3M CO 10-Q

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. The MD&A should be read in conjunction with 3M's consolidated financial statements and the accompanying notes to the consolidated financial statements. 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 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. As discussed in Note 1, certain changes are reflective in this document for all applicable periods presented. As discussed in Note 2, on April 1, 2024, 3M completed the 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, Solventum became an independent public company, 3M no longer consolidates Solventum into 3M’s financial results and 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 manages its continuing operations in three operating business segments: Safety and Industrial; Transportation and Electronics; and Consumer. From a geographic perspective, EMEA refers to Europe, Middle East and Africa on a combined basis. Financial highlights for first quarter of 2025: • Sales of $6.0 billion, down 1.0 percent year-on-year (YoY), down 0.3 percent YoY organically 1 ; adjusted sales of $5.8 billion, up 0.8 percent YoY, up 1.5 percent YoY organically 1 ◦ Driven by strength in electrical markets, industrial adhesives and tapes, and aerospace; softer auto, abrasives, and packaging/expression; and YoY impact of applicable special item (manufactured PFAS products) • Operating margin of 20.9%, up 1.8 percentage points YoY; adjusted operating margin of 23.5%, up 2.2 percentage points YoY ◦ Reflecting benefits from growth, lower restructuring costs, productivity, transition service agreement reimbursement; and the YoY impact of special items (primarily manufactured PFAS products), partially offset by continued growth investments in the business, timing of stock-based compensation, cost dis-synergies and foreign currency impacts. • Earnings per diluted share (EPS) from continuing operations of $2.04, up 61 percent YoY;adjusted EPS from continuing operations of $1.88, up 10 percent YoY ◦ Driven by growth and productivity, lower restructuring costs, share buyback partially offset by higher growth investments, non-operating pension headwind; and the YoY impact of special items (primarily the change in value of Solventum ownership). 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. Additional information regarding certain items impacting pre-2025 periods that may also be relevant in 2025 can be found in the Overview section of Part II, Item 7 as well as in further sections of 3M’s 2024 Annual Report on Form 10-K. 45 Table of Contents Results of Operations Net Sales: Percent change information compares the three months ended March 31, 2025 and 2024, unless otherwise indicated. Discussion of business segment results is provided in the Performance by Business Segment section. Information regarding sales by geographic area is included below. Three months ended March 31, 2025 Americas Asia Pacific EMEA Worldwide Net sales (millions) $ 3,207 $ 1,722 $ 1,025 $ 5,954 % of worldwide sales 53.9 % 28.9 % 17.2 % 100.0 % Components of net sales change: Organic sales 1 1.6 (0.7) (5.1) (0.3) Divestitures 2 1.6 0.2 0.5 1.0 Translation (1.4) (2.1) (2.1) (1.7) Total sales change 1.8 % (2.6) % (6.7) % (1.0) % 1 Organic sales change (which includes both organic volume and selling price impacts), is defined as the change in net sales, absent the separate impacts from foreign currency translation and acquisitions, net of divestitures. 3M believes this information is useful to investors and management in understanding ongoing operations and in analysis of ongoing operating trends. 2 Acquisition and divestiture sales change impacts are measured separately for the first twelve months post-transaction and, beginning April 2024, include, within divestitures, the impact of commercial agreements associated with the separation of Solventum. For the first quarter of 2025, in the Americas geographic area, U.S. total sales increased 3 percent which included increased organic sales of 1 percent. Operating Expenses: Three months ended March 31, (Percent of net sales) 2025 2024 Change Cost of sales 58.4 % 57.9 % 0.5 % Selling, general and administrative expenses (SG&A) 15.9 18.8 (2.9) Research, development and related expenses (R&D) 4.8 4.2 0.6 Operating income margin 20.9 % 19.1 % 1.8 % Cost of Sales measured as a percent of sales : Increases in the first quarter of 2025 were primarily due to foreign currency impacts; cost dis-synergies due to the spin of Solventum and PFAS exit partially offset by ongoing manufacturing productivity initiatives. See also Certain Expenses Impacting Multiple Line Items within Results of Operations subsection further below. SG&A measured as a percent of sales : Decreases were primarily impacted by lower YoY restructuring charges, Solventum transition agreement income partially offset by timing of stock-based compensation grants. See also Certain Expenses Impacting Multiple Line Items within Results of Operations subsection further below. R&D measured as a percent of sales : 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. See also Certain Expenses Impacting Multiple Line Items within Results of Operations subsection further below. Other Expense (Income), Net: See Note 7 for a detailed breakout of this line item. Interest expense (net of interest income) decreased in the first quarter of 2025 compared to the same period YoY driven by decreased imputed interest associated with the obligations resulting from the PWS Settlement and the CAE Settlement (discussed in Note 17). The non-service pension and postretirement net benefit decreased approximately $39 million in the first quarter of 2025 compared to the same period YoY. See also Certain Expenses Impacting Multiple Line Items within Results of Operations subsection further below. Solventum ownership - change in value resulted in a YoY benefit of $0.3 billion in the first quarter of 2025. 46 Table of Contents Provision (benefit) for Income Taxes: Three months ended March 31, (Percent of pre-tax income/loss) 2025 2024 Effective tax rate 19.1 % 23.7 % The primary factors that decreased the Company's effective tax rate for first quarter 2025 were the effective tax rate benefit on the change in value of 3M's retained ownership interest in Solventum offset by the effective tax rate on the PWS and CAE Settlements (as discussed in Note 17) and implementation of Pillar Two Model Rules published by the Organization for Economic Cooperation and Development (OECD). On an adjusted basis, the effective tax rate for the first quarter of 2025 was 20.9%, no change from the prior year. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below. Income from Unconsolidated Subsidiaries, Net of Taxes: Three months ended March 31, (Millions) 2025 2024 Income (loss) from unconsolidated subsidiaries, net of taxes $ 2 $ 1 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 March 31, (Millions) 2025 2024 Net income (loss) attributable to noncontrolling interest $ 6 $ 5 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. Certain Expenses Impacting Multiple Line Items within Results of Operations: Stock compensation is discussed in Note 18 and impacts cost of sales, SG&A, and R&D. As noted therein, higher stock-based compensation expense is recognized in the quarter in which 3M’s annual stock option, restricted stock unit and performance share grant is made because of accounting rules for grants to employees that are retiree-eligible. Typically, the annual grant is made in the first quarter. However, due to the spin-off of Solventum (see Note 2), the 2024 annual grant was made in May 2024, after the April 1, 2024 separation. Pre-tax continuing operations stock compensation expense was $85 million and $26 million for the first quarter of 2025 and 2024, respectively. Pre-tax defined benefit pension and postretirement service cost expense for continuing operations impacts cost of sales, SG&A, and R&D while the non-service cost component of pension and postretirement benefits for continuing operations impacts the other expense (income), net line item. Refer to Note 13 for additional information. For the first quarter of 2025, the Company recognized pre-tax defined benefit pension and postretirement benefit service cost expense of $41 million and non-service pension and postretirement net benefit costs (including settlements, curtailments, special termination benefits and other) of $28 million for a total pre-tax continuing operations defined benefit pension and postretirement expense of $69 million. For the first quarter of 2024 on a comparable continuing operations basis, the Company recognized pre-tax defined benefit pension and postretirement service cost expense of $52 million and a benefit of $11 million related to non-service pension and postretirement net benefit costs (including settlements, curtailments, special termination benefits and other) for a total pre-tax continuing operations defined benefit pension and postretirement expense of $41 million. The Company continues to make investments in the implementation of new business systems and solutions, including enterprise resource planning, with the amortization relating to these investments impacting cost of sales, SG&A, and R&D. Performance by Business Segment The section entitled Business Segments in Item 1 within 3M's 2024 Annual Report on Form 10-K provides an overview of 3M’s business segments including discussion of 3M products that are included in each business segment. In addition, disclosures relating to 3M’s business segments are provided in Note 19. 3M manages its continuing operations in three business segments. The reportable segments are Safety and Industrial; Transportation and Electronics; and Consumer. Table of Contents Safety and Industrial Business: Three months ended March 31, 2025 2024 Sales (millions) $ 2,745 $ 2,732 Sales change analysis: Organic sales 1 2.5 % Translation (2.0) Total sales change 0.5 % Business segment operating income (millions) $ 696 $ 657 Percent change 5.9 % Percent of sales 25.4 % 24.1 % First quarter 2025 results: Sales in Safety and Industrial were up 0.5 percent in U.S. dollars. On an organic sales basis: • Sales increased in electrical markets, industrial adhesives and tapes, roofing granules, industrial specialties and personal safety, and decreased in automotive aftermarket and abrasives. • Growth primarily came from electrical markets with strong demand for cable accessories from construction of data centers and renewable energy projects and from industrial adhesives and tapes with strength in industrial and electronic bonding solutions driven by continued share gains in structural adhesives. Business segment operating income margins increased YoY driven by benefits from growth, lower restructuring costs, productivity partially offset by continued growth investments in the business, timing of stock-based compensation and cost dis-synergies due to the spin of Solventum. Adjusting for special item net costs for significant litigation (non-GAAP measure) related to respirator mask/asbestos, business segment operating income margins increased YoY from 24.3 percent to 25.5 percent. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below for additional details. Transportation and Electronics Business : Three months ended March 31, 2025 2024 Sales (millions) $ 1,990 $ 2,104 Sales change analysis: Organic sales 1 (4.0) % Translation (1.4) Total sales change (5.4) % Business segment operating income (millions) $ 352 $ 481 Percent change (26.8) % Percent of sales 17.7 % 22.9 % First quarter 2025 results: Sales in Transportation and Electronics were down 5.4 percent in U.S. dollars. On an organic sales basis: • Sales increased in commercial branding and transportation and decreased in advanced materials, electronics and automotive and aerospace. • Growth was negatively impacted by headwinds related to PFAS manufactured products. • The electronics business was negatively impacted by lower device demand, while the automotive OEM business was down reflecting continued weakness in auto builds, particularly in Europe and the U.S. This was partially offset by growth from commercial aircraft and defense related business in aerospace and from project wins in advanced materials. Business segment operating income margins decreased YoY due to challenging comparison against last year's strong share gains from spec-in wins and new product introductions in automotive and consumer electronics, cost dis-synergies due to the spin of Solventum and exit of PFAS manufacturing, continued growth investments in the business, timing of stock-based compensation partially offset by benefits from growth, lower restructuring costs and productivity. Adjusting for special item PFAS manufactured products (non-GAAP measure), sales of $1,816 million were down 0.4 percent YoY in U.S. dollars, or up 1.1 percent organically while business segment operating income margins decreased YoY from 26.3 percent to 21.5 percent. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below for additional details. 48 Table of Contents Consumer Business: Three months ended March 31, 2025 2024 Sales (millions) $ 1,124 $ 1,140 Sales change analysis: Organic sales 1 0.3 % Translation (1.7) Total sales change (1.4) % Business segment operating income (millions) $ 219 $ 216 Percent change 1.3 % Percent of sales 19.5 % 19.0 % First quarter 2025 results: Sales in Consumer were down 1.4 percent in U.S. dollars. On an organic sales basis: • Sales increased in consumer safety and well-being, were flat in home improvement and home and auto care and decreased in packaging and expression. • Growth was led by consumer safety & well-being driven by demand for Filtrete™ filters and respiratory products. • Home improvement and home and auto care were both flat with growth driven by investment and new product innovation in paint protection and Meguiar’s™ auto care partially offset by soft consumer spending, principally in Command™ and packaging and expression. Business segment operating income margins increased YoY driven by benefits from growth, productivity, and lower restructuring costs partially offset by continued growth investments in the business, timing of stock-based compensation and cost dis-synergies due to the spin of Solventum. Corporate and Other: Outside of 3M's reportable operating segments, 3M has Corporate and Other which is not a reportable business segment as it does not meet the segment reporting criteria. Because Corporate and Other includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis. Corporate and Other are further described in Note 19. Other corporate operating expenses, net, decreased YoY in the first three months of 2025 primarily due to the extent of transition arrangement income from divested businesses (and associated costs) largely related to Solventum's April 2024 Separation as well as the extent of non-discontinued operations-eligible former Solventum-allocated costs included in Corporate and Other prior to the Separation. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section and Note 19 for additional details on the components of corporate special items and their impact. 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 Other, 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 from continuing operations before taxes • Provision for income taxes and effective tax rate • Net income from continuing operations • EPS from continuing operations 49 Table of Contents 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), legal costs, 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), foreign tax credits and tax costs of repatriation. 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 Other. 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 updating 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. 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. 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 March 31, 2024 Amounts from continuing operations (Dollars in millions, except per share amounts) Net sales Operating income Operating income margin Income before taxes Provision for income taxes Effective tax rate Net income attributable to 3M EPS Safety and Industrial GAAP amounts $ 657 24.1 % Adjustments for special items: Net costs for significant litigation 7 Adjusted amounts (non-GAAP measures) $ 664 24.3 % Transportation and Electronics GAAP amounts $ 2,104 $ 481 22.9 % Adjustments for special items: Manufactured PFAS products (281) (2) Adjusted amounts (non-GAAP measures) $ 1,823 $ 479 26.3 % Total company GAAP amounts $ 6,016 $ 1,149 19.1 % $ 929 $ 220 23.7 % $ 705 $ 1.27 Adjustments for special items: Net costs for significant litigation — 70 274 31 243 0.44 Manufactured PFAS products (281) (2) (2) (1) (1) — Divestiture costs — 6 6 2 4 — Total special items (281) 74 278 32 246 0.44 Adjusted amounts (non-GAAP measures) $ 5,735 $ 1,223 21.3 % $ 1,207 $ 252 20.9 % $ 951 $ 1.71 50 Table of Contents Three months ended March 31, 2025 Amounts from continuing operations (Dollars in millions, except per share amounts) Net sales Sales change Operating income Operating income margin Income before taxes Provision for income taxes Effective tax rate Net income attributable to 3M EPS EPS percent change Safety and Industrial GAAP amounts $ 696 25.4 % Adjustments for special items: Net costs for significant litigation 3 Adjusted amounts (non-GAAP measures) $ 699 25.5 % Transportation and Electronics GAAP amounts $ 1,990 (5.4) % $ 352 17.7 % Adjustments for special items: Manufactured PFAS products (174) 38 Adjusted amounts (non-GAAP measures) $ 1,816 (0.4) % $ 390 21.5 % Total company GAAP amounts $ 5,954 (1.0) % $ 1,246 20.9 % $ 1,385 $ 265 19.1 % $ 1,116 $ 2.04 61 % Adjustments for special items: Net costs for significant litigation — 74 224 (2) 226 0.41 Manufactured PFAS products (174) 38 38 9 29 0.06 Solventum ownership - change in value — — (343) — (343) (0.63) Total special items (174) 112 (81) 7 (88) (0.16) Adjusted amounts (non-GAAP measures) $ 5,780 0.8 % $ 1,358 23.5 % $ 1,304 $ 272 20.9 % $ 1,028 $ 1.88 10 % Three months ended March 31, 2025 Sales Change Organic sales Acquisitions Divestitures Translation Total sales change Total company (0.3) % — % 1.0 % (1.7) % (1.0) % Remove manufactured PFAS products special item impact 1.8 — — — 1.8 Adjusted total company (non-GAAP measures) 1.5 % — % 1.0 % (1.7) % 0.8 % Transportation and Electronics (4.0) % — % — % (1.4) % (5.4) % Remove manufactured PFAS products special item impact 5.1 — — (0.1) 5.0 Adjusted Transportation and Electronics (non-GAAP measures) 1.1 % — % — % (1.5) % (0.4) % 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. As of March 31, 2025, 3M owned 19.9% of Solventum Corporation common stock which ownership interest's fair value was $2.6 billion. As previously disclosed, 3M intends to divest its ownership in Solventum within five years from its April 2024 spin-off. 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 as of March 31, 2025 and December 31, 2024. 51 Table of Contents 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+, stable outlook from S&P Global Ratings, and a credit rating of A-, stable outlook from Fitch. The Company’s total debt at March 31, 2025 increased when compared to December 31, 2024 as a result of issuance of $1.1 billion in aggregate principal amount of debt partially offset by $750 million aggregate principal amount of debt maturities. 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. 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, 2025, 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. 3M has a $4.25 billion five-year revolving credit facility that expires in May 2028. 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 credit facility was undrawn at March 31, 2025. 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 March 31, 2025, 3M was in compliance with this requirement. Debt covenants do not restrict the payment of dividends. The Company also had $0.7 billion in stand-alone letters of credit, bank guarantees, and other similar instruments issued and outstanding at March 31, 2025. These instruments are utilized in connection with normal business activities. Cash, cash equivalents and marketable securities: At March 31, 2025, 3M had $7.0 billion of cash, cash equivalents and marketable securities, of which approximately $3.2 billion was held by the Company’s foreign subsidiaries and approximately $3.8 billion was held in the United States. These balances are invested in bank instruments and other high quality securities. At December 31, 2024, 3M had $7.7 billion of cash, cash equivalents and marketable securities, of which approximately $3.5 billion was held by the Company’s foreign subsidiaries and $4.2 billion was held by the United States. The decrease from December 31, 2024 was driven by $0.7 billion in payments associated with the CAE legal settlement (discussed in Note 17), debt maturities of $0.8 billion, purchases of treasury stock of $1.3 billion and dividend payments of $0.4 billion, partially offset by $1.1 billion in proceeds from debt and $0.9 billion of proceeds from issuances of treasury shares pursuant to option/benefit plans. 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 March 31, 2025 and December 31, 2024. (Millions) March 31, 2025 December 31, 2024 Change Total debt $ 13,476 $ 13,044 $ 432 Less: Cash, cash equivalents and marketable securities 7,040 7,744 (704) Net debt (non-GAAP measure) $ 6,436 $ 5,300 $ 1,136 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. 52 Table of Contents Working capital (non-GAAP measure): (Millions) March 31, 2025 December 31, 2024 Change Current assets $ 15,657 $ 15,884 $ (227) Less: Current liabilities 9,451 11,256 (1,805) Working capital (non-GAAP measure) $ 6,206 $ 4,628 $ 1,578 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 $1.6 billion compared with December 31, 2024 primarily driven by lower balances of current liabilities relating to CAE legal settlement, short-term borrowings and current portions of long-term debt. 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 three months of 2025, cash flows provided by operating activities decreased $0.8 billion compared to the same period last year, primarily driven by approximately $0.7 billion in payments associated with the CAE legal settlement . 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 $0.2 billion on PP&E in the first three months of 2025. The Company expects 2025 capital spending to be approximately $1.1 billion as 3M continues to invest in growth, productivity and sustainability. 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. Cash Flows from Financing Activities: Debt cash flow activity includes proceeds from issuance of $1.1 billion in aggregate principal amount of debt partially offset by $750 million aggregate principal amount of debt maturities in the first quarter of 2025. 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 as of March 31, 2025 and December 31, 2024. 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. In February 2025, 3M’s Board of Directors replaced the Company’s November 2018 repurchase program with a new repurchase program. This new program authorizes the repurchase of up to $7.5 billion of 3M’s outstanding common stock, with no pre-established end date. Repurchases of common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes. In the first three months of 2025, the Company purchased $1.3 billion of its own stock, compared to $21 million of stock purchases in the first three months of 2024. As of March 31, 2025, approximately $6.6 billion remained available under the authorization. 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. The Company also had $0.9 billion in proceeds from issuance of treasury stock pursuant to stock option and benefit plans in the first three months of 2025. 3M has paid dividends since 1916. In February 2025, 3M's Board of Directors declared a first-quarter 2025 dividend of $0.73 per share, an increase of 4 percent. 53 Table of Contents 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. Significant Accounting Policies: Information regarding new accounting standards is included in Note 1 to the Consolidated Financial Statements. 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 2024 Annual Report on Form 10-K. 54 Table of Contents 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,” "future," "outlook," "guidance" 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; trade restrictions such as sanctions, tariffs, reciprocal and retaliatory tariffs, and other tariff-related measures; regulatory requirements, legal actions, or enforcement; 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 work to 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, as well as compliance risks related to legal or regulatory requirements, government contract requirements, policies and practices, or other matters that require or encourage the Company or its customers, suppliers, vendors, or channel partners to conduct business in a certain way, • 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, tariffs, 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 or operational 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 impacts on the Company's relationships with its customers, suppliers, employees, regulators and other counterparties; the ability to realize the desired tax treatment; risks under the agreements and obligations entered into in connection with the spin-off, and • matters relating to Combat Arms Earplugs (“CAE”) and related products, 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 the Company (“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. 55 Table of Contents 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.