3M 2009 Annual Report Download - page 35

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For the full year of 2008, sales declined 16.6 percent, driving operating income down 50 percent to $583 million.
Operating margins were at 17.8 percent for 2008. 3M took aggressive action during 2008 to reduce its cost structure
across all businesses within Display and Graphics with particular focus on the optical film business. Second-half
2008 restructuring charges and exit activities of $42 million reduced operating income for total year 2008. These
expenses were comprised of severance/related benefits and asset impairments. In 2007, 3M recorded a gain on the
sale of its Opticom Priority Control Systems and Canoga Traffic Detection businesses, which was partially offset by
expenses related to restructuring and exit activities. These items on a combined basis benefited operating income by
$51 million in 2007. In aggregate, these items contributed approximately 6 percentage points of this 50 percent
operating income decline when comparing 2008 to 2007. In addition, the 2008 restructuring and exit activity charges
reduced 2008 operating income margins by 1.3 percentage points, while the 2007 net benefit contributed 1.3
percentage points of the 29.8 percent operating income margin for 2007.
Electro and Communications Business (9.8% of consolidated sales):
2009 2008 2007
Sales (millions) ............................................................................... $ 2,276 $ 2,835 $ 2,805
Sales change analysis:
Organic local-currency sales (volume and price).................... (18.4) (2.0)% (0.5 )%
Acquisitions ............................................................................. 0.6 0.4 1.5
Local-currency sales ............................................................... (17.8)% (1.6)% 1.0 %
Divestitures ............................................................................. (0.2) — —
Translation .............................................................................. (1.7) 2.7 3.0
Total sales change...................................................................... (19.7)% 1.1% 4.0 %
Operating income (millions) ........................................................... $ 322 $ 540 $ 501
Percent change........................................................................... (40.4)% 7.9% 19.3 %
Percent of sales .......................................................................... 14.2% 19.1% 17.8 %
The Electro and Communications segment serves the electrical, electronics and communications industries,
including electrical utilities; electrical construction, maintenance and repair; original equipment manufacturer (OEM)
electrical and electronics; computers and peripherals; consumer electronics; telecommunications central office,
outside plant and enterprise; as well as aerospace, military, automotive and medical markets; with products that
enable the efficient transmission of electrical power and speed the delivery of information. Products include electronic
and interconnect solutions, micro interconnect systems, high-performance fluids, high-temperature and display tapes,
telecommunications products, electrical products, and touch screens and touch monitors.
Fourth quarter and year 2009 results:
Electro and Communications continued to gather momentum in the fourth quarter of 2009. Fourth-quarter sales
increased 1.7 percent sequentially, and were also up 4.6 percent year on-year. Local-currency sales were up 1.4
percent year-on-year, led by businesses that supply the consumer electronics and semiconductor industries. 3M’s
infrastructure-related businesses in telecommunications and commercial construction remained challenging in the
fourth quarter.
Electro and Communications posted year-on-year operating income improvement in the fourth quarter, with operating
income margins approaching 19 percent for the second consecutive quarter. The fourth quarter of 2008 included $7
million in restructuring expenses. Electro and Communications is driving operational efficiencies in the business to
offset what has been an extremely challenging global business environment.
Sales for the full-year 2009 were $2.3 billion, down 19.7 percent, with local-currency sales declining 17.8 percent,
foreign currency translation reducing sales by 1.7 percent, and divestitures reducing sales by 0.2 percent. The global
economic downturn weighed heavily on all businesses, particularly telecom infrastructure, commercial construction
and utilities. Operating income for the year was $322 million, with operating income margins of 14.2 percent.
Operating income in 2009 included charges of $11 million related to restructuring actions, with this charge comprised
of employee-related liabilities for severance and benefits. Operating income in 2008 was impacted by $7 million in
restructuring expenses.
In Electro and Communications, 3M was encouraged by the fourth quarter sales improvement and the progress in
streamlining the cost structure of the business in 2009. In addition, this business has recently developed and
introduced a number of new products, including solutions for touch-enabled mobile handheld devices and smart
phones. Other recent product launches include electrically conductive optically clear adhesives, wafer handling