Published on 3M News | Unit ed St at es (ht t p://news.3m.com) on 1/24/06 6:30 am CST
3M Reports 2005 Fourth-Quarter and Calendar Year Sales and Earnings Release Date: Tuesday, January 24, 2006 6:30 am CST
T erms:
Company
Earnings and Dividends
Dateline City: ST. PAUL, Minn. ST. PAUL, Minn.--(BUSINESS WIRE)--3M (NYSE:MMM) t oday announced it s sales and profit result s for t he fourt h-quart er and calendar year 2005. Fourt h-quart er net income before a cumulat ive effect of account ing change relat ed t o FIN 47(a) was $796 million, or $1.04 per share, versus $720 million, or $0.91 per share, in t he fourt h quart er of 2004. Earnings per-share increased 14.3 percent , excluding t he effect of FIN 47(a). Fourt h-quart er report ed net income was $761 million, or $0.99 per share. "This was a great quart er for 3M wit h broad-based cont ribut ions from our diverse port folio and part icularly st rong result s in our indust rial and elect ronics-relat ed businesses," said George W. Buckley, 3M chairman, president and CEO. "This quart er demonst rat es t he value 3M's innovat ive product s bring t o cust omers and t he superb capabilit y of t he 3M organizat ion t o overcome t he headwinds of raw mat erial price inflat ion. I would like t o t hank 3M employees worldwide for leveraging t he combinat ion of solid sales growt h and st rong operat ional performance int o anot her double-digit earnings per share increase in 2005." Fourt h-quart er worldwide sales t ot aled $5.3 billion, up 4.6 percent compared t o t he fourt h quart er of 2004. Local-currency sales increased 7.3 percent , including 2.1 percent from t he acquisit ion of CUNO Inc. Currency effect s decreased sales by 2.7 percent . Local-currency sales increased 18.2 percent in Indust rial (including 12.0 percent due t o CUNO), 10.9 percent in Elect ro and Communicat ions, 10.2 percent in Display and Graphics, 9.7 percent in Safet y, Securit y and Prot ect ion Services, 3.3 percent in Transport at ion, 0.5 percent in Consumer and Office, and were unchanged in Healt h Care. For t he 2005 calendar year, report ed net income was $3.2 billion, or $4.12 per share. Net income excluding t he effect s of FIN 47(a) and t he American Jobs Creat ion Act (b), t ot aled $3.3 billion or $4.26 per share, up from $3.0 billion or $3.75 per share in 2004, an EPS increase of 13.6 percent . Calendar year 2005 sales t ot aled $21.2 billion, a 5.8 percent increase over 2004. Local-currency sales increased 5.1 percent , including 0.9 percent from t he acquisit ion of CUNO. Selling prices increased 0.6 percent , and currency effect s increased sales by 0.7 percent . For t he calendar year, local-currency sales growt h was driven by increases of 9.3 percent in Indust rial (including 5.1 percent from CUNO); 6.9 percent in Safet y, Securit y and Prot ect ion Services; 5.0 percent in Transport at ion; and 4.2 percent in Elect ro and Communicat ions. "Looking ahead, we will focus on driving profit able growt h by invest ing in our most promising commercializat ion, geographic and t echnology opport unit ies, and part of t his invest ment will come from savings generat ed t hrough cont inuous operat ional improvement s," said Buckley. "Aft er long admiring 3M for it s unique cult ure of innovat ion, decades of success, wealt h of t echnology and out st anding people, I look forward t o being part of t he t eam t hat will make real t he t remendous pot ent ial of 3M in 2006 and beyond." 3M also provided it s full-year 2006 earnings est imat es. The company expect s 2006 per share earnings t o be in t he range of $4.45 t o $4.60, including an est imat ed $0.16 per share cost of st ock opt ions expensing. 