EXHIBIT 99

 

As more fully described in our 2005 Annual Report on Form 10-K and below, during the first quarter of 2006, 3M effected certain business segment realignments and adopted an accounting standard that requires 3M to expense stock-based compensation. 3M is including in this Current Report on Form 8-K the following annual and quarterly information for the years ended December 31, 2005, 2004 and 2003 (except where indicated otherwise):

 

•                  Supplemental unaudited reclassified business segment net sales

•                  Supplemental unaudited operating income information to reflect the business segment realignments and to reflect the impact of the adoption of SFAS No. 123R

•                  Supplemental unaudited stock-based compensation expense amounts by business segment relating to the adoption of SFAS No. 123R

•                  Supplemental unaudited reclassified related sales growth information (provided on annual and quarterly basis for the years ended December 31, 2005 and 2004)

 

This supplemental unaudited information is being provided to show reclassified historical results for the realigned segments, in addition to showing revised operating income information that reflects the impact of adopting SFAS No. 123R. Operating income was revised since 3M elected to use the modified retrospective method upon adoption of SFAS No. 123R, with prior periods adjusted to give effect to the fair-value-based method of accounting for awards granted in fiscal years beginning on or after January 1, 1995. The Company did not operate under the realigned segments structure for any of these prior periods and will begin to report comparative results under the new structure, including the impact of the adoption of the stock-based compensation accounting standard, with the filing of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.

 

As described in our 2005 Annual Report, effective in the first quarter of 2006, 3M made two changes to its business segments:

 

•                  3M combined its Industrial and Transportation business segments (which on a combined basis had previously reported 2005 sales of $5,578 million)

•                  3M’s Personal Care Division (2005 sales of $613 million) was transferred from the Health Care segment to the combined Industrial and Transportation segment.

 

In addition, during the first quarter of 2006, certain adhesive tapes (2005 sales of $47 million) previously in the Industrial and Transportation segment were transferred to the construction and home improvement business within the Consumer and Office segment. On a reclassified basis, 2005 sales for Industrial and Transportation totaled $6,144 million. This new Industrial and Transportation segment is intended to leverage common markets, sales channels and customers, technologies, manufacturing facilities and selling processes. Further, 3M formed the Film and Materials Resource Division as a corporate resource for the development of films and materials. This resulted in the transfer of 3M’s commercial videotape business (2005 sales of $47 million), which 3M began to phase out in the fourth quarter of 2004, to the Corporate and Unallocated segment from the Display and Graphics segment. The financial information presented herein reflects the impact of all of these changes for all periods presented.

 

3M’s businesses are organized, managed and internally grouped into segments based on differences in products, technologies and services. These segments have worldwide responsibility for virtually all of the Company’s product lines. 3M is not dependent on any single product or market. Transactions among reportable segments are recorded at cost. 3M is an integrated enterprise characterized by substantial intersegment cooperation, cost allocations and inventory transfers. Therefore, management does not represent that these segments, if operated independently, would report the operating income and other financial information shown.

 

In addition, effective January 1, 2006, 3M adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), “Share-Based Payment”, which requires 3M to expense stock-based compensation. The Company has adopted SFAS No. 123R using the modified retrospective method. Effective January 1, 2006, all prior periods were revised to give effect to the fair-value-based method of accounting for awards granted in fiscal years beginning on or after January 1, 1995.

 


 

Supplemental Unaudited Business Segment Information

Based on Segment Structure Effective in the First Quarter of 2006

 

NET SALES

 

 

First

 

Second

 

Third

 

Fourth

 

Total

 

(Millions)

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial and

 

 

 

 

 

 

 

 

 

 

 

Transportation

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

1,524

 

$

1,518

 

$

1,544

 

$

1,558

 

$

6,144

 

2004

 

1,436

 

1,423

 

1,410

 

1,442

 

5,711

 

2003

 

1,263

 

1,275

 

1,275

 

1,319

 

5,132

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

948

 

$

957

 

$

926

 

$

929

 

$

3,760

 

2004

 

877

 

890

 

876

 

953

 

3,596

 

2003

 

810

 

879

 

871

 

871

 

3,431

 

 

 

 

 

