What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-09 · 165 added, 151 removed, 256 unchanged (55% of the section changed)

1 unchanged sentence

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Company’s unaudited condensed consolidated and combined financial statements and corresponding notes elsewhere in this Quarterly Report on Form 10-Q.

The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Solventum Corporation ( " Solventum, " or the " Company " ) for the six months ended June 30, 2024 and 2023.

The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Solventum Corporation ( “ Solventum, ” or the “ Company ” ) for the nine months ended September 30, 2024 and 2023.

For a full understanding of our financial condition and results of operations, the below discussion should be read alongside the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Registration Statement on Form 10 as filed with the Securities and Exchange Commission (the “SEC”) on March 11, 2024, which became effective on March 13, 2024 (the “Information Statement”).

5 unchanged sentences

Certain columns and rows within tables may not add up due to the use of rounded numbers.

Unless the context otherwise requires, references to "Solventum" and the "Company" refer to (i) 3M's Health Care Business prior to the Spin-Off as a carve-out business of 3M with related condensed combined financial statements and (ii) Solventum Corporation and its subsidiaries following the Spin-Off with related condensed consolidated financial statements.

Unless the context otherwise requires, references to “Solventum” and the “Company” refer to (i) 3M’s Health Care Business prior to the Spin-Off as a carve-out business of 3M with related condensed combined financial statements and (ii) Solventum Corporation and its subsidiaries following the Spin-Off with related condensed consolidated and combined financial statements.

Transition to Standalone Company

17 unchanged sentences

References are made to organic sales change, which is defined as the change in net sales, absent the separate impacts on sales from foreign currency translation and acquisitions, net of divestitures.

Other, as comprised in the tables below, include acquisition and divestiture-related activities.

Other, as comprised in the tables below, includes acquisition and divestiture-related activities.

Acquisitions include non-health care related supply agreements that conveyed from 3M to the Company at Spin-Off and sales from new supply agreements with 3M that commenced at Spin-Off.

Divestiture impacts include lost sales from the sale of the Company's dental anesthetics business that was sold in August 2023 as well as lost sales of certain health care businesses retained by 3M India in connection with the Spin-Off.

Divestiture impacts include lost sales from the Company’s dental anesthetics business that was sold in August 2023 as well as lost sales of certain health care businesses retained by 3M India in connection with the Spin-Off.

Solventum believes this information is useful to investors and management in understanding ongoing operations and in analysis of ongoing operating trends.

4 unchanged sentences

Refer to Note 15 to the condensed consolidated and combined financial statements for additional information on business segments.

Sales by Business Segment

Three months ended June 30,

2024 2023 Sales Change 2024 vs 2023

(Dollars in millions) Net Sales Net Sales Total Sales Change Translation Other Organic Sales

Segment and Total Company Net Sales

Three months ended September 30, Increase/(Decrease)

(Dollars in millions) 2024 2023 Total

Currency Impact

Other Organic

Segment Sales

5 unchanged sentences

Total Company $ 2,082 $ 2,074 0.4 % (0.1) % 0.2% 0.3 %

Six months ended June 30,

2024 2023 Sales Change 2024 vs 2023

(Dollars in millions) Net Sales Net Sales Total Sales Change Translation Other Organic Sales

Nine months ended September 30, Increase/(Decrease)

(Dollars in millions) 2024 2023 Total

Currency Impact

Other Organic

Segment Sales

5 unchanged sentences

Total Company $ 6,179 $ 6,161 0.3 % (0.5) % — % 0.8 %

Operating Income by Business Segment

Three months ended June 30,

Segment and Total Company Operating Income

Three months ended September 30,

(Dollars in millions) 2024 2023 2024 vs 2023 change

6 unchanged sentences

Total Company $ 275 $ 504 (45.4) %

Six months ended June 30,

Nine months ended September 30,

(Dollars in millions) 2024 2023 2024 vs 2023 change

6 unchanged sentences

Total Company $ 900 $ 1,286 (30.0) %

Sales by geographic area:

Percent change information compares the three and six months ended June 30, 2024 with the same period for the prior year, unless otherwise indicated.

