EX-99 2 a08-7151_1ex99.htm EX-99

 

EXHIBIT 99

 

As more fully described below, during the first quarter of 2008, 3M effected certain business segment realignments. 3M is including in this Current Report on Form 8-K supplemental unaudited reclassified business segment net sales and operating income information (provided on an annual and quarterly basis for the years ended December 31, 2007, 2006 and 2005).

 

This supplemental unaudited information is being provided to show reclassified historical results for the realigned segments. The Company did not operate under the realigned segments structure for any of these prior periods and will begin to report comparative results under the new structure effective with the filing of its Quarterly Report on Form 10-Q for the quarter ending March 31, 2008.

 

Effective in the first quarter of 2008, 3M made certain changes to its business segments in its continuing effort to drive growth by aligning businesses around markets and customers. These changes are summarized as follows:

 

·                  3M’s Display and Graphics segment created the Projection Systems Department by combining Visual Systems, 3M Precision Optics Inc. and the Company’s mobile display technology. The new department will focus on bringing 3M technology to the projection market, providing customers with a centralized resource dedicated to developing differentiated solutions. Visual Systems (previously in the Electro and Communications segment) serves the world’s office and education markets with overhead projectors and transparency films, as well as equipment and materials for electronic and multimedia presentations. 3M Precision Optics Inc. and the Company’s mobile display technology were previously part of the Optical Systems Division within the Display and Graphics segment.

 

·                  3M’s Touch Systems business (previously in the Display and Graphics segment), which includes touch screens and touch monitors, was transferred to the Electro and Communications segment. Touch Systems brings synergistic technologies and strong alignment with 3M’s electronics’ divisions and markets.

 

·                  Certain adhesives and tapes in the Industrial Adhesives and Tapes business (Industrial and Transportation segment) were transferred to the Consumer and Office segment, primarily related to the Stationery Products business and Construction and Home Improvement business.

 

Segment information for all periods presented has been reclassified to reflect the new segment structure. There were no changes for the Health Care segment, Safety, Security and Protection Services segment, or 3M in total. The impact of these changes on previously reported 2007 net sales and operating income is summarized as follows:

 

 

 

NET SALES

 

OPERATING INCOME

 

Year ended Dec. 31, 2007

 

Previously

 

 

 

 

 

Previously

 

 

 

 

 

(Dollars in millions)

 

Reported

 

Revised

 

Change

 

Reported

 

Revised

 

Change

 

Industrial and Transportation

 

$

7,274

 

$

7,266

 

$

(8

)

$

1,501

 

$

1,497

 

$

(4

)

Health Care

 

3,968

 

3,968

 

—

 

1,882

 

1,882

 

—

 

Display and Graphics

 

3,892

 

3,904

 

12

 

1,174

 

1,163

 

(11

)

Consumer and Office

 

3,403

 

3,411

 

8

 

688

 

692

 

4

 

Safety, Security and Protection Services

 

3,070

 

3,070

 

—

 

611

 

611

 

—

 

Electro and Communications

 

2,775

 

2,763

 

(12

)

481

 

492

 

11

 

Corporate and Unallocated

 

80

 

80

 

 

 

(144

)

(144

)

—

 

Total Company

 

$

24,462

 

$

24,462

 

$

—

 

$

6,193

 

$

6,193

 

$

—

 

 

3M’s businesses are organized, managed and internally grouped into segments based on differences in products, technologies and services. Effective in the first quarter of 2008, 3M continues to manage its operations in six operating business segments: Industrial and Transportation segment, Health Care segment, Display and Graphics segment, Consumer and Office segment, Safety, Security and Protection Services segment, and the Electro and Communications segment. 3M’s six business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources. These segments have worldwide responsibility for virtually all 3M product lines. 3M is not dependent on any single product or market. Transactions among reportable segments are recorded at cost. 3M is an integrated enterprise characterized by substantial intersegment cooperation, cost allocations and inventory transfers. Therefore, management does not represent that these segments, if operated independently, would report the operating income information shown.

