Net income totaled $467 million, compared with $456 million in the comparable period excluding non-recurring items. Sales totaled $4.17 billion, up 2.3 percent in U.S. dollars and 6.7 percent in local currencies.
Our people delivered solid results under extremely difficult U.S. economic conditions, continued strengthening of the U.S. dollar and sharply higher energy costs, said W. James McNerney, Jr., chairman of the board and CEO. Currency effects reduced earnings for the quarter by 7 cents per share and higher U.S. energy costs reduced earnings by 4 cents per share. Aggressive global cost control combined with good international volume gains largely offset these negative pressures.
We are intensely focused on driving down costs to deliver positive earnings growth in an uncertain global economic environment, McNerney said. Unusually unpredictable market and currency trends produce a range of $4.75 to $5.00 per share for 2001 earnings in total, with negative market and currency trends more than offset in any scenario by our aggressive cost plan. 3M earned $4.68 per share in 2000, excluding non-recurring items. The company expects earnings for the second quarter to be similar to, or up slightly from, the second quarter last year.
3M also announced it will consolidate operations and streamline the organization to increase speed and productivity. This strategic and selective restructuring will reduce 3M’s global workforce by about 5,000 positions, or about 7 percent, over the next 12 months. About half of the employment reductions will occur outside the United States.
Business units, functional groups and geographic areas across the company are driving the restructuring. In particular, much of the streamlining will be targeted at parts of the company facing the greatest economic challenges, and where the greatest opportunities exist to eliminate unnecessary structure and improve productivity, efficiency and the supply chain.
Our management team is accelerating efforts to grow our strong market positions and deliver solid financial results, McNerney said. We’ve identified opportunities to streamline our supply chain and achieve other structural improvements — especially important now in light of the current, difficult economic situation, and the reality that these conditions may last longer than expected.
McNerney added, While no one likes to eliminate jobs, this action is consistent with our resolve to achieve solid growth, make the whole organization faster, and advance 3M to an even higher level.
3M continues its significant investment in technology and product development. The company also has launched five initiatives, including a major Six Sigma push, to drive long-term growth, profitability and cash flow.
Our businesses continue to strengthen their leading market positions, McNerney said. As a result, we’re well-positioned to resume strong growth once economic conditions improve.
The company expects to incur a one-time charge of approximately $600 million over the next few quarters as a result of this action. The restructuring is expected to provide annual pre-tax savings of approximately $300 million upon completion of the plan. Not included in the charge are previously incurred costs related to elimination of some jobs stemming from the ongoing integration of recently acquired businesses.
During the first quarter of 2001, 3M incurred one-time, pre-tax costs of $23 million primarily related to acquisitions. These costs were recorded in cost of sales. During the first quarter of 2000, 3M recorded a $50 million pre-tax gain related to the termination of a product distribution agreement in the company’s health care business. Including these non-recurring items, earnings totaled $453 million, or $1.13 per share, in the first quarter of 2001, compared with $487 million, or $1.21 per share, in the first quarter of 2000.
