Business:

 

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):

  

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