3M Q1 net income rose 4% year-over-year to more than US$1.1B, with sales rising 2.4% to hit Q1 record of US$7.5B; results positively impacted by acquisitions

ST. PAUL, Minnesota , April 24, 2012 (press release) – 3M (NYSE: MMM) today reported record first-quarter sales of $7.5 billion, up 2.4 percent year-on-year. Earnings were $1.59 per share, an increase of 6.7 percent versus the first quarter of 2011, and operating margins for the quarter were 21.8 percent.

First-quarter organic local-currency sales grew 1.8 percent, acquisitions added 1.5 percent to sales and foreign exchange impacts reduced sales by 0.9 percent.

On a segment basis, sales increased 8.6 percent in Industrial and Transportation, 5.5 percent in Safety, Security and Protection Services, 4.3 percent in Consumer and Office and 2.0 percent in Health Care. Sales declined 3.4 percent in Electro and Communications and 11.8 percent in Display and Graphics, both impacted by the consumer electronics industry. On a geographic basis, sales grew 8.4 percent in Latin America/Canada, 6.3 percent in the United States and 0.1 percent in Europe. Sales declined 1.9 percent in Asia Pacific.

First-quarter net income rose 4.0 percent year-on-year to over $1.1 billion and earnings were $1.59 per share, an increase of 6.7 percent versus last year’s first quarter. First-quarter 2012 results included a $0.04 per share charge related to a voluntary retirement program and other restructuring actions. Total-company operating income margins were 21.8 percent for the quarter, with five business segments above 20 percent, and free cash flow was $567 million.

“We are off to a very good start in 2012 with record first-quarter sales and strong earnings,” said Inge G. Thulin, 3M president and chief executive officer. “3M employees everywhere did an outstanding job of managing in a challenging environment for growth.”

Thulin continued, “Looking ahead, we will keep driving operational excellence to fund ongoing investments in innovation, commercialization and manufacturing. I am very confident in our ability to improve every aspect of our company and to keep delivering high-quality results into the future.”

3M also updated its 2012 performance expectations. The company now expects full-year earnings to be in the range of $6.35 to $6.50 per share versus a previous expected range of $6.25 to $6.50 per share. 3M continues to expect organic sales volume growth of 2 to 5 percent, and operating income margins in the range of 21.0 to 22.5 percent for the year.

First-Quarter Business Segment Discussion

Industrial and Transportation

  • Sales of $2.7 billion, up 8.6 percent, including 3.1 percent from acquisitions. Foreign currency translation reduced sales by 1.2 percent.
  • Broad-based sales growth led by double-digit increases in aerospace, abrasives and automotive OEM.
  • Sales rose in all geographic regions, including a double-digit increase in the U.S.
  • Operating income rose 16.2 percent to $600 million; operating income margin of 22.5 percent.

Health Care

  • Sales of $1.3 billion, up 2.0 percent; foreign exchange impacts reduced sales by 1.1 percent.
  • Sales increased in most businesses, led by a double-digit increase in health information systems; sales declined year-on-year in the drug delivery business.
  • Positive sales growth in Asia Pacific, Latin America/Canada and the U.S.; European sales declined year-on-year.
  • Operating income increased 9.0 percent to $402 million; operating income margin of 31.4 percent.

Consumer and Office

  • Sales of $1.0 billion, up 4.3 percent, including 3.0 percent from the recent acquisition of GPI. Foreign currency translation reduced sales by 0.8 percent.
  • Double-digit sales increase in DIY, driven by a combination of acquired and organic growth.
  • European sales grew double-digits (driven by GPI); U.S. declined slightly year-on-year.
  • Operating income rose 8.8 percent to $234 million; operating income margin of 22.4 percent.

Safety, Security and Protection Services

  • Sales of $1.0 billion, up 5.5 percent; foreign currency translation reduced sales by 1.3 percent.
  • Strongest sales growth in the roofing granules and personal safety businesses; sales declined year-on-year in security systems.
  • Sales rose double-digits in Latin America/Canada and the U.S.; European sales declined year-on-year.
  • Operating income rose 16.3 percent to $231 million; operating margin of 23.6 percent.

Display and Graphics

  • Sales of $832 million, down 11.8 percent; foreign exchange impacts reduced sales by 0.4 percent.
  • Optical systems’ sales declined 28 percent, impacted by lower film volumes for LCD TVs.
  • Sales increased in both architectural markets and commercial graphics, and were down slightly in traffic safety systems.
  • Sales declined in Europe due to soft economy, and in Asia Pacific, largely electronics related.
  • Operating income declined 29.2 percent to $163 million; operating margin of 19.6 percent.

Electro and Communications

  • Sales of $808 million, down 3.4 percent; foreign currency translation reduced sales by 0.3 percent.
  • Consumer electronics-related sales declined year-on-year due to lower customer production levels.
  • Sales in Asia Pacific and Europe declined year-on-year, partially offset by increases in the U.S. and Latin America/Canada.
  • Operating income of $168 million, down 5.7 percent; operating margin of 20.8 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 21538620).
    • The telephone replay will be available until 10:00 a.m. CDT on April 29, 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. Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Annual Report under “Cautionary Note Concerning Factors That May Affect Future Results” and “Risk Factors” in Part I, Items 1 and 1A, respectively. 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
      March 31,
      2012     2011
             
Net sales     $ 7,486       $ 7,311  
             
Operating expenses            
Cost of sales       3,889         3,802  
Selling, general and administrative expenses       1,552         1,533  
Research, development and related expenses       411         398  
             
Total operating expenses       5,852         5,733  
             
Operating income       1,634         1,578  
             
Interest expense and income            
Interest expense       40         43  
Interest income       (9 )       (10 )
             
Total interest expense – net       31         33  
             
Income before income taxes       1,603         1,545  
             
Provision for income taxes       462         442  
             
Net income including noncontrolling interest     $ 1,141       $ 1,103  
             
Less: Net income attributable to noncontrolling interest       16         22  
             
Net income attributable to 3M     $ 1,125       $ 1,081  
             
Weighted average 3M common shares outstanding – basic       696.8         711.5  
Earnings per share attributable to 3M common shareholders – basic     $ 1.61       $ 1.52  
             
Weighted average 3M common shares outstanding – diluted       706.1         726.4  
Earnings per share attributable to 3M common shareholders – diluted     $ 1.59       $ 1.49  
             
Cash dividends paid per 3M common share     $ 0.59       $ 0.55  
                     
 
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
                   
      Mar. 31,     Dec. 31,     Mar. 31,
      2012     2011     2011
ASSETS                  
Current assets                  
Cash and cash equivalents     $ 2,332     $ 2,219     $ 2,747
Marketable securities – current       1,399       1,461       1,285
Accounts receivable – net       4,323       3,867       4,209
Inventories       3,561       3,416       3,489
Other current assets       1,238       1,277       915
Total current assets       12,853       12,240       12,645
Marketable securities – non-current       763       896       360
Investments       160       155       160
Property, plant and equipment – net       7,755       7,666       7,503
Goodwill and intangible assets – net       8,955       8,963       9,125
Prepaid pension benefits       43       40       78
Other assets (a)       1,486       1,656       1,258
Total assets     $ 32,015     $ 31,616     $ 31,129
                   
LIABILITIES AND EQUITY                  
Current liabilities                  
Short-term borrowings and                  
current portion of long-term debt     $ 664     $ 682     $ 1,133
Accounts payable       1,779       1,643       1,815
Accrued payroll       473       676       479
Accrued income taxes       423       355       393
Other current liabilities       2,069       2,085       2,080
Total current liabilities       5,408       5,441       5,900
Long-term debt       4,510       4,484       4,486
Pension and postretirement benefits (a)       3,686       3,972       1,964
Other liabilities       1,792       1,857       1,892
Total liabilities     $ 15,396     $ 15,754     $ 14,242
                   
Total equity (a)     $ 16,619     $ 15,862     $ 16,887
Shares outstanding                  
March 31, 2012: 693,872,048 shares                  
December 31, 2011: 694,970,041 shares                  
March 31, 2011: 710,577,360 shares                  
Total liabilities and equity     $ 32,015     $ 31,616     $ 31,129
                         

(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 (b)
(Dollars in millions)
(Unaudited)
       
      Three-months ended
      March 31,
      2012     2011
NET CASH PROVIDED BY            
OPERATING ACTIVITIES     $ 828      

$

733  
             
Cash flows from investing activities:            
Purchases of property, plant            
and equipment       (261 )       (231 )
Acquisitions, net of cash acquired           (471 )
Purchases and proceeds from sale or maturities of            
marketable securities and investments – net       213         (18 )
Other investing activities       5         (4 )
             
NET CASH USED IN INVESTING ACTIVITIES       (43 )       (724 )
             
Cash flows from financing activities:            
Change in debt       (27 )       15  
Purchases of treasury stock       (524 )       (680 )
Proceeds from issuances of treasury stock            
pursuant to stock option and benefit plans       213         378  
Dividends paid to shareholders       (410 )       (392 )
Other financing activities       26         (18 )
             
NET CASH USED IN FINANCING ACTIVITIES       (722 )       (697 )
             
Effect of exchange rate changes            
on cash and cash equivalents       50         58  
             
Net increase (decrease) in cash            
and cash equivalents       113         (630 )
Cash and cash equivalents at            
beginning of year       2,219         3,377  
           

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