3M 2007 Annual Report Download - page 33

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PERFORMANCE BY GEOGRAPHIC AREA
Financial information related to 3M operations in various geographic areas is provided in Note 17. Operating income
results by geographic area were significantly impacted by the gain on sale businesses and other items as discussed in
Note A at the end of the preceding overview section. A summary of key information and discussion related to 3M’s
geographic areas follow:
Geographic Area 2007 2007 vs. 2006 % Change
Net Sales and Total
Operating Income % of Oper. Local Divesti- Trans- Sales Oper.
(Dollars in millions) Sales Total Income Currency tures lation Change Income
United States $ 8,987 36.7% $1,692 5.7% (4.2)% – 1.5% (11.3)%
Asia Pacific 6,601 27.0% 2,136 4.9% (1.3)% 2.0% 5.6% 1.8%
Europe, Middle East
and Africa 6,503 26.6% 1,705 11.7% (6.6)% 8.5% 13.6% 56.1%
Latin America and Canada 2,365 9.7% 665 10.6% (2.8)% 5.9% 13.7% 5.8%
Other Unallocated 6 – (5)
Total Company $24,462 100% $6,193 7.3% (3.8)% 3.2% 6.7% 8.7%
While 3M manages its businesses globally and believes its business segment results are the most relevant measure of
performance, the Company also utilizes geographic area data as a secondary performance measure. Export sales are
reported within the geographic area where the final sales to 3M customers are made. A portion of the products or
components sold by 3M’s operations to its customers are exported by these customers to different geographic areas. As
customers move their operations from one geographic area to another, 3M’s results will follow. Thus, net sales in a
particular geographic area are not indicative of end-user consumption in that geographic area.
U.S. local-currency sales increased 5.7%, with acquisitions contributing 3.1 percentage points. U.S. local-currency
sales growth was led by Health Care (without Pharmaceuticals) and Industrial and Transportation, which was partially
offset by softness in the electronic solutions business and weakness in a few businesses that are impacted by the
slowdown in the U.S. housing, road construction and mass retail markets, primarily roofing granules, protective
materials, traffic safety and office supply businesses. Asia Pacific local-currency sales increased 4.9%, with all six
business segments contributing to this increase. Sales in Japan totaled approximately $2 billion, with local-currency
sales up 2% from 2006. European local-currency sales increased 11.7%, with good growth across all segments,
especially Safety, Security and Protection Services and Health Care (without Pharmaceuticals). In the combined Latin
America and Canada area, local-currency sales increases of 10.6% were led by Industrial and Transportation; Safety,
Security and Protection Services; and Health Care (without Pharmaceuticals). Foreign currency translation positively
impacted European area sales by 8.5%, the combined Latin America and Canada area sales by 5.9%, and the Asia
Pacific area by 2%, as the U.S. dollar weakened against these currencies. For 2007, international operations
represented approximately 63% of 3M’s sales.
Since 3M sold its global branded pharmaceuticals business in December 2006 and January 2007, both sales growth and
operating income were negatively impacted when comparing 2007 to 2006. Sales in 2006 for pharmaceuticals totaled
$332 million in the United States, $315 million in the Europe, Middle East and Africa area, $77 million in the Asia Pacific
area, and $50 million in the Latin America and Canada area. In 2007, the gain on sale of businesses and a gain on sale
of real estate, net of restructuring and other items, increased worldwide operating income by $681 million, with the
largest impact in the Europe, Middle East and Africa area. In 2006, the gain on sale, restructuring and other items
increased worldwide operating income by $523 million, with the largest impact in the United States. These items are
discussed in more detail in the preceding overview section.