What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-10-24 compared with 2023-07-25 · 191 added, 148 removed, 669 unchanged (34% of the section changed)

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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 June 30, 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.

During the first six months of 2023, 3M's costs for significant litigation (see Certain amounts adjusted for special items - (non-GAAP measures) section below) totaled approximately $10.5 billion pre-tax and included, among other things, a $10.3 billion pre-tax charge related to the proposed settlement agreement announced in the second quarter of 2023 with public water systems in the United States regarding PFAS.

In addition within this Form 10-Q for the quarterly period ended September 30, 2023, risk factors with respect to unexpected events such as 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.

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

During the first nine months of 2023, 3M's costs for significant litigation (see Certain amounts adjusted for special items - (non-GAAP measures) section below) totaled approximately $15.0 billion pre-tax and included, among other things, a $10.3 billion pre-tax charge related to the proposed settlement agreement announced in the second quarter of 2023 with public water systems in the United States regarding PFAS and a $4.2 billion pre-tax charge related to the settlement agreement announced in the third quarter of 2023 to resolve Combat Arms Earplugs litigation.

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.

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Earnings (loss) per diluted share Three months ended

June 30, 2023 Six months ended

June 30, 2023

September 30, 2023 Nine months ended

September 30, 2023

Same period last year $ 6.77 $ 9.15

Net costs for significant litigation 0.37 3.10

Divestiture costs

Gain on business divestitures (4.71) (4.69)

Divestiture-related restructuring actions 0.05 0.06

Russia exit charges 0.20 0.19

Manufactured PFAS products (0.09) (0.13)

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Total organic growth/productivity and other 0.22 (0.13)

Restructuring (0.31) (0.36)

Restructuring and related charges

(0.10) (0.46)

Raw material impact (0.03) (0.22)

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Divestiture costs (0.19) (0.53)

Gain on business divestitures 0.05 0.05

Russia exit (charges) benefits — 0.04

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Total organic growth/productivity and other:

• For the second quarter of 2023, the following components impacted operating margins and earnings (loss) per diluted share year-on-year:

◦ Declines in disposable respirator demand year-on-year negatively impacted earnings (loss) per share by $0.09.

• For the third quarter of 2023, the following components impacted operating margins and earnings (loss) 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 (loss) per share by $0.09.

◦ Remaining organic growth/productivity and other impacts resulted in a net year-on-year increase of $0.31 per share which was impacted by the following:

• Benefits from ongoing productivity actions, restructuring, strong spending discipline and higher selling prices

• Lower sales volumes (particularly electronics/consumer retail), inflation impacts and investments in growth, productivity, and sustainability

• For the first six months of 2023, the following components impacted operating margins and earnings (loss) per diluted share year-on-year:

• Lower sales volumes (particularly electronics, consumer retail and China) and investments in growth, productivity, and sustainability

• For the first nine months of 2023, the following components impacted operating margins and earnings (loss) 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 (loss) per share by $0.39.

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inflation impacts;

China (COVID-related);

and Europe geopolitical impacts

▪ Benefits from spending discipline, restructuring, higher selling prices and ongoing productivity actions

Restructuring:

• 3M recorded restructuring pre-tax charges of $212 million and $264 million in the second quarter and first six months of 2023, respectively, compared to no charges and $18 million in the same periods last year, respectively, (refer to Note 5 for additional discussion).

Restructuring and related charges:

• 3M recorded restructuring pre-tax charges of $62 million and $326 million in the third quarter and first nine months of 2023, respectively, compared to $41 million and $59 million in the same periods last year, respectively, (refer to Note 5 for additional discussion).

In addition, 3M recorded certain related accelerated depreciation.

Raw material impact:

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Foreign exchange impacts

• Foreign currency impacts (net of hedging) decreased operating income (loss) by approximately $39 million (or a decrease of pre-tax earnings (loss) by approximately $23 million) year-on-year for the second quarter of 2023 and decreased operating income (loss) by approximately $115 million (or a decrease of pre-tax earnings (loss) by approximately $99 million) year-on-year for the first six months of 2023, primarily resulting from the strength of the U.S.

• Foreign currency impacts (net of hedging) increased operating loss by approximately $2 million (or an increase of pre-tax loss by approximately $5 million) year-on-year for the third quarter of 2023 and increased operating loss by approximately $117 million (or an increase of pre-tax loss by approximately $104 million) year-on-year for the first nine months of 2023.

These estimates include:

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• 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 the split-off of the Food Safety business (discussed in Note 3).

◦ In the third quarter of 2023, 3M completed the sale of its dental local anesthetic business (discussed in Note 3).

In the third quarter of 2022, 3M completed the split-off of the Food Safety business.

◦ In the third quarter of 2022, 3M deconsolidated the Aearo Entities and, in the second quarter of 2023, reconsolidated those entities (discussed in Note 14).

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Other expense (income), net:

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

• Interest expense (net of interest income) decreased for the second quarter and first six months of 2023 compared to the same period year-on-year.

• Interest expense (net of interest income) included in other expense (income), net as presented above decreased for the third quarter and first nine months of 2023 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 third quarter and first nine months of 2023.

