UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1994
Commission file number 1-3285
MINNESOTA MINING AND MANUFACTURING COMPANY
State of Incorporation: Delaware
I.R.S. Employer Identification No. 41-0417775
Executive offices: 3M Center, St. Paul, Minnesota 55144
Telephone number: (612) 733-1110
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------------------- ----------------------
Common Stock, Without Par Value New York Stock Exchange
Pacific Stock Exchange
Chicago Stock Exchange
Note: The common stock of the registrant is also traded on the
Amsterdam Stock Exchange, German stock exchanges, Swiss stock
exchanges, the Paris Stock Exchange and the Tokyo Stock Exchange.
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of
the registrant, based on the closing price of $52.38 per share as
reported on the New York Stock Exchange-Composite Index on
January 31, 1995, was $22.0 billion.
Shares of common stock outstanding at January 31, 1995: 419,796,244.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference in
Parts III and IV of this Form 10-K: (1) Proxy Statement for
registrant's 1995 annual meeting, (2) Form 10-Q for period ended
June 30, 1987, and (3) Registration Nos. 33-29329, 33-48089 and
33-49842.
This document contains 45 pages.
MINNESOTA MINING AND MANUFACTURING COMPANY
FORM 10-K
For the Year Ended December 31, 1994
PART I
Item 1. Business.
Minnesota Mining and Manufacturing Company was incorporated in 1929 under the
laws of the State of Delaware to continue operations, begun in 1902, of a
Minnesota corporation of the same name. As used herein, the term "3M"
includes Minnesota Mining and Manufacturing Company and subsidiaries unless
the context otherwise indicates. At December 31, 1994, the company employed
85,166 persons.
3M is an integrated enterprise characterized by substantial interdivision and
intersector cooperation in research, manufacturing and marketing of products
incorporating similar component materials manufactured at common internal
sources. Its business has developed from its research and technology in
coating and bonding for coated abrasives, its only product in its early years.
Coating and bonding is the process of applying one material to another, such
as adhesives to a backing (pressure-sensitive tapes), abrasive granules to
paper or cloth (coated abrasives), ceramic coating to granular mineral
(roofing granules), heat-sensitive or light-sensitive materials to paper,
film and metal (dry silver paper, photographic film and lithographic plates),
iron oxide to plastic backing (magnetic recording tape), glass beads to
plastic backing (reflective sheeting), and low tack adhesives to paper
(repositionable notes).
3M believes that it is among the leading producers of products for many of
the markets it serves. In all cases, 3M products are subject to direct or
indirect competition. Generally speaking, most 3M products involve technical
competence in development, manufacturing and marketing and are subject to
competition with products manufactured and sold by other technically-oriented
companies.
3M's three business sectors are: Industrial and Consumer; Information,
Imaging and Electronic; and Life Sciences. Each sector brings together
common or related 3M technologies and thus provides greater opportunity for
the future development of products and services and a more efficient sharing
of business strengths.
The notes to consolidated financial statements on pages 32 and 33 of this
Form 10-K provide financial information concerning 3M's three industry
segments and 3M's operations in various geographic areas of the world.
Industry Segments
3M's operations are organized into three business sectors. These sectors have
worldwide responsibility for virtually all 3M product lines. A few
miscellaneous and staff-sponsored new products, still in development, are not
assigned to the sectors.
Industrial and Consumer Sector: This sector is a leader in developing the
technologies for pressure-sensitive adhesives, specialty tapes, coated and
nonwoven abrasives, and specialty chemicals. These core technologies provide
a strong basis for the development of new products. The sector also has
strong distribution channels and logistics expertise. The sector is
organized into five groups: Abrasive, Chemical and Film Products; Automotive
Systems; Consumer Markets; Office Markets; and Tape.
Major products in the Abrasive, Chemical and Film Products Group include
coated abrasives (such as sandpaper) for grinding, conditioning and finishing
a wide range of surfaces; natural and color-coated mineral granules for
asphalt shingles; finishing compounds; and flame-retardant materials. This
group also markets products for maintaining and repairing vehicles. Major
chemical products include protective chemicals for furniture, fabrics and
paper products; fire-fighting agents; fluoroelastomers for seals, tubes and
gaskets in engines; engineering fluids; and high performance fluids used in
the manufacture of computer chips and for electronic cooling and lubricating
of computer hard disk drives. This group also serves as a major resource for
other 3M divisions, supplying specialty chemicals, adhesives and films used
in the manufacture of many 3M products.
Major products in the Automotive Systems Group include body side-molding and
trim; functional and decorative graphics; corrosion-resistant and
abrasion-resistant films; tapes for attaching nameplates, trim and moldings;
and fasteners for attaching interior panels and carpeting.
Major products in the Consumer and Office Markets businesses include Scotch
brand tapes; Post-it brand note products, including memo pads, labels,
stickers, pop-up notes and dispensers; home cleaning products, including
Scotch-Brite brand scouring products, O-Cel-O brand sponges and Scotchgard
brand fabric protectors; energy control products, such as window insulation
kits; nonwoven abrasive materials for floor maintenance and commercial
cleaning; floor matting; and a wide range of do-it-yourself products,
including surface preparation and wood finishing materials, and filters for
furnaces and air conditioners.
The Tape Group manufactures and markets a wide variety of high-performance
and general-use pressure-sensitive tapes and specialty products. Major
product categories include industrial application tapes made from a wide
variety of materials such as foil, film, vinyl and polyester; specialty tapes
and adhesives for industrial applications, including Scotch brand VHB brand
tapes, lithographic tapes, joining systems, specialty additives, vibration
control materials, liquid adhesives, and reclosable fasteners; general-use
tapes, such as masking, box-sealing and filament; and labels and other
materials for identifying and marking durable goods.
Information, Imaging and Electronic Sector: This sector serves rapidly
changing markets in audio, video and data recording; graphic communications;
information storage, output and transfer; telecommunications; electronics and
electrical products. The sector has the leading technologies for certain
electrical, electronic and fiber-optic applications and a wide variety of
graphic imaging technologies. Having these related areas in one operating
unit fosters efficient product development and innovation. The sector is
also strong in worldwide distribution and service. The sector is organized
into three groups: Electro and Communications Systems; Imaging Systems; and
Memory Technologies.
The Electro and Communications Systems Group includes products in the
electronic, electrical, telecommunication and visual communication fields.
The electronic and electrical products include packaging and inter-connection
devices; insulating materials, including pressure-sensitive tapes and resins;
and other related equipment. These products are used extensively by
manufacturers of electronic and electrical equipment, as well as the
construction and maintenance segments of the electric utility, telephone and
other industries. The telecommunication products serve the world's telephone
companies with a wide array of products for fiber-optic and copper-based
telephone systems. These include many innovative connecting, closure and
splicing systems, maintenance products and test equipment. The visual
communication products serve the world's office and education markets with
overhead projectors and transparency films and materials plus equipment and
accessories for computer-based presentations.
The Imaging Systems Group offers a complete line of products for printers and
graphic arts firms, ranging from the largest commercial printer to the
smallest instant printer or in-house facility. These products include a
broad line of presensitized lithographic plates and related supplies; a
complete line of duplicator press plates and automated imaging systems and
related supplies; copy and art preparation materials; pre-press proofing
systems; carbonless paper sheets for multiple-part business forms; and a line
of light-sensitive dry silver papers and films for electronically recorded
images. This group's imaging technologies are used in producing photographic
products, including medical X-ray films, graphic arts films and amateur color
films. It also is a major supplier of laser imagers and supplies and
computerized medical diagnostic systems. This group also offers an array of
micrographic systems including readers and printers for engineering graphics
and office applications. Related products include dry silver imaging papers
and microfilm in aperture card and roll formats.
The Memory Technologies Group manufactures and markets a complete line of
magnetic and optical recording products for many applications that meet the
requirements for complex applications in computers, instrumentation,
automation and other fields. Memory Technologies is the world's largest
supplier of removable memory media for computers. Products range from
computer diskettes, cartridges and tapes to CD-ROM and rewritable optical
media. The group markets a wide array of recording products which are used
for home video recording, in professional radio and television markets, as
well as for commercial and industrial uses. These include reel-to-reel,
cartridge and cassette tapes for audio and video recording.
Life Sciences Sector: This sector contributes to better health and safety
for people around the world. The Life Sciences Sector's major technologies
include pressure-sensitive adhesives, substrates, extrusion/coating, nonwoven
materials, specialty polymers and resins, optical systems, drug delivery, and
electro-mechanical devices. The sector has strong distribution channels in
all its major markets. The sector is organized into three groups: Medical
Products; Pharmaceuticals, Dental and Personal Care Products; and Traffic and
Personal Safety Products.
The Medical Products Group produces a broad range of medical supplies, devices
and equipment. Medical supplies include tapes, dressings, surgical drapes and
masks, biological indicators, orthopedic casting materials and electrodes.
Medical devices and equipment include stethoscopes, heart-lung machines,
sterilization equipment, blood gas monitors, powered orthopedic instruments,
and intravenous infusion pumps. The Medical Products Group also develops
hospital information systems.
The Pharmaceuticals, Dental and Personal Care Products Group serves
pharmaceutical and dental markets, as well as manufacturers of disposable
diapers. Pharmaceuticals include ethical drugs and drug-delivery systems.
Among ethical pharmaceuticals are analgesics, anti-inflammatories and
cardiovascular and respiratory products. Drug-delivery systems include
metered-dose inhalers, as well as transdermal skin patches and related
components. Dental products include dental restoratives, adhesives,
impression materials, temporary crowns, infection control products, and
orthodontic brackets and wires. This group also produces a broad line of
tape closures for disposable diapers.
The Traffic and Personal Safety Products Group is a leader in the following
markets: traffic control materials, commercial graphics, occupational health
and safety, and out-of-home advertising. In traffic control materials, 3M is
the worldwide leader in reflective sheetings. These materials are used on
highway signs, vehicle license plates, construction workzone devices, and
trucks and other vehicles. In commercial graphics, 3M supplies a broad line
of films, inks and related products used to produce graphics for trucks and
signs. Major occupational health and safety products include maintenance-free
and reusable respirators, plus personal monitoring systems. Out-of-home
advertising includes outdoor advertising, advertising displays in shopping
centers, and local advertising in national magazines. This product group
also markets a variety of other products. These include spill-control
sorbents, Thinsulate brand and Lite Loft brand insulations, traffic control
devices, filtration products, electronic surveillance products, reflective
sheetings for personal safety, and films for protection against counterfeiting.
