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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, 1993
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. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant, based on the closing price of $107.25 per share as reported on the
New York Stock Exchange-Composite Index on January 31, 1994, was $23.0
billion.
Shares of common stock outstanding at January 31, 1994: 214,001,230.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference to Parts
III and IV of this Form 10-K: (1) Proxy Statement for registrant's 1994
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 41 pages.
MINNESOTA MINING AND MANUFACTURING COMPANY
FORM 10-K
For the Year Ended December 31, 1993
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. 3M employs 86,168 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- 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 the financial statements on page 25 and 26 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 Group; Automotive
Systems Group; Consumer Markets; Office Markets; and Tape Group.
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- 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 Market 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 full 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 Communication 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, 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 Disposable
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, skin staplers, and intravenous infusion pumps. The Medical
Products Group also develops hospital information systems.
The Pharmaceuticals, Dental and Disposable 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 322 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 99 sales
offices and distribution centers located in the United States. The remaining
223 sales offices and distribution centers are located in 52 countries outside
the United States.
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 $1.030 billion, $1.007 billion,
and $914 million in 1993, 1992 and 1991, 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 and domestic subsidiaries, as well as several international
subsidiaries, 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 1993. 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,
1994, 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.
Year Elected
to Present
Name Age Present Position Position Other Positions Held During 1989-1994
_________________ ___ _________________________ _____________ _____________________________________
L.D. DeSimone 57 Chairman of the Board and 1991 Executive Vice President,
Chief Executive Officer Information and Imaging
Technologies Sector and
Corporate Services, 1989-1991
Executive Vice President, Industrial
and Electronic Sector and
Corporate Services, 1987-1989
Giulio Agostini 58 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 57 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 56 Executive Vice President, 1991 Group Vice President,
Information, Imaging, Memory Technologies Group,
and Electronic Sector 1986-1991
and Corporate Services
Harry A. Hammerly 60 Executive Vice President, 1994 Executive Vice President,
Life Sciences Sector and International Operations and
International Operations Corporate Services, 1991-1994
Executive Vice President,
Industrial and Electronic Sector
and Corporate Services, 1989-1991
Vice President, Europe, 1987-1989
Robert J. Hershock 60 Vice President, 1994 Group Vice President, Abrasive
Marketing Technologies Group, 1990-1993
Division Vice President, Occupational
Health and Environmental Safety
Division, 1988-1990
Charles E. Kiester 57 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 57 Vice President, 1992 Staff Vice President, Human Resource
Human Resources Operations, 1987-1992
Ronald A. Mitsch 59 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 54 Vice President, Legal Affairs 1993 General Counsel, 1992-1993
and General Counsel Deputy General Counsel, 1990-1992
Associate General Counsel, 1986-1990
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 82 plants in 28 states and
has 99 sales offices and distribution centers located in 24 states.
Internationally, 3M operates 109 manufacturing and converting facilities in 44
countries.
3M owns substantially all of its physical properties. 3M leases certain
facilities that 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. Mammary
implant cases and claims are discussed separately below. 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 able to estimate the nature and amount of any
future liability with respect to such matters.
Mammary Implant Litigation
As of December 31, 1993, the company had been named as a defendant, often
with multiple co-defendants, in 3,054 claims and lawsuits in various courts,
all seeking damages for personal injuries from allegedly defective breast
implants. These claims and lawsuits, including class actions, purport to
represent 8,842 individual claimants. These claims and lawsuits are generally
in very preliminary stages, and 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 subsequently sold that business in 1984. The
company's sales of implants, during the time that it engaged in this business,
represent approximately seven percent of the total cumulative mammary implant
sales. The company is vigorously defending the individual claims and
lawsuits. Given the preliminary state of the proceedings, company's counsel
has not yet reached a conclusion on the probability of company liability.
Discussions regarding a possible "global settlement" have taken place
during the last several months, with the facilitation of a panel of federal
judges acting as mediators, between a plaintiffs' steering committee, various
plaintiff groups, the mediators, and key defendants. The company was a
participant in these mediation efforts. On February 14, 1994, Dow Corning,
Bristol-Myers Squibb, and Baxter Healthcare Corp., together with several other
defendants, announced an agreement with representatives from the plaintiffs'
steering committee on financial terms for a global settlement. The company
was not included by the parties in this arrangement. Discussions are now
being conducted between the company and representatives of the plaintiffs'
steering committee. The company does not know at this time whether these
discussions will lead to resolution of all or any portion of the suits and
claims against it or whether it will be a participant in such a settlement.
With respect to these silicone gel mammary implant claims and lawsuits,
the company's general counsel has opined that, based solely on the facts known
as of February 25, 1994, date of the opinion and subject to future
developments, there is sufficient insurance coverage to recover all liability
and costs arising out of these matters. No insurers have denied coverage.
Therefore, the company believes that such matters will not pose a material
risk to the financial position of the company or its results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
None in the quarter ended December 31, 1993.
Part II
Item 5. Market Price of 3M's Common Stock and Related Security Holder Matters.
At January 31, 1994, there were 117,343 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) is as follows:
Quarter First Second Third Fourth Year
1993 High $111.75 $117.00 $111.25 $113.50 $117.00
Low 97.25 104.88 102.25 101.50 97.25
1992 High 98.75 97.38 103.75 107.00 107.00
Low 87.38 85.50 95.75 97.00 85.50
[TEXT]
Item 6. Selected Financial Data.
(Dollars in millions except amounts per share)
1993 1992 1991 1990 1989
For the Year Ended December 31:
Net Sales ................................ $14,020 $13,883 $13,340 $13,021 $11,990
Net Income ............................... 1,263 1,233* 1,154 1,308 1,244
Per Share of Common Stock:
Net Income ............................. 5.82 5.63* 5.26 5.91 5.60
Cash Dividends Declared and Paid ....... 3.32 3.20 3.12 2.92 2.60
Ratio of Earnings to Fixed Charges ....... 15.51 12.81* 11.02 12.42 16.75
At December 31:
Total Assets ............................. 12,197 11,955 11,304 11,079 9,741
Long-term Debt (excluding portion due
within one year) ....................... 796 687 764 760 885
* Includes a net earnings increase of $6million, or 2 cents 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 20.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Operating Results
1993 was a challenging year in several respects. The company faced recessions
in Europe and Japan, negative currency effects, a soft U.S. health care market
and a highly competitive pricing environment.
