What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-10-26 compared with 2021-07-27 · 290 added, 200 removed, 492 unchanged (50% of the section changed)

24 unchanged sentences

In addition, risk factors with respect to COVID-19, can be found in Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.

Given the diversity

of 3M’s businesses, some of the factors described in that Overview—Consideration of COVID-19 section have increased the demand for 3M products, while others have decreased demand or made it more difficult for 3M to serve customers.

Overall, 3M experienced broad-based growth across all business segments and geographic areas in the second quarter of 2021, benefiting from continued improvements in certain end markets including home improvement, oral care and industrial along with healthcare elective procedure volumes increasing as COVID-19 related hospitalizations declined.

3M’s total sales increased 24.7% and 16.7% year-on-year in the second quarter and first six months of 2021, respectively.

Organic local-currency sales increased 21.4% and 14.3% year-on-year in the second quarter and first six months of 2021, respectively.

3M experienced the strongest sales growth in Transportation and Electronics and Health Care.

While COVID-related respirator sales increased year-on-year in the second quarter and first six months of 2021, they are estimated to have negatively impacted year-on-year second quarter organic local-currency sales growth by approximately 1 percent as they grew at a slower rate than the rest of the Company.

For the first six months of 2021, they positively impacted year-on-year organic-local currency sales growth by approximately 1 percent .

In the second quarter of 2020, as effects of COVID-19 set-in, weak demand in a number of end markets negatively impacted oral care, automotive and aerospace, automotive aftermarket, commercial solutions, stationery and office, and businesses aligned to general industrial applications such as industrial adhesives and tapes and abrasives.

At the same time, 2020 demand was increasing in areas such as personal safety, home improvement, general cleaning, semiconductor, data center, and biopharma filtration.

3M’s operating income margins decreased 2.3 percentage points year-on-year in the second quarter and remained flat the first six months of 2021.

Factoring out the impact on operating income of special items as described in the Certain amounts adjusted for special items - (non-GAAP measures) section below, operating income margins increased 2.4 and 2.1 percentage points to 22.0 and 22.3 percent for the second quarter and first six months of 2021, respectively, when compared to 2020.

Given the diversity of 3M’s businesses, some of the factors described in that Overview—Consideration of COVID-19

section have increased the demand for 3M products, while others have decreased demand or made it more difficult for 3M to serve customers.

Overall, 3M experienced broad-based growth across all business segments and geographic areas in the third quarter of 2021, benefiting from continued improvements in certain end markets including home improvement and general industrial.

3M’s total sales increased 7.1% and increased 13.3% year-on-year in the third quarter and first nine months of 2021, respectively.

Organic local-currency sales increased 6.3% and increased 11.5% year-on-year in the third quarter and first nine months of 2021, respectively.

3M experienced the strongest third quarter sales growth in Consumer and Safety and Industrial.

COVID-related respirator sales negatively impacted year-on-year third quarter organic-local currency sales growth by approximately 0.5 percent as they grew at a slower rate than the rest of the Company.

For the first nine months of 2021, they positively impacted year-on-year organic-local currency sales growth by approximately 0.3 percent.

Given the diversity of 3M's businesses, the impact of COVID-19 varied across the Company.

In the first nine months of 2020, 3M experienced strong sales in personal safety, as well as in other areas such as home improvement, general cleaning, semiconductor, data center, and biopharma filtration while businesses aligned to general industrial applications with strength in abrasives and industrial adhesives and tapes.

At the same time, weakness in several end markets, while improving, contributed in part to sales declines in a number of 3M's businesses such as oral care, automotive and aerospace, advanced materials, commercial solutions, stationery and office, automotive aftermarket.

3M’s operating income margins decreased 2.9 percentage points in the third quarter and decreased 1.0 percentage points in the first nine months of 2021 year-on-year.

Factoring out the impact on operating income of special items as described in the Certain amounts adjusted for special items - (non-GAAP measures) section below, operating income margins decreased 2.9 and increased 0.3 percentage points to 20.0 and 21.5 percent for the third quarter and first nine months of 2021, respectively, when compared to 2020.

Various COVID-19 implications contributed in part to these results.

Overall, the impact of the COVID-19 pandemic on 3M’s consolidated results of operations was primarily driven by factors related to changes in demand for products and disruption in global supply chains as described or referenced above.

While it is not feasible to identify or quantify all the other direct and indirect implications on 3M’s results of operations, below are factors that 3M believes have also affected its result for second quarter and first six months of 2021 when compared to 2020:

While it is not feasible to identify or quantify all the other direct and indirect implications on 3M’s results of operations, below are factors that 3M believes have also affected its results for third quarter and first nine months of 2021 when compared to 2020:

Factors contributing to charges or other impacts:

● Increased raw materials and logistics costs during the first half of 2021 from ongoing COVID-19 related supply chain challenges further magnified in February 2021 by winter storm Uri in the United States.

● Period expenses of unabsorbed manufacturing costs and increased expected credit losses on customer receivables in the second quarter of 2020.

• Increased raw materials and logistics costs from ongoing COVID-19 and Delta variant related global supply chain challenges further magnified by extreme weather events, such as February 2021 winter storm Uri in the United States.

• Period expenses of unabsorbed manufacturing costs and increased expected credit losses on customer receivables in 2020.

• Restructuring actions addressing structural enterprise costs and operations in certain end markets as a result of the COVID-19 pandemic and related economic impact resulting in a second quarter 2020 charge of $58 million.

● Committed financial support in the second quarter of 2020 to various COVID-relief and medical research initiatives.

• Committed financial support in 2020 to various COVID-relief and medical research initiatives.

• Charge of $22 million in the first quarter of 2020 related to equity securities as discussed in the “Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis” section of Note 13 that use the measurement alternative described therein in addition to an immaterial pre-tax charge related to impairment of certain indefinite lived tradenames.

Factors providing benefits or other impacts:

● In 2020 ongoing cost management in discretionary spending in areas such as travel, professional services, and advertising/merchandising resulting in lower spending .

• Cost management in discretionary spending in areas such as travel, professional services, and advertising/merchandising resulting in lower spending in 2020.

• Continued productivity efforts, including year-on-year savings from restructuring actions taken in 2020.

5 unchanged sentences

Operating income margin and earnings per share attributable to 3M common shareholders – diluted:

The following table provides the increases (decreases) in operating income margins and diluted earnings per share for the three and six months ended June 30, 2021 and 2020.

The following table provides the increases (decreases) in operating income margins and diluted earnings per share for the three and nine months ended September 30, 2021 and 2020.

Three months ended

Six months ended

June 30, 2021

diluted share

September 30, 2021 Nine months ended

September 30, 2021

net sales Earnings per

diluted share Percent of

net sales Earnings per

diluted share

9 unchanged sentences

Foreign exchange impacts (0.2) (0.01) — 0.20

Other expense (income), net

Income tax rate

Shares of common stock outstanding

Other expense (income), net N/A 0.08 N/A 0.17

Income tax rate N/A 0.09 N/A 0.22

Shares of common stock outstanding N/A (0.02) N/A (0.07)

Current period, excluding special items 20.0 % $ 2.45 21.5 % $ 7.81

Current period 20.0 % $ 2.45 21.5 % $ 7.81

Operating income margins decreased 2.3 percentage points in the second quarter of 2021 and remained flat for the first six months of 2021 when compared to the same period last year.

