What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-26 compared with 2021-10-26 · 199 added, 427 removed, 355 unchanged (64% of the section changed)

9 unchanged sentences

Effective in the first quarter of 2022, 3M made the following changes:

Information provided herein reflects the impact of these changes for all periods presented.

• Change in accounting principle for net periodic pension and postretirement plan cost.

See detailed discussion in Note 1.

• Change in measure of segment operating performance used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income).

• Changes in measure of segment operating performance used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income).

See additional information in Note 16.

• Change in alignment of certain products within 3M’s Consumer business segment—creating the Consumer Health and Safety Division.

3M's disclosed disaggregated revenue was also updated as a result of the changes in segment reporting.

See additional information in Note 2.

• Changes to non-GAAP measures - certain amounts adjusted for special items.

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below for additional information.

Information provided herein reflects the impact of these changes for all periods presented.

3M manages its operations in four operating business segments:

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From a geographic perspective, any references to EMEA refer to Europe, Middle East and Africa on a combined basis.

Consideration of COVID-19:

As described in the Overview—Consideration of COVID-19 section of Part II, Item 7 of the Company’s 2020 Annual Report on Form 10-K, 3M is impacted by the global pandemic and related effects associated with the coronavirus (COVID-19).

As described in the Overview—Consideration of COVID-19 section of Part II, Item 7 of the Company’s 2021 Annual Report on Form 10-K, 3M continues to be impacted by the global pandemic and related effects associated with the coronavirus (COVID-19).

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 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 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 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 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:

• 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.

• Government-sponsored COVID-response stimulus and relief initiatives in 2020, including certain employee retention benefits under the Coronavirus Aid, Relief and Economic Security (CARES) Act in the United States.

• Lower incentive compensation and self-insured medical visit/insurance expense in 2020.

• Accelerated vacation usage policies in the second quarter of 2020 which benefited the second quarter of 2020, but provided a penalty in the second half of 2020.

Refer to the Financial Condition and Liquidity section below for more information on the Company’s liquidity position.

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.

Due to the speed with which the COVID-19 situation continues to develop and evolve and the uncertainty of its duration and the timing of recovery, 3M is not able at this time to predict the extent to which the COVID-19 pandemic may have a material effect on its consolidated results of operations or financial condition.

3M is experiencing interruption to a portion of the manufacturing at its site in Zwijndrecht, Belgium as more fully discussed in Note 14.

3M is also impacted by the Russia-Ukraine conflict.

Relevant risk factors can be found in Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.

As discussed in Note 14, 3M continues to explore and deploy options to mitigate the impact of a prolonged suspension or interruption of the Zwijndrecht facility's operations.

With respect to the Russia-Ukraine conflict, the business and operational environment in Russia is impacted by, among other things, Russian laws and regulations as well as sanctions imposed by the U.S.

and other governments.

In light of the conflict, in March 2022, 3M suspended operations of its subsidiaries in Russia, the net sales of which was less than one percent of 3M’s consolidated net sales for 2021.

If the environment were to deteriorate, such as a lack of currency exchangeability coupled with an acute degradation in the ability to make key operational decisions, a need to deconsolidate these subsidiaries' operations could arise.

In addition, 3M has other operations that source certain raw materials from suppliers in Russia and have experienced related supply disruption due to the conflict.

Further supply disruption could lead to downstream customer impacts.

Though 3M monitors relevant factors as well as options to mitigate potential impacts, it is not able to predict the extent to which these circumstances may have a material effect on 3M’s consolidated results of operations or financial condition.

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 nine months ended September 30, 2021 and 2020.

The following table provides the increases (decreases) in operating income margins and diluted earnings per share for the three months ended March 31, 2022 and 2021.

Three months ended

September 30, 2021 Nine months ended

September 30, 2021

net sales Earnings per

diluted share Percent of

March 31, 2022

net sales Earnings per

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Same period last year 22.5 % $ 2.77

Significant litigation-related charges/benefits — — 0.1 (0.07)

Gain/loss on sale of businesses — — (1.6) (0.52)

Divestiture-related restructuring actions — — 0.2 0.08

Net costs for significant litigation 1.6 0.18

Same period last year, excluding special items 24.1 % $ 2.95

Increase/(decrease) due to:

Organic growth/productivity and other (1.4) (0.02) 1.3 1.19

Selling price and raw material impact (1.3) (0.12) (1.0) (0.29)

Acquisitions/divestitures — — — (0.05)

Total organic growth/productivity and other (0.4) —

Raw material impact (2.4) (0.30)

Foreign exchange impacts 0.1 (0.04)

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)

Other expense (income), net N/A 0.01

Income tax rate N/A (0.02)

Shares of common stock outstanding N/A 0.05

Current period, excluding special items 21.4 % $ 2.65

Net costs for significant litigation (2.8) (0.39)

Current period 18.6 % $ 2.26

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”.

