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3M Updates Second-Quarter Sales and Earnings
St. Paul, Minnesota, USA, 07 July 2006 --(BUSINESS WIRE) -- 3M (NYSE:MMM) today announced that second quarter sales would be approximately USD 5.7 billion, an increase of between 7.5% and 8% versus the second quarter of 2005. Organic local currency sales growth, which excludes the effect of acquisitions, divestitures, and foreign currency fluctuations, is expected to be near the low end of the company's previous guidance of 5% to 8%.

Second quarter reported earnings are expected to be within the company's previously announced guidance of USD 1.14 to USD 1.17 per share, including net gains of approximately USD 0.08 to USD 0.10 per share due to the combination of positive benefits from income tax adjustments(a), partially offset by settlement costs of a previously disclosed antitrust class action(b) and costs related to the company's current efforts to seek strategic alternatives for its branded pharmaceuticals business.

Excluding these special items, earnings are expected to fall below previous expectations. In the second quarter of 2005, 3M reported earnings of USD 0.96 per share, which included a USD 0.10 per share charge related to the domestic reinvestment provisions of the American Jobs Creation Act of 2004(c).

This second quarter performance was affected in large part by lower than expected sales volumes and higher than anticipated new capacity start-up costs in its optical systems division, a part of 3M's Display and Graphics business segment. 3M develops and manufactures the world's broadest line of proprietary optical films that enhance the brightness and viewing angle of all types of LCD displays.

"As other companies in the LCD industry have recently noted, the industry has experienced an increase in inventory levels over the last few months, particularly in desktop monitors, which has significantly impacted sales of 3M optical films," said George W. Buckley, 3M chairman, president, and chief executive officer. "Coincident with this, it appears the industry overestimated demand for LCD televisions in anticipation of the FIFA World Cup(TM) and has temporarily reduced production accordingly, also impacting sales of our optical films. Finally, as demand for LCD TV accelerates, we expect LCD film sales will increasingly follow more seasonal patterns, with revenues being lowest in the second quarter and higher in the third and fourth quarters in anticipation of the holiday season," he added.

Buckley also noted that second quarter income would be negatively affected by higher than expected start-up costs associated with the scale up of new multilayer optical film production capacity. "While manufacturing of multilayer optical films is technically challenging, particularly in larger sizes, and start-up costs ran above plan in the quarter, we expect to resolve these issues as quickly as possible," Buckley said. "This new optical film facility is designed to improve yields, accelerate run speeds, and enhance our ability to satisfy growing demand for increasingly larger LCD TV screens," he added. "3M's capability remains unmatched in this category, and by continuously providing technology-driven solutions for customers, including the larger-format films from our new production facilities, 3M is well-positioned in this fast-growth industry."

3M expects calendar year 2006 reported earnings to be in the range of USD 4.55 to USD 4.65 per share. Included in this estimate is the combination of the previously mentioned net gains of approximately USD 0.08 to USD 0.10 per share.

3M will release its complete second quarter financial results on 25 July. 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) on that day.


(a) Second quarter tax adjustments are due to the resolution of
certain tax audits in Europe and the United States and
adjustments to tax accruals for all other open audit years.

(b) 3M entered into an agreement in principle during the second
quarter to resolve the antitrust class action involving direct
purchasers of transparent tape that as previously disclosed
had been scheduled to start trial at the end of May. The
settlement is conditioned on court approval, which will be
sought promptly upon execution of final settlement documents
and is expected to be granted later this year.

(c) In 2005, 3M reinvested USD 1.8 billion of foreign earnings in the
United States pursuant to the provisions of the American Jobs
Creation Act of 2004. This act provided the company the
opportunity to tax efficiently repatriate foreign earnings for
U.S. qualifying investments specified in its domestic
reinvestment plan. As a consequence, in the second quarter of
2005, 3M recorded a non-recurring charge of USD 75 million, net of available foreign tax credits.

For more information, including the latest product and technology news, visit www.3M.com.


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