For the second quarter of 2021, net income attributable to 3M was $1.5 billion, or $2.59 per diluted share compared to $1.3 billion or $2.25 per diluted share in the same period last year, an increase of 15.1 percent on a per diluted share basis.

For the first six months of 2021 net income attributable to 3M was $3.1 billion, or $5.36 per diluted share compared to $2.6 billion or $4.50 per diluted share in the same period last year, an increase of 19.1 percent on a per diluted share basis.

Operating income margins decreased 2.9 percentage points in the third quarter of 2021 and decreased 1.0 percentage points for the first nine months of 2021 when compared to the same period last year.

For the third quarter of 2021, net income attributable to 3M was $1.4 billion, or $2.45 per diluted share which is consistent on a per diluted share basis.

For the first nine months of 2021 net income attributable to 3M was $4.6 billion, or $7.81 per diluted share compared to $4.0 billion or $6.95 per diluted share in the same period last year, an increase of 12 percent on a per diluted share basis.

The Company refers to various amounts or measures on an “adjusted basis”.

1 unchanged sentence

These non-GAAP measures are further described and reconciled to the most directly comparable GAAP financial measures in the Certain amounts adjusted for special items - (non-GAAP measures) section below.

On an adjusted basis, operating margins increased 2.4 percentage points to 22.0 percent in the second quarter of 2021 when compared to the same period last year.

For the first six months of 2021, operating margins increased 2.1 percentage points to 22.3 percent when compared to the same period last year.

Net income attributable to 3M was $1.5 billion, or $2.59 per diluted share versus $1.0 billion, or $1.81 per diluted share in the same period last year, which was an increase of 43.5 percent on a per diluted share basis.

On an adjusted basis for the first six months of 2021, net income attributable to 3M was $3.1 billion, or $5.36 per diluted share versus $2.3 billion, or $3.99 per diluted share for the same period last year, which was an increase of 34.4 percent on a per diluted share basis.

On an adjusted basis, operating margins decreased 2.9 percentage points to 20.0 percent in the third quarter of 2021 when compared to the same period last year.

For the first nine months of 2021, operating margins increased 0.3 percentage points to 21.5 percent when compared to the same period last year.

On an adjusted basis for the third quarter of 2021, net income attributable to 3M was $1.4 billion, or $2.45 per diluted share, which is consistent year over year on a per diluted share basis.

On an adjusted basis for the first nine months of 2021 , net income attributable to 3M was $4.6 billion, or $7.81 per diluted share versus $3.7 billion, or $6.44 per diluted share for the same period last year, which was an increase of 21 percent on a per diluted share basis.

Additional discussion related to the components of the year-on-year change in earnings per diluted share follows:

Organic growth/productivity and other:

● Higher organic volume growth, ongoing cost management, and improved productivity increased operating income margins and earnings per diluted share year-on-year for both the second quarter and first six months of 2021.

The following also impacted results:

o Second quarter of 2021 benefit of $91 million pre-tax ($0.12 per share after tax) from a favorable Brazilian Supreme Court decision that concluded on the impact of state value-added tax when determining Brazil’s federal sales-based social tax—essentially lowering the social tax that 3M should have paid in prior periods.

o Certain increased legal and reserve adjustments costs year-over-year.

• For the third quarter of 2021, organic volume growth was more than offset by productivity penalties from global supply chain challenges, increased investments in growth and sustainability, and increased litigation-related costs resulting in decreased operating margins and earnings per diluted share year-on-year.

For the first nine months of 2021, continued organic volume growth, ongoing cost management and improved productivity offset by increased

litigation-related costs increased operating income margins and earnings per diluted share year-on-year.

The following also impacted results or provide additional information:

◦ Second quarter of 2021 benefit of $91 million pre-tax ($0.12 per share after tax) from a favorable Brazilian Supreme Court decision that concluded on the impact of state value-added tax when determining Brazil’s federal sales-based social tax—essentially lowering the social tax that 3M should have paid in prior periods.

◦ Certain increased legal and reserve adjustments costs year-over-year.

3M regularly reviews and updates its associated liabilities and is involved in various trials and defense preparation as discussed in Note 14.

o 2021 benefit from restructuring actions taken in 2020 and positive/negative impact of year-over-year change in non-divestiture-related restructuring charges, net of adjustments, for respective periods.

◦ 2021 benefit from restructuring actions taken in 2020 and positive/negative impact of year-over-year change in non-divestiture-related restructuring charges, net of adjustments, for respective periods.

Note 5 provides additional information relative to restructuring actions.

o COVID-impacts recognized on certain assets in the first quarter of 2020.

o On a combined basis, higher defined benefit pension and postretirement service cost expense year-on-year.

◦ COVID-impacts recognized on certain assets in the first quarter of 2020.

◦ On a combined basis, higher defined benefit pension and postretirement service cost expense year-on-year.

Selling price and raw material impact:

● Higher raw material and logistics costs from strong end-market demand and COVID-impacted manufacturing and supply chain disruptions that were further magnified by February 2021 winter storm Uri in the U.S.

These factors were partially offset by higher selling prices for both the second quarter and first six months of 2021.

• 3M experienced higher raw material, logistics, and outsourced manufacturing costs from strong end-market demand and ongoing COVID-19 and Delta variant related global supply chain challenges that were further magnified by extreme weather events, such as February 2021 winter storm Uri in the U.S.

These factors were partially offset by higher selling prices for both the third quarter and first nine months of 2021.

Acquisitions/divestitures:

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Foreign exchange impacts:

● Foreign currency impacts (net of hedging) increased operating income by approximately $49 million and $139 million (or pre-tax earnings by approximately $60 million and $155 million) year-on-year for the second quarter and first six months of 2021, respectively.

• Foreign currency impacts (net of hedging) decreased operating income by approximately $7 million and increased operating income by approximately $132 million (or a decrease of pre-tax earnings by approximately $7 million and an increase of pre-tax earnings by $148 million) year-on-year for the third quarter and first nine months of 2021, respectively.

This estimate includes the effect of translating profits from local currencies into U.S.

2 unchanged sentences

Other expense (income), net:

● Higher income related to non-service cost components of pension and postretirement expense, decreased expense year-on-year for both the second quarter and first six months of 2021.

● Interest expense (net of interest income) decreased slightly for the second quarter of 2021 and remained flat for the first six months of 2021 compared to the same periods year-on-year.

• Higher income related to non-service cost components of pension and postretirement expense, decreased expense year-on-year for both the third quarter and first nine months of 2021.

• Interest expense (net of interest income) decreased for both the third quarter and first nine months of 2021 compared to the same periods year-on-year.

Income tax rate:

• Certain items above reflect specific income tax rates associated therewith.

Overall, the effective tax rate for the second quarter and first six months of 2021 was 21.5 percent and 18.9 percent, respectively, largely consistent with 21.0 percent and 19.3 percent for the same periods, respectively, in prior year.

● On an adjusted basis, the effective tax rate for the second quarter and first six months of 2021 was 21.5 percent and 18.9 percent, respectively, an increase of 0.8 and decrease of 1.8 percentage points compared to the same periods year-on-year.

Overall, the effective tax rate for the third quarter and first nine months of 2021 was 18.4 percent and 18.8 percent, respectively, a decrease from 21.5 percent and 20.1 percent compared to the same periods, respectively, in prior year.

