3M 2007 Annual Report Download - page 61

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Income statement line in which the preceding 2007 and 2006 expenses (credits) are reflected:
(Millions) 2007 2006
Cost of sales $ 40 $130
Selling, general and administrative expenses 5 198
Research, development and related expenses (7) 75
Total $ 38 $403
The amount of expenses (credits) incurred in 2007 and 2006 associated with the preceding
are reflected in the Company’s business segments as follows:
(Millions) 2007 2006
Industrial and Transportation $ 2 $ 15
Health Care (11) 293
Display and Graphics 3 39
Safety, Security and Protection Services 28 10
Electro and Communications 18 46
Corporate and Unallocated (2) –
Total $ 38 $403
Actions with respect to the above activities were substantially completed in 2007 and additional charges and adjustments
are not expected to be material.
In connection with this targeted restructuring plan, the Company eliminated a total of approximately 1,900 positions from
various functions within the Company. Approximately 390 positions were pharmaceuticals business employees,
approximately 960 positions related primarily to corporate staff overhead reductions, and approximately 550 positions were
business-specific reduction actions. Of the 1,900 employment reductions, about 58% are in the United States, 21% in
Europe, 12% in Latin America and Canada, and 9% in the Asia Pacific area. As a result of the second-quarter 2007 phase-
out of operations at a New Jersey roofing granule facility and the sale of the Company’s Opticom Priority Control Systems
and Canoga Traffic Detection businesses, the Company eliminated approximately 100 additional positions.
Employee-related severance charges are largely based upon distributed employment policies and substantive severance
plans and were reflected in the quarter in which management approved the restructuring actions. Severance amounts for
which affected employees were required to render service in order to receive benefits at their termination dates were
measured at the date such benefits were communicated to the applicable employees and recognized as expense over the
employees’ remaining service periods.
Non-cash employee-related changes in 2007 and 2006 primarily relate to special termination pension and medical benefits
granted to certain U.S. eligible employees. These pension and medical benefits were reflected as a component of the
benefit obligation of the Company’s pension and medical plans as of December 31, 2007 and 2006. In addition, these
changes also reflect non-cash stock option expense due to the reclassification of certain employees age 50 and older to
retiree status, resulting in a modification of their original stock option awards for accounting purposes.
Contract termination and other charges primarily reflect costs to terminate a contract before the end of its term (measured
at fair value at the time the Company provided notice to the counterparty) or costs that will continue to be incurred under
the contract for its remaining term without economic benefit to the Company.
Business-specific asset impairment charges for 2007 totaled $35 million. This included charges of $24 million related to
property, plant and equipment associated with the Company’s decision to phase-out operations at a New Jersey roofing
granule facility (Safety, Security and Protection Services segment) and charges of $11 million ($10 million related to
property, plant and equipment and $1 million related to intangible assets) related to the Company’s decision to close an
Electro and Communications facility in Wisconsin. Asset impairment charges related to intangible assets and property,
plant and equipment reflect the excess of the assets’ carrying values over their fair values.
Asset impairment charges in 2006 associated with the pharmaceuticals business and business-specific actions include
$109 million relative to property, plant and equipment; $30 million relative to intangible assets; and $5 million relative to
other assets. Impairment charges relative to intangible assets and property, plant and equipment reflect the excess of the
assets’ carrying values over their fair values as discussed in Note 1. The pharmaceuticals business asset impairment
charges are for certain assets not transferred to the buyers and primarily relate to the write-down of the assets to salvage
value. The business-specific asset impairment charges primarily relate to decisions the Company made in the fourth
quarter of 2006 to exit certain marginal product lines in the Display and Graphics segment and Electro and
Communications segment.