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3M Reports 2008 Results

3M Company (3M) has reported net sales of $25.2 billion for the full year of 2008, up 3.3%, compared with the net sales of $24.4 billion in the previous year-end. It has also reported net income of $3.5 billion, or $4.89 per diluted share, for the full year of 2008, compared with the net income of $4.1 billion or $5.60 per diluted share, in the previous year-end.

Full-Year 2008 Highlights:

Local-currency sales, including acquisitions, up 1.4%

Reported operating income of $5.2 billion versus $6.2 billion in 2007; excluding special items (a-i), operating income was $5.5 billion in both years

Reported earnings per share of $4.89 versus $5.60 in 2007; excluding special items (a-i), earnings were $5.17 per share versus $4.98 in 2007, an increase of 3.8%

Returned $3 billion to shareholders in 2008 through cash dividends and repurchases of shares

Fourth Quarter 2008 Highlights:

Sales down 11.2% to $5.5 billion, or down 8.1% excluding optical

Local-currency sales, including acquisitions, down 6%

Reported operating income of $755 million versus $1.3 billion in 2007; excluding special items (a-i), operating income was $974 million versus $1.3 billion in 2007

Reported earnings per share of $0.77 versus $1.17 in 2007; excluding special items (a-i), earnings were $0.97 per share versus $1.19 in the prior year in the fourth quarter of 2007. Excluding special items (a-i), net income in the fourth quarter of 2008 was $676 million, or $0.97 per share, versus $863 million, or $1.19 per share, in the fourth quarter of 2007.

“3M drove record sales in 2008 despite a dramatic fourth-quarter economic downturn,” said George W. Buckley, 3M chairman, president and chief executive officer, “and we are responding to lower demand with aggressive cost management and operational discipline. 3M employees are doing an outstanding job managing through worldwide market challenges and are positioning our company to seize the upside when growth resumes.”

Buckley continued, “We streamlined our operations throughout 2008 and we will continue to optimize to protect against the downside throughout 2009. In addition, we plan to reduce capital expenditures by about 30% and aggressively attack working capital in order to conserve cash. Finally, we remain focused on gaining share by delighting our current customers and winning new ones. Throughout our 106-year history, we have weathered many economic storms, and expect to emerge from this one stronger and more competitive than ever.”

Reflecting the ongoing global economic uncertainty and continued challenges in many of its end-markets, 3M adjusted its 2009 sales and earnings expectations. The company is now planning for organic sales volumes to decline between 5% and 9% in 2009, versus a previous planning assumption of negative 3% to negative 7%. As a result, the company is now planning for 2009 earnings to be in the range of $4.30 to $4.70 per share, down from a previous range of $4.50 to $4.95. These estimates exclude any potential special items.

Full-year key financial highlights

For the full-year 2008, sales increased 3.3% to $25.3 billion, driven by a 1.4% increase in local-currency sales, including acquisitions. Local-currency sales growth was led by 3M’s three largest businesses—with growth of 18.3% in Safety, Security and Protection Services; 6.8% in Health Care; and 4.6% in Industrial and Transportation. Local-currency sales declined in the three remaining businesses, with Consumer and Office down 0.3%, Electro and Communications down 1.7% and Display and Graphics down 17.9%. Sales in 3M’s international operations grew 4% and now constitute 64% of total sales, the highest in 3M’s history.

Full-year net income was $3.5 billion, or $4.89 per share, versus $4.1 billion or $5.60 per share in 2007. Excluding special items (a-i), 2008 net income was $3.7 billion, or $5.17 per share, versus $3.6 billion, or $4.98 per share, in 2007. Per-share earnings increased 3.8% on this basis.

Fourth quarter key financial highlights

Fourth-quarter worldwide sales totaled $5.5 billion, down 11.2% compared to the fourth quarter of 2007. Local-currency sales including acquisitions decreased 6% and foreign exchange impacts were negative 4.9% in the quarter. Local-currency sales including acquisitions increased in two businesses during the quarter—up 13.2% in Safety, Security and Protection Services and up 4.5% in Health Care. Sales in local currencies for the other four 3M business segments dropped during the fourth quarter, with Industrial and Transportation down 6.3%, Consumer and Office down 6.5%, Electro and Communications down 12.3%, and Display and Graphics down 25.8%.

Fourth-quarter net income was $536 million, or $0.77 per share, versus $851 million, or $1.17 per share, in the fourth quarter of 2007. Included in these results is a net loss from special items (a-i) of $140 million, or $0.20 per share, in the fourth quarter of 2008, and a net loss of $12 million, or $0.02 per share, in last year’s fourth quarter. Excluding special items (a-i), fourth-quarter 2008 net income was $676 million, or $0.97 per share, versus $863 million, or $1.19 per share, in last year’s fourth quarter.