Worldwide net sales rose 1.0 percent to $14.020 billion. This followed
increases of 4.1 percent in 1992 and 2.5 percent in 1991.
Sales in the United States were $7.126 billion, up about 3 percent from
1992. Internationally, sales totaled $6.894 billion, a decrease of about 1
percent from 1992.
Estimatedcomponents ofsales changefrom prioryears wereasfollows (percents):
1993 1992
______________________________________________________________________________
U.S. Int'l Worldwide U.S. Int'l Worldwide
______________________________________________________________________________
Volume 5 7 6 3 5 4
Price (2) (2) (2) --- (1) (1)
Translation --- (6) (3) --- 1 1
______________________________________________________________________________
Total 3 (1) 1 3 5 4
______________________________________________________________________________
In the United States volume growth accelerated in 1993, helped by a slight
improvement in the domestic economy; however, pricing pressures also
increased, mainly in memory technologies product lines.
Internationally, sales growth in local currencies was slightly better than
in 1992. However, currency fluctuations, which added to international sales
in 1992, reduced those sales by about 6 percent in 1993.
Cost of goods sold was 60.8 percent of sales, up from 60.1 percent in 1992.
The negative impact of lower selling prices and currency was partially offset
by improvements due to productivity gains and lower raw material costs. In
1992, cost of goods sold decreased as a percent of sales compared to 1991 due
to productivity gains and lower raw material costs which were partially offset
by higher R&D spending and lower selling prices. Cost of goods sold includes
manufacturing, research and development, and engineering expenses.
Selling, general and administrative expenses decreased to 25.2 percent of
sales as the result of several cost-reduction programs. This compares with
25.6 percent in 1992 and 24.9 percent in 1991. The 1992 increase was
magnified by costs for voluntary separations, higher sales costs and modest
volume growth.
Worldwide employment decreased by over 1,000 in 1993, even though about 600
people were added to support continued rapid growth in developing countries.
This net reduction in employment occurred with little disruption to the
company.
(Percent of sales) 1993 1992 1991
______________________________________________________________________________
Cost of goods sold 60.8 60.1 60.4
______________________________________________________________________________
Selling, general and administrative expenses 25.2 25.6 24.9
______________________________________________________________________________
In December 1992, 3M recognized $129 million in settlement of a patent
lawsuit involving 3M orthopedic casting materials. Operating income in 1992
includes this amount, which is shown on a separate line of the Income
Statement titled "legal settlement."
Also in 1992, 3M recorded $115 million of special charges to enhance its
competitiveness and productivity. These charges relate primarily to asset
write-downs, including rationalization of manufacturing operations. Operating
income in 1992 includes this amount, which is shown on a separate Income
Statement line titled "special charges".
Worldwide operating income in 1993 decreased 1.9 percent to $1.956 billion.
The positive impact of increased sales volume and cost control was more than
offset by negative currency and pricing. Operating income in 1993 included
about $53 million for manufacturing rationalizations and voluntary
separations. This compared to 1992 costs of about $80 million for voluntary
separation programs, in addition to the $115 million of special charges. In
1992, operating income increased 1.7 percent, following a decrease of 10.6
percent in 1991.
(Percent of sales) 1993 1992 1991
______________________________________________________________________________
Operating Income 14.0 14.4 14.7
______________________________________________________________________________
Interest expense was $50 million, down from $76 million in 1992 and $97
million in 1991. The declines in both 1993 and 1992 were mainly due to lower
interest rates. Investment and other income totaled $96 million in 1993,
which includes a $36 million benefit from tax settlements, improved investment
results, and other items, many of which were of a non-recurring nature. This
compared with investment and other income of $29 million in 1992 and $15
million in 1991.
The company's effective tax rate was 35.3 percent of pre-tax income, the
same as in 1992 and down from 36.8 percent in 1991. The 1 percent increase in
the 1993 U.S. statutory corporate tax rate was offset by lower taxes on 3M
International Operations, the extension of the U.S. R&D tax credit and the
positive effect of revaluing deferred tax assets. The company's deferred tax
assets will reverse over an extended period of time.
Net income increased 2.5 percent to $1.263 billion, or $5.82 per share. In
1992, net income increased 6.8 percent to $1.233 billion, or $5.63 per share,
compared with $1.154 billion, or $5.26 per share, in 1991.
The company estimates that changes in the value of the U.S. dollar
decreased 1993 net income by about $62 million, or 29 cents per share.
Currency changes increased net income by about $1 million, or 1 cent per
share, in 1992, and by $23 million, or 11 cents per share, in 1991. 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 3.4 percent in 1993. Currency effects reduced
earnings by about 5 percent. Return on average stockholders' equity was 19.1
percent, up from 18.8 percent in 1992. This return has averaged 20.5 percent
over the past 5 years. Return on capital employed was 19.1 percent, down from
19.7 percent in 1992. This return has averaged 22.1 percent over the past 5
years. In 1993 more than 25 percent of sales came from products introduced
within the last 4 years.
Performance by Business Sector
Industrial and Consumer Sector:
In 1993, sales were up 2.6 percent to $5.4 billion. Operating income rose 2.8
percent to $849 million. Excluding special charges of $13 million in 1992,
operating income rose 1.2 percent in 1993. Sales and profits showed strong
growth in the Asia Pacific area and in Latin America. However, results in
Europe were adversely affected by weak economies and the stronger U.S. dollar.
This sector expects continued growth in the United States, Asia Pacific area
and in Latin America.
Information, Imaging and Electronic Sector:
In 1993, sales were down 1.7 percent to $4.5 billion. A solid increase in
unit volume was more than offset by continued price competition and negative
currency translation. Operating income increased 14.0 percent to $271
million. Excluding special charges of $81 million in 1992, operating income
decreased 15.0 percent. Operating profit margins were affected by price
competition and currency effects, as well as by large investments in new
products and efforts to streamline operations. This sector will continue to
face significant price pressure in 1994.
Life Sciences Sector:
In 1993, sales increased 2.6 percent to $4.1 billion. Sales growth was
constrained by the stronger U.S. dollar and by the slowdown in the U.S. health
care market due to uncertainty over health care reform. Operating income
decreased 8.6 percent to $846 million. Excluding a net benefit of $108
million from a legal settlement and special charges, operating income
increased by 3.4 percent. This sector will continue to be impacted by the
uncertainty over U.S. health care reform.
