What changed in this filing

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Item 1. Financial Statements

2021-04-27 compared with 2020-10-27 · 453 added, 701 removed, 1164 unchanged (50% of the section changed)

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Three months ended

Nine months ended

September 30,

(Millions, except per share amounts)

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Three months ended

Nine months ended

September 30,

Net income including noncontrolling interest

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Consolidated Balance Sheet

September 30,

(Dollars in millions, except per share amount)

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944,033,056 shares issued

Shares outstanding - September 30, 2020:

Shares outstanding - March 31, 2021:

Shares outstanding - December 31, 2020:

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Treasury stock, at cost:

Shares at September 30, 2020:

Shares at March 31, 2021:

Shares at December 31, 2020:

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Consolidated Statement of Cash Flows

Nine months ended

September 30,

Three months ended

Cash Flows from Operating Activities

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Deferred income taxes

Loss on deconsolidation of Venezuelan subsidiary

Changes in assets and liabilities

33 unchanged sentences

This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Annual Report on Form 10-K.

As described in Note 16, effective in the second quarter of 2020, the measure of segment operating performance used by 3M’s chief operating decision maker changed and, as a result, the Company’s disclosed measure of segment profit/loss has been updated.

Also, effective in the first quarter of 2020, the Company changed its business segment reporting in its continuing effort to improve the alignment of businesses around markets and customers.

Additionally, the Company consolidated the way it presents geographic area net sales by providing an aggregate Americas geographic region (combining former United States and Latin America and Canada areas).

Effective in the first quarter of 2021, 3M made the following changes.

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

Use of estimates

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

The Company considered the coronavirus (COVID-19) related impacts on its estimates, as appropriate, within its consolidated financial statements and there may be changes to those estimates in future periods.

3M believes that the accounting estimates are appropriate after giving consideration to the increased uncertainties surrounding the severity and duration of the COVID-19 pandemic.

Such estimates and assumptions are subject to inherent uncertainties which may result in actual amounts differing from these estimates.

Changes to Significant Accounting Policies

The following significant accounting policies have been added or changed as applicable since the Company’s 2019 Annual Report on Form 10-K as a result of adoption of new accounting pronouncements as described in the “New Accounting Pronouncements” section.

Accounts receivable and allowances :

Trade accounts receivable are recorded at the invoiced amount and do not bear interest.

The Company maintains allowances for bad debts, cash discounts, and various other items.

The allowances for bad debts and cash discounts are based on the best estimate of the amount of expected credit losses in existing accounts receivable and anticipated cash discounts.

The Company determines the allowances based on historical write-off experience by industry and regional economic data, current expectations of future credit losses, and historical cash discounts.

The Company reviews the allowances monthly.

The allowances for bad debts as well as the provision for credit losses, write-off activity and recoveries for the periods presented are not material.

The Company does not have any significant off-balance-sheet credit exposure related to its customers.

The Company has long-term customer receivables that do not have significant credit risk, and the origination dates of which are typically not older than five years .

These long-term receivables are subject to an allowance methodology similar to other receivables.

Marketable securities:

Marketable securities include available-for-sale debt securities and are recorded at fair value.

Cost of securities sold use the first in, first out (FIFO) method.

The classification of marketable securities as current or non-current is based on the availability for use in current operations.

3M reviews impairments associated with its marketable securities in accordance with the measurement guidance provided by ASC 320, Investments-Debt Securities and ASC 326-30, Available-for-Sale Debt Securities , when determining whether a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors.

An impairment relating to credit losses is recorded through an allowance for credit losses.

The allowance is limited by the amount that the fair value is less than the amortized cost basis.

A change in the allowance for credit losses is recorded into earnings in the period of the

Any impairment that has not been recorded through an allowance for credit losses is recorded through accumulated other comprehensive income as a component of shareholders’ equity.

The factors considered in determining whether a credit loss exists can include the extent to which fair value is less than the amortized cost basis, changes in the credit quality of the underlying loan obligors, credit ratings actions, as well as other factors.

When a credit loss exists, the Company compares the present value of cash flows expected to be collected from the debt security with the amortized cost basis of the security to determine what allowance amount, if any, should be recorded.

Amounts are reclassified out of accumulated other comprehensive income and into earnings upon sale or a change in the portions of impairment related to credit losses and not related to credit losses.

Property, plant and equipment:

3M’s accounting policy with respect to property, plant and equipment, is disclosed in the Company’s notes to consolidated financial statements included in its most recent Annual Report on Form 10-K.

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

and associated unpaid liabilities and grant proceeds receivable are considered non-cash changes in such balances for purposes of preparation of statement of cash flows.

Foreign Currency Translation

Local currencies generally are considered the functional currencies outside the United States with the exception of 3M’s subsidiaries in Argentina, the economy of which was considered highly inflationary beginning in 2018, and accordingly the financial statements of these subsidiaries are remeasured as if their functional currency is that of their parent.

Assets and liabilities for operations in local-currency environments are translated at month-end exchange rates of the period reported.

Income and expense items are translated at average monthly currency exchange rates in effect during the period.

Cumulative translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity.

3M had a consolidated subsidiary in Venezuela, the financial statements of which were remeasured as if its functional currency were that of its parent because Venezuela’s economic environment is considered highly inflationary.

The operating income of this subsidiary was immaterial as a percent of 3M’s consolidated operating income for the periods presented.

In light of circumstances, including the country’s unstable environment and heightened unrest leading to sustained lack of demand, and expectation that these circumstances will continue for the foreseeable future, during May 2019, 3M concluded it no longer met the criteria of control in order to continue consolidating its Venezuelan operations.

As a result, as of May 31, 2019, the Company began reflecting its interest in the Venezuelan subsidiary as an equity investment that does not have a readily determinable fair value.

This resulted in a pre-tax charge of $ 162 million within other expense (income) in the second quarter of 2019.

The charge primarily relates to $ 144 million of foreign currency translation losses associated with foreign currency movements before Venezuela was accounted for as a highly inflationary economy and pension elements previously included in accumulated other comprehensive loss along with write-down of intercompany receivable and investment balances associated with this subsidiary.

Beginning May 31, 2019, 3M’s consolidated balance sheets and statements of operations no longer include the Venezuelan entity’s operations other than an immaterial equity investment and associated loss or income thereon largely only to the extent, if any, that 3M provides support or materials and receives funding or dividends.

● Change in accounting principle for net periodic pension and postretirement plan cost.

See below for additional information.

● Change in measure of segment operating performance used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income).

See additional information in Note 16.

● Change in alignment of certain products within 3M’s Consumer business segment—creating the Consumer Health and Safety Division.

See additional information in Note 16.

Change in Accounting Principle for Determining Net Periodic Pension and Postretirement Plan Cost

In the first quarter of 2021, 3M changed the method it uses to calculate the market-related value of fixed income securities included in its pension and other postretirement plan assets.

The market-related value is used to determine the expected return on plan assets and the amortization of net unamortized actuarial gains or losses expense components of net periodic benefit cost.

The Company previously used the calculated value approach for all plan assets, deferring over three years the impact on these amounts of asset gains or losses that differed from expected returns.

3M changed to the fair value approach for calculating market-related value for the fixed income class of plan assets, which does not involve deferring the impact of excess plan asset gains or losses in the determination of these two components of net periodic benefit cost.

3M considers the use of the fair value approach preferrable to the calculated value approach as it results in a more current reflection of impacts of changes in value of these plan assets in the determination of net periodic benefit cost.

Additionally, given the plans’ liability-driven investment strategy whereby the changes in value of the fixed income plan assets should offset changes in the value of the plans’ liabilities, this approach more closely aligns the expected return on plan assets expense component with the value reflected in the plans’ funded status.

This change was applied retrospectively to all periods presented within 3M’s financial statements.

The change did not impact consolidated operating income or net cash provided by operating activities but did impact the previously reported portion of pension and postretirement net periodic benefit cost (benefit) that was included within non-operating other expense (income) along with related consolidated income items such as net income and earnings per share.

Other impacts included related changes to previously reported consolidated other comprehensive income, retained earnings, accumulated other comprehensive income (loss), and associated line items within the determination of net cash provided by operating activities.

For classes of plan assets other than fixed income investments, the Company continues to use the calculated value approach to determine their market-related value.

The adoption of this change impacted previously reported amounts included herein as indicated in the tables below.

Consolidated Statement of Income

Three months ended

March 31, 2020

(Millions, except per share amounts)

Other expense (income), net

Income before income taxes

Provision for income taxes

Income of consolidated group

Net income including noncontrolling interest

Net income attributable to 3M

Earnings per share attributable to 3M common shareholders — basic

Earnings per share attributable to 3M common shareholders — diluted

Consolidated Statement of Comprehensive Income

Three months ended

March 31, 2020

Net income including noncontrolling interest

Other comprehensive income (loss), net of tax:

Defined benefit pension and postretirement plans adjustment

Total other comprehensive income (loss), net of tax

Comprehensive income (loss) including noncontrolling interest

Comprehensive income (loss) attributable to 3M

Consolidated Balance Sheet

As of December 31, 2020

Retained Earnings

Accumulated other comprehensive income (loss)

Consolidated Statement of Cash Flows

Three months ended

March 31, 2020

Net income including noncontrolling interest

Company pension and postretirement expense

The cumulative adjustment as of January 1, 2020, the beginning of the earliest period presented in the consolidated financial statements included herein, was a $ 5 million reduction to each of retained earnings and accumulated other comprehensive loss.

Earnings Per Share

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

options for the three months ended March 31, 2021 and 2020, respectively).

The computations for basic and diluted earnings per share follow:

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Three months ended

Nine months ended

September 30,

(Amounts in millions, except per share amounts)

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New Accounting Pronouncements

See the Company’s 2019 Annual Report on Form 10-K for a more detailed discussion of the standards in the tables that follow, except for those pronouncements issued subsequent to the most recent Form 10-K filing date for which separate, more detailed discussion is provided below as applicable.

Refer to Note 1 in 3M’s 2020 Annual Report on Form 10-K for a more detailed discussion of the standards in the tables that follow, except for those pronouncements issued subsequent to the most recent Form 10-K filing date for which separate, more detailed discussion is provided below as applicable.

Standards Adopted During the Current Fiscal Year

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Impact and Other Matters

2016-13, Measurement of Credit Losses on Financial Instruments (in conjunction with ASU Nos.

2018-19, 2019-04, 2019-05, 2019-11, and 2020-03)

Introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities.

Amends the current other-than-temporary impairment model for available-for-sale debt securities.

For such securities with unrealized losses, entities will still consider if a portion of any impairment is related only to credit losses and therefore recognized as a reduction in income.

January 1, 2020

Adopted using the modified retrospective approach.

Adoption of this ASU did not have a material impact due to the nature and extent of 3M’s financial instruments in scope for this ASU (primarily accounts receivable) and the historical, current and expected credit quality of its customers as of the date of adoption.