Three months ended June 30, 2024

Net Sales by Geographic Area

Percent change information compares the three and nine months ended September 30, 2024 with the same period for the prior year, unless otherwise indicated.

Three months ended September 30, 2024

United States International Worldwide

1 unchanged sentence

% of worldwide sales 58.5 % 41.5 % 100.0 %

Components of net sales change:

Total sales change 4.8 % (5.4) % 0.2 %

Translation — (2.4) (1.1)

Increase/(decrease)

4.1 % (4.5) % 0.4 %

Currency impact

— (0.1) (0.1)

Other 1.9 (1.9) 0.2

Organic sales 4.5 % (2.7) % 1.3 %

Six months ended June 30, 2024

2.2 % (2.5) % 0.3 %

Nine months ended September 30, 2024

United States International Worldwide

1 unchanged sentence

% of worldwide sales 57.2 % 42.8 % 100.0 %

Components of net sales change:

Total sales change 3.0 % (3.2) % 0.2 %

Translation — (1.6) (0.7)

Increase/(decrease)

3.4 % (3.6) % 0.3 %

Currency impact

— (1.2) (0.5)

Other 1.4 (1.8) —

Organic sales 2.9 % (1.1) % 1.1 %

2.0 % (0.6) % 0.8 %

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

Second quarter 2024 results

Third quarter 2024 results

• In the United States both total sales and organic sales increased.

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• In International, both total sales and organic sales decreased.

Foreign currency translation negatively impacted total growth.

Organic growth decline was led by MedSurg and Dental Solutions.

First six months 2024 results

First nine months 2024 results

• In the United States both total sales and organic sales increased.

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The stronger U.S.

dollar had a negative impact on sales of 1 percent for the second quarter 2024 compared to the same period last year.

dollar had an immaterial worldwide impact on sales for the third quarter of 2024 compared to the same period last year.

The stronger U.S.

dollar had a negative impact on sales of 1 percent in the first six months of 2024 compared to the first six months of 2023.

Net of the Company's hedging strategy, foreign currency negatively impacted earnings for the second quarter and first six months of 2024 compared to the same periods last year.

dollar had a negative worldwide impact on sales of less than 1 percent in the first nine months of 2024 compared to the first nine months of 2023.

Net of the Company’s hedging strategy, foreign currency negatively impacted earnings for the third quarter and first nine months of 2024 compared to the same periods last year.

Financial condition

3 unchanged sentences

Operating Expenses

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(Percent of corresponding net sales) 2024 2023 Change 2024 2023 Change

3 unchanged sentences

Costs of product includes manufacturing, engineering and freight costs.

Costs of product, measured as a percent of sales of product, increased in the second quarter of 2024 when compared to the second quarter of 2023.

The increase was driven by increased costs in international and unfavorable mix within MedSurg that was driven by backorder recovery in our lower margin OEM business, as well as higher costs from transition manufacturing, procurement and distribution support provided by 3M.

Costs of product, measured as a percent of sales of product, increased in the first six months of 2024 when compared to the first six months of 2023.

The increase was driven by higher costs from transition manufacturing, procurement and distribution support provided by 3M.

These increases were partially offset by sales price benefit.

Costs of product, measured as a percent of sales of product, increased in the third quarter of 2024 when compared to the third quarter of 2023.

The increase was driven by increased costs due to the impact of higher costs on inventory sourced under the master supply and transition manufacturing agreements with 3M and due to the cost of other transition support provided by 3M.

Costs of product, measured as a percent of sales of product, increased in the first nine months of 2024 when compared to the first nine months of 2023.

These costs were partially offset by a sales price benefit.

Costs of Software and Rentals

Costs of software and rentals includes compensation-related costs associated with installation, training and maintenance for our software products, and depreciation, maintenance and refurbishment cost and freight costs related to our hardware rental units.

Costs of software and rentals, measured as a percent of sales of software and rentals, decreased in both the second quarter and first six months of 2024 as compared to the same periods last year due to product mix from higher software sales.

Three months ended June 30, Six months ended June 30,

Costs of software and rentals, measured as a percent of sales of software and rentals, increased during the third quarter of 2024 as compared to the same period last year due to the impact of lower rental equipment revenue.