Financial Position
3M's financial condition remained strong in 1993, despite a sluggish worldwide
economy. Balance sheet amounts did not vary significantly from 1992. Various
items, such as cash and short-term debt, can fluctuate significantly from
month to month depending on short-term liquidity needs. Substantially all of
the vested and earned benefits under 3M's employee retirement plans, and about
half of the other postretirement benefit obligations, were funded as of
December 31, 1993.
The company's key inventory index, which represents the number of months of
inventory, was 4.0 months, up from 3.8 months in 1992. Accounts receivable
days' sales outstanding were 66 days, up one day from 1992. The company's
current ratio was 1.9, unchanged from the end of 1992.
Of the long-term debt outstanding at the end of 1993, $469 million was a
guarantee of debt of the 3M Employee Stock Ownership Plan. Total debt was 23
percent of stockholders' equity at the end of 1993. This compared with 22
percent at year-end 1992. The company's borrowings continued to maintain AAA
long-term ratings.
Legal proceedings, including the silicone gel mammory prosthesis situation
and environmental liabilities, are discussed in the legal proceedings section
on page 8. The company believes that such matters will not pose a material
risk to the financial position of the company.
Liquidity
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 a 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) 1993 1992 1991
______________________________________________________________________________
Net cash provided by
operating activities $2,091 $2,218 $1,909
Net cash used in
investing activities (1,092) (1,139) (1,197)
Net cash used in
financing activities (1,128) (1,027) (686)
Effect of exchange rate
changes on cash 21 (20) (62)
______________________________________________________________________________
Net increase (decrease) in
cash and cash equivalents $ (108) $ 32 $ (36)
______________________________________________________________________________
Capital expenditures $1,112 $1,225 $1,326
Depreciation 976 950 884
______________________________________________________________________________
The company met its cash requirements primarily from operating activities.
During 1993, cash flows provided by operating activities totaled $2.091
billion. This more than covered capital expenditures and dividend payments of
$1.833 billion. The company's superior credit rating provides easy and ample
access to global capital markets.
As part of our efforts to control overall spending, capital expenditures
declined 9.3 percent to $1.112 billion in 1993. This followed a decline of
7.5 percent in calendar year 1992.
Stockholder dividends increased 3.8 percent to $3.32 per share in 1993.
Cash dividend payments totaled $721 million. 3M has paid dividends for 78
consecutive years. On February 14, 1994 the 3M Board of Directors boosted the
quarterly dividend on 3M common stock 6 percent to 88 cents a share, declared
a two-for-one stock split to shareholders of record on March 15, 1994 and
authorized the repurchase of up to 12 million of the company's (pre-split)
shares. This share-repurchase authorization runs through February 10, 1995.
The company repurchased all of the six million shares available under a
previous authorization.
Repurchases of 3M common stock totaled $706 million in 1993, compared with
$247 million in 1992 and $240 million in 1991. Increased share repurchases in
1993 reduced the total number of shares outstanding by more than 4 million.
Repurchases were made to support employee stock purchase plans and for other
corporate purposes.
Future Outlook
Most economists expect slightly better global economic growth this year, with
the improvement coming in the second half. This combined with continued
emphasis on productivity improvement and new products should help our results;
however, the pricing environment is likely to remain quite competitive and
currency fluctuations could have a significant, negative effect on our results
again this year.
Spending on research and development and capital equipment is expected to
remain around 1993 levels. Employment levels should continue to decline
slightly in 1994.
In 1992, the Financial Accounting Standards Board issued Statement No. 112,
"Employers' Accounting for Postemployment Benefits." Postemployment benefits
include, but are not limited to, disability, severance and health care
benefits. 3M will adopt this standard in the first quarter of 1994. This
adoption will have a diminimus effect on the company's results of operations.
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Reference (pages)
Form 10-K
Data submitted herewith:
Report of Independent Accountants............... 15
Consolidated statements of income for the years ended
December 31, 1993, 1992 and 1991 ............. 16
Consolidated balance sheets as of December 31, 1993 and
1992 ........................................... 17
Consolidated statements of cash flows
for the years ended December 31,
1993, 1992 and 1991........................... 18
Notes to financial statements .................. 19-30
Report of Independent Accountants
We have audited the consolidated financial statements and the financial
statement schedules of Minnesota Mining and Manufacturing Company and
subsidiaries (the company) as listed in Item 8 and Item 14(a) of this Form
10-K. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedules
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 misstatements. 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, 1993 and 1992,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
As discussed in the Notes to the Financial Statements, the company changed the
fiscal year-end of its international companies in 1992. The company also
adopted in 1992 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
COOPERS & LYBRAND
St. Paul, Minnesota
February 14, 1994
20
Consolidated Statement of Income
Minnesota Mining and Manufacturing Company and Subsidiaries
__________________________________________________________________________________________________
For the Years Ended December 31, 1993, 1992 and 1991 1993 1992 1991
_______________________________________________________
(Amounts in millions, except per-share data)
__________________________________________________________________________________________________
Net Sales $14,020 $13,883 $13,340
_______________________________________________________________________________________________
Operating Expenses
Cost of goods sold 8,529 8,346 8,058
Selling, general and administrative expenses 3,535 3,557 3,323
Legal settlement --- (129) ---
Special charges --- 115 ---
_______________________________________________________________________________________________
Total 12,064 11,889 11,381
_______________________________________________________________________________________________
Operating Income 1,956 1,994 1,959
_______________________________________________________________________________________________
Other Income and Expense
Interest expense 50 76 97
Investment and other income - net (96) (29) (15)
_______________________________________________________________________________________________
Total (46) 47 82
_______________________________________________________________________________________________
Income Before Income Taxes, Minority Interest and
Cumulative Effect of Accounting Changes 2,002 1,947 1,877
Provision for Income Taxes 707 687 691
Minority Interest 32 24 32
_______________________________________________________________________________________________
Income Before Cumulative Effect of Accounting Changes 1,263 1,236 1,154
Cumulative Effect of Accounting Changes --- (3) ---
_______________________________________________________________________________________________
Net Income $ 1,263 $ 1,233 $ 1,154
_______________________________________________________________________________________________
Per-Share Amounts:
Income Before Cumulative Effect of Accounting Changes $ 5.82 $ 5.65 $ 5.26
Cumulative Effect of Accounting Changes --- (0.02) ---
_______________________________________________________________________________________________
Net Income $ 5.82 $ 5.63 $ 5.26
_______________________________________________________________________________________________
Average Shares Outstanding 217.2 219.1 219.6
_______________________________________________________________________________________________
The accompanying Notes to Financial Statements are an integral part of this statement.