Distribution
3M products are sold directly to users and through numerous wholesalers,
retailers, jobbers, distributors and dealers in a wide variety of trades in
many countries of the world. Management believes that the confidence of
wholesalers, retailers, jobbers, distributors and dealers in 3M and its
products, developed through long association with trained marketing and sales
representatives, has contributed significantly to 3M's position in the
marketplace and to its growth. 3M has 297 sales offices and distribution
centers worldwide, including 9 major branch offices and warehouses that are
located in principal cities throughout the United States. There are 90 sales
offices and distribution centers located in the United States.
Internationally, 3M has 207 sales offices and distribution centers located
in 55 countries.
Research, Patents and Raw Materials
Research and product development constitute an important part of 3M's
activities, and products resulting from such research and product development
have contributed in large measure to its growth. The total amount spent for
all research and development activities was $1.054 billion, $1.030 billion
and $1.007 billion in 1994, 1993 and 1992, respectively.
The corporate research laboratories are engaged in research which does not
relate directly to 3M's existing product lines. They also support the
research efforts of division and sector laboratories. Most major operating
divisions, as well as several international companies, have their own
laboratories for improvement of existing products and development of related
new products. Engineering research staff groups provide specialized services
in instrumentation, engineering and process development. An organization is
maintained for technological development not sponsored by other units of the
company.
3M is the owner of many domestic and foreign patents derived primarily from
its own research activities. 3M does not consider that its business as a
whole is materially dependent upon any one patent, license or trade secret
or any group of related patents, licenses or trade secrets.
The company experienced no significant or unusual problems in the purchase of
raw materials during 1994. While 3M has successfully met its demands to date,
it is impossible to predict future shortages or their impact.
Executive Officers
The following is a list of the executive officers of 3M as of March 1, 1995,
their present position, their current age, the year first elected to their
position and other positions held within 3M during the previous five years.
All of these persons have been employed full time by 3M or a subsidiary of 3M
for more than five years. All officers are elected by the Board of Directors
at its annual meeting, with vacancies and new positions being filled at
interim meetings. There are no family relationships between any of the
executive officers named, nor is there any arrangement or understanding
pursuant to which any person was selected as an officer.
<TABLE>
<CAPTION>
Year Elected
to Present
Name Age Present Position Position Other Positions Held During 1990-1995
- ------------- ---- ------------------- --------- --------------------------------------
<S> <C> <C> <C> <C>
L.D. DeSimone 58 Chairman of the Board 1991 Executive Vice President,
and Chief Executive Officer Information and Imaging
Technologies Sector and
Corporate Services, 1989-1991
J. M. Adam 57 Vice President, Marketing 1995 Group Vice President, Medical
Products Group, 1991-1995
Group Vice President, Consumer and
Advertising Markets Group, 1991
Group Vice President, Consumer
Products Group, 1986-1991
Giulio Agostini 59 Senior Vice President, 1993 Senior Vice President,
Finance and Office Finance, 1991-1993
Administration Director, Finance and Administration,
3M Italy, 1972-1991
William E. Coyne 58 Vice President, 1994 President and General Manager,
Research and Development 3M Canada, Inc., 1990-1994
Group Vice President, Medical
Products Group, 1988-1990
Lawrence E. Eaton 57 Executive Vice President, 1991 Group Vice President,
Information, Imaging, Memory Technologies Group,
and Electronic Sector 1986-1991
and Corporate Services
Harry A. Hammerly 61 Executive Vice President, 1995 Executive Vice President,
International Operations Life Sciences Sector and
International Operations, 1994
Executive Vice President, International
Operations and Corporate Services, 1991-1994.
Executive Vice President,
Industrial and Electronic Sector
and Corporate Services, 1989-1991
Charles E. Kiester 58 Senior Vice President, 1993 Vice President, Engineering,
Engineering, Quality and Quality and Manufacturing Services
Manufacturing Services 1990-1993
President and General Manager,
3M Canada,Inc., 1988-1990
Richard A. Lidstad 58 Vice President, 1992 Staff Vice President, Human Resource
Human Resources Operations, 1987-1992
W. G. Meredith 52 Executive Vice President, 1995 Group Vice President, Pharmaceuticals, Dental
Life Sciences Sector and and Personal Care Products Group, 1994
Corporate Services Group Vice President, Pharmaceuticals, Dental
and Disposable Products Group, 1991-1994
Group Vice President, Pharmaceutical and
Dental Products Group, 1990-1991
Division Vice President, 3M Pharmaceuticals,
1989-1990
Ronald A. Mitsch 60 Executive Vice President, 1991 Senior Vice President, Research
Industrial and Consumer and Development, 1990-1991
Sector and Corporate Services Group Vice President, Traffic and
Personal Safety Products Group, 1985-1990
John J. Ursu 55 Vice President, Legal 1993 General Counsel, 1992-1993
Affairs and General Counsel Deputy General Counsel, 1990-1992
Associate General Counsel, 1986-1990
</TABLE>
Item 2. Properties.
3M's general offices, corporate research laboratories, most division
laboratories and certain manufacturing facilities are located in St. Paul,
Minnesota. Within the United States, 3M operates 80 plants in 28 states and
has 90 sales offices and distribution centers located in 23 states.
Internationally, 3M operates 107 manufacturing and converting facilities in
45 countries and has 207 sales offices and distribution centers located in 55
countries.
3M owns substantially all of its physical properties. 3M leases certain
facilities which were financed through the issuance of industrial development
bonds in the original principal amount of $30 million. 3M has capitalized
the construction costs related to these facilities and recorded the related
liabilities. Management believes 3M's existing physical facilities are highly
suitable for the purposes for which they were designed.
Item 3. Legal Proceedings.
The company and certain of its subsidiaries are named defendants in a number
of actions, governmental proceedings and claims, including product liability
claims involving products now or formerly manufactured and sold by the
company, many of which relate to silicone gel mammary implants, and some of
which claims are purported or tentatively certified class actions. In some
actions, the claimants seek damages as well as other relief which, if granted,
would require substantial expenditures.
The company is involved in a number of environmental proceedings by
governmental agencies asserting liability for past waste disposal and other
alleged environmental damage. The company conducts ongoing investigations,
assisted by environmental consultants, to determine accruals for the probable,
estimable costs of remediation. The remediation accruals are reviewed each
quarter and changes are made as appropriate.
Some of these matters raise difficult and complex factual and legal issues
and are subject to many uncertainties, including, but not limited to, the
facts and circumstances of each particular action, the jurisdiction and forum
in which each action is proceeding, and differences in applicable law.
Accordingly, the company is not always able to estimate the nature and
precise amount of future liabilities with respect to such matters.
Although there can be no certainty that the company may not ultimately incur
charges (whether for governmental proceedings and claims, mammary implant
claims, other product liability claims, environmental proceedings or other
actions) in excess of presently established accruals, the company believes
that such additional charges, if any, will not pose a material risk to the
financial position of the company or its results of operations.
Mammary Implant Litigation:
As of December 31, 1994, the company had been named as a defendant, often
with multiple co-defendants, in 6,166 claims and lawsuits in various courts,
all seeking damages for personal injuries from allegedly defective breast
implants. These claims and lawsuits purport to represent 15,732 individual
claimants. It is not yet certain how many of these lawsuits and claims
involve products manufactured and sold by the company, as opposed to other
manufacturers. The company entered the business in 1977 by purchasing McGhan
Medical and then sold that business in 1984.
On April 8, 1994, the company and other defendants concluded provisional
agreements with a plaintiffs' negotiating committee regarding their
contributions to a "global settlement" in the amount of $4.75 billion, which
had been previously announced by the committee and three major defendants in
these claims and lawsuits. The company has agreed that its maximum commitment
of $325 million will be paid into a court-administered fund within three years
from the date that the final order ratifying the global settlement is entered
and after appeals, if any, have been exhausted. On September 1,1994, the
global settlement was approved as fair, reasonable and adequate by the U.S.
District Court, Northern District of Alabama, which has had jurisdiction over
this matter. This ruling subsequently was appealed by several third parties
(i.e. neither plaintiffs nor defendants). The company maintains a unilateral
right to withdraw from the global settlement. This right to withdraw will
continue until the process of evaluating and classifying claims is complete.
The claims process is expected to continue well into 1995.
In the first quarter of 1994, the company took a pre-tax charge of $35 million
($22 million after tax) in recognition of its best estimate of its probable
liabilities and associated expenses net of the probable amount of insurance
recoverable from its carriers. The company's current estimate of the total
liabilities and associated expenses is nearly $500 million. After subtracting
payments made in 1994 (for legal fees and payment of settlements to litigants
and claimants electing to remove themselves from the global settlement) and
adjusting for discounting, the company as of December 31, 1994, had accrued
liabilities having a net present value of $356 million. The company had also
accrued receivables for insurance recoveries of $377 million as of December
31, 1994. Although, since the first quarter of 1994, a number of out-of-court
settlements have been reached and discussions continue with litigants and
claimants, the company's current estimate of its uninsured financial exposure
has not materially changed.
On September 22, 1994, three excess coverage insurers initiated in the courts
of the State of Minnesota a declaratory judgment action against the company
and numerous insurance carriers seeking adjudication of certain coverage
issues and a determination concerning allocation among insurers for coverage
under the terms of the various insurance policies with possible application.
On December 9, 1994, the company initiated an action against its occurrence
insurers in the Texas State Court in and for Harrison County, seeking a
determination concerning allocation of financial responsibility among the
company's various insurers having applicable coverages, including
adjudication of overlapping coverages. This action has since been removed
to the U.S. District Court, Eastern District of Texas. None of the insurers
that are parties to this action has denied coverage.
The company conducts ongoing reviews, assisted by outside counsel, to
determine the adequacy and extent of insurance coverage provided by its
occurrence and claims-made insurers. The most recent review shows that no
insurer has denied coverage, and that the aforementioned actions in the
courts of Minnesota and Texas relate principally to the allocation of
financial responsibility among the company's insurers (including adjudication
of overlapping coverages).
