local-currency growth since 2000. Local-currency growth accelerated in the second half of 2005, with local-currency growth in the fourth quarter of 2005 up 10.9%. Local-currency growth was led by demand for 3M electronic products from semiconductor manufacturers, along with continued strong growth in electrical products used for insulating, testing and sensing. This strong sales growth helped offset weakness in the electronic solutions and communications markets. Operating margins were 19.2% in 2005, with operating income increasing 41.5% in 2005.

PERFORMANCE BY GEOGRAPHIC AREA

Financial information related to 3M operations in various geographic areas is provided in Note 18. A summary of key information and discussion related to 3M’s geographic areas follow: 

While 3M manages its businesses globally and believes its business segment results are the most relevant measure of performance, the Company also utilizes geographic area data as a secondary performance measure. Export sales are reported within the geographic area where the final sales to 3M customers are made. A portion of the products or components sold by 3M’s operations to its customers are exported by these customers to different geographic areas. As customers move their operations from one geographic area to another, 3M’s results will follow. Thus, net sales in a particular geographic area are not indicative of end-user consumption in that geographic area.

U.S. sales revenue increased 7.1%, as all six business segments contributed to this increase. Asia Pacific local-currency sales (which exclude translation impacts) increased 9.2%. All six business segments contributed to this increase in the Asia Pacific area, with optical film being the largest growth component. Sales in Japan totaled approximately $2 billion, with local-currency sales up 1.5% from 2005. European local-currency sales increased 8.3%, with good growth in Industrial and Transportation and Safety, Security and Protection Services. In the combined Latin America and Canada area, local-currency sales increases of 6.1% were led by Industrial and Transportation, Safety, Security and Protection Services and Consumer and Office. Foreign currency translation positively impacted the combined Latin America and Canada area sales by 4.4%, and the European area sales by 1.4%, as the U.S. dollar weakened against these currencies. Foreign currency translation had a minimal impact on Asia Pacific sales. For 2006, international operations represented 61.4% of 3M’s sales.

Since 3M sold its global branded pharmaceuticals business in December 2006 and January 2007, both sales growth and operating income will be negatively impacted in 2007. Sales in 2006 for pharmaceuticals totaled $332 million in the United States, $315 million in the Europe, Middle East and Africa area, $77 million in the Asia Pacific area, and $50 million in the Latin America and Canada area. The gain on sale, restructuring and other items in 2006, as discussed in the preceding overview section, increased worldwide operating income by $523 million, with the largest impact in the United States. 

Employment:

Employment increased by approximately 4,100 people