Event Brief of Q2 2005 3M Company Earnings Conference Call - Part 1.

Publication: The America's Intelligence Wire

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COPYRIGHT 2005 Financial Times Ltd.

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CORPORATE PARTICIPANTS . Mark Colin, 3M Company, Director, IR . Pat Campbell, 3M Company, SVP & CFO OVERVIEW MMM reported 2Q05 revenues of $5.3b, up 5.6% vs. 2Q04. After achieving two new approvals for Aldara in 2004, MMM directed many of its sales and marketing resources over the last year. For 3Q05, the Co. expects EPS of $1.09-1.11, excluding the impact of the Cuno acquisition. Q&A Focus: Display & Graphics, pricing, and guidance. FINANCIAL DATA A. Key Data From Call 1. 2Q05 revenues = $5.3b. 2. 2Q05 CapEx = $217m. 3. 2Q05 free cash flow = $951m. 4. 2Q05 weighted avg. diluted shares outstanding = 780.2m. 5. 3Q05 expected EPS = $1.09-1.11. 6. Full year expected EPS = $4.20-4.25 per share. PRESENTATION SUMMARY S1. 2Q05 Review (P.C.) 1. Highlights: 1. Sales were slightly below expectations, operational discipline and broad contributions from MMM's diversed portfolio, drove all-time record quarterly sales and operating income performance. 2. MMM team's ongoing focus on operational excellence continues to pay off, delivering outstanding results in 2Q05 with six of its seven businesses posting double-digit operating income growth. 3. Operating income margins in 2Q05 reached an all-time record coming in at 24.2%. 4. MMM finalized plans in 2Q05, which were announced on 07/01/2005 to reinvest approx. $1.7b of foreign earnings into the US pursuant to the provisions of the American Jobs Creation Act of 2004. 1. The act provides the Co. the opportunity to tax effectively repatriate foreign earnings for US-qualifying investment, specifying by its domestic reinvestment. 5. As a consequence of 2Q05, MMM recorded a non-recurring tax charge of $75m, net of available tax credits. 6. Reported EPS in 2Q05 were $1. 1. Excluding the impact of the tax charge, the Co. achieved EPS of $1.09, a 12.4% YoverY increase. 7. 2Q05 revenues were a record $5.3b, up 5.6% vs. 2Q04. 1. Local currency growth (volume plus selling price) was 3.5%. 2. MMM had six of seven businesses posting YonY local currency growth. 8. The LCD Optical film business again posted record volumes in a much more competitive environment. 1. The LCD industry's growth driven primarily by demand for LCD televisions, is expected to accelerate in 2H05 and the Co.'s film business is well positioned to meet this demand. 2. The Co.'s proven business model, characterized by strong customer relationships, proprietary manufacturing, and quality processes, and leading economies of scale continues to provide MMM a competitive advantage. 9. In Healthcare, local currency growth in 2Q05 was hampered by two reasons. 1. A slowdown in the growth rate of the Co.'s Aldara Pharmaceutical product. 2. The impact of increased pricing and competitive pressures in personal care and related products. 10. After achieving two new approvals for Aldara in 2004, MMM directed many of its sales and marketing resources over the last year, squarely at the Actinic keratosis and basal cell carcinoma indication. 1. Aldara continues to represents a significant change for MMM, to change the way patients are treated for AK and BCC, two very common and serious diseases. 2. The Co. continues to work hard to educate doctors and patients on the long-term benefits of Aldara. 3. To intensify the Co.'s marketing efforts and accelerate Aldara's growth, MMM just launched a direct-to-consumer advertising campaign to raise the public's awareness of skin health and the solution provided by Aldara. 11. MMM's pricing strategy continues to gain traction in 2Q05 with an 80 BP improvement. 1. The US price performance of 2% comes on top of 1.7% in 1Q05. 2. As in past quarters, the Co.'s international price performance was negatively impacted by its businesses that serve the consumer electronics market. 3. As MMM adjusts it for the price down impact in MMM's businesses that serve the consumer electronics industry, the Co.'s international prices would have been up 40 BP. S2. Geographic Sales Performance in 2Q05 (P.C.) 1. Highlights: 1. Worldwide local currency sales were up 3.5% in 2Q05, slightly short of the bottom end of MMM's 4-7% guidance range. 1. This was primarily due to a shortfall in the Co.'s Healthcare and Display & Graphics business. 2. Global volumes increased 2.7%, but...

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