What changed in this filing

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Item 1. Financial Statements

2020-10-27 compared with 2020-07-28 · 286 added, 222 removed, 1579 unchanged (24% of the section changed)

3 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

(Millions, except per share amounts)

9 unchanged sentences

Provision for income taxes

Income of consolidated group

Income (loss) from unconsolidated subsidiaries, net of taxes

Net income including noncontrolling interest

9 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Net income including noncontrolling interest

10 unchanged sentences

Consolidated Balance Sheet

September 30,

(Dollars in millions, except per share amount)

31 unchanged sentences

944,033,056 shares issued

Shares outstanding - June 30, 2020:

Shares outstanding - September 30, 2020:

Shares outstanding - December 31, 2019:

2 unchanged sentences

Treasury stock, at cost:

Shares at June 30, 2020:

Shares at September 30, 2020:

Shares at December 31, 2019:

6 unchanged sentences

Consolidated Statement of Cash Flows

Six months ended

Nine months ended

September 30,

Cash Flows from Operating Activities

95 unchanged sentences

The difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is a result of the dilution associated with the Company’s stock-based compensation plans.

Certain options outstanding under these stock-based compensation plans were not included in the computation of diluted earnings per share attributable to 3M common shareholders because they would have had an anti-dilutive effect ( 20.9 million average options for the three months ended June 30, 2020;

20.0 million average options for the six months ended June 30, 2020;

6.7 million average options for the three months ended June 30, 2019;

6.0 million average options for the six months ended June 30, 2019).

Certain options outstanding under these stock-based compensation plans were not included in the computation of diluted earnings per share attributable to 3M common shareholders because they would have had an anti-dilutive effect ( 18.8 million average options for the three months ended September 30, 2020;

19.6 million average options for the nine months ended September 30, 2020;

11.9 million average options for the three months ended September 30, 2019;

8.0 million average options for the nine months ended September 30, 2019).

The computations for basic and diluted earnings per share follow:

1 unchanged sentence

Three months ended

Six months ended

Nine months ended

September 30,

(Amounts in millions, except per share amounts)

55 unchanged sentences

Deferred revenue primarily relates to revenue that is recognized over time for one-year software license contracts.

Deferred revenue (current portion) as of June 30, 2020 and December 31, 2019 was $ 412 million and $ 430 million, respectively.

Approximately $ 110 million and $ 270 million of the December 31, 2019 balance was recognized as revenue during the three and six months ended June 30, 2020, respectively, while approximately $ 110 million and $ 480 million of the December 31, 2018 balance was recognized as revenue during the three and six months ended June 30, 2019, respectively.

Deferred revenue (current portion) as of September 30, 2020 and December 31, 2019 was $ 390 million and $ 430 million, respectively.

Approximately $ 100 million and $ 370 million of the December 31, 2019 balance was recognized as revenue during the three and nine months ended September 30, 2020, respectively, while approximately $ 80 million and $ 560 million of the December 31, 2018 balance was recognized as revenue during the three and nine months ended September 30, 2019, respectively.

Operating Lease Revenue:

Net sales includes rental revenue from durable medical devices as part of operating lease arrangements, which was $ 133 million and $ 275 million during the three and six months ended June 30, 2020.

Applicable rental revenue for the three and six months ended June 30, 2019 was not material.

Net sales includes rental revenue from durable medical devices as part of operating lease arrangements, which was $ 153 million and $ 428 million during the three and nine months ended September 30, 2020.

Applicable rental revenue for the three and nine months ended September 30, 2019 was not material.

Disaggregated revenue information:

1 unchanged sentence

Three months ended

Six months ended

Nine months ended

September 30,

Net Sales (Millions)

27 unchanged sentences

Total Company

Three months ended June 30, 2020

Three months ended September 30, 2020

Net Sales (Millions)

6 unchanged sentences

Total Company

Six months ended June 30, 2020

Nine months ended September 30, 2020

Net Sales (Millions)

6 unchanged sentences

Total Company

Three months ended June 30, 2019

Three months ended September 30, 2019

Net Sales (Millions)

6 unchanged sentences

Total Company

Six months ended June 30, 2019

Nine months ended September 30, 2019

Net Sales (Millions)

6 unchanged sentences

Total Company

Americas included United States net sales to customers of $ 3.1 billion and $ 3.4 billion for the three months ended June 30, 2020 and 2019, respectively, and $ 6.6 billion and $ 6.5 billion for the six months ended June 30, 2020 and 2019, respectively.

Americas included United States net sales to customers of $ 3.7 billion and $ 3.3 billion for the three months ended September 30, 2020 and 2019, respectively, and $ 10.2 billion and $ 9.7 billion for the nine months ended September 30, 2020 and 2019, respectively.

Acquisitions and Divestitures

4 unchanged sentences

2020 acquisitions:

There were no acquisitions that closed during the six months ended June 30, 2020.

There were no acquisitions that closed during the nine months ended September 30, 2020.

2019 acquisitions:

1 unchanged sentence

The allocation of purchase consideration related to M*Modal was completed in the fourth quarter of 2019.

Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations for the second quarter of 2019 were approximately $ 75 million and $ 15 million, respectively.

Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations for the first six months of 2019 were approximately $ 125 million and $ 35 million, respectively.

Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations for the third quarter of 2019 were approximately $ 75 million and $ 5 million, respectively.

Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations for the first nine months of 2019 were approximately $ 200 million and $ 40 million, respectively.

M*Modal is reported within the Company’s Health Care business.

1 unchanged sentence

and its KCI subsidiaries and in the first quarter of 2020 paid certain consideration previously accrued under the terms of related agreements.

Adjustments in 2020 to the purchase price allocation were approximately $ 5 million and related to ongoing identification and valuation of certain acquired assets and liabilities.

Adjustments in 2020 to the purchase price allocation were approximately $ 34 million and related to identification and valuation of certain acquired assets and liabilities.

The change to provisional amounts did not result in material impacts to results of operations in 2020 or any portion related to earlier quarters in the measurement period.

The allocation of purchase consideration related to Acelity is considered preliminary with provisional amounts primarily related to intangible assets, and certain tax-related and contingent liability amounts.

3M expects to finalize the allocation of purchase price within the one-year measurement-period following the acquisition.

The allocation of purchase consideration related to Acelity was completed in the third quarter of 2020.

Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations in the fourth quarter of 2019 were approximately $ 350 million and $ 45 million, respectively.

8 unchanged sentences

3M reflected immaterial impacts in the third quarter of 2019 as a result of measuring this disposal group at the lower of its carrying amount or fair value less cost to sell and in the first quarter 2020 related to completion of the divestiture and recognition of contingent consideration.

In May 2020, 3M completed the sale of substantially all of its drug delivery business, formerly part of the Health Care business, to an affiliate of Altaris Capital Partners, LLC for $ 617 million in consideration including $ 487 million of cash, approximately $ 70 million in the form of an interest-bearing security, and approximately $ 60 million in the form of a 17 percent noncontrolling interest in the new company, Kindeva Drug Delivery (Kindeva).

new company, Kindeva Drug Delivery (Kindeva).

Non-cash consideration was valued at time of initial recognition on an income-based approach using relevant estimated future cash flows and applicable market interest rates while considering impacts of restrictions related to transferability.

3 unchanged sentences

The Company reflects its ownership interest in Kindeva using the equity method of accounting incorporating the recording of 3M’s share of earnings/losses on a lag-basis based on availability of Kindeva financial statements.

As a result, income/loss from this unconsolidated subsidiary will begin to be reflected in 3M’s financial statements in the third quarter of 2020.

As a result, income/loss from this unconsolidated subsidiary began to be reflected in 3M’s financial statements in the third quarter of 2020.

Kindeva and 3M entered into certain limited-term agreements related to post-divestiture transition and supply services.

In the third quarter of 2020, 3M completed the sale of a small dermatology products business, formerly part of the Health Care business, for immaterial proceeds that approximated the business’s book value.

2019 divestitures:

3 unchanged sentences

Operating income and held for sale amounts:

The aggregate operating income of these businesses was approximately $ 38 million and immaterial in the first six months of 2020 and 2019, respectively.

The aggregate operating income of these businesses was approximately $ 40 million and $ 25 million in the first nine months of 2020 and 2019, respectively.

The approximate amounts of major assets and liabilities associated with disposal groups classified as held-for-sale as of December 31, 2019 included the following:

4 unchanged sentences

Goodwill and Intangible Assets

There was no goodwill recorded from acquisitions during the first six months of 2020.

The acquisition activity in the following table relates to the net impact of adjustments to the preliminary allocation of purchase price within the one year measurement period following prior acquisitions, which decreased goodwill by $ 5 million during the six months ended June 30, 2020.

There was no goodwill recorded from acquisitions during the first nine months of 2020.

The acquisition activity in the following table relates to the net impact of adjustments to the preliminary allocation of purchase price within the one year measurement period following prior acquisitions, which decreased goodwill by $ 34 million during the nine months ended September 30, 2020.

The amounts in the “Translation and other” row in the following table primarily relate to changes in foreign currency exchange rates.

The goodwill balance by business segment as of December 31, 2019 and June 30, 2020, follow:

The goodwill balance by business segment as of December 31, 2019 and September 30, 2020, follow:

Safety and Industrial

5 unchanged sentences

Translation and other

Balance as of June 30, 2020

Balance as of September 30, 2020

Accounting standards require that goodwill be tested for impairment annually and between annual tests in certain circumstances such as a change in reporting units or the testing of recoverability of a significant asset group within a reporting unit.

4 unchanged sentences

Acquired Intangible Assets

The carrying amount and accumulated amortization of acquired finite-lived intangible assets, in addition to the balance of non-amortizable intangible assets, as of June 30, 2020, and December 31, 2019, follow:

The carrying amount and accumulated amortization of acquired finite-lived intangible assets, in addition to the balance of non-amortizable intangible assets, as of September 30, 2020, and December 31, 2019, follow:

September 30,

Customer related intangible assets

14 unchanged sentences

As discussed in Note 13, 3M reflected an immaterial charge related to impairment of certain indefinite-lived assets in the first quarter of 2020.

Amortization expense for the three and six months ended June 30, 2020 and 2019 follows:

Amortization expense for the three and nine months ended September 30, 2020 and 2019 follows:

Three months ended

Six months ended

Nine months ended

September 30,

Amortization expense

Expected amortization expense for acquired amortizable intangible assets recorded as of June 30, 2020:

Expected amortization expense for acquired amortizable intangible assets recorded as of September 30, 2020:

Amortization expense

18 unchanged sentences

Non-cash changes

Accrued divestiture-related restructuring action balances as of June 30, 2020

Cash payments

Accrued divestiture-related restructuring action balances as of September 30, 2020

Remaining activities related to this divestiture-related restructuring are expected to be largely completed through the second quarter of 2021.

21 unchanged sentences

Non-cash changes

Accrued restructuring action balances as of June 30, 2020

Accrued restructuring action balances as of September 30, 2020

Remaining activities related to this restructuring are expected to be largely completed through the second quarter of 2021.

24 unchanged sentences

Cash Payments

Accrued restructuring action balances as of June 30, 2020

Accrued restructuring action balances as of September 30, 2020

Adjustments in the table above reflect changes in estimates from factors such as additional natural attrition and redeployment as COVID-19 delayed the start of plan execution and update of costs associated with the mix of impacted roles.

Remaining activities related to this restructuring are expected to be completed largely through early 2021.

2 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Interest expense

8 unchanged sentences

Supplemental Equity and Comprehensive Income Information

Cash dividends declared and paid totaled $ 1.47 and $ 1.44 per share for the first and second quarters 2020 and 2019, respectively, or $ 2.94 and $ 2.88 per share for the first six months of 2020 and 2019, respectively.

Cash dividends declared and paid totaled $ 1.47 and $ 1.44 per share for the first, second, and third quarters 2020 and 2019, respectively, or $ 4.41 and $ 4.32 per share for the first nine months of 2020 and 2019, respectively.

Consolidated Changes in Equity

Three months ended June 30, 2020

Three months ended September 30, 2020

3M Company Shareholders

Comprehensive

Balance at March 31, 2020

Balance at June 30, 2020

Other comprehensive income (loss), net of tax:

4 unchanged sentences

Dividends declared

Purchase of subsidiary shares

Stock-based compensation

1 unchanged sentence

Issuances pursuant to stock option and benefit plans

Balance at June 30, 2020

Six months ended June 30, 2020

Balance at September 30, 2020

Nine months ended September 30, 2020

3M Company Shareholders

11 unchanged sentences

Issuances pursuant to stock option and benefit plans

Balance at June 30, 2020

Three months ended June 30, 2019

Balance at September 30, 2020

Three months ended September 30, 2019

3M Company Shareholders

Comprehensive

Balance at March 31, 2019

Balance at June 30, 2019

Other comprehensive income (loss), net of tax:

7 unchanged sentences

Issuances pursuant to stock option and benefit plans

Balance at June 30, 2019

Six months ended June 30, 2019

Balance at September 30, 2019

Nine months ended September 30, 2019

3M Company Shareholders

12 unchanged sentences

Issuances pursuant to stock option and benefit plans

Balance at June 30, 2019

Balance at September 30, 2019

*See Note 1 in 3M’s 2019 Annual Report on Form 10-K.

Changes in Accumulated Other Comprehensive Income (Loss) Attributable to 3M by Component

Three months ended June 30, 2020

Three months ended September 30, 2020

Defined Benefit

1 unchanged sentence

Comprehensive

Balance at March 31, 2020, net of tax:

Balance at June 30, 2020, net of tax:

Other comprehensive income (loss), before tax:

3 unchanged sentences

Total other comprehensive income (loss), net of tax

Balance at June 30, 2020, net of tax:

Six months ended June 30, 2020

Balance at September 30, 2020, net of tax:

Nine months ended September 30, 2020

Defined Benefit

7 unchanged sentences

Total other comprehensive income (loss), net of tax

Balance at June 30, 2020, net of tax:

Three months ended June 30, 2019

Balance at September 30, 2020, net of tax:

Three months ended September 30, 2019

Defined Benefit

1 unchanged sentence

Comprehensive

Balance at March 31, 2019, net of tax:

Balance at June 30, 2019, net of tax:

Other comprehensive income (loss), before tax:

3 unchanged sentences

Total other comprehensive income (loss), net of tax

Balance at June 30, 2019, net of tax:

Six months ended June 30, 2019

Balance at September 30, 2019, net of tax:

Nine months ended September 30, 2019

Defined Benefit

8 unchanged sentences

Total other comprehensive income (loss), net of tax

Balance at June 30, 2019, net of tax

Balance at September 30, 2019, net of tax

*See Note 1 in 3M’s 2019 Annual Report on Form 10-K.

6 unchanged sentences

Comprehensive Income Components

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Location on Income

24 unchanged sentences

The IRS has completed its field examination of the U.S.

federal income tax returns for all years through 2016, but the years have not closed as the Company is in the process of resolving issues identified during those examinations.

federal income tax returns for all years for 2005 through 2016, but the years have not closed as the Company is in the process of resolving issues identified during those examinations.

In addition to the U.S.

federal examination, there is also audit activity in several U.S.

state and foreign jurisdictions.

As of June 30, 2020, no taxing authority has proposed significant adjustments to the Company’s tax positions for which the Company is not adequately reserved.

state and foreign jurisdictions where the Company is subject to ongoing tax examinations and governmental assessments, which could be impacted by evolving political environments in those jurisdictions.

As of September 30, 2020, no taxing authority has proposed significant adjustments to the Company’s tax positions for which the Company is not adequately reserved.

It is reasonably possible that the amount of unrecognized tax benefits could significantly change within the next 12 months.

At this time, the Company is not able to estimate the range by which these potential events could impact 3M’s unrecognized tax benefits in the next 12 months.

The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of June 30, 2020 and December 31, 2019 are $ 1,140 million and $ 1,178 million, respectively.

The decrease in unrecognized tax benefits includes a $ 52 million decrease associated with the tax treatment of the 2018 agreement reached with the State of Minnesota that resolved the Natural Resources Damages (NRD) lawsuit.

As of June 30, 2020 and December 31, 2019, the Company had valuation allowances of $ 150 million and $ 158 million on its deferred tax assets, respectively.

The effective tax rate for the second quarter of 2020 was 21.0 percent, compared to 21.8 percent in the second quarter of 2019, a decrease of 0.8 percentage points.

Primary factors contributing to the 0.8 percentage point decrease were the 2019 non-deductible charge related to the deconsolidation of the Venezuelan subsidiary, adjustments to uncertain tax positions not repeating in 2020 and increased year-over-year benefit from US international tax provisions.

These decreases were partially offset by the 2019 tax benefit that did not repeat related to the “held for sale” status of legal entities associated with the then pending divestiture of the gas and flame detection business and decreased year-over-year benefit from stock options.

The effective tax rate for the first six months of 2020 was 19.2 percent, compared to 20.1 percent in the first six months of 2019, a decrease of 0.9 percentage points.

Primary factors that decreased the effective rate for the first six months of 2020 include the 2019 non-deductible charge related to the deconsolidation of the Venezuelan subsidiary, adjustments to uncertain tax positions not repeating in 2020, 2020 resolution of the tax treatment of the 2018 NRD lawsuit, and increased year-over-year benefit from US international tax provisions.

These decreases were partially offset by the 2019 tax benefit that did not repeat related to the “held for sale” status of legal entities associated with the then-pending divestiture of the gas and flame detection business and decreased year-over-year benefit from stock options.

In March 2020, in response to the impact of the COVID-19 pandemic in the US and across the globe, the United States Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act.

The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of September 30, 2020 and December 31, 2019 are $ 1,155 million and $ 1,178 million, respectively.

The change in unrecognized tax benefits during 2020 includes a $ 52 million decrease associated with the tax treatment of the 2018 agreement reached with the State of Minnesota that resolved the Natural Resources Damages (NRD) lawsuit.

As of September 30, 2020 and December 31, 2019, the Company had valuation allowances of $ 124 million and $ 158 million on its deferred tax assets, respectively.