Income tax rate:

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

Overall, the effective tax rate for the second quarter of 2023 was 24.2 percent on a pre-tax loss, compared to (38.3) percent on pre-tax income in the prior year.

The primary factor that impacted the comparison of these rates was the second quarter 2022 charge related to steps toward resolving Combat Arms Earplugs litigation (see Note 14).

The effective tax rate for the first six months of 2023 was 25.2 percent, compared to 16.8 percent in the prior year.

The primary factor that impacted the comparison of the six-month rates was the second quarter 2023 charge related to the proposed settlement agreement with public water systems in the United States regarding PFAS (discussed in Note 14).

• On an adjusted basis (as discussed below), the effective tax rate for the second quarter and first six months of 2023 was 19.1 percent and 18.5 percent, respectively, a decrease of 0.7 percentage points and a decrease of 0.1 percent, respectively, compared to the same period year-on-year.

Overall, the effective tax rate for the third quarter of 2023 was 27.4 percent on a pre-tax loss, compared to 6.6 percent on pre-tax income in the prior year.

The primary factors that impacted the comparison of these rates were the third quarter 2023 charge related to the settlement agreement to resolve Combat Arms Earplugs litigation (see Note 14) and the tax efficient structure associated with the third quarter 2022 gain on split-off of the Food Safety business.

The effective tax rate for the first nine months of 2023 was 25.8 percent, compared to 9.5 percent in the prior year.

The primary factors that impacted the comparison of the nine-month rates were the third quarter 2023 charge related to the settlement agreement to resolve Combat Arms Earplugs litigation, the second quarter 2023 charge related to the proposed settlement agreement with public water systems in the United States regarding PFAS, and the tax impact associated with the second quarter 2022 charge related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 14), along with the tax efficient structure associated with the third quarter 2022 gain on split-off of the Food Safety business.

• On an adjusted basis (see section entitled Certain amounts adjusted for special items - (non-GAAP measures)) , the effective tax rate for the third quarter and first nine months of 2023 was 18.1 percent and 18.3 percent, respectively, an increase of 2.2 percentage points and an increase 0.6 percentage points, respectively, compared to the same period year-on-year.

The primary drivers of the increase are year-over-year adjustments to uncertain tax positions and audit settlements, including a partially offsetting adjustment in the third quarter of 2023 of an uncertain tax position related to Health Care business.

Shares of common stock outstanding:

• Lower shares outstanding increased earnings (loss) per share year-on-year for the second quarter and first six months of 2023.

• Lower shares outstanding increased earnings (loss) per share year-on-year for the third quarter and first nine months of 2023.

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

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

Net costs include the impacts of changes in accrued liabilities (including interest imputation on contractual settlement obligations), external legal fees, and insurance recoveries, along with the associated tax impacts.

Net costs include the impacts of changes in accrued liabilities (including interest imputation on applicable settlement obligations), external legal fees, and insurance recoveries, along with the associated tax impacts.

3M does not consider the elements of the net costs associated with these matters to be normal, operating expenses related to the Company’s ongoing operations, revenue generating activities, business strategy, industry, and regulatory environment.

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

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Prior to the bankruptcy, costs associated with Combat Arms Earplugs matters were reflected as part of special items in the Safety and Industrial business segment.

Gain/loss on sale of business divestitures:

• In 2023, 3M recorded a gain related to the sale of its dental local anesthetic business partially offset by a loss associated with a previously contingent indemnification obligation from a 2020 divestiture.

Refer to Note 3 for further details.

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

Divestiture costs:

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

Divestiture-related restructuring actions:

• In the third quarter of 2022, following the split-off of the Food Safety business, 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 businesses.

Refer to Note 5 for further details.

Manufactured PFAS products:

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Refer to Note 13 for further details.

Three months ended June 30, 2022

Three months ended September 30, 2022

(Dollars in millions, except per share amounts) Net sales Operating income (loss) Operating income (loss) margin Income (loss) before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) attributable to 3M Earnings per diluted share

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Manufactured PFAS products (350) (65) (65) (16) (49) (0.09)

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

Russia exit charges (benefits) — 109 109 (2) 111 0.20

Divestiture-related restructuring actions — 41 41 9 32 0.05

Divestiture costs — 6 6 2 4 0.01

Total special items (350) (2,366) (2,366) 11 (2,377) (4.17)

Adjusted amounts (non-GAAP measures) $ 8,269 $ 1,790 21.6 % $ 1,766 $ 282 15.9 % $ 1,482 $ 2.60

Three months ended June 30, 2023

Three months ended September 30, 2023

(Dollars in millions, except per share amounts) Net sales Sales change Operating income (loss) Operating income (loss) margin Income (loss) before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) attributable to 3M Earnings (loss) per diluted share Earnings (loss) per diluted share percent change

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Total Company

GAAP amounts $ 8,325 (4.3) % $ (8,958) (107.6) % $ (9,023) $ (2,184) 24.2 % $ (6,841) $ (12.35) N/M

GAAP amounts $ 8,312 (3.6) % $ (2,654) (31.9) % $ (2,854) $ (781) 27.4 % $ (2,075) $ (3.74) (155) %

Adjustments for special items:

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Manufactured PFAS products (292) 105 105 25 80 0.15

Russia exit charges (benefits) — (18) (18) 3 (21) (0.04)

Gain on business divestitures — (36) (36) (11) (25) (0.05)

Divestiture costs — 132 132 26 106 0.19

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1 For the per share amount, this includes adjusting-out the impact of this item causing weighted average shares outstanding to be the same for both basic and diluted loss per share in periods of resulting net losses.

Three months ended June 30, 2023

Three months ended September 30, 2023

Sales Change Organic sales Acquisitions Divestitures Translation Total sales change

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Adjusted Transportation and Electronics (non-GAAP measures) (1.8) % 1.7 % (0.5) % 0.1 % (0.5) %

Six months ended June 30, 2022

Nine months ended September 30, 2022

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Manufactured PFAS products (988) (101) (101) (26) (75) (0.13)

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

Russia exit charges (benefits) — 109 109 (2) 111 0.19

Divestiture-related restructuring actions — 41 41 9 32 0.06

Divestiture costs — 6 6 2 4 0.01

Total special items (988) (436) (436) 400 (836) (1.46)

Adjusted amounts (non-GAAP measures) $ 25,162 $ 5,471 21.7 % $ 5,359 $ 950 17.7 % $ 4,400 $ 7.69

Six months ended June 30, 2023

Nine months ended September 30, 2023

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Manufactured PFAS products (969) 54 54 12 42 0.08

Gain on business divestitures — (36) (36) (11) (25) (0.05)

Russia exit charges (benefits) — (18) (18) 3 (21) (0.04)

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Six months ended June 30, 2023

Nine months ended September 30, 2023

Sales Change Organic sales Acquisitions Divestitures Translation Total sales change

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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 six months ended June 30, 2023 and 2022.

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

Three months ended September 30,

2023 2022 % change

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Corporate and Unallocated 2 (4,438) 1 2,280

Total Company $ 8,325 $ (8,958) $ 8,702 $ 110 (4.3) % N/M

Six months ended June 30,

Total Company $ 8,312 $ (2,654) $ 8,619 $ 4,156 (3.6) % (163.9) %

Nine months ended September 30,

2023 2022 % change

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Total Company $ 24,668 $ (10,371) $ 26,150 $ 5,907 (5.7) % N/M

Three months ended June 30, 2023

Three months ended September 30, 2023

Worldwide Sales Change

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Total Company (3.7) 0.4 (0.9) 0.6 (3.6)

Six months ended June 30, 2023

Nine months ended September 30, 2023

Worldwide Sales Change

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Sales by geographic area:

Percent change information compares the three and six months ended June 30, 2023 with the same prior year period, unless otherwise indicated.

Percent change information compares the three and nine months ended September 30, 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 June 30, 2023

Three months ended September 30, 2023

Americas Asia

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Total sales change 0.6 % (15.6) % 3.9 % (3.6) %

Six months ended June 30, 2023

Nine months ended September 30, 2023

Americas Asia Pacific Europe, Middle East & Africa Other Unallocated Worldwide

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

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

total sales decreased 1 percent which included flat organic sales.

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

total sales was flat which included flat organic sales.

Total sales in Mexico increased 19 percent which included increased organic sales of 11 percent.

In Canada, total sales decreased 8 percent which included decreased organic sales of 4 percent.

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

In Brazil, total sales increased 5 percent which included increased organic sales of 1 percent.

In the Asia Pacific geographic area, China total sales decreased 20 percent which included decreased organic sales of 17 percent.

In Japan, total sales decreased 14 percent which included decreased organic sales of 9 percent.

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

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

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

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Managing currency risks:

The weaker U.S.

dollar had a positive impact on sales in the third quarter of 2023 compared to the same period last year.

The stronger U.S.

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

Net of the Company’s hedging strategy, foreign currency negatively impacted earnings in the second quarter and first six months of 2023 compared to the same period last year.

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

Net of the Company’s hedging strategy, foreign currency negatively impacted earnings in the third quarter and first nine 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.

3M also uses financial hedges to mitigate currency risk.

In the case of more liquid currencies, 3M hedges a portion of its aggregate exposure, using a 12, 24 or 36 month horizon, depending on the currency in question.

In the case of more liquid currencies, 3M hedges a portion of its aggregate exposure, using a 12, 24 or 36 month horizon, depending on the currency.

For less liquid currencies, financial hedging is frequently more expensive with more limitations on tenor.

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

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

As of June 30, 2023, approximately $4.2 billion remained available under the authorization.

In the first nine months of 2023, the Company purchased $31 million of its own stock, compared to $928 million of stock purchases in the first nine months of 2022.

As of September 30, 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.

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In May 2023, 3M's Board of Directors declared a second-quarter 2023 dividend of $1.50 per share.

In August 2023, 3M's Board of Directors declared a third-quarter 2023 dividend of $1.50 per share.

RESULTS OF OPERATIONS

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(Percent of net sales) 2023 2022 Change 2023 2022 Change

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Research, development and related expenses (R&D) 5.2 5.4 (0.2) 5.6 5.4 0.2

Gain on business divestitures (0.4) (31.6) 31.2 (0.1) (10.4) 10.3

Operating income (loss) margin (31.9) % 48.2 % (80.1) % (42.0) % 22.6 % (64.6) %

Stock compensation expense was $41 million and $47 million for the second quarter of 2023 and 2022, respectively, and was $176 million and $182 million for the six months ended June 30, 2023 and 2022, respectively, which impacts cost of sales;

Stock compensation expense was $46 million and $44 million for the third quarter of 2023 and 2022, respectively, and was $222 million and $226 million for the nine months ended September 30, 2023 and 2022, respectively, which impacts cost of sales;

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

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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 second quarter and first six months of 2023 was approximately $38 million and $80 million, respectively.

The year-on-year decrease in defined benefit pension and postretirement service cost expense for the third quarter and first nine months of 2023 was approximately $37 million and $117 million, respectively.

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.

For total year 2023, defined benefit pension and postretirement service cost expense is anticipated to total approximately $270 million while non-service pension and postretirement net benefit cost is anticipated to be a benefit of approximately $125 million, for a total consolidated defined benefit pre-tax pension and postretirement expense of approximately $145 million, a decrease in expense of approximately $30 million compared to 2022.

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.

The Company continues to make investments in the implementation of new business systems and solutions, including enterprise resource planning, with these investments impacting cost of sales, SG&A, and R&D.

Cost of Sales:

Cost of sales, measured as a percent of sales, decreased in the second quarter and first six months of 2023 when compared to the same period last year.

Decreases were primarily due to lower year-on-year net costs for significant litigation to address certain PFAS-related matters at 3M's Zwijndrecht, Belgium site, higher selling prices, spending discipline and restructuring benefits.

These decreases were partially offset by higher raw materials and energy costs;

manufacturing productivity headwinds;

investments in growth, productivity and sustainability;

and restructuring charges.

Cost of sales, measured as a percent of sales, increased in the third quarter and decreased the first nine months of 2023 when compared to the same period last year.

Increases in the third quarter of 2023 were due to investments in growth, productivity and sustainability;

restructuring charges and carryover impact of higher raw material, logistics and energy cost inflation.

Decreases in the first nine months of 2023 were primarily due to lower year-on-year net costs for significant litigation to address certain PFAS-related matters at 3M's Zwijndrecht, Belgium site, higher selling prices, spending discipline and restructuring benefits.These decreases were partially offset by investments in growth, productivity and sustainability;

restructuring charges, and carryover impact of higher raw material, logistics and energy cost inflation.

Selling, General and Administrative Expenses:

SG&A, measured as a percent of sales, increased in the second quarter and first six months of 2023 when compared to the same period last year.

SG&A in 2023 was primarily impacted by a $10.3 billion pre-tax charge related to the proposed settlement agreement announced in the second quarter of 2023 with public water systems in the United States regarding PFAS (see Note 14).

SG&A, measured as a percent of sales, increased in the third quarter and first nine months of 2023 when compared to the same period last year.

SG&A in 2023 was primarily impacted by the $10.3 billion pre-tax charge related to the proposed settlement agreement announced in the second quarter of 2023 with public water systems in the United States regarding PFAS and the $4.2 billion pre-tax charge related to the third quarter 2023 settlement agreement to resolve Combat Arms Earplugs litigation (both discussed in Note 14).

SG&A was also impacted by restructuring charges, divestiture costs (related to separating and preparing the Health Care business for spin-off), continued investment in key growth initiatives and ongoing respirator mask/asbestos litigation matters.

These impacts were partially offset by lower net costs for significant litigation to address Combat Arms Earplugs litigation matters (for which a pre-tax charge of approximately $1.2 billion was reflected in the second quarter of 2022), restructuring benefits and ongoing general 3M cost management.

These impacts were partially offset by 2022 net costs for significant litigation to address Combat Arms Earplugs litigation matters (for which a pre-tax charge of approximately $1.2 billion was reflected in the second quarter of 2022), restructuring benefits and ongoing general 3M cost management.

Research, Development and Related Expenses:

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

R&D, measured as a percent of sales, decreased in the third quarter and increased the first nine 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.

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

Interest expense (net of interest income) decreased in the second quarter and first six months of 2023 compared to the same period year-on-year primarily driven by interest income generated on invested cash.

The non-service pension and postretirement net benefit decreased approximately $36 million and $72 million in the second quarter and first six months of 2023, respectively, compared to the same period year-on-year.

Interest expense (net of interest income) increased in the third quarter and first nine months of 2023 compared to the same period year-on-year primarily driven by the addition of imputed interest associated with the obligations resulting from the PFAS-related public water systems proposed settlement and the Combat Arms Earplugs settlement (discussed in Note 14).

The non-service pension and postretirement net benefit decreased approximately $34 million and $106 million in the third quarter and first nine months of 2023, respectively, compared to the same period year-on-year.

Provision (benefit) for Income Taxes:

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(Percent of pre-tax income/loss) 2023 2022 2023 2022

Effective tax rate 27.4 % 6.6 % 25.8 % 9.5 %

The primary factors that impacted the comparisons of the Company's effective tax rate for the second quarters and the first six months of 2023 and 2022 were the second quarter 2022 charge related to steps toward resolving Combat Arms Earplugs litigation and the second quarter 2023 charge related to the proposed settlement agreement with public water systems in the United States regarding PFAS (both discussed in Note 14).

The primary factors that impacted the comparisons of the Company's effective tax rate for the third quarters and the first nine months of 2023 and 2022 were the third quarter 2023 charge related to the settlement agreement to resolve Combat Arms Earplugs litigation, the second quarter 2023 charge related to the proposed settlement agreement with public water systems in the United States regarding PFAS, and the tax impact associated with the second quarter 2022 charge related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 14), along with the tax efficient structure associated with the third quarter 2022 gain on split-off of the Food Safety business.

On an adjusted basis (see section entitled Certain amounts adjusted for special items - (non-GAAP measures)) , the effective tax rate for the third quarter and first nine months of 2023 was 18.1 percent and 18.3 percent, respectively, an increase of 2.2 percentage points and 0.6 percentage points, respectively, compared to the same period year-on-year.

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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(Millions) 2023 2022 2023 2022

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(Millions) 2023 2022 2023 2022

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

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

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

The subsections below provide additional information.

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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 increased year-over-year primarily due to increased net costs for significant litigation as a result of the $10.3 billion pre-tax charge related to the proposed settlement agreement announced in the second quarter of 2023 with public water systems in the United States regarding PFAS (see Note 14) and divestiture costs.

Other Corporate Expense - Net

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

Other corporate operating expenses, net, increased in the third quarter and first nine 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 (see Note 5).

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Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

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Total sales change (4.9) % (6.5) %

Business segment operating income (loss) (millions) $ 534 $ (707) $ 1,135 $ (80)

Business segment operating income (millions)

$ 666 $ 652 $ 1,801 $ 572

Percent change 2.3 % N/M

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

Second quarter 2023 results:

Third quarter 2023 results:

Sales in Safety and Industrial were down 4.9 percent in U.S.

On an organic sales basis:

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

• Growth was held back by disposable respirator sales decline within personal safety (which negatively impacted year-on-year second quarter organic growth by 4.8 percentage points);

declines in closure and masking systems due to slowdown in packaging and shipping activity;

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

• Growth was held back by disposable respirator sales decline within personal safety along with the exit of Russia (which negatively impacted year-on-year third quarter organic growth by 4.3 percentage points);

declines in closure and masking systems due to lower packaging and shipping activity;

and declines within industrial adhesives and tapes from continued end-market softness in electronics.

Business segment operating income (loss) margins increased year-on-year primarily due to lower special item costs for significant litigation.

2022 was impacted by a pre-tax charge in the second quarter of approximately $1.2 billion related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 14).

In addition, year-on-year margins increased from productivity actions, strong spending discipline, and pricing which more than offset the decline driven by lower sales volume, restructuring costs, and inflation impacts.

Business segment operating income margins increased year-on-year from ongoing productivity actions, benefits from restructuring, strong spending discipline, pricing, and lower special item costs for significant litigation which more than offset the decline driven by lower sales volume and higher restructuring costs.

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

First six months 2023 results:

First nine months 2023 results:

Sales in Safety and Industrial were down 6.5 percent in U.S.

On an organic sales basis:

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

• 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 organic growth by 7.3 percentage points) for the first six months of 2023;

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

• 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 organic growth by 6.3 percentage points) for the first nine months of 2023;

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 (slowing down in packaging and shipping activity).

Business segment operating income (loss) margins increased year-on-year primarily due to lower special item costs for significant litigation.

Business segment operating income margins increased year-on-year primarily due to lower special item costs for significant litigation.

2022 was impacted by a pre-tax charge in the second quarter of approximately $1.2 billion related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 14).

Margins were also impacted by aggressive spending discipline, pricing and productivity actions which were more than offset by the lower sales volume, restructuring costs, inflation impacts, investments in the business and China COVID-related challenges.

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

Margins were also impacted by aggressive spending discipline, pricing and productivity actions which were more than offset by the lower sales volume, higher restructuring costs, inflation impacts, investments in the business and China-related challenges.

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

Transportation and Electronics Business:

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

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

Second quarter 2023 results:

Third quarter 2023 results:

Sales in Transportation and Electronics were down 3.0 percent in U.S.

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On an organic sales basis:

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

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

• Growth continued to be held back by soft end-market demand for electronics partially offset by growth in automotive and aerospace, which outpaced global car and light truck builds.

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For each of the 12-months post-deconsolidation and post-reconsolidation, impacts are each reflected separately as divestiture and acquisition, respectively.

Business segment operating income margins decreased year-on-year from sales volume declines, restructuring costs, and inflation impacts partially offset by benefits from strong spending discipline, productivity actions, and pricing.

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

First six months 2023 results:

Business segment operating income margins decreased year-on-year from operating losses on PFAS manufactured products, sales volume declines, and higher restructuring costs partially offset by benefits from productivity actions, restructuring, strong spending discipline, and pricing.

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

First nine months 2023 results:

Sales in Transportation and Electronics were down 6.3 percent in U.S.

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On an organic sales basis:

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

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

• Growth continued to be held back by consumer electronics end-market weakness.

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For each of the 12-months post-deconsolidation and post-reconsolidation, impacts are each reflected separately as divestiture and acquisition, respectively.

Business segment operating income margins decreased year-on-year from lower sales volumes, inflation impacts, investments in the business, restructuring costs, manufacturing and supply chain headwinds and China COVID-related challenges partially offset by benefits from aggressive spending discipline, pricing and productivity actions.

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

Business segment operating income margins decreased year-on-year from lower sales volumes, operating losses on PFAS manufactured products, inflation impacts, investments in the business, higher restructuring costs, manufacturing and supply chain headwinds and China-related challenges partially offset by benefits from aggressive spending discipline, pricing 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

June 30, Six months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

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Percent of sales 22.2 % 21.7 % 20.0 % 21.7 %

Second quarter 2023 results:

Third quarter 2023 results:

Sales in Health Care were down 0.2 percent in U.S.

On an organic sales basis:

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

• Growth was held back by declines in separation and purification and health information systems, which continued to be negatively impacted by lower post-COVID-related biopharma demand and ongoing stress on hospital budgets.

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

• Growth was held back by the normalization of post-COVID related biopharma demand, and tighter hospital budgets negatively impacting separation and purification, and health information systems performance.

Divestitures:

• 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 lower sales volume, restructuring costs, and inflation impacts partially offset by benefits from strong spending discipline, productivity actions, and pricing.

• Divestiture impact relates to the lost sales year-on-year from the third quarter 2023 sale of the dental local anesthetic business and the third quarter 2022 split-off of the Food Safety business.

Business segment operating income margins increased year-on-year due to productivity actions, benefits from restructuring, strong spending discipline, and pricing partially offset by higher restructuring costs.

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.

In addition, as discussed in Note 3, in the second quarter of 2023, 3M entered into agreements to sell the assets associated with its dental local anesthetic business That transaction is expected to close in the third quarter of 2023.

First six months 2023 results:

First nine months 2023 results:

Sales in Health Care were down 3.5 percent in U.S.

On an organic sales basis:

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

• Growth was held back by declines in separation and purification due to the normalization of post-COVID-related biopharma demand, declines in health information systems from ongoing stress on hospital budgets along with overall headwinds from the exit of Russia.

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

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

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 due to manufacturing and supply chain headwinds, inflation impacts, investments in the business and restructuring costs partially offset by benefits from aggressive spending discipline, pricing and productivity actions.

Business segment operating income margins decreased year-on-year due to manufacturing and supply chain headwinds, inflation impacts, investments in the business and higher restructuring costs partially offset by benefits from aggressive spending discipline, pricing, productivity actions, and restructuring.

Consumer Business:

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

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Percent of sales 20.5 % 21.2 % 18.0 % 18.9 %

Second quarter 2023 results:

Third quarter 2023 results:

Sales in Consumer were down 6.7 percent in U.S.

On an organic sales basis:

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

• Growth was negatively impacted as discretionary spending trends on hardline categories remains soft.

Business segment operating income margins decreased year-on-year from lower sales volumes, restructuring costs, and inflation impacts, partially offset by benefits from strong spending discipline, productivity actions, and pricing.

First six months 2023 results:

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

• Growth was negatively impacted as discretionary spending trends on hardline categories remain subdued.

The back-to-school season was soft, and rising interest rates continued to impact the housing market and related spending.

Business segment operating income margins decreased year-on-year from lower sales volumes and higher restructuring costs, partially offset by benefits from productivity actions, restructuring, strong spending discipline, and pricing.

First nine months 2023 results:

Sales in Consumer were down 6.1 percent in U.S.

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• Growth was negatively impacted as consumers have shifted their spending patterns to more non-discretionary items.

Business segment operating income margins decreased year-on-year from lower sales volumes, inflation impacts, investments, manufacturing and supply chain headwinds, and restructuring costs partially offset by benefits from aggressive spending discipline, pricing and productivity actions.

Business segment operating income margins decreased year-on-year from lower sales volumes, inflation impacts, investments, manufacturing and supply chain headwinds, and higher restructuring costs partially offset by benefits from aggressive spending discipline, pricing, productivity actions and restructuring.

FINANCIAL CONDITION AND LIQUIDITY

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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 $1.8 billion in commercial paper outstanding at June 30, 2023, compared to no commercial paper outstanding as of December 31, 2022.

The Company had $1.9 billion in commercial paper outstanding at September 30, 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 June 2023, 3M has a credit rating of A2, 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 June 30, 2023 was consistent when compared to December 31, 2022 as maturities of $1.8 billion of fixed-rate notes were offset by issuances of commercial paper of $1.8 billion.

As of September 2023, 3M has a credit rating of A2, negative outlook from Moody's Investors Service, and a credit rating of BBB+, CreditWatch negative from S&P Global Ratings.

The Company’s total debt at September 30, 2023 was largely consistent when compared to December 31, 2022 as maturities of $1.8 billion of fixed-rate notes were offset by issuances of commercial paper of $1.9 billion.

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

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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, and certain USD LIBOR rates subject to a synthetic methodology will continue to be published until September 2024.

The Company anticipates its debt securities, bank facilities, and derivative instruments that previously utilized LIBOR as the reference rate will transition to the Secured Overnight Financing Rate, or SOFR, as a reference rate as necessary.

Certain USD LIBOR rates subject to a synthetic methodology will continue to be published until September 2024.

The Company's believes its material debt securities, bank facilities, and derivative instruments that previously utilized LIBOR as the reference rate have transitioned to the Secured Overnight Financing Rate, or SOFR, as a reference rate as necessary.

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.

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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 June 30, 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).

As of September 30, 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.

In May 2023, 3M entered into a $4.25 billion five-year revolving credit facility expiring in 2028;

the facility was amended in July 2023.

the facility was amended in July and September 2023.

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 $5.25 billion.

The agreement replaced the amended and restated $3.0 billion, five-year revolving credit agreement and the $1.25 billion 364-day credit facility that would have expired in November 2024 and November 2023, respectively.

The credit facility was undrawn at June 30, 2023.

The credit facility was undrawn at September 30, 2023.

Under the $4.25 billion credit facility, 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 (based on amounts defined in the amended agreement) as the ratio of consolidated total EBITDA for the four consecutive quarters then ended to total interest expense on all funded debt for the same period.

At June 30, 2023, this ratio, reflecting the July 2023 amendment, was approximately 17 to 1.

At September 30, 2023, this ratio was approximately 15 to 1.

Debt covenants do not restrict the payment of dividends.

The Company also had $315 million in stand-alone letters of credit and bank guarantees issued and outstanding at June 30, 2023.

The Company also had $330 million in stand-alone letters of credit and bank guarantees issued and outstanding at September 30, 2023.

These instruments are utilized in connection with normal business activities.

Cash, cash equivalents and marketable securities:

At June 30, 2023, 3M had $4.3 billion of cash, cash equivalents and marketable securities, of which approximately $3.2 billion was held by the Company’s foreign subsidiaries and approximately $1.1 billion was held in the United States.

At September 30, 2023, 3M had $5.2 billion of cash, cash equivalents and marketable securities, of which approximately $3.2 billion was held by the Company’s foreign subsidiaries and approximately $2.0 billion was held in the United States.

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

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

The following table provides net debt as of June 30, 2023 and December 31, 2022.

(Millions) June 30, 2023 December 31, 2022 Change

The following table provides net debt as of September 30, 2023 and December 31, 2022.

(Millions) September 30, 2023 December 31, 2022 Change

Total debt $ 16,013 $ 15,939 $ 74

7 unchanged sentences

Working capital (non-GAAP measure):

(Millions) June 30, 2023 December 31, 2022 Change

(Millions) September 30, 2023 December 31, 2022 Change

Current assets $ 16,198 $ 14,688 $ 1,510

8 unchanged sentences

Balance changes in current assets increased working capital by $1.5 billion, driven largely by increases in cash and cash equivalents and accounts receivable.

Balance changes in current liabilities decreased working capital by $1.4 billion, primarily due to increases in short-term borrowings driven by issuances of commercial paper and increases in other current liabilities.

Balance changes in current liabilities decreased working capital by $5.9 billion, primarily due to increases in the current portion of obligations resulting from the PFAS-related public water systems proposed settlement and the Combat Arms Earplugs settlement (discussed in Note 14).

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

2 unchanged sentences

Cash Flows from Operating Activities:

Six months ended June 30,

Nine months ended September 30,

(Millions) 2023 2022

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Stock-based compensation expense 222 226

Gain on business divestitures (36) (2,724)

Income taxes (deferred and accrued income taxes) (3,837) (506)

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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 six months of 2023, cash flows provided by operating activities increased $646 million compared to the same period last year, primarily driven by the combination of accounts receivable, inventories and accounts payable.

Cumulatively, they decreased operating cash flow by $157 million in the first six months of 2023, compared to operating cash flow decreasing by $893 million for these items in the first six months of 2022.

The second quarter pre-tax charges of approximately $10.3 billion in 2023 related to the proposed settlement agreement with public water systems in the United States regarding PFAS and $1.2 billion in 2022 related to steps toward resolving Combat Arms Earplugs litigation (both discussed in Note 14) largely impacted the net income component above, with offsets in the other-net and deferred tax elements in each of those periods.

In the first nine months of 2023, cash flows provided by operating activities increased $1,025 million compared to the same period last year, primarily driven by the combination of accounts receivable, inventories and accounts payable.

Cumulatively, they decreased operating cash flow by $17 million in the first nine months of 2023, compared to operating cash flow decreasing by $1,310 million for these items in the first nine months of 2022.

The 2023 pre-tax charges of $10.3 billion related to the proposed settlement agreement with public water systems in the United States regarding PFAS and $4.2 billion related to the settlement agreement to resolve Combat Arms Earplugs litigation along with the $1.2 billion pre-tax charge in 2022 related to steps toward resolving Combat Arms Earplugs litigation (all discussed in Note 14) largely impacted the net income component above, with offsets in the other-net and deferred tax elements in each of those periods.

Cash Flows from Investing Activities:

Six months ended June 30,

Nine months ended September 30,

(Millions) 2023 2022

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Proceeds from sale of businesses, net of cash sold 60 13

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

Other — net 28 1

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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.

Refer to Note 3 to the Consolidated Financial Statements in 3M's 2022 Annual Report on Form 10-K for additional information on the 2022 Cash payment from Food Safety business split-off, net of divested cash.

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.

2 unchanged sentences

Cash Flows from Financing Activities:

Six months ended June 30,

Nine months ended September 30,

(Millions) 2023 2022

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Net cash provided by (used in) financing activities $ (2,223) $ (4,035)

Total debt was approximately $16.0 billion at June 30, 2023 and $15.9 billion at December 31, 2022.

During the first six months of 2023, maturities of $1.8 billion of fixed-rate notes were offset by issuances of commercial paper of $1.8 billion.

The Company had $1.8 billion in commercial paper outstanding at June 30, 2023, compared to no commercial paper outstanding as of December 31, 2022.

Total debt was approximately $16.0 billion at September 30, 2023 and $15.9 billion at December 31, 2022.

During the first nine months of 2023, maturities of $1.8 billion of fixed-rate notes were offset by issuances of commercial paper of $1.9 billion.

The Company had $1.9 billion in commercial paper outstanding at September 30, 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.

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

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

In the first nine months of 2023, the Company purchased $31 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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In May 2023, 3M's Board of Directors declared a second-quarter 2023 dividend of $1.50 per share.

In August 2023, 3M's Board of Directors declared a third-quarter 2023 dividend of $1.50 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 (loss) attributable to 3M component of the calculation of free cash flow conversion.

Six months ended June 30,

Nine months ended September 30,

(Millions) 2023 2022

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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.

In addition, the Company expects to pay up to $12.5 billion in the aggregate from 2024 through 2036 pursuant to the terms of a proposed settlement agreement with public water systems in the United States related to PFAS.

See Note 14 and the settlement agreement that is included in the exhibit list to this filing for additional information.

In addition, the Company expects to pay up to $12.5 billion in the aggregate from 2023 through 2036 pursuant to the terms of a proposed settlement agreement with public water systems in the United States related to PFAS (see Note 14).

Further, the Company expects to pay up to $6.0 billion ($1.0 billion of which may be paid in 3M common stock) in the aggregate from 2023 to 2029 pursuant to the terms of the settlement agreement to resolve Combat Arms Earplugs litigation.

See Note 14 and the settlement agreements that are included in the exhibit list to this filing for additional information.

Cautionary Note Concerning Factors That May Affect Future Results

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

The Company may also make forward-looking statements in other reports filed with the Securities and Exchange Commission, in materials delivered to shareholders and in press releases.

The Company may also make forward-looking statements in other reports filed with the United States Securities and Exchange Commission ("SEC"), in materials delivered to shareholders and in press releases.

In addition, the Company’s representatives may from time to time make oral forward-looking statements.

Forward-looking statements relate to future events and typically address the Company’s expected future business and financial performance.

Words such as “plan,” “expect,” “aim,” “believe,” “project,” “target,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could,” “forecast” and other words and terms of similar meaning, typically identify such forward-looking statements.

Words such as “plan,” “expect,” “aim,” “believe,” “project,” “target,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could,” "would," “forecast” and other words and terms of similar meaning, typically identify such forward-looking statements.

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

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• 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,

• risks related to the proposed class-action settlement (“Settlement”) to resolve claims by public water systems in the United States regarding PFAS, including whether court approval of the Settlement will be obtained, whether the number of plaintiffs that opt out of the Settlement will exceed current expectations or will exceed the level that would permit 3M to terminate the Settlement (and whether 3M will elect to terminate the Settlement if this occurs), whether the Settlement is appealed, the timing and amount of payments made under the Settlement, and the impact of the settlement on other PFAS-related matters,

• risks related to the proposed class-action settlement (“PWS Settlement”) to resolve claims by public water systems in the United States regarding PFAS, including whether court approval of the PWS Settlement will be obtained, whether the number of plaintiffs that opt out of the PWS Settlement will exceed current expectations or will exceed the level that would permit 3M to terminate the PWS Settlement (and whether 3M will elect to terminate the PWS Settlement if this occurs), whether the PWS Settlement is appealed, the timing and amount of payments made under the PWS Settlement, and the impact of the PWS Settlement on other PFAS-related matters,

• 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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• the proposed spin-off of the Company's Health Care business to establish two separate public companies,

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

• matters relating to Combat Arms Earplugs (“CAE”), including those related to the voluntary chapter 11 proceedings of the Company’s subsidiary Aearo Technologies and certain of its affiliates (“Aearo Entities”), as well as those related to the August 2023 settlement that is intended to resolve, to the fullest extent possible, all litigation and alleged claims involving the CAE sold or manufactured by the Aearo Entities and/or 3M (“CAE Settlement”), including, but not limited to, whether the anticipated full participation by plaintiffs in the CAE Settlement will be achieved, whether the number of plaintiffs who participate in the CAE Settlement will meet the full participation expectations or will fall below the level that would permit 3M to terminate the CAE Settlement (and whether 3M will elect to terminate the CAE Settlement if this occurs), whether there will be a significant number of future claims by plaintiffs that decline to participate in the CAE Settlement, whether the CAE Settlement is appealed or challenged, whether the requirements applicable to the issuance of the equity securities that are contemplated to be part of the CAE Settlement will be met, the filing and outcome of additional litigation, if any, relating to the products that are the subject of the CAE Settlement, or changes in laws or regulations related to the CAE products or CAE settlement, and

• 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.

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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