3M Achieves Record Sales of $6.9 Billion on 11 Percent Organic Volume Growth

Company Drives 13 Percent Increase in Earnings per Share

ST. PAUL, Minn.--(BUSINESS WIRE)--3M (NYSE: MMM) today reported record third-quarter earnings of $1.53 per share on sales of $6.9 billion. Sales and per-share earnings increased 11 percent and 13.3 percent, respectively, versus the third quarter of 2009. Operating income was a third quarter record $1.576 billion and operating margins were 22.9 percent. Operating margins exceeded 20 percent in all six of the company’s business segments for the third consecutive quarter.

“The 3M team posted yet another outstanding quarter, with 11 percent organic volume growth and 23 percent margins”

During the third quarter, the company drove double-digit sales increases in four of its six business segments, led by Electro and Communications at 25 percent and Display and Graphics at 19 percent. Asia Pacific led all geographic regions with a 28 percent sales increase.

Sales in emerging markets grew by 25 percent in the third quarter and now comprise 34 percent of 3M’s worldwide sales. Sales grew by 48 percent in Korea, 39 percent in India, 32 percent in Russia, 31 percent in the China/Hong Kong region and 25 percent in Brazil.

“The 3M team posted yet another outstanding quarter, with 11 percent organic volume growth and 23 percent margins,” said George W. Buckley, 3M chairman, president and CEO. “We drove growth throughout the portfolio, with more than 80 percent of our operating divisions posting year-on-year sales increases. New products are fueling market share gains and filling adjacent spaces everywhere, but particularly in emerging markets, the fastest-growing area of our company. My thanks to the many 3Mers around the world who continue to make this happen.”

For the first nine months of 2010, sales increased 17.4 percent to $20 billion, driven primarily by a 16 percent increase in organic volumes. Year-to-date earnings were $4.36 per share, up 35.8 percent over 2009.

3M also commented on its full-year 2010 performance expectations. The company expects that full-year organic sales volume growth will be in the range of 13.5 to 14 percent and that operating margins will equal approximately 22.5 percent for the year.

The company also expects that full-year earnings per share, excluding the Medicare Part D-related charge recorded in the first quarter of this year, will be in the range of $5.70 to $5.74. The high end of this range is down 6 cents per share versus the company’s prior expectations, due solely to anticipated earnings dilution related to the company’s October 2010 purchases of Attenti Holdings S.A. and Arizant Inc. and a controlling interest in Cogent Inc. GAAP earnings are expected to be in the range of $5.59 to $5.63 per share for 2010 in total.

Key Financial Highlights

Worldwide sales totaled $6.9 billion in the third quarter, up 11 percent compared to the third quarter of 2009. Local-currency sales including acquisitions increased 11.1 percent, divestitures reduced sales by 0.1 percent and year-on-year changes in foreign exchange rates had no impact on third quarter sales.

Third-quarter sales growth was broad-based, with year-on-year local-currency increases of 24 percent in Electro and Communications, 18 percent in Display and Graphics, 14 percent in Industrial and Transportation, 11 percent in Consumer and Office and 2 percent in Health Care. In the company’s Safety, Security and Protection Services Business, local-currency sales declined 2 percent versus the third quarter of 2009.

On a geographic basis, sales rose 28 percent in Asia Pacific, 14 percent in Latin America/Canada and 6 percent in the United States. In Europe, organic volumes rose 4 percent, but sales in total declined 1 percent as currency effects more than offset volume gains.

Third-quarter net income was $1.106 billion, or $1.53 per share, versus $957 million, or $1.35 per share, in last year’s third quarter. Total-company operating income was $1.576 billion, a third-quarter record for 3M, and operating margins were 22.9 percent. Margins exceeded 20 percent in all six of 3M’s business segments.

Business Segment Highlights

(All figures are on GAAP basis and include the impact of special items (b-c))

Industrial and Transportation

• Sales of $2.2 billion, up 14.2 percent in local currency.
• Double-digit local-currency growth in many businesses led by renewable energy at 83 percent, energy and advanced materials at 25 percent, abrasives at 18 percent and auto OEM at 17 percent.
• Continued rapid sales growth in Asia Pacific with 25 percent local-currency growth; also drove double-digit local-currency sales growth in Europe and in Latin America/Canada.
• Operating income up 14 percent to $446 million; operating margin of 20.2 percent.

Health Care

• Sales of $1.1 billion, up 1.6 percent in local currency.
• Year-on-year H1N1-related comps reduced sales growth by 2 percent.
• Local-currency sales up 11 percent in Latin America/Canada and 9 percent in Asia Pacific.
• Local-currency sales down slightly in both the U.S. and Western Europe; hospital admits down and elective procedures being postponed due to macroeconomic uncertainty.
• Positive local-currency sales growth in skin and wound care, health information systems, drug delivery and oral care.
• Operating income of $326 million; operating margin of 29.8 percent.

Display and Graphics

• Sales of $1.1 billion, up 18.4 percent in local currency.
• Commercial graphics business continued to strengthen with double-digit local-currency sales growth; sales also rose in traffic safety systems and in mobile interactive solutions.
• Local-currency sales up 28 percent in optical systems, driven by new products for LED flat screen TVs; September sales impacted by inventory adjustments in the LCD TV channel.
• Strong double-digit sales growth in Asia Pacific, Latin America/Canada and the U.S.
• Operating income up 37 percent to $282 million; operating margin of 26.4 percent.

Consumer and Office

• Sales increased 11.1 percent in local currency and exceeded $1 billion for the first time ever.
• Double-digit local-currency sales growth in the office products and DIY businesses; high-single-digit growth in home care and stationery products.
• Sales growth broadly dispersed around the world: Asia Pacific up 27 percent, Latin America/Canada up 21 percent, U.S. up 9 percent.
• Advertising/merchandising investments rose over 30 percent year on year.
• Operating income of $235 million; operating margin of 22.9 percent.

Safety, Security and Protection Services

• Sales of $810 million, down 1.6 percent in local currency; H1N1-related comps reduced sales growth by 10 percent.
• Double-digit sales increase in security systems, corrosion protection and building and commercial services businesses.
• Sales in occupational health and environmental safety business declined 5 percent, again impacted by H1N1; double-digit sales decline in roofing granules business due to sluggish residential construction and repair market.
• Positive sales growth in Asia Pacific and Latin America/Canada; U.S. and European sales down year on year.
• Operating profit of $164 million; operating margin declined year on year to 20.2 percent, largely attributable to H1N1 comps and transient volume declines in roofing granules.

Electro and Communications

• Sales of $772 million, up 23.9 percent in local currency.
• Continued strength in businesses that serve the consumer electronics industry; local-currency sales up over 50 percent in electronics markets materials and 30 percent in the electronic solutions business.
• Double-digit local-currency sales growth in electrical products; local-currency sales up slightly in the telecom infrastructure business.
• Sales grew in all geographies, led by Asia Pacific at 36 percent and both the U.S. and Latin America/Canada at 22 percent.
• Operating income of $173 million, up 49 percent; operating margin of 22.4 percent.