EXHIBIT 99
Minnesota Mining and Manufacturing Company and Subsidiaries
3M, as discussed in its January 17, 2001, press release of fourth-quarter
2000 results (excluding non-recurring items), has now issued additional
financial information for the quarters and years 2000 and 1999 in this Form
8-K. This filing does not contain certain information that will be included
in the company's 2000 Annual Report on Form 10-K, which will be published at
a later date.
Reclassifications:
Certain amounts have been reclassified to conform with the current
presentation. Research, development and related expenses have been
reclassified from cost of sales and are now separately presented. Pursuant
to FASB Emerging Issues Task Force Issue No. 00-10, Accounting for Shipping
and Handling Fees and Costs, the company has also reclassified freight
billed to customers from selling, general and administrative expenses to net
sales, and has reclassified related freight costs from selling, general and
administrative expenses to cost of sales.
Revenue Recognition:
During the fourth quarter of 2000, the company changed its revenue
recognition policy. The company's previous policy stated that revenue is
recognized upon shipment of goods to customers and upon performance of
services. Essentially, the new policies recognize that the risks and
rewards of ownership in many transactions do not substantively transfer to
customers until the product has been delivered, regardless of whether or not
legal title has transferred. In addition to this change in accounting that
affects a substantial portion of its product sales, the company has revised
aspects of its accounting for services provided in several of its smaller
businesses. These new policies are consistent with the guidance contained
in SEC Staff Accounting Bulletin No. 101. The effect of these changes in
revenue recognition policies, as of January 1, 2000, has been reported as
the cumulative effect of an accounting change in the fourth quarter of 2000.
This change did not have a significant effect on previously reported 2000
quarters.
Non-recurring Items - Fourth Quarter:
The company had several significant non-recurring items in the fourth
quarter of 2000 which reduced net income by $121 million, or $.30 per share.
Cost of sales includes $90 million of expenses related to the company's
previously announced intentions to phase-out perfluorooctanyl chemistry, the
write down of certain corporate assets and acquisition related expenses.
Other expense (income) - net includes a $16 million gain from the sale of
securities. These items reduced operating income by $74 million and net
income by $46 million. The cumulative effect of an accounting change related
to revenue recognition, net of taxes, amounted to $75 million. Without these
items, net income would have been $447 million, or $1.12 per share. The
schedule that follows reconciles the impact of these non-recurring items on
our consolidated statement of income.
Supplemental Unaudited Consolidated Statement of Income Information
(Millions, except per-share amounts)
Three months ended Three months ended
December 31, 2000 December 31, 1999
Excluding Excluding
non- Non- non- Non-
recurring recurring Reported recurring recurring Reported
items items total items items total
Operating
income (loss) $ 721 $ (74) $ 647 $ 742 $ -- $ 742
Other expense 19 -- 19 15 -- 15
Income (loss) before
income taxes,
minority interest
and cumulative
effect of
accounting change $ 702 $ (74) $ 628 $ 727 $ -- $ 727
Provision (benefit)
for income taxes 232 (28) 204 256 -- 256
Effective tax rate 33.1% 32.5% 35.2% 35.2%
Minority interest 23 -- 23 27 -- 27
Income (loss) before
cumulative effect
of accounting
change $ 447 $ (46) $ 401 $ 444 $ -- $ 444
Cumulative effect
of accounting
change - net of tax -- (75) (75) -- -- --
Net income (loss) $ 447 $(121) $ 326 $ 444 $ -- $ 444
Per share-diluted $1.12 $(.30) $ .82 $1.10 $ -- $1.10
Non-recurring Items - Annual Period:
Non-recurring items during 2000 decreased net income by $90 million, or $.23
per share. Non-recurring items during 1999 increased net income by $52
million, or $.13 per share. The schedule that follows reconciles the impact
of these non-recurring items on our consolidated statement of income.
