3M 2007 Annual Report Download - page 29

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Pharmaceuticals Business:
2007 2006 2005
Sales (millions) $ – $ 774 $797
Sales change analysis:
Local currency (volume and price) N/A (3.5)% 0.3%
Translation N/A 0.6 0.3
Total sales change N/A (2.9)% 0.6%
Operating income (millions) $796 $1,039 $226
Percent change N/A N/A 16.6%
Percent of sales N/A N/A 28.4%
The combination of the following items positively impacted total year 2007 pharmaceuticals operating income by $796
million. As discussed in Note 2, in January 2007 the Company sold its branded pharmaceuticals business in the
Europe region. The operating income gain related to this sale totaled $781 million. In addition, as discussed in Note 4,
a net operating income gain of $15 million was recorded in 2007, which primarily related to adjustments to
restructuring costs incurred in the fourth quarter of 2006. Drug Delivery Systems Division (part of Health Care without
Pharmaceuticals) is a source of supply to the acquiring companies and records sales and operating income related to
the pharmaceuticals supply agreements.
In total, the combination of the following items positively impacted total year 2006 pharmaceuticals operating income
by $783 million, primarily in the fourth quarter of 2006. As discussed in Note 2, in early December 2006, the Company
sold its branded pharmaceuticals business in the Asia Pacific region, including Australia and South Africa. The Company
also sold its branded pharmaceuticals business in the United States, Canada and Latin America in late December 2006.
The operating income gain related to these transactions totaled $1.074 billion. As discussed in Note 4, $112 million of
severance and benefit costs were recorded in the fourth quarter of 2006 related to worldwide staff overhead reduction
actions taken to streamline the Company's cost structure in response to the sale of 3M’s branded pharmaceuticals
business. As also discussed in Note 4, the pharmaceuticals business for total year 2006 included $97 million in
employee-related severance and benefits and $69 million of asset impairments and other expenses. In addition, an
environmental reserve of $13 million was recognized related to the pharmaceuticals business.
Display and Graphics Business (15.9% of consolidated sales):
2007 2006 2005
Sales (millions) $3,892 $3,770 $3,547
Sales change analysis:
Local currency (volume and price) 1.8% 6.0% 4.6%
Divestitures (0.4) – –
Translation 1.8 0.3 0.2
Total sales change 3.2% 6.3% 4.8%
Operating income (millions) $1,174 $1,044 $1,148
Percent change 12.4% (9.0)% 2.9%
Percent of sales 30.2% 27.7% 32.4%
The Display and Graphics segment serves markets that include electronic display, touch screen, traffic safety and
commercial graphics. This segment includes optical film and lens solutions for electronic displays; touch screens and
touch monitors; computer screen filters; reflective sheeting for transportation safety; and commercial graphics systems.
The optical film business provides films that serve numerous market segments of the electronic display industry. 3M
provides distinct products for five market segments, including products for: 1) LCD computer monitors 2) LCD
televisions 3) handheld devices such as cellular phones 4) notebook PCs and 5) automotive displays. The optical
business includes a number of different products that are protected by various patents and groups of patents. The
remaining lifetimes of such patents, as well as patents protecting future products, range from less than a few years to
more than 10 years. These patents provide varying measures of exclusivity to 3M for a number of such products. 3M’s
proprietary manufacturing technology and know-how also provide a competitive advantage to 3M with respect to
some of these products.