(Source: Business Wire)
3M (NYSE: MMM) today announced third-quarter earnings of $1.35 per share
on sales of $6.2 billion, with operating income margins of 23.9 percent
(a). Sales and per-share earnings declined 5.6 percent and 4.3 percent
year-on-year, respectively. On a sequential basis, sales and per-share
earnings increased 8.3 percent and 20.5 percent, respectively, and
operating income margins improved by 3.1 percentage points versus second
quarter levels. Free cash flow (i) for the third quarter was $1.6
billion, up 97 percent year-on-year.
Excluding special items (b-f), net income was $971 million and earnings
were $1.37 per share, down 2.8 percent and 3.5 percent year-on-year,
respectively. 3M's Display and Graphics and Health Care businesses each
delivered double-digit year-on-year profit improvements. All business
segments and all geographic regions reported sequential sales
improvements.
"These results reflect the strength of 3M's business model as we again
delivered higher than expected sales, strong operating margins and
outstanding free cash flow," said George W. Buckley, 3M chairman,
president and CEO. "At the same time, we continued to invest in research
and development, improving our supply chains and strengthening our
brands and customer relationships, which will position us well as
economies improve."
For the second consecutive quarter, the company raised its 2009 earnings
expectations. 3M now expects 2009 full-year earnings to be in the range
of $4.50 to $4.55 per share, versus a prior range of $4.10 to $4.30. The
company also updated its 2009 organic sales volume expectations to a
decline of 9.5 percent to 10.5 percent from a previous range of down 10
percent to down 13 percent. All estimates quoted exclude special items.
Key Financial Highlights
Third-quarter worldwide sales totaled $6.2 billion, a year-on-year
decrease of 5.6 percent. Local-currency sales including acquisitions
decreased 3.3 percent, while currency translation effects reduced sales
by 2.3 percent.
Local-currency sales including acquisitions increased 5.5 percent in
Display and Graphics and 4.7 percent in Health Care, offset by declines
of 2 percent in Safety, Security and Protection Services, 4.8 percent in
Consumer and Office, 6.4 percent in Industrial and Transportation and
15.3 percent in Electro and Communications. Excluding special items
(b-f), third-quarter net income was $971 million, or $1.37 per share,
versus $999 million, or $1.42 per share, in the third quarter of 2008.
Business Segment Highlights
(Operating income and margin figures exclude special items (b-f))
Industrial and Transportation
Sales of $1.9 billion, down 6.4 percent year-on-year in local
currency, including a 3 percent benefit from acquisitions; currency
impacts reduced sales by 2.2 percent.
Continued year-on-year declines in many large industrial markets, such
as automotive OEM and home appliances, although quarter-on-quarter
trends are improving.
Double-digit local-currency growth in both the automotive aftermarket
and renewable energy businesses.
Sequential sales and operating income improved by 10.1 percent and
22.7 percent, respectively, led by the industrial adhesives and tapes
and automotive OEM businesses.
Operating income of $403 million, with strong operating margins of
21.2 percent.
Health Care
Sales of $1.1 billion, up 4.7 percent year-on-year in local currency;
currency impacts reduced sales by 3.1 percent.
Local-currency sales growth led by the skin and wound care, infection
prevention and oral care businesses; drug delivery local-currency
sales were down year-on-year.
Profits increased year-over-year in all businesses.
All major geographic regions drove positive local-currency sales
growth.
Operating income increased 12 percent to $340 million and operating
margins were 31.5 percent.
Consumer and Office
Sales of $923 million, down 4.8 percent year-on-year in local
currency, which includes 2.8 percentage points from acquisitions;
currency impacts reduced sales by 1.8 percent.
Double-digit local-currency sales declines in the office channel; high
unemployment levels were a major factor.
Overall soft consumer spending drove local-currency sales declines in
the mass retail and do-it-yourself channels.
Positive local-currency sales growth in both home care cleaning
products and in consumer health care, driven by the recent
acquisitions of Futuro® and ACE brands in the consumer health care
market.
Sales increased sequentially in most businesses, including consumer
mass retail, home care cleaning and consumer health care businesses.
Operating income of $227 million, with strong operating margins of
24.6 percent.
Display and Graphics
Sales of $896 million, up 5.5 percent year-on-year in local currency,
including 2.5 percentage points of growth from acquisitions; currency
impacts reduced sales by 1 percent; sales rose 10.8 percent
sequentially.
