What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-04-27 compared with 2020-10-27 · 209 added, 481 removed, 364 unchanged (65% of the section changed)

8 unchanged sentences

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

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.

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

See detailed discussion in Note 1.

● 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.

3M manages its operations in four operating business segments:

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Consideration of COVID-19:

3M is impacted by the global pandemic and related effects associated with the coronavirus (COVID-19).

The Company updated its risk factors with respect to COVID-19, which can be found in Item 1A “Risk Factors” in this document.

Public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions and the adoption of remote working, have impacted 3M’s operations.

3M is working to protect its employees and the public, maintain business continuity and sustain its operations, including ensuring the safety and protection of people who work in its plants and distribution centers across the world, many of whom support the manufacturing and delivery of products that are critical in response to the global pandemic.

COVID-19 has impacted 3M’s supply chains relative to global demand for products like respirators, surgical masks and commercial cleaning solutions.

As this situation continues, 3M is also closely monitoring and responding to potential impacts to the Company’s broader supply chain associated with other products.

COVID-19 has also affected the ability of suppliers and vendors to provide products and services to 3M.

Furthermore, COVID-19 has impacted the broader economies of affected countries, including negatively impacting economic growth.The Company has taken steps to help employees lead safe and productive lives during the outbreak including remote working;

escalated procedures in factories related to personal safety, cleaning and medical screening measures;

and pandemic leave policies.

3M is closely monitoring how the spread of COVID-19 is affecting employees and business operations and has developed preparedness plans to help protect the safety of employees around the world while safely continuing business.

While nearly all of our manufacturing locations and distribution centers are fully or partially operational, the Company implemented plant and/or line shutdowns during 2020 related to certain markets due to weaker customer demand or government mandates.

Some of the above factors have increased the demand for 3M products, while others have decreased demand or made it more difficult for 3M to serve customers.

Serving 3M customers is a priority and teams continue to communicate with individual customers about potential disruptions.

3M’s total sales increased 4.5% and decreased 1.8% year-on-year in the third quarter and first nine months of 2020, respectively.

Organic local-currency sales increased 0.9% and decreased 4.1% year-on-year in the third quarter and first nine months of 2020, respectively.

Given the diversity of 3M’s businesses, the impact of COVID-19 varied across the Company in the third quarter and first

nine months of 2020.

3M experienced strong sales growth in personal safety, as well as in other areas such as home improvement, general cleaning, semiconductor, data center, and biopharma filtration.

COVID-related respirator sales are estimated to have impacted year-on-year organic local-currency sales growth by approximately 3 percent and 2 percent for the third quarter and first nine months of 2020, respectively.

At the same time, weakness in several end markets, while improving, contributed in part to sales declines in a number of 3M’s businesses with the biggest year-on-year first nine months total sales decreases in oral care (down 25 percent), automotive and aerospace (down 23 percent), advanced materials (down 20 percent), commercial solutions (down 17 percent), stationery and office (down 15 percent), automotive aftermarket (down 13 percent), and businesses aligned to general industrial applications such as abrasives (down 19 percent) and industrial adhesives and tapes (down 8 percent).

3M’s operating income margins decreased 2.3 and increased 2.3 percentage points year-on-year in the third quarter and first nine months of 2020, respectively.

Factoring out the impact on operating income of special items as described in the Certain amounts adjusted for special items - (non-GAAP measures) section below, operating income margins decreased 0.9 and 0.8 percentage points to 22.9 percent and 21.2 percent, respectively, for the third quarter and first nine months of 2020 when compared the same periods in 2019.

Various COVID-19 implications contributed in part to these decreases.

Overall, the impact of the COVID-19 pandemic on 3M’s consolidated results of operations was primarily driven by factors related to changes in demand for products and disruption in global supply chains as described above.

While it is not feasible to identify or quantify all the other direct and indirect implications on 3M’s results of operations, below are factors that 3M believes have also impacted its operating income for the third quarter and first nine months of 2020:

As described in the Overview—Consideration of COVID-19 section of Part II, Item 7 of the Company’s 2020 Annual Report on Form 10-K, 3M is impacted by the global pandemic and related effects associated with the coronavirus (COVID-19).

In addition, risk factors with respect to COVID-19, can be found in Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.

Given the diversity of 3M’s businesses, some of the factors described in that Overview—Consideration of COVID-19 section have increased the demand for 3M products, while others have decreased demand or made it more difficult for 3M to serve customers.

Overall, 3M experienced broad-based growth across all business segments in the first quarter of 2021, benefiting from continued improvements in certain end markets.

3M’s total sales increased 9.6% year-on-year in the first quarter of 2021 with organic local-currency sales growth of 8.0%.

3M experienced the strongest sales growth in personal safety, as well as in other areas such as home improvement, oral care, electronics, and separation and purification sciences.

COVID-related respirator sales are estimated to have impacted year-on-year organic local-currency sales growth by approximately 2.4 percent for the first quarter of 2021.

In the first quarter of 2020, as effects of COVID-19 emerged, weak demand in a number of end markets began to negatively impact oral care, automotive OEM and aftermarket, general industrial, commercial solutions and stationery and office, while demand was increasing in areas such as personal safety, home improvement, general cleaning, food safety and biopharma filtration.

3M’s operating income margins increased 1.9 percentage points year-on-year in the first quarter of 2021.

Factoring out the impact on operating income of special items as described in the Certain amounts adjusted for special items - (non-GAAP measures) section below, operating income margins increased 1.7 points to 22.5 percent for the first quarter of 2021 when compared to 2020.

Various COVID-19 implications contributed in part to these results.

While it is not feasible to identify or quantify all the other direct and indirect implications on 3M’s results of operations, below are factors that 3M believes have also affected its result for first quarter of 2021 when compared to 2020:

Factors contributing to charges:

● Period expenses of unabsorbed manufacturing costs and increased expected credit losses on customer receivables.

● Restructuring actions addressing structural enterprise costs and operations in certain end markets as a result of the COVID-19 pandemic and related economic impact resulting in a second quarter 2020 charge of $58 million (as further discussed in Note 5).

● Committed financial support to various COVID-relief and medical research initiatives.

● Charge of $22 million related to equity securities as discussed in the “ Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis” section of Note 13 that use the measurement alternative described therein in addition to an immaterial pre-tax charge related to impairment of certain indefinite lived tradenames in the first quarter of 2020.

3M continues to regularly consider if COVID-19 and other related market implications could indicate it is more likely than not the carrying amount of various applicable assets may be impaired and assess whether certain investments without readily determinable fair values may have been impacted.

● Increased raw materials and logistics costs during first-quarter 2021 from ongoing COVID-19 related manufacturing supply chain challenges further magnified in February 2021 by winter storm Uri in the United States.

● During first-quarter 2020 implemented targeted plant and/or line shutdowns due to weak customer demand or government mandates as a result of the COVID-19 pandemic.

● Charge of $22 million in the first quarter of 2020 related to equity securities as discussed in the “ Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis” section of Note 13 that use the measurement alternative described therein in addition to an immaterial pre-tax charge related to impairment of certain indefinite lived tradenames.

Factors providing benefits or other impacts:

● Decreased discretionary spending in areas such as travel, professional services, and advertising/merchandising as well as cost reduction efforts, hiring freezes, and maintaining only essential contract workers.

3M plans to monitor discretionary spending and cost control efforts as the situation continues.

● Government-sponsored COVID-response stimulus and relief initiatives, including certain employment retention benefits under the Coronavirus Aid, Relief and Economic Security (CARES) Act in the United States.

● Lower self-insured medical visit/instance expense during the first nine months of 2020 as a result of lower expense in the second quarter of 2020 compared to the same period in 2019.

● Instituted accelerated vacation usage policies which benefit the second quarter of 2020 year-on-year, but provide a penalty in comparison to prior year in the second half of 2020.

As previously disclosed, in light of circumstances, 3M took actions to ensure sources of cash may remain strong, including the March 2020 issuance of $1.75 billion of registered notes, suspension of share repurchases, and lowering its original $1.6 billion to $1.8 billion range of full year 2020 estimated capital spending which was further updated during the third quarter of 2020 to approximately $1.4 billion to $1.5 billion.

While estimated capital spending decreased, it includes additional expansion of respirator production capacity.

3M continues to have access to its commercial paper program and undrawn committed credit facility.

● Ongoing cost management in discretionary spending in areas such as travel, professional services, and advertising/merchandising .

● Continued productivity efforts, including year-on-year savings from restructuring actions taken in 2020.

Refer to the Financial Condition and Liquidity section below for more information on the Company’s liquidity position.

The Company also continues to evaluate the extent to which it may avail itself of various government-sponsored COVID-response stimulus, relief, and production initiatives around the world, such as under the Defense Production Act (DPA) and CARES Act in the United States.

During 2020, under the DPA, the U.S.

government initiated certain agreements with 3M involving just over $200

million of anticipated funding of assets to expand capacity to supply N-95 respirators to the U.S.

The nature of the agreement provides a program of expedited partial funding to begin expansion while final terms are completed.