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

These exclude special items.

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 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:

• 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.

◦ 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.

◦ 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:

• 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:

• Divestiture impacts are comprised of the lost income from the divestiture of the Company’s drug delivery business (sale completed in May 2020).

A discussion related to the components of year-on-year changes in operating income margin and earnings per diluted share follows:

Total organic growth/productivity and other:

• For the first quarter of 2022, the following components impacted operating margins and earnings per diluted share year-on-year:

◦ Declines in disposable respirator demand year-on-year negatively impacted operating margins by 0.1 percent and earnings per share by $0.03.

◦ Remaining organic growth/productivity and other impacts resulted in a net year-on-year benefit $0.03 to earnings per share and penalty of 0.3 percent to operating margins.

The increase in organic sales did not fully offset operating margin effects of non-raw material/logistics cost headwinds as a percent of sales.

Impacts included the following:

▪ Strong pricing, spending discipline and benefits from restructuring actions taken in 2021

▪ Manufacturing headwinds from global supply chain challenges, including geopolitical impacts due to the Russia/Ukraine conflict

▪ Increased investments in growth, productivity and sustainability

Raw material impact:

• 3M continued to experience inflationary pressures with year-on-year increases in raw material and logistics costs.

Foreign exchange impacts

• 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.

the impact of currency fluctuations on the transfer of goods between 3M operations in the United States and abroad;

and transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

• Foreign currency impacts (net of hedging) decreased operating income by approximately $42 million (or a decrease of pre-tax earnings by approximately $26 million) year-on-year for the first three months of 2022 primarily the result of the strength of the U.S.

These estimates include:

(a) the effects of year-on-year changes in exchange rates on translating current period functional currency profits into U.S.

dollars and on current period non-functional currency denominated purchases or transfers of goods between 3M operations, and (b) year-on-year changes in transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

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 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.

• Lower income related to non-service cost components of pension and postretirement expense increased expense year-on-year for the first three months of 2022.

• Interest expense (net of interest income) decreased for the first quarter of 2022 compared to the same period year-on-year.

Income tax rate:

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

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.

Overall, the effective tax rate for the first quarter of 2022 was 18.8 percent, an increase from 16.4 percent in the prior year.

The primary factor that increased the Company's effective tax rate included adjustments to reserves for uncertain tax positions.

• On an adjusted basis (as discussed below), the effective tax rate for the first quarter of 2022 was 17.6%, an increase of 0.7 percentage points compared to the same period year-on-year.

Shares of common stock outstanding:

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

• Lower shares outstanding increased earnings per share year-on-year for the first three months of 2022.

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

In addition to reporting financial results in accordance with U.S.

GAAP, the Company also provides non-GAAP measures that adjust for the impacts of special items.

GAAP, 3M also provides non-GAAP measures that adjust for the impacts of special items.

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

While the Company includes certain items in its measure of segment operating performance, it also considers these non-GAAP measures in evaluating and managing its operations.

The Company believes that discussion of results adjusted for special items is useful to investors in understanding underlying business performance, while also providing additional transparency to the special items.

Special items impacting operating income are reflected in Corporate and Unallocated, except as described below with respect to net costs for significant litigation.

The determination of these items may not be comparable to similarly titled measures used by other companies.

Special items include:

Significant litigation-related charges/benefits:

• In the first quarter of 2020, 3M recorded a net pre-tax charge of $17 million ($13 million after tax) related to PFAS (certain perfluorinated compounds) matters.

The charge was more than offset by a reduction in tax expense of $52 million related to resolution of tax treatment with authorities regarding the previously disclosed 2018 agreement reached with the State of Minnesota that resolved the Natural Resources Damages (NRD) lawsuit.

These items, in aggregate, resulted in a $39 million after tax benefit.

Gain/loss on sale of businesses:

• In the first quarter of 2020, 3M recorded a pre-tax gain of $2 million ($1 million loss after tax) related to the sale of its advanced ballistic-protection business and recognition of certain contingent consideration.

In the second quarter of 2020, 3M recorded a pre-tax gain of $387 million ($304 million after tax) related to the sale of its drug delivery business.

Refer to Note 3 for further details.

Divestiture-related restructuring actions:

• 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

In the first quarter of 2022, the Company changed the extent of matters and charges/benefits it includes within special items with respect to net costs for significant litigation.

Previously, 3M included net costs, when significant, associated with changes in accrued liabilities related to respirator mask/asbestos litigation and PFAS-related other environmental matters, along with the associated tax impacts.

