EX-99 2 a09-9820_1ex99.htm EX-99

 

EXHIBIT 99

 

As more fully described below, this Current Report on Form 8-K includes supplemental unaudited reclassified business segment net sales and operating income information (provided on an annual and quarterly basis for the years ended December 31, 2008, 2007 and 2006). This supplemental unaudited information is being provided to show reclassified historical results for business segment realignments, including both product moves between business segments and reporting changes related to revised U.S. performance measures. The Company did not operate under the realigned segment 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 ended March 31, 2009.

 

Effective in the first quarter of 2009, 3M made certain product moves between its business segments in its continuing effort to drive growth by aligning businesses around markets and customers. There were no changes in business segments related to product moves for the Health Care segment, Display and Graphics segment or Electro and Communications segment, or 3M in total. The product moves between business segments are summarized as follows:

 

·                  Certain 3M window films, such as 3M™ Scotchtint™ Window Film for buildings and 3M™ Ultra Safety and Security Window Film for property and personal protection during destructive weather conditions, were previously part of the Building and Commercial Services Division within the Safety, Security and Protection Services business segment. These window films were transferred to the newly created Renewable Energy Division, which is part of the Industrial and Transportation business segment. The Renewable Energy Division consists of current 3M solar energy creation and management products and solutions, as well as products focused on the renewable energy markets. Renewable Energy’s portfolio includes various 3M products for solar energy production and solar energy management (such as window films) and also includes responsibility for wind, geothermal and biofuel oriented products. The preceding product moves resulted in an increase in net sales for total year 2008 of $152 million for Industrial and Transportation, which was offset by a corresponding decrease in net sales for Safety, Security and Protection Services.

 

·                  3M acquired Aearo Holding Corp., the parent company of Aearo Technologies Inc. (hereafter referred to as Aearo), in April 2008. Aearo manufactures and sells personal protection and energy absorbing products through both the Industrial and Consumer retail channels. The consumer retail portion of Aearo’s business manufactures and markets personal safety products, including safety glasses and hearing protectors, among other products, to the do-it-yourself consumer retail markets. The do-it-yourself retail market portion of 3M’s Aearo business (previously in the Occupational Health and Environmental Safety Division within the Safety, Security and Protection Services business segment) was transferred to the Construction and Home Improvement Division within the Consumer and Office business segment. The preceding product moves resulted in an increase in net sales for total year 2008 of $49 million for Consumer and Office, which was offset by a corresponding decrease in net sales for Safety, Security and Protection Services.

 

Also, during the first quarter of 2009, 3M changed its segment reporting measures to include dual credit to business segments for certain U.S. sales and related operating income. Management now evaluates each of its six operating business segments based on net sales and operating income performance, including dual credit U.S. reporting. This change was made to further incentivize U.S. sales growth. As a result, 3M now provides additional (“dual”) credit to those business segments selling products in the U.S. to an external customer when that segment is not the primary seller of the product. For example, certain respirators are primarily sold by the Occupational Health and Environmental Safety Division within the Safety, Security and Protection Services business segment; however, the Industrial and Transportation business segment also sells this product to certain customers in its U.S. markets. In this example, the non-primary selling segment (Industrial and Transportation) would also receive credit for the associated net sales it initiated and the related approximate operating income. The assigned operating income related to dual credit activity may differ from operating income that would result from actual costs associated with such sales. The offset to the dual credit business segment reporting is reflected as a reconciling item entitled “Elimination of Dual Credit,” such that sales and operating income for the U.S. in total are unchanged.

 

 


 

The impact of the preceding changes on previously reported 2008 business segment net sales and operating income is summarized as follows:

 

 

 

NET SALES

 

OPERATING INCOME

 

Year ended Dec. 31, 2008

 

Previously

 

 

 

 

 

Previously

 

 

 

 

 

(Dollars in millions)

 

Reported

 

Revised

 

Change

 

Reported

 

Revised

 

Change

 

Industrial and Transportation

 

$

7,818

 

$

8,173

 

$

355

 

$

1,477

 

$

1,548

 

$

71

 

Health Care

 

4,293

 

4,303

 

10

 

1,173

 

1,175

 

2

 

Safety, Security and Protection Services

 

3,642

 

3,450

 

(192

)

736

 

710

 

(26

)

Consumer and Office

 

3,448

 

3,578

 

130

 

663

 

683

 

20

 

Display and Graphics

 

3,255

 

3,268

 

13

 

580

 

583

 

3

 

Electro and Communications

 

2,791

 

2,835

 

44

 

531

 

540

 

9

 

Corporate and Unallocated

 

22

 

23

 

1

 

58

 

58

 

—

 

Elimination of Dual Credit

 

—

 

(361

)

(361

)

—

 

(79

)

(79

)

Total Company

 

$

25,269

 

$

25,269

 

$

—

 

$

5,218

 

$

5,218

 

$

—

 

 

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 2009, 3M continues to manage its operations in six operating business segments: Industrial and Transportation segment; Health Care segment; Safety, Security and Protection Services segment; Consumer and Office segment; Display and Graphics 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 financial information shown. The difference between operating income and pre-tax income relates to interest income and interest expense, which are not allocated to business segments.

 

 


 

Supplemental Unaudited Business Segment Information

Based on Segment Structure and Dual Credit Reporting Effective in the First Quarter of 2009

Net Sales

 

NET SALES

 

First

 

Second

 

Third

 

Fourth

 

Total

 

(Millions)

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

Industrial and Transportation

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

2,182

 

$

2,178

 

$

2,078

 

$

1,735

 

$

8,173

 

2007

 

1,881

 

1,902

 

1,903

 

1,953

 

7,639

 

2006

 

1,765

 

1,758

 

1,750

 

1,724

 

6,997

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

1,080

 

$

1,120

 

$

1,066

 

$

1,037

 

$

4,303

 

2007

 

965

 

991

 

964

 

1,060

 

3,980

 

2006

 

970

 

1,003

 

1,002

 

1,050

 

4,025

 

 

 

 

 

 

 

 

 

 

 

 

 

Safety, Security and Protection Services

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

821

 

$

979

 

$

921

 

$

729

 

$

3,450

 

2007

 

725

 

764

 

733

 

722

 

2,944

 

2006

 

613

 

632

 

660

 

651

 

2,556

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Office

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

855

 

$

939

 

$

988

 

$

796

 

$

3,578

 

2007

 

835

 

855

 

924

 

880

 

3,494

 

2006

 

762

 

791

 

875

 

826

 

3,254

 

 

 

 

 

 

 

 

 

 

 

 

 

Display and Graphics

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

875

 

$

849

 

$

857

 

$

687

 

$

3,268

 

2007

 

929

 

1,009

 

1,020

 

958

 

3,916

 

2006

 

918

 

909

 

987

 

944

 

3,758

 

 

 

 

 

 

 

 

 

 

 

 

 

Electro and Communications

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

735

 

$

760

 

$

740

 

$

600

 

$

2,835

 

2007

 

674

 

704

 

721

 

706

 

2,805

 

2006

 

659

 

688

 

684

 

665

 

2,696

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and Unallocated

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

6

 

$

9

 

$

6

 

$

2

 

$

23

 

2007

 

28

 

21

 

19

 

11

 

79

 

2006

 

12

 

14

 

10

 

9

 

45

 

 

 

 

 

 

 

 

 

 

 

 

 

Elimination of Dual Credit

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

(91

)

$

(95

)

$

(98

)

$

(77

)

$

(361

)

2007

 

(100

)

(104

)

(107

)

(84

)

(395

)

2006

 

(104

)

(107

)

(110

)

(87

)

(408

)

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

6,463

 

$

6,739

 

$

6,558

 

$

5,509

 

$

25,269

 

2007

 

5,937

 

6,142

 

6,177

 

6,206

 

24,462

 

2006

 

5,595

 

5,688

 

5,858

 

5,782

 

22,923

 

 

Supplemental Unaudited Business Segment Information

Based on Segment Structure and Dual Credit Reporting Effective in the First Quarter of 2009

Operating Income

 

Refer to Note 2 and Note 4 to the Consolidated Financial Statements in 3M’s 2008 Annual Report on Form 10-K for disclosure of items that significantly impacted 2008, 2007 and 2006 business segment reported operating income. The most significant items impacting 2008, 2007 and 2006 operating income are the gain or loss on sale of businesses, primarily the gain on sale of 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 and environmental expenses, corporate restructuring program charges and certain under- or over-absorbed costs (e.g. pension) that the Company may choose not to allocate directly to its business segments. 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

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

492

 

$

427

 

$

415

 

$

214

 

$

1,548

 

2007

 

433

 

381

 

400

 

366

 

1,580

 

2006

 

397

 

339

 

360

 

310

 

1,406

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

322

 

$

310

 

$

294

 

$

249

 

$

1,175

 

2007

 

1,062

 

280

 

260

 

282

 

1,884

 

2006

 

299

 

261

 

288

 

1,000

 

1,848

 

 

 

 

 

 

 

 

 

 

 

 

 

Safety, Security and Protection Services

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

196

 

$

186

 

$

212

 

$

116

 

$

710

 

2007

 

173

 

132

 

148

 

130

 

583

 

2006

 

154

 

134

 

135

 

115

 

538

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Office

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

170

 

$

187

 

$

223

 

$

103

 

$

683

 

2007

 

182

 

170

 

198

 

160

 

710

 

2006

 

155

 

140

 

197

 

159

 

651

 

 

 

 

 

 

 

 

 

 

 

 

 

Display and Graphics

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

188

 

$

185

 

$

162

 

$

48

 

$

583

 

2007

 

297

 

351

 

284

 

234

 

1,166

 

2006

 

295

 

239

 

291

 

222

 

1,047

 

 

 

 

 

 

 

 

 

 

 

 

 

Electro and Communications

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

149

 

$

153

 

$

158

 

$

80

 

$

540

 

2007

 

112

 

137

 

122

 

130

 

501

 

2006

 

120

 

116

 

126

 

58

 

420

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and Unallocated

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

4

 

$

22

 

$

70

 

$

(38

)

$

58

 

2007

 

(136

)

(31

)

36

 

(13

)

(144

)

2006

 

(28

)

(30

)

(31

)

(35

)

(124

)

 

 

 

 

 

 

 

 

 

 

 

 

Elimination of Dual Credit

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

(20

)

$

(21

)

$

(21

)

$

(17

)

$

(79

)

2007

 

(22

)

(23

)

(23

)

(19

)

(87

)

2006

 

(23

)

(24

)

(24

)

(19

)

(90

)

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

 

 

 

2008

 

$

1,501

 

$

1,449

 

$

1,513

 

$

755

 

$

5,218

 

2007

 

2,101

 

1,397

 

1,425

 

1,270

 

6,193

 

2006

 

1,369

 

1,175

 

1,342

 

1,810

 

5,696

 

 

 


 

Supplemental Unaudited Business Segment Information

Based on Segment Structure and Dual Credit Reporting Effective in the First Quarter of 2009

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 2008 Annual Report on Form 10-K, 2008 results included net losses for special items that reduced operating income by $269 million. 2008 included restructuring actions ($229 million), exit activities ($58 million) and losses related to the sale of businesses ($23 million), which were partially offset by a gain on sale of real estate ($41 million). These net losses were recorded in the second quarter of 2008 ($42 million), third quarter of 2008 ($8 million) and fourth quarter of 2008 ($219 million).

 

As also discussed in 3M’s 2008 Annual Report on Form 10-K, 2007 results included net gains for special items that increased 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 2008 Annual Report on Form 10-K, 2006 results included net gains for special items that increased 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 segment realignment effective in the first quarter of 2009, 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, 2008, 2007 and 2006. There was no change in total worldwide consolidated operating income compared to what was previously reported.

 

 

 

Twelve-months ended
Dec. 31, 2008

 

OPERATING INCOME BY

 

Revised

 

 

 

Adjusted

 

BUSINESS SEGMENT

 

Operating

 

Special

 

Non-GAAP

 

(Millions)

 

Income

 

items

 

Oper. Income

 

Industrial and Transportation

 

$

1,548

 

$

66

 

$

1,614

 

Health Care

 

1,175

 

60

 

1,235

 

Safety, Security and Protection Services

 

710

 

38

 

748

 

Consumer and Office

 

683

 

18

 

701

 

Display and Graphics

 

583

 

42

 

625

 

Electro and Communications

 

540

 

7

 

547

 

Corporate and Unallocated

 

58

 

38

 

96

 

Elimination of Dual Credit

 

(79

)

—

 

(79

)

Total Operating Income

 

$

5,218

 

$

269

 

$

5,487

 

 

 


 

 

 

Twelve-months ended
Dec. 31, 2007

 

Twelve-months ended
Dec. 31, 2006

 

OPERATING INCOME BY

 

Revised

 

Adjusted

 

 

 

Revised

 

 

 

Adjusted

 

BUSINESS SEGMENT

 

Operating

 

Special

 

Non-GAAP

 

Operating

 

Special

 

Non-GAAP

 

(Millions)

 

Income

 

items

 

Oper. Income

 

Income

 

Items

 

Oper. Income

 

Industrial and Transportation

 

$

1,580

 

$

9

 

$

1,589

 

$

1,406

 

$

15

 

$

1,421

 

Health Care

 

1,884

 

(791

)

1,093

 

1,848

 

(673

)

1,175

 

Safety, Security and Protection Services

 

583

 

29

 

612

 

538

 

10

 

548

 

Consumer and Office

 

710

 

—

 

710

 

651

 

—

 

651

 

Display and Graphics

 

1,166

 

(51

)

1,115

 

1,047

 

31

 

1,078

 

Electro and Communications

 

501

 

41

 

542

 

420

 

54

 

474

 

Corporate and Unallocated

 

(144

)

82

 

(62

)

(124

)

40

 

(84

)

Elimination of Dual Credit

 

(87

)

—

 

(87

)

(90

)

—

 

(90

)

Total Operating Income

 

$

6,193

 

$

(681

)

$

5,512

 

$

5,696

 

$

(523

)

$

5,173