• On an adjusted basis, the effective tax rate for the third quarter and first nine months of 2021 was 18.4 percent and 18.8 percent, respectively, a decrease of 3.1 and a decrease of 2.2 percentage points compared to the same periods year-on-year.

• The primary factor that decreased the Company’s effective tax rate was favorable adjustments in 2021 related to impacts of U.S.

international tax provisions.

Shares of common stock outstanding:

● Higher shares outstanding decreased earnings per share year-on-year for both the second quarter and first six months of 2021.

• Higher shares outstanding decreased earnings per share year-on-year for both the third quarter and first nine months of 2021.

Certain amounts adjusted for special items - (non-GAAP measures):

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For the periods presented, special items include the items described below.

Operating income (measure of segment operating performance), income before taxes, net income, earnings per share, and the effective tax rate are all

measures for which 3M provides the reported GAAP measure and a measure adjusted for special items.

Operating income (measure of segment operating performance), income before taxes, net income, earnings per share, and the effective tax rate are all measures for which 3M provides the reported GAAP measure and a measure adjusted for special items.

The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures.

The Company considers these non-GAAP measures in evaluating and managing the Company’s operations.

The Company considers these non-GAAP

measures in evaluating and managing the Company’s operations.

The Company believes that discussion of results adjusted for these items is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends.

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Divestiture-related restructuring actions:

● In the second quarter 2020, following the divestiture of substantially all of the drug delivery business management approved and committed to undertake certain restructuring actions addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business.

• In the second quarter of 2020, following the divestiture of substantially all of the drug delivery business, management approved and committed to undertake certain restructuring actions addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business.

As a result, 3M recorded a pre-tax charge of $55 million ($46 million after tax).

Refer to Note 5 for further details.

(Dollars in millions, except per share amounts)

Operating Income

Operating Income Margin

Income Before Taxes

Provision for Income Taxes

Effective Tax Rate

Net Income Attributable to 3M

Earnings Per Diluted Share

Earnings per diluted share percent change

Three months ended June 30, 2020 GAAP

(Dollars in millions, except per share amounts) Operating

Income Operating Income

Income Before

Taxes Provision for

Income Taxes Effective Tax

Rate Net Income

Attributable to

3M Earnings Per

Diluted Share Earnings per

diluted share

percent change

Three months ended September 30, 2020 GAAP

$ 1,909 22.9 % $ 1,826 $ 391 21.5 % $ 1,430 $ 2.45

Adjustments for special items:

Gain/loss on sale of businesses

Divestiture-related restructuring actions

Three months ended June 30, 2020 adjusted amounts (non-GAAP measures)

Three months ended June 30, 2021 GAAP

None — — — — —

Three months ended September 30, 2020 adjusted amounts (non-GAAP measures)

$ 1,909 22.9 % $ 1,826 $ 391 21.5 % $ 1,430 $ 2.45

Three months ended September 30, 2021 GAAP

$ 1,788 20.0 % $ 1,757 $ 324 18.4 % $ 1,434 $ 2.45 — %

Adjustments for special items:

Three months ended June 30, 2021 adjusted amounts (non-GAAP measures)

(Dollars in millions, except per share amounts)

Operating Income

Operating Income Margin

Income Before Taxes

Provision for Income Taxes

Effective Tax Rate

Net Income Attributable to 3M

Earnings Per Diluted Share

Earnings per diluted share percent change

Six months ended June 30, 2020 GAAP

None — — — — —

Three months ended September 30, 2021 adjusted amounts (non-GAAP measures)

$ 1,788 20.0 % $ 1,757 $ 324 18.4 % $ 1,434 $ 2.45 — %

(Dollars in millions, except per share amounts) Operating

Income Operating

Margin Income

Before Taxes Provision

Taxes Effective

Tax Rate Net Income

Attributable to

Share Earnings per diluted

Nine months ended

September 30, 2020 GAAP

$ 5,312 22.5 % $ 5,064 $ 1,016 20.1 % $ 4,044 $ 6.95

Adjustments for special items:

2 unchanged sentences

Divestiture-related restructuring actions 55 55 9 46 0.08

Six months ended June 30, 2020 adjusted amounts (non-GAAP measures)

Six months ended June 30, 2021 GAAP

Nine months ended

September 30, 2020 adjusted amounts (non-GAAP measures)

$ 4,995 21.2 % $ 4,747 $ 995 21.0 % $ 3,748 $ 6.44

Nine months ended

September 30, 2021 GAAP

$ 5,753 21.5 % $ 5,640 $ 1,058 18.8 % $ 4,582 $ 7.81 12 %

Adjustments for special items:

Six months ended June 30, 2021 adjusted amounts (non-GAAP measures)

None — — — — —

Nine months ended

September 30, 2021 adjusted amounts (non-GAAP measures)

5,753 21.5 % 5,640 1,058 18.8 % 4,582 7.81 21 %

Sales and operating income by business segment:

The following tables contain sales and operating income results by business segment for the three and six months ended June 30, 2021 and 2020.

The following tables contain sales and operating income results by business segment for the three and nine months ended September 30, 2021 and 2020.

Refer to the section entitled “Performance by Business Segment” later in MD&A for additional discussion concerning 2021 versus 2020 results, including Corporate and Unallocated.

Refer to Note 16 for additional information on business segments, including Elimination of Dual Credit.

Three months ended June 30,

(Dollars in millions)

Three months ended September 30,

2021 2020 % change

(Dollars in millions) Net

Business Segments

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Transportation and Electronics 2,450 465 2,316 514 5.8 (9.4)

Health Care 2,249 529 2,160 493 4.1 7.2

Consumer 1,525 332 1,412 343 8.1 (3.3)

Corporate and Unallocated 3 (27) (2) (73)

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Total Company $ 8,942 $ 1,788 $ 8,350 $ 1,909 7.1 % (6.3) %

Six months ended June 30,

(Dollars in millions)

Nine months ended September 30,

2021 2020 % change

(Dollars in millions) Net

Business Segments

1 unchanged sentence

Transportation and Electronics 7,463 1,602 6,492 1,338 15.0 19.8

Health Care 6,775 1,614 6,087 1,246 11.3 29.6

Consumer 4,380 932 3,893 886 12.5 5.2

Corporate and Unallocated 2 (116) (1) 125

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Total Company $ 26,743 $ 5,753 $ 23,601 $ 5,312 13.3 % 8.3 %

Three months ended June 30, 2021

Three months ended September 30, 2021

Worldwide Sales Change

Organic local-

By Business Segment

currency sales

By Business Segment Organic local-

currency sales Acquisitions Divestitures Translation Total sales

Safety and Industrial 6.1 % — % — % 1.1 % 7.2 %

Transportation and Electronics 5.1 — — 0.7 5.8

Health Care 3.3 — — 0.8 4.1

Consumer 7.6 — — 0.5 8.1

Total Company 6.3 — — 0.8 7.1

Six months ended June 30, 2021

Nine months ended September 30, 2021

Worldwide Sales Change

Organic local-

By Business Segment

currency sales

By Business Segment Organic local-

currency sales Acquisitions Divestitures Translation Total sales

Safety and Industrial 11.0 % — % — % 3.1 % 14.1 %

Transportation and Electronics 12.4 — — 2.6 15.0

Health Care 11.4 — (2.7) 2.6 11.3

Consumer 10.8 — — 1.7 12.5

Total Company 11.5 — (0.7) 2.5 13.3

Sales by geographic area:

Percent change information compares the second quarter and first six months of 2021 with the same period last year, unless otherwise indicated.