Although the company's current estimate of total liabilities and associated
expenses has increased to nearly $500 million, the company believes, based on
ongoing reviews, that the coverage provided by the policies with possible
application is sufficient to cover the current exposure. The totality of the
insurance coverage, which has not been denied by any insurer, is thus the
basis for the company's belief that its uninsured financial exposure has not
materially changed, and therefore, no recognition of additional charges has
been necessary since the first quarter of 1994.
Item 4. Submission of Matters to a Vote of Security Holders.
None in the quarter ended December 31, 1994.
Part II
Item 5. Market Price of 3M's Common Stock and Related Security Holder Matters.
At January 31, 1995, there were 125,339 shareholders of record.
3M's stock is listed on the following stock exchanges: New York Stock
Exchange, Pacific Stock Exchange, Chicago Stock Exchange, Amsterdam Stock
Exchange, German stock exchanges, Swiss stock exchanges, Paris Stock
Exchange, and Tokyo Stock Exchange.
Stock price comparison information (New York Stock Exchange Composite
Transactions), which reflects a two-for-one stock split effective
March 15, 1994, is as follows:
Quarter First Second Third Fourth Year
1994 High $56.38 $52.38 $57.13 $56.63 $57.13
Low 49.00 46.38 49.25 50.38 46.38
1993 High 55.88 58.50 55.63 56.75 58.50
Low 48.63 52.44 51.13 50.75 48.63
Item 6. Selected Financial Data.
All per-share data reflect a two-for-one stock split effective March 15, 1994.
(Dollars in millions, except amounts per share)
1994 1993 1992 1991 1990
For the Year Ended December 31:
Net Sales..........................$15,079 $14,020 $13,883 $13,340 $13,021
Net Income ......................... 1,322 1,263 1,233* 1,154 1,308
Per Share of Common Stock:
Net Income ........................ 3.13 2.91 2.81* 2.63 2.95
Cash Dividends Declared and Paid .. 1.76 1.66 1.60 1.56 1.46
Ratio of Earnings to Fixed Charges...13.30 15.51 12.81* 11.02 12.42
At December 31:
Total Assets .......................13,496 12,197 11,955 11,304 11,079
Long-term Debt (excluding portion due
within one year) ................. 1,031 796 687 764 760
* Includes a net earnings increase of $6 million, or 1 cent per share, from
the combination of a legal settlement, special charges and the cumulative
effect of accounting changes, which are more fully discussed on page 26.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Operating Results
All share and per-share data reflect a two-for-one stock split effective
March 15, 1994.
Worldwide net sales rose 7.6 percent to $15.079 billion. This followed
increases of 1.0 percent in 1993 and 4.1 percent in 1992. Sales in the
United States were $7.511 billion, up more than 5 percent from 1993.
International sales totaled $7.568 billion, an increase of about 10 percent
from 1993.
Estimated components of sales change from prior year were as follows:
______________________________________________________________________________
1994 1993
U.S. Intl. Worldwide U.S. Intl. Worldwide
______________________________________________________________________________
Volume 7% 10% 9% 5% 7% 6%
Price (2) (2) (2) (2) (2) (2)
Translation - 2 1 - (6) (3)
______________________________________________________________________________
Total 5% 10% 8% 3% (1)% 1%
______________________________________________________________________________
Volume growth accelerated both in the United States and internationally in
1994, helped by improving economies, a strong flow of new products, and
increased efforts to improve customer satisfaction. Selling prices declined
about 2 percent in both 1994 and 1993, largely due to competition in our
memory technologies product lines. Currency fluctuations, which reduced
sales by about 3 percent in 1993, increased sales slightly in 1994.
Cost of goods sold was 59.7 percent of sales, down from 60.8 percent in 1993.
Cost of goods sold benefited from solid volume growth, productivity gains and
cost control efforts. In 1993, cost of goods sold increased by seven-tenths
of a percentage point. Benefits from productivity gains and lower raw
material costs were more than offset by lower selling prices and negative
currency effects. Cost of goods sold includes manufacturing, research and
development, and engineering expenses.
Selling, general and administrative expenses were 25.4 percent of sales,
compared with 25.2 percent in 1993 and 25.6 percent in 1992. The increase in
1994 largely reflected investments to sustain rapid growth in developing
countries. Cost-reduction efforts helped SG&A spending in both 1994 and 1993.
(Percent of sales) 1994 1993 1992
Cost of goods sold 59.7 60.8 60.1
______________________________________________________________________________
Selling, general and administrative expenses 25.4 25.2 25.6
______________________________________________________________________________
Worldwide employment decreased by over 660 in 1994 and by over 1,000 in 1993,
even though the company added employees to support rapid growth in developing
countries. This net reduction in employment occurred with little disruption
to the company. Sales per employee rose about 8 percent.
Worldwide operating income totaled $2.251 billion, up 15.0 percent from 1993.
Operating income benefited from strong volume growth and from efforts to
control costs and improve productivity. Operating profit margins improved by
nine-tenths of a percentage point. The company estimates that currency
changes increased operating income by about $21 million in 1994 and reduced
operating income by about $95 million in 1993. In 1993, operating income
decreased 1.9 percent, largely due to this negative currency impact.
(Percent of sales) 1994 1993 1992
Operating Income 14.9 14.0 14.4
______________________________________________________________________________
In 1992, 3M recognized $129 million in settlement of a patent lawsuit
involving 3M orthopedic casting materials. Operating income in 1992 included
this amount, which is shown on a separate line of the Consolidated Statement
of Income titled "Legal settlement."
Also in 1992, 3M recorded $115 million of special charges related to actions
taken to enhance its competitiveness and productivity. These charges relate
primarily to asset write-downs, reflecting decisions in 1992 to rationalize
certain manufacturing operations. Operating income in 1992 included this
amount, which is shown on a separate line of the Consolidated Statement of
Income titled "Special charges."
Interest expense was $87 million, compared with $50 million in 1993 and $76
million in 1992. The increase from 1993 was due to a planned increase in
debt and higher interest rates. The declines in both 1993 and 1992 were
mainly due to lower interest rates. Investment and other income was $25
million, compared with $96 million in 1993 and $29 million in 1992. In
1993, investment and other income included a $36 million benefit from tax
settlements, improved investment results, and other items, many of which were
of a non-recurring nature.
During the first quarter of 1994, the company recorded a charge of $35
million related to mammary implant litigation. Other income and expense
in 1994 includes this amount, which is shown on a separate line of the
Consolidated Statement of Income titled "Implant litigation - net." The
company entered the implant business in 1977 by purchasing McGhan Medical
and then sold that business in 1984. Although there can be no certainty
that the company may not ultimately incur charges in excess of presently
established reserves, the company believes that such additional charges, if
any, will not pose a material risk to the financial position of the company
or its results of operations.
The company's effective tax rate was 35.8 percent of pre-tax income, up from
35.3 percent in both 1993 and 1992. The higher tax rate was primarily due to
a lower level of foreign tax credits in 1994 and the accounting benefit in
1993 of revaluing deferred tax assets and liabilities for the higher 1993
U.S. statutory tax rate. This was partially offset by an adjusted prior
years' export sales benefit in 1994. The company's deferred tax assets and
liabilities will reverse over an extended period of time.
Minority interest was $61 million, compared to $32 million in 1993 and $24
million in 1992. Minority interest includes our joint ventures in Japan,
India, Indonesia, and Korea. These companies' results are fully consolidated
into 3M's financial statements, and then partially eliminated on the minority
interest line to reflect 3M's net position in these companies. The increase
in 1994 was largely due to increased profits in these companies.
Net income rose 4.7 percent to $1.322 billion, or $3.13 per share
($1.344 billion, or $3.18 a share, excluding the charge for mammary implant
litigation). In 1993, net income increased 2.5 percent to $1.263 billion,
or $2.91 per share, compared with $1.233 billion, or $2.81 per share, in 1992.
The company estimates that changes in the value of the U.S. dollar had a
minimal effect on net income in 1994 and 1992, but decreased net income by
an estimated $62 million, or 14 cents per share, in 1993. These estimates
include the effect of translating profits from local currencies into U.S.
dollars, the costs in local currencies of transferring goods between the
parent company in the U.S. and international companies, and transaction gains
and losses in countries not considered to be highly inflationary.
Over the long term, 3M expects to meet its aggressive financial goals. These
include a growth in earnings per share averaging 10 percent a year or better,
return on stockholders' equity of 20 to 25 percent, return on capital employed
of 27 percent or better, and 30 percent of sales from products introduced in
the last four years.
Earnings per share increased 7.6 percent in 1994. Return on average
stockholders' equity was 20.1 percent, up from 19.1 percent in 1993. This
return has averaged 19.9 percent over the past 5 years. Return on capital
employed was 20.7 percent, up from 19.1 percent in 1993. This return has
averaged 20.8 percent over the past 5 years. In 1994 about 30 percent of
sales came from products introduced within the last 4 years.
Performance by Business Sector
Industrial and Consumer Sector:
In 1994, sales were up 9.8 percent to $5.9 billion. Operating income
increased 17.1 percent to $994 million. Profit margins increased by a full
percentage point. All of the sector's major businesses contributed to this
excellent performance, with particularly strong growth in the tape, abrasive
and chemical businesses. Excluding special charges of $13 million in 1992,
operating income increased 1.2 percent in 1993.
The competitive advantages of this sector include market leadership, depth of
technology, innovative new products, brand equity, and international reach.
New products in this sector include microstructured abrasives which are based
on a patented new technology, electroluminescent lamps, structural adhesives,
and performance fluids.
A strong international presence keeps this sector close to its customers
around the world, enabling quick responses to changing needs and preferences.
Because the market penetration is less than in the U.S., this sector has
excellent opportunities for growth internationally.
Information, Imaging and Electronic Sector:
In 1994, sales were up 2.5 percent to $4.6 billion. Operating income rose
7.6 percent to $292 million. Excluding special charges of $81 million in 1992,
operating income decreased 15.0 percent in 1993. Results over the past few
years have been negatively affected by continuing investments in new
technologies and new products, recessions in Europe and Japan, and severe
price competition.
This sector's core businesses include data storage products and visual
systems for the office market; printing and medical imaging systems; and
high-value products for the telecommunications, electronics and electrical
markets.
In the Electro and Communications Systems group, a new electrical tape plant
in China was opened to increase our share of the fast growing Asian market.
This group is also taking advantage of rapid growth in communications in
developing countries, where many people still do not have telephones.