Supplemental Unaudited Consolidated Statement of Income Information
(Millions, except per-share amounts)
Year ended Year ended
December 31, 2000 December 31, 1999
Excluding Excluding
non- Non- non- Non-
recurring recurring Reported recurring recurring Reported
items items total items items total
Operating
income (loss) $3,081 $ (23) $3,058 $2,856 $ 100 $2,956
Other expense 84 -- 84 76 -- 76
Income (loss) before
income taxes,
minority interest
and cumulative
effect of
accounting change $2,997 $ (23) $2,974 $2,780 $ 100 $2,880
Provision (benefit)
for income taxes 1,033 (8) 1,025 984 48 1,032
Effective tax rate 34.5% -- 34.5% 35.4% 47.8% 35.8%
Minority interest 92 -- 92 85 -- 85
Income (loss) before
cumulative effect
of accounting
change $1,872 $ (15) $1,857 $1,711 $ 52 $1,763
Cumulative effect
of accounting
change - net of tax -- (75) (75) -- -- --
Net income (loss) $1,872 $ (90) $1,782 $1,711 $ 52 $1,763
Per share-diluted $ 4.68 $ (.23) $ 4.45 $ 4.21 $ .13 $ 4.34
Minnesota Mining and Manufacturing Company and Subsidiaries
Consolidated Statement of Income
(Amounts in millions, except per-share amounts)
(Unaudited)
Three months Year
ended ended
December 31 December 31
2000 1999 2000 1999
Net sales $4,136 $4,047 $16,724 $15,748
Operating expenses
Cost of sales 2,220 2,053 8,787 8,126
Selling, general and
administrative expenses 1,009 970 3,963 3,712
Research, development and
related expenses 276 284 1,101 1,056
Restructuring credit -- (2) -- (28)
Other expense (income) (16) -- (185) (74)
Total 3,489 3,305 13,666 12,792
Operating income 647 742 3,058 2,956
Other income and expense
Interest expense 30 26 111 109
Interest income (11) (11) (27) (33)
Total 19 15 84 76
Income before income taxes, minority
interest and cumulative effect
of accounting change 628 727 2,974 2,880
Provision for income taxes 204 256 1,025 1,032
Minority interest 23 27 92 85
Income before cumulative effect
of accounting change 401 444 1,857 1,763
Cumulative effect of
accounting change (75) -- (75) --
Net income $ 326 $ 444 $ 1,782 $ 1,763
Weighted average common
shares outstanding - basic 394.5 400.0 395.7 402.0
Earnings per share - basic
Income before cumulative effect $ 1.02 $ 1.11 $ 4.69 $ 4.39
Cumulative effect (.19) -- (.19) --
Net income $ .83 $ 1.11 $ 4.50 $ 4.39
Weighted average common
shares outstanding - diluted 399.6 404.8 399.9 406.5
Earnings per share - diluted
Income before cumulative effect $ 1.00 $1.10 $ 4.64 $ 4.34
Cumulative effect (.18) -- (.19) --
Net income $ .82 $ 1.10 $ 4.45 $ 4.34
Minnesota Mining and Manufacturing Company and Subsidiaries
Consolidated Statement of Income
(Amounts in millions, except per-share amounts)
(Unaudited)
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
Net sales $4,270 $4,021 $12,588 $11,701
Operating expenses
Cost of sales 2,295 2,072 6,567 6,073
Selling, general and
administrative expenses 1,000 922 2,954 2,742
Research, development and
related expenses 275 262 825 772
Restructuring credit -- (26) -- (26)
Other expense (income) (119) 30 (169) (74)
Total 3,451 3,260 10,177 9,487
Operating income 819 761 2,411 2,214
Other income and expense
Interest expense 29 26 81 83
Interest income (4) (7) (16) (22)
Total 25 19 65 61
Income before income taxes
and minority interest 794 742 2,346 2,153
Provision for income taxes 274 260 821 776
Minority interest 21 23 69 58
Net income $ 499 $ 459 $ 1,456 $ 1,319
Weighted average common
shares outstanding - basic 395.1 402.1 396.1 402.5
Earnings per share - basic $ 1.26 $ 1.14 $ 3.67 $ 3.28