Due to the speed with which the COVID-19 situation is developing and evolving and the uncertainty of its duration and the timing of recovery, 3M is not able at this time to predict the extent to which the COVID-19 pandemic may have a material effect on its consolidated results of operations or financial condition.

Earnings per share attributable to 3M common shareholders – diluted:

The following table provides the increase (decrease) in diluted earnings per share for the three and nine months ended September 30, 2020 and 2019.

Due to the speed with which the COVID-19 situation continues to develop and evolve and the uncertainty of its duration and the timing of recovery, 3M is not able at this time to predict the extent to which the COVID-19 pandemic may have a material effect on its consolidated results of operations or financial condition.

Operating income margin and Earnings per share attributable to 3M common shareholders – diluted:

The following table provides a summary of the increases (decreases) in operating income margins and diluted earnings per share for the three months ended March 31, 2021.

Three months ended

Nine months ended

(Earnings per diluted share)

September 30, 2020

March 31, 2021

diluted share

Same period last year

Significant litigation-related charges/benefits

Loss on deconsolidation of Venezuelan subsidiary

Gain/loss on sale of businesses

Same period last year, excluding special items

Increase/(decrease) in earnings per share - diluted, due to:

Increase/(decrease) due to:

Organic growth/productivity and other

Selling price and raw material impact

Acquisitions/divestitures

Foreign exchange impacts

Other expense (income), net

Income tax rate

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Current period, excluding special items

Significant litigation-related charges/benefits

Gain/loss on sale of businesses

Divestiture-related restructuring actions

Current period

For the third quarter of 2020, net income attributable to 3M was $1.413 billion, or $2.43 per diluted share compared to $1.583 billion or $2.72 per diluted share in the same period last year, a decrease of 10.7 percent on a per diluted share basis.

For the first nine months of 2020 net income attributable to 3M was $3.995 billion, or $6.87 per diluted share compared to $3.601 billion or $6.15 per diluted share in the same period last year, an increase of 11.7 percent on a per diluted share basis.

Operating income margins increased 1.9 percentage points in the first three months of 2021 when compared to the same period last year.

For the first quarter of 2021, net income attributable to 3M was $1.62 billion, or $2.77 per diluted share, versus $1.31 billion, or $2.25 per diluted share, in the same period last year, an increase of 23.1 percent on a per diluted share basis.

The Company refers to various amounts or measures on an “adjusted basis”.

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These non-GAAP measures are further described and reconciled to the most directly comparable GAAP financial measures in the Certain amounts adjusted for special items - (non-GAAP measures) section below.

On an adjusted basis for the third quarter 2020, net income attributable to 3M was $1.413 billion, or $2.43 per diluted share versus $1.504 billion, or $2.58 per diluted share in the same period last year, which was a decrease of 5.8 percent on a per diluted share basis.

On an adjusted basis for the first nine months of 2020, net income attributable to 3M was $3.699 billion, or $6.36 per diluted share versus $4.058 billion, or $6.93 per diluted share for the same period last year, which was a decrease of 8.2 percent on a per diluted share basis.

Additional discussion related to the components of the year-on-year change in earnings per diluted share follows:

On an adjusted basis, operating margins increased 1.7 percentage points to 22.5 percent in the first three months of 2021 when compared to the same period last year.

Net income attributable to 3M on an adjusted basis was $1.62 billion, or $2.77 per diluted

share, versus $1.27 billion, or $2.19 per diluted share, for the same period last year, an increase of 26.8 percent on a per diluted share basis.

Additional discussion related to the components of the year-on-year change in operating income margins and earnings per diluted share follows:

Organic growth/productivity and other:

● Lower organic volume growth in the first nine months of 2020 as a result of significant COVID-19 related impacts, in addition to COVID-related net factors described in the preceding Overview—Consideration of COVID-19 section, decreased earnings per diluted share year-on-year.

These net factors included cost saving actions taken in response to COVID-19 but also reflected second quarter 2020 charges for items such as restructuring actions addressing structural enterprise costs and operations in certain end markets as a result of the COVID-19 pandemic and related economic impact (further described in Note 5) along with certain related follow-on accelerated depreciation.

Additional items that reduced earnings per diluted share year-on-year include net gains related to certain property sales in the third quarter of 2019.

Partially offsetting this net decrease were benefits recognized in the first nine months of 2020 related to the restructuring and other actions taken in 2019 (and the adjustments thereto in 2020) in addition to continued cost management and productivity efforts.

● Higher organic volume growth, ongoing cost management, and improved productivity increased operating income margins and earnings per diluted share year-on-year.

In addition, the first quarter of 2021 compared to 2020 benefited from restructuring in 2020, net of additional actions in 2021, and COVID-impacts recognized on certain assets in the first quarter of 2020.

● On a combined basis, higher defined benefit pension and postretirement service cost increased expense year-on-year.

● Interest expense (net of interest income) increased year-on-year for both the third quarter and first nine months of 2020, as a result of higher U.S.

average debt balances and lower year-on-year interest income driven by lower average interest rates on cash balances.

Selling price and raw material impact:

● Higher raw material and logistics costs from strong end-market demand and COVID-impacted manufacturing and supply chain disruptions that were further magnified by February 2021 winter storm Uri in the U.S.

These factors were partially offset by higher selling prices.

Acquisitions/divestitures:

● Acquisition impacts, which are measured for the first twelve months post-transaction, relate to the acquisitions of M*Modal (first quarter 2019), and Acelity (fourth quarter 2019).

These items collectively increased earnings per diluted share by 2 cents for the third quarter of 2020 and decreased earnings per diluted share by 7 cents for the first nine months of 2020.

The net impacts related to these acquisitions included income from operations, partially offset in the third quarter of 2020 and more than offset for the first nine months of 2020 by transaction and integration costs.

Financing costs related to these acquisitions is also included.

● Divestiture impacts include the lost operating income from divested businesses, which decreased earnings per diluted share by 1 cent and 4 cents for the third quarter and first nine months of 2020, respectively.

This was primarily related to the divestiture of the Company’s drug delivery business.

● Divestiture impacts are comprised of the lost income from the divestiture of the Company’s drug delivery business (sale completed in May 2020).

Foreign exchange impacts:

● Foreign currency impacts (net of hedging) decreased pre-tax earnings year-on-year by approximately $8 million and $103 million, which had a minimal effect on diluted earnings per share for the third quarter of 2020 and 13 cents per diluted share for the first nine months of 2020, excluding the impact of foreign currency changes on tax rates.

● Foreign currency impacts (net of hedging) increased operating income by approximately $90 million (or pre-tax earnings by approximately $95 million) year-on-year.

Other expense (income), net:

● Higher income related to non-service cost components of pension and postretirement expense, decreased expense year-on-year.

● Interest expense (net of interest income) increased year-on-year due to an early debt extinguishment charge related to make-whole call offers on $450 million of debt in March 2021.

Income tax rate:

● Certain items above reflect specific income tax rates associated with those items.

Overall, the effective tax rate for the third quarter of 2020 was 21.4 percent, an increase of 2.1 percentage points versus 2019.

The effective tax rate for the first nine months of 2020 was 20.0 percent, an increase of 0.3 percentage points versus 2019.

Excluding the special items (as discussed below), the effective tax rate increased 2.4 percentage points and 0.8 percentage points year-on-year for the third quarter and first nine months of 2020, respectively.

● The primary factor that increased the effective tax rate for the third quarter year-on-year 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 largely consistent with that of 2019.

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

Overall, the effective tax rate for the first quarter of 2021 was 16.4 percent, a decrease of 1.1 percentage points year-on-year.

● On an adjusted basis, the effective tax rate decreased 4.3 percentage points year-on-year primarily from nonrepeating favorable adjustments in 2021 related to impacts of U.S.

international tax provisions.

Shares of common stock outstanding:

● Lower shares outstanding had minimal impact to earnings per diluted share for the third quarter of 2020 and increased earnings per share year-on-year by 5 cents per diluted share for the first nine months of 2020.

Weighted-average diluted shares outstanding in the third quarter and first nine months of 2020 declined 0.1 percent and 0.7 percent year-on-year, respectively, which benefited earnings per share.

The decrease in the outstanding weighted-average diluted shares relates to the Company’s purchase of $366 million of its own stock in the first nine months of 2020, prior to 3M’s suspension of its stock repurchase program in late March 2020.

● Higher shares outstanding decreased earnings per share year-on-year.

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

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For the periods presented, special items include the items described below.

Beginning in 2020, the Company includes gain/loss on sale of businesses and divestiture-related restructuring actions as special items due to their potential distortion of underlying operating results.

Information provided herein reflects the impact of this change for all periods presented.

Operating income (measure of segment operating performance), income before taxes, net income, earnings per share, and the effective tax rate are all measures for which 3M provides the reported GAAP measure and a measure adjusted for special items.

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Special items include:

Gain/loss from sale of businesses:

● In the first quarter of 2020, 3M recorded a pre-tax gain of $2 million ($1 million loss after tax) related to the sale of its advanced ballistic-protection business and recognition of certain contingent consideration.

Refer to Note 3 for further details.

