What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-30 compared with 2023-10-24 · 163 added, 436 removed, 424 unchanged (59% of the section changed)

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• Cautionary Note Concerning Factors That May Affect Future Results

The term "N/M" used herein references "not meaningful" for certain percent changes.

Forward-looking statements in Part I, Item 2 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to the section entitled Cautionary Note Concerning Factors That May Affect Future Results in Part I, Item 2 and the risk factors provided in Part II, Item 1A for discussion of these risks and uncertainties).

3M is a diversified global manufacturer, technology innovator and marketer of a wide variety of products and services.

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

• 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 (loss))—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 these changes.

See additional information in Note 2.

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

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

3M is a diversif ied global manufacturer, technology innovator and marketer of a wide variety of products and services.

Effective in the first quarter of 2024, 3M made certain changes within its business segments.

The changes are described in Note 17.

While they impacted the composition and names of certain divisions within 3M's business segments, they did not change the overall composition of segments or the measure of segment operating performance used by 3M’s chief operating decision maker (CODM).

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

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and Consumer.

As discussed in Note 3, on April 1, 2024, 3M completed the previously announced separation of its Health Care business (the Separation) through a pro rata distribution of 80.1% of the outstanding shares of Solventum Corporation (Solventum) to 3M stockholders.

As a result of the Separation, Solventum became an independent public company and 3M will no longer consolidate Solventum into 3M’s financial results.

In connection with the Separation, the historical net income of Solventum and applicable assets and liabilities included in the Separation will be reported in 3M's consolidated financial statements as discontinued operations beginning in the second quarter of 2024.

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

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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 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.

3M is impacted by certain special items such as costs for significant litigation and the sales and income associated with manufactured PFAS products.

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

September 30, 2023 Nine months ended

September 30, 2023

March 31, 2024

Same period last year $ 1.76

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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 (0.01)

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Restructuring and related charges

(0.10) (0.46)

Raw material impact (0.03) (0.22)

Foreign exchange impacts (0.09)

Acquisitions/divestitures — (0.05)

Other expense (income), net 0.05

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Divestiture costs (0.28)

Gain on business divestitures 0.05 0.05

Russia exit (charges) benefits — 0.04

Manufactured PFAS products —

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Current period $ 1.67

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.

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Total organic growth/productivity and other:

• 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.

• For the first quarter of 2024, the following components impacted earnings per diluted share year-on-year:

◦ Timing of stock-based compensation grants to be incurred in the second quarter of 2024 versus the first quarter of 2023 due to Solventum spin (further discussed in "Results of Operations" section) resulted in a net year-on-year benefit of $0.15 per share.

◦ Nonrecurring items including gain on property sales resulted in a net year-on-year increase of $0.08 per share

◦ Remaining organic growth/productivity and other impacts resulted in a net year-on-year increase of $0.42 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 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.

◦ Remaining organic growth/productivity and other impacts resulted in a net year-on-year decline of $0.26 per share which was impacted by the following:

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

▪ Benefits from productivity, sourcing actions, restructuring and spending discipline

▪ Investments in growth, productivity, and sustainability

manufacturing/supply chain headwinds;

inflation impacts;

and Europe geopolitical impacts

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

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:

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

• 3M recorded restructuring pre-tax charges of $104 million in the first quarter of 2024 compared to $52 million in the same period last year (refer to Note 5 for additional discussion).

In addition, 3M recorded adjustments to previous accruals and certain related accelerated depreciation.

Foreign exchange impacts:

• 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.

• Foreign currency impacts (net of hedging) decreased operating income by approximately $63 million (or decreased pre-tax income by approximately $65 million) year-on-year for 2024.

These estimates include:

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Acquisitions/divestitures:

• Acquisition and divestiture impacts are measured separately for the first 12 months post-transaction.

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

◦ 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.

• Impacts primarily relate to reconsolidation of Aearo entities.

◦ In the third quarter of 2022, 3M deconsolidated the Aearo Entities and, in the second quarter of 2023, reconsolidated those entities (discussed in Note 16).

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Other expense (income), net:

• 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.

• Interest expense (net of interest income) included in other expense (income), net as presented above decreased for the first quarter of 2024 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 2024.

Income tax rate:

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

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.

Overall, the effective tax rate for the first quarter of 2024 was 24.7 percent, an increase from 17.7 percent in the prior year.

The primary factors that increased the Company's effective tax rate for first quarter 2024 were nonrecurring deferred tax benefits in 2023 as compared to 2024's decreased tax benefits related to significant litigation and stock-based compensation, as well as tax costs of entity structuring associated with the separation of Solventum.

• On an adjusted basis (as discussed below), the effective tax rate for the first quarter of 2024 was 20.5 percent, an increase of 2.8 percentage points compared to the same period year-on-year.

The primary factors were nonrecurring deferred tax benefits in 2023 and decreased tax benefits from stock-based compensation in 2024.

Shares of common stock outstanding:

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

• Higher shares outstanding decreased earnings per share year-on-year for the first quarter of 2024.

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

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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.

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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.

• These include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture, including net tax costs of entity structuring associated with the separation of Solventum.

These also include interest expense on debt issued by Solventum for the period outstanding prior to the April 1, 2024 completion of the separation of Solventum from 3M.

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.

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

Along with other costs in arriving at this associated income, these amounts include estimates of costs of sales of $230 million and $276 million for the three months ended March 31, 2024 and 2023, respectively.

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.

Russia exit charges/benefits:

• In the second quarter of 2023, 3M recorded a gain on final disposal of net assets in Russia.

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

Refer to Note 13 for further details.

Three months ended September 30, 2022

Three months ended March 31, 2023

(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 (345) (10) (10) (3) (7) (0.01)

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 — 102 102 20 82 0.15

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

Three months ended September 30, 2023

Three months ended March 31, 2024

(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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Manufactured PFAS products (281) (2) (2) (1) (1) —

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

Divestiture costs — 121 165 8 157 0.28

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Adjusted amounts (non-GAAP measures) $ 7,722 0.5 % $ 1,690 21.9 % $ 1,674 $ 343 20.5 % $ 1,327 $ 2.39 21 %

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 September 30, 2023

Three months ended March 31, 2024

Sales Change Organic sales Acquisitions Divestitures Translation Total sales change

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Adjusted Transportation and Electronics (non-GAAP measures) 6.7 % 1.7 % — % (1.5) % 6.9 %

Nine months ended September 30, 2022

Safety and Industrial

GAAP amounts $ 572 6.4 %

Adjustments for special items:

Net costs for significant litigation 1,421

Total special items 1,421

Adjusted amounts (non-GAAP measures) $ 1,993 22.5 %

Transportation and Electronics

GAAP amounts $ 6,847 $ 1,414 20.6 %

Adjustments for special items:

Manufactured PFAS products (988) (101)

Total special items (988) (101)

Adjusted amounts (non-GAAP measures) $ 5,859 $ 1,313 22.4 %

Total Company

GAAP amounts $ 26,150 $ 5,907 22.6 % $ 5,795 $ 550 9.5 % $ 5,236 $ 9.15

Adjustments for special items:

Net costs for significant litigation — 2,233 2,233 456 1,777 3.10

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

Nine months ended September 30, 2023

Safety and Industrial

GAAP amounts $ 1,801 21.7 %

Adjustments for special items:

Net costs for significant litigation 83

Total special items 83

Adjusted amounts (non-GAAP measures) $ 1,884 22.7 %

Transportation and Electronics

GAAP amounts $ 6,412 (6.3) % $ 1,093 17.0 %

Adjustments for special items:

Manufactured PFAS products (969) 54

Total special items (969) 54

Adjusted amounts (non-GAAP measures) $ 5,443 (7.1) % $ 1,147 21.1 %

Total Company

GAAP amounts $ 24,668 (5.7) % $ (10,371) (42.0) % $ (10,688) $ (2,755) 25.8 % $ (7,940) $ (14.34) N/M

Adjustments for special items:

Net costs for significant litigation 1

— 14,792 14,961 3,532 11,429 20.64

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)

Divestiture costs — 359 359 66 293 0.53

Total special items (969) 15,151 15,320 3,602 11,718 21.16

Adjusted amounts (non-GAAP measures) $ 23,699 (5.8) % $ 4,780 20.2 % $ 4,632 $ 847 18.3 % $ 3,778 $ 6.82 (11) %

Nine months ended September 30, 2023

Sales Change Organic sales Acquisitions Divestitures Translation Total sales change

Total Company (3.6) % 0.2 % (1.2) % (1.1) % (5.7) %

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

Adjusted total Company (non-GAAP measures) (3.8) % 0.2 % (1.2) % (1.0) % (5.8) %

Transportation and Electronics (4.5) % 0.6 % (0.9) % (1.5) % (6.3) %

Remove manufactured PFAS products special item impact (0.8) 0.2 (0.2) — (0.8)

Adjusted Transportation and Electronics (non-GAAP measures) (5.3) % 0.8 % (1.1) % (1.5) % (7.1) %

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, 2023 and 2022.

The following tables contain sales and operating income (loss) results by business segment for the three months ended March 31, 2024 and 2023.

Refer to the section entitled Performance by Business Segment later in MD&A for additional discussion concerning 2024 versus 2023 results, including Corporate and Unallocated.

Refer to Note 17 for additional information on business segments.

Three months ended September 30,

Three months ended March 31,

2024 2023 % change

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Total Company $ 8,003 $ 1,501 $ 8,031 $ 1,241 (0.3) % 20.9 %

Nine months ended September 30,

2023 2022 % change

(Dollars in millions) Net Sales Operating Income (Loss) Net Sales Operating Income (Loss) Net Sales Operating Income (Loss)

Business Segments

Safety and Industrial $ 8,295 $ 1,801 $ 8,869 $ 572 (6.5) % N/M

Transportation and Electronics 6,412 1,093 6,847 1,414 (6.3) (22.7)

Health Care 6,158 1,231 6,383 1,387 (3.5) (11.3)

Consumer 3,800 683 4,048 766 (6.1) (10.9)

Corporate and Unallocated 3 (15,179) 3 1,768

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

Three months ended September 30, 2023

Three months ended March 31, 2024

Worldwide Sales Change

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Total Company — 0.4 (0.1) (0.6) (0.3)

Nine months ended September 30, 2023

Worldwide Sales Change

By Business Segment Organic sales Acquisitions Divestitures Translation Total sales change

Safety and Industrial (5.5) % — % — % (1.0) % (6.5) %

Transportation and Electronics (4.5) 0.6 (0.9) (1.5) (6.3)

Health Care 1.3 — (3.9) (0.9) (3.5)

Consumer (5.4) — (0.1) (0.6) (6.1)

Total Company (3.6) 0.2 (1.2) (1.1) (5.7)

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, 2023 with the same prior year period, unless otherwise indicated.

Percent change information compares the three months ended March 31, 2024 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, 2023

Three months ended March 31, 2024

Americas Asia

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Total sales change (0.5) % (3.4) % 4.8 % (0.3) %

Nine months ended September 30, 2023

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

Net sales (millions) $ 13,846 $ 6,411 $ 4,411 $ — $ 24,668

% of worldwide sales 56.1 % 26.0 % 17.9 % 100.0 %

Components of net sales change:

Organic sales 0.5 (11.9) (2.0) (3.6)

Acquisitions 0.3 — — 0.2

Divestitures (1.3) (1.0) (1.0) (1.2)

Translation (0.1) (3.9) 0.6 (1.1)

Total sales change (0.6) % (16.8) % (2.4) % (5.7) %

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

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

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

• For the first quarter of 2024, in the Americas geographic area, U.S.

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

Total sales in Mexico increased 10 percent which included increased organic sales of 1 percent.

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

In Brazil, total sales increased 3 percent which included increased organic sales of 3 percent.

In the Asia Pacific geographic area, China total sales decreased 18 percent which included decreased organic sales of 13 percent.

In Brazil, total sales were flat which included decreased organic sales of 5 percent.

In the Asia Pacific geographic area, China total sales increased 5 percent which included increased organic sales of 8 percent.

In Japan, total sales decreased 14 percent which included decreased organic sales of 4 percent.

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 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.

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

Thus, this risk is largely managed via local operational actions using natural hedging tools as discussed above.

In either case, 3M’s hedging approach is designed to mitigate a portion of foreign currency risk and reduce volatility, ultimately allowing time for 3M’s businesses to respond to changes in the marketplace.

Financial condition:

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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 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 the first three months of 2024, the Company purchased $21 million of its own stock, compared to $29 million of stock purchases in the first three months of 2023.

As of March 31, 2024, approximately $4.2 billion remained available under the authorization.

In February 2024, 3M’s Board of Directors declared a first-quarter 2024 dividend of $1.51 per share, an increase of 1 percent.

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

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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Three months ended

September 30, Nine months ended

September 30,

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

(Percent of net sales) 2024 2023 Change

Cost of sales 54.1 % 57.4 % (3.3) %

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Research, development and related expenses (R&D) 5.5 5.9 (0.4)

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

Operating income (loss) margin 18.8 % 15.4 % 3.4 %

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;

Stock compensation expense was $29 million and $135 million for the first quarter of 2024 and 2023, respectively, which impacts cost of sales;

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

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

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 third quarter and first nine months of 2023 was approximately $37 million and $117 million, respectively.

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

As discussed in Note 20 to the Consolidated Financial Statements in 3M's 2023 Annual Report on Form 10-K, because of certain accounting rules, grants to employees that are retiree-eligible are essentially fully reflected as compensation at time of grant.

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

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

However, as previously disclosed, due to the spin-off separation of Solventum, the 2024 annual grant will be made after the April 1, 2024 separation.

For total year 2024, 3M previously expected defined benefit pension and postretirement service cost expense (which impacts cost of sales, SG&A, and R&D) to total approximately $250 million while non-service pension and postretirement net benefit costs was expected to be a benefit of approximately $30 million, for a total consolidated defined benefit pre-tax pension and postretirement expense of approximately $220 million, an increase of approximately $75 million compared to 2023.

In connection with the April 1, 2024 separation of Solventum (see Note 3), the historical net income of Solventum will be reported in 3M's consolidated financial statements as discontinued operations beginning in the second quarter of 2024.

Further, the remeasurement of U.S.

pension and postretirement pension plans discussed in Note 12 impacts 2024 expense.

Considering this remeasurement and also on the basis of treating Solventum as a discontinued operation, 3M preliminarily estimates full year 2024 continuing operations defined benefit pension and postretirement service cost expense to total approximately $200 million while continuing operations non-service pension and postretirement net benefit cost is anticipated to be a benefit of approximately $10 million, for a total estimated continuing operations consolidated defined benefit pre-tax pension and postretirement expense of approximately $190 million.

The year-on-year decrease in defined benefit pension and postretirement service cost expense for the first three months of 2024 was approximately $3 million.

For total year 2023, the Company recognized consolidated defined benefit pre-tax pension and postretirement service cost expense of $274 million and a benefit of $129 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 $145 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 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, 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.

Cost of sales, measured as a percent of sales, decreased in the first quarter of 2024 when compared to the same period last year.

Decreases in the first quarter of 2024 were primarily due to ongoing manufacturing productivity initiatives and timing of stock-based compensation grants.

Selling, General and Administrative Expenses:

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 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.

SG&A, measured as a percent of sales, increased slightly in the first three months of 2024 when compared to the same period last year.

SG&A in 2024 was primarily impacted by divestiture costs (related to the spin-off separation of Solventum), restructuring charges and timing of stock-based compensation grants.

Research, Development and Related Expenses:

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.

R&D, measured as a percent of sales, decreased in the first quarter of 2024 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.

R&D was also impacted by restructuring charges.

R&D was also impacted by timing of stock-based compensation grants and restructuring charges.

Other Expense (Income), Net:

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

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.

Interest expense (net of interest income) increased in the first quarter of 2024 driven by the addition of imputed interest associated with the obligations resulting from the PWS Settlement and the CAE Settlement (discussed in Note 16) and interest expense on debt issued by Solventum for the period outstanding prior to the April 1, 2024 completion of the separation of Solventum from 3M.

The non-service pension and postretirement net benefit decreased approximately $20 million in the first quarter of 2024 compared to the same period year-on-year.

Provision (benefit) for Income Taxes:

Three months ended

September 30, Nine months ended

September 30,

(Percent of pre-tax income/loss) 2024 2023

Effective tax rate 24.7 % 17.7 %

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;

as well as recurring factors, such as the geographic mix of income before taxes.

Refer to Note 8 for further discussion of income taxes.

Factors that impacted the tax rates between years are further discussed in the Overview section above and in Note 8.

Income from Unconsolidated Subsidiaries, Net of Taxes:

Three months ended

September 30, Nine months ended

September 30,

(Millions) 2024 2023

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

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.

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.

Net Income (Loss) Attributable to Noncontrolling Interest:

Three months ended

September 30, Nine months ended

September 30,

(Millions) 2024 2023

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In addition, disclosures relating to 3M’s business segments are provided in Note 17.

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 (loss)) was updated for all comparative periods presented.

The change to business segment operating income (loss) 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).

Effective in the first quarter of 2024, 3M made certain changes within its business segments.

The changes are described in Note 17.

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

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Prior to the bankruptcy, costs associated with Combat Arms Earplugs matters were not included in the Corporate net costs for significant litigation special item, instead being reflected in the Safety and Industrial business segment.

Corporate special items also include divestiture costs, gain/loss on business divestitures (see Note 3), divestiture-related restructuring costs (see Note 5), and Russia exit costs/benefits (see Note 13).

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, 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.

Corporate special items also include divestiture costs impacting operating income.

These 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 certain enterprise and governance activities resulting in unallocated corporate costs and other activity and net costs that 3M may choose not to allocate directly to its business segments.

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 third quarter and first nine months of 2023, when compared to the same period last year.

Corporate and Unallocated net operating loss increased in the first three months of 2024, 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 17 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 and the third quarter 2023 $4.2 billion pre-tax charge related to the settlement agreement to resolve Combat Arms Earplug litigation (both discussed in Note 14) and divestiture costs.

Corporate special item net costs were similiar year-over-year primarily due to increased divestiture costs offset by lower net costs for significant litigation associated with Corporate and Unallocated.

Other Corporate Expense - Net:

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).

Other corporate operating expenses, net, increased year-over-year in the first three months of 2024 primarily due to higher unallocated corporate costs relating to certain enterprise and governance activities.

Operating Business Segments:

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Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Sales (millions) $ 2,732 $ 2,779

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Business segment operating income (millions)

$ 666 $ 652 $ 1,801 $ 572

Percent change 2.3 % N/M

Percent change 9.3 %

Percent of sales 24.1 % 21.6 %

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

Third quarter 2023 results:

First quarter 2024 results:

Sales in Safety and Industrial were down 1.7 percent in U.S.

On an organic sales basis:

• 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 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.

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

• Growth was held back by disposable respirator sales decline within personal safety (which negatively impacted year-on-year first quarter organic growth by 0.8 percentage points) and industrial end market demand remained mixed.

This was partially offset by growth in roofing granules and industrial adhesives and tapes.

Business segment operating income margins increased year-on-year driven by benefits from productivity actions, restructuring, strong spending discipline, timing of stock-based compensation grants to be incurred in the second quarter of 2024 versus the first quarter of 2023 due to Solventum spin and lower special item costs for significant litigation which more than offset the decline in organic 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 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 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 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, 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

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Sales (millions) $ 2,104 $ 2,050

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Acquisitions 1.4

Divestitures (0.4) (0.9)

Translation (1.5)

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Acquisitions 1.7

Divestitures (0.5) (1.1)

Translation (1.5)

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

Third quarter 2023 results:

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

Adjusting for special item PFAS manufactured products (non-GAAP measure), sales were down 0.5 percent in U.S.

First quarter 2024 results:

Sales in Transportation and Electronics were up 2.6 percent in U.S.

Adjusting for special item PFAS manufactured products (non-GAAP measure), sales were up 6.9 percent in U.S.

On an organic sales basis:

• 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.

Acquisitions/divestitures:

• Divestiture and acquisition impacts relate to lost/gained Transportation and Electronics sales year-on-year from the Aearo Entities.

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

• Growth came from strong momentum in automotive electrification and share gains with spec-in wins and new product introductions in automotive and consumer electronics driving strong volume growth to support customer production ramp and product launches along with continued channel inventory normalization as electronics demand stabilizes.

Acquisitions:

• Impacts related to reconsolidation of Aearo entities are included in Transportation and Electronics.

◦ In the third quarter of 2022, 3M deconsolidated the Aearo Entities and, in the second quarter of 2023, reconsolidated those entities (discussed in Note 16).

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 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.

Business segment operating income margins increased year-on-year driven by benefits from strong leverage on organic sales volumes growth, productivity actions, restructuring, strong spending discipline, and timing of stock-based compensation grants to be incurred in the second quarter of 2024 versus the first quarter of 2023 due to Solventum spin partially offset by higher restructuring costs.

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.

Adjusting for special item PFAS manufactured products (non-GAAP measure), sales were down 7.1 percent in U.S.

On an organic sales basis:

• 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.

Acquisitions/divestitures:

• Divestiture and acquisition impacts relate to lost/gained Transportation and Electronics sales year-on-year from the Aearo Entities.

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).

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, 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

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Sales (millions) $ 2,017 $ 2,010

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Percent of sales 17.5 % 17.9 %

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, 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 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.

First nine months 2023 results:

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

First quarter 2024 results:

Sales in Health Care were up 0.3 percent in U.S.

On an organic sales basis:

• 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:

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.

• Sales increased in purification and filtration, and was flat in medical surgical (MedSurg), dental solutions and health information systems.

Business segment operating income margins decreased year-on-year largely due to public company stand-up costs.

As discussed in Note 3, on April 1, 2024, 3M completed the previously announced separation of its Health Care business as a separate public company, Solventum.

3M retained equity ownership interest of approximately 19.9% in Solventum.

Consumer Business:

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Sales (millions) $ 1,140 $ 1,192

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Organic sales (3.9) %

Divestitures — (0.1)

Translation (0.4)

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Percent of sales 19.0 % 15.0 %

Third quarter 2023 results:

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

On an organic sales basis:

• 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:

First quarter 2024 results:

Sales in Consumer were down 4.3 percent in U.S.

On an organic sales basis:

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

• 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 higher restructuring costs partially offset by benefits from aggressive spending discipline, pricing, productivity actions and restructuring.

• Sales decreased in packaging and expression, home and auto care, home improvement and consumer safety and well-being.

• Growth was negatively impacted by continued softness in consumer discretionary spending along with product portfolio and geographic prioritization.

Business segment operating income margins increased year-on-year driven by benefits from productivity actions, restructuring, portfolio initiatives, strong spending discipline and timing of stock-based compensation grants to be incurred in the second quarter of 2024 versus the first quarter of 2023 due to Solventum spin partially offset by decline in organic sales volume and higher restructuring costs.

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 $1.9 billion in commercial paper outstanding at September 30, 2023, compared to no commercial paper outstanding as of December 31, 2022.

The Company had no commercial paper outstanding at March 31, 2024, compared to $1.8 billion commercial paper outstanding as of December 31, 2023.

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 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.

As of the date of this report, 3M has a credit rating of A3, negative outlook from Moody's Investors Service, a credit rating of BBB+, CreditWatch negative from S&P Global Ratings, and a credit rating of A-, stable outlook from Fitch.

The Company’s total debt at March 31, 2024 increased when compared to December 31, 2023 as a result of Solventum's issuance of $8.4 billion in aggregate principal amount of debt.

This was partially offset by $2.9 billion in debt maturities, consisting of $1.1 billion of medium-term notes and $1.8 billion repayment of commercial paper borrowings.

As discussed in Note 11, obligations associated with Solventum's borrowings became the sole responsibility of Solventum after the April 1, 2024 Separation.

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

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

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

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

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.

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

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 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.

Effective February 8, 2023, the Company renewed 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 WKSI shelf registration dated February 10, 2020.

The Company has issued debt securities under a WKSI shelf in August 2019 and March 2020.

3M also has a medium-term notes program (Series F) program, originally established in 2016, up to an aggregate principal amount of $18 billion.

As of March 31, 2024, the total amount of debt issued under the (Series F) program is approximately $17.6 billion (utilizing the foreign exchange rates applicable at the time of issuance for the euro denominated debt).

The Company has not issued any debt under the (Series F) program since February 2019 and does not intend to issue any additional debt under this program in the future.

Information with respect to long-term debt issuances and maturities for the periods presented is included in Note 11.

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

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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 September 30, 2023.

The credit facility was undrawn at March 31, 2024.

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

At March 31, 2024, this ratio was approximately 15 to 1.

Debt covenants do not restrict the payment of dividends.

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

In the first quarter of 2024, as discussed in Note 11, Solventum entered into a revolving credit facility of $2 billion which was undrawn as of March 31, 2024.

This credit facility became the sole responsibility of Solventum after the April 1, 2024 Separation.

The Company also had $368 million in stand-alone letters of credit and bank guarantees issued and outstanding at March 31, 2024.

These instruments are utilized in connection with normal business activities.

Cash, cash equivalents and marketable securities:

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.

At March 31, 2024, 3M had $11.0 billion of cash, cash equivalents and marketable securities, of which approximately $5.2 billion was held by the Company’s foreign subsidiaries and approximately $5.8 billion was held in the United States.

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

At December 31, 2023, 3M had $6.0 billion of cash, cash equivalents and marketable securities, of which approximately $3.2 billion was held by the Company’s foreign subsidiaries and $2.8 billion was held by the United States.

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

The increase from December 31, 2023 was driven by proceeds from Solventum's issuance of $8.4 billion in aggregate principal amount of debt prior to the Separation as discussed in Note 11.

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, 2023 and December 31, 2022.

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

The table below provides net debt as of March 31, 2024 and December 31, 2023.

Note, as discussed above, that obligations associated with Solventum's first quarter 2024 $8.4 billion aggregate principal amount of borrowings remained with Solventum after the April 1, 2024 Separation while, as discussed in Note 3, 3M expects to retain approximately $7.7 billion of proceeds from these borrowing after completion of accounting for the Separation.

(Millions) March 31, 2024 December 31, 2023 Change

Total debt $ 21,413 $ 16,035 $ 5,378

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Working capital (non-GAAP measure):

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

(Millions) March 31, 2024 December 31, 2023 Change

Current assets $ 21,613 $ 16,379 $ 5,234

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

Working capital decreased $4.4 billion compared with December 31, 2022.

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 $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.

Individual amounts in the Consolidated Statement of Cash Flows exclude the effects of acquisitions, divestitures and exchange rate impacts on cash and cash equivalents, which are presented separately in the cash flows.

Thus, the amounts presented in the following operating, investing and financing activities tables reflect changes in balances from period to period adjusted for these effects.

Working capital increased $7.4 billion compared with December 31, 2023.

Balance changes in current assets increased working capital by $5.2 billion, driven largely by increases in cash and cash equivalents due to Solventum's issuance of $8.4 billion in aggregate principal amount of debt.

This was partially offset by $2.9 billion in debt maturities, consisting of $1.1 billion of medium-term notes and $1.8 billion repayment of commercial paper borrowings.

Balance changes in current liabilities increased working capital by $2.1 billion, primarily due to decreases in short-term borrowings and current portions of long-term debt.

Discussions of cash flows from operating, investing and financing activities are provided in the sections that follow.

Cash Flows from Operating Activities:

Nine months ended September 30,

(Millions) 2023 2022

Net income (loss) including noncontrolling interest $ (7,926) $ 5,248

Depreciation and amortization 1,450 1,371

Company pension and postretirement contributions (85) (102)

Company pension and postretirement expense 113 124

Stock-based compensation expense 222 226

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

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

Accounts receivable (371) (467)

Inventories 236 (1,018)

Accounts payable 118 175

Other — net 14,810 1,342

Net cash provided by (used in) operating activities $ 4,694 $ 3,669

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

In the first three months of 2024, cash flows provided by operating activities decreased $508 million compared to the same period last year, primarily driven by an additional CAE payment of $253 million (discussed in Note 16) and balance changes in inventories decreasing operating cash flow $232 million (a decrease of operating cash flow by $141 million in 2024, compared to an increase in operating cash flow by $91 million in 2023).

Cash Flows from Investing Activities:

Nine months ended September 30,

(Millions) 2023 2022

Purchases of property, plant and equipment (PP&E) $ (1,257) $ (1,243)

Proceeds from sale of PP&E and other assets 114 65

Acquisitions, net of cash acquired — —

Purchases and proceeds from maturities and sale of marketable securities and investments, net 149 28

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

Net cash provided by (used in) investing activities $ (906) $ (658)

Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency.

The Company expects 2023 capital spending to be approximately $1.5 billion to $1.7 billion as 3M continues to invest in growth, productivity and sustainability.

Investments in property, plant and equipment (PP&E) enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency.

3M spent $375 million on PP&E in the first quarter of 2024 and is evaluating its expected capital spending for the remainder of 2024.

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

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Finally, 3M also invests in other initiatives, such as information technology (IT), laboratory facilities, and a continued focus on investments in sustainability.

Refer to Note 3 for information on acquisitions and divestitures.

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.

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Cash Flows from Financing Activities:

Nine months ended September 30,

(Millions) 2023 2022

Change in short-term debt — net $ 485 $ 340

Repayment of debt (maturities greater than 90 days) (2,434) (1,179)

Proceeds from debt (maturities greater than 90 days) 2,011 1

Total cash change in debt 62 (838)

Purchases of treasury stock (31) (928)

Proceeds from issuances of treasury stock pursuant to stock option and benefit plans 245 310

Dividends paid to shareholders (2,483) (2,550)

Other — net (16) (29)

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

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.

Total debt was approximately $21.4 billion at March 31, 2024 and $16.0 billion at December 31, 2023.

Solventum's issuance of $8.4 billion in aggregate principal amount of debt.

This was partially offset by $2.9 billion in debt maturities, consisting of $1.1 billion of medium-term notes and $1.8 billion repayment of commercial paper borrowings.The gross commercial paper issuances and repayments, in addition to repayments of the fixed-rate notes are largely reflected in “Proceeds from debt (maturities greater than 90 days)” and "Repayment of debt (maturities greater than 90 days)".

The Company had no commercial paper outstanding at March 31, 2024, compared to $1.8 billion commercial paper outstanding as of December 31, 2023.

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

commercial paper issuances.

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.

Refer to Note 11 for more detail regarding debt.

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 2023, the Company purchased $31 million of its own stock.

In the first three months of 2024, the Company purchased $21 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 February 2024, 3M’s Board of Directors declared a first-quarter 2024 dividend of $1.51 per share, an increase of 1 percent.

This is equivalent to an annual dividend of $6.00 per share and marked the 65th consecutive year of dividend increases.

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.

Nine months ended September 30,

Three months ended March 31,

(Millions) 2024 2023

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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 2023 Annual Report on Form 10-K.

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

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

• 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,

• 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,

• competitive conditions and customer preferences,

• worldwide economic, political, regulatory, international trade, geopolitical, capital markets and other external conditions and other factors beyond the Company's control, including inflation, recession, military conflicts, and natural and other disasters or climate change affecting the operations of the Company or its customers and suppliers,

• foreign currency exchange rates and fluctuations in those rates,

• 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 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 and impact of organizational restructuring activities,

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

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

• pension and postretirement obligation assumptions and future contributions,

• asset impairments,

• tax liabilities and effects of changes in tax rates, laws or regulations,

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

• 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.

• liabilities and the outcome of contingencies related to certain fluorochemicals known as "PFAS," including liabilities related to claims, lawsuits, and government regulatory proceedings concerning various PFAS-related products and chemistries, as well as risks related to the Company's plans to exit PFAS manufacturing and discontinue use of PFAS across its product portfolio,

• risks related to the class-action settlement (“PWS Settlement”) to resolve claims by public water systems in the United States regarding PFAS,

• legal proceedings, including significant developments that could occur in the legal and regulatory proceedings described in the Company's reports on Form 10-K, 10-Q, and 8-K,

• competitive conditions and customer preferences,

• the timing and market acceptance of new product and service offerings,

• the availability and cost of purchased components, compounds, raw materials and energy due to shortages, increased demand and wages, supply chain interruptions, or natural or other disasters,

• unanticipated problems or delays with the phased implementation of a global enterprise resource planning (ERP) system, or security breaches and other disruptions to the Company's information technology infrastructure,

• the impact of acquisitions, strategic alliances, divestitures, and other strategic events resulting from portfolio management actions and other evolving business strategies,

• operational execution, including the extent to which the Company can realize the benefits of planned productivity improvements, as well as the impact of organizational restructuring activities,

• financial market risks that may affect the Company's funding obligations under defined benefit pension and postretirement plans,

• the Company’s credit ratings and its cost of capital,

• tax-related external conditions, including changes in tax rates, laws, or regulations,

• matters relating to the spin-off of the Company's Health Care business, including the risk that the expected benefits will not be realized;

the risk that the costs or dis-synergies will exceed the anticipated amounts;

potential business disruption;

the diversion of management time;

the impact of the transaction on the Company's ability to retain talent;

potential impacts on the Company's relationships with its customers, suppliers, employees, regulators and other counterparties;

the ability to realize the desired tax treatment;

the risk that any consents or approvals required will not be obtained;

risks under the agreements and obligations entered into in connection with the spin-off, and

• matters relating to Combat Arms Earplugs (“CAE”), including 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 Company's subsidiary Aearo Technologies and certain of its affiliates (“Aearo Entities”) and/or 3M (“CAE Settlement”).

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

Changes in such assumptions or factors could produce significantly different results.

Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties.

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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