3M 2005 Annual Report Download - page 49

23
Transportation Business (8.4% of consolidated sales):
2005 2004 2003
Sales (millions) $1,772 $1,674 $1,531
Sales change analysis:
Local currency (volume and price) 5.0% 5.1% 5.4%
Translation 0.8 4.2 5.6
Total sales change 5.8% 9.3% 11.0%
Operating income (millions) $ 461 $ 426 $ 388
Percent change 8.1% 9.8% 17.2%
Percent of sales 26.0% 25.5% 25.4%
The Transportation segment serves markets that include automotive, automotive aftermarket, marine, aerospace
and specialty vehicle markets. This segment provides components and products that are used in the manufacture,
repair and maintenance of automotive, marine, aircraft and specialty vehicles.
In 2005, Transportation local-currency sales growth was 5.0%, with benefits from customer-focused new products and
productivity solutions driving results. One of these new products is 3M™ Paint Replacement Film, which is an
alternative to using paint around car and truck windows. In the automotive aftermarket area, the 3M™ Paint
Preparation System shortens paint changeover and clean-up time while also reducing the use of solvents for cleaning
paint guns. Sales growth was broad based in Transportation, led by businesses that serve the automotive OEMs and
auto body repair shops, despite challenges in the U.S. OEM Big-3 automotive market along with lower levels of
distribution buy-in due to cash flow trade-offs by customers in the automotive aftermarket business. Operating income
increased 8.1% in 2005.
In March 2005, 3M’s automotive business completed the purchase from TI&M Beteiligungsgesellschaft mbH of
19 percent of I&T Innovation Technology (I&T), which was founded in Austria in 1999. 3M and I&T will collaborate
to deliver flat flexible wiring systems for automotive interior applications to the global automotive market. The
purchase price of approximately $55 million is reported as “Investments” in the Consolidated Balance Sheet and
as “Purchases of Investments” in the Consolidated Statement of Cash Flows. Due to its distribution involvement
and voting rights, the Company is using equity method accounting for its investment in I&T. The Company has a
purchase option to buy an additional 31% investment of I&T after certain conditions have been met. This purchase
option expires December 31, 2008. The Company also has a put option, which provides the Company the right to
sell back its entire ownership interest in I&T, exercisable between January 1, 2007 and March 31, 2009, unless
the Company exercises its purchase option before then.
In 2004, local-currency sales growth was 5.1% in Transportation. Top-line growth in this business continued to benefit
from new products and solutions for customers, along with a strategy of replicating successful 3M solutions across
several distinct segments of the transportation industry. Operating income increased 9.8% to $426 million in 2004.
PERFORMANCE BY GEOGRAPHIC AREA
Financial information related to 3M operations in various geographic areas is provided in Note 16 to the Consolidated
Financial Statements. A summary of key information and discussion related to 3M’s geographic areas follow:
Geographic Area 2005 2005 vs. 2004 % Change
Net Sales and Total
Operating Income % o
f
Oper. Local Trans- Sales Oper.
(Dollars in millions) Sales Total Income Currency lation Change Income
United States $ 8,267 39.1% $1,324 4.9% – 4.9% 10.3%
Asia Pacific 5,744 27.1% 2,093 10.6% 0.5% 11.1% 11.7%
Europe, Middle East
and Africa 5,219 24.7% 1,073 0.9% (0.2)% 0.7% 5.8%
Latin America and Canada 1,881 8.9% 519 1.3% 7.4% 8.7% 7.5%
Other Unallocated 56 0.2% –
Total Company $21,167 100.0% $5,009 5.1% 0.7% 5.8% 9.4%