The effective tax rate for the third quarter of 2020 was 21.4 percent, compared to 19.3 percent in the third quarter of 2019, an increase of 2.1 percentage points.

The primary factor contributing to the increase was nonrepeating 2019 favorable adjustments related to international tax provisions of U.S.

The effective tax rate for the first nine months of 2020 was 20.0 percent, compared to 19.7 percent in the first nine months of 2019, largely consistent year-on-year.

The Company previously disclosed as of December 31, 2019 that approximately $ 14 billion of the undistributed earnings of its foreign subsidiaries were considered indefinitely reinvested.

During the third quarter of 2020, 3M determined that approximately $ 5 billion of these earnings are no longer considered permanently reinvested.

The incremental tax cost to repatriate these earnings to the US is immaterial.

The Company has not provided deferred taxes on approximately $ 9 billion of undistributed earnings from non-U.S.

subsidiaries as of September 30, 2020 which are indefinitely reinvested in operations.

Because of the multiple avenues by which to repatriate the earnings to minimize tax cost, and because a large portion of these earnings are not liquid, it is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

In March 2020, in response to the impact of the COVID-19 pandemic in the U.S.

and across the globe, the United States Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act.

The enactment period impacts to 3M were immaterial to income tax expense.

Marketable Securities and Held-to-Maturity Debt Securities

The Company invests in asset-backed securities, certificates of deposit/time deposits, commercial paper, and other securities.

The following is a summary of amounts recorded on the Consolidated Balance Sheet for marketable securities (current and non-current).

June 30, 2020

The following is a summary of the types of investments and amounts recorded on the Consolidated Balance Sheet for marketable securities (current and non-current).

September 30, 2020

December 31, 2019

Corporate debt securities

Commercial paper

Certificates of deposit/time deposits

treasury securities

municipal securities

3 unchanged sentences

Total marketable securities

At June 30, 2020 and December 31, 2019, gross unrealized, gross realized, and net realized gains and/or losses (pre-tax) were not material.

The balances at June 30, 2020 for marketable securities by contractual maturity are shown below.

At September 30, 2020 and December 31, 2019, gross unrealized, gross realized, and net realized gains and/or losses (pre-tax) were not material.

The balances at September 30, 2020 for marketable securities by contractual maturity are shown below.

Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

June 30, 2020

September 30, 2020

Due in one year or less

6 unchanged sentences

This debt security was considered held-to-maturity due to the restrictions in satisfying and discharging the Third Lien Notes, was carried at amortized cost, and was reflected in other current assets on the Company’s consolidated balance sheet.

Upon the maturity of the debt security in May 2020, the Company has no held-to-maturity debt securities as of June 30, 2020.

Upon the maturity of the debt security in May 2020, the Company has no held-to-maturity debt securities.

Long-Term Debt and Short-Term Borrowings

1 unchanged sentence

These were comprised of $ 500 million of 5-year notes due 2025 with a coupon rate of 2.65 %, $ 600 million of 10-year notes due 2030 with a coupon rate of 3.05 %, and $ 650 million of 30-year notes due 2050 with a coupon rate of 3.70 %.

As of June 30, 2020, the Company had no commercial paper outstanding, compared to $ 150 million in commercial paper outstanding as of December 31, 2019.

3M has a credit facility expiring in July 2020 in the amount of 80 billion Japanese yen that in July 2020 was further extended until August 2021.

At June 30, 2020, 69 billion Japanese yen, or approximately $ 646 million at June 30, 2020 exchange rates, was drawn and outstanding.

As of September 30, 2020, the Company had no commercial paper outstanding, compared to $ 150 million in commercial paper outstanding as of December 31, 2019.

In July 2020, 3M extended a credit facility initially expiring in July 2020 to August 2021 in the amount of 80 billion Japanese yen.

In November 2019, 3M entered into a credit facility expiring in November 2020 in the amount of 150 million euros.

At June 30, 2020, 150 million euros, or $ 168 million at June 30, 2020 exchange rates, was drawn and outstanding.

During the third quarter of 2020, the Company paid the outstanding balances and closed these credit facilities.

In conjunction with the October 2019 acquisition of Acelity (see Note 3), 3M assumed outstanding debt of the business, of which $ 445 million in principal amount of third lien senior secured notes (Third Lien Notes) maturing in 2021 with a coupon rate of 12.5 % was not immediately redeemed at closing.

4 unchanged sentences

In May 2020, 3M repaid the aggregate $ 445 million principal amount of Third Lien Notes subject to the in-substance defeasance above and repaid 650 million euros aggregate principal amount of floating-rate medium-term notes that matured.

In August 2020, 3M repaid $ 500 million aggregate principal amount of floating rate medium-term notes that matured.

Future Maturities of Long-term Debt

Maturities of long-term debt in the table below reflect the impact of put provisions associated with certain debt instruments and are net of the unaccreted debt issue costs such that total maturities equal the carrying value of long-term debt as of June 30, 2020.

The maturities of long-term debt for the periods subsequent to June 30, 2020 are as follows (in millions):

The maturities of long-term debt for the periods subsequent to September 30, 2020 are as follows (in millions):

Pension and Postretirement Benefit Plans

3 unchanged sentences

The other components of net periodic benefit cost are reflected in other expense (income), net.

Components of net periodic benefit cost and other supplemental information for the three and six months ended June 30, 2020 and 2019 follow:

Components of net periodic benefit cost and other supplemental information for the three and nine months ended September 30, 2020 and 2019 follow:

Benefit Plan Information

Three months ended June 30,

Three months ended September 30,

Qualified and Non-qualified

8 unchanged sentences

Expected return on plan assets

Amortization of transition asset

Amortization of prior service benefit

3 unchanged sentences

Total net periodic benefit cost (benefit)

Six months ended June 30,

Nine months ended September 30,

Qualified and Non-qualified

14 unchanged sentences

Total net periodic benefit cost (benefit)

For the six months ended June 30, 2020 contributions totaling $ 75 million were made to the Company’s U.S.

For the nine months ended September 30, 2020 contributions totaling $ 119 million were made to the Company’s U.S.

and international pension plans and $ 3 million to its postretirement plans.

For total year 2020, the Company expects to contribute approximately $ 200 million of cash to its global defined benefit pension and postretirement plans.

The Company does not have a required minimum cash

pension contribution obligation for its U.S.

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

plans in 2020.

28 unchanged sentences

The portion of gains or losses on the derivative instrument previously included in accumulated other comprehensive income for dedesignated hedges remains in accumulated other comprehensive income until the forecasted transaction occurs or becomes probable of not occurring.

Changes in the value of derivative instruments after dedesignation are recorded in earnings and are included in the Derivatives Not Designated as

Hedging Instruments section below.

Changes in the value of derivative instruments after dedesignation are recorded in earnings and are included in the Derivatives Not Designated as Hedging Instruments section below.

The maximum length of time over which 3M hedges its exposure to the variability in future cash flows of the forecasted transactions is 36 months .

5 unchanged sentences

The amortization of gains and losses on forward starting interest rate swap and treasury rate lock contracts is included in the tables below as part of the gain/(loss) reclassified from accumulated other comprehensive income into income.

As of June 30, 2020, the Company had a balance of $ 20 million after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income.

As of September 30, 2020, the Company had a balance of $ 91 million after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income.

This includes a remaining balance of $ 109 million (after-tax loss) related to the forward starting interest rate swap and treasury rate lock contracts, which will be amortized over the respective lives of the notes.

Based on exchange rates as of June 30, 2020, 3M expects to reclassify approximately $ 56 million, $ 31 million, and $ 37 million of the after-tax net unrealized cash flow hedging gains to earnings over the next 12 months, over the remainder of 2020, and in 2021, respectively, in addition to reclassifying approximately $ 88 million of the after-tax net unrealized cash flow hedging losses to earnings after 2021 (with the impact offset by earnings/losses from underlying hedged items).

Based on exchange rates as of September 30, 2020, 3M expects to reclassify approximately $ 7 million, $ 3 million, and $ 4 million of the after-tax net unrealized cash flow hedging gains to earnings over the next 12 months, over the remainder of 2020, and in 2021, respectively, in addition to reclassifying approximately $ 98 million of the after-tax net unrealized cash flow hedging losses to earnings after 2021 (with the impact offset by earnings/losses from underlying hedged items).

The location in the consolidated statements of income and comprehensive income and amounts of gains and losses related to derivative instruments designated as cash flow hedges are provided in the following table.

7 unchanged sentences

Comprehensive Income into Income

Three months ended June 30, 2020 (Millions)

Three months ended September 30, 2020 (Millions)

Foreign currency forward/option contracts

2 unchanged sentences

Interest expense

Six months ended June 30, 2020 (Millions)

Nine months ended September 30, 2020 (Millions)

Foreign currency forward/option contracts

2 unchanged sentences

Interest expense

Three months ended June 30, 2019 (Millions)

Three months ended September 30, 2019 (Millions)

Foreign currency forward/option contracts

2 unchanged sentences

Interest expense

Six months ended June 30, 2019 (Millions)

Nine months ended September 30, 2019 (Millions)

Foreign currency forward/option contracts

10 unchanged sentences

Additional information regarding designated interest rate swaps can be found in Note 14 in 3M’s 2019 Annual Report on Form 10-K.

Refer to the section below titled Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments for details on the location within the consolidated statements of income for amounts of gains and losses related to derivative instruments designated as fair value hedges and similar information relative to the hedged items for the three and six months ended June 30, 2020 and 2019.

The following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges:

5 unchanged sentences

Location on the Consolidated Balance Sheet

June 30, 2020

September 30, 2020

December 31, 2019

June 30, 2020

September 30, 2020

December 31, 2019

10 unchanged sentences

Additionally, variation can occur in connection with the extent of the Company’s desired foreign exchange risk coverage.

At June 30, 2020, the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 50 million euros, along with a principal amount of long-term debt instruments designated in net investment hedges totaling 3.5 billion euros.

At September 30, 2020, the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 50 million euros, along with a principal amount of long-term debt instruments designated in net investment hedges totaling 3.5 billion euros.

The maturity dates of these derivative and nonderivative instruments designated in net investment hedges range from 2021 to 2031.

The location in the consolidated statements of income and comprehensive income and amounts of gains and losses related to derivative and nonderivative instruments designated as net investment hedges are as follows.

There were no reclassifications of the

effective portion of net investment hedges out of accumulated other comprehensive income into income for the periods presented in the table below.

There were no reclassifications of the effective portion of net investment hedges out of accumulated other comprehensive income into income for the periods presented in the table below.

Pretax Gain (Loss)

5 unchanged sentences

Recognized in Income

Three months ended June 30, 2020 (Millions)

Three months ended September 30, 2020 (Millions)

Foreign currency denominated debt

2 unchanged sentences

Cost of sales

Six months ended June 30, 2020 (Millions)

Nine months ended September 30, 2020 (Millions)

Foreign currency denominated debt

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Cost of sales

Three months ended June 30, 2019 (Millions)

Three months ended September 30, 2019 (Millions)

Foreign currency denominated debt

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Cost of sales

Six months ended June 30, 2019 (Millions)

Nine months ended September 30, 2019 (Millions)

Foreign currency denominated debt

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The location in the consolidated statement of income and amounts of gains and losses related to derivative instruments not designated as hedging instruments are as follows:

Three months ended June 30, 2020

Six months ended June 30, 2020

Three months ended September 30, 2020

Nine months ended September 30, 2020

Gain (Loss) on Derivative Recognized in

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Interest expense

Three months ended June 30, 2019

Six months ended June 30, 2019

Three months ended September 30, 2019

Nine months ended September 30, 2019

Gain (Loss) on Derivative Recognized in

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Location and Amount of Gain (Loss) Recognized in Income

Three months ended June 30, 2020

Six months ended June 30, 2020

Three months ended September 30, 2020

Nine months ended September 30, 2020

Cost of sales

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Location and Amount of Gain (Loss) Recognized in Income

Three months ended June 30, 2019

Six months ended June 30, 2019

Three months ended September 30, 2019

Nine months ended September 30, 2019

Cost of sales

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Additional information with respect to the fair value of derivative instruments is included in Note 13.

June 30, 2020 (Millions)

September 30, 2020 (Millions)

Derivatives designated as

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A master netting arrangement may allow each counterparty to net settle amounts owed between a 3M entity and the counterparty as a result of multiple, separate derivative transactions.

As of June 30, 2020, 3M has International Swaps and Derivatives Association (ISDA) agreements with 17 applicable banks and financial institutions which contain netting provisions.

As of September 30, 2020, 3M has International Swaps and Derivatives Association (ISDA) agreements with 17 applicable banks and financial institutions which contain netting provisions.

In addition to a master agreement with 3M supported by a primary counterparty’s parent guarantee, 3M also has associated credit support agreements in place with 16 of its primary derivative counterparties which, among other things, provide the circumstances under which either party is required to post eligible collateral (when the market value of transactions

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Net Amount of

June 30, 2020 (Millions)

September 30, 2020 (Millions)

Balance Sheet

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Net Amount of

June 30, 2020 (Millions)

September 30, 2020 (Millions)

Balance Sheet

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Currency Effects

3M estimates that year-on-year foreign currency transaction effects, including hedging impacts, increased pre-tax income by approximately $ 12 million and $ 11 million for the three and six months ended June 30, 2020.

3M estimates that year-on-year foreign currency transaction effects, including hedging impacts, decreased pre-tax income by approximately $ 15 million and $ 4 million for the three and nine months ended September 30, 2020, respectively.

These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

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Using Inputs Considered as

June 30, 2020

September 30, 2020

Available-for-sale:

Marketable securities:

Corporate debt securities

Commercial paper

Certificates of deposit/time deposits

treasury securities

municipal securities

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Three months ended

Six months ended

Nine months ended

Marketable securities — certain U.S.

municipal securities only

September 30,

Beginning balance

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3M reflected an immaterial charge related to impairment of certain indefinite-lived assets and a net charge of $ 22 million related to adjustment to the carrying value of equity securities using the measurement alternative during the first quarter of 2020.

There were no material impairments of assets or adjustments to equity securities using the measurement alternative for the three months ended June 30, 2020 in addition to the three and six months ended June 30, 2019.

There were no material impairments of assets or adjustments to equity securities using the measurement alternative for the three months ended September 30, 2020 in addition to the three and nine months ended September 30, 2019.

Fair Value of Financial Instruments:

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Information with respect to the carrying amounts and estimated fair values of these financial instruments follow:

June 30, 2020

September 30, 2020

December 31, 2019

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The carrying amount of long-term debt referenced above is impacted by certain fixed-to-floating interest rate swaps that are designated as fair value hedges and by the designation of certain fixed rate Eurobond securities issued by the Company as hedging instruments of the Company’s net investment in its European subsidiaries.

A number of 3M’s fixed-rate bonds were trading at a premium at June 30, 2020 and December 31, 2019 due to lower interest rates compared to issuance levels.

A number of 3M’s fixed-rate bonds were trading at a premium at September 30, 2020 and December 31, 2019 due to lower interest rates compared to issuance levels.

Commitments and Contingencies

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Respirator Mask/Asbestos Litigation

As of June 30, 2020, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in various courts that purport to represent approximately 1,688 individual claimants, compared to approximately 1,727 individual claimants with actions pending on December 31, 2019.

As of September 30, 2020, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in various courts that purport to represent approximately 1,884 individual claimants, compared to approximately 1,727 individual claimants with actions pending on December 31, 2019.

The vast majority of the lawsuits and claims resolved by and currently pending against the Company allege use of some of the Company’s mask and respirator products and seek damages from the Company and other defendants for alleged personal injury from workplace exposures to asbestos, silica, coal mine dust or other occupational dusts found in products manufactured by other defendants or generally in the workplace.

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In January 2020, the manufacturers filed a petition with the West Virginia Supreme Court, challenging the trial court’s rulings;

that petition is scheduled to be heard in September 2020.

that petition was heard in September 2020.

No liability has been recorded for this matter because the Company believes that liability is not probable and estimable at this time.

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These developments include, but are not limited to, significant changes in (i) the key assumptions underlying the Company’s accrual, including, the number of future claims, the nature and mix of those claims, the average cost of defending and resolving claims, and in maintaining trial readiness (ii) trial and appellate outcomes, (iii) the law and procedure applicable to these claims, and (iv) the financial viability of other co-defendants and insurers.

As a result of its review of its respirator mask/asbestos liabilities, of pending and expected lawsuits and of the cost of resolving claims of persons who claim more serious injuries, including mesothelioma, other malignancies, and black lung disease, the Company increased its accruals in the first six months of 2020 for respirator mask/asbestos liabilities by $ 8 million.

In the first six months of 2020, the Company made payments for legal defense costs and settlements of $ 35 million related to the respirator mask/asbestos litigation.

As a result of its review of its respirator mask/asbestos liabilities, of pending and expected lawsuits and of the cost of resolving claims of persons who claim more serious injuries, including mesothelioma, other malignancies, and black lung disease, the Company increased its accruals in the first nine months of 2020 for respirator mask/asbestos liabilities by $ 23 million.

In the first nine months of 2020, the Company made payments for legal defense costs and settlements of $ 45 million related to the respirator mask/asbestos litigation.

During the first quarter of 2019, the Company recorded a pre-tax charge of $ 313 million in conjunction with an increase in the accrual as a result of the March and April 2019 settlements-in-principle of the coal mine dust lawsuits mentioned above and the Company’s assessment of other current and expected coal mine dust lawsuits (including the costs to resolve all current and expected coal mine dust lawsuits in Kentucky and West Virginia).

As of June 30, 2020, the Company had an accrual for respirator mask/asbestos liabilities (excluding Aearo accruals) of $ 581 million.

As of September 30, 2020, the Company had an accrual for respirator mask/asbestos liabilities (excluding Aearo accruals) of $ 586 million.

This accrual represents the Company’s best estimate of probable loss and reflects an estimation period for future claims that may be filed against the Company approaching the year 2050.

The Company cannot estimate the amount or upper end of the range of amounts by which the liability may exceed the accrual the Company has established because of the (i) inherent difficulty in projecting the number of claims that have not yet been asserted or the time period in which future claims may be asserted, (ii) the complaints nearly always assert claims against multiple defendants where the damages alleged are typically not attributed to individual defendants so that a defendant’s share of liability may turn on the law of joint and several liability, which can vary by state, (iii) the multiple factors described above that the Company considers in estimating its liabilities, and (iv) the several possible developments described above that may occur that could affect the Company’s estimate of liabilities.

As of June 30, 2020, the Company’s receivable for insurance recoveries related to the respirator mask/asbestos litigation was $ 4 million.

As of September 30, 2020, the Company’s receivable for insurance recoveries related to the respirator mask/asbestos litigation was $ 4 million.

The Company continues to seek coverage under the policies of certain insolvent and other insurers.

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Aearo manufactured and sold various products, including personal protection equipment, such as eye, ear, head, face, fall and certain respiratory protection products.

As of June 30, 2020, Aearo and/or other companies that previously owned and operated Aearo’s respirator business (American Optical Corporation, Warner-Lambert LLC, AO Corp.

As of September 30, 2020, Aearo and/or other companies that previously owned and operated Aearo’s respirator business (American Optical Corporation, Warner-Lambert LLC, AO Corp.

and Cabot Corporation (“Cabot”)) are named defendants, with multiple co-defendants, including the Company, in numerous lawsuits in various courts in which plaintiffs allege use of mask and respirator products and seek damages from Aearo and other defendants for alleged personal injury from workplace exposures to asbestos, silica-related, coal mine dust, or other occupational dusts found in products manufactured by other defendants or generally in the workplace.

As of June 30, 2020, the Company, through its Aearo subsidiary, had accruals of $ 21 million for product liabilities and defense costs related to current and future Aearo-related asbestos and silica-related claims.

As of September 30, 2020, the Company, through its Aearo subsidiary, had accruals of $ 20 million for product liabilities and defense costs related to current and future Aearo-related asbestos and silica-related claims.

This accrual represents the Company’s best estimate of Aearo’s probable loss and reflects an estimation period for future claims that may be filed against Aearo approaching the year 2050.

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manufacturing facility in Decatur, Alabama associated with the historic (1978-1998) incorporation of wastewater treatment plant sludge.

With ADEM’s agreement, 3M is installing a multilayer cap on the former sludge incorporation areas and implementing groundwater migration controls and treatment.

With ADEM’s agreement, 3M substantially completed installation of a multilayer cap on the former sludge incorporation areas.

Further remediation activities, including certain on-site and off-site investigations and studies, will be conducted in accordance with the July 2020 Interim Consent Order described below in the “Other PFAS-related Matters” section.

The Company continues to work with the Minnesota Pollution Control Agency (MPCA) pursuant to the terms of the previously disclosed May 2007 Settlement Agreement and Consent Order to address the presence of certain PFAS in the soil and groundwater at former disposal sites in Washington County, Minnesota (Oakdale and Woodbury) and at the Company’s manufacturing facility at Cottage Grove, Minnesota.

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In June 2020, 3M submitted comments on EPA’s preliminary determinations to regulate PFOA and PFOS under the SDWA.

EPA announced in its Spring 2020 Regulatory Agenda, released in June 2020, that it intends to publish a notice of proposed rulemaking to designate PFOA and PFOS as hazardous substances under CERCLA in August 2020.

EPA announced in its Spring 2020 Regulatory Agenda, released in June 2020, that it intended to publish a notice of proposed rulemaking to designate PFOA and PFOS as hazardous substances under CERCLA in August 2020.

EPA has not published this notice of proposed rulemaking.

Agency for Toxic Substances and Disease Registry (ATSDR) within the Department of Health and Human Services released a draft Toxicological Profile for PFAS for public review and comment in June 2018.

In the draft report, ATSDR proposed draft minimal risk levels (MRLs) for PFOS, PFOA and several other PFAS.

An MRL is an estimate of the daily human exposure to a

hazardous substance that is likely to be without appreciable risk of adverse non-cancer health effects over a specified duration of exposure.

An MRL is an estimate of the daily human exposure to a hazardous substance that is likely to be without appreciable risk of adverse non-cancer health effects over a specified duration of exposure.

MRLs are not intended to define cleanup or action levels for ATSDR or other agencies.

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Several state legislatures and state agencies have been evaluating or have taken actions related to cleanup standards, groundwater values or drinking water values for PFOS, PFOA, and other PFAS, and 3M has submitted various responsive comments.

In September 2019, 3M and several other parties filed a lawsuit in New Hampshire state court to enjoin new PFAS regulations in New Hampshire.

In September 2019, 3M and several other parties filed a lawsuit in New Hampshire state court to enjoin PFAS regulations in New Hampshire.

In November 2019, the court issued a preliminary injunction preventing the regulations from being enforced.

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New Jersey finalized drinking water standards and designated PFOA and PFOS as hazardous substances in June 2020.

New York established drinking water standards for PFOA and PFOS in July 2020.

Michigan implemented final drinking water standards for certain PFAS, including PFOS and PFOA, in August 2020.

Massachusetts published final regulations establishing a drinking water standard relating to six combined PFAS in October 2020.

Some other states have also been evaluating or have taken actions relating to PFOA, PFOS and other PFAS in products such as food packaging, carpets and other products.

In October 2020, 3M and several other parties filed notices of appeal in the appellate division of the Superior Court of New Jersey to challenge the validity of the New Jersey PFOS and PFOA regulations.

The Company cannot predict what additional regulatory actions arising from the foregoing or other proceedings and activities, if any, may be taken regarding such compounds or the consequences of any such actions.

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The parties have agreed to continue to stay the St.

John case through September 2020, pending ongoing mediation between the parties involved in this case and another case discussed below.

John case through December 2020, pending ongoing mediation between the parties involved in this case and another case discussed below.

Two additional putative class actions filed in the same court by certain residents in the vicinity of the Decatur plant seeking relief on similar grounds (the Chandler case and the Stover case, respectively) are stayed pending the resolution of class certification issues in the St.

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In April 2019, 3M and the Water Authority settled the lawsuit for $ 35 million, which will fund a new water filtration system, with 3M indemnifying the Water Authority from liability resulting from the resolution of the currently pending and future lawsuits against the Water Authority alleging liability or damages related to 3M PFAS.

The putative class claims brought by the representative plaintiffs who were supplied drinking water by the Water Authority (the “Lindsey” case) remain, with a trial set for October 2020.

3M has filed its opposition to class certification and a motion for summary judgment.

Discovery is ongoing.

The parties are in active discussions regarding a negotiated resolution, and the case has been stayed through September 2020.

The putative class claims brought by the representative plaintiffs who were supplied drinking water by the Water Authority (the “Lindsey” case) remain.

The parties are in active discussions regarding a negotiated resolution, and the case is currently stayed.

In June 2016, the Tennessee Riverkeeper, Inc.

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and the Municipal Utilities Board of Decatur, Morgan County, Alabama.

The complaint alleges that the defendants violated the Resource Conservation and Recovery Act in connection with the disposal of certain PFAS through their ownership and operation of their respective sites.

The complaint alleges that the defendants violated the Resource Conservation and

Recovery Act in connection with the disposal of certain PFAS through their ownership and operation of their respective sites.

The complaint further alleges such practices may present an imminent and substantial endangerment to health and/or the environment and that Riverkeeper has suffered and will continue to suffer irreparable harm caused by defendants’ failure to abate the endangerment unless the court grants the requested relief, including declaratory and injunctive relief.

This case has been stayed through August 2020, pending ongoing mediation between the parties in conjunction with the St.

This case has been stayed through December 2020, pending ongoing mediation between the parties in conjunction with the St.

In August 2016, a group of over 200 plaintiffs filed a putative class action against West Morgan-East Lawrence Water and Sewer Authority (Water Authority), 3M, Dyneon, Daikin, BFI, and the City of Decatur in state court in Lawrence County, Alabama (the “Billings” case).

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3M is also defending or has received notice of potential lawsuits in state and federal court brought by individual property owners who claim damages related to historical PFAS disposal at former area landfills near their properties.

3M has resolved for an immaterial amount some of the claims brought by property owners.

In September 2020, the City of Guin Water Works and Sewer Board (Guin WWSB) brought a lawsuit against 3M in Alabama state court, alleging that PFAS contamination in the Guin water system stems from manufacturing operations at 3M’s Guin facility and disposal activity at a nearby landfill.

In this same month, Guin WWSB dismissed its lawsuit without prejudice and is working with 3M to further investigate the presence of chemicals in the area.

Litigation Related to Historical PFAS Manufacturing Operations in Minnesota

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3M recorded a pre-tax charge of $ 897 million, inclusive of legal fees and other related obligations, in the first quarter of 2018 associated with the resolution of this matter.

The State of New York, by its Attorney General, has filed four lawsuits (in June 2018, February 2019, July 2019, and November 2019) against 3M and other defendants seeking to recover the costs incurred in responding to PFAS contamination

allegedly caused by Aqueous Film Forming Foam (AFFF) manufactured by 3M and others.

In connection with the above referenced settlement, the Minnesota Pollution Control Agency and the Department of Natural Resources, as co-trustees of the Fund, released in September 2020 a conceptual drinking water supply plan for the communities in the East Metro area, seeking public comment on three recommended options for utilizing the Fund.

Each of the four suits was filed in Albany County Supreme Court before being removed to federal court, and each has been transferred to the multi-district litigation (MDL) proceeding for AFFF cases, which is discussed further below.

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In June 2020, the court entered a consent order lifting the stay and consolidating the two actions, along with two others brought by the NJDEP relating to the DuPont facilities, for case management and pretrial purposes.

The case is in early stages of litigation.

In May 2019, the New Jersey Attorney General and NJDEP filed a lawsuit against 3M, DuPont, and six other companies, alleging natural resource damages from AFFF products and seeking damages, including punitive damages, and associated fees.

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In its June 2020 ruling on defendants’ motions to dismiss, the court dismissed the state’s trespass claim, but allowed several claims to proceed.

In October 2020, the court allowed the state to file an amended complaint.

In June 2019, the Vermont Attorney General filed two lawsuits alleging contamination of the state’s drinking water supplies and other natural resources by PFAS chemicals.

The first lawsuit was filed against 3M and ten co-defendants, alleging PFAS contamination resulting from the use of AFFF products at several sites around the state.

The first lawsuit was filed against 3M and ten co-defendants, alleging PFAS

contamination resulting from the use of AFFF products at several sites around the state.

This case was removed to federal court and transferred to the AFFF MDL.

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In May 2020, the court denied the defendants’ motion to dismiss, but dismissed the state’s trespass claim as to property the state does not own.

The case remains in early stages of litigation.

The parties are now engaged in discovery.

In May 2019, the Michigan Attorney General issued a request for proposal seeking outside legal expertise in pursuing claims against manufacturers, distributors, and other parties related to PFAS.

In January 2020, the Michigan Attorney General filed a lawsuit in state court against 3M, Dyneon, DuPont, Chemours and others seeking injunctive and equitable relief and damages for alleged injury to Michigan public natural resources and its residents relating to PFAS.

The defendants filed a motion to dismiss in May 2020.

The defendants filed motions to dismiss, and 3M’s motion was denied in August 2020.

In August 2020, the Michigan Attorney General filed two lawsuits against numerous AFFF manufacturers and distributors, and suppliers of PFAS to AFFF manufacturers.

3M is named a defendant in one of the lawsuits, filed in federal court, and the case has been transferred to the AFFF MDL, where it remains in early stages of litigation.

In September 2019, the Attorney General of Guam filed a lawsuit against 3M and other defendants relating to contamination of the territory’s drinking water supplies and other natural resources by PFAS, allegedly resulting from the use of AFFF products at several sites around the island.

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In December 2019, the Attorney General of the Commonwealth of Northern Mariana Islands, a U.S.

territory, filed a lawsuit against 3M and other defendants relating to contamination of the territory’s drinking water

supplies and other natural resources by PFAS, allegedly resulting from the use of AFFF products.

territory, filed a lawsuit against 3M and other defendants relating to contamination of the territory’s drinking water supplies and other natural resources by PFAS, allegedly resulting from the use of AFFF products.

This lawsuit has been removed to federal court and transferred to the AFFF MDL.

In addition to the above state attorneys general actions, the Company is in discussions with several other state attorneys general and agencies and responding to information and other requests relating to PFAS matters.

In addition to the above state attorneys general actions, the Company is in discussions with several state attorneys general and agencies, responding to information and other requests relating to PFAS matters and exploring potential resolution of some of the matters raised.

Aqueous Film Forming Foam (AFFF) Environmental Litigation

3M manufactured and marketed AFFF for use in firefighting at airports and military bases from approximately 1963 to 2002.

As of June 30, 2020, 730 lawsuits (including 25 putative class actions) have been filed against 3M (along with other defendants) in various state and federal courts where current or former airports, military bases, or fire training facilities are or were located.

As of September 30, 2020, 784 lawsuits (including 26 putative class actions) have been filed against 3M (along with other defendants) in various state and federal courts where current or former airports, military bases, or fire training facilities are or were located.

As previously noted, some of these cases have been brought by state or territory attorneys general.

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Additional AFFF cases continue to be transferred into the MDL as they are filed or removed to federal court.

As of June 30, 2020, there were 725 cases in the MDL, 715 of which name 3M as a defendant.

As of September 30, 2020, there were 783 cases in the MDL, 770 of which name 3M as a defendant.

The parties in the MDL are currently in the process of conducting discovery.

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Two subsidiaries of Husky Energy filed suit in April 2020 against 3M and other AFFF manufacturers in Wisconsin state court relating to alleged PFAS contamination from AFFF use at Husky facilities in Superior, Wisconsin and Lima, Ohio.

This case remains in early stages of litigation.

As of June 30, 2020, the Company was named but not served in nine other AFFF lawsuits filed by individuals in state courts against the Company and other defendants.

The parties have entered into a tolling agreement deferring further action on the plaintiffs’ claims.

The plaintiffs filed a notice of dismissal without prejudice in September 2020.

As of September 30, 2020, the Company was named in nine other AFFF lawsuits filed by plaintiffs in state courts against the Company and other defendants, including three cases in which the Company was served ( one in each of Arizona, California and Missouri) .

Other PFAS-related Product and Environmental Litigation

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Plaintiffs allege Wolverine used 3M Scotchgard in its manufacturing process and that chemicals from 3M’s product contaminated the environment and drinking water sources after disposal.

In addition to the consolidated federal court putative class action, as of June 30, 2020, 3M has been named as a defendant in approximately 267 private individual actions in Michigan state court based on similar allegations.

In addition to the consolidated federal court putative class action, as of September 30, 2020, 3M has been named as a defendant in approximately 270 private individual actions in Michigan state court based on similar allegations.

These cases are coordinated for pre-trial purposes.

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In January 2020, the court issued the first round of dispositive motion rulings related to the first two bellwether cases, including dismissing the second bellwether case entirely and dismissing certain plaintiffs’ medical monitoring and risk of future disease claims, and granting summary judgment to the defendants on one plaintiff’s cholesterol injury claims.

The plaintiffs settled the first bellwether case in early 2020.

In June 2020, the court denied the plaintiffs’ motion to reconsider the dismissal of the second bellwether case.

The parties settled the first bellwether case in early 2020.

In June 2020, the court denied the plaintiffs’ motion to reconsider the dismissal of the second bellwether case, and the plaintiffs have appealed the decision to the state appellate court.

The court has since allowed the addition of another bellwether case.

The three bellwether trials are scheduled to begin in March 2021.

The parties are engaged in mediation in both the putative class action and the state court mass action.

The first of the three bellwether trials is scheduled to begin in March 2021.

The parties have engaged in mediation discussions in both the putative class action and the state court mass action cases.

Wolverine also filed a third-party complaint against 3M in a suit by the State of Michigan and intervenor townships that seeks to compel Wolverine to investigate and address contamination associated with its historic disposal activity.

3M filed an answer and counterclaims to Wolverine’s third-party complaint in June 2019.

In September and October 2019, the parties (including 3M as third-party defendant) engaged in mediation.

In September and October 2019, the parties (including 3M as third-

party defendant) engaged in mediation.

In December 2019, the State of Michigan, the intervening townships, and Wolverine announced that they had tentatively resolved the State and townships’ claims against Wolverine in exchange for a $ 70 million payment and certain future remediation measures by Wolverine.

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The defendants have moved to dismiss certain claims in the complaint, and the parties have begun discovery on the remaining claims.

In Alabama and Georgia, 3M is defending four state court cases, including three brought by municipal water utilities, relating to 3M’s sale of PFAS-containing products to carpet manufacturers in Georgia.

As a result of discussions among Georgia-Pacific, 3M and municipalities near Parchment, Georgia-Pacific and 3M have agreed to contribute to a fund of approximately $ 5 million to provide expanded municipal water service in the area.

In Alabama and Georgia, 3M, together with multiple co-defendants, is defending four state court cases, including three brought by municipal water utilities, relating to 3M’s sale of PFAS-containing products to carpet manufacturers in Georgia.

The plaintiffs in these cases allege that the carpet manufacturers improperly discharged PFAS into the surface water and groundwater, contaminating drinking water supplies of cities located downstream along the Coosa River, including Rome, Georgia and Centre and Gadsden, Alabama.

The three water utility cases remain in the early stages of litigation.

One state court case was brought by individuals asserting PFAS contamination by the Georgia carpet manufacturers and seeking economic damages and injunctive relief on behalf of a putative class of Rome and Floyd County water

This case has been removed to federal court where it remains in the early stages of litigation.

3M filed a motion to dismiss the putative class action in April 2020, which remains pending.

In Delaware, 3M is defending one putative class action brought by individuals alleging PFAS contamination of their water supply resulting from the operations of local metal plating facilities.

In California, 3M and other defendants are defending an action brought in federal court by Golden State Water Company, alleging PFAS contamination of certain wells located in its water systems.

The case is in early stages of litigation.

In Delaware, 3M, together with several co-defendants, is defending one putative class action brought by individuals alleging PFAS contamination of their water supply resulting from the operations of local metal plating facilities.

Plaintiffs allege that 3M supplied PFAS to the metal plating facilities.

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3M has filed a motion to dismiss the amended complaint.

In New Jersey, 3M is defending an action brought in federal court by Middlesex Water Company, alleging PFAS contamination of its water wells.

In New Jersey, 3M is a co-defendant in an action brought in federal court by Middlesex Water Company, alleging PFAS contamination of its water wells.

3M’s motion to transfer the case to the AFFF MDL was denied.

3M has moved to dismiss the complaint, and the case is currently in the early stages of discovery.

In addition, 3M is defending a case brought in state court by multiple individuals with private drinking water wells near Dupont and Solvay facilities that were allegedly supplied with PFAS by 3M.

3M has moved to dismiss the complaint, and the case is currently in discovery.

In addition, 3M, together with several co-defendants, is defending a case brought in state court by multiple individuals with private drinking water wells near DuPont and Solvay facilities that were allegedly supplied with PFAS by 3M.

Plaintiffs seek medical monitoring and damages.

This case has been removed to federal court, where it remains in early stages.

This case has been removed to federal court, and 3M has filed a motion to dismiss.

3M and other defendants are also defending two federal court cases brought by individuals who live near the DuPont and Solvay facilities, alleging personal injury caused by PFAS exposure.

Those cases are in early stages of litigation.

In September 2020, a federal court case was filed against 3M and other defendants on behalf of the Borough of Hopatcong, alleging general PFAS contamination of its public water supply.

In October 2018, 3M and other defendants, including DuPont and Chemours, were named in a putative class action in the U.S.

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In February 2020, the court denied 3M’s motion to transfer the case to the AFFF MDL.

The case is in early stages of litigation.

In West Virginia, 3M and other defendants are defending a state court action brought by Weirton Area Water Board that alleges PFAS contamination of local water supplies.

This case has been removed to federal court, where 3M has moved to dismiss the case, which remains in early stages of litigation.

Other PFAS-related Matters

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In addition, as part of its ongoing evaluation of regulatory compliance at its Cordova, Illinois facility, the Company discovered it had not fully characterized its PFAS discharge in its NPDES permit for the Cordova facility.

In November 2019, the Company disclosed this matter to the EPA, and in January 2020 disclosed this matter to the Illinois Environmental Protection Agency (IEPA).

The Company continues to work with the EPA and IEPA to address the discharge from the Cordova facility.

In November 2019, the Company disclosed

this matter to the EPA, and in January 2020 disclosed this matter to the Illinois Environmental Protection Agency (IEPA).

The Company continues to work with the EPA and IEPA to address these issues from the Cordova facility.

The Company is also reviewing operations at its other plants with similar manufacturing processes, such as the plant in Cottage Grove, Minnesota, to ensure those operations are in compliance with applicable environmental regulatory requirements and Company policies and procedures.

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In July 2020, the Company received an information request from MPCA for documents and information related to, among other matters, the Company’s compliance with the Clean Water Act at its Cottage Grove facility.

The Company is cooperating with this inquiry and will be producing documents and information in response to the request for information.

The Company is cooperating with this inquiry and is producing documents and information in response to the request for information.

The Company continues to work with the MPCA and EPA to address the discharges from the Cottage Grove facility.

Separately, in June 2020, the Company reported to EPA and MPCA that it had not fully complied with elements of the inspection, characterization and waste stream profile verification process of the Waste and Feedstream Analysis plan of its Resource Conservation and Recovery Act permit for its Cottage Grove incinerator.

Separately, in June 2020, the Company reported to EPA and MPCA that it had not fully complied with elements of the inspection, characterization and waste stream profile verification process of the Waste and Feedstream Analysis Plan (WAP/FAP) of its Resource Conservation and Recovery Act (RCRA) permit for its Cottage Grove incinerator.

In July 2020, the Company received an information request from MPCA related to the June 2020 disclosure, to which the Company responded in September 2020.

The Company continues to work with the MPCA to address WAP/FAP implementation issues disclosed in June 2020.

In February 2020, the Company received an information request from EPA for documents and information related to, among other matters, the Company’s compliance with the Clean Water Act at its facilities that manufacture, process and use PFAS, including the Decatur, Cordova and Cottage Grove facilities.

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The Company periodically examines whether the contingent liabilities related to the environmental matters and litigation described above are probable and estimable based on experience and developments in those matters.

During the six months ended June 30, 2020, the Company increased its accrual for PFAS-related other environmental liabilities by $ 43 million and made related payments of $ 106 million.

During the nine months ended September 30, 2020, the Company increased its accrual for PFAS-related other environmental liabilities by $ 41 million and made related payments of $ 111 million.

During the first quarter of 2019, the EPA issued its PFAS Action Plan and the Company settled the litigation with the Water Authority (both matters are described in more detail above).

The Company completed a comprehensive review with the assistance of environmental consultants and other experts regarding environmental matters and litigation related to historical PFAS manufacturing operations in Minnesota, Alabama, Gendorf Germany, and at four former landfills in Alabama.

Gendorf Germany;

and at four former landfills in Alabama.

As a result of these developments and of that review, the Company increased its accrual for “other environmental liabilities” by $ 235 million pre-tax (including the settlement with the Water Authority) in the first quarter of 2019.

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As previously disclosed, 3M has been engaged in mediation and resolution negotiations in multiple cases.

In addition, during the fourth quarter, the Company updated its assessment of environmental matters and litigation related to its historical PFAS manufacturing operations and expanded its evaluation of other 3M sites that may have used certain PFAS-containing materials and locations at which they were disposed.

In addition, during

the fourth quarter, the Company updated its assessment of environmental matters and litigation related to its historical PFAS manufacturing operations and expanded its evaluation of other 3M sites that may have used certain PFAS-containing materials and locations at which they were disposed.

As a result of these actions during the fourth quarter the Company recorded a pre-tax charge of $ 214 million.

As of June 30, 2020, the Company had recorded liabilities of $ 382 million for “other environmental liabilities.” The accruals represent the Company’s best estimate of the probable loss.

As of September 30, 2020, the Company had recorded liabilities of $ 375 million for “other environmental liabilities.” The accruals represent the Company’s best estimate of the probable loss.

The Company is not able to estimate a possible loss or range of loss in excess of the established accruals at this time.

As of June 30, 2020, the Company had recorded liabilities of $ 20 million for estimated non-PFAS related “environmental remediation” costs to clean up, treat, or remove hazardous substances at current or former 3M manufacturing or third-party sites.

As of September 30, 2020, the Company had recorded liabilities of $ 23 million for estimated non-PFAS related “environmental remediation” costs to clean up, treat, or remove hazardous substances at current or former 3M manufacturing or third-party sites.

The Company evaluates available facts with respect to each individual site each quarter and records liabilities for remediation costs on an undiscounted basis when they are probable and reasonably estimable, generally no later than the completion of feasibility studies or the Company’s commitment to a plan of action.

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The Company has both pre-1986 general and product liability occurrence coverage and post-1985 occurrence reported product liability and other environmental coverage for environmental matters and litigation.

As of June 30, 2020, the Company’s receivable for insurance recoveries related to the environmental matters and litigation was $ 8 million.

As of September 30, 2020, the Company’s receivable for insurance recoveries related to the environmental matters and litigation was $ 8 million.

Various factors could affect the timing and amount of recovery of this and future expected increases in the receivable, including (i) delays in or avoidance of payment by insurers;

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Product Liability Litigation

As of June 30, 2020, the Company was a named defendant in 19 lawsuits in the United States involving 23 plaintiffs and one Canadian punitive class action with a single named plaintiff, alleging that the Bair Hugger™ patient warming system caused a surgical site infection.

As of September 30, 2020, the Company was a named defendant in 22 lawsuits in the United States involving 25 plaintiffs and one Canadian putative class action with a single named plaintiff, alleging that the Bair Hugger™ patient warming system caused a surgical site infection.

As previously disclosed, 3M had been a named defendant in lawsuits in federal courts involving over 5,000 plaintiffs.

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In July 2019, the court excluded several of the plaintiffs’ causation experts, and granted summary judgment for 3M in all cases pending at that time in the MDL.

Plaintiffs have appealed that decision to the U.S.

Plaintiffs have

appealed that decision to the U.S.

Court of Appeals for the Eighth Circuit.

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The plaintiff seeks various damages, including medical and related expenses, loss of income, and punitive damages.

As of June 30, 2020, the Company is a named defendant in approximately 2,853 lawsuits (including 14 putative class actions) in various state and federal courts that purport to represent approximately 11,650 individual claimants making similar allegations.

As of September 30, 2020, the Company is a named defendant in approximately 3,000 lawsuits (including 14 putative class actions) in various state and federal courts that purport to represent approximately 12,000 individual claimants making similar allegations.

In April 2019, the U.S.

Judicial Panel on Multidistrict Litigation granted motions to transfer and consolidate all cases pending in federal courts to the U.S.

District Court for the Northern District of Florida to be managed

in a multi-district litigation (MDL) proceeding to centralize pre-trial proceedings.

District Court for the Northern District of Florida to be managed in a multi-district litigation (MDL) proceeding to centralize pre-trial proceedings.

Discovery is underway.

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In July 2020, based on the current record, the court granted the plaintiffs’ summary judgment motion and denied the defendants’ summary judgment motion, ruling that plaintiffs’ claims are not barred by the government contractor defense.

The court denied the Company’s request to immediately certify the summary judgment ruling for appeal to the U.S.

Court of Appeals for the Eleventh Circuit.

The first bellwether case is scheduled for April 2021.

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In August 2019, an individual plaintiff filed a similar putative securities class action in the same district.

Plaintiffs allege that defendants made false and misleading statements regarding 3M's exposure to liability associated with PFAS, and bring claims for damages under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 against all defendants, and under Section 20(a) of the Securities and Exchange Act of 1934 against the individual defendants.

20(a) of the Securities and Exchange Act of 1934 against the individual defendants.

In October 2019, the court consolidated the securities class actions and appointed a group of lead plaintiffs.

In January 2020, defendants filed a motion to transfer venue to the U.S.

In January 2020, the defendants filed a motion to transfer venue to the U.S.

District Court for the District of Minnesota.

In August 2020, the court denied the motion to transfer venue, and in September 2020, the defendants filed a petition for writ of mandamus to the U.S.

Court of Appeals for the Third Circuit.

The suit is in the early stages of litigation.

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The derivative lawsuits rely on similar factual allegations as the putative securities class action discussed above.

Plaintiffs have agreed to stay these cases pending a ruling on a motion to dismiss the securities class action.

The plaintiffs have agreed to stay these cases pending a ruling on a motion to dismiss the securities class action.

In October 2020, the derivative action pending in the U.S.

District Court for the District of New Jersey was dismissed, without prejudice, for failure to serve the complaint within the required time period.

In August 2020, an individual shareholder who had previously submitted a books and records demand filed an additional follow-on derivative lawsuit in the U.S.

District Court for the District of New Jersey against 3M and several of its current and former executives and directors.

This derivative lawsuit also relies on similar factual allegations as the putative securities class action discussed above.

Federal False Claims Act / Qui Tam Litigation

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Court of Appeals for the Ninth Circuit reversed and remanded the case to the district court for further proceedings.

The district court has ordered a stay of the proceedings pending a status conference in August 2020.

The district court has ordered a stay of the proceedings pending a further status conference in November 2020.

Separately, in June 2019, following discovery, the district court in the second case (the “Hartpence case”) entered summary judgment in the KCI Defendants’ favor on all of the relator-plaintiff’s claims.

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The appellate court’s opinion remains pending.

No liability has been recorded for these matters because the Company believes that any such liability is not probable and estimable at this time.

For the matters described in this section for which a liability has been recorded, the amount recorded is not material to the Company’s consolidated results of operations or financial condition.

Compliance Matter

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Awards may be issued in the form of incentive stock options, nonqualified stock options, progressive stock options, stock appreciation rights, restricted stock, restricted stock units, other stock awards, and performance units and performance shares.

As of June 30, 2020, the remaining shares available for grant under the LTIP Program are 15.7 million.

As of September 30, 2020, the remaining shares available for grant under the LTIP Program are 16 million.

The Company’s annual stock option and restricted stock unit grant is made in February to provide a strong and immediate link between the performance of individuals during the preceding year and the size of their annual stock compensation grants.

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Amounts recognized in the financial statements with respect to stock-based compensation programs, which include stock options, restricted stock, restricted stock units, performance shares and the General Employees’ Stock Purchase Plan (GESPP), are provided in the following table.

Capitalized stock-based compensation amounts were not material for the three and six months ended June 30, 2020 and 2019.

Capitalized stock-based compensation amounts were not material for the three and nine months ended September 30, 2020 and 2019.

Stock-Based Compensation Expense

Three months ended

Six months ended

Nine months ended

September 30,

Cost of sales

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Stock Option Program

The following table summarizes stock option activity during the six months ended June 30, 2020:

The following table summarizes stock option activity during the nine months ended September 30, 2020:

Intrinsic Value

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Stock options vest over a period from one year to three years with the expiration date at 10 years from date of grant.

As of June 30, 2020, there was $ 89 million of compensation expense that has yet to be recognized related to non-vested stock option based awards.

As of September 30, 2020, there was $ 71 million of compensation expense that has yet to be recognized related to non-vested stock option based awards.

This expense is expected to be recognized over the remaining weighted-average vesting period of 21 months .

The total intrinsic values of stock options exercised were $ 127 million and $ 341 million during the six months ended June 30, 2020 and 2019, respectively.

Cash received from options exercised was $ 145 million and $ 270 million for the six months ended June 30, 2020 and 2019, respectively.

The Company’s actual tax benefits realized for the tax deductions related to the exercise of employee stock options were $ 27 million and $ 72 million for the six months ended June 30, 2020 and 2019, respectively.

The total intrinsic values of stock options exercised were $ 160 million and $ 368 million during the nine months ended September 30, 2020 and 2019, respectively.

Cash received from options exercised was $ 193 million and $ 304 million for the nine months ended September 30, 2020 and 2019, respectively.

The Company’s actual tax benefits realized for the tax deductions related to the exercise of employee stock options were $ 34 million and $ 77 million for the nine months ended September 30, 2020 and 2019, respectively.

For the primary 2020 annual stock option grant, the weighted average fair value at the date of grant was calculated using the Black-Scholes option-pricing model and the assumptions that follow.

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Restricted Stock and Restricted Stock Units

The following table summarizes restricted stock and restricted stock unit activity during the six months ended June 30, 2020:

The following table summarizes restricted stock and restricted stock unit activity during the nine months ended September 30, 2020:

(Shares in thousands)

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As of January 1

As of June 30

As of June 30, 2020, there was $ 111 million of compensation expense that has yet to be recognized related to non-vested restricted stock and restricted stock units.

As of September 30

As of September 30, 2020, there was $ 96 million of compensation expense that has yet to be recognized related to non-vested restricted stock and restricted stock units.

This expense is expected to be recognized over the remaining weighted-average vesting period of 24 months .

The total fair value of restricted stock and restricted stock units that vested during the six months ended June 30, 2020 and 2019 was $ 89 million and $ 135 million, respectively.

The Company’s actual tax benefits realized for the tax deductions related to the vesting of restricted stock and restricted stock units was $ 17 million and $ 26 million for the six months ended June 30, 2020 and 2019, respectively.

The total fair value of restricted stock and restricted stock units that vested during the nine months ended September 30, 2020 and 2019 was $ 89 million and $ 136 million, respectively.

The Company’s actual tax benefits realized for the tax deductions related to the vesting of restricted stock and restricted stock units was $ 17 million and $ 26 million for the nine months ended September 30, 2020 and 2019, respectively.

Restricted stock units granted generally vest three years following the grant date assuming continued employment.

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Weighted average performance shares whose performance period is complete are included in computation of diluted earnings per share.

The following table summarizes performance share activity during the six months ended June 30, 2020:

The following table summarizes performance share activity during the nine months ended September 30, 2020:

(Shares in thousands)

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Performance change

As of June 30

As of June 30, 2020, there was $ 33 million of compensation expense that has yet to be recognized related to performance shares.

As of September 30

As of September 30, 2020, there was $ 24 million of compensation expense that has yet to be recognized related to performance shares.

This expense is expected to be recognized over the remaining weighted-average earnings period of 20 months .

The total fair value of performance shares that were distributed were $ 35 million and $ 45 million for the six months ended June 30, 2020 and 2019, respectively.

The Company’s actual tax benefits realized for the tax deductions related to the distribution of performance shares were $ 7 million and $ 9 million for the six months ended June 30, 2020 and 2019, respectively.

The total fair value of performance shares that were distributed were $ 35 million and $ 45 million for the nine months ended September 30, 2020 and 2019, respectively.

The Company’s actual tax benefits realized for the tax deductions related to the distribution of performance shares were $ 7 million and $ 9 million for the nine months ended September 30, 2020 and 2019, respectively.

Business Segments

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Three months ended

Six months ended

Nine months ended

September 30,

Net Sales (Millions)

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pension, stock-based compensation) that the Company may choose not to allocate directly to its business segments and is disclosed as “other corporate expense-net”.

Additionally, Corporate and

Unallocated includes special items such as significant litigation-related charges/benefits, gain/loss on sale of businesses (see Note 3), and divestiture-related restructuring costs (see Note 5).

Corporate and Unallocated also includes sales, costs, and income from contract manufacturing, transition services and other arrangements with the acquirer of the Communication Markets Division following its 2018 divestiture through 2019.

Additionally, Corporate and Unallocated includes special items such as significant litigation-related charges/benefits, gain/loss on sale of businesses (see Note 3), and divestiture-related restructuring costs (see Note 5).

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements