3M 2009 Annual Report Download - page 31

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25
Pharmaceuticals Business:
2009 2008 2007
Operating income (millions) ........................................................... $—
$ — $ 796
The combination of the following items positively impacted total year 2007 pharmaceuticals operating income by
$796 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 totaled $781 million. In addition, as discussed in Note
4, a net operating income gain of $15 million was recorded in 2007, which primarily related to adjustments to
restructuring costs incurred in the fourth quarter of 2006. Drug Delivery Systems Division (part of Health Care without
Pharmaceuticals) is a source of supply to the acquiring companies and records sales and operating income related
to the pharmaceuticals supply agreements.
Consumer and Office Business (15.0% of consolidated sales):
2009 2008 2007
Sales (millions) ............................................................................... $ 3,471 $ 3,578 $ 3,494
Sales change analysis:
Organic local-currency sales (volume and price).................... (3.1) (0.8)% 4.0%
Acquisitions ............................................................................. 2.6 1.8 0.9
Local-currency sales ............................................................... (0.5)% 1.0% 4.9%
Translation .............................................................................. (2.5) 1.4 2.5
Total sales change...................................................................... (3.0)% 2.4% 7.4%
Operating income (millions) ........................................................... $ 748 $ 683 $ 710
Percent change........................................................................... 9.5% (3.8)% 9.0%
Percent of sales .......................................................................... 21.5% 19.1% 20.3%
The Consumer and Office segment serves markets that include consumer retail, office retail, home improvement,
building maintenance and other markets. Products in this segment include office supply products, stationery
products, construction and home improvement products (do-it-yourself), home care products, protective material
products, certain consumer retail personal safety products, and consumer health care products.
Fourth quarter and year 2009 results:
Fourth-quarter 2009 sales were $887 million, up 11.4 percent in dollar terms and up 7.1 percent in local currencies. A
number of businesses posted positive local-currency sales growth, including home care products, retail health care,
and do-it-yourself and mass retail. Local-currency sales declined just slightly in the office products business as
unemployment levels remain high and employers continue to act cautiously with respect to office supply purchases.
Fourth-quarter operating income in Consumer and Office increased to $159 million, and operating income margins
were 17.9 percent. Fourth-quarter 2008 includes $18 million in restructuring charges.
Consumer and Office has executed a bolt-on acquisition strategy over the past couple of years. Acquisitions
contributed 3.7 percent to fourth quarter local-currency sales growth, largely related to two purchases. In
December 2008, 3M purchased Futuro, a leading supplier of braces, supports and compression hosiery. In
July 2009, 3M purchased ACE Products, one of the strong consumer health care brands, from Becton, Dickinson.
These investments, combined with 3M’s own successful brands, provide critical mass in the retail drug store channel.
Consumer and Office has a long and successful history of growth in the United States via strong, category-defining
brands and an emphasis on customer relationships. 3M is leveraging this success outside the United States as well.
Fourth-quarter sales rose more than 20 percent in Latin America, 14 percent in Asia Pacific and 8 percent in Europe.
Operating income rose in all geographic regions as well.
For the full year 2009, sales declined 3 percent to $3.5 billion, which was largely due to currency. Operating income
margins were at 21.5 percent for the year, up over 2 percentage points versus 2008. In 2009, this business segment
recorded charges of $13 million related to restructuring actions, with this charge comprised of employee-related
liabilities for severance and benefits. 2008 includes $18 million in restructuring charges.
Fourth quarter and year 2008 results:
In the fourth quarter of 2008, Consumer and Office sales declined 9.6 percent to $796 million. Local currency sales
were down 5 percent and currency impacts reduced sales by just under 5 percentage points. U.S. sales declined by