Weighted average common
shares outstanding - diluted 399.0 406.8 400.0 406.5
Earnings per share - diluted $ 1.25 $ 1.13 $ 3.64 $ 3.25
Minnesota Mining and Manufacturing Company and Subsidiaries
Consolidated Statement of Income
(Amounts in millions, except per-share amounts)
(Unaudited)
Three months ended Six months ended
June 30 June 30
2000 1999 2000 1999
Net sales $4,243 $3,885 $8,318 $7,680
Operating expenses
Cost of sales 2,181 2,010 4,272 4,001
Selling, general and
administrative expenses 998 916 1,954 1,820
Research, development and
related expenses 287 259 550 510
Other income - net -- (104) (50) (104)
Total 3,466 3,081 6,726 6,227
Operating income 777 804 1,592 1,453
Other income and expense
Interest expense 26 26 52 57
Interest income (6) (7) (12) (15)
Total 20 19 40 42
Income before income taxes
and minority interest 757 785 1,552 1,411
Provision for income taxes 265 291 547 516
Minority interest 22 18 48 35
Net income $ 470 $ 476 $ 957 $ 860
Weighted average common
shares outstanding - basic 395.6 403.2 396.6 402.8
Earnings per share - basic $ 1.19 $ 1.18 $ 2.41 $ 2.14
Weighted average common
shares outstanding - diluted 399.2 407.4 400.5 406.5
Earnings per share - diluted $ 1.18 $ 1.17 $ 2.39 $ 2.12
Minnesota Mining and Manufacturing Company and Subsidiaries
Consolidated Statement of Income
(Amounts in millions, except per-share amounts)
(Unaudited)
Three months ended
March 31
2000 1999
Net sales $4,075 $3,795
Operating expenses
Cost of sales 2,091 1,991
Selling, general and
administrative expenses 956 904
Research, development and
related expenses 263 251
Restructuring credit -- --
Other expense (income) (50) --
Total 3,260 3,146
Operating income 815 649
Other income and expense
Interest expense 26 31
Interest income (6) (8)
Total 20 23
Income before income taxes
and minority interest 795 626
Provision for income taxes 282 225
Minority interest 26 17
Net income $ 487 $ 384
Weighted average common
shares outstanding - basic 397.7 402.3
Earnings per share - basic $ 1.22 $ .95
Weighted average common
shares outstanding - diluted 401.9 405.9
Earnings per share - diluted $ 1.21 $ .95
Minnesota Mining and Manufacturing Company and Subsidiaries
Consolidated Balance Sheet
(Dollars in millions)
(Unaudited)
December 31, December 31,
2000 1999
Assets
Current assets
Cash and cash equivalents $ 302 $ 387
Accounts receivable - net 2,709 2,778
Inventories 2,377 2,030
Other current assets 873 871
Total current assets 6,261 6,066
Property, plant and equipment - net 5,620 5,656
Investments and Other assets 2,521 2,174
Total $14,402 $13,896
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $ 1,866 $ 1,130
Other current liabilities 2,771 2,689
Total current liabilities 4,637 3,819
Long-term debt 971 1,480
Other liabilities 2,260 2,308
Stockholders' equity - net 6,534 6,289
Shares outstanding
Dec. 31, 2000: 396,085,348 shares
Dec. 31, 1999: 398,710,817 shares
Total $14,402 $13,896
Minnesota Mining and Manufacturing Company and Subsidiaries
(Unaudited)
Business Segments:
Net sales in prior periods have been reclassified to conform with the
current presentation. In the first quarter of 2000, business segment
operating income for 1999 was restated for minor amounts to be consistent
with year 2000 management reporting practices. Certain costs previously
included in Corporate and Unallocated were allocated to the individual
business segments. 3M net sales and operating income by segment for 1999 and
2000 follow.
