What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-25 compared with 2022-10-25 · 237 added, 357 removed, 398 unchanged (60% of the section changed)

9 unchanged sentences

Effective in the first quarter of 2023, 3M made the following changes:

• 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).

• Changes in measure of segment operating performance and segment composition used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income)—and realignment of 3M's Consumer business segment from four divisions to three divisions.

See additional information in Note 15.

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

3M's disclosed disaggregated revenue was also updated as a result of these changes.

See additional information in Note 2.

7 unchanged sentences

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

As described in the Overview—Consideration of COVID-19 section of Part II, Item 7 of the Company's Current Report on Form 8-K dated April 26, 2022 (which updated 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.

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.

During the first nine months of 2022, 3M's costs for significant litigation (see Certain amounts adjusted for special items - (non-GAAP measures section below) totaled approximately $2.2 billion pre-tax and included, among things, pre-tax charges associated with steps toward resolving Combat Arms Earplugs litigation and associated with additional commitments to address PFAS-related matters at its Zwijndrecht, Belgium site (approximately $1.3 billion and $355 million, respectively, in the first nine months of 2022).

These matters are further discussed in Note 14.

In the third quarter of 2022, 3M also completed the split-off of its Food Safety Division business resulting in a pre-tax gain of $2.7 billion.

See Certain amounts adjusted for special items - (non-GAAP measures) section below for additional discussion of these and other special items.

3M Belgium has experienced interruptions to portions of the manufacturing at its site in Zwijndrecht, Belgium, as more fully discussed in Note 14 .

As discussed in Note 14, 3M Belgium received agreement with authorities in June 2022 to begin the process toward restarting operations at the Zwijndrecht facility.

3M Belgium has provided information required by the Flemish environmental authorities to receive agreement from the authorities to restart operations, and has done so for production or sampling purposes.

Belgian government authorities continue to maintain oversight of these operations and compliance with applicable requirements.

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

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

Further, in September 2022, management committed to a plan to exit and dispose of the related net assets through an intended sale of the subsidiaries.

The associated charge in the third quarter of 2022 related to this action is further discussed in Note 13.

3M also 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.

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

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, 2022 and 2021.

Three months ended

September 30, 2022 Nine months ended

September 30, 2022

net sales Earnings per

diluted share Percent of

net sales Earnings per

diluted share

References are made to organic sales change (which include both organic volume impacts and selling price impacts), which is defined as the change in net sales, absent the separate impacts on sales from foreign currency translation and acquisitions, net of divestitures.

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

3M believes this information is useful to investors and management in understanding ongoing operations and in analysis of ongoing operating trends.

3M has been and may continue to be impacted by the global pandemic and related effects associated with the coronavirus (COVID-19).

The Overview section of Part II, Item 7 of the Company’s 2022 Annual Report on Form 10-K provides a description of how COVID-19 has impacted or may impact 3M.

In addition within this Form 10-Q for the quarterly period ended March 31, 2023, risk factors with respect to COVID-19 can be found in Item 1A “Risk Factors” and certain COVID-19 impacts are referenced in various discussions within this Form 10-Q, including in this Item 2.

3M is also impacted by certain special items such as costs for significant litigation and the sales and income associated with manufactured PFAS products that 3M plans to exit by the end of 2025.

See Certain amounts adjusted for special items - (non-GAAP measures) section below for additional discussion of these and other special items, including references therein to where further information is provided.

Additional information regarding certain items impacting pre-2023 periods that may also be relevant in 2023 can be found in the Overview section of Part II, Item 7 as well as in further sections of 3M’s 2022 Annual Report on Form 10-K.

Earnings per share attributable to 3M common shareholders – diluted:

The following table provides the increases (decreases) in diluted earnings per share.

Earnings per diluted share Three months ended

March 31, 2023

Same period last year $ 2.26

Net costs for significant litigation 0.39

Manufactured PFAS products (0.02)

Total special items 0.37

Same period last year, excluding special items $ 2.63

1 unchanged sentence

Total organic growth/productivity and other (0.38)

Restructuring (0.05)

Raw material impact (0.15)

Divestitures — (0.02) — (0.02)

Foreign exchange impacts (0.10)

Other expense (income), net N/A — N/A (0.01)

Income tax rate N/A 0.07 N/A 0.10

Shares of common stock outstanding N/A 0.08 N/A 0.19

Divestitures (0.03)

Other expense (income), net (0.02)

Income tax rate —

Shares of common stock outstanding 0.07

Current period, excluding special items 1.97

1 unchanged sentence

Divestiture costs (0.15)

Gain on business divestitures 31.6 4.71 10.4 4.69

Divestiture-related restructuring actions (0.5) (0.05) (0.2) (0.06)

Russia exit charges (1.2) (0.20) (0.4) (0.19)

Manufactured PFAS products 0.01

Total special items (0.21)

Current period $ 1.76

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

These exclude special items.

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.

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

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

Total organic growth/productivity and other:

• For the third 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 0.3 percent and earnings per share by $0.07.

◦ Remaining organic growth/productivity and other impacts resulted in a net year-on-year benefit $0.48 to earnings per share and 3.2 percent to operating margins which was impacted by the following:

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

▪ Recovery of sales backlog in China from earlier 2022 COVID-related shutdowns

▪ Manufacturing headwinds from global supply chain challenges;

geopolitical impacts due to the Russia/Ukraine conflict

▪ Increased investments in growth, productivity and sustainability

• For the first nine months 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 0.3 percent and earnings per share by $0.19.

◦ Remaining organic growth/productivity and other impacts resulted in a net year-on-year benefit $0.72 to earnings per share and 1.4 percent to operating margins which was impacted by the following:

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

▪ Manufacturing headwinds from global supply chain challenges;

geopolitical impacts due to the Russia/Ukraine conflict as well as the COVID-related shutdown in China, offset by China backlog recovery later in 2022

▪ Second quarter of 2021 benefit of $91 million pre-tax ($0.12 per share after tax) from the impact of the favorable decision of the Brazilian Supreme Court regarding the calculation of past social taxes

▪ Increased investments in growth, productivity and sustainability

• For the first quarter of 2023, the following components impacted earnings per diluted share year-on-year:

◦ Declines in disposable respirator demand year-on-year and the 2022 exit of operations in Russia negatively impacted earnings per share by $0.21.

◦ Remaining organic growth/productivity and other impacts resulted in a net year-on-year decline of $0.17 per share which was impacted by the following:

▪ Lower sales volumes (particularly electronics/consumer retail);

manufacturing/supply chain headwinds;

China (COVID-related);

and Europe geopolitical impacts

▪ Benefits from higher selling prices;

aggressive spending discipline;

ongoing productivity actions

▪ Investments in growth, productivity, and sustainability

Restructuring:

• 3M recorded restructuring pre-tax charges of $52 million in the first quarter of 2023 compared to $18 million in the same period last year (refer to Note 5 for additional discussion).

Raw material impact:

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

Divestitures:

• Divestiture impact includes lost income from divested businesses and remaining stranded costs (net of transition arrangement income).

3M completed the split-off of the Food Safety business in September 2022 (discussed in Note 3).

The impact also includes lost income from deconsolidation of the Aearo Entities in July 2022 (discussed in Note 14).

• 3M continued to experience headwinds year-on-year from the carryover impact of higher raw material, logistics and energy cost inflation.

Foreign exchange impacts

• Foreign currency impacts (net of hedging) decreased operating income by approximately $88 million (or a decrease of pre-tax earnings by approximately $87 million) year-on-year for the third quarter of 2022 and decreased operating income by approximately $199 million (or a decrease of pre-tax earnings by approximately $208 million) year-on-year for the first nine months of 2022, primarily resulting from the strength of the U.S.

• Foreign currency impacts (net of hedging) decreased operating income and pre-tax earnings by approximately $76 million year-on-year for the first quarter of 2023, primarily resulting from the strength of the U.S.

These estimates include:

1 unchanged sentence

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.

Divestitures:

• Divestiture impact includes lost income from divested businesses and remaining stranded costs (net of transition arrangement income).

In the third quarter of 2022, 3M completed both the split-off of the Food Safety business (discussed in Note 3) and the deconsolidation of the Aearo Entities (discussed in Note 14).

Other expense (income), net:

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

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

• Lower income related to non-service cost components of pension and postretirement expense increased expense year-on-year for the first quarter of 2023.

• Interest expense (net of interest income) decreased for the first quarter of 2023 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 of 2022 was 6.6 percent, a decrease from 18.4 percent in the prior year.

The effective tax rate for the first nine months of 2022 was 9.5 percent, as compared to 18.8 percent in the prior year.

The primary factor that decreased the Company's effective tax rate for third quarter 2022 was the tax efficient structure associated with the third quarter 2022 gain on split-off of the Food Safety business (see Note 3).

The primary factors that decreased the Company's effective tax rate for the first nine months of 2022 were the tax efficient structure associated with the third quarter 2022 gain on split-off of the Food Safety business (see Note 3) and the tax impact associated with the second quarter 2022 charge related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 14).

• On an adjusted basis (as discussed below), the effective tax rate for the third quarter and first nine months of 2022 was 16.2 percent and 17.9 percent, respectively, a decrease of 2.3 percentage points and a decrease of 1.1 percent, respectively, compared to the same period year-on-year.

Overall, the effective tax rate for the first quarter of 2023 was 17.7 percent, a decrease from 18.8 percent in the prior year.

The primary factor that decreased the Company's effective tax rate for first quarter 2023 was deferred tax impacts of 2023 activity.

• On an adjusted basis (as discussed below), the effective tax rate for the first quarter of 2023 was 17.7 percent, an increase of 0.2 percentage points compared to the same period year-on-year.

Shares of common stock outstanding:

• Lower shares outstanding increased earnings per share year-on-year for the third quarter and first nine months of 2022.

• Lower shares outstanding increased earnings per share year-on-year for the first quarter of 2023.

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

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

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, segment operating income (loss), 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.

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.

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.

GAAP, 3M also provides certain non-GAAP measures.

These measures are not in accordance with, nor are they a substitute for GAAP measures, and may not be comparable to similarly titled measures used by other companies.

Certain measures adjust for the impacts of special items.

Special items for the periods presented include the items described below.

Because 3M provides certain information with respect to business segments, it is noteworthy that special items impacting operating income (loss) are reflected in Corporate and Unallocated, except as described below with respect to net costs for significant litigation and manufactured PFAS products items.

In 2023, 3M changed certain of its non-GAAP measures by adjusting for the results of manufactured PFAS products in arriving at results, adjusted for special items.

In the fourth quarter of 2022, 3M recorded a charge for PFAS manufacturing exit costs and included it as an adjustment in arriving at results, adjusted for special items.

The 2023 non-GAAP measure change involved expanding the extent of adjustment to include the sales and estimates of income (including exit costs) and associated activity regarding manufactured PFAS products that 3M plans to exit by the end of 2025.

The information herein reflects the impacts of these changes for all periods presented.

This document contains measures for which 3M provides the reported GAAP measure and a non-GAAP measure adjusted for special items.These measures and reasons 3M believes they are useful to investors (and, as applicable, used by 3M) include:

GAAP amounts for which a measure adjusted for special items is also provided:

Reasons 3M believes the measure is useful

• Net sales (and sales change)

Considered, in addition to segment operating performance, in evaluating and managing operations;

useful in understanding underlying business performance, provides additional transparency to special items

• Operating income, segment operating income and operating income margin

• Income before taxes

• Provision for income taxes and effective tax rate

• Earnings per share

Special items for the periods presented include:

1 unchanged sentence

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

Prior to initiating voluntary chapter 11 bankruptcy proceedings in July 2022, net costs related to Combat Arms Earplugs and Aearo-respirator mask/asbestos matters along with non-Aearo respirator mask/asbestos matters were reflected as special items in the Safety and Industrial business segment.

During the bankruptcy period, net costs related to Combat Arms Earplugs and Aearo-respirator mask/asbestos matters are reflected as corporate special items in Corporate and Unallocated while those associated with non-Aearo respirator mask/asbestos matters continue to be reflected as special items in the Safety and Industrial business segment.

Net costs associated with PFAS-related other environmental matters are primarily reflected as corporate special items in Corporate and Unallocated.

During the bankruptcy period, net costs related to Combat Arms Earplugs and Aearo-respirator mask/asbestos matters are reflected as corporate special items in Corporate and Unallocated.

Divestiture costs:

• These include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture.

Gain on business divestitures:

• In the third quarter of 2022, 3M recorded a gain related to the split-off and combination of its Food Safety business with Neogen Corporation.

Refer to Note 3 for further details.

Divestiture-related restructuring actions:

• In the third quarter of 2022, following the split-off of the Food Safety business (see Note 3), management approved and committed to undertake certain restructuring actions addressing corporate functional costs across 3M in relation to the magnitude of amounts previously allocated to the divested business.

Refer to Note 5 for further details.

Russia exit charges:

• In the third quarter of 2022, 3M recorded a charge primarily related to impairment of net assets in Russia in connection with management's committed exit and disposal plan.

Refer to Note 13 for further details.

Operating Income (Loss)

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

Total Company 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 September 30, 2021 GAAP

$ 562 18.7% $ 1,788 20.0 % $ 1,757 $ 324 18.4 % $ 1,434 $ 2.45

Manufactured PFAS products:

• These amounts relate to sales and estimates of income regarding manufactured PFAS products that 3M plans to exit by the end of 2025 included within the Transportation and Electronics business segment.

Estimated income does not contemplate impacts on non-operating items such as net interest income/expense and the non-service cost components portion of defined benefit plan net periodic benefit costs.

Three months ended March 31, 2022

(Dollars in millions, except per share amounts) Net Sales Operating Income Operating Income Margin Income Before Taxes Provision for Income Taxes Effective tax rate Net Income Attributable to 3M Earnings per Diluted Share

Safety and Industrial

GAAP amounts $ 627 20.6 %

Adjustments for special items:

Net costs for significant litigation 63

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

$ 622 20.7% $ 1,885 21.1 % $ 1,854 $ 342 18.5 % $ 1,513 $ 2.58

Three months ended September 30, 2022 GAAP

$ 652 22.5% $ 4,156 48.2 % $ 4,132 $ 271 6.6 % $ 3,859 $ 6.77 177 %

Total special items 63

Adjusted amounts (non-GAAP measures) $ 690 22.6 %

Transportation and Electronics

GAAP amounts $ 2,340 $ 464 19.8 %

Adjustments for special items:

Manufactured PFAS products (320) (16)

Total special items (320) (16)

Adjusted amounts (non-GAAP measures) $ 2,020 $ 448 22.2 %

Total Company

GAAP amounts $ 8,829 $ 1,641 18.6 % $ 1,603 $ 302 18.8 % $ 1,299 $ 2.26

Adjustments for special items:

Net costs for significant litigation — 250 250 25 225 0.39

Divestiture costs — 6 6 2 4 0.01

Gain on business divestitures — (2,724) (2,724) (39) (2,685) (4.71)

Divestiture-related restructuring actions — 41 41 9 32 0.05

Russia exit charges — 109 109 (2) 111 0.20

Manufactured PFAS products (320) (16) (16) (4) (12) (0.02)

Total special items (320) 234 234 21 213 0.37

Three months ended September 30, 2022 adjusted amounts (non-GAAP measures)

$ 673 23.2% $ 1,855 21.5 % $ 1,831 $ 298 16.2 % $ 1,531 $ 2.69 4 %

Operating Income (Loss)

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

Total Company 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

Nine months ended September 30, 2021 GAAP

$ 1,976 21.6% $ 5,753 21.5 % $ 5,640 $ 1,058 18.8 % $ 4,582 $ 7.81

Adjusted amounts (non-GAAP measures) $ 8,509 $ 1,875 22.0 % $ 1,837 $ 323 17.5 % $ 1,512 $ 2.63

Three months ended March 31, 2023

(Dollars in millions, except per share amounts) Net Sales Sales Change 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

Safety and Industrial

GAAP amounts $ 601 21.6 %

Adjustments for special items:

Net costs for significant litigation (39)

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

$ 2,153 23.6% $ 6,112 22.9 % $ 5,999 $ 1,138 19.0 % $ 4,861 $ 8.28

Nine months ended September 30, 2022 GAAP

$ 581 6.6% $ 5,907 22.6 % $ 5,795 $ 550 9.5 % $ 5,236 $ 9.15 17 %

Total special items (39)

Adjusted amounts (non-GAAP measures) $ 562 20.2 %

Transportation and Electronics

GAAP amounts $ 2,050 (12.4) % $ 294 14.4 %

Adjustments for special items:

Manufactured PFAS products (345) (10)

Total special items (345) (10)

Adjusted amounts (non-GAAP measures) $ 1,705 (15.6) % $ 284 16.7 %

Total Company

GAAP amounts $ 8,031 (9.0) % $ 1,241 15.4 % $ 1,189 $ 210 17.7 % $ 976 $ 1.76 (22) %

Adjustments for special items:

Net costs for significant litigation — 43 43 7 36 0.07

Manufactured PFAS products (345) (10) (10) (3) (7) (0.01)

Divestiture costs — 102 102 20 82 0.15

Gain on business divestitures — (2,724) (2,724) (39) (2,685) (4.69)

Divestiture-related restructuring actions — 41 41 9 32 0.06

Russia exit charges — 109 109 (2) 111 0.19

Total special items (345) 135 135 24 111 0.21

Nine months ended September 30, 2022 adjusted amounts (non-GAAP measures)

Adjusted amounts (non-GAAP measures) $ 7,686 (9.7) % $ 1,376 17.9 % $ 1,324 $ 234 17.7 % $ 1,087 $ 1.97 (25) %

Three months ended March 31, 2023

Sales Change Organic sales Acquisitions Divestitures Translation Total sales change

Total Company (4.9) % — % (1.3) % (2.8) % (9.0) %

Remove manufactured PFAS products special item impact (0.7) — — — (0.7)

Adjusted total Company (non-GAAP measures)

(5.6) % — % (1.3) % (2.8) % (9.7) %

Transportation and Electronics (8.0) % — % (1.0) % (3.4) % (12.4) %

Remove manufactured PFAS products special item impact (3.3) — (0.1) 0.2 (3.2)

Adjusted Transportation and Electronics (non-GAAP measures) (11.3) % — % (1.1) % (3.2) % (15.6) %

Sales and operating income (loss) by business segment:

The following tables contain sales and operating income (loss) results by business segment for the three and nine months ended September 30, 2022 and 2021.

The following tables contain sales and operating income (loss) results by business segment for the three months ended March 31, 2023 and 2022.

Refer to the section entitled Performance by Business Segment later in MD&A for additional discussion concerning 2023 versus 2022 results, including Corporate and Unallocated.

Refer to Note 15 for additional information on business segments.

Three months ended September 30,

2022 2021 % change

(Dollars in millions) Net

Income (Loss) Net

Income (Loss)

Business Segments

Safety and Industrial $ 2,894 $ 652 $ 3,005 $ 562 (3.7) % 15.9 %

Transportation and Electronics 2,239 474 2,327 435 (3.8) 9.1

Health Care 2,076 452 2,173 510 (4.4) (11.3)

Consumer 1,409 299 1,434 308 (1.7) (3.0)

Corporate and Unallocated 1 2,279 3 (27)

Total Company $ 8,619 $ 4,156 $ 8,942 $ 1,788 (3.6) % 132.5 %

Nine months ended September 30,

Three months ended March 31,

2023 2022 % change

10 unchanged sentences

Total Company $ 8,031 $ 1,241 $ 8,829 $ 1,641 (9.0) % (24.4) %

Three months ended September 30, 2022

Worldwide Sales Change

By Business Segment Organic sales Acquisitions Divestitures Translation Total sales

Safety and Industrial 1.7 % — % — % (5.4) % (3.7) %

Transportation and Electronics 3.0 — (0.8) (6.0) (3.8)

Health Care 1.7 — (1.3) (4.8) (4.4)

Consumer 1.5 — — (3.2) (1.7)

Total Company 2.0 — (0.5) (5.1) (3.6)

Nine months ended September 30, 2022

Three months ended March 31, 2023

Worldwide Sales Change

5 unchanged sentences

Total Company (4.9) — (1.3) (2.8) (9.0)

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of special items on sales (and sales change) and operating income (loss) by business segment.

Sales by geographic area:

Percent change information compares the three and nine months ended September 30, 2022 with the same period last year, unless otherwise indicated.

Percent change information compares the three months ended March 31, 2023 with the same prior year period, unless otherwise indicated.

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

Three months ended September 30, 2022

Americas Asia

Pacific Europe,

& Africa Other

Unallocated Worldwide

Net sales (millions) $ 4,741 $ 2,485 $ 1,393 $ — $ 8,619

% of worldwide sales 55.0 % 28.8 % 16.2 % 100.0 %

Components of net sales change:

Organic sales 2.3 2.8 (0.3) 2.0

Divestitures (0.7) (0.5) (0.2) (0.5)

Translation (0.5) (8.3) (12.9) (5.1)

Total sales change 1.1 % (6.0) % (13.4) % (3.6) %

Nine months ended September 30, 2022

Three months ended March 31, 2023

Americas Asia

10 unchanged sentences

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

• For the third quarter of 2022, in the Americas geographic area, U.S.

total sales was flat which included flat organic sales.

Total sales in Mexico increased 8 percent which included increased organic sales of 14 percent.

In Canada, total sales increased 10 percent which included increased organic sales of 14 percent.

In Brazil, total sales increased 9 percent which included increased organic sales of 11 percent.

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

In Japan, total sales decreased 17 percent which included flat organic sales.

• For the first nine months of 2022, in the Americas geographic area, U.S.

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

• For the first quarter of 2023, in the Americas geographic area, U.S.

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

Total sales in Mexico increased 6 percent which included increased organic sales of 10 percent.

In Canada, total sales increased 15 percent which included increased organic sales of 17 percent.

In Canada, total sales decreased 14 percent which included decreased organic sales of 7 percent.

In Brazil, total sales increased 5 percent which included increased organic sales of 8 percent.

In the Asia Pacific geographic area, China total sales decreased 23 percent which included decreased organic sales of 18 percent.

In Japan, total sales decreased 11 percent which included increased organic sales of 2 percent.

In Japan, total sales decreased 21 percent which included decreased organic sales of 10 percent.

Managing currency risks:

The stronger U.S.

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

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

dollar had a negative impact on sales in the first three months of 2023 compared to the same period last year.

Net of the Company’s hedging strategy, foreign currency negatively impacted earnings in the first three months of 2023 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.

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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 2022, the Company purchased $928 million of its own stock, compared to $1,261 million of stock purchases in the first nine months of 2021.

As of September 30, 2022, approximately $4.7 billion remained available under the authorization.

In the first three months of 2023, the Company purchased $29 million of its own stock, compared to $773 million of stock purchases in the first three months of 2022.

As of March 31, 2023, approximately $4.2 billion remained available under the authorization.

In February 2023, 3M’s Board of Directors declared a first-quarter 2023 dividend of $1.50 per share, an increase of 1 percent.

This marked the 65th consecutive year of dividend increases for 3M.

In May 2022, 3M's Board of Directors declared a second-quarter dividend of $1.49 per share.

In August 2022, 3M's Board of Directors declared a third-quarter dividend of $1.49 per share.

3M expects to contribute approximately $100 million to $200 million of cash to its global defined benefit pension and postretirement plans in 2022.

The Company does not have a required minimum cash pension contribution obligation for its U.S.

plans in 2022.

RESULTS OF OPERATIONS

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Three months ended

September 30, Nine months ended

September 30,

(Percent of net sales) 2022 2021 Change 2022 2021 Change

(Percent of net sales) 2023 2022 Change

Cost of sales 57.4 % 54.7 % 2.7 %

1 unchanged sentence

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

Gain on business divestitures (31.6) — (31.6) (10.4) — (10.4)

Operating income margin 15.4 % 18.6 % (3.2) %

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;

Stock compensation expense was $135 million and $135 million for the three months ended March 31, 2023 and 2022, respectively, which impacts cost of sales;

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

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

The year-on-year decrease in defined benefit pension and postretirement service cost expense for the third quarter and first nine months of 2022 was approximately $19 million and $53 million.

The Company’s annual stock option and restricted stock unit grant is made in February.

Accounting rules require recognition of expense under a non-substantive vesting period approach, requiring compensation expense recognition when an employee is eligible to retire.

This retiree-eligible population represents 35 percent of the annual grant stock-based compensation expense;

therefore, higher stock-based compensation expense is recognized in the first quarter each year.

3M expects global defined benefit pension and postretirement service cost expense in 2023 to decrease by approximately $160 million pre-tax when compared to 2022, which impacts cost of sales, SG&A, and R&D.

The year-on-year decrease in defined benefit pension and postretirement service cost expense for the first three months of 2023 was approximately $42 million.

For total year 2022, the Company recognized consolidated defined benefit pre-tax pension and postretirement service cost expense of $426 million and a benefit of $248 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 $178 million.

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Cost of Sales:

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

Increases were primarily due to 2022 special item costs for significant litigation from additional commitments to address PFAS-related maters at 3M's Zwijndrecht, Belgium site (discussed in Note 14), higher raw materials and logistics costs, manufacturing productivity headwinds which were further magnified by the shutdown of certain operations in Belgium and progress on restarting previously-idled operations, and investments in growth, productivity and sustainability.

Cost of sales, measured as a percent of sales, increased in the first three months of 2023 when compared to the same period last year.

Increases were primarily due to higher raw materials and energy costs;

manufacturing productivity headwinds;

investments in growth, productivity and sustainability;

and restructuring.

These increases were partially offset year-on-year due to lower net costs for significant litigation to address certain PFAS-related other environmental matters, strong pricing and aggressive spending discipline.

Selling, General and Administrative Expenses:

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

SG&A was impacted by increased special item costs for significant litigation primarily related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 14) resulting in a 2022 second quarter pre-tax charge of approximately $1.2 billion and other subsequent impacts, costs related to exiting Russia (see Note 13), divestiture-related restructuring charges (see Note 5), and continued investment on key growth initiatives.

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

SG&A, measured as a percent of sales, was consistent in the first three months of 2023 when compared to the same period last year.

SG&A was impacted restructuring charges and continued investment in key growth initiatives.

These impacts were offset by lower net costs for significant litigation to address Combat Arms Earplugs and 3M's respirator mask/asbestos litigation matters, restructuring benefits and ongoing general 3M cost management.

Research, Development and Related Expenses:

R&D, measured as a percent of sales, was flat in the third quarter and decreased in first nine months of 2022 when compared to the same period last year.

R&D, measured as a percent of sales, increased in the first three months of 2023 when compared to the same period last year.

3M continues to invest in a range of R&D activities from application development, product and manufacturing support, product development and technology development aimed at disruptive innovations.

Gain on Business Divestitures:

In the third quarter of 2022, 3M recorded a pre-tax gain of $2.7 billion ($2.7 billion after tax) related to the split-off and combination of its Food Safety business with Neogen Corporation.

Refer to Note 3 for further details.

Other Expense (Income), Net:

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

Interest expense (net of interest income) decreased in the third quarter of 2022 primarily due to prior period debt maturities and foreign exchange;

net interest decreased in the first nine 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 and generation of incremental interest income.

The non-service pension and postretirement net benefit decreased approximately $15 million and $40 million in the third quarter and first nine months of 2022, respectively, compared to the same period year-on-year.

Interest expense (net of interest income) decreased in the first quarter of 2023 primarily due to prior period debt maturities and interest income generated on invested cash.

The non-service pension and postretirement net benefit decreased approximately $36 million in the first quarter of 2023 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) 2023 2022

Effective tax rate 17.7 % 18.8 %

The primary factor that decreased the Company's effective tax rate for first quarter 2023 was deferred tax impacts of 2023 activity.

The tax rate can vary from quarter to quarter due to discrete items, such as the settlement of income tax audits, changes in tax laws, and employee share-based payment accounting;

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Three months ended

September 30, Nine months ended

September 30,

(Millions) 2023 2022

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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.

In the fourth quarter of 2022, 3M sold its remaining ownership interest in Kindeva.

Net Income (Loss) Attributable to Noncontrolling Interest:

Three months ended

September 30, Nine months ended

September 30,

(Millions) 2023 2022

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PERFORMANCE BY BUSINESS SEGMENT

Disclosures relating to 3M’s business segments are provided in Note 16.

Effective in the first quarter of 2022, the measure of segment operating performance used by 3M’s chief operating decision maker (CODM) changed and, as a result, 3M’s disclosed measure of segment profit/loss (business segment operating income) was updated for all comparative periods presented.

Item 1, Business Segments, provides an overview of 3M’s business segments.

In addition, disclosures relating to 3M’s business segments are provided in Note 15.

Effective in the first quarter of 2023, the measure of segment operating performance and segment composition used by 3M’s chief operating decision maker (CODM) changed and, as a result, 3M’s disclosed measure of segment profit/loss (business segment operating income) was updated for all comparative periods presented.

The change to business segment operating income aligns with the update to how the CODM assesses performance and allocates resources for the Company’s business segments (see Note 15 for additional details).

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Divestiture costs include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture.

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 transition supply, manufacturing and service arrangements with Neogen Corporation following the split-off of 3M's Food Safety business in 2022 and with the acquirer of the former Drug Delivery business following its 2020 divestiture.

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, gains/losses from sales of property, plant and equipment and other assets, 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 transition supply, manufacturing and service arrangements with Neogen Corporation following the 2022 split-off of 3M's Food Safety business.

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 first nine months of 2022, when compared to the same period last year.

Corporate and Unallocated operating expenses increased in the first three months of 2023, when compared to the same period last year.

The subsections below provide additional information.

Corporate Special Items

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of special items and to Note 16 for addition information on the components of corporate special items.

Corporate special item net costs decreased in the third quarter and first nine months of 2022 year over year primarily due to the gain on divestiture associated with the 2022 split-off of the Food Safety business (discussed in Note 3) partially offset by additional commitments in 2022 to address PFAS-related matters, including at 3M's Zwijndrecht, Belgium site (discussed in Note 14).

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of special items and to Note 15 for additional information on the components of corporate special items.

Corporate special item net costs remained flat year over year.

Other Corporate Expense - Net

Other corporate operating expenses, net, increased 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 included in the second quarter of 2021 regarding the calculation of past social taxes.

Other corporate operating expenses, net, increased in the first three months of 2023, when compared to the same period last year.

The year-on-year increase was primarily due to higher pre-tax restructuring charges and lower gains on sale of property, plant and equipment.

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.

Refer to 3M's Current Report on Form 8-K dated April 26, 2022 (which updated 3M’s 2021 Annual Report on Form 10-K), Item 1, Business, for discussion of 3M products that are included in each business segment.

Refer to 3M's 2022 Annual Report on Form 10-K, Item 1, Business, for discussion of 3M products that are included in each business segment.

Safety and Industrial Business:

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Sales (millions) $ 2,779 $ 3,051

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

Third quarter 2022 results:

Sales in Safety and Industrial were down 3.7 percent in U.S.

On an organic sales basis:

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

• Growth from continued improving general industrial manufacturing activity, other end-market demand and backlog recovery from the 2022 second quarter COVID-related lockdowns in China were partially offset by the disposable respirator sales decline within personal safety, which negatively impacted year-on-year third quarter organic growth by 4.6 percentage points.

Business segment operating income margins increased year-on-year from selling price actions, strong spending discipline and restructuring actions which more than offset increased raw materials and logistics costs and manufacturing productivity headwinds.

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

First nine months 2022 results:

First quarter 2023 results:

Sales in Safety and Industrial were down 8.9 percent in U.S.

On an organic sales basis:

• Sales increased in abrasives, electrical markets, closure and masking systems, roofing granules, automotive aftermarket, and industrial adhesives and tapes 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 organic growth by 3.9 percentage points.

Business segment operating income margins decreased year-on-year due to special item costs for significant litigation primarily related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 14) resulting in a 2022 second quarter pre-tax charge of approximately $1.2 billion.

Margins were also impacted by increased raw materials and logistics costs, manufacturing productivity headwinds, partially offset by selling price actions, spending discipline and 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.

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

• Growth was held back by the disposable respirator sales decline within personal safety along with the exit of Russia (which, together, negatively impacted year-on-year first quarter organic growth by 9.9 percentage points);

declines within industrial adhesives and tapes due to consumer electronics softness, closure and masking systems was down as consumers pulled back on discretionary spending impacting e-commerce shipments.

Business segment operating income margins increased year-on-year from pricing, aggressive spending discipline, and productivity actions which more than offset the decline driven by lower sales volume, manufacturing and supply chain headwinds, carryover raw material/logistics/energy cost inflation, investments in the business and China COVID-related challenges.

Adjusting for special items (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,

2022 2021 2022 2021

Sales (millions) $ 2,050 $ 2,340

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Percent of sales 14.4 % 19.8 %

Third quarter 2022 results:

Sales in Transportation and Electronics were down 3.8 percent in U.S.

On an organic sales basis:

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

• Growth benefited from continued COVID-related backlog recovery in the greater China region which was partially offset by increased weakness in consumer electronics demand, along with the continued constraints in the semiconductor supply chain.

Adjusted sales (millions) (non-GAAP measure) $ 1,705 $ 2,020

Sales change analysis:

Organic sales (11.3) %

Divestitures (1.1) %

• Divestiture impact relates to lost Transportation and Electronics sales year-on-year from deconsolidation of the Aearo Entities in July 2022.

First nine months 2022 results:

Translation (3.2) %

Total sales change (15.6) %

Adjusted business segment operating income (millions) (non-GAAP measure) $ 284 $ 448

Percent change (36.4) %

Percent of sales 16.7 % 22.2 %

The preceding table also displays business segment sales (and sales change) and operating income (loss) information adjusted for special items.

For Transportation and Electronics these adjustments include the sales and estimates of income regarding PFAS manufactured products that 3M plans to exit by the end of 2025.

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

First quarter 2023 results:

Sales in Transportation and Electronics were down 12.4 percent in U.S.

Adjusting for special item PFAS manufactured products (non-GAAP measure), sales were down 15.6 percent in U.S.

On an organic sales basis:

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

• Growth was held back by the ongoing impacts of the semiconductor supply chain constraints on the automotive and consumer electronics end-markets.

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

• Growth continued to be held back by significant consumer electronics end-market weakness along with tiers and original equipment manufacturers (OEMs) aggressively reducing inventories particularly for smartphones, tablets and TVs.

Divestitures:

• Divestiture impact relates to lost Transportation and Electronics sales year-on-year from deconsolidation of the Aearo Entities in July 2022.

Business segment operating income margins decreased year-on-year due to increased raw materials and logistics costs, manufacturing productivity headwinds which were further magnified by the shutdown of certain operations in Belgium and investments in auto electrification, partially offset by selling price actions, strong spending discipline and restructuring actions.

Business segment operating income margins decreased year-on-year from lower sales volumes, manufacturing and supply chain headwinds, carryover raw material/logistics/energy cost inflation, investments in the business and China COVID-related challenges partially offset by benefits from pricing, aggressive spending discipline, and productivity actions.

Adjusting for special item PFAS manufactured products (non-GAAP measure), business segment operating income margins decreased year-on-year as displayed above.

Health Care Business:

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Sales (millions) $ 2,010 $ 2,128

7 unchanged sentences

Percent of sales 17.9 % 20.9 %

Third quarter 2022 results:

First quarter 2023 results:

Sales in Health Care were down 5.6 percent in U.S.

On an organic sales basis:

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

• Sales continue to be impacted by COVID-related trends on elective procedure volumes and ongoing inflationary pressures.

• Sales increased in medical solutions, and oral care;

were flat in health information systems, and decreased in separation and purification.

• Growth was held back by declines in separation and purification due to the normalization of post-COVID-related biopharma demand along with overall headwinds from the exit of Russia.

Divestitures:

• Divestiture impact relates to the lost sales year-on-year from the Food Safety Division split-off transaction in September 2022.

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

As discussed in Note 3, in July 2022, 3M announced its intention to spin off the Health Care business as a separate public company.

• Divestiture impact relates to the lost sales year-on-year from the Food Safety Division split-off transaction in the third quarter of 2022.

Business segment operating income margins decreased year-on-year due to manufacturing and supply chain headwinds, carryover raw material/logistics/energy costs inflation and investments in the business, partially offset by benefits from pricing, aggressive spending discipline, and productivity actions.

As discussed in Note 3, in the third quarter of 2022, 3M announced its intention to spin off the Health Care business as a separate public company.

3M expects to initially retain a 19.9% ownership position in the Health Care business.

First nine months 2022 results:

Sales in Health Care were down 0.4 percent in U.S.

On an organic sales basis:

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

• Sales continue to be impacted by COVID-related trends on elective procedure volumes and ongoing inflationary pressures.

Divestitures:

• Divestiture impact relates to the lost sales year-on-year from the divestiture from the Food Safety Division split-off transaction and combination with Neogen completed in the third quarter of 2022.

Business segment operating income margins decreased year-on-year due to increased raw materials and logistics costs along with manufacturing productivity headwinds, investments in the business and transaction-related costs associated with the announced divestiture of the food safety business (see Note 3), partially offset by sales growth (including selling price actions), strong spending discipline and restructuring actions.

Consumer Business:

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Sales (millions) $ 1,192 $ 1,309

1 unchanged sentence

Organic sales (6.8) %

Divestitures (0.3)

Translation (1.9)

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Percent of sales 15.0 % 16.8 %

Third quarter 2022 results:

Sales in Consumer totaled were down 1.7 percent in U.S.

On an organic sales basis:

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

• Sales decreases impacted by soft back-to-school season performance due to elevated inventory levels at retailers.

Business segment operating income margins decreased year-on-year from increased raw materials, logistics and outsourced hardgoods manufacturing costs along with manufacturing productivity headwinds and investments in the business, partially offset by selling price actions, strong spending discipline and restructuring actions.

First nine months 2022 results:

Sales in Consumer totaled were down 1.7 percent in U.S.

First quarter 2023 results:

Sales in Consumer were down 9.0 percent in U.S.

On an organic sales basis:

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

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

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 and investments in the business, partially offset by sales growth (including selling price actions), strong spending discipline and restructuring actions.

• Sales increased in stationery and office, and decreased in home improvement and home health and auto care.

• Growth was negatively impacted as consumers have shifted their spending patterns to more non-discretionary items and retailers have aggressively reduced their inventory levels.

Business segment operating income margins decreased year-on-year from lower sales volumes;

manufacturing and supply chain headwinds and carryover raw material/logistics/energy cost inflation, partially offset by benefits from pricing, aggressive spending discipline, and productivity actions.

FINANCIAL CONDITION AND LIQUIDITY

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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 to the Consolidated Financial Statements in 3M's Current Report on Form 8-K dated April 26, 2022 (which updated 3M’s 2021 Annual Report on Form 10-K) for further information on earnings considered to be reinvested indefinitely.

See Note 10 in 3M's 2022 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, 2022 and December 31, 2021.

The Company had $1.1 billion in commercial paper outstanding at March 31, 2023, compared to no commercial paper outstanding as of December 31, 2022.

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.

As of September 2022, 3M has a credit rating of A1, stable outlook from Moody's Investors Service and a credit rating of A+, CreditWatch negative from S&P Global Ratings.

The Company’s total debt was lower at September 30, 2022 when compared to December 31, 2021.

Decreases in debt were largely due to the repayments of 500 million euros and $600 million aggregate principal amounts of fixed-rate medium-term notes in February 2022 and June 2022, respectively.

As of March 2023, 3M has a credit rating of A1, negative outlook from Moody's Investors Service, and a credit rating of A, CreditWatch negative from S&P Global Ratings.

The Company’s total debt at March 31, 2023 was consistent when compared to December 31, 2022 as maturities of $1.15 billion of fixed-rate notes were offset by issuances of commercial paper of $1.1 billion.

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

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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.

3M will continue its assessment and monitor regulatory developments during the transition period.

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

Contracts will be modified to apply a new reference rate where applicable.

Effective February 8, 2023, the Company updated its “well-known seasoned issuer” (WKSI) shelf registration statement, which registers an indeterminate amount of debt or equity securities for future issuance and sale.

This replaced 3M’s previous shelf registration dated February 10, 2020.

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, 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 Current Report on Form 8-K dated April 26, 2022 (which updated 3M’s 2021 Annual Report on Form 10-K).

In May 2016, 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 March 31, 2023, 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 in 3M's 2022 Annual Report on Form 10-K.

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

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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 having a maturity date one year later.

These credit facilities were undrawn at September 30, 2022.

These credit facilities were undrawn at March 31, 2023.

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, 2022, this ratio was approximately 21 to 1.

At March 31, 2023, this ratio was approximately 17 to 1.

Debt covenants do not restrict the payment of dividends.

As disclosed in Note 10, 3M had debt financing facilities providing commitments for term loans and potential bridge financing aggregating $1.0 billion related to the Food Safety Division split-off transaction and combination with Neogen (discussed in Note 3).

The debt commitments also included a $150 million revolving credit facility for the Food Safety business.

Coincident with completion of the September 2022 split-off, the Food Safety business term loan borrowings funded the cash payment to 3M discussed in Note 3.

The bridge financing component of these facilities was terminated early and not utilized.

Obligations under the commitments (including the $150 million revolving credit facility) transferred with the Food Safety business and became those of Neogen.

The Company also had $314 million in stand-alone letters of credit and bank guarantees issued and outstanding at September 30, 2022.

The Company also had $320 million in stand-alone letters of credit and bank guarantees issued and outstanding at March 31, 2023.

These instruments are utilized in connection with normal business activities.

Cash, cash equivalents and marketable securities:

At September 30, 2022, 3M had $3.6 billion of cash, cash equivalents and marketable securities, of which approximately $2.9 billion was held by the Company’s foreign subsidiaries and approximately $0.7 billion was held in the United States.

At March 31, 2023, 3M had $4.0 billion of cash, cash equivalents and marketable securities, of which approximately $2.7 billion was held by the Company’s foreign subsidiaries and approximately $1.3 billion was held in the United States.

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

At December 31, 2022, 3M had $3.9 billion of cash, cash equivalents and marketable securities, of which approximately $2.7 billion was held by the Company’s foreign subsidiaries and $1.2 billion was held by the United States.

The decrease from December 31, 2021 primarily resulted from cash flow from operations and cash consideration and earlier borrowings related to the Food Safety transaction (see Note 3) offset by ongoing dividend payments, purchases of treasury stock, capital expenditures, and the fixed-rate medium-term note maturities in the first nine months of 2022.

The increase from December 31, 2022 primarily resulted from cash flow from operations.

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, 2022 and December 31, 2021.

(Millions) September 30,

2022 December 31,

The following table provides net debt as of March 31, 2023 and December 31, 2022.

(Millions) March 31, 2023 December 31, 2022 Change

Total debt $ 15,960 $ 15,939 $ 21

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Working capital (non-GAAP measure):

(Millions) September 30,

2022 December 31,

(Millions) March 31, 2023 December 31, 2022 Change

Current assets $ 14,963 $ 14,688 $ 275

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Working capital decreased $0.8 billion compared with December 31, 2022.

Balance changes in current assets decreased working capital by $0.5 billion, driven largely by decreases in cash and cash equivalents.

Balance changes in current liabilities decreased working capital by $0.5 billion, primarily due to increases in short-term borrowings and current-portion of long-term debt and accounts payable.

Inventory increased $630 million from December 31, 2021, primarily as a result of increased underlying operating activity 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 bond maturities in the first nine months of 2022, while accounts payable also increased as a result of increased sequential operating activity partially offset by foreign currency translation impacts.

Balance changes in current assets increased working capital by $0.3 billion, driven largely by increases in cash and cash equivalents and accounts receivable.

Balance changes in current liabilities decreased working capital by $1.0 billion, primarily due to increases in short-term borrowings driven by issuances of commercial paper partially offset by decreases in accrued payroll.

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

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Cash Flows from Operating Activities:

Nine months ended

September 30,

Three months ended March 31,

(Millions) 2023 2022

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Stock-based compensation expense 135 135

Gain on business divestitures (2,724) —

Income taxes (deferred and accrued income taxes) (130) 130

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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 nine months of 2022, cash flows provided by operating activities decreased $1,780 million compared to the same period last year, with this decrease primarily due to increased variable compensation and benefits costs, increased payments related to net costs for significant litigation and the cash impact from capitalization of R&D for U.S.

tax purposes.

The combination of accounts receivable, inventories and accounts payable decreased operating cash flow by $1,310 million in the first nine months of 2022, compared to an operating cash flow decrease of $807 million in the first nine months of 2021.

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

The 2022 second quarter pre-tax charge of approximately $1.2 billion related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 14) largely impacted the 2022 net income component above, with offsets in the other-net and deferred tax elements.

In the first three months of 2023, cash flows provided by operating activities increased $264 million compared to the same period last year, primarily driven by the combination of accounts receivable, inventories and accounts payable increasing operating cash flow by $54 million in the first three months of 2023, compared to operating cash flow decreasing by $247 million for these items in the first three months of 2022 (additional discussion on working capital changes is provided earlier in the Financial Condition and Liquidity section).

These favorable working capital changes along with decreased annual incentive cash compensation were partially offset by lower net income.

Cash Flows from Investing Activities:

Nine months ended

September 30,

Three months ended March 31,

(Millions) 2023 2022

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Proceeds from sale of businesses, net of cash sold — 13

Cash payment from Food Safety business split-off, net of divested cash 478 —

Other — net 1 18

Net cash provided by (used in) investing activities $ (386) $ (263)

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Cash Flows from Financing Activities:

Nine months ended

September 30,

Three months ended March 31,

(Millions) 2023 2022

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Net cash provided by (used in) financing activities $ (716) $ (2,054)

Total debt was approximately $15.7 billion at September 30, 2022 and $17.4 billion at December 31, 2021.

Decreases in debt were largely due to the repayments of 500 million euros and $600 million aggregate principal amounts of fixed-rate medium-term notes in February 2022 and June 2022, respectively.

The Company had no commercial paper outstanding at September 30, 2022 and December 31, 2021.

In conjunction with the Food Safety Division split-off transaction and combination with Neogen (discussed in Note 3), the associated non-cash debt-for-debt exchange in the third quarter of 2022 reduced, then-outstanding 3M commercial paper indebtedness of $350 million (borrowed earlier in the year) which became new term-debt obligations of Neogen.

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.

Total debt was approximately $16.0 billion at March 31, 2023 and $15.9 billion at December 31, 2022.

During the first quarter of 2023, maturities of $1.15 billion of fixed-rate notes were offset by issuances of commercial paper of $1.1 billion.

The Company had $1.1 billion in commercial paper outstanding at March 31, 2023, compared to no commercial paper outstanding as of December 31, 2022.

Net commercial paper issuances in addition to repayments and borrowings by international subsidiaries are largely reflected in “Proceeds from debt (maturities greater than 90 days)” in the preceding table.

3M’s primary short-term liquidity needs are met through cash on hand and U.S.

commercial paper issuances.

2021 issuances, maturities, and extinguishments of short-and long-term debt are described in Note 10 to the Consolidated Financial Statements in 3M's Current Report on Form 8-K dated April 26, 2022 (which updated 3M’s 2021 Annual Report on Form 10-K).

2022 issuances, maturities, and extinguishments of short-and long-term debt are described in Note 10 to the Consolidated Financial Statements in 3M’s 2022 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 the first nine months of 2022, the Company purchased $928 million of its own stock.

In the first three months of 2023, the Company purchased $29 million of its own stock.

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 $6.00 per share and marked the 65th consecutive year of dividend increases.

In May 2022, 3M's Board of Directors declared a second-quarter 2022 dividend of $1.49 per share.

In August 2022, 3M's Board of Directors declared a third-quarter dividend of $1.49 per share.

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.

Nine months ended

September 30,

Three months ended March 31,

(Millions) 2023 2022

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Material Cash Requirements from Known Contractual and Other Obligations:

See the Financial Condition and Liquidity - Material Cash Requirement from Known Contractual and Other Obligations section of Item 7 of 3M's Current Report on Form 8-K dated April 26, 2022 (which updated 3M’s 2021 Annual Report on Form 10-K).

Additionally, in July 2022, as discussed in Note 14 herein, in connection with steps toward resolving Combat Arms Earplugs litigation, 3M entered into an agreement and committed $1.0 billion to fund a trust to satisfy claims determined to be entitled to compensation and committed an additional $0.2 billion to fund projected related case expenses.

See the Financial Condition and Liquidity - Material Cash Requirements from Known Contractual and Other Obligations section of Item 7 of 3M's 2022 Annual Report on Form 10-K.

Cautionary Note Concerning Factors That May Affect Future Results

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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, 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),

• liabilities related to certain fluorochemicals and the outcome of contingencies,

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

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

• liabilities and the outcome of contingencies related to certain fluorochemicals known as "PFAS," as well as matters related to the Company's plans to discontinue the use of PFAS,

• the Company’s strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position,

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• foreign currency exchange rates and fluctuations in those rates,

• new business opportunities, product development, and future performance or results of current or anticipated products,

• new business opportunities, product and service development, and future performance or results of current or anticipated products and services,

• fluctuations in the costs and availability of purchased components, compounds, raw materials and energy,

• Information technology systems including ERP system roll-out and implementations,

• information technology systems including implementation of an enterprise resource planning (ERP) system,

• security breaches and other disruptions to information technology infrastructure,

• the scope, nature or impact of acquisition, strategic alliance and divestiture activities,

• operational execution, including inability to generate productivity improvements as estimated,

• operational execution, including inability to generate productivity improvements and impact of organizational restructuring activities,

• future levels of indebtedness, common stock repurchases and capital spending,

• future availability of and access to credit markets,

• future access to credit markets and the cost of credit,

• pension and postretirement obligation assumptions and future contributions,

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• the voluntary chapter 11 proceedings initiated by the Company's Aearo Entities, and

• legal and regulatory proceedings, legal compliance risks (including third-party risks) with regards to environmental, product liability and other laws and regulations in the United States and other countries in which we operate.

• laws and regulations, as well as legal compliance risks (including third-party risks), and legal and regulatory proceedings related to the same, including with regards to environmental matters and product liability, in the United States and other countries in which we operate.

The Company assumes no obligation to update or revise any forward-looking statements.

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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