3M 2005 Annual Report Download - page 74

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Year 2003 acquisitions:
In January 2003, 3M purchased an additional 25% interest in Sumitomo 3M Limited from NEC Corporation for
$377 million in cash. Prior to this purchase, 3M controlled and owned 50% of Sumitomo 3M Limited and fully
consolidated both Sumitomo 3M Limited’s balance sheet and results of operations, with a provision for the minority
interest that did not have participating rights. As a result of this acquisition, 3M now owns 75% of Sumitomo 3M
Limited. Sumitomo Electric Industries, Ltd., a Japanese corporation, owns the remaining 25% of Sumitomo 3M
Limited. Because all business segments benefit from this combination, goodwill acquired in this acquisition was
allocated to 3M’s seven business segments.
During the first quarter of 2003, 3M (Display and Graphics Business) finalized the purchase of Corning Precision
Lens, Inc. (Precision Optics, Inc.), which was acquired in December 2002, exclusive of the settlement described
previously under “Year 2004 acquisitions”. The impacts of finalizing the purchase price allocation, including a
working capital adjustment and payment of direct acquisition expenses, are shown in the business combination
activity table that follows.
During the year ended December 31, 2003, 3M entered into six additional business combinations for a total
purchase price of $49 million, net of cash acquired.
1) 3M (Industrial Business) purchased 100% of the outstanding shares of Solvay Fluoropolymers, Inc. (SFI),
previously a wholly owned subsidiary of Solvay America, Inc. SFI is a manufacturer of fluoroplastic products.
2) 3M (Display and Graphics Business) purchased Corning Shanghai Logistics Company Limited, previously a
wholly owned subsidiary of Corning Incorporated. This business is involved in the distribution of lens systems for
projection televisions.
3) 3M (Safety, Security and Protection Services Business) purchased 100% of the outstanding shares of
GuardiaNet Systems, Inc., a software company.
4) 3M (Electro and Communications Business) purchased the outstanding minority interest of Pouyet
Communications, Inc. (PCI), an Indian company. PCI is a telecommunications supplier.
5) 3M (Health Care Business) purchased 100% of the outstanding shares of Vantage Health Limited, a British
company. Vantage Health Limited develops health information systems software.
6) 3M (Health Care Business) purchased certain tangible and intangible assets from AstraZeneca S.p.A., an
Italian company. AstraZeneca S.p.A. is a research-based pharmaceuticals company.
Purchased identifiable intangible assets for these acquisitions are being amortized on a straight-line basis over lives
ranging from 5 to 15 years (weighted-average life of 11.3 years). There were no in-process research and development
charges associated with these acquisitions. Pro forma information related to these acquisitions is not included because
the impact of these acquisitions, either individually or in the aggregate, on the Company’s consolidated results of
operations is not considered to be material.
The purchase price allocations and the resulting impact on the Consolidated Balance Sheet relating to all 2003
acquisitions follow:
2003 ACTIVITY
Asset (Liability) Sumitomo Precision Optics, Inc. Aggregation of Total
(Millions) 3M Limited (2003 activity) Remaining Acquisitions Activity
Accounts receivable $ – $ – $ 4 $ 4
Inventory 9 – 14 23
Other current assets – – 1 1
Investments – – (15) (15)
Property, plant, and
equipment – net – (3) 29 26
Purchased intangible assets – 4 8 12
Purchased goodwill 289 8 11 308
Deferred tax asset 37 – – 37
Accounts payable and other
current liabilities – 4 (6) (2)
Minority interest liability 139 – 1 140
Other long-term liabilities (97) – 2 (95)
Net assets acquired $ 377 $ 13 $ 49 $ 439