Citigroup 19th Annual Global Industrial Manufacturing Conference
2008 Citigroup Conference Presentation
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Transcript of 2008 Citigroup Conference Presentation
© 3M 2007. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
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© 3M 2008. All Rights Reserved.
Patrick D. CampbellVice President and CFO3M Company
March 5, 2008
Accelerated GrowthPremium Returns
Enhanced Shareholder Value
Citigroup 2008 Global Industrial Manufacturing Conference
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© 3M 2008. All Rights Reserved.
This presentation contain forward-looking information (within the meaning of the Private Securities Litigation Reform Act of 1995) about 3M’s financial results and estimates and business prospects that involve substantial risks and uncertainties. You can identify these statements by the use of words such as “anticipate,” “estimate,”“expect,” “project,” “intend,” “plan,” “believe,” “will,” and other words and terms of similar meaning in connection
with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic conditions; (2) competitive conditions and customer preferences; (3) foreign currency exchange rates and fluctuations in those rates; (4) the timing and acceptance of new product offerings; (5) the availability and cost of purchased components, compounds, raw materials and energy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply interruptions (including those caused by natural and other disasters and other events); (6) the impact of acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring; (7) generating less productivity improvements than estimated; and (8) legal proceedings, including significant developments that
could occur in the legal and regulatory proceedings described in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2007. Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports under “Risk Factors” in Part I, Item 1A
(Annual Report). The information contained in this presentation is as of the date indicated. The company assumes no obligation to update any forward-looking statements contained in this presentation as a result of
new information or future events or developments.
Forward-Looking Statements
Citigroup 2008 Global Industrial Manufacturing Conference
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© 3M 2008. All Rights Reserved.
Today’s Agenda
1. Recent performance
2. Unparalleled and diverse portfolio
3. International operations
4. Innovation
5. Financial strength
6. 2008 outlook
1
2
3
4
5
6
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© 3M 2008. All Rights Reserved.
Operational ExcellenceGrowth
Planning Framework
Protect andGrow the Core
AdjacencyBuild Out
New Technology New Products
Emerging Bus. Opportunities
(EBO’s)Go to Market
StrategiesLocalized, Simplified
Supply Chains
M&A
Lean Six Sigma / Factory Cost Reductions
Solve Low Turns Inventory
Service & Quality Revolution
Sourcing
Control Price Leakage
Leverage Overhead
Comp/BenefitCompetitiveness
Operational Excellence Within a Growth Culture Is Essential
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Citigroup 2008 Global Industrial Manufacturing Conference© 3M 2008. All Rights Reserved.
A Long-Term Track Record Of SuccessLocal Currency Growth
-2%
0%
2%
4%
6%
8%
10%
2001 2005 2006 2007
Operating Margins
$0
$1,500
$3,000
$4,500
$6,000
2001 2005 2006 20070%
5%
10%
15%
20%
25%
6% CAGR15% CAGR
Ope
ratin
g In
com
e
OI %
EPS
$0
$1
$2
$3
$4
$5
$6
2001 2005 2006 2007
18% CAGR
ROIC %
0%
4%
8%
12%
16%
20%
24%
2001 2005 2006 2007
+6 Points
* Amounts exclude special items and pharma in all periods. See appendix.
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
All Businesses Are Contributing, But Changing
Portfolio Breadth Strengthens ResultsAmounts exclude special items and pharma in all periods. See appendix.
+23.0%
Total Local Currency
-3%
1%
5%
9%
13%
17%
21%
2001 2002 2003 2004 2005 2006 2007
D&G LC Growth Other Segments LC Growth Total 3M LC Growth
Operating Margins
13%
16%
19%
22%
25%
28%
31%
34%
2001 2002 2003 2004 2005 2006 2007
D&G OI Margin Other Segments OI Margin Total 3M OI Margin
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© 3M 2008. All Rights Reserved.
Unparalleled and Diverse Portfolio
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
3M: A Global Diversified Materials Science Company
Superior materials science and innovation company with more than 40 technology platforms serving multiple end marketsStrong global diversified portfolio with operations in more than 60 countriesSuperb international distribution capabilities63% of sales are international growing at 12% CAGR over last 5 years
28%+ sales in emerging markets growing at 19%+ CAGR during last 5 years
World class margins and returnsReturned > 100% of reported net income to shareholders over last 5 years via dividends and share repurchases
By Segment
Transportation
Gov’t & Infrastructure
Electronics & Tech
Consumer
Health Care
Industrial
By End Markets4% - 5%10%-13%
10% - 13%
12% - 15%
14% - 16%
16%
25% - 30%
Res. & Com. Const.11%
13%
14%
16%
16%
30% Industrial &Transportation
Health Care
Display &Graphics
Consumer &Office
Safety, Sec. &Protection
Electro & Com.