 


 

Supplemental Unaudited Business Segment Information

Based on Segment Structure Effective in the First Quarter of 2008

Net Sales

 

NET SALES

 

First

 

Second

 

Third

 

Fourth

 

Total

 

(Millions)

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

Industrial and Transportation

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

1,783

 

$

1,802

 

$

1,805

 

$

1,876

 

$

7,266

 

2006

 

1,670

 

1,660

 

1,652

 

1,650

 

6,632

 

2005

 

1,500

 

1,492

 

1,518

 

1,528

 

6,038

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

962

 

$

988

 

$

961

 

$

1,057

 

$

3,968

 

2006

 

966

 

1,000

 

998

 

1,047

 

4,011

 

2005

 

948

 

957

 

926

 

929

 

3,760

 

 

 

 

 

 

 

 

 

 

 

 

 

Display and Graphics

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

926

 

$

1,005

 

$

1,017

 

$

956

 

$

3,904

 

2006

 

915

 

906

 

984

 

942

 

3,747

 

2005

 

867

 

866

 

919

 

907

 

3,559

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Office

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

817

 

$

834

 

$

899

 

$

861

 

$

3,411

 

2006

 

743

 

771

 

850

 

808

 

3,172

 

2005

 

679

 

723

 

789

 

744

 

2,935

 

 

 

 

 

 

 

 

 

 

 

 

 

Safety, Security and Protection Services

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

758

 

$

799

 

$

766

 

$

747

 

$

3,070

 

2006

 

639

 

662

 

691

 

671

 

2,663

 

2005

 

561

 

607

 

581

 

571

 

2,320

 

 

 

 

 

 

 

 

 

 

 

 

 

Electro and Communications

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

664

 

$

693

 

$

709

 

$

697

 

$

2,763

 

2006

 

649

 

676

 

673

 

656

 

2,654

 

2005

 

597

 

634

 

636

 

630

 

2,497

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and Unallocated

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

27

 

$

21

 

$

20

 

$

12

 

$

80

 

2006

 

13

 

13

 

10

 

8

 

44

 

2005

 

14

 

15

 

13

 

16

 

58

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

5,937

 

$

6,142

 

$

6,177

 

$

6,206

 

$

24,462

 

2006

 

5,595

 

5,688

 

5,858

 

5,782

 

22,923

 

2005

 

5,166

 

5,294

 

5,382

 

5,325

 

21,167

 

 


 

Supplemental Unaudited Business Segment Information

Based on Segment Structure Effective in the First Quarter of 2008

Operating Income

 

Refer to Note 2 and Note 4 to the Consolidated Financial Statements in 3M’s 2007 Annual Report on Form 10-K for disclosure of items that significantly impacted 2007 and 2006 business segment reported operating income. The most significant items impacting 2007 and 2006 operating income are the gain on sale of businesses, primarily the global branded pharmaceuticals business (within the Health Care segment), and restructuring and other actions. Operating income presented in the table that follows includes the impact of these significant items.

 

Corporate and Unallocated operating income principally includes corporate investment gains and losses, certain derivative gains and losses, insurance-related gains and losses, certain litigation expenses, corporate restructuring program charges and other miscellaneous items. Because this category includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

 

OPERATING INCOME

 

 

 

First

 

Second

 

Third

 

Fourth

 

Total

 

(Millions)

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

Industrial and Transportation

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

410

 

$

358

 

$

377

 

$

352

 

$

1,497

 

2006

 

379

 

319

 

338

 

302

 

1,338

 

2005

 

308

 

312

 

290

 

296

 

1,206

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

1,062

 

$

279

 

$

259

 

$

282

 

$

1,882

 

2006

 

298

 

261

 

287

 

999

 

1,845

 

2005

 

272

 

284

 

273

 

285

 

1,114

 

 

 

 

 

 

 

 

 

 

 

 

 

Display and Graphics

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

296

 

$

350

 

$

283

 

$

234

 

$

1,163

 

2006

 

295

 

239

 

290

 

221

 

1,045

 

2005

 

288

 

271

 

313

 

285

 

1,157

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Office

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

178

 

$

165

 

$

193

 

$

156

 

$

692

 

2006

 

151

 

136

 

191

 

155

 

633

 

2005

 

127

 

149

 

182

 

155

 

613

 

 

 

 

 

 

 

 

 

 

 

 

 

Safety, Security and Protection Services

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

181

 

$

140

 

$

157

 

$

133

 

$

611

 

2006

 

158

 

139

 

141

 

111

 

549

 

2005

 

118

 

142

 

133

 

120

 

513

 

 

 

 

 

 

 

 

 

 

 

 

 

Electro and Communications

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

110

 

$

135

 

$

119

 

$

128

 

$

492

 

2006

 

118

 

