Business Segments and Geographic Information

12 Months Ended

Dec. 31, 2020

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.

Effective in the second quarter of 2020, the measure of segment operating performance used by 3M’s chief operating decision maker (CODM) changed and, as a result, 3M’s disclosed measure of segment profit/loss (business segment operating income) has been updated for all periods presented. The change to business segment operating income aligns with the update to how the CODM assesses performance and allocates resources for the Company’s business segments.

3M discloses business segment operating income as its measure of segment profit/loss, reconciled to both total 3M operating income and income before taxes. Business segment operating income includes dual credit for certain related operating income (as described below in “Elimination of Dual Credit”). Business segment operating income excludes certain expenses and income that are not allocated to business segments (as described below in “Corporate and Unallocated”). Additionally, the following special items are excluded from business segment operating income and, instead, are included within Corporate and Unallocated: significant litigation-related charges/benefits, gain/loss on sale of businesses (see Note 3), and divestiture-related restructuring actions (see Note 5).

In addition, effective in the first quarter of 2020, in a continuing effort to improve the alignment of its businesses around customers and markets, the Company made the following changes:

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. As a result of this change, previously reported aggregate business segment net sales and operating income for the total year 2019 decreased $42 million and $10 million, respectively, offset by corresponding decreases in the “Elimination of Dual Credit” net sales and operating income amounts.

Additional actions impacting product line alignments

● The remaining retail auto care product lines formerly in the Automotive Aftermarket Division (within the Safety and Industrial business segment), were realigned to the Construction and Home Improvement Division (within the Consumer business segment). This change resulted in a decrease of previously reported net sales and operating income for total year 2019 of $35 million and $11 million, respectively, in the Safety and Industrial business segment, offset by a corresponding increase in net sales and operating income within the Consumer business segment.

● In addition, certain product lines were realigned within business segments. The transdermal drug delivery components business, formerly included in the Drug Delivery Systems Division, was realigned to the Medical Solutions Division (both of which are within the Health Care business segment) and the paint protection film business, formerly included in the Automotive and Aerospace Division, was realigned to the Commercial Solutions Division (both of which are within the Transportation and Electronics business segment).

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

Business Segment Products

Business Segment	Representative revenue-generating activities, products or services
Safety and Industrial	o Industrial abrasives and finishing for metalworking applications o Autobody repair solutions o Closure systems for personal hygiene products, masking, and packaging materials o Electrical products and materials for construction and maintenance, power distribution and electrical OEMs o Structural adhesives and tapes o Respiratory, hearing, eye and fall protection solutions o Natural and color-coated mineral granules for shingles
Transportation and Electronics	o Advanced ceramic solutions o Attachment tapes, films, sound and temperature management for transportation vehicles o Premium large format graphic films for advertising and fleet signage o Light management films and electronics assembly solutions o Packaging and interconnection solutions o Reflective signage for highway, and vehicle safety
Health Care	o Food safety indicator solutions o Health care procedure coding and reimbursement software o Skin, wound care, and infection prevention products and solutions o Dentistry and orthodontia solutions o Filtration and purification systems
Consumer	o Consumer bandages, braces, supports and consumer respirators o Cleaning products for the home o Retail abrasives, paint accessories, car care DIY products, picture hanging and consumer air quality solutions o Stationery products

Business Segment Information

	Year ended December 31,
Net Sales (Millions)	2020		2019		2018
Safety and Industrial	$	11,767	$	11,514	$	12,414
Transportation and Electronics		8,827		9,591		10,104
Health Care		8,345		7,431		6,821
Consumer		5,336		5,151		5,127
Corporate and Unallocated		(1)		110		50
Elimination of Dual Credit		(2,090)		(1,661)		(1,751)
Total Company	$	32,184	$	32,136	$	32,765
Operating Performance (Millions)
Safety and Industrial	$	3,054	$	2,510	$	2,860
Transportation and Electronics		1,927		2,221		2,643
Health Care		1,828		1,858		1,918
Consumer		1,249		1,124		1,084
Elimination of Dual Credit		(534)		(409)		(436)
Total business segment operating income	$	7,524	$	7,304	$	8,069
Corporate and Unallocated
Special items:
Significant litigation-related (charges)/benefits	$	(17)	$	(762)	$	(897)
Gain/(loss) on sale of businesses		389		114		547
Divestiture-related restructuring actions		(55)		—		(127)
Other corporate expense - net		(680)		(482)		(385)
Total Corporate and Unallocated		(363)		(1,130)		(862)
Total Company operating income	$	7,161	$	6,174	$	7,207
Other expense/(income), net		450		462		207
Income before income taxes	$	6,711	$	5,712	$	7,000

Business Segment Information

	Assets				Depreciation & Amortization						Capital Expenditures
(Millions)	2020		2019		2020		2019		2018		2020		2019		2018
Safety and Industrial	$	11,711	$	11,682	$	562	$	509	$	493	$	451	$	391	$	375
Transportation and Electronics		6,997		6,871		429		401		390		454		390		339
Health Care		14,531		14,790		626		392		262		251		264		245
Consumer		2,567		2,428		140		134		126		120		130		115
Corporate and Unallocated		11,538		8,888		154		157		217		225		524		503
Total Company	$	47,344	$	44,659	$	1,911	$	1,593	$	1,488	$	1,501	$	1,699	$	1,577

Assets subject to attribution to business segments largely include accounts receivable; inventories; property, plant and equipment; goodwill; intangible assets; and certain limited other assets. All other items are reflected in Corporate and Unallocated. Accounts receivable and inventory are attributed based on underlying sales or activity. Property, plant and equipment are attributed to a particular business segment based on that item’s primary user while certain items such as corporate-shared headquarters/administrative centers, laboratories, distribution centers and enterprise software systems are reflected in Corporate and Unallocated. Intangible assets and goodwill are largely directly associated with a particular reporting unit and attributed on that basis. Business segment depreciation reflected above is based on the underlying usage of assets (while the particular asset itself may be entirely reflected within a different business segment’s asset balance as its primary user). This depreciation also includes allocated depreciation associated with a number of the assets reflected in Corporate and Unallocated as described above.

During 2020, information relative to business segment depreciation and assets reviewed by 3M’s CODM changed. The change did not impact each segment’s operating income, but did change the separate summarization of depreciation by segment in CODM information. Depreciation previously was summarized based generally on depreciation of a particular asset being associated entirely

with a single reporting unit, as opposed to an estimate of underlying asset usage. New CODM reporting of depreciation is as described above. With respect to assets in CODM reporting, previously certain assets used by multiple segments were “split” in terms of determining the balances associated with each business segment (new reporting aligns the entire asset to a single primary user), certain shared manufacturing assets were retained in Corporate and Unallocated, and a number of other assets were allocated to the business segments. The impact of these changes has been reflected in the above table for all periods presented.

Corporate and Unallocated

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 and is disclosed as ‘other corporate expense-net”. Additionally, Corporate and Unallocated includes special items such as significant litigation-related charges/benefits, gain/loss on sale of businesses (see Note 3), and divestiture-related restructuring costs (see Note 5). 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 2018 divestiture through 2019 and the acquirer of the former drug delivery business following its 2020 divestiture. Because this category includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

Elimination of Dual Credit

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. Refer to Note 2 for geographic net sales.

	Property, Plant and
	Equipment - net
(Millions)	2020		2019
Americas	$	5,752	$	5,873
Asia Pacific		1,662		1,637
Europe, Middle East and Africa		2,007		1,823
Total Company	$	9,421	$	9,333

United States net property, plant and equipment (PP&E) was $5,358 and $5,442 million at December 31, 2020 and 2019, respectively. China/Hong Kong net property, plant and equipment (PP&E) was $583 million and $553 million at December 31, 2020 and 2019, respectively.