Percent change information compares the third quarter and first nine months of 2021 with the same period last year, unless otherwise indicated.

Additional discussion of business segment results is provided in the Performance by Business Segment section.

Three months ended June 30, 2021

Three months ended September 30, 2021

Americas Asia

Pacific Europe,

& Africa Other

Unallocated Worldwide

Net sales (millions) $ 4,692 $ 2,642 $ 1,608 $ — $ 8,942

2 unchanged sentences

Volume — organic 5.4 % 5.1 % 3.1 % 4.9 %

Price 2.0 0.5 1.1 1.4

Organic local-currency sales 7.4 5.6 4.2 6.3

Divestitures — — — —

Translation 0.5 1.2 1.0 0.8

Total sales change 7.9 % 6.8 % 5.2 % 7.1 %

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Transportation and Electronics 13.7 0.6 12.2 5.8

Health Care 1.7 12.8 4.3 4.1

Consumer 10.0 4.2 0.5 8.1

Organic local-currency sales change:

1 unchanged sentence

Transportation and Electronics 13.3 (0.2) 11.3 5.1

Health Care 1.4 10.9 3.1 3.3

Consumer 9.5 3.8 (0.6) 7.6

Additional information beyond what is included in the preceding table is as follows:

• In the Americas geographic area, U.S.

total sales increased 21 percent and organic-local currency sales increased 22 percent.

Total sales in Mexico increased 66 percent and organic local-currency sales increased 60 percent.

In Canada, total sales increased 52 percent and organic local-currency sales increased of 37 percent.

In Brazil, total sales increased 58 percent and organic local-currency sales increased 54 percent.

● In the Asia Pacific geographic area, China total sales increased 20 percent and organic local-currency sales increased 12 percent.

In Japan, total sales increased 10 percent and organic local-currency sales increased 12 percent.

Six months ended June 30, 2021

total sales increased 6 percent which included increased organic-local currency sales of 6 percent.

Total sales in Mexico increased 15 percent which included increased organic local-currency sales of 12 percent.

In Canada, total sales increased 12 percent which included increased organic local-currency sales of 7 percent.

In Brazil, total sales increased 26 percent which included increased organic local-currency sales of 22 percent.

• In the Asia Pacific geographic area, China total sales increased 8 percent which included increased organic local-currency sales of 3 percent.

In Japan, total sales increased 2 percent which included increased organic local-currency sales of 6 percent.

Nine months ended September 30, 2021

Americas Asia

Pacific Europe,

& Africa Other

Unallocated Worldwide

Net sales (millions) $ 13,602 $ 8,066 $ 5,077 $ (2) $ 26,743

2 unchanged sentences

Volume — organic 11.2 % 11.1 % 8.6 % 10.7 %

Price 1.3 (0.1) 0.8 0.8

Organic local-currency sales 12.5 11.0 9.4 11.5

Divestitures (0.8) — (1.5) (0.7)

Translation 0.5 3.7 6.2 2.5

Total sales change 12.2 % 14.7 % 14.1 % 13.3 %

2 unchanged sentences

Transportation and Electronics 13.5 14.2 21.0 15.0

Health Care 8.4 15.8 15.7 11.3

Consumer 13.0 9.7 13.9 12.5

Organic local-currency sales change:

1 unchanged sentence

Transportation and Electronics 13.1 11.5 14.6 12.4

Health Care 10.5 10.7 14.3 11.4

Consumer 12.5 5.8 7.8 10.8

Additional information beyond what is included in the preceding table is as follows:

• In the Americas geographic area, U.S.

total sales increased 13 percent and organic-local currency sale increased 14 percent.

Total sales in Mexico increased 24 percent and organic local-currency sales increased 22 percent.

In Canada, total sales increased 27 percent and organic local-currency sales increased 16 percent.

In Brazil, total sales increased 24 percent and organic local-currency sales increased 33 percent.

● In the Asia Pacific geographic area, China total sales increased 29 percent and organic local-currency sales increased 22 percent.

In Japan, total sales increased 5 percent and organic local-currency sales increased 5 percent.

total sales increased 10 percent which included increased organic-local currency sales of 11 percent.

Total sales in Mexico increased 21 percent which included increased organic local-currency sales of 18 percent.

In Canada, total sales increased 21 percent which included increased organic local-currency sales of 13 percent.

In Brazil, total sales increased 25 percent which included increased organic local-currency sales of 29 percent.

• In the Asia Pacific geographic area, China total sales increased 21 percent which included increased organic local-currency sales of 15 percent.

In Japan, total sales increased 4 percent which included increased organic local-currency sales of 5 percent.

Managing currency risks:

The weaker U.S.

dollar had a positive impact on sales in the second quarter and first six months of 2021 compared to the same periods last year.

Net of the Company’s hedging strategy, foreign currency positively impacted earnings in the second quarter and first six months of 2021 compared to the same period last year.

dollar had a positive impact on sales in the third quarter and first nine months of 2021 compared to the same periods last year.

Net of the Company’s hedging strategy, foreign currency negatively impacted earnings in the third quarter and positively impacted earnings in the first nine months of 2021 compared to the same periods last year.

3M utilizes a number of tools to manage currency risk related to earnings including natural hedges such as pricing, productivity, hard currency and hard currency-indexed billings, and localizing source of supply.

5 unchanged sentences

Financial condition:

3M generated $3.6 billion of operating cash flows in the first six months of 2021, an increase of $457 million when compared to the first six months of 2020, with this increase year-on-year primarily driven by higher net income as a result of strong organic sales

growth and ongoing cost management.

3M generated $5.4 billion of operating cash flows in the first nine months of 2021, a decrease of $149 million when compared to the first nine months of 2020, with this decrease year-on-year primarily driven by working capital changes.

Refer to the section entitled “Financial Condition and Liquidity” later in MD&A for a discussion of items impacting cash flows.

1 unchanged sentence

This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date.

In the first six months of 2021, the Company purchased $734 billion of its own stock, compared to $366 million of stock purchases in the first six months of 2020.

As of June 30, 2021, approximately $7.0 billion remained available under the authorization.

In the first nine months of 2021, the Company purchased $1,261 million of its own stock, compared to $366 million of stock purchases in the first nine months of 2020.

As of September 30, 2021, approximately $6.5 billion remained available under the authorization.

In February 2021, 3M’s Board of Directors declared a first-quarter 2021 dividend of $1.48 per share, an increase of 1 percent.

This marked the 63 rd consecutive year of dividend increases for 3M.

In May 2021, 3M’s Board of Directors declared a second-quarter dividend of $1.48 per share.

In May and August 2021, 3M’s Board of Directors declared a second and third quarter 2021 dividend of $1.48 per share for each quarter.

3M currently has an A1 credit rating with a negative outlook from Moody’s Investors Service and has an A+ credit rating with Standard & Poor’s with a negative outlook.

