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23
highly competitive environment where 3M’s brand presence and high quality are clearly making a difference. Doctors,
hospitals and other medical service providers continue to show a strong preference for 3M products.
For full-year 2008, Health Care’s results were strong, with sales increasing 8.2 percent to $4.3 billion and operating
income margins of 27.3 percent. As discussed further below, both 2007 and 2006 operating income results include
significant gains from the sale of 3M’s pharmaceuticals business in December 2006 and January 2007, negatively
impacting the 2008 versus 2007 year-on-year operating income comparison. Local-currency sales were up 6.8
percent, largely organic, but also included 1.7 percent from acquisitions. In 2008, 3M closed a number of important
bolt-on acquisitions in Health Care, including TOP-Service, a German orthodontic technology and services company
offering a digital lingual solution; Imtec, an Oklahoma-based manufacturer of dental implants and cone beam
computed tomography; and Solumed, a Quebec-based developer and marketer of leading-edge medical products
designed to prevent infections in operating rooms and hospitals. Full-year 2008 sales were led by strong increases in
3M’s medical, dental and orthodontics businesses. Sales grew in all geographies, led by strong gains in Asia Pacific
and Latin America.
In 2007, Health Care sales were $3.968 billion. Local-currency growth was 18.3 percent (excluding divestitures),
including 4.4 percentage points of growth from acquisitions and 4.5 percentage points of growth from supply
agreements related to the sale of the global branded pharmaceuticals business. The sale of the pharmaceuticals
business reduced Health Care sales growth by 23.7 percent. 3M provides disaggregated information on sales growth
for Health Care’s remaining businesses (without pharmaceuticals) further below.
The combination of the following items positively impacted total year 2007 Health Care operating income by $791
million. As discussed in Note 2, in January 2007 the Company sold its branded pharmaceuticals business in the
Europe region. The operating income gain related to this sale, which is included in Health Care, totaled $781 million.
In addition, as discussed in Note 4, a net operating income gain of $10 million was recorded in 2007, which primarily
related to adjustments to restructuring costs incurred in the fourth quarter of 2006.
The combination of the following items positively impacted total year 2006 Health Care operating income by $673
million, primarily in the fourth quarter of 2006. As discussed in Note 2, in early December 2006, the Company sold its
branded pharmaceuticals business in the Asia Pacific region, including Australia and South Africa. The Company
also sold its branded pharmaceuticals business in the United States, Canada and Latin America in late
December 2006. The operating income gain related to this sale, which is included in Health Care, totaled $1.074
billion. In addition, as discussed in Note 4, the Health Care segment for the year 2006 included $293 million in
restructuring costs, primarily employee-related severance and benefit costs. Of the $293 million, $166 million was
related to the pharmaceuticals business and $15 million related to Health Care severance and other costs. In
addition, $112 million of severance and benefit costs were recorded in the fourth quarter of 2006 related to worldwide
staff overhead reduction actions taken to streamline the Company’s cost structure in response to the sale of 3M’s
branded pharmaceuticals business. Health Care also included $95 million of expensed in-process research and
development costs related to the Brontes acquisition and $13 million in environmental reserves related to the
pharmaceuticals business.
3M believes the following disaggregated information for 3M Health Care’s remaining businesses (without
pharmaceuticals) and for pharmaceuticals on a stand-alone basis provides useful information.
Health Care Business without Pharmaceuticals:
2008 2007 2006
Sales (millions)....................................... $ 4,293 $ 3,968 $ 3,237
Sales change analysis:
Local currency (volume and price).. 6.8 % 18.3 % 8.5 %
Divestitures ..................................... (0.1 ) — —
Translation ...................................... 1.5 4.3 0.7
Total sales change.............................. 8.2 % 22.6 % 9.2 %
Operating income (millions) ................... $ 1,173 $ 1,086 $ 806
Percent change................................... 8.0 % 34.6 % (9.1 )%
Percent of sales .................................. 27.3 % 27.4 % 24.9 %
The following discussion provides information on 3M Health Care’s remaining businesses (without pharmaceuticals).
Refer to the preceding section entitled “Health Care Business” for a discussion of sales change for 2008 compared to
2007. Operating income increased 8.0 percent to $1.173 billion, while operating income margins were maintained in