3M 2014 Annual Report Download - page 24

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currency sales grew 3.6 percent in the Health Care business segment, with the strongest sales growth in health
information systems, food safety, critical and chronic care, and infection prevention; organic local-currency sales declined
in drug delivery systems. Organic local-currency sales increased 1.3 percent in the Consumer business segment, led by
the consumer health care and home care businesses. Electronics and Energy organic local-currency sales growth was
0.4 percent, with increases in energy-related sales in renewable energy and electrical markets. Electronic-related sales
declined, with growth in display materials and systems more than offset by declines in electronics materials solutions. For
the Company in total, organic-local currency sales grew 3.4 percent, with higher organic volumes contributing 2.0 percent
and selling price increases contributing 1.4 percent. Acquisitions added 0.7 percent to sales, which related to the late
November 2012 acquisition of Ceradyne, Inc. Foreign currency translation reduced sales by 1.7 percent year-on-year.
From a geographic area perspective, fourth-quarter 2013 organic local-currency sales growth was 4.5 percent in the
United States, 3.4 percent in EMEA, 3.3 percent in Asia Pacific, and 2.2 percent in Latin America/Canada. In the U.S.,
EMEA, and Asia Pacific, all five business segments generated positive organic local-currency sales growth. Organic local-
currency sales growth in the United States was led by Industrial, and Safety and Graphics. Organic local-currency sales
growth in EMEA was led by Industrial. West Europe grew organically by 3 percent year-on-year, continuing the positive
trends 3M had seen in preceding quarters. Organic local-currency sales growth in Asia Pacific was led by Consumer,
Safety and Graphics, and Health Care. Sales in Japan grew 4 percent organically. China/Hong Kong sales grew 1 percent
organically, impacted by a strong prior-year comparison of 16 percent growth in the fourth quarter of 2012 and weakness
in electronics. Organic local-currency sales growth in Latin America/Canada was positive across most countries, but
below trend levels for a few reasons. First, slowing in government tenders for infrastructure projects in certain countries
impacted sales in Electronics and Energy. Consumer was also soft in the fourth quarter due to weak retail demand and
challenging year-on-year comparisons. And lastly, sales in Venezuela declined year-on-year due to the economic and
political situation there. Venezuela diluted fourth-quarter organic sales growth in Latin America/Canada by 1.5 percentage
points, as 3M continued to work towards minimizing its Bolivar exposure and any associated costs.
Year 2013 results:
For total year 2013, net income attributable to 3M was $4.659 billion, or $6.72 per diluted share, compared to $4.444
billion, or $6.32 per diluted share, in 2012, an increase of 6.3 percent on a per diluted share basis. Sales totaled $30.9
billion, an increase of 3.2 percent from 2012. From a business segment perspective, organic local-currency sales growth
was 5.0 percent in Health Care, 4.6 percent in Industrial, 4.1 percent in Safety and Graphics, 3.0 percent in Consumer,
and was flat in Electronics and Energy. From a geographic area perspective, 2013 organic local-currency sales growth
was 7.1 percent in Latin America/Canada, 3.6 percent in Asia Pacific, 3.1 percent in the United States, and 2.1 percent in
EMEA. For the Company in total, organic local-currency sales grew 3.4 percent, with higher organic volumes contributing
2.5 percent and selling price increases contributing 0.9 percent. Acquisitions added 1.4 percent to sales, driven by the
November 2012 acquisition of Ceradyne, Inc. (Industrial), the September 2012 purchase of the net assets that comprised
the business of Federal Signal Technologies Group (Safety and Graphics), and the April 2012 acquisition of CodeRyte,
Inc. (Health Care). Foreign currency translation reduced sales by 1.6 percent year-on-year.
Operating income in 2013 was 21.6 percent of sales, compared to 21.7 percent of sales in 2012, a decline of 0.1
percentage points. Items that reduced operating income margins included lower factory utilization/productivity, strategic
investments, the impact of 2012 acquisitions, and other factors. These factors were largely offset by the combination of
selling price increases and raw material cost decreases, in addition to lower pension/postretirement benefit costs. Refer to
the section entitled “Results of Operations” for further discussion.
The income tax rate was 28.1 percent in 2013, down 0.9 percentage points versus 2012, which increased earnings per
diluted share by approximately 9 cents. Weighted-average diluted shares outstanding in 2013 declined 1.4 percent year-
on-year to 693.6 million, which increased earnings per diluted share by approximately 9 cents. Foreign exchange impacts
decreased earnings per diluted share by approximately 11 cents.
Sales and operating income by business segment:
The following table contains sales and operating income results by business segment for the years ended December 31,
2014 and 2013. In addition to the discussion below, refer to the section entitled “Performance by Business Segment” and
“Performance by Geographic Area” later in MD&A for a more detailed discussion of the sales and income results of the
Company and its respective business segments (including Corporate and Unallocated). Refer to Note 15 for additional
information on business segments, including Elimination of Dual Credit.