Costs of software and rentals, measured as a percent of sales of software and rentals, were flat for the first nine months of 2024 as compared to the same period last year driven by higher software sales offset by higher compensation costs and lower rental revenue.

Three months ended September 30, Nine months ended September 30,

(Percent of total net sales) 2024 2023 Change 2024 2023 Change

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Selling, General and Administrative

SG&A, measured as a percent of total net sales, increased in both the second quarter and first six months of 2024 when compared to the same periods last year.

The increase in both periods was driven by higher compensation, including equity- based awards, and higher costs associated with both initial standup and ongoing operations to support a standalone Company.

SG&A, measured as a percent of total net sales, increased in both the third quarter and first nine months of 2024 when compared to the same periods last year.

The increase in both periods was driven by higher compensation, including equity- based awards, and higher costs associated with both initial stand-up and ongoing operations to support a standalone company.

Research and Development

R&D, measured as a percent of total net sales, was flat in both the second quarter and the first six months of 2024 when compared to the same periods last year as the Company maintained consistent investment in research and development initiatives.

R&D, measured as a percent of total net sales, increased in both the third quarter and the first nine months of 2024 when compared to the same periods last year due to higher compensation costs.

Interest Expense, Net and Other Expense (Income), Net

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(Dollars in millions) 2024 2023 2024 2023

1 unchanged sentence

Other expense (income), net 1 4 $ 48 $ 10

Interest expense, net includes interest accrued on debt and interest income from cash and marketable securities.

Interest expense, net increased in both the second quarter and first six months of 2024 as compared to the same periods last year due to interest incurred on the February 2024 issuance of senior notes and March draw on the senior term loan credit facilities.

Interest expense, net includes interest accrued on debt obligations, offset by interest income from cash and marketable securities.

Interest expense, net increased in both the third quarter and first nine months of 2024 as compared to the same periods last year due to interest incurred on the February 2024 issuance of senior notes and March draw on the senior term loan credit facilities.

Refer to Note 8 to the financial statements for more information.

This increase was partially offset by interest earned from cash balances and marketable securities held during the period.

This increase was partially offset by interest earned from cash and marketable securities held during the period.

Other expense (income), net includes the non-service component of periodic pension cost, investment gains and losses, and currency-related impacts from foreign currency translation.

Other expense (income), net increased in both the second quarter and the first six months of 2024 as compared to the same periods last year resulting from charges associated with the substantial liquidation of foreign operations completed as part of our separation from 3M.

Other expense (income), net decreased slightly for the third quarter of 2024 as compared to the same period last year.

Other expense (income), net increased for the first nine months of 2024 as compared to the same period last year resulting from charges associated with the substantial liquidation of foreign operations completed as part of our separation from 3M.

Provision (benefit) for Income Taxes:

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

(Percent of pre-tax income/loss) 2024 2023 2024 2023

Effective tax rate 26.9 % 8.0 % 24.3 % 15.8 %

The effective tax rates for the three months ended June 30, 2024 and 2023 were 7.3% and 22.3%, respectively.

The effective tax rates for the six months ended June 30, 2024 and 2023 were 23.3% and 20.9% , respectively.

Refer to Note 7 to the financial statements for further discussion of income taxes.

Performance by Business Segment

Note 14 to the audited combined financial statements within the Company's Information Statement dated March 11, 2024, provides an overview of Solventum's business segments.

In addition, disclosures relating to Solventum’s segments are provided in Note 15 to financial statements.

Note 14 to the audited combined financial statements within the Company’s Information Statement provides an overview of Solventum’s business segments.

In addition, disclosures relating to Solventum’s segments are provided in Note 15 to the accompanying condensed consolidated and combined financial statements.

We manage our operations in four business segments.

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

Corporate and Unallocated net operating loss increased in both the second quarter and the first six months of 2024 when compared to the same period last year as the Company had higher Spin-Off and separation related costs.

Corporate and Unallocated net operating loss increased in both the third quarter and the first nine months of 2024 when compared to the same period last year as the Company had higher Spin-Off and separation related costs.

Operating Business Segments

1 unchanged sentence

Refer to the section entitled “Business” in Solventum’s Information Statement for discussion of products that are included in each business segment.

