Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of 3M’s financial statements with a narrative from the perspective of management. 3M’s MD&A is presented in the following sections:
• Overview
• Results of Operations
• Performance by Business Segment
• Financial Condition and Liquidity
• 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).
Overview
3M is a diversified global manufacturer, technology innovator and marketer of a wide variety of products and services. Certain changes are reflective in this document for all applicable periods presented. These include:
• As discussed in Note 2, 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 no longer consolidates 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 are reported in 3M's consolidated financial statements as discontinued operations.
• 3M made certain changes to the composition of segment information reviewed by 3M's chief operating decision maker (CODM) effective in the second quarter of 2024 largely as a result of the separation of Solventum and changes within its business segments effective in the first quarter of 2024 as further described in Note 19. To the extent these changes impacted 3M's disclosed disaggregated revenue information, data in Note 3 has also been updated.
3M manages its continuing operations in three operating business segments: Safety and Industrial; Transportation and Electronics; and Consumer. From a geographic perspective, any references to EMEA refer to Europe, Middle East and Africa on a combined basis. References are made to organic sales change (which include both organic volume impacts and selling price impacts), which is defined as the change in net sales, absent the separate impacts on sales from foreign currency translation and acquisitions, net of divestitures. Acquisition and divestiture sales change impacts, if any, are measured separately for the first twelve months post-transaction and, beginning April 2024, include the impact of commercial agreements associated with the separation of Solventum. 3M believes this information is useful to investors and management in understanding ongoing operations and in analysis of ongoing operating trends.
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.
Additional information regarding certain items impacting pre-2024 periods that may also be relevant in 2024 can be found in the Overview section of Part II, Item 7 as well as in further sections of 3M’s 2023 Annual Report on Form 10-K.
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Earnings (loss) from continuing operations per share attributable to 3M common shareholders – diluted: The following table provides the increases (decreases) in diluted earnings (loss) from continuing operations per share.
Earnings (loss) from continuing operations per diluted share Three months ended
June 30, 2024 Six months ended
June 30, 2024
Same period last year $ (12.94) $ (11.76)
Net costs for significant litigation 14.43 14.51
Divestiture costs — 0.01
Russia exit charges (benefits)
(0.04) (0.04)
Manufactured PFAS products (0.06) (0.07)
Total special items 14.33 14.41
Same period last year, excluding special items $ 1.39 $ 2.65
Increase/(decrease) due to:
Total organic growth/productivity and other 0.18 0.78
Restructuring and related charges 0.23 0.13
Foreign exchange impacts (0.04) (0.10)
Acquisitions 0.03 0.05
Other expense (income), net 0.13 0.20
Income tax rate 0.01 (0.06)
Shares of common stock outstanding — (0.01)
Current period, excluding special items 1.93 3.64
Net costs for significant litigation (0.44) (0.88)
Divestiture costs (0.23) (0.24)
Pension risk transfer cost (1.09) (1.09)
Solventum ownership benefit from change in value
2.00 2.01
Total special items 0.24 (0.20)
Current period $ 2.17 $ 3.44
The Company refers to various "adjusted" amounts or measures on an “adjusted" basis. These exclude special items. These non-GAAP measures are further described and reconciled to the most directly comparable GAAP financial measures in the Certain amounts adjusted for special items - (non-GAAP measures) section below.
A discussion related to the components of year-on-year changes in earnings (loss) from continuing operations per diluted share follows:
Total organic growth/productivity and other:
• For the second quarter of 2024, the following components impacted operating margins and earnings (loss) from continuing operations 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 headwind of $0.18 per share.
◦ Income from transition service agreements with Solventum (refer to Note 2 for additional discussion) resulted in a net year-on-year increase of $0.05 per share
◦ 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 volume growth, productivity, spending discipline and restructuring
• For the first six months of 2024, the following components impacted operating margins and earnings (loss) from continuing operations per diluted share year-on-year:
◦ Nonrecurring items including gain on property sales resulted in a net year-on-year increase of $0.08 per share.
◦ Income from transition services agreements with Solventum (refer to Note 2 for additional discussion) resulted in a net year-on-year increase of $0.05 per share
◦ Remaining organic growth/productivity and other impacts resulted in a net year-on-year increase of $0.65 per share which was impacted by the following:
▪ Benefits from productivity, volume growth, sourcing actions, spending discipline and restructuring
▪ Investments in growth, productivity, and sustainability
Restructuring and related charges:
• 3M recorded restructuring pre-tax charges of $35 million and $138 million in the second quarter and first six months of 2024, respectively, compared to $202 million and $252 million in the same periods last year, respectively, (refer to Note 6 for additional discussion). In addition, 3M recorded certain related accelerated depreciation.
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Foreign exchange impacts:
• Foreign currency impacts (net of hedging) decreased operating income from continuing operations by approximately $24 million (or a decrease of pre-tax income from continuing operations by approximately $31 million) year-on-year for the second quarter of 2024 and decreased operating income from continuing operations by approximately $73 million (or a decrease of pre-tax income from continuing operations by approximately $82 million) year-on-year for the first six months of 2024. These estimates include: (a) the effects of year-on-year changes in exchange rates on translating current period functional currency profits into U.S. dollars and on current period non-functional currency denominated purchases or transfers of goods between 3M operations, and (b) year-on-year changes in transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.
Acquisitions/divestitures:
• Impacts relate to:
◦ Divestiture impacts include the effect of new commercial agreements associated with the April 2024 separation of Solventum.
◦ 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 17). For each of the 12-months post-deconsolidation and post-reconsolidation, impacts are each reflected separately as divestiture and acquisition, respectively.
Other expense (income), net:
• Interest expense (net of interest income) included in other expense (income), net as presented above decreased for the second quarter and first six months 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 second quarter and first six months of 2024.
Income tax rate:
• Certain items above reflect specific income tax rates associated therewith. Overall, the effective tax rate for the second quarter of 2024 was 14.4 percent on a pre-tax income, compared to 24.0 percent on pre-tax loss in the prior year. The effective tax rate for the first six months of 2024 was 18.1 percent, compared to 24.6 percent in the prior year. The primary factors that impacted the comparison of these rates year-over -year were the second quarter 2023 charge related to the settlement agreement with public water systems in the United States regarding PFAS (see Note 17) and the tax rate associated with second quarter 2024 benefit related to the change in value of the retained ownership interest in Solventum.
• On an adjusted basis (as discussed below), the effective tax rate for the second quarter and first six months of 2024 was 19.1% and 19.9%, respectively, a decrease of 0.4 percentage points and an increase of 1.2 percentage points, respectively, compared to the same period year-on-year.
Shares of common stock outstanding:
• Shares outstanding did not significantly impact earnings (loss) from continuing operations per share year-on-year for the second quarter and first six months of 2024.
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Certain amounts adjusted for special items - (non-GAAP measures): In addition to reporting financial results in accordance with U.S. GAAP, 3M also provides certain non-GAAP measures. These measures are not in accordance with, nor are they a substitute for GAAP measures, and may not be comparable to similarly titled measures used by other companies.
Certain measures adjust for the impacts of special items. Special items for the periods presented include the items described in the section entitled “Description of special items”. 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 with respect to net costs for significant litigation and manufactured PFAS products items in the “Description of special items” section. The reconciliations below, therefore, also include impacted segments as applicable.
This document contains measures for which 3M provides the reported GAAP measure and a non-GAAP measure adjusted for special items. The document also contains additional measures which are not defined under U.S. GAAP. These measures and reasons 3M believes they are useful to investors (and, as applicable, used by 3M) include:
GAAP amounts for which a measure adjusted for special items is also provided: Reasons 3M believes the measure is useful
• Net sales (and sales change)
Considered, in addition to segment operating performance, in evaluating and managing operations; useful in understanding underlying business performance, provides additional transparency to special items
• Operating income (loss), segment operating income (loss) and operating income (loss) margin
• Income (loss) from continuing operations before taxes
• Provision for income taxes and effective tax rate
• Net income (loss) from continuing operations
• Earnings (loss) per share from continuing operations
Special items for the periods presented include:
Net costs for significant litigation:
• 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 17). 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. Associated tax impacts of significant litigation include impacts on Foreign Derived Intangible Income (FDII), Global Intangible Low Taxed Income (GILTI), and foreign tax credits. 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. In addition, during the voluntary chapter 11 bankruptcy period (which began in July 2022 and ended in June 2023—see Note 17), costs associated with the Aearo portion of respirator mask/asbestos matters were reflected in corporate special items in Corporate and Unallocated. 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.
Divestiture costs:
• These include certain limited costs that were not eligible to be included within discontinued operations related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture. As a result of completion of the April 2024 separation of Solventum, this includes the tax cost of update to 3M’s previous indefinite reinvestment plans on past unrepatriated earnings through the period of the Separation’s close and to tax positions retained by 3M.
Manufactured PFAS products:
• 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 $186 million and $233 million for the three months ended June 30, 2024 and 2023, respectively, and $416 million and $509 million for the six months ended June 30, 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.
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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.
Pension risk transfer charge:
• In the second quarter of 2024, 3M recorded a non-cash pension settlement charge reflected in other expense (income), net as a result of transferring a portion of its U.S. pension payment obligations and related plan assets to an insurance company (as discussed in Note 13).
Solventum ownership - change in value:
• This amount relates to the change in value of 3M's retained ownership interest in Solventum common stock reflected in other expense (income), net.
Three months ended June 30, 2023
(Dollars in millions, except per share amounts) Net sales Operating income (loss) Operating income (loss) margin Income (loss) from continuing operations before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) from continuing operations attributable to 3M Earnings (loss) from continuing operations per diluted share
Safety and Industrial
GAAP amounts $ 534 19.3 %
Adjustments for special items:
Net costs for significant litigation 80
Total special items 80
Adjusted amounts (non-GAAP measures) $ 614 22.2 %
Transportation and Electronics
GAAP amounts $ 2,191 $ 410 18.7 %
Adjustments for special items:
Manufactured PFAS products (332) (41)
Total special items (332) (41)
Adjusted amounts (non-GAAP measures) $ 1,859 $ 369 19.8 %
Total Company
GAAP amounts $ 6,283 $ (9,358) (148.9) % $ (9,430) $ (2,261) 24.0 % $ (7,171) $ (12.94)
Adjustments for special items:
Net costs for significant litigation 3
— 10,437 10,449 2,457 7,992 14.43
Manufactured PFAS products (332) (41) (41) (10) (31) (0.06)
Russia exit charges (benefits) — (18) (18) 3 (21) (0.04)
Divestiture costs — 1 1 — 1 —
Total special items (332) 10,379 10,391 2,450 7,941 14.33
Adjusted amounts (non-GAAP measures) $ 5,951 $ 1,021 17.2 % $ 961 $ 189 19.5 % $ 770 $ 1.39
3 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.
