3M 2009 Annual Report Download - page 29

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its investment both through the Austrian bankruptcy proceedings and pursuant to the terms of the Share Purchase
Agreement. The Company received approximately $6 million of its investment back in the fourth quarter of 2008. The
Company believes collection of its remaining investment is probable and, as a result, no impairment reserve has
been recorded.
Health Care Business (18.6% of consolidated sales):
2009 2008 2007
Sales (millions) ............................................................................... $ 4,294 $ 4,303 $ 3,980
Sales change analysis:
Organic local-currency sales (volume and price).................... 2.7% 5.0% 13.6%
Acquisitions ............................................................................. 0.9 1.7 4.6
Local-currency sales ............................................................... 3.6% 6.7% 18.2%
Divestitures ............................................................................. — (0.1) (23.5)
Translation .............................................................................. (3.8) 1.5 4.2
Total sales change...................................................................... (0.2)% 8.1% (1.1)%
Operating income (millions) ........................................................... $ 1,350 $ 1,175 $ 1,884
Percent change........................................................................... 14.9% (37.6)% 2.0%
Percent of sales .......................................................................... 31.4% 27.3% 47.4%
The Health Care segment serves markets that include medical clinics and hospitals, pharmaceuticals, dental and
orthodontic practitioners, and health information systems. Products and services provided to these and other markets
include medical and surgical supplies, skin health and infection prevention products, drug delivery systems, dental
and orthodontic products, health information systems and anti-microbial solutions. As discussed in Note 2, 3M
completed the sale of its global branded pharmaceuticals business in Europe in January 2007.
Fourth quarter and year 2009 results:
Fourth-quarter sales in Health Care were $1.1 billion, up nearly 11 percent in dollars and up 6 percent in local
currency. Foreign exchange impacts added nearly 5 percent to fourth quarter sales. Sales increased in every
business within health care, most notably infection prevention, skin and wound care and health information systems.
The orthodontics business also showed a nice rebound in the fourth quarter. Geographically, sales grew in all major
areas led by Canada, Latin America and Asia Pacific.
Fourth-quarter 2009 operating income increased to $375 million, or 32.7 percent of sales, with operating income
growth driven by favorable product mix, good cost control and continued productivity efforts across the portfolio.
Fourth quarter 2008 includes charges of $50 million for restructuring and exit activities.
For the full year, sales were $4.3 billion, up 3.6 percent in local currencies. This growth was broad-based, with
positive contributions from nearly all businesses. Sales growth was led by the infection prevention and skin and
wound care businesses, which provide a multitude of products that improve patient treatment outcomes and increase
efficiency for health care providers. 3M also drove positive local-currency sales growth in the oral care business. On
a geographic basis, sales growth rates were highest in Asia Pacific, Latin America and Canada.
Health Care recorded charges of $20 million related to restructuring actions in 2009, with this charge comprised of
employee-related liabilities for severance and benefits. In 2008, this business segment recorded charges of $60
million related to restructuring and exit activities. Including these charges, full-year operating income in Health Care
grew 15 percent to $1.35 billion, with operating income margins of 31.4 percent in 2009. 3M’s longer-term plan is to
keep reinvesting in this business to drive higher growth, even if operating income margins at some point compress to
the high-20’s.
In addition, the Health Care business invested in a number of areas to drive new products, accelerate growth and
improve competitiveness. For example, 3M’s drug delivery systems business entered the large and growing dry-
powder inhaler segment. In wound care, 3M strengthened its market leadership in clear wound dressings with new
3M™ Tegaderm™ dressings for IV sites and chronic wound care. The dental business launched a number of new
products, including new decay-preventative sealants, curing lights and impression material systems. In health
information systems, 3M continued to launch solutions for the new International Classification of Diseases (ICD-10)
coding, inpatient/outpatient medical record coding, reimbursement and data connectivity. And finally, 3M opened or
expanded major new R&D and manufacturing facilities around the world, including China, Singapore, India, Brazil
and Dubai. These investments are critical to 3M’s growth acceleration plans around the globe.