent and acquisitions added 1.9 percent to sales. Currency impacts reduced sales by 1.3 percent year-on-year.

Operating income was $1.7 billion and operating income margins for the quarter were 22.0 percent. Second-quarter net income was $1.2 billion and free cash flow was $1.3 billion.

The company paid $436 million in cash dividends to shareholders and repurchased $1.2 billion of its own shares during the quarter.

Organic local-currency sales growth was 5.7 percent in Health Care, 3.3 percent in Industrial, 2.9 percent in Consumer and 2.0 percent in Safety and Graphics; Electronics and Energy declined 2.1 percent year-on-year. On a geographic basis, organic local-currency sales grew 8.5 percent in Latin America/Canada, 2.2 percent in Asia Pacific, 1.9 percent in EMEA (Europe, Middle East and Africa) and 0.8 percent in the U.S.

"This was a good quarter for 3M, with strong performances across the portfolio," said Inge G. Thulin, 3M's chairman, president and chief executive officer. "Four of our five business segments achieved positive organic growth and posted operating margins above 21 percent. We converted 107 percent of net income to free cash flow in the quarter, which fueled ongoing investment in the business and allowed for significant cash returned to shareholders. Our employees executed well in the face of continued slow economic growth."

3M reiterated its 2013 full-year performance expectations. The company anticipates 2013 earnings to be in the range of $6.60 to $6.85 per share with organic local-currency sales growth of 2 to 5 percent. 3M continues to expect free cash flow conversion will be in the range of 90 to 100 percent.

In addition, the company now expects full-year gross share repurchases will be in the range of $3.5 billion to $4.5 billion versus a previous range of $2 billion to $3 billion.

Second-Quarter Business Group Discussion

Industrial

• Sales of $2.7 billion, up 6.6 percent in U.S. dollars. Organic local-currency sales increased 3.3 percent, acquisitions (Ceradyne) added 4.6 percent to sales and foreign currency translation reduced sales by 1.3 percent.

• On an organic local-currency basis:

  • Sales grew in most businesses led by aerospace, automotive aftermarket, liquid filtration, industrial adhesives and tapes and automotive OEM.

  • Sales rose in all major geographies led by Latin America/Canada, the U.S. and EMEA.

• Operating income was $599 million, up 1.2 percent year-on-year; operating margin of 22.5 percent.

Safety and Graphics

• Sales of $1.5 billion, up 2.3 percent in U.S. dollars. Organic local-currency sales increased 2.0 percent; acquisitions (Federal Signal Technologies) added 1.9 percent to sales and foreign currency translation reduced sales by 1.6 percent.

• On an organic local-currency basis:

  • Sales growth was led by commercial graphics, personal safety, architectural markets and building and commercial services; sales declined in roofing granules and traffic safety and security systems.

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

• Operating income was $333 million, down 9.7 percent year-on-year; operating margin of 22.9 percent.

Electronics and Energy

• Sales of $1.3 billion, down 3.2 percent in U.S. dollars. Organic local-currency sales decreased 2.1 percent and foreign currency translation reduced sales by 1.1 percent.

• On an organic local-currency basis:

  • Electronics-related sales declined year-on-year as end-markets remained soft during the quarter.

  • Energy-related sales also declined year-on-year; weakness in renewable energy more than offset sales gains in electrical markets.

  • Sales increased slightly in Latin America/Canada and declined in APAC, EMEA and the U.S.

• Operating income was $237 million, down 16.0 percent year-on-year; operating margin of 17.7 percent.

Health Care

• Sales of $1.3 billion, up 4.6 percent in U.S. dollars. Organic local-currency sales increased 5.7 percent and foreign currency translation reduced sales by 1.1 percent.

• On an organic local-currency basis:

  • Sales growth was strongest in health information systems, food safety, critical and chronic care, oral care and infection prevention; sales declined in drug delivery.

  • Sales grew in all major geographies, with double-digit growth in Latin America/Canada and APAC.

• Operating income increased 1.2 percent to $417 million; operating margin of 31.2 percent.

Consumer

• Sales of $1.1 billion, up 1.4 percent in U.S. dollars. Organic local-currency sales increased 2.9 percent, divestitures reduced sales by 0.1 percent and foreign currency translation reduced sales by 1.4 percent.

• On an organic local-currency basis:

  • Sales growth driven by the consumer health care, home care, stationery & office supplies and DIY businesses.

  • Sales increased in all regions led by Latin America/Canada, Asia Pacific and the U.S.

• Operating income grew 3.5 percent to $235 million; operating margin of 21.4 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 21609532).
  The telephone replay will be available until 10:00 a.m. CDT on July 30, 2013.

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) unanticipated problems or delays with the phased implementation of a global enterprise resource planning (ERP) system, or 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, 2012 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.