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Business Segments
6 Months Ended
Jun. 30, 2012
Business Segments  
Business Segments

NOTE 13. Business Segments

 

3M's businesses are organized, managed and internally grouped into segments based on differences in markets, products, technologies and services. 3M continues to manage its operations in six operating business segments: Industrial and Transportation; Health Care; Consumer and Office; Safety, Security and Protection Services; Display and Graphics; and Electro and Communications. 3M's six business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources. These segments have worldwide responsibility for virtually all 3M product lines. 3M is not dependent on any single product/service or market. Transactions among reportable segments are recorded at cost. 3M is an integrated enterprise characterized by substantial intersegment cooperation, cost allocations and inventory transfers. Therefore, management does not represent that these segments, if operated independently, would report the operating income information shown. The difference between operating income and pre-tax income relates to interest income and interest expense, which are not allocated to business segments.

Business Segment Information Three months ended Six months ended
  June 30, June 30,
(Millions) 2012 2011 2012 2011
         
Net Sales            
Industrial and Transportation  $ 2,627 $ 2,641 $ 5,287 $ 5,091
Health Care    1,283   1,269   2,563   2,524
Consumer and Office    1,062   1,038   2,105   2,038
Safety, Security and Protection Services    991   1,011   1,972   1,940
Display and Graphics    882   973   1,714   1,916
Electro and Communications    824   864   1,632   1,700
Corporate and Unallocated    2   3   3   8
Elimination of Dual Credit    (137)   (119)   (256)   (226)
Total Company  $ 7,534 $ 7,680 $ 15,020 $ 14,991
             
Operating Income            
Industrial and Transportation  $ 614 $ 544 $ 1,214 $ 1,060
Health Care    414   364   816   733
Consumer and Office    222   202   456   417
Safety, Security and Protection Services    258   242   489   441
Display and Graphics    179   222   342   452
Electro and Communications    195   200   363   378
Corporate and Unallocated    (124)   (93)   (262)   (198)
Elimination of Dual Credit    (30)   (26)   (56)   (50)
Total Company  $ 1,728 $ 1,655 $ 3,362 $ 3,233

Corporate and unallocated operating income includes a variety of miscellaneous items, such as corporate investment gains and losses, certain derivative gains and losses, certain insurance-related gains and losses, certain litigation and environmental expenses, corporate restructuring charges and certain under- or over-absorbed costs (e.g. pension, stock-based compensation) that the Company may choose not to allocate directly to its business segments. Because this category includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

 

3M business segment reporting measures include dual credit to business segments for certain U.S. sales and related operating income. Management evaluates each of its six operating business segments based on net sales and operating income performance, including dual credit U.S. reporting to further incentivize U.S. sales growth. As a result, 3M provides additional (“dual”) credit to those business segments selling products in the U.S. to an external customer when that segment is not the primary seller of the product. For example, certain respirators are primarily sold by the Occupational Health and Environmental Safety Division within the Safety, Security and Protection Services business segment; however, the Industrial and Transportation business segment also sells this product to certain customers in its U.S. markets. In this example, the non-primary selling segment (Industrial and Transportation) would also receive credit for the associated net sales it initiated and the related approximate operating income. The assigned operating income related to dual credit activity may differ from operating income that would result from actual costs associated with such sales. The offset to the dual credit business segment reporting is reflected as a reconciling item entitled “Elimination of Dual Credit,” such that sales and operating income for the U.S. in total are unchanged.