MedSurg (55.8 percent and 55.7 percent of consolidated sales for the three and six months ended June 30, 2024)

Three months ended June 30, Six months ended June 30,

MedSurg (56.8% and 56.0% of consolidated sales for the three and nine months ended September 30, 2024)

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

Sales (millions) $ 1,162 $ 1,161 $ 2,281 $ 2,284

Sales change analysis:

Organic sales 1.8 % 0.3 % 1.0 % 1.5 %

Net sales (millions)

$ 1,182 $ 1,180 $ 3,463 $ 3,464

Translation (1.1) (1.0) (0.8) (2.0 %)

Total sales change 0.1 % (0.7 %) (0.1) % (0.5 %)

Increase/(decrease)

1.0 % 1.4 % 1.1 % 1.4 %

(0.7) — (0.5) — %

Currency impact

(0.1) 0.6 (0.6) (1.1 %)

0.1 % 2.0 % — % 0.3 %

Business segment operating income (millions)

2 unchanged sentences

Percent of sales 20.6 % 26.0 % 19.6 % 23.9 %

Second quarter 2024 results

Sales in MedSurg were up 0.1 percent:

• Organic sales growth was driven by both volume and price, including a benefit from OEM backorder reduction.

• Volume growth benefited from single-use negative pressure wound therapy and I.V.

site management solutions.

Third quarter 2024 results

Sales in MedSurg were up 0.1%:

• Organic sales growth was driven by volumes, including a benefit from I.V.

site management and medical OEM products, partially offset by traditional negative pressure wound therapy.

• Volume growth continues to benefit from single-use negative pressure wound therapy.

• Other includes lost sales from certain health care businesses in India retained by 3M in connection with the Spin-Off.

1 unchanged sentence

Business segment operating income margin decreased when compared to the same period last year.

The decrease was driven by a mix penalty due to OEM backorder reduction and higher costs to standup and operate our standalone structure after Spin-Off.

First six months 2024 results

Sales in MedSurg were down (0.1) percent:

The decrease was driven by higher costs to stand-up and operate our standalone structure after Spin-Off.

First nine months 2024 results

Sales in MedSurg were flat:

• Positive price growth was driven by the impact from actions initiated during the prior year in response to higher material and labor input costs.

The favorable impact of prior year price actions is expected to decline as we progress in 2024.

• Organic growth was led by single-use negative pressure wound therapy, partially offset by declines in sterilization assurance and advanced wound dressings.

The favorable impact of prior year price actions has and will continue to decline during the remainder of 2024.

• Organic growth was led by I.V.

site management, medical OEM products, and single-use negative pressure wound therapy, partially offset by declines in sterilization assurance products and traditional negative pressure wound therapy.

• Other includes certain health care businesses retained by 3M India in connection with the Spin-Off.

1 unchanged sentence

Business segment operating income margin decreased when compared to the same period last year.

The decrease was driven by higher costs to standup and operate our standalone structure after Spin-Off.

Dental Solutions (15.9 percent and 16.3 percent of consolidated sales for the three and six months ended June 30, 2024)

Three months ended June 30, Six months ended June 30,

The decrease was driven by higher costs to stand-up and operate our standalone structure after Spin-Off.

Dental Solutions (15.0% and 15.8% of consolidated sales for the three and nine months ended September 30, 2024)

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

Sales (millions) $ 331 $ 351 $ 666 $ 692

Sales change analysis:

Organic sales (2.0) % 1.1 % (0.8) % 1.3 %

Net sales (millions)

$ 313 $ 331 $ 979 $ 1,023

Translation (1.5) (0.8) (0.9) (2.1)

Total sales change (5.8) % 0.3% (3.8) % (0.8) %

Increase/(decrease)

(3.9) % 7.7 % (1.8) % 3.2 %

(1.2) (2.1) (1.9) (0.6)

Currency impact

— 1.5 (0.6) (1.0)

(5.2) % 7.1% (4.3) % 1.6 %

Business segment operating income (millions) $ 72 $ 114 $ 272 $ 349

1 unchanged sentence

Percent of sales 23.0 % 34.4 % 27.8 % 34.1 %

Second quarter 2024 results:

Sales in Dental Solutions were down (5.8) percent.