Business
Segment Fourth Fourth Third Third Second Second First First
Information Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
(Millions) 2000 1999 2000 1999 2000 1999 2000 1999
Net sales
Industrial $ 847 $ 869 $ 887 $ 855 $ 876 $ 840 $ 915 $ 845
Transportation,
Graphics and Safety 840 821 892 827 912 807 874 779
Health Care 792 795 776 773 798 798 769 772
Consumer and Office 709 705 753 716 696 642 690 642
Electro and
Communications 664 554 654 535 642 485 507 443
Specialty Material 274 291 299 306 310 299 314 298
Corporate and
Unallocated 10 12 9 9 9 14 6 16
Total Company $4,136 $4,047 $4,270 $4,021 $4,243 $3,885 $4,075 $3,795
Operating income
Industrial $ 137 $ 156 $ 166 $ 154 $ 153 $ 154 $ 185 $ 148
Transportation,
Graphics and Safety 167 172 194 184 213 171 209 148
Health Care 159 159 165 183 158 194 193 144
Consumer and Office 95 97 132 121 102 95 105 88
Electro and
Communications 99 111 111 119 105 90 89 82
Specialty Material (8) 20 (43) 50 57 60 51 55
Corporate and
Unallocated (2) 27 94 (50) (11) 40 (17) (16)
Total Company $ 647 $ 742 $ 819 $ 761 $ 777 $ 804 $ 815 $ 649
Business
Segment Net sales Operating income
Information Year Year Year Year
(Millions) 2000 1999 2000 1999
Industrial $ 3,525 $ 3,409 $ 641 $ 612
Transportation,
Graphics and Safety 3,518 3,234 783 675
Health Care 3,135 3,138 675 680
Consumer and Office 2,848 2,705 434 401
Electro and
Communications 2,467 2,017 404 402
Specialty Material 1,197 1,194 57 185
Corporate and
Unallocated 34 51 64 1
Total Company $16,724 $15,748 $3,058 $2,956
Several non-recurring items impacted operating income by business segment.
Fourth quarter 2000 operating income includes non-recurring costs of $90
million (included in cost of sales) and non-recurring gains of $16 million
from the sale of equity securities (recorded in Corporate and Unallocated).
Non-recurring costs in the fourth quarter of 2000 include $62 million of
costs in the Speciality Material segment related to the company's phaseout
of perflourooctanyl-based chemistry products, $20 million write-down of
corporate and unallocated assets, and $8 million of expenses primarily
related to acquisitions in the Electro and Communications segment. Third
quarter 2000 operating income includes non-recurring costs of $118 million
(included in cost of sales) and non-recurring gains of $119 million. Non-
recurring items in the third quarter of 2000 include $106 million of costs
in the Specialty Material segment relating to the company's phase out of
perfluorooctanyl-based chemistry products. Remaining non-recurring items in
the third quarter of 2000 were largely gains related to asset dispositions,
principally the sale of available-for-sale equity securities, and are
primarily recorded in Corporate and Unallocated. First quarter 2000
operating income includes a $50 million benefit relating to the termination
of a product distribution agreement in the Health Care segment. Third
quarter 1999 operating income includes a $43 million gain related to
divestitures, mainly in the Health Care segment, and Corporate and
Unallocated includes $73 million in litigation expense partially offset by a
$26 million change in estimate that reduced the restructuring charge.
Second quarter 1999 operating income includes gains on divestitures, net of
an investment valuation adjustment, of $30 million in the Health Care
segment and $74 million in Corporate and Unallocated.
Minnesota Mining and Manufacturing Company and Subsidiaries
RESULTS OF OPERATIONS
Fourth Quarter
The following discussion excludes the impact of non-recurring items in all
periods.