The Imaging Systems Group announced a new line of imagers that should offer
significant cost savings, productivity improvements and environmental
advantages. The 3M brand DryView brand Laser Imaging Systems produce high
image quality, while eliminating the need for wet chemicals, special plumbing,
darkrooms and chemical disposal. In the high growth digital imaging market
the 3M brand Rainbow brand Color Proofing System enables advertising agencies,
small printers, graphic designers and others to make proofs of color graphics
without using film.
In the diskette arena the company is developing proprietary technology to
advance 3.5-inch diskette capacity beyond the 2MB levels of today. Diskettes
are being developed with storage capacities in excess of 100MB.
In the consumer and professional video market segments a focused approach is
being taken. Manufacturing operations have been consolidated and non-core
activities outsourced. Essentially, all videotape is produced in one highly
efficient U.S. facility, where unit costs continue to decline.
Life Sciences Sector:
In 1994, sales increased 10.2 percent to $4.6 billion. Operating income
increased 12.7 percent to $954 million. Operating profit was 21.0 percent
of sales. This sector's sales growth was led by the transportation and
safety businesses, with good growth in hospital supplies, pharmaceutical and
dental. Excluding a net benefit of $108 million in 1992 from a legal
settlement and special charges, operating income increased 3.4 percent in
1993.
Throughout the world, 3M has long had success helping health care
professionals improve patient outcomes and lower overall costs. For example,
with the carpal tunnel release system, surgeons no longer have to open the
palm of the hand to treat patients afflicted with carpal tunnel syndrome, a
growing occupational hazard. Now doctors can operate through a small incision
in the wrist instead.
This sector introduced a new surgical gown that provides a barrier against
blood and infectious diseases. This is 3M's first entry into a large and
growing market segment. Also in 1994, this sector announced the development
of a metered-dose, drug inhalation technology that is free of ozone-depleting
chlorofluorocarbons.
In the transportation market, this sector contributes to safety efforts
around the world with products that improve visibility of signs, traffic
lanes and vehicles. In worker safety, 3M is a global leader in industrial
respirators for filtering air contaminants. Market leadership is extended
through innovations that increase worker comfort, improve filtration
capabilities, and help reduce costs.
Performance by Geographic Area
United States
In the United States, volume increased about 7 percent, with growth
well-balanced among the three business sectors. Selling prices declined
about 2 percent, for a total sales increase of about 5 percent. Operating
profit margins increased by one-and-a-half percentage points from 1993.
Employment decreased by more than 550 people in 1994 and by over 700 in 1993.
Europe and Middle East
Strong emphasis on customer satisfaction and productivity improvement helped
Europe leverage the economic recovery that began to take hold in 1994. In
Western Europe profits increased about 10 percent on a 6 percent increase in
sales. Through European business centers and the expertise of local
companies, customer needs are being met better, faster and more efficiently.
In 1994, 3M Egypt was formed.
As part of Europe's efforts to be number one in customer preference,
investments are being made in new distribution centers and in an
order-processing system. In 1994, Europe put into place key-account programs
with many Pan-European and regional customers.
Asia Pacific
In the Asia-Pacific area, sales increased nearly 15 percent. Growth was
particularly strong in Asia outside Japan. To sustain rapid growth in this
area, investments continue in new products, operations and people. In Japan,
the company posted a solid increase in profits, with results benefiting from
a strong flow of new products and continued productivity improvement.
Canada, Latin America and Africa
Latin America and Africa continued to show strong growth. Freer trade in
Latin America is stimulating healthy economic growth in many countries. In
Canada, manufacturing operations play a key role in leveraging 3M resources
in North America and worldwide. The North American Free Trade Agreement
affords opportunities to further integrate operations in the United States,
Canada and Mexico, thereby meeting customer needs more effectively and
efficiently.
Financial Position
3M's financial condition remained strong in 1994. Various items, such as
cash and short-term debt, can fluctuate significantly from month to month
depending on short-term liquidity needs. The company's key inventory index,
which represents the number of months of inventory, was 4.2 months, up from
4.0 months in 1993. Accounts receivable days' sales outstanding was 67 days,
up one day from 1993. The company's current ratio was 1.9, unchanged from
1993.
The adoption of FASB Interpretation Number 39 and mammary implant litigation
were the primary contributors to the increase in the "Other Assets" and
"Other Liabilities" components of the Consolidated Balance Sheet compared to
year-end 1993 balances. The company's current estimate of the total mammary
implant claims and associated expenses is nearly $500 million. After
subtracting payments made in 1994 (for legal fees and payment of settlements
to litigants and claimants electing to remove themselves from the global
settlement) and adjusting for discounting, the company as of December 31,
1994 has accrued liabilities having a net present value of $356 million.
The company has accrued receivables as of December 31, 1994, primarily on
the "Other Assets" line, having a nominal value of $377 million.
Total debt was $1.948 billion, a planned increase from $1.493 billion in 1993.
Of the long-term debt outstanding at the end of 1994, $444 million was a
guarantee of debt of the 3M Employee Stock Ownership Plan. Total debt was
29 percent of stockholders' equity, up from 23 percent in 1993. The company's
borrowings continue to maintain AAA long-term ratings.
Legal proceedings, including mammary implant and environmental, are discussed
in the legal proceedings section on pages 9 and 10. The company believes that
such matters will not pose a material risk to the financial position or
liquidity of the company.
Liquidity
The company meets its cash requirements primarily from operating activities.
During 1994, cash flows provided by operating activities totaled $1.929
billion. This more than covered capital expenditures and dividend payments
of $1.892 billion. The decrease in cash provided from operations in 1994
of $162 million was mainly due to the receipt of a large cash settlement
in 1993 of $129 million. In both 1994 and 1993, increased working capital
requirements due to higher sales growth affected cash provided by operating
activities.
Capital spending increased 3.3 percent to $1.148 billion. This followed
declines of 9.3 percent in 1993 and 7.5 percent in calendar year 1992.
Stockholder dividends increased 6.0 percent to $1.76 per share in 1994.
Cash dividend payments totaled $744 million, up 3.2 percent from 1993. 3M
has paid dividends for 79 consecutive years.
On February 13, 1995, the 3M Board of Directors increased the quarterly
dividend on 3M common stock 6.8 percent to 47 cents a share, and authorized
the repurchase of up to 8 million of the company's shares. This share
repurchase authorization runs through February 12, 1996. The company
purchased about 11 million shares under a previous authorization.
Repurchases of 3M common stock totaled $689 million in 1994, compared with
$706 million in 1993 and $247 million in 1992. Repurchases were made to
support employee stock purchase plans and for other corporate purposes.
During 1994, the number of shares outstanding was reduced by nearly 10
million, or about 2 percent.
The company's credit rating provides easy and ample access to global capital
markets. 3M maintains a shelf registration with the Securities and Exchange
Commission that provides the means to offer medium-term notes not to exceed
$601 million. At December 31, 1994, $402 million was available for future
financial needs.
On January 10, 1995, the company completed a two year, $200 million 7.75
percent Eurobond offering. The company entered into an interest rate swap
which resulted in an all-in borrowing cost of the 30-day commercial paper
rate less 30 basis points for two years.
Due to a change in the financial reporting period for 3M's international
companies, the 1992 Consolidated Statement of Cash Flows includes the cash
provided or used by 3M's international companies for the 14-month period
(November 1, 1991, to December 31, 1992).
The following table is presented on a comparative basis, whereby 1992
excludes the November 1 to December 31, 1991, period for our international
companies.
(Millions) 1994 1993 1992
Net cash provided by
operating activities $1,929 $2,091 $2,218
Net cash used in
investing activities (1,171) (1,092) (1,139)
Net cash used in
financing activities (740) (1,128) (1,027)
Effect of exchange rate
changes on cash 5 21 (20)
______________________________________________________________________________
Net increase (decrease) in
cash and cash equivalents $ 23 $ (108) $ 32
Capital expenditures $1,148 $1,112 $1,225
Depreciation 1,003 976 950
______________________________________________________________________________
Future Outlook
Looking ahead, the company expects good sales and earnings growth to continue
in 1995. The company's strong flow of new products, expansion in
international markets, sharp focus on customer satisfaction and continued
productivity improvement all will drive growth. The company will work to
offset expected higher raw material costs through selling price increases and
continued productivity improvements.
Capital spending, after declining in 1992 and 1993, increased about 3 percent
in 1994. The company expects capital spending to increase about 10 percent
in 1995. Depreciation expense as a percent of sales should continue to
contribute to margin improvement. Employment levels should continue to
decline slightly in 1995.
The company's tax rate is expected to increase by about one percentage point
in 1995. In 1994, the company was allowed to claim additional tax benefits
on export sales from several earlier years. In addition, the company expects
to earn more profit from outside the United States, where tax rates are
generally higher.
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Reference (pages)
Form 10-K
Data submitted herewith:
Report of Independent Accountants. ........................... 20
Consolidated statement of income for the years ended
December 31, 1994, 1993 and 1992 ........................... 21
Consolidated balance sheet at December 31, 1994 and
1993 ....................................................... 22
Consolidated statement of cash flows
for the years ended December 31,
1994, 1993 and 1992 ......................................... 23
Notes to consolidated financial statements ...................24-37
Report of Independent Accountants
To the Stockholders of Minnesota Mining and Manufacturing Company:
We have audited the consolidated financial statements of Minnesota Mining and
Manufacturing Company and Subsidiaries as listed in Item 8 of this Form 10-K.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Minnesota
Mining and Manufacturing Company and Subsidiaries as of December 31, 1994
and 1993, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in the Notes to Consolidated Financial Statements, the company
changed the fiscal year-end of its international companies in 1992 and also
adopted Statements of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and No. 109,
"Accounting for Income Taxes."