7 unchanged sentences

Three months ended

Six months ended

(Percent of net sales)

September 30, Nine Months Ended

September 30,

(Percent of net sales) 2021 2020 Change 2021 2020 Change

Cost of sales 54.3 % 51.5 % 2.8 % 52.7 % 51.7 % 1.0 %

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and research, development and related expenses (R&D).

The year-on-year increase in defined benefit pension and postretirement service cost expense for the second quarter and first six months of 2021 was approximately $11 million and $22 million, respectively.

The year-on-year increase in defined benefit pension and postretirement service cost expense for the third quarter and first nine months of 2021 was approximately $9 million and $31 million, respectively.

For total year 2020, the Company recognized consolidated defined benefit pre-tax pension and postretirement service cost expense of $456 million and a benefit of $134 million related to all non-service pension and postretirement net benefit costs (after settlements, curtailments, special termination benefits and other) for a total consolidated defined benefit pre-tax pension and postretirement expense of $322 million.

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Cost of Sales:

Cost of sales, measured as a percent of sales, decreased in the second quarter and first six months of 2021 when compared to the same periods last year.

Decreases primarily related to lower COVID-related net impacts taken in the first half of 2021 versus the same period last year, including period expenses of unabsorbed manufacturing costs taken in the second quarter of 2020.

These were partially offset by higher raw material and logistics costs and increased adjustments to other environmental liabilities in the first half of 2021.

Cost of sales, measured as a percent of sales, increased in the third quarter and first nine months of 2021 when compared to the same periods last year.

Increases primarily related to higher raw material, logistics and outsourced manufacturing costs;

increased adjustments to other environmental liabilities;

and increased investments in sustainability.

Cost of sales was also impacted by year-over-year changes in restructuring charges, net of restructuring benefits.

Year-over-year cost increases were partially offset by lower COVID-related net impacts taken in the first nine months of 2021 versus the same period last year, including period expenses of unabsorbed manufacturing costs taken in 2020.

Selling, General and Administrative Expenses:

SG&A in dollars increased 9.6 percent and 5.8 percent in the second quarter and first six months of 2021, respectively, when compared to the same period last year.

These results reflect increased legal and reserve adjustment costs, continued spending on key initiatives, partially offset by the impact of the favorable decision of the Brazilian Supreme Court in the second quarter of 2021 regarding the calculation of past social taxes and ongoing general 3M cost management.

SG&A in dollars increased 8 percent and 7 percent in the third quarter and first nine months of 2021, respectively, when compared to the same period last year.

These results reflect increased litigation-related costs and continued spending on key growth initiatives.

SG&A was also impacted by year-over-year changes in restructuring charges, net of restructuring benefits.

Cost increases were partially offset by the impact of the favorable decision of the Brazilian Supreme Court in the second quarter of 2021 regarding the calculation of past social taxes and ongoing general 3M cost management.

Prior year also included a number of COVID-related net impacts as described in the Overview- Consideration of COVID-19 section above.

As a percent of sales, SG&A decreased for both the second quarter and first six months of 2021 as a result of continued discretionary spending cost management.

As a percent of sales, SG&A increased in the third quarter and decreased in the first nine months of 2021 as a result of these factors.

Research, Development and Related Expenses:

R&D in dollars increased $90 million and $77 million in the second quarter and first six months of 2021, respectively, when compared to the same period last year, as 3M continued to invest in its key initiatives, including R&D aimed at disruptive innovation programs with the potential to create entirely new markets and disrupt existing markets.

R&D in dollars increased $21 million and $98 million in the third quarter and first nine months of 2021, respectively, when compared to the same period last year, as 3M continued to invest in its key initiatives, including R&D aimed at disruptive innovation programs with the potential to create entirely new markets and disrupt existing markets.

Gain on Sale of Businesses:

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See Note 6 for a detailed breakout of this line item.

Interest expense (net of interest income) decreased slightly for the second quarter and remained flat for the first six months of 2021 compared to the same periods year-on-year.

Interest expense (net of interest income) decreased for both the third quarter and the first nine months of 2021 compared to the same periods year-on-year.

Interest expense includes an early debt extinguishment pre-tax charge in the first quarter of 2021.

The non-service pension and postretirement net benefit increased approximately $42 million and $83 million in the second quarter and first six months of 2021, respectively, compared to the same period in 2020.

The non-service pension and postretirement net benefit increased approximately $40 million and $123 million in the third quarter and first nine months of 2021, respectively, compared to the same period in 2020.

Provision for Income Taxes:

Three months ended

Six months ended

September 30, Nine months ended

September 30,

(Percent of pre-tax income) 2021 2020 2021 2020

Effective tax rate 18.4 % 21.5 % 18.8 % 20.1 %

The effective tax rate for the second quarter and first six months of 2021 was 21.5 percent and 18.9 percent, respectively, largely consistent with 21.0 percent and 19.3 percent for the same periods, respectively, in prior year.

The effective tax rate for the third quarter of 2021 was 18.4 percent, compared to 21.5 percent in the third quarter of 2020, a decrease of 3.1 percentage points.

The effective tax rate for the first nine months of 2021 was 18.8 percent compared to 20.1 percent in the first nine months of 2020 a decrease of 1.3 percentage points.

The primary factor that decreased the Company’s effective tax rate was favorable adjustments in 2021 related to impacts of U.S.

international tax provisions.

3M currently estimates its effective tax rate for 2021 to be approximately 18.5 to 19.5 percent.

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Three months ended

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September 30, Nine months ended

September 30,

(Millions) 2021 2020 2021 2020

Income (loss) from unconsolidated subsidiaries, net of taxes $ 4 $ (1) $ 7 $ (1)

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Three months ended

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September 30, Nine months ended

September 30,

(Millions) 2021 2020 2021 2020

Net income (loss) attributable to noncontrolling interest $ 3 $ 4 $ 7 $ 3

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Because Corporate and Unallocated includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

Corporate and Unallocated operating expenses increased in the second quarter and first six months of 2021, when compared to the same period last year.

Corporate and Unallocated operating expenses decreased in the third quarter and increased in first nine months of 2021, when compared to the same period last year.

Special Items

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Other Corporate Expense - Net

Other corporate operating expenses, net, increased and decreased in the second quarter and first six months of 2021, respectively, when compared to the same period last year primarily due to a $91 million pre-tax benefit from the impact of the favorable decision of the Brazilian Supreme Court in the second quarter of 2021 regarding the calculation of past social taxes, lower overall corporate staff spending and first quarter 2020 charges related to equity securities (as discussed in the “Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis” section of Note 13), offset by increased 2021 legal and reserve adjustment costs.

Other corporate operating expenses, net, decreased in the third quarter and first nine months of 2021, respectively, when compared to the same period last year primarily due to a $91 million pre-tax benefit from the impact of the favorable decision of the Brazilian Supreme Court in the second quarter of 2021 regarding the calculation of past social taxes, continued lower overall corporate staff spending and first quarter 2020 charges related to equity securities (as discussed in the “Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis” section of Note 13), partially offset by increased legal and reserve adjustment costs.

Operating Business Segments:

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Three months ended

Six months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

Sales (millions) $ 3,235 $ 3,017 $ 9,816 $ 8,601

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Organic local-currency 6.1 % 11.0 %

Translation 1.1 3.1

Total sales change 7.2 % 14.1 %

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Percent of sales 19.2 % 25.7 % 21.9 % 24.3 %

Second quarter 2021 results:

Third quarter 2021 results:

Sales in Safety and Industrial totaled $3.2 billion, up 7.2 percent in U.S.