Components of Sales Change
Fourth Quarter 2000 Year 2000
U.S. Intl. W.W. U.S. Intl. W.W.
Volume 0% 16% 8.5% 5% 15% 10%
Price (1) (2) (1.5) (1) (2) (1.5)
Translation - (9) (5) - (5) (2.5)
Total (1)% 5% 2% 4% 8% 6%
Sales volume increased about 8.5 percent from the fourth quarter of 1999.
Selling prices were down about 1.5 percent, mainly due to the carryover of
reductions in our electronics business. Currency translation reduced
worldwide sales by nearly 5 percent due to weakness in both the euro and the
yen. Sales in dollars increased a little more than 2 percent from the year-
earlier quarter.
Internationally, volume increased 16 percent on a nominal basis and 12
percent adjusted for acquisitions. This rate of growth was consistent with
the third quarter. In Europe, volume increased 9 percent on an organic
basis and 18 percent including acquisitions. In the Asia Pacific area,
volume increased 18 percent, with strong growth in both Japan and the Asia
region.
With respect to performance by business segment internationally, all six
business segments posted volume gains, with growth particularly strong in
the Electro and Communications markets and the Transportation, Graphics and
Safety markets.
International volume gains were significantly offset by the stronger dollar.
Currency reduced international sales by over 9 percent. Translation was
negative by nearly 13 percent in Europe and by 7 percent in the Asia Pacific
area.
In the United States, volume was basically unchanged from the year-earlier
quarter. The company saw U.S. volume increases in the Electro and
Communications, Consumer and Office, and Health Care businesses. Unit sales
declined in 3M's more economically sensitive businesses, including tapes and
abrasives, automotive products, fleet graphics and respiratory protection
products. The Specialty Material business also experienced a decline in U.S.
volume, impacted by the phase-out of its perfluorooctanyl-based chemistry
products.
Cost of sales, after adjusting for the reclassifications previously
discussed, were 51.5 percent of sales, up from 50.7 percent of sales in the
fourth quarter of 1999. Gross margins were negatively affected by flat U.S.
volume, negative currency, higher raw material costs and acquisition
effects.
Selling, general and administrative expenses were 24.4 percent of sales,
after adjusting for the reclassifications previously discussed, up from 24.0
percent in the year-earlier quarter. Adjustments in several areas of 3M's
discretionary spending were not timely enough to compensate for the dramatic
slowing in the U.S. economy. 3M is aggressively addressing this area in
2001.
Selling, general and administrative expenses were also impacted by greater
advertising and promotional activity in the consumer and office business,
and by increased investments to support new 3M pharmaceutical products.
Overall, operating income was 17.4 percent of sales, down nearly one point
from the year-earlier quarter.
Other income and expense was $4 million dollars higher than in the
comparable quarter and the tax rate was 33.1 percent, bringing the rate for
the full year to 34.5 percent. We expect 3M's tax rate to continue at this
level in 2001.
The net profit margin for the quarter was 10.8 percent. Earnings for the
quarter were $1.12 per share, up about 2 percent from the fourth quarter of
1999. Currency effects reduced earnings for the quarter by 5 cents a share.
FUTURE OUTLOOK
The following discussion excludes the impact of non-recurring items.
While fourth quarter earnings were up only slightly, 2000 was a very good
year for 3M. 3M increased earnings per share 11 percent, and volume more
than 10 percent.
3M is developing an action plan to achieve at least 10 percent earnings
growth in an environment of slower economic growth, and assuming that
currency effects continue at the current or slightly more negative levels.
3M is moving forward with a more conservative set of growth assumptions for
the year, while maintaining our growth objectives over the longer term. This
more conservative plan assumes organic volume growth of about 6 percent with
another 2.5 to 3 percentage points of growth provided by acquisitions. 3M
expects pricing to be down about 1 percent. Currency, for planning
purposes, would reduce our worldwide sales by about 3 percent.