Significant litigation-related charges/benefits:

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These items, in aggregate, resulted in a $39 million after tax benefit.

● In the first quarter of 2019, 3M recorded significant litigation-related charges of $548 million ($424 million after tax) related to historical PFAS manufacturing operations and coal mine dust respirator mask lawsuits as further discussed in Note 14.

These were reflected in cost of sales ($223 million) and selling, general and administrative expense ($325 million).

Loss on deconsolidation of Venezuelan subsidiary:

● In the second quarter of 2019, 3M recorded a pre-tax charge of $162 million related to the deconsolidation of the Company’s Venezuelan subsidiary as further discussed in Note 1.

Gain/loss on sale of businesses:

In the second quarter of 2020, 3M recorded a pre-tax gain of $387 million ($304 million after tax) related to the sale of its drug delivery business.

Refer to Note 3 for further details.

● In the first quarter of 2019, 3M recorded a gain related to the sale of certain oral care technology comprising a business in addition to reflecting an earnout on a previous divestiture, which together resulted in a net gain of $8 million ($7 million after tax).

In the second quarter of 2019, as a result of a “held for sale” tax benefit related to the legal entities associated with the pending divestiture of the Company’s gas and flame detection business, 3M recorded an after tax gain of $43 million.

In the third quarter of 2019, 3M recorded a gain related to the divestiture of the Company’s gas and flame detection business and an immaterial impact as a result of measuring a disposal group at the lower of its carrying amount or fair value less cost to sell, which in aggregate resulted in a pre-tax gain of $106 million ($79 million after tax).

Divestiture-related restructuring actions:

● In the second quarter 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.

As a result, 3M recorded a pre-tax charge of $55 million ($46 million after tax).

Refer to Note 5 for further details.

(Dollars in millions, except per share amounts)

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Earnings per diluted share percent change

Three months ended September 30, 2019 GAAP

Adjustments for special items:

Gain/loss on sale of businesses

Three months ended September 30, 2019 adjusted amounts (non-GAAP measures)

Three months ended September 30, 2020 GAAP

Adjustments for special items:

Three months ended September 30, 2020 adjusted amounts (non-GAAP measures)

(Dollars in millions, except per share amounts)

Operating Income

Operating Income Margin

Income Before Taxes

Provision for Income Taxes

Effective Tax Rate

Net Income Attributable to 3M

Earnings Per Diluted Share

Earnings per diluted share percent change

Nine months ended September 30, 2019 GAAP

Three months ended March 31, 2020 GAAP

Adjustments for special items:

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Gain/loss on sale of businesses

Loss on deconsolidation of Venezuelan subsidiary

Nine months ended September 30, 2019 adjusted amounts (non-GAAP measures)

Nine months ended September 30, 2020 GAAP

Three months ended March 31, 2020 adjusted amounts (non-GAAP measures)

Three months ended March 31, 2021 GAAP

Adjustments for special items:

Significant litigation-related charges/benefits

Gain/loss on sale of businesses

Divestiture-related restructuring actions

Nine months ended September 30, 2020 adjusted amounts (non-GAAP measures)

Three months ended March 31, 2021 adjusted amounts (non-GAAP measures)

Sales and operating income by business segment:

The following tables contain sales and operating income results by business segment for the three and nine months ended September 30, 2020 and 2019.

The following tables contain sales and operating income results by business segment for the three months ended March 31, 2021 and 2020.

Refer to the section entitled “Performance by Business Segment” later in MD&A for additional discussion concerning 2021 versus 2020 results, including Corporate and Unallocated.

Refer to Note 16 for additional information on business segments, including Elimination of Dual Credit.

Three months ended September 30,

(Dollars in millions)

Business Segments

Safety and Industrial

Transportation and Electronics

Corporate and Unallocated

Elimination of Dual Credit

Total Company

Nine months ended September 30,

Three months ended March 31,

(Dollars in millions)

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Total Company

Three months ended September 30, 2020

Worldwide Sales Change

Organic local-

By Business Segment

currency sales

Safety and Industrial

Transportation and Electronics

Total Company

Nine months ended September 30, 2020

Three months ended March 31, 2021

Worldwide Sales Change

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Sales by geographic area:

Percent change information compares the third quarter and first nine months of 2020 with the same period last year, unless otherwise indicated.

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

Three months ended September 30, 2020

Percent change information compares the first three months of 2021 with the same period last year, unless otherwise indicated.

Additional discussion of business segment results is provided in the Performance by Business Segment section.

Three months ended March 31, 2021

Net sales (millions)

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Total sales in Mexico decreased 1 percent and organic local-currency sales decreased 2 percent.

In Canada, total sales increased 4 percent as organic local-currency sales decreases of 1 percent were more than offset by acquisition-related sale growth.

In Brazil, total sales decreased 14 percent while organic local-currency sales increased 12 percent, as organic sales growth was more than offset by foreign currency translation impacts.

In Canada, total sales increased 6 percent and organic local-currency sales remained flat.

In Brazil, total sales remained flat while organic local-currency sales increased 18 percent, as foreign currency translation impacts offset organic local-currency sales growth.

● In the Asia Pacific geographic area, China total sales increased 39 percent and organic local-currency sales increased 32 percent.

In Japan, total sales decreased 10 percent and organic local-currency sales decreased 13 percent.

Nine months ended September 30, 2020

Net sales (millions)

% of worldwide sales

Components of net sales change:

Volume — organic

Organic local-currency sales

Total sales change

Total sales change:

Safety and Industrial

Transportation and Electronics

Organic local-currency sales change:

Safety and Industrial

Transportation and Electronics

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

● In the Americas geographic area, U.S.

total sales increased 5 percent as organic-local currency sale decreases of 1 percent were more than offset by acquisition-related sales growth.

Total sales in Mexico decreased 18 percent and organic local-currency sales decreased 16 percent.

In Canada, total sales decreased 3 percent and organic local-currency sales decreased 6 percent.

In Brazil, total sales decreased 20 percent while organic local-currency sales increased 2 percent, as organic sales growth was more than offset by foreign currency translation impacts.

● In the Asia Pacific geographic area, China total sales decreased 1 percent and organic local-currency sales were flat.

In Japan, total sales decreased 5 percent and organic local-currency sales decreased 8 percent.

In Japan, total sales increased 1 percent and organic local-currency sales decreased 1 percent.

Managing currency risks:

The stronger U.S.

dollar had a negative impact on sales in the first nine months of 2020 compared to the same period last year, which was partially offset by the positive impact of the weakening dollar in the third quarter of 2020 compared to the same period last year.

Net of the Company’s hedging strategy, foreign currency negatively impacted earnings in the third quarter and first nine months of 2020 compared to the same periods last year.

3M utilizes a number of tools to hedge currency risk related to earnings.

3M uses natural hedges such as pricing, productivity, hard currency and hard currency-indexed billings, and localizing source of supply.

The weaker U.S.

dollar had a positive impact on sales in the first three months of 2021 compared to the same period last year.

Net of the Company’s hedging strategy, foreign currency positively impacted earnings in the first quarter of 2021 compared to the same

period last year.

3M utilizes a number of tools to manage currency risk related to earnings including natural hedges such as pricing, productivity, hard currency and hard currency-indexed billings, and localizing source of supply.

3M also uses financial hedges to mitigate currency risk.

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Financial condition:

3M generated $5.598 billion of operating cash flows in the first nine months of 2020, an increase of $866 million when compared to the first nine months of 2019, with this increase primarily due to cost saving actions taken in response to COVID-19 and lower year-on-year significant litigation-related charges and the timing of associated payments.

3M generated $1.7 billion of operating cash flows in the first three months of 2021, an increase of $475 million when compared to the first three months of 2020, with this increase year-on-year primarily driven by higher net income as a result of strong organic sales growth and ongoing cost management.

Refer to the section entitled “Financial Condition and Liquidity” later in MD&A for a discussion of items impacting cash flows.

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This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date.

In the first nine months of 2020, the Company purchased $366 million of its own stock, compared to $1.2 billion of stock purchases in the first nine months of 2019.

As of September 30, 2020, approximately $7.8 billion remained available under the authorization.

In the first quarter of 2020, the Company suspended its stock repurchase program in the face of uncertainty arising from the COVID-19 pandemic.

In the first three months of 2021, the Company purchased $231 million of its own stock, compared to $365 million of stock purchases in the first three months of 2020.

As of March 31, 2021, approximately $7.5 billion remained available under the authorization.

In February 2021, 3M’s Board of Directors declared a first-quarter 2021 dividend of $1.48 per share, an increase of 1 percent.

This marked the 62 nd consecutive year of dividend increases for 3M.

In May 2020, 3M’s Board of Directors declared a second-quarter dividend of $1.47 per share.

In August 2020, 3M’s Board of Directors declared a third-quarter dividend of $1.47 per share.

3M currently has an A1 credit rating with a negative outlook from Moody’s Investors Service and an A+ credit rating with a negative outlook from Standard & Poor’s.

This marked the 63 rd consecutive year of dividend increases for 3M.

3M currently has an A1 credit rating with a negative outlook from Moody’s Investors Service and has an A+ credit rating with Standard & Poor’s with a negative outlook.