These non-GAAP measure changes involved including net costs for litigation related to 3M’s Combat Arms Earplugs, expanding net costs to include external legal fees and insurance recoveries associated with the applicable matters in addition to changes in accrued liabilities, and to include all such net costs for the applicable matters, not just when considered significant.

Information provided herein reflects the impact of these changes for all periods presented.

Special items for the periods presented include:

Net costs for significant litigation:

• These relate to 3M's respirator mask/asbestos, PFAS-related other environmental, and Combat Arms Earplugs matters (as discussed in Note 14).

Net costs include the impacts of any changes in accrued liabilities, external legal fees, and insurance recoveries, along with associated tax impacts.

Net costs related to respirator mask/asbestos and Combat Arms Earplugs matters are reflected as special items in the Safety and Industrial business segment while those associated with PFAS-related other environmental matters are primarily reflected as corporate special items in Corporate and Unallocated.

Operating Income

(Dollars in millions, except per share amounts) Safety and Industrial Safety and Industrial Margin Total Company

Total Company Margin

Income Before

2 unchanged sentences

Rate Net Income

Attributable to

Attrib-utable to

3M Earnings per

2 unchanged sentences

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:

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:

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

Three months ended March 31, 2021 GAAP

$ 752 24.3% $ 1,994 22.5 % $ 1,945 $ 319 16.4 % $ 1,624 $ 2.77

Adjustments for special items:

Significant litigation-related charges/benefits 17 17 56 (39) (0.07)

Gain/loss on sale of businesses (389) (389) (86) (303) (0.52)

Divestiture-related restructuring actions 55 55 9 46 0.08

Nine months ended

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

Net costs for significant litigation 65 135 135 32 103 0.18

Three months ended March 31, 2021 adjusted amounts (non-GAAP measures)

$ 817 26.4% $ 2,129 24.1 % $ 2,080 $ 351 16.9 % $ 1,727 $ 2.95

Nine months ended

September 30, 2021 GAAP

Three months ended March 31, 2022 GAAP

$ 636 20.8% $ 1,641 18.6 % $ 1,603 $ 302 18.8 % $ 1,299 $ 2.26 (18) %

Adjustments for special items:

None — — — — —

Nine months ended

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

Net costs for significant litigation 63 250 250 25 225 0.39

Three months ended March 31, 2022 adjusted amounts (non-GAAP measures)

$ 699 22.9% $ 1,891 21.4 % $ 1,853 $ 327 17.6 % $ 1,524 $ 2.65 (10) %

Sales and operating income by business segment:

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

The following tables contain sales and operating income results by business segment for the three months ended March 31, 2022 and 2021.

Refer to the section entitled “Performance by Business Segment” later in MD&A for additional discussion concerning 2022 versus 2021 results, including Corporate and Unallocated.

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

Three months ended September 30,

2021 2020 % change

(Dollars in millions) Net

Business Segments

Safety and Industrial $ 3,235 $ 620 $ 3,017 $ 774 7.2 % (19.9) %

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)

Elimination of Dual Credit (520) (131) (553) (142)

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

Nine months ended September 30,

Refer to Note 16 for additional information on business segments.

Three months ended March 31,

2022 2021 % change

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Corporate and Unallocated 1 (163) (2) (47)

Elimination of Dual Credit (1,693) (428) (1,471) (374)

Total Company $ 8,829 $ 1,641 $ 8,851 $ 1,994 (0.3) % (17.7) %

Three months ended September 30, 2021

Worldwide Sales Change

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

Nine months ended September 30, 2021

Three months ended March 31, 2022

Worldwide Sales Change

By Business Segment Organic local-

currency sales Acquisitions Divestitures Translation Total sales

By Business Segment Organic sales Acquisitions Divestitures Translation Total sales

Safety and Industrial 0.5 % — % — % (2.1) % (1.6) %

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Sales by geographic area:

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

Percent change information compares the three months ended March 31, 2022 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 September 30, 2021

Americas Asia

Pacific Europe,

& Africa Other

Unallocated Worldwide

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

% of worldwide sales 52.5 % 29.5 % 18.0 % — 100.0 %

Components of net sales change:

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 %

Total sales change:

Safety and Industrial 5.5 % 18.1 % 0.2 % 7.2 %

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:

Safety and Industrial 4.9 % 15.6 % (0.8) % 6.1 %

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 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

Three months ended March 31, 2022

Americas Asia

5 unchanged sentences

Components of net sales change:

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

Organic sales 2.5 2.7 (1.9) 1.7

Divestitures — — — —

1 unchanged sentence

Total sales change 2.5 % — % (7.6) % (0.3) %

Total sales change:

Safety and Industrial 12.8 % 19.5 % 11.6 % 14.1 %

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:

Safety and Industrial 12.2 % 14.1 % 5.4 % 11.0 %

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 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.

total sales were flat which included increased organic sales of 1 percent.