3M's action plan to meet earnings targets under these circumstances is
straightforward - to size costs to achieve its earnings target while clearly
anticipating significantly lower 2001 sales growth than originally
anticipated.
3M has in place strict cost controls to hold selling, general and
administrative expenses flat compared with the first quarter of 2000. This
represents a running rate improvement of $50 million or 5 percent compared
with the fourth quarter of 2000.
3M expects mid-single-digit growth in first-quarter 2001 earnings as these
accelerated cost-reduction efforts begin to take effect. 3M will
aggressively address selling, general and administrative expenses for the
balance of the year with follow through on cost controls and initial
traction from several longer-term programs that are in the initial stages of
implementation.
These include:
* An initiative to more effectively prioritize 3M's significant R&D
commercialization investments across all businesses to further strengthen
returns.
* Adoption and concentration of Six Sigma across the company - one way of
doing business across all of 3M that will particularly help direct costs and
cash.
* E-Productivity - taking full advantage of web-based IT systems
investments to increase productivity.
* Leveraging the critical mass of 3M to achieve significant savings in
sourcing and procurement.
Aggressive and sustained implementation of these additional initiatives over
time will help ensure that 3M consistently meets its financial objectives,
while simultaneously funding 3M's existing growth initiatives such as: re-
deploying resources into higher growth areas; selective and targeted
acquisitions; and driving global market penetration to its full potential.
These growth initiatives, already in place, should gain momentum as economic
conditions improve.
3M's future prospects are enhanced by the fundamental strengths of the
company: A strong portfolio; leading market positions; an efficient and
increasingly competitive infrastructure; unequalled international
capabilities; and an underlying emphasis on innovation, creation and new
product generation. 3M will continue to convert these strengths into market
success and accelerated earnings growth.
All of these elements - combined with an enhanced level of accountability
across the entire organization - provides confidence that 3M will meet its
short- and long-term expectations.
FORWARD-LOOKING STATEMENTS
This Form 8-K contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements may be
identified by their use of words like "plan," "expect," "aim," "believe,"
"project," "anticipate," "intend," "estimate," "will," "should," "could" and
other expressions that indicate future events and trends. All statements
that address expectations or projections about the future, including
statements about the company's strategy for growth, product development,
market position, expenditures and financial results are forward-looking
statements.
Forward-looking statements are based on certain assumptions and expectations
of future events that are subject to risks and uncertainties. Actual future
results and trends may differ materially from historical results or those
projected in any such forward-looking statements depending on a variety of
factors, including but not limited to the following:
* The effects of, and changes in, worldwide economic conditions - The
company operates in more than 60 countries and derives more than half of its
revenues from sales outside the United States. 3M's business may be affected
by factors in other countries that are outside its control, such as downturns
in economic activity in a specific country or region, the economic
difficulties that occurred in Asia in 1998 as an example; social, political
or labor conditions in a specific country or region; or potential adverse
foreign tax consequences.
* Foreign currency exchange rates and fluctuations in those rates -
Because 3M derives more than half its revenues from sales outside the United
States, its ability to realize projected growth rates in sales and net
earnings and results of operations could be adversely affected if the United
States dollar strengthens significantly against foreign currencies.
* The timing and market acceptance of 3M's new product offerings - 3M's
growth objectives are largely dependent on its ability to renew its pipeline
of new products and to bring those products to market. This ability may be
adversely affected by difficulties or delays in product development, such as
the inability to: identify viable new products; successfully complete
clinical trials and obtain regulatory approvals; obtain adequate intellectual
property protection; or gain market acceptance of new products.
* Raw materials, including shortages and increases in the costs of key raw
materials.
* Acquisitions, divestitures and strategic alliances - As part of 3M's
strategy for growth, the company has made and may continue to make
acquisitions, divestitures and strategic alliances. However, there can be no
assurance that these will be completed or beneficial to the company.
* Legal proceedings.