Consolidated Balance Sheet
Minnesota Mining and Manufacturing Company and Subsidiaries
_______________________________________________________________________________________
As of December 31, 1993 and 1992 1993 1992
_____________________________________________
(Dollars in millions)
________________________________________________________________________________________
Assets
Current Assets
Cash and cash equivalents $ 274 $ 382
Other securities 382 340
Accounts receivable - net 2,610 2,394
Inventories 2,401 2,315
Other current assets 696 778
___________________________________________________________________________
Total current assets 6,363 6,209
Investments 455 452
Property, Plant and Equipment - net 4,830 4,792
Other Assets 549 502
___________________________________________________________________________
Total $12,197 $11,955
___________________________________________________________________________
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 878 $ 836
Payroll 331 310
Income taxes 290 299
Short-term debt 697 739
Other current liabilities 1,086 1,057
___________________________________________________________________________
Total current liabilities 3,282 3,241
Other Liabilities 1,607 1,428
Long-Term Debt 796 687
Stockholders' Equity - net 6,512 6,599
Shares outstanding - 1993: 214,739,319;
1992: 219,034,050
___________________________________________________________________________
Total $12,197 $11,955
___________________________________________________________________________
The accompanying Notes to 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, 1993, 1992 and 1991 1993 1992* 1991
____________________________________________________
(Dollars in millions)
_________________________________________________________________________________________
Cash Flows from Operating Activities
Net income $1,263 $1,233 $1,154
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-
SFAS Nos. 106 and 109 103 ---
Depreciation 976 1,004 884
Amortization 100 83 85
Deferred income taxes (86) (111) (117)
Accounts receivable (327) (142) (155)
Inventories (161) (78) (21)
Other working capital changes 226 199 79
____________________________________________________________________________________________
Net cash provided by operating activities 2,091 2,277 1,909
Cash Flows from Investing Activities
Capital expenditures (1,112) (1,318) (1,326)
Disposals of property, plant and equipment 53 78 76
Acquisitions and other investments (71) (59) (35)
Proceeds from divestitures and investments 38 63 88
____________________________________________________________________________________________
Net cash used in investing activities (1,092) (1,236) (1,197)
Cash Flows from Financing Activities
Net change in short-term debt 48 (83) 57
Repayment of long-term debt (80) (187) (162)
Proceeds from long-term debt 150 139 140
Purchases of treasury stock (706) (247) (240)
Reissuances of treasury stock 181 177 139
Payment of dividends (721) (701) (685)
Other --- --- 65
____________________________________________________________________________________________
Net cash used in financing activities (1,128) (902) (686)
Effect of exchange rate changes on cash 21 (15) (62)
____________________________________________________________________________________________
Net increase (decrease) in cash and cash equivalents (108) 124 (36)
Cash and cash equivalents at beginning of year 382 258 294
____________________________________________________________________________________________
Cash and cash equivalents at end of year $ 274 $ 382 $ 258
____________________________________________________________________________________________
*Includes cash flows of international companies for a 14-month period
November 1, 1991 to December 31, 1992. See accounting changes note on
page 20 for details.
The accompanying Notes to Financial Statements are an integral part of
this statement.
Notes to 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: 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. The securities 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.
Investments: Investments primarily include assets from captive insurance
and banking operations and from venture capital investments. These
investments are stated at cost, which approximates fair value.
Other Assets: Other assets include goodwill, patents, other intangibles,
deferred taxes and other noncurrent assets. Other assets are periodically
reviewed for impairment 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.
Deferred Income Taxes: Deferred income taxes arise from differences in
basis for tax and financial-reporting purposes.
Revenue Recognition: Revenue is recognized upon shipment of goods to
customers and upon performance of services.
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 $1.030 billion in 1993, $1.007 billion in
1992 and $914 million in 1991.
Foreign Currency Translation: Local currencies are generally considered the
functional currencies outside the United States, except in countries with
highly inflationary economies. 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. Translation adjustments are recorded as a component of
stockholders' equity.
For operations in countries with highly inflationary economies, 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 $12 million in 1993, increased net income by $10
million in 1992 and decreased net income by $6 million in 1991.
24
Accounting Changes
Effective January 1, 1992, 3M's international companies changed their
reporting period from a fiscal year ending October 31 to a calendar year
ending December 31. The change was made to aid worldwide business planning,
increase efficiency and reflect the global nature of the company's business.
The international companies' results of operations for the period November 1
to December 31, 1991, are shown in the 1992 Consolidated Statement of Income
as a cumulative effect of an accounting change. The cash flows of the
international companies for the 14-month period November 1, 1991, to December
31, 1992, are reflected in the 1992 Consolidated Statement of Cash Flows.
Effective January 1, 1992, the company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement requires that the cost of
providing postretirement benefits be accrued over an employee's service
period. In implementing this standard, the company was required to accrue the
unfunded obligation. The company had accrued and funded - under a different
actuarial methodology - a substantial amount of these benefits since 1977. In
implementing this standard, the company elected to record the transition
obligation using the immediate recognition option.
Also effective January 1, 1992, the company adopted SFAS No. 109,
"Accounting for Income Taxes." This statement requires an asset and liability
approach for financial accounting and reporting of income taxes. Under this
approach, deferred taxes are recognized for the estimated taxes ultimately
payable or recoverable based on enacted tax law. Changes in enacted tax rates
will be reflected in the tax provision as they occur.
Adoption of these accounting changes, in aggregate, did not have a material
impact on 1992 results of operations.
The table below shows the components of the cumulative effect of accounting
changes.
______________________________________________________________________________
(Millions, except per-share data) 1992
______________________________________________________________________________
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 $ 0.46
Accounting for other
postretirement benefits, net of
$107 million in taxes (183) (0.84)
Accounting for income taxes 80 0.36
______________________________________________________________________________
Total $ (3) $(0.02)
______________________________________________________________________________
Legal Settlement and Special Charges
In December 1992, Johnson & Johnson agreed to pay 3M $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.
25
Supplemental Balance Sheet Information
______________________________________________________________________________
(Millions) 1993 1992
______________________________________________________________________________
Accounts receivable
______________________________________________________________________________
Accounts receivable $ 2,730 $ 2,506
Less allowances 120 112
______________________________________________________________________________
Accounts receivable - net $ 2,610 $ 2,394
______________________________________________________________________________
Inventories
______________________________________________________________________________
Finished goods $ 1,246 $ 1,224
Work in process 604 586
Raw materials and supplies 551 505
______________________________________________________________________________
Total inventories $ 2,401 $ 2,315
______________________________________________________________________________
Property, plant and equipment - at cost
______________________________________________________________________________
Land $ 258 $ 241
Buildings and leasehold improvements 2,572 2,463
Machinery and equipment 8,305 7,732
Construction in progress 353 392
______________________________________________________________________________
$11,488 $10,828
Less accumulated depreciation 6,658 6,036
______________________________________________________________________________
Property, plant and equipment - net $ 4,830 $ 4,792
______________________________________________________________________________
Short-term debt
______________________________________________________________________________
Commercial paper $ 193 $ 165
Long-term debt - current portion 79 148
Other borrowings 425 426
______________________________________________________________________________
Total short-term debt $ 697 $ 739
______________________________________________________________________________
Other current liabilities
______________________________________________________________________________
Deposits - banking operations $ 291 $ 259
Other current liabilities 795 798
______________________________________________________________________________
Total other current liabilities $ 1,086 $ 1,057
______________________________________________________________________________
Other liabilities
______________________________________________________________________________
Minority interest in subsidiaries $ 376 $ 314
Nonpension postretirement benefits 386 366
Other liabilities 845 748
______________________________________________________________________________
Total other liabilities $ 1,607 $ 1,428
______________________________________________________________________________
The carrying amount of short-term debt approximates fair value.
Deposits - banking operations - are primarily demand deposits and,
as such, the carrying amount approximates fair value.
Leases
Rental expense under operating leases was $141 million in 1993, $140 million
in 1992 and $141 million in 1991.
The table below sets forth minimum payments under operating leases with
noncancelable terms in excess of one year
as of year-end 1993.
_______________________________________________________________________________
After
(Millions) 1994 1995 1996 1997 1998 1998 Total
_______________________________________________________________________________
Minimum lease payments $70 $53 $39 $21 $16 $88 $287
_______________________________________________________________________________
Long-Term Debt
Employee Stock Ownership Plan: In 1989, the company established an Employee
Stock Ownership Plan (ESOP). The ESOP borrowed $548 million. Because the
company has guaranteed repayment of the ESOP debt, the debt and related
unearned compensation are recorded on the Consolidated Balance Sheet.
Medium-Term Notes: 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. As of December 31, 1993, $502 million was available
for future financial needs. The company entered into interest rate swap
agreements to achieve variable interest rates below U.S. commercial paper
rates for notes outstanding. The effective rate of these agreements
approximated 2.5 percent at year-end 1993.
Other Borrowings: These are primarily borrowings of 3M's international
companies and municipal bond issues in the United States. Interest rates
range mainly from 2.3 to 11.0 percent.
______________________________________________________________________________
(Millions) 1993 1992
______________________________________________________________________________
ESOP debt guarantee, 8.13-8.27%, due 1995-2004 $469 $490
Eurobond, 4.81%, due 1998 114 ---
Medium-term notes, due 1995 75 115
Other borrowings, due 1995-2025 138 82
______________________________________________________________________________
Total long-term debt $796 $687
______________________________________________________________________________
Maturities of long-term debt for the next five years are as follows: 1994,
$79 million; 1995, $168 million; 1996, $44 million; 1997, $41 million; and
1998, $159 million.
Interest payments included in the Consolidated Statement of Cash Flows
totaled $53 million in 1993, $88 million in 1992 and $118 million in 1991.
For the calendar year 1992, interest payments were $79 million.
The company estimates that the fair value of long-term debt is not
materially different than the carrying amount of this debt.
Other Financial Instruments
The company has entered into interest rate and currency swaps, as well as
forward interest rate agreements, with face amounts of $605 million and $308
million, respectively, as of December 31, 1993, and 1992. The company uses
27
these instruments to manage risk from interest rate and currency fluctuations
and to lower its cost of borrowing. The unrealized gains and losses are
deferred until the underlying transactions are realized. As of December 31,
1993, the unrealized gains and losses were not material.
The company also had foreign exchange forward and option contracts with face
amounts of $704 million and $785 million, respectively, at December 31, 1993,
and 1992. The company uses these financial instruments primarily to hedge
transactions denominated in foreign currencies, thereby reducing risk from
exchange rate fluctuations in the regular course of its global business. The
net unrealized gain on these contracts as of December 31, 1993, was not
material.
Income Taxes
_______________________________________________________________________________
Income Before Income Taxes
_______________________________________________________________________________
(Millions) 1993 1992 1991
_______________________________________________________________________________
U.S. $1,390 $1,301 $1,136
International 612 646 741
_______________________________________________________________________________
Total $2,002 $1,947 $1,877
_______________________________________________________________________________
Provision for Income Taxes
_______________________________________________________________________________
(Millions) 1993 1992 1991
_______________________________________________________________________________
Currently payable
Federal $430 $371 $396
State 74 78 74
International 292 339 343
Deferred
Federal (66) (63) (110)
State (5) (6) (9)
International (18) (32) (3)
_______________________________________________________________________________
Total $707 $687 $691
_______________________________________________________________________________
Net deferred tax assets totaled $439 million ($293 million current) and net
deferred tax liabilities totaled $98 million ($6 million current) at year-end
1993. The major components of deferred taxes include benefit costs not
currently deductible of $336 million and accelerated depreciation for tax
purposes of $362 million.
Income tax payments included in the Consolidated Statement of Cash Flows
totaled $802 million in 1993, $743 million in 1992 and $867 million in 1991.
For calendar year 1992, income tax payments were $714 million.
At December 31, 1993, there were approximately $2.850 billion of retained
earnings attributable to our 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 should
these earnings be remitted.
_______________________________________________________________________________________
Reconciliation of Effective Income Tax Rate 1993 1992 1991
_______________________________________________________________________________________
Statutory U.S. tax rate 35.0% 34.0% 34.0%
State income taxes - net 2.2 2.5 2.3
International taxes 3.0 4.4 4.7
All other - net (4.9) (5.6) (4.2)
_______________________________________________________________________________________
Effective worldwide tax rate 35.3% 35.3% 36.8%
_______________________________________________________________________________________
[TEXT]
Stockholders' Equity
Common stock, without par value, of 500,000,000 shares is authorized, with
236,008,264 shares issued in 1993, 1992 and 1991. Treasury shares at year-end
totaled 21,268,945 in 1993, 16,974,214 in 1992 and 16,867,905 in 1991. This
stock is reported at cost. Preferred stock, without par value, of 10,000,000
shares is authorized but unissued. A two-for-one stock split will be
distributed on or aboutApril 8, 1994to shareholders of recordon March 15,1994.
____________________________________________________________________________________________________________
ESOP
Common Retained Cumulative Unearned Treasury
(Dollars in millions) Stock Earnings Translation Compensation Stock Total
____________________________________________________________________________________________________________
Balance, December 31, 1990 $296 $7,106 $ 175 $(530) $ (937) $6,110
Net income 1,154 1,154
Dividends paid ($3.12 per share) (685) (685)
Reacquired stock (2,733,416 shares) (240) (240)
Issuances pursuant to stock option and
benefit plans (2,040,372 shares) (39) 178 139
Amortization of unearned compensation 14 14
Translation adjustments (199) (199)
____________________________________________________________________________________________________________
Balance, December 31, 1991 $296 $7,536 $ (24) $(516) $ (999) $6,293
Net income 1,233 1,233
Dividends paid ($3.20 per share) (701) (701)
Reacquired stock (2,561,689 shares) (247) (247)
Issuances pursuant to stock option and
benefit plans (2,455,380 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 ($3.32 per share) (721) (721)
Reacquired stock (6,580,868 shares) (706) (706)
Issuances pursuant to stock option and
benefit plans (2,286,137 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
____________________________________________________________________________________________________________
[TEXT]
Business Sectors
Financial information relating to the company's business sectors for the years
ended December 31, 1993, 1992 and 1991 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 1993 $5,350 $4,520 $4,132 $ 18 $14,020
1992 5,215 4,599 4,026 43 13,883
1991 5,003 4,544 3,748 45 13,340
_____________________________________________________________________________________________________
Operating Income 1993 849 271 846 (10) 1,956
1992 826 238 926 4 1,994
1991 852 383 769 (45) 1,959
_____________________________________________________________________________________________________
Identifiable Assets 1993 3,776 3,460 2,854 144 10,234
1992 3,734 3,264 2,712 172 9,882
1991 3,592 3,414 2,603 127 9,736
_____________________________________________________________________________________________________
Depreciation 1993 341 366 249 20 976
1992 323 356 238 33 950
1991 307 329 224 24 884
_____________________________________________________________________________________________________
Capital Expenditures 1993 399 388 327 (2) 1,112
1992 437 444 327 17 1,225
1991 462 477 369 18 1,326
_____________________________________________________________________________________________________
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 millionwas in theInformation, Imaging andElectronic
Sector.
2 Excludes certaincorporate assets,primarilycash andcash equivalents,other
securities, deferred income taxes, certain other current assets and
investments.
3 Excludes $93 millionof capitalexpenditures and $54million ofdepreciation
for international companies from November 1 to December 31, 1991. See
accounting changes note on page 20 for details.
[TEXT]
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 Asia Other Elimin- Total
(Millions) States Europe Pacific Areas ations Company
_____________________________________________________________________________________________
Net Sales to 1993 $7,126 $3,646 $2,154 $1,094 $14,020
Customers 1992 6,922 4,068 1,847 1,046 13,883
1991 6,738 3,889 1,718 995 13,340
_____________________________________________________________________________________________
Transfers 1993 1,393 172 28 146 $(1,739) ---
Between 1992 1,273 176 31 119 (1,599) ---
Geographic Areas 1991 1,135 156 37 105 (1,433) ---
_____________________________________________________________________________________________
Operating 1993 940 376 429 211 1,956
Income 1992 945 489 368 192 1,994
1991 802 618 362 177 1,959
_____________________________________________________________________________________________
Identifiable 1993 5,875 2,633 1,531 710 (515) 10,234
Assets 1992 5,634 2,824 1,333 660 (569) 9,882
1991 5,548 2,912 1,214 555 (493) 9,736
_____________________________________________________________________________________________
1 Includes Canada, Latin America and Africa.
2 Includesa legal settlement that increased operating income in the United
Statesby $129 million. Also includesspecial charges of $115 million, of
which $74 million was in Europe.
3 Excludescertain corporateassets, primarilycash andcash equivalents,other
securities, deferred income taxes, certain other current assets and
investments.
[TEXT]
At year-end,net assetsof companiesoutside the UnitedStates totaled$2.963
billion in 1993, $2.998 billion in 1992 and $2.835 billion in 1991.
In1993, thecompany changed thebasis ofpresenting exportsales and certain
income andexpense items in theabove table. Operating income in1993 under
the prior methodology would have been $1,341 million, $205 million, $277
million and $133 million, respectively.
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 $203 million in 1993, $178
million in 1992 and $133 million in 1991.
_________________________________________________________________________________________________________________________
Net Pension Cost U.S. Plan International Plans
_________________________________________________________________________________________________________________________
(Millions) 1993 1992 1991 1993 1992 1991
_________________________________________________________________________________________________________________________
Service cost (employee benefits
earned during the year) $ 110 $ 108 $ 89 $ 86 $73 $65
Interest cost on projected benefit
obligation 276 252 228 80 78 73
Return on assets - actual (430) (221) (602) (185) (73) (112)
Net amortization and deferral 154 (38) 347 112 (1) 45
_________________________________________________________________________________________________________________________
Net pension cost $ 110 $ 101 $ 62 $ 93 $77 $71
_________________________________________________________________________________________________________________________
Assumptions:
Discount rate at year-end 7.25% 8.00% 8.00% 7.26% 7.91% 8.07%
Rate of increase in compensation levels 5.00% 6.25% 6.25% 5.31% 6.40% 6.60%
Long-term rate of return on assets 9.00% 9.00% 9.00% 7.64% 8.23% 8.44%
_________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________
Funded Status of Pension Plans U.S. Plan International Plans
_________________________________________________________________________________________________________________________
(Millions) 1993 1992 1993 1992
_________________________________________________________________________________________________________________________
Actuarial present value of:
Vested benefit obligation $2,797 $2,490 $ 875 $790
Non-vested benefit obligation 435 372 65 58
_________________________________________________________________________________________________________________________
Accumulated benefit obligation $3,232 $2,862 $ 940 $848
_________________________________________________________________________________________________________________________
Projected benefit obligation $3,921 $3,442 $1,279 $1,179
Plan assets at fair value 3,473 3,141 1,207 996
_________________________________________________________________________________________________________________________
Plan assets less than the projected
benefit obligation $ (448) $ (301) $ (72) $(183)
Unrecognized net transition asset (224) (261) 10 10
Other adjustments and unrecognized items 492 435 (16) 80
Accrued pension expense recognized in
the Consolidated Balance Sheet $ (180) $ (127) $ (78) $(93)
_________________________________________________________________________________________________________________________
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) 1993 1992
______________________________________________________________________________
Service cost $ 23 $ 21
Interest cost 53 49
Return on plan assets - actual (23) (20)
Net amortization and deferral 1 ---
______________________________________________________________________________
Total $ 54 $ 50
______________________________________________________________________________
Funded Status of Postretirement Benefits Plan
______________________________________________________________________________
(Millions) 1993 1992
______________________________________________________________________________
Fair value of plan assets $335 $314
______________________________________________________________________________
Accumulated postretirement
benefit obligation:
Retirees 248 193
Fully eligible active plan participants 153 139
Other active plan participants 378 348
______________________________________________________________________________
Benefit obligation 779 680
______________________________________________________________________________
Plan assets less benefit obligation (444) (366)
Adjustments and unrecognized items 58 ---
Accrued postretirement expense recognized in the
Consolidated Balance Sheet $(386) $(366)
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 7.5 percent
in 1994 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 $57 million and the current year benefit expense by $4 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 7.25 percent.
The charge to income relating to these plans was $54 million in 1993, $50
million in 1992 and $51 million in 1991.
Other Postemployment Benefits
In 1992, the Financial Accounting Standards Board issued Statement No. 112,
"Employers' Accounting for Postemployment Benefits." Postemployment benefits
include, but are not limited to, disability, severance and health care
benefits. 3M will adopt this standard in the first quarter of 1994. This
adoption will have a diminimus effect on the company's results of operations.
Employee Stock Ownership Plan
The company maintains an Employee Stock Ownership Plan (ESOP) for
substantially all full-time U.S. employees. 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 its 401(k)
employee savings plan. The ESOP borrowed $548 million and used the proceeds
to purchase 7.7 million shares of the company's common stock, previously held
in treasury. The debt is being serviced by dividends on stock held by the
ESOP and by company contributions. These contributions are reported as a
benefit expense.
Employee Savings Plan
The company sponsors an employee savings plan under Section 401(k) of the
Internal Revenue Code. This plan covers substantially all full-time U.S.
employees. The company matches employee contributions of up to 6 percent of
compensation at rates ranging from 35 to 85 percent, depending upon company
performance. Amounts charged against income were $29 million in 1993 and
1992, and $28 million in 1991.
General Employees' Stock Purchase Plan
Participants in the General Employees' Stock Purchase Plan are granted options
at 85 percent of market value at the date of grant. At December 31, 1993,
there were 23,216 participants in the plan, with 58,058 employees eligible to
participate. Options must be exercised within 27 months from date of grant.
Shares Price Range
______________________________________________________________________________
Under Option-
January 1, 1993 223,179 $66.94-88.30
Granted 818,005 83.57-96.59
Exercised (777,102) 66.94-96.59
Cancelled (27,633) 66.94-96.59
______________________________________________________________________________
Under Option-
December 31, 1993 236,449 $73.90-96.59
______________________________________________________________________________
Shares available for grant-
December 31, 1993 8,803,215
______________________________________________________________________________
Management Stock Ownership Program
Management stock options are granted at market value at the date of grant. At
December 31, 1993, there were 4,238 participants in the plan. All outstanding
options expire between May 1994 and May 2003.
Shares Price Range
______________________________________________________________________________
Under Option-
January 1, 1993 9,400,910 $38.73-103.60
Granted 2,138,014 97.85-116.15
Exercised (1,361,733) 38.73-103.60
Cancelled (85,844) 38.73-113.25
______________________________________________________________________________
Under Option-
December 31, 1993 10,091,347 $38.73-116.15
______________________________________________________________________________
Options Exercisable-
December 31, 1993 8,133,231 $38.73-115.45
______________________________________________________________________________
Shares available for grant-
December 31, 1993 10,869,705
______________________________________________________________________________
Quarterly Data (Unaudited)
___________________________________________________________________________
(Millions, except
per-share data) First Second Third Fourth Year
__________________________________________________________________________
Net Sales
1993 $3,517 $3,540 $3,481 $3,482 $14,020
1992 3,438 3,519 3,551 3,375 13,883
__________________________________________________________________________
Cost of Goods Sold
1993 $2,112 $2,131 $2,167 $2,119 $8,529
1992 2,058 2,115 2,134 2,039 8,346
__________________________________________________________________________
Income Before Cumulative Effect of Accounting Changes
1993 $330 $331 $316 $286 $1,263
1992 306 317 324 289 1,236
Per Share
1993 $1.51 $1.51 $1.47 $1.33 $5.82
1992 1.40 1.45 1.48 1.32 5.65
__________________________________________________________________________
Net Income
1993 $330 $331 $316 $286 $1,263
1992 303 317 324 289 1,233
Per Share
1993 $1.51 $1.51 $1.47 $1.33 $5.82
1992 1.38 1.45 1.48 1.32 5.63
__________________________________________________________________________
Stock Price Comparisons (New York Stock Exchange Composite Transactions)
1993 High $111.75 $117.00 $111.25 $113.50 $117.00
Low 97.25 104.88 102.25 101.50 97.25
1992 High 98.75 97.38 103.75 107.00 107.00
Low 87.38 85.50 95.75 97.00 85.50
__________________________________________________________________________
[FN]
1 Includes a legal settlement and special charges, which together
added $9 million, or 4 cents a share, to net income.
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, 1994.
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 14.
Index to Financial Statement Schedules
Reference(pages)
Form 10-K
________________
Financial Statement Schedules for the years ended
December 31, 1993, 1992 and 1991:
V Property, Plant and Equipment.......................33
VI Accumulated Depreciation of Property, Plant
and Equipment ......................................34
IX Short-Term Borrowings .............................35
X Supplementary Income Statement
Information ..........................................35
All other 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, 1993.
(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
unit plan and other compensation contained in issuer's
arrangements. proxy statement for
the 1994 annual
shareholders meeting.
Reference (pages)
Form 10-K
Submitted herewith:
(11) Computation of per share earnings. 36
(12) Calculation of ratio of earnings
to fixed charges. 37
(22) Subsidiaries of the registrant. 38
(24) Consent of experts. 39
(25) Power of attorney. 40
MINNESOTA MINING AND MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
SCHEDULES
(Dollars in Millions)
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT BALANCE
BEGINNING ADDITIONS OTHER AT END OF
CLASSIFICATION OF YEAR AT COST RETIREMENTS CHANGES* YEAR
______________________________________ __________ __________ ___________ _________ _________
For the Year Ended December 31, 1993:
Land ................................ $ 241 $ 18 $ 4 $ 3 $ 258
Buildings and Leasehold
Improvements ...................... 2,463 145 24 (12) 2,572
Machinery and Equipment ............. 7,732 988 330 (85) 8,305
Construction in Progress............. 392 (39) ** --- --- 353
Total ............................. $10,828 $ 1,112 $ 358 $ (94) $11,488
For the Year Ended December 31, 1992:
Land ................................ $ 196 $ 20 $ 2 $ 27 $ 241
Buildings and Leasehold
Improvements ...................... 2,250 261 21 (27) 2,463
Machinery and Equipment ............. 7,182 1,078 387 (141) 7,732
Construction in Progress ............ 452 (41)** - (19) 392
Total ............................. $10,080 $ 1,318 *** $ 410 $ (160) $10,828
For the Year Ended December 31, 1991:
Land ................................ $ 189 $ 11 $ 2 $ (2) $ 196
Buildings and Leasehold
Improvements ..................... 2,031 274 22 (33) 2,250
Machinery and Equipment ............. 6,708 1,026 403 (149) 7,182
Construction in Progress ............ 455 15** 1 (17) 452
Total ............................. $ 9,383 $ 1,326 $ 428 $ (201) $10,080
_________________________________________________________________________
*Translation adjustments, acquisitions, and transfers between accounts.
**Net increase (decrease) in construction in progress.
***Includes $93 million of capital expenditures for the international companies from November 1 to
December 31, 1991.
Included in the retirements column are asset write-downs relating to special charges.
41
MINNESOTA MINING AND MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
SCHEDULES
(Dollars in Millions)
SCHEDULE VI
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED OTHER AT END OF
CLASSIFICATION OF YEAR TO EXPENSE RETIREMENTS CHANGES* YEAR
_____________________________________ ___________ ___________ ___________ _________ _________
For the Year Ended December 31, 1993:
Buildings and Leasehold
Improvements ................ $ 1,034 $ 121 $ 15 $ (5) $ 1,135
Machinery and Equipment ....... 5,002 855 289 (45) 5,523
Total ...................... $ 6,036 $ 976 $ 304 $ (50) $ 6,658
For the Year Ended December 31, 1992:
Buildings and Leasehold
Improvements ............... $ 934 $ 122 $ 15 $ (7) $ 1,034
Machinery and Equipment ...... 4,480 882 293 (67) 5,002
Total ....................... $ 5,414 $ 1,004** $ 308 $ (74) $ 6,036
For the Year Ended December 31, 1991:
Buildings and Leasehold
Improvements ............... $ 866 $ 98 $ 13 $ (17) $ 934
Machinery and Equipment ....... 4,128 786 333 (101) 4,480
Total ...................... $ 4,994 $ 884 $ 346 $ (118) $ 5,414
* Translation adjustments and transfers between accounts.
** Includes $54 million of depreciation for the international companies from November 1 to December 31, 1991.
NOTE: Estimated useful lives range from two to forty years.
MINNESOTA MINING AND MANUFACTURING COMPANY
AND CONSOLIDATED SUBSIDIARIES
SCHEDULES
(Dollars in Millions)
SCHEDULE IX
SHORT-TERM BORROWINGS*
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
WEIGHTED MAXIMUM AVERAGE AMOUNT WEIGHTED AVERAGE
BALANCE AVERAGE MONTH-END BALANCE OUTSTANDING INTEREST RATE
AT END OF INTEREST OUTSTANDING DURING DURING THE DURING THE
DESCRIPTION PERIOD RATE THE PERIOD PERIOD** PERIOD***
________________________ _________ _________ __________________ ___________ _____________
1993: Short-Term
Debt (U.S.).. $317 3.5% $510 $326 3.9%
Short-Term Debt
(International).. $301 7.4% $446 $245 7.2%
1992: Short-Term
Debt (U.S.) .......... $189 4.5% $387 $278 4.4%
Short-Term Debt
(International)****.. $402 6.5% $514 $326 11.6%
1991: Short-Term
Debt (U.S.) .......... $229 4.6% $470 $287 6.1%
Short-Term Debt
(International).. $343 11.6% $407 $345 10.7%
The company does not maintain formal lines of credit, however, the company believes it has sufficient borrowing sources
should the need arise.
* Excluding current portion of long-term debt.
** Average of month-end balances outstanding during each year.
*** Interest expense for the year on short-term borrowings divided by average short-term borrowings outstanding during the year.
**** Includes short-term borrowings for international companies for the 14-month period November 1, 1991 to December 31, 1992.
[TEXT]
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
COLUMN A COLUMN B
_____________________________________________________________________
CHARGED TO COSTS
AND EXPENSES
ITEM 1993 1992* 1991
__________________________________ ____ ____ ____
Maintenance and Repairs ................ $463 $456 $420
Advertising Costs ...................... $161 $172 $152
* Includes expenses for the 12-month period ending December 31, 1992.