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15
RESULTS OF OPERATIONS
Net Sales:
2007 2006
U.S. Intl. Worldwide U.S. Intl. Worldwide
Net sales (millions) $8,987 $15,475 $24,462 $8,853 $14,070 $22,923
% of worldwide sales 36.7% 63.3%
38.6% 61.4%
Components of net sales change:
Volume – organic 1.6% 7.4% 5.1% 3.1% 8.0% 6.1%
Volume – acquisitions 3.1 2.1 2.4 2.6 1.9 2.1
Price 1.0 (1.1) (0.2) 1.4 (1.8) (0.5)
Local-currency sales 5.7 8.4 7.3 7.1 8.1 7.7
(including acquisitions)
Divestitures (4.2) (3.6) (3.8) – – –
Translation – 5.2 3.2 – 1.0 0.6
Total sales change 1.5% 10.0% 6.7% 7.1% 9.1% 8.3%
In 2007, local-currency sales growth of 7.3% (which includes acquisitions, but excludes divestiture and translation
impacts) was led by the Health Care; Safety, Security and Protection Services; Industrial and Transportation and
Consumer and Office segments. All business segments have contributed positive local-currency sales growth for four
consecutive years. Acquisitions increased 2007 sales by 2.4%, led by the August 2006 acquisition of Security Printing
and Systems Limited and the late 2006 acquisitions of Softmed Systems Inc. and Biotrace International PLC.
In 2006, local-currency sales growth of 7.7% was broad-based, as all business segments made positive contributions to
local-currency sales growth. Acquisitions increased 2006 sales by 2.1%, driven by the August 2005 acquisition of CUNO
and the August 2006 acquisition of Security Printing and Systems Limited.
Refer to both the “Performance by Business Segment” and “Performance by Geographic Area” sections for additional
discussion of sales change.
Operating Expenses:
(Percent of net sales) 2007 2006
Versus Versus
2007 2006 2005 2006 2005
Cost of sales 52.1% 51.1% 49.2% 1.0% 1.9%
Selling, general and administrative expenses 20.5 22.1 21.9 (1.6) 0.2
Research, development and related expenses 5.6 6.6 6.0 (1.0) 0.6
Gain on sale of businesses (3.5) (4.6) – 1.1 (4.6)
Operating income 25.3% 24.8% 22.9% 0.5% 1.9%
As discussed in the preceding overview section, the 2007 gain on sale of businesses and real estate, net of
environmental liability charges, restructuring and other exit activities, benefited 2007 operating income by $681
million, or 2.8% of net sales. In addition, the 2006 gain on sale, net of restructuring and other items, benefited 2006
operating income by $523 million, or 2.2% of net sales. The following tables summarize these items by operating
expense category. Items included in the “Other” category of the table for 2006 are acquired in-process research and
development expenses ($95 million), settlement costs of a previously disclosed antitrust class action ($40 million), and
environmental obligations related to the pharmaceuticals business ($13 million).