3M 2006 Annual Report Download - page 73

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for fiscal periods ending after June 15, 2006. The proposed SFAS No. 128R further addresses contingently
convertible debt and several other issues. Unless the Company takes steps to modify certain terms of this debt
security, EITF Issue No. 04-08 and proposed SFAS No. 128R (when effective) would result in an increase of
approximately 5.8 million shares to diluted shares outstanding to give effect to the contingent issuance of shares.
Also, using the if-converted method, net income for the diluted earnings per share calculations would be adjusted for
interest expense associated with this debt instrument. EITF Issue No. 04-08 would have been effective beginning with
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intent and ability to settle this debt security in cash versus the issuance of stock, the impact of the additional diluted
shares will not be included in the diluted earnings per share calculation until the proposed SFAS No. 128R is effective.
:KHQ6)$61R5LVHIIHFWLYHSULRUSHULRGV¶GLOXWed shares outstanding and diluted earnings per share amounts
will be restated to present comparable information. The esWLPDWHGDQQXDOUHGXFWLRQLQWKH&RPSDQ\¶VGLOXWHGHDUQLQJV
per share would have been approximately $.02 to $.04 per share for each of the total years 2006, 2005 and 2004.
Because the impact of this standard is ongoing, the ComSDQ\¶VGLOXWHGVKDUHVRXWVWDQGLQJDQGGLOXWHGHDUQLQJVSHU
share amounts would be impacted until retirement or modification of certain terms of this debt security.
NOTE 2. Acquisitions and Divestitures
Divestitures:
In December 2006, 3M completed the sale of its global branded pharmaceuticals business in the United States,
Canada, and Latin America region and the Asia Pacific region, including Australia and South Africa. 3M received
proceeds of $1.209 billion for this transaction and recognized, net of assets sold, a pre-tax gain of $1.074 billion
UHFRUGHGLQ+HDOWK&DUH%XVLQHVV%X\HUDQGVDOH price information by region is as follows:
 Graceway Pharmaceuticals Inc. acTXLUHG0¶VSKDUPDFHXWLFDORSHUDWLRQV in the United States, Canada, and
Latin America for $860 million.
 Ironbridge Capital and Archer Capital DFTXLUHG0¶VSKDUPDFHXWLFDOVEXVLQHVVLQWKH$VLD3DFLILFUHJLRQ
including Australia and South Africa for $349 million.
 0HGD$%DFTXLUHG0¶VSKDUPDFHXWLFDOVEXVLQHVVLQEurope for $817 million in January 2007, which is not
included in the financial statements for 2006 (reIHUWRVXEVHTXHQWHYHQWGLVFXVVLRQEHORZ
The agreements are the result of a review of strategic options for the branded pharmaceuticals business and its
immune response modifier (IRM) platform that 3M announced in April 2006. Under the agreements, the purchasers
DFTXLUHGUHJLRQDOPDUNHWLQJDQGLQWHOOHFWXDOSURSHUW\ULJKWVIRU0¶VZHOONQRZQEUDQGHGSKDUPDFHXWLFDOVLQFOXGLQJ
Aldara, Difflam, Duromine, Tambocor, Maxair, Metrogel-Vaginal and Minitran. As part of the transaction, Graceway
3KDUPDFHXWLFDOVDOVRDFTXLUHGWKHrights to certain IRM molecules.
In connection with these transactions, 3M entered into agreements whereby its Drug Delivery Systems Division
EHFDPHDVRXUFHRIVXSSO\WRWKHDFTXLULQJFRPSDQLHV%Hcause of the extent of 3M cash flows from these
agreements in relation to those of the disposed-of businesses, the operations of the branded pharmaceuticals
business are not classified as discontinued operations. See Note 4 for further discussion of the 2006 restructuring
actions that resulted from the divesture of tKH&RPSDQ\¶VJOREDOEUDQGHGSKDUPDFHXWLFDOVEXVLQHVV
Subsequent event:
As discussed above, in January 2007, 3M completed the sale of its global branded pharmaceuticals business in
Europe to Meda AB for $817 million. The gain on sale, net of other anticipated restructuring costs, is estimated at
WRSHUGLOXWHGVKDUH+HOGIRUVDOHDVVHWVDQGOLDEilities related to this transaction are not material. This
WUDQVDFWLRQZLOOEHUHIOHFWHGLQ0¶VILQDQFLDOstatements for the period ending March 31, 2007.
Acquisitions:
During the 12 months ended December 31, 2006, 3M completed 19 business combinations for a total purchase price
RIPLOOLRQQHWRIFDVKDFTXLUHGPurchased identifiable intangible assets RIPLOOLRQIRUWKHVHDFTXLVLWLRQVZLOO
be amortized on a straight-line basis over lives ranging from 1 to 17 years (weighted-average life of 9 years). The
SXUFKDVHSULFHRIVHYHUDORIWKHVHDFTXLsitions is subject to increases, which could be triggered by the achievement of
certain milestones.
7KHODUJHVWRIWKHVHDFTXLVLWLRQVZDVWKH$XJXVWSXUFKDVe of 100 percent of the outstanding shares of Security
Printing and Systems Limited (Safety, Security and Protection Services BusiQHVVIURPDXWKHQWRV*PE+*HUPDQ\
7KHDFTXLUHGFRPSDQ\LVDSURGXFHURIILQLVKHGSHUVonalized passports and secure cards. The purchase price
allocation is considered preliminary.
,Q2FWREHU0+HDOWK&DUH%XVLQHVVSXUFKDVed 100 percent of the outstanding shares of Brontes
Technologies Inc. (Brontes), a Lexington, Massachusetts based developer of proprietary 3-D imaging technology for
dental and orthodontic applications, for $95 million in cash. %URQWHVZDVD³GHYHORSPHQWVWDJHHQWHUSULVH´WKDWGRHV