2007$24.5B Sales
2007$24.5B Sales
Estimate
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
($ in billions)
Industrial and Transportation
$6.0
$6.6
$7.3
$5.6
$5.5
$6.5
$7.5
2004 2005 2006 2007
Sales
$0.9
$1.4
$1.9
Opera
ting I
ncom
e
CAGR: Sales 9%, OI 13%
LC Org Sls 5.2% 3.1% 4.4% 4.0%
OI Margin 18.4% 20.0% 20.4% 20.7%
Amounts exclude special items in all periods. See appendix.
Global market leader in tapes, abrasives, autobody repair and
specialty automotive OEM solutions
Sales Op Income
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
($ in billions)
$2.8
$3.0
$4.0
$3.2
$2.5
$3.4
$4.3
2004 2005 2006 2007
Sales
$0.6
$1.0
$1.3
Opera
ting I
ncom
e
LC Org Sls 2.8% 5.1% 7.4% 13.9%
OI Margin 27.8% 30.0% 28.3% 27.5%
CAGR: Sales 12%, OI 12%
Amounts exclude special items and pharma in all periods. See appendix.
Health Care
Technology leadership across health care market; a growing space driven by aging population and global expansion
Sales Op Income
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
LC Org Sls 10.1% 3.1% 4.9% 2.6%
OI Margin 32.8% 32.5.% 28.7% 28.5%
$3.4
$3.6
$3.7
$3.9
$3.0
$3.5
$4.0
2004 2005 2006 2007
Sales
$0.6
$1.0
$1.3
Opera
ting I
ncom
e
CAGR: Sales 4%, OI 0%
($ in billions)
Amounts exclude special items in all periods. See appendix.
Display and Graphics
Leading market positions in LCD films, traffic safety systems and
commercial graphics
Sales Op Income
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
($ in billions)
$2.9
$3.2
$3.4
$2.7
$2.5
$3.0
$3.5
2004 2005 2006 2007
Sales
$0.4
$0.7
$1.0
Opera
ting I
ncom
e
CAGR: Sales 8%, OI 8%
LC Org Sls 10.9% 6.4% 6.8% 4.1%
OI Margin 20.4% 20.9% 20.0% 20.3%
Consumer and Office
Category defining brands: Scotch®, Post-it®, Scotch-Brite®,
Filtrete™ and Command™
Sales Op Income
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
($ in billions)
$2.2
$2.3
$2.7
$3.1
$2.0
$2.6
$3.2
2004 2005 2006 2007
Sales
$0.3
$0.6
$0.8
Opera
ting I
ncom
e
CAGR: Sales 13%, OI 13%
LC Org Sls 4.1% 6.2% 9.6% 3.4%
OI Margin 20.9% 22.1% 21.0% 20.9%
Amounts exclude special items in all periods. See appendix.
Safety, Security and Protection Services
Global leader in respiratory protection, roofing granules, building safety solutions &
automated library systems; emerging security systems & RFID platforms
Sales Op Income
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
$2.4
$2.5
$2.7
$2.8
$2.0
$2.5
$2.9
2004 2005 2006 2007
Sales
$0.2
$0.4
$0.6
Ope
ratin
g In
com
e
CAGR: Sales 5%, OI 23%
LC Org Sls 2.1% 3.5% 4.2% -0.5%
OI Margin 12.0% 16.5% 17.5% 19.3%
($ in billions)
Amounts exclude special items in all periods. See appendix.
Electro and Communications
Leading positions in electrical tapes, copper interconnects, OEM insulating
tapes & medium-voltage splicing & terminating solutions
Sales Op Income
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© 3M 2008. All Rights Reserved.© 3M 2007. All Rights Reserved.
International OperationsOur Largest Growth Platform
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© 3M 2008. All Rights Reserved.