3M has elect ed t o rest at e prior year earnings t o reflect st ock opt ions expensing, t he det ails of which will be described in t he 2006 first quart er 10-Q. Rest at ed 2005 earnings per share will be $4.12(d), including a $0.14 per share cost from expensing st ock opt ions, and excluding t he one-t ime impact s of FIN 47(a) and t he Jobs Act (b). Calendar year 2006 organic local-currency growt h is expect ed t o be bet ween 4 and 7 percent , wit h an addit ional approximat ely 1.4 percent local currency growt h from t he CUNO acquisit ion. For t he first quart er of 2006, t he company expect s earnings per share t o be in t he range of $1.10 t o $1.14, including an est imat ed $0.02 per share cost from st ock opt ions expensing(c). In t he first quart er of 2005, 3M earned $0.97 per share adjust ed t o reflect st ock opt ions expensing of $0.06 per share. The company expect s first -quart er, local-currency sales growt h of 4 t o 7 percent wit h an addit ional est imat ed 2.3 percent from CUNO. George W. Buckley, and Pat rick D. Campbell, senior vice president and chief financial officer, will conduct an invest or t eleconference at 10 a.m. East ern Time (9 a.m. Cent ral Time) t oday. Invest ors can access a webcast of t his conference, along wit h relat ed chart s and mat erials, at ht t p://invest or.3M.com. (a) In March 2005, t he FASB issued Int erpret at ion No. 47, "Account ing for Condit ional Asset Ret irement Obligat ions -- an int erpret at ion of FASB St at ement No.143" ("FIN 47"). In adopt ing FIN 47 in t he fourt h quart er, 3M recorded a noncash charge of $35 million aft er-t ax as a cumulat ive effect of change in account ing principle in t he accompanying Consolidat ed St at ement of Income. This charge represent s condit ional ret irement obligat ions associat ed wit h 3M long-lived asset s. (b) During t he quart er ended June 30, 2005, t he company complet ed it s evaluat ion of t he repat riat ion provision of t he American Jobs Creat ion Act of 2004 (Jobs Act ) and recognized $75 million, net of available foreign t ax credit s, of relat ed t ax liabilit y. The company reinvest ed approximat ely $1.8 billion of foreign earnings in t he Unit ed St at es pursuant t o t he provisions of t he Jobs Act in 2005.
(c) For calendar year 2006, 3M expect s an est imat ed $0.16 earnings per share cost from st ock opt ions expensing, wit h an est imat ed $0.02 per share cost in t he first quart er, an est imat ed $0.08 per share cost in t he second quart er, and est imat ed $0.03 per share cost s in each of t he t hird and fourt h quart ers. 3M expect s a higher expense when t he company's annual grant is made in t he second quart er, due t o a requirement under FAS 123R t o immediat ely expense st ock opt ions grant ed t o ret irement -eligible employees. (d) Report ed 2005 earnings per share will be $3.98, including t he rest at ement for st ock opt ions expensing and t he one-t ime impact s of FIN 47(a) and t he Jobs Act (b). Forward-Looking St at ement s This news release cont ains forward-looking informat ion (wit hin t he meaning of t he Privat e Securit ies Lit igat ion Reform Act of 1995) about t he company's financial result s and est imat es, business prospect s, and product s under development t hat involve subst ant ial risks and uncert aint ies. You can ident ify t hese st at ement s by t he use of words such as "ant icipat e," "est imat e," "expect ," "project ," "int end," "plan," "believe," and ot her words and t erms of similar meaning in connect ion wit h any discussion of fut ure operat ing or financial performance. Among t he fact ors t hat could cause act ual result s t o differ mat erially are t he following: (1) worldwide economic condit ions; (2) compet it ive condit ions and cust omer preferences; (3) foreign currency exchange rat es and fluct uat ions in t hose rat es; (4) t he t iming and accept ance of new product offerings; (5) t he availabilit y and cost of purchased component s, compounds, raw mat erials and energy (including oil and nat ural gas and t heir derivat ives) due t o short ages, increased demand or supply int errupt ions (including t hose caused by nat ural and ot her disast ers and ot her event s); (6) t he impact of acquisit ions, st rat egic alliances, divest it ures, and ot her unusual event s result ing from port folio management act ions and ot her evolving business st rat egies, and possible organizat ional rest ruct uring; (7) generat ing less product ivit y improvement s t han est imat ed; and (8) legal proceedings, including t he out come of and informat ion derived from pending Congressional act ion concerning asbest os-relat ed lit igat ion and ot her significant development s t hat could occur in t he legal proceedings described in t he company's Annual Report on Form 10-K for t he year-ended Dec. 31, 2004 and t he Quart erly Report s on Form 10-Q for t he quart ers ended March 31, 2005, June 30, 2005, and Sept . 30, 2005 (t he "Report s"). Changes in such assumpt ions or fact ors could produce significant ly different result s. A furt her descript ion of t hese fact ors is locat ed in t he report s. The informat ion cont ained in t his news release is as of t he dat e indicat ed. The company assumes no obligat ion t o updat e any forward-looking st at ement s cont ained in t his release as a result of new informat ion or fut ure event s or development s. About 3M - A Global, Diversified Technology Company Every day, 3M people find new ways t o make amazing t hings happen. Wherever t hey are, what ever t hey do, t he company's cust omers know t hey can rely on 3M t o help make t heir lives bet t er. 3M's brands include Scot ch, Post -it , Scot chgard, Thinsulat e, Scot ch-Brit e, Filt ret e, Command and Vikuit i. Serving cust omers in more t han 200 count ries around t he world, t he company's 69,000 people use t heir expert ise, t echnologies and global st rengt h t o lead in major market s including consumer and office; display and graphics; elect ronics and t elecommunicat ions; safet y, securit y and prot ect ion services; healt h care; indust rial and t ransport at ion. For more informat ion, including t he lat est product and t echnology news, visit www.3M.com. Scot ch, Post -it , Scot chgard, Thinsulat e, Scot ch-Brit e, Filt ret e, Command and Vikuit i are t rademarks of 3M.
3M Company and Subsidiaries CONSOLIDATED STATEMENT OF INCOME (Millions, except per-share amount s) (Unaudit ed)
Three-mont hs ended
Twelve-mont hs ended
December 31
December 31
2005
2004
$5,325
$5,091
$21,167
$20,011
2,618
2,613
10,381
9,958
1,178
1,084
4,535
4,281
317
302
1,242
1,194
Tot al
4,113
3,999
16,158
15,433
Operat ing income
1,212
1,092
5,009
4,578
23
17
82
69
(11)
(14)
(56)
(46)
26
23
Net sales
2005
2004
Operat ing expenses Cost of sales Selling, general and administ rat ive expenses (e) Research, development and relat ed expenses (e)
Int erest expense and income Int erest expense Int erest income Tot al Income before income t axes, minorit y int erest and cumulat ive effect of
12
3
account ing change
Provision for income t axes Minorit y int erest
1,200
1,089
4,983
4,555
389
359
1,694
1,503
15
10
55
62
796
720
3,234
2,990
Income before cumulat ive effect of account ing change Cumulat ive effect of account ing change
(35)
Net income
-
(35)
-
$761
$720
$3,199
$2,990
757.6
776.2
764.9
780.5
$1.05
$0.93
$4.23
$3.83
Weight ed average common shares out st anding - basic Earnings per share - basic Income before cumulat ive effect of account ing change Cumulat ive effect of account ing change
(0.05)
Net Income
-
(0.05)
-
$1.00
$0.93
$4.18
$3.83
768.2
790.4
776.9
796.5
$1.04
$0.91
$4.16
$3.75
Weight ed average common shares out st anding - dilut ed Earnings per share - dilut ed Income before cumulat ive effect of account ing change Cumulat ive effect of account ing change
(0.05)
-
(0.04)
-
Net income
$0.99
$0.91
$4.12
$3.75
$0.42
$0.36
$1.68
$1.44
Cash dividends paid per common share
(e) Cert ain amount s in t he prior periods' consolidat ed financial st at ement s have been reclassified t o conform t o t he current period present at ion. Int ernally developed pat ent cost s have been reclassified t o "Research, development and relat ed expenses" from "Selling, general and administ rat ive expenses". Cost s of int ernally developed pat ent s include cost s and fees incurred t o prepare, file, secure and maint ain pat ent s.
3M Company and Subsidiaries SUPPLEMENTAL CONSOLIDATED STATEMENT OF INCOME INFORMATION (Millions, except per-share amount s) (Unaudit ed)
Twelve-mont hs ended December 31, 2005 Excluding
Net sales
special
Special
Report ed
it ems (f)
it ems (f)
t ot al
$21,167
$-
$21,167
10,381
-
10,381
4,535
-
4,535
1,242
-
1,242
16,158
-
16,158
5,009
-
5,009
26
-
26
effect of account ing change
4,983
-
4,983
Provision for income t axes
1,619
75
1,694
Operat ing expenses Cost of sales Selling, general and administ rat ive expenses Research, development and relat ed expenses Tot al Operat ing income
Int erest expense and (income), net
Income before income t axes, minorit y int erest and cumulat ive
Effect ive t ax rat e
Minorit y int erest
32.5%
-
34.0%
55
-
55
Income before cumulat ive effect of account ing change
3,309
(75)
3,234
-
(35)
Net income (loss)
3,309
(110)
Weight ed average dilut ed shares
776.9
776.9
776.9
$4.26
$(0.10)
$4.16
-
(0.04)
(0.04)
$4.26
$(0.14)
$4.12
Cumulat ive effect of account ing change
(35) 3,199
Income before cumulat ive effect of account ing change Cumulat ive effect of account ing change Net income (loss) per dilut ed shares
(f) In addit ion t o disclosing result s t hat are det ermined in accordance wit h U.S. generally accept ed account ing principles (GAAP), t he company also discloses non-GAAP result s t hat exclude special it ems. Special it ems represent significant charges or credit s t hat are import ant t o an underst anding of t he company's ongoing operat ions. The company provides reconciliat ions of it s non-GAAP financial report ing t o t he most comparable GAAP report ing. The company believes t hat discussion of result s excluding special it ems provides a useful analysis of ongoing operat ing t rends. Earnings per share and ot her amount s before special it ems are not measures recognized under GAAP. The det erminat ion of special it ems may not be comparable t o similarly t it led measures used by ot her companies. During t he quart er ended June 30, 2005, t he Company complet ed it s evaluat ion of t he repat riat ion provision of t he American Jobs Creat ion Act of 2004 (Jobs Act ) and
recognized $75 million, net of available foreign t ax credit s, of relat ed t ax liabilit y. The Company reinvest ed approximat ely $1.8 billion of foreign earnings in t he Unit ed St at es pursuant t o t he provisions of t he Jobs Act in 2005. In March 2005, t he FASB issued Int erpret at ion No. 47, "Account ing for Condit ional Asset Ret irement Obligat ions--an int erpret at ion of FASB St at ement No.143" ("FIN 47"). In adopt ing FIN 47 in t he fourt h quart er of 2005, 3M recorded a non-cash charge of $35 million aft er-t ax as a cumulat ive effect of change in account ing principle. This charge represent s condit ional ret irement obligat ions associat ed wit h 3M long-lived asset s.
3M Company and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in millions) (Unaudit ed)
Dec. 31,
Dec. 31,
2005
2004
$1,072
$2,757
Account s receivable - net
2,838
2,792
Invent ories
2,162
1,897
Ot her current asset s
1,043
1,274
Tot al current asset s
7,115
8,720
272
227
Propert y, plant and equipment - net
5,593
5,711
Prepaid pension and post ret irement benefit s
2,951
2,591
Goodwill, int angible asset s and ot her asset s (g)
4,582
3,459
$20,513
$20,708
$1,072
$2,094
1,256
1,168
Accrued payroll
469
487
Accrued income t axes
989
867
Ot her current liabilit ies
1,452
1,455
Tot al current liabilit ies
5,238
6,071
Long-t erm debt
1,309
727
Ot her liabilit ies
3,866
3,532
Tot al liabilit ies
10,413
10,330
Tot al st ockholders' equit y - net
10,100
10,378
$20,513
$20,708
ASSETS Current asset s Cash and cash equivalent s
Invest ment s
Tot al asset s LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilit ies Short -t erm borrowings and current port ion of longt erm debt Account s payable
Shares out st anding December 31, 2005: 754,538,387 shares December 31, 2004: 773,518,281 shares Tot al liabilit ies and st ockholders' equit y
(g) The acquisit ion of CUNO in t he t hird quart er of 2005 increased t he "Goodwill, int angible asset s and ot her asset s" balance by
approximat ely $1.3 billion.
3M Company and Subsidiaries CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in millions) (Unaudit ed)
Twelve-mont hs ended December 31 2005
2004
$4,258
$4,282
SUMMARY OF CASH FLOW:
NET CASH PROVIDED BY OPERATING ACTIVITIES Cash flows from invest ing act ivit ies: Purchases of propert y, plant and equipment Acquisit ions, net of cash acquired Ot her invest ing act ivit ies
(943)
(937)
(1,293)
(73)
(5)
NET CASH USED IN INVESTING ACTIVITIES
72
(2,241)
(938)
(485)
(111)
(2,377)
(1,791)
Cash flows from financing act ivit ies: Change in debt Purchases of t reasury st ock Reissuances of t reasury st ock
545
Dividends paid t o st ockholders
508
(1,286)
(1,125)
(76)
(15)
NET CASH USED IN FINANCING ACTIVITIES
(3,679)
(2,534)
Effect of exchange rat e changes on cash
(23)
111
(1,685)
921
Ot her financing act ivit ies
Net increase (decrease) in cash and cash equivalent s Cash and cash equivalent s at beginning of period Cash and cash equivalent s at end of period
2,757
1,836
$1,072
$2,757
3M Company and Subsidiaries SUPPLEMENTAL CASH FLOW AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION (Dollars in millions) (Unaudit ed)
Twelve-mont hs ended December 31 2005
2004
$4,258
$4,282
NON-GAAP MEASURES
Free Cash Flow: Net cash provided by operat ing act ivit ies Purchases of propert y, plant and equipment Free Cash Flow (h)
(943)
(937)
$3,315
$3,345
5.7
5.8
OTHER NON-GAAP MEASURES: Net Working Capit al Turns (i)
Report ed (before cumulat ive effect of account ing change): Economic Profit (j)
$1,882
Ret urn on Invest ed Capit al (j)
$1,758
23.2%
23.4%
Excluding Special It ems in 2005: Economic Profit (j)
$1,957
Ret urn on Invest ed Capit al (j)
$1,758
23.7%
23.4%
(h) Free cash flow is not defined under U.S. generally accept ed account ing principles (GAAP). Therefore, it should not be considered a subst it ut e for income or cash flow dat a prepared in accordance wit h U.S. GAAP and may not be comparable t o similarly t it led measures used by ot her companies. The company defines free cash flow as net cash provided by operat ing act ivit ies less purchases of propert y, plant and equipment . It should not be inferred t hat t he ent ire free cash flow amount is available for discret ionary expendit ures. The company believes free cash flow is a useful measure of performance and uses t his measure as an indicat ion of t he st rengt h of t he company and it s abilit y t o generat e cash.
(i) The company uses various working capit al measures t hat place emphasis and focus on cert ain working capit al asset s and liabilit ies. 3M's net working capit al index is defined as quart erly net sales mult iplied by four, divided by ending net account s receivable plus invent ory less account s payable. This measure is not recognized under U.S. generally accept ed account ing principles and may not be comparable t o similarly t it led measures used by ot her companies.
(j) The company uses non-GAAP measures t o focus on shareholder value creat ion. 3M's Economic Profit is defined as aft er-t ax operat ing income less a charge for operat ing capit al. 3M also uses Ret urn on Invest ed Capit al, defined as aft er-t ax operat ing income divided by average operat ing capit al. This measure is present ed as report ed and also excluding 2005 special it ems. 3M's report ed economic profit calculat ion also excludes t he impact of t he adopt ion of FIN 47. Special it ems were previously defined wit hin t he Supplement al Consolidat ed St at ement of Income Informat ion sect ion of t his document . These measures are not recognized under U.S. generally accept ed account ing principles and may not be comparable t o similarly t it led measures used by ot her companies.
3M Company and Subsidiaries SALES CHANGE ANALYSIS (Unaudit ed)
Three-Mont hs Ended Dec. 31, 2005
Sales Change Analysis
Unit ed
Int er-
By Geographic Area
St at es
nat ional
Worldwide
Volume - organic
(1.4)%
9.4%
5.1%
Volume - acquisit ions
3.2
1.3
2.1
Volume - t ot al
1.8
10.7
7.2
Price
3.2
(1.9)
0.1
Tot al local-currency sales
5.0
8.8
7.3
(4.5)
(2.7)
Translat ion
-
Tot al sales change
5.0%
Worldwide
4.3%
Local-
4.6%
Tot al
Sales Change Analysis
currency
Trans-
Sales
By Business Segment
Sales
lat ion
Change
Healt h Care
0.0%
(3.6)%
(3.6)%
Indust rial (k)
18.2
(2.6)
15.6
Display and Graphics
10.2
(2.1)
8.1
Consumer and Office
0.5
(1.7)
(1.2)
10.9
(3.3)
7.6
Services
9.7
(2.6)
7.1
Transport at ion
3.3
(3.7)
(0.4)
Elect ro and Communicat ions
Safet y, Securit y and Prot ect ion
(k) Indust rial includes a 12.0% benefit due t o t he CUNO acquisit ion. 3M Company and Subsidiaries SALES CHANGE ANALYSIS (Unaudit ed)
Twelve-Mont hs Ended Dec. 31, 2005
Sales Change Analysis
Unit ed
Int er-
By Geographic Area
St at es
nat ional
Worldwide
Volume - organic
1.0%
5.1%
3.5%
Volume - acquisit ions
1.4
0.7
1.0
Volume - t ot al
2.4
5.8
4.5
Price
2.5
(0.7)
0.6
Tot al local-currency sales
4.9
5.1
5.1
-
1.2
0.7
Translat ion
Tot al sales change
4.9%
Sales Change Analysis
6.3%
Local-
5.8%
Tot al
By Int ernat ional
currency
Trans-
Sales
Geographic Area
Sales
lat ion
Change
Europe, Middle East and Africa
0.9%
Asia Pacific
Lat in America and Canada
Worldwide
(0.2)%
0.7%
10.6
0.5
11.1
1.3
7.4
8.7
Local-
Tot al
Sales Change Analysis
currency
Trans-
Sales
By Business Segment
Sales
lat ion
Change
Healt h Care
2.9%
0.5%
Indust rial (l)
9.3
1.2
10.5
Display and Graphics
4.0
0.2
4.2
Consumer and Office
3.4
1.0
4.4
Elect ro and Communicat ions
4.2
0.7
4.9
Services
6.9
1.0
7.9
Transport at ion
5.0
0.8
5.8
3.4%
Safet y, Securit y and Prot ect ion
(l) Indust rial includes a 5.1% benefit due t o t he CUNO acquisit ion.
3M Company and Subsidiaries BUSINESS SEGMENTS (Dollars in millions) (Unaudit ed)
BUSINESS SEGMENT INFORMATION (Millions)
Three-mont hs ended
Twelve-mont hs ended
Dec. 31
Dec. 31
2005
2004
2005
2004
$1,074
$1,115
$4,373
$4,230
1,004
869
3,806
3,444
Display and Graphics
912
844
3,558
3,416
Consumer and Office
754
763
2,986
2,861
Elect ro and Communicat ions
585
544
2,333
2,224
563
526
2,292
2,125
NET SALES Healt h Care Indust rial
Safet y, Securit y and Prot ect ion Services
Transport at ion
420
421
1,772
1,674
13
9
47
37
$5,325
$5,091
$21,167
$20,011
$304
$310
$1,215
$1,123
Indust rial
188
141
735
610
Display and Graphics
281
240
1,159
1,133
Consumer and Office
143
147
576
542
Elect ro and Communicat ions
115
84
463
342
Services
130
107
553
491
Transport at ion
100
98
461
426
(35)
(153)
Corporat e and Unallocat ed Tot al Company
OPERATING INCOME Healt h Care
Safet y, Securit y and Prot ect ion
Corporat e and Unallocat ed Tot al Company
(49) $1,212
$1,092
$5,009
(89) $4,578
Language: English
Contact: 3M, St . Paul Invest or Cont act s: Mark Colin, 651-733-8206 or Bruce Jermeland, 651-733-1807 or Media Cont act : Jacqueline Berry, 651-733-3611 Source URL: http://news.3m.com/press-release/company/3m-reports-2005-fourth-quarter-and-calendar-year-sales-and-earnings