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
St. Paul, Minnesota
February 13, 1995
Consolidated Statement of Income
Minnesota Mining and Manufacturing Company and Subsidiaries
For the Years Ended December 31 1994 1993 1992
(Amounts in millions, except per-share amounts)
Net Sales $15,079 $14,020 $13,883
________________________________________________________________________________
Operating Expenses
Cost of goods sold 8,995 8,529 8,346
Selling, general and administrative expenses 3,833 3,535 3,557
Legal settlement -- -- (129)
Special charges -- -- 115
_______________________________________________________________________________
Total 12,828 12,064 11,889
________________________________________________________________________________
Operating Income 2,251 1,956 1,994
________________________________________________________________________________
Other Income and Expense
Interest expense 87 50 76
Investment and other income - net (25) (96) (29)
Implant litigation - net 35 -- --
________________________________________________________________________________
Total 97 (46) 47
________________________________________________________________________________
Income Before Income Taxes, Minority Interest and
Cumulative Effect of Accounting Changes 2,154 2,002 1,947
Provision for Income Taxes 771 707 687
Minority Interest 61 32 24
________________________________________________________________________________
Income Before Cumulative Effect of Accounting Changes 1,322 1,263 1,236
Cumulative Effect of Accounting Changes -- -- (3)
_______________________________________________________________________________
Net Income $ 1,322 $ 1,263 $ 1,233
Per-Share Amounts:
Income Before Cumulative Effect of Accounting Changes $3.13 $ 2.91 $ 2.82
Cumulative Effect of Accounting Changes -- -- (0.01)
________________________________________________________________________________
Net Income $3.13 $ 2.91 $ 2.81
________________________________________________________________________________
Average Shares Outstanding 423.0 434.3 438.2
All share and per-share data reflect a two-for-one stock split effective
March 15, 1994.
The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.
Consolidated Balance Sheet
Minnesota Mining and Manufacturing Company and Subsidiaries
At December 31 1994 1993
(Dollars in millions)
Assets
Current Assets
Cash and cash equivalents $ 297 $ 274
Other securities 194 382
Accounts receivable - net 2,948 2,610
Inventories 2,763 2,401
Other current assets 726 696
______________________________________________________________________________
Total current assets 6,928 6,363
Investments 536 455
Property, Plant and Equipment - net 5,054 4,830
Other Assets 978 549
______________________________________________________________________________
Total $13,496 $12,197
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 996 $ 878
Payroll 328 331
Income taxes 110 290
Short-term debt 917 697
Other current liabilities 1,254 1,086
______________________________________________________________________________
Total current liabilities 3,605 3,282
Other Liabilities 2,126 1,607
Long-Term Debt 1,031 796
Stockholders' Equity - net 6,734 6,512
Shares outstanding - 1994: 419,793,702
1993: 429,478,638
______________________________________________________________________________
Total $13,496 $12,197
Share data reflect a two-for-one stock split effective March 15, 1994.
The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.
Consolidated Statement of Cash Flows
Minnesota Mining and Manufacturing Company and Subsidiaries
For the Years Ended December 31 1994 1993 1992*
(Dollars in millions)
Cash Flows from Operating Activities
Net income $1,322 $1,263 $1,233
Adjustments to reconcile net income
to net cash provided by operating activities:
Legal settlement -- 129 (129)
Special charges -- (29) 115
Cumulative effect of accounting changes -- -- 103
Depreciation 1,003 976 1,004
Amortization 98 100 83
Accounts receivable (243) (327) (142)
Inventories (302) (161) (78)
Working capital and other changes 51 140 88
________________________________________________________________________________
Net cash provided by operating activities 1,929 2,091 2,277
Cash Flows from Investing Activities
Capital expenditures (1,148) (1,112) (1,318)
Proceeds from sale of property, plant and equipment 45 53 78
Acquisitions and other investments (93) (71) (59)
Proceeds from divestitures and investments 25 38 63
________________________________________________________________________________
Net cash used in investing activities (1,171) (1,092) (1,236)
Cash Flows from Financing Activities
Net change in short-term debt 216 48 (83)
Repayment of long-term debt (62) (80) (187)
Proceeds from long-term debt 401 150 139
Purchases of treasury stock (689) (706) (247)
Reissuances of treasury stock 138 181 177
Payment of dividends (744) (721) (701)
________________________________________________________________________________
Net cash used in financing activities (740) (1,128) (902)
Effect of exchange rate changes on cash 5 21 (15)
________________________________________________________________________________
Net increase (decrease) in cash and cash equivalents 23 (108) 124
Cash and cash equivalents at beginning of year 274 382 258
________________________________________________________________________________
Cash and cash equivalents at end of year $ 297 $ 274 $ 382
________________________________________________________________________________
*Includes cash flows of international companies for a 14-month period from
November 1, 1991, to December 31, 1992. See note on page 26 for details.
The accompanying Notes to Consolidated Financial Statements are an integral
part of this statement.
Notes to Consolidated Financial Statements
Accounting Policies
Consolidation: All significant subsidiaries are consolidated. Unconsolidated
subsidiaries and affiliates are included on the equity basis.
Cash and Cash Equivalents: Cash and cash equivalents consist of cash and
temporary investments with maturities of three months or less when purchased.
Other Securities and Investments: Other securities consist of marketable
securities and interest-bearing bank deposits with varied maturity dates.
These securities are employed in the company's banking, captive insurance and
cash management operations. Investments primarily include assets from
captive insurance, banking operations, other insurance, and real estate and
venture capital investments.
Effective January 1, 1994, the company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Other securities and investments classified as
available-for-sale are reported at their fair value of about $160 million at
December 31, 1994, with unrealized gains and losses included as a component
of stockholders' equity. Held-to-maturity securities and investments are
reported at amortized cost of about $350 million at December 31, 1994. Other
investments totaling about $220 million are stated at cost, which approximates
fair value.
Inventories: Inventories are stated at lower of cost or market, with cost
generally determined on a first-in, first-out basis.
Other Assets: Other assets include goodwill, patents, other intangibles,
product and other insurance claims, deferred taxes and other noncurrent
assets. Intangible assets are periodically reviewed for impairment based on
an assessment of future operations to ensure that they are appropriately
valued. Goodwill is generally amortized on a straight-line basis over 10
years. Other intangible items are amortized on a straight-line basis over
their estimated economic lives.
Effective January 1, 1994, the company adopted FASB Interpretation No. 39,
which requires gross reporting for environmental and other liabilities, and
for any related insurance claims. This adoption primarily increased "Other
Assets" and "Other Liabilities" from year-end 1993 balances.
Deferred Income Taxes: Deferred income taxes arise from differences in bases
between tax reporting and financial reporting.
Revenue Recognition: Revenue is recognized upon shipment of goods to
customers and upon performance of services. The company sells a wide range
of products to a diversified base of customers around the world, and therefore
believes that no material concentrations of credit risk exist.
Depreciation: Depreciation of property, plant and equipment is generally
computed on a straight-line basis over the estimated useful lives of these
assets.
Research and Development: Research and development costs are charged to
operations as incurred and totaled $1.054 billion in 1994, $1.030 billion in
1993 and $1.007 billion in 1992.
Advertising Costs: Advertising costs are generally charged to operations in
the year incurred and totaled $191 million in 1994, $161 million in 1993 and
$172 million in 1992.
Foreign Currency Translation: Local currencies are generally considered the
functional currencies outside the United States, except in countries treated
as highly inflationary. Assets and liabilities are translated at year-end
exchange rates for operations in local currency environments. Income and
expense items are translated at average rates of exchange prevailing during
the year. Cumulative translation adjustments, recorded as a component of
stockholders' equity, reduced stockholders equity by $163 million, $331
million and $198 million at December 31, 1994, 1993 and 1992, respectively.
For operations in countries treated as highly inflationary, certain financial
statement amounts are translated at historical exchange rates, with all other
assets and liabilities translated at year-end exchange rates. These
translation adjustments are reflected in the results of operations. They
decreased net income by $20 million in 1994 and by $12 million in 1993, and
increased net income by $10 million in 1992.
Derivatives: Derivative financial instruments are utilized by the company to
manage risks generally associated with foreign exchange rate and interest
rate market volatility. The company does not hold or issue derivative
financial instruments for trading purposes. The company is not a party to
leveraged derivatives. Realized and unrealized gains and losses are deferred
until the underlying transactions are realized. These gains and losses are
recognized either as interest expense over the borrowing period for interest
rate and currency swaps, as an adjustment to cost of goods sold for
inventory-related hedge transactions, or in stockholders' equity for hedges
of net investments in international companies. Cash flows attributable to
these financial instruments are included with the cash flows from the
associated hedged items.
1992 Accounting Changes
Effective January 1, 1992, the company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 109,
"Accounting for Income Taxes." In addition, the international companies
changed their fiscal year-end from October 31 to December 31. Adoption of
these accounting changes, in aggregate, did not have a material impact on
1992 results of operations.
______________________________________________________________________________
Cumulative Effect of 1992 Accounting Changes
(Millions, except per-share data) Amount Per Share
Cumulative effect of change in:
Reporting period for international
companies, net of $25 million in
taxes (including tax benefits from
revaluation of certain fixed assets
in Italy) $ 100 $ 0.23
Accounting for other
postretirement benefits, net of
$107 million in taxes (183) (0.42)
Accounting for income taxes 80 0.18
Total $ (3) $(0.01)
Legal Settlement and Special Charges
In December 1992, 3M recognized $129 million in settlement of a patent
lawsuit involving 3M orthopedic casting materials. 3M received payment
in January 1993.
In 1992, 3M recorded $115 million of special charges designed to enhance
competitiveness and productivity. About 75 percent of these charges related
to asset write-downs, including rationalization of manufacturing operations.
Supplemental Balance Sheet Information
______________________________________________________________________________
(Millions) 1994 1993
Accounts receivable
Accounts receivable $ 3,058 $ 2,730
Less allowances 110 120
Accounts receivable - net $ 2,948 $ 2,610
Inventories
Finished goods $ 1,475 $ 1,246
Work in process 676 604
Raw materials and supplies 612 551
Total inventories $ 2,763 $ 2,401
Other current assets
Deferred taxes $ 212 $ 293
Product and other insurance claims 158 62
Other 356 341
Total other current assets $ 726 $ 696
Property, plant and equipment - at cost
Land $ 287 $ 258
Buildings and leasehold improvements 2,799 2,572
Machinery and equipment 8,859 8,305
Construction in progress 458 353
$12,403 $11,488
Less accumulated depreciation 7,349 6,658
Property, plant and equipment - net $ 5,054 $ 4,830
Other assets
Product and other insurance claims $ 466 $ 61
Deferred taxes 167 146
Other 345 342
Total other assets $ 978 $ 549
Other current liabilities
Deposits - banking operations $ 270 $ 291
Product and other liabilities 184 111
Deferred taxes 11 6
Other 789 678
Total other current liabilities $ 1,254 $ 1,086
Other liabilities
Product and other liabilities $ 690 $ 268
Minority interest in subsidiaries 460 376
Nonpension postretirement benefits 404 386
Deferred taxes 96 92
Other 476 485
Total other liabilities $ 2,126 $ 1,607
Deposits - banking operations - are primarily demand deposits and, as such,
the carrying amount approximates fair value.