Total sales in Mexico increased 10 percent which included increased organic sales of 10 percent.

In Canada, total sales increased 22 percent which included increased organic sales of 22 percent.

In Brazil, total sales increased 19 percent which included increased organic sales of 14 percent.

• In the Asia Pacific geographic area, China total sales decreased 1 percent which included decreased organic sales of 3 percent.

In Japan, total sales decreased 4 percent which included increased organic sales of 3 percent.

Managing currency risks:

The weaker U.S.

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.

The stronger U.S.

dollar had a negative impact on sales in the first three months of 2022 compared to the same periods last year.

Net of the Company’s hedging strategy, foreign currency negatively impacted earnings in the first three months of 2022 compared to the same period last year.

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

3M also uses financial hedges to mitigate currency risk.

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Financial condition:

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.

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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 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 the first three months of 2022, the Company purchased $773 million of its own stock, compared to $231 million of stock purchases in the first three months of 2021.

As of March 31, 2022, approximately $4.8 billion remained available under the authorization.

In February 2022, 3M’s Board of Directors declared a first-quarter 2022 dividend of $1.49 per share, an increase of 1 percent.

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

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.

The Company generates significant ongoing cash flow and has proven access to capital markets funding throughout business cycles.

This marked the 64th consecutive year of dividend increases for 3M.

3M expects to contribute approximately $200 million of cash to its global defined benefit pension and postretirement plans in 2022.

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Three months ended

September 30, Nine Months Ended

September 30,

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

(Percent of net sales) 2022 2021 Change

Cost of sales 54.7 % 51.1 % 3.6 %

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Research, development and related expenses (R&D) 5.4 5.9 (0.5)

Gain on sale of businesses — — — — (1.6) 1.6

Operating income margin 18.6 % 22.5 % (3.9) %

3M expects global defined benefit pension and postretirement service cost expense in 2021 to increase by approximately $40 million pre-tax when compared to 2020, which impacts cost of sales;

3M expects global defined benefit pension and postretirement service cost expense in 2022 to decrease by approximately $68 million pre-tax when compared to 2021, which impacts cost of sales;

selling, general and administrative expenses (SG&A);

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

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.

The year-on-year decrease in defined benefit pension and postretirement service cost expense for the first quarter of 2022 was approximately $16 million.

For total year 2021, the Company recognized consolidated defined benefit pre-tax pension and postretirement service cost expense of $503 million and a benefit of $297 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 $206 million.

For total year 2022, defined benefit pension and postretirement service cost expense is anticipated to total approximately $435 million while non-service pension and postretirement net benefit cost is anticipated to be a benefit of approximately $250 million, for a total consolidated defined benefit pre-tax pension and postretirement expense of approximately $185 million, a decrease in expense of approximately $20 million compared to 2021.

The Company is investing in an initiative called business transformation, with these investments impacting cost of sales, SG&A, and R&D.

Business transformation encompasses the ongoing multi-year phased implementation of an enterprise resource planning (ERP) system on a worldwide basis, as well as changes in processes and internal/external service delivery across 3M.

The Company is continuing the ongoing deployment of an enterprise resource planning (ERP) system on a worldwide basis,

with these investments impacting cost of sales, SG&A, and R&D.

Cost of Sales:

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.

Cost of sales, measured as a percent of sales, increased in the first three months of 2022 when compared to the same periods last year.

Increases primarily due to negative manufacturing productivity impacts from ongoing global supply chain, raw material and logistics challenges, including estimate of idled portions of Belgium manufacturing facility, increased net costs for significant litigation, increased compensation and benefit costs, and increased investments in growth, productivity and sustainability.

Selling, General and Administrative Expenses:

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 increased in the third quarter and decreased in the first nine months of 2021 as a result of these factors.

SG&A, measured as a percent of sales, increased in the first three months of 2022 when compared to the same period last year.

SG&A was impacted by increased compensation and benefit costs, and continued investment on key growth initiatives.

Cost increases were partially offset by restructuring benefits and ongoing general 3M cost management.

Research, Development and Related Expenses:

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:

During the first quarter of 2020, the Company recorded a pre-tax gain of $2 million ($1 million loss after tax) related to the sale of its advanced ballistic-protection business and recognition of certain contingent consideration.

During the second quarter of 2020, the Company recorded a pre-tax gain of $387 million ($304 after tax) related to the sale of substantially all of its drug delivery business.

Refer to Note 3 for additional details on divestitures.

R&D, measured as a percent of sales, decreased in the first three months of 2022 when compared to the same period last year.

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.

Other Expense (Income), Net:

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

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 $40 million and $123 million in the third quarter and first nine months of 2021, respectively, compared to the same period in 2020.