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Three months ended June 30, 2024
(Dollars in millions, except per share amounts) Net sales Sales change Operating income (loss) Operating income (loss) margin Income (loss) from continuing operations before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) from continuing operations attributable to 3M Earnings (loss) from continuing operations per diluted share Earnings (loss) from continuing operations per diluted share percent change
Safety and Industrial
GAAP amounts $ 612 22.2 %
Adjustments for special items:
Net costs for significant litigation 11
Total special items 11
Adjusted amounts (non-GAAP measures) $ 623 22.6 %
Transportation and Electronics
GAAP amounts $ 2,143 (2.2) % $ 428 20.0 %
Adjustments for special items:
Manufactured PFAS products (236) (2)
Total special items (236) (2)
Adjusted amounts (non-GAAP measures) $ 1,907 2.6 % $ 426 22.3 %
Total Company
GAAP amounts $ 6,255 (0.5) % $ 1,272 20.3 % $ 1,410 $ 203 14.4 % $ 1,204 $ 2.17 117 %
Adjustments for special items:
Net costs for significant litigation
— 19 221 (25) 246 0.44
Manufactured PFAS products (236) (2) (2) (1) (1) —
Divestiture costs — 14 14 (113) 127 0.23
Solventum ownership - change in value
— — (1,113) — (1,113) (2.00)
Pension risk transfer charge
— — 795 188 607 1.09
Total special items (236) 31 (85) 49 (134) (0.24)
Adjusted amounts (non-GAAP measures) $ 6,019 1.1 % $ 1,303 21.6 % $ 1,325 $ 252 19.1 % $ 1,070 $ 1.93 39 %
Three months ended June 30, 2024
Sales Change Organic sales Acquisitions Divestitures Translation Total sales change
Total Company (0.3) % 0.4 % 0.8 % (1.4) % (0.5) %
Remove manufactured PFAS products special item impact 1.5 — 0.1 — 1.6
Adjusted total Company (non-GAAP measures)
1.2 % 0.4 % 0.9 % (1.4) % 1.1 %
Transportation and Electronics (1.3) % 1.0 % — % (1.9) % (2.2) %
Remove manufactured PFAS products special item impact 4.6 0.1 — 0.1 4.8
Adjusted Transportation and Electronics (non-GAAP measures) 3.3 % 1.1 % — % (1.8) % 2.6 %
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Six months ended June 30, 2023
(Dollars in millions, except per share amounts) Net sales Operating income (loss) Operating income (loss) margin Income (loss) from continuing operations before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) from continuing operations attributable to 3M Earnings (loss) from continuing operations per diluted share
Safety and Industrial
GAAP amounts $ 1,135 20.5 %
Adjustments for special items:
Net costs for significant litigation 41
Total special items 41
Adjusted amounts (non-GAAP measures) $ 1,176 21.2 %
Transportation and Electronics
GAAP amounts $ 4,241 $ 704 16.6 %
Adjustments for special items:
Manufactured PFAS products (677) (51)
Total special items (677) (51)
Adjusted amounts (non-GAAP measures) $ 3,564 $ 653 18.3 %
Total Company
GAAP amounts $ 12,338 $ (8,492) (68.8) % $ (8,620) $ (2,116) 24.6 % $ (6,509) $ (11.76)
Adjustments for special items:
Net costs for significant litigation 3
— 10,480 10,492 2,464 8,028 14.51
Manufactured PFAS products (677) (51) (51) (13) (38) (0.07)
Russia exit charges (benefits) — (18) (18) 3 (21) (0.04)
Divestiture costs — 4 4 — 4 0.01
Total special items (677) 10,415 10,427 2,454 7,973 14.41
Adjusted amounts (non-GAAP measures) $ 11,661 $ 1,923 16.5 % $ 1,807 $ 338 18.7 % $ 1,464 $ 2.65
Six months ended June 30, 2024
(Dollars in millions, except per share amounts) Net sales Sales change Operating income (loss) Operating income (loss) margin Income (loss) from continuing operations before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) from continuing operations attributable to 3M Earnings (loss) from continuing operations per diluted share Earnings (loss) from continuing operations per diluted share percent change
Safety and Industrial
GAAP amounts $ 1,269 23.1 %
Adjustments for special items:
Net costs for significant litigation 18
Total special items 18
Adjusted amounts (non-GAAP measures) $ 1,287 23.4 %
Transportation and Electronics
GAAP amounts $ 4,247 0.2 % $ 909 21.4 %
Adjustments for special items:
Manufactured PFAS products (517) (4)
Total special items (517) (4)
Adjusted amounts (non-GAAP measures) $ 3,730 4.7 % $ 905 24.3 %
Total Company
GAAP amounts $ 12,271 (0.5) % $ 2,421 19.7 % $ 2,339 $ 423 18.1 % $ 1,909 $ 3.44 129 %
Adjustments for special items:
Net costs for significant litigation — 89 495 6 489 0.88
Manufactured PFAS products (517) (4) (4) (2) (2) —
Divestiture costs — 20 20 (111) 131 0.24
Solventum ownership - change in value — — (1,113) — (1,113) (2.01)
Pension risk transfer charge — — 795 188 607 1.09
Total special items (517) 105 193 81 112 0.20
Adjusted amounts (non-GAAP measures) $ 11,754 0.8 % $ 2,526 21.5 % $ 2,532 $ 504 19.9 % $ 2,021 $ 3.64 38 %
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Six months ended June 30, 2024
Sales Change Organic sales Acquisitions Divestitures Translation Total sales change
Total Company (0.3) % 0.4 % 0.4 % (1.0) % (0.5) %
Remove manufactured PFAS products special item impact 1.3 — — — 1.3
Adjusted total Company (non-GAAP measures) 1.0 % 0.4 % 0.4 % (1.0) % 0.8 %
Transportation and Electronics 0.6 % 1.2 % — % (1.6) % 0.2 %
Remove manufactured PFAS products special item impact 4.3 0.2 — — 4.5
Adjusted Transportation and Electronics (non-GAAP measures) 4.9 % 1.4 % — % (1.6) % 4.7 %
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, 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 and Other. Corporate and Unallocated and Other are not reportable business segments as they do not meet the segment reporting criteria. Refer to Note 19 for additional information on business segments.
Three months ended June 30,
2024 2023 % change
(Dollars in millions) Net
Sales Operating
Income (Loss) Net
Sales Operating
Income (Loss) Net
Sales Operating
Income (Loss)
Safety and Industrial $ 2,759 $ 612 $ 2,765 $ 534 (0.2) % 14.4 %
Transportation and Electronics 2,143 428 2,191 410 (2.2) 4.6
Consumer 1,263 219 1,293 235 (2.4) (6.7)
Corporate and Unallocated 86 (24) 22 (10,547)
Other 4 37 12 10
Total Company $ 6,255 $ 1,272 $ 6,283 $ (9,358) (0.5) % N/M
Six months ended June 30,
2024 2023 % change
(Dollars in millions) Net Sales Operating Income (Loss) Net Sales Operating Income (Loss) Net Sales Operating Income (Loss)
Safety and Industrial $ 5,491 $ 1,269 $ 5,544 $ 1,135 (0.9) % 11.7 %
Transportation and Electronics 4,247 909 4,241 704 0.2 29.2
Consumer 2,403 435 2,485 414 (3.3) 5.2
Corporate and Unallocated 112 (164) 45 (10,764)
Other 18 (28) 23 19
Total Company $ 12,271 $ 2,421 $ 12,338 $ (8,492) (0.5) % N/M
Three months ended June 30, 2024
Worldwide Sales Change
By Business Segment Organic sales Acquisitions Divestitures Translation Total sales
change
Safety and Industrial 1.1 % — % — % (1.3) % (0.2) %
Transportation and Electronics (1.3) 1.0 — (1.9) (2.2)
Consumer (1.4) — — (1.0) (2.4)
Six months ended June 30, 2024
Worldwide Sales Change
By Business Segment Organic sales Acquisitions Divestitures Translation Total sales change
Safety and Industrial (0.2) % — % — % (0.7) % (0.9) %
Transportation and Electronics 0.6 1.2 — (1.6) 0.2
Consumer (2.6) — — (0.7) (3.3)
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.
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Sales by geographic area: Percent change information compares the three and six months ended June 30, 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 June 30, 2024
Americas Asia Pacific
Europe, Middle East & Africa
Worldwide
Net sales (millions) $ 3,480 $ 1,721 $ 1,054 $ 6,255
% of worldwide sales 55.7 % 27.5 % 16.8 % 100.0 %
Components of net sales change:
Organic sales 0.7 0.6 (4.6) (0.3)
Acquisitions 0.5 0.2 — 0.4
Divestitures 1.6 0.1 0.1 0.8
Translation (0.3) (4.0) (0.7) (1.4)
Total sales change 2.5 % (3.1) % (5.2) % (0.5) %
Six months ended June 30, 2024
Americas Asia Pacific Europe, Middle East & Africa Worldwide
Net sales (millions) $ 6,630 $ 3,489 $ 2,152 $ 12,271
% of worldwide sales 54.0 % 28.5 % 17.5 % 100.0 %
Components of net sales change:
Organic sales (0.6) 1.1 (1.6) (0.3)
Acquisitions 0.7 0.1 — 0.4
Divestitures 0.8 — (0.1) 0.4
Translation 0.1 (4.0) 0.4 (1.0)
Total sales change 1.0 % (2.8) % (1.3) % (0.5) %
Additional information beyond what is included in the preceding tables are as follows:
• For the second quarter of 2024, in the Americas geographic area, U.S. total sales increased 3 percent which included increased organic sales of 1 percent. Total sales in Mexico increased 12 percent which included increased organic sales of 6 percent. In Canada, total sales increased 3 percent which included increased organic sales of 3 percent. In Brazil, total sales decreased 3 percent which included increased organic sales of 2 percent. In the Asia Pacific geographic area, China total sales increased 8 percent which included increased organic sales of 10 percent. In Japan, total sales decreased 14 percent which included decreased organic sales of 4 percent.
• For the first six months of 2024, in the Americas geographic area, U.S. total sales increased 1 percent which included flat organic sales. Total sales in Mexico increased 12 percent which included increased organic sales of 4 percent. In Canada, total sales increased 1 percent which included flat organic sales. In Brazil, total sales decreased 2 percent which included decreased organic sales of 2 percent. In the Asia Pacific geographic area, China total sales increased 8 percent which included increased organic sales of 10 percent. In Japan, total sales decreased 13 percent which included decreased organic sales of 4 percent.
Financial condition: Refer to the section entitled Financial Condition and Liquidity later in MD&A for a discussion of items impacting cash flows.
In November 2018, 3M’s Board of Directors replaced the Company’s February 2016 repurchase program with a new repurchase program. This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date. In the first six months of 2024, the Company purchased $421 million of its own stock, compared to $29 million of stock purchases in the first six months of 2023. As of June 30, 2024, approximately $3.8 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. In May 2024, 3M's Board of Directors declared a second-quarter 2024 dividend of $0.70 per share resetting 3M's dividend post-Solventum spin.
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Results of Operations
Net Sales: Refer to the preceding Overview section and the Performance by Business Segment section later in MD&A for additional discussion of sales change.
Operating Expenses:
Three months ended
June 30, Six months ended
June 30,
(Percent of net sales) 2024 2023 Change 2024 2023 Change
Cost of sales 57.1 % 59.3 % (2.2) % 57.5 % 60.6 % (3.1) %
Selling, general and administrative expenses (SG&A) 18.1 184.9 (166.8) 18.4 103.4 (85.0)
Research, development and related expenses (R&D) 4.5 4.7 (0.2) 4.4 4.8 (0.4)
Operating income (loss) margin 20.3 % (148.9) % 169.2 % 19.7 % (68.8) % 88.5 %
Stock compensation expense was $154 million and $35 million for the second quarter of 2024 and 2023, respectively, and $180 million and $155 million for the six months ended 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 typically made in February. As discussed in Note 18, 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 34 percent of the annual grant stock-based compensation expense; therefore, higher stock-based compensation expense is typically recognized in the first quarter. However, due to the spin-off of Solventum (see Note 2), the 2024 annual grant was made in May, after the April 1, 2024 separation.
Defined benefit pension and postretirement service cost expense for continuing operations (which impacts cost of sales, SG&A, and R&D) for the first six months of 2024 was $48 million compared to $56 million in same period last year (as discussed in Note 13). For total year 2024, considering the remeasurements of U.S. pension and postretirement pension plans and second quarter 2024 $795 million pension settlement charge associated the pension risk transfer special item (all discussed in Note 13), 3M estimates full year 2024 continuing operations defined benefit pension and postretirement service cost expense to total approximately $195 million while continuing operations non-service pension and postretirement net benefit cost is anticipated to be a charge of approximately $810 million, for a total estimated continuing operations consolidated defined benefit pre-tax pension and postretirement expense of approximately $1,005 million. These amounts reflect a decrease of $27 million and an increase of $918 million in the service and non-service cost components, respectively, compared to 2023 on similar basis as discussed below
For total year 2023 on a comparable continuing operations basis, the Company recognized defined benefit pension and postretirement service cost expense of $222 million and a benefit of $108 million related to all non-service pension and postretirement net benefit costs (after settlements, curtailments, special termination benefits and other) for a total continuing operations defined benefit pension and postretirement expense of $114 million.
For 2025, 3M preliminarily expects a year-on-year non-service pension and postretirement expense tailwind of approximately $720 million, primarily as a result of the second quarter 2024 pension risk transfer charge special item (see Note 13 and section entitled “Description of special items”). Adjusting for this 2024 special item, 3M expects a year-on-year headwind of approximately $70 million primarily due to amortization of prior service costs and impacts from previously deferred asset losses. These estimates are based on assumptions from 3M's most recent remeasurements of applicable plans carrying over to the year-end 2024 measurement.
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 2024 when compared to the same period last year. Decreases were primarily due to ongoing manufacturing productivity initiatives and lower raw materials and energy costs, along with lower year-on-year restructuring charges. In the second quarter of 2024, these decreases were partially offset by timing of stock-based compensation grants.
Selling, General and Administrative Expenses: SG&A, measured as a percent of sales, decreased in the second quarter and first six months of 2024 when compared to the same period last year. Decreases were primarily impacted by a $10.3 billion pre-tax charge related to the PWS settlement in the second quarter of 2023 (discussed in Note 17). SG&A in 2024 was impacted by lower year-on-year restructuring charges and the second quarter 2024 timing of stock-based compensation grants.
Research, Development and Related Expenses: R&D, measured as a percent of sales, slightly decreased in the second quarter and first six months 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.
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Other Expense (Income), Net: See Note 7 for a detailed breakout of this line item.
Interest expense (net of interest income) increased in the second quarter and first six months of 2024 compared to the same period year-on-year primarily driven by the addition of imputed interest associated with the obligations resulting from the PWS Settlement and the CAE Settlement in the second and third quarter of 2023 respectively (discussed in Note 17).
The non-service pension and postretirement net benefit decreased approximately $821 million and $836 million in the second quarter and first six months of 2024, respectively, compared to the same period year-on-year, largely due to the $795 million second quarter 2024 pension settlement charge as a result of transferring a portion of U.S. pension payment obligations and related plan assets to an insurance company (see Note 13).
Solventum ownership - change in value resulted in a year-on-year benefit of $1.1 billion for both second quarter and first six months of 2024 following Solventum's separation from 3M in April 2024 (discussed in Note 2).
Provision (benefit) for Income Taxes:
Three months ended
June 30, Six months ended
June 30,
(Percent of pre-tax income/loss) 2024 2023 2024 2023
Effective tax rate 14.4 % 24.0 % 18.1 % 24.6 %
Factors that impacted the tax rates between years are further discussed in the Overview section above and in Note 9.
Income from Unconsolidated Subsidiaries, Net of Taxes:
Three months ended
June 30, Six months ended
June 30,
(Millions) 2024 2023 2024 2023
Income (loss) from unconsolidated subsidiaries, net of taxes $ 3 $ 3 $ 4 $ 5
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
June 30, Six months ended
June 30,
(Millions) 2024 2023 2024 2023
Net income (loss) attributable to noncontrolling interest $ 6 $ 5 $ 11 $ 10
Net income (loss) attributable to noncontrolling interest represents the elimination of the income or loss attributable to non-3M ownership interests in 3M consolidated entities. The primary noncontrolling interest relates to 3M India Limited, of which 3M’s effective ownership is 75 percent.
Significant Accounting Policies: Information regarding new accounting standards is included in Note 1 to the Consolidated Financial Statements.
Performance by Business Segment
Item 1, Business Segments, provides an overview of 3M’s business segments. In addition, disclosures relating to 3M’s business segments are provided in Note 19. As discussed in Note 19, 3M made changes to the composition of segment information reviewed by 3M's chief operating decision maker (CODM) effective in the second quarter of 2024 largely as a result of the separation of Solventum and changes within its business segments effective in the first quarter of 2024. Information provided herein reflects the impact of these changes for all applicable periods presented. 3M manages its continuing operations in three business segments. The reportable segments are Safety and Industrial; Transportation and Electronics; and Consumer.
Corporate and Unallocated and Other: Outside of 3M's operating segments, 3M has Corporate and Unallocated and Other which are not reportable business segments as they do not meet the segment reporting criteria. Because Corporate and Unallocated and Other include a variety of miscellaneous items, they are subject to fluctuation on a quarterly and annual basis. Corporate and Unallocated and Other are presented separately in the preceding business segments table and in Note 19.
• Corporate and Unallocated operating income (loss) includes “corporate special items” and “other corporate expense-net”.
◦ Corporate special items include net costs for significant litigation impacting operating income (loss) associated with PFAS-related other environmental and Combat Arms Earplugs matters. In addition, during the voluntary chapter 11 bankruptcy period (which began in July 2022 and ended in June 2023—see Note 17), costs associated with the Aearo portion of respirator mask/asbestos matters were also included in corporate special items. 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
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Safety and Industrial business segment. Corporate special items for the periods presented also include divestiture costs and Russia exit costs/ benefits. Divestiture costs include costs that were not eligible to be part of discontinued operations related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture.
▪ 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 19 for additional information on the components of corporate special items. Corporate special item net costs decreased year-over-year primarily due to lower net costs for significant litigation associated with Corporate and Unallocated.
◦ 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. Other corporate expense-net also includes costs previously allocated to Solventum prior to the Separation that were not eligible to be part of discontinued operations, commercial activity with Solventum post-Separation, and certain operations of the former Health Care business segment retained by 3M.
▪ Other corporate operating expenses, net, decreased year-over-year in the second quarter and first six months of 2024 primarily due to lower pre-tax restructuring charges (see Note 6).
• Other:
◦ This category principally reflects activity associated with:
▪ Operations of businesses of the former Health Care segment divested prior to the Separation and therefore not reflected as discontinued operations within 3M's financial statements, along with limited-duration supply agreements with those previous divestitures.
▪ Transition arrangement agreements (e.g. fees charged by 3M, net of underlying costs) related to divested businesses, including those related to the Separation, as well as other applicable divestitures.
◦ Operating income categorized as "Other" increased year-over-year in the second quarter of 2024 and decreased year-over-year in the first six months of 2024 primarily due to the extent of transition arrangement income from divested businesses.
Operating Business Segments: Information related to 3M’s business segments is presented in the tables that follow with additional context in the corresponding narrative below the tables.
Refer to 3M's 2023 Annual Report on Form 10-K, Item 1, Business, for discussion of 3M products that are included in each business segment.
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Safety and Industrial Business:
Three months ended
June 30, Six months ended
June 30,
2024 2023 2024 2023
Sales (millions) $ 2,759 $ 2,765 $ 5,491 $ 5,544
Sales change analysis:
Organic sales 1.1 % (0.2) %
Translation (1.3) (0.7)
Total sales change (0.2) % (0.9) %
Business segment operating income (millions)
$ 612 $ 534 $ 1,269 $ 1,135
Percent change 14.4 % 11.7 %
Percent of sales 22.2 % 19.3 % 23.1 % 20.5 %
Adjusted business segment operating income (millions) (non-GAAP measure) $ 623 $ 614 $ 1,287 $ 1,176
Percent change 1.4 % 9.4 %
Percent of sales 22.6 % 22.2 % 23.4 % 21.2 %
The preceding table also displays business segment operating income (loss) information adjusted for special items. For Safety and Industrial these adjustments include net costs related to respirator mask/asbestos (Aearo-related and non-Aearo related). During the voluntary Aearo chapter 11 bankruptcy period (which began in July 2022 and ended in June 2023 —see Note 17), net costs related to Aearo-respirator mask/asbestos matters were reflected as corporate special items in Corporate and Unallocated while those associated with non-Aearo respirator mask/asbestos matters continued to be reflected as special items in the Safety and Industrial business segment. Prior to the bankruptcy, costs associated with Combat Arms Earplugs matters were reflected in the Safety and Industrial business segment (rather than reflected in Corporate and Unallocated—see Note 19 for additional information). Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details.
Second quarter 2024 results:
Sales in Safety and Industrial were down 0.2 percent in U.S. dollars.
On an organic sales basis:
• Sales increased in industrial adhesives and tapes, personal safety, and automotive aftermarket, were flat in electrical markets and roofing granules, and decreased in industrial specialties and abrasives.
• Growth primarily came from industrial adhesives and tapes driven by strength in bonding solutions for consumer electronics devices partially offset by continued mixed industrial end market demand as end customers remained cautious.
Business segment operating income margins increased year-on-year driven by benefits from organic volume growth, productivity and lower restructuring charges partially offset by headwinds from stock-based compensation and cost inefficiencies due to the spin of Solventum. Adjusting for special item costs for significant litigation (non-GAAP measure), business segment operating income margins increased year-on-year as displayed above.
First six months 2024 results:
Sales in Safety and Industrial were down 0.9 percent in U.S. dollars.
On an organic sales basis:
• Sales increased in roofing granules and industrial adhesives and tapes, were flat in personal safety, and decreased in industrial specialties, abrasives, electrical markets and automotive aftermarket.
• 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 industrial adhesives and tapes.
Business segment operating income margins increased year-on-year primarily driven by benefits from productivity actions, restructuring and strong spending discipline, partially offset by cost inefficiencies due to the spin of Solventum. Adjusting for special item costs for significant litigation (non-GAAP measure), business segment operating income margins increased year-on-year as displayed above.
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Transportation and Electronics Business:
Three months ended
June 30, Six months ended
June 30,
2024 2023 2024 2023
Sales (millions) $ 2,143 $ 2,191 $ 4,247 $ 4,241
Sales change analysis:
Organic sales (1.3) % 0.6 %
Acquisitions 1.0 1.2
Translation (1.9) (1.6)
Total sales change (2.2) % 0.2 %
Business segment operating income (millions) $ 428 $ 410 $ 909 $ 704
Percent change 4.6 % 29.2 %
Percent of sales 20.0 % 18.7 % 21.4 % 16.6 %
Adjusted sales (millions) (non-GAAP measure) $ 1,907 $ 1,859 $ 3,730 $ 3,564
Sales change analysis:
Organic sales 3.3 % 4.9 %
Acquisitions 1.1 1.4
Translation (1.8) (1.6)
Total sales change 2.6 % 4.7 %
Adjusted business segment operating income (millions) (non-GAAP measure) $ 426 $ 369 $ 905 $ 653
Percent change 15.8 % 38.8 %
Percent of sales 22.3 % 19.8 % 24.3 % 18.3 %
The preceding table also displays business segment sales (and sales change) and operating income (loss) information adjusted for special items. For Transportation and Electronics these adjustments include the sales and estimates of income regarding PFAS manufactured products that 3M plans to exit by the end of 2025. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details.
Second quarter 2024 results:
Sales in Transportation and Electronics were down 2.2 percent in U.S. dollars. Adjusting for special item PFAS manufactured products (non-GAAP measure), sales were up 2.6 percent in U.S. dollars.
On an organic sales basis:
• Sales increased in electronics, and decreased in advanced materials, and commercial branding and transportation,and automotive and aerospace.
• Growth was held back by headwinds related to PFAS manufactured products.
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 17). 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 increased year-on-year driven by benefits from organic volume growth, productivity, and lower restructuring charges partially offset by headwinds from stock-based compensation and cost inefficiencies due to the spin of Solventum. Adjusting for special item PFAS manufactured products (non-GAAP measure), business segment operating income margins increased year-on-year as displayed above.
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First six months 2024 results:
Sales in Transportation and Electronics were up 0.2 percent in U.S. dollars. Adjusting for special item PFAS manufactured products (non-GAAP measure), sales were up 4.7 percent in U.S. dollars.
On an organic sales basis:
• Sales increased in electronics and automotive and aerospace, were flat in commercial branding and transportation, and decreased in advanced materials.
• Growth came from strength in electronics due to additional spec-in wins and strength in semiconductor. This was partially offset by headwinds related to PFAS manufactured products.
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 17). 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 increased year-on-year driven by benefits from strong leverage on organic sales volume growth, productivity actions, restructuring and strong spending discipline partially offset by cost inefficiencies due to the spin of Solventum. Adjusting for special item PFAS manufactured products (non-GAAP measure), business segment operating income margins increased year-on-year as displayed above.
Consumer Business:
Three months ended
June 30, Six months ended
June 30,
2024 2023 2024 2023
Sales (millions) $ 1,263 $ 1,293 $ 2,403 $ 2,485
Sales change analysis:
Organic sales (1.4) % (2.6) %
Translation (1.0) (0.7)
Total sales change (2.4) % (3.3) %
Business segment operating income (millions) $ 219 $ 235 $ 435 $ 414
Percent change (6.7) % 5.2 %
Percent of sales 17.4 % 18.2 % 18.1 % 16.7 %
Second quarter 2024 results:
Sales in Consumer were down 2.4 percent in U.S. dollars.
On an organic sales basis:
• Sales increased in home improvement and consumer safety and well-being, and decreased in home and auto care and packaging and expression.
• Growth was negatively impacted by continued softness in consumer discretionary demand for hardline goods along with product portfolio and geographic prioritization.
Business segment operating income margins decreased year-on-year driven by headwinds from organic volume decline, stock-based compensation and cost inefficiencies due to the spin of Solventum partially offset by lower restructuring charges.
First six months 2024 results:
Sales in Consumer were down 3.3 percent in U.S. dollars.
On an organic sales basis:
• Sales increased in home improvement and consumer safety and well-being, and decreased in home and auto care and packaging and expression.
• 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 from benefits from productivity actions, restructuring, portfolio initiatives, strong spending discipline partially offset by decline in organic sales volume and cost inefficiencies due to the spin of Solventum.
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Financial Condition and Liquidity
The strength and stability of 3M’s business model and strong free cash flow capability, together with proven capital markets access, provide financial flexibility to deploy capital in accordance with the Company's stated priorities and meet needs associated with contractual commitments and other obligations. Investing in 3M’s business to drive organic growth and deliver strong returns on invested capital remains the first priority for capital deployment. This includes research and development, capital expenditures, and commercialization capability. The Company also continues to actively manage its portfolio through acquisitions and divestitures to maximize value for shareholders. 3M expects to continue returning cash to shareholders through dividends and share repurchases. To fund cash needs in the United States, the Company relies on ongoing cash flow from U.S. operations, access to capital markets and repatriation of the earnings of its foreign affiliates that are not considered to be permanently reinvested. For those international earnings considered to be reinvested indefinitely, the Company currently has no plans or intentions to repatriate these funds for U.S. operations. See Note 9 for further information on earnings considered to be reinvested indefinitely.
3M maintains a strong liquidity profile. The Company’s primary short-term liquidity needs are met through cash on hand and U.S. commercial paper issuances. 3M believes it will have continuous access to the commercial paper market. 3M’s commercial paper program permits the Company to have a maximum of $5 billion outstanding with a maximum maturity of 397 days from date of issuance. The Company had no commercial paper outstanding at June 30, 2024, compared to $1.8 billion commercial paper outstanding as of December 31, 2023.
Total debt: 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 the date of this report, 3M has a credit rating of A3, stable outlook from Moody's Investors Service, a credit rating of BBB+, negative outlook from S&P Global Ratings, and a credit rating of A-, stable outlook from Fitch.
The Company’s total debt associated with continuing operations at June 30, 2024 decreased when compared to December 31, 2023 as a result of $2.9 billion in debt maturities, consisting of $1.1 billion of medium-term notes and $1.8 billion repayment of commercial paper borrowings. Amounts borrowed by Solventum during the first quarter of 2024 were a liability associated with discontinued operations and, as transferred obligations, became the sole responsibility of Solventum after the April 1, 2024 Separation, as discussed in Note 12. For discussion of repayments of and proceeds from debt refer to the following Cash Flows from Financing Activities section.
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 June 30, 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 12.
In May 2023, 3M entered into a $4.25 billion five-year revolving credit facility expiring in 2028; 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, 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 June 30, 2024, this ratio was approximately 16 to 1. Debt covenants do not restrict the payment of dividends.
The Company also had $329 million in stand-alone letters of credit and bank guarantees issued and outstanding at June 30, 2024. These instruments are utilized in connection with normal business activities.
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Cash, cash equivalents and marketable securities: At June 30, 2024, 3M had $10.4 billion of cash, cash equivalents and marketable securities, of which approximately $4.8 billion was held by the Company’s foreign subsidiaries and approximately $5.6 billion was held in the United States. These balances are invested in bank instruments and other high quality securities. At December 31, 2023, 3M had $5.8 billion of cash, cash equivalents and marketable securities, of which approximately $3.1 billion was held by the Company’s foreign subsidiaries and $2.7 billion was held by the United States. The increase from December 31, 2023 was driven by proceeds from Solventum's issuance of debt prior to the Separation as discussed in Note 12, of which approximately $7.7 billion of proceeds was retained by 3M in the Separation, partially offset by debt maturities. As discussed in the "Material Cash Requirements from Known Contractual and Other Obligations" section further below, 3M expects to pay approximately $3.7 billion in July 2024 related to the PWS Settlement and CAE Settlement, reducing cash, cash equivalents and marketable securities ($0.7 billion was paid in the first half of 2024 - discussed in Note 17).
Net Debt (non-GAAP measure): Net debt is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. The Company defines net debt as total debt less the total of cash, cash equivalents and current and long-term marketable securities all on a continuing operations basis. 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 table below provides net debt as of June 30, 2024 and December 31, 2023.
(Millions) June 30, 2024 December 31, 2023 Change
Total debt $ 13,083 $ 16,035 $ (2,952)
Less: Cash, cash equivalents and marketable securities 10,372 5,805 4,567
Net debt (non-GAAP measure) $ 2,711 $ 10,230 $ (7,519)
Refer to the preceding Total Debt and Cash, Cash Equivalents and Marketable Securities sections for additional details.
Balance Sheet: 3M’s strong balance sheet and liquidity provide the Company with significant flexibility to fund its numerous opportunities going forward. The Company will continue to invest in its operations to drive growth, including continual review of acquisition opportunities.
The Company uses working capital measures that place emphasis and focus on certain working capital assets, such as accounts receivable and inventory activity.
Working capital (non-GAAP measure):
(Millions) June 30, 2024 December 31, 2023 Change
Current assets $ 19,515 $ 16,379 $ 3,136
Less: Current liabilities 14,345 15,297 (952)
Working capital (non-GAAP measure) $ 5,170 $ 1,082 $ 4,088
Various assets and liabilities, including cash and short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs. Working capital is not defined under U.S. generally accepted accounting principles and may not be computed the same as similarly titled measures used by other companies. The Company defines working capital as current assets minus current liabilities. 3M believes working capital is meaningful to investors as a measure of operational efficiency and short-term financial health.
Working capital increased $4.1 billion compared with December 31, 2023. Balance changes in current assets increased working capital by $3.1 billion, driven largely by increases in cash and cash equivalents due to proceeds retained by 3M in the Separation from Solventum's issuance of debt partially offset by debt maturities. Balance changes in current liabilities increased working capital by $1.0 billion, primarily due to short-term borrowings and current portions of long-term debt partially offset by increases in current liabilities relating to other environment liabilities and the CAE Settlement (discussed in Note 17).
Cash Flows: Discussions of cash flows from operating, investing and financing activities are provided in the sections that follow. The Consolidated Statements of Cash Flows include the results of continuing and discontinued operations and, therefore, also include cash and cash equivalents associated with Solventum through its April 2024 separation from 3M that were presented in current assets of discontinued operations in the 3M Consolidated Balance Sheet.
Cash Flows from Operating Activities:
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 six months of 2024, cash flows provided by operating activities decreased $996 million compared to the same period last year, primarily driven by payments of $603 million related to the CAE Settlement (discussed in Note 17) and balance changes in inventories decreasing operating cash flow $371 million (a decrease of operating cash flow by $270 million in 2024, compared to an increase in operating cash flow by $101 million in 2023). The second quarter pre-tax charge of approximately $10.3 billion in 2023 related to the PWS Settlement (discussed in Note 17 largely impacted the net income component above, with offsets in the other-net and deferred tax elements.
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Cash Flows from Investing Activities:
Investments in property, plant and equipment (PP&E) enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency. 3M invested $644 million on PP&E in the first six months of 2024.
3M invests in renewal and maintenance programs, which pertain to cost reduction, cycle time, maintaining and renewing current capacity, eliminating pollution, and compliance. Costs related to maintenance, ordinary repairs, and certain other items are expensed. 3M also invests in growth, which adds to capacity, driven by new products, both through expansion of current facilities and new facilities. Finally, 3M also invests in other initiatives, such as information technology (IT), laboratory facilities, and a continued focus on investments in sustainability.
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. Refer to Note 11 for more details about 3M’s diversified marketable securities portfolio. Purchases of investments include additional survivor benefit insurance, plus investments in equity securities.
Cash Flows from Financing Activities:
Debt cash flow activity includes proceeds from Solventum's issuance of $8.4 billion in aggregate principal amount of debt in the first quarter of 2024 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 June 30, 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. Refer to Note 12 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 six months of 2024, the Company purchased $421 million of its own stock. For more information, refer to the table titled “Issuer Purchases of Equity Securities” in Part II, Item 2. The Company does not utilize derivative instruments linked to the Company’s stock.
3M has paid dividends since 1916. In February 2024, 3M’s Board of Directors declared a first-quarter 2024 dividend of $1.51 per share. In May 2024, 3M's Board of Directors declared a second-quarter 2024 dividend of $0.70 per share resetting 3M's dividend post-Solventum spin.
Cash flows from financing activity in 2024 also include $0.6 billion of net cash transferred to Solventum associated with the close of the Separation (discussed in Note 2).
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.
Material Cash Requirements from Known Contractual and Other Obligations: 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. Amongst the items and amounts referenced therein, 3M expects to pay approximately $3.7 billion in July 2024 related to the PWS Settlement and CAE Settlement.
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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 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,” "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:
• 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,
• 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 suppliers 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. Actual future results and trends may differ materially from historical results or those reflected in any such forward-looking statements depending on a variety of factors. Important information as to these factors can be found in this document, including, among others, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings of “Overview,” “Financial Condition and Liquidity” and annually in “Critical Accounting Estimates.” Discussion of these factors is incorporated by reference from Part II, Item 1A, “Risk Factors,” of this document, and should be considered an integral part of Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For additional information concerning factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 10-K, 10-Q and 8-K filed with the SEC from time to time.
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