Debt
Short-Term Debt Effective
(Millions) Interest rate* 1994 1993
Commercial paper 6.03% $ 593 $193
Long-term debt - current portion 8.13% 174 79
Other borrowings 7.93% 150 425
______________________________________________________________________________
Total short-term debt $ 917 $697
______________________________________________________________________________
Long-Term Debt Effective Maturity
(Millions) Interest rate* Date 1994 1993
ESOP debt guarantee 8.21% 1996-2004 $ 444 $469
U.S. 6.375% Eurobond 6.52% 1997 200 --
Canadian 6.5% Eurobond 4.81% 1998 114 114
Medium-term 6.25% note 6.61% 1999 100 75
Swiss Franc 5.5% note 5.73% 1997 98 --
Other borrowings 7.50% 1996-2025 75 138
______________________________________________________________________________
Total long-term debt $1,031 $796
*Weighted average effective interest rates, which reflect the effects of
interest rate and currency swaps, at December 31, 1994.
Other borrowings consist primarily of borrowings of 3M's international
companies and industrial bond issues in the United States.
On January 10, 1995, the company completed a two year, $200 million 7.75
percent Eurobond offering. The company entered into an interest rate swap,
which resulted in an all-in borrowing cost of the 30-day commercial paper
rate less 30 basis points for two years.
Maturities of long-term debt for the next five years are as follows:
1995, $174 million; 1996, $45 million; 1997, $340 million; 1998, $160 million;
and 1999, $146 million.
Interest payments included in the Consolidated Statement of Cash Flows totaled
$89 million in 1994, $53 million in 1993 and $88 million in 1992. The $88
million in 1992 includes cash flows of international companies for a 14-month
period from November 1, 1991, to December 31, 1992. For the calendar year
1992, interest payments were $79 million. The ESOP debt is being serviced by
dividends on stock held by the ESOP and by company contributions. These
contributions are reported as a benefit expense.
The company estimates that the fair value of short-term and long-term debt
approximates the carrying amount of this debt. Payment of dividends is not
restricted by debt covenants.
Other Financial Instruments
Interest Rate and Currency Swaps: To manage interest rate and foreign
exchange rate risk and to lower its cost of borrowing, the company has
entered into interest rate and currency swaps. The notional amounts set
forth in the table below serve solely as a basis for the calculation of
payment streams to be exchanged. These notional amounts are not a measure of
the exposure of the company through its use of derivatives. These instruments
mature in relationship to the underlying debt instruments and have maturities
extending to 1999. Unrealized gains and losses and exposure to changes in
market conditions were not material at December 31, 1994 and 1993.
Notional Amounts
(Millions) 1994 1993
Interest rate swaps $489 $486
Currency swaps 256 119
Foreign Exchange Forward and Options Contracts: The company has entered into
foreign exchange forward and options contracts, all having maturities of less
than one year. The face amounts represent contracted U.S. dollar equivalents
of non-U.S. dollar forward and options contracts. The amounts at risk are not
material, because the company is not required to exercise options purchased,
and it has the ability to generate offsetting foreign currency cash flows.
The unrealized gains and losses at December 31, 1994 and 1993, were not
material.
Face Amounts
(Millions) 1994 1993
Forward contracts $772 $601
Options purchased 65 235
Options sold 109 103
The company engages in foreign currency hedging activities to reduce exchange
risks arising from cross-border, non-U.S. dollar cash flows. The company
operates on a global basis, generating about one-half of its revenues from
international customers and engaging in substantial product and financial
transfers between geographic areas.
Credit Risk: The company is exposed to credit loss in the event of
nonperformance by counterparties in interest rate swaps, currency swaps and
foreign exchange contracts, but the company does not anticipate nonperformance
by any of these counterparties. The company actively monitors its exposure to
credit risk through the use of credit approvals and credit limits, and by
selection of major international banks and financial institutions as
counterparties.
Leases
Rental expense under operating leases was $149 million in 1994, $141 million
in 1993 and $140 million in 1992. The table below sets forth minimum payments
under operating leases with noncancelable terms in excess of one year as of
year-end 1994.
______________________________________________________________________________
After
(Millions) 1995 1996 1997 1998 1999 1999 Total
Minimum lease payments $69 $56 $42 $22 $17 $87 $293
Income Taxes
______________________________________________________________________________
Income Before Income Taxes
(Millions) 1994 1993 1992
U.S. $1,435 $1,390 $1,301
International 719 612 646
Total $2,154 $2,002 $1,947
______________________________________________________________________________
Provision for Income Taxes
(Millions) 1994 1993 1992
Currently payable
Federal $ 338 $ 430 $ 371
State 67 74 78
International 297 292 339
Deferred
Federal 52 (66) (63)
State 5 (5) (6)
International 12 (18) (32)
______________________________________________________________________________
Total $ 771 $ 707 $ 687
Deferred taxes in 1994 and 1993 include benefit costs not currently deductible
of $293 million and $336 million, respectively, and accelerated depreciation
for tax purposes of $362 million in both 1994 and 1993.
Income tax payments included in the Consolidated Statement of Cash Flows
totaled $895 million in 1994, $802 million in 1993 and $743 million in 1992.
The $743 million in 1992 includes cash flows of international companies for
the 14-month period from November 1, 1991, to December 31, 1992. For
calendar year 1992, income tax payments were $714 million.
At December 31, 1994, there were approximately $3.060 billion of retained
earnings attributable to international companies that are considered to be
permanently invested. No provision has been made for taxes that might be
payable if these earnings were remitted to the United States. It is not
practical to determine the amount of incremental tax that might arise were
these earnings to be remitted.
______________________________________________________________________________
Reconciliation of Effective Income Tax Rate 1994 1993 1992
Statutory U.S. tax rate 35.0% 35.0% 34.0%
State income taxes - net 2.2 2.2 2.5
International taxes 2.7 3.0 4.4
Adjusted prior years' export sales benefit (1.9) -- --
All other - net (2.2) (4.9) (5.6)
Effective worldwide tax rate 35.8% 35.3% 35.3%
<TABLE>
Stockholders' Equity
Common stock, without par value, of 500,000,000 shares is authorized, with
472,016,528 shares issued in 1994, 1993 and 1992. Treasury shares at year-end
totaled 52,222,826 in 1994, 42,537,890 in 1993 and 33,948,428 in 1992. This
stock is reported at cost. Preferred stock, without par value, of 10,000,000
shares is authorized but unissued. All share and per-share data reflect a
two-for-one common stock split effective March 15, 1994.
<CAPTION>
_______________________________________________________________________________________
Translation
and Fair ESOP
Common Retained Value Unearned Treasury
(Dollars in millions) Stock Earnings Adjustments Compensation Stock Total
_______________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $296 $7,536 $ (24) $(516) $ (999) $6,293
Net income 1,233 1,233
Dividends paid ($1.60 per share) (701) (701)
Reacquired stock (5,123,378 shares) (247) (247)
Issuances pursuant to stock option and
benefit plans (4,910,760 shares) (56) 233 177
Amortization of unearned compensation 18 18
Translation adjustments (174) (174)
Balance, December 31, 1992 $296 $8,012 $(198) $(498) $(1,013) $6,599
Net income 1,263 1,263
Dividends paid ($1.66 per share) (721) (721)
Reacquired stock (13,161,736 shares) (706) (706)
Issuances pursuant to stock option and
benefit plans (4,572,274 shares) (54) 245 191
Amortization of unearned compensation 19 19
Translation adjustments (133) (133)
Balance, December 31, 1993 $296 $8,500 $(331) $(479) $(1,474) $6,512
Net income 1,322 1,322
Dividends paid ($1.76 per share) (744) (744)
Reacquired stock (13,136,376 shares) (689) (689)
Issuances pursuant to stock option and
benefit plans (3,451,440 shares) (39) 188 149
Amortization of unearned compensation 19 19
Translation and fair value adjustments 165 165
Balance, December 31, 1994 $296 $9,039 $(166) $(460) $(1,975) $6,734
</TABLE>
Business Sectors
Financial information relating to the company's business sectors for the
years ended December 31, 1994, 1993 and 1992 appears below. 3M is an
integrated enterprise characterized by substantial intersector cooperation,
cost allocations and inventory transfers. Therefore, management does not
represent that these sectors, if operated independently, could earn the
operating income shown.
Information,
Industrial Imaging and Life Eliminations Total
(Millions) and Consumer Electronic Sciences and Other Company
Net Sales 1994 $5,875 $4,635 $4,553 $ 16 $15,079
1993 5,350 4,520 4,132 18 14,020
1992 5,215 4,599 4,026 43 13,883
Operating 1994 $ 994 $ 292 $ 954 $ 11 $ 2,251
Income 1993 849 271 846 (10) 1,956
1992(1) 826 238 926 4 1,994
Identifiable 1994 $4,161 $3,596 $3,155 $172 $11,084
Assets (2) 1993 3,776 3,460 2,854 144 10,234
1992 3,734 3,264 2,712 172 9,882
Depreciation 1994 $ 343 $ 375 $ 261 $ 24 $ 1,003
1993 341 366 249 20 976
1992(3) 323 356 238 33 950
Capital 1994 $ 394 $ 403 $ 351 $ -- $ 1,148
Expenditures 1993 399 388 327 (2) 1,112
1992(3) 437 444 327 17 1,225
(1) Includes a legal settlement that increased operating income for the Life
Sciences Sector by $129 million. Also includes special charges of $115
million, of which $81 million was in the Information, Imaging and Electronic
Sector.
(2) Excludes certain corporate assets, primarily cash and cash equivalents,
other securities, insurance receivables, deferred income taxes, certain other
current assets, and investments.
(3) Excludes $93 million of capital expenditures and $54 million of
depreciation for international companies from November 1 to December 31, 1991.
See accounting changes note on page 26 for details.
Geographic Areas
Information in the table below is presented on the same basis as utilized by
the company to manage the business. Export sales and certain income and
expense items are reported in the geographic area where the final sale to
customers is made rather than where the transaction originates.
United Europe and Asia Other Elimina- Total
(Millions) States Middle East Pacific Areas (1) tions Company
Net Sales to 1994 $7,511 $3,870 $2,469 $1,229 $15,079
Customers 1993 7,126 3,646 2,154 1,094 14,020
1992 6,922 4,068 1,847 1,046 13,883
Transfers 1994 $1,642 $ 213 $ 31 $ 158 $(2,044) --
Between 1993 1,393 172 28 146 (1,739) --
Geographic 1992 1,273 176 31 119 (1,599) --
Areas
Operating 1994 $1,107 $ 401 $ 515 $ 228 $ 2,251
Income 1993 940 376 429 211 1,956
1992(2) 945 489 368 192 1,994
Identifiable 1994 $6,200 $2,872 $1,742 $ 863 $ (593) $11,084
Assets (3) 1993 5,875 2,633 1,531 710 (515) 10,234
1992 5,634 2,824 1,333 660 (569) 9,882
(1) Includes Canada, Latin America and Africa.
(2) Includes a legal settlement that increased operating income in the United
States by $129 million. Also includes special charges of $115 million, of
which $74 million was in Europe.
(3) Excludes certain corporate assets, primarily cash and cash equivalents,
other securities, insurance receivables, deferred income taxes, certain other
current assets, and investments.
At year-end, net assets of companies outside the United States totaled
$3.390 billion in 1994, $2.963 billion in 1993 and $2.998 billion in 1992.
Retirement Plans
3M has various company-sponsored retirement plans covering substantially all
U.S. employees and many employees outside the United States. Pension benefits
are based principally on an employee's years of service and compensation near
retirement. Plan assets are invested in common stocks, fixed-income
securities, real estate and other investments.
The company's funding policy is to deposit with an independent trustee
amounts at least equal to those required by law. A trust fund is maintained
to provide pension benefits to plan participants and their beneficiaries.
In addition, a number of plans are maintained by deposits with insurance
companies. The charge to income relating to these plans was $183 million in
1994, $203 million in 1993 and $178 million in 1992.
Net Pension Cost U.S. Plan International Plans
(Millions) 1994 1993 1992 1994 1993 1992
Service cost $117 $110 $108 $85 $ 86 $73
Interest cost 280 276 252 89 80 78
Return on plan assets - actual 70 (430) (221) (2) (185) (73)
Net amortization and deferral (377) 154 (38) (79) 112 (1)
Net pension cost $ 90 $110 $101 $93 $ 93 $77
Funded Status of Pension Plans U.S. Plan International Plans
(Millions) 1994 1993 1994 1993
Plan assets at fair value $3,343 $3,473 $1,333 $1,207
Accrued pension cost 161 180 97 78
Amount provided for future benefits $3,504 $3,653 $1,430 $1,285
Actuarial present value of:
Vested benefit obligation 2,889 3,024 1,022 875
Non-vested benefit obligation 423 470 100 65
Accumulated benefit obligation $3,312 $3,494 $1,122 $ 940
Amount provided for future benefits
less accumulated benefit obligation 192 159 308 345
Projected benefit obligation 3,721 3,921 1,514 1,279
Plan assets at fair value less
projected benefit obligation $ (378) $ (448) $ (181) $ (72)
Unrecognized net transition
(asset) obligation (187) (224) 22 10
Other unrecognized items 404 492 62 (16)
Accrued pension cost $ (161) $ (180) $ (97) $ (78)
U.S. Plan International Plans
Assumptions at Year-End 1994 1993 1992 1994 1993 1992
Discount rate 8.25% 7.25% 8.00% 7.45% 7.26% 7.91%
Compensation rate increase 5.00% 5.00% 6.25% 5.71% 5.31% 6.40%
Long-term rate of return on
assets 9.00% 9.00% 9.00% 7.65% 7.64% 8.23%
Net pension cost is determined using assumptions at the beginning of the year.
Funded status is determined using assumptions at year-end.
Other Postretirement Benefits
The company provides health care and life insurance benefits for substantially
all of its U.S. employees who reach retirement age while employed by the
company. The company has set aside funds with an independent trustee for
these postretirement benefits and makes periodic contributions to the plan.
The assets held by the trustee are invested in common stocks and fixed-income
securities. Employees outside the United States are covered principally by
government-sponsored plans and the cost of company-provided plans for these
employees is not material.
The table below sets forth the components of the net periodic postretirement
benefit cost and a reconciliation of the funded status of the postretirement
benefit plan for U.S. employees.
Net Periodic Postretirement Benefit Cost
(Millions) 1994 1993 1992
Service cost $ 28 $ 23 $ 21
Interest cost 55 53 49
Return on plan assets - actual 16 (23) (20)
Net amortization and deferral (40) 1 --
Total $ 59 $ 54 $ 50
Funded Status of Postretirement Benefit Plan
(Millions) 1994 1993
Fair value of plan assets $ 319 $ 335
Accumulated postretirement
benefit obligation:
Retirees $ 256 $ 248
Fully eligible active plan participants 167 153
Other active plan participants 367 378
Benefit obligation $ 790 $ 779
Plan assets less benefit obligation $(471) $(444)
Adjustments and unrecognized items 67 58
Accrued postretirement cost $(404) $(386)
The accumulated postretirement benefit obligation and related benefit cost are
determined through the application of relevant actuarial assumptions. The
company anticipates its health care cost trend rate to slow from 7.2 percent
in 1995 to 5.0 percent in 2003, after which the trend rate is expected to
stabilize. The effect of a one percentage point increase in the assumed
health care cost trend rate for each future year would increase the benefit
obligation by $62 million and the current year benefit expense by $8 million.
Other actuarial assumptions include an expected long-term rate of return on
plan assets of 9.0 percent (before taxes applicable to a portion of the
return on plan assets), and a discount rate of 8.25 percent.
Employee Stock Ownership Plan
The company maintains an Employee Stock Ownership Plan (ESOP) for
substantially all regular U.S. employees not covered by collective
bargaining agreements. This plan was established in 1989 as a
cost-effective way of funding certain employee retirement savings benefits,
including the company's matching contributions under a 401(k) employee
savings plan. The ESOP borrowed $548 million and used the proceeds to
purchase 15.4 million shares of the company's common stock, previously
held in treasury. Because the company has guaranteed repayment of the
ESOP debt, the debt and related unearned compensation are recorded in the
Consolidated Balance Sheet.
ESOP Shares 1994 1993 1992
Allocated shares 4,236,925 3,447,668 2,587,306
Committed to be released -- -- --
Unreleased shares 10,941,944 11,875,928 12,780,918
Total shares held by the ESOP 15,178,869 15,323,596 15,368,224
Employee Savings Plan
The company sponsors employee savings plans under Section 401(k) of the
Internal Revenue Code. These plans are offered to substantially all regular
U.S. employees. The company matches employee contributions of up to 6
percent of compensation at rates ranging from 10 to 85 percent, depending
upon company performance. Amounts charged against income were $26 million
in 1994, and $29 million in both 1993 and 1992.
General Employees' Stock Purchase Plan
Substantially all regular U.S. employees are eligible to participate in the
General Employees' Stock Purchase Plan. Participants are granted options at
85 percent of market value at the date of grant. Options must be exercised
within 27 months from date of grant.
Shares Price Range
Under option-
January 1, 1994 472,898 $36.95-48.30
Granted 1,711,898 41.76-46.54
Exercised (1,750,579) 36.95-48.30
Canceled (65,017) 36.95-48.30
Under option-
December 31, 1994 369,200 $41.76-48.30
Shares available for grant-
December 31, 1994 15,959,549
Management Stock Ownership Program
Management stock options are granted at market value at the date of grant.
At year-end, there were 4,374 participants in the plan. All outstanding
options expire between May 1995 and May 2004.
Shares Price Range
Under option-
January 1, 1994 20,182,694 $19.37-58.08
Granted 4,228,789 47.65-56.25
Exercised (1,656,146) 19.37-51.83
Canceled (39,396) 19.44-58.08
Under option-
December 31, 1994 22,715,941 $19.44-58.08
Options exercisable-
December 31, 1994 18,960,735 $19.44-58.08
Shares available for grant-
December 31, 1994 17,595,213
Quarterly Data (Unaudited)
(Millions, except
per-share data) First Second Third Fourth Year
Net Sales
1994 $3,632 $3,772 $3,820 $3,855 $15,079
1993 3,517 3,540 3,481 3,482 14,020
Cost of Goods Sold
1994 $2,168 $2,247 $2,282 $2,298 $8,995
1993 2,112 2,131 2,167 2,119 8,529
Net Income
1994 $306 $343 $341 $332 $1,322
1993 330 331 316 286 1,263
Per-Share
1994 $.72 $.81 $.81 $.79 $3.13
1993 .75 .76 .73 .67 $2.91
Stock Price Comparisons (NYSE Composite Transactions)
1994 High $56.38 $52.38 $57.13 $56.63 $57.13
1994 Low 49.00 46.38 49.25 50.38 46.38
1993 High 55.88 58.50 55.63 56.75 58.50
1993 Low 48.63 52.44 51.13 50.75 48.63
Legal Proceedings
Discussion of legal matters is cross-referenced to Form 10-K Item 3, Legal
Proceedings, and should be considered an integral part of the Financial
Statements and Notes.
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Item 13. Certain Relationships and Related Transactions.
The information called for by Items 10 through 13 are omitted
pursuant to general instruction G(3). The registrant will file
with the Commission a definitive proxy statement pursuant to
Regulation 14A before April 30, 1995.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The financial statements filed as part of this report are listed in the
index to financial statements on page 19.
All schedules are omitted because of the absence of the conditions under
which they are required or because the required information is included in
the financial statements or the notes thereto.
(b) Reports on Form 8-K:
3M was not required to file any reports on Form 8-K for the quarter ended
December 31, 1994.
(c) Exhibits:
Incorporated by Reference:
Incorporated by Reference in the
Report From
(3) Restated certificate of incorporation Exhibit (3) to
and bylaws, amended to and Report Form 10-Q
including amendments of for period ended
May 12, 1987. June 30, 1987.
(4) Instruments defining the rights of security
holders, including debentures:
(a) common stock. Exhibit (3) above
(b) medium term notes. Registration Nos. 33-29329
and 33-48089 on Form S-3.
(10) Management contracts, management
remuneration:
(a) management stock ownership program. Exhibit 4 of
Registration No. 33-49842
on Form S-8
(b) profit sharing plan, performance Written description contained
unit plan and other compensation in issuer's proxy statement
arrangements. for the 1995 annual
shareholders meeting.
Reference (pages)
Form 10-K
Submitted herewith:
(11) Computation of per share earnings. 40
(12) Calculation of ratio of earnings
to fixed charges. 41
(21) Subsidiaries of the registrant. 42
(23) Consent of experts. 43
(24) Power of attorney. 44
(27) Financial data schedule (EDGAR filing only)
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MINNESOTA MINING AND MANUFACTURING COMPANY
By /s/ Giulio Agostini
Giulio Agostini, Senior Vice President -
Finance and Office Administration
Principal Financial and Accounting Officer
March 6, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 6, 1995.
Signature Title
LIVIO D. DeSIMONE Chairman of the Board and
Chief Executive Officer, Director
EDWARD A. BRENNAN Director
LAWRENCE E. EATON Director
HARRY A. HAMMERLY Director
ALLEN F. JACOBSON Director
JERRY R. JUNKINS Director
RONALD A. MITSCH Director
ALLEN E. MURRAY Director
AULANA L. PETERS Director
ROZANNE L. RIDGWAY Director
FRANK SHRONTZ Director
F. ALAN SMITH Director
LOUIS W. SULLIVAN Director
Arlo D. Levi, by signing his name hereto, does hereby sign this document
pursuant to powers of attorney duly executed by the other persons named,
filed with the Securities and Exchange Commission on behalf of such other
persons, all in the capacities and on the date stated, such persons
constituting a majority of the directors of the company.
By /s/ Arlo D. Levi
Arlo D. Levi, Attorney-in-Fact
EXHIBIT 11
MINNESOTA MINING AND MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
PER SHARE EARNINGS OF COMMON STOCK
Year ended December 31 1994 1993 1992
(Millions)
Income before cumulative effect
of accounting changes $1,322 $1,263 $1,236
Cumulative effect of accounting changes -- -- (3)
Net income $1,322 $1,263 $1,233
Primary earnings per share:
Income before cumulative effect
of accounting changes $ 3.13 $ 2.91 $ 2.82
Cumulative effect of accounting changes -- -- (.01)
Earnings per share $ 3.13 $ 2.91 $ 2.81
Weighted average number of
common shares outstanding 422,955,241 434,312,393 438,173,736
Fully diluted earnings per share: (1)
Income before cumulative effect
of accounting changes $ 3.10 $ 2.88 $ 2.79
Cumulative effect of accounting changes -- -- --
Earnings per share $ 3.10 $ 2.88 $ 2.79
Weighted average number of
common shares outstanding 422,955,241 434,312,393 438,173,736
Common equivalent shares 3,706,298 4,331,742 4,253,994
Average number of common
shares outstanding and
equivalents 426,661,539 438,644,135 442,427,730
All share and per-share data reflect a two-for-one stock split effective
March 15, 1994.
Primary earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding for each period.
The calculation excludes the effect of common equivalent shares
resulting from stock options using the treasury stock method as the
effect would not be material.
Fully diluted earnings per share are computed based on the weighted
average number of common shares and common equivalent shares outstanding
for each period.
(1) This calculation is submitted in accordance with Regulation S-K item
601(b)(11), despite not being required by APB Opinion No. 15 because it
results in dilution of less than 3 percent.
EXHIBIT 12
MINNESOTA MINING AND MANUFACTURING COMPANY
AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
1994 1993 1992 1991 1990
EARNINGS
Income Before Income Taxes,
Minority Interest and $2,154 $2,002 $1,947 $1,877 $2,135
Cumulative Effect of
Accounting Changes
Add:
Interest on debt 87 50 76 97 98
Interest component of the ESOP
benefit expense 39 41 42 44 45
Portion of rent under operating
leases representative of
the interest component 49 47 47 47 44
Less:
Equity in undistributed income
of 20-50 percent owned companies 2 -- (1) (6) 1
TOTAL EARNINGS AVAILABLE
FOR FIXED CHARGES $ 2,327 $2,140 $2,113 $2,071 $2,321
FIXED CHARGES
Interest on debt 87 50 76 97 98
Interest component of the ESOP
benefit expense 39 41 42 44 45
Portion of rent under operating
leases representative of
the interest component 49 47 47 47 44
TOTAL FIXED CHARGES $ 175 $ 138 $ 165 $ 188 $ 187
RATIO OF EARNINGS TO FIXED CHARGES 13.30 15.51 12.81 11.02 12.42
EXHIBIT 21
MINNESOTA MINING AND MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
PARENT AND SUBSIDIARIES
Percentage of
Organized Voting Securities
Under Beneficially Owned
Name of Company Laws of by Registrant
Registrant:
Minnesota Mining and Manufacturing Company Delaware
Consolidated subsidiaries of the registrant:
Eastern Heights Bank Minnesota 99
Media Networks, Inc. Delaware 100
National Advertising Company Delaware 100
3M Unitek Corporation California 100
3M Argentina S.A.C.I.F.I.A. Argentina 100
3M Australia Pty. Limited Australia 100
3M Oesterreich GmbH Austria 100
3M Belgium S.A./N.V. Belgium 100
Seaside Insurance Limited Bermuda 100
3M do Brasil Limitada Brazil 100
3M Canada Inc. Canada 100
3M A/S Denmark 100
Suomen 3M Oy Finland 100
3M France, S.A. France 100
3M Deutschland GmbH Germany 100
3M Hong Kong Limited Hong Kong 100
3M Italia Finanziaria S.p.A. Italy 100
Sumitomo 3M Limited Japan 50
3M Health Care Limited Japan 75
3M Korea Limited Korea 60
3M Mexico, S.A. de C.V. Mexico 100
Distribution Services International B.V. Netherlands 100
3M Nederland B.V. Netherlands 100
3M (New Zealand) Limited New Zealand 100
3M Norge A/S Norway 100
3M Puerto Rico, Inc. Puerto Rico 100
3M Singapore Private Limited Singapore 100
3M South Africa (Proprietary) Limited South Africa 100
3M Espana, S.A. Spain 100
3M Svenska AB Sweden 100
3M (East) A.G. Switzerland 100
3M (Schweiz) A.G. Switzerland 100
3M Taiwan Limited Taiwan 100
3M Thailand Limited Thailand 100
3M United Kingdom P.L.C. United Kingdom 100
3M Venezuela, S.A. Venezuela 100
NOTE: Subsidiary companies excluded from the above listing, if considered
in the aggregate, would not constitute a significant subsidiary.
EXHIBIT 23
CONSENT TO INCORPORATION BY REFERENCE
We consent to the incorporation by reference in the Registration Statements of
Minnesota Mining and Manufacturing Company on Form S-8 (Registration Nos.
33-14791, 33-48690, 33-49842, and 2-78422) and Form S-3 (Registration Nos.
33-29329 and 33-48089), of our report dated February 13, 1995, on the audits
of the consolidated financial statements of Minnesota Mining and Manufacturing
Company and Subsidiaries as of December 31, 1994 and 1993, and for each of
the three years in the period ended December 31, 1994, which report is
included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
St. Paul, Minnesota
March 6, 1995
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned directors and the
Principal Financial and Accounting Officer of MINNESOTA MINING AND
MANUFACTURING COMPANY, a Delaware corporation, hereby constitute and appoint
Livio D. DeSimone, Giulio Agostini, Dwight A. Peterson, John J. Ursu, Arlo D.
Levi, and Roger P. Smith, or any of them, their true and lawful
attorneys-in-fact and agents, and each of them with full power to act without
the others, for them and in their name, place, and stead, in any and all
capacities, to do any and all acts and things and execute any and all
instruments which said attorneys and agents may deem necessary or desirable
to enable MINNESOTA MINING AND MANUFACTURING COMPANY to comply with the
Securities Exchange Act of 1934, as amended, and any rules, regulations, and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing with said Commission of its annual report Form 10-K
for the fiscal year ended December 31, 1994, including specifically, but
without limiting the generality of the foregoing, power and authority to sign
the name of MINNESOTA MINING AND MANUFACTURING COMPANY, and the names of the
undersigned directors and Principal Financial and Accounting Officer to the
Form 10-K and to any instruments and documents filed as part of or in
connection with said Form 10-K or amendments thereto; and the undersigned
hereby ratify and confirm all that said attorneys and agents shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these presents this 13th
day of February, 1995.
/s/ Livio D. DeSimone /s/ Giulio Agostini
Livio D. DeSimone, Chairman Giulio Agostini
of the Board and Chief Executive Senior Vice President
Officer, Director Principal Financial Officer
Principal Accounting Officer
/s/ Edward A. Brennan /s/ Allen E. Murray
Edward A. Brennan, Director Allen E. Murray, Director
/s/ Lawrence E. Eaton /s/ Aulana L. Peters
Lawrence E. Eaton, Director Aulana L. Peters, Director
/s/ Harry A. Hammerly /s/ Rozanne L. Ridgway
Harry A. Hammerly, Director Rozanne L. Ridgway, Director
/s/ Allen F. Jacobson /s/ Frank Shrontz
Allen F. Jacobson, Director Frank Shrontz, Director
/s/ Jerry R. Junkins /s/ F. Alan Smith
Jerry R. Junkins, Director F. Alan Smith, Director
/s/ Ronald A. Mitsch /s/ Louis W. Sullivan
Ronald A. Mitsch, Director Louis W. Sullivan, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 297
<SECURITIES> 194
<RECEIVABLES> 2,948
<ALLOWANCES> 0
<INVENTORY> 2,763
<CURRENT-ASSETS> 6,928
<PP&E> 12,403
<DEPRECIATION> 7,349
<TOTAL-ASSETS> 13,496
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<BONDS> 1,031
<COMMON> 296
0
0
<OTHER-SE> 6,438
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<SALES> 15,079
<TOTAL-REVENUES> 15,079
<CGS> 8,995
<TOTAL-COSTS> 8,995
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<INCOME-PRETAX> 2,154
<INCOME-TAX> 771
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,322
<EPS-PRIMARY> 3.13
<EPS-DILUTED> 3.13
</TABLE>