The Company generates significant ongoing cash flow and has proven access to capital markets funding throughout business cycles.

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Three months ended

Nine months ended

September 30,

(Percent of net sales)

Cost of sales

Selling, general and administrative expenses

Research, development and related expenses

Selling, general and administrative expenses (SG&A)

Research, development and related expenses (R&D)

Gain on sale of businesses

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

The year-on-year increase in defined benefit pension and postretirement service cost expense for the third quarter and first nine months of 2020 was approximately $11 million and $27 million, respectively.

The year-on-year increase in defined benefit pension and postretirement service cost expense for the first three months of 2021 was approximately $10 million.

For total year 2020, the Company recognized consolidated defined benefit pre-tax pension and postretirement service cost expense of $456 million and a benefit of $134 million related to all non-service pension and postretirement net benefit costs (after settlements,

curtailments, special termination benefits and other) for a total consolidated defined benefit pre-tax pension and postretirement expense of $322 million.

For total year 2021, defined benefit pension and postretirement service cost expense is anticipated to total approximately $500 million while non-service pension and postretirement net benefit cost is anticipated to be a benefit of approximately $295 million, for a total consolidated defined benefit pre-tax pension and postretirement expense of approximately $200 million, a decrease in expense of approximately $120 million compared to 2020.

The Company is investing in an initiative called business transformation, with these investments impacting cost of sales, SG&A, and R&D.

Business transformation encompasses the ongoing multi-year phased implementation of an enterprise resource planning (ERP) system on a worldwide basis, as well as changes in processes and internal/external service delivery across 3M.

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 (as discussed earlier in the Certain amounts adjusted for special items - (non-GAAP measures) .

In addition, the Company approved and committed to 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 restructuring actions impacted cost of sales, SG&A, and R&D.

3M also reflected adjustments in 2020 related to restructuring initiated in 2019.

See Note 5 for additional details.

Additionally, the Company’s operating expenses were impacted by factors described in the preceding Overview – Consideration of COVID-19 section above.

Cost of Sales:

Cost of sales includes manufacturing, engineering and freight costs.

Cost of sales, measured as a percent of sales, decreased in the third quarter and first nine months of 2020 when compared to the same periods last year.

Decreases were related to lower significant litigation-related charges taken in the first quarter of 2020 compared to the same period in 2019, which were partially offset by COVID-related net impacts, including period expenses of unabsorbed manufacturing costs, in addition to higher restructuring action charges taken in the second quarter of 2020 versus the same period last year along with certain related follow-on accelerated depreciation.

In addition, selling price increased net sales year-on-year by 0.6 percent in the third quarter and 0.5 percent in the first nine months of 2020, and lower raw material costs reduced cost of sales as a percentage of sales.

Cost of sales, measured as a percent of sales, increased in first three months of 2021.

Increases in the first three months of 2021 primarily related to higher raw material and logistics costs from COVID-19 impacted manufacturing and supply chain disruptions, further magnified by February 2021 winter storm Uri in the U.S., partially offset by higher selling prices.

Selling, General and Administrative Expenses:

SG&A, as a percent of sales, increased in the third quarter and first nine months of 2020 when compared to the same periods last year.

SG&A was affected by the COVID-19 pandemic’s impact on overall sales and as a result yielded higher costs as a percent of sales.

SG&A was also impacted by increased spending year-on-year related to Acelity, which was acquired in the fourth quarter of 2019.

Partially offsetting these were cost saving actions taken in response to COVID-19, in addition to lower year-on-year second quarter impact related to restructuring action charges and benefits from prior year restructuring (and adjustments thereto in 2020).

Additional factors that decreased SG&A in the first nine months of 2020 also include lower year-on-year impact related to significant litigation-related charges.

SG&A in dollars increased 2.3 percent in the first three months of 2021, when compared to the same period last year.

The increase in the first three months of 2021 primarily increased net costs as a result of the regular review of 3M’s respirator mask liabilities, higher litigation and environmental costs, continued spending on key initiatives, partially offset by ongoing general cost management.

As a percent of sales, SG&A decreased as a result of continued discretionary spending cost management.

Research, Development and Related Expenses:

R&D in dollars increased $18 million and $32 million in the third quarter and first nine months of 2020, respectively, when compared to the same period last year.

R&D, measured as a percent of sales, was flat for the third quarter and and increased for the first nine months of 2020, as 3M continued to invest in its key initiatives, including R&D aimed at disruptive innovation programs with the potential to create entirely new markets and disrupt existing markets.

The increase is primarily driven by additional R&D spending related to the Company’s acquisition of Acelity.

R&D in dollars decreased $13 million in the first three months of 2021, when compared to the same period last year, as 3M continued to invest in its key initiatives, including R&D aimed at disruptive innovation programs with the potential to create entirely new markets and disrupt existing markets.

The overall decrease in spending is primarily driven by the May 2020 divestiture of the drug delivery business and other indirect spending reductions.

Gain on Sale of Businesses:

During the first quarter of 2020, the Company recorded a pre-tax gain of $2 million ($1 million loss after tax) related to the sale of its advanced ballistic-protection business and recognition of certain contingent consideration.

During the second quarter of 2020, the Company recorded a pre-tax gain of $387 million ($304 after tax) related to the sale of substantially all of its drug delivery business.

During the first quarter of 2019, the Company sold certain oral care technology comprising a business and reflected an earnout on a previous divestiture resulting in a pre-tax gain of $8 million ($7 million gain after tax).

Refer to Note 3 for additional details on divestitures.

Operating Income:

3M uses operating income as one of its primary business segment performance measurement tools.

Refer to the table below for a reconciliation of operating income margins for the three and nine months ended September 30, 2020 and 2019.

Three months ended

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(Percent of net sales)

September 30, 2020

Same period last year

Significant litigation-related charges/benefits

Gain/loss on sale of businesses

Same period last year, excluding special items

Increase/(decrease) in operating income margin, due to:

Organic volume/productivity and other

Acquisitions/divestitures

Selling price and raw material impact

Foreign exchange impacts

Current period, excluding special items

Significant litigation-related charges/benefits

Gain/loss on sale of businesses

Divestiture-related restructuring actions

Current period

Operating income margins decreased 2.3 percentage points and increased 2.3 percentage points year-on-year in the third quarter and first nine months of 2020, respectively.

Factoring out the impact on operating income of special items as described in the Certain amounts adjusted for special items - (non-GAAP measures) section above, operating margins decreased 0.9 and 0.8 percentage points to 22.9 percent and 21.2 percent, respectively, for the third quarter and first nine months of 2020 when compared to the same periods in 2019.

Additional discussion related to the components of the year-on-year change in operating income margins follows:

Organic volume/productivity and other:

Additional items that reduced operating income margins year-on-year include net gains related to certain property sales in the third quarter of 2019.

Partially offsetting this net decrease were benefits recognized in the first nine months of 2020 related to restructuring and other actions taken in 2019 (and adjustments thereto in 2020) in addition to continued cost management and productivity efforts.

● Operating income margins decreased year-on-year due to higher defined benefit pension and postretirement service cost expense.

Acquisitions/divestitures:

● Acquisition-related impacts relate to the ongoing integration of M*Modal and Acelity, which decreased operating income margins year-on-year .

● Divestiture impacts, which includes lost operating income from divested businesses, increased operating income margins year-on-year.

Selling price and raw material impact:

● Higher selling prices in addition to lower raw material cost impacts benefited operating income margins year-on-year for both the third quarter and first nine months of 2020.

Foreign exchange impacts:

● Foreign currency effects (net of hedge gains) decreased operating income margins year-on-year.

Significant litigation-related charges:

● Operating income margins for the first nine months of 2020 and 2019 included the $17 million and $548 million impact, respectively, of significant litigation-related charges (as discussed earlier in the Certain amounts adjusted for special items - (non-GAAP measures) section).

Gain/loss on sale of businesses:

● There were no gains on the sale of businesses for the third quarter of 2020, whereas, operating income margins for the third quarter of 2019 included gains of $106 million on the sale of businesses.

The first nine months of 2020 and 2019 included gains of $389 million and $114 million, respectively, on sale of businesses.

See the Certain amounts adjusted for special items - (non-GAAP measures) section for more information.

Divestiture-related restructuring actions:

● Operating income margins for the first nine months of 2020 included the $55 million second quarter impact as a result of certain restructuring actions following the divestiture of substantially all of the drug delivery business addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business.

Refer to Note 5 for further details.

This item was also discussed earlier in the Certain amounts adjusted for special items - (non-GAAP measures) section.

Other Expense (Income), Net:

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

Interest expense (net of interest income) increased in the third quarter and first nine months of 2020 compared to the same period in 2019 due to higher U.S.

average debt balances and lower year-on-year interest income driven by lower average interest rates on cash balances.

Other expense (income) decreased year-on-year in the first nine months 2020 primarily due to the impact of the 2019 deconsolidation of the Company’s Venezuelan subsidiary.

Refer to Note 1 for additional details.

In addition, other expense (income) also decreased year-on-year due to the charge associated with the voluntary retirement incentive program taken in the second quarter of 2019.