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On an organic local-currency sales basis:

● Sales increased in automotive aftermarket, roofing granules, abrasives, industrial adhesives and tapes, electrical markets, and closure and masking driven by continued end market strength (industrial, automotive, electronics and construction) and prior year pandemic impacts.

● Sales declined in personal safety as growth in head, face, hearing, fall protection and disposable respirator growth was more than offset by declines across the rest of the respiratory protection portfolio.

Business segment operating income margins decreased year-on-year due to increases in raw materials, logistics and ongoing legal costs partially offset by leverage on sales growth.

First six months 2021 results:

• Sales increased in abrasives, industrial adhesives and tapes, electrical markets, closure and masking systems, and automotive aftermarket driven by continued robust industrial manufacturing activity along with prior year pandemic-related impacts.

• Sales declined in roofing granules and personal safety against strong comparisons from prior year and declines due to prior year's strong COVID-related respiratory demand.

Business segment operating income margins decreased year-on-year due to ongoing increases in raw materials, logistics and litigation-related costs along with manufacturing productivity impacts, partially offset by leverage on sales growth.

First nine months 2021 results:

Sales in Safety and Industrial totaled $9.8 billion, up 14.1 percent in U.S.

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On an organic local-currency sales basis:

● Sales increased in roofing granules, automotive aftermarket, industrial adhesives and tapes, abrasives, electrical markets, and personal safety;

sales declined in closure and masking.

• Sales increased in abrasives, industrial adhesives and tapes, automotive aftermarket, roofing granules, electrical markets, personal safety, and closure and masking systems.

• Growth was driven by improving general industrial manufacturing activity and other end-market demand along with pandemic-related respirator mask demand in the first quarter of 2021.

Business segment operating income margins decreased year-on-year due to rising raw materials, logistics and legal costs partially offset by sales growth leverage.

Business segment operating income margins decreased year-on-year due to rising raw materials, logistics and litigation-related costs along with manufacturing productivity impacts, partially offset by sales growth leverage.

Transportation and Electronics Business:

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September 30, Nine months ended

September 30,

2021 2020 2021 2020

Sales (millions) $ 2,450 $ 2,316 $ 7,463 $ 6,492

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Organic local-currency 5.1 % 12.4 %

Translation 0.7 2.6

Total sales change 5.8 % 15.0 %

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Percent of sales 19.0 % 22.2 % 21.5 % 20.6 %

Second quarter 2021 results:

Third quarter 2021 results:

Sales in Transportation and Electronics totaled $2.5 billion, up 5.8 percent in U.S.

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On an organic local-currency sales basis:

● Sales increased in automotive and aerospace with year-on-year growth in car and light truck build rates in regions where 3M has higher content per vehicle, a year-on-year increase in sell-in of 3M products versus change in build rate, and continued penetration gains into new platforms.

• Sales increased in advanced materials, commercial solutions, automotive and aerospace and transportation safety;

sales decreased in electronics.

• Sales increased in automotive and aerospace with year-on-year growth in car and light truck build rates as premium vehicle production increased where 3M has higher content per vehicle, a year-on-year increase in sell-in of 3M products versus change in build rate, and continued penetration gains into new platforms.

• Sales increased in commercial solutions, advanced materials and transportation safety from return to workplace trends.

● Sales increased in electronics driven by continued strength in semiconductor, factory automation and data centers along with consumer electronic devices, namely tablets and TV’s.

Business segment operating income margins increased year-on-year due to strong leverage on sales growth, partially offset by increases in raw materials and logistic costs.

First six months 2021 results:

• Sales decreased in electronics due to ongoing semiconductor constraints on customers and pandemic-related impacts.

Business segment operating income margins decreased year-on-year due to strong leverage on sales growth, more than offset by increases in raw materials and logistic costs along with manufacturing productivity impacts.

First nine months 2021 results:

Sales in Transportation and Electronics totaled $7.5 billion, up 15.0 percent in U.S.

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On an organic local-currency sales basis:

● Sales increased in automotive and aerospace from improving automotive-end market activity and increases in car and light truck builds and factors mentioned above relative to second quarter results.

• Sales increased in automotive and aerospace, advanced materials, commercial solutions, electronics and transportation safety.

• Sales increased in automotive and aerospace from improving automotive-end market activity and increases in car and light truck builds and factors mentioned above relative to third quarter results.

• Sales increased in electronics due to strong demand in data center, semiconductor, interconnect and consumer electronics markets.

• Sales increased in commercial solutions, advanced materials and transportation safety due to increased advertising spend and return to workplace trends.

Business segment operating income margins increased year-on-year due to sales growth leverage and COVID impacts recognized on certain assets in 2020, partially offset by rising raw materials and logistic costs.

Health Care Business:

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September 30, Nine months ended

September 30,

2021 2020 2021 2020

Sales (millions) $ 2,249 $ 2,160 $ 6,775 $ 6,087

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Organic local-currency 3.3 % 11.4 %

Divestitures — (2.7)

Translation 0.8 2.6

Total sales change 4.1 % 11.3 %

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Percent of sales 23.5 % 22.8 % 23.8 % 20.5 %

Second quarter 2021 results:

Third quarter 2021 results:

Sales in Health Care totaled $2.2 billion, up 4.1 percent in U.S.

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On an organic local-currency sales basis:

● Sales increased in oral care as patient visits returned to pre-COVID levels, in food safety as food service activity returned along with continued strong growth from new product introductions, and in medical solutions due to rising elective procedure volumes as COVID-related hospitalizations declined.

● Sales increased in separation and purification due to continued demand for biopharma solutions for COVID-related vaccine and therapeutics along with improving demand trends for water filtration solutions.

• Sales increased in food safety, oral care, health information systems and separation and purification;

sales declined in medical solutions.

• Sales increased in oral care as dental procedures continued to be near pre-COVID levels, in food safety as food service activity returned, and in separation and purification due to ongoing demand for biopharma filtration solutions for COVID-related vaccine and therapeutics.

• Sales increased in health information systems driven by strong growth in clinician solutions.

Divestitures:

● In May 2020, 3M completed the sale of substantially all of its drug delivery business.

Business segment operating income margins increased year-on-year due to leverage on sales growth, partially offset by increasing raw materials and logistics costs along with increased investments in growth.

First six months 2021 results:

• Sales decreased in medical solutions due to the continued decline in demand for COVID-related respirators along with the pace of hospital elective procedure volumes coming in at the low end of industry expectations.

Business segment operating income margins increased year-on-year due to leverage on sales growth, partially offset by increasing raw materials and logistics costs, manufacturing productivity impacts, along with increased investments in growth.

First nine months 2021 results:

Sales in Health Care totaled $6.8 billion, up 11.3 percent in U.S.

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On an organic local-currency sales basis:

● Sales increased in oral care driven by higher year-on-year dental industry activity and in separation and purification from continued high demand for biopharma filtration solutions for COVID-related vaccine and therapeutic development and manufacturing.

● Sales increased in medical solutions from rising elective procedure volumes and strong respirator demand in the first quarter of 2021.

• Sales increased in oral care, separation and purification, food safety, health information systems, and medical solutions.

• Sales increased in oral care driven by higher year-on-year dental procedures and in separation and purification from continued high demand for biopharma filtration solutions for COVID-related vaccine and therapeutic development and manufacturing.

• Sales increased in medical solutions from rising elective procedure volumes in the first six months of 2021 and strong respirator demand in the first quarter of 2021.

• Sales increased in health information systems due to improving hospital information technology investments.

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• In May 2020, 3M completed the sale of substantially all of its drug delivery business.

Business segment operating income margins increased year-on-year due to sales growth leverage, partially offset by supply chain disruptions, rising raw materials and logistics costs along with increased investments in growth.

Consumer Business:

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September 30, Nine months ended

September 30,

2021 2020 2021 2020

Sales (millions) $ 1,525 $ 1,412 $ 4,380 $ 3,893

1 unchanged sentence

Organic local-currency 7.6 % 10.8 %

Translation 0.5 1.7

Total sales change 8.1 % 12.5 %

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Percent of sales 21.7 % 24.3 % 21.3 % 22.7 %

Second quarter 2021 results:

Sales in Consumer totaled $1.5 billion, an increase of 20.4 percent in U.S.

Third quarter 2021 results:

Sales in Consumer totaled $1.5 billion, up 8.1 percent in U.S.

Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

● Sales increased in stationery and office supplies as the business laps last year’s COVID-related comparisons, continued strength in consumer demand for Scotch ® -branded packaging and shipping products, along with improved sell-in trends in Post-it ® -solutions and Scotch ® -branded home and office tapes as retailers prepare for back-to-school and return-to-workplace.

● Sales increased in consumer health and safety as last year’s COVID-related impacts are lapped along with improved supply of safety products for retail customers.

● Sales increased in home improvement as the business continued to experience strong demand in many of our category leading franchises particularly for Command TM adhesives, Filtrete TM air quality solutions, and Meguiars TM auto care solutions.

• Sales increased in stationery and office, consumer health and safety, home improvement and home care.

• Sales increased in stationery and office supplies as the business laps last year’s COVID-related comparisons and due to a strong back-to-school consumer demand and holiday-related sell-in for Scotch ® -branded packaging and shipping products, Post-it ® -solutions and Scotch ® -branded home and office tapes.

• Sales increased in consumer health and safety as last year’s COVID-related impacts are lapped.

• Sales increased in home improvement as the business continued to experience strong demand in many of our category leading franchises particularly for Command TM adhesives and Filtrete TM air quality solutions.

• Sales increased in home care due to continued strength in home cleaning.

Business segment operating income margins decreased year-on-year as a result of increased costs for raw materials, logistics and outsourced hardgoods manufacturing costs, along with rising investments in advertising and merchandising, more than offset leverage from sales growth.

First six months 2021 result:

Sales in Consumer totaled $2.9 billion, an increase of 15.1 percent in U.S.

Business segment operating income margins decreased year-on-year as a result of increased costs for raw materials, logistics and outsourced hardgoods manufacturing costs that more than offset leverage from sales growth.

First nine months 2021 results:

Sales in Consumer totaled $4.4 billion, up of 12.5 percent in U.S.

Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

• Sales increased in stationery and office, home improvement, consumer health and safety and home care.

• Sales increased in home improvement driven by continued strength in home improvement with strong demand for Command TM adhesives, Filtrete TM air quality solutions, Meguiars TM auto care and Scotch Blue TM painter’s tape.

● Sales increased in stationery and office supplies from ongoing strength in consumer demand for packaging and shipping products and Scotch ® brand office tapes as the business laps last year’s COVID-related comparisons.

• Sales increased in stationery and office supplies from ongoing strength in consumer demand for packaging and shipping products, Post-it ® -solutions and Scotch ® brand office tapes as the business laps last year’s COVID-related comparisons.

• Sales also increased in consumer health and safety as the global economy impacted by COVID continues to evolve versus 2020 and in home care due to consumer demand for home cleaning products and solutions.

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The Company also continues to actively manage its portfolio to maximize value for shareholders.

3M repurchased shares in the first six months of 2021, after having suspended repurchases under its board-approved share repurchase program (with other repurchase activity limited to 3M’s stock compensation plans) in the first quarter of 2020.

3M repurchased shares in the first nine months of 2021, after having suspended repurchases under its board-approved share repurchase program (with other repurchase activity limited to 3M’s stock compensation plans) in the first quarter of 2020.

To fund cash needs in the United States, the Company relies on ongoing cash flow from U.S.

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3M’s commercial paper program permits the Company to have a maximum of $5 billion outstanding with a maximum maturity of 397 days from date of issuance.

The Company had no commercial paper outstanding at June 30, 2021 and December 31, 2020.

The Company had no commercial paper outstanding at September 30, 2021 and December 31, 2020.

The strength of 3M’s credit profile and significant ongoing cash flows provide 3M proven access to capital markets.

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3M currently has an A1 credit rating with a negative outlook from Moody’s Investors Service and an A+ credit rating with negative outlook from Standard and Poor’s.

The Company’s total debt was $547 million lower at June 30, 2021 when compared to December 31, 2020.

The Company’s total debt was $630 million lower at September 30, 2021 when compared to December 31, 2020.

Decreases in debt were largely due to the March 2021 early redemption via make-whole call offers of $450 million in debt.

For discussion of repayments of and proceeds from debt refer to the following “Cash Flows from Financing Activities” section.

As discussed in Note 10, in the second quarter of 2021, 3M entered into interest rate swaps that converted part of the Company’s $1.0 billion and $650 million principal amount of fixed rate notes due 2049 and 2050, respectively, into floating rate debt for the portion of their terms through mid-2028.

As discussed in Note 10, during the second and third quarters of 2021, 3M entered into interest rate swaps that converted part of the Company’s $1.0 billion and $650 million principal amount of fixed rate notes due 2049 and 2050, respectively, into floating rate debt for the portion of their terms through mid-2028.

In July 2017, the United Kingdom’s Financial Conduct Authority announced that it would no longer require banks to submit rates for the London InterBank Offered Rate (“LIBOR”) after 2021.

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In May 2016, in connection with the WKSI shelf, 3M entered into an amended and restated distribution agreement relating to the future issuance and sale (from time to time) of the Company’s medium-term notes program (Series F), up to the aggregate principal amount of $18 billion, which was an increase from the previous aggregate principal amount up to $9 billion of the same Series.

As of June 30, 2021, the total amount of debt issued as part of the medium-term notes program (Series F), inclusive of debt issued in February 2019 and prior years is approximately $17.6 billion (utilizing the foreign exchange rates applicable at the time of issuance for the euro denominated debt).

As of September 30, 2021, the total amount of debt issued as part of the medium-term notes program (Series F), inclusive of debt issued in February 2019 and prior years is approximately $17.6 billion (utilizing the foreign exchange rates applicable at the time of issuance for the euro denominated debt).

Additionally, the August 2019 and March 2020 debt was issued under the WKSI shelf registration, but not as part of the medium-term notes program (Series F).

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The 364-day credit agreement includes a provision under which 3M may convert any advances outstanding on the maturity date into term loans with a maturity date one year later.

These credit facilities were undrawn at June 30, 2021.

These credit facilities were undrawn at September 30, 2021.

Under both the $3.0 billion and $1.25 billion credit agreements, the Company is required to maintain its EBITDA to Interest Ratio as of the end of each fiscal quarter at not less than 3.0 to 1.