See Note 1 Significant Accounting Policies for updated applicable accounting policies.

2018-13, Changes to the Disclosure Requirements for Fair Value Measurement

Eliminates, amends, and adds disclosure requirements for fair value measurements, primarily related to Level 3 fair value measurements.

January 1, 2020

This ASU relates to disclosure only.

The nature and extent of 3M’s financial instruments in scope for this ASU (primarily Level 3 fair value measurements) are immaterial to 3M’s consolidated results of operations and financial condition.

2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

Aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service arrangement (i.e.

hosting arrangement) with the guidance on capitalizing costs in ASC 350-40, Internal-Use Software

January 1, 2020

Adopted on a prospective basis.

Relevant capitalizable costs are included in prepaid expenses or other non-current asset, as applicable, prospectively beginning in 2020.

Standards Issued and Not Yet Adopted

Relevant Description

Effective Date for 3M

Impact and Other Matters

2019-12, Simplifying the Accounting for Income Taxes (Topic 740)

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January 1, 2021

3M previously disclosed it does not expect this ASU to have a material impact on its consolidated results of operations and financial condition.

Adoption of this ASU did not have a material impact on 3M’s consolidated results of operations and financial condition.

2020-01, Clarifying the Interactions between Topic 321, Investments—Equity Securities, Topic 323, Investments—Equity Method and Joint Ventures, and Topic 815, Derivatives and Hedging

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January 1, 2021

3M previously disclosed it does not expect this ASU to have a material impact on its consolidated results of operations and financial condition, but will apply such guidance, where applicable, to future circumstances.

Relevant New Standards Issued Subsequent to Most Recent Annual Report

In March 2020, the FASB issued ASU No.

Adoption of this ASU did not have a material impact on 3M’s consolidated results of operations and financial condition.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This ASU provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as LIBOR which is being phased out in 2021, to alternate reference rates, such as SOFR.

The standard was effective upon issuance and allowed application to contract changes as early as January 1, 2020.

The provisions have impact as contract modifications and other changes occur while LIBOR is phased out.

The Company is in the process of evaluating the optional relief guidance provided within this ASU and is also reviewing its debt securities, bank facilities, derivative instruments and commercial contracts that utilize LIBOR as the reference rate.

3M will continue its assessment and monitor regulatory developments during the LIBOR transition period.

Facilitation of the Effects of Reference Rate Reform on

Financial Reporting and ASU No.

2021-01, Reference Rate Reform (Topic 848):

Provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as LIBOR which is being phased out beginning at the end of 2021, to alternate reference rates, such as SOFR.

Effective upon ASUs’ issuances in 2020 & 2021

With the beginning of the phase out of LIBOR at the end of 2021, 3M continues to evaluate commercial contracts that may utilize LIBOR and will continue to monitor developments during the LIBOR transition period.

Contract Balances:

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

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.

Deferred revenue (current portion) as of March 31, 2021 and December 31, 2020 was $ 482 million and $ 498 million, respectively.

Approximately $ 180 million of the December 31, 2020 balance was recognized as revenue during the three months ended March 31, 2021, while approximately $ 160 million of the December 31, 2019 balance was recognized as revenue during the three months ended March 31, 2020.

Operating Lease Revenue:

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.

Net sales includes rental revenue from durable medical devices as part of operating lease arrangements (reported within the Medical Solutions Division), which was $ 140 million and $ 142 million for the three months ended March 31, 2021 and 2020, respectively.

Disaggregated revenue information:

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Three months ended

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September 30,

Net Sales (Millions)

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Total Health Care Business Group

Consumer Health Care

Consumer Health and Safety

Home Improvement

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Total Company

Three months ended September 30, 2020

Net Sales (Millions)

Europe, Middle East and Africa

Other Unallocated

Safety and Industrial

Transportation and Electronics

Corporate and Unallocated

Elimination of Dual Credit

Total Company

Nine months ended September 30, 2020

Net Sales (Millions)

Europe, Middle East and Africa

Other Unallocated

Safety and Industrial

Transportation and Electronics

Corporate and Unallocated

Elimination of Dual Credit

Total Company

Three months ended September 30, 2019

Three months ended March 31, 2021

Net Sales (Millions)

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Total Company

Nine months ended September 30, 2019

Three months ended March 31, 2020

Net Sales (Millions)

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Total Company

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.

Americas included United States net sales of $ 3.6 billion and $ 3.4 billion for the three months ended March 31, 2021 and 2020, respectively.

Acquisitions and Divestitures

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2021 acquisitions:

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

There were no acquisitions that closed during the three months ended March 31, 2021.

2020 acquisitions:

In February 2019, 3M completed the acquisition of the technology business of M*Modal for $ 0.7 billion of cash, net of cash acquired, and assumption of $ 0.3 billion of M*Modal’s debt.

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 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.

In October 2019, the Company completed the acquisition of all of the ownership interests of Acelity Inc.

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 $ 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 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.

Acelity is reported within the Company’s Health Care business.

There were no acquisitions that closed during the year ended December 31, 2020.

Divestitures:

3M may divest certain businesses from time to time based upon review of the Company’s portfolio considering, among other items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders.

As discussed in Note 16 (Business Segments), gains/losses on sale of businesses are reflected in Corporate and Unallocated.

2021 divestitures:

In January 2020, 3M completed the sale of its advanced ballistic-protection business, formerly part of the Transportation and Electronics business, to Avon Rubber p.l.c for $ 86 million in cash and recognized certain contingent consideration from the outcome of pending tenders.

Further contingent consideration of less than $ 25 million may be recognized depending on outcomes in the future.

The business, with annual sales of approximately $ 85 million, consists of ballistic helmets, body armor, flat armor and related helmet-attachment products serving government and law enforcement.

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).

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.

The divested business had annual sales of approximately $ 380 million.

3M retained its transdermal drug delivery components business.

3M reflected a pre-tax gain of $ 387 million as a result of the divestiture.

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 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.

There were no divestitures that closed during the three months ended March 31, 2021.

2020 divestitures:

During 2019, as described in Note 3 in 3M’s 2019 Annual Report on Form 10-K, the Company divested a number of businesses including:

certain oral care technology comprising a business and the gas and flame detection business.

3M also reflected an earnout on a previous divestiture.

During 2020, as described in Note 3 in 3M’s 2020 Annual Report on Form 10-K, the Company divested its advanced ballistic-protection business, substantially all of its drug delivery business, and a small dermatology products business.

Operating income and held for sale amounts :

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:

Property, plant and equipment

Intangible assets

In addition, approximately $ 30 million of goodwill was estimated to be attributable to disposal groups classified as held-for-sale as of December 31, 2019 based upon relative fair value.

The amounts above have not been segregated and are classified within the existing corresponding line items on the Company’s consolidated balance sheet.

The aggregate operating income of applicable businesses held for sale with respect to the first three months of 2020 was $ 25 million.

Goodwill and Intangible Assets

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.

There was no goodwill recorded from acquisitions during the first three months of 2021.

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 September 30, 2020, follow:

The goodwill balance by business segment as of December 31, 2020 and March 31, 2021, follow:

Safety and Industrial

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Balance as of December 31, 2020

Acquisition activity

Divestiture activity

Translation and other

Balance as of September 30, 2020

Balance as of March 31, 2021

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.

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For any product changes that resulted in reporting unit changes, the Company applied the relative fair value method to determine the impact on goodwill of the associated reporting units, the results of which were immaterial.

In conjunction with the change in segment reporting, 3M completed an assessment indicating no goodwill impairment existed as a result of this new segment structure.

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 September 30, 2020, and December 31, 2019, follow:

September 30,

The carrying amount and accumulated amortization of acquired finite-lived intangible assets, in addition to the balance of non-amortizable intangible assets, as of March 31, 2021 and December 31, 2020, follow:

Customer related intangible assets

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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 nine months ended September 30, 2020 and 2019 follows:

Amortization expense for the three months ended March 31, 2021 and 2020 follows:

Three months ended

Nine months ended

September 30,

Amortization expense

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

Expected amortization expense for acquired amortizable intangible assets recorded as of March 31, 2021:

Amortization expense

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3M expenses the costs incurred to renew or extend the term of intangible assets.

Restructuring Actions

2020 Restructuring Actions:

Divestiture-Related Restructuring

During the second quarter of 2020, following the divestiture of substantially all of the drug delivery business (see Note 3) management approved and committed to undertake certain restructuring actions addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business.

These actions affected approximately 1,300 positions worldwide and resulted in a second quarter 2020 pre-tax charge of $ 55 million, within Corporate and Unallocated.

The divestiture-related restructuring actions were recorded in the income statement as follows:

Second Quarter 2020

Cost of sales

Selling, general and administrative expenses

Research, development and related expenses

Total operating income impact

Divestiture-related restructuring actions, including cash and non-cash impacts, follow:

Employee-Related

Asset-Related and Other

Expense incurred in the second quarter of 2020

Non-cash changes

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.

Other Restructuring

Additionally, in the second quarter of 2020, management approved and committed to undertake certain restructuring actions addressing structural enterprise costs and operations in certain end markets as a result of the COVID-19 pandemic and related economic impacts.

These actions affected approximately 400 positions worldwide and resulted in a second quarter 2020 pre-tax charge of $ 58 million.

The restructuring charges were recorded in the income statement as follows:

Second Quarter 2020

Restructuring Actions and Exit Activities

2020 and 2021 Restructuring Actions:

Operational/Marketing Capability Restructuring:

As described in Note 5 in 3M’s 2020 Annual Report on Form 10-K, in late 2020, 3M announced it would undertake certain actions to further enhance its operations and marketing capabilities to take advantage of certain global market trends while de-prioritizing investments in slower-growth end markets.

During the fourth quarter of 2020, management approved and committed to undertake associated restructuring actions impacting approximately 2,100 positions resulting in a pre-tax charge of $ 137 million.

In the first quarter of 2021, management approved and committed to undertake additional actions under this initiative resulting in a pre-tax charge of $ 14 million.

Remaining activities related to the restructuring actions approved and committed under this initiative are expected to be largely completed through 2021.

3M is planning further actions under this initiative throughout 2021.

This aggregate initiative, spanning 2020 and 2021, is expected to impact approximately 2,900 positions worldwide with an expected pre-tax charge of $ 250 to $ 300 million.

The related first quarter 2021 restructuring charges were recorded in the income statement as follows:

First Quarter 2021

Cost of sales

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Total operating income impact

The business segment operating income impact of these restructuring charges are summarized by business segment as follows:

Second Quarter 2020

The business segment operating income impact of these restructuring charges is summarized as follows:

First Quarter 2021

Employee-Related

Asset-Related

Safety and Industrial

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Employee-Related

Asset-Related

Expense incurred in the second quarter of 2020

Non-cash changes

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.