Sales in optical systems rose 26 percent year-on-year and 27 percent
sequentially, driven by new products for eco-friendly LCD displays
along with overall improvement in LCD market volumes.
Single-digit local-currency sales growth in traffic safety systems;
business conditions in commercial graphics remain challenging.
Operating income up 12 percent to $204 million, with margins of 22.8
percent.
Safety, Security and Protection Services
Sales of $864 million, down 2 percent year-on-year in local currency;
currency translation impacts reduced sales by 4.1 percent.
Single-digit local-currency sales growth in security systems and in
personal protective products, driven by H1N1-related respirator demand.
Respirator manufacturing plants running at full capacity; adding new
respirator capacity to address substantial near-term backlog.
Difficult economic conditions continued to hurt sales of corrosion
protection products.
Operating income increased 9.8 percent to $236 million, with strong
operating margins of 27.3 percent.
Electro and Communications
Sales of $617 million, down 15.3 percent year-on-year in local
currency; currency translation reduced sales by 0.9 percent.
Sales impacted by continued weak market conditions in telecom and
commercial construction; despite these challenges, sales and operating
income improved sequentially in all major geographies.
Operating income down 26 percent to $117 million, with margins of 19
percent.
On a sequential basis, sales increased 12 percent and operating income
increased 59 percent.
George W. Buckley and Patrick D. Campbell, 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.
Forward-Looking Statements
This news release contains forward-looking information (within the
meaning of the Private Securities Litigation Reform Act 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," "will," 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 and capital markets
conditions; (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 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; and (9) 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 Dec. 31, 2008 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
"Risk Factors" in Part I, Item 1A (Annual Report) and in 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.
About 3M
A recognized leader in research and development, 3M produces thousands
of innovative products for dozens of diverse markets. 3M's core strength
is applying its more than 40 distinct technology platforms -- often in
combination -- to a wide array of customer needs. With $25 billion in
sales, 3M employs 75,000 people worldwide and has operations in more
than 60 countries. For more information, visit www.3M.com.
3M Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Millions, except per-share amounts)
(Unaudited)
Three-months ended Nine-months ended
September 30, September 30,
2009 2008 2009 2008
Net sales $ 6,193 $ 6,558 $ 17,001 $ 19,760
Operating expenses
Cost of sales 3,171 3,432 8,920 10,278
Selling, general andadministrative expenses 1,209 1,269 3,642 3,938
Research, development andrelated expenses 335 344 967 1,058
(Gain) loss on sale of businesses -- -- -- 23
Total operating expenses 4,715 5,045 13,529 15,297
Operating income 1,478 1,513 3,472 4,463
Interest expense and income
Interest expense 55 52 165 158
Interest income (8 ) (28 ) (26 ) (76 )
Total interest expense (income) 47 24 139 82
Income before income taxes 1,431 1,489 3,333 4,381
Provision for income taxes 460 479 1,040 1,402
Net income including noncontrollinginterest 971 1,010 2,293 2,979
Less: Net income attributable tononcontrolling interest 14 19 35 55
Net income attributable to 3M (a) $ 957 $ 991 $ 2,258 $ 2,924
Weighted average 3M common sharesoutstanding -- basic 702.8 695.5 697.7 701.3
Earnings per share attributable to3M common shareholders -- basic $ 1.36 $ 1.43 $ 3.24 $ 4.17
Weighted average 3M common sharesoutstanding -- diluted 710.8 703.1 702.3 710.7
Earnings per share attributable to3M common shareholders -- diluted (a) $ 1.35 $ 1.41 $ 3.21 $ 4.11
Cash dividends paid per 3M common share $ 0.51 $ 0.50 $ 1.53 $ 1.50
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(a) 3M adopted a new accounting standard relating to the reporting of noncontrolling interest in partially owned consolidated subsidiaries effective January 1, 2009. The new standard, among other things, changed the presentation format and certain captions of the consolidated income statement and consolidated balance sheet. 3M uses the captions recommended by this standard in its consolidated financial statements such as "net income attributable to 3M" and "earnings per share attributable to 3M common shareholders - diluted." However, in the preceding release 3M has shortened this language to "net income" and "earnings per share" (or a slight variation thereof), respectively.
