3M 2009 Annual Report Download - page 23

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Operating Expenses:
(Percent of net sales) 2009 2008 2007
2009
Versus
2008
2008
Versus
2007
Cost of sales...............................................
52.4% 52.9% 52.1% (0.5)% 0.8%
Selling, general and administrative
expenses ................................................
21.2 20.8 20.5 0.4 0.3
Research, development and related
expenses ................................................
5.6 5.6 5.6 — —
(Gain)/loss from sale of businesses ........... — 0.1 (3.5) (0.1) 3.6
Operating income.......................................
20.8% 20.6% 25.3% 0.2% (4.7)%
As discussed in the preceding overview section, 2009 included restructuring charges, partially offset by a gain on
sale of real estate, which combined decreased operating income by $194 million, or 0.9 percent of net sales. In 2008,
the combination of restructuring actions, exit activities and a loss on sale of businesses, partially offset by a gain on
sale of real estate, decreased operating income by $269 million, or 1.1 percent of net sales. In 2007, the gain on sale
of businesses and real estate, net of environmental liability charges, restructuring and exit activities, benefited 2007
operating income by $681 million, or 2.8 percent of net sales. The following tables summarize these special items by
income statement caption.
2009 Restructuring and Other Summary
(Millions)
Restructuring
actions
Gain on sale of
real estate Total
Cost of sales............................................... $ 110 $ (15) $ 95
Selling, general and administrative
expenses ................................................ 91 — 91
Research, development and related
expenses ................................................ 8 — 8
Total operating income penalty (benefit) .... $ 209 $ (15) $ 194
2008 Restructuring and Other Summary
(Millions)
Restructuring
actions
Exit
activities
Loss on sale
of
businesses
Gain on sale
of real
estate Total
Cost of sales............................................... $ 84 $ 38 $ — $ — $ 122
Selling, general and administrative
expenses ................................................ 135 17 — (41) 111
Research, development and related
expenses ................................................ 10 3 — — 13
Loss from sale of businesses ..................... — — 23 — 23
Total operating income penalty (benefit).... $ 229 $ 58 $ 23 $ (41) $ 269
2007 Gain on Sale, Restructuring and Other Summary
(Millions)
Gain on sale
of
businesses
Environmental
liabilities
Restructuring
and exit
activities
Gain on sale
of real estate Total
Cost of sales............................................... $ — $ — $ 64 $ — $ 64
Selling, general and administrative
expenses ................................................ — 134 26 (52) 108
Research, development and related
expenses ................................................ — — (4) — (4)
Gain from sale of businesses ..................... (849) — — — (849)
Total operating income penalty (benefit).... $ (849) $ 134 $ 86 $ (52) $ (681)
Cost of Sales:
Cost of sales includes manufacturing, engineering and freight costs. Cost of sales as a percent of net sales
decreased 0.5 percentage points in 2009 compared to 2008. As discussed in Note 4 (Restructuring Actions and Exit
Activities), in 2009, 3M recorded $209 million in restructuring charges, of which $110 million was recorded in cost of
sales. This was partially offset by a $15 million gain on sale of a New Jersey roofing granule facility, which was also
recorded in cost of sales. In 2008, $122 million in restructuring and exit activities were recorded in cost of sales.
Thus, restructuring and other items were $27 million lower year-on-year, benefiting cost of sales by 0.1 percentage