• Volume declines were partially offset by modest price growth.

Lower volumes were primarily driven by traditional orthodontics.

Third quarter 2024 results:

Sales in Dental Solutions were down (5.2)%:

• Lower volumes were driven by soft end-market demand.

• Other includes lost sales from the Company’s dental anesthetics business that was sold in August 2023 as well as certain health care businesses retained by 3M India in connection with the Spin-Off.

• Foreign currency translation negatively impacted sales by (1.5%).

Business segment operating income margin decreased when compared to the same period last year as a result of higher costs to standup and operate our standalone structure after Spin-Off, partially offset by the benefit from higher price.

First six months 2024 results:

Sales in Dental Solutions were down (3.8) percent.

• Foreign currency translation impact to sales was flat.

Business segment operating income margin decreased when compared to the same period last year as a result of higher costs to stand-up and operate our standalone structure after Spin-Off in addition to the impact of lower sales volumes.

First nine months 2024 results:

Sales in Dental Solutions were down (4.3)%:

• Volume declines were partially offset by positive price growth.

The favorable impact of prior year price actions decreased during the period and the impact of such price actions are expected to continue to moderate through the remainder of 2024.

• Other is primarily driven by lost sales from the Company's dental anesthetics business that was sold in August 2023.

The favorable impact of prior year price actions decreased during the period and the impact of such price actions has and will continue to moderate through the remainder of 2024.

• Other is primarily driven by lost sales from the Company’s dental anesthetics business that was sold in August 2023 as well as certain health care businesses retained by 3M India in connection with the Spin-Off.

• Foreign currency translation negatively impacted sales by (0.6%)

Health Information Systems (15.8 percent and 15.7 percent of consolidated sales for the three and six months ended June 30, 2024)

Three months ended June 30, Six months ended June 30,

Health Information Systems (15.7% and 15.7% of consolidated sales for the three and nine months ended September 30, 2024)

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

Sales (millions) $ 328 $ 316 $ 645 $ 632

Sales change analysis:

Organic sales 3.6 % 3.4 % 2.0 % 5.8 %

Translation (0.1) (0.1) — (0.2)

Total sales change 3.5 % 3.3 % 2.0 % 5.6 %

Net sales (millions)

$ 326 $ 321 $ 971 $ 953

Increase/(decrease)

1.5 % 3.9 % 1.8 % 5.2 %

Currency impact

0.1 0.3 — (0.1)

1.5 % 4.2 % 1.8 % 5.1 %

Business segment operating income (millions) $ 105 $ 114 $ 317 $ 304

1 unchanged sentence

Percent of sales 32.2 % 35.5 % 32.6 % 31.9 %

Second quarter 2024 results:

Sales in Health Information Systems were up 3.5 percent.

• Positive growth was driven by continued adoption of our 3M TM 360 Encompass TM and performance management solutions.

• Clinician productivity solutions declined primarily impacted by changing market conditions.

Business segment operating income margin increased when compared to the same period last year driven by both price and a product mix benefit due to higher software sales and lower professional services.

First six months 2024 results:

Sales in Health Information Systems were up 2.0 percent.

Third quarter 2024 results:

Sales in Health Information Systems were up 1.5%:

• Positive growth was driven by continued adoption of our 3M TM 360 Encompass TM , partially offset by performance management solutions and clinician productivity solutions.

• Clinician productivity solutions declined primarily due to impacts from changing market conditions.

Business segment operating income margin decreased when compared to the same period last year driven by higher compensation costs.

First nine months 2024 results:

Sales in Health Information Systems were up 1.8%:

• Positive growth was driven by continued adoption of our 3M TM 360 Encompass TM and performance management solutions.

• Clinician productivity solutions declined primarily impacted by changing market conditions.

Business segment operating income margin increased when compared to the same period last year driven by a product mix benefit due to higher software sales and lower professional services.

Purification and Filtration (11.4 percent and 11.8 percent of consolidated sales for the three and six months ended June 30, 2024)

Three months ended June 30, Six months ended June 30,

• Clinician productivity solutions declined primarily due to impacts from changing market conditions.

Business segment operating income margin increased when compared to the same period last year driven by a product mix benefit due to higher software sales and lower professional services, partially offset by higher compensation costs.