3M’s Subsidiary Network
KeySales & MarketingManufacturing/ConvertingTechnical Capabilities
Venezuela
Panama
El Salvador
Puerto Rico
Trinidad& Tobago
Brazil
UruguayArgentina
Chile
Peru
Colombia
Ecuador
Jamaica
Costa Rica
Guatemala
Dominican Republic
Mexico
Canada
China
Korea
Japan
Taiwan
Hong Kong
Vietnam
Philippines
Thailand
India
Malaysia
Indonesia
New ZealandAustralia
Singapore
Sri Lanka
UAE
Switzerland
Austria
Greece
Italy
Pakistan
Egypt
Kenya
South Africa
Morocco
France
Germany
United Kingdom
Belgium
Netherlands
Denmark
Norway
Sweden Finland
Spain
Portugal
Poland
CzechRepublic
Hungary
Russia
Turkey
RomaniaUkraine
East
Israel
Kazakhstan
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
51%
64-65%
40%
45%
50%
55%
60%
65%
70%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
E
Percentage Non-US
3M’s Dependency on US Economy Lessens Over Time
Amounts exclude pharma in all periods.
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© 3M 2008. All Rights Reserved.
International Sales Growth
Our Single Largest Growth Platform…
$7.5 $7.9$8.5 $8.2 $8.5
$10.2
$11.7$12.4
$13.6
$15.5
4
6
8
10
12
14
$16
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
($ in Billions)
3% CAGR
12% CAGR
Accelerating International Sales Growth
18 Amounts exclude pharma in all periods.
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© 3M 2008. All Rights Reserved.
International Sales Growth
Amounts exclude pharma in all periods
$2.4 $2.5$2.8 $2.7 $2.9
$3.7
$4.5
$5.2
$6.1
$7.0
2
3
4
5
6
7
$8
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
($ in Billions)
5% CAGR
Emerging Markets = Central/Eastern Europe + Middle East Africa + Asia Pacific ex. Japan/ANZ + Latin America
19%+ CAGR
Emerging Markets Adding Almost $1B/Year Or 4% To
Growth
…With a Growing Percentage of Emerging Market Sales
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© 3M 2007. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
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© 3M 2008. All Rights Reserved.
Innovation
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© 3M 2008. All Rights Reserved.
Voice of The Market
Technology-enabled solutions
3M Technology Capability
3M’s Core Strength: Connecting Technology to Markets
NPI
Ab
Bi
Ac
Ce
Ad
Dd
Am
Di
An
Do
As
Ec
Em
Fc
Fe
Fs
Fi
Im
Fl
In
Is
Lm
Md
Me
Mf
Mi
Mo
Mr
Pe
Nt
Nw
Rp
Se
Po
Pm
Wo
Vp
Su
Sm
Op
Pd
Pr
Pp
Tt
We
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© 3M 2008. All Rights Reserved.
FROM
Traditional mineral materials and market focus; metal finishing and wood-working
2003 OI Margin = 12%2003 ROIC = 16%2003 Growth Rate ≈ 1%
The Oldest Can Be Forever New - Abrasive Reinvention
Cubitron™
Trizact™ Super Abrasives Hook-it™
Synthetic materials and specialized applications; aerospace, healthcare, composites2012 OI Margin = 25%2012 ROIC = 45%2007 Growth Rate = 7.8%
Movement to higher growth, higher profit market zones
TO
Sandblaster™
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
Lava™ Chairside Oral Scanner“Digital Impressions”
Technology Obtained via Brontes Acquisition
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© 3M 2008. All Rights Reserved.
3M Mobile Projection Products
Coming Soon to a………Mobile Phone Media Player Digital Camera SmartphoneUMPC Pocket Big Screen TV Camcorder Laptop
…….Near You
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© 3M 2008. All Rights Reserved.
High Performance Window Film
• Film offers IR reflectivity and the nanomaterial hardcoat absorbs IR resulting in rejection of up to 97% of the sun’s IR energy
• Tiered global launch with a new businessmodel to meet service expectations – met 100% of sales forecast in 1st year
• Established a technology platform to launch subsequent products (Prestige Safety – 2007).
Film + Nanomaterials
LinerPSAHPWF 875
Nanomaterialhardcoat
Prestige and Crystalline Window Films
Superior heat rejection with low reflectivity and high visible light transmission
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© 3M 2008. All Rights Reserved.
New Consumer Products Inspired by Non-Woven Technology
• New performance attributes• Natural materials• Sustainable and renewable
• New performance attributes• Natural materials• Sustainable and renewable
Non-woven
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© 3M 2008. All Rights Reserved.