2019 Restructuring Actions:

As described in Note 5 in 3M’s 2019 Annual Report on Form 10-K, during the second quarter of 2019, in light of slower than expected 2019 sales, management approved and committed to undertake certain restructuring actions.

These actions impacted approximately 2,000 positions worldwide, including attrition.

The Company recorded second quarter 2019 pre-tax charges of $ 148 million.

The restructuring charges were recorded in the income statement as follows:

Second Quarter 2019

Cost of sales

Selling, general and administrative expenses

Research, development and related expenses

Total operating income impact

Other expense (income), net

Total income before taxes impact

The operating income impact of these restructuring charges are summarized by business segment as follows:

Second Quarter 2019

Accrued restructuring action balances as of December 31, 2020

Incremental expense incurred in the first quarter of 2021

Cash payments

Accrued restructuring action balances as of March 31, 2021

Divestiture-Related Restructuring

As described in Note 5 in 3M’s 2020 Annual Report on Form 10-K, during the second quarter of 2020, following the divestiture of substantially all of the drug delivery business, management approved and committed to undertake certain restructuring actions addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business.

These actions affected approximately 1,300 positions worldwide and resulted in a second quarter 2020 pre-tax charge of $ 55 million, within Corporate and Unallocated.

Divestiture-related restructuring actions, including cash and non-cash impacts, follow:

Employee-Related

Asset-Related

Safety and Industrial

Transportation and Electronics

Corporate and Unallocated

Total Operating Expense

The second quarter 2019 actions included a voluntary early retirement incentive (further discussed in Note 11), the charge for which is included in other expense (income), net above.

Restructuring action activity from 2019, which includes both second and fourth quarter actions, including cash and non-cash impacts, follow:

Asset-Related and Other

Accrued divestiture-related restructuring action balances as of December 31, 2020

Cash payments

Accrued divestiture-related restructuring action balances as of March 31, 2021

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

Other Restructuring

As described in Note 5 in 3M’s 2020 Annual Report on Form 10-K, in the second quarter of 2020, management approved and committed to undertake certain restructuring actions addressing structural enterprise costs and operations in certain end markets as a result of the COVID-19 pandemic and related economic impacts.

These actions affected approximately 400 positions worldwide and resulted in a second quarter 2020 pre-tax charge of $ 58 million.

Restructuring actions, including cash and non-cash impacts, follow:

Employee-Related

1 unchanged sentence

Cash payments

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.

Accrued restructuring action balances as of March 31, 2021

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

Supplemental Income Statement Information

1 unchanged sentence

Three months ended

Nine months ended

September 30,

Interest expense

1 unchanged sentence

Pension and postretirement net periodic benefit cost (benefit)

Loss on deconsolidation of Venezuelan subsidiary

Interest expense includes an early debt extinguishment pre-tax charge of approximately $ 11 million in the first quarter of 2021.

Pension and postretirement net periodic benefit costs described in the table above include all components of defined benefit plan net periodic benefit costs except service cost, which is reported in various operating expense lines.

Pension and postretirement net periodic benefit costs include a second quarter 2019 charge related to the voluntary early retirement incentive program announced in May 2019.

Refer to Note 11 for additional details on the voluntary early retirement incentive program in addition to the components of pension and postretirement net periodic benefit costs.

In the second quarter of 2019, the Company incurred a charge of $ 162 million related to the deconsolidation of its Venezuelan subsidiary.

Refer to Note 1 for additional details.

Refer to Note 11 for additional details on the components of pension and postretirement net periodic benefit costs.

Supplemental Equity and Comprehensive Income Information

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.

Cash dividends declared and paid totaled $ 1.48 and $ 1.47 per share for the first quarter 2021 and 2020, respectively.

Consolidated Changes in Equity

Three months ended September 30, 2020

3M Company Shareholders

Comprehensive

Balance at June 30, 2020

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

Defined benefit pension and post-retirement plans adjustment

Cash flow hedging instruments

Total other comprehensive income (loss), net of tax

Dividends declared

Stock-based compensation

Reacquired stock

Issuances pursuant to stock option and benefit plans

Balance at September 30, 2020

Nine months ended September 30, 2020

Three months ended March 31, 2021

3M Company Shareholders

7 unchanged sentences

Dividends declared

Purchase of subsidiary shares

Stock-based compensation

1 unchanged sentence

Issuances pursuant to stock option and benefit plans

Balance at September 30, 2020

Three months ended September 30, 2019

3M Company Shareholders

Comprehensive

Balance at June 30, 2019

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

Defined benefit pension and post-retirement plans adjustment

Cash flow hedging instruments

Total other comprehensive income (loss), net of tax

Dividends declared

Stock-based compensation

Reacquired stock

Issuances pursuant to stock option and benefit plans

Balance at September 30, 2019

Nine months ended September 30, 2019

Balance at March 31, 2021

Three months ended March 31, 2020

3M Company Shareholders

1 unchanged sentence

Balance at December 31, 2019

Impact of adoption of ASU No.

Other comprehensive income (loss), net of tax:

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Issuances pursuant to stock option and benefit plans

Balance at September 30, 2019

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

Balance at March 31, 2020

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

Three months ended September 30, 2020

Defined Benefit

Postretirement

Comprehensive

Balance at June 30, 2020, net of tax:

Other comprehensive income (loss), before tax:

Amounts before reclassifications

Amounts reclassified out

Total other comprehensive income (loss), before tax

Total other comprehensive income (loss), net of tax

Balance at September 30, 2020, net of tax:

Nine months ended September 30, 2020

Three months ended March 31, 2021

Defined Benefit

7 unchanged sentences

Total other comprehensive income (loss), net of tax

Balance at September 30, 2020, net of tax:

Three months ended September 30, 2019

Defined Benefit

Postretirement

Comprehensive

Balance at June 30, 2019, net of tax:

Other comprehensive income (loss), before tax:

Amounts before reclassifications

Amounts reclassified out

Total other comprehensive income (loss), before tax

Total other comprehensive income (loss), net of tax

Balance at September 30, 2019, net of tax:

Nine months ended September 30, 2019

Balance at March 31, 2021, net of tax:

Three months ended March 31, 2020

Defined Benefit

2 unchanged sentences

Balance at December 31, 2019, net of tax:

Impact of adoption of ASU No.

Other comprehensive income (loss), before tax:

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Total other comprehensive income (loss), net of tax

Balance at September 30, 2019, net of tax

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

Balance at March 31, 2020, net of tax:

Income taxes are not provided for foreign translation relating to permanent investments in international subsidiaries, but tax effects within cumulative translation does include impacts from items such as net investment hedge transactions.

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Comprehensive Income Components

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Location on Income

Cumulative translation adjustment

Deconsolidation of Venezuelan subsidiary

Other income (expense), net

Total before tax

Provision for income taxes

Defined benefit pension and postretirement plans adjustments

4 unchanged sentences

Curtailments/Settlements

Deconsolidation of Venezuelan subsidiary

Other income (expense), net

Total before tax

8 unchanged sentences

Total reclassifications for the period, net of tax

The Company is under IRS examination or appeals for the tax years 2017 through 2018.

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

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.

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

federal income tax returns through 2018, but the years 2005 through 2017 have not closed as the Company is in the process of resolving issues identified during those examinations.

In addition to the U.S.

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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.

As of March 31, 2021, no taxing authority 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 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 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

The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of March 31, 2021 and December 31, 2020 are $ 1,094 million and $ 1,145 million, respectively.

As of March 31, 2021 and December 31, 2020, the Company had valuation allowances of $ 143 million and $ 135 million on its deferred tax assets, respectively.

The effective tax rate for the first quarter of 2021 was 16.4 percent, compared to 17.5 percent in the first quarter of 2020, a decrease of 1.1 percentage points.

The primary factor that decreased the Company’s effective tax rate was nonrepeating favorable adjustments in 2021 related to impacts of U.S.

international tax provisions.

Marketable 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).

March 31, 2021

December 31, 2020

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Total marketable securities

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.

At March 31, 2021 and December 31, 2020, gross unrealized, gross realized, and net realized gains and/or losses (pre-tax) were not material.

The balances at March 31, 2021 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.

September 30, 2020

March 31, 2021

Due in one year or less

2 unchanged sentences

Total marketable securities

Held-to-Maturity Debt Securities

In connection with the in-substance debt defeasance of the Third Lien Notes described in Note 10, the Company purchased a $ 0.5 billion U.S.

Treasury security in the fourth quarter of 2019 and transferred it to a trust with irrevocable instructions to use the proceeds from its maturity to satisfy the redemption of the Third Lien Notes that occurred in May 2020.

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.

Long-Term Debt and Short-Term Borrowings

In March 2020, 3M issued $ 1.75 billion aggregate principal amount of fixed rate registered notes.

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 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.

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.

Instead, at closing, 3M satisfied and discharged the Third Lien Notes via an in-substance defeasance, whereby 3M transferred cash equivalents and marketable securities to a trust with irrevocable instructions to redeem the Third Lien Notes on May 1, 2020.

The trust assets were restricted from use in 3M’s operations and were only used for the redemption of the Third Lien Notes that occurred in May 2020.

These actions, however, did not represent a legal defeasance.

Therefore, this debt was included in current portion of long-term debt and the related trust assets were included in current assets on the Company’s consolidated balance sheet as of December 31, 2019.

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.

In March 2021, 3M, via a make-whole call offer, redeemed $ 450 million principal amount of 2.75 % notes due 2022.

The Company recorded an early debt extinguishment pre-tax charge of approximately $ 11 million within interest expense.

This charge reflected the differential between the carrying value and the amount paid to reacquire the notes and related expenses.

2020 issuances, maturities, and extinguishments of short- and long-term debt are described in Note 5 in 3M’s 2020 Annual Report on Form 10-K.

The Company had no commercial paper outstanding at March 31, 2021 and December 31, 2020.

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 September 30, 2020.

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

The maturities of long-term debt for the periods subsequent to March 31, 2021 are as follows (in millions):

Pension and Postretirement Benefit Plans

As discussed in Note 1, effective in the first quarter of 2021, 3M made a change in accounting principle for net periodic pension and postretirement plan cost.

This impacted the expected return on plan assets and the amortization of net unamortized actuarial gains or losses expense components of net periodic benefit cost.

This change was applied retrospectively to all periods presented within 3M’s financial statements.

The service cost component of defined benefit net periodic benefit cost is recorded in cost of sales;

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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 nine months ended September 30, 2020 and 2019 follow:

Components of net periodic benefit cost and other supplemental information for the three months ended March 31, 2021 and 2020 follow:

Benefit Plan Information

Three months ended September 30,

Qualified and Non-qualified

Pension Benefits

Postretirement

United States

International

Net periodic benefit cost (benefit)

Operating expense

Non-operating expense

Interest cost

Expected return on plan assets

Amortization of transition asset

Amortization of prior service benefit

Amortization of net actuarial loss

Settlements, curtailments, special termination benefits and other

Total non-operating expense (benefit)

Total net periodic benefit cost (benefit)

Nine months ended September 30,

Three months ended March 31,

Qualified and Non-qualified

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Total net periodic benefit cost (benefit)

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

For the three months ended March 31, 2021 contributions totaling $ 46 million were made to the Company’s U.S.

and international pension plans and $ 1 million to its postretirement plans.

