3M 2009 Annual Report Download - page 32

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10 percent, heavily impacted by the slump in U.S. consumer retail spending levels. More than 50 percent of sales in
Consumer and Office are generated within the United States. By far the biggest contributor to this decline was the
retail and wholesale office channel. The combination of massive office worker layoffs, coupled with across-the-board
declines in office retail foot traffic, had a dramatic and negative impact on sales. 3M businesses serving other U.S.
retail channels performed well in the fourth quarter despite the tough economic environment. This business posted
positive local-currency sales for its home care products, such as Scotch-Brite® Scrub Sponges, and for its do-it-
yourself retail channel. Elsewhere around the globe, 3M’s Consumer and Office business drove positive local-
currency sales growth in both Latin America and Asia Pacific, but overall growth was muted by declines in Europe.
Worldwide operating income declined in the fourth quarter, including the impact of $18 million in restructuring
charges, which contributed 11.1 percentage points of this 35.7 percent decline.
For total year 2008, Consumer and Office sales grew 2.4 percent. This business has successfully created new
products and designed new programs and planograms with their large U.S. customers in order to mitigate what is a
very tough end-market situation. Sales growth was led by home care and do-it-yourself products. Acquisitions,
primarily the do-it-yourself retail market portion of 3M’s Aearo business, contributed 1.8 percentage points to sales
growth. Operating income declined 3.8 percent and margins were in excess of 19 percent, a strong return
considering the slow U.S. market environment and a synchronized slowdown in growth across most other areas of
the world. Geographically, sales growth was led by Asia Pacific and Latin America. Operating income was negatively
impacted by the $18 million in restructuring charges discussed in the preceding paragraph.
Safety, Security and Protection Services Business (13.8% of consolidated sales):
2009 2008 2007
Sales (millions) ............................................................................... $ 3,180 $ 3,450 $ 2,944
Sales change analysis:
Organic local-currency sales (volume and price).................... (5.4) 4.1 3.1
Acquisitions ............................................................................. 2.7 13.0 7.6
Local-currency sales ............................................................... (2.7)% 17.1% 10.7%
Divestitures ............................................................................. (0.9) (1.8) —
Translation .............................................................................. (4.2) 1.9 4.5
Total sales change...................................................................... (7.8)% 17.2% 15.2%
Operating income (millions) ........................................................... $ 745 $ 710 $ 583
Percent change........................................................................... 5.0% 21.7% 8.4%
Percent of sales .......................................................................... 23.4% 20.6% 19.8%
The Safety, Security and Protection Services segment serves a broad range of markets that increase the safety,
security and productivity of workers, facilities and systems. Major product offerings include personal protection
products, safety and security products (including border and civil security solutions), cleaning and protection products
for commercial establishments, track and trace solutions, and roofing granules for asphalt shingles. In the second
quarter of 2008, 3M completed the sale of its HighJump Software business which provided supply chain execution
software solutions. 3M’s Track and Trace Solutions utilize radio frequency identification (RFID) technology to provide
a growing array of solutions — from library patron self-checkout systems to tracking packages.
Fourth quarter and year 2009 results:
In Safety, Security and Protection Services, sales grew 13.5 percent in the fourth quarter, or 7.9 percent in local
currency. Foreign exchange impacts added 5.6 percent to fourth quarter sales. Sales growth in the quarter was
largely driven by the personal protection business. In May of 2009, 3M began to see a surge in orders for respirators
approved for use in defending against the H1N1 virus. Since that time, demand has continued to exceed available
supply. 3M recently approved respirator capacity investments in both Singapore and in the United States.
Elsewhere within this segment, local-currency sales growth was slightly positive in the building and commercial
services business, driven by a number of new product introductions, but all other businesses posted lower year-on-
year sales. In particular, 3M saw more than 10 percent local-currency sales declines in its industrial-oriented
corrosion protection products business, and in businesses linked closely to residential construction, such as roofing
granules.
Fourth-quarter operating income increased to $201 million, with operating income margins at 24.3 percent. Fourth
quarter 2008 included $12 million in restructuring expenses.