3M Reports Record Third-Quarter Sales

3M (NYSE: MMM):

• Reported earnings per share of $1.41, or $1.42 excluding special items (a-h), an increase of 10.1 percent over the same period last year
• Third-quarter revenues of $6.6 billion, up 6.2 percent from 2007
• Local-currency sales, including the impact of acquisitions, up 4.4 percent from 2007, or up 7.8 percent excluding the company’s Optical Systems business
• Operating income of $1.5 billion, an increase of 8.7 percent, excluding special items (a-h)
• Operating income margins of 23.2 percent, up 60 basis points versus 2007, excluding special items (a-h)
• Operating margins exceeded 20 percent in all businesses, excluding special items (a-h)
• $863 million returned to shareholders through cash dividends and share repurchases

3M (NYSE: MMM) today announced third-quarter sales of $6.6 billion, an increase of 6.2 percent over third quarter of 2007. Net income was $991 million, or $1.41 per share, versus $960 million, or $1.32 per share in the corresponding period last year. Excluding special items in both 2007 and 2008 (a-h), net income in the third quarter of 2008 was $999 million, or $1.42 per share, versus $940 million, or $1.29 per share, in 2007, increases of 6.2 percent and 10.1 percent, respectively.

"Our diversified business portfolio served us well in the third quarter, as 3M employees once again delivered consistent results with 23 percent-plus operating margins in a highly challenging economic environment,” said George W. Buckley, 3M chairman, president and CEO. "Our many category-defining brands, 40-plus technology platforms, unmatched global distribution capability and relentless focus on our customers drove consistent and highly profitable growth.”

The company posted double-digit sales growth in its three largest businesses, namely Safety, Security and Protection Services, Health Care and Industrial and Transportation.

Segment trends were very similar to the first half of 2008 with continued growth across the company’s international operations. 3M sales in Latin America increased 26 percent over last year, while Europe and Canada achieved 8 percent and 9 percent sales growth, respectively. Sales in Asia Pacific were down 1 percent, or up 13 percent excluding the impact of the secular transition underway in the company’s optical film business.

"Our diversified global business model has enabled us to weather many economic storms and to also take advantage of opportunities when our competitors could not,” Buckley added. "For example, 3M started 15 successful new international companies during the recession of the 1970s, and we aggressively built strength and gained market share in Asia during the late-1990s. We are poised again to take full advantage of market opportunities presented by the current environment and to emerge more competitive and successful than ever before.”

Key Financial Highlights

Third-quarter worldwide sales totaled $6.6 billion, an increase of 6.2 percent over last year. Local-currency sales including acquisitions increased 4.4 percent, and foreign exchange impacts added 2.1 points to growth in the quarter. Local-currency sales including acquisitions increased 27.7 percent in Safety, Security and Protection Services, 9.2 percent in Health Care, 7.1 percent in Industrial and Transportation, 3.7 percent in Consumer and Office, 0.2 percent in Electro and Communications, but declined 17.7 percent in Display and Graphics due to the secular transition in the company’s optical films business. Third-quarter net income was $999 billion, or $1.42 per share, versus $940 million, or $1.29 per share, in the third quarter of 2007, excluding special items in both periods. Net income and earnings per share increased 6.2 percent and 10.1 percent respectively, excluding special items (a-h).

For the first nine months of 2008, sales increased 8.2 percent to $19.8 billion, driven by a 3.9 percent increase in local-currency sales, including acquisitions. Year-to-date earnings were $4.19 per share, up 10.6 percent over 2007, excluding special items (a-h) in both periods.

Business Segment Discussion

Industrial and Transportation

• Sales increased 10 percent to $2 billion.
• Sales up 7.1 percent in local currencies, including 4.2 percent from acquisitions.
• Broad-based sales performance with double-digit growth in adhesives and tapes, automotive aftermarket, abrasives and personal care divisions.
• Double-digit sales growth in Asia Pacific and Latin America.
• Profits up 8 percent to $407 million and operating margins of 20.5 percent, excluding special items.

Health Care

• Sales rose 10.7 percent to $1.1 billion.
• Local-currency sales growth of 9.2 percent including 2.7 percent from acquisitions.
• Outstanding growth in the core, with sales up more than 15 percent in oral care and 13 percent in medical supplies.
• Positive sales growth in all major geographies, including double-digit growth in Asia Pacific and Latin America.
• Operating income increased 17.2 percent to $304 million, with margins of 28.5 percent, excluding special items.

Safety, Security and Protection Services

• Sales of $974 million, up 27.1 percent.
• Sales growth in local currency of 27.7 percent, including 18.7 percent from acquisitions, primarily Aearo Technologies, Inc.
• Broad-based sales growth led by personal protection, protective window films and cleaning solutions for commercial buildings.
• Double-digit sales growth in all geographic regions led by the U.S. and Asia Pacific.
• Profits up 41.6 percent to $222 million, with operating margins of 22.8 percent, excluding special items.

Consumer and Office

• Sales up 5.2 percent to $946 million.
• Local-currency sales increased 3.7 percent, with 0.5 percent from acquisitions.
• Positive sales growth in all businesses led by the home care and do-it-yourself businesses.
• Positive sales growth across all major geographic regions, led by Latin America and Asia Pacific; sales growth of 1.9 percent in the U.S. despite continued challenges in the retail industry.
• Profits increased 12.7 percent to $217 million, with operating margins of 22.9 percent.

Display and Graphics

• Sales declined 16.1 percent to $853 million, with local-currency sales down 17.7 percent.
• Sales rose 1.8 percent excluding Optical Systems.
• Positive sales growth in Traffic Safety Systems and Commercial Graphics.
• Double-digit sales growth in Latin America.
• Optical Systems sales and profits down 34 percent and 60 percent, respectively. Sequential sales for this business increased 5.3 percent.
• Operating profits were $181 million, with a 21.2 percent margin, excluding special items.

Electro and Communications

• Sales increased 2.6 percent to $728 million.
• Local-currency sales were up slightly.
• Sales growth was strongest in Asia Pacific and Latin America.
• Double-digit sales growth in two businesses: Electrical Markets and Electronics Markets Materials
• Communications Markets and Electronics Solutions businesses remain soft.
• Operating profits up 7.5 percent, excluding special items, to $155 million, with margins of 21.4 percent.

Outlook

"We will manage prudently in the remainder of this year as economic conditions remain volatile,” Buckley said. "Full-year 2008 earnings are expected to be in the range of $5.40 to $5.48 per share, an increase of 8.4 percent to 10 percent, and operating margins are expected to be between 22.5 and 23 percent.” The company anticipates a full-year tax rate of 31.5 to 32 percent and capital expenditures of $1.3 to $1.4 billion. All estimates quoted exclude 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 and capital markets 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 fewer 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, 2007 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 release is as of the date indicated. The company assumes no obligation to update any forward-looking statements contained in this presentation 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 79,000 people worldwide and has operations in more than 60 countries. For more information, visit www.3M.com.