Interest expense (net of interest income) decreased in the first three months of 2022 compared to the same period year-on-year due to an early debt extinguishment pre-tax charge in the first quarter of 2021.

The non-service pension and postretirement net benefit decreased approximately $12 million in the first three months of 2022 compared to the same period year-on-year.

Provision for Income Taxes:

Three months ended

September 30, Nine months ended

September 30,

(Percent of pre-tax income) 2022 2021

Effective tax rate 18.8 % 16.4 %

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.

The primary factor that increased the Company’s effective tax rate included adjustments to uncertain tax positions.

3M currently estimates its effective tax rate for 2022 to be approximately 18.5 to 19.5 percent.

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Three months ended

September 30, Nine months ended

September 30,

(Millions) 2022 2021

Income (loss) from unconsolidated subsidiaries, net of taxes $ 2 $ 1

Income (loss) from unconsolidated subsidiaries, net of taxes, is primarily attributable to the Company’s ownership interest in Kindeva using the equity method of accounting following 3M’s divestiture of the drug delivery business in 2020.

Income (loss) from unconsolidated subsidiaries, net of taxes, is attributable to the Company’s accounting under the equity method for ownership interests in certain entities such as Kindeva following 3M's divestiture of the drug delivery business in 2020.

Net Income (Loss) Attributable to Noncontrolling Interest:

Three months ended

September 30, Nine months ended

September 30,

(Millions) 2022 2021

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In addition to these four business segments, 3M assigns certain costs to “Corporate and Unallocated,” which is presented separately in the preceding business segments table and in Note 16.

Corporate and Unallocated operating income includes “special items” and “other corporate expense-net”.

Special items include significant litigation-related charges/benefits, gain/loss on sale of businesses, and divestiture-related restructuring costs.

Other corporate expense-net includes items such as net costs related to limited unallocated corporate staff and centrally managed material resource centers of expertise costs, certain litigation and environmental expenses largely related to legacy products/businesses not allocated to business segments, corporate philanthropic activity, and other net costs that 3M may choose not to allocate directly to its business segments.

Other corporate expense-net also includes costs and income from contract manufacturing, transition services and other arrangements with the acquirer of the Communication Markets Division following its 2018 divestiture through 2019 and the acquirer of the former Drug Delivery business following its 2020 divestiture.

Corporate and Unallocated operating income includes “corporate special items” and “other corporate expense-net”.

Corporate special items include net costs for significant litigation associated with PFAS-related other environmental matters (see Note 14), gain/loss on sale of businesses (see Note 3), and divestiture-related restructuring costs.

Other corporate expense-net includes items such as net costs related to limited unallocated corporate staff and centrally managed material resource centers of expertise costs, corporate philanthropic activity, and other net costs that 3M may choose not to allocate directly to its business segments.

Other corporate expense-net also includes costs and income from contract manufacturing, transition services and other arrangements with the acquirer of the former Drug Delivery business following its 2020 divestiture.

Items classified as revenue from this activity are included in Corporate and Unallocated net sales.

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

Special Items

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of significant litigation-related charges/benefits, gain/loss on sale of businesses, and divestiture-related restructuring actions that are reflected in Corporate and Unallocated.

Corporate and Unallocated operating expenses increased in the first three months of 2022, when compared to the same period last year.

Corporate Special Items

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of net costs for significant litigation, gain/loss on sale of businesses, and divestiture-related restructuring actions.

Other Corporate Expense - Net

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.

Other corporate operating expenses, net, in the first three months of 2022, was relatively flat when compared to the same period last year.

Operating Business Segments:

Information related to 3M’s business segments is presented in the tables that follow with additional context in the corresponding narrative below the tables.

Organic local-currency sales include both organic volume impacts plus selling price impacts.

Acquisition impacts, if any, are measured separately for the first twelve months post-transaction.

The divestiture impacts, if any, foreign currency translation impacts and total sales change are also provided for each business segment.

Any references to EMEA relate to Europe, Middle East and Africa on a combined basis.

Refer to the preceding “Sales and operating income by geographic area” section for organic local-currency sales growth by business segment within major geographic areas.

Refer to 3M’s 2021 Annual Report on Form 10-K, Item 1, Business, for discussion of 3M products that are included in each business segment.

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Three months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

Sales (millions) $ 3,051 $ 3,099

Sales change analysis:

Organic local-currency 6.1 % 11.0 %

Organic sales 0.5 %

Translation (2.1)

3 unchanged sentences

Percent of sales 20.8 % 24.3 %

Third quarter 2021 results:

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

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

On an organic local-currency sales basis:

• 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 litigation-related costs along with manufacturing productivity impacts, partially offset by sales growth leverage.

Adjusted business segment operating income (millions) (non-GAAP measure) $ 699 $ 817

Percent change (14.4) %

Percent of sales 22.9 % 26.4 %

The preceding table also displays business segment operating income information adjusted for special items.

For Safety and Industrial these adjustments include net costs for respirator mask/asbestos and Combat Arms Earplugs litigation matters.

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details.

First quarter 2022 results:

Sales in Safety and Industrial were down 1.6 percent in U.S.

On an organic sales basis:

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

• Growth from continued improving general industrial manufacturing activity and other end-market demand was partially offset by the disposable respirator sales decline within personal safety, which negatively impacted year-on-year first quarter organic growth by 1.5 percent.

Business segment operating income margins decreased year-on-year due to increased raw materials and logistics costs, special item costs for significant litigation and manufacturing productivity headwinds, partially offset by selling price actions, strong spending discipline and benefits from restructuring actions.

Adjusting for special item costs for significant litigation (non-GAAP measure), business segment operating income margins decreased year-on-year as displayed above.

Transportation and Electronics Business:

Three months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

Sales (millions) $ 2,340 $ 2,396

Sales change analysis:

Organic local-currency 5.1 % 12.4 %

Organic sales (0.3) %

Translation (2.0)

3 unchanged sentences

Percent of sales 21.2 % 23.2 %

Third quarter 2021 results:

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

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

On an organic local-currency sales basis:

• 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 along with manufacturing productivity impacts.

First quarter 2022 results:

Sales in Transportation and Electronics were down 2.3 percent in U.S.

On an organic sales basis:

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

• Sales declines were primarily due to the ongoing impacts of the semiconductor supply chain constraints on the automotive and consumer electronics end-markets.

Business segment operating income margins decreased year-on-year due to increased raw materials and logistics costs, manufacturing productivity headwinds and investments in auto electrification, partially offset by selling price actions, strong spending discipline and benefits from restructuring actions.

Health Care Business:

Three months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

Sales (millions) $ 2,124 $ 2,069

Sales change analysis:

Organic local-currency 3.3 % 11.4 %

Divestitures — (2.7)

Organic sales 4.7 %

Translation (2.0)

3 unchanged sentences

Percent of sales 21.1 % 22.5 %

Third quarter 2021 results:

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

• 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.

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

On an organic local-currency sales basis:

• 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.

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 sales growth leverage, partially offset by supply chain disruptions, rising raw materials and logistics costs, manufacturing productivity impacts, and increased investments in growth.

First quarter 2022 results:

Sales in Health Care were up 2.7 percent in U.S.

On an organic sales basis:

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

• Sales increased in medical solutions and oral care, but continue to be impacted by COVID-related trends on elective procedure volumes.

• Sales increased in separation and purification with sustained demand for biopharma filtration solutions for COVID-related vaccines and therapeutics.

• Sales increased in health information systems due to strong growth in revenue cycle management and clinician solutions.

Business segment operating income margins decreased year-on-year due to increased raw materials and logistics costs along with manufacturing productivity headwinds and investments, partially offset by sales growth (including selling price actions), strong spending discipline and benefits from restructuring actions.

Consumer Business:

Three months ended

September 30, Nine months ended

September 30,

2021 2020 2021 2020

Sales (millions) $ 1,313 $ 1,289

Sales change analysis:

Organic local-currency 7.6 % 10.8 %

Organic sales 3.4 %

Translation (1.6)

3 unchanged sentences

Percent of sales 17.1 % 20.8 %

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, 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 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, 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.

Business segment operating income margins decreased year-on-year as a result of rising raw materials, logistics and outsourced hardgoods manufacturing costs, and higher investments in advertising and merchandising, partially offset by sales growth leverage.

First quarter 2022 results:

Sales in Consumer totaled were up 1.8 percent in U.S.

On an organic sales basis:

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

• Sales increases continue to be benefited by strength and demand in market-lead categories such as Filtrete TM air quality solutions and Command TM adhesives.

Business segment operating income margins decreased year-on-year as a result of increased raw materials, logistics and outsourced hardgoods manufacturing costs along with manufacturing productivity headwinds, partially offset by sales growth (including selling price actions), strong spending discipline and benefits from restructuring actions.

FINANCIAL CONDITION AND LIQUIDITY

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This includes research and development, capital expenditures, and commercialization capability.

Organic investments will be supplemented by complementary acquisitions.

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

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.

The Company also continues to actively manage its portfolio through acquisitions and divestitures to maximize value for shareholders.

3M expects to continue returning cash to shareholders through dividends and share repurchases.

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

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For those international earnings still considered to be reinvested indefinitely, the Company currently has no plans or intentions to repatriate these funds for U.S.

See Note 10 in 3M’s 2020 Annual Report on Form 10-K for further information on earnings considered to be reinvested indefinitely.

See Note 10 to the Consolidated Financial Statements in 3M’s 2021 Annual Report on Form 10-K for further information on earnings considered to be reinvested indefinitely.

3M maintains a strong liquidity profile.

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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 September 30, 2021 and December 31, 2020.

The Company had no commercial paper outstanding at March 31, 2022 and December 31, 2021.

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

Additionally, the Company’s debt maturity profile is staggered to help ensure refinancing needs in any given year are reasonable in proportion to the total portfolio.

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 $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.

3M currently has an A1 credit rating with a stable 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 lower at March 31, 2022 when compared to December 31, 2021.

Decreases in debt were largely due to the February 2022 repayment of 500 million euros aggregate principal amount of fixed-rate medium-term notes.

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

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.

In November 2020, the ICE Benchmark Administration (IBA), LIBOR’s administrator, proposed extending the publication of USD LIBOR through June 2023.

Subsequently, in March of 2021, IBA stated it will cease publication of certain LIBOR rates after December 31, 2021.

USD LIBOR rates that do not cease on December 31, 2021 will continue to be published through June 30, 2023.

Subsequently, in March of 2021, IBA ceased publication of certain LIBOR rates after December 31, 2021.

USD LIBOR rates that did not cease on December 31, 2021 will continue to be published through June 30, 2023.

The Company has reviewed its debt securities, bank facilities, and derivative instruments and continues to evaluate commercial contracts that may utilize LIBOR as the reference rate.

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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 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).

Information with respect to long-term debt issuances and maturities for the periods presented is included in Note 10 of this Form 10-Q and Note 12 of 3M’s 2020 Annual Report on Form 10-K.

The Company has a $3.0 billion five-year revolving credit facility expiring in November 2024.

As of March 31, 2022, 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).

Information with respect to long-term debt issuances and maturities for the periods presented is included in Note 10 of this Form 10-Q and Note 12 to the Consolidated Financial Statements in 3M’s 2021 Annual Report on Form 10-K.

3M has an amended and restated $3.0 billion five-year revolving credit facility expiring in November 2024.

The revolving credit agreement includes a provision under which 3M may request an increase of up to $1.0 billion (at lender’s discretion), bringing the total facility up to $4.0 billion.

In addition, 3M entered into a $1.25 billion 364-day credit facility, which was renewed in November 2021 with an expiration date of November 2022.

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 September 30, 2021.

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

These credit facilities were undrawn at March 31, 2022.

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

At March 31, 2022, this ratio was approximately 20 to 1.

Debt covenants do not restrict the payment of dividends.

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

As disclosed in Note 12 to the Consolidated Financial Statements in 3M’s 2021 Annual Report on Form 10-K, 3M has a $1 billion debt financing commitment related to the intended Food Safety Division spin-off or split transaction.

Amounts outstanding under this facility have a term of 364 days following the borrowing date and are required to be repaid when certain conditions are met.

This commitment was undrawn at March 31, 2022.

The Company also had $286 million in stand-alone letters of credit and bank guarantees issued and outstanding at March 31, 2022.

These instruments are utilized in connection with normal business activities.

Cash, cash equivalents and marketable securities:

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.

At March 31, 2022, 3M had $3.4 billion of cash, cash equivalents and marketable securities, of which approximately $3.0 billion was held by the Company’s foreign subsidiaries and approximately $0.4 billion was held in the United States.

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

At December 31, 2021, 3M had $4.8 billion of cash, cash equivalents and marketable securities, of which approximately $3.1 billion was held by the Company’s foreign subsidiaries and $1.7 billion was held by the United States.

The increase from December 31, 2020 primarily resulted from strong cash flow from operations offset by ongoing dividend payments, purchases of treasury stock, capital expenditures, and the March 2021 early redemption via make-whole call offers of $450 million in debt.

The decrease from December 31, 2021 primarily resulted from cash flow from operations offset by ongoing dividend payments, purchases of treasury stock, capital expenditures, and the Q1 2022 Eurobond maturity.

Net Debt (non-GAAP measure):

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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 September 30, 2021 and December 31, 2020.

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

The following table provides net debt as of March 31, 2022 and December 31, 2021.

(Millions) March 31,

2022 December 31,

Total debt $ 16,678 $ 17,363 $ (685)

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Working capital (non-GAAP measure):

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

(Millions) March 31,

2022 December 31,

Current assets $ 14,452 $ 15,403 $ (951)

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Working capital decreased $1.1 billion compared with December 31, 2021.

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 assets decreased working capital by $1.0 billion, driven largely by decreases in cash and cash equivalents .

Balance changes in current liabilities decreased working capital by $0.1 billion, primarily due to increases in current-portion of long-term debt and accounts payable.

Accounts receivable increased $155 million and inventory increased $305 million, respectively, from December 31, 2021, primarily as a result of increased sequential sales and related operating activity from that of late 2021 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.

Current portion of long-term debt increased as upcoming debt maturities now considered current were partially offset by the realized Eurobond maturity in the first quarter of 2022, while accounts payable also increased as a result of increased sequential operating activity from that of late 2021 partially offset by foreign currency translation impacts.

Cash flows from operating, investing and financing activities are provided in the tables that follow.

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Cash Flows from Operating Activities:

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Stock-based compensation expense 135 131

Gain on sale of businesses — (389)

Income taxes (deferred and accrued income taxes) 130 58

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Net cash provided by (used in) operating activities $ 1,011 $ 1,688

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 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.

Cash flows from operating activities can fluctuate significantly from period to period, as working capital movements, tax timing differences and other items can significantly impact cash flows.

In the first three months of 2022, cash flows provided by operating activities decreased $677 million compared to the same period last year, with this decrease primarily due to increased variable compensation and benefits costs and increased net costs for significant litigation.

The combination of accounts receivable, inventories and accounts payable decreased operating cash flow by $247 million in the first three months of 2022, compared to an operating cash flow decrease of $354 million in the first three months of 2021.

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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Proceeds from sale of PP&E and other assets 56 32

Acquisitions, net of cash acquired — (25)

Purchases and proceeds from maturities and sale of marketable securities and investments, net 92 (110)

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The Company expects 2022 capital spending to be approximately $1.7 billion to $2.0 billion as 3M continues to invest in growth, productivity and sustainability.

In 2020, 3M reduced overall spending in light of uncertainty regarding COVID-19—resulting in full year capital spending of $1.5 billion—but continued to invest in expanding the Company’s ability to increase production of respiratory products to meet worldwide demand.

3M records capital-related government grants earned as reductions to the cost of property, plant and equipment;

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The Company is actively considering additional acquisitions, investments and strategic alliances, and from time to time may also divest certain businesses.

Acquisitions, net of cash acquired, in the first three months of 2020 primarily relate to the payment made for contingent consideration in regards to the Acelity acquisition.

Proceeds from sale of businesses in 2020 primarily relate to the sale of the Company’s advanced ballistic-protection business and its drug delivery business.

Purchases of marketable securities and investments and proceeds from maturities and sale of marketable securities and investments are primarily attributable to certificates of deposit/time deposits, commercial paper, and other securities, which are classified as available-for-sale.

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Cash Flows from Financing Activities:

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Net cash provided by (used in) financing activities $ (2,054) $ (1,251)

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 September 30, 2021 and December 31, 2020.

Total debt was approximately $16.7 billion at March 31, 2022 and $17.4 billion at December 31, 2021.

Decreases in debt were largely due to the February 2022 repayment of 500 million euros aggregate principal amount of fixed-rate medium-term notes.

The Company had no commercial paper outstanding at March 31, 2022 and December 31, 2021.

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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commercial paper issuances.

2020 issuances, maturities, and extinguishments of short-and long-term debt are described in Note 5 in 3M’s 2020 Annual Report on Form 10-K.

2021 issuances, maturities, and extinguishments of short-and long-term debt are described in Note 10 to the Consolidated Financial Statements in 3M’s 2021 Annual Report on Form 10-K.

Repurchases of common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes.

In November 2018, 3M’s Board of Directors replaced the Company’s February 2016 repurchase program with a new repurchase program.

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 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.

In the first three months of 2022, the Company purchased $773 million of its own stock.

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

The Company does not utilize derivative instruments linked to the Company’s stock.

3M has paid dividends each year since 1916.

3M has paid dividends since 1916.

In February 2022, 3M’s Board of Directors declared a first-quarter 2022 dividend of $1.49 per share, an increase of 1 percent.

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

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.

This is equivalent to an annual dividend of $5.96 per share and marked the 64th consecutive year of dividend increases.

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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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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(Millions) 2022 2021

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In particular, these include, among others, statements relating to:

• worldwide economic, political, regulatory, international trade, capital markets and other external conditions, such as interest rates, financial conditions of our suppliers and customers, trade restrictions such as tariffs in addition to retaliatory counter measures, inflation, and natural and other disasters or climate change affecting the operations of the Company or our suppliers and customers,

• worldwide economic, political, regulatory, international trade, capital markets and other external conditions, such as interest rates, financial conditions of our suppliers and customers, trade restrictions such as tariffs in addition to retaliatory counter measures, inflation, military conflicts, and natural and other disasters or climate change affecting the operations of the Company or our suppliers and customers,

• risks related to public health crises such as the global pandemic associated with the coronavirus (COVID-19),

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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