Business Segments and Geographic Information

12 Months Ended

Dec. 31, 2019

Business Segments and Geographic Information

Business Segments and Geographic Information

NOTE 19. Business Segments and Geographic Information

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 four business segments: Safety and Industrial; Transportation and Electronics; Health Care; and Consumer. 3M’s four 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. 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 other expense (income), which is not allocated to business segments. Further information about which is included in Note 6.

Effective in the second quarter of 2019, to enable the Company to better serve global customers and markets, the Company made the following changes to its business segments:

Realignment of the Company’s business segments from five to four

The Company realigned its former five business segments into four: Safety and Industrial; Transportation and Electronics; Health Care; and Consumer. Existing divisions were largely realigned to this new structure. In addition, certain retail auto care product lines formerly in the Automotive Aftermarket Division (now within the Safety and Industrial business segment) were moved to the Construction and Home Improvement Division (within the Consumer business segment). Also, product lines relating to the refrigeration filtration business, formerly included in the Separation and Purification Sciences Division (now within the Health Care business segment) were moved to Other Safety and Industrial (within the Safety and Industrial business segment). 3M business segment reporting measures include dual credit to business segments for certain sales and operating income. Dual credit, which is

based on which business segment provides customer account activity with respect to a particular product sold in a specific country, was reduced as a result of the closer alignment between customer account activity and their respective markets. The four business segments are as follows:

Safety and Industrial: This segment includes businesses that serve the global industrial, electrical and safety markets. This business segment consists of personal safety, industrial adhesives and tapes, abrasives, closure and masking systems, electrical markets, automotive aftermarket, and roofing granules. This segment also includes the Communication Markets Division (which was substantially sold in 2018) and the refrigeration filtration product lines (within Other Safety and Industrial).

Transportation and Electronics: This segment includes businesses that serve global transportation and electronic original equipment manufacturer (OEM) customers. This business segment consists of electronics (display materials and systems, electronic materials solutions), automotive and aerospace, commercial solutions, advanced materials, and transportation safety.

Health Care: This business segment serves the global healthcare industry and includes medical solutions, oral care, separation and purification sciences, health information systems, drug delivery systems, and food safety.

Consumer: This business serves global consumers and consists of home improvement, stationery and office supplies, home care, and consumer health care. This segment also includes, within the Construction and Home Improvement Division, certain retail auto care product lines.

In addition, as part of 3M’s continuing effort to improve the alignment of its businesses around markets and customers, the Company made the following changes, effective in the first quarter of 2019, and other revisions impacting business segment reporting:

Continued alignment of customer account activity

● As part of 3M’s regular customer-focus initiatives, the Company realigned certain customer account activity (“sales district”) to correlate with the primary divisional product offerings in various countries and reduce complexity for customers when interacting with multiple 3M businesses. This largely impacted the amount of dual credit certain business segments receive as a result of sales district attribution. 3M business segment reporting measures include dual credit to business segments for certain sales and operating income. This dual credit is based on which business segment provides customer account activity with respect to a particular product sold in a specific country.

Creation of Closure and Masking Systems Division and Medical Solutions Division

● 3M created the Closure and Masking Systems Division, which combines the masking tape, packaging tape and personal care portfolios formerly within Industrial Adhesives and Tapes Division in the former Industrial business segment into a separate division also within the former Industrial business segment. 3M created the Medical Solutions Division in the Health Care business segment, which combines the former Critical and Chronic Care Division and Infection Prevention Division (which were also both within the Health Care business segment).

Additional actions impacting business segment reporting

● The business associated with certain safety products sold through retail channels in the Asia Pacific region was realigned from the Personal Safety Division within the former Safety and Graphics business segment to the Construction and Home Improvement Division within the Consumer business segment. In addition, certain previously non-allocated costs related to manufacturing and technology of centrally managed material resource centers of expertise within Corporate and Unallocated are now reflected as being allocated to the business segments.

The financial information presented herein reflects the impact of the preceding business segment reporting changes for all periods presented.

Business Segment Products

Business Segment	Major Products
Safety and Industrial	Tapes, coated, nonwoven and bonded abrasives, adhesives, sealants, specialty materials, closure systems for personal hygiene products, abrasion-resistant films, structural adhesives, infrastructure protection products, renewable energy component solutions, roofing granules for asphalt shingles, personal protection products, fall protection products, and self-contained breathing apparatus systems
Transportation and Electronics	Optical film solutions for electronic displays, packaging and interconnection devices, insulating and splicing solutions for the electronics and electrical industries, touch screens and touch monitors, acoustic systems products, automotive components, advanced ceramics, commercial graphics systems, commercial cleaning and protection products, and transportation safety products
Health Care	Medical and surgical supplies, skin health and infection prevention products, drug delivery systems, dental and orthodontic products, health information systems, filtration products, and food safety products
Consumer	Consumer and office tapes and adhesives, repositionable notes, indexing systems, home improvement products, furnace filters, painter tapes, mounting products, home care products, sponges, scouring pads, high-performance clothes, protective material products, paint finishing and detailing products, and adhesive bandages and braces

Business Segment Information

	Net Sales						Operating Income
(Millions)	2019		2018		2017		2019		2018		2017
Safety and Industrial	$	11,607	$	12,494	$	11,946	$	2,648	$	3,423	$	2,603
Transportation and Electronics		9,602		10,106		9,861		2,221		2,649		2,986
Health Care		7,431		6,826		6,635		1,863		1,921		1,877
Consumer		5,089		5,086		5,006		1,105		1,071		1,051
Corporate and Unallocated		110		50		2		(1,243)		(1,409)		(367)
Elimination of Dual Credit		(1,703)		(1,797)		(1,793)		(420)		(448)		(458)
Total Company	$	32,136	$	32,765	$	31,657	$	6,174	$	7,207	$	7,692

	Assets						Depreciation & Amortization						Capital Expenditures
(Millions)	2019		2018		2017		2019		2018		2017		2019		2018		2017
Safety and Industrial	$	12,593	$	13,086	$	13,560	$	682	$	528	$	424	$	391	$	375	$	255
Transportation and Electronics		7,611		7,773		7,786		324		337		437		390		339		382
Health Care		15,210		7,092		7,258		277		216		257		264		245		217
Consumer		2,792		2,963		2,909		91		97		117		130		115		110
Corporate and Unallocated		6,453		5,586		6,474		219		310		309		524		503		409
Total Company	$	44,659	$	36,500	$	37,987	$	1,593	$	1,488	$	1,544	$	1,699	$	1,577	$	1,373

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. Corporate and Unallocated also includes sales, costs, and income from contract manufacturing, transition services and other arrangements with the acquirer of all of the Communication Markets Division following its divestiture in 2018. 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 sales and related operating income. Management evaluates each of its four business segments based on net sales and operating income performance, including dual credit reporting to further incentivize sales growth. As a result, 3M reflects additional (“dual”) credit to another business segment when the customer account activity (“sales district”) with respect to the particular product sold to the external customer is provided by a different business segment. This additional dual credit is largely reflected at the division level. For example, privacy screen protection products are primarily sold by the Display Materials and Systems Division within the Transportation and Electronics business

segment; however, certain sales districts within the Consumer business segment provide the customer account activity for sales of the product to particular customers. In this example, the non-primary selling segment (Consumer) would also receive credit for the associated net sales initiated through its sales district 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 in total are unchanged.

Geographic Information

Geographic area information is used by the Company as a secondary performance measure to manage its businesses. Export sales and certain income and expense items are generally reported within the geographic area where the final sales to 3M customers are made.

							Property, Plant and
	Net Sales						Equipment - net
(Millions)	2019		2018		2017		2019		2018
United States	$	13,159	$	12,840	$	12,372	$	5,442	$	4,915
Asia Pacific		9,796		10,254		9,809		1,637		1,624
Europe, Middle East and Africa		6,226		6,654		6,456		1,823		1,751
Latin America and Canada		2,965		3,024		3,033		431		448
Other Unallocated		(10)		(7)		(13)		—		—
Total Company	$	32,136	$	32,765	$	31,657	$	9,333	$	8,738

Asia Pacific included China/Hong Kong net sales to customers of $3.337 billion, $3.574 billion and $3.255 billion in 2019, 2018, and 2017, respectively. China/Hong Kong net property, plant and equipment (PP&E) was $553 million and $542 million at December 31, 2019 and 2018, respectively.