Purification and Filtration (11.4% and 11.7% of consolidated sales for the three and nine months ended September 30, 2024)

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

Sales (millions) $ 238 $ 248 $ 483 $ 479

Sales change analysis:

Organic sales (0.9) % (4.7) % 2.6 % (6.1) %

Net sales (millions)

$ 238 $ 242 $ 721 $ 721

Translation (1.6) (0.6) (1.1) (2.1)

Total sales change (3.6) % (5.3) % 0.9 % (8.2) %

Increase/(decrease)

(0.3) % 1.4 % 1.7 % (3.8) %

(1.1) — (0.9) —

Currency impact

— 1.6 (0.7) (1.0)

(1.5) % 3.0 % 0.1 % (4.8) %

Business segment operating income (millions) $ 20 $ 48 $ 78 $ 134

1 unchanged sentence

Percent of sales 8.4 % 19.8 % 10.8 % 18.6 %

Second quarter 2024 results:

Sales in Purification and Filtration were down (3.6) percent:

• Primarily driven by drinking water filtration end markets, partially offset by higher volume growth in bioprocessing filtration.

Third quarter 2024 results:

Sales in Purification and Filtration were down (1.5)%:

• Primarily driven by declines in drinking water filtration and membrane OEM product categories, partially offset by continued strength in bioprocessing filtration product category and added capacity coming online for industrial filtration product category.

• Other includes certain business in India retained by 3M in connection with the Spin-Off.

• Foreign currency translation negatively impacted growth by (1.6%).

Business segment operating income margin decreased due to a negative impact from higher costs in international, sales mix and costs to standup and operate our standalone structure after Spin-Off.

First six months 2024 results:

Sales in Purification and Filtration were up 0.9 percent:

• Primarily driven by higher volume growth in both our bioprocessing filtration and membrane OEM product categories.

This growth was partially offset by a decline in our separation filtration and drinking water filtration products.

• Foreign currency translation impact to sales was flat.

Business segment operating income margin decreased due to a negative impact from costs to stand-up and operate our standalone structure after Spin-Off and sales mix.

First nine months 2024 results:

Sales in Purification and Filtration were up 0.1%:

• Primarily driven by higher volume growth in our bioprocessing filtration product category.

This growth was partially offset by a decline in our industrial filtration and drinking water filtration product categories.

• Other includes certain health care businesses retained by 3M India in connection with the Spin-Off.

• Foreign currency translation negatively impacted growth by (0.7%).

Business segment operating income margin decreased due to the negative impact from higher costs in international, sales mix and costs to standup and operate our standalone structure after Spin-Off.

Business segment operating income margin decreased due to the negative impact from costs to stand-up and operate our standalone structure after Spin-Off and sales mix.

Financial Condition and Liquidity

The strength and stability of Solventum’s operating model and strong free cash flow capability provides financial flexibility and enables the Company to invest through business cycles.

Historically, Solventum generated positive operating cash flows and a majority of such cash flows were transferred to 3M Company as part of 3M’s cash pooling arrangements, the effect of which is presented as Net parent investment in our condensed combined financial statements.

Historically, Solventum generated positive operating cash flows and a majority of such cash flows were transferred to 3M as part of 3M’s cash pooling arrangements, the effect of which is presented as Net parent investment in our condensed combined financial statements.

Upon completion of the Spin-Off, Solventum has ceased participation in 3M's cash pooling arrangement and our cash and cash equivalents are held and used solely for our own operations.

The Company's capital structure, long-term commitments and sources of liquidity will change significantly from historical practices.

For additional detail regarding changes to our capital structure, see section entitled " Description of Material Indebtedness " below.

For additional detail regarding changes to our capital structure, refer to the section entitled “ Description of Material Indebtedness ” in Solventum's Information Statement.

Debt and Credit Facilities

On February 16, 2024, the Company entered into a five-year $2.0 billion unsecured revolving credit facility expiring in 2029, an 18-month senior unsecured term loan facility of $500 million and a three-year senior unsecured term loan facility of $1.0 billion (together the " Facilities " ).

In March 2024, the Company withdrew $1.48 billion under the Facilities.

1 unchanged sentence

On February 27, 2024, Solventum issued $6.9 billion of Senior Notes in preparation for the payment of partial consideration to 3M Company in connection with the Spin-Off.

In August 2024, the Company repaid $200 million of the outstanding principal amount from the 18-month senior unsecured term loan credit facility.

Refer to Note 8 for more information.

Commercial Paper

On March 4, 2024, the Company entered into a commercial paper program that allows Solventum up to $2.0 billion aggregate principal amount of short-term notes to finance short-term liabilities.

On March 4, 2024, the Company entered into a commercial paper program that allows it to issue up to an $2.0 billion aggregate principal amount of short-term notes to finance short-term liabilities.

Any such issuance will mature within 364 days from date of issue.

There was no commercial paper outstanding as of June 30, 2024.

There was no commercial paper outstanding as of September 30, 2024.

Cash, cash equivalents and marketable securities

At June 30, 2024, Solventum had $897 million of cash and cash equivalents, of which approximately $378 million was held by the Company’s foreign subsidiaries and approximately $519 million was held in the United States.

As of September 30, 2024, Solventum had $772 million of cash and cash equivalents, of which approximately $570 million was held by the Company’s foreign subsidiaries and approximately $202 million was held in the United States.

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

At December 31, 2023, Solventum had $194 million of cash and cash equivalents, of which approximately $150 million was held by the Company’s foreign subsidiaries and $44 million was held in the United States.

As of December 31, 2023, Solventum had $194 million of cash and cash equivalents, of which approximately $150 million was held by the Company’s foreign subsidiaries and $44 million was held in the United States.

The increase from December 31, 2023 resulted from both cash retained by the Company at Spin-Off and operating cash generated by the Company subsequent to the Spin-Off.

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Cash Flows from Operating Activities:

Six months ended June 30,

Nine months ended September 30,

(Millions) 2024 2023

5 unchanged sentences

Stock-based compensation expense 87 32

Gain on business divestitures — (56)

Deferred income taxes (93) (99)

7 unchanged sentences

Net cash provided by operating activities $ 966 $ 1,368

In the first six months of 2024, cash flows provided by operating activities decreased compared to the first six months of 2023 primarily due to lower net income, partially offset by payments from related parties and lower accounts receivable.

The benefit in accounts payable is largely offset by due from related parties as the Company reimburses 3M for certain procurement activities managed through 3M's IT systems.

In the first nine months of 2024, cash flows provided by operating activities decreased compared to the first nine months of 2023 primarily due to lower net income, partially offset by payments from related parties.

The benefit in accounts payable is largely offset by amounts due to related parties as the Company reimburses 3M for certain procurement activities managed through 3M's IT systems.

In addition to this procurement activity, due to related parties also includes cash paid to 3M for operating transactions with Solventum entities prior to the Spin-Off and the net impact of payables and associated payments related to transition agreements with 3M.

Cash Flows from Investing Activities:

Six months ended June 30,

Nine months ended September 30,

(Millions) 2024 2023

1 unchanged sentence

Purchases of property, plant and equipment $ (253) $ (202)

Proceeds from sale of business — 60

Net cash used in investing activities $ (253) $ (142)

Purchases of property, plant and equipment increased in the first six months of 2024 as compared to the first six months of 2023.

Purchases of property, plant and equipment increased in the first nine months of 2024 as compared to the first nine months of 2023.

The increase is primarily driven by the timing of investment spend.

The Company is focused on investments to support growth, renewal and maintenance programs, Environmental Health Services ("EHS") and relocating manufacturing operations currently co-located within 3M facilities.

The Company is focused on investments to support growth, renewal and maintenance programs, environmental health services, and relocating manufacturing operations currently co-located within 3M facilities.

Cash Flows from Financing Activities:

Six months ended June 30,

Nine months ended September 30,

(Millions) 2024 2023

Cash Flows from Financing Activities

Repayment of debt $ (200) $ —

Net transfers to 3M (8,247) (1,248)

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Net cash provided by (used in) financing activities $ (136) $ (1,246)

Repayment of debt is related to the August 2024 repayment of $200 million outstanding principal from the 18-month senior unsecured term loan credit facility.

Proceeds from debt of $8.3 billion were related to the first quarter issuance of $6.9 billion in senior notes and $1.5 billion in senior term loan credit facilities.

The proceeds from these financing transactions were transferred to 3M in connection with transaction, other than the amounts retained in order to achieve the $600 million retained cash target.

Cash flows from financing activities increased in the first six months of 2024 compared to the same period in 2023 due to proceeds of long-term debt, partially offset by net transfers to 3M.

Material Cash Requirement from Known Contractual and Other Obligations:

Solventum’s material cash requirements from known contractual and other obligations primarily relate to the following, for which information on both a short-term and long-term basis is provided in the indicated notes to the condensed consolidated and combined financial statements and the audited consolidated financial statements included in the Information Statement:

• Tax obligations—Refer to Note 9 to the audited consolidated and combined financial statements and Note 7 to the unaudited condensed consolidated and combined financial statements.

The proceeds from these financing transactions were transferred to 3M in connection with the Spin-Off transaction, other than the amounts retained in order to achieve the $600 million retained cash target.

Material Cash Requirements from Known Contractual and Other Obligations:

Solventum’s material cash requirements from known contractual and other obligations primarily relate to the following, for which information on both a short-term and long-term basis is provided in the indicated notes to the condensed consolidated and combined financial statements and the audited combined financial statements included in the Information Statement:

• Tax obligations—Refer to Note 9 to the audited combined financial statements and Note 7 to the unaudited condensed consolidated and combined financial statements.

• Debt—Refer to Note 8 to the unaudited condensed consolidated and combined financial statements.

• Commitments and contingencies—Refer to Note 11 to the audited consolidated and combined financial statements and Note 11 to the unaudited condensed consolidated and combined financial statements.

• Commitments and contingencies—Refer to Note 11 to the audited combined financial statements and Note 11 to the unaudited condensed consolidated and combined financial statements.

• Operating leases—Refer to Note 12 to the audited combined financial statements.

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Additionally, contractual capital commitments represent a small part of the Company’s expected capital spending.

Cautionary Note Concerning Factors That May Affect Future Results

Cautionary Note Concerning Forward Looking Statements

This Quarterly Report on Form 10-Q, including “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in Part I, Item 2, contains or incorporates by reference statements that relate to future events and expectations and, as such, constitute forward-looking statements that involve risk and uncertainties.

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Such risks and uncertainties include, but are not limited to:

• The effects of, and changes in, worldwide economic, political, regulatory, international, trade and geopolitical conditions, natural disasters, war, and other events beyond Solventum’s control.

• the effects of, and changes in, worldwide economic, political, regulatory, international, trade and geopolitical conditions, natural disasters, war, public health crises, and other events beyond Solventum’s control;

• unexpected events, such as those related to the COVID-19 public health crisis;

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• pension and postretirement obligation liabilities;

• Any events that adversely affect the sale or profitability of one of Solventum’s key products or the revenue delivered from sales to its key customers.

• any failure by 3M to perform any of its obligations under the various separation agreements in connection with the separation and distribution;

• The expected benefits and timing of the separation and the risk that conditions to the separation will not be satisfied and/or that the separation will not be completed within the expected time frame, on the expected terms or at all.

• any failure to realize the expected benefits of the separation, and/or that the separation will not be completed within the expected time frame, on the expected terms or at all;

• a determination by the IRS or other tax authorities that the distribution or certain related transactions should be treated as taxable transactions;

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• the risk that incremental costs of operating on a standalone basis (including the loss of synergies), costs of restructuring transactions and other costs incurred in connection with the separation will exceed Solventum’s estimates;

• The impact of the separation on its businesses and the risk that the separation may be more difficult, time-consuming or costly than expected, including the impact on its resources, systems, procedures and controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties.

The above list of factors is not exhaustive or necessarily in the order of importance.

Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties.

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

• the impact of the separation on its businesses and the risk that the separation may be more difficult, time-consuming or costly than expected, including the impact on its resources, systems, procedures and controls, diversion of

management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties.

The above list is not exhaustive or necessarily set forth in the order of importance.

Forward-looking statements are based on certain assumptions and expectations of future events and trends, and 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.

Solventum assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis