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3M Reports Record 2007 Sales and Earnings


January 29, 2008
For Immediate Release

3M Reports Record 2007 Sales and Earnings

Company Posts Record Fourth Quarter Sales; Reaffirms Minimum 10 Percent Earnings Per Share Expectation For 2008

St. Paul, Minn – 3M (NYSE:MMM) today reported 2007 sales of $24.5 billion, an all-time record for the company. Sales were up 7 percent from a year ago, and up 11 percent adjusted for recently divested businesses. Net income for 2007 was $4.1 billion, or $5.60 per share, versus $3.9 billion or $5.06 per share in 2006, up 6 percent and 11 percent, respectively. Excluding special items (a-m), 2007 earnings were $4.98 per share, up 11 percent.

The company’s pharmaceuticals business, which was divested during the fourth quarter of 2006 and the first quarter of 2007, earned $0.23 per share in 2006. Excluding special items in both periods and excluding the 2006 earnings from the now-divested pharmaceuticals business, 2007 earnings per share increased 17 percent.

The company announced record fourth-quarter sales of $6.2 billion, an increase of 7 percent. Sales rose 11 percent adjusted for divestitures, primarily the company’s branded pharmaceuticals business.

Fourth-quarter net income was $851 million, or $1.17 per share, versus $1.176 billion, or $1.57 per share, in the fourth quarter of 2006. These results include a net loss from special items of $12 million, or $0.02 per share, in the fourth quarter of 2007, and a net gain of $354 million, or $0.47 per share, in last year’s fourth quarter (items a-m).

In the fourth quarter of 2006, the company’s now-divested pharma business earned $0.06 per share. Excluding these pharma earnings and special items, fourth-quarter 2006 earnings were $1.04 per share. Fourth-quarter 2007 earnings excluding special items were $1.19 per share, up 14 percent.

“I thank the employees of 3M for their efforts in achieving record full-year sales and earnings,” said George W. Buckley, 3M chairman, president and CEO. “I’m especially pleased that we were able to achieve these results, continue with our growth initiatives and still return $4.6 billion to our shareholders via dividends and share repurchases.”

Buckley continued. “We made good progress on our growth plan in 2007 and we will continue this effort in 2008. By investing in our many enduring franchises, strategic acquisitions and new plants to streamline our supply chain, we are securing 3M’s future as a faster-growing and more efficient enterprise.”

3M reiterated its 2008 earnings expectations. The company expects 2008 earnings to be a minimum 10 percent increase over its 2007 earnings-per-share of $4.98, which excludes special items.

“We will continue to balance growth and operational excellence in order to meet our commitments to our shareholders and customers around the world,” stated Buckley.

Executive Summary

  • Full-year revenues of $24.5 billion, up 6.7 percent from 2006 and up 10.5 percent excluding the impact of businesses divested within the past year; fourth quarter revenues of $6.2 billion, up 7.3 percent from 2006 and up 11 percent excluding divestitures
  • Full-year local-currency sales, including acquisitions, up 7.3 percent; fourth-quarter local currency sales up 6.3 percent, also including acquisitions
  • Currency impacts added 3.2 percentage points to sales growth for the full-year and 4.7 points for the fourth quarter
  • Reported full-year operating income of $6.2 billion, up 8.7 percent. Reported operating income for the quarter was $1.3 billion; excluding special items in the fourth quarter of both this year and last, operating income increased 5.2 percent; further excluding the 2006 earnings from the now-divested branded pharmaceuticals business, operating income for the quarter improved by 11 percent
  • Full-year earnings per share of $5.60, up 10.7 percent from 2006. Reported fourth quarter earnings per share of $1.17, versus $1.57 in 2006; excluding special items in both periods, earnings per share increased by more than 8 percent; further excluding 2006 earnings of the pharmaceuticals business, per-share earnings increased 14 percent
  • Returned a total of $4.6 billion to shareholders through cash dividends and repurchases of shares in 2007, $824 million of that coming during the fourth quarter

Full-Year Key Financial Highlights

For the full-year 2007, sales increased 6.7 percent to $24.5 billion, driven by a 7.3 percent increase in local-currency sales, including acquisitions. Local-currency sales growth was led by Health Care and Safety, Security and Protection Services. Sales in 3M’s international operations grew 10 percent and now constitute 63 percent of total, the highest in 3M’s history.

Full-year earnings were $5.60 per share, up 10.7 percent over 2006, and up 10.9 percent excluding special items (a-m) in both periods. Further adjusting for the 2006 earnings from the now-divested branded pharmaceuticals business, 2007 per-share earnings increased almost 17 percent.

Full-year net income was $4.1 billion, or $5.60 per share, versus $3.9 billion or $5.06 per share in 2006, increasing 6 percent and 11 percent, respectively. Excluding special items (a-m), 2007 net income was $3.6 billion or $4.98 per share, versus $3.4 billion in 2006 or $4.49, an increase in per-share earnings of 11 percent. The company’s pharmaceuticals business, which was sold in multiple transactions during the fourth quarter of 2006 and the first quarter of 2007, earned $0.23 per share in 2006.

Fourth Quarter Key Financial Highlights

Fourth-quarter worldwide sales totaled $6.2 billion, up 7.3 percent compared to the fourth quarter of 2006. Local-currency sales including acquisitions increased 6.3 percent and foreign exchange impacts added 4.7 percent in the quarter. Divestitures, primarily the recent sale of the company’s branded pharmaceuticals business, reduced reported sales growth by 3.7 percent. Local-currency sales including acquisitions increased 17 percent in Health Care, 8 percent in Industrial and Transportation, 5 percent in Safety, Security and Protection Services, 3 percent in Consumer and Office, 2 percent in Electro and Communications and were down 1 percent in Display and Graphics.

Fourth-quarter net income was $851 million, or $1.17 per share, versus $1.2 billion, or $1.57 per share, in the fourth quarter of 2006. Included in these results is a net loss from special items of $12 million, or $0.02 per share, in the fourth quarter of 2007, and a net gain of $354 million, or $0.47 per share, in last year’s fourth quarter (items a-m). Excluding special items and the 2006 earnings from the now-divested pharma business, EPS increased 14%.

Fourth Quarter Business Segment Discussion

Industrial and Transportation

  • Sales advanced 13.7 percent to $1.9 billion
  • Sales up 7.8 percent in local currencies, including 4 percent from acquisitions
  • Broad-based sales performance: strongest growth in industrial adhesives and tapes, automotive OEM, automotive aftermarket and abrasives businesses
  • Positive growth in all major geographic regions
  • Solid operational performance, with profits up 13.5 percent; operating margin of 19.1 percent excluding special items


Health Care

  • Sales of $1.1 billion, climbing 22.4 percent excluding the divestiture of pharma
  • Local-currency sales growth of 17 percent including 3.5 percent from acquisitions
  • All businesses generated double-digit sales growth, led by drug delivery systems, medical and oral care
  • Pharma divestiture reduced reported sales by 21.4 percent
  • Exceptional double-digit growth, adjusted for pharma, in all major geographic regions, led by Europe and the US
  • Operating income of $286 million, up 18.7 percent, and company-high margins at 27 percent, both excluding pharma and special items


Display and Graphics

  • Sales increased approximately one percent to $953 million
  • Local-currency sales down 1.3 percent
  • Strongest growth in Europe and Latin America, with sales up double-digits; sales declined year-on-year in APAC, largely driven by Optical Systems
  • Operating profit of $252 million; profits up in commercial graphics and traffic safety systems, down 13 percent in optical systems excluding special items
  • Operating margins of 26.4 percent excluding special items


Consumer and Office

  • Sales grew 6.6 percent to $859 million
  • Local-currency sales growth of 2.6 percent
  • Strongest growth in home care and do-it-yourself businesses
  • Regional sales growth led by Europe and APAC
  • Operating margins of 18.1 percent, with profits of $155 million


Safety, Security and Protection Services

  • Sales of $747 million, up 11.3 percent
  • Sales growth in local currencies of 5.3 percent, including 2.4 percent from acquisitions
  • Broad-based sales growth led by respiratory protection and corrosion protection products
  • International local currency sales growth of 8.9 percent
  • Excluding special items, profits up 10.3 percent to $133 million; operating margins of 17.8 percent


Electro and Communications

  • Sales increased 7.3 percent to $700 million
  • Local-currency growth of 2.4 percent, including a point from acquisitions
  • Outstanding sales and profit growth in both electrical and electronic markets materials
  • Sales and profits of flexible circuits declined year-on-year
  • Improved consumer electronics market supported overall growth, with APAC leading geographic sales
  • Outstanding productivity with profits up 16.7 percent to $120 million; margins of 17 percent excluding special items


 

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 conditions; (2) competitive conditions and customer preferences; (3) foreign currency exchange rates and fluctuations in those rates; (4) the timing and acceptance of new product offerings; (5) 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); (6) 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; (7) generating less productivity improvements than estimated; and (8) 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, 2006 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 $24 billion in sales, 3M employs 75,000 people worldwide and has operations in more than 60 countries.

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