113

 

123

 

56

 

410

 

2005

 

82

 

112

 

117

 

102

 

413

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and Unallocated

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

(136

)

$

(30

)

$

37

 

$

(15

)

$

(144

)

2006

 

(30

)

(32

)

(28

)

(34

)

(124

)

2005

 

(42

)

(26

)

(41

)

(53

)

(162

)

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

 

 

 

2007

 

$

2,101

 

$

1,397

 

$

1,425

 

$

1,270

 

$

6,193

 

2006

 

1,369

 

1,175

 

1,342

 

1,810

 

5,696

 

2005

 

1,153

 

1,244

 

1,267

 

1,190

 

4,854

 

 


 

Supplemental Unaudited Business Segment Information

Based on Segment Structure Effective in the First Quarter of 2008

Reconciliation of GAAP to Non-GAAP Operating Income

 

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company also discusses non-GAAP measures that exclude special items. Operating income measures that exclude special items are not in accordance with, nor are they a substitute for, GAAP measures. Special items represent significant charges or credits that are important to an understanding of the Company’s ongoing operations. The Company uses these non-GAAP measures to evaluate and manage the Company’s operations. The Company believes that discussion of results excluding special items provides a useful analysis of ongoing operating trends. The determination of special items may not be comparable to similarly titled measures used by other companies.

 

As discussed in 3M’s 2007 Annual Report on Form 10-K, 2007 results included net gains that increased pre-tax operating income by $681 million. 2007 included gains related to the sale of businesses ($849 million) and a gain on sale of real estate ($52 million), which were partially offset by increases in environmental liabilities ($134 million), restructuring actions ($41 million), and other exit activities ($45 million). Net gains of $653 million were recorded for the three-months ended March 31, 2007 (first quarter of 2007), in addition to net gains of $22 million in the second quarter of 2007, net gains of $26 million in the third quarter of 2007, and net losses of $20 million in the fourth quarter of 2007.

 

As also discussed in 3M’s 2007 Annual Report on Form 10-K, 2006 results included net gains that increased pre-tax operating income by $523 million. 2006 included net benefits from gains related to the sale of certain portions of 3M’s branded pharmaceuticals business ($1.074 billion), which were partially offset by restructuring actions ($403 million), acquired in-process research and development expenses ($95 million), settlement costs of a previously disclosed antitrust class action ($40 million), and environmental obligations related to the pharmaceuticals business ($13 million).  These items primarily impacted the three-months ended December 31, 2006 (fourth quarter of 2006) with net gains totaling $585 million, except for the $40 million in settlement costs which were incurred in the second quarter of 2006 and certain costs related to the Company’s efforts to sell its pharmaceuticals business ($9 million in the second quarter of 2006 and $13 million in the third quarter of 2006).

 

The reconciliation provided below, which has been revised from what was previously reported to reflect the new segment structure effective in the first quarter of 2008, reconciles the non-GAAP operating income measure by business segment with the most directly comparable GAAP financial measure for the twelve months ended December 31, 2007 and 2006.

 

 

 

Twelve-months ended
Dec. 31, 2007

 

Twelve-months ended
Dec. 31, 2006

 

OPERATING INCOME BY

 

GAAP

 

 

 

Adjusted

 

GAAP

 

 

 

Adjusted

 

BUSINESS SEGMENT

 

Operating

 

Special

 

Non-GAAP

 

Operating

 

Special

 

Non-GAAP

 

(Millions)

 

Income

 

items

 

Oper. Income

 

Income

 

Items

 

Oper. Income

 

Industrial and Transportation

 

$

1,497

 

$

9

 

$

1,506

 

$

1,338

 

$

15

 

$

1,353

 

Health Care

 

1,882

 

(791

)

1,091

 

1,845

 

(673

)

1,172

 

Display and Graphics

 

1,163

 

(51

)

1,112

 

1,045

 

31

 

1,076

 

Consumer and Office

 

692

 

—

 

692

 

633

 

—

 

633

 

Safety, Security and Protection Services

 

611

 

29

 

640

 

549

 

10

 

559

 

Electro and Communications

 

492

 

41

 

533

 

410

 

54

 

464

 

Corporate and Unallocated

 

(144

)

82

 

(62

)

(124

)

40

 

(84

)

Total Operating Income

 

$

6,193

 

$

(681

)

$

5,512

 

$

5,696

 

$

(523

)

$

5,173