This is calculated (as defined in the agreement) as the ratio of consolidated total EBITDA for the four consecutive quarters then ended to total interest expense on all funded debt for the same period.

At June 30, 2021, this ratio was approximately 19 to 1.

At September 30, 2021, this ratio was approximately 19 to 1.

Debt covenants do not restrict the payment of dividends.

The Company also had $271 million in stand-alone letters of credit and bank guarantees issued and outstanding at June 30, 2021.

The Company also had $268 million in stand-alone letters of credit and bank guarantees issued and outstanding at September 30, 2021.

These instruments are utilized in connection with normal business activities.

Cash, cash equivalents and marketable securities:

At June 30, 2021, 3M had $5.5 billion of cash, cash equivalents and marketable securities, of which approximately $4.3 billion was held by the Company’s foreign subsidiaries and approximately $1.2 billion was held in the United States.

At September 30, 2021, 3M had $5.8 billion of cash, cash equivalents and marketable securities, of which approximately $4.9 billion was held by the Company’s foreign subsidiaries and approximately $0.9 billion was held in the United States.

These balances are invested in bank instruments and other high-quality fixed income securities.

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3M believes net debt is meaningful to investors as 3M considers net debt and its components to be important indicators of liquidity and financial position.

The following table provides net debt as of June 30, 2021 and December 31, 2020.

June 30, 2021

December 31, 2020

The following table provides net debt as of September 30, 2021 and December 31, 2020.

(Millions) September 30, 2021 December 31, 2020 Change

Total debt $ 18,165 $ 18,795 $ (630)

Cash, cash equivalents and marketable securities 5,763 5,068 695

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Working capital (non-GAAP measure):

June 30, 2021

December 31, 2020

(Millions) September 30, 2021 December 31, 2020 Change

Current assets $ 16,426 $ 14,982 $ 1,444

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3M believes working capital is meaningful to investors as a measure of operational efficiency and short-term financial health.

Working capital as of June 30, 2021 was largely consistent with December 31, 2020.

Working capital decreased $0.2 billion compared with December 31, 2020.

Balance changes in current assets increased working capital by $1.4 billion, driven largely by increases in inventory, marketable securities and accounts receivable.

Balance changes in current liabilities decreased working capital by $1.7 billion, primarily due to increases in current-portion of long-term debt and accounts payable.

Accounts receivable and inventory increased $286 million and $603 million, respectively, from December 31, 2020, primarily as a result of increased sequential sales and related operating activity from that of late 2020 partially offset by foreign currency translation impacts.

Accounts receivable increased $211 million and inventory increased $711 million, respectively, from December 31, 2020, primarily as a result of increased sequential sales and related operating activity from that of late 2020 partially offset by foreign currency translation impacts.

Current portion of long-term debt increased based on underlying debt maturities while accounts payable also increased as a result of increased sequential operating activity from that of late 2020 partially offset by foreign currency translation impacts.

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Cash Flows from Operating Activities:

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September 30,

(Millions) 2021 2020

Net income including noncontrolling interest $ 4,589 $ 4,047

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Accounts receivable (324) 113

Inventories (823) 43

Accounts payable 340 (48)

Other — net 212 4

Net cash provided by (used in) operating activities $ 5,449 $ 5,598

Cash flows from operating activities can fluctuate significantly from period to period, as pension funding decisions, tax timing differences and other items can significantly impact cash flows.

In the first six months of 2021, cash flows provided by operating activities increased $457 million compared to the same period last year, with this increase primarily due to overall sales growth and continued spending discipline leading to higher net income year-on-year, offset by working capital changes and the timing of income tax payments.

The combination of accounts receivable, inventories and accounts payable decreased operating cash flow by $570 million and $226 million in the first six months of 2021 and 2020, respectively.

In addition, operating cash flows for the first six months of 2020 benefited from the deferral of income tax payments into the third quarter of 2020.

This deferral did not repeat in 2021.

In the first nine months of 2021, cash flows provided by operating activities decreased $149 million compared to the same period last year, with this decrease primarily due to working capital changes and the timing of income tax payments offset by higher net income year-on-year.

The combination of accounts receivable, inventories and accounts payable decreased operating cash flow by $807 million and increased operating cash flow by $108 million in the first nine months of 2021 and 2020, respectively.

Additional discussion on working capital changes is provided earlier in the “Financial Condition and Liquidity” section.

Cash Flows from Investing Activities:

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(Millions) 2021 2020

Purchases of property, plant and equipment (PP&E) $ (1,047) $ (1,079)

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Proceeds from sale of businesses, net of cash sold — 576

Other — net 18 8

Net cash provided by (used in) investing activities $ (1,432) $ (321)

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Cash Flows from Financing Activities:

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(Millions) 2021 2020

Change in short-term debt — net $ 4 $ (138)

5 unchanged sentences

Dividends paid to shareholders (2,572) (2,540)

Other — net (21) (47)

Net cash provided by (used in) financing activities $ (3,733) $ (3,498)

Total debt was approximately $18.2 billion at June 30, 2021 and $18.8 billion at December 31, 2020.

Total debt was approximately $18.2 billion at September 30, 2021 and $18.8 billion at December 31, 2020.

Decreases in debt were largely due to the March 2021 early redemption of $450 million in debt maturing in 2022 via make-whole call offers.

The Company had no commercial paper outstanding at June 30, 2021 and December 31, 2020.

The Company had no commercial paper outstanding at September 30, 2021 and December 31, 2020.

Net commercial paper issuances in addition to repayments and borrowings by international subsidiaries are largely reflected in “Change in short-term debt – net” in the preceding table.

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This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date.

In the first six months of 2021, the Company purchased $734 million of its own stock.

3M repurchased shares in 2021, after having suspended repurchases (with other repurchase activity limited to 3M’s stock compensation plans) in the first quarter of 2020.

In the first nine months of 2021, the Company purchased $1.3 billion of its own stock.

3M repurchased shares, after having suspended repurchases (with other repurchase activity limited to 3M’s stock compensation plans) in the first quarter of 2020.

For more information, refer to the table titled “Issuer Purchases of Equity Securities” in Part II, Item 2.

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This is equivalent to an annual dividend of $5.92 per share and marked the 63rd consecutive year of dividend increases.

In May 2021, 3M’s Board of Directors declared a second-quarter 2021 dividend of $1.48 per share.

In May and August 2021, 3M’s Board of Directors declared a second and third quarter 2021 dividend of $1.48 per share for each quarter.

Other cash flows from financing activities may include various other items, such as cash paid associated with certain derivative instruments, distributions to or sales of noncontrolling interests, changes in overdraft balances, and principal payments for finance leases.

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The Company believes free cash flow and free cash flow conversion are meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication of the strength of the company and its ability to generate cash.

The first quarter of each year is typically 3M’s seasonal low for free cash flow and free cash flow conversion.

Free cash flow and free cash flow conversion vary across quarters throughout the year.

Below find a recap of free cash flow and free cash flow conversion.

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Refer to the preceding “Results of Operations” section for discussion of items that impacted the net income attributable to 3M component of the calculation of free cash flow conversion.

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Nine months ended

September 30,

(Millions) 2021 2020

Major GAAP Cash Flow Categories

38 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis