<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended September 30, 2000 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: (651) 733-1110
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 .
On September 30, 2000, there were 394,433,465 shares of the
Registrant's common stock outstanding.
This document contains 31 pages.
The exhibit index is set forth on page 27.
<PAGE> 2
<TABLE>
Minnesota Mining and Manufacturing Company and Subsidiaries
PART I. Financial Information
Consolidated Statement of Income
(Amounts in millions, except per-share amounts)
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $4,252 $3,997 $12,528 $11,636
Operating expenses
Cost of goods sold 2,479 2,253 7,124 6,603
Selling, general and
administrative expenses 1,073 979 3,162 2,919
Restructuring credit -- (26) -- (26)
Other expense (income) (119) 30 (169) (74)
Total 3,433 3,236 10,117 9,422
Operating income 819 761 2,411 2,214
Other income and expense
Interest expense 29 26 81 83
Investment and other
income (4) (7) (16) (22)
Total 25 19 65 61
Income before income taxes
and minority interest 794 742 2,346 2,153
Provision for income taxes 274 260 821 776
Minority interest 21 23 69 58
Net income $ 499 $ 459 $ 1,456 $ 1,319
Weighted average common
shares outstanding - basic 395.1 402.1 396.1 402.5
Earnings per share - basic $ 1.26 $ 1.14 $ 3.67 $ 3.28
Weighted average common
shares outstanding - diluted 399.0 406.8 400.0 406.5
Earnings per share - diluted $ 1.25 $ 1.13 $ 3.64 $ 3.25
<FN>
<F1>
The accompanying Notes to Consolidated Financial Statements
are an integral part of this statement.
</FN>
</TABLE>
<PAGE> 3
<TABLE>
Minnesota Mining and Manufacturing Company and Subsidiaries
Consolidated Balance Sheet
(Dollars in millions, except per-share amounts)
<CAPTION>
(Unaudited)
September 30, December 31,
2000 1999
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 323 $ 387
Other securities -- 54
Accounts receivable - net 3,057 2,778
Inventories
Finished goods 1,218 1,103
Work in process 603 544
Raw materials and supplies 415 383
Total inventories 2,236 2,030
Other current assets 1,035 817
Total current assets 6,651 6,066
Investments 514 487
Property, plant and equipment 13,558 13,379
Less accumulated depreciation (8,022) (7,723)
Property, plant and equipment - net 5,536 5,656
Other assets 1,981 1,687
Total $14,682 $13,896
Liabilities and Stockholders' Equity
Current liabilities
Short-term debt $ 1,633 $ 1,130
Accounts payable 1,077 1,008
Payroll 382 361
Income taxes 754 464
Other current liabilities 984 856
Total current liabilities 4,830 3,819
Long-term debt 1,141 1,480
Other liabilities 2,274 2,308
Stockholders' equity
Common stock, 472,016,528 shares issued,
$.01 par value ($.50 par value - 1999) 5 236
Capital in excess of par value 291 60
Retained earnings 11,446 10,741
Treasury stock, at cost (4,210) (3,833)
September 30, 2000: 77,583,063 shares
December 31, 1999: 73,305,711 shares
Unearned compensation - ESOP (303) (327)
Accumulated other comprehensive income (loss)
Cumulative translation - net (910) (694)
Minimum pension liability adjustments - net (30) (30)
Debt and equity securities, unrealized gain - net 148 136
Total accumulated other comprehensive loss (792) (588)
Stockholders' equity - net 6,437 6,289
Total $14,682 $13,896
<FN>
<F1>
The accompanying Notes to Consolidated Financial Statements
are an integral part of this statement.
</FN>
</TABLE>
<PAGE> 4
<TABLE>
Minnesota Mining and Manufacturing Company and Subsidiaries
Consolidated Statement of Cash Flows
(Dollars in millions)
(Unaudited)
<CAPTION>
Nine months ended
September 30
2000 1999
<S> <C> <C>
Cash Flows from Operating Activities
Net income $1,456 $1,319
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 737 669
Asset impairment charges (credits) 48 (31)
Accounts receivable (329) (255)
Inventories (205) 75
Implant litigation 51 44
Other 10 619
Net cash provided by operating activities 1,768 2,440
Cash Flows from Investing Activities
Purchases of property, plant and equipment (673) (727)
Acquisitions of businesses (307) (5)
Proceeds from sale of businesses 1 248
Proceeds from sale of investments 115 7
Other changes - net (20) (45)
Net cash used in investing activities (884) (522)
Cash Flows from Financing Activities
Change in short-term debt - net 75 (786)
Repayment of long-term debt (22) (113)
Proceeds from long-term debt 152 2
Purchases of treasury stock (675) (478)
Reissuances of treasury stock 202 265
Dividends paid to stockholders (689) (677)
Distributions to minority interests (70) (49)
Net cash used in financing activities (1,027) (1,836)
Effect of exchange rate changes on cash 79 9
Net (decrease) increase in cash and cash equivalents (64) 91
Cash and cash equivalents at beginning of year 387 211
Cash and cash equivalents at end of period $ 323 $ 302
<FN>
<F1>
The accompanying Notes to Consolidated Financial Statements
are an integral part of this statement.
</FN>
</TABLE>
<PAGE> 5
Minnesota Mining and Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
The interim consolidated financial statements are unaudited but, in
the opinion of management, reflect all adjustments necessary for a
fair presentation of financial position, results of operations and
cash flows for the periods presented. These adjustments consist of
normal, recurring items, except for non-recurring items in the third
quarter of 2000, primarily relating to costs to phase out
perfluorooctanyl chemistry production and gains related to asset
dispositions; a benefit from the termination of a product
distribution agreement in the first quarter of 2000; and non-
recurring items relating to divestitures (net of an investment
valuation adjustment), litigation and restructuring activities in the
second and third quarters of 1999. The results of operations for any
interim period are not necessarily indicative of results for the full
year. The interim consolidated financial statements and notes are
presented as permitted by the requirements of Form 10-Q and do not
contain certain information included in the company's annual
consolidated financial statements and notes. This Form 10-Q should
be read in conjunction with the company's consolidated financial
statements and notes included in its 1999 Annual Report on Form 10-K.
Acquisitions:
In separate transactions during the second and third quarters of
2000, 3M acquired about 85 percent of Quante AG (a telecommunications
company) and 100 percent of five smaller businesses for a total
purchase price of $307 million in cash (net of cash acquired) plus
128,994 shares of 3M common stock. The stock had a fair market value
of $11 million at the acquisition date and was previously held as 3M
treasury stock. All of these transactions were accounted for using
the purchase method of accounting. The preliminary estimated fair
values of assets acquired and liabilities assumed relating to these
acquisitions are summarized below:
<TABLE>
<CAPTION>
Amounts in millions - Asset (Liability):
<S> <C>
Accounts receivable $ 86
Inventories 99
Other working capital - net (93)
Property, plant and equipment 140
Purchased intangible assets 182
Other assets 30
Interest bearing debt (99)
Long-term liabilities (27)
Net assets acquired $318
</TABLE>
The purchased intangible assets, including goodwill, are being
amortized on a straight-line basis over the periods benefited,
ranging from three to twenty years. In-process research and
development charges associated with these acquisitions were not
significant. The company has made a tender offer for the remaining
shares outstanding of Quante AG. Proforma information related to
these acquisitions is not included as the impact of these
acquisitions on the company's results of operations is not considered
to be significant.
<PAGE> 6
Specialty Material - Perfluorooctanyl Chemistry Phase Out:
In May 2000, 3M announced its intent to substantially phase out
production by the end of 2000 of the perfluorooctanyl chemistry used
to produce certain repellents and surfactant products. These include
many Scotchgard brand products, such as soil, oil and water repellent
products; coatings used for oil and grease resistance on paper
packaging; fire-fighting foams; and specialty components for other
products. The affected product lines represent about $300 million in
annual sales with an operating income margin around 20 percent.
In the third quarter of 2000, after further analysis of the
alternative future use of productive assets impacted by the
perfluorooctanyl phase-out, the company determined that certain
affected equipment was not expected to be utilized after the phase-
out. The company determined that estimated future undiscounted cash
flows were insufficient to recover the related carrying values.
Accordingly, the carrying value of these assets was written down by
$48 million to reflect the company's estimates of fair value
(determined by discounting estimated future cash flows). The other
components of the $106 million in phase-out costs include $29 million
for accelerated depreciation, and other incremental costs directly
related to the phase-out. This $106 million charge is recorded in
cost of goods sold. The company expects to incur additional phase-out
costs in future periods of approximately $50 million, primarily
related to accelerated depreciation and severance.
Company Restructuring Charge:
As of December 31, 1999, the company-wide restructuring program,
initiated in the second half of 1998, was substantially complete.
This is discussed in the 1999 Form 10-K. Because certain employees
can defer receipt of termination benefits for up to 12 months, cash
payments in the first nine months of 2000 relate primarily to
previous terminations. Selected information relating to the
restructuring liability follows.
<TABLE>
<CAPTION>
Restructuring Employee
Liability Termination
(Millions) Benefits Other Total
<S> <C> <C> <C>
December 31, 1999 liability $ 31 $ 8 $ 39
Cash payments
First quarter 2000 (18) (1) (19)
Second quarter 2000 (1) (1) (2)
Third quarter 2000 (2) (3) (5)
September 30, 2000 liability $ 10 $ 3 $ 13
</TABLE>
<PAGE> 7
Financial Instruments:
In the second and third quarters of 2000, the company entered into
additional foreign exchange forward contracts, primarily in Euros and
Japanese yen, to reduce exchange rate risk arising from cross-border
financing activities denominated in foreign currencies. This
increased the forward contracts face amounts from $997 million at
year-end 1999 to about $1.4 billion at September 30, 2000. The
amounts at risk are not material because the company has the ability
to generate offsetting foreign currency cash flows.
Business Segments:
In the first quarter of 2000, business segment operating income for
1999 was restated for minor amounts, to be consistent with year 2000
management reporting practices. Certain costs previously included in
Corporate and Unallocated were allocated to the individual business
segments. 3M net sales and operating income by segment for 1999 and
2000 follow.
<TABLE>
<CAPTION>
Business
Segment
Information Third Quarter Second Quarter First Quarter
(Millions) 2000 1999 2000 1999 2000 1999
<S> <C> <C> <C> <C> <C> <C>
Net sales
Industrial $ 885 $ 851 $ 873 $ 836 $ 911 $ 842
Transportation,
Graphics and Safety 891 826 912 806 872 777
Health Care 773 768 794 793 765 768
Consumer and Office 750 712 692 638 687 638
Electro and
Communications 654 534 642 485 505 442
Specialty Material 292 298 302 292 305 292
Corporate and
Unallocated 7 8 9 13 7 17
Total Company $4,252 $3,997 $4,224 $3,863 $4,052 $3,776
Operating income
Industrial $ 166 $ 154 $ 153 $ 154 $ 185 $ 148
Transportation,
Graphics and Safety 194 184 213 171 209 148
Health Care 165 183 158 194 193 144
Consumer and Office 132 121 102 95 105 88
Electro and
Communications 111 119 105 90 89 82
Specialty Material (43) 50 57 60 51 55
Corporate and
Unallocated 94 (50) (11) 40 (17) (16)
Total Company $ 819 $ 761 $ 777 $ 804 $ 815 $ 649
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Business
Segment Net sales Operating income
Information Nine Months Year Nine Months Year
(Millions) 2000 1999 1999 2000 1999 1999
<S> <C> <C> <C> <C> <C> <C>
Industrial $ 2,669 $2,529 $3,394 $ 504 $ 456 $ 612
Transportation,
Graphics and Safety 2,675 2,409 3,228 616 503 675
Health Care 2,332 2,329 3,118 516 521 680
Consumer and Office 2,129 1,988 2,688 339 304 401
Electro and
Communications 1,801 1,461 2,014 305 291 402
Specialty Material 899 882 1,166 65 165 185
Corporate and
Unallocated 23 38 51 66 (26) 1
Total Company $12,528 $11,636 $15,659 $2,411 $2,214 $2,956
</TABLE>
Several non-recurring items impacted the operating income by business
segment. Third quarter 2000 operating income includes non-recurring
costs of $118 million (included in cost of goods sold) and non-
recurring gains of $119 million. Non-recurring items in the third
quarter of 2000 include $106 million of costs in the Specialty
Material segment relating to the company's phase out of
perfluorooctanyl chemistry. Remaining non-recurring items in the
third quarter of 2000 were largely gains related to asset
dispositions, principally the sale of available-for-sale equity
securities, and are primarily recorded in Corporate and Unallocated.
First quarter 2000 operating income includes a $50 million benefit
relating to the termination of a product distribution agreement in
the Health Care segment. Third quarter 1999 operating income
includes a $43 million gain related to divestitures, mainly in the
Health Care segment, and Corporate and Unallocated includes $73
million in litigation expense partially offset by a $26 million
change in estimate that reduced the restructuring charge. Second
quarter 1999 operating income includes gains on divestitures, net of
an investment valuation adjustment, of $30 million in the Health Care
segment and $74 million in Corporate and Unallocated.
Accounting Pronouncements:
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition." An amendment in
June 2000 delayed the effective date until the fourth quarter of
2000. The company is reviewing the requirements of this standard and
is evaluating the potential effects on its consolidated financial
statements.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133, as amended, must be adopted by the company no later than
January 1, 2001. Based on the company's current derivative positions,
the company does not expect this standard to materially affect its
financial position or results of operations.
<PAGE> 9
As required by a recent Emerging Issues Task Force (EITF) consensus,
stock option income tax benefits have been classified as a component
of cash flows from operating activities in the consolidated statement
of cash flows. Prior period consolidated statement of cash flows
amounts have been restated to conform with this presentation.
Debt Issuance:
In September 2000, the company completed a 3-year, 16 billion yen
(approximately $150 million), 1.0 percent Euro Yen Bond offering.
Shelf Registration:
On October 30, 2000, the company filed a shelf registration with the
Securities and Exchange Commission. This registration provides the
means to offer debt securities of up to $1.5 billion. 3M plans to
use the net proceeds from future issuances of debt securities under
this shelf registration for general corporate purposes, including the
repayment of debt, investments in or extensions of credit to the
company's subsidiaries, or the financing of possible acquisitions or
business combinations.
Earnings Per Share:
The difference in the weighted average common shares outstanding for
calculating basic and diluted earnings per share is attributable to
the assumed exercise of the Management Stock Ownership Program (MSOP)
stock options for the three-month and nine-month periods ended
September 30, 2000 and 1999. Certain MSOP options outstanding were
not included in the computation of diluted earnings per share because
they would not have had a dilutive effect (about 5.2 million to 16.0
million shares for the periods presented).
Comprehensive Income:
The components of total comprehensive income are shown below. In the
third quarter of 2000, deferred income taxes for the unrealized loss
on debt and equity securities totaled $18 million. For the third
quarter of 1999, deferred income taxes for the unrealized gain on
debt and equity securities totaled $30 million, and in the first nine
months of 2000 and 1999 totaled $7 million and $59 million,
respectively. Reclassification adjustments in the third quarter and
first nine months of 2000 for realized gains included in income
totaled $85 million ($52 million after tax). These gains related to
the sale of available-for-sale marketable equity securities.
<TABLE>
<CAPTION>
Total Comprehensive Income Three months ended Nine months ended
September 30 September 30
(Millions) 2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income $ 499 $ 459 $1,456 $1,319
Other comprehensive income (loss)
Cumulative translation - net (157) 70 (216) (140)
Debt and equity securities,
unrealized gain (loss) - net (30) 49 12 97
Total comprehensive income $ 312 $ 578 $1,252 $1,276
</TABLE>
<PAGE> 10
Common Stock:
At the Annual Meeting of Stockholders held on May 9, 2000, the
company's shareholders approved amendments to the company's Restated
Certificate of Incorporation (i) to increase the number of authorized
shares of common stock of the company to 1.5 billion shares and (ii)
to change the par value of the company's common stock to $.01 per
share. This change resulted in a reclassification of $231 million
from common stock to capital in excess of par value.
Other:
Discussion of legal matters is cross-referenced to this Form 10-Q,
Part II, Item 1, Legal Proceedings, and should be considered an
integral part of the interim consolidated financial statements.
PricewaterhouseCoopers LLP, the company's independent auditors, have
performed a review of the unaudited interim consolidated financial
statements included herein, and their review report thereon
accompanies this filing.
<PAGE> 11
Review Report of Independent Auditors
To the Stockholders and Board of Directors of Minnesota Mining and
Manufacturing Company:
We have reviewed the accompanying consolidated balance sheet of
Minnesota Mining and Manufacturing Company and Subsidiaries as of
September 30, 2000, and the related consolidated statements of income
for each of the three-month and nine-month periods ended September
30, 2000 and 1999, and of cash flows for the nine-month periods ended
September 30, 2000 and 1999. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying consolidated interim
financial statements for them to be in conformity with accounting
principles generally accepted in the United States of America.
We previously audited, in accordance with auditing standards
generally accepted in the United States of America, the consolidated
balance sheet as of December 31, 1999, and the related consolidated
statements of income, of changes in stockholders' equity and
comprehensive income, and of cash flows for the year then ended (not
presented herein); and in our report dated February 14, 2000, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of December 31, 1999, is
fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
St. Paul, Minnesota
October 23, 2000
<PAGE> 12
Minnesota Mining and Manufacturing Company and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Third Quarter
Worldwide sales for the third quarter totaled $4.252 billion, up 6.4
percent from the third quarter last year. Volume increased 11
percent on a reported basis and 8.5 percent excluding acquisitions
and divestitures. Selling prices worldwide declined about 1.5
percent, largely due to volume-related price reductions in 3M's
electronics business, which posted strong volume gains. Currency,
driven by the weak Euro, decreased worldwide sales by about 3
percent.
In the United States, sales totaled $2.040 billion, with volume up
5.5 percent. U.S. selling prices declined 1 percent overall.
Internationally, sales totaled $2.212 billion, up about 8 percent in
dollars. Volume increased 16 percent and selling prices decreased
about 2 percent. Adjusting for the acquisition of Quante AG, a
manufacturer of telecommunications products and systems, volume
increased about 12 percent. Currency reduced international sales by 6
percent, driven by negative currency translation of 13 percent in
Europe.
European volume increased about 18 percent. Adjusting for the
acquisition of Quante AG, volume increased about 8 percent. In the
Asia Pacific area, volume increased 17 percent. In Asia outside
Japan, volume increased 22 percent, led by Korea and the China
region. In Japan, volume increased 17 percent. In Latin America,
volume increased about 11 percent, with strong growth in Mexico and
good growth in Brazil. In Canada, volume increased 7 percent.
Cost of goods sold includes non-recurring costs of $118 million,
primarily related to the company's decision to phase-out its
perfluorooctanyl chemistry. Excluding these costs, cost of goods
sold was 55.6 percent of sales, down eight-tenths of a percentage
point from the third quarter last year. Gross margins benefited from
a strong performance in our factories, volume growth, productivity
gains and lower employee benefit costs, but were negatively affected
by raw material costs and currency effects. Cost of goods sold
includes manufacturing; research, development, and related expenses;
and engineering expenses.
Selling, general and administrative expenses were 25.2 percent of
sales, up from 24.4 percent in the third quarter of last year. These
expenses reflected higher advertising and promotion expenses, but
benefited from lower employee benefit costs.
The non-recurring restructuring pre-tax credit of $26 million in 1999
related to changes in estimates that reduced certain restructuring
charges originally recorded in the second half of 1998.
<PAGE> 13
Other operating income in the third quarter of 2000 includes non-
recurring gains of approximately $119 million related to asset
dispositions, principally the sale of available-for-sale equity
securities. Other operating expense in the third quarter of 1999
reflects a pre-tax charge of $30 million related to two non-recurring
items. A pre-tax charge of $73 million was recorded relating to an
adverse jury verdict and legal fees associated with a lawsuit filed
by LePage's, Inc. 3M also recorded a pre-tax gain of $43 million
related to divestitures, mainly in the Health Care segment.
The following discussion excludes the impact of third quarter 2000
and 1999 non-recurring items.
<TABLE>
Supplemental Unaudited Consolidated Statement of Income Information
(Millions, except per-share amounts)
<CAPTION>
Three months ended Three months ended
September 30, 2000 September 30, 1999
Excluding Excluding
non- Non- non- Non-
recurring recurring Reported recurring recurring Reported
items items total items items total
<S> <C> <C> <C> <C> <C> <C>
Operating
income (loss) $ 818 $ 1 $ 819 $ 765 $ (4) $ 761
Other expense 25 -- 25 19 -- 19
Income (loss) before
income taxes and
minority interest $ 793 $ 1 $ 794 $ 746 $ (4) $ 742
Provision (benefit)
for income taxes 273 1 274 261 (1) 260
Effective tax rate 34.4% 34.5% 35.0% 27.3% 35.0%
Minority interest 21 -- 21 23 -- 23
Net income (loss) $ 499 $ -- $ 499 $ 462 $ (3) $ 459
Per share-diluted $1.25 $ -- $1.25 $1.14 $ (.01) $1.13
</TABLE>
Worldwide operating income was 19.2 percent of sales, the same as in
the third quarter last year.
Third-quarter interest expense of $29 million was $3 million higher
than the third quarter last year, reflecting higher interest rates.
Investment and other income was $4 million, compared with $7 million
in the same quarter last year, reflecting slightly lower interest
income.
The worldwide effective income tax rate for the quarter was 34.4
percent, down from 35.0 percent in the third quarter last year.
Minority interest was $21 million, compared with $23 million in the
third quarter of 1999. The decrease is a result of 3M's acquisition
of the 46 percent minority interest in Dyneon in December of 1999,
largely offset by higher profits in Sumitomo 3M Limited.
Net income for the third quarter of 2000 totaled $499 million, or
$1.25 per diluted share, compared with $462 million, or $1.14 per
diluted share, in the third quarter of 1999. The company estimates
that changes in the value of the U.S. dollar decreased earnings for the
<PAGE> 14
quarter by about 2 cents per share compared with the third quarter of
1999. This estimate includes the effect of translating profits from
local currencies into U.S. dollars; the impact of currency
fluctuations on the transfer of goods between 3M operations in the
United States and abroad; and transaction gains and losses, including
derivative instruments designed to reduce exchange rate risks.
Derivative transactions resulted in a net pre-tax gain of $9 million
(included in cost of goods sold) in the third quarter of 2000,
primarily related to terminated foreign exchange forward contracts
which had been used to hedge Euro exposure.
First Nine Months
Worldwide sales for the first nine months totaled $12.528 billion, up
7.7 percent from the same period last year. Volume increased 11
percent on a reported basis and 10 percent adjusted for acquisitions
and divestitures. Selling prices worldwide declined about 1.5
percent, largely due to volume-related price reductions in 3M's
electronics business, which posted strong volume gains. Currency
decreased worldwide sales by about 2 percent.
In the United States, sales totaled $5.890 billion, with volume up 7
percent and selling prices down 1 percent overall. Internationally,
sales totaled $6.638 billion. Volume increased 15 percent, while
selling prices were down about 2 percent, resulting in overall local-
currency sales gains of about 13 percent. Currency translation
reduced international sales by 3.5 percent.
Cost of goods sold includes non-recurring costs of $118 million,
primarily related to the company's decision to phase out its
perfluorooctanyl chemistry. Excluding these costs, cost of goods
sold was 56.0 percent of sales, down eight-tenths of a percentage
point from the same period last year. Gross margins benefited from a
strong performance in our factories, volume growth, productivity
gains and lower employee benefit costs, but were negatively affected
by raw material costs and currency effects. Cost of goods sold
includes manufacturing; research, development, and related expenses;
and engineering expenses.
Selling, general and administrative expenses were 25.2 percent of
sales, compared with 25.0 percent in the same period last year. These
expenses reflected higher advertising and promotion expenses, but
benefited from lower employee benefit costs.
Other operating income in the first nine months of 2000 includes non-
recurring gains of $169 million. These gains include $119 million
relating to asset dispositions, principally the sale of available-for-
sale equity securities, and also reflect a pre-tax benefit of $50
million associated with the termination of a product marketing and
distribution agreement in the health care segment. Results for the
first nine months of 1999 reflect a pre-tax benefit of $100 million
relating to gains on divestitures (net of an investment valuation
adjustment), litigation and restructuring activities. The impact of
these items on 3M's Consolidated Statement of Income follows.
<PAGE> 15
<TABLE>
Supplemental Unaudited Consolidated Statement of Income Information
(Millions, except per-share amounts)
<CAPTION>
Nine months ended Nine months ended
September 30, 2000 September 30, 1999
Excluding Excluding
non- Non- non- Non-
recurring recurring Reported recurring recurring Reported
items items total items items total
<S> <C> <C> <C> <C> <C> <C>
Operating income $2,360 $ 51 $2,411 $2,114 $ 100 $2,214
Other expense 65 -- 65 61 -- 61
Income before
income taxes and
minority interest $2,295 $ 51 $2,346 $2,053 $ 100 $2,153
Provision for
income taxes 801 20 821 728 48 776
Effective tax rate 34.9% 39.7% 35.0% 35.5% 47.8% 36.0%
Minority interest 69 -- 69 58 -- 58
Net income $1,425 $ 31 $1,456 $1,267 $ 52 $1,319
Per share-diluted $ 3.56 $ .08 $ 3.64 $ 3.12 $ .13 $ 3.25
The following discussion excludes the impact of non-recurring items.
Worldwide operating income was 18.8 percent of sales, up six-tenths
of a percentage point from the same period last year. Volume growth
and productivity gains drove most of the improvement in worldwide
operating income. The lower employee benefit costs discussed
previously is the result of lower pension expense, primarily in the
United States. This estimated five-tenths of a percentage point
improvement is more than offset by higher payroll costs and other
inflationary impacts.
Interest expense for the first nine months was $81 million, down $2
million from the same period last year. Net investment and other
income was $16 million, compared with $22 million in the first nine
months of 1999.
The worldwide effective income tax rate for the first nine months was
34.9 percent, down from 35.5 percent in the same period last year.
Minority interest was $69 million, compared with $58 million in the
same period of 1999. The increase reflects higher profits in Sumitomo
3M Limited, partially offset by a decrease as a result of 3M's
acquisition of the 46 percent minority interest in Dyneon in December
of 1999.
Net income for the first nine months of 2000 totaled $1.425 billion,
or $3.56 per diluted share, compared with $1.267 billion, or $3.12
per diluted share, in the same period of 1999. The company estimates
that changes in the value of the U.S. dollar decreased earnings for
the first nine months of 2000 by about 8 cents per share compared
with the same period of 1999. This estimate includes the effect of
translating profits from local currencies into U.S. dollars; the
impact of currency fluctuations on the transfer of goods between 3M
operations in the United States and abroad; and transaction gains and
losses, including derivative instruments designed to reduce exchange
rate risks.
<PAGE> 16
Performance by Business Segment
The following is a discussion of the global operating results of the
company's six business segments. The discussion applies to both
third quarter and first nine month results unless otherwise
indicated.
In Industrial Markets, sales for the third quarter increased 7
percent in local currencies and 4 percent in dollars, and for the
first nine months sales increased 8 percent in local currencies and 6
percent in dollars. Leading growth in this market was the
Superabrasives and Microfinishing Systems business, which is growing
through strong demand for proprietary 3M abrasives used in the
electronics and telecommunications industries. Industrial Markets
also saw good growth in packaging and bonding tapes and specialty
adhesives. Profits of this market increased in the third quarter and
first nine months of 2000 compared with the same periods last year.
Operating income improvement was driven by volume gains, increased
manufacturing efficiencies, and other cost improvements.
In the Transportation, Graphics and Safety segment, sales for the
third quarter increased 11 percent in local currencies and 8 percent
in dollars, and for the first nine months rose 12 percent in local
currencies and 11 percent in dollars. Optical Systems continued to
show outstanding growth. This business provides optical films for
computer monitors, electronic organizers, cell phones and other
devices with electronic displays. At the end of second quarter of
2000, 3M acquired a manufacturer of touch screens and related
products, which adds product offerings to the Optical Systems
business. The occupational health and safety, automotive, and safety
and security businesses also turned in good worldwide sales growth.
Operating income margins were down slightly in the third quarter,
affected by acquisition-related costs. Double-digit sales growth and
productivity gains drove margin improvements for the first nine
months.
In the Health Care segment, sales for the third quarter were up 5
percent in local currencies and up 1 percent in dollars, and for the
first nine months rose 3 percent in local currencies and were flat in
dollars. Excluding acquisitions and divestitures, local-currency
health care sales increased about 6 percent for the first nine months
of 2000. Leading this growth was the health information systems
business. The dental business also showed good sales growth.
Non-recurring items in Health Care in the first quarter of 2000
include a $50 million gain associated with the termination of a
product distribution agreement. A new co-promotion and distribution
agreement was entered into in the fourth quarter of 2000. Non-
recurring items in the first nine months of 1999 include gains on
divestitures of $62 million. Excluding non-recurring items,
operating income improved in the third quarter, while the first nine
months was relatively flat, affected by the impact of divestitures
made in 1999 and by inflationary and spending increases in 2000.
In the Consumer and Office segment, sales for the third quarter
increased more than 8 percent in local currencies and 5 percent in
dollars, and for the first nine months increased about 9 percent in
local currencies and 7 percent in dollars. The office supply, home
<PAGE> 17
care and do-it-yourself businesses drove higher revenues. Profits
rose in the third quarter and the first nine months, mainly due to solid
volume gains. Increased advertising and promotion expenses, together
with strong relationships with retailers, helped to drive this volume
growth.
In the Electro and Communications segment, revenues for the third
quarter and first nine months increased 24 percent in local
currencies and more than 22 percent in dollars. Excluding
acquisitions, revenues for the third quarter increased 6 percent and
for the first nine months increased 11 percent. In the second and
third quarters of 2000, 3M acquired about 85 percent of the total shares
outstanding of Quante AG, a German telecommunications company. Sales
of Quante AG in 1999 were approximately $350 million. This market
continued to see strong growth in Microflex circuits, connectors,
telecom, and electronic handling and protection products. Profits of
this market decreased in the third quarter, but showed good growth
for the first nine months. Profits grew more slowly than sales due
to volume-related price decreases in certain 3M electronic products
and acquisition-related costs associated with the Quante AG
acquisition.
In the Specialty Material segment, sales for the third quarter
increased 1 percent in local currencies and were down 2 percent in
dollars, and for the first nine months sales increased 4 percent in
local currencies and about 2 percent in dollars. High-performance
materials for telecommunications and electronics markets posted solid
gains. In May 2000, 3M announced its intent to substantially phase
out production by the end of 2000 of the perfluorooctanyl chemistry
used to produce certain repellents and surfactant products. The
affected product lines represent about $300 million in annual sales
with an operating income margin around 20 percent. Overall sales
were affected by this phase-out. The company is introducing
alternatives that are gaining customer acceptance and should enable
3M to retain an important portion of this business. Operating income
in the third quarter of 2000 includes non-recurring costs of $106
million related to the company's decision to phase-out the
perfluorooctanyl chemistry. Excluding these costs, this segment
reported good operating income results for the quarter and for the
first nine months.
FINANCIAL CONDITION AND LIQUIDITY
The company's financial condition and liquidity remain strong.
Working capital totaled $1.821 billion at September 30, 2000,
compared with $2.247 billion at year-end 1999. The company's current
ratio was 1.4, down from 1.6 at year-end. Working capital and the
current ratio were both impacted by higher short-term debt at
September 30, 2000, largely relating to acquisitions, compared with a
lower short-term debt balance at December 31, 1999, helped by
business divestiture proceeds received in 1999. The accounts
receivable average days' sales outstanding was 59 days, down from 61
days at year-end, but the same as September 30, 1999. The company's
inventory index, which represents the average number of months of
inventory on-hand, was 3.2 months, up slightly from 3.1 months at
year-end.
<PAGE> 18
Total debt increased $164 million from year-end 1999 to $2.774
billion. As of September 30, 2000, total debt was 30 percent of
total capital.
The company's strong credit rating provides ready and ample access
to funds in global capital markets. At September 30, 2000, the
company had available short-term lines of credit totaling about $768
million.
Net cash provided by operating activities totaled $1.768 billion in
the first nine months of the year, down $672 million from the same
period last year. In 2000, depreciation and amortization includes $29
million for accelerated depreciation relating to the phase out of
perfluorooctanyl chemistry. In 2000, accounts receivable and
inventory dollars increased, primarily due to solid sales growth. In
1999, the company had benefits in working capital and other areas.
Net cash inflows from mammary implant litigation were $51 million in
the first nine months of 2000, compared with $44 million in net cash
inflows in the same period last year.
Timing differences between payment of implant liabilities and receipt
of related insurance recoveries could affect the cash flows of future
periods. This is discussed in Part II, Item 1, Legal Proceedings, of
this Form 10-Q.
Cash used in investing activities totaled $884 million in the first
nine months of the year, compared with $522 million in the same
period last year. Capital expenditures for the first nine months of
2000 were $673 million, a decrease of about 7 percent from the same
period last year. Proceeds from sales of businesses in 1999 totaling
$248 million related to divestitures of Eastern Heights Bank and
certain health care businesses. In the third quarter of 2000, the
company sold an available-for-sale equity security with net cash
proceeds of $93 million.
In the second and third quarters of 2000, in separate transactions,
3M acquired about 85 percent of Quante AG and 100 percent of five
smaller businesses for a total purchase price of $307 million in cash
(net of cash acquired) plus 128,994 shares of 3M common stock. Refer
to "Acquisitions" in the Notes to Consolidated Financial Statements
for details concerning these acquisitions.
In October 2000, the company finalized the acquisition of a Wisconsin-
based single-chip module substrate business. The company expects to
complete additional business combinations in the near future,
dependent upon necessary approvals, including 1) acquiring Robinson
Nugent, Inc., which provides electronic connector products for the
telecommunications market and 2) combining 3M's Dental Products
Division with ESPE Dental AG, a Munich, Germany-based developer and
manufacturer of high-quality products and delivery systems for the
dental profession. The company continues to explore additional
acquisition opportunities.
<PAGE> 19
Financing activities in the first nine months of 2000 for both short-
term and long-term debt included net cash inflows of $205 million,
compared with net cash outflows of $897 million in the same period
last year. In September 2000, the company completed a 3-year, 16
billion yen (approximately $150 million), 1.0 percent Euro Yen Bond
offering. On October 30, 2000, the company filed a shelf
registration with the Securities and Exchange Commission that
provides the means to offer debt securities of up to $1.5 billion.
Treasury stock repurchases for the first nine months of 2000 were
$675 million, compared with $478 million in the same period last
year. The company repurchased about 7.6 million shares of common
stock in the first nine months of 2000, compared with about 5.3
million shares in the same period last year. In November 1999, the
Board of Directors authorized the repurchase of up to 12 million
shares of 3M common stock through December 31, 2000. As of September
30, 2000, 4.4 million shares remained authorized for repurchase.
Stock repurchases are made to support employee stock purchase plans
and for other corporate purposes, including acquisitions.
Cash dividends paid to shareholders totaled $689 million in the first
nine months of this year, compared with $677 million in the same
period last year. In February 2000, the quarterly dividend was
increased to 58 cents per share. Distributions to minority interests
totaled $70 million in the first nine months of 2000, compared with
$49 million in the same period last year, and relate to 3M's minority
interest in Sumitomo 3M Limited and 3M Health Care Limited.
Legal proceedings are discussed in the Legal Proceedings section in
Part II, Item 1, of this Form 10-Q.
FUTURE OUTLOOK
The company is not able to project what the consequences will be from
the dynamic economies around the world. The company is monitoring
business conditions closely and is prepared to make adjustments in
costs, pricing and investments as appropriate.
The company expects continued solid revenue and earnings growth in
the fourth quarter of 2000. Volume gains in the fourth quarter are
expected to be a little stronger than the third quarter, primarily
due to a resumption of European growth to the levels experienced in
the first half of 2000. The company estimates, based on currency
rates as of September 30, 2000, that currency would reduce earnings
for the year by about 15 cents per share, primarily due to a weaker-
than-anticipated Euro. The company expects raw material costs to
increase 1 to 2 percent for the year 2000. Despite these challenges,
the company believes it will continue to deliver solid results,
helped by strong volume gains and good productivity.
ACCOUNTING PRONOUNCEMENTS
Refer to "Accounting Pronouncements" in the Notes to Consolidated
Financial Statements for a discussion of accounting pronouncements to
be adopted in the future which could affect the company's current
financial reporting practices.
<PAGE> 20
YEAR 2000 UPDATE
As of the date of this filing, the company has not experienced any
material Year 2000 problems with its IT or non-IT systems or
products, nor has the company experienced any material problems with
any of its key customers or suppliers. Refer to the 1999 Form 10-K
for a complete discussion of the Year 2000 issue.
THE EURO CONVERSION
There have not been any significant new developments relating to the
Euro Conversion since year-end 1999. Refer to the 1999 Form 10-K for
a complete discussion of the Euro Conversion.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements may be identified by their use
of words like "plan," "expect," "aim," "believe," "project,"
"anticipate," "intend," "estimate," "will," "should," "could" and
other expressions that indicate future events and trends. All
statements that address expectations or projections about the future,
including statements about the company's strategy for growth, product
development, market position, expenditures and financial results are
forward-looking statements.
Forward-looking statements are based on certain assumptions and
expectations of future events that are subject to risks and
uncertainties. Actual future results and trends may differ materially
from historical results or those projected in any such forward-
looking statements depending on a variety of factors, including but
not limited to the following:
* The effects of, and changes in, worldwide economic conditions -
The company operates in more than 60 countries and derives more than
half of its revenues from sales outside the United States. 3M's
business may be affected by factors in other countries that are
outside its control, such as downturns in economic activity in a
specific country or region, the economic difficulties that occurred
in Asia in 1998 as an example; social, political or labor conditions
in a specific country or region; or potential adverse foreign tax
consequences.
* Foreign currency exchange rates and fluctuations in those rates
- Because 3M derives more than half its revenues from sales outside
the United States, its ability to realize projected growth rates in
sales and net earnings and results of operations could be adversely
affected if the United States dollar strengthens significantly
against foreign currencies.
<PAGE> 21
* The timing and market acceptance of 3M's new product offerings -
3M's growth objectives are largely dependent on its ability to renew
its pipeline of new products and to bring those products to market.
This ability may be adversely affected by difficulties or delays in
product development, such as the inability to: identify viable new
products; successfully complete clinical trials and obtain regulatory
approvals; obtain adequate intellectual property protection; or gain
market acceptance of new products.
* Raw materials, including shortages and increases in the costs of
key raw materials.
* Acquisitions, divestitures and strategic alliances - As part of
3M's strategy for growth, the company has made and may continue to
make acquisitions, divestitures and strategic alliances. However,
there can be no assurance that these will be completed or beneficial
to the company.
* Legal proceedings (see discussion of Legal Proceedings in Part
II, Item 1 of this Form 10-Q).
<PAGE> 22
Minnesota Mining and Manufacturing Company and Subsidiaries
PART II. Other Information
Item 1. Legal Proceedings
The company and certain of its subsidiaries are named as defendants
in a number of actions, governmental proceedings and claims,
including environmental proceedings and products liability claims
involving products now or formerly manufactured and sold by the
company. In some actions, the claimants seek damages as well as
other relief, which, if granted, would require substantial
expenditures. The company has accrued certain liabilities, which
represent reasonable estimates of its probable liabilities for these
matters. The company also has recorded receivables for the probable
amount of insurance recoverable with respect to these matters.
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 amount of its possible future
liabilities with respect to such matters.
There can be no certainty that the company may not ultimately incur
charges, whether for governmental proceedings and claims, products
liability claims, or other actions, in excess of presently
established accruals. While such future charges could have a
material adverse impact on the company's net income in the quarterly
period in which they are recorded, the company believes that such
additional charges, if any, would not have a material adverse effect
on the consolidated financial position, annual results of
operations, or cash flows of the company. (NOTE: The preceding
sentence applies to all legal proceedings involving the company
except the breast implant litigation and environmental matters,
which are discussed separately in the next sections).
Breast Implant Litigation
As previously reported in the company's Annual Report on Form 10-K
for the year ended December 31, 1999, the company and certain other
companies have been named as a defendant in a number of claims and
lawsuits alleging damages for personal injuries of various types
resulting from breast implants formerly manufactured by the company
or a related company. The company entered the business of
manufacturing breast implants in 1977 by purchasing McGhan Medical
Corporation. In 1984, the company sold the business to a
corporation that also was named McGhan Medical Corporation.
As of September 30, 2000, the company is currently named as a
defendant, often with multiple co-defendants, in 1,523 lawsuits and
46 claims in various courts, all seeking damages for personal
injuries from allegedly defective breast implants. These lawsuits
and claims purport to represent 4,514 individual claimants. It is
not yet certain how many of these lawsuits and claims involve (i)
products manufactured and sold by the company, as opposed to other
<PAGE> 23
manufacturers, or (ii) individuals who accepted benefits under the
Revised Settlement Program (as defined later). The company has
confirmed that 111 of the 4,514 individual claimants have opted out
of the class action and have 3M Implants. The company believes that
most of these lawsuits and claims will be dismissed either because
the claimants did not have 3M Implants or the claimants accepted
benefits under the Revised Settlement Program. The company continues
to work to clarify the status of these lawsuits and claims.
On December 22, 1995, the Court approved a revised class action
settlement program for resolution of claims seeking damages for
personal injuries from allegedly defective breast implants (the
"Revised Settlement Program"). The Court ordered that, beginning
after November 30, 1995, members of the plaintiff class may choose
to participate in the Revised Settlement Program or opt out, which
would then allow them to proceed with separate product liability
actions.
The company believes that approximately 90 percent of the
registrants, including those claimants who filed current claims,
have elected to participate in the Revised Settlement Program. It is
still unknown as to what disease criteria all claimants have
satisfied, and what options they have chosen. As a result, the
total amount and timing of the company's prospective payments under
the Revised Settlement Program cannot be determined with precision
at this time. As of September 30, 2000, the company has paid $296
million into the court-administered fund as a reserve against costs
of claims payable by the company under the Revised Settlement
Program (including a $5 million administrative assessment).
Additional payments will be made as necessary. Payments to date have
been consistent with the company's estimates of the total liability
for these claims.
Under the Revised Settlement Program, additional opt outs are
expected to be minimal since the opt-out deadline has passed for
virtually all U.S. class members. The company's remaining
obligations under the Revised Settlement Program are limited since
(i) most payments to Current Claimants have already been made, (ii)
no additional Current Claims may be filed without court approval,
and (iii) Late Registrants are limited by the terms of the Revised
Settlement Program.
The company's current best estimate of the amount to cover the cost
and expense of the Revised Settlement Program and the cost and
expense of resolving opt-out claims and recovering insurance
proceeds is $1.2 billion. After subtracting payments of $1.159
billion as of September 30, 2000, for defense and other costs and
settlements with litigants and claimants, the company had accrued
liabilities of $41 million.
As previously reported in the company's Annual Report on Form 10-K
for the year ended December 31, 1999, the company's insurers
initiated a declaratory judgment action in Ramsey County Minnesota
against the company seeking adjudication of certain coverage and
allocation issues. The jury trial finished on February 24, 2000.
<PAGE> 24
The jury returned a verdict favorable to the company by rejecting all of
the insurers' remaining defenses to coverage for breast implant
liabilities and costs. The court will consider additional remedies
requested by the company and the insurers including eliminating,
limiting or extending allocation among the insurers providing
occurrence-based coverage (before 1986), pre- and post-judgment
interest, attorneys' fees and further equitable relief. The court's
rulings in post verdict motions were rendered favorable to 3M. The
court awarded 3M prejudgment interest on amounts owing by insurers
including 3M's reasonable attorney fees. Entry of judgment should
occur during the fourth quarter of 2000.
As of September 30, 2000, the company had receivables for insurance
recoveries of $527 million, representing settled but yet to be
received amounts as well as amounts contested by the insurance
carriers. During the first nine months of 2000, the company received
payments from its occurrence carriers. Various factors could affect
the timing and amount of proceeds to be received under the company's
various insurance policies, including (i) the timing of payments
made in settlement of claims; (ii) the outcome of occurrence
insurance litigation in the courts of Minnesota (as discussed above)
and Texas; (iii) potential arbitration with claims-made insurers;
(iv) delays in payment by insurers; and (v) the extent to which
insurers may become insolvent in the future. There can be no
absolute assurance that the company will collect all amounts
recorded as being probable of recovery from its insurers.
The company's current estimate of the probable liabilities,
associated expenses and probable insurance recoveries related to the
breast implant claims is based on the facts and circumstances
existing at this time. New developments may occur that could affect
the company's estimates of probable liabilities (including
associated expenses) and the probable amount of insurance
recoveries. These developments include, but are not limited to, (i)
the ultimate Fixed Amount Benefit distribution to claimants in the
Revised Settlement Program; (ii) the success of and costs to the
company in defending opt-out claims, including claims involving
breast implants not manufactured or sold by the company; (iii) the
outcome of the occurrence insurance litigation in the courts of
Minnesota and Texas; and (iv) the outcome of potential arbitration
with claims-made insurers.
The company cannot determine the impact of these potential
developments on the current estimate of probable liabilities
(including associated expenses) and the probable amount of insurance
recoveries. Accordingly, the company is not able to estimate its
possible future liabilities and recoveries beyond the current
estimates of probable amounts. As new developments occur, these
estimates may be revised, or additional charges may be necessary to
reflect the impact of these developments on the costs to the company
of resolving breast implant litigation, claims and insurance
recoveries. Such revisions or additional future charges could
have a material adverse impact on the company's net income in the
quarterly period in which they are recorded. Although the company
considers it unlikely, such revisions or additional future charges could
<PAGE> 25
also have a material adverse effect on the consolidated financial
position, annual results of operations, or cash flows of the
company.
Environmental Matters
The company's operations are subject to environmental laws and
regulations enforceable by foreign, federal, state, local
authorities and private parties in the United States and abroad,
including those pertaining to air emissions, wastewater discharges,
toxic substances, and the handling and disposal of solid and
hazardous wastes. These laws and regulations provide under certain
circumstances for the remediation of contamination, as well as
personal injury and property damage claims. The company has
incurred, and will continue to incur, costs and capital expenditures
in complying with these laws and regulations, defending potential
personal injury and property damage claims, and modifying its
business operations in light of its environmental responsibilities.
In its effort to carry out its environmental responsibilities and
comply with environmental laws and regulations, the company has
established, and periodically updates, policies relating to
environmental standards of performance for its operations worldwide.
Under certain environmental laws, including the United States
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 and similar state laws, the company may be jointly and
severally liable for the costs of environmental contamination at
current or former facilities and at off-site locations at which the
company has disposed of hazardous waste. The company has identified
numerous locations, most of which are in the United States, at which
it may have some liability for remediating contamination. Amounts
expensed for environmental remediation activities are not expected
to be material for the year 2000 at these locations. Liabilities for
estimated costs of environmental remediation are, depending on the
site, based primarily upon internal or third-party environmental
studies, and estimates as to the number, participation level and
financial viability of any other potentially responsible parties,
the extent of the contamination and the nature of required remedial
actions. Recorded liabilities are adjusted as further information
develops or circumstances change. The amounts provided in the
company's consolidated financial statements for environmental
liabilities are the gross amount of such liabilities, without
deductions for insurance or third party indemnity claims. The
company expects that the amounts accrued will be paid out over the
periods of remediation for the applicable sites, currently ranging
from approximately 5 to 30 years.
It is often difficult to estimate the cost of environmental
compliance and remediation and potential claims given the
uncertainties regarding the interpretation and enforcement of
applicable environmental laws and regulations, the extent of
environmental contamination and the existence of alternate cleanup
methods. The company records an environmental liability when it is
probable that a liability has been incurred by the company and the
amount of the liability can be reasonably estimated. Where no
<PAGE> 26
amount within a range of estimates is more likely, the minimum is
recorded. Otherwise, the most likely cost to be incurred is
recorded.
The company's current assessment of the probable liabilities and
associated expenses related to environmental matters is based on the
facts and circumstances known at this time. New developments may
occur that could affect the company's assessment. These developments
include, but are not limited to, (i) changes in the information
available regarding the environmental impact of the company's
operations and products; (ii) changes in environmental regulations
or enforcement policies; (iii) new and evolving analytical and
remediation techniques; (iv) success in allocating liability to
other potentially responsible parties; and (v) financial viability
of other potentially responsible parties and third-party
indemnitors.
Although the company believes that the amounts accrued for current
environmental liabilities are adequate, given the uncertainties
involved in environmental matters, it is possible that the amount of
capital expenditures and other costs which will be required may
exceed the amounts accrued for environmental liabilities and the
difference could have a material adverse effect on the consolidated
financial position, annual results of operations, or cash flows of
the company.
<PAGE> 27
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are incorporated by reference in this
Report.
Incorporate by
Reference in the
Report From
(3) Restated certificate of incorporation, Form 8-K filed
as amended as of May 9, 2000 July 27, 2000
(4) Instruments defining the rights of
security holders, including debentures:
(a) debt securities Registration No.
333-48922 on
Form S-3
(b) common stock Registration No.
333-42660 dated
July 31, 2000
(as amended on
August 18, 2000)
on Form S-3
(10) Material contracts, management renumeration
(a) management stock ownership program Registration No.
333-44760 on
Form S-8
(b) director stock ownership program Registration No.
333-44692 on
Form S-8
The following documents are filed as exhibits to this Report.
(12) A statement setting forth the calculation of the
ratio of earnings to fixed charges. Page 30.
(15) Awareness letter of PricewaterhouseCoopers LLP, regarding
unaudited interim consolidated financial statements.
Page 31.
(27) Financial data schedule (EDGAR filing only).
<PAGE> 28
(b) The company filed a report on Form 8-K dated October 23,
2000. An exhibit was attached to this Form 8-K that contains
the press release reporting 3M's financial results for the
third quarter of 2000.
The company filed a report on Form 8-K dated July 27, 2000.
An exhibit was attached to this Form 8-K that contains the
press release reporting 3M's financial results for the
second quarter of 2000.
The company filed a report on Form 8-K dated July 27, 2000.
An exhibit was attached reflecting amendments to the
Certificate of Incorporation approved by the stockholders
at the Annual Meeting held on May 13, 2000.
None of the other item requirements of Part II of Form 10-Q are
applicable to the company for the quarter ended September 30, 2000.
<PAGE> 29
SIGNATURE
Pursuant to the requirements 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
(Registrant)
Date: November 1, 2000
/s/ Robert J. Burgstahler
Robert J. Burgstahler, Vice President and
Chief Financial Officer
(Mr. Burgstahler is the Principal Financial
and Accounting Officer and has been duly
authorized to sign on behalf of the
registrant.)
</TABLE>