Low thermal expansionHighly conductive
Light weight like aluminum
Strong like steel
Aluminum-oxide fibersAluminum-oxide fibers
Metal matrix(inorganic)
Metal matrix(inorganic)
Key Features:Capable of carrying 2-3x the current of conventional, steel core conductors
Compatible with existing structures
Less sag
Almost no corrosion due to:Chemically compatible materials Environmental stability
Key Features:Capable of carrying 2-3x the current of conventional, steel core conductors
Compatible with existing structures
Less sag
Almost no corrosion due to:Chemically compatible materials Environmental stability
Advanced Materials Provides Basis for 3M Aluminum Composite Conductor Composite (ACCR)
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© 3M 2008. All Rights Reserved.
IR Reflective FilmsBarrier Films
Structural Tapes, Sealants & Adhesives
Optically Clear UV Stable Fluoropolymer Films
Anti-soil &Hard Coatings
Metallized Mirror Films
Micro-replicatedLens Film
Electrical Foil &Connectors
Wavelength Selective Mirror Films
60 Years of Experience(Weathering Resource Center)
Solar: Strong Capabilities & Technology Base
© 3M 2007. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
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Financial Strength
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
Financial PolicyFirst priority: fund available growth
Capital expenditures: drive 20%+ ROIC via organic growthSupplement organic with accretive, growth-enhancing acquisitions
Increase annual dividendMaintain competitive yield and payout ratioOffset inflation at a minimum, with the maximum dependent on other growth-generating uses at that time
Opportunistic share buybackEconomic dynamics and alternative cash uses will drive repurchase levelsReady to support the stock when warranted
For the right growth investments, lever up as required
Managing With “AA” Operating Discipline; Will Consider “A” For The Right Strategic Cash-Generating Opportunity
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
Stock Repurchases in Millions
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2001 2002 2003 2004 2005 2006 2007
Cash Back to ShareholdersFor The Period 2001-2007:
$12.7B in share repurchases$8.1B in dividends paidDividend CAGR of 6.5%No-equity-dilution policy
Dividends in Millions
$800
$1,100
$1,400
2001 2002 2003 2004 2005 2006 2007
Returned 108% of Reported Net Income Via Dividends and Share Repurchases
© 3M 2007. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
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Outlook
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© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
General Outlook For 2008Moderately softer but stable worldwide economic growth
Slower but sustainable growth in developing economies – BRICP Continued slow US ; H2 stronger than H1; no relief on residential housingLow single-digit IPI growth in Western Europe and JapanHigher commodity prices/RMs; raising prices to help offset
InvestmentsR&D investments and plant start-upsInvesting in emerging marketsLCD films
ProductivityLean Six Sigma, benefit cost containment, G&A leverage
TailwindsFavorable currency trendsFewer shares outstandingSome commodities likely to ease
We Will Deliver a Minimum of 10%+ EPS Growth in 2008
© 3M 2008. All Rights Reserved.
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Citigroup 2008 Global Industrial Manufacturing Conference
Driving Toward Our Long-Term Objectives
Deliver sales growth at >2x IPICustomer-inspired innovationMove into faster-growing market spacesAggressively drive EBOs
Commitment to double-digit earnings growthMaintain >20% ROICContinuous supply chain improvement
Quadruple win: better service, improve inventory, lower logistics cost, lower tax rate
Driving to 30.5% tax rate by 2012
Unlimited Potential for Shareholder Value Creation
© 3M 2007. All Rights Reserved.© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
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March 5, 2008
Question and Answer
© 3M 2007. All Rights Reserved.© 3M 2008. All Rights Reserved. Citigroup 2008 Global Industrial Manufacturing Conference
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March 5, 2008
Appendix
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© 3M 2008. All Rights Reserved.
LAC12%
APAC24%
Europe29%
U.S.35%
Industrial & Transportation
2007 Sales by Geography
2007 Sales Breakdown2005 2006 2007 CAGR
Sales $6.0B $6.6B $7.3B 10%
OI $1.2B $1.4B $1.5B 12%
OI% 20.0% 20.4% 20.7%
With leading positions in:AbrasivesIndustrial tapesAutobody repair solutionsSpecialty solutions for automotive OEMs
Amounts exclude special items in all periods. See appendix.
Other7%Liquid Filtration
7%
Transportation29%
Adhesives & Tapes33%
Energy & Adv Mtls11%
Abrasives13%
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© 3M 2008. All Rights Reserved.
Oral Care26%
Medical50%
Health Information Systems
10%
Drug Delivery14%
LAC8%
APAC11%
Europe36%
U.S.45%
2007 Sales by Geography
2005 2006 2007 CAGR
Sales $3.0B $3.2B $4.0B 16%
OI $0.9B $0.9B $1.1B 11%
OI% 30.0% 28.3% 27.5%
Health Care2007 Sales Breakdown
Amounts exclude special items and pharma in all periods. See appendix.
With leading positions in:Skin & wound careInfection preventionStethoscopesRestorative dentistry & orthodonticsCoding and reimbursement softwareInhalation drug delivery
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© 3M 2008. All Rights Reserved.
Traffic Safety24%
Optical51%
Projection Systems
5%Commercial Graphics
20%
LAC5%
Europe17%
U.S.19%
APAC59%
2007 Sales by Geography
2005 2006 2007 CAGR
Sales $3.6B $3.7B $3.9B 5%
OI $1.2B $1.1B $1.1B -2%
OI% 32.5% 28.7% 28.5%
Display & Graphics2007 Sales Breakdown
Amounts exclude special items in all periods. See appendix.
With leading positions in:LCD filmsCommercial graphicsReflective materials for highway signs, license plates and construction work zones
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© 3M 2008. All Rights Reserved.
DIY27%
Office & Stationery
44%
Prot. Mtrls & Consumer HC
6%
Home Care23%
LAC10%
APAC13%
Europe18%
U.S.59%
2007 Sales by Geography
2005 2006 2007 CAGR
Sales $2.9B $3.2B $3.4B 8%
OI $0.6B $0.6B $0.7B 6%
OI% 20.9% 20.0% 20.3%
Consumer & Office2007 Sales Breakdown
Home to many category-defining brands:Scotch®Post-it®Scotch-Brite®Filtrete™Command™
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© 3M 2008. All Rights Reserved.
Security & RFID17%
Roofing Granules9% Personal
Protection Equipment
46%
Building Svcs20%
CorrosionProtection
8%
LAC12%
APAC18%
Europe35%
U.S.35%
2007 Sales by Geography
2005 2006 2007 CAGR
Sales $2.3B $2.7B $3.1B 15%
OI $0.5B $0.6B $0.6B 12%
OI% 22.1% 21.0% 20.9%
Safety, Security & Protection Services2007 Sales Breakdown
Amounts exclude special items in all periods. See appendix.
With leading positions in:Respiratory protectionRoofing granules for asphalt shinglesAutomated library systemsBuilding safety solutions
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© 3M 2008. All Rights Reserved.
Electrical Mkts30%
Electronics43%
Telecom&Other27%
LAC10%
Europe23%
U.S.28%
APAC39%
2007 Sales by Geography
2005 2006 2007 CAGR
Sales $2.5B $2.7B $2.8B 5%
OI $0.4B $0.5B $0.5B 14%
OI% 16.5% 17.5% 19.3%
Electro & Communications2007 Sales Breakdown
Amounts exclude special items in all periods. See appendix.
With leading positions in:Electrical tapesSplicing/terminating solutions for medium voltageOEM insulating tapesCopper interconnectsFluorochemicals for electronics applications
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© 3M 2008. All Rights Reserved.
Non-GAAP Financial Measures3M Company and Subsidiaries
SUPPLEMENTAL CONSOLIDATED INFORMATION NON-GAAP FINANCIAL MEASURES
(Millions, except per-share amounts) (Unaudited)
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company also discusses non-GAAP measures that exclude special items. Sales, operating income and diluted earnings per share measures that exclude special items and that exclude the impact of Pharmaceuticals are not in accordance with, nor are they a substitute for, GAAP measures. Special items represent significant charges or credits that are important to an understanding of the Company’s ongoing operations. The company uses these non-GAAP measures to evaluate and manage the Company’s operations. The company believes that discussion of results excluding special items provides a useful analysis of ongoing operating trends. The determination of special items may not be comparable to similarly titled measures used by other companies. Special items for the twelve months ended December 31, 2007 and 2006 and prior periods presented have been previously provided (See Note 1). In addition, the Company believes that providing financial results excluding the impact of Pharmaceuticals provides useful information (See Note 2). The reconciliations provided below reconcile the non-GAAP financial measures with the most directly comparable GAAP financial measures for the periods indicated.