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3M’s annual measurement date for pension and postretirement assets and liabilities is December 31 each year, which is also the date used for the related annual measurement assumptions.

In May 2019 (as part of the 2019 restructuring actions discussed in Note 5), the Company began offering a voluntary early retirement incentive program to certain eligible participants of its U.S.

pension plans who meet age and years of pension service requirements.

The eligible participants who accepted the offer and retired by July 1, 2019 received an enhanced pension benefit.

Pension benefits were enhanced by adding one additional year of pension service and one additional year of age for certain benefit calculations.

Approximately 800 participants accepted the offer and retired before July 1, 2019.

As a result, the Company incurred a $ 35 million charge related to these special termination benefits in the second quarter of 2019.

In May 2019, 3M modified the 3M Retiree Life Insurance Plan postretirement benefit to close it to new participants effective August 1, 2019 (which results in employees who retire on or after August 1, 2019 not being eligible to participate in the plan) and reducing the maximum life insurance and death benefit to $ 8,000 for deaths on or after August 1, 2019.

Due to these changes, the plan was re-measured in the second quarter of 2019, resulting in a decrease to the accumulated projected benefit obligation liability of approximately $ 150 million and a related increase to shareholders’ equity, specifically accumulated other comprehensive income in addition to an immaterial income statement benefit prospectively.

In the second quarter of 2020, as a result of the divestiture of the drug delivery business, the Company recognized a curtailment in its United Kingdom Pension Plan.

The resulting re-measurement of the pension plan funded status reduced long-term prepaid pension and post retirement assets (located within “other assets” of the Company’s balance sheet) by approximately $ 80 million, which was offset within accumulated other comprehensive income (located within the equity section of the Company’s balance sheet).

The expense impact of this re-measurement was immaterial for the second quarter of 2020 and subsequent periods.

The Company uses interest rate swaps, currency swaps, commodity price swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations.

The Company uses interest rate swaps, currency swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations.

The information that follows explains the various types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, how such instruments are accounted for, and how such instruments impact 3M’s financial position and performance.

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Cash Flow Hedging — Interest Rate Contracts:

The Company may use forward starting interest rate swap or treasury rate lock contracts to hedge exposure to variability in cash flows from interest payments on forecasted debt issuances.

The Company may use forward starting interest rate contracts and treasury rate lock contracts to hedge exposure to variability in cash flows from interest payments on forecasted debt issuances.

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

Additional information regarding previously issued but terminated interest rate contracts, which have related balances within accumulated other comprehensive income being amortized over the underlying life of related debt, can be found in Note 14 in 3M’s 2020 Annual Report on Form 10-K.

In March 2020, the Company entered into treasury rate lock contracts with a notional amount of $ 500 million that were terminated concurrently with the March 2020 issuance of registered notes as discussed in Note 10.

The termination resulted in an immaterial net loss within accumulated other comprehensive income that will be amortized over the respective lives of the debt .

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 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.

As of March 31, 2021, the Company had a balance of $ 115 million associated with the after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income.

This includes a remaining balance of $ 106 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 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).

Based on exchange rates as of March 31, 2021, 3M expects to reclassify approximately $ 19 million over the next 12 months, $ 22 million over the remainder of 2021, $ 2 million in 2022 and $ 91 million after 2022 of the after-tax net unrealized foreign exchange cash flow hedging losses to earnings (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.

Reclassifications of amounts from accumulated other comprehensive income into income include accumulated gains (losses) on dedesignated hedges at the time earnings are impacted by the forecasted transactions.

Pretax Gain (Loss)

Recognized in Other

Pretax Gain (Loss) Reclassified

Comprehensive

from Accumulated Other

Income on Derivative

Comprehensive Income into Income

Three months ended September 30, 2020 (Millions)

Foreign currency forward/option contracts

Cost of sales

Interest rate contracts

Interest expense

Nine months ended September 30, 2020 (Millions)

Foreign currency forward/option contracts

Cost of sales

Interest rate contracts

Interest expense

Three months ended September 30, 2019 (Millions)

Foreign currency forward/option contracts

Cost of sales

Interest rate contracts

Interest expense

Nine months ended September 30, 2019 (Millions)

Pretax Gain (Loss) Recognized in Other

Pretax Gain (Loss) Reclassified from Accumulated

Comprehensive Income on Derivative

Other Comprehensive Income into Income

Three months ended March 31,

Foreign currency forward/option contracts

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Additional information regarding designated interest rate swaps can be found in Note 14 in 3M’s 2020 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 nine months ended September 30, 2020.

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

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Adjustment Included in the Carrying Value

Hedged Liabilities (in millions)

of the Hedged Liabilities (in millions)

Hedged Liabilities

of the Hedged Liabilities

Location on the Consolidated Balance Sheet

September 30, 2020

March 31, 2021

December 31, 2020

September 30, 2020

March 31, 2021

December 31, 2020

4 unchanged sentences

For instruments that are designated and qualify as hedges of net investments in foreign operations and that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within other comprehensive income.

Amounts excluded from the assessment of hedge effectiveness, including the time value of the forward contract at the inception of the hedge, are recognized in earnings using an amortization approach over the life of the hedging instrument on a straight-line basis.

Any difference between the change in the fair value of the excluded component and the amount amortized into earnings during the period is recorded in cumulative translation within other comprehensive income.

The remainder of the change in value of such instruments is recorded in earnings.

Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation.

2 unchanged sentences

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

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.

At March 31, 2021, 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.

1 unchanged sentence

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)

Recognized as

Cumulative Translation

Pretax Gain (Loss) Recognized

Amount of Gain (Loss) Excluded

as Cumulative Translation within

from Effectiveness Testing

Comprehensive Income

Other Comprehensive Income

Recognized in Income

Three months ended September 30, 2020 (Millions)

Foreign currency denominated debt

Cost of sales

Foreign currency forward contracts

Cost of sales

Nine months ended September 30, 2020 (Millions)

Foreign currency denominated debt

Cost of sales

Foreign currency forward contracts

Cost of sales

Three months ended September 30, 2019 (Millions)

Foreign currency denominated debt

Cost of sales

Foreign currency forward contracts

Cost of sales

Nine months ended September 30, 2019 (Millions)

Three months ended March 31,

Foreign currency denominated debt

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Derivatives not designated as hedging instruments include dedesignated foreign currency forward and option contracts that formerly were designated in cash flow hedging relationships (as referenced in the Cash Flow Hedges section above).

In addition, 3M enters into foreign currency forward contracts to offset, in part, the impacts of certain intercompany activities and enters into commodity price swaps to offset, in part, fluctuations in costs associated with the use of certain commodities and precious metals.

In addition, 3M enters into foreign currency contracts that are not designated in hedging relationships to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances.

These derivative instruments are not designated in hedging relationships;

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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 September 30, 2020

Nine months ended September 30, 2020

Gain (Loss) on Derivative Recognized in

Foreign currency forward/option contracts

Cost of sales

Foreign currency forward contracts

Interest expense

Three months ended September 30, 2019

Nine months ended September 30, 2019

Gain (Loss) on Derivative Recognized in

Gain (Loss) on Derivative Recognized in Income

Three months ended March 31,

Foreign currency forward/option contracts

Cost of sales

Foreign currency forward contracts

Interest expense

Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments

2 unchanged sentences

Location and Amount of Gain (Loss) Recognized in Income

Three months ended September 30, 2020

Nine months ended September 30, 2020

Cost of sales

Other expense

(income), net

Cost of sales

Other expense

(income), net

Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of cash flow or fair value hedges are recorded

The effects of cash flow and fair value hedging:

Gain or (loss) on cash flow hedging relationships:

Foreign currency forward/option contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive income into income

Interest rate contracts:

Amount of gain or (loss) reclassified from accumulated other comprehensive income into income

Gain or (loss) on fair value hedging relationships:

Interest rate contracts:

Derivatives designated as hedging instruments

Location and Amount of Gain (Loss) Recognized in Income

Three months ended September 30, 2019

Nine months ended September 30, 2019

Three months ended March 31, 2021

Three months ended March 31, 2020

Cost of sales

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

September 30, 2020 (Millions)

March 31, 2021 (Millions)

Derivatives designated as

8 unchanged sentences

Other current liabilities

Interest rate contracts

Other liabilities

Total derivatives designated as hedging instruments

17 unchanged sentences

Other current liabilities

Interest rate contracts

Other liabilities

Total derivatives designated as hedging instruments

7 unchanged sentences

Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments

The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency swaps, commodity price swaps, and forward and option contracts.

The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency swaps, and forward and option contracts.

However, the Company’s risk is limited to the fair value of the instruments.

2 unchanged sentences

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 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

covered by these agreements exceeds specified thresholds or if a counterparty’s credit rating has been downgraded to a predetermined rating).

As of March 31, 2021, 3M has International Swaps and Derivatives Association (ISDA) agreements with 17 applicable banks and financial institutions which contain netting provisions.

The Company does not anticipate nonperformance by any of these counterparties.

14 unchanged sentences

Net Amount of

September 30, 2020 (Millions)

March 31, 2021 (Millions)

Balance Sheet

16 unchanged sentences

Net Amount of

September 30, 2020 (Millions)

March 31, 2021 (Millions)

Balance Sheet

6 unchanged sentences

Currency Effects

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.

3M estimates that year-on-year foreign currency transaction effects, including hedging impacts, decreased pre-tax income by approximately $ 10 million for the three months ended March 31, 2021.

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

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The Company adopted ASU No.

2018-13, Changes to the Disclosure Requirements for Fair Value Measurement , as of January 1, 2020.

2018-13, Changes to the Disclosure Requirements for Fair Value Measurements, as of January 1, 2020.

This ASU primarily amended the disclosures around Level 3 investments, of which the Company had an immaterial amount for all periods presented.

Refer to Note 1 for additional details.

In addition to the information above, refer to Note 15 in 3M’s 2020 Annual Report on Form 10-K for a qualitative discussion of the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis, a description of the valuation methodologies used by 3M, and categorization within the valuation framework of ASC 820.

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Using Inputs Considered as

September 30, 2020

March 31, 2021

Available-for-sale:

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Marketable securities:

Corporate debt securities

Commercial paper

Certificates of deposit/time deposits

treasury securities

municipal securities

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Three months ended

Nine months ended

Marketable securities — certain U.S.

municipal securities only

September 30,

Beginning balance

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For 3M, such measurements of fair value relate primarily to indefinite-lived and long-lived asset impairments, goodwill impairments, and adjustment in carrying value of equity securities for which the measurement alternative of cost less impairment plus or minus observable price changes is used.

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 September 30, 2020 in addition to the three and nine months ended September 30, 2019.

There were no material impairments of assets or adjustments to equity securities using the measurement alternative for the three months ended March 31, 2021.

Fair Value of Financial Instruments:

The Company’s financial instruments include cash and cash equivalents, marketable securities, held-to-maturity debt securities, accounts receivable, certain investments, accounts payable, borrowings, and derivative contracts.

The fair values of cash equivalents, accounts receivable, held-to-maturity debt securities, accounts payable, and short-term borrowings and current portion of long-term debt approximated carrying values because of the short-term nature of these instruments.

The Company’s financial instruments include cash and cash equivalents, marketable securities, accounts receivable, certain investments, accounts payable, borrowings, and derivative contracts.

The fair values of cash equivalents, accounts receivable, accounts payable, and short-term borrowings and current portion of long-term debt approximated carrying values because of the short-term nature of these instruments.

Available-for-sale marketable securities, in addition to certain derivative instruments, are recorded at fair values as indicated in the preceding disclosures.

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

September 30, 2020

March 31, 2021

December 31, 2020

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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 September 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 March 31, 2021 and December 31, 2020 due to the lower interest rates and tighter credit spreads compared to issuance levels.

Commitments and Contingencies

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Respirator Mask/Asbestos Litigation

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.

As of March 31, 2021, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in various courts that purport to represent approximately 2,179 individual claimants, compared to approximately 2,075 individual claimants with actions pending December 31, 2020.

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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Accordingly, the number of claims alleging more serious injuries, including mesothelioma, other malignancies, and black lung disease, will represent a greater percentage of total claims than in the past.

Over the past twenty plus years, the Company has prevailed in fourteen of the fifteen cases tried to a jury (including the lawsuits in 2018 described below).

Over the past twenty plus years, the Company has prevailed in fifteen of the sixteen cases tried to a jury (including the lawsuits in 2018 described below).

In 2018, 3M received a jury verdict in its favor in two lawsuits – one in California state court in February and the other in Massachusetts state court in December – both involving allegations that 3M respirators were defective and failed to protect the plaintiffs against asbestos fibers.

In April 2018, a jury in state court in Kentucky found 3M’s 8710 respirators failed to protect two coal miners from coal mine dust and awarded compensatory damages and punitive damages.

In April 2018, a jury in state court in Kentucky found 3M’s 8710 respirators failed to protect two coal miners from coal mine dust and awarded compensatory damages of approximately $ 2 million and punitive damages totaling $ 63 million.

In August 2018, the trial court entered judgment and the Company appealed.

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That settlement was completed in 2019, and the appeal has been dismissed.

In October 2020, 3M defended a respirator case before a jury in King County, Washington, involving a former shipyard worker who alleged 3M’s 8710 respirator was defective and that 3M acted negligently in failing to protect him against asbestos fibers.

The jury delivered a complete defense verdict in favor of 3M, concluding that the 8710 respirator was not defective in design or warnings and any conduct by 3M was not a cause of plaintiff’s mesothelioma.

The plaintiff has filed a notice of appeal.

The Company has demonstrated in these past trial proceedings that its respiratory protection products are effective as claimed when used in the intended manner and in the intended circumstances.

Consequently, the Company believes that claimants are unable to establish that their medical conditions, even if significant, are attributable to the Company’s respiratory protection products.

therefore believes the average cost of resolving pending and future claims on a per-claim basis will continue to be higher than it experienced in prior periods when the vast majority of claims were asserted by medically unimpaired claimants.

Consequently, the Company believes that claimants are unable to

establish that their medical conditions, even if significant, are attributable to the Company’s respiratory protection products.

Nonetheless, the Company’s litigation experience indicates that claims of persons alleging more serious injuries, including mesothelioma, other malignancies, and black lung disease, are costlier to resolve than the claims of unimpaired persons, and it therefore believes the average cost of resolving pending and future claims on a per-claim basis will continue to be higher than it experienced in prior periods when the vast majority of claims were asserted by medically unimpaired claimants.

In addition, during the second half of 2020 and as of March 31, 2021, the Company has experienced an increase in the number of cases filed that allege injuries from exposures to coal mine dust.

As previously reported, the State of West Virginia, through its Attorney General, filed a complaint in 2003 against the Company and two other manufacturers of respiratory protection products in the Circuit Court of Lincoln County, West Virginia, and amended its complaint in 2005.

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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 was heard in September 2020.

that petition was denied in November 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 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 September 30, 2020, the Company had an accrual for respirator mask/asbestos liabilities (excluding Aearo accruals) of $ 586 million.

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 three months of 2021 for respirator mask/asbestos liabilities by $ 36 million.

In the first quarter of 2021, the Company made payments for legal defense costs and settlements of $ 19 million related to the respirator mask/asbestos litigation.

As previously disclosed, 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 then current and expected coal mine dust lawsuits (including the costs to resolve all then current and expected coal mine dust lawsuits in Kentucky and West Virginia at the time of the charge).

As of March 31, 2021, the Company had an accrual for respirator mask/asbestos liabilities (excluding Aearo accruals) of $ 679 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 September 30, 2020, the Company’s receivable for insurance recoveries related to the respirator mask/asbestos litigation was $ 4 million.

As of March 31, 2021, 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 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.

As of March 31, 2021, 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 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.

As of March 31, 2021, the Company, through its Aearo subsidiary, had accruals of $ 27 million for product liabilities and defense costs related to current and future Aearo-related asbestos, silica-related and coal mine dust 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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If any of the developments described above were to occur, the actual amount of these liabilities for existing and future claims could be significantly larger than the amount accrued.

Because of the inherent difficulty in projecting the number of claims that have not yet been asserted, the complexity of allocating responsibility for future claims among the Payor Group, and the several possible developments that may occur that could affect the estimate of Aearo’s liabilities, the Company cannot estimate the amount or range of amounts by which Aearo’s liability may exceed the accrual the Company has established.

estimate of Aearo’s liabilities, the Company cannot estimate the amount or range of amounts by which Aearo’s liability may exceed the accrual the Company has established.

Environmental Matters and Litigation

The Company’s operations are subject to environmental laws and regulations including those pertaining to air emissions, wastewater discharges, toxic substances, and the handling and disposal of solid and hazardous wastes enforceable by national, state, and local

authorities around the world, and private parties in the United States and abroad.

These laws and regulations provide, under certain circumstances, a basis for the remediation of contamination, for capital investment in pollution control equipment, for restoration of or compensation for damages to natural resources, and for personal injury and property damage claims.

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These activities include gathering of exposure and use information, risk assessment, and consideration of regulatory approaches.

As the database of studies of both PFOA and PFOS has expanded, the EPA has developed human health effects documents summarizing the available data from these studies.

In the European Union, where 3M has manufacturing facilities in countries such as Germany and Belgium, recent regulatory activities have included preliminary work on various restrictions under the Regulation concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), including the restriction of PFAS in certain usages and a broader restriction of PFAS as a class.

As of December 2020, PFOA is subject to certain restrictions under EU’s Persistent Organic Pollutants (POPs) Recast Regulation.

With respect to the applicability of the newly enacted POPs to certain manufacturing processes that create PFOA as an unintended and unavoidable byproduct designed to be removed through an emulsifier recycling process, Dyneon, a 3M subsidiary that operates a facility at Gendorf, Germany, proactively consulted with the relevant German regulatory authority.

In response to the authority’s view that POPs may apply to those processes, Dyneon continues to communicate its position regarding POPs’ applicability, share technical process improvements that are in progress and discuss potential options if an agreement is not reached on the applicability of POPs.

In the United States, as the database of studies of both PFOA and PFOS has expanded, the EPA has developed human health effects documents summarizing the available data from these studies.

In February 2014, the EPA initiated external peer review of its draft human health effects documents for PFOA and PFOS.

The peer review panel met in August 2014.

In May 2016, the EPA announced lifetime health advisory levels for PFOA and PFOS at 70 parts per trillion (ppt) (superseding the provisional levels established by the EPA in 2009 of 400 ppt for PFOA and 200 ppt for PFOS).

In May 2016, the EPA announced lifetime health advisory levels for PFOA and PFOS at 70 parts per trillion (ppt) (superseding the provisional levels established by the

EPA in 2009 of 400 ppt for PFOA and 200 ppt for PFOS).

Where PFOA and PFOS are found together, EPA recommends that the concentrations be added together, and the lifetime health advisory for PFOA and PFOS combined is also 70 ppt.

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and Cordova, Illinois plants.

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

As previously reported, the Company entered into a voluntary remedial action agreement with the Alabama Department of Environmental Management (ADEM) to remediate the presence of PFAS in the soil and groundwater at the Company’s manufacturing facility in Decatur, Alabama associated with the historic (1978-1998) incorporation of wastewater treatment plant sludge.

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

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In April 2019, the MDH issued a new HBV for PFOS of 15 ppt and a new HBV for PFHxS of 47 ppt.

In May 2018, the EPA announced a four-step PFAS action plan, which includes evaluating the need to set Safe Drinking Water Act maximum contaminant levels (MCLs) for PFOA and PFOS and beginning the steps necessary to designate PFOA and PFOS as “hazardous substances” under CERCLA.

“hazardous substances” under CERCLA.

In November 2018, the EPA asked for public comment on draft toxicity assessments for two PFAS compounds, including PFBS.

In April 2021, EPA released an updated toxicity assessment for PFBS.

In February 2019, the EPA issued a PFAS Action Plan that outlines short- and long-term actions the EPA is taking to address PFAS – actions that include developing a national drinking water determination for PFOA and PFOS, strengthening enforcement authorities and evaluating cleanup approaches, nationwide drinking water monitoring for PFAS, expanding scientific knowledge for understanding and managing risk from PFAS, and developing consistent risk communication tools for communicating with other agencies and the public.

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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.

In November 2020, EPA announced it was developing of a new analytical method to test for PFAS in wastewater and other environmental media.

In December 2020, EPA released two new guidance documents related to PFAS.

First, it issued a Draft Compliance Guide for Imported Articles Containing Surface Coatings Subject to the Long-Chain Perfluoroalkyl Carboxylate and Perfluoroalkyl Sulfonate Chemical Substances Significant New Use Rule.

Second, EPA released for public comment interim guidance on destroying and disposing of certain PFAS and PFAS-containing materials.

3M has submitted comments on both guidance documents.

In March 2021, EPA published its intention to initiate a process to develop a national primary drinking water regulation for PFOA and PFOS;

the process will include further analyses, scientific review and opportunities for public comment.

EPA also announced in January 2021 that it will issue an advance notice of proposed rulemaking (ANPR) to solicit public comment on whether the agency should take additional regulatory steps to address PFAS contamination, including designating PFOA and PFOS and other PFAS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and seeking comment on whether PFOA and PFOS and other PFAS should be subject to regulation as hazardous waste under the Resource Conservation and Recovery Act (RCRA).

EPA indicated it will also issue an ANPR to collect information regarding manufacturers of PFAS and the presence and treatment of PFAS in discharges from these facilities.

In January 2021, the new federal Administration withdrew this EPA ANPR announcement.

EPA also separately issued an ANPR in March 2021 to collect information regarding manufacturers of PFAS and the presence and treatment of PFAS in discharges from these facilities.

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.

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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 PFAS regulations in New Hampshire.

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

In April 2020, the New Hampshire Supreme Court agreed to review several issues related to the preliminary injunctive order.

In July 2020, the governor signed a bill passed by the New Hampshire legislature setting the same drinking water standards that had been enjoined by the court.

Those states include the following:

Vermont finalized drinking water standards for a combination of PFOA, PFOS and three other PFAS in March 2020.

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

New Hampshire established drinking water standards by legislation for certain PFAS, including PFOS and PFOA, in July 2020.

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

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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.

For example, in March 2021, California proposed listing PFOA and PFOS as carcinogens under its Proposition 65 law.

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.

In January 2021, the appellate division of the court denied the

group’s motion to stay the regulations, and the parties are proceeding to litigation on the merits.

In March 2021, 3M and several other parties filed a lawsuit against the New York State Department of Health, urging that drinking water levels set by the agency for PFOS and PFOA be vacated.

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

Litigation Related to Historical PFAS Manufacturing Operations in Alabama

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The parties have agreed to continue to stay the St.

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

John case , 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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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 December 2020, pending ongoing mediation between the parties in conjunction with the St.

This case has been stayed, 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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John case, discussed above, stayed this litigation pending resolution of the St.

Plaintiffs in the Billings case have amended their complaint numerous times to add additional plaintiffs.

There are now approximately 4,000 named plaintiffs.

Mediation in the Billings case is ongoing, but plaintiffs have moved to lift the stay, and that motion is set for hearing in May 2021.

In January 2017, several hundred plaintiffs sued 3M, Dyneon and Daikin America in Lawrence and Morgan Counties, Alabama (the “Owens” case).

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They assert common law claims for negligence, nuisance, trespass, wantonness and battery, and they seek injunctive relief and punitive damages.

The plaintiffs contend that the defendants own and operate manufacturing and disposal facilities in Decatur that have released and continue to release PFOA, PFOS and related chemicals into the groundwater and surface water of their sites, resulting in discharges into the Tennessee River.

The plaintiffs contend that the defendants own and operate manufacturing and disposal facilities in Decatur that have released and continue to release PFOA, PFOS

and related chemicals into the groundwater and surface water of their sites, resulting in discharges into the Tennessee River.

The plaintiffs contend that, as a result of the alleged discharges, the water supplied by the Water Authority to the plaintiffs was, and is, contaminated with PFOA, PFOS and related chemicals at a level dangerous to humans.

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In November 2019, the King plaintiffs amended their complaint to withdraw all class allegations, dismiss the Water Authority as a defendant and add 24 new individual plaintiffs (for a total of 59 plaintiffs).

In November 2019, the King plaintiffs amended their complaint to withdraw all class allegations.

Since then, the plaintiffs have added 37 new individual plaintiffs and voluntarily dismissed five plaintiffs (for a total of 55 plaintiffs).

The case is scheduled for trial in June 2022, but the plaintiffs have sought to extend the case deadlines.

The parties negotiated a revised schedule and proposed a July 2023 trial date, pending the court’s approval.

Discovery in this case is proceeding.

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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.

Discussions between the parties are ongoing.

Litigation Related to Historical PFAS Manufacturing Operations in Minnesota

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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.

In December 2020, 3M submitted preliminary comments on the co-trustees’ draft conceptual drinking water supply plan to address legal and technical aspects of the draft plan.

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.

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DuPont removed these cases to federal court.

In August 2019, the court stayed all proceedings in these actions pending a ruling on NJDEP’s motions to remand the cases to state court.

In April 2020, the federal court denied the state’s motion to remand.

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.

In June 2020, the court consolidated the two actions, along with two others brought by the NJDEP relating to the DuPont facilities, for case management and pretrial purposes.

In August 2020, the NJDEP filed second amended complaints.

3M has moved to dismiss those complaints.

The parties have exchanged written discovery requests.

The case is in early stages of litigation.

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The second suit asserts PFAS contamination from non-AFFF sources and names 3M, DuPont, and Chemours as defendants.

This suit remains in state court in early stages of litigation.

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 October 2020, the state amended its complaint to add a state commission as plaintiff and make a claim related to the state’s drinking water and groundwater trust fund statute.

Defendants have filed motions to dismiss related to these amendments, and the case remains in early stages of litigation.

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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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 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 removed the case to federal court in March 2021, and 3M and certain other defendants have filed a motion to transfer the case to the AFFF MDL.

The state has filed a motion to remand the case to state court.

In addition, 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.

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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 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.

In December 2020, the Mississippi Attorney General filed an AFFF-related PFAS lawsuit against 3M and other defendants directly with the AFFF MDL court in South Carolina.

The lawsuit alleges injuries to the State’s property and natural resources purportedly caused by PFAS contamination from AFFF use and seeks both compensatory and punitive damages.

In April 2021, the State of Alaska filed a lawsuit against 3M and other defendants, alleging damages from the release of PFAS into the environment from a variety of products, including AFFF.

In addition to the above state attorneys general actions, several other states and the District of Columbia, through their attorneys general, have announced selection processes to retain outside law firms to bring PFSA-related lawsuits against certain manufacturers including the Company.

In addition, 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 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.

In most of these cases, plaintiffs typically allege that certain PFAS used in AFFF contaminated the soil and groundwater where AFFF was used and seek damages for alleged injuries such as loss of use and enjoyment of properties, diminished property values, investigation costs, remediation costs, personal injury and/or funds for medical monitoring.

278 cases filed since October 2019 have been brought by current or former firefighters who claim to have suffered personal injury as a result of exposure to AFFF while using the product.

The United States, the U.S.

Department of Defense and several companies have been sued along with 3M, including but not limited to Ansul Co.

(acquired by Tyco, Inc.), Angus Fire, Buckeye Fire Protection Co., Chemguard, Chemours, DuPont, National Foam, Inc., and United Technologies Corp.

As of March 31, 2021, 1,076 lawsuits (including 26 putative class actions) alleging injuries or damages by AFFF use have been filed against 3M (along with other defendants) in various state and federal courts.

As further described below, a vast majority of these pending cases are in a federal Multi-District Litigation (MDL) court in South Carolina.

Additional AFFF cases continue to be filed in or transferred to the MDL.

The Company also continues to defend certain AFFF cases that remain in state court and be in discussions with pre-suit claimants for possible resolutions where appropriate.

In December 2018, the U.S.

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District Court for the District of South Carolina to be managed in an MDL proceeding to centralize pre-trial proceedings.

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

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.

An initial pool of ten water supplier cases was selected in February 2021 for case-specific fact discovery as potential bellwether cases.

After completion of such discovery, the parties and the MDL court will select a smaller set of these cases for expert discovery and to be tried as bellwethers.

In June 2019, several subsidiaries of Valero Energy Corporation, an independent petroleum refiner, filed eight AFFF cases against 3M and other defendants, including DuPont/Chemours, National Foam, Buckeye Fire Equipment, and Kidde-Fenwal, in various state courts.

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Five cases remain pending in state courts where they are in early stages of litigation, after Valero dismissed its Ohio state court action without prejudice in October 2019.

The parties in the state court cases have agreed to stay all five cases through November 2020.

The parties in the state court cases have agreed to stay all five cases until September 2021.

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.

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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) .

As of March 31, 2021, the Company is aware of six other AFFF suits originally filed in various state courts across the country in which the Company has been named a defendant.

The Company is assessing whether these cases may be removed to federal court and transferred to the AFFF MDL.

Separately, the Company is aware of pre-suit claims by other parties related to the use and disposal of

The Company had discussions with certain potential claimants pre-suit and reached a negotiated resolution with the City of Bemidji in March 2021.

Other PFAS-related Product and Environmental Litigation

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The plaintiffs claim that the drinking water around Hoosick Falls became contaminated with unsafe levels of PFOA due to the activities of the defendants and allege that they suffered bodily injury due to the ingestion and inhalation of PFOA.

The four state court cases also include Tonaga, Inc.

(Taconic) as a defendant and make similar allegations related to Taconic’s facility in neighboring Petersburg.

The plaintiffs seek unstated compensatory, consequential, and punitive damages, as well as attorneys’ fees and costs.

3M has answered the complaints in these cases, which are now proceeding through discovery.

The plaintiffs in the putative class action have moved for class certification.

3M is also defending eight additional cases in New York filed by Nassau County drinking water providers in the U.S.

3M has answered the complaints in these individual cases, which are now proceeding through discovery.

In the putative class action, briefings on class certification have been completed and the parties are engaging in mediation efforts.

3M is also defending 12 individual cases in New York filed by Nassau County drinking water providers in the U.S.

District Court for the Eastern District of New York.

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DuPont’s motion to transfer these cases to the AFFF MDL was denied in March 2020.

These cases are in the preliminary stages of litigation.

3M has filed answers in the cases in which it has been served.

Preliminary discovery is ongoing.

In Michigan, one consolidated putative class action is pending in the U.S.

District Court for the Western District of Michigan against 3M and Wolverine World Wide (Wolverine) and other defendants.

District Court for the Western District of Michigan against 3M and Wolverine World Wide (Wolverine).

The action arises from Wolverine’s allegedly improper disposal of materials and wastes, including 3M Scotchgard, related to Wolverine’s shoe manufacturing operations.

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 September 30, 2020, 3M has been named as a defendant in approximately 270 private individual actions in Michigan state court based on similar allegations.

In January 2021, 3M moved to dismiss certain claims in the complaint, and the case remains in early stages of litigation.

The court has set a trial date in January 2022.

In addition to the consolidated federal court putative class action, as of March 31, 2021, 3M is a defendant in approximately 277 private individual actions in Michigan state court based on similar allegations.

These cases are coordinated for pre-trial purposes.

Four of these cases were selected for bellwether trials in 2020.

Five of these cases were selected over time for bellwether trials.

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.

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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 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.

In January 2021, the court granted summary judgment in favor of the defendants in one of three remaining bellwether cases.

The plaintiffs in this dismissed bellwether case have also appealed the dismissal to the state appellate court.

The remaining two bellwether trials are preliminarily scheduled for October 2021.

The parties have engaged in mediation efforts 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 sought 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.

In February 2020, the court approved a Consent Decree that memorializes Wolverine’s ongoing remediation obligations and the State’s and intervening townships’ covenants not to bring further lawsuits as to the remediated area.

In February 2020, the court approved a Consent Decree that

memorializes Wolverine’s ongoing remediation obligations and the State’s and intervening townships’ covenants not to bring further lawsuits as to the remediated area.

3M has been formally designated as a “Contributing Party,” and as such, the State’s and townships’ covenants will also apply to 3M.

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This amount was part of 3M’s charge taken in the fourth quarter of 2019 as discussed below in the “Environmental Liabilities and Insurance Receivables” section.

3M is also a defendant, together with Georgia-Pacific as co-defendant, in a putative class action in federal court in Michigan brought by residents of Parchment, who allege that the municipal drinking water is contaminated from waste generated by a paper mill owned by Georgia-Pacific’s corporate predecessor.

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

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.

3M is also a defendant, together with Georgia-Pacific as co-defendant, in a putative class action in federal court in Michigan brought by residents of Parchment, who allege that the municipal drinking water was contaminated from waste generated by a paper mill owned by Georgia-Pacific’s corporate predecessor.

The defendants’ motion to dismiss certain claims in the complaint was denied in January 2021.

A trial date is set for January 2022.

The parties have engaged in mediation and in April 2021 reached a preliminary settlement agreement, subject to court approval, under which 3M and Georgia-Pacific would pay an amount and be released from plaintiffs’ putative class action claims.

Separately, as a result of discussions among Georgia-Pacific, 3M and municipalities near Parchment, Georgia-Pacific and 3M contributed to a fund in November 2020 to provide expanded municipal water service in the area.

These municipalities released 3M from claims relating to or arising out of the extension of municipal water or the alleged PFAS contamination in the area of that extension.

3M’s portion relative to the preliminary agreement and contribution above was not material.

In Alabama and Georgia, 3M, together with multiple co-defendants, is defending three state court cases 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 subscribers.

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

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.

Another case originally filed in Georgia state court 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 subscribers.

This case has been removed to federal court, where 3M has filed a motion to dismiss a series of amended complaints.

3M, together with co-defendants, is also defending two putative class actions in federal court, where the plaintiffs seek relief on behalf of classes of individual ratepayers in Summerville, Georgia who allege their water supply was contaminated by PFAS discharged from a textile mill.

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

3M filed a motion to dismiss in November 2020 and in January 2021, the court granted defendants’ motion to dismiss the case for lack of personal jurisdiction.

In February 2021, the plaintiffs voluntarily dismissed their action without prejudice and filed a new case in the AFFF MDL court.

Separately, in December 2020, the Orange County Water District and ten additional local water providers sued 3M, Decra Roofing and certain DuPont-related entities in California state court, alleging PFAS contamination of the plaintiffs’ water sources and also referring to 3M's industrial minerals facility in Corona, California as a potential source of contamination.

The plaintiffs filed an amended complaint, and 3M filed a demurrer to the amended complaint in March 2021.

In April 2021, the court denied 3M’s demurrer, and the case remains in early stages of litigation.

In February 2021, the City of Corona and a local utility authority filed a lawsuit in California state court against 3M and other defendants, alleging PFAS contamination from 3M products generally as well as from 3M’s Corona facility and roofing granules products.

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.

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

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.

In February 2021, the court raised the question whether subject matter jurisdiction under the Class Action Fairness Act was proper, issued an order requiring the parties to brief the issue and denied defendants’ motions to dismiss with leave to renew pending the court’s ruling on jurisdiction.

Briefing on the jurisdictional question is anticipated to be complete in May 2021.

In New Jersey, 3M is a 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 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.

In addition, 3M, together with several co-defendants, is defending two federal court cases 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, 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.

3M has filed a motion to dismiss in the first of those actions and the motion was denied.

In January 2021, certain plaintiffs in that lawsuit severed their claims in order to be represented by different counsel in what is now a separate case, which remains in early stages of litigation.

The second case is in early stages of litigation.

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

In December 2020, 3M filed a motion to dismiss the Hopatcong matter.

In January 2021, another case of this nature was filed in federal court on behalf of Pequannock Township.

3M has filed a motion to dismiss this case.

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.

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.

In December 2020, the defendants filed their joint opposition to the class certification motion filed earlier by the plaintiff.

The plaintiffs filed a reply brief in support of class certification in March 2021.

In West Virginia, 3M and other entities were originally named as defendants in a state court action brought by Weirton Area Water Board that alleges PFAS contamination of local water supplies.

This case was been removed to federal court where the defendants filed various motions to dismiss the complaint based on pleading deficiencies and lack of personal jurisdiction.

In November 2020, the court granted some of the personal jurisdiction motions, denied other personal jurisdiction motions (including 3M’s) and ordered the remaining parties to engage in discovery on jurisdiction.

In December 2020, the court denied the defendants’ non-jurisdictional motion to dismiss.

In January 2021, the plaintiffs amended its complaint to include allegations related to AFFF, and the case was transferred to the AFFF MDL court, where it remains in early stages of litigation.

Other PFAS-related Matters

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As part of ongoing work with the EPA and ADEM to address compliance matters at the Decatur facility, the Company discovered it had not fully characterized its PFAS discharge in its NPDES permit.

In September 2019, the Company disclosed the matter to the EPA and ADEM and announced that it had elected to temporarily idle certain other manufacturing processes at 3M Decatur.

In September 2019, the Company disclosed the matter to the EPA

and ADEM and announced that it had elected to temporarily idle certain other manufacturing processes at 3M Decatur.

The Company is reviewing its operations at the plant, has installed wastewater treatment controls and has restarted idled processes.

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Attorney’s Office for the Northern District of Alabama for documents related to, among other matters, the Company’s compliance with the 2009 TSCA consent order and unpermitted discharges to the Tennessee River.

The Company is cooperating with this inquiry and is producing documents in response to the subpoena.

The Company is cooperating with this and other inquiries and is producing documents in response to requests.

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).

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.

In December 2020, the EPA requested certain documents and information related to TSCA compliance at the facility.

In February and April 2021, the EPA requested certain documents and information related to RCRA compliance at this facility.

The Company is cooperating and producing documents and information in response to these requests.

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

In January 2021, the Company received a notice of violation (NOV) from MPCA related to, among other matters, the above-described Clean Water Act and RCRA issues.

The Company is cooperating with MPCA to address the issues that are the subject of the NOV.

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.

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

The Company will continue to work with relevant state and federal agencies as it conducts these reviews.

The Company will continue to work with relevant federal and state agencies (including EPA, the U.S.

Department of Justice, state environmental agencies and state attorneys general) as it conducts these reviews.

The Company cannot predict at this time the outcomes of resolving these compliance matters or what potential actions may be taken by the regulatory agencies.

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Whether, and to what extent, the Company may be required to contribute to the costs at issue in the case remains to be determined.

For environmental matters and litigation described above, unless otherwise stated, no liability has been recorded as the Company believes liability in those matters is not probable and estimable and the Company is not able to estimate a possible loss or range of loss at this time.

For environmental matters and litigation described above, unless otherwise described below, no liability has been recorded as the Company believes liability in those matters is not probable and estimable and the Company is not able to estimate a possible loss or range of possible loss at this time.

The Company’s environmental liabilities and insurance receivables are described below.

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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 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 three months of 2021, the Company increased its accrual for PFAS-related other environmental liabilities by $ 55 million and made related payments of $ 8 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).

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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.

During the fourth quarter of 2019, 3M updated its evaluation of certain customer-related litigation based on continued, productive settlement discussions with multiple parties.

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.

During the fourth quarter of 2019, 3M updated its evaluation of certain customer-related PFAS litigation based on continued, productive settlement discussions with multiple parties.

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

In addition, during the fourth quarter of 2019, 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 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 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.

As of March 31, 2021, the Company had recorded liabilities of $ 463 million for “other environmental liabilities.” The accruals represent the Company’s best estimate of the probable loss in connection with the environmental matters and PFAS-related litigation described above.

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

As of March 31, 2021, the Company had recorded liabilities of $ 24 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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and (v) the financial viability of other potentially responsible parties and third-party indemnitors.

For sites included in both “environmental remediation liabilities” and “other environmental liabilities,” at which remediation activity is largely complete and remaining activity relates primarily to operation and maintenance of the remedy, including required post-remediation monitoring, the Company believes the exposure to loss in excess of the amount accrued would not be material to the Company’s consolidated results of operations or financial condition.

operation and maintenance of the remedy, including required post-remediation monitoring, the Company believes the exposure to loss in excess of the amount accrued would not be material to the Company’s consolidated results of operations or financial condition.

However, for locations at which remediation activity is largely ongoing, the Company cannot estimate a possible loss or range of loss in excess of the associated established accruals for the reasons described above.

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

As of March 31, 2021, 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 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.

Aearo Technologies sold Dual-Ended Combat Arms – Version 2 earplugs starting in about 2003.

3M acquired Aearo Technologies in 2008 and sold these earplugs from 2008 through 2015, when the product was discontinued.

In December 2018, a military veteran filed an individual lawsuit against 3M in the San Bernardino Superior Court in California alleging that he sustained personal injuries while serving in the military caused by 3M’s Dual-Ended Combat Arms earplugs – Version 2.

The plaintiff asserts claims of product liability and fraudulent misrepresentation and concealment.

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

As of March 31, 2021, the Company is a named defendant in approximately 3,349 lawsuits (including 14 putative class actions) in various state and federal courts that purport to represent approximately 12,700 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.

Discovery is underway.

The plaintiffs and 3M filed preliminary summary judgment motions on the government contractor defense.

In July 2020, 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.

In December 2020, the MDL court granted the plaintiffs’ motion to consolidate three plaintiffs for the first bellwether trial, which began in March 2021.

Individual trials for the next two bellwether plaintiffs are scheduled to proceed in May and June of 2021.

Discovery in the next 20 bellwether cases in the MDL court is ongoing and is scheduled to be complete by the end of 2021.

3M is also defending lawsuits brought by non-military plaintiffs in state court in Hennepin County, Minnesota.

3M removed these actions to federal court and the federal court remanded them to state court in March 2020.

The Company has appealed the remand orders to the U.S.

Court of Appeals for the Eighth Circuit.

Oral argument on the first remand order appeal is scheduled for June 2021.

There are approximately 40 lawsuits involving approximately 800 plaintiffs pending in the state court.

The state court actions will be subject to a bellwether case selection process.

The first trial in Hennepin County is scheduled for August 2021.

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

As of March 31, 2021, the Company was a named defendant in 26 lawsuits in the United States involving 27 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.

Plaintiffs have also appealed a 2018 jury verdict in favor of 3M in the first bellwether trial in the MDL and appealed the dismissal of another bellwether case.

The Eighth Circuit court heard oral argument on all pending appeals in March 2021.

Among the 26 remaining lawsuits in the United States, 23 are in the MDL court and three are in state court.

The MDL court declined to remand one case to Oklahoma state court and has stayed all 19 remaining lawsuits pending the appeal of the summary judgment decision.

The MDL has stayed all 23 remaining lawsuits pending the appeal of the summary judgment decision.

In February 2020, the MDL court remanded two cases to state court in Jackson County, Missouri that combined Bair Hugger product liability claims with medical malpractice claims.

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That plaintiff has appealed the order to the U.S.

Court of Appeals for the Eighth Circuit.

Court of Appeals for the Eighth Circuit, which heard oral argument on this appeal in March 2021.

The Texas state court has stayed the entire case while the appeal is pending.

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In January 2018, the Minnesota state court excluded plaintiffs’ experts and granted 3M’s motion for summary judgment on general causation.

Plaintiffs appealed that ruling and the state court’s punitive damages ruling.

The Minnesota Court of Appeals affirmed the Minnesota state court orders in their entirety and the Minnesota Supreme Court denied plaintiffs’ petition for review.

Final dismissal was entered in April 2019, effectively ending the Minnesota state court cases.

In June 2016, the Company was served with a putative class action filed in the Ontario Superior Court of Justice for all Canadian residents who underwent various joint arthroplasty, cardiovascular, and other surgeries and later developed surgical site infections due to the use of the Bair Hugger™ patient warming system.

The Minnesota Court of Appeals affirmed the state court orders in their entirety and the Minnesota Supreme Court denied plaintiffs’ petition for review and entered the finial dismissal in 2019, effectively ending the Minnesota state court cases.

In June 2016, the Company was served with a putative class action filed in the Ontario Superior Court of Justice for all Canadian residents who underwent various joint arthroplasty, cardiovascular, and other surgeries and later developed surgical site infections that the representative plaintiff claims was due to the use of the Bair Hugger™ patient warming system.

The representative plaintiff seeks relief (including punitive damages) under Canadian law based on theories similar to those asserted in the MDL.

No liability has been recorded for the Bair Hugger™ litigation because the Company believes that any such liability is not probable and estimable at this time.

Aearo Technologies sold Dual-Ended Combat Arms – Version 2 earplugs starting in about 2003.

3M acquired Aearo Technologies in 2008 and sold these earplugs from 2008 through 2015, when the product was discontinued.

The plaintiff asserts claims of product liability and fraudulent misrepresentation and concealment.

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

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.

Discovery is underway.

The plaintiffs and 3M filed preliminary summary judgment motions on the government contractor defense.

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.

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 product liability litigation 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.

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

Securities Litigation

In July 2019, Heavy & General Laborers’ Locals 472 & 172 Welfare Fund filed a putative securities class action against 3M Company, its former Chairman and CEO, current Chairman and CEO, and current CFO in the U.S.

Stockholder Litigation

District Court for the District of New Jersey.

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.

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.

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

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Court of Appeals for the Third Circuit.

In November 2020, the federal Court of Appeals granted 3M’s petition for a writ of mandamus and directed the New Jersey federal court to transfer the action to the Minnesota federal court.

The defendants filed a motion to dismiss the action in January 2021, which is not yet briefed.

The suit is in the early stages of litigation.

In October 2019, a follow-on derivative lawsuit was filed in the U.S.

In October 2019, a stockholder derivative lawsuit was filed in the U.S.

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

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

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

The state court 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.

In August 2020, a stockholder 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.

This derivative lawsuit, having been transferred to Minnesota federal court, also relies on similar factual allegations as the putative securities class action discussed above.

In February 2021, an additional stockholder derivative lawsuit was filed in the District of Minnesota, making 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 further status conference in November 2020.

In March 2021, the court held another status conference and allowed the KCI defendants to send an official request for information and documents to the government, but the court has not ordered further discovery to commence.

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.

The plaintiff then filed an appeal in the U.S.

The relator-plaintiff then filed an appeal in the U.S.

Court of Appeals for the Ninth Circuit.

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The 3M 2016 Long-Term Incentive Plan provides for the issuance or delivery of up to 123,965,000 shares of 3M common stock pursuant to awards granted under the plan.

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

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

As of March 31, 2021, the remaining shares available for grant under the LTIP Program are 10.7 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 nine months ended September 30, 2020 and 2019.

Capitalized stock-based compensation amounts were not material for the three months ended March 31, 2021 and 2020.

Stock-Based Compensation Expense

Three 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 nine months ended September 30, 2020:

The following table summarizes stock option activity during the three months ended March 31, 2021:

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

As of March 31, 2021, there was $ 93 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 25 months .

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.

The total intrinsic values of stock options exercised were $ 180 million and $ 98 million during the three months ended March 31, 2021 and 2020, respectively.

Cash received from options exercised was $ 240 million and $ 100 million for the three months ended March 31, 2021 and 2020, respectively.

The Company’s actual tax benefits realized for the tax deductions related to the exercise of employee stock options were $ 38 million and $ 20 million for the three months ended March 31, 2021 and 2020, respectively.

For the primary 2021 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 nine months ended September 30, 2020:

The following table summarizes restricted stock and restricted stock unit activity during the three months ended March 31, 2021:

(Shares in thousands)

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As of January 1

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.

As of March 31

As of March 31, 2021, there was $ 141 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 27 months .

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.

The total fair value of restricted stock and restricted stock units that vested during the three months ended March 31, 2021 and 2020 was $ 78 million and $ 88 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 $ 14 million and $ 16 million for the three months ended March 31, 2021 and 2020, 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 nine months ended September 30, 2020:

The following table summarizes performance share activity during the three months ended March 31, 2021:

(Shares in thousands)

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Performance change

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.

As of March 31

As of March 31, 2021, there was $ 40 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 21 months .

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.

The total fair value of performance shares that were distributed were $ 22 million and $ 35 million for the three months ended March 31, 2021 and 2020, respectively.

The Company’s actual tax benefits realized for the tax deductions related to the distribution of performance shares were $ 4 million and $ 7 million for the three months ended March 31, 2021 and 2020, respectively.

Business Segments

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3M is an integrated enterprise characterized by substantial intersegment cooperation, cost allocations and inventory transfers.

Therefore, management does not represent that these segments, if operated independently, would report the business segment operating income information shown.

Effective in the second quarter of 2020, the measure of segment operating performance used by 3M’s chief operating decision maker (CODM) changed and, as a result, 3M’s disclosed measure of segment profit/loss (business segment operating income) has been updated for all periods presented.

The change to business segment operating income aligns with the update to how the CODM assesses performance and allocates resources for the Company’s business segments.

Therefore, management does not represent that these segments, if operated independently, would report the operating income information shown.

3M discloses business segment operating income as its measure of segment profit/loss, reconciled to both total 3M operating income and income before taxes.

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significant litigation-related charges/benefits, gain/loss on sale of businesses (see Note 3), and divestiture-related restructuring actions (see Note 5).

In addition, effective in the first quarter of 2020, in a continuing effort to improve the alignment of its businesses around customers and markets, the Company made the following changes:

Effective in the first quarter of 2021, the measure of segment operating performance used by 3M’s CODM changed and, as a result, 3M’s disclosed measure of segment profit/loss (business segment operating income) was updated.

The change to business segment

operating income aligns with the update to how the CODM assesses performance and allocates resources for the Company’s business segments.

The change included the following:

Changes in cost attribution

The extent of allocation and method of attribution of certain net costs were updated to result in fewer items remaining in Corporate and Unallocated and, instead, including them in 3M’s business segments’ operating performance.

See the updated description of Corporate and Unallocated below.

Previously, a larger portion of ongoing corporate staff costs and costs associated with centrally managed material resource centers was retained in Corporate and Unallocated.

In addition, portions of pension costs and costs associated with certain centrally managed but ongoing business-related legal matters, along with certain insurance-related costs, were retained in Corporate and Unallocated.

Continued alignment of customer account activity

As part of 3M’s regular customer-focus initiatives, the Company realigned certain customer account activity (“sales district”) to correlate with the primary divisional product offerings in various countries and reduce complexity for customers when interacting with multiple 3M businesses.

This largely impacted the amount of dual credit certain business segments receive as a result of sales district attribution.

3M business segment reporting measures include dual credit to business segments for certain sales and operating income.

This dual credit is based on which business segment provides customer account activity with respect to a particular product sold in a specific country.

As a result of this change, previously reported aggregate

business segment net sales and operating income for the total year 2019 decreased $ 42 million and $ 10 million, respectively, offset by corresponding decreases in the “Elimination of Dual Credit” net sales and operating income amounts.

Additional actions impacting product line alignments

● The remaining retail auto care product lines formerly in the Automotive Aftermarket Division (within the Safety and Industrial business segment), were realigned to the Construction and Home Improvement Division (within the Consumer business segment).

This change resulted in a decrease of previously reported net sales and operating income for total year 2019 of $ 35 million and $ 11 million, respectively, in the Safety and Industrial business segment, offset by a corresponding increase in net sales and operating income within the Consumer business segment.

● In addition, certain product lines were realigned within business segments.

The transdermal drug delivery components business, formerly included in the Drug Delivery Systems Division, was realigned to the Medical Solutions Division (both of which are within the Health Care business segment) and the paint protection film business, formerly included in the Automotive and Aerospace Division, was realigned to the Commercial Solutions Division (both of which are within the Transportation and Electronics business segment).

This impacted the amount of dual credit certain business segments receive as a result of sales district attribution.

Also effective in the first quarter of 2021, within 3M’s Consumer business segment, certain safety products formerly within the Construction and Home Improvement Division and the Stationery and Office Division were moved to the newly-named Consumer Health and Safety Division (formerly the Consumer Health Care Division).

The financial information presented herein reflects the impact of the preceding changes for all periods presented.

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Three months ended

Nine months ended

September 30,

Net Sales (Millions)

Safety and Industrial

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Total Company

Operating Performance (Millions)

Operating Performance

Safety and Industrial

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Gain/(loss) on sale of businesses

Divestiture-related restructuring actions

Other corporate expense - net

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Corporate and Unallocated

Corporate and unallocated operating income includes a variety of miscellaneous items, such as corporate investment gains and losses, certain derivative gains and losses, certain insurance-related gains and losses, certain litigation and environmental expenses, corporate restructuring charges and certain under- or over-absorbed costs (e.g.

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 and the acquirer of the former drug delivery business following its 2020 divestiture.

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

Corporate and Unallocated operating income includes “special items” and “other corporate expense-net”.

Special items include significant litigation-related charges/benefits, gain/loss on sale of businesses, and divestiture-related restructuring costs.

Other corporate expense-net includes items such as net costs related to limited unallocated corporate staff and centrally managed material resource centers of expertise costs, certain litigation and environmental expenses largely related to legacy products/businesses not allocated to business segments, corporate philanthropic activity, and other net costs that 3M may choose not to allocate directly to its business segments.

Other corporate expense-net also includes costs and income from contract manufacturing, transition services and other arrangements with the acquirer of the Communication Markets Division following its 2018 divestiture through 2019 and the acquirer of the former Drug Delivery business following its 2020 divestiture.

Items classified as revenue from this activity are included in Corporate and Unallocated net sales.

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

Elimination of Dual Credit

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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