3M 2012 Annual Report Download - page 33

27
Display and Graphics Business (11.9% of consolidated sales):
2012
2011
2010
Sales (millions)
$
3,560
$
3,674
$
3,884
Sales change analysis:
Organic local currency
(2.4)
%
(7.5)
%
23.0
%
Acquisitions
0.9
0.1
―
Translation
(1.6)
2.0
1.0
Total sales change
(3.1)
%
(5.4)
%
24.0
%
Operating income (millions)
$
693
$
788
$
946
Percent change
(12.1)
%
(16.6)
%
60.3
%
Percent of sales
19.5
%
21.5
%
24.4
%
The Display and Graphics segment serves markets that include electronic display, traffic safety and commercial graphics.
This segment includes optical film solutions for LCD electronic displays; reflective sheeting for transportation safety;
commercial graphics sheeting and systems; architectural surface and lighting solutions; and mobile interactive solutions,
including mobile display technology, visual systems products, and computer screen films. 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 and tablets 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. These patents provide varying levels of
exclusivity to 3M for a number of such products. As some of 3M’s optical film patents expire at the end of 2013 and over
several years thereafter, 3M will likely see more competition in these products. 3M continues to innovate in the area of
optical films and files patents on its new technology and products. 3M’s proprietary manufacturing technology and know-
how also provide a competitive advantage to 3M independent of its patents.
Year 2012 results:
Sales in Display and Graphics were $3.6 billion, down 3.1 percent in U.S. dollars. Organic local-currency sales decreased
2.4 percent, as optical systems sales declined 10 percent, driven by lower optical film volumes for LCD TVs. Organic
local-currency sales increased in both commercial graphics and architectural markets and were up slightly in traffic safety
systems. Acquisitions added 0.9 percent to sales growth. This related to the September 2012 purchase of assets that
comprised the business of Federal Signal Technologies Group from Federal Signal Corp. This business focuses on
electronic toll collection and parking management hardware and software services. Foreign currency translation reduced
sales by 1.6 percent.
Organic local-currency sales increased 11 percent in Latin America/Canada and 6 percent in the United States. Organic
local-currency sales declined 4 percent in EMEA and 6 percent in Asia Pacific, where the decrease in optical systems
sales was a major factor.
Operating income in 2012 totaled $693 million, down 12.1 percent. Operating income margins were 19.5 percent of sales,
compared to 21.5 percent in 2011. The year-on-year decline was largely attributable to the decline in optical systems,
along with softness in traffic safety systems, which has been impacted by lower government spending.
Year 2011 results:
Sales in Display and Graphics were $3.7 billion in 2011, a decline of 5.4 percent in U.S. dollars. Organic local-currency
sales declined 7.5 percent. Acquisitions added 0.1 percent to sales growth and foreign currency impacts increased sales
by 2.0 percent. Optical Systems sales decreased 17 percent due to lower year-on-year LCD TV-related sales over the last
three quarters of 2011. Sales grew in commercial graphics and architectural markets. Traffic safety systems also posted
sales growth, which was all currency related. Sales increased in Latin America/Canada and the U.S., but declined in
Europe. Sales also declined in Asia Pacific, where the decline in optical systems sales was a major factor.
Operating income in 2011 totaled $788 million, down 16.6 percent from 2010. 3M achieved 21.5 percent operating income
margins in this business segment, as productivity improvements helped to partially offset negative impacts from lower
sales of optical films for LCD TVs, impacted by LCD TV volume reductions, as well as continued LCD selling price
declines.