Year Year Year Year Year Year Year(Millions, except per-share amounts) 2001 2002 2003 2004 2005 2006 2007Sales Dollars:Reported GAAP 16,054$ 16,332$ 18,232$ 20,011$ 21,167$ 22,923$ 24,462$ Pharmaceutical (699)$ (767)$ (813)$ (793)$ (797)$ (774)$ -$ Adjusted Non-GAAP 15,355$ 15,565$ 17,419$ 19,218$ 20,370$ 22,149$ 24,462$
Operating Income Dollars:Reported GAAP 2,075$ 2,816$ 3,504$ 4,326$ 4,854$ 5,696$ 6,193$ Special Items 504$ 202$ 93$ (523)$ (681)$ Pharmaceutical (157)$ (200)$ (217)$ (194)$ (226)$ (256)$ -$ Adjusted Non-GAAP 2,422$ 2,818$ 3,380$ 4,132$ 4,628$ 4,917$ 5,512$
Diluted Earnings per Share:Reported GAAP 1.60$ 2.32$ 2.88$ 3.56$ 3.98$ 5.06$ 5.60$ Special Items 0.39$ 0.14$ 0.07$ -$ 0.14$ (0.57)$ (0.62)$ Pharmaceutical (0.12)$ (0.17)$ (0.18)$ (0.16)$ (0.20)$ (0.23)$ -$ Adjusted Non-GAAP 1.87$ 2.29$ 2.77$ 3.40$ 3.92$ 4.26$ 4.98$
The Company uses local-currency sales growth, which excludes the impact of translation or currency exchange rates, as an indication of its economic sales growth. The Company has provided the components of local-currency sales growth below, including the impact of translation. The Company has provided local-currency sales growth that excludes the historical impacts of divestitures, primarily the Pharmaceuticals business, to portray what it believes are more meaningful sales growth trends. 3M believes this non-GAAP sales growth information excluding divestitures provides useful information (See Note 2). These measures are not in accordance with, nor are they a substitute for, GAAP measures.
Year Year Year Year Year Year Year2001 2002 2003 2004 2005 2006 2007
Sales Change Percents:Total Reported Sales Change -3.9% 1.7% 11.6% 9.8% 5.8% 8.3% 6.7%Less: Translation Impact -3.3% 0.1% 5.2% 3.8% 0.7% 0.6% 3.2%Local-Currency Sales Change (including divestitures) -0.6% 1.6% 6.4% 6.0% 5.1% 7.7% 3.5%
Local Currency Sales Change (excluding divestitures) -1.1% 1.4% 6.8% 6.5% 5.3% 8.1% 7.3%
The Company uses non-GAAP measures to focus on shareholder value creation. 3M uses Return on Invested Capital, defined as after-tax operating income divided by average operating capital. This measure excludes special items and the historical impacts of the Pharmaceuticals business (see Notes 1 and 2). These measures are not recognized under U.S. generally accepted accounting principles and may not be comparable to similarly titled measures used by other companies.
Year Year Year Year2001 2005 2006 2007
Return on Invested Capital 12.8% 22.1% 25.3% 24.0%Return on Invested Capital - excluding Pharmaceuticals and Special Items 15.3% 21.9% 21.6% 21.4%
As previously indicated, the Company provides non-GAAP measures, including the business segment operating income amounts shown within this presentation that exclude special items. Special items for the years 2007 and 2006 have been previously provided in an 8-K that was furnished to the U.S. Securities and Exchange Commission on January 29, 2008. An 8-K furnished March 4, 2008, provided results that reflect for all periods presented the impacts of certain business segment product moves effective in the first quarter of 2008. There were no special items that impacted business segment operating income results for the years 2005 and 2004.
(1) Special items for the periods presented have been discussed in Form 8-K’s that were furnished to the U.S. Securities and Exchange Commission on January 29, 2008 and January 30, 2007 and in 3M’s 2003 Form 10-K filed March 2, 2004. Also reference 3M’s Form 8-K dated March 4, 2008, which provided results that reflect for all periods presented the impacts of certain business segment product moves effective in the first quarter of 2008.
(2) In December 2006 and January 2007, 3M completed the sale of its global branded Pharmaceuticals
business. In connection with these transactions, 3M’s Drug Delivery Systems Division became a source of supply to the acquiring companies. Because of the extent of 3M cash flows from these agreements in relation to the disposed businesses, the operations of the branded Pharmaceuticals business were not classified as discontinued operations. The sale of the branded Pharmaceuticals business impacted both sales and operating income growth in 2007, as significant Pharmaceuticals sales and income are in the reported base 2006 period and also in prior periods. Where indicated, to provide more meaningful trend information, portions of this presentation exclude the impact of 2006 and prior Pharmaceutical financial results, as this business was sold in December 2006 and January 2007.