3M 2009 Annual Report Download - page 25

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19
impacted by 2.8 percentage points ($681 million) from the gain on sale of businesses and real estate, net of
environmental liabilities, restructuring and other exit activities.
Interest Expense and Income:
(Millions) 2009 2008 2007
Interest expense............................................................................. $ 219 $ 215 $ 210
Interest income............................................................................... (37) (105) (132)
Total............................................................................................ $ 182 $ 110 $ 78
Interest Expense: Interest expense increased slightly in 2009, primarily due to higher average U.S. long-term debt
balances largely offset by benefits from reduced short-term balances and lower interest rates. Interest expense
increased slightly in 2008 compared to 2007, primarily related to higher average U.S. and international long-term
debt balances, which were partially offset by lower short-term debt balances and interest rates.
Interest Income: Interest income declined in 2009 when compared to 2008, primarily due to lower yields on
investments. Interest income was lower in 2008 compared to 2007, primarily due to lower interest rates, which were
partially offset by higher average cash and cash equivalent balances.
Provision for Income Taxes:
(Percent of pre-tax income) 2009 2008 2007
Effective tax rate............................................................................. 30.0% 31.1% 32.1
%
The effective tax rate for 2009 was 30.0 percent, compared with 31.1 percent in 2008, and 32.1 percent in 2007. In
both 2009 and 2008, the Company’s tax rate primarily benefited from reduced international tax rates. Refer to Note 8
for additional information.
Noncontrolling Interest:
(Millions) 2009 2008 2007
Noncontrolling interest ................................................................... $51
$ 60 $ 55
Net income attributable to noncontrolling interest represents the elimination of the income or loss attributable to non-
3M ownership interests in 3M consolidated entities. The changes in noncontrolling interest amounts are primarily
related to Sumitomo 3M Limited (Japan), which is 3M’s most significant consolidated entity with non-3M ownership
interests. As discussed in Note 6, in the third quarter of 2009, 3M’s effective ownership in Sumitomo 3M Limited was
reduced from 75 percent to 71.5 percent.
Currency Effects:
Currency Effects: 3M estimates that year-on-year currency effects, including hedging impacts, decreased net income
attributable to 3M by approximately $220 million in 2009 and increased net income attributable to 3M by
approximately $160 million in 2008 and $150 million in 2007. This estimate includes the effect of translating profits
from local currencies into U.S. dollars; the impact of currency fluctuations on the transfer of goods between 3M
operations in the United States and abroad; and transaction gains and losses, including derivative instruments
designed to reduce foreign currency exchange rate risks and the negative impact of swapping Venezuelan bolivars
into U.S. dollars. 3M estimates that year-on-year derivative and other transaction gains and losses had an immaterial
impact in 2009, and increased net income attributable to 3M by approximately $40 million in 2008 and by
approximately $10 million in 2007.