 

 

 

 

 

 

 

 

Display and Graphics

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

846

 

$

854

 

$

910

 

$

901

 

$

3,511

 

2004

 

821

 

866

 

830

 

829

 

3,346

 

2003

 

630

 

695

 

747

 

786

 

2,858

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Office

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

710

 

$

748

 

$

810

 

$

765

 

$

3,033

 

2004

 

696

 

685

 

748

 

772

 

2,901

 

2003

 

620

 

646

 

682

 

693

 

2,641

 

 

 

 

 

 

 

 

 

 

 

 

 

Electro and

 

 

 

 

 

 

 

 

 

 

 

Communications

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

557

 

$

594

 

$

597

 

$

585

 

$

2,333

 

2004

 

551

 

572

 

557

 

544

 

2,224

 

2003

 

500

 

532

 

524

 

545

 

2,101

 

 

 

 

 

 

 

 

 

 

 

 

 

Safety, Security and

 

 

 

 

 

 

 

 

 

 

 

Protection Services

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

557

 

$

599

 

$

573

 

$

563

 

$

2,292

 

2004

 

527

 

547

 

525

 

526

 

2,125

 

2003

 

458

 

518

 

482

 

470

 

1,928

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and

 

 

 

 

 

 

 

 

 

 

 

Unallocated

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

24

 

$

24

 

$

22

 

$

24

 

$

94

 

2004

 

31

 

29

 

23

 

25

 

108

 

2003

 

37

 

35

 

35

 

34

 

141

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

5,166

 

$

5,294

 

$

5,382

 

$

5,325

 

$

21,167

 

2004

 

4,939

 

5,012

 

4,969

 

5,091

 

20,011

 

2003

 

4,318

 

4,580

 

4,616

 

4,718

 

18,232

 

 


 

Supplemental Unaudited Business Segment Information

Based on Segment Structure Effective in the First Quarter of 2006

(including impact of adoption of SFAS No. 123R)

 

OPERATING INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First

 

Second

 

Third

 

Fourth

 

Total

 

(Millions)

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial and

 

 

 

 

 

 

 

 

 

 

 

Transportation

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

308

 

$

312

 

$

293

 

$

298

 

$

1,211

 

2004

 

283

 

266

 

262

 

239

 

1,050

 

2003

 

228

 

191

 

213

 

191

 

823

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

272

 

$

284

 

$

273

 

$

285

 

$

1,114

 

2004

 

224

 

237

 

236

 

276

 

973

 

2003

 

198

 

236

 

245

 

228

 

907

 

 

 

 

 

 

 

 

 

 

 

 

 

Display and Graphics

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

285

 

$

277

 

$

314

 

$

286

 

$

1,162

 

2004

 

291

 

307

 

278

 

239

 

1,115

 

2003

 

173

 

208

 

245

 

239

 

865

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Office

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

114

 

$

136

 

$

169

 

$

142

 

$

561

 

2004

 

117

 

117

 

142

 

138

 

514

 

2003

 

104

 

102

 

123

 

109

 

438

 

 

 

 

 

 

 

 

 

 

 

 

 

Electro and

 

 

 

 

 

 

 

 

 

 

 

Communications

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

95

 

$

115

 

$

124

 

$

113

 

$

447

 

2004

 

72

 

83

 

84

 

77

 

316

 

2003

 

52

 

71

 

70

 

73

 

266

 

 

 

 

 

 

 

 

 

 

 

 

 

Safety, Security and

 

 

 

 

 

 

 

 

 

 

 

Protection Services

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

126

 

$

147

 

$

137

 

$

127

 

$

537

 

2004

 

121

 

129

 

115

 

100

 

465

 

2003

 

99

 

125

 

107

 

85

 

416

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and

 

 

 

 

 

 

 

 

 

 

 

Unallocated

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

(47

)

$

(27

)

$

(43

)

$

(61

)

$

(178

)

2004

 

(38

)

(14

)

(8

)

(47

)

(107

)

2003

 

(134

)

(26

)

(20

)

(31

)

(211

)

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

1,153

 

$

1,244

 

$

1,267

 

$

1,190

 

$

4,854

 

2004

 

1,070

 

1,125

 

1,109

 

1,022

 

4,326

 

2003

 

720

 

907

 

983

 

894

 

3,504

 

 


 

Corporate and Unallocated operating income principally includes corporate investment gains and losses, certain derivative gains and losses, insurance-related gains and losses, certain litigation expenses, corporate restructuring program charges and other miscellaneous items. Because this category includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis. In 2005, Corporate and Unallocated was impacted by a pre-tax charge of approximately $30 million (recorded in the fourth quarter of 2005) in connection with settlement agreements of one pending LePage’s follow-on class actions and of two individual follow-on actions, all involving direct purchasers of transparent tape. In 2003, Corporate and Unallocated included a pre-tax charge of $93 million (recorded in the first quarter of 2003) related to an adverse ruling associated with a lawsuit filed against 3M in 1997 by LePage’s Inc.  As discussed previously, Corporate and Unallocated net sales and operating income information also includes 3M’s commercial videotape business.

 

The following table provides by business segment the amount of stock-based compensation expense related to the adoption of SFAS No. 123R.  This supplemental unaudited information is being provided to show the impact of adopting SFAS No. 123R on the Company’s business segment operating income results. Since the Company has adopted SFAS No. 123R using the modified retrospective method, all prior periods were adjusted to give effect to the fair-value-based method of accounting for awards granted in fiscal years beginning on or after January 1, 1995.  As shown in the table, 3M’s election to use the modified restrospective method upon adoption of SFAS No. 123R reduced 3M’s operating income by $155 million in 2005, $252 million in 2004, and $209 million in 2003, when compared to previously reported results. The Company did not operate under the realigned segments structure for any of these prior periods and will begin to report comparative results under the new structure, including the impact of the adoption of the stock-based compensation accounting standard, with the filing of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.

 


 

Supplemental Unaudited Business Segment Information

Based on Segment Structure Effective in the First Quarter of 2006

 

STOCK-BASED COMPENSATION EXPENSE IMPACT DUE TO ADOPTION OF SFAS NO. 123R

 

 

 

First

 

Second

 

Third

 

Fourth

 

Total

 

(Millions)

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial and

 

 

 

 

 

 

 

 

 

 

 

Transportation

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

20

 

$

13

 

$

7

 

$

7

 

$

47

 

2004

 

14

 

18

 

22

 

20

 

74

 

2003

 

18

 

16

 

14

 

14

 

62

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

17

 

$

8

 

$

5

 

$

5

 

$

35

 

2004

 

11

 

14

 

17

 

16

 

58

 

2003

 

14

 

12

 

11

 

11

 

48

 

 

 

 

 

 

 

 

 

 

 

 

 

Display and Graphics

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

10

 

$

4

 

$

3

 

$

2

 

$

19

 

2004

 

6

 

8

 

10

 

10

 

34

 

2003

 

9

 

6

 

6

 

6

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Office

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

10

 

$

5

 

$

3

 

$

3

 

$

21

 

2004

 

6

 

9

 

10

 

9

 

34

 

2003

 

8

 

8

 

6

 

7

 

29

 

 

 

 

 

 

 

 

 

 

 

 

 

Electro and

 

 

 

 

 

 

 

 

 

 

 

Communications

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

7

 

$

5

 

$

2

 

$

3

 

$

17

 

2004

 

5

 

6

 

7

 

8

 

26

 

2003

 

6

 

6

 

5

 

5

 

22

 

 

 

 

 

 

 

 

 

 

 

 

 

Safety, Security and

 

 

 

 

 

 

 

 

 

 

 

Protection Services

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

7

 

$

4

 

$

3

 

$

2

 

$

16

 

2004

 

5

 

6

 

8

 

7

 

26

 

2003

 

6

 

5

 

5

 

5

 

21

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

 

 

 

2005

 

$

71

 

$

39

 

$

23

 

$

22

 

$

155

 

2004

 

47

 

61

 

74

 

70

 

252

 

2003

 

61

 

53

 

47

 

48

 

209

 

 


 

Supplemental Unaudited Business Segment Information

Based on Segment Structure Effective in the First Quarter of 2006

 

The information presented in the following table represents the percent change in sales from the same period in the preceding year. Local-currency sales include both core plus acquisition volume impacts, in addition to price impacts.  While the Electro and Communications segment, Safety, Security and Protection Services segment, and total company historical sales results did not change, they are provided for reference purposes.

 

SALES GROWTH

 

 

2004 versus 2003 % change

 

2005 versus 2004 % change

 

(Millions)

 

First
Quarter

 

Second
Quarter

 

Third
Quarter

 

Fourth
Quarter

 

Total
Year

 

First
Quarter

 

Second
Quarter

 

Third
Quarter

 

Fourth
Quarter

 

Total
Year

 

Industrial and Transportation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Local-currency

 

7.1

%

8.8

%

7.9

%

5.3

%

7.2

%

3.2

%

3.6

%

7.9

%

11.0

%

6.5

% 

Translation

 

6.6

 

2.8

 

2.7

 

4.1

 

4.1

 

2.9

 

3.0

 

1.7

 

(3.0

)

1.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

13.7

%

11.6

%

10.6

%

9.4

%

11.3

%

6.1

%

6.6

%

9.6

%

8.0

%

7.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Local-currency

 

1.6

%

(1.6

)%

(2.6

)%

5.1

%

0.6

%

5.5

%

5.4

%

4.9

%

1.1

%

4.2

%

Translation

 

6.6

 

2.9

 

3.1

 

4.3

 

4.2

 

2.6

 

2.1

 

0.8

 

(3.6

)

0.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

8.2

%

1.3

%

0.5

%

9.4

%

4.8

%

8.1

%

7.5

%

5.7

%

(2.5

)%

4.6

 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Display and Graphics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Local-currency

 

22.9

%

20.2

%

8.6

%

0.6

%

12.4

%

1.7

%

(1.8

)%

8.5

%

10.8

 %

4.7

%

Translation

 

7.3

 

4.5

 

2.5

 

4.9

 

4.7

 

1.4

 

0.3

 

1.2

 

(2.1

)

0.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

30.2

%

24.7

%

11.1

%

5.5

%

17.1

%

3.1

%

(1.5)

%

9.7

%

8.7

%

4.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer and Office

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Local-currency

 

7.7

%

4.3

%

7.9

%

8.3

%

7.1

%

(0.2

)%

7.0

%

6.9

%

0.7

%

3.6

%

Translation

 

4.6

 

1.7

 

1.8

 

3.1

 

2.8

 

2.2

 

2.2

 

1.4

 

(1.6

)

1.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

12.3

%

6.0

%

9.7

%

11.4

%

9.9

%

2.0

%

9.2

%

8.3

%

(0.9

)%

4.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Electro and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Communications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Local-currency

 

5.6

%

5.2

%

4.0

%

(3.5

)%

2.7

%

(1.4

)%

1.5

%

6.0

%

10.9

%

4.2

 %

Translation

 

4.8

 

2.3

 

2.1

 

3.3

 

3.1

 

2.4

 

2.3

 

1.3

 

(3.3

)

0.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

10.4

%

7.5

%

6.1

%

(0.2

)%

5.8

%

1.0

%

3.8

%

7.3

%

7.6

%

4.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Safety, Security and Protection Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Local-currency

 

9.2

%

3.4

%

6.4

%

7.9

%

6.6

%

3.0

%

7.0

%

7.8

%

9.7

%

6.9

%

Translation

 

5.9

 

2.2

 

2.5

 

4.0

 

3.6

 

2.6

 

2.6

 

1.3

 

(2.6

)

1.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

15.1

%

5.6

%

8.9

%

11.9

%

10.2

%

5.6

%

9.6

%

9.1

%

7.1

%

7.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Local-currency

 

8.3

%

6.7

%

5.1

%

3.9

%

6.0

%

2.3

%

3.5

%

7.0

%

7.3

%

5.1

%

Translation

 

6.1

 

2.8

 

2.5

 

4.0

 

3.8

 

2.3

 

2.1

 

1.3

 

(2.7

)

0.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

14.4

%

9.5

%

7.6

%

7.9

%

9.8

%

4.6

%

5.6

%

8.3

%

4.6

%

5.8

%