Business Segments

9 Months Ended

Sep. 30, 2015

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 manages its operations in five operating business segments: Industrial; Safety and Graphics; Electronics and Energy; Health Care; and Consumer. 3M’s five 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.

Assets as reported in Note 15 (Business Segments) in the 2014 Annual Report on Form 10-K have increased due to 2015 acquisitions. The impact of these 2015 acquisitions on asset balances is provided in Note 2 (Acquisitions and Divestitures) within this Form 10-Q.

Business Segment Information

	Three months ended				Nine months ended
	September 30,				September 30,
(Millions)	2015		2014		2015		2014
Net Sales
Industrial	$	2,575	$	2,772	$	7,867	$	8,363
Safety and Graphics		1,417		1,448		4,221		4,365
Electronics and Energy		1,378		1,500		4,010		4,233
Health Care		1,346		1,390		4,039		4,180
Consumer		1,162		1,177		3,321		3,395
Corporate and Unallocated		2		3		—		5
Elimination of Dual Credit		(168)		(153)		(482)		(439)
Total Company	$	7,712	$	8,137	$	22,976	$	24,102
Operating Income
Industrial	$	580	$	616	$	1,787	$	1,851
Safety and Graphics		324		340		1,023		1,011
Electronics and Energy		342		338		902		858
Health Care		432		432		1,280		1,293
Consumer		293		272		792		741
Corporate and Unallocated		(58)		(63)		(232)		(184)
Elimination of Dual Credit		(37)		(34)		(106)		(97)
Total Company	$	1,876	$	1,901	$	5,446	$	5,473

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 five 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 Personal Safety Division within the Safety and Graphics business segment; however, the Industrial business segment also sells this product to certain customers in its U.S. markets. In this example, the non-primary selling segment (Industrial) 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.