Refer to Note 11 for additional details.

Interest expense (net of interest income) increased in the first three months of 2021 compared to the same period in 2020 due to an early debt extinguishment charge related to make-whole call offers on $450 million of debt in March 2021.

The non-service pension and postretirement net benefit increased approximately $40 million in the first three months of 2021 compared to the same period in 2020.

Provision for Income Taxes:

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(Percent of pre-tax income)

Effective tax rate

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 effective tax rate for the first nine months of 2020 was 20.0 percent, compared to 19.7 percent in the first nine months 2019, an increase of 0.3 percentage points.

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

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

Due to uncertainty around the ultimate impact from the COVID-19 pandemic, 3M is not providing an estimated range of its 2020 effective tax rate at this time.

The Company will continue to assess the situation and provide quarterly updates throughout the year.

3M currently estimates its effective tax rate for 2021 to be approximately 20 to 21 percent.

The tax rate can vary from quarter to quarter due to discrete items, such as the settlement of income tax audits, changes in tax laws, and employee share-based payment accounting;

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Refer to Note 8 for further discussion of income taxes.

Net Income (Loss) Attributable to Noncontrolling Interest:

Income from Unconsolidated Subsidiaries, Net of Taxes:

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Income (loss) from unconsolidated subsidiaries, net of taxes

Income (loss) from unconsolidated subsidiaries, net of taxes, is primarily attributable to the Company’s ownership interest in Kindeva using the equity method of accounting following 3M’s divestiture of the drug delivery business in 2020.

Net Income Attributable to Noncontrolling Interest:

Three months ended

Net income (loss) attributable to noncontrolling interest

Net income (loss) attributable to noncontrolling interest represents the elimination of the income or loss attributable to non-3M ownership interests in 3M consolidated entities.

Net income attributable to noncontrolling interest represents the elimination of the income or loss attributable to non-3M ownership interests in 3M consolidated entities.

The primary noncontrolling interest relates to 3M India Limited, of which 3M’s effective ownership is 75 percent.

Currency Effects:

3M estimates that year-on-year currency effects, including hedging impacts, decreased pre-tax income by approximately $8 million and $103 million for the third quarter of 2020 and nine months ended September 30, 2020, respectively.

3M estimates that year-on-year currency effects, including hedging impacts, increased pre-tax income by approximately $95 million for the three months ended March 31, 2021.

This estimate includes the effect of translating profits from local currencies into U.S.

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

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.

Refer to Note 12 in the Consolidated Financial Statements for additional information concerning 3M’s hedging activities.

Significant Accounting Policies:

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Disclosures relating to 3M’s business segments are provided in Note 16.

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.

As discussed in Note 16, 3M discloses business segment operating income as its measure of segment profit/loss, reconciled to both total 3M operating income and income before taxes.

Business segment operating income includes dual credit for certain related operating income (as described below in “Elimination of Dual Credit”).

Business segment operating income excludes certain expenses and income that are not allocated to business segments (as described below in “Corporate and Unallocated”).

Additionally, the following special items are excluded from business segment operating income and, instead, are included within Corporate and Unallocated:

significant litigation-related charges/benefits, gain/loss on sale of businesses, and divestiture-related restructuring actions.

Additionally, effective in the first quarter of 2020, the Company changed its business segment reporting (see Note 16 for additional details).

Effective in the first quarter of 2021, 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) was updated for all comparative 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 (see Note 16 for additional details).

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

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In addition to these four business segments, 3M assigns certain costs to “Corporate and Unallocated,” which is presented separately in the preceding business segments table and in Note 16.

Corporate and Unallocated 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 determines not to allocate directly to its business segments.

Additionally, Corporate and Unallocated operating income includes special items such as significant litigation-related charges/benefits, gain/loss on sale of businesses, and divestiture-related restructuring costs.

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 expense for the third quarter and first nine months 2020 when compared to same periods last year are as follows:

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.

Corporate and Unallocated operating expenses decreased in the first three months of 2021, when compared to the same period last year.

Special Items

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section and Note 5 for additional details on the impact of significant litigation-related charges/benefits, gain/loss on sale of businesses, and divestiture-related restructuring actions that are reflected in Corporate and Unallocated.

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of significant litigation-related charges/benefits, gain/loss on sale of businesses, and divestiture-related restructuring actions that are reflected in Corporate and Unallocated.

Other Corporate Expense - Net

Other corporate operating expenses increased in both the third quarter and first nine months of 2020, when compared to the same periods last year, due to lower year-on-year gains from certain property sales, in addition to transition service and other arrangement costs, net of income, post-divestiture of the Company’s former drug delivery business in 2020, and increased legal expenses.

These were partially offset by lower year-on-year restructuring charges.

In the second quarter of 2020 and 2019, operating expenses included non-divestiture-related restructuring charges of $23 million and $82 million, respectively, as further discussed in Note 5.

In addition, 3M’s defined benefit pension and postretirement service-cost expense allocation to Corporate and Unallocated increased year-on-year.

Other corporate operating expenses, net, decreased in the first three months of 2021, when compared to the same period last year primarily due to lower overall corporate staff spending and first quarter 2020 charges related to equity securities (as discussed in the “Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis” section of Note 13), partially offset by increased 2021 legal expenses.

Operating Business Segments:

Information related to 3M’s business segments for both the third quarter and first nine months of 2020 and 2019 are presented in the tables that follow.

Information related to 3M’s business segments is presented in the tables that follow with additional context in the corresponding narrative below the tables.

Organic local-currency sales include both organic volume impacts plus selling price impacts.

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Nine months ended

September 30,

Sales (millions)

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Percent of sales

Third quarter 2020 results:

First quarter 2021 results:

Sales in Safety and Industrial totaled $3.3 billion, up 13.7 percent in U.S.

Organic local-currency sales increased 6.9 percent, divestitures decreased sales by 0.4 percent, and foreign currency translation increased sales by 0.4 percent.

On an organic local-currency sales basis:

● Sales increased in personal safety, roofing granules and automotive aftermarket, while electrical markets, industrial adhesives and tapes, closure and masking system, and abrasives sales declined year-on-year.

● Strong growth related to unprecedented demand for respirators as a result of the COVID-19 pandemic was partially offset by softness that impacted sales growth across most of the Company’s general industrial-related portfolio.

Divestitures:

● In 2018, 3M completed the sale of substantially all of its Communication Markets Division .

● In August 2019, 3M completed the sale of its gas and flame detection business.

Business segment operating income:

● Business segment operating income margins increased 4.3 percentage points, primarily related to strong productivity and continued cost discipline.

First nine months 2020 results:

Sales in Safety and Industrial totaled $8.6 billion, down 1.2 percent in U.S.

Organic local-currency sales increased 0.9 percent, divestitures decreased sales by 0.8 percent, and foreign currency translation decreased sales by 1.3 percent.

Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

● Sales increased in personal safety and roofing granules, while electrical markets, industrial adhesives and tapes, closure and masking systems, automotive aftermarket, and abrasives sales declined year-on-year.

● Strong growth related to unprecedented demand for respirators as a result of the COVID-19 pandemic was more than offset by softness that impacted sales growth across most of the Company’s general industrial-related portfolio.

Divestitures:

● 2018 divestitures that impacted the first nine months of 2019 results relate to the sale of certain personal safety product offerings primarily focused on noise, environmental, and heat stress monitoring (first quarter 2018), and it’s abrasives glass products business (second quarter of 2018).

● Also in 2018, 3M completed the sale of substantially all of its Communication Markets Division .

● In August 2019, 3M completed the sale of its gas and flame detection business.

Business segment operating income:

● Business segment operating income margins increased 3.2 percentage points, primarily related to strong productivity, continued cost discipline and benefits from 2019 restructuring and other actions.

● Sales increased in personal safety, roofing granules, industrial adhesives and tapes, automotive aftermarket, electrical markets, and abrasives;

sales declined in closure and masking systems.

● Growth includes benefits from continued pandemic-related respirator mask demand, improving general industrial manufacturing activity and other end-market demand contributing to sales increases.

Business segment operating income margins increased year-on-year due to sales growth leverage, partially offset by rising raw materials, logistics and legal costs.

Transportation and Electronics Business:

Three months ended

Nine months ended

September 30,

Sales (millions)

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Percent of sales

Third quarter 2020 results:

Sales in Transportation and Electronics totaled $2.3 billion, down 7.4 percent in U.S.

Organic local-currency sales decreased 7.1 percent, divestitures decreased sales by 1.2 percent, and foreign currency translation increased sales by 0.9 percent.

On an organic local-currency sales basis:

● Sales declined in transportation safety, commercial solutions, automotive and aerospace, and advanced materials.

Automotive and aerospace was primarily impacted by the decline in global car and light truck builds .

Commercial solutions and transportation safety were impacted by soft-end markets such as hospitality, advertising and highway infrastructure due to social distancing and work-from-home protocols as a result of COVID-19.

● Sales increased 1 percent in 3M’s electronics-related businesses.

