Business Segments

9 Months Ended

Sep. 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.

Consistent with 3M's strategy of building relevance and presence in the marketplace, the Company announced in October 2012 that it was beginning immediately to align resources and management toward a new structure comprised of five business groups: Consumer; Industrial; Health Care; Safety and Graphics; and Electronics and Energy. The company intends that its operating results will be managed on the basis of its existing segment structure through 2012 with results managed under the new alignment once it is fully effective in the first quarter of 2013.

Business Segment Information	Three months ended				Nine months ended
	September 30,				September 30,
(Millions)	2012		2011		2012		2011
Net Sales
Industrial and Transportation	$	2,566	$	2,580	$	7,853	$	7,671
Health Care		1,263		1,246		3,826		3,770
Consumer and Office		1,114		1,096		3,219		3,134
Safety, Security and Protection Services		926		954		2,898		2,894
Display and Graphics		936		935		2,650		2,851
Electro and Communications		820		838		2,452		2,538
Corporate and Unallocated		1		1		4		9
Elimination of Dual Credit		(129)		(119)		(385)		(345)
Total Company	$	7,497	$	7,531	$	22,517	$	22,522
Operating Income
Industrial and Transportation	$	575	$	525	$	1,789	$	1,585
Health Care		400		367		1,216		1,100
Consumer and Office		244		244		700		661
Safety, Security and Protection Services		196		202		685		643
Display and Graphics		199		179		541		631
Electro and Communications		186		181		549		559
Corporate and Unallocated		(93)		(91)		(355)		(289)
Elimination of Dual Credit		(29)		(26)		(85)		(76)
Total Company	$	1,678	$	1,581	$	5,040	$	4,814

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.