Electronics-related sales increases were primarily related to demand in semiconductor, data center, and factory automation end-markets, partially offset by softness in the consumer electronics end-market.

Divestitures:

● In January 2020, 3M completed the sale of its advanced ballistic-protection business.

Refer to Note 3 for details.

Business segment operating income:

● Business segment operating income margins decreased 1.5 percentage points, primarily related to lower sales which were partially offset by continued cost discipline.

First nine months 2020 results:

Sales in Transportation and Electronics totaled $6.5 billion, down 11.2 percent in U.S.

Organic local-currency sales decreased 9.8 percent, divestitures decreased sales by 1.0 percent, and foreign currency translation decreased sales by 0.4 percent.

First quarter 2021 results:

Sales in Transportation and Electronics totaled $2.5 billion, up 13.1 percent in U.S.

Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

● Sales declined in transportation safety, advanced materials, commercial solutions, and automotive and aerospace.

Automotive and aerospace was primarily impacted by the decline in global car and light truck builds .

● Sales were flat in 3M’s electronics-related businesses.

Electronics-related growth was led by demand for semiconductor, data center, and factory automation end-markets, offset by softness in the consumer electronics end-market.

Divestitures:

● In January 2020, 3M completed the sale of its advanced ballistic-protection business.

Refer to Note 3 for details.

Business segment operating income:

● Business segment operating income margins decreased 2.1 percentage points, primarily related to lower sales and reduced productivity in key end-markets due to COVID-19 related impacts, partially offset by continued cost discipline and benefits from last year’s restructuring actions.

● Sales increased in electronics-related businesses due to strong demand in data center, semiconductor, interconnect and consumer electronics markets.

● Sales increased in automotive and aerospace solutions and advanced materials driven by improving automotive end-market activity, and increases in car and light truck builds.

● Transportation safety was flat year-on-year due to a slow 2021 start to roadway industry construction projects;

commercial solutions sales decreased due to continued negative pandemic-related impacts on advertising spend and demand for workplace cleaning and safety products and solutions.

Business segment operating income margins increased year-on-year due to sales growth leverage and COVID impacts recognized on certain assets in 2020, partially offset by rising raw materials and logistic costs.

Health Care Business:

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Sales (millions)

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Percent of sales

Third quarter 2020 results:

Sales in Health Care totaled $2.2 billion, up 25.5 percent in U.S.

Organic local-currency sales increased 8.1 percent, acquisitions increased sales by 23.4 percent, divestitures decreased sales by 7.1 percent, and foreign currency translation increased sales by 1.1 percent.

On an organic local-currency sales basis:

● Sales increased in medical solutions, separation and purification sciences, and oral care, while sales declined in food safety and health information systems.

● Medical solutions and oral care benefitted from increases in healthcare and elective procedure volumes, after significant disruptions in the second quarter, in addition to strong pandemic-related demand for disposable respirators.

These increases were partially offset by decreases in food safety, as a result of pandemic and related prevention protocols continuing to negatively impact the food services industry, and in health information systems, due to hospitals remaining cautious relative to their information technology investments.

Acquisitions:

● In February 2019, 3M acquired M*Modal, a leading healthcare technology provider of cloud-based, conversational artificial intelligence-powered systems that help physicians efficiently capture and improve the patient narrative.

● In October 2019, 3M completed the acquisition of Acelity Inc.

and its KCI subsidiaries, a leading global medical technology company focused on advanced wound care and specialty surgical applications.

Divestitures:

● In the first quarter of 2019, the Company sold certain oral care technology comprising a business.

● In May 2020, 3M completed the sale of substantially all of its drug delivery business.

Business segment operating income:

● Business segment operating income margins decreased 3.2 percentage points year-on-year, primarily driven by impacts related to the Acelity acquisition and investments in productivity and growth, partially offset by continued cost discipline.

First nine months 2020 results:

First quarter 2021 results:

Sales in Health Care totaled $2.2 billion, up 6.8 percent in U.S.

Organic local-currency sales decreased 1.3 percent, acquisitions increased sales by 20.9 percent, divestitures decreased sales by 3.7 percent, and foreign currency translation decreased sales by 0.8 percent.

Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

● Sales increased in separation and purification sciences, medical solutions, and food safety, while sales decreased in health information systems and oral care.

● Increases in healthcare and elective procedure volumes benefited both Medical solutions and oral care after significant disruptions in the second quarter, with strong pandemic-related demand for disposable respirators resulting in increased sales for medical solutions, while oral care sales decreased year-on-year.

In addition, health information systems decreased due to hospitals remaining cautious relative to their information technology investments.

Acquisitions:

● In October 2019, 3M completed the acquisition of Acelity Inc.

and its KCI subsidiaries, a leading global medical technology company focused on advanced wound care and specialty surgical applications .

● Sales increased in oral care, separation and purification, medical solutions, and health information systems.

Growth was driven by higher year-on-year dental industry activity, continued high demand for biopharma filtration solutions for COVID-related vaccine and therapeutic development and manufacturing, continued strong respirator demand, and improving hospital information technology investments, partially offset by year-on-year declines in elective healthcare procedure volumes.

● Sales declined in food safety as the food service industry had strong early COVID buy-ins in 2020.

Divestitures:

● In the first quarter of 2019, the Company sold certain oral care technology comprising a business.

● In May 2020, 3M completed the sale of substantially all of its drug delivery business.

Business segment operating income:

● Business segment operating income margins decreased 5.6 percentage points year-on-year, driven by impacts related to the Acelity acquisition in addition to significant sales declines in oral care during the second quarter of 2020, partially offset by continued cost discipline and benefits from 2019 restructuring and other costs.

Business segment operating income margins increased year-on-year due to sales growth leverage, partially offset by supply chain disruptions and rising raw materials and logistics costs.

Consumer Business:

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Sales (millions)

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Percent of sales

Third quarter 2020 results:

Sales in Consumer totaled $1.4 billion, an increase of 5.6 percent in U.S.

Organic local-currency sales increased 5.5 percent and foreign currency translation increased sales by 0.1 percent.

On an organic local-currency sales basis:

● Sales grew in home care and home improvement, while consumer health care was flat.

● Stationery and office declined year-on-year as a result of many business offices and schools remaining partially or fully closed due to the pandemic.

● Sales showed continued strength in the Company’s Command TM , Filtrete TM , Scotch Blue TM , Scotch Brite TM , and Meguiars TM brands.

Business segment operating income:

● Business segment operating income margins increased 2.0 percentage points year-on-year as a result of strong organic sales growth and continued cost discipline.

First nine months 2020 result:

First quarter 2021 results:

Sales in Consumer totaled $1.4 billion, an increase of 9.8 percent in U.S.

Organic local-currency sales increased 2.1 percent and foreign currency translation decreased sales by 0.8 percent.

Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

● Sales grew in home care and home improvement, while consumer health care and stationery and office declined.

● Stationery and office declined year-on-year as a result of many business offices and schools remaining partially or fully closed due to the pandemic.

● Sales showed continued strength in the Company’s Command TM , Filtrete TM , Scotch Blue TM , Scotch Brite TM , and Meguiars TM brands.

Business segment operating income:

● Business segment operating income margins increased 2.1 percentage points year-on-year as a result of strong organic sales growth and continued cost discipline.

● Sales increased in home improvement and stationery and office supplies.

Growth in home improvement was driven by continued strong demand for Command TM adhesives, Filtrete TM air quality solutions and Scotch Blue TM painter’s tape.

Growth in stationery and office was led by ongoing strength in consumer demand for packaging and shipping products and Scotch ® brand office tapes as prior year remote work and school trends begin to be lapped.

● Home care experienced continued growth due to consumer demand for home cleaning products and solutions.

Consumer health and safety declined as the global economy impacted by COVID continues to evolve versus 2020.

Business segment operating income margins decreased 0.1 points year-on-year as a result of higher raw materials, logistics, outsourced hardgoods manufacturing costs and investments in advertising and merchandising offsetting sales growth leverage.

FINANCIAL CONDITION AND LIQUIDITY

The strength and stability of 3M’s business model and strong free cash flow capability, together with proven capital markets access, provides financial flexibility and enables the Company to invest through business cycles.

Investing in 3M’s business to drive organic growth and deliver strong return on invested capital remains the first priority for capital deployment.

Investing in 3M’s business to drive organic growth and deliver strong returns on invested capital remains the first priority for capital deployment.

This includes research and development, capital expenditures, and commercialization capability.

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The Company also continues to actively manage its portfolio to maximize value for shareholders.

Given uncertainty arising from COVID-19, the Company suspended its share repurchase program effective March 2020.

3M will continue to return cash to shareholders through dividends and will consider whether to resume share repurchases once the COVID-19 impacts are better known.

3M maintains strong liquidity and further added to its liquidity position through the issuance of $1.75 billion in registered notes in March 2020.

3M repurchased shares in the first three months of 2021, after having suspended repurchases under its board-approved share repurchase program (with other repurchase activity limited to 3M’s stock compensation plans) in the first quarter of 2020.

To fund cash needs in the United States, the Company relies on ongoing cash flow from U.S.

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For those international earnings still considered to be reinvested indefinitely, the Company currently has no plans or intentions to repatriate these funds for U.S.

See Note 8 for further information on earnings considered to be reinvested indefinitely.

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

See Note 10 in 3M’s 2020 Annual Report on Form 10-K for further information on earnings considered to be reinvested indefinitely.

3M maintains a strong liquidity profile.

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

commercial paper issuances.

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3M’s commercial paper program permits the Company to have a maximum of $5 billion outstanding with a maximum maturity of 397 days from date of issuance.

At September 30, 2020, there was no commercial paper issued and outstanding, compared to $150 million outstanding at December 31, 2019.

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

The strength of 3M’s credit profile and significant ongoing cash flows provide 3M proven access to capital markets.

Additionally, the Company’s debt maturity profile is staggered to help ensure refinancing needs in any given year are reasonable in proportion to the total portfolio.

3M currently has an A1 credit rating with a negative outlook from Moody’s Investors Service and an A+ credit rating with a negative outlook from Standard & Poor’s.

The Company’s total debt was $0.7 billion lower at September 30, 2020 when compared to December 31, 2019.

Decreases in debt include the repayment of aggregate $445 million principal amount of Third Lien Notes subject to in-substance defeasance (see Note 10), 650 million euros and $500 million aggregate principal amount of floating-rate medium-term notes that matured, lower

commercial paper balance, and the repayment of the 80 billion Japanese yen and 150 million euro credit facilities.

These decreases were partially offset by the March 2020 issuance of $1.75 billion of registered notes.

Additionally, the Company’s debt maturity profile is staggered to help ensure refinancing needs in any given year are reasonable in proportion to the

total portfolio.

3M currently has an A1 credit rating with a negative outlook from Moody’s Investors Service and an A+ credit rating with negative outlook from Standard and Poor’s.

The Company’s total debt was $0.6 billion lower at March 31, 2021 when compared to December 31, 2020.

Decreases in debt were largely due to the March 2021 early redemption via make-whole call offers of $450 million in debt.

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

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

The Company is in the process of reviewing its debt securities, bank facilities, derivative instruments and commercial contracts that utilize LIBOR as the reference rate.

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

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

Subsequently, in March of 2021, IBA stated it will cease publication of certain LIBOR rates after December 31, 2021.

USD LIBOR rates that do not cease on December 31,2021 will continue to be published through June 30, 2023.

The Company has reviewed its debt securities, bank facilities, and derivative instruments and continues to evaluate commercial contracts that may utilize LIBOR as the reference rate.

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

Effective February 10, 2020, the Company updated its “well-known seasoned issuer” (WKSI) shelf registration statement, which registers an indeterminate amount of debt or equity securities for future issuance and sale.

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In May 2016, in connection with the WKSI shelf, 3M entered into an amended and restated distribution agreement relating to the future issuance and sale (from time to time) of the Company’s medium-term notes program (Series F), up to the aggregate principal amount of $18 billion, which was an increase from the previous aggregate principal amount up to $9 billion of the same Series.

As of September 30, 2020, the total amount of debt issued as part of the medium-term notes program (Series F), inclusive of debt issued in February 2019 and prior years is approximately $17.6 billion (utilizing the foreign exchange rates applicable at the time of issuance for the euro denominated debt).

As of March 31, 2021, the total amount of debt issued as part of the medium-term notes program (Series F), inclusive of debt issued in February 2019 and prior years is approximately $17.6 billion (utilizing the foreign exchange rates applicable at the time of issuance for the euro denominated debt).

Additionally, the August 2019 and March 2020 debt was issued under the WKSI shelf registration, but not as part of the medium-term notes program (Series F).

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The revolving credit agreement includes a provision under which 3M may request an increase of up to $1.0 billion (at lender’s discretion), bringing the total facility up to $4.0 billion.

In addition, 3M entered into a $1.25 billion 364-day credit facility expiring in November 2020.

In addition, 3M entered into a $1.25 billion 364-day credit facility, which was renewed in November 2020 with an expiration date of November 2021.

The 364-day credit agreement includes a provision under which 3M may convert any advances outstanding on the maturity date into term loans with a maturity date one year later.

These credit facilities were undrawn at September 30, 2020.

These credit facilities were undrawn at March 31, 2021.

Under both the $3.0 billion and $1.25 billion credit agreements, the Company is required to maintain its EBITDA to Interest Ratio as of the end of each fiscal quarter at not less than 3.0 to 1.

This is calculated (as defined in the agreement) as the ratio of consolidated total EBITDA for the four consecutive quarters then ended to total interest expense on all funded debt for the same period.

At September 30, 2020, this ratio was approximately 17 to 1.

At March 31, 2021, this ratio was approximately 18 to 1.

Debt covenants do not restrict the payment of dividends.

Apart from the committed credit facilities described above, 3M has a credit facility initially expiring in July 2020 in the amount of 80 billion Japanese yen that in July 2020 was further extended until August 2021.

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.

The Company also had $271 million in stand-alone letters of credit and bank guarantees issued and outstanding at September 30, 2020.

The Company also had $266 million in stand-alone letters of credit and bank guarantees issued and outstanding at March 31, 2021.

These instruments are utilized in connection with normal business activities.

Cash, cash equivalents and marketable securities:

At September 30, 2020, 3M had $4.6 billion of cash, cash equivalents and marketable securities, of which approximately $2.9 billion was held by the Company’s foreign subsidiaries and approximately $1.7 billion was held in the United States.

At March 31, 2021, 3M had $5.2 billion of cash, cash equivalents and marketable securities, of which approximately $3.0 billion was held by the Company’s foreign subsidiaries and approximately $2.2 billion was held by the United States.

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

At December 31, 2019, cash, cash equivalents and marketable securities held by the Company’s foreign subsidiaries and in the United States totaled approximately $2.4 billion and $100 million, respectively.

The increase from December 31, 2019 primarily resulted from $1.75 billion of debt the Company issued in March 2020 in light of the uncertain impact of the COVID-19 pandemic.

At December 31, 2020, 3M had $5.1 billion of cash, cash equivalents and marketable securities, of which approximately $2.8 billion was held by the Company’s foreign subsidiaries and $2.3 billion was held by the United States.

The increase from December 31, 2020 primarily resulted from strong cash flow from operations offset by ongoing dividend payments, capital expenditures, and the March 2021 early redemption via make-whole call offers of $450 million in debt.

Net Debt (non-GAAP measure):

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3M believes net debt is meaningful to investors as 3M considers net debt and its components to be important indicators of liquidity and financial position.

The following table provides net debt as of September 30, 2020 and December 31, 2019.

September 30, 2020

The following table provides net debt as of March 31, 2021 and December 31, 2020.

March 31, 2021

December 31, 2020

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Working capital (non-GAAP measure):

September 30, 2020

March 31, 2021

December 31, 2020

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

Working capital increased $3.0 billion compared with December 31, 2019.

Balance changes in current assets increased working capital by $1.2 billion, driven by increases to cash and cash equivalents, partially offset by decreases in account receivable and inventory.

Balance changes in current liabilities increased working capital by $1.8 billion, primarily due to decreases in short-term borrowing and the current portion of long-term debt.

Accounts receivable decreased $168 million compared to December 31, 2019, primarily due to lower sales in 2020 in relation to sales in the fourth quarter 2019 and increased expected credit losses on customer receivables related to COVID-19 uncertainty.

Inventory decreased $150 million from December 31, 2019 as a result of actions taken to reduce inventory in light of slower growth conditions in several key end-markets, changes in channel inventory levels by customers related to impacts from COVID-19 and improving sequential organic sales volumes in the third quarter.

Inventory also decreased as a result of the divestiture of the drug delivery business.

Working capital as of March 31, 2021 was largely consistent with December 31, 2020.

Balance changes in current assets increased working capital by $0.4 billion, driven largely by increases in inventory, accounts receivable and marketable securities offset by decreases in prepaids.

Balance changes in current liabilities decreased working capital by $0.4 billion, primarily due to increases in current-portion of long-term debt and accounts payable, offset by decrease in accrued payroll and other current liabilities.

Accounts receivable and inventory increased $112 million and $219 million, respectively, from December 31, 2020, primarily as a result of increased sequential sales and related operating activity from that of late 2020 partially offset by foreign currency translation impacts.

Current portion of long-term debt increased based on underlying debt maturities while accounts payable also increased as a result of increased sequential operating activity from that of late 2020 partially offset by foreign currency translation impacts.

Accrued payroll decreased as accrued annual incentive compensation was paid in early 2021.

Cash flows from operating, investing and financing activities are provided in the tables that follow.

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Cash Flows from Operating Activities:

Nine months ended

September 30,

Three months ended

Net income including noncontrolling interest

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Income taxes (deferred and accrued income taxes)

Loss on deconsolidation of Venezuelan subsidiary

Accounts receivable

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Net cash provided by (used in) operating activities

Cash flows from operating activities can fluctuate significantly from period to period, as pension funding decisions, tax timing differences and other items can significantly impact cash flows.

In the first nine months of 2020, cash flows provided by operating activities increased $0.9 billion compared to the same period last year, with this increase primarily due to cost saving actions taken in response to COVID-19 and lower year-on-year significant litigation-related charges and the timing of associated payments.

The combination of accounts receivable, inventories and accounts payable increased working capital by $108 million in the first nine months of 2020, compared to the working capital increases of $19 million in the first nine months of 2019.

Cash flows from operating activities can fluctuate significantly from period to period, as changes in working capital needs, tax timing differences and other items can significantly impact cash flows.

In the first three months of 2021, cash flows provided by operating activities increased $475 million compared to the same period last year, with this increase primarily due to overall sales growth and continued spending discipline leading to higher net income year-on-year.

The combination of accounts receivable, inventories and accounts payable decreased operating cash flow by $354 million in the first three months of 2021, compared to an operating cash flow decrease of $338 million in the first three months of 2020.

Additional discussion on working capital changes is provided earlier in the “Financial Condition and Liquidity” section.

Cash Flows from Investing Activities:

Nine months ended

September 30,

Three months ended

Purchases of property, plant and equipment (PP&E)

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

The Company expects full-year 2020 estimated capital spending to be approximately $1.4 billion to $1.5 billion (which was further updated in the third quarter of 2020 versus original guidance of $1.6 billion to $1.8 billion) as 3M

reduces overall spending in light of uncertainty regarding COVID-19, but continues to invest in expanding the Company’s ability to increase production of respiratory products to meet worldwide demand.

The Company expects 2021 capital spending to be approximately $1.8 billion to $2.0 billion as 3M continues to invest in growth, productivity and sustainability.

In 2020, 3M reduced overall spending in light of uncertainty regarding COVID-19—resulting in full year capital spending of $1.5 billion—but continued to invest in expanding the Company’s ability to increase production of respiratory products to meet worldwide demand.

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.

3M invests in renewal and maintenance programs, which pertain to cost reduction, cycle time, maintaining and renewing current capacity, eliminating pollution, and compliance.

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The Company is actively considering additional acquisitions, investments and strategic alliances, and from time to time may also divest certain businesses.

Acquisitions, net of cash acquired, in the first nine months of 2019 primarily includes the purchase of M*Modal.

Acquisitions, net of cash acquired, in the first nine months of 2020 primarily relate to the payment made for contingent consideration in regards to the Acelity acquisition.

Proceeds from sale of businesses in 2019 primarily relate to the sale of certain oral care technology comprising a business and the gas and flame detection business.

Proceeds from sale of businesses in 2020 primarily relate to the sales of the Company’s advanced ballistic-protection business and its drug delivery business.

Acquisitions, net of cash acquired, in the first three months of 2020 primarily relate to the payment made for contingent consideration in regards to the Acelity acquisition.

Proceeds from sale of businesses in 2020 primarily relate to the sale of the Company’s advanced ballistic-protection business.

Purchases of marketable securities and investments and proceeds from maturities and sale of marketable securities and investments are primarily attributable to certificates of deposit/time deposits, commercial paper, and other securities, which are classified as available-for-sale.

In the first nine months of 2020 these included the maturity of the held-to-maturity debt security that was entered into to satisfy the redemption of the Third Lien Notes (which matured in May 2020).

Refer to Note 9 for more details about 3M’s diversified marketable securities portfolio.

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Cash Flows from Financing Activities:

Nine months ended

September 30,

Three months ended

Change in short-term debt — net

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Net cash provided by (used in) financing activities

Total debt was approximately $19.6 billion at September 30, 2020 and $20.3 billion at December 31, 2019.

Repayment of debt primarily consists of the aggregate $445 million principal amount of Third Lien Notes and the 650 million euros and $500 million aggregate principal amount of floating-rate medium-term notes that matured in May 2020 and August 2020, respectively.

Increases in debt related to the March 2020 issuance of $1.75 billion in registered notes.

Outstanding commercial paper was zero at September 30, 2020, as compared to $150 million at December 31, 2019.

During the third quarter of 2020, the Company paid the outstanding balances on their Japanese yen and and euro credit facilities.

Total debt was approximately $18.2 billion at March 31, 2021 and $18.8 billion at December 31, 2020.

Decreases in debt were largely due to the March 2021 early redemption of $450 million in debt maturing in 2022 via make-whole call offers.

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

Net commercial paper issuances in addition to repayments and borrowings by international subsidiaries are largely reflected in “Change in short-term debt – net” in the preceding table.

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commercial paper issuances.

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.

Repurchases of common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes.

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This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date.

In the first nine months of 2020, the Company purchased $366 million of its own stock prior to 3M’s suspension of its share repurchase program in late March.

In first three months of 2021, the Company purchased $0.2 billion of its own stock.

3M repurchased shares in 2021, after having suspended repurchases (with other repurchase activity limited to 3M’s stock compensation plans) in the first quarter of 2020.

For more information, refer to the table titled “Issuer Purchases of Equity Securities” in Part II, Item 2.

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In February 2021, 3M’s Board of Directors declared a first-quarter 2021 dividend of $1.48 per share, an increase of 1 percent.

This is equivalent to an annual dividend of $5.88 per share and marked the 62 nd consecutive year of dividend increases.

In May 2020, 3M’s Board of Directors declared a second-quarter 2020 dividend of $1.47 per share.

In August 2020, 3M’s Board of Directors declared a third-quarter 2020 dividend of $1.47 per share.

Other cash flows from financing activities may include various other items, such as cash paid associated with certain derivative instruments, distributions to or sales of noncontrolling interests, changes in cash overdraft balances, and principal payments for finance leases.

This is equivalent to an annual dividend of $5.92 per share and marked the 63 rd consecutive year of dividend increases.

Other cash flows from financing activities may include various other items, such as cash paid associated with certain derivative instruments, distributions to or sales of noncontrolling interests, changes in overdraft balances, and principal payments for finance leases.

Free Cash Flow (non-GAAP measure):

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The first quarter of each year is typically 3M’s seasonal low for free cash flow and free cash flow conversion.

In the table below details the components of free cash flow for the nine months ended September 30, 2020 and 2019.

In the first nine months of 2020 and 2019, free cash flow conversion was impacted by cost saving actions taken in response to COVID-19 and significant litigation-related charges and timing of associated payments.

Refer to the preceding “Cash Flows from Operating Activities” section for discussion of additional items that impacted operating cash flow.

Refer to the proceeding “Cash Flows from Investing Activities” section for discussion on capital spending for property, plant and equipment.

Nine months ended

September 30,

Below find a recap of free cash flow and free cash flow conversion.

Refer to the preceding “Cash Flows from Operating Activities” and “Cash Flows from Investing Activities” sections for discussion of items that impacted the operating cash flow and purchases of PP&E components of the calculation of free cash flow.

Refer to the preceding “Results of Operations” section for discussion of items that impacted the net income attributable to 3M component of the calculation of free cash flow conversion.

Three months ended

Major GAAP Cash Flow Categories

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Net cash provided by (used in) operating activities

Purchases of property, plant and equipment (PP&E)

Purchases of property, plant and equipment

Free cash flow

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

● worldwide economic, political, regulatory, capital markets and other external conditions, such as interest rates, foreign currency exchange rates, financial conditions of our suppliers and customers, trade restrictions such as tariffs in addition to retaliatory counter measures, and natural and other disasters or climate change affecting the operations of the Company or our suppliers and customers,

● worldwide economic, political, regulatory, international trade, capital markets and other external conditions, such as interest rates, financial conditions of our suppliers and customers, trade restrictions such as tariffs in addition to retaliatory counter measures, inflation, and natural and other disasters or climate change affecting the operations of the Company or our suppliers and customers,

● risks related to public health crises such as the global pandemic associated with the coronavirus (COVID-19),

● liabilities related to certain fluorochemicals and the outcome of contingencies, such as legal and regulatory proceedings,

● liabilities related to certain fluorochemicals and the outcome of contingencies,

● the Company’s strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position,

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● asset impairments,

● tax liabilities, and

● the effects of changes in tax (including the Tax Cuts and Jobs Act), environmental and other laws and regulations in the United States and other countries in which we operate.

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

● legal and regulatory proceedings, legal compliance risks (including third-party risks) with regards to environmental, product liability and other laws and regulations in the United States and other countries in which we operate.

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

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Actual future results and trends may differ materially from historical results or those reflected in any such forward-looking statements depending on a variety of factors.

Important information as to these factors can be found in this document, including, among others, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings of “Overview,” “Financial Condition and Liquidity” and annually in “Critical Accounting Estimates.” Discussion of these factors is incorporated by reference from Part II, Item 1A, “Risk Factors,” of this document, and should be considered an integral part of Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For additional information concerning factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 10-K, 10-Q and 8-K filed with the SEC from time to time.

Important information as to these factors can be found in this document, including, among others, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings of “Overview,” “Financial Condition and Liquidity” and annually in “Critical Accounting Estimates.” Discussion of these factors is incorporated by reference from Part I, Item 1A, “Risk Factors,” of this document, and should be considered an integral part of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For additional information concerning factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 10-K, 10-Q and 8-K filed with the SEC from time to time.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis