~~P1Y0000066740false--12-312020Q3P3YP20YCommon Stock, Par Value $.01 Per Share10000000P3Y15000000042000000P5YP10YP30Y35000000110000008000000011~~

Note: The common stock of the Registrant is also traded on the SWX Swiss Exchange.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Form 10-Q for the Quarterly Period Ended September 30, ~~2020~~

2021

For the Quarterly Period Ended September 30, ~~2020~~

2021

PART I. Financial Information

Item 1. Financial Statements.

3M Company and Subsidiaries

Consolidated Statement of Income

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,

(Millions, except per share amounts)

2020

2019

2020

2019

Net sales

$
8,350

$
7,991

$
23,601

$
24,025

Operating expenses

Cost of sales

4,303

4,188

12,217

12,811

Selling, general and administrative expenses

1,677

1,455

5,039

5,089

Research, development and related expenses

461

443

1,422

1,390

Gain on sale of businesses

—

(106)

(389)

(114)

Total operating expenses

6,441

5,980

18,289

19,176

Operating income

1,909

2,011

5,312

4,849

Other expense (income), net

104

45

311

349

Income before income taxes

1,805

1,966

5,001

4,500

Provision for income taxes

387

378

1,002

888

Income of consolidated group

1,418

1,588

3,999

3,612

Income (loss) from unconsolidated subsidiaries, net of taxes

(1)

—

(1)

—

Net income including noncontrolling interest

1,417

1,588

3,998

3,612

Less: Net income (loss) attributable to noncontrolling interest

4

5

3

11

Net income attributable to 3M

$
1,413

$
1,583

$
3,995

$
3,601

Weighted average 3M common shares outstanding — basic

577.8

576.5

577.2

577.2

Earnings per share attributable to 3M common shareholders — basic

$
2.45

$
2.75

$
6.92

$
6.24

Weighted average 3M common shares outstanding — diluted

582.4

583.0

581.6

585.9

Earnings per share attributable to 3M common shareholders — diluted

$
2.43

$
2.72

$
6.87

$
6.15


	Three months ended September 30,				Nine months ended September 30,
(Millions, except per share amounts)	2021		2020		2021		2020
Net sales	$	8,942	$	8,350	$	26,743	$	23,601

Operating expenses
Cost of sales	4,853		4,303		14,097		12,217
Selling, general and administrative expenses	1,819		1,677		5,373		5,039
Research, development and related expenses	482		461		1,520		1,422
Gain on sale of businesses	—		—		—		(389)
Total operating expenses	7,154		6,441		20,990		18,289
Operating income	1,788		1,909		5,753		5,312

Other expense (income), net	31		83		113		248

Income before income taxes	1,757		1,826		5,640		5,064
Provision for income taxes	324		391		1,058		1,016
Income of consolidated group	1,433		1,435		4,582		4,048

Income (loss) from unconsolidated subsidiaries, net of taxes	4		(1)		7		(1)
Net income including noncontrolling interest	1,437		1,434		4,589		4,047

Less: Net income (loss) attributable to noncontrolling interest	3		4		7		3

Net income attributable to 3M	$	1,434	$	1,430	$	4,582	$	4,044

Weighted average 3M common shares outstanding — basic	579.6		577.8		580.3		577.2
Earnings per share attributable to 3M common shareholders — basic	$	2.47	$	2.47	$	7.90	$	7.01

Weighted average 3M common shares outstanding — diluted	586.3		582.4		587.1		581.6
Earnings per share attributable to 3M common shareholders — diluted	$	2.45	$	2.45	$	7.81	$	6.95

The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.

3M Company and Subsidiaries

Consolidated Statement of Comprehensive Income

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,

(Millions)

2020

2019

2020

2019

Net income including noncontrolling interest

$
1,417

$
1,588

$
3,998

$
3,612

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

271

(202)

(67)

(2)

Defined benefit pension and postretirement plans adjustment

127

76

304

356

Cash flow hedging instruments

(71)

8

(60)

(24)

Total other comprehensive income (loss), net of tax

327

(118)

177

330

Comprehensive income (loss) including noncontrolling interest

1,744

1,470

4,175

3,942

Comprehensive (income) loss attributable to noncontrolling interest

(5)

(3)

(1)

(10)

Comprehensive income (loss) attributable to 3M

$
1,739

$
1,467

$
4,174

$
3,932


	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Net income including noncontrolling interest	$	1,437	$	1,434	$	4,589	$	4,047
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	(302)		271		(354)		(67)
Defined benefit pension and postretirement plans adjustment	119		116		359		271
Cash flow hedging instruments	48		(71)		95		(60)
Total other comprehensive income (loss), net of tax	(135)		316		100		144
Comprehensive income (loss) including noncontrolling interest	1,302		1,750		4,689		4,191
Comprehensive (income) loss attributable to noncontrolling interest	(2)		(5)		(6)		(1)
Comprehensive income (loss) attributable to 3M	$	1,300	$	1,745	$	4,683	$	4,190

The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.

3M Company and Subsidiaries

Consolidated Balance Sheet

(Unaudited)

September 30,

December 31,

(Dollars in millions, except per share amount)

2020

2019

Assets

Current assets

Cash and cash equivalents

$
4,121

$
2,353

Marketable securities — current

440

98

Accounts receivable — net of allowances of $228 and $161

4,623

4,791

Inventories

Finished goods

1,859

2,003

Work in process

1,224

1,194

Raw materials and supplies

901

937

Total inventories

3,984

4,134

Prepaids

516

704

Other current assets

426

891

Total current assets

14,110

12,971

Property, plant and equipment

26,452

26,124

Less: Accumulated depreciation

(17,236)

(16,791)

Property, plant and equipment — net

9,216

9,333

Operating lease right of use assets

844

858

Goodwill

13,535

13,444

Intangible assets — net

5,926

6,379

Other assets

1,759

1,674

Total assets

$
45,390

$
44,659

Liabilities

Current liabilities

Short-term borrowings and current portion of long-term debt

$
1,169

$
2,795

Accounts payable

2,208

2,228

Accrued payroll

721

702

Accrued income taxes

220

194

Operating lease liabilities — current

252

247

Other current liabilities

2,840

3,056

Total current liabilities

7,410

9,222

Long-term debt

18,429

17,518

Pension and postretirement benefits

3,679

3,911

Operating lease liabilities

605

607

Other liabilities

3,324

3,275

Total liabilities

$
33,447

$
34,533

Commitments and contingencies (Note 14)

Equity

3M Company shareholders’ equity:

Common stock par value, $.01 par value; 944,033,056 shares issued

$
9

$
9

Shares outstanding - September 30, 2020: 576,821,878

Shares outstanding - December 31, 2019: 575,184,835

Additional paid-in capital

6,116

5,907

Retained earnings

43,285

42,135

Treasury stock, at cost:

(29,570)

(29,849)

Shares at September 30, 2020: 367,211,178

Shares at December 31, 2019: 368,848,221

Accumulated other comprehensive income (loss)

(7,960)

(8,139)

Total 3M Company shareholders’ equity

11,880

10,063

Noncontrolling interest

63

63

Total equity

$
11,943

$
10,126

Total liabilities and equity

$
45,390

$
44,659


(Dollars in millions, except per share amount)	September 30, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	4,878	$	4,634
Marketable securities — current	855		404
Accounts receivable — net of allowances of $212 and $233	4,916		4,705
Inventories
Finished goods	2,324		2,081
Work in process	1,436		1,226
Raw materials and supplies	1,190		932
Total inventories	4,950		4,239
Prepaids	501		675
Other current assets	326		325
Total current assets	16,426		14,982
Property, plant and equipment	27,211		26,650
Less: Accumulated depreciation	(17,888)		(17,229)
Property, plant and equipment — net	9,323		9,421
Operating lease right of use assets	840		864
Goodwill	13,597		13,802
Intangible assets — net	5,426		5,835
Other assets	2,666		2,440
Total assets	$	48,278	$	47,344
Liabilities
Current liabilities
Short-term borrowings and current portion of long-term debt	$	1,972	$	806
Accounts payable	2,862		2,561
Accrued payroll	1,019		747
Accrued income taxes	278		300
Operating lease liabilities — current	262		256
Other current liabilities	3,242		3,278
Total current liabilities	9,635		7,948
Long-term debt	16,193		17,989
Pension and postretirement benefits	3,987		4,405
Operating lease liabilities	580		609
Other liabilities	3,353		3,462
Total liabilities	33,748		34,413
Commitments and contingencies (Note 14)	0		0
Equity
3M Company shareholders’ equity:
Common stock par value, $.01 par value; 944,033,056 shares issued	9		9
Shares outstanding - September 30, 2021: 576,252,803
Shares outstanding - December 31, 2020: 577,749,638
Additional paid-in capital	6,383		6,162
Retained earnings	45,361		43,821
Treasury stock, at cost:	(29,673)		(29,404)
Shares at September��30, 2021: 367,780,253
Shares at December 31, 2020: 366,283,418
Accumulated other comprehensive income (loss)	(7,620)		(7,721)
Total 3M Company shareholders’ equity	14,460		12,867
Noncontrolling interest	70		64
Total equity	14,530		12,931
Total liabilities and equity	$	48,278	$	47,344

The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.

3M Company and Subsidiaries

Consolidated Statement of Cash Flows

(Unaudited)

Nine months ended

September 30,

(Millions)

2020

2019

Cash Flows from Operating Activities

Net income including noncontrolling interest

$
3,998

$
3,612

Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities

Depreciation and amortization

1,413

1,130

Company pension and postretirement contributions

(122)

(129)

Company pension and postretirement expense

295

242

Stock-based compensation expense

216

230

Gain on sale of businesses

(389)

(111)

Deferred income taxes

(57)

(88)

Loss on deconsolidation of Venezuelan subsidiary

—

162

Changes in assets and liabilities

Accounts receivable

113

(14)

Inventories

43

255

Accounts payable

(48)

(222)

Accrued income taxes (current and long-term)

146

(53)

Other — net

(10)

(282)

Net cash provided by (used in) operating activities

5,598

4,732

Cash Flows from Investing Activities

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

(1,079)

(1,161)

Proceeds from sale of PP&E and other assets

29

91

Acquisitions, net of cash acquired

(25)

(704)

Purchases of marketable securities and investments

(1,069)

(917)

Proceeds from maturities and sale of marketable securities and investments

1,239

1,265

Proceeds from sale of businesses, net of cash sold

576

236

Other — net

8

45

Net cash provided by (used in) investing activities

(321)

(1,145)

Cash Flows from Financing Activities

Change in short-term debt — net

(138)

(466)

Repayment of debt (maturities greater than 90 days)

(2,477)

(871)

Proceeds from debt (maturities greater than 90 days)

1,745

6,116

Purchases of treasury stock

(366)

(1,243)

Proceeds from issuance of treasury stock pursuant to stock option and benefit plans

325

437

Dividends paid to shareholders

(2,540)

(2,488)

Other — net

(47)

(158)

Net cash provided by (used in) financing activities

(3,498)

1,327

Effect of exchange rate changes on cash and cash equivalents

(11)

(36)

Net increase (decrease) in cash and cash equivalents

1,768

4,878

Cash and cash equivalents at beginning of year

2,353

2,853

Cash and cash equivalents at end of period

$
4,121

$
7,731


	Nine months ended September 30,
(Millions)	2021		2020
Cash Flows from Operating Activities
Net income including noncontrolling interest	$	4,589	$	4,047
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities
Depreciation and amortization	1,408		1,413
Company pension and postretirement contributions	(121)		(122)
Company pension and postretirement expense	137		232
Stock-based compensation expense	227		216
Gain on sale of businesses	—		(389)
Deferred income taxes	(155)		(57)
Changes in assets and liabilities
Accounts receivable	(324)		113
Inventories	(823)		43
Accounts payable	340		(48)
Accrued income taxes (current and long-term)	(41)		146
Other — net	212		4
Net cash provided by (used in) operating activities	5,449		5,598

Cash Flows from Investing Activities
Purchases of property, plant and equipment (PP&E)	(1,047)		(1,079)
Proceeds from sale of PP&E and other assets	44		29
Acquisitions, net of cash acquired	—		(25)
Purchases of marketable securities and investments	(1,810)		(1,069)
Proceeds from maturities and sale of marketable securities and investments	1,363		1,239
Proceeds from sale of businesses, net of cash sold	—		576
Other — net	18		8
Net cash provided by (used in) investing activities	(1,432)		(321)

Cash Flows from Financing Activities
Change in short-term debt — net	4		(138)
Repayment of debt (maturities greater than 90 days)	(450)		(2,477)
Proceeds from debt (maturities greater than 90 days)	1		1,745
Purchases of treasury stock	(1,261)		(366)
Proceeds from issuance of treasury stock pursuant to stock option and benefit plans	566		325
Dividends paid to shareholders	(2,572)		(2,540)
Other — net	(21)		(47)
Net cash provided by (used in) financing activities	(3,733)		(3,498)

Effect of exchange rate changes on cash and cash equivalents	(40)		(11)

Net increase (decrease) in cash and cash equivalents	244		1,768
Cash and cash equivalents at beginning of year	4,634		2,353
Cash and cash equivalents at end of period	$	4,878	$	4,121

The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.

3M Company and Subsidiaries

Notes to Consolidated Financial Statements

NOTE 1. Significant Accounting Policies

Basis of Presentation

The interim consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair statement of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. These adjustments consist of normal, recurring items. The results of operations for any interim period are not necessarily indicative of results for the full year. The interim consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Annual Report on Form 10-K.

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

Effective in the first quarter of ~~2020,~~2021, 3M made 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).following changes. Information provided herein reflects the impact of these changes for all periods presented.

•

~~Use~~Change in accounting principle for net periodic pension and postretirement plan cost. See below for additional information.

•Change in measure of ~~estimates~~

segment operating performance used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income). See additional information in Note 16.

•

Change in alignment of certain products within 3M’s Consumer business segment—creating the Consumer Health and Safety Division. See additional information in Note 16.

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

In the first quarter of 2021, 3M changed the method it uses to calculate the market-related value of fixed income securities included in its pension and other postretirement plan assets. The ~~preparation~~market-related value is used to determine the expected return on plan assets and the amortization of ~~financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect~~net unamortized actuarial gains or losses expense components of net periodic benefit cost. The Company previously used the ~~reported~~calculated value approach for all plan assets, deferring over three years the impact on these amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company considered the coronavirus (COVID-19) related impacts on its estimates, as appropriate, within its consolidated financial statements and there may be changesasset gains or losses that differed from expected returns. 3M changed to those estimates in future periods. 3M believes that the accounting estimates are appropriate after giving consideration to the increased uncertainties surrounding the severity and duration of the COVID-19 pandemic. Such estimates and assumptions are subject to inherent uncertainties which may result in actual amounts differing from these estimates.

~~Changes to Significant Accounting Policies~~

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

~~Accounts receivable and allowances~~: Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains allowances for bad debts, cash discounts, and various other items. The allowances for bad debts and cash discounts are based on the best estimate of the amount of expected credit losses in existing accounts receivable and anticipated cash discounts. The Company determines the allowances based on historical write-off experience by industry and regional economic data, current expectations of future credit losses, and historical cash discounts. The Company reviews the allowances monthly. ~~The~~ ~~allowances for bad debts as well as the provision for credit losses, write-off activity and recoveries for the periods presented are not material.~~ ~~The Company does not have any significant off-balance-sheet credit exposure related to its customers.~~ The Company has long-term customer receivables that do not have significant credit risk, and the origination dates of which are typically not older than five years. These long-term receivables are subject to an allowance methodology similar to other receivables.

~~Marketable securities:~~ Marketable securities include available-for-sale debt securities and are recorded at fair value. Cost of securities sold use the first in, first out (FIFO) method. The classification of marketable securities as current or non-current is based on the availability for use in current operations. 3M reviews impairments associated with its marketable securities in accordance with the measurement guidance provided by ASC 320, ~~Investments-Debt Securities~~ ~~and ASC 326-30,~~ ~~Available-for-Sale Debt Securities~~, when determining whether a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An impairment relating to credit losses is recorded through an allowance for credit losses. The allowance is limited by the amount that the fair value ~~is less than~~approach for calculating market-related value for the ~~amortized cost basis. A change~~fixed income class of plan assets, which does not involve deferring the impact of excess plan asset gains or losses in the ~~allowance for credit losses is recorded into earnings~~determination of these two components of net periodic benefit cost. 3M considers the use of the fair value approach preferable to the calculated value approach as it results in a more current reflection of impacts of changes in value of these plan assets in the ~~period~~determination of net periodic benefit cost. Additionally, given the

~~Table~~ plans’ liability-driven investment strategy whereby the changes in value of ~~Contents~~

~~change. Any impairment~~the fixed income plan assets should offset changes in the value of the plans’ liabilities, this approach more closely aligns the expected return on plan assets expense component with the value reflected in the plans’ funded status. This change was applied retrospectively to all periods presented within 3M’s financial statements. The change did not impact consolidated operating income or net cash provided by operating activities but did impact the previously reported portion of pension and postretirement net periodic benefit cost (benefit) that ~~has not been recorded through an allowance for credit losses is recorded through~~was included within non-operating other expense (income) along with related consolidated income items such as net income and earnings per share. Other impacts included related changes to previously reported consolidated other comprehensive income, retained earnings, accumulated other comprehensive income (loss), and associated line items within the determination of net cash provided by operating activities. For classes of plan assets other than fixed income investments, the Company continues to use the calculated value approach to determine their market-related value.

Table of Contents

The adoption of this change impacted previously reported amounts included herein as ~~a component of shareholders’ equity. The factors considered in determining whether a credit loss exists can include the extent to which fair value is less than the amortized cost basis, changes~~indicated in the ~~credit quality~~tables below.


Consolidated Statement of Income
	Three months ended September 30, 2020				Nine months ended September 30, 2020
(Millions, except per share amounts)	Under Prior Method		As Adjusted		Under Prior Method		As Adjusted
Other expense (income), net	$	104	$	83	$	311	$	248

Income before income taxes	1,805		1,826		5,001		5,064
Provision for income taxes	387		391		1,002		1,016
Income of consolidated group	1,418		1,435		3,999		4,048

Net income including noncontrolling interest	1,417		1,434		3,998		4,047
Net income attributable to 3M	1,413		1,430		3,995		4,044
Earnings per share attributable to 3M common shareholders — basic	$	2.45	$	2.47	$	6.92	$	7.01
Earnings per share attributable to 3M common shareholders — diluted	$	2.43	$	2.45	$	6.87	$	6.95


Consolidated Statement of Comprehensive Income
	Three months ended September 30, 2020				Nine months ended September 30, 2020
(Millions)	Under Prior Method		As Adjusted		Under Prior Method		As Adjusted
Net income including noncontrolling interest	$	1,417	$	1,434	$	3,998	$	4,047
Other comprehensive income (loss), net of tax:
Defined benefit pension and postretirement plans adjustment	127		116		304		271
Total other comprehensive income (loss), net of tax	327		316		177		144
Comprehensive income (loss) including noncontrolling interest	1,744		1,750		4,175		4,191
Comprehensive income (loss) attributable to 3M	1,739		1,745		4,174		4,190


Consolidated Balance Sheet
	As of December 31, 2020
(Millions)	Under Prior Method		As Adjusted
Retained earnings	$	43,761	$	43,821
Accumulated other comprehensive income (loss)	(7,661)		(7,721)


Consolidated Statement of Cash Flows
	Nine months ended September 30, 2020
(Millions)	Under Prior Method		As Adjusted
Net income including noncontrolling interest	$	3,998	$	4,047
Company pension and postretirement expense	295		232
Other — net	(10)		4

The cumulative adjustment as of January 1, 2020, the beginning of the underlying loan obligors, credit ratings actions, as well as other factors. When a credit loss exists, the Company compares the present value of cash flows expected to be collected from the debt security with the amortized cost basis of the security to determine what allowance amount, if any, should be recorded. Amounts are reclassified out of accumulated other comprehensive income and into earnings upon sale or a changeearliest period presented in the ~~portions of impairment related to credit losses and not related to credit losses.~~

~~Property, plant and equipment:~~~~3M’s accounting policy with respect to property, plant and equipment, is disclosed in the Company’s notes to~~ consolidated financial statements included ~~in its most recent Annual Report on Form 10-K. In addition, 3M records capital-related government grants earned as reductions~~herein, was a $5 million reduction to ~~the cost~~each of ~~property, plant~~retained earnings and ~~equipment; and associated unpaid liabilities and grant proceeds receivable are considered non-cash changes in such balances for purposes of preparation of statement of cash flows.~~

~~Foreign Currency Translation~~

Local currencies generally are considered the functional currencies outside the United States with the exception of 3M’s subsidiaries in Argentina, the economy of which was considered highly inflationary beginning in 2018, and accordingly the financial statements of these subsidiaries are remeasured as if their functional currency is that of their parent. Assets and liabilities for operations in local-currency environments are translated at month-end exchange rates of the period reported. Income and expense items are translated at average monthly currency exchange rates in effect during the period. Cumulative translation adjustments are recorded as a component of accumulated other comprehensive ~~income (loss) in shareholders’ equity.~~

loss.

~~3M had a consolidated subsidiary in Venezuela, the financial statements~~Table of which were remeasured as if its functional currency were that of its parent because Venezuela’s economic environment is considered highly inflationary. The operating income of this subsidiary was immaterial as a percent of 3M’s consolidated operating income for the periods presented. In light of circumstances, including the country’s unstable environment and heightened unrest leading to sustained lack of demand, and expectation that these circumstances will continue for the foreseeable future, during May 2019, 3M concluded it no longer met the criteria of control in order to continue consolidating its Venezuelan operations. As a result, as ofMay 31, 2019, the Company began reflecting its interest in the Venezuelan subsidiary as an equity investment that does not have a readily determinable fair value. This resulted in a pre-tax charge of $162 million within other expense (income) in the second quarter of 2019. The charge primarily relates to $144 million of foreign currency translation losses associated with foreign currency movements before Venezuela was accounted for as a highly inflationary economy and pension elements previously included in accumulated other comprehensive loss along with write-down of intercompany receivable and investment balances associated with this subsidiary. Beginning May 31, 2019, 3M’s consolidated balance sheets and statements of operations no longer include the Venezuelan entity’s operations other than an immaterial equity investment and associated loss or income thereon largely only to the extent, if any, that 3M provides support or materials and receives funding or dividends.

Contents

Earnings Per Share

The difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is a result of the dilution associated with the Company’s stock-based compensation plans. Certain options outstanding under these stock-based compensation plans were not included in the computation of diluted earnings per share attributable to 3M common shareholders because they would have had an anti-dilutive effect ~~(18.8~~of 7.9 million average options for the three months ended September 30, 2021; 7.7 million average options for the nine months ended September 30, 2021; 18.8 million average options for the three months ended September 30, 2020; 19.6 million average options for the nine months ended September 30, ~~2020; 11.9 million average options for the three months ended September 30, 2019; 8.0 million average options for the nine months ended September 30, 2019)~~2020). The computations for basic and diluted earnings per share follow:

~~Table of Contents~~

Earnings Per Share Computations


	Three months ended September 30,				Nine months ended September 30,
(Amounts in millions, except per share amounts)	2021		2020		2021		2020
Numerator:
Net income attributable to 3M	$	1,434	$	1,430	$	4,582	$	4,044

Denominator:
Denominator for weighted average 3M common shares outstanding – basic	579.6		577.8		580.3		577.2
Dilution associated with the Company’s stock-based compensation plans	6.7		4.6		6.8		4.4
Denominator for weighted average 3M common shares outstanding – diluted	586.3		582.4		587.1		581.6

Earnings per share attributable to 3M common shareholders – basic	$	2.47	$	2.47	$	7.90	$	7.01
Earnings per share attributable to 3M common shareholders – diluted	$	2.45	$	2.45	$	7.81	$	6.95

Table of Contents

Three months ended

Nine months ended

September 30,

September 30,

(Amounts in millions, except per share amounts)

2020

2019

2020

2019

Numerator:

Net income attributable to 3M

$
1,413

$
1,583

$
3,995

$
3,601

Denominator:

Denominator for weighted average 3M common shares outstanding – basic

577.8

576.5

577.2

577.2

Dilution associated with the Company’s stock-based compensation plans

4.6

6.5

4.4

8.7

Denominator for weighted average 3M common shares outstanding – diluted

582.4

583.0

581.6

585.9

Earnings per share attributable to 3M common shareholders – basic

$
2.45

$
2.75

$
6.92

$
6.24

Earnings per share attributable to 3M common shareholders – diluted

$
2.43

$
2.72

$
6.87

$
6.15

New Accounting Pronouncements

~~See the Company’s 2019~~

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

Standards Adopted During the Current Fiscal Year

Standard

Relevant Description

Effective Date for 3M

Impact and Other Matters

~~ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (in conjunction with ASU Nos. 2018-19, 2019-04, 2019-05, 2019-11, and 2020-03)~~

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

Amends the current other-than-temporary impairment model for available-for-sale debt securities. For such securities with unrealized losses, entities will still consider if a portion of any impairment is related only to credit losses and therefore recognized as a reduction in income.

~~January 1, 2020~~

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

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

~~ASU No. 2018-13,~~ ~~Changes to the Disclosure Requirements for Fair Value Measurement~~

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

~~January 1, 2020~~

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

~~ASU No. 2018-15,~~ ~~Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~

~~Aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service arrangement (i.e. hosting arrangement) with the guidance on capitalizing costs in ASC 350-40,~~ ~~Internal-Use Software~~

~~January 1, 2020~~

~~Adopted on a prospective basis. Relevant capitalizable costs are included in prepaid expenses or other non-current asset, as applicable, prospectively beginning in 2020.~~

~~Table of Contents~~


~~Standards Issued and Not Yet Adopted~~
~~Standard~~	~~Relevant Description~~	~~Effective Date for 3M~~	~~Impact and Other Matters~~
ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740)	Eliminates certain existing exceptions related to the general approach in ASC 740 relating to franchise taxes, reducing complexity in the interim-period accounting for year-to-date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combination that result in a step-up in the tax basis of goodwill.			January 1, 2021		~~3M previously disclosed it does not expect~~Adoption of this ASU todid not have a material impact on ~~its~~3M’s consolidated results of operations and financial condition.
ASU No. 2020-01, Clarifying the Interactions between Topic 321, Investments—Equity Securities, Topic 323, Investments—Equity Method and Joint Ventures, and Topic 815, Derivatives and Hedging			Clarifies when accounting for certain equity securities, a Company should consider observable transactions before applying or upon discontinuing the equity method of accounting for the purposes of applying the measurement alternative. Indicates when determining the accounting for certain derivatives, a Company should not consider if the underlying securities would be accounted for under the equity method or fair value option.		January 1, 2021		~~3M previously disclosed it does not expect~~Adoption of this ASU todid not have a material impact on ~~its~~3M’s consolidated results of operations and financial ~~condition, but will apply such guidance, where applicable, to future circumstances.~~ condition.
ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope			Provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as LIBOR which is being phased out beginning at the end of 2021, to alternate reference rates, such as SOFR.		Effective upon ASU issuances in 2020 & 2021		With the beginning of the phase out of LIBOR at the end of 2021, 3M continues to evaluate commercial contracts that may utilize LIBOR and will continue to monitor developments during the LIBOR transition period.

~~Relevant New Standards Issued Subsequent to Most Recent Annual Report~~

~~In March 2020, the FASB issued ASU No. 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~.This ASU provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as LIBOR which is being phased out in 2021, to alternate reference rates, such as SOFR. The standard was effective upon issuance and allowed application to contract changes as early as January 1, 2020. The provisions have impact as contract modifications and other changes occur while LIBOR is phased out. The Company is in the process of evaluating the optional relief guidance provided within this ASU and is also reviewing its debt securities, bank facilities, derivative instruments and commercial contracts that utilize LIBOR as the reference rate. 3M will continue its assessment and monitor regulatory developments during the LIBOR transition period.

NOTE 2. Revenue

Contract Balances:

Deferred revenue primarily relates to revenue that is recognized over time for one-year software license contracts. Deferred revenue (current portion) as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$390~~$467 million and ~~$430~~$498 million, respectively. Approximately $90 million and $410 million of the December 31, 2020 balance was recognized as revenue during the three and nine months ended September 30, 2021, respectively, while approximately $100 million and $370 million of the December 31, 2019 balance was recognized as revenue during the three and nine months ended September 30, 2020, ~~respectively, while approximately $80 million and $560 million of the December 31, 2018 balance was recognized as revenue during the three and nine months ended September 30, 2019,~~ respectively.

Operating Lease Revenue:

Net sales includes rental revenue from durable medical devices as part of operating lease arrangements (reported within the Medical Solutions Division), which was $148 million and $153 million during the three months ended September 30, 2021 and 2020, respectively, and $433 million and $428 million during the ~~three and~~ nine months ended September 30, ~~2020. Applicable rental revenue for the three~~2021 and ~~nine months ended September 30, 2019 was not material.~~

Disaggregated revenue information:

The Company views the following disaggregated disclosures as useful to understanding the composition of revenue recognized during the respective reporting periods:

Three months ended

Nine months ended

September 30,

September 30,

Net Sales (Millions)

2020

2019

2020

2019

Abrasives

$
290

$
338

$
863

$
1,059

Automotive Aftermarket

309

307

796

917

Closure and Masking Systems

242

282

745

835

Electrical Markets

285

299

829

912

Industrial Adhesives and Tapes

647

684

1,873

2,041

Personal Safety

1,136

812

3,221

2,653

Roofing Granules

114

101

295

293

Other Safety and Industrial

1

6

5

19

Total Safety and Industrial Business Segment

$
3,024

$
2,829

$
8,627

$
8,729

Advanced Materials

$
246

$
319

$
770

$
961

Automotive and Aerospace

410

477

1,125

1,463

Commercial Solutions

390

443

1,147

1,382

Electronics

1,024

1,001

2,771

2,760

Transportation Safety

245

260

678

741

Other Transportation and Electronics

(1)

—

(2)

(2)

Total Transportation and Electronics Business Segment

$
2,314

$
2,500

$
6,489

$
7,305

Drug Delivery

$
—

$
93

$
146

$
277

Food Safety

82

86

252

254

Health Information Systems

280

296

833

853

Medical Solutions

1,251

745

3,472

2,319

Oral Care

320

312

741

991

Separation and Purification Sciences

221

191

639

602

Other Health Care

6

(2)

5

(6)

Total Health Care Business Group

$
2,160

$
1,721

$
6,088

$
5,290

Consumer Health Care

$
96

$
97

$
278

$
295

Home Care

268

243

796

747

Home Improvement

686

612

1,863

1,729

Stationery and Office

323

362

859

1,008

Other Consumer

44

28

115

83

Total Consumer Business Group

$
1,417

$
1,342

$
3,911

$
3,862

Corporate and Unallocated

$
—

$
28

$
(1)

$
98

Elimination of Dual Credit

(565)

(429)

(1,513)

(1,259)

Total Company

$
8,350

$
7,991

$
23,601

$
24,025


	Three months ended September 30,				Nine months ended September 30,
Net Sales (Millions)	2021		2020		2021		2020
Abrasives	$	362	$	289	$	1,067	$	861
Automotive Aftermarket	314		308		939		794
Closure and Masking Systems	264		242		761		745
Electrical Markets	322		285		948		824
Industrial Adhesives and Tapes	760		643		2,289		1,859
Personal Safety	1,105		1,136		3,475		3,220
Roofing Granules	109		113		338		294
Other Safety and Industrial	(1)		1		(1)		4
Total Safety and Industrial Business Segment	3,235		3,017		9,816		8,601

Advanced Materials	305		247		925		771
Automotive and Aerospace	439		410		1,424		1,126
Commercial Solutions	457		391		1,349		1,148
Electronics	1,000		1,025		3,040		2,772
Transportation Safety	250		245		727		678
Other Transportation and Electronics	(1)		(2)		(2)		(3)
Total Transportation and Electronics Business Segment	2,450		2,316		7,463		6,492

Drug Delivery	—		—		—		146
Food Safety	96		83		279		252
Health Information Systems	309		280		897		833
Medical Solutions	1,241		1,251		3,783		3,471
Oral Care	359		320		1,086		741
Separation and Purification Sciences	244		221		733		639
Other Health Care	—		5		(3)		5
Total Health Care Business Group	2,249		2,160		6,775		6,087

Consumer Health and Safety	152		139		465		431
Home Care	278		268		829		796
Home Improvement	699		644		1,988		1,711
Stationery and Office	355		318		992		843
Other Consumer	41		43		106		112
Total Consumer Business Group	1,525		1,412		4,380		3,893

Corporate and Unallocated	3		(2)		2		(1)
Elimination of Dual Credit	(520)		(553)		(1,693)		(1,471)
Total Company	$	8,942	$	8,350	$	26,743	$	23,601

Three months ended September 30, 2020

Net Sales (Millions)

Americas

Asia Pacific

Europe, Middle East and Africa

Other Unallocated

Worldwide

Safety and Industrial

$
1,623

$
706

$
695

$
—

$
3,024

Transportation and Electronics

640

1,357

317

—

2,314

Health Care

1,335

377

448

—

2,160

Consumer

1,032

231

154

—

1,417

Corporate and Unallocated

(1)

—

—

1

—

Elimination of Dual Credit

(282)

(197)

(86)

—

(565)

Total Company

$
4,347

$
2,474

$
1,528

$
1

$
8,350

Nine months ended September 30, 2020

Net Sales (Millions)

Americas

Asia Pacific

Europe, Middle East and Africa

Other Unallocated

Worldwide

Safety and Industrial

$
4,509

$
2,080

$
2,038

$
—

$
8,627

Transportation and Electronics

1,847

3,709

933

—

6,489

Health Care

3,690

1,091

1,307

—

6,088

Consumer

2,801

699

411

—

3,911

Corporate and Unallocated

(1)

—

—

—

(1)

Elimination of Dual Credit

(724)

(550)

(239)

—

(1,513)

Total Company

$
12,122

$
7,029

$
4,450

$
—

$
23,601

Three months ended September 30, 2019

Net Sales (Millions)

Americas

Asia Pacific

Europe, Middle East and Africa

Other Unallocated

Worldwide

Safety and Industrial

$
1,497

$
706

$
626

$
—

$
2,829

Transportation and Electronics

749

1,388

362

1

2,500

Health Care

973

360

388

—

1,721

Consumer

975

228

140

(1)

1,342

Corporate and Unallocated

27

1

1

(1)

28

Elimination of Dual Credit

(185)

(193)

(52)

1

(429)

Total Company

$
4,036

$
2,490

$
1,465

$
—

$
7,991

Nine months ended September 30, 2019

Net Sales (Millions)

Americas

Asia Pacific

Europe, Middle East and Africa

Other Unallocated

Worldwide

Safety and Industrial

$
4,532

$
2,165

$
2,033

$
(1)

$
8,729

Transportation and Electronics

2,256

3,912

1,137

—

7,305

Health Care

2,916

1,121

1,253

—

5,290

Consumer

2,723

718

422

(1)

3,862

Corporate and Unallocated

97

1

1

(1)

98

Elimination of Dual Credit

(562)

(534)

(164)

1

(1,259)

Total Company

$
11,962

$
7,383

$
4,682

$
(2)

$
24,025

Three months ended September 30, 2021
Net Sales (Millions) Americas Asia Pacific Europe, Middle
East and Africa Other
Unallocated Worldwide
Safety and Industrial $ 1,710 $ 828 $ 698 $ (1) $ 3,235
Transportation and Electronics 728 1,367 355 — 2,450
Health Care 1,357 425 467 — 2,249
Consumer 1,135 241 149 — 1,525
Corporate and Unallocated 1 — 1 1 3
Elimination of Dual Credit (239) (219) (62) — (520)
Total Company $ 4,692 $ 2,642 $ 1,608 $ — $ 8,942


	Nine months ended September 30, 2021
Net Sales (Millions)	Americas		Asia Pacific		Europe, Middle East and Africa		Other Unallocated		Worldwide
Safety and Industrial	$	5,077	$	2,465	$	2,275	$	(1)	$	9,816
Transportation and Electronics	2,096		4,239		1,129		(1)		7,463
Health Care	4,001		1,263		1,512		(1)		6,775
Consumer	3,165		765		450		—		4,380
Corporate and Unallocated	1		—		1		—		2
Elimination of Dual Credit	(738)		(666)		(290)		1		(1,693)
Total Company	$	13,602	$	8,066	$	5,077	$	(2)	$	26,743


	Three months ended September 30, 2020
Net Sales (Millions)	Americas		Asia Pacific		Europe, Middle East and Africa		Other Unallocated		Worldwide
Safety and Industrial	$	1,618	$	702	$	696	$	1	$	3,017
Transportation and Electronics	641		1,358		317		—		2,316
Health Care	1,335		377		447		1		2,160
Consumer	1,032		231		148		1		1,412
Corporate and Unallocated	—		—		—		(2)		(2)
Elimination of Dual Credit	(279)		(194)		(80)		—		(553)
Total Company	$	4,347	$	2,474	$	1,528	$	1	$	8,350


	Nine months ended September 30, 2020
Net Sales (Millions)	Americas		Asia Pacific		Europe, Middle East and Africa		Other Unallocated		Worldwide
Safety and Industrial	$	4,500	$	2,063	$	2,038	$	—	$	8,601
Transportation and Electronics	1,848		3,711		933		—		6,492
Health Care	3,690		1,091		1,306		—		6,087
Consumer	2,801		697		395		—		3,893
Corporate and Unallocated	(1)		—		—		—		(1)
Elimination of Dual Credit	(716)		(533)		(222)		—		(1,471)
Total Company	$	12,122	$	7,029	$	4,450	$	—	$	23,601

Americas included United States net sales to customers of ~~$3.7~~$3.9 billion and ~~$3.3~~$3.7 billion for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$10.2~~$11.3 billion and ~~$9.7~~$10.2 billion for the nine months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively.

Table of Contents

NOTE 3. Acquisitions and Divestitures

Refer to Note 3 in 3M’s ~~2019~~2020 Annual Report on Form 10-K for more information on relevant ~~pre-2020~~pre-2021 acquisitions and divestitures.

Acquisitions:

3M makes acquisitions of certain businesses from time to time that are aligned with its strategic intent with respect to, among other factors, growth markets and adjacent product lines or technologies. Goodwill resulting from business combinations is largely attributable to the existing workforce of the acquired businesses and synergies expected to arise after 3M’s acquisition of these businesses.

~~2020~~

2021 acquisitions:

There were 0no acquisitions that closed during the nine months ended September 30, ~~2020.~~

~~2019~~2021.

2020 acquisitions:

~~In February 2019, 3M completed~~

There were no acquisitions that closed during the acquisition of the technology business of M*Modal for $0.7 billion of cash, net of cash acquired, and assumption of $0.3 billion of M*Modal’s debt. The allocation of purchase consideration related to M*Modal was completed in the fourth quarter of 2019. Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations for the third quarter of 2019 were approximately $75 million and $5 million, respectively. Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations for the first nine months of 2019 were approximately $200 million and $40 million, respectively. M*Modal is reported within the Company’s Health Care business.

In October 2019, the Company completed the acquisition of all of the ownership interests of Acelity Inc. and its KCI subsidiaries and in the first quarter of 2020 paid certain consideration previously accrued under the terms of related agreements. Adjustments in 2020 to the purchase price allocation were approximately $34 million and related to identification and valuation of certain acquired assets and liabilities. The change to provisional amounts did not result in material impacts to results of operations in 2020 or any portion related to earlier quarters in the measurement period. The allocation of purchase consideration related to Acelity was completed in the third quarter ofyear ended December 31, 2020. Net sales and operating loss (inclusive of transaction and integration costs) of this business included in 3M’s consolidated results of operations in the fourth quarter of 2019 were approximately $350 million and $45 million, respectively. Acelity is reported within the Company’s Health Care business.

Divestitures:

3M may divest certain businesses from time to time based upon review of the Company’s portfolio considering, among other items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders. ~~As discussed in Note 16 (Business Segments), gains/losses on sale of businesses are reflected in Corporate and Unallocated.~~

2021 divestitures:

There were no divestitures that closed during the nine months ended September 30, 2021.

2020 divestitures:

~~In January~~

During 2020, 3M completed the sale of its advanced ballistic-protection business, formerly part of the Transportation and Electronics business, to Avon Rubber p.l.c for $86 million in cash and recognized certain contingent consideration from the outcome of pending tenders. Further contingent consideration of less than $25 million may be recognized depending on outcomes in the future. The business, with annual sales of approximately $85 million, consists of ballistic helmets, body armor, flat armor and related helmet-attachment products serving government and law enforcement. 3M reflected immaterial impacts in the third quarter of 2019 as a result of measuring this disposal group at the lower of its carrying amount or fair value less cost to sell and in the first quarter 2020 related to completion of the divestiture and recognition of contingent consideration.

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

~~Table of Contents~~

new company, Kindeva Drug Delivery (Kindeva). Non-cash consideration was valued at time of initial recognition on an income-based approach using relevant estimated future cash flows and applicable market interest rates while considering impacts of restrictions related to transferability. The divested business had annual sales of approximately $380 million. 3M retained its transdermal drug delivery components business. 3M reflected a pre-tax gain of $387 million as a result of the divestiture. The Company reflects its ownership interest in Kindeva using the equity method of accounting incorporating the recording of 3M’s share of earnings/losses on a lag-basis based on availability of Kindeva financial statements. As a result, income/loss from this unconsolidated subsidiary began to be reflected in 3M’s financial statements in the third quarter of 2020. Kindeva and 3M entered into certain limited-term agreements related to post-divestiture transition and supply services.

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

~~2019 divestitures:~~

~~During 2019,~~ as described in Note 3 in 3M’s ~~2019~~2020 Annual Report on Form 10-K, the Company divested ~~a number~~its advanced ballistic-protection business, substantially all of ~~businesses including: certain oral care technology comprising a~~its drug delivery business, and ~~the gas and flame detection~~a small dermatology products business. ~~3M also reflected an earnout on a previous divestiture.~~

Operating income and held for sale amounts:

The aggregate operating income of ~~these~~applicable businesses ~~was approximately $40 million and $25 million in~~held for sale with respect to the first nine months of 2020 ~~and 2019, respectively. The approximate amounts of major assets and liabilities associated with disposal groups classified as held-for-sale as of December 31, 2019 included the following:~~


	~~December 31,~~
~~(Millions)~~	~~2019~~
~~Inventory~~		70
~~Property, plant and equipment~~		~~150~~
~~Intangible assets~~		35

~~In addition, approximately $30 million of goodwill~~ was estimated to be attributable to disposal groups classified as held-for-sale as of December 31, 2019 based upon relative fair value. The amounts above have not been segregated and are classified within the existing corresponding line items on the Company’s consolidated balance sheet.

$40 million.

NOTE 4. Goodwill and Intangible Assets

There was no goodwill recorded from acquisitions during the first nine months of 2020. The acquisition activity in the following table relates to the net impact of adjustments to the preliminary allocation of purchase price within the one year measurement period following prior acquisitions, which decreased goodwill by $34 million during the nine months ended September 30, 2020.2021. The amounts in the “Translation and other” row in the following table primarily relate to changes in foreign currency exchange rates. The goodwill balance by business segment as of December 31, ~~2019~~2020 and September 30, ~~2020,~~2021, follow:

~~Goodwill~~

(Millions)

Safety and Industrial

Transportation and Electronics

Health Care

Consumer

Total Company

Balance as of December 31, 2019

$
4,621

$
1,830

$
6,739

$
254

$
13,444

Acquisition activity

—

—

(34)

—

(34)

Divestiture activity

—

(10)

(19)

—

(29)

Translation and other

(7)

13

143

5

154

Balance as of September 30, 2020

$
4,614

$
1,833

$
6,829

$
259

$
13,535

Goodwill


(Millions)	Safety and Industrial		Transportation and Electronics		Health Care		Consumer		Total Company
Balance as of December 31, 2020	$	4,687	$	1,858	$	6,992	$	265	$	13,802
Translation and other	(43)		(21)		(133)		(8)		(205)
Balance as of September 30, 2021	$	4,644	$	1,837	$	6,859	$	257	$	13,597

Accounting standards require that goodwill be tested for impairment annually and between annual tests in certain circumstances such as a change in reporting units or the testing of recoverability of a significant asset group within a reporting unit. At 3M, reporting units correspond to a division.

As described in Note 16, effective in the first quarter of ~~2020,~~2021, the Company changed its business segment reporting. For any product changes that resulted in reporting unit changes, the Company applied the relative fair value method to determine the impact on goodwill of the associated reporting units, the results of which were immaterial. ~~In conjunction with the change in segment reporting, 3M completed an assessment indicating 0 goodwill impairment existed as a result of this new segment structure.~~

Acquired Intangible Assets

The carrying amount and accumulated amortization of acquired finite-lived intangible assets, in addition to the balance of non-amortizable intangible assets, as of September 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, follow:

September 30,

December 31,

(Millions)

2020

2019

Customer related intangible assets

$
4,232

$
4,316

Patents

530

538

Other technology-based intangible assets

2,099

2,124

Definite-lived tradenames

1,175

1,158

Other amortizable intangible assets

121

125

Total gross carrying amount

$
8,157

$
8,261

Accumulated amortization — customer related

(1,337)

(1,180)

Accumulated amortization — patents

(502)

(499)

Accumulated amortization — other technology-based

(576)

(435)

Accumulated amortization — definite-lived tradenames

(367)

(316)

Accumulated amortization — other

(87)

(90)

Total accumulated amortization

$
(2,869)

$
(2,520)

Total finite-lived intangible assets — net

$
5,288

$
5,741

Non-amortizable intangible assets (primarily tradenames)

638

638

Total intangible assets — net

$
5,926

$
6,379


(Millions)	September 30, 2021		December 31, 2020
Customer related intangible assets	$	4,229	$	4,280
Patents	516		537
Other technology-based intangible assets	2,112		2,114
Definite-lived tradenames	1,172		1,178
Other amortizable intangible assets	104		104
Total gross carrying amount	8,133		8,213

Accumulated amortization — customer related	(1,563)		(1,422)
Accumulated amortization — patents	(500)		(512)
Accumulated amortization — other technology-based	(789)		(638)
Accumulated amortization — definite-lived tradenames	(431)		(385)
Accumulated amortization — other	(79)		(79)
Total accumulated amortization	(3,362)		(3,036)

Total finite-lived intangible assets — net	4,771		5,177

Non-amortizable intangible assets (primarily tradenames)	655		658
Total intangible assets — net	$	5,426	$	5,835

Certain tradenames acquired by 3M are not amortized because they have been in existence for over 60 years, have a history of leading-market share positions, have been and are intended to be continuously renewed, and the associated products of which are expected to generate cash flows for 3M for an indefinite period of time. As discussed in Note 13, 3M reflected an immaterial charge related to impairment of certain indefinite-lived assets in the first quarter of 2020.

Amortization expense for the three and nine months ended September 30, 2021 and 2020 ~~and 2019~~ follows:

Three months ended

Nine months ended

September 30,

September 30,

(Millions)

2020

2019

2020

2019

Amortization expense

$
137

$
69

$
405

$
208


	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Amortization expense	$	131	$	137	$	398	$	405

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

Remainder of

After

(Millions)

2020

2021

2022

2023

2024

2025

2025

Amortization expense

$
132

$
524

$
511

$
485

$
460

$
428

$
2,748

2021:


(Millions)	Remainder of 2021		2022		2023		2024		2025		2026		After 2026
Amortization expense	$	131	$	514	$	486	$	458	$	428	$	420	$	2,334

The preceding expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment of intangible assets, accelerated amortization of intangible assets and other events. 3M expenses the costs incurred to renew or extend the term of intangible assets.

NOTE 5. Restructuring Actions

2021 and 2020 Restructuring Actions:

Operational/Marketing Capability Restructuring:

As described in Note 5 in 3M’s 2020 Annual Report on Form 10-K, in late 2020, 3M announced it would undertake certain actions to further enhance its operations and marketing capabilities to take advantage of certain global market trends while de-prioritizing investments in slower-growth end markets. During the fourth quarter of 2020, management approved and committed to undertake associated restructuring actions impacting approximately 2,100 positions resulting in a pre-tax charge of $137 million. In the first nine months of 2021, management approved and committed to undertake additional actions under this initiative resulting in pre-tax charges of $14 million, $43 million, and $50 million in the first, second, and third quarters of 2021, respectively. Remaining activities related to the restructuring actions approved and committed under this initiative are expected to be largely completed through the first quarter of 2022. 3M expects further actions under this initiative through early 2022. This aggregate initiative, begun in 2020 and continuing through early 2022, is expected to impact approximately 3,100 positions worldwide with an expected pre-tax charge of $300 million to $325 million over that period. The related first nine months of 2021 restructuring charges were recorded in the income statement as follows:

(Millions) First Nine Months of 2021
Cost of sales $ 18
Selling, general and administrative expenses 74
Research, development and related expenses 15
Total operating income impact $ 107

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

First Nine Months of 2021
(Millions) Employee-Related
Safety and Industrial $ 28
Transportation and Electronics 23
Health Care 18
Consumer 6
Corporate and Unallocated 32
Total Operating Expense $ 107

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

(Millions) Employee-Related
Accrued restructuring action balance as of December 31, 2020 $ 101
Incremental expense incurred in the first quarter of 2021 14
Incremental expense incurred in the second quarter of 2021 43
Incremental expense incurred in the third quarter of 2021 50
Cash payments (94)
Adjustments (8)
Accrued restructuring action balances as of September 30, 2021 $ 106

Divestiture-Related Restructuring

Table of Contents

~~During~~

As described in Note 5 in 3M’s 2020 Annual Report on Form 10-K, during the second quarter of 2020, following the divestiture of substantially all of the drug delivery business, ~~(see Note 3)~~ management approved and committed to undertake certain restructuring actions addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business. These actions affected approximately 1,300 positions worldwide and resulted in a second quarter 2020 pre-tax charge of $55 million, within Corporate and Unallocated. ~~The divestiture-related restructuring actions were recorded in the income statement as follows:~~

(Millions)

Second Quarter 2020

Cost of sales

$
42

Selling, general and administrative expenses

12

Research, development and related expenses

1

Total operating income impact

$
55

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

(Millions)

Employee-Related

Asset-Related and Other

Total

Expense incurred in the second quarter of 2020

$
32

$
23

$
55

Non-cash changes

—

(14)

(14)

Cash payments

(7)

—

(7)

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

$
25

$
9

$
34


(Millions)	Employee-Related		Asset-Related and Other		Total
Accrued divestiture-related restructuring action balances as of December 31, 2020	$	15	$	9	$	24
Cash payments	(5)		—		(5)
Adjustments	(1)		—		(1)
Accrued divestiture-related restructuring action balances as of June 30, 2021	$	9	$	9	$	18

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

Other Restructuring

~~Additionally,~~

As described in Note 5 in 3M’s 2020 Annual Report on Form 10-K, in the second quarter of 2020, management approved and committed to undertake certain restructuring actions addressing structural enterprise costs and operations in certain end markets as a result of the COVID-19 pandemic and related economic impacts. These actions affected approximately 400 positions worldwide and resulted in a second quarter 2020 pre-tax charge of $58 million. ~~The restructuring charges were recorded in the income statement as follows:~~

(Millions)

Second Quarter 2020

Cost of sales

$
13

Selling, general and administrative expenses

37

Research, development and related expenses

8

Total operating income impact

$
58

~~Table of Contents~~

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

Second Quarter 2020

(Millions)

Employee-Related

Asset-Related

Total

Safety and Industrial

$
7

$
—

$
7

Transportation and Electronics

11

—

11

Health Care

12

—

12

Consumer

5

—

5

Corporate and Unallocated

—

23

23

Total Operating Expense

$
35

$
23

$
58

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

(Millions)

Employee-Related

Asset-Related

Total

Expense incurred in the second quarter of 2020

$
35

$
23

$
58

Non-cash changes

—

(23)

(23)

Adjustments

(9)

—

(9)

Accrued restructuring action balances as of September 30, 2020

$
26

$
—

$
26


(Millions)	Employee-Related
Accrued restructuring action balances as of December 31, 2020	$	24
Cash payments	(4)
Adjustments	(9)
Accrued restructuring action balances as of March 31, 2021	$	11

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

~~2019 Restructuring Actions:~~

As described in Note 5 in 3M’s 2019 Annual Report on Form 10-K, during the second quarter of 2019, in light of slower than expected 2019 sales, management approved and committed to undertake certain restructuring actions. These actions impacted approximately 2,000 positions worldwide, including attrition. The Company recorded second quarter 2019 pre-tax charges of $148 million. The restructuring charges were recorded in the income statement as follows:

(Millions)

Second Quarter 2019

Cost of sales

$
18

Selling, general and administrative expenses

89

Research, development and related expenses

5

Total operating income impact

112

Other expense (income), net

36

Total income before taxes impact

$
148

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

Second Quarter 2019

(Millions)

Employee-Related

Asset-Related

Total

Safety and Industrial

$
11

$
—

$
11

Transportation and Electronics

8

—

8

Health Care

6

—

6

Consumer

5

—

5

Corporate and Unallocated

42

40

82

Total Operating Expense

$
72

$
40

$
112

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

~~Table of Contents~~

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

(Millions)

Employee-Related

Accrued restructuring action balances as of December 31, 2019

$
140

Cash Payments

(25)

Adjustments

(55)

Accrued restructuring action balances as of September 30, 2020

$
60

Adjustments in the table above reflect changes in estimates from factors such as additional natural attrition and redeployment as COVID-19 delayed the start of plan execution and update of costs associated with the mix of impacted roles. Remaining activities related to this restructuring are expected to be completed largely through early 2021.

NOTE 6. Supplemental Income Statement Information

Other expense (income), net consists of the following:

Three months ended

Nine months ended

September 30,

September 30,

(Millions)

2020

2019

2020

2019

Interest expense

$
128

$
109

$
388

$
324

Interest income

(5)

(26)

(24)

(64)

Pension and postretirement net periodic benefit cost (benefit)

(19)

(38)

(53)

(73)

Loss on deconsolidation of Venezuelan subsidiary

—

—

—

162

Total

$
104

$
45

$
311

$
349


	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Interest expense	$	117	$	128	$	370	$	388
Interest income	(6)		(5)		(18)		(24)
Pension and postretirement net periodic benefit cost (benefit)	(80)		(40)		(239)		(116)
Total	$	31	$	83	$	113	$	248

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

Pension and postretirement net periodic benefit costs described in the table above include all components of defined benefit plan net periodic benefit costs except service cost, which is reported in various operating expense lines. ~~Pension and postretirement net periodic benefit costs include a second quarter 2019 charge related to the voluntary early retirement incentive program announced in May 2019.~~ Refer to Note 11 for additional details on ~~the voluntary early retirement incentive program in addition to~~ the components of pension and postretirement net periodic benefit costs.

~~In the second quarter of 2019, the Company incurred a charge of $162 million related to the deconsolidation of its Venezuelan subsidiary. Refer to Note 1 for additional details.~~

Table of ~~Contents~~

Contents

NOTE 7. Supplemental Equity and Comprehensive Income Information

Cash dividends declared and paid totaled ~~$1.47~~$1.48 and ~~$1.44~~$1.47 per share for the first, second, and third quarters ~~2020~~of 2021 and ~~2019,~~2020, respectively, or ~~$4.41~~$4.44 and ~~$4.32~~$4.41 per share for the first nine months of 2021 and 2020, ~~and 2019,~~ respectively.

Consolidated Changes in Equity

Three months ended September 30, 2021


			3M Company Shareholders
(Millions)	Total		Common Stock and Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non- controlling Interest
Balance at June 30, 2021	$	14,516	$	6,346	$	44,824	$	(29,236)	$	(7,486)	$	68

Net income	1,437				1,434						3
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	(302)								(301)		(1)
Defined benefit pension and post-retirement plans adjustment	119								119		—
Cash flow hedging instruments	48								48		—
Total other comprehensive income (loss), net of tax	(135)
Dividends declared	(856)				(856)
Stock-based compensation	46		46
Reacquired stock	(563)						(563)
Issuances pursuant to stock option and benefit plans	85				(41)		126
Balance at September 30, 2021	$	14,530	$	6,392	$	45,361	$	(29,673)	$	(7,620)	$	70

Nine months ended September 30, 2021


			3M Company Shareholders
(Millions)	Total		Common Stock and Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non- controlling Interest
Balance at December 31, 2020	$	12,931	$	6,171	$	43,821	$	(29,404)	$	(7,721)	$	64

Net income	4,589				4,582						7
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	(354)								(353)		(1)
Defined benefit pension and post-retirement plans adjustment	359								359		—
Cash flow hedging instruments	95								95		—
Total other comprehensive income (loss), net of tax	100
Dividends declared	(2,572)				(2,572)
Stock-based compensation	221		221
Reacquired stock	(1,305)						(1,305)
Issuances pursuant to stock option and benefit plans	566				(470)		1,036
Balance at September 30, 2021	$	14,530	$	6,392	$	45,361	$	(29,673)	$	(7,620)	$	70

Table of Contents

Three months ended September 30, 2020

3M Company Shareholders

Common

Accumulated

Stock and

Other

Additional

Comprehensive

Non-

Paid-in

Retained

Treasury

Income

controlling

(Millions)

Total

Capital

Earnings

Stock

(Loss)

Interest

Balance at June 30, 2020

$
10,915

$
6,083

$
42,759

$
(29,699)

$
(8,286)

$
58

Net income

1,417

1,413

4

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

271

270

1

Defined benefit pension and post-retirement plans adjustment

127

127

—

Cash flow hedging instruments

(71)

(71)

—

Total other comprehensive income (loss), net of tax

327

Dividends declared

(847)

(847)

Stock-based compensation

42

42

Reacquired stock

(1)

(1)

Issuances pursuant to stock option and benefit plans

90

(40)

130

Balance at September 30, 2020

$
11,943

$
6,125

$
43,285

$
(29,570)

$
(7,960)

$
63

3M Company Shareholders
(Millions) Total Common
Stock and
Additional
Paid-in
Capital Retained
Earnings Treasury
Stock Accumulated
Other
Comprehensive
Income
(Loss) Non-
controlling
Interest
Balance at June 30, 2020 $ 10,925 $ 6,083 $ 42,786 $ (29,699) $ (8,303) $ 58
Net income 1,434 1,430 4
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment 271 270 1
Defined benefit pension and post-retirement plans adjustment 116 116 —
Cash flow hedging instruments (71) (71) —
Total other comprehensive income (loss), net of tax 316
Dividends declared (847) (847)
Stock-based compensation 42 42
Reacquired stock (1) (1)
Issuances pursuant to stock option and benefit plans 90 (40) 130
Balance at September 30, 2020 $ 11,959 $ 6,125 $ 43,329 $ (29,570) $ (7,988) $ 63

Nine months ended September 30, 2020

3M Company Shareholders

Common

Accumulated

Stock and

Other

Additional

Comprehensive

Non-

Paid-in

Retained

Treasury

Income

controlling

(Millions)

Total

Capital

Earnings

Stock

(Loss)

Interest

Balance at December 31, 2019

$
10,126

$
5,916

$
42,135

$
(29,849)

$
(8,139)

$
63

Net income

3,998

3,995

3

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

(67)

(65)

(2)

Defined benefit pension and post-retirement plans adjustment

304

304

—

Cash flow hedging instruments

(60)

(60)

—

Total other comprehensive income (loss), net of tax

177

Dividends declared

(2,540)

(2,540)

Purchase of subsidiary shares

(1)

(1)

Stock-based compensation

209

209

Reacquired stock

(357)

(357)

Issuances pursuant to stock option and benefit plans

331

(305)

636

Balance at September 30, 2020

$
11,943

$
6,125

$
43,285

$
(29,570)

$
(7,960)

$
63


			3M Company Shareholders
(Millions)	Total		Common Stock and Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non- controlling Interest
Balance at December 31, 2019	$	10,126	$	5,916	$	42,130	$	(29,849)	$	(8,134)	$	63

Net income	4,047				4,044						3
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	(67)								(65)		(2)
Defined benefit pension and post-retirement plans adjustment	271								271		—
Cash flow hedging instruments	(60)								(60)		—
Total other comprehensive income (loss), net of tax	144
Dividends declared	(2,540)				(2,540)
Purchase of subsidiary shares	(1)										(1)
Stock-based compensation	209		209
Reacquired stock	(357)						(357)
Issuances pursuant to stock option and benefit plans	331				(305)		636
Balance at September 30, 2020	$	11,959	$	6,125	$	43,329	$	(29,570)	$	(7,988)	$	63

Table of ~~Contents~~

Contents

~~Three months ended September 30, 2019~~

3M Company Shareholders

Common

Accumulated

Stock and

Other

Additional

Comprehensive

Non-

Paid-in

Retained

Treasury

Income

controlling

(Millions)

Total

Capital

Earnings

Stock

(Loss)

Interest

Balance at June 30, 2019

$
10,142

$
5,821

$
41,362

$
(29,828)

$
(7,272)

$
59

Net income

1,588

1,583

5

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

(202)

(200)

(2)

Defined benefit pension and post-retirement plans adjustment

76

76

—

Cash flow hedging instruments

8

8

—

Total other comprehensive income (loss), net of tax

(118)

Dividends declared

(828)

(828)

Stock-based compensation

49

49

Reacquired stock

(141)

(141)

Issuances pursuant to stock option and benefit plans

72

(32)

104

Balance at September 30, 2019

$
10,764

$
5,870

$
42,085

$
(29,865)

$
(7,388)

$
62

~~Nine months ended September 30, 2019~~

3M Company Shareholders

Common

Accumulated

Stock and

Other

Additional

Comprehensive

Non-

Paid-in

Retained

Treasury

Income

controlling

(Millions)

Total

Capital

Earnings

Stock

(Loss)

Interest

Balance at December 31, 2018

$
9,848

$
5,652

$
40,636

$
(29,626)

$
(6,866)

$
52

Impact of adoption of ASU No. 2018-02*

—

853

(853)

Impact of adoption of ASU No. 2016-02*

14

14

Net income

3,612

3,601

11

Other comprehensive income (loss), net of tax:

��

Cumulative translation adjustment

(2)

(1)

(1)

Defined benefit pension and post-retirement plans adjustment

356

356

—

Cash flow hedging instruments

(24)

(24)

—

Total other comprehensive income (loss), net of tax

330

Dividends declared

(2,488)

(2,488)

Stock-based compensation

218

218

Reacquired stock

(1,211)

(1,211)

Issuances pursuant to stock option and benefit plans

441

(531)

972

Balance at September 30, 2019

$
10,764

$
5,870

$
42,085

$
(29,865)

$
(7,388)

$
62

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

~~Table of Contents~~

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

Three months ended September 30, 2021

(Millions) Cumulative
Translation
Adjustment Defined Benefit
Pension and
Postretirement
Plans
Adjustment Cash Flow
Hedging
Instruments,
Unrealized
Gain (Loss) Total
Accumulated
Other
Comprehensive
Income (Loss)
Balance at June 30, 2021, net of tax: $ (1,502) $ (5,858) $ (126) $ (7,486)
Other comprehensive income (loss), before tax:
Amounts before reclassifications (286) — 44 (242)
Amounts reclassified out — 158 18 176
Total other comprehensive income (loss), before tax (286) 158 62 (66)
Tax effect (15) (39) (14) (68)
Total other comprehensive income (loss), net of tax (301) 119 48 (134)
Balance at September 30, 2021, net of tax: $ (1,803) $ (5,739) $ (78) $ (7,620)

Nine months ended September 30, 2021

(Millions) Cumulative
Translation
Adjustment Defined Benefit
Pension and
Postretirement
Plans
Adjustment Cash Flow
Hedging
Instruments,
Unrealized
Gain (Loss) Total
Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2020, net of tax: $ (1,450) $ (6,098) $ (173) $ (7,721)
Other comprehensive income (loss), before tax:
Amounts before reclassifications (303) — 84 (219)
Amounts reclassified out — 477 39 516
Total other comprehensive income (loss), before tax (303) 477 123 297
Tax effect (50) (118) (28) (196)
Total other comprehensive income (loss), net of tax (353) 359 95 101
Balance at September 30, 2021, net of tax: $ (1,803) $ (5,739) $ (78) $ (7,620)

Three months ended September 30, 2020

Total

Defined Benefit

Cash Flow

Accumulated

Pension and

Hedging

Other

Cumulative

Postretirement

Instruments,

Comprehensive

Translation

Plans

Unrealized

Income

(Millions)

Adjustment

Adjustment

Gain (Loss)

(Loss)

Balance at June 30, 2020, net of tax:

$
(2,234)

$
(6,032)

$
(20)

$
(8,286)

Other comprehensive income (loss), before tax:

Amounts before reclassifications

237

—

(72)

165

Amounts reclassified out

—

163

(21)

142

Total other comprehensive income (loss), before tax

237

163

(93)

307

Tax effect

33

(36)

22

19

Total other comprehensive income (loss), net of tax

270

127

(71)

326

Balance at September 30, 2020, net of tax:

$
(1,964)

$
(5,905)

$
(91)

$
(7,960)


(Millions)	Cumulative Translation Adjustment		Defined Benefit Pension and Postretirement Plans Adjustment		Cash Flow Hedging Instruments, Unrealized Gain (Loss)		Total Accumulated Other Comprehensive Income (Loss)
Balance at June 30, 2020, net of tax:	$	(2,234)	$	(6,049)	$	(20)	$	(8,303)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	237		—		(72)		165
Amounts reclassified out	—		149		(21)		128
Total other comprehensive income (loss), before tax	237		149		(93)		293
Tax effect	33		(33)		22		22
Total other comprehensive income (loss), net of tax	270		116		(71)		315
Balance at September 30, 2020, net of tax:	$	(1,964)	$	(5,933)	$	(91)	$	(7,988)

Table of Contents

Nine months ended September 30, 2020

Total

Defined Benefit

Cash Flow

Accumulated

Pension and

Hedging

Other

Cumulative

Postretirement

Instruments,

Comprehensive

Translation

Plans

Unrealized

Income

(Millions)

Adjustment

Adjustment

Gain (Loss)

(Loss)

Balance at December 31, 2019, net of tax:

$
(1,899)

$
(6,209)

$
(31)

$
(8,139)

Other comprehensive income (loss), before tax:

Amounts before reclassifications

(98)

(80)

(10)

(188)

Amounts reclassified out

—

489

(68)

421

Total other comprehensive income (loss), before tax

(98)

409

(78)

233

Tax effect

33

(105)

18

(54)

Total other comprehensive income (loss), net of tax

(65)

304

(60)

179

Balance at September 30, 2020, net of tax:

$
(1,964)

$
(5,905)

$
(91)

$
(7,960)

~~Three months ended September 30, 2019~~

Total

Defined Benefit

Cash Flow

Accumulated

Pension and

Hedging

Other

Cumulative

Postretirement

Instruments,

Comprehensive

Translation

Plans

Unrealized

Income

(Millions)

Adjustment

Adjustment

Gain (Loss)

(Loss)

Balance at June 30, 2019, net of tax:

$
(1,912)

$
(5,369)

$
9

$
(7,272)

Other comprehensive income (loss), before tax:

Amounts before reclassifications

(149)

—

31

(118)

Amounts reclassified out

—

101

(21)

80

Total other comprehensive income (loss), before tax

(149)

101

10

(38)

Tax effect

(51)

(25)

(2)

(78)

Total other comprehensive income (loss), net of tax

(200)

76

8

(116)

Balance at September 30, 2019, net of tax:

$
(2,112)

$
(5,293)

$
17

$
(7,388)


(Millions)	Cumulative Translation Adjustment		Defined Benefit Pension and Postretirement Plans Adjustment		Cash Flow Hedging Instruments, Unrealized Gain (Loss)		Total Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2019, net of tax:	$	(1,899)	$	(6,204)	$	(31)	$	(8,134)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	(98)		(80)		(10)		(188)
Amounts reclassified out	—		446		(68)		378
Total other comprehensive income (loss), before tax	(98)		366		(78)		190
Tax effect	33		(95)		18		(44)
Total other comprehensive income (loss), net of tax	(65)		271		(60)		146
Balance at September 30, 2020, net of tax	$	(1,964)	$	(5,933)	$	(91)	$	(7,988)

~~Table of Contents~~

~~Nine months ended September 30, 2019~~

Total

Defined Benefit

Cash Flow

Accumulated

Pension and

Hedging

Other

Cumulative

Postretirement

Instruments,

Comprehensive

Translation

Plans

Unrealized

Income

(Millions)

Adjustment

Adjustment

Gain (Loss)

(Loss)

Balance at December 31, 2018, net of tax:

$
(2,098)

$
(4,832)

$
64

$
(6,866)

Impact of adoption of ASU No. 2018-02*

(13)

(817)

(23)

(853)

Other comprehensive income (loss), before tax:

Amounts before reclassifications

(86)

153

14

81

Amounts reclassified out

142

310

(48)

404

Total other comprehensive income (loss), before tax

56

463

(34)

485

Tax effect

(57)

(107)

10

(154)

Total other comprehensive income (loss), net of tax

(1)

356

(24)

331

Balance at September 30, 2019, net of tax

$
(2,112)

$
(5,293)

$
17

$
(7,388)

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

Income taxes are not provided for foreign translation relating to permanent investments in international subsidiaries, but tax effects within cumulative translation ~~does~~do include impacts from items such as net investment hedge transactions. Reclassification adjustments are made to avoid double counting in comprehensive income items that are subsequently recorded as part of net income.

Reclassifications out of Accumulated Other Comprehensive Income Attributable to 3M

Amount Reclassified from

Details about Accumulated Other

Accumulated Other Comprehensive Income

Comprehensive Income Components

Three months ended September 30,

Nine months ended September 30,

Location on Income

(Millions)

2020

2019

2020

2019

Statement

Cumulative translation adjustment

Deconsolidation of Venezuelan subsidiary

$
—

$
—

$
—

$
(142)

Other income (expense), net

Total before tax

—

—

—

(142)

Tax effect

—

—

—

—

Provision for income taxes

Net of tax

$
—

$
—

$
—

$
(142)

Defined benefit pension and postretirement plans adjustments

Gains (losses) associated with defined benefit pension and postretirement plans amortization

Transition asset

$
(1)

$
—

$
(2)

$
—

See Note 11

Prior service benefit

15

18

46

50

See Note 11

Net actuarial loss

(176)

(119)

(530)

(358)

See Note 11

Curtailments/Settlements

(1)

—

(3)

—

See Note 11

Deconsolidation of Venezuelan subsidiary

—

—

—

(2)

Other income (expense), net

Total before tax

(163)

(101)

(489)

(310)

Tax effect

36

25

118

70

Provision for income taxes

Net of tax

$
(127)

$
(76)

$
(371)

$
(240)

Cash flow hedging instruments gains (losses)

Foreign currency forward/option contracts

$
23

$
22

$
74

$
50

Cost of sales

Interest rate contracts

(2)

(1)

(6)

(2)

Interest expense

Total before tax

21

21

68

48

Tax effect

(5)

(4)

(16)

(9)

Provision for income taxes

Net of tax

$
16

$
17

$
52

$
39

Total reclassifications for the period, net of tax

$
(111)

$
(59)

$
(319)

$
(343)


Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income								Location on Income Statement
	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Defined benefit pension and postretirement plans adjustments
Gains (losses) associated with defined benefit pension and postretirement plans amortization
Transition asset	$	(1)	$	(1)	$	(2)	$	(2)	See Note 11
Prior service benefit	15		15		45		46		See Note 11
Net actuarial loss	(172)		(162)		(518)		(487)		See Note 11
Curtailments/Settlements	—		(1)		(2)		(3)		See Note 11
Total before tax	(158)		(149)		(477)		(446)
Tax effect	39		33		118		108		Provision for income taxes
Net of tax	(119)		(116)		(359)		(338)
Cash flow hedging instruments gains (losses)
Foreign currency forward/option contracts	(15)		23		(32)		74		Cost of sales
Interest rate contracts	(3)		(2)		(7)		(6)		Interest expense
Total before tax	(18)		21		(39)		68
Tax effect	4		(5)		9		(16)		Provision for income taxes
Net of tax	(14)		16		(30)		52
Total reclassifications for the period, net of tax	$	(133)	$	(100)	$	(389)	$	(286)

~~Table of Contents~~

NOTE 8. Income Taxes

The ~~Company is under IRS examination or appeals~~effective tax rate for the ~~tax years 2017 through 2018. The IRS has completed its field examination~~third quarter of ~~the U.S. federal income tax returns for all years for 2005 through 2016, but the years have not closed as the Company is~~2021 was 18.4 percent, compared to 21.5 percent in the ~~process~~third quarter of ~~resolving issues identified during those examinations. In addition~~2020, a decrease of 3.1 percentage points. The effective tax rate for the first nine months of 2021 was 18.8 percent compared to 20.1 percent in the first nine months of 2020, a decrease of 1.3 percentage points. The primary factor that decreased the Company’s effective tax rate was favorable adjustments in 2021 related to impacts of U.S. ~~federal examination, there is also audit activity in several U.S. state and foreign jurisdictions where~~international tax provisions.

The total amounts of unrecognized tax benefits that, if recognized, would affect the ~~Company is subject to ongoing~~effective tax ~~examinations and governmental assessments, which could be impacted by evolving political environments in those jurisdictions. As~~rate as of September 30, 2021 and December 31, 2020 ~~no taxing authority has proposed significant adjustments to the Company’s tax positions for which the Company is not adequately reserved.~~

are $1,105 million and $1,145 million, respectively. It is reasonably possible that the amount of

Table of Contents

unrecognized tax benefits could significantly change within the next 12 months. At this time, the Company is not able to estimate the range by which these potential events could impact 3M’s unrecognized tax benefits in the next 12 months. The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of September 30, 2020 and December 31, 2019 are $1,155 million and $1,178 million, respectively. The change in unrecognized tax benefits during 2020 includes a $52 million decrease associated with the tax treatment of the 2018 agreement reached with the State of Minnesota that resolved the Natural Resources Damages (NRD) lawsuit.

As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had valuation allowances of ~~$124~~$158 million and ~~$158~~$135 million on its deferred tax assets, respectively.

The effective tax rate for the third quarter of 2020 was 21.4 percent, compared to 19.3 percent in the third quarter of 2019, an increase of 2.1 percentage points. The primary factor contributing to the increase was nonrepeating 2019 favorable adjustments related to international tax provisions of U.S. tax reform.

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

The Company previously disclosed as of December 31, 2019 that approximately $14 billion of the undistributed earnings of its foreign subsidiaries were considered indefinitely reinvested. During the third quarter of 2020, 3M determined that approximately $5 billion of these earnings are no longer considered permanently reinvested. The incremental tax cost to repatriate these earnings to the US is immaterial. The Company has not provided deferred taxes on approximately $9 billion of undistributed earnings from non-U.S. subsidiaries as of September 30, 2020 which are indefinitely reinvested in operations. Because of the multiple avenues by which to repatriate the earnings to minimize tax cost, and because a large portion of these earnings are not liquid, it is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

In March 2020, in response to the impact of the COVID-19 pandemic in the U.S. and across the globe, the United States Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act. The enactment period impacts to 3M were immaterial to income tax expense.

~~Table of Contents~~

NOTE 9. Marketable Securities

The Company invests in asset-backed securities, certificates of deposit/time deposits, commercial paper, and ~~Held-to-Maturity Debt Securities~~

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

(Millions)

September 30, 2020

December 31, 2019

Corporate debt securities

$
7

$
—

Commercial paper

233

85

Certificates of deposit/time deposits

47

10

U.S. treasury securities

150

—

U.S. municipal securities

3

3

Current marketable securities

$
440
��
$
98

U.S. municipal securities

$
34

$
43

Non-current marketable securities

$
34

$
43

Total marketable securities

$
474

$
141


(Millions)	September 30, 2021		December 31, 2020
Corporate debt securities	$	—	$	7
Commercial paper	501		237
Certificates of deposit/time deposits	45		31
U.S. treasury securities	305		125
U.S. municipal securities	4		4
Current marketable securities	855		404

U.S. municipal securities	30		30
Non-current marketable securities	30		30

Total marketable securities	$	885	$	434

At September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, gross unrealized, gross realized, and net realized gains and/or losses (pre-tax) were not material.

The balances at September 30, ~~2020~~2021 for marketable securities by contractual maturity are shown below. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(Millions)

September 30, 2020

Due in one year or less

$
440

Due after one year through five years

14

Due after five years through ten years

20

Total marketable securities

$
474

~~Held-to-Maturity Debt Securities~~

In connection with the in-substance debt defeasance of the Third Lien Notes described in Note 10, the Company purchased a $0.5 billion U.S. Treasury security in the fourth quarter of 2019 and transferred it to a trust with irrevocable instructions to use the proceeds from its maturity to satisfy the redemption of the Third Lien Notes that occurred in May 2020. This debt security was considered held-to-maturity due to the restrictions in satisfying and discharging the Third Lien Notes, was carried at amortized cost, and was reflected in other current assets on the Company’s consolidated balance sheet. Upon the maturity of the debt security in May 2020, the Company has 0 held-to-maturity debt securities.


(Millions)	September 30, 2021
Due in one year or less	$	855
Due after one year through five years	15
Due after five years through ten years	15
Total marketable securities	$	885

NOTE 10. Long-Term Debt and Short-Term Borrowings

In March ~~2020,~~2021, 3M, ~~issued $1.75~~via a make-whole call offer, redeemed $450 million principal amount of 2.75% notes due 2022. The Company recorded an early debt extinguishment pre-tax charge of approximately $11 million within interest expense. This charge reflected the differential between the carrying value and the amount paid to reacquire the notes and related expenses.

During the second and third quarters of 2021, 3M entered into interest rate swaps with an aggregate notional amount of $800 million. These swaps converted $500 million and $300 million of 3M’s $1.0 billion ~~aggregate~~and $650 million principal amount of fixed rate ~~registered notes. These were comprised of $500 million of~~ ~~5-year~~notes due ~~2025~~2049 and 2050, respectively, into floating rate debt for the portion of their terms through mid-2028 with an interest rate based on a ~~coupon rate~~three-month LIBOR index.

2020 issuances, maturities, and extinguishments of ~~2.65%, $600 million~~short- and long-term debt are described in Note 5 in 3M’s 2020 Annual Report on Form 10-K.

Table of ~~10-year~~Contents ~~notes due 2030 with a coupon rate of 3.05%, and $650 million of~~ ~~30-year~~ ~~notes due 2050 with a coupon rate of 3.70%.~~

~~As of September 30, 2020, the~~

The Company had 0no commercial paper outstanding ~~compared to $150 million in commercial paper outstanding as of~~at September 30, 2021 and December 31, ~~2019.~~

In July 2020, 3M extended a credit facility initially expiring in July 2020 to August 2021 in the amount of 80 billion Japanese yen. In November 2019, 3M entered into a credit facility expiring in November 2020 in the amount of 150 million euros. During the third quarter of 2020, the Company paid the outstanding balances and closed these credit facilities.

2020.

~~Table of Contents~~

In conjunction with the October 2019 acquisition of Acelity (see Note 3), 3M assumed outstanding debt of the business, of which $445 million in principal amount of third lien senior secured notes (Third Lien Notes) maturing in 2021 with a coupon rate of 12.5% was not immediately redeemed at closing. Instead, at closing, 3M satisfied and discharged the Third Lien Notes via an in-substance defeasance, whereby 3M transferred cash equivalents and marketable securities to a trust with irrevocable instructions to redeem the Third Lien Notes on May 1, 2020. The trust assets were restricted from use in 3M’s operations and were only used for the redemption of the Third Lien Notes that occurred in May 2020. These actions, however, did not represent a legal defeasance. Therefore, this debt was included in current portion of long-term debt and the related trust assets were included in current assets on the Company’s consolidated balance sheet as of December 31, 2019.

In May 2020, 3M repaid the aggregate $445 million principal amount of Third Lien Notes subject to the in-substance defeasance above and repaid 650 million euros aggregate principal amount of floating-rate medium-term notes that matured. In August 2020, 3M repaid $500 million aggregate principal amount of floating rate medium-term notes that matured.

Future Maturities of Long-term Debt

Maturities of long-term debt in the table below reflect the impact of put provisions associated with certain debt instruments and are net of the ~~unaccreted~~unamortized debt issue costs such that total maturities equal the carrying value of long-term debt as of September 30, ~~2020.~~2021. The maturities of long-term debt for the periods subsequent to September 30, ~~2020~~2021 are as follows (in millions):

Remainder of











After


2020

2021

2022

2023

2024

2025

2025

Total

$
149

$
1,710

$
1,629

$
1,842

$
1,101

$
1,789

$
11,362

$
19,582


Remainder of 2021		2022		2023		2024		2025		2026		After 2026		Total
$	754	$	1,253	$	1,942	$	1,100	$	1,792	$	1,511	$	9,797	$	18,149

NOTE 11. Pension and Postretirement Benefit Plans

As discussed in Note 1, effective in the first quarter of 2021, 3M made a change in accounting principle for net periodic pension and postretirement plan cost. This impacted the expected return on plan assets and the amortization of net unamortized actuarial gains or losses expense components of net periodic benefit cost. This change was applied retrospectively to all periods presented within 3M’s financial statements.

The service cost component of defined benefit net periodic benefit cost is recorded in cost of sales; selling, general and administrative expenses; and research, development and related expenses. The other components of net periodic benefit cost are reflected in other expense (income), net. Components of net periodic benefit cost and other supplemental information for the three and nine months ended September 30, 2021 and 2020 ~~and 2019~~ follow:

Benefit Plan Information

Three months ended September 30,

Qualified and Non-qualified

Pension Benefits

Postretirement

United States
International

Benefits

(Millions)

2020

2019

2020

2019

2020

2019

Net periodic benefit cost (benefit)

Operating expense

Service cost

$
66

$
63

$
39

$
32

$
11

$
10

Non-operating expense

Interest cost

$
124

$
155

$
31

$
40

$
16

$
20

Expected return on plan assets

(255)

(260)

(77)

(75)

(20)

(20)

Amortization of transition asset

—

—

1

—

—

—

Amortization of prior service benefit

(6)

(6)

(1)

(3)

(8)

(9)

Amortization of net actuarial loss

134

91

30

20

12

8

Settlements, curtailments, special termination benefits and other

—

—

—

—

1

—

Total non-operating expense (benefit)

(3)

(20)

(16)

(18)

1

(1)

Total net periodic benefit cost (benefit)

$
63

$
43

$
23

$
14

$
12

$
9


	Three months ended September 30,
	Qualified and Non-qualified Pension Benefits								Postretirement Benefits
	United States				International
(Millions)	2021		2020		2021		2020		2021		2020
Net periodic benefit cost (benefit)
Operating expense
Service cost	$	72	$	66	$	41	$	39	$	12	$	11
Non-operating expense
Interest cost	90		124		25		31		11		16
Expected return on plan assets	(264)		(263)		(81)		(77)		(19)		(20)
Amortization of transition asset	—		—		1		1		—		—
Amortization of prior service benefit	(6)		(6)		—		(1)		(9)		(8)
Amortization of net actuarial loss	132		123		26		28		14		11
Settlements, curtailments, special termination benefits and other	—		—		—		—		—		1
Total non-operating expense (benefit)	(48)		(22)		(29)		(18)		(3)		—
Total net periodic benefit cost (benefit)	$	24	$	44	$	12	$	21	$	9	$	11

Table of Contents

Nine months ended September 30,

Qualified and Non-qualified

Pension Benefits

Postretirement

United States
International

Benefits

(Millions)

2020

2019

2020

2019

2020

2019

Net periodic benefit cost (benefit)

Operating expense

Service cost

$
197

$
188

$
115

$
98

$
33

$
32

Non-operating expense

Interest cost

$
374

$
466

$
95

$
118

$
48

$
62

Expected return on plan assets

(765)

(780)

(231)

(225)

(60)

(61)

Amortization of transition asset

—

—

2

—

—

—

Amortization of prior service benefit

(18)

(18)

(4)

(9)

(24)

(23)

Amortization of net actuarial loss

402

274

92

59

36

25

Settlements, curtailments, special termination benefits and other

—

35

—

1

3

—

Total non-operating expense (benefit)

(7)

(23)

(46)

(56)

3

3

Total net periodic benefit cost (benefit)

$
190

$
165

$
69

$
42

$
36

$
35

Nine months ended September 30,
Qualified and Non-qualified
Pension Benefits Postretirement
Benefits
United States International
(Millions) 2021 2020 2021 2020 2021 2020
Net periodic benefit cost (benefit)
Operating expense
Service cost $ 216 $ 197 $ 125 $ 115 $ 35 $ 33
Non-operating expense
Interest cost 270 373 75 95 33 48
Expected return on plan assets (792) (786) (244) (232) (58) (60)
Amortization of transition asset — — 2 2 — —
Amortization of prior service benefit (18) (18) (2) (4) (25) (24)
Amortization of net actuarial loss 396 368 80 85 42 34
Settlements, curtailments, special termination benefits and other — — — — 2 3
Total non-operating expense (benefit) (144) (63) (89) (54) (6) 1
Total net periodic benefit cost (benefit) $ 72 $ 134 $ 36 $ 61 $ 29 $ 34

For the nine months ended September 30, ~~2020~~2021 contributions totaling ~~$119~~$118 million were made to the Company’s U.S. and international pension plans and $3 million to its postretirement plans. For total year ~~2020,~~2021, the Company expects to contribute approximately $200 million of cash to its global defined benefit pension and postretirement plans. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in ~~2020.~~2021. Future contributions will depend on market conditions, interest rates and other factors. 3M’s annual measurement date for pension and postretirement assets and liabilities is December 31 each year, which is also the date used for the related annual measurement assumptions.

In May 2019 (as part of the 2019 restructuring actions discussed in Note 5), the Company began offering a voluntary early retirement incentive program to certain eligible participants of its U.S. pension plans who meet age and years of pension service requirements. The eligible participants who accepted the offer and retired by July 1, 2019 received an enhanced pension benefit. Pension benefits were enhanced by adding 1 additional year of pension service and 1 additional year of age for certain benefit calculations. Approximately 800 participants accepted the offer and retired before July 1, 2019. As a result, the Company incurred a $35 million charge related to these special termination benefits in the second quarter of 2019.

In May 2019, 3M modified the 3M Retiree Life Insurance Plan postretirement benefit to close it to new participants effective August 1, 2019 (which results in employees who retire on or after August 1, 2019 not being eligible to participate in the plan) and reducing the maximum life insurance and death benefit to $8,000 for deaths on or after August 1, 2019. Due to these changes, the plan was re-measured in the second quarter of 2019, resulting in a decrease to the accumulated projected benefit obligation liability of approximately $150 million and a related ~~increase~~ ~~to shareholders’ equity, specifically accumulated other comprehensive income in addition to an immaterial income statement benefit prospectively.~~

In the second quarter of 2020, as a result of the divestiture of the drug delivery business, the Company recognized a curtailment in its United Kingdom Pension Plan. The resulting re-measurement of the pension plan funded status reduced long-term prepaid pension and post retirement assets (located within “other assets” of the Company’s balance sheet) by approximately $80 million, which was ~~offset~~ within accumulated other comprehensive income (located within the equity section of the Company’s balance sheet). The expense impact of this re-measurement was immaterial for the second quarter of 2020 and subsequent periods.

~~Table of Contents~~

NOTE 12. Derivatives

The Company uses interest rate swaps, currency ~~swaps, commodity price~~ swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations. ~~The information that follows~~Note 14 in 3M's 2020 Annual Report on Form 10-K explains the ~~various~~ types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, and how such instruments are accounted ~~for, and how such instruments impact 3M’s financial position and performance.~~

for.It also contains information regarding previously initiated contracts or instruments.

Additional information with respect to derivatives is included elsewhere as follows:

●

•Impact on ~~other comprehensive income of nonderivative hedging and derivative instruments is included in Note 7.~~

●

~~Fair value of derivative instruments is included in Note 13.~~

●

~~Derivatives and/or hedging instruments associated with the Company’s long-term debt are described in Note 12 in 3M’s 2019 Annual Report on Form 10-K.~~

~~Types of Derivatives/Hedging Instruments and Inclusion in Income/Other Comprehensive Income~~

~~Cash Flow Hedges:~~

~~For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative is reported as a component of~~ other comprehensive income of nonderivative hedging and ~~reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the~~ derivative ~~representing hedge components excluded from the assessment of effectiveness are recognized in current earnings.~~

~~Cash Flow Hedging - Foreign Currency Forward and Option Contracts:~~ The Company enters into foreign exchange forward and option contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactions are designated as cash flow hedges. The settlement or extension of these derivatives will result in reclassifications (from accumulated other comprehensive income) to earnings in the period during which the hedged transactions affect earnings. 3M may dedesignate these cash flow hedge relationships in advance of the occurrence of the forecasted transaction. The portion of gains or losses on the derivative instrument previouslyinstruments is included in accumulated other comprehensive income for dedesignated hedges remains in accumulated other comprehensive income until the forecasted transaction occurs or becomes probable of not occurring. Changes in theNote 7.

•Fair value of derivative instruments ~~after dedesignation are recorded in earnings and are~~is included in Note 13.

•Derivatives and/or hedging instruments associated with the Company’s long-term debt are described in Note 12 in 3M’s 2020 Annual Report on Form 10-K.

Refer to the section below titled Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments ~~section below. The maximum length~~for details on the location within the consolidated statements of ~~time over which 3M hedges its exposure to the variability in future cash flows of the forecasted transactions is 36 months.~~

~~Cash Flow Hedging - Interest Rate Contracts:~~ The Company may use forward starting interest rate swap or treasury rate lock contracts to hedge exposure to variability in cash flows from interest payments on forecasted debt issuances. Additional information regarding previously issued but terminated interest rate contracts, which have related balances within accumulated other comprehensive income ~~being amortized over the underlying life of related debt, can be found in Note 14 in 3M’s 2019 Annual Report on Form 10-K.~~

In March 2020, the Company entered into treasury rate lock contracts with a notional amount of $500 million that were terminated concurrently with the March 2020 issuance of registered notes as discussed in Note 10. The termination resulted in an immaterial net loss within accumulated other comprehensive income that will be amortized over the respective lives of the debt.

~~The amortization~~for amounts of gains and losses ~~on forward starting interest rate swap~~related to derivative instruments designated as cash flow or fair value hedges (along with similar information relative to the hedged items) and ~~treasury rate lock contracts~~derivatives not designated as hedging instruments. Additional information relative to cash flow hedges, fair value hedges, net investment hedges and derivatives not designated as hedging instruments is included ~~in the tables~~ below as ~~part of the gain/(loss) reclassified from accumulated other comprehensive income into income.~~

applicable.

Cash Flow Hedges:

As of September 30, ~~2020,~~2021, the Company had a balance of ~~$91~~$78 million associated with the after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income. This includes a remaining balance of ~~$109~~$102 million (after-tax loss) related to the forward starting interest rate swap and treasury rate lock contracts, which will be amortized over the respective lives of the notes. Based on exchange rates as of September 30, ~~2020,~~2021, of the total after-tax net unrealized balance as of September 30, 2021, 3M expects to reclassify approximately ~~$7 million, $3 million, and~~ $4 million ~~of the~~ after-tax net unrealized ~~cash flow hedging gains to earnings~~gain over the next 12 months ~~over the remainder of 2020, and in 2021, respectively, in addition to reclassifying approximately $98 million of the after-tax net unrealized cash flow hedging losses to earnings after 2021~~ (with the impact offset by earnings/losses from underlying hedged items).

The ~~location~~amount of pretax gain (loss) recognized in ~~the consolidated statements of income and~~other comprehensive income ~~and amounts of gains and losses~~ related to derivative instruments designated as cash flow hedges ~~are~~is provided in the following table. Reclassifications of amounts from accumulated other comprehensive income into income include accumulated gains (losses) on dedesignated hedges at the time earnings are impacted by the forecasted transactions.

Pretax Gain (Loss)

Recognized in Other

Pretax Gain (Loss) Reclassified

Comprehensive

from Accumulated Other

Income on Derivative

Comprehensive Income into Income

Three months ended September 30, 2020 (Millions)

Amount

Location

Amount

Foreign currency forward/option contracts

$
(72)

Cost of sales

$
23

Interest rate contracts

—

Interest expense

(2)

Total

$
(72)

$
21

Nine months ended September 30, 2020 (Millions)

Amount

Location

Amount

Foreign currency forward/option contracts

$
(8)

Cost of sales

$
74

Interest rate contracts

(2)

Interest expense

(6)

Total

$
(10)

$
68

Three months ended September 30, 2019 (Millions)

Amount

Location

Amount

Foreign currency forward/option contracts

$
105

Cost of sales

$
22

Interest rate contracts

(74)

Interest expense

(1)

Total

$
31

$
21

Nine months ended September 30, 2019 (Millions)

Amount

Location

Amount

Foreign currency forward/option contracts

$
137

Cost of sales

$
50

Interest rate contracts

(123)

Interest expense

(2)

Total

$
14

$
48


	Pretax Gain (Loss) Recognized in Other Comprehensive Income on Derivative
	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Foreign currency forward/option contracts	$	44	$	(72)	$	84	$	(8)
Interest rate contracts	—		—		—		(2)
Total	$	44	$	(72)	$	84	$	(10)

Fair Value Hedges:

~~For derivative instruments that are designated~~

During the second and ~~qualify as fair value hedges, the gain or loss on the derivatives as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.~~

~~Fair Value Hedging - Interest Rate Swaps:~~ ~~The Company manages interest expense using a mix~~third quarters of ~~fixed and floating rate debt. To help manage borrowing costs, the Company may enter~~2021, 3M entered into interest rate ~~swaps. Under these arrangements,~~swaps with an aggregate notional amount of $800 million. These swaps converted $500 million and $300 million of 3M’s $1.0 billion and $650 million principal amount of fixed rate notes due 2049 and 2050, respectively, into floating rate debt for the ~~Company agrees~~portion of their terms through mid-2028 with an interest rate based on a three-month LIBOR index as a hedge of its exposure to ~~exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The mark-to-market of these~~changes in fair value hedges is recorded as gains or losses in interest expense and is offset by the gain or loss of the underlying debt instrument, which also is recorded in interest expense. Additional information regarding designatedthat are attributable to interest rate ~~swaps can be found in Note 14 in 3M’s 2019 Annual Report on Form 10-K.~~

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

risk.

~~Table of Contents~~

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

Cumulative Amount of Fair Value Hedging

Carrying Value of the

Adjustment Included in the Carrying Value

Hedged Liabilities (in millions)

of the Hedged Liabilities (in millions)

Location on the Consolidated Balance Sheet

September 30, 2020

December 31, 2019

September 30, 2020

December 31, 2019

Short-term borrowings and current portion of long-term debt

$
205

$
499

$
5

$
—

Long-term debt

581

775

13

22

Total

$
786

$
1,274

$
18

$
22


(Millions)	Carrying Value of the Hedged Liabilities				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Liabilities
Location on the Consolidated Balance Sheet	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Short-term borrowings and current portion of long-term debt	$	353	$	373	$	1	$	5
Long-term debt	1,008		225		8		6
Total	$	1,361	$	598	$	9	$	11

Net Investment Hedges:

The Company may use non-derivative (foreign currency denominated debt) and derivative (foreign exchange forward contracts) instruments to hedge portions of the Company’s investment in foreign subsidiaries and manage foreign exchange risk. For instruments that are designated and qualify as hedges of net investments in foreign operations and that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within other comprehensive income. Amounts excluded from the assessment of hedge effectiveness, including the time value of the forward contract at the inception of the hedge, are recognized in earnings using an amortization approach over the life of the hedging instrument on a straight-line basis. Any difference between the change in the fair value of the excluded component and the amount amortized into earnings during the period is recorded in cumulative translation within other comprehensive income. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. To the extent foreign currency denominated debt is not designated in or is dedesignated from a net investment hedge relationship, changes in value of that portion of foreign currency denominated debt due to exchange rate changes are recorded in earnings through their maturity date.

3M’s use of foreign exchange forward contracts designated in hedges of the Company’s net investment in foreign subsidiaries can vary by time period depending on when foreign currency denominated debt balances designated in such relationships are dedesignated, matured, or are newly issued and designated. Additionally, variation can occur in connection with the extent of the Company’s desired foreign exchange risk coverage.

At September 30, ~~2020,~~2021, the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 50150 million euros, along with a principal amount of long-term debt instruments designated in net investment hedges totaling 3.5 billion euros. The maturity dates of these derivative and nonderivative instruments designated in net investment hedges range from 2021 to 2031.

The ~~location~~amount of gain (loss) excluded from effectiveness testing recognized in ~~the consolidated statements~~income relative to instruments designated in net investment hedge relationships is not material. The amount of ~~income and~~pretax gain (loss) recognized in other comprehensive income ~~and amounts of gains and losses~~ related to derivative and nonderivative instruments designated as net investment hedges are as follows. ~~There were 0 reclassifications of the effective portion of net investment hedges out of accumulated other comprehensive income into income for the periods presented in the table below.~~


	~~Pretax Gain (Loss)~~
	~~Recognized as~~
	~~Cumulative Translation~~		~~Amount of Gain (Loss) Excluded~~
	~~within Other~~		~~from Effectiveness Testing~~
	~~Comprehensive Income~~		~~Recognized in Income~~
~~Three months ended September 30, 2020 (Millions)~~	~~Amount~~		~~Location~~	~~Amount~~
~~Foreign currency denominated debt~~	$	~~(154)~~	~~Cost of sales~~	$	—
~~Foreign currency forward contracts~~		~~(3)~~	~~Cost of sales~~		—
~~Total~~	$	~~(157)~~		$	—

Nine months ended September 30, 2020 (Millions)

Amount

Location

Amount

Foreign currency denominated debt

$
(150)

Cost of sales

$
—

Foreign currency forward contracts

2

Cost of sales

5

Total

$
(148)

$
5


	Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income
	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Foreign currency denominated debt	$	83	$	(154)	$	195	$	(150)
Foreign currency forward contracts	3		(3)		4		2
Total	$	86	$	(157)	$	199	$	(148)

Table of ~~Contents~~

Contents

Three months ended September 30, 2019 (Millions)

Amount

Location

Amount

Foreign currency denominated debt

$
177

Cost of sales

$
—

Foreign currency forward contracts

38

Cost of sales

6

Total

$
215

$
6

Nine months ended September 30, 2019 (Millions)

Amount

Location

Amount

Foreign currency denominated debt

$
205

Cost of sales

$
—

Foreign currency forward contracts

43

Cost of sales

18

Total

$
248

$
18

~~Derivatives Not Designated as Hedging Instruments:~~

Derivatives not designated as hedging instruments include dedesignated foreign currency forward and option contracts that formerly were designated in cash flow hedging relationships (as referenced in the Cash Flow Hedges section above). In addition, 3M enters into foreign currency forward contracts to offset, in part, the impacts of certain intercompany activities and enters into commodity price swaps to offset, in part, fluctuations in costs associated with the use of certain commodities and precious metals. These derivative instruments are not designated in hedging relationships; therefore, fair value gains and losses on these contracts are recorded in earnings. The Company does not hold or issue derivative financial instruments for trading purposes.

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

Three months ended September 30, 2020

Nine months ended September 30, 2020

Gain (Loss) on Derivative Recognized in

Gain (Loss) on Derivative Recognized in

Income

Income

(Millions)

Location

Amount


Location

Amount

Foreign currency forward/option contracts

Cost of sales

$
1

Cost of sales

$
3

Foreign currency forward contracts

Interest expense

29

Interest expense

2

Total

$
30

$
5

Three months ended September 30, 2019

Nine months ended September 30, 2019

Gain (Loss) on Derivative Recognized in

Gain (Loss) on Derivative Recognized in

Income

Income

(Millions)

Location

Amount


Location

Amount

Foreign currency forward/option contracts

Cost of sales

$
6

Cost of sales

$
4

Foreign currency forward contracts

Interest expense

(8)

Interest expense

(26)

Total

$
(2)

$
(22)

~~Table of Contents~~

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

and Derivatives Not Designated as Hedging Instruments

The location in the consolidated statement of income and pre-tax amounts recognized in income related to derivative instruments designated in a cash flow or fair value hedging ~~relationship~~relationships and for derivatives not designated as hedging instruments are as follows:

Location and Amount of Gain (Loss) Recognized in Income

Location and Amount of Gain (Loss) Recognized in Income

Three months ended September 30, 2020

Nine months ended September 30, 2020

(Millions)

Cost of sales

Other expense
(income), net

Cost of sales

Other expense
(income), net

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

$
4,303

$
104

$
12,217

$
311

The effects of cash flow and fair value hedging:

Gain or (loss) on cash flow hedging relationships:

Foreign currency forward/option contracts:

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

$
23

$
—

$
74

$
—

Interest rate contracts:

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

—

(2)

—

(6)

Gain or (loss) on fair value hedging relationships:

Interest rate contracts:

Hedged items

$
—

$
3

$
—

$
3

Derivatives designated as hedging instruments

—

(3)

—

(3)

Location and Amount of Gain (Loss) Recognized in Income

Location and Amount of Gain (Loss) Recognized in Income

Three months ended September 30, 2019

Nine months ended September 30, 2019

(Millions)

Cost of sales

Other expense
(income), net

Cost of sales

Other expense
(income), net

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

$
4,188

$
45

$
12,811

$
349

The effects of cash flow and fair value hedging:

Gain or (loss) on cash flow hedging relationships:

Foreign currency forward/option contracts:

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

$
22

$
—

$
50

$
—

Interest rate contracts:

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

—

(1)

—

(2)

Gain or (loss) on fair value hedging relationships:

Interest rate contracts:

Hedged items

$
—

$
1

$
—

$
(11)

Derivatives designated as hedging instruments

—

(1)

—

11


	Location and Amount of Gain (Loss) Recognized in Income
	Three months ended September 30,								Nine months ended September 30,
	Cost of sales				Other expense (income), net				Cost of sales				Other expense (income), net
(Millions)	2021		2020		2021		2020		2021		2020		2021		2020
Information regarding cash flow and fair value hedging relationships:
Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of derivatives are recorded	$	4,853	$	4,303	$	31	$	83	$	14,097	$	12,217	$	113	$	248
Gain or (loss) on cash flow hedging relationships:
Foreign currency forward/option contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	(15)		23		—		—		(32)		74		—		—
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	—		—		(3)		(2)		—		—		(7)		(6)
Gain or (loss) on fair value hedging relationships:
Interest rate contracts:
Hedged items	—		—		1		3		—		—		3		3
Derivatives designated as hedging instruments	—		—		(1)		(3)		—		—		(3)		(3)

Information regarding derivatives not designated as hedging instruments:
Gain or (loss) on derivatives not designated as instruments:
Foreign currency forward/option contracts	—		1		(35)		29		—		3		(7)		2

Location, ~~and~~ Fair Value, ~~Amount~~and Gross Notional Amounts of Derivative Instruments

The following tables summarize the fair value of 3M’s derivative instruments, excluding nonderivative instruments used as hedging instruments, and their location in the consolidated balance sheet. Notional amounts below are presented at period end foreign exchange rates, except for certain interest rate swaps, which are presented using the inception date’s foreign exchange rate. ~~Additional information with respect to the fair value of derivative instruments is included in Note 13.~~

Gross

Assets

Liabilities

Notional

Fair

Fair

September 30, 2020 (Millions)

Amount

Location

Value Amount

Location

Value Amount

Derivatives designated as

hedging instruments

Foreign currency forward/option contracts

$
1,675

Other current assets

$
40

Other current liabilities

$
24

Foreign currency forward/option contracts

722

Other assets

23

Other liabilities

7

Interest rate contracts

200

Other current assets

5

Other current liabilities

—

Interest rate contracts

403

Other assets

8

Other liabilities

—

Total derivatives designated as hedging instruments

$
76

$
31

Derivatives not designated as

hedging instruments

Foreign currency forward/option contracts

$
3,697

Other current assets

$
19

Other current liabilities

$
15

Total derivatives not designated as hedging instruments

$
19

$
15

Total derivative instruments

$
95

$
46

Gross

Assets

Liabilities

Notional

Fair

Fair

December 31, 2019 (Millions)

Amount

Location

Value Amount

Location

Value Amount

Derivatives designated as

hedging instruments

Foreign currency forward/option contracts

$
1,995

Other current assets

$
64

Other current liabilities

$
9

Foreign currency forward/option contracts

1,041

Other assets

50

Other liabilities

3

Interest rate contracts

500

Other current assets

—

Other current liabilities

—

Interest rate contracts

603

Other assets

17

Other liabilities

—

Total derivatives designated as hedging instruments

$
131

$
12

Derivatives not designated as

hedging instruments

Foreign currency forward/option contracts

$
2,684

Other current assets

$
11

Other current liabilities

$
8

Total derivatives not designated as hedging instruments

$
11

$
8

Total derivative instruments

$
142

$
20

Gross
Notional
Amount Assets Liabilities
September 30, 2021 (Millions) Location Fair
Value Amount Location Fair
Value Amount
Derivatives designated as hedging instruments
Foreign currency forward/option contracts 1,796 Other current assets $ 41 Other current liabilities $ 17
Foreign currency forward/option contracts 792 Other assets 31 Other liabilities 3
Interest rate contracts 403 Other current assets 1 Other current liabilities —
Interest rate contracts 800 Other assets 3 Other liabilities —
Total derivatives designated as hedging instruments 76 20
Derivatives not designated as hedging instruments
Foreign currency forward/option contracts 5,269 Other current assets 8 Other current liabilities 20
Total derivatives not designated as hedging instruments 8 20
Total derivative instruments $ 84 $ 40

Gross
Notional
Amount Assets Liabilities
December 31, 2020 (Millions) Location Fair
Value Amount Location Fair
Value Amount
Derivatives designated as hedging instruments
Foreign currency forward/option contracts 1,630 Other current assets $ 14 Other current liabilities $ 67
Foreign currency forward/option contracts 669 Other assets 10 Other liabilities 25
Interest rate contracts 403 Other current assets 7 Other current liabilities —
Total derivatives designated as hedging instruments 31 92
Derivatives not designated as hedging instruments
Foreign currency forward/option contracts 3,166 Other current assets 13 Other current liabilities 14
Total derivatives not designated as hedging instruments 13 14
Total derivative instruments $ 44 $ 106

Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments

The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency swaps, commodity price swaps, and forward and option contracts. However, the Company’s risk is limited to the fair value of the instruments. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial institutions as counterparties.

3M enters into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions. ~~A master netting arrangement~~These arrangements may allow each counterparty to net settle amounts owed between a 3M entity and the counterparty as a result of multiple, separate derivative transactions. As of September 30, 2020, 3M has International Swaps and Derivatives Association (ISDA) agreements with 17 applicable banks and financial institutions which contain netting provisions. In addition to a master agreement with 3M supported by a primary counterparty’s parent guarantee, 3M also has associated credit support agreements in place with ~~16 of~~ its primary derivative counterparties which, among other things, provide the circumstances under which either party is required to post eligible collateral (when the market value of transactions

~~Table of Contents~~

covered by these agreements exceeds specified thresholds or if a counterparty’s credit rating has been downgraded to a predetermined rating). The Company does not anticipate nonperformance by any of these counterparties.

3M has elected to present the fair value of derivative assets and liabilities within the Company’s consolidated balance sheet on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. However, the following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties. For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period based on the 3M entity that is a party to the transactions. Derivatives not subject to master netting agreements are not eligible for net presentation. As

Table of ~~the applicable dates presented below, 0 cash collateral had been received or pledged related to these derivative instruments.~~

Contents

Offsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties

Gross Amounts not Offset in the




Consolidated Balance Sheet that are Subject


Gross Amount of

to Master Netting Agreements

Derivative Assets

Gross Amount of

Presented in the

Eligible Offsetting

Cash

Consolidated

Recognized

Collateral

Net Amount of

September 30, 2020 (Millions)

Balance Sheet

Derivative Liabilities

Received

Derivative Assets

Derivatives subject to master netting agreements

$
95

$
27

$
—

$
68

Derivatives not subject to master netting agreements

—

—

Total

$
95

$
68

December 31, 2019 (Millions)

Derivatives subject to master netting agreements

$
142

$
14

$
—

$
128

Derivatives not subject to master netting agreements

—

—

Total

$
142

$
128

Gross Amount of Derivative Assets Presented in the
Consolidated
Balance Sheet Gross Amounts not Offset in the
Consolidated Balance Sheet that are Subject to Master Netting Agreements
September 30, 2021 (Millions) Gross Amount of Eligible Offsetting
Recognized
Derivative
Liabilities Cash
Collateral
Received Net Amount of
Derivative Assets
Derivatives subject to master netting agreements $ 84 $ 20 $ — $ 64
Derivatives not subject to master netting agreements — —
Total $ 84 $ 64

December 31, 2020 (Millions)
Derivatives subject to master netting agreements $ 44 $ 11 $ — $ 33
Derivatives not subject to master netting agreements — —
Total $ 44 $ 33

Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties

Gross Amounts not Offset in the




Consolidated Balance Sheet that are Subject


Gross Amount of

to Master Netting Agreements

Derivative Liabilities

Gross Amount of

Presented in the

Eligible Offsetting

Cash

Net Amount of

Consolidated

Recognized

Collateral

Derivative

September 30, 2020 (Millions)

Balance Sheet

Derivative Assets

Pledged

Liabilities

Derivatives subject to master netting agreements

$
46

$
27

$
—

$
19

Derivatives not subject to master netting agreements

—

—

Total

$
46

$
19

December 31, 2019 (Millions)

Derivatives subject to master netting agreements

$
20

$
14

$
—

$
6

Derivatives not subject to master netting agreements

—

—

Total

$
20

$
6

Gross Amount of
Derivative
Liabilities
Presented in the
Consolidated
Balance Sheet Gross Amounts not Offset in the
Consolidated Balance Sheet that are
Subject to Master Netting Agreements
September 30, 2021 (Millions) Gross Amount of
Eligible Offsetting
Recognized
Derivative Assets Cash
Collateral
Pledged Net Amount of
Derivative
Liabilities
Derivatives subject to master netting agreements $ 40 $ 20 $ — $ 20
Derivatives not subject to master netting agreements — —
Total $ 40 $ 20

December 31, 2020 (Millions)
Derivatives subject to master netting agreements $ 106 $ 11 $ — $ 95
Derivatives not subject to master netting agreements — —
Total $ 106 $ 95

Currency Effects

3M estimates that year-on-year foreign currency transaction effects, including hedging impacts, decreased pre-tax income by approximately ~~$15~~$36 million and $4$94 million for the three and nine months ended September 30, ~~2020,~~2021, respectively. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

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NOTE 13. Fair Value Measurements

3M follows ASC 820, Fair Value Measurements and Disclosures,, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. ~~The Company adopted ASU No. 2018-13,~~ ~~Changes to the Disclosure Requirements for Fair Value Measurement~~, as of January 1, 2020. This ASU primarily amended the disclosures around Level 3 investments, of which the Company had an immaterial amount for all periods presented. Refer to Note 1 for additional details.

In addition to the information above, refer to Note 15 in 3M’s ~~2019~~2020 Annual Report on Form 10-K for a qualitative discussion of the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis, a description of the valuation methodologies used by 3M, and categorization within the valuation framework of ASC 820.

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The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis.

Fair Value Measurements

Description

Fair Value at

Using Inputs Considered as

(Millions)

September 30, 2020

Level 1

Level 2

Level 3

Assets:

Available-for-sale:

Marketable securities:

Corporate debt securities

$
7

$
—

$
7

$
—

Commercial paper

233

—

233

—

Certificates of deposit/time deposits

47

—

47

—

U.S. treasury securities

150

150

—

—

U.S. municipal securities

37

—

—

37

Investments

5

5

—

—

Derivative instruments — assets:

Foreign currency forward/option contracts

82

—

82

—

Interest rate contracts

13

—

13

—

Liabilities:

Derivative instruments — liabilities:

Foreign currency forward/option contracts

46

—

46

—

Fair Value Measurements

Description

Fair Value at

Using Inputs Considered as

(Millions)

December 31, 2019

Level 1

Level 2

Level 3

Assets:

Available-for-sale:

Marketable securities:

Commercial paper

$
85

$
—

$
85

$
—

Certificates of deposit/time deposits

10

—

10

—

U.S. municipal securities

46

—

—

46

Investments

25

25

—

—

Derivative instruments — assets:

Foreign currency forward/option contracts

125

—

125

—

Interest rate contracts

17

—

17

—

Liabilities:

Derivative instruments — liabilities:

Foreign currency forward/option contracts

20

—

20

—


Description	Fair Value at September 30, 2021		Fair Value Measurements Using Inputs Considered as
(Millions)			Level 1		Level 2		Level 3
Assets:
Available-for-sale:
Marketable securities:
Corporate debt securities	$	—	$	—	$	—	$	—
Commercial paper	501		—		501		—
Certificates of deposit/time deposits	45		—		45		—
U.S. treasury securities	305		305		—		—
U.S. municipal securities	34		—		—		34
Derivative instruments — assets:
Foreign currency forward/option contracts	80		—		80		—
Interest rate contracts	4		—		4		—

Liabilities:
Derivative instruments — liabilities:
Foreign currency forward/option contracts	40		—		40		—


Description	Fair Value at December 31, 2020		Fair Value Measurements Using Inputs Considered as
(Millions)			Level 1		Level 2		Level 3
Assets:
Available-for-sale:
Marketable securities:
Corporate debt securities	$	7	$	—	$	7	$	—
Commercial paper	237		—		237		—
Certificates of deposit/time deposits	31		—		31		—
U.S. treasury securities	125		125		—		—
U.S. municipal securities	34		—		—		34
Derivative instruments — assets:
Foreign currency forward/option contracts	37		—		37		—
Interest rate contracts	7		—		7		—

Liabilities:
Derivative instruments — liabilities:
Foreign currency forward/option contracts	106		—		106		—

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The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the table above that used significant unobservable inputs (level 3).

Three months ended

Nine months ended

Marketable securities — certain U.S. municipal securities only

September 30,

September 30,

(Millions)

2020

2019

2020

2019

Beginning balance

$
37

$
49

$
46

$
40

Total gains or losses:

Included in earnings

0

0

0

0

Included in other comprehensive income

0

0

0

0

Purchases and issuances

0

0

10

9

Sales and settlements

0

0

(19)

0

Transfers in and/or out of level 3

0

0

0

0

Ending balance

$
37

$
49

$
37

$
49

Change in unrealized gains or losses for the period included in earnings for securities held at the end of the reporting period

—

—

—

—


Marketable securities — certain U.S. municipal securities only	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Beginning balance	$	34	$	37	$	34	$	46
Total gains or losses:
Included in earnings	—		—		—		—
Included in other comprehensive income	—		—		—		—
Purchases and issuances	—		—		—		10
Sales and settlements	—		—		—		(19)
Transfers in and/or out of level 3	—		—		—		—
Ending balance	$	34	$	37	$	34	$	37
Change in unrealized gains or losses for the period included in earnings for securities held at the end of the reporting period	—		—		—		—

In addition, the plan assets of 3M’s pension and postretirement benefit plans are measured at fair value on a recurring basis (at least annually). Refer to Note 13 in 3M’s ~~2019~~2020 Annual Report on Form 10-K.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis:

Disclosures are required for certain assets and liabilities that are measured at fair value, but are recognized and disclosed at fair value on a nonrecurring basis in periods subsequent to initial recognition. For 3M, such measurements of fair value relate primarily to indefinite-lived and long-lived asset impairments, goodwill impairments, and adjustment in carrying value of equity securities for which the measurement alternative of cost less impairment plus or minus observable price changes is used. There were no material impairments of assets or adjustments to equity securities using the measurement alternative for the three and nine months ended September 30, 2021. 3M reflected an immaterial charge related to impairment of certain indefinite-lived assets and a net charge of $22 million related to adjustment to the carrying value of equity securities using the measurement alternative during the first quarter of 2020. There were 0no material impairments of assets or adjustments to equity securities using the measurement alternative for the three months ended September 30, ~~2020 in addition to the three and nine months ended September 30, 2019.~~

2020.

Fair Value of Financial Instruments:

The Company’s financial instruments include cash and cash equivalents, marketable ~~securities, held-to-maturity debt~~ securities, accounts receivable, certain investments, accounts payable, borrowings, and derivative contracts. The fair values of cash equivalents, accounts receivable, ~~held-to-maturity debt securities,~~ accounts payable, and short-term borrowings and current portion of long-term debt approximated carrying values because of the short-term nature of these instruments. Available-for-sale marketable securities, in addition to certain derivative instruments, are recorded at fair values as indicated in the preceding disclosures. To estimate fair values (classified as level 2) for its long-term debt, the Company utilized third-party quotes, which are derived all or in part from model prices, external sources, market prices, or the third-party’s internal records. Information with respect to the carrying amounts and estimated fair values of these financial instruments follow:

September 30, 2020

December 31, 2019


Carrying

Fair

Carrying

Fair

(Millions)

Value

Value

Value

Value

Long-term debt, excluding current portion

$
18,429

$
20,794

$
17,518

$
18,475


	September 30, 2021				December 31, 2020
(Millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, excluding current portion	$	16,193	$	17,836	$	17,989	$	20,496

The fair values reflected above consider the terms of the related debt absent the impacts of derivative/hedging activity. The carrying amount of long-term debt referenced above is impacted by certain fixed-to-floating interest rate swaps that are designated as fair value hedges and by the designation of certain fixed rate Eurobond securities issued by the Company as hedging instruments of the Company’s net investment in its European subsidiaries. A number of 3M’s fixed-rate bonds were trading at a premium at September 30, ~~2020~~2021 and December 31, ~~2019~~2020 due to the lower interest rates and tighter credit spreads compared to issuance levels.

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NOTE 14. Commitments and Contingencies

Legal Proceedings:

The Company and some of its subsidiaries are involved in numerous claims and lawsuits, principally in the United States, and regulatory proceedings worldwide. These claims, lawsuits and proceedings include, but are not limited to, products liability (involving products that the Company now or formerly manufactured and sold), intellectual property, commercial, antitrust, federal False Claims Act, securities, and ~~state~~environmental laws in the United States and ~~federal environmental laws.~~other jurisdictions. Unless otherwise stated, the Company is vigorously defending all such litigation and proceedings. From time to time, the Company also receives subpoenas or requests for information from various government agencies. The Company generally responds to such subpoenas and requests in a cooperative, thorough and timely manner. These responses sometimes require time and effort and can result in considerable costs being incurred by the Company. Such subpoenas and requests can also lead to the assertion of claims or the commencement of administrative, civil or criminal legal proceedings against the Company and others, as well as to settlements. The outcomes of legal proceedings and regulatory matters are often difficult to predict. Any determination that the Company’s operations or activities are not, or were not, in compliance with applicable laws or regulations could result in the imposition of fines, civil or criminal penalties, and equitable remedies, including disgorgement, suspension or debarment or injunctive relief. Additional information about the Company’s process for disclosure and recording of liabilities and insurance receivables related to legal proceedings can be found in Note 16 “Commitments and Contingencies” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

2020.

The following sections first describe the significant legal proceedings in which the Company is involved, and then describe the liabilities and associated insurance receivables the Company has accrued relating to its significant legal proceedings.

Respirator Mask/Asbestos Litigation

As of September 30, ~~2020,~~2021, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in various courts that purport to represent approximately ~~1,884~~3,096 individual claimants, compared to approximately ~~1,727~~2,075 individual claimants with actions pending on December 31, ~~2019.~~

2020.

The vast majority of the lawsuits and claims resolved by and currently pending against the Company allege use of some of the Company’s mask and respirator products and seek damages from the Company and other defendants for alleged personal injury from workplace exposures to asbestos, silica, coal mine dust or other occupational dusts found in products manufactured by other defendants or generally in the workplace. A minority of the lawsuits and claims resolved by and currently pending against the Company generally allege personal injury from occupational exposure to asbestos from products previously manufactured by the Company, which are often unspecified, as well as products manufactured by other defendants, or occasionally at Company premises.

The Company’s current volume of new and pending matters is substantially lower than it experienced at the peak of filings in 2003. The Company expects that filing of claims by unimpaired claimants in the future will continue to be at much lower levels than in the past. Accordingly, the number of claims alleging more serious injuries, including mesothelioma, other malignancies, and black lung disease, will represent a greater percentage of total claims than in the past. Over the past twenty plus years, the Company has prevailed in 1415 of the 1516 cases tried to a jury (including the lawsuits in 2018 described below). In 2018, 3M received a jury verdict in its favor in 2 lawsuits – 1 in California state court in February and the other in Massachusetts state court in December – both involving allegations that 3M respirators were defective and failed to protect the plaintiffs against asbestos fibers. In April 2018, a jury in state court in Kentucky found 3M’s 8710 respirators failed to protect 2 coal miners from coal mine dust and awarded compensatory damages of approximately $2 million and punitive ~~damages.~~damages totaling $63 million. In August 2018, the trial court entered judgment and the Company appealed. During March and April 2019, the Company agreed in principle to settle a substantial majority of the then-pending coal mine dust lawsuits in Kentucky and West Virginia for $340 million, including the jury verdict in April 2018 in the Kentucky case mentioned above. That settlement was completed in 2019, and the appeal has been dismissed.

In October 2020, 3M defended a respirator case before a jury in King County, Washington, involving a former shipyard worker who alleged 3M’s 8710 respirator was defective and that 3M acted negligently in failing to protect him against asbestos fibers. The jury delivered a complete defense verdict in favor of 3M, concluding that the 8710 respirator was not defective in design or warnings and any conduct by 3M was not a cause of plaintiff’s mesothelioma. The plaintiff’s appeal is pending.

The Company has demonstrated in these past trial proceedings that its respiratory protection products are effective as claimed when used in the intended manner and in the intended circumstances. Consequently, the Company believes that claimants are unable to establish that their medical conditions, even if significant, are attributable to the Company’s respiratory protection

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products. Nonetheless, the Company’s litigation experience indicates that claims of persons alleging more serious injuries, including mesothelioma, other malignancies, and black lung disease, are costlier to resolve than the claims of unimpaired persons, and it

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

In addition, during the second half of 2020 and through September 30, 2021, the Company has experienced an increase in the number of cases filed that allege injuries from exposures to coal mine dust.

As previously reported, the State of West Virginia, through its Attorney General, filed a complaint in 2003 against the Company and ~~two~~2 other manufacturers of respiratory protection products in the Circuit Court of Lincoln County, West Virginia, and amended its complaint in 2005. The amended complaint seeks substantial, but unspecified, compensatory damages primarily for reimbursement of the costs allegedly incurred by the State for worker’s compensation and healthcare benefits provided to all workers with occupational pneumoconiosis and unspecified punitive damages. In October 2019, the court granted the State’s motion to sever its unfair trade practices claim. In January 2020, the manufacturers filed a petition with the West Virginia Supreme Court, challenging the trial court’s rulings; that petition was ~~heard~~denied in ~~September~~November 2020. ~~NaN~~No liability has been recorded for this matter because the Company believes that liability is not probable and reasonably estimable at this time. In addition, the Company is not able to estimate a possible loss or range of loss given the lack of any meaningful discovery responses by the State of West Virginia, the otherwise minimal activity in this case, and the assertions of claims against ~~two~~2 other manufacturers where a defendant’s share of liability may turn on the law of joint and several liability and by the amount of fault, if any, a jury may allocate to each defendant if the case were ultimately tried.

Respirator Mask/Asbestos Liabilities and Insurance Receivables

The Company regularly conducts a comprehensive legal review of its respirator mask/asbestos liabilities. The Company reviews recent and historical claims data, including without limitation, (i) the number of pending claims filed against the Company, (ii) the nature and mix of those claims (i.e., the proportion of claims asserting usage of the Company’s mask or respirator products and alleging exposure to each of asbestos, silica, coal or other occupational dusts, and claims pleading use of asbestos-containing products allegedly manufactured by the Company), (iii) the costs to defend and resolve pending claims, and (iv) trends in filing rates and in costs to defend and resolve claims, (collectively, the “Claims Data”). As part of its comprehensive legal review, the Company regularly provides the Claims Data to a third party with expertise in determining the impact of Claims Data on future filing trends and costs. The third party assists the Company in estimating the costs to defend and resolve pending and future claims. The Company uses these estimates to develop its best estimate of probable liability.

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

As a result of its review of its respirator mask/asbestos liabilities, of pending and expected lawsuits and of the cost of resolving claims of persons who claim more serious injuries, including mesothelioma, other malignancies, and black lung disease, the Company increased its accruals in the first nine months of ~~2020~~2021 for respirator mask/asbestos liabilities by ~~$23~~$80 million. In the first nine months of ~~2020,~~2021, the Company made payments for legal defense costs and settlements of ~~$45~~$87 million related to the respirator mask/asbestos litigation. ~~During~~As previously disclosed, during the first quarter of 2019, the Company recorded a pre-tax charge of $313 million in conjunction with an increase in the accrual as a result of the March and April 2019 settlements-in-principle of the coal mine dust lawsuits mentioned above and the Company’s assessment of other then current and expected coal mine dust lawsuits (including the costs to resolve all then current and expected coal mine dust lawsuits in Kentucky and West ~~Virginia)~~Virginia at the time of the charge). As of September 30, ~~2020,~~2021, the Company had an accrual for respirator mask/asbestos liabilities (excluding Aearo accruals) of ~~$586~~$655 million. This accrual represents the Company’s best estimate of probable loss and reflects an estimation period for future claims that may be filed against the Company approaching the year 2050. The Company cannot estimate the amount or upper end of the range of amounts by which the liability may exceed the accrual the Company has established because of the (i) inherent difficulty in projecting the number of claims that have not yet been asserted or the time period in which future claims may be asserted, (ii) the complaints nearly always assert claims against multiple defendants where the damages alleged are typically not attributed to individual defendants so that a defendant’s share of liability may turn on the law of joint and several liability, which can vary by state, (iii) the multiple factors described above that the Company considers in estimating its liabilities, and (iv) the several possible developments described above that may occur that could affect the Company’s estimate of liabilities.

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As of September 30, ~~2020,~~2021, the Company’s receivable for insurance recoveries related to the respirator mask/asbestos litigation was $4 million. The Company continues to seek coverage under the policies of certain insolvent and other insurers. Once those claims for coverage are resolved, the Company will have collected substantially all of its remaining insurance coverage for respirator mask/asbestos claims.

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Respirator Mask/Asbestos Litigation — Aearo Technologies

On April 1, 2008, a subsidiary of the Company acquired the stock of Aearo Holding Corp., the parent of Aearo Technologies (“Aearo”). Aearo manufactured and sold various products, including personal protection equipment, such as eye, ear, head, face, fall and certain respiratory protection products.

As of September 30, ~~2020,~~2021, Aearo and/or other companies that previously owned and operated Aearo’s respirator business (American Optical Corporation, Warner-Lambert LLC, AO Corp. and Cabot Corporation (“Cabot”)) are named defendants, with multiple co-defendants, including the Company, in numerous lawsuits in various courts in which plaintiffs allege use of mask and respirator products and seek damages from Aearo and other defendants for alleged personal injury from workplace exposures to asbestos, silica-related, coal mine dust, or other occupational dusts found in products manufactured by other defendants or generally in the workplace.

As of September 30, ~~2020,~~2021, the Company, through its Aearo subsidiary, had accruals of ~~$20~~$29 million for product liabilities and defense costs related to current and future Aearo-related asbestos, silica-related and ~~silica-related~~coal mine dust claims. This accrual represents the Company’s best estimate of ~~Aearo��s~~Aearo’s probable loss and reflects an estimation period for future claims that may be filed against Aearo approaching the year 2050. The accrual was reduced by $37 million during the second quarter of 2020 after paying Aearo’s share of certain settlements under the informal arrangement described below. The accrual reflects the Company’s assessment of pending and expected lawsuits, its review of its respirator mask/asbestos liabilities, and the cost of resolving claims of persons who claim more serious injuries. Responsibility for legal costs, as well as for settlements and judgments, is currently shared in an informal arrangement among Aearo, Cabot, American Optical Corporation and a subsidiary of Warner Lambert and their respective insurers (the “Payor Group”). Liability is allocated among the parties based on the number of years each company sold respiratory products under the “AO Safety” brand and/or owned the AO Safety Division of American Optical Corporation and the alleged years of exposure of the individual plaintiff.

Aearo’s share of the contingent liability is further limited by an agreement entered into between Aearo and Cabot on July 11, 1995. This agreement provides that, so long as Aearo pays to Cabot a quarterly fee of $100,000, Cabot will retain responsibility and liability for, and indemnify Aearo against, any product liability claims involving exposure to asbestos, silica, or silica products for respirators sold prior to July 11, 1995. Because of the difficulty in determining how long a particular respirator remains in the stream of commerce after being sold, Aearo and Cabot have applied the agreement to claims arising out of the alleged use of respirators involving exposure to asbestos, silica or silica products prior to January 1, 1997. With these arrangements in place, Aearo’s potential liability is limited to exposures alleged to have arisen from the use of respirators involving exposure to asbestos, silica, or silica products on or after January 1, 1997. To date, Aearo has elected to pay the quarterly fee. Aearo could potentially be exposed to additional claims for some part of the pre-July 11, 1995 period covered by its agreement with Cabot if Aearo elects to discontinue its participation in this arrangement, or if Cabot is no longer able to meet its obligations in these matters.

Developments may occur that could affect the estimate of Aearo’s liabilities. These developments include, but are not limited to: (i) significant changes in the number of future claims, (ii) significant changes in the average cost of resolving claims, (iii) significant changes in the legal costs of defending these claims, (iv) significant changes in the mix and nature of claims received, (v) trial and appellate outcomes, (vi) significant changes in the law and procedure applicable to these claims, (vii) significant changes in the liability allocation among the co-defendants, (viii) the financial viability of members of the Payor Group including exhaustion of available insurance coverage limits, and/or (ix) a determination that the interpretation of the contractual obligations on which Aearo has estimated its share of liability is inaccurate. The Company cannot determine the impact of these potential developments on its current estimate of Aearo’s share of liability for these existing and future claims. If any of the developments described above were to occur, the actual amount of these liabilities for existing and future claims could be significantly larger than the amount accrued.

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

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Environmental Matters and Litigation

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

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authorities around the world, and private parties in the United States and abroad. These laws and regulations provide, under certain circumstances, a basis for the remediation of contamination, for capital investment in pollution control equipment, for restoration of or compensation for damages to natural resources, and for personal injury and property damage claims. The Company has incurred, and will continue to incur, costs and capital expenditures in complying with these laws and regulations, defending personal injury and property damage claims, and modifying its business operations in light of its environmental responsibilities. In its effort to satisfy its environmental responsibilities and comply with environmental laws and regulations, the Company has established, and periodically updates, policies relating to environmental standards of performance for its operations worldwide.

Under certain environmental laws, including the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and similar state laws, the Company may be jointly and severally liable, typically with other companies, for the costs of remediation of environmental contamination at current or former facilities and at off-site locations. The Company has identified numerous locations, most of which are in the United States, at which it may have some liability. Please refer to the section entitled “Environmental Liabilities and Insurance Receivables” that follows for information on the amount of the accrual for such liabilities.

Environmental Matters

As previously reported, the Company has been voluntarily cooperating with ongoing reviews by local, state, federal (primarily the U.S. Environmental Protection Agency (EPA)), and international agencies of possible environmental and health effects of various perfluorinated compounds, including perfluorooctanoate (PFOA), perfluorooctane sulfonate (PFOS), perfluorohexane sulfonate (PFHxS), or other per- and polyfluoroalkyl substances (collectively PFAS). As a result of its phase-out decision in May 2000, the Company no longer manufactures certain PFAS compounds including PFOA, PFOS, PFHxS, and their pre-cursor compounds. The Company ceased manufacturing and using the vast majority of these compounds within approximately two years of the phase-out announcement and ceased all manufacturing and the last significant use of this chemistry by the end of 2008. The Company continues to manufacture a variety of shorter chain length PFAS compounds, including, but not limited to, pre-cursor compounds to perfluorobutane sulfonate (PFBS). These compounds are used as input materials to a variety of products, including engineered fluorinated fluids, fluoropolymers and fluorelastomers, as well as surfactants, additives, and coatings. Through its ongoing life cycle management and its raw material composition identification processes associated with the Company’s policies covering the use of all persistent and bio-accumulative materials, the Company continues to review, control or eliminate the presence of certain PFAS in purchased materials or as byproducts in some of 3M’s current fluorochemical manufacturing processes, products, and waste streams.

PFAS Regulatory Activity

Regulatory activities concerning PFAS continue in the United States, Europe and elsewhere, and before certain international bodies. These activities include gathering of exposure and use information, risk assessment, and consideration of regulatory approaches. In the European Union, where 3M has manufacturing facilities in countries such as Germany and Belgium, recent regulatory activities have included both preliminary and on-going work on various restrictions under the Regulation concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), including the restriction of PFAS in certain usages and a broader restriction of PFAS as a class. As of the ~~database~~second half of ~~studies~~2020, PFOA is subject to broad restrictions under the EU’s Persistent Organic Pollutants (POPs) Regulation. Dyneon, a 3M subsidiary that operates a facility at Gendorf, Germany, has a recycling process for a critical emulsifier from which small amounts of ~~both~~ PFOA are present after recycling, as an unintended and ~~PFOS~~unavoidable byproduct of certain earlier process steps. The recycling process removes and concentrates the PFOA for incineration in accordance with applicable waste law. With respect to the applicability of the recently enacted POPs, Dyneon proactively consulted with the relevant German regulatory authority regarding process improvements underway that are designed to ensure compliance with the PFOA limits in the recycled material. In October 2021, Dyneon also discussed with the authority technical complexities it had recently discovered in achieving PFOA reductions. The engagement is ongoing.

In addition, as previously disclosed, 3M Belgium, a subsidiary of the Company, has ~~expanded,~~been working with the Public Flemish Waste Agency (OVAM) for several years to investigate and remediate historical PFOA contaminations at and near its facility in Zwijndrecht, Antwerp, Belgium. In connection with a ring road construction project (the Oosterweel Project) in Antwerp that has involved extensive soil work, an investigative committee with judicial investigatory powers was formed in June 2021 by the Flemish Parliament to investigate PFAS found in the soil and groundwater near 3M’s Zwijndrecht facility. The Company testified at Flemish parliamentary committee hearings in June and September 2021 on PFAS-related matters. The Flemish Parliament, the Minister of the Environment, and regulatory authorities have initiated investigations and demands for

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information related to the release of PFAS from the Zwijndrecht facility. The Company is cooperating with the authorities in the investigations and information requests. Separately, as previously disclosed, the Company is aware that certain residents of Zwijndrecht have filed a criminal complaint with an Antwerp investigatory judge against 3M Belgium, alleging it had unlawfully abandoned waste in violation of its environmental care obligations. 3M Belgium has not been served with any such complaint.

In August 2021, the Flemish Government served 3M Belgium with a notice of intent to impose a safety measure (wastewater discharge stoppage) and issued an infraction report alleging permit and/or legal violations in connection with the discharge of certain specific PFAS compounds for alleged lack of specific authorization. Following discussions with the government officials, 3M Belgium implemented a focused safety measure that would allow continued production activities and plans to contest through appeal the underlying legal and factual basis for the safety measure. Separately, the permitting authority has initiated a process to tighten the wastewater discharge limits immediately, and a hearing was held on the limits and discharge permit. An adverse permit action, and an unsuccessful appeal thereof, could adversely impact the facility’s normal operations. In September 2021, the Flemish Government served 3M Belgium with a notice of intent to impose an administrative measure related to the removal and potential remediation of soil piles on 3M’s Zwijndrecht site. Also in September 2021, the Flemish Region issued a notice of default alleging violations of environmental laws and seeking PFAS-related information, indemnity and a remediation plan for soil and water impacts due to PFAS originating from the Zwijndrecht facility. In September 2021, 3M responded to the notice of default and announced a plan to invest up to 125 million euros in the next three years in actions related to the Zwijndrecht community, including support for an ongoing off-site descriptive soil investigation and appropriate soil remediation, support for local commercial farmers impacted by restrictions on sale of agricultural products, and enhancements to site discharge control technologies.

In the United States, the EPA has developed human health effects documents summarizing the available data ~~from these studies. In February 2014, the EPA initiated external peer review~~studies of ~~its draft human health effects documents for~~both PFOA and PFOS. ~~The peer review panel met in August 2014.~~ In May 2016, the EPA announced lifetime health advisory levels for PFOA and PFOS at 70 parts per trillion (ppt) (superseding the provisional levels established by the EPA in 2009 of 400 ppt for PFOA and 200 ppt for PFOS). Where PFOA and PFOS are found together, ~~EPA recommends that the concentrations be added together, and the~~EPA’s lifetime health advisory for PFOA and PFOS combined is also 70 ppt. Lifetime health advisories, which are non-enforceable and non-regulatory, provide information about concentrations of drinking water contaminants at which adverse health effects are not expected to occur over the specified exposure duration. ~~To collect~~

The U.S.Agency for Toxic Substances and Disease Registry (ATSDR) within the Department of Health and Human Services released a draft Toxicological Profile for PFAS for public review and comment in June 2018. In the draft report, ATSDR proposed draft minimal risk levels (MRLs) for PFOS, PFOA and several other PFAS. An MRL is an estimate of the daily human exposure ~~information~~to a hazardous substance that is likely to be without appreciable risk of adverse non-cancer health effects over a specified duration of exposure. MRLs establish a screening level and are not intended to define cleanup or action levels for ATSDR or other agencies. In May 2021, ATSDR released a final toxicological profile for certain PFAS that preserved the draft MRLs. Earlier, in April 2021, EPA released a final toxicity assessment for PFBS.

As periodically required under the Safe Drinking Water Act (SDWA), the EPA published onin May 2, 2012 a list of unregulated substances, including 6six PFAS chemicals, required to be monitored during the period 2013-2015 by public water system suppliers to determine the extent of their occurrence. Through January 2017, the EPA reported results for 4,920 public water supplies nationwide. Based on the 2016 lifetime health advisory, 13 public water supplies ~~exceed~~exceeded the level for PFOA and 46 ~~exceed~~exceeded the level for PFOS (unchanged from the July 2016 EPA summary). ~~A technical advisory issued by EPA in September 2016 on laboratory analysis of drinking water samples stated that 65 public water supplies had exceeded the combined level for PFOA and PFOS.~~ These results are based on 1one or more samples collected during the period 2012-2015 and do not necessarily reflect current conditions of these public water supplies. EPA reporting does not identify the sources of the PFOA and PFOS in the public water supplies.

In March 2021, EPA proposed including 29 PFAS in the fifth version of the unregulated contaminant monitoring rule. If finalized, monitoring for these additional substances will occur between 2023 and 2025.

In February 2019, the EPA issued a PFAS Action Plan that outlines short- and long-term actions the EPA plans to take to address PFAS – actions that include developing a national drinking water determination for PFOA and PFOS, strengthening enforcement authorities and evaluating cleanup approaches, nationwide drinking water monitoring for PFAS, expanding scientific knowledge for understanding and managing risk from PFAS, and developing consistent risk communication tools for communicating with other agencies and the public. With respect to PFOA and PFOS in groundwater, EPA issued interim recommendations in December 2019, providing guidance for screening levels and preliminary remediation goals for groundwater that is a current or potential drinking water source, to inform final clean-up levels of contaminated sites.

EPA has taken a number of actions to advance its PFAS Action Plan and regulatory agenda and to comply with mandatory actions required by Congress in the National Defense Authorization Act for Fiscal Year 2020. EPA announced in its Spring 2020 Regulatory Agenda, released in June 2020, that it intended to publish a notice of proposed rulemaking to designate PFOA

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and PFOS as hazardous substances under CERCLA in August 2020. In November 2020, EPA announced it was developing a new analytical method to test for PFAS in wastewater and other environmental media. In December 2020, EPA released for public comment interim guidance on destroying and disposing of certain PFAS and PFAS-containing materials. The Company submitted comments on that draft guidance document.

In March 2021, EPA published its intention to initiate a process to develop a national primary drinking water regulation for PFOA and PFOS; the process is expected to take several years and will include further analyses, scientific review and opportunities for public comment. EPA also issued an Advance Notice of Proposed Rulemaking (ANPR) in March 2021 to collect information regarding manufacturers of PFAS and the presence and treatment of PFAS in discharges from these manufacturing facilities. The Company responded to that ANPR in May 2021. EPA has also taken several actions to increase reporting and restrictions regarding PFAS under the Toxic Substances Control Act (TSCA) and the Toxics Release Inventory (TRI), which is a part of the Emergency Planning and Community Right-to-Know Act. EPA has added more than 170 PFAS to the list of substances that must be included in TRI reports as of July 2021. In June 2021, EPA published a proposed rule under TSCA that, if adopted, would require certain persons that manufacture (including import) or have manufactured PFAS in any year since 2011 to report information regarding PFAS uses, production volumes, disposal, exposures, and hazards. The Company submitted comments on the proposed rule during the public comment period, which ended in September 2021.

In October 2021, EPA released its "PFAS Strategic Roadmap: EPA's Commitments to Action 2021-2024," which presents EPA's integrated approach to PFAS, including investing in research to increase an understanding of PFAS, pursuing a comprehensive approach to proactively control PFAS exposures to humans and the environment, and broadening and accelerating the scope of clean-up of PFAS in the environment.The 2021-2024 Roadmap sets timelines by which EPA plans to take specific actions, including, among other items, publishing a national PFAS testing strategy, proposing to designate PFOA and PFOS as CERCLA hazardous substances, restricting PFAS discharges from industrial sources through Effluent Limitations Guidelines, publishing the final toxicity assessment for five additional PFAS, requiring water systems to test for 29 PFAS under the Safe Drinking Water Act, and publishing improved analytical methods in eight different environmental matrices to monitor 40 PFAS present in wastewater and stormwater discharges.

•Minnesota Department of Health in May 2017 stated that HBVs “are designed to reduce long-term health risks across the population and are based on multiple safety factors to protect the most vulnerable citizens, which makes them overprotective for most of the residents in our state.” As of 2021, the current HBVs are 35 ppt for PFOA, 15 ppt for PFOS, 47 ppt for PFHxS and 2 ppb for PFBS. In February 2018, the MDH published reports finding no unusual rates of certain cancers or adverse birth outcomes (low birth rates or premature births) among residents of Washington and Dakota Counties in Minnesota.

•California finalized drinking water standards for PFOA and PFOS in February 2020.

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

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

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

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

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

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

Some other states have also been evaluating or have taken actions relating to PFOA, PFOS and other PFAS in products such as food packaging, carpets and other products. For example, in October 2021, 2 bills were signed into law in California that prohibit the use of PFAS in children’s products and in food packaging. Additionally, in March 2021, California proposed listing PFOA and PFOS as carcinogens, and PFDA, PFHXS, PFNA, and PFUNDA as reproductive toxicants under its Proposition 65 law.

In October 2020, 3M and several other parties filed notices of appeal in the appellate division of the Superior Court of New Jersey to challenge the validity of the New Jersey PFOS and PFOA regulations. In January 2021, the appellate division of the court denied the group’s motion to stay the regulations. The parties completed briefing on the merits in October 2021. In March 2021, 3M filed a lawsuit against the New York State Department of Health, on the grounds that drinking water levels set by the agency for PFOS and PFOA should be vacated because they are arbitrary and did not comply with statutorily required processes. The court has scheduled oral argument on the merits for November 2021. In April 2021, 3M also filed a lawsuit

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against the Michigan Department of Environment, Great Lakes, and Energy (EGLE) to invalidate the drinking water standards EGLE promulgated under an accelerated timeline. EGLE moved to dismiss that lawsuit. In September 2021, the court denied EGLE’s motion in part, and the parties are proceeding to litigation on the merits of the remaining claims.

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

Litigation Related to Historical PFAS Manufacturing Operations in Alabama

As previously reported, a former employee filed a putative class action lawsuit against 3M, BFI Waste Management Systems of Alabama, and others in the Circuit Court of Morgan County, Alabama (the “St. John” case), seeking property damage from exposure to certain perfluorochemicals at or near the Company’s Decatur, Alabama, manufacturing facility. The parties have agreed to continue to stay the St. John case, pending ongoing mediation between the parties involved in this case and another case discussed below. NaN additional putative class actions filed in the same court by certain residents in the vicinity of the Decatur plant seeking relief on similar grounds (the Chandler case and the Stover case, respectively) are stayed pending the resolution of class certification issues in the St. John case. The Company is ~~continuing~~in discussions for negotiated resolutions with multiple parties regarding filed claims and pre-litigation disputes related to historical PFAS manufacturing operations in Alabama.

In June 2016, the Tennessee Riverkeeper, Inc. (Riverkeeper), a non-profit corporation, filed a lawsuit in the U.S. District Court for the Northern District of Alabama against 3M; BFI Waste Systems of Alabama; the City of Decatur, Alabama; and the Municipal Utilities Board of Decatur, Morgan County, Alabama. The complaint alleges that the defendants violated the Resource Conservation and Recovery Act in connection with the disposal of certain PFAS through their ownership and operation of their respective sites. The complaint further alleges such practices may present an imminent and substantial endangerment to health and/or the environment and that Riverkeeper has suffered and will continue to suffer irreparable harm caused by defendants’ failure to abate the endangerment unless the court grants the requested relief, including declaratory and injunctive relief. This case has been stayed, pending ongoing mediation and discussions between the parties in conjunction with the St. John case.

In October 2021, 3M reached agreements in principle to resolve litigation with the Tennessee Riverkeeper organization, as well as the plaintiffs in the St. John (including Stover, Owens, and Chandler) matters. The agreements, if finalized and approved by the court, will complement the Interim Consent Order that 3M entered with ADEM in 2020. Key provisions of these agreements include 3M’s continued environmental characterization, including sampling of environmental media, such as soil, ground water, and sediment, regarding the potential presence of PFAS at the 3M Decatur facility and legacy disposal sites, as well as supporting the execution of appropriate remedial actions. The estimate of committed actions and other costs are reflected in the Company's balance of accruals for PFAS-related "other environmental liabilities."

In October 2015, West Morgan-East Lawrence Water & Sewer Authority (Water Authority) filed an individual complaint against 3M Company, Dyneon, L.L.C, and Daikin America, Inc., in the U.S. District Court for the Northern District of Alabama. The complaint also includes representative plaintiffs who brought the complaint on behalf of themselves, and a class of all owners and possessors of property who use water provided by the Water Authority and 5 local water works to which the Water Authority supplies water. The complaint seeks compensatory and punitive damages and injunctive relief based on allegations that the defendants’ chemicals, including PFOA and PFOS from their manufacturing processes in Decatur, have contaminated the water in the Tennessee River at the water intake, and that the chemicals cannot be removed by the water treatment processes utilized by the Water Authority. In April 2019, 3M and the Water Authority settled the lawsuit for $35 million, which will fund a new water filtration system, with 3M indemnifying the Water Authority from liability resulting from the resolution of the currently pending and future lawsuits against the Water Authority alleging liability or damages related to 3M PFAS. In October 2021, with respect to the putative class claims brought by the representative plaintiffs who were supplied drinking water by the Water Authority (the “Lindsey” case), the parties reached an agreement in principle, subject to court approval, to resolve the claims for an immaterial amount.

In August 2016, a group of over 200 plaintiffs filed a putative class action against West Morgan-East Lawrence Water and Sewer Authority (Water Authority), 3M, Dyneon, Daikin, BFI, and the City of Decatur in state court in Lawrence County, Alabama (the “Billings” case). Plaintiffs are residents of Lawrence, Morgan and other counties who are or have been customers of the Water Authority. They contend defendants have released PFAS that contaminate the Tennessee River and, in turn, their drinking water, causing damage to their health and properties. In January 2017, the court in the St. John case, discussed above, stayed this litigation pending resolution of the St. John case. Plaintiffs in the Billings case have amended their complaint numerous times to add additional plaintiffs. There are now approximately 4,000 named plaintiffs.

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In January 2017, several hundred plaintiffs sued 3M, Dyneon and Daikin America in Lawrence and Morgan Counties, Alabama (the “Owens” case). The plaintiffs are owners of property, residents, and holders of property interests who receive their water from the West Morgan-East Lawrence Water and Sewer Authority (Water Authority). They assert common law claims for negligence, nuisance, trespass, wantonness and battery, and they seek injunctive relief and punitive damages. The plaintiffs contend that the defendants own and operate manufacturing and disposal facilities in Decatur that have released and continue to release PFOA, PFOS and related chemicals into the groundwater and surface water of their sites, resulting in discharges into the Tennessee River. The plaintiffs contend that, as a result of the alleged discharges, the water supplied by the Water Authority to the plaintiffs was, and is, contaminated with PFOA, PFOS and related chemicals at a level dangerous to humans. The court denied a motion by co-defendant Daikin to stay this case pending resolution of the St. John case, and the case is progressing through discovery. The parties have engaged in negotiations to resolve the litigation.

In November 2017, a putative class action (the “King” case) was filed against 3M, Dyneon, Daikin America and the West Morgan-East Lawrence Water and Sewer Authority (Water Authority) in the U.S. District Court for the Northern District of Alabama. The plaintiffs are residents of Lawrence and Morgan County, Alabama who receive their water from the Water Authority and seek injunctive relief, attorneys’ fees, compensatory and punitive damages for their alleged personal injuries. The plaintiffs contend that the defendants own and operate manufacturing and disposal facilities in Decatur, Alabama that have released and continue to release PFOA, PFOS and related chemicals into the groundwater and surface water of their sites, resulting in discharges into the Tennessee River. The plaintiffs contend that, as a result of the alleged discharges, the water supplied by the Water Authority to the plaintiffs was, and is, contaminated with PFOA, PFOS and related chemicals at a level dangerous to humans. In November 2019, the King plaintiffs amended their complaint to withdraw all class allegations. Since then, the plaintiffs have added 37 new individual plaintiffs and voluntarily dismissed 5 plaintiffs (for a total of 55 plaintiffs). The case is scheduled for trial in July 2023. Discovery in this case is proceeding.

In July 2019, 3M announced that it had initiated an investigation into the possible presence of PFAS in 3 closed municipal landfills in Decatur that accepted waste from 3M’s Decatur plant and other companies in the 1960s through the 1980s. 3M has worked with the City of Decatur and other local and state entities such as Morgan County and Decatur Utilities as it conducted its investigation. In October 2021, 3M reached a collaborative agreement with the City of Decatur, Decatur Utilities and Morgan County, subject to their final approval, under which the Company will contribute approximately $99 million and also continue to address certain PFAS-related matters in the area. The contribution relates to initiatives to improve the quality of life and overall environment in Decatur, including community redevelopment and recreation projects by the City, County and Decatur Utilities. It also includes addressing PFAS matters at the Morgan County landfill and reimbursement of costs previously incurred related to PFAS remediation. In addition to the contribution, 3M will continue to address PFAS at certain other closed municipal sites at which the Company historically disposed waste and continue environmental characterization in the area. This work will complement the Interim Consent Order that 3M entered with ADEM in 2020 and includes sampling of environmental media, such as ground water, regarding the potential presence of PFAS at the 3M Decatur facility and legacy disposal sites as well as supporting the execution of any appropriate remedial actions. The contribution and estimate of committed actions are reflected in the Company’s balance of accruals for PFAS-related "other environmental liabilities."

3M is also defending or has received notice of potential lawsuits in state and federal court brought by individual property owners who claim damages related to historical PFAS disposal at former area landfills near their properties. 3M continues to negotiate with property owners and has resolved for an immaterial amount some of the claims brought by them.

In September 2020, the City of Guin Water Works and Sewer Board (Guin WWSB) brought a lawsuit against 3M in Alabama state court alleging that PFAS contamination in the Guin water system stems from manufacturing operations at 3M’s Guin facility and disposal activity at a nearby landfill. In this same month, Guin WWSB dismissed its lawsuit without prejudice and has been working with 3M to further investigate the presence of chemicals in the area. The parties, including the City of Guin are in discussions for a negotiated resolution.

Litigation Related to Historical PFAS Manufacturing Operations in Minnesota

In July 2016, the City of Lake Elmo filed a lawsuit in the U.S. District Court for the District of Minnesota against 3M alleging that the City suffered damages from drinking water supplies contaminated with PFAS, including costs to construct alternative sources of drinking water. In April 2019, 3M and the City of Lake Elmo agreed to settle the lawsuit for less than $5 million.

State Attorneys General Litigation related to PFAS

Minnesota.In December 2010, the State of Minnesota, by its Attorney General, filed a lawsuit in Hennepin County District Court against 3M seeking damages and injunctive relief with respect to the presence of PFAS in the groundwater, surface water, fish or other aquatic life, and sediments in the state of Minnesota (the “NRD Lawsuit”). In February 2018, 3M and the State of Minnesota reached a resolution of the NRD Lawsuit. Under the terms of the settlement, 3M agreed to provide an $850

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million grant to the State for a special “3M Water Quality and Sustainability Fund.” This Fund, which is administered by the State, will enable projects that support water sustainability in the Twin Cities East Metro region, such as continued delivery of water to residents and enhancing groundwater recharge to support sustainable growth. Other purposes of the grant include habitat and recreation improvements, such as fishing piers, trails, and open space preservation. 3M recorded a pre-tax charge of $897 million, inclusive of legal fees and other related obligations, in the first quarter of 2018 associated with the resolution of this matter.

In connection with the above referenced settlement, the Minnesota Pollution Control Agency and the Department of Natural Resources, as co-trustees of the Fund, released in September 2020 a conceptual drinking water supply plan for the communities in the East Metro area, seeking public comment on 3 recommended options for utilizing the Fund. In December 2020, 3M submitted preliminary comments on the co-trustees’ draft conceptual drinking water supply plan to address legal and technical aspects of the draft plan. The Company and the State continue to discuss those aspects of the draft plan.

New York. The State of New York, by its Attorney General, has filed 4 lawsuits (in June 2018, February 2019, July 2019, and November 2019) against 3M and other defendants seeking to recover the costs incurred in responding to PFAS contamination allegedly caused by Aqueous Film Forming Foam (AFFF) manufactured by 3M and others. Each of the 4 suits was filed in Albany County Supreme Court before being removed to federal court, and each has been transferred to the multi-district litigation (MDL) proceeding for AFFF cases, which is discussed further below. The state is seeking compensatory and punitive damages, and injunctive and equitable relief in the form of a monetary fund for the State’s reasonably expected future damages, and/or requiring defendants to perform investigative and remedial work.

Ohio. In December 2018, the State of Ohio, by its Attorney General, filed a lawsuit in the Common Pleas Court of Lucas County, Ohio against 3M, Tyco Fire Products LP, Chemguard, Inc., Buckeye Fire Equipment Co., National Foam, Inc., and Angus Fire Armour Corp., seeking injunctive relief and compensatory and punitive damages for remediation costs and alleged injury to Ohio natural resources from AFFF manufacturers. This case was removed to federal court and transferred to the MDL.

New Jersey. In March 2019, the New Jersey Attorney General filed 2 actions against 3M, DuPont, and Chemours on behalf of the New Jersey Department of Environmental Protection (NJDEP), the NJDEP’s commissioner, and the New Jersey Spill Compensation Fund regarding alleged discharges at 2 DuPont facilities in Pennsville, New Jersey (Salem County) and Parlin, New Jersey (Middlesex County). 3M is included as a defendant in both cases because it allegedly supplied PFOA to DuPont for use at the facilities at issue. Both cases expressly seek to have the defendants pay all costs necessary to investigate, remediate, assess, and restore the affected natural resources of New Jersey.DuPont removed these cases to federal court. In June 2020, the court consolidated the 2 actions, along with 2 others brought by the NJDEP relating to the DuPont facilities, for case management and pretrial purposes. In August 2020, the NJDEP filed second amended complaints. 3M has moved to dismiss those complaints. Discovery is proceeding in these cases.

In May 2019, the New Jersey Attorney General and NJDEP filed a lawsuit against 3M, DuPont, and 6 other companies, alleging natural resource damages from AFFF products and seeking damages, including punitive damages, and associated fees. This case was removed to federal court and transferred to the AFFF MDL.

New Hampshire. In May 2019, the New Hampshire Attorney General filed 2 lawsuits alleging contamination of the state’s drinking water supplies and other natural resources by PFAS chemicals. The first lawsuit was filed against 3M and 7 co-defendants, alleging PFAS contamination resulting from the use of AFFF products at several sites around the state. This case was removed to federal court and transferred to the AFFF MDL. The second suit asserts PFAS contamination from non-AFFF sources and names 3M, DuPont, and Chemours as defendants. In its June 2020 ruling on defendants’ motions to dismiss, the court dismissed the state’s trespass claim, but allowed several claims to proceed. In October 2020, the state amended its complaint to add a state commission as plaintiff and make a claim related to the state’s drinking water and groundwater trust fund statute. In July 2021, the court granted defendants’ motions to dismiss these amendments. In September 2021 the state filed its second amended complaint; the case remains in early stages of litigation.

Vermont. In June 2019, the Vermont Attorney General filed 2 lawsuits alleging contamination of the state’s drinking water supplies and other natural resources by PFAS chemicals. The first lawsuit was filed against 3M and 10 co-defendants, alleging PFAS contamination resulting from the use of AFFF products at several sites around the state. This case was removed to federal court and transferred to the AFFF MDL. The second suit asserts PFAS contamination from non-AFFF sources and names 3M and several entities related to DuPont and Chemours as defendants. This suit is proceeding in state court. In May 2020, the court denied the defendants’ motion to dismiss, but dismissed the state’s trespass claim as to property the state does not own. The parties are now engaged in discovery and have filed a joint motion to extend discovery schedule into 2023 and the court has set a trial-ready date in October 2023.

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Michigan. In January 2020, the Michigan Attorney General filed a lawsuit in state court against 3M, Dyneon, DuPont, Chemours and others seeking injunctive and equitable relief and damages for alleged injury to Michigan public natural resources and its residents related to PFAS, excluding AFFF. The case was removed to federal court in March 2021 and subsequently transferred to the AFFF MDL. The state has filed a motion to remand the case to state court. In addition, in August 2020, the Michigan Attorney General filed 2 lawsuits against numerous AFFF manufacturers and distributors, and suppliers of PFAS to AFFF manufacturers. 3M is named a defendant in 1 of the lawsuits, filed in federal court, and the case has been transferred to the AFFF MDL, where it remains in early stages of litigation.

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

Commonwealth of Northern Mariana Islands. In December 2019, the Attorney General of the Commonwealth of Northern Mariana Islands, a U.S. territory, filed a lawsuit against 3M and other defendants relating to contamination of the territory’s drinking water supplies and other natural resources by PFAS, allegedly resulting from the use of AFFF products. This lawsuit has been removed to federal court and transferred to the AFFF MDL.

Mississippi. In December 2020, the Mississippi Attorney General filed an AFFF-related PFAS lawsuit against 3M and other defendants directly with the AFFF MDL court in South Carolina. The lawsuit alleges injuries to the State’s property and natural resources purportedly caused by PFAS contamination from AFFF use and seeks both compensatory and punitive damages.

Alaska. In April 2021, the State of Alaska filed a lawsuit against 3M and other defendants, alleging damages from the release of PFAS into the environment from a variety of products, including AFFF. This lawsuit was removed to federal court and transferred to the AFFF MDL in August 2021.

In addition to the above state attorneys general actions, several other states and the District of Columbia, through their attorneys general, have announced selection processes to retain outside law firms to bring PFSA-related lawsuits against certain manufacturers including the Company. In addition, the Company is in discussions with several state attorneys general and agencies, responding to information and other requests relating to PFAS matters and exploring potential resolution of some of the matters raised.

Aqueous Film Forming Foam (AFFF) Environmental Litigation

3M manufactured and marketed AFFF for use in firefighting at airports and military bases from approximately 1963 to 2002. As of September 30, 2021, 1,762 lawsuits (including 27 putative class actions) alleging injuries or damages by AFFF use have been filed against 3M (along with other defendants) in various state and federal courts. As further described below, a vast majority of these pending cases are in a federal Multi-District Litigation (MDL) court in South Carolina. Additional AFFF cases continue to be filed in or transferred to the MDL. The Company also continues to defend certain AFFF cases that remain in state court and be in discussions with pre-suit claimants for possible resolutions where appropriate.

In December 2018, the U.S. Judicial Panel on Multidistrict Litigation (JPML) granted motions to transfer and consolidate all AFFF cases pending in federal courts to the U.S. District Court for the District of South Carolina to be managed in an MDL proceeding to centralize pre-trial proceedings. The parties in the MDL are currently in the process of conducting discovery. An initial pool of 10 water supplier cases was selected in February 2021 for case-specific fact discovery as potential bellwether cases. In October 2021, the parties and the MDL court selected 3 of these cases for additional fact and expert discovery and for potential trial as bellwether cases. The MDL court in August 2021 issued a scheduling order and set the first bellwether cases to begin trial on or after January 1, 2023.

In June 2019, several subsidiaries of Valero Energy Corporation, an independent petroleum refiner, filed 8 AFFF cases against 3M and other defendants, including DuPont/Chemours, National Foam, Buckeye Fire Equipment, and Kidde-Fenwal, in various state courts. Plaintiffs seek damages that allegedly have been or will be incurred in investigating and remediating PFAS contamination at their properties and replacing or disposing of AFFF products containing long-chain PFAS. NaN of these cases have been removed to federal court and transferred to the AFFF MDL. NaN cases remain pending in state courts where they are in early stages of litigation, after Valero dismissed its Ohio state court action without prejudice in October 2019. The parties in the state court cases have agreed to stay all 5 cases until March 2022.

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As of September 30, 2021, the Company is aware of 6 other AFFF suits outside the MDL in which the Company has been named a defendant. Three of these cases are pending in federal court.

NaN subsidiaries of Husky Energy filed suit in April 2020 against 3M and other AFFF manufacturers in Wisconsin state court relating to alleged PFAS contamination from AFFF use at Husky facilities in Superior, Wisconsin and Lima, Ohio. The parties have entered into a tolling agreement deferring further action on the plaintiffs’ claims. The plaintiffs filed a notice of dismissal without prejudice in September 2020.

Separately, the Company is aware of pre-suit claims or demands by other parties related to the use and disposal of AFFF, one of which purports to represent a large group of firefighters. The Company had discussions with certain potential pre-suit claimants and, as a result of such discussions, reached a negotiated resolution for an immaterial amount with the City of Bemidji in March 2021.

Other PFAS-related Product and Environmental Litigation

3M manufactured and sold various products containing PFOA and PFOS, including Scotchgard, for several decades. Starting in 2017, 3M has been served with individual and putative class action complaints in various state and federal courts alleging, among other things, that 3M’s customers’ improper disposal of PFOA and PFOS resulted in the contamination of groundwater or surface water. The plaintiffs in these cases generally allege that 3M failed to warn its customers about the hazards of improper disposal of the product. They also generally allege that contaminated groundwater has caused various injuries, including personal injury, loss of use and enjoyment of their properties, diminished property values, investigation costs, and remediation costs. Several companies have been sued along with 3M, including Saint-Gobain Performance Plastics Corp., Honeywell International Inc. f/k/a Allied-Signal Inc. and/or AlliedSignal Laminate Systems, Inc., Wolverine World Wide Inc., Georgia-Pacific LLC, E.I. DuPont De Nemours and Co., Chemours Co., and various carpet manufacturers.

In New York, 3M is defending 40 individual cases and 1 putative class action filed in the U.S. District Court for the Northern District of New York and 4 additional individual cases filed in New York state court against 3M, Saint-Gobain Performance Plastics Corp. (Saint-Gobain), Honeywell International Inc. and E.I. DuPont De Nemours and Co. (DuPont). Tonaga, Inc. (Taconic) is also a defendant in the state court actions. Plaintiffs allege that PFOA discharged from fabric coating facilities operated by non-3M entities (that allegedly had used PFOA-containing materials from 3M, among others) contaminated the drinking water in the Village of Hoosick Falls, the Town of Hoosick and Petersburg, New York. They assert various tort claims for personal injury and property damage and in some cases request medical monitoring. 3M has answered the complaints in these individual cases, which are now proceeding through discovery. In the federal court individual cases, the parties selected 24 claimants in May 2021 for a pool from which 8 plaintiffs will be chosen for expert discovery and dispositive motions. At the conclusion of these motions, the court will determine which case(s) will continue toward trial. In the putative class action, certain parties, including 3M, reached an agreement to resolve litigation among the settling parties. The settlement agreement received preliminary approval from the district court in July 2021. Under the agreement, 3M, Saint-Gobain and Honeywell will collectively contribute to a fixed total amount of approximately $65 million to resolve the plaintiffs’ claims and those of the proposed classes. 3M’s contribution is not considered material 3M is also defending 12 individual cases in the U.S. District Court for the Eastern District of New York filed by Nassau and Suffolk County drinking water providers. The plaintiffs in these cases allege that products manufactured by 3M, DuPont, and additional unnamed defendants contaminated plaintiffs’ water supply sources with various PFAS compounds. DuPont’s motion to transfer these cases to the AFFF MDL was denied in March 2020. 3M has filed answers in these cases and discovery is ongoing.

In Michigan, 1 consolidated putative class action is pending in the U.S. District Court for the Western District of Michigan against 3M and Wolverine World Wide (Wolverine). The action arises from Wolverine’s allegedly improper disposal of materials and wastes, including 3M Scotchgard, related to Wolverine’s shoe manufacturing operations. Plaintiffs allege Wolverine used 3M Scotchgard in its manufacturing process and that chemicals from 3M’s product contaminated the environment and drinking water sources after disposal. In June 2021, the court partially denied the defendants' motions to dismiss, by granting the motions to dismiss the negligence claim only insofar as the plaintiffs seek damages for personal injuries, as opposed to property damage. In September 2021, the plaintiffs filed a motion to amend the complaint, including to add four new named plaintiffs and putative class representatives. 3M and Wolverine filed a motion to strike the plaintiffs’ motion for class certification and opposed plaintiffs’ motion to amend the complaint. The court has set a trial date in April 2022. In addition to the consolidated federal court putative class action, as of September 30, 2021, 3M is a defendant in approximately 280 private individual actions in Michigan state court based on similar allegations. These cases are coordinated for pre-trial purposes. NaN of these cases were selected over time for bellwether trials. In January 2020, the court issued the first round of dispositive motion rulings related to the first 2 bellwether cases, including dismissing the second bellwether case entirely and dismissing certain plaintiffs’ medical monitoring and risk of future disease claims, and granting summary judgment to the defendants on 1 plaintiff’s cholesterol injury claims. The parties settled the first bellwether case in early 2020 for an immaterial amount. In June 2020, the court denied the plaintiffs’ motion to reconsider the dismissal of the second bellwether case, and the plaintiffs have appealed the decision to the state appellate court. In January 2021, the court granted

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summary judgment in favor of the defendants in 1 of 3 remaining bellwether cases. The plaintiffs in this dismissed bellwether case have also appealed the dismissal to the state appellate court. The Company has settled both remaining bellwether cases for an immaterial amount. An additional 8 cases have been identified as a pool from which future bellwether cases will be selected. The parties have engaged in mediation efforts in the putative class action and are in discussions in certain state court mass action cases for negotiated resolutions.

Wolverine also filed a third-party complaint against 3M in a suit by the State of Michigan and intervenor townships that sought to compel Wolverine to investigate and address contamination associated with its historic disposal activity. 3M filed an answer and counterclaims to Wolverine’s third-party complaint in June 2019. In September and October 2019, the parties (including 3M as third-party defendant) engaged in mediation. In December 2019, the State of Michigan, the intervening townships, and Wolverine announced that they had tentatively resolved the State and townships’ claims against Wolverine in exchange for a $70 million payment and certain future remediation measures by Wolverine. In February 2020, the court approved a Consent Decree that memorializes Wolverine’s ongoing remediation obligations and the State’s and intervening townships’ covenants not to bring further lawsuits as to the remediated area. 3M has been formally designated as a “Contributing Party,” and as such, the State’s and townships’ covenants will also apply to 3M. In February 2020, 3M and Wolverine executed an agreement to resolve the legal claims between the 2 companies. Pursuant to the agreement, 3M made a one-time financial contribution of $55 million in March 2020 to support Wolverine’s past and ongoing efforts to address PFAS remediation under Wolverine’s Consent Decree with the State and the townships. This amount was part of 3M’s charge taken in the fourth quarter of 2019 as discussed below in the “Environmental Liabilities and Insurance Receivables” section.

3M was also a defendant, together with Georgia-Pacific as co-defendant, in a putative class action in federal court in Michigan brought by residents of Parchment, who allege that the municipal drinking water was contaminated from waste generated by a paper mill owned by Georgia-Pacific’s corporate predecessor. The defendants’ motion to dismiss certain claims in the complaint was denied in January 2021. The parties engaged in mediation and in April 2021 reached a preliminary settlement agreement, subject to court approval, under which 3M and Georgia-Pacific would jointly pay an amount and be released from plaintiffs’ putative class action claims. 3M’s portion is not considered material. The court approved the settlement in September 2021. Separately, as a result of discussions among Georgia-Pacific, 3M and municipalities near Parchment, Georgia-Pacific and 3M contributed to a fund in November 2020 to provide expanded municipal water service in the area. These municipalities released 3M from claims relating to or arising out of the extension of municipal water or the alleged PFAS contamination in the area of that extension. 3M’s portion relative to the preliminary agreement and contribution above was not material.

In Alabama and Georgia, 3M, together with multiple co-defendants, is defending 3 state court cases brought by municipal water utilities, relating to 3M’s sale of PFAS-containing products to carpet manufacturers in Georgia. The plaintiffs in these cases allege that the carpet manufacturers improperly discharged PFAS into the surface water and groundwater, contaminating drinking water supplies of cities located downstream along the Coosa River, including Rome, Georgia and Centre and Gadsden, Alabama. The 3 water utility cases are proceeding through discovery. Another case originally filed in Georgia state court was brought by individuals asserting PFAS contamination by the Georgia carpet manufacturers and seeking economic damages and injunctive relief on behalf of a putative class of Rome and Floyd County water subscribers. This case has been removed to federal court, where 3M filed a motion to dismiss a series of amended complaints, resulting in the dismissal of plaintiffs’ negligence claim against 3M. This case is proceeding through discovery. 3M, together with co-defendants, is also defending 2 putative class actions in federal court, where the plaintiffs seek relief on behalf of a class of individual ratepayers in Summerville, Georgia who allege their water supply was contaminated by PFAS discharged from a textile mill. In May 2021, the City of Summerville filed a motion to intervene in the lawsuit, which remains pending. 3M has moved to dismiss this case. This case remains in early stages of litigation.

In California, 3M and other defendants were named as defendants in an action brought in federal court by Golden State Water Company, alleging PFAS contamination of certain wells located in its water systems. 3M filed a motion to dismiss in November 2020 and in January 2021, the court granted defendants’ motion to dismiss the case for lack of personal jurisdiction. In February 2021, the plaintiffs voluntarily dismissed their action without prejudice and filed a new case in the AFFF MDL court. Separately, in December 2020, the Orange County Water District and 10 additional local water providers sued 3M, Decra Roofing and certain DuPont-related entities in California state court, alleging PFAS contamination of the plaintiffs’ water sources and also referring to 3M's industrial minerals facility in Corona, California as a potential source of contamination. The plaintiffs filed an amended complaint, and 3M filed a demurrer to the amended complaint in March 2021. In April 2021, the court denied 3M’s demurrer, and the case remains in early stages of litigation. In May 2021, the Orange County plaintiffs filed a second amended complaint. In June 2021, the case was removed to the U.S. District Court for the Central District of California where the plaintiffs moved to remand the case back to state court. The court granted plaintiffs’ motion to remand. 3M has appealed the remand decision to the U.S. Court of Appeals for the Ninth Circuit, which is hearing the appeal on an expedited basis, with briefing scheduled to be completed in December 2021. Pending that appeal, in September 2021, the state court ordered that discovery can proceed against 3M. In February 2021, the City of Corona and a local utility authority filed a lawsuit in California state court against 3M and other defendants, alleging PFAS contamination from 3M products generally as well as from 3M’s Corona facility and roofing granules products. Plaintiffs filed an amended complaint in June 2021. In July

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2021, the case was removed to the U.S. District Court for the Central District of California. The federal court granted plaintiffs’ motion to remand the action to state court. In October 2021, 3M filed a demurrer to the amended complaint in state court.

In Delaware, 3M, together with several co-defendants, is defending 1 putative class action brought by individuals alleging PFAS contamination of their water supply resulting from the operations of local metal plating facilities. Plaintiffs allege that 3M supplied PFAS to the metal plating facilities. DuPont, Chemours, and the metal platers have also been named as defendants. This case has been removed from state court to federal court, and plaintiffs have withdrawn its motion to remand to state court and filed an amended complaint. 3M has filed a motion to dismiss the amended complaint. In February 2021, the court raised the question whether subject matter jurisdiction under the Class Action Fairness Act was proper, issued an order requiring the parties to brief the issue and denied defendants’ motions to dismiss with leave to renew pending the court’s ruling on jurisdiction. Briefing on the jurisdictional question is complete, and oral argument was held in September 2021.

In New Jersey, 3M is a defendant in an action brought in federal court by Middlesex Water Company, alleging PFAS

contamination of its water wells. 3M’s motion to transfer the case to the AFFF MDL was denied. 3M has moved to dismiss the complaint, and discovery closed in September 2021. The parties expect to engage in mediation. In September 2020, 3M was named a defendant in a similar lawsuit brought by the Borough of Hopatcong. In December 2020, 3M filed a motion to dismiss the Hopatcong matter. In January 2021, 3M was named a defendant in another similar lawsuit brought by the Pequannock Township. In March 2021, 3M filed a motion to dismiss the Pequannock matter. 3M, together with several co-defendants, is also defending 12 cases in New Jersey federal court brought by individuals with private drinking water wells near certain DuPont and Solvay facilities that were allegedly supplied with PFAS by 3M. Plaintiffs in 7 of these cases seek medical monitoring and damages, while plaintiffs in the remaining cases seek damages for alleged personal injuries to themselves or their disabled adult children. 3M’s motion to dismiss the earliest filed case, which seeks medical monitoring, was largely denied in February 2021. 3M has filed answers in these cases, which remain in early stages of litigation and have been coordinated for discovery purposes. A similar case was filed in federal court in August 2021, but that case has not yet been coordinated with the others for discovery, and 3M has not yet answered the complaint.

In October 2018, 3M and other defendants, including DuPont and Chemours, were named in a putative class action in the U.S. District Court for the Southern District of Ohio brought by the named plaintiff, a firefighter allegedly exposed to PFAS chemicals through his use of firefighting foam, purporting to represent a putative class of all U.S. individuals with detectable levels of PFAS in their blood. The plaintiff brings claims for negligence, battery, and conspiracy and seeks injunctive relief, including an order “establishing an independent panel of scientists” to evaluate PFAS. 3M and other entities jointly filed a motion to dismiss in February 2019. In September 2019, the court denied the defendants’ motion to dismiss. In February 2020, the court denied 3M’s motion to transfer the case to the AFFF MDL. Briefing on plaintiff’s class certification motion is complete, and the court’s ruling on class certification is pending.

Other PFAS-related Matters

In July 2019, the Company received a written request from the Subcommittee on Environment of the Committee on Oversight and Reform, U.S. House of Representatives, seeking certain documents and information relating to the Company’s manufacturing and distribution of PFAS products. In September 2019, a 3M representative testified before and responded to questions from the Subcommittee on Environment with respect to PFAS and the Company’s environmental stewardship initiatives. The Company continues to cooperate with the Subcommittee.

The Company continues to make progress in its work, under the supervision of state regulators, to remediate historic disposal of PFAS-containing waste associated with manufacturing operations at its Decatur, Alabama; Cottage Grove, Minnesota; and Cordova, Illinois plants.

As previously reported, the Illinois EPA in August 2014 approved a request by the Company ~~entered into~~to establish a ~~voluntary remedial action agreement with the Alabama Department of Environmental Management (ADEM) to remediate the presence of PFAS in the soil and~~ groundwater management zone at ~~the Company’s~~

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its manufacturing facility in ~~Decatur, Alabama associated with~~Cordova, Illinois, which includes ongoing pumping of impacted site groundwater, groundwater monitoring and routine reporting of results.

In Minnesota, the historic (1978-1998) incorporation of wastewater treatment plant sludge. With ADEM’s agreement, 3M substantially completed installation of a multilayer cap on the former sludge incorporation areas. Further remediation activities, including certain on-site and off-site investigations and studies, will be conducted in accordance with the July 2020 Interim Consent Order described below in the “Other PFAS-related Matters” section.

~~The~~ Company continues to work with the Minnesota Pollution Control Agency (MPCA) pursuant to the terms of the previously disclosed May 2007 Settlement Agreement and Consent Order to address the presence of certain PFAS in the soil and groundwater at former disposal sites in Washington County, Minnesota (Oakdale and Woodbury) and at the Company’s manufacturing facility at Cottage Grove, Minnesota. Under this agreement, the Company’s principal obligations include (i) evaluating releases of certain PFAS from these sites and proposing response actions; (ii) providing treatment or alternative drinking water upon identifying any level exceeding a Health Based Value (HBV) or Health Risk Limit (HRL) (i.e., the amount of a chemical in drinking water determined by the Minnesota Department of Health (MDH) to be safe for human consumption over a lifetime) for certain PFAS for which a HBV and/or HRL exists as a result of contamination from these sites; (iii) remediating identified sources of other PFAS at these sites that are not controlled by actions to remediate PFOA and PFOS; and (iv) sharing information with the MPCA about certain perfluorinated compounds. During 2008, the MPCA issued

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formal decisions adopting remedial options for the former disposal sites in Washington County, Minnesota (Oakdale and Woodbury). In August 2009, the MPCA issued a formal decision adopting remedial options for the Company’s Cottage Grove manufacturing facility. During the spring and summer of 2010, 3M began implementing the agreed upon remedial options at the Cottage Grove and Woodbury sites. 3M commenced the remedial option at the Oakdale site in late 2010. At each location the remedial options were recommended by the Company and approved by the MPCA. ~~Remediation~~The Company has completed remediation work ~~has been completed~~and continues with operational and maintenance activities at the Oakdale and Woodbury ~~sites, and they are in an operational maintenance mode.~~sites. Remediation work has been substantially completed at the Cottage Grove site, with operational and maintenance activities ongoing.

In ~~August 2014, the Illinois EPA approved a request by~~Alabama, as previously reported, the Company ~~to establish~~entered into a ~~groundwater management zone at its manufacturing facility in Cordova, Illinois, which includes ongoing pumping of impacted site groundwater, groundwater monitoring and routine reporting of results.~~

~~In May 2017,~~voluntary remedial action agreement with the MDH issued new HBVs for PFOA and PFOS. The new HBVs are 35 ppt for PFOA and 27 ppt for PFOS. In connection with its announcement the MDH stated that “Drinking water with PFOA and PFOS, even at the levels above the updated values, does not represent an immediate health risk. These values are designed to reduce long-term health risks across the population and are based on multiple safety factors to protect the most vulnerable citizens, which makes them overprotective for most of the residents in our state.” In December 2017, the MDH issued a new HBV for perfluorobutane sulfonate (PFBS) of 2 parts per billion (ppb). In February 2018, the MDH published reports finding no unusual rates of certain cancers or adverse birth outcomes (low birth rates or premature births) among residents of Washington and Dakota Counties in Minnesota. In April 2019, the MDH issued a new HBV for PFOS of 15 ppt and a new HBV for PFHxS of 47 ppt.

In May 2018, the EPA announced a four-step PFAS action plan, which includes evaluating the need to set Safe Drinking Water Act maximum contaminant levels (MCLs) for PFOA and PFOS and beginning the steps necessary to designate PFOA and PFOS as “hazardous substances” under CERCLA. In November 2018, the EPA asked for public comment on draft toxicity assessments for 2 PFAS compounds, including PFBS. In February 2019, the EPA issued a PFAS Action Plan that outlines short- and long-term actions the EPA is taking to address PFAS – actions that include developing a national drinking water determination for PFOA and PFOS, strengthening enforcement authorities and evaluating cleanup approaches, nationwide drinking water monitoring for PFAS, expanding scientific knowledge for understanding and managing risk from PFAS, and developing consistent risk communication tools for communicating with other agencies and the public. With respect to groundwater contaminated with PFOA and PFOS, the EPA issued interim recommendations in December 2019, providing guidance for screening levels and preliminary remediation goals for groundwater that is a current or potential drinking water source, to inform final clean-up levels of contaminated sites. In February 2020, the EPA provided notice and requested public comment on certain preliminary determinations to regulate PFOA and PFOS under the Safe Drinking Water Act (SDWA). In June 2020, 3M submitted comments on EPA’s preliminary determinations to regulate PFOA and PFOS under the SDWA.

EPA announced in its Spring 2020 Regulatory Agenda, released in June 2020, that it intended to publish a notice of proposed rulemaking to designate PFOA and PFOS as hazardous substances under CERCLA in August 2020. EPA has not published this notice of proposed rulemaking.

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~~The U.S.Agency for Toxic Substances and Disease Registry (ATSDR) within the~~Alabama Department of Health and Human Services released a draft Toxicological Profile for PFAS for public review and comment in June 2018. In the draft report, ATSDR proposed draft minimal risk levels (MRLs) for PFOS, PFOA and several other PFAS. An MRL is an estimate of the daily human exposureEnvironmental Management (ADEM) to a hazardous substance that is likely to be without appreciable risk of adverse non-cancer health effects over a specified duration of exposure. MRLs are not intended to define cleanup or action levels for ATSDR or other agencies. In August 2018, 3M submitted comments on the ATSDR proposal, noting that there are major shortcomings with the current draft, especially with the MRLs, and that the ATSDR’s profile must reflect the best science and full weight of evidence known about these chemicals.

Several state legislatures and state agencies have been evaluating or have taken actions related to cleanup standards, groundwater values or drinking water values for PFOS, PFOA, and other PFAS, and 3M has submitted various responsive comments. In September 2019, 3M and several other parties filed a lawsuit in New Hampshire state court to enjoin PFAS regulations in New Hampshire. In November 2019, the court issued a preliminary injunction preventing the regulations from being enforced. In April 2020, the New Hampshire Supreme Court agreed to review several issues related to the preliminary injunctive order. In July 2020, the governor signed a bill passed by the New Hampshire legislature setting the same drinking water standards that had been enjoined by the court.

Vermont finalized drinking water standards for a combination of PFOA, PFOS and 3 other PFAS in March 2020. New Jersey finalized drinking water standards and designated PFOA and PFOS as hazardous substances in June 2020. New York established drinking water standards for PFOA and PFOS in July 2020. Michigan implemented final drinking water standards for certain PFAS, including PFOS and PFOA, in August 2020. Massachusetts published final regulations establishing a drinking water standard relating to 6 combined PFAS in October 2020. Some other states have also been evaluating or have taken actions relating to PFOA, PFOS and other PFAS in products such as food packaging, carpets and other products.

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

~~Litigation Related to Historical PFAS Manufacturing Operations in Alabama~~

As previously reported, a former employee filed a putative class action lawsuit against 3M, BFI Waste Management Systems of Alabama, and others in the Circuit Court of Morgan County, Alabama (the “St. John” case), seeking property damage from exposure to certain perfluorochemicals at or near the Company’s Decatur, Alabama, manufacturing facility. The parties have agreed to continue to stay the St. John case through December 2020, pending ongoing mediation between the parties involved in this case and another case discussed below. NaN additional putative class actions filed in the same court by certain residents in the vicinity of the Decatur plant seeking relief on similar grounds (the Chandler case and the Stover case, respectively) are stayed pending the resolution of class certification issues in the St. John case.

In October 2015, West Morgan-East Lawrence Water & Sewer Authority (Water Authority) filed an individual complaint against 3M Company, Dyneon, L.L.C, and Daikin America, Inc., in the U.S. District Court for the Northern District of Alabama. The complaint also includes representative plaintiffs who brought the complaint on behalf of themselves, and a class of all owners and possessors of property who use water provided by the Water Authority and 5 local water works to which the Water Authority supplies water (collectively, the “Water Utilities”). The complaint seeks compensatory and punitive damages and injunctive relief based on allegations that the defendants’ chemicals, including PFOA and PFOS from their manufacturing processes in Decatur, have contaminated the water in the Tennessee River at the water intake, and that the chemicals cannot be removed by the water treatment processes utilized by the Water Authority. In April 2019, 3M and the Water Authority settled the lawsuit for $35 million, which will fund a new water filtration system, with 3M indemnifying the Water Authority from liability resulting from the resolution of the currently pending and future lawsuits against the Water Authority alleging liability or damages related to 3M PFAS. The putative class claims brought by the representative plaintiffs who were supplied drinking water by the Water Authority (the “Lindsey” case) remain. The parties are in active discussions regarding a negotiated resolution, and the case is currently stayed.

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Recovery Act in connection with the disposal of certain PFAS through their ownership and operation of their respective sites. The complaint further alleges such practices may present an imminent and substantial endangerment to health and/or the environment and that Riverkeeper has suffered and will continue to suffer irreparable harm caused by defendants’ failure to abate the endangerment unless the court grants the requested relief, including declaratory and injunctive relief. This case has been stayed through December 2020, pending ongoing mediation between the parties in conjunction with the St. John case.

In November 2017, a putative class action (the “King” case) was filed against 3M, Dyneon, Daikin America and the West Morgan-East Lawrence Water and Sewer Authority (Water Authority) in the U.S. District Court for the Northern District of Alabama. The plaintiffs are residents of Lawrence and Morgan County, Alabama who receive their water from the Water Authority and seek injunctive relief, attorneys’ fees, compensatory and punitive damages for their alleged personal injuries. The plaintiffs contend that the defendants own and operate manufacturing and disposal facilities in Decatur, Alabama that have released and continue to release PFOA, PFOS and related chemicals into the groundwater and surface water of their sites, resulting in discharges into the Tennessee River. The plaintiffs contend that, as a result of the alleged discharges, the water supplied by the Water Authority to the plaintiffs was, and is, contaminated with PFOA, PFOS and related chemicals at a level dangerous to humans. In November 2019, the King plaintiffs amended their complaint to withdraw all class allegations, dismiss the Water Authority as a defendant and add 24 new individual plaintiffs (for a total of 59 plaintiffs). Discovery in this case is proceeding.

In July 2019, 3M announced that it had initiated an investigation into the possible presence of PFAS in 3 closed municipal landfills in Decatur that accepted waste from 3M’s Decatur plant and other companies in the 1960s through the 1980s. 3M is working with local and state entities as it conducts its investigation and will report the results and recommended remedial action, if any, to those entities and the public. 3M is also defending or has received notice of potential lawsuits in state and federal court brought by individual property owners who claim damages related to historical PFAS disposal at former area landfills near their properties. 3M has resolved for an immaterial amount some of the claims brought by property owners.

In September 2020, the City of Guin Water Works and Sewer Board (Guin WWSB) brought a lawsuit against 3M in Alabama state court, alleging that PFAS contamination in the Guin water system stems from manufacturing operations at 3M’s Guin facility and disposal activity at a nearby landfill. In this same month, Guin WWSB dismissed its lawsuit without prejudice and is working with 3M to further investigate the presence of chemicals in the area.

~~Litigation Related to Historical PFAS Manufacturing Operations in Minnesota~~

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~~State Attorneys General Litigation related to PFAS~~

~~Minnesota.~~~~In December 2010, the State of Minnesota, by its Attorney General, filed a lawsuit in Hennepin County District Court against 3M seeking damages and injunctive relief with respect to~~remediate the presence of PFAS in the soil and groundwater ~~surface water, fish or other aquatic life, and sediments~~at the Company’s manufacturing facility in the state of Minnesota (the “NRD Lawsuit”). In February 2018, 3M and the State of Minnesota reached a resolution of the NRD Lawsuit. Under the terms of the settlement, 3M agreed to provide an $850 million grant to the State for a special “3M Water Quality and Sustainability Fund.” This Fund, which is administered by the State, will enable projects that support water sustainability in the Twin Cities East Metro region, such as continued delivery of water to residents and enhancing groundwater recharge to support sustainable growth. Other purposes of the grant include habitat and recreation improvements, such as fishing piers, trails, and open space preservation. 3M recorded a pre-tax charge of $897 million, inclusive of legal fees and other related obligations, in the first quarter of 2018Decatur, Alabama associated with the ~~resolution~~historic (1978-1998) incorporation of ~~this matter.~~

~~In connection~~wastewater treatment plant sludge. With ADEM’s agreement, 3M substantially completed installation of a multilayer cap on the former sludge incorporation areas. Further remediation activities, including certain on-site and off-site investigations and studies, will be conducted in accordance with the ~~above referenced settlement, the Minnesota Pollution Control Agency and the Department of Natural Resources, as co-trustees of the Fund, released in September~~July 2020 ~~a conceptual drinking water supply plan for the communities in the East Metro area, seeking public comment on 3 recommended options for utilizing the Fund.~~

~~New York.~~ The State of New York, by its Attorney General, has filed 4 lawsuits (in June 2018, February 2019, July 2019, and November 2019) against 3M and other defendants seeking to recover the costs incurred in responding to PFAS contamination allegedly caused by Aqueous Film Forming Foam (AFFF) manufactured by 3M and others. Each of the 4 suits was filed in Albany County Supreme Court before being removed to federal court, and each has been transferred to the multi-district litigation (MDL) proceeding for AFFF cases, which is discussed furtherInterim Consent Order described below. The state is seeking compensatory and punitive damages, and injunctive and equitable relief in the form of a monetary fund for the State’s reasonably expected future damages, and/or requiring defendants to perform investigative and remedial work.

~~Ohio.~~ In December 2018, the State of Ohio, by its Attorney General, filed a lawsuit in the Common Pleas Court of Lucas County, Ohio against 3M, Tyco Fire Products LP, Chemguard, Inc., Buckeye Fire Equipment Co., National Foam, Inc., and Angus Fire Armour Corp., seeking injunctive relief and compensatory and punitive damages for remediation costs and alleged injury to Ohio natural resources from AFFF manufacturers. This case was removed to federal court and transferred to the MDL.

~~New Jersey.~~ In March 2019, the New Jersey Attorney General filed 2 actions against 3M, DuPont, and Chemours on behalf of the New Jersey Department of Environmental Protection (NJDEP), the NJDEP’s commissioner, and the New Jersey Spill Compensation Fund regarding alleged discharges at 2 DuPont facilities in Pennsville, New Jersey (Salem County) and Parlin, New Jersey (Middlesex County). 3M is included as a defendant in both cases because it allegedly supplied PFOA to DuPont for use at the facilities at issue. Both cases expressly seek to have the defendants pay all costs necessary to investigate, remediate, assess, and restore the affected natural resources of New Jersey.DuPont removed these cases to federal court. In August 2019, the court stayed all proceedings in these actions pending a ruling on NJDEP’s motions to remand the cases to state court. In April 2020, the federal court denied the state’s motion to remand. In June 2020, the court entered a consent order lifting the stay and consolidating the 2 actions, along with 2 others brought by the NJDEP relating to the DuPont facilities, for case management and pretrial purposes. The case is in early stages of litigation.

In May 2019, the New Jersey Attorney General and NJDEP filed a lawsuit against 3M, DuPont, and six other companies, alleging natural resource damages from AFFF products and seeking damages, including punitive damages, and associated fees. This case was removed to federal court and transferred to the AFFF MDL.

~~New Hampshire.~~ In May 2019, the New Hampshire Attorney General filed 2 lawsuits alleging contamination of the state’s drinking water supplies and other natural resources by PFAS chemicals. The first lawsuit was filed against 3M and seven co-defendants, alleging PFAS contamination resulting from the use of AFFF products at several sites around the state. This case was removed to federal court and transferred to the AFFF MDL. The second suit asserts PFAS contamination from non-AFFF sources and names 3M, DuPont, and Chemours as defendants. This suit remains in state court in early stages of litigation. In its June 2020 ruling on defendants’ motions to dismiss, the court dismissed the state’s trespass claim, but allowed several claims to proceed. In October 2020, the court allowed the state to file an amended complaint.

~~Vermont.~~ In June 2019, the Vermont Attorney General filed 2 lawsuits alleging contamination of the state’s drinking water supplies and other natural resources by PFAS chemicals. The first lawsuit was filed against 3M and ten co-defendants, alleging PFAS

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contamination resulting from the use of AFFF products at several sites around the state. This case was removed to federal court and transferred to the AFFF MDL. The second suit asserts PFAS contamination from non-AFFF sources and names 3M and several entities related to DuPont and Chemours as defendants. This suit is proceeding in state court. In May 2020, the court denied the defendants’ motion to dismiss, but dismissed the state’s trespass claim as to property the state does not own. The parties are now engaged in discovery.

~~Michigan.~~ In May 2019, the Michigan Attorney General issued a request for proposal seeking outside legal expertise in pursuing claims against manufacturers, distributors, and other parties related to PFAS. In January 2020, the Michigan Attorney General filed a lawsuit in state court against 3M, Dyneon, DuPont, Chemours and others seeking injunctive and equitable relief and damages for alleged injury to Michigan public natural resources and its residents relating to PFAS. The defendants filed motions to dismiss, and 3M’s motion was denied in August 2020. In August 2020, the Michigan Attorney General filed 2 lawsuits against numerous AFFF manufacturers and distributors, and suppliers of PFAS to AFFF manufacturers. 3M is named a defendant in 1 of the lawsuits, filed in federal court, and the case has been transferred to the AFFF MDL, where it remains in early stages of litigation.

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

~~Commonwealth of Northern Mariana Islands.~~ In December 2019, the Attorney General of the Commonwealth of Northern Mariana Islands, a U.S. territory, filed a lawsuit against 3M and other defendants relating to contamination of the territory’s drinking water supplies and other natural resources by PFAS, allegedly resulting from the use of AFFF products. This lawsuit has been removed to federal court and transferred to the AFFF MDL.

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

~~Aqueous Film Forming Foam (AFFF) Environmental Litigation~~

3M manufactured and marketed AFFF for use in firefighting at airports and military bases from approximately 1963 to 2002. As of September 30, 2020, 784 lawsuits (including 26 putative class actions) have been filed against 3M (along with other defendants) in various state and federal courts where current or former airports, military bases, or fire training facilities are or were located. As previously noted, some of these cases have been brought by state or territory attorneys general. In most of these cases, plaintiffs typically allege that certain PFAS used in AFFF contaminated the soil and groundwater where AFFF was used and seek damages for alleged injuries such as loss of use and enjoyment of properties, diminished property values, investigation costs, remediation costs, personal injury and/or funds for medical monitoring. 278 cases filed since October 2019 have been brought by current or former firefighters who claim to have suffered personal injury as a result of exposure to AFFF while using the product. The United States, the U.S. Department of Defense and several companies have been sued along with 3M, including but not limited to Ansul Co. (acquired by Tyco, Inc.), Angus Fire, Buckeye Fire Protection Co., Chemguard, Chemours, DuPont, National Foam, Inc., and United Technologies Corp.

In December 2018, the U.S. Judicial Panel on Multidistrict Litigation (JPML) granted motions to transfer and consolidate all AFFF cases pending in federal courts to the U.S. District Court for the District of South Carolina to be managed in an MDL proceeding to centralize pre-trial proceedings. Additional AFFF cases continue to be transferred into the MDL as they are filed or removed to federal court. As of September 30, 2020, there were 783 cases in the MDL, 770 of which name 3M as a defendant. The parties in the MDL are currently in the process of conducting discovery.

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As of September 30, 2020, the Company was named in 9 other AFFF lawsuits filed by plaintiffs in state courts against the Company and other defendants, including 3 cases in which the Company was served (1 in each of Arizona, ~~California~~ ~~and~~ ~~Missouri)~~.

~~Other PFAS-related Product and Environmental Litigation~~

3M manufactured and sold products containing various PFOA and PFOS, including Scotchgard, for several decades. Starting in 2017, 3M has been served with individual and putative class action complaints in various state and federal courts alleging, among other things, that 3M’s customers’ improper disposal of PFOA and PFOS resulted in the contamination of groundwater or surface water. The plaintiffs in these cases generally allege that 3M failed to warn its customers about the hazards of improper disposal of the product. They also generally allege that contaminated groundwater has caused various injuries, including personal injury, loss of use and enjoyment of their properties, diminished property values, investigation costs, and remediation costs. Several companies have been sued along with 3M, including Saint-Gobain Performance Plastics Corp., Honeywell International Inc. f/k/a Allied-Signal Inc. and/or AlliedSignal Laminate Systems, Inc., Wolverine World Wide Inc., Georgia-Pacific LLC, E.I. DuPont De Nemours and Co., Chemours Co., and various carpet manufacturers.

In New York, 3M is defending 41 individual cases and 1 putative class action filed in the U.S. District Court for the Northern District of New York and 4 additional cases filed in New York state court against 3M, Saint-Gobain Performance Plastics Corp. (Saint-Gobain), Honeywell International Inc. and E.I. DuPont De Nemours and Co. (DuPont). The plaintiffs allege that 3M manufactured and sold PFOA that was used for manufacturing purposes at Saint-Gobain’s and Honeywell’s facilities located in the Village of Hoosick Falls and the Town of Hoosick. The plaintiffs claim that the drinking water around Hoosick Falls became contaminated with unsafe levels of PFOA due to the activities of the defendants and allege that they suffered bodily injury due to the ingestion and inhalation of PFOA. The plaintiffs seek unstated compensatory, consequential, and punitive damages, as well as attorneys’ fees and costs. 3M has answered the complaints in these cases, which are now proceeding through discovery. The plaintiffs in the putative class action have moved for class certification. 3M is also defending 8 additional cases in New York filed by Nassau County drinking water providers in the U.S. District Court for the Eastern District of New York. The plaintiffs in these cases allege that 3M, DuPont, and additional unnamed defendants are responsible for the contamination of plaintiffs’ water supply sources with various PFAS compounds. DuPont’s motion to transfer these cases to the AFFF MDL was denied in March 2020. These cases are in the preliminary stages of litigation.

In Michigan, 1 consolidated putative class action is pending in the U.S. District Court for the Western District of Michigan against 3M and Wolverine World Wide (Wolverine) and other defendants. The action arises from Wolverine’s allegedly improper disposal of materials and wastes, including 3M Scotchgard, related to Wolverine’s shoe manufacturing operations. Plaintiffs allege Wolverine used 3M Scotchgard in its manufacturing process and that chemicals from 3M’s product contaminated the environment and drinking water sources after disposal. In addition to the consolidated federal court putative class action, as of September 30, 2020, 3M has been named as a defendant in approximately 270 private individual actions in Michigan state court based on similar allegations. These cases are coordinated for pre-trial purposes. NaN of these cases were selected for bellwether trials in 2020. In January 2020, the court issued the first round of dispositive motion rulings related to the first 2 bellwether cases, including dismissing the second bellwether case entirely and dismissing certain plaintiffs’ medical monitoring and risk of future disease claims, and granting summary judgment to the defendants on 1 plaintiff’s cholesterol injury claims. The parties settled the first bellwether case in early 2020. In June 2020, the court denied the plaintiffs’ motion to reconsider the dismissal of the second bellwether case, and the plaintiffs have appealed the decision to the state appellate court. The court has since allowed the addition of another bellwether case. The first of the 3 bellwether trials is scheduled to begin in March 2021. The parties have engaged in mediation discussions in both the putative class action and the state court mass action cases.

Wolverine also filed a third-party complaint against 3M in a suit by the State of Michigan and intervenor townships that seeks to compel Wolverine to investigate and address contamination associated with its historic disposal activity. 3M filed an answer and counterclaims to Wolverine’s third-party complaint in June 2019. In September and October 2019, the parties (including 3M as third-

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party defendant) engaged in mediation. In December 2019, the State of Michigan, the intervening townships, and Wolverine announced that they had tentatively resolved the State and townships’ claims against Wolverine in exchange for a $70 million payment and certain future remediation measures by Wolverine. In February 2020, the court approved a Consent Decree that memorializes Wolverine’s ongoing remediation obligations and the State’s and intervening townships’ covenants not to bring further lawsuits as to the remediated area. 3M has been formally designated as a “Contributing Party,” and as such, the State’s and townships’ covenants will also apply to 3M. In February 2020, 3M and Wolverine executed an agreement to resolve the legal claims between the 2 companies. Pursuant to the agreement, 3M made a one-time financial contribution of $55 million in March 2020 to support Wolverine’s past and ongoing efforts to address PFAS remediation under Wolverine’s Consent Decree with the State and the townships. This amount was part of 3M’s charge taken in the fourth quarter of 2019 as discussed below in the “Environmental Liabilities and Insurance Receivables” section.

3M is also a defendant, together with Georgia-Pacific as co-defendant, in a putative class action in federal court in Michigan brought by residents of Parchment, who allege that the municipal drinking water is contaminated from waste generated by a paper mill owned by Georgia-Pacific’s corporate predecessor. The defendants have moved to dismiss certain claims in the complaint, and the parties have begun discovery on the remaining claims. As a result of discussions among Georgia-Pacific, 3M and municipalities near Parchment, Georgia-Pacific and 3M have agreed to contribute to a fund of approximately $5 million to provide expanded municipal water service in the area.

In Alabama and Georgia, 3M, together with multiple co-defendants, is defending 4 state court cases, including 3 brought by municipal water utilities, relating to 3M’s sale of PFAS-containing products to carpet manufacturers in Georgia. The plaintiffs in these cases allege that the carpet manufacturers improperly discharged PFAS into the surface water and groundwater, contaminating drinking water supplies of cities located downstream along the Coosa River, including Rome, Georgia and Centre and Gadsden, Alabama. The 3 water utility cases remain in the early stages of litigation. NaN state court case was brought by individuals asserting PFAS contamination by the Georgia carpet manufacturers and seeking economic damages and injunctive relief on behalf of a putative class of Rome and Floyd County water subscribers. This case has been removed to federal court where it remains in the early stages of litigation.

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

In New Jersey, 3M is a co-defendant in an action brought in federal court by Middlesex Water Company, alleging PFAS contamination of its water wells. 3M’s motion to transfer the case to the AFFF MDL was denied. 3M has moved to dismiss the complaint, and the case is currently in discovery. In addition, 3M, together with several co-defendants, is defending a case brought in state court by multiple individuals with private drinking water wells near DuPont and Solvay facilities that were allegedly supplied with PFAS by 3M. Plaintiffs seek medical monitoring and damages. This case has been removed to federal court, and 3M has filed a motion to dismiss. 3M and other defendants are also defending 2 federal court cases brought by individuals who live near the DuPont and Solvay facilities, alleging personal injury caused by PFAS exposure. Those cases are in early stages of litigation. In September 2020, a federal court case was filed against 3M and other defendants on behalf of the Borough of Hopatcong, alleging general PFAS contamination of its public water supply.

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In West Virginia, 3M and other defendants are defending a state court action brought by Weirton Area Water Board that alleges PFAS contamination of local water supplies. This case has been removed to federal court, where 3M has moved to dismiss the case, which remains in early stages of litigation.

~~Other PFAS-related Matters~~

The Company operates under a 2009 consent order issued under the federal Toxic Substances Control Act (TSCA) (the “2009 TSCA consent order”) for the manufacture and use of 2 perfluorinated materials (FBSA and FBSEE) at its Decatur, Alabama site that does not permit release of these materials into “the waters of the United States.” In March 2019, the Company halted the manufacture, processing, and use of these materials at the site upon learning that these materials may have been released from certain specified processes at the Decatur site into the Tennessee River. In April 2019, the Company voluntarily disclosed the releases to the U.S. Environmental Protection Agency (EPA) and the Alabama Department of Environmental Management (ADEM). During June and July 2019, the Company took steps to fully control the aforementioned processes by capturing all wastewater produced by the processes and by treating all air emissions. These processes have been back on-line and in operation since July 2019. The Company continues to cooperate with the EPA and ADEM in their investigations and will work with the regulatory authorities to demonstrate compliance with the release restrictions.

The Company is authorized to discharge wastewater from its Decatur plant pursuant to the terms of a Clean Water Act National Pollutant Discharge Elimination System (NPDES) permit issued by ADEM. The NPDES permit requires the Company to report on a monthly and quarterly basis the quality and quantity of pollutants discharged to the Tennessee River. In June 2019, as previously reported, the Company voluntarily disclosed to the EPA and ADEM that it had included incorrect values in certain of its monthly and quarterly reports. The Company has submitted the corrected values to both the EPA and ADEM.

As previously reported, as part of ongoing work with the EPA and ADEM to address compliance matters at the Decatur facility, the Company discovered it had not fully characterized its PFAS discharge in its NPDES permit. In September 2019, the Company disclosed the matter to the EPA and ADEM and announced that it had elected to temporarily idle certain other manufacturing processes at 3M Decatur. The Company is reviewing its operations at the plant, has installed wastewater treatment controls and has restarted idled processes.

As a result of the Company’s discussions with ADEM to address these and other related matters in the state of Alabama, as previously reported, 3M and ADEM have agreed to the terms of an interim Consent Order in July 2020 to cover all PFAS-related wastewater discharges and air emissions from the Company’s Decatur facility. Under the interim Consent Order, the Company’s principal obligations include commitments related to (i) future ongoing site operations such as (a) providing certain notices or reports and performing various analytical and characterization studies and (b) future capital improvements; and (ii) remediation activities, including certain on-site and off-site investigations and studies. Obligations related to ongoing future site operations under the Consent Order will involve additional operating costs and capital expenditures over multiple years. The Company does not expect them to have a material impact on its consolidated results of operations or financial position. With respect to remediation activities, financial obligations related to certain activities under the Consent Order are probable and estimable, and are included in the Company’s accruals for “other environmental liabilities” as described in the “Environmental Liabilities and Insurance Receivables” section below. As offsite investigation activities continue, additional remediation amounts may become probable and reasonably estimable in the future.

As previously reported, in December 2019, the Company received a grand jury subpoena from the U.S. Attorney’s Office for the Northern District of Alabama for documents related to, among other matters, the Company’s compliance with the 2009 TSCA consent order and unpermitted discharges to the Tennessee River. The Company is cooperating with this ~~inquiry~~and other inquiries and is producing documents in response to ~~the subpoena.~~

requests.

In addition, as previously reported, as part of its ongoing evaluation of regulatory compliance at its Cordova, Illinois facility, the Company discovered it had not fully characterized its PFAS discharge in its NPDES permit for the Cordova facility. In November 2019, the Company disclosed

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this matter to the EPA, and in January 2020 disclosed this matter to the Illinois Environmental Protection Agency (IEPA). The Company continues to work with the EPA and IEPA to address these issues from the Cordova facility.

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The Company is also reviewing operations at its other plants with similar manufacturing processes, such as the plant in Cottage Grove, Minnesota, to ensure those operations are in compliance with applicable environmental regulatory requirements and Company policies and procedures. As a result of these reviews, as previously reported, the Company discovered it had not fully characterized its PFAS discharge in its NPDES permit for the Cottage Grove facility. In March 2020, the Company disclosed this matter to the Minnesota Pollution Control Agency (MPCA) and the EPA. In July 2020, the Company received an information request from MPCA for documents and information related to, among other matters, the Company’s compliance with the Clean Water Act at its Cottage Grove facility. The Company is cooperating with this inquiry and is producing documents and information in response to the request for information. The Company continues to work with the MPCA and EPA to address the discharges from the Cottage Grove facility.

Separately, as previously reported, in June 2020, the Company reported to EPA and MPCA that it had not fully complied with elements of the inspection, characterization and waste stream profile verification process of the Waste and Feedstream Analysis Plan (WAP/FAP) of its Resource Conservation and Recovery Act (RCRA) permit for its Cottage Grove incinerator. In July 2020, the Company received an information request from MPCA related to the June 2020 disclosure, to which the Company responded in September 2020. The Company continues to work with the MPCA to address WAP/FAP implementation issues disclosed in June 2020.

In January 2021, the Company received a notice of violation (NOV) from MPCA related to, among other matters, the above-described Clean Water Act and RCRA issues. The Company is cooperating with MPCA to address the issues that are the subject of the NOV.

In February 2020, as previously reported, the Company received an information request from EPA for documents and information related to, among other matters, the Company’s compliance with the Clean Water Act at its facilities that manufacture, process and use PFAS, including the Decatur, Cordova and Cottage Grove facilities. The Company is cooperating with this inquiry and is producing documents and information in response to the request for information.

The Company ~~will continue~~continues to work with relevant federal and state agencies (including EPA, the U.S. Department of Justice, state environmental agencies and ~~federal agencies~~state attorneys general) as it conducts these ~~reviews.~~reviews and responds to information, inspection and other requests from the agencies. The Company cannot predict at this time the outcomes of resolving these compliance matters, or what ~~potential~~ actions may be taken by the regulatory ~~agencies.~~

agencies or the potential consequences to the Company.

Other Environmental Litigation

In July 2018, the Company, along with more than 120 other companies, was served with a complaint seeking cost recovery and contribution towards the cleaning up of approximately 8 miles of the Lower Passaic River in New Jersey. The plaintiff, Occidental Chemical Corporation, alleges that it agreed to design and pay the estimated $165 million cost to remove and cap sediment containing 8 chemicals of concern, including PCBs and dioxins. The complaint seeks to spread those costs among the defendants, including the Company. The Company’s involvement in the case relates to its past use of 2 commercial drum conditioning facilities in New Jersey. Whether, and to what extent, the Company may be required to contribute to the costs at issue in the case remains to be determined.

For environmental matters and litigation described above, unless otherwise ~~stated, 0~~described below, no liability has been recorded as the Company believes liability in those matters is not probable and reasonably estimable and the Company is not able to estimate a possible loss or range of possible loss at this time. The Company’s environmental liabilities and insurance receivables are described below.

Environmental Liabilities and Insurance Receivables

The Company periodically examines whether the contingent liabilities related to the environmental matters and litigation described above are probable and reasonably estimable based on experience and ongoing developments in those ~~matters.~~matters, including discussions regarding negotiated resolutions. During the first nine months ~~ended September 30, 2020,~~of 2021, as a result of recent developments in ongoing environmental matters and litigation, the Company increased its accrual for PFAS-related other environmental liabilities by ~~$41~~$132 million since December 31, 2020 and made related payments of $111 million. During the first quarter of 2019, the EPA issued its PFAS Action Plan and the Company settled the litigation with the Water Authority (both matters are described in more detail above). The Company completed a comprehensive review with the assistance of environmental consultants and other experts regarding environmental matters and litigation related to historical PFAS manufacturing operations in Minnesota; Alabama; Gendorf Germany; and at 4 former landfills in Alabama. As a result of these developments and of that review, the Company increased its accrual for “other environmental liabilities” by $235 million pre-tax (including the settlement with the Water Authority) in the first quarter of 2019. During the fourth quarter of 2019, 3M updated its evaluation of certain customer-related litigation based on continued, productive settlement discussions with multiple parties. As previously disclosed, 3M has been engaged in mediation and resolution negotiations in multiple cases. In addition, during

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the fourth quarter, the Company updated its assessment of environmental matters and litigation related to its historical PFAS manufacturing operations and expanded its evaluation of other 3M sites that may have used certain PFAS-containing materials and locations at which they were disposed. As a result of these actions during the fourth quarter the Company recorded a pre-tax charge of $214$53 million. As of September 30, ~~2020,~~2021, the Company had recorded liabilities of ~~$375~~$494 million for “other environmental liabilities.” The accruals represent the Company’s best estimate of the probable ~~loss.~~loss in connection with the environmental matters and PFAS-related litigation described above. The Company is not able to estimate a possible loss or range of possible loss in excess of the established accruals at this time.

As of September 30, ~~2020,~~2021, the Company had recorded liabilities of ~~$23~~$28 million for estimated non-PFAS related “environmental remediation” costs to clean up, treat, or remove hazardous substances at current or former 3M manufacturing or third-party sites. The Company evaluates available facts with respect to each individual site each quarter and records liabilities for remediation costs on an undiscounted basis when they are probable and reasonably estimable, generally no later than the

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completion of feasibility studies or the Company’s commitment to a plan of action. Liabilities for estimated costs of environmental remediation, depending on the site, are based primarily upon internal or third-party environmental studies, and estimates as to the number, participation level and financial viability of any other potentially responsible parties, the extent of the contamination and the nature of required remedial actions. The Company adjusts recorded liabilities as further information develops or circumstances change. The Company expects that it will pay the amounts recorded over the periods of remediation for the applicable sites, currently ranging up to 20 ~~years.~~

years .

It is difficult to estimate the cost of environmental compliance and remediation given the uncertainties regarding the interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental contamination and the existence of alternative cleanup methods. Developments may occur that could affect the Company’s current assessment, including, but not limited to: (i) changes in the information available regarding the environmental impact of the Company’s operations and products; (ii) changes in environmental regulations, changes in permissible levels of specific compounds in drinking water sources, or changes in enforcement theories and policies, including efforts to recover natural resource damages; (iii) new and evolving analytical and remediation techniques; (iv) success in allocating liability to other potentially responsible parties; and (v) the financial viability of other potentially responsible parties and third-party indemnitors. For sites included in both “environmental remediation liabilities” and “other environmental liabilities,” at which remediation activity is largely complete and remaining activity relates primarily to operation and maintenance of the remedy, including required post-remediation monitoring, the Company believes the exposure to loss in excess of the amount accrued would not be material to the Company’s consolidated results of operations or financial condition. However, for locations at which remediation activity is largely ongoing, the Company cannot estimate a possible loss or range of possible loss in excess of the associated established accruals for the reasons described above.

The Company has both pre-1986 general and product liability occurrence coverage and post-1985 occurrence reported product liability and other environmental coverage for environmental matters and litigation. As of September 30, ~~2020,~~2021, the Company’s receivable for insurance recoveries related to the environmental matters and litigation was $8 million. Various factors could affect the timing and amount of recovery of this and future expected increases in the receivable, including (i) delays in or avoidance of payment by insurers; (ii) the extent to which insurers may become insolvent in the future, (iii) the outcome of negotiations with insurers, and (iv) the scope of the insurers’ purported defenses and exclusions to avoid coverage.

Product Liability Litigation

As of September 30, 2020, the Company was a named defendant in 22 lawsuits in the United States involving 25 plaintiffs and 1 Canadian putative class action with a single named plaintiff, alleging that the Bair Hugger™ patient warming system caused a surgical site infection.

As previously disclosed, 3M had been a named defendant in lawsuits in federal courts involving over 5,000 plaintiffs. The plaintiffs claim they underwent various joint arthroplasty, cardiovascular, and other surgeries and later developed surgical site infections due to the use of the Bair Hugger™ patient warming system. The plaintiffs seek damages and other relief based on theories of strict liability, negligence, breach of express and implied warranties, failure to warn, design and manufacturing defect, fraudulent and/or negligent misrepresentation/concealment, unjust enrichment, and violations of various state consumer fraud, deceptive or unlawful trade practices and/or false advertising acts.

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appealed that decision to the U.S. Court of Appeals for the Eighth Circuit. Plaintiffs have also appealed a 2018 jury verdict in favor of 3M in the first bellwether trial in the MDL and appealed the dismissal of another bellwether case.

Among the 22 remaining lawsuits in the United States, 19 are in the MDL court and 3 are in state court. The MDL court declined to remand 1 case to Oklahoma state court and has stayed all 19 remaining lawsuits pending the appeal of the summary judgment decision. In February 2020, the MDL court remanded 2 cases to state court in Jackson County, Missouri that combined Bair Hugger product liability claims with medical malpractice claims. There is also 1 case in Hidalgo County, Texas that combines Bair Hugger product liability claims with medical malpractice claims. In August 2019, the MDL court enjoined the individual plaintiff from pursuing his claims in Texas state court because he had previously filed and dismissed a claim in the MDL. That plaintiff has appealed the order to the U.S. Court of Appeals for the Eighth Circuit. The Texas state court has stayed the entire case while the appeal is pending.

As previously disclosed, 3M had been named a defendant in 61 cases in Minnesota state court. In January 2018, the Minnesota state court excluded plaintiffs’ experts and granted 3M’s motion for summary judgment on general causation. Plaintiffs appealed that ruling and the state court’s punitive damages ruling. The Minnesota Court of Appeals affirmed the Minnesota state court orders in their entirety and the Minnesota Supreme Court denied plaintiffs’ petition for review. Final dismissal was entered in April 2019, effectively ending the Minnesota state court cases.

In June 2016, the Company was served with a putative class action filed in the Ontario Superior Court of Justice for all Canadian residents who underwent various joint arthroplasty, cardiovascular, and other surgeries and later developed surgical site infections due to the use of the Bair Hugger™ patient warming system. The representative plaintiff seeks relief (including punitive damages) under Canadian law based on theories similar to those asserted in the MDL.

~~NaN liability has been recorded for the Bair Hugger™ litigation because the Company believes that any such liability is not probable and estimable at this time.~~

Aearo Technologies sold Dual-Ended Combat Arms – Version 2 earplugs starting in about 2003. 3M acquired Aearo Technologies in 2008 and sold these earplugs from 2008 through 2015, when the product was discontinued. In December 2018, a military veteran filed an individual lawsuit against 3M in the San Bernardino Superior Court in California alleging that he sustained personal injuries while serving in the military caused by 3M’s Dual-Ended Combat Arms earplugs – Version 2. The plaintiff asserts claims of product liability and fraudulent misrepresentation and concealment. The plaintiff seeks various damages, including medical and related expenses, loss of income, and punitive damages.

As of September 30, ~~2020,~~2021, the Company is a named defendant in approximately ~~3,000~~3,522 lawsuits (including 14 putative class actions) in various state and federal courts that purport to represent approximately ~~12,000~~13,437 individual claimants making similar allegations. In April 2019, the U.S. Judicial Panel on Multidistrict Litigation granted motions to transfer and consolidate all cases pending in federal courts to the U.S. District Court for the Northern District of Florida to be managed in a multi-district litigation (MDL) proceeding to centralize pre-trial proceedings. ~~Discovery is underway.~~ The plaintiffs and 3M filed preliminary summary judgment motions on the government contractor defense. In July 2020, ~~based on~~ the ~~current record, the~~MDL court granted the plaintiffs’ summary judgment motion and denied the defendants’ summary judgment motion, ruling that plaintiffs’ claims are not barred by the government contractor defense. The court denied the Company’s request to immediately certify the summary judgment ruling for appeal to the U.S. Court of Appeals for the Eleventh Circuit. In December 2020, the court granted the plaintiffs’ motion to consolidate 3 plaintiffs for the first bellwether trial, which began in March 2021.

In April 2021, 3M received an adverse jury verdict in the first bellwether trial. The jury awarded the 3 plaintiffs less than $1 million in compensatory damages and $6 million in punitive damages for a total of $7 million. 3M has appealed the verdicts, challenging, among other rulings, the MDL court's denial of 3M’s motion to assert the government contractor defense. The next 2 bellwether trials occurred in May and June of 2021. In May 2021, 3M received a verdict in its favor in the second bellwether trial, in which a jury rejected claims that 3M knowingly sold earplugs with design defects. In June 2021, 3M received an adverse verdict in the third bellwether trial. The jury found 3M liable for strict liability failure to warn, but found 3M not liable for design defect or fraud. The jury apportioned fault 62 percent to 3M and 38 percent to the plaintiff for a total damage award of approximately $1 million. 3M has appealed the verdict. In October 2021, 3M received an adverse verdict in the fourth bellwether trial, in which a jury awarded $8 million to the plaintiff. 3M plans to appeal the verdict. Separately, the

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MDL court set an accelerated trial schedule for the next 12 bellwether cases for October, November and December 2021 and January, March, April and May 2022. These trials will not include several bellwether cases that plaintiffs' counsel dismissed with prejudice either during discovery or after being set for trial. An administrative docket of approximately 260,000 unfiled and unverified claims has also been maintained at the MDL court. The MDL court in August 2021 issued transition orders requiring all claims be moved off the administrative docket to the active docket on a rolling basis over the next 12 months. The orders provide that any case not moved to the active docket will be dismissed without prejudice, and the administrative docket will then be closed. The MDL court also ordered the parties to prepare for the trial of 1,500 cases in 3 waves of 500 cases over the next 14 months. After the preparation of these cases is completed, the cases will be remanded to the federal district courts where the cases were originally filed.

3M is also defending lawsuits brought primarily by non-military plaintiffs in state court in Hennepin County, Minnesota. 3M removed these actions to federal court, and the federal court remanded them to state court in March 2020. On appeal, the U.S. Court of Appeals for the Eighth Circuit ruled in October 2021 that the cases brought by non-military plaintiffs were properly remanded to state court, whereas the cases brought by military contractor plaintiffs who had received the Combat Arms Earplugs from the military should have remained in federal court. The Eighth Circuit has not yet ruled on the appeal concerning the remand of cases brought by military plaintiffs. There are approximately 65 lawsuits involving approximately 1,100 plaintiffs pending in the state court. The state court actions are subject to a bellwether case selection process. The first ~~bellwether case is~~two trials in Hennepin County are scheduled for January and April ~~2021. NaN~~of 2022.

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

As of September 30, 2021, the Company was a named defendant in 27 lawsuits in the United States involving 34 plaintiffs and 1 Canadian putative class action with a single named plaintiff, alleging that the Bair Hugger™ patient warming system caused a surgical site infection.

The U.S. Judicial Panel on Multidistrict Litigation (JPML) consolidated all cases pending in federal courts to the U.S. District Court for the District of Minnesota to be managed in a multi-district litigation (MDL) proceeding. In July 2019, the court excluded several of the plaintiffs’ causation experts, and granted summary judgment for 3M in all cases pending at that time in the MDL. Plaintiffs have appealed that decision to the U.S. Court of Appeals for the Eighth Circuit. Plaintiffs have also appealed a 2018 jury verdict in favor of 3M in the first bellwether trial in the MDL and appealed the dismissal of another bellwether case. The Eighth Circuit court heard oral argument on all pending appeals in March 2021. A panel of the appellate court in August 2021 reversed the district court’s exclusion of the plaintiffs’ causation experts and the grant of summary judgment for 3M. The Company has sought further appellate

en banc review by the full Eighth Circuit court. Proceedings have not resumed in the MDL court. Also, in August 2021, the Eighth Circuit court separately affirmed the 2018 jury verdict in 3M’s favor in the only bellwether trial in the MDL.

Among the 29 remaining lawsuits in the United States, 26 are in the MDL court and 3 are in state court. The MDL has stayed all 26 remaining lawsuits pending the appeal of the summary judgment decision. In February 2020, the MDL court remanded 2 cases to state court in Jackson County, Missouri that combined Bair Hugger product liability claims with medical malpractice claims. The Missouri court set trial dates of September 2022 and April 2023 for these 2 cases. There is also 1 case in Hidalgo County, Texas that combines Bair Hugger product liability claims with medical malpractice claims. In August 2019, the MDL court enjoined the individual plaintiff from pursuing his claims in Texas state court because he had previously filed and dismissed a claim in the MDL. That plaintiff has appealed the order to the U.S. Court of Appeals for the Eighth Circuit, which heard oral argument on this appeal in March 2021. In May 2021, the Court of Appeals lifted the MDL court’s injunction that barred plaintiff from litigating the Texas state court case. No trial date has been set in the case.

As previously disclosed, 3M had been named a defendant in 61 cases in Minnesota state court. In January 2018, the Minnesota state court excluded plaintiffs’ experts and granted 3M’s motion for summary judgment on general causation. The Minnesota Court of Appeals affirmed the state court orders in their entirety and the Minnesota Supreme Court denied plaintiffs’ petition for review and entered the finial dismissal in 2019, effectively ending the Minnesota state court cases.

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In June 2016, the Company was served with a putative class action filed in the Ontario Superior Court of Justice for all Canadian residents who underwent various joint arthroplasty, cardiovascular, and other surgeries and later developed surgical site infections that the representative plaintiff claims was due to the use of the Bair Hugger™ patient warming system. The representative plaintiff seeks relief (including punitive damages) under Canadian law based on theories similar to those asserted in the MDL.

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

For product liability litigation matters described in this section for which a liability has been recorded, the amount recorded is not material to the Company’s consolidated results of operations or financial condition. In addition, the Company is not able to estimate a possible loss or range of possible loss in excess of the established accruals at this time.

Stockholder Litigation

~~Securities Litigation~~

In July 2019, Heavy & General Laborers’ Locals 472 & 172 Welfare Fund filed a putative securities class action against 3M Company, its former Chairman and CEO, current Chairman and CEO, and ~~current~~former CFO in the U.S. District Court for the District of New Jersey. In August 2019, an individual plaintiff filed a similar putative securities class action in the same district. Plaintiffs allege that defendants made false and misleading statements regarding 3M's exposure to liability associated with PFAS and bring claims for damages under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 against all defendants, and under Section

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20(a) of the Securities and Exchange Act of 1934 against the individual defendants. In October 2019, the court consolidated the securities class actions and appointed a group of lead plaintiffs. In January 2020, the defendants filed a motion to transfer venue to the U.S. District Court for the District of Minnesota. In August 2020, the court denied the motion to transfer venue, and in September 2020, the defendants filed a petition for writ of mandamus to the U.S. Court of Appeals for the Third Circuit. In November 2020, the federal Court of Appeals granted 3M’s petition for a writ of mandamus and directed the New Jersey federal court to transfer the action to the Minnesota federal court. The ~~suit is~~defendants filed a motion to dismiss the action in January 2021, and in September 2021, the ~~early stages of litigation.~~

Minnesota federal court granted 3M’s motion to dismiss the securities class action.

In October 2019, a ~~follow-on~~stockholder derivative lawsuit was filed in the U.S. District Court for the District of New Jersey against 3M and several of its current and former executives and directors. In November and December 2019, 2 additional derivative lawsuits were filed in a Minnesota state court. The derivative lawsuits rely on similar factual allegations as the putative securities class action discussed above. The state court plaintiffs have agreed to stay these cases pending a ruling on a motion to dismiss the securities class action. In October 2020, the derivative action pending in the U.S. District Court for the District of New Jersey was dismissed, without prejudice, for failure to serve the complaint within the required time period.

In August 2020, ~~an individual shareholder~~a stockholder who had previously submitted a books and records demand filed an additional follow-on derivative lawsuit in the U.S. District Court for the District of New Jersey against 3M and several of its current and former executives and directors. This derivative lawsuit, having been transferred to Minnesota federal court, also relies on similar factual allegations as the putative securities class action discussed above.

In February 2021, an additional stockholder derivative lawsuit was filed in the District of Minnesota, making similar factual allegations as the putative securities class action discussed above. The Minnesota federal court consolidated these federal derivative suits and stayed them pending and through any appeal of the securities class action dismissal.

Federal False Claims Act / Qui Tam Litigation

In October 2019, 3M acquired Acelity, Inc. and its KCI subsidiaries, including Kinetic Concepts, Inc. and KCI USA, Inc. As previously disclosed in the SEC filings by the KCI entities, in 2009, Kinetic Concepts, Inc. received a subpoena from the U.S. Department of Health and Human Services Office of Inspector General. In 2011, following the completion of the government’s review and its decision declining to intervene in 2 qui tam actions described further below, the qui tam relator-plaintiffs’ pleadings were unsealed.

The government inquiry followed 2 qui tam actions filed in 2008 by 2 former employees against Kinetic Concepts, Inc. and KCI USA, Inc. (collectively, the “KCI defendants”) under seal in the U.S. District Court for the Central District of California. The complaints contain allegations that the KCI Defendants violated the federal False Claims Act by submitting false or fraudulent claims to federal healthcare programs by billing for V.A.C.^®Therapy in a manner that was not consistent with the Local Coverage Determinations issued by the Durable Medical Equipment Medicare Administrative Contractors and seek monetary damages. NaN complaint (the “Godecke case”) also contains allegations that the KCI Defendants retaliated against the relator-plaintiff for alleged whistle-blowing behavior.

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In October 2016, the KCI Defendants filed counterclaims in the Godecke case, asserting breach of contract and conversion. In August 2017, the relator-plaintiff’s fraud claim in the Godecke case was dismissed in favor of the KCI defendants. In January 2018, the district court stayed the retaliation claim and the KCI Defendants' counterclaims pending the relator-plaintiff’s appeal. In September 2019, the U.S. Court of Appeals for the Ninth Circuit reversed and remanded the case to the district court for further proceedings. The Godecke case is in a pre-trial phase and, in August 2021, the district court ~~has ordered~~entered a ~~stay of the proceedings pending a further status conference in November 2020.~~discovery and pretrial schedule with an April 2022 trial date. Separately, in June 2019, ~~following discovery,~~ the district court in the second case (the “Hartpence case”) entered summary judgment in the KCI Defendants’ favor on all of the relator-plaintiff’s claims. The ~~plaintiff~~relator-plaintiff then filed an appeal in the U.S. Court of Appeals for the Ninth Circuit. Oral argument in the Hartpence case was held in July 2020. The appellate court’s opinion remains pending.

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

Compliance Matter

The Company, through its internal processes, discovered certain travel activities and related funding and record keeping issues raising concerns, arising from marketing efforts by certain business groups based in China. The Company initiated an internal investigation to determine whether the expenditures may have violated the U.S. Foreign Corrupt Practices Act (FCPA) or other potentially applicable anti-corruption laws.The Company has retained outside counsel and a forensic accounting firm to assist with the investigation. In July 2019, the Company voluntarily disclosed this investigation to both the Department of Justice and Securities and Exchange Commission and is cooperating with both agencies. The Company cannot predict at this time the outcome of its investigation or what potential actions may be taken by the Department of Justice or Securities and Exchange Commission.

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NOTE 15. Stock-Based Compensation

~~The~~

At the May 2021 Annual Meeting, the shareholders approved the Amended and Restated 3M Company 2016 Long-Term Incentive Plan ~~provides~~(LTIP), which included an increase of 26,633,508 in the number of shares available for ~~the issuance or delivery of up to 123,965,000 shares of 3M common stock pursuant to awards granted under the plan.~~issuance. Awards may be issued in the form of incentive stock options, nonqualified ~~stock options, progressive~~ stock options, stock appreciation rights, restricted stock, restricted stock units, other stock awards, and performance units and performance shares. As of September 30, ~~2020,~~2021, the remaining shares available for grant under the LTIP Program are 1637 million.

The Company’s annual stock option and restricted stock unit grant is made in February to provide a strong and immediate link between the performance of individuals during the preceding year and the size of their annual stock compensation grants. The grant to eligible employees uses the closing stock price on the grant date. Accounting rules require recognition of expense under a non-substantive vesting period approach, requiring compensation expense recognition when an employee is eligible to retire. Employees are considered eligible to retire at age 55 and after having completed ten years of service. This retiree-eligible population represents 35 percent of the annual grant stock-based compensation expense; therefore, higher stock-based compensation expense is recognized in the first quarter.

In addition to the annual grants, the Company makes other minor grants of stock options, restricted stock units and other stock-based grants. The Company issues cash settled restricted stock units and stock appreciation rights in certain countries. These grants do not result in the issuance of common stock and are considered immaterial by the Company.

Amounts recognized in the financial statements with respect to stock-based compensation programs, which include stock options, restricted stock, restricted stock units, performance shares and the General Employees’ Stock Purchase Plan (GESPP), are provided in the following table. Capitalized stock-based compensation amounts were not material for the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~

2020.

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Stock-Based Compensation Expense

Three months ended

Nine months ended

September 30,

September 30,

(Millions)

2020

2019

2020

2019

Cost of sales

$
9

$
8

$
41

$
39

Selling, general and administrative expenses

30

33

138

151

Research, development and related expenses

5

7

37

40

Stock-based compensation expenses

$
44

$
48

$
216

$
230

Income tax benefits

(13)

(12)

(67)

(120)

Stock-based compensation expenses (benefits), net of tax

$
31

$
36

$
149

$
110


	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Cost of sales	$	8	$	9	$	39	$	41
Selling, general and administrative expenses	30		30		151		138
Research, development and related expenses	5		5		37		37
Stock-based compensation expenses	$	43	$	44	$	227	$	216
Income tax benefits	(13)		(13)		(89)		(67)
Stock-based compensation expenses (benefits), net of tax	$	30	$	31	$	138	$	149

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Stock Option Program

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

Weighted

Average




Weighted

Remaining

Aggregate

Number of

Average

Contractual

Intrinsic Value

(Options in thousands)

Options

Exercise Price

Life (months)

(millions)

Under option —

January 1

33,675

$
151.15

Granted:

Annual

4,741

157.26

Other

36

155.43

Exercised

(2,132)

91.51

Forfeited

(250)

179.87

September 30

36,070

$
155.28

65

$
643

Options exercisable

September 30

28,189

$
148.59

54

$
629

2021:


(Options in thousands)	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (months)	Aggregate Intrinsic Value (millions)
Under option —
January 1	35,401	$	156.23
Granted	3,612	175.04
Exercised	(3,880)	110.14
Forfeited	(206)	179.50
September 30	34,927	$	163.16	64	$	691
Options exercisable
September 30	27,271	$	160.79	52	$	634

Stock options vest over a period from one year to three years with the expiration date at 10 years from date of grant. As of September 30, ~~2020,~~2021, there was ~~$71~~$62 million of compensation expense that has yet to be recognized related to non-vested stock option based awards. This expense is expected to be recognized over the remaining weighted-average vesting period of 21 months. The total intrinsic values of stock options exercised were ~~$160~~$306 million and ~~$368~~$160 million during the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Cash received from options exercised was ~~$193~~$425 million and ~~$304~~$193 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company’s actual tax benefits realized for the tax deductions related to the exercise of employee stock options were ~~$34~~$65 million and ~~$77~~$34 million for the nine months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively.

For the primary ~~2020~~2021 annual stock option grant, the weighted average fair value at the date of grant was calculated using the Black-Scholes option-pricing model and the assumptions that follow.

Stock Option Assumptions


	Annual 2021
Exercise price	$	175.04
Risk-free interest rate	0.8		%
Dividend yield	2.8		%
Expected volatility	22.6		%
Expected life (months)	83
Black-Scholes fair value	$	25.33

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Annual

2020

Exercise price

$
157.24

Risk-free interest rate

1.5
%
Dividend yield

2.7
%
Expected volatility

19.7
%
Expected life (months)

78

Black-Scholes fair value

$
21.58

Expected volatility is a statistical measure of the amount by which a stock price is expected to fluctuate during a period. For the ~~2020~~2021 annual grant date, the Company estimated the expected volatility based upon the following three volatilities of 3M stock: the median of the term of the expected life rolling volatility; the median of the most recent term of the expected life volatility; and the implied volatility on the grant date. The expected term assumption is based on the weighted average of historical grants.

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Restricted Stock and Restricted Stock Units

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

Weighted

Average

Number of

Grant Date

(Shares in thousands)

Shares

Fair Value

Nonvested balance —

As of January 1

1,573

$
201.11

Granted

Annual

733

157.29

Other

41

158.91

Vested

(560)

176.21

Forfeited

(52)

198.48

As of September 30

1,735

$
189.72

2021:


(Shares in thousands)	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested balance —
As of January 1	1,722	$	189.78
Granted	785	176.87
Vested	(450)	230.32
Forfeited	(68)	173.49
As of September 30	1,989	$	176.07

As of September 30, ~~2020,~~2021, there was ~~$96~~$109 million of compensation expense that has yet to be recognized related to non-vested restricted stock and restricted stock units. This expense is expected to be recognized over the remaining weighted-average vesting period of 2425 months. The total fair value of restricted stock and restricted stock units that vested during the nine months ended September 30, 2021 and 2020 ~~and 2019~~ was ~~$89~~$81 million and ~~$136~~$89 million, respectively. The Company’s actual tax benefits realized for the tax deductions related to the vesting of restricted stock and restricted stock units was ~~$17~~$15 million and ~~$26~~$17 million for the nine months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively.

Restricted stock units granted generally vest three years following the grant date assuming continued employment. Dividend equivalents equal to the dividends payable on the same number of shares of 3M common stock accrue on these restricted stock units during the vesting period, although 0no dividend equivalents are paid on any of these restricted stock units that are forfeited prior to the vesting date. Dividends are paid out in cash at the vest date on restricted stock units. Since the rights to dividends are forfeitable, there is 0no impact on basic earnings per share calculations. Weighted average restricted stock unit shares outstanding are included in the computation of diluted earnings per share.

Performance Shares

Instead of restricted stock units, the Company makes annual grants of performance shares to members of its executive management. The ~~2020~~2021 performance criteria for these performance shares (organic volume growth, return on invested capital, free cash flow conversion, and earnings per share growth) were selected because the Company believes that they are important drivers of long-term stockholder value. The number of shares of 3M common stock that could actually be delivered at the end of the three-year performance period may be anywhere from 0% to 200% of each performance share granted, depending on the performance of the Company during such performance period. When granted, these performance shares are awarded at 100% of the estimated number of shares at the end of the three-year performance period and are reflected under “Granted” in the table below. Non-substantive vesting requires that expense for the performance shares be recognized over one or three years depending on when each individual became a 3M executive. The performance share grants accrue dividends; therefore, the grant date fair value is equal to the closing stock price on the date of grant. Since the rights to dividends are forfeitable, there is no impact on basic earnings per share calculations. Weighted average performance shares whose performance period is complete are included in computation of diluted earnings per share.

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

Weighted

Average

Number of

Grant Date

(Shares in thousands)

Shares

Fair Value

Undistributed balance —

As of January 1

444

$
205.58

Granted

203

153.16

Distributed

(206)

190.84

Performance change

25

166.49

Forfeited

(43)

172.92

As of September 30

423

$
188.61

2021:


(Shares in thousands)	Number of Shares	Weighted Average Grant Date Fair Value
Undistributed balance —
As of January 1	423	$	188.61
Granted	166	176.79
Distributed	(115)	228.80
Performance change	16	180.90
Forfeited	(25)	171.17
As of September 30	465	$	175.15

As of September 30, ~~2020,~~2021, there was ~~$24~~$23 million of compensation expense that has yet to be recognized related to performance shares. This expense is expected to be recognized over the remaining weighted-average earnings period of 2018 months. The total fair value of performance shares that were distributed were ~~$35~~$22 million and ~~$45~~$35 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company’s actual tax benefits realized for the tax deductions related to the distribution of performance shares were $7$4 million and $9$7 million for the nine months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively.

NOTE 16. Business Segments

3M’s businesses are organized, managed and internally grouped into segments based on differences in markets, products, technologies and services. 3M manages its operations in 4 business segments: Safety and Industrial; Transportation and Electronics; Health Care; and Consumer. 3M’s 4 business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources. Transactions among reportable segments are recorded at cost. 3M is an integrated enterprise characterized by substantial intersegment cooperation, cost allocations and inventory transfers. Therefore, management does not represent that these segments, if operated independently, would report the ~~business segment~~ operating income information shown.

Effective in the second quarter of 2020, the measure of segment operating performance used by 3M’s chief operating decision maker (CODM) changed and, as a result, 3M’s disclosed measure of segment profit/loss (business segment operating income) has been updated for all periods presented. The change to business segment operating income aligns with the update to how the CODM assesses performance and allocates resources for the Company’s business segments.

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 (see Note 3), and divestiture-related restructuring actions (see Note 5).

Effective in the first quarter of 2021, the measure of segment operating performance used by 3M’s CODM changed and, as a result, 3M’s disclosed measure of segment profit/loss (business segment operating income) was updated. The change to business segment operating income aligns with the update to how the CODM assesses performance and allocates resources for the Company’s business segments. The change included the following:

Changes in cost attribution

The extent of allocation and method of attribution of certain net costs were updated to result in fewer items remaining in Corporate and Unallocated and, instead, including them in 3M’s business segments’ operating performance. See the updated description of Corporate and Unallocated below. Previously, a larger portion of ongoing corporate staff costs and costs associated with centrally managed material resource centers was retained in Corporate and Unallocated. In addition, portions of pension costs and costs associated with certain centrally managed but ongoing business-related legal matters, along with certain insurance-related costs, were retained in Corporate and Unallocated.

Continued alignment of customer account activity

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customers when interacting with multiple 3M businesses. This impacted the amount of dual credit certain business segments receive as a result of sales district attribution.

Also effective in the first quarter of ~~2020, in a continuing effort~~2021, within 3M’s Consumer business segment, certain safety products formerly within the Construction and Home Improvement Division and the Stationery and Office Division were moved to ~~improve~~ the ~~alignment of its businesses around customers~~newly-named Consumer Health and ~~markets,~~Safety Division (formerly the ~~Company made the following changes:~~

~~Continued alignment of customer account activity~~

●

As part of 3M’s regular customer-focus initiatives, the Company realigned certain customer account activity (“sales district”) to correlate with the primary divisional product offerings in various countries and reduce complexity for customers when interacting with multiple 3M businesses. This largely impacted the amount of dual credit certain business segments receive as a result of sales district attribution. 3M business segment reporting measures include dual credit to business segments for certain sales and operating income. This dual credit is based on which business segment provides customer account activity with respect to a particular product sold in a specific country. As a result of this change, previously reported aggregate

Consumer Health Care Division).

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

~~Additional actions impacting product line alignments~~

●

The remaining retail auto care product lines formerly in the Automotive Aftermarket Division (within the Safety and Industrial business segment), were realigned to the Construction and Home Improvement Division (within the Consumer business segment). This change resulted in a decrease of previously reported net sales and operating income for total year 2019 of $35 million and $11 million, respectively, in the Safety and Industrial business segment, ~~offset~~ ~~by a corresponding~~ ~~increase~~ ~~in net sales and operating income within the Consumer business segment.~~

●

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

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

Business Segment Information

Three months ended

Nine months ended

September 30,

September 30,

Net Sales (Millions)

2020

2019

2020

2019

Safety and Industrial

$
3,024

$
2,829

$
8,627

$
8,729

Transportation and Electronics

2,314

2,500

6,489

7,305

Health Care

2,160

1,721

6,088

5,290

Consumer

1,417

1,342

3,911

3,862

Corporate and Unallocated

—

28

(1)

98

Elimination of Dual Credit

(565)

(429)

(1,513)

(1,259)

Total Company

$
8,350

$
7,991

$
23,601

$
24,025

Operating Performance (Millions)

Safety and Industrial

$
823

$
647

$
2,185

$
1,931

Transportation and Electronics

552

637

1,416

1,747

Health Care

508

459

1,270

1,401

Consumer

358

313

914

821

Elimination of Dual Credit

(145)

(111)

(384)

(308)

Total business segment operating income

$
2,096

$
1,945

$
5,401

$
5,592

Corporate and Unallocated

Special items:

Significant litigation-related (charges)/benefits

—

—

(17)

(548)

Gain/(loss) on sale of businesses

—

106

389

114

Divestiture-related restructuring actions

—

—

(55)

—

Other corporate expense - net

(187)

(40)

(406)

(309)

Total Corporate and Unallocated

(187)

66

(89)

(743)

Total Company operating income

$
1,909

$
2,011

$
5,312

$
4,849

Other expense/(income), net

$
104

$
45

$
311

$
349

Income before income taxes

$
1,805

$
1,966

$
5,001

$
4,500


(Millions)	Three months ended September 30,				Nine months ended September 30,
Net Sales	2021		2020		2021		2020
Safety and Industrial	$	3,235	$	3,017	$	9,816	$	8,601
Transportation and Electronics	2,450		2,316		7,463		6,492
Health Care	2,249		2,160		6,775		6,087
Consumer	1,525		1,412		4,380		3,893
Corporate and Unallocated	3		(2)		2		(1)
Elimination of Dual Credit	(520)		(553)		(1,693)		(1,471)
Total Company	$	8,942	$	8,350	$	26,743	$	23,601

Operating Performance
Safety and Industrial	$	620	$	774	$	2,149	$	2,091
Transportation and Electronics	465		514		1,602		1,338
Health Care	529		493		1,614		1,246
Consumer	332		343		932		886
Elimination of Dual Credit	(131)		(142)		(428)		(374)
Total business segment operating income	1,815		1,982		5,869		5,187
Corporate and Unallocated
Special items:
Significant litigation-related (charges)/benefits	—		—		—		(17)
Gain/(loss) on sale of businesses	—		—		—		389
Divestiture-related restructuring actions	—		—		—		(55)
Other corporate expense - net	(27)		(73)		(116)		(192)
Total Corporate and Unallocated	(27)		(73)		(116)		125
Total Company operating income	1,788		1,909		5,753		5,312

Other expense/(income), net	31		83		113		248
Income before income taxes	$	1,757	$	1,826	$	5,640	$	5,064

~~Table of Contents~~

Corporate and Unallocated

Corporate and ~~unallocated~~Unallocated operating income includes ~~a variety~~“special items” and “other corporate expense-net”. Special items include significant litigation-related charges/benefits, gain/loss on sale of ~~miscellaneous~~businesses, and divestiture-related restructuring costs. Other corporate expense-net includes items such as net costs related to limited unallocated corporate ~~investment gains~~staff and ~~losses, certain derivative gains and losses, certain insurance-related gains and losses,~~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 ~~restructuring charges~~philanthropic activity, and ~~certain under- or over-absorbed~~other net costs ~~(e.g. pension, stock-based compensation)~~ that ~~the Company~~3M may choose not to allocate directly to its business ~~segments and is disclosed as “other~~segments. Other corporate expense-net”. Additionally, Corporate and Unallocated includes special items such as significant litigation-related charges/benefits, gain/loss on sale of businesses (see Note 3), and divestiture-related restructuring costs (see Note 5). Corporate and Unallocatedexpense-net 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~~Drug Delivery business following its 2020 divestiture. Items

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classified as revenue from this activity are included in Corporate and Unallocated net sales. Because ~~this category~~Corporate and Unallocated includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

Elimination of Dual Credit

3M business segment reporting measures include dual credit to business segments for certain sales and related operating income. Management evaluates each of its 4 business segments based on net sales and operating income performance, including dual credit reporting to further incentivize sales growth. As a result, 3M reflects additional (“dual”) credit to another business segment when the customer account activity (“sales district”) with respect to the particular product sold to the external customer is provided by a different business segment. This additional dual credit is largely reflected at the division level. For example, privacy screen protection products are primarily sold by the Display Materials and Systems Division within the Transportation and Electronics business segment; however, certain sales districts within the Consumer business segment provide the customer account activity for sales of the product to particular customers. In this example, the non-primary selling segment (Consumer) would also receive credit for the associated net sales initiated through its sales district and the related approximate operating income. The assigned operating income related to dual credit activity may differ from operating income that would result from actual costs associated with such sales. The offset to the dual credit business segment reporting is reflected as a reconciling item entitled “Elimination of Dual Credit,” such that sales and operating income in total are unchanged.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of 3M’s financial statements with a narrative from the perspective of management. 3M’s MD&A is presented in the following sections:

●

~~Overview~~

●

~~Results of Operations~~

●

~~Performance by Business Segment~~

●

~~Financial Condition and Liquidity~~

●

~~Cautionary Note Concerning Factors That May Affect Future Results~~

•

Overview

•Results of Operations

•Performance by Business Segment

•Financial Condition and Liquidity

•Cautionary Note Concerning Factors That May Affect Future Results

Forward-looking statements in Part I, Item 2 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to the section entitled “Cautionary Note Concerning Factors That May Affect Future Results” in Part I, Item 2 and the risk factors provided in Part II, Item 1A for discussion of these risks and uncertainties).

OVERVIEW

3M is a diversified global manufacturer, technology innovator and marketer of a wide variety of products and services. As 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, effectiveEffective in the first quarter of ~~2020,~~2021, 3M made 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).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: Safety and Industrial; Transportation and Electronics; Health Care; and Consumer. From a geographic perspective, any references to EMEA refer to Europe, Middle East and Africa on a combined basis.

Consideration of COVID-19:

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). ~~The Company updated its~~In addition, 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~~Quarterly Report on Form 10-Q. Given the ~~transmission~~diversity 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. Somebusinesses, some of the ~~above~~ factors described in that Overview—Consideration of COVID-19

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section have increased the demand for 3M products, while others have decreased demand or made it more difficult for 3M to serve customers. ~~Serving~~

Overall, 3M ~~customers is a priority~~experienced broad-based growth across all business segments and ~~teams continue to communicate with individual customers about potential disruptions.~~

geographic areas in the third quarter of 2021, benefiting from continued improvements in certain end markets including home improvement and general industrial. 3M’s total sales increased ~~4.5%~~7.1% and ~~decreased 1.8%~~increased 13.3% year-on-year in the third quarter and first nine months of ~~2020,~~2021, respectively. Organic local-currency sales increased ~~0.9%~~6.3% and ~~decreased 4.1%~~increased 11.5% year-on-year in the third quarter and first nine months of ~~2020,~~2021, respectively. 3M experienced the strongest third quarter sales growth in Consumer and Safety and Industrial. COVID-related respirator sales negatively impacted year-on-year third quarter organic-local currency sales growth by approximately 0.5 percent as they grew at a slower rate than the rest of the Company. For the first nine months of 2021, they positively impacted year-on-year organic-local currency sales growth by approximately 0.3 percent. Given the diversity of ~~3M’s~~3M's businesses, the impact of COVID-19 varied across the ~~Company in~~Company. In the ~~third quarter and~~ first

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nine months of ~~2020.~~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~~filtration while businesses aligned to ~~have impacted year-on-year organic local-currency sales growth by approximately 3 percent~~general industrial applications with strength in abrasives and ~~2 percent for the third quarter~~industrial adhesives and ~~first nine months of 2020, respectively.~~tapes. At the same time, weakness in several end markets, while improving, contributed in part to sales declines in a number of ~~3M’s~~3M's businesses ~~with the biggest year-on-year first nine months total sales decreases in~~such as 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).~~

aftermarket.

3M’s operating income margins decreased ~~2.3 and increased 2.3~~2.9 percentage points ~~year-on-year~~ in the third quarter and decreased 1.0 percentage points in the first nine months of ~~2020, respectively.~~2021 year-on-year. 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~~2.9 and ~~0.8~~increased 0.3 percentage points to ~~22.9~~20.0 and 21.5 percent ~~and 21.2 percent, respectively,~~ for the third quarter and first nine months of ~~2020~~2021, respectively, when compared ~~the same periods in 2019.~~to 2020. Various COVID-19 implications contributed in part to these ~~decreases.~~

results.

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 or referenced 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~~affected its ~~operating income~~results for ~~the~~ third quarter and first nine months 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.

charges or other impacts:

•

Increased raw materials and logistics costs from ongoing COVID-19 and Delta variant related global supply chain challenges further magnified by extreme weather events, such as February 2021 winter storm Uri in the United States.

•Period expenses of unabsorbed manufacturing costs and increased expected credit losses on customer receivables in 2020.

•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.

•Committed financial support in 2020 to various COVID-relief and medical research initiatives.

•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~~

•Cost management in discretionary spending in areas such as travel, professional services, and advertising/merchandising resulting 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 spending in 2020.

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

•Government-sponsored COVID-response stimulus and relief initiatives in 2020, including certain employee retention benefits under the Coronavirus Aid, Relief and Economic Security (CARES) Act in the United States.

•Lower incentive compensation and self-insured medical visit/insurance expense in 2020.

•Accelerated vacation usage policies 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~~which benefited the second quarter of ~~respirator production capacity. 3M continues to have access to its commercial paper program and undrawn committed credit facility.~~ 2020, but provided a penalty in the second half of 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

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million of anticipated funding of assets to expand capacity to supply N-95 respirators to the U.S. government. 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~~continues to develop and ~~evolving~~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.

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~~Earnings~~

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

The following table provides the ~~increase (decrease)~~increases (decreases) in operating income margins and diluted earnings per share for the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~

Three months ended

Nine months ended

(Earnings per diluted share)

September 30, 2020

September 30, 2020

Same period last year

$
2.72

$
6.15

Significant litigation-related charges/benefits

—

0.72

Loss on deconsolidation of Venezuelan subsidiary

—

0.28

Gain/loss on sale of businesses

(0.14)

(0.22)

Same period last year, excluding special items

$
2.58

$
6.93

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

Organic growth/productivity and other

(0.08)

(0.31)

Acquisitions/divestitures

0.01

(0.11)

Foreign exchange impacts

—

(0.13)

Income tax rate

(0.08)

(0.07)

Shares of common stock outstanding

—

0.05

Current period, excluding special items

$
2.43

$
6.36

Significant litigation-related charges/benefits

—

0.07

Gain/loss on sale of businesses

—

0.52

Divestiture-related restructuring actions

—

(0.08)

Current period

$
2.43

$
6.87

2020.


	Three months ended September 30, 2021				Nine months ended September 30, 2021
	Percent of net sales		Earnings per diluted share		Percent of net sales		Earnings per diluted share
Same period last year	22.9	%	$	2.45	22.5	%	$	6.95
Significant litigation-related charges/benefits	—		—		0.1		(0.07)
Gain/loss on sale of businesses	—		—		(1.6)		(0.52)
Divestiture-related restructuring actions	—		—		0.2		0.08
Same period last year, excluding special items	22.9	%	$	2.45	21.2	%	$	6.44
Increase/(decrease) due to:
Organic growth/productivity and other	(1.4)		(0.02)		1.3		1.19
Selling price and raw material impact	(1.3)		(0.12)		(1.0)		(0.29)
Acquisitions/divestitures	—		—		—		(0.05)
Foreign exchange impacts	(0.2)		(0.01)		—		0.20
Other expense (income), net	N/A		0.08		N/A		0.17
Income tax rate	N/A		0.09		N/A		0.22
Shares of common stock outstanding	N/A		(0.02)		N/A		(0.07)
Current period, excluding special items	20.0	%	$	2.45	21.5	%	$	7.81
None	—		—		—		—
Current period	20.0	%	$	2.45	21.5	%	$	7.81

Operating income margins decreased 2.9 percentage points in the third quarter of 2021 and decreased 1.0 percentage points for the first nine months of 2021 when compared to the same period last year. For the third quarter of ~~2020,~~2021, net income attributable to 3M was ~~$1.413~~$1.4 billion, or ~~$2.43~~$2.45 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~~which is consistent on a per diluted share basis. For the first nine months of ~~2020~~2021 net income attributable to 3M was ~~$3.995~~$4.6 billion, or ~~$6.87~~$7.81 per diluted share compared to ~~$3.601~~$4.0 billion or ~~$6.15~~$6.95 per diluted share in the same period last year, an increase of ~~11.7~~12 percent on a per diluted share basis.

The Company refers to various amounts or measures on an “adjusted basis”. These exclude special items. These non-GAAP measures are further described and reconciled to the most directly comparable GAAP financial measures in the Certain amounts adjusted for special items - (non-GAAP measures) section below.

On an adjusted basis, operating margins decreased 2.9 percentage points to 20.0 percent in the third quarter of 2021 when compared to the same period last year. For the first nine months of 2021, operating margins increased 0.3 percentage points to 21.5 percent when compared to the same period last year. On an adjusted basis for the third quarter ~~2020,~~of 2021, net income attributable to 3M was ~~$1.413~~$1.4 billion, or ~~$2.43~~$2.45 per diluted share, ~~versus $1.504 billion, or $2.58 per diluted share in the same period last~~which is consistent year ~~which was a decrease of 5.8 percent~~over year on a per diluted share basis. On an adjusted basis for the first nine months of ~~2020,~~2021 , net income attributable to 3M was ~~$3.699~~$4.6 billion, or ~~$6.36~~$7.81 per diluted share versus ~~$4.058~~$3.7 billion, or ~~$6.93~~$6.44 per diluted share for the same period last year, which was ~~a decrease~~an increase of ~~8.2~~21 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:

~~Table of Contents~~

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.

●

~~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.

•

For the third quarter of 2021, organic volume growth was more than offset by productivity penalties from global supply chain challenges, increased investments in growth and sustainability, and increased litigation-related costs resulting in decreased operating margins and earnings per diluted share year-on-year. For the first nine months of 2021, continued organic volume growth, ongoing cost management and improved productivity offset by increased

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litigation-related costs increased operating income margins and earnings per diluted share year-on-year. The following also impacted results or provide additional information:
◦Second quarter of 2021 benefit of $91 million pre-tax ($0.12 per share after tax) from a favorable Brazilian Supreme Court decision that concluded on the impact of state value-added tax when determining Brazil’s federal sales-based social tax—essentially lowering the social tax that 3M should have paid in prior periods.
◦Certain increased legal and reserve adjustments costs year-over-year. 3M regularly reviews and updates its associated liabilities and is involved in various trials and defense preparation as discussed in Note 14.
◦2021 benefit from restructuring actions taken in 2020 and positive/negative impact of year-over-year change in non-divestiture-related restructuring charges, net of adjustments, for respective periods. Note 5 provides additional information relative to restructuring actions.
◦COVID-impacts recognized on certain assets in the first quarter of 2020.
◦On a combined basis, higher defined benefit pension and postretirement service cost expense year-on-year.

Selling price and raw material impact:
•3M experienced higher raw material, logistics, and outsourced manufacturing costs from strong end-market demand and ongoing COVID-19 and Delta variant related global supply chain challenges that were further magnified by extreme weather events, such as February 2021 winter storm Uri in the U.S. These factors were partially offset by higher selling prices for both the third quarter and first nine months of 2021.

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) decreased operating income by approximately $7 million and increased operating income by approximately $132 million (or a decrease of pre-tax earnings by approximately $7 million and an increase of pre-tax earnings by $148 million) year-on-year for the third quarter and first nine months of 2021, respectively. This estimate includes the effect of translating profits from local currencies into U.S. dollars; the impact of currency fluctuations on the transfer of goods between 3M operations in the United States and abroad; and transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

Other expense (income), net:

•Higher income related to non-service cost components of pension and postretirement expense, decreased expense year-on-year for both the third quarter and first nine months of 2021.

•Interest expense (net of interest income) decreased for both the third quarter and first nine months of 2021 compared to the same periods year-on-year.

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. tax reform.~~

●

~~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 third quarter and first nine months of 2021 was 18.4 percent and 18.8 percent, respectively, a decrease from 21.5 percent and 20.1 percent compared to the same periods, respectively, in prior year.

•On an adjusted basis, the effective tax rate for the third quarter and first nine months of 2021 was 18.4 percent and 18.8 percent, respectively, a decrease of 3.1 and a decrease of 2.2 percentage points compared to the same periods year-on-year.

•The primary factor that decreased the Company’s effective tax rate was 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 for both the third quarter and first nine months of 2021.

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

In addition to reporting financial results in accordance with U.S. GAAP, the Company also provides non-GAAP measures that adjust for the impacts of special items. 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. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. The Company considers these non-GAAP

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measures in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for these items is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. The determination of these items may not be comparable to similarly titled measures used by other companies. Special items include:

Significant litigation-related charges/benefits:

●

•In the first quarter of 2020, 3M recorded a net pre-tax charge of $17 million ($13 million after tax) related to PFAS (certain perfluorinated compounds) matters. The charge was more than offset by a reduction in tax expense of $52 million related to resolution of tax treatment with authorities regarding the previously disclosed 2018 agreement reached with the State of Minnesota that resolved the Natural Resources Damages (NRD) lawsuit. 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.~~

2020, 3M recorded a net pre-tax charge of $17 million ($13 million after tax) related to PFAS (certain perfluorinated compounds) matters. The charge was more than offset by a reduction in tax expense of $52 million related to resolution of tax treatment with authorities regarding the previously disclosed 2018 agreement reached with the State of Minnesota that resolved the Natural Resources Damages (NRD) lawsuit. These items, in aggregate, resulted in a $39 million after tax benefit.

Gain/loss on 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. 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 of 2020, following the divestiture of substantially all of the drug delivery business, ~~(see Note 3)~~ management approved and committed to undertake certain restructuring actions addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business. As a result, 3M recorded a pre-tax charge of $55 million ($46 million after tax). Refer to Note 5 for further details.

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(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

Three months ended September 30, 2019 GAAP

$
2,011

25.2
%
$
1,966

$
378

19.3
%
$
1,583

$
2.72

Adjustments for special items:

Gain/loss on sale of businesses

(106)

(106)

(27)

(79)

(0.14)

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

$
1,905

23.8
%
$
1,860

$
351

19.0
%
$
1,504

$
2.58

Three months ended September 30, 2020 GAAP

$
1,909

22.9
%
$
1,805

$
387

21.4
%
$
1,413

$
2.43

(10.7)
%
Adjustments for special items:

None

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

$
1,909

22.9
%
$
1,805

$
387

21.4
%
$
1,413

$
2.43

(5.8)
%

(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

$
4,849

20.2
%
$
4,500

$
888

19.7
%
$
3,601

$
6.15

Adjustments for special items:

Significant litigation-related charges/benefits

548

548

124

424

0.72

Gain/loss on sale of businesses

(114)

(114)

15

(129)

(0.22)

Loss on deconsolidation of Venezuelan subsidiary

—

162

—

162

0.28

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

$
5,283
��
22.0
%
$
5,096

$
1,027

20.2
%
$
4,058

$
6.93

Nine months ended September 30, 2020 GAAP

$
5,312

22.5
%
$
5,001

$
1,002

20.0
%
$
3,995

$
6.87

11.7
%
Adjustments for special items:

Significant litigation-related charges/benefits

17

17

56

(39)

(0.07)

Gain/loss on sale of businesses

(389)

(389)

(86)

(303)

(0.52)

Divestiture-related restructuring actions

55

55

9

46

0.08

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

$
4,995

21.2
%
$
4,684

$
981

21.0
%
$
3,699

$
6.36

(8.2)
%


(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
Three months ended September 30, 2020 GAAP	$	1,909	22.9	%	$	1,826	$	391	21.5	%	$	1,430	$	2.45
Adjustments for special items:
None	—				—		—				—		—
Three months ended September 30, 2020 adjusted amounts (non-GAAP measures)	$	1,909	22.9	%	$	1,826	$	391	21.5	%	$	1,430	$	2.45

Three months ended September 30, 2021 GAAP	$	1,788	20.0	%	$	1,757	$	324	18.4	%	$	1,434	$	2.45	—	%
Adjustments for special items:
None	—				—		—				—		—
Three months ended September 30, 2021 adjusted amounts (non-GAAP measures)	$	1,788	20.0	%	$	1,757	$	324	18.4	%	$	1,434	$	2.45	—	%

~~Table of Contents~~


(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, 2020 GAAP	$	5,312	22.5	%	$	5,064	$	1,016	20.1	%	$	4,044	$	6.95
Adjustments for special items:
Significant litigation-related charges/benefits	17				17		56				(39)		(0.07)
Gain/loss on sale of businesses	(389)				(389)		(86)				(303)		(0.52)
Divestiture-related restructuring actions	55				55		9				46		0.08
Nine months ended September 30, 2020 adjusted amounts (non-GAAP measures)	$	4,995	21.2	%	$	4,747	$	995	21.0	%	$	3,748	$	6.44

Nine months ended September 30, 2021 GAAP	$	5,753	21.5	%	$	5,640	$	1,058	18.8	%	$	4,582	$	7.81	12	%
Adjustments for special items:
None	—				—		—				—		—
Nine months ended September 30, 2021 adjusted amounts (non-GAAP measures)	5,753		21.5	%	5,640		1,058		18.8	%	4,582		7.81		21	%

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~~2021 and ~~2019.~~2020. Refer to the section entitled “Performance by Business Segment” later in MD&A for additional discussion concerning ~~2020~~2021 versus ~~2019~~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,

2020

2019

% change


Net

Oper.

Net

Oper.

Net

Oper.

(Dollars in millions)

Sales

Income

Sales

Income

Sales

Income

Business Segments

Safety and Industrial

$
3,024

$
823

$
2,829

$
647

6.9
%

27.2
%

Transportation and Electronics

2,314

552

2,500

637

(7.4)

(13.2)

Health Care

2,160

508

1,721

459

25.5

10.6

Consumer

1,417

358

1,342

313

5.6

14.7

Corporate and Unallocated

—

(187)

28

66

—

—

Elimination of Dual Credit

(565)

(145)

(429)

(111)

—

—

Total Company

$
8,350

$
1,909

$
7,991

$
2,011

4.5
%

(5.1)
%

Nine months ended September 30,

2020

2019

% change


Net

Oper.

Net

Oper.

Net


Oper.

(Dollars in millions)

Sales

Income

Sales

Income

Sales

Income

Business Segments

Safety and Industrial

$
8,627

$
2,185

$
8,729

$
1,931

(1.2)
%

13.2
%

Transportation and Electronics

6,489

1,416

7,305

1,747

(11.2)

(18.9)

Health Care

6,088

1,270

5,290

1,401

15.1

(9.4)

Consumer

3,911

914

3,862

821

1.3

11.4

Corporate and Unallocated

(1)

(89)

98

(743)

—

—

Elimination of Dual Credit

(1,513)

(384)

(1,259)

(308)

—

—

Total Company

$
23,601

$
5,312

$
24,025

$
4,849

(1.8)
%

9.6
%

Three months ended September 30, 2020

Worldwide Sales Change

Organic local-

Total sales

By Business Segment

currency sales

Acquisitions

Divestitures

Translation

change

Safety and Industrial

6.9
%
—
%
(0.4)
%
0.4
%
6.9
%
Transportation and Electronics

(7.1)

—

(1.2)

0.9

(7.4)

Health Care

8.1

23.4

(7.1)

1.1

25.5

Consumer

5.5

—

—

0.1

5.6

Total Company

0.9
%
4.8
%
(1.8)
%
0.6
%
4.5
%

Nine months ended September 30, 2020

Worldwide Sales Change

Organic local-

Total sales

By Business Segment

currency sales

Acquisitions

Divestitures

Translation

change

Safety and Industrial

0.9
%
—
%
(0.8)
%
(1.3)
%
(1.2)
%
Transportation and Electronics

(9.8)

—

(1.0)

(0.4)

(11.2)

Health Care

(1.3)

20.9

(3.7)

(0.8)

15.1

Consumer

2.1

—

—

(0.8)

1.3

Total Company

(4.1)
%
4.5
%
(1.3)
%
(0.9)
%
(1.8)
%

Table of Contents

Three months ended September 30,
2021 2020 % change
(Dollars in millions) Net
Sales Oper.
Income Net
Sales Oper.
Income Net
Sales Oper.
Income
Business Segments
Safety and Industrial $ 3,235 $ 620 $ 3,017 $ 774 7.2 % (19.9) %
Transportation and Electronics 2,450 465 2,316 514 5.8 (9.4)
Health Care 2,249 529 2,160 493 4.1 7.2
Consumer 1,525 332 1,412 343 8.1 (3.3)
Corporate and Unallocated 3 (27) (2) (73)
Elimination of Dual Credit (520) (131) (553) (142)
Total Company $ 8,942 $ 1,788 $ 8,350 $ 1,909 7.1 % (6.3) %


	Nine months ended September 30,
	2021				2020				% change
(Dollars in millions)	Net Sales		Oper. Income		Net Sales		Oper. Income		Net Sales		Oper. Income
Business Segments
Safety and Industrial	$	9,816	$	2,149	$	8,601	$	2,091	14.1	%	2.8	%
Transportation and Electronics	7,463		1,602		6,492		1,338		15.0		19.8
Health Care	6,775		1,614		6,087		1,246		11.3		29.6
Consumer	4,380		932		3,893		886		12.5		5.2
Corporate and Unallocated	2		(116)		(1)		125
Elimination of Dual Credit	(1,693)		(428)		(1,471)		(374)
Total Company	$	26,743	$	5,753	$	23,601	$	5,312	13.3	%	8.3	%


	Three months ended September 30, 2021
Worldwide Sales Change By Business Segment	Organic local- currency sales		Acquisitions		Divestitures		Translation		Total sales change
Safety and Industrial	6.1	%	—	%	—	%	1.1	%	7.2	%
Transportation and Electronics	5.1		—		—		0.7		5.8
Health Care	3.3		—		—		0.8		4.1
Consumer	7.6		—		—		0.5		8.1
Total Company	6.3		—		—		0.8		7.1


	Nine months ended September 30, 2021
Worldwide Sales Change By Business Segment	Organic local- currency sales		Acquisitions		Divestitures		Translation		Total sales change
Safety and Industrial	11.0	%	—	%	—	%	3.1	%	14.1	%
Transportation and Electronics	12.4		—		—		2.6		15.0
Health Care	11.4		—		(2.7)		2.6		11.3
Consumer	10.8		—		—		1.7		12.5
Total Company	11.5		—		(0.7)		2.5		13.3

Table of Contents

Sales by geographic area:

Percent change information compares the third quarter and first nine months of ~~2020~~2021 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

Europe,

Asia

Middle East

Other


Americas

Pacific

& Africa

Unallocated

Worldwide

Net sales (millions)

$
4,347

$
2,474

$
1,528

$
1

$
8,350

% of worldwide sales

52.1
%

29.6
%

18.3
%

—

100.0
%
Components of net sales change:

Volume — organic

2.3
%

(1.8)
%

(1.8)
%

—

0.3
%
Price

1.1

(0.8)

1.5

—

0.6

Organic local-currency sales

3.4

(2.6)

(0.3)

—

0.9

Acquisitions

7.5

1.0

4.1

—

4.8

Divestitures

(1.8)

(0.6)

(4.0)

—

(1.8)

Translation

(1.4)

1.6

4.6

—

0.6

Total sales change

7.7
%

(0.6)
%

4.4
%

—

4.5
%

Total sales change:

Safety and Industrial

8.3
%

0.1
%

11.3
%

—

6.9
%
Transportation and Electronics

(14.6)
%

(2.2)
%

(12.7)
%

—

(7.4)
%
Health Care

37.3
%

4.6
%

15.4
%

—

25.5
%
Consumer

5.8
%

1.6
%

10.0
%

—

5.6
%

Organic local-currency sales change:

Safety and Industrial

10.5
%

(1.6)
%

7.7
%

—

6.9
%
Transportation and Electronics

(10.8)
%

(2.7)
%

(16.4)
%

—

(7.1)
%
Health Care

12.7
%

(3.9)
%

8.5
%

—

8.1
%
Consumer

6.9
%

(0.6)
%

4.8
%

—

5.5
%

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


	Three months ended September 30, 2021
	Americas			Asia Pacific			Europe, Middle East & Africa			Other Unallocated		Worldwide
Net sales (millions)	$	4,692		$	2,642		$	1,608		$	—	$	8,942
% of worldwide sales	52.5		%	29.5		%	18.0		%	—		100.0		%
Components of net sales change:
Volume — organic	5.4		%	5.1		%	3.1		%			4.9		%
Price	2.0			0.5			1.1					1.4
Organic local-currency sales	7.4			5.6			4.2					6.3
Divestitures	—			—			—					—
Translation	0.5			1.2			1.0					0.8
Total sales change	7.9		%	6.8		%	5.2		%			7.1		%

Total sales change:
Safety and Industrial	5.5		%	18.1		%	0.2		%			7.2		%
Transportation and Electronics	13.7			0.6			12.2					5.8
Health Care	1.7			12.8			4.3					4.1
Consumer	10.0			4.2			0.5					8.1

Organic local-currency sales change:
Safety and Industrial	4.9		%	15.6		%	(0.8)		%			6.1		%
Transportation and Electronics	13.3			(0.2)			11.3					5.1
Health Care	1.4			10.9			3.1					3.3
Consumer	9.5			3.8			(0.6)					7.6

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

•

●

In the Americas geographic area, U.S. total sales increased 11 percent and organic-local currency sales increased 5 percent. Total sales in Mexico decreased 15 percent and organic local-currency sales decreased 13 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 the Asia Pacific geographic area, China total sales increased 10 percent and organic local-currency sales increased 8 percent. In Japan, total sales decreased 10 percent and organic local-currency sales decreased 13In the Americas geographic area, U.S. total sales increased 6 percent which included increased organic-local currency sales of 6 percent. Total sales in Mexico increased 15 percent which included increased organic local-currency sales of 12 percent. In Canada, total sales increased 12 percent which included increased organic local-currency sales of 7 percent. In Brazil, total sales increased 26 percent which included increased organic local-currency sales of 22 percent.

•In the Asia Pacific geographic area, China total sales increased 8 percent which included increased organic local-currency sales of 3 percent. In Japan, total sales increased 2 percent which included increased organic local-currency sales of 6 percent.

Table of Contents

Nine months ended September 30, 2020

Europe,

Asia

Middle East

Other


Americas

Pacific

& Africa

Unallocated

Worldwide

Net sales (millions)

$
12,122

$
7,029

$
4,450

$
—

$
23,601

% of worldwide sales

51.4
%

29.8
%

18.8
%

—

100.0
%
Components of net sales change:

Volume — organic

(3.8)
%

(4.5)
%

(6.7)
%

—

(4.6)
%
Price

0.9

(0.5)

1.1

—

0.5

Organic local-currency sales

(2.9)

(5.0)

(5.6)

—

(4.1)

Acquisitions

7.1

0.9

3.6

—

4.5

Divestitures

(1.5)

(0.2)

(2.7)

—

(1.3)

Translation

(1.4)

(0.5)

(0.2)

—

(0.9)

Total sales change

1.3
%

(4.8)
%

(4.9)
%

—

(1.8)
%

Total sales change:

Safety and Industrial

(0.5)
%

(3.9)
%

0.3
%

—

(1.2)
%
Transportation and Electronics

(18.1)
%

(5.2)
%

(18.0)
%

—

(11.2)
%
Health Care

26.6
%

(2.7)
%

4.3
%

—

15.1
%
Consumer

2.9
%

(2.6)
%

(2.6)
%

—

1.3
%

Organic local-currency sales change:

Safety and Industrial

1.8
%

(2.7)
%

3.0
%

—

0.9
%
Transportation and Electronics

(14.4)
%

(4.7)
%

(17.7)
%

—

(9.8)
%
Health Care

1.8
%

(7.9)
%

(2.4)
%

—

(1.3)
%
Consumer

4.0
%

(2.4)
%

(2.7)
%

—

2.1
%

Nine months ended September 30, 2021
Americas Asia
Pacific Europe,
Middle East
& Africa Other
Unallocated Worldwide
Net sales (millions) $ 13,602 $ 8,066 $ 5,077 $ (2) $ 26,743
% of worldwide sales 50.9 % 30.2 % 18.9 % — 100.0 %
Components of net sales change:
Volume — organic 11.2 % 11.1 % 8.6 % 10.7 %
Price 1.3 (0.1) 0.8 0.8
Organic local-currency sales 12.5 11.0 9.4 11.5
Divestitures (0.8) — (1.5) (0.7)
Translation 0.5 3.7 6.2 2.5
Total sales change 12.2 % 14.7 % 14.1 % 13.3 %
Total sales change:
Safety and Industrial 12.8 % 19.5 % 11.6 % 14.1 %
Transportation and Electronics 13.5 14.2 21.0 15.0
Health Care 8.4 15.8 15.7 11.3
Consumer 13.0 9.7 13.9 12.5
Organic local-currency sales change:
Safety and Industrial 12.2 % 14.1 % 5.4 % 11.0 %
Transportation and Electronics 13.1 11.5 14.6 12.4
Health Care 10.5 10.7 14.3 11.4
Consumer 12.5 5.8 7.8 10.8

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 the Americas geographic area, U.S. total sales increased 10 percent which included increased organic-local currency sales of 11 percent. Total sales in Mexico increased 21 percent which included increased organic local-currency sales of 18 percent. In Canada, total sales increased 21 percent which included increased organic local-currency sales of 13 percent. In Brazil, total sales increased 25 percent which included increased organic local-currency sales of 29 percent.

•In the Asia Pacific geographic area, China total sales increased 21 percent which included increased organic local-currency sales of 15 percent. In Japan, total sales increased 4 percent which included increased organic local-currency sales of 5 percent.

Managing currency risks:

The ~~stronger~~weaker U.S. dollar had a ~~negative~~positive impact on sales in the third quarter and first nine months of ~~2020~~2021 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~~periods last year. Net of the Company’s hedging strategy, foreign currency negatively impacted earnings in the third quarter and positively impacted earnings in the first nine months of ~~2020~~2021 compared to the same periods last year. 3M utilizes a number of tools to ~~hedge~~manage currency risk related to ~~earnings. 3M uses~~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. In the case of more liquid currencies, 3M hedges a portion of its aggregate exposure, using a 12, 24 or 36 month horizon, depending on the currency in question. For less liquid currencies, financial hedging is frequently more expensive with more limitations on tenor. Thus, this risk is largely managed via local operational actions using natural hedging tools as discussed above. In either case, 3M’s hedging approach is designed to mitigate a portion of foreign currency risk and reduce volatility, ultimately allowing time for 3M’s businesses to respond to changes in the marketplace.

Financial condition:

3M generated ~~$5.598~~$5.4 billion of operating cash flows in the first nine months of ~~2020, an increase~~2021, a decrease of ~~$866~~$149 million when compared to the first nine months of ~~2019,~~2020, with this ~~increase~~decrease year-on-year 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.~~driven by working capital changes. Refer to the section entitled “Financial Condition and Liquidity” later in MD&A for a discussion of items impacting cash flows.

In November 2018, 3M’s Board of Directors replaced the Company’s February 2016 repurchase program with a new repurchase program. 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,~~2021, the Company purchased ~~$366~~$1,261 million of its own stock, compared to ~~$1.2 billion~~$366 million of stock purchases in the first nine months of ~~2019.~~2020. As of September 30, ~~2020,~~2021, approximately ~~$7.8~~$6.5 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~~ February ~~2020,~~2021, 3M’s Board of Directors declared a first-quarter ~~2020~~2021 dividend of ~~$1.47~~$1.48 per share, an increase of 21 percent. This marked the 62^nd63rd consecutive year of dividend increases for 3M. In May ~~2020,~~and August 2021, 3M’s Board of Directors declared a ~~second-quarter~~second and third quarter 2021 dividend of ~~$1.47~~$1.48 per ~~share. In August 2020, 3M’s Board of Directors declared a third-quarter dividend of $1.47 per share.~~

share for each quarter.

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 from Standard & Poor’s.~~outlook. The Company generates significant ongoing cash flow and has proven access to capital markets funding throughout business cycles.

3M expects to contribute approximately $200 million of cash to its global defined benefit pension and postretirement plans in ~~2020.~~2021. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in ~~2020.~~

2021.

RESULTS OF OPERATIONS

Refer to the preceding “Overview” section and the “Performance by Business Segment” section later in MD&A for additional discussion of sales change.

Operating Expenses:

Three months ended

Nine months ended

September 30,

September 30,

(Percent of net sales)

2020

2019

Change

2020

2019

Change

Cost of sales

51.5
%
52.4
%
(0.9)
%
51.7
%
53.3
%
(1.6)
%
Selling, general and administrative expenses

20.1

18.2

1.9

21.4

21.2

0.2

Research, development and related expenses

5.5

5.5

—

6.0

5.8

0.2

Gain on sale of businesses

—

(1.3)

1.3

(1.6)

(0.5)

(1.1)

Operating income margin

22.9
%
25.2
%
(2.3)
%
22.5
%
20.2
%
2.3
%


	Three months ended September 30,						Nine Months Ended September 30,
(Percent of net sales)	2021		2020		Change		2021		2020		Change
Cost of sales	54.3	%	51.5	%	2.8	%	52.7	%	51.7	%	1.0	%
Selling, general and administrative expenses (SG&A)	20.3		20.1		0.2		20.1		21.4		(1.3)
Research, development and related expenses (R&D)	5.4		5.5		(0.1)		5.7		6.0		(0.3)
Gain on sale of businesses	—		—		—		—		(1.6)		1.6
Operating income margin	20.0	%	22.9	%	(2.9)	%	21.5	%	22.5	%	(1.0)	%

3M expects global defined benefit pension and postretirement service cost expense in ~~2020~~2021 to increase by approximately ~~$34~~$40 million pre-tax when compared to ~~2019,~~2020, which impacts cost of sales; selling, general and administrative expenses (SG&A); 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~~2021 was approximately ~~$11~~$9 million and ~~$27~~$31 million, respectively.

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

~~Table of Contents~~

~~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.

~~Selling, General and Administrative Expenses:~~

~~SG&A,~~ as a percent of sales, increased in the third quarter and first nine months of ~~2020~~2021 when compared to the same periods last year. Increases primarily related to higher raw material, logistics and outsourced manufacturing costs; increased adjustments to other environmental liabilities; and increased investments in sustainability. Cost of sales was also impacted by year-over-year changes in restructuring charges, net of restructuring benefits. Year-over-year cost increases were partially offset by lower COVID-related net impacts taken in the first nine months of 2021 versus the same period last year, including period expenses of unabsorbed manufacturing costs taken in 2020.

Selling, General and Administrative Expenses:

SG&A ~~was affected by~~in dollars increased 8 percent and 7 percent in the ~~COVID-19 pandemic’s impact~~third quarter and first nine months of 2021, respectively, when compared to the same period last year. These results reflect increased litigation-related costs and continued spending on ~~overall sales and as a result yielded higher costs as a percent of sales.~~key growth initiatives. SG&A was also impacted by ~~increased spending year-on-year related to Acelity, which was acquired~~year-over-year changes in restructuring charges, net of restructuring benefits. Cost increases were partially offset by the impact of the favorable decision of the Brazilian Supreme Court in the ~~fourth~~second quarter of ~~2019. Partially offsetting these were~~2021 regarding the calculation of past social taxes and ongoing general 3M cost ~~saving actions taken~~management. Prior year also included a number of COVID-related net impacts as described in ~~response to~~the Overview- Consideration of COVID-19 section above.As a percent of sales, SG&A increased in ~~addition to lower year-on-year second~~the third 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.~~

2021 as a result of these factors.

Research, Development and Related Expenses:

R&D in dollars increased ~~$18~~$21 million and ~~$32~~$98 million in the third quarter and first nine months of ~~2020,~~2021, 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,~~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 increase is primarily driven by additional R&D spending related to the Company’s acquisition of Acelity.~~

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). 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). Refer to Note 3 for additional details on divestitures.

~~Table of Contents~~

~~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

Nine months ended

(Percent of net sales)

September 30, 2020

September 30, 2020

Same period last year

25.2
%
20.2
%
Significant litigation-related charges/benefits

—

2.3

Gain/loss on sale of businesses

(1.4)

(0.5)

Same period last year, excluding special items

23.8
%
22.0
%
Increase/(decrease) in operating income margin, due to:

Organic volume/productivity and other

(1.2)

(0.7)

Acquisitions/divestitures

(0.2)

(0.6)

Selling price and raw material impact

0.8

0.7

Foreign exchange impacts

(0.3)

(0.2)

Current period, excluding special items

22.9
%
21.2
%
Significant litigation-related charges/benefits

—

(0.1)

Gain/loss on sale of businesses

—

1.6

Divestiture-related restructuring actions

—

(0.2)

Current period

22.9
%
22.5
%

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:~~

●

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 operating income margins 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 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.~~

~~Table of Contents~~

~~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) decreased for both the third quarter and the first nine months of 2021 compared to the same periods year-on-year. Interest expense includes an early debt extinguishment pre-tax charge in the first quarter of 2021.

The non-service pension and postretirement net benefit increased approximately $40 million and $123 million in the third quarter and first nine months of ~~2020~~2021, respectively, 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.

2020.

Provision for Income Taxes:

Three months ended

Nine months ended

September 30,

September 30,

(Percent of pre-tax income)

2020

2019

2020

2019

Effective tax rate

21.4
%
19.3
%
20.0
%
19.7
%


	Three months ended September 30,				Nine months ended September 30,
(Percent of pre-tax income)	2021		2020		2021		2020
Effective tax rate	18.4	%	21.5	%	18.8	%	20.1	%

The effective tax rate for the third quarter of ~~2020~~2021 was ~~21.4~~18.4 percent, compared to ~~19.3~~21.5 percent in the third quarter of ~~2019, an increase~~2020, a decrease of ~~2.1~~3.1 percentage points. The effective tax rate for the first nine months of ~~2020~~2021 was ~~20.0~~18.8 percent compared to ~~19.7~~20.1 percent in the first nine months ~~2019, an increase~~ of ~~0.3~~2020 a decrease of 1.3 percentage points. ~~Factors~~The primary factor that ~~impacted~~decreased 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~~Company’s effective tax rate ~~at this time. The Company will continue~~was favorable adjustments in 2021 related to ~~assess the situation and provide quarterly updates throughout the year.~~

impacts of U.S. international tax provisions.

Table of Contents

3M currently estimates its effective tax rate for 2021 to be approximately 18.5 to 19.5 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; as well as recurring factors, such as the geographic mix of income before taxes.

Refer to Note 8 for further discussion of income taxes.

Income from Unconsolidated Subsidiaries, Net of Taxes:


	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Income (loss) from unconsolidated subsidiaries, net of taxes	$	4	$	(1)	$	7	$	(1)

~~Table~~Income (loss) from unconsolidated subsidiaries, net of ~~Contents~~

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 (Loss) Attributable to Noncontrolling Interest:

Three months ended

Nine months ended

September 30,

September 30,

(Millions)

2020

2019

2020

2019

Net income (loss) attributable to noncontrolling interest

$
4

$
5

$
3

$
11


	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Net income (loss) attributable to noncontrolling interest	$	3	$	4	$	7	$	3

Net income (loss) attributable to noncontrolling interest represents the elimination of the income or loss attributable to non-3M ownership interests in 3M consolidated entities. The primary noncontrolling interest relates to 3M India Limited, of which 3M’s effective ownership is 75 percent.

~~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. This estimate includes the effect of translating profits from local currencies into U.S. dollars; the impact of currency fluctuations on the transfer of goods between 3M operations in the United States and abroad; 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. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

Significant Accounting Policies:

Information regarding new accounting standards is included in Note 1 to the Consolidated Financial Statements.

PERFORMANCE BY BUSINESS SEGMENT

Disclosures relating to 3M’s business segments are provided in Note 16. Effective in the ~~second~~first quarter of ~~2020,~~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) ~~has been~~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.~~

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).

Information provided herein reflects the impact of these changes for all periods presented. 3M manages its operations in four business segments. The reportable segments are Safety and Industrial; Transportation and Electronics; Health Care; and Consumer.

Corporate and Unallocated:

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~~

~~Table of Contents~~

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~~“special items” and “other corporate expense-net”. Special items ~~such as~~include significant litigation-related charges/benefits, gain/loss on sale of businesses, and divestiture-related restructuring costs. ~~Corporate~~Other corporate expense-net includes items such as net costs related to limited unallocated corporate staff and ~~Unallocated~~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 ~~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~~Drug Delivery business following its 2020 divestiture. Items classified as revenue from this activity are included in Corporate and Unallocated net sales. Because ~~this category~~Corporate and Unallocated includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

Table of Contents

Corporate and Unallocated ~~expense for~~operating expenses decreased in the third quarter and increased in first nine months ~~2020~~of 2021, when compared to the same ~~periods~~period last ~~year are as follows:~~

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.

Other Corporate Expense - Net

Other corporate operating expenses, ~~increased~~net, decreased in ~~both~~ the third quarter and first nine months of ~~2020,~~2021, respectively, when compared to the same ~~periods~~period last year primarily due to ~~lower year-on-year gains~~a $91 million pre-tax benefit from ~~certain property sales, in addition to transition service and other arrangement costs, net of income, post-divestiture~~the impact of the ~~Company’s former drug delivery business~~favorable decision of the Brazilian Supreme Court in ~~2020, and increased legal expenses. These were partially offset by lower year-on-year restructuring charges. In~~ the second quarter of 2021 regarding the calculation of past social taxes, continued lower overall corporate staff spending and first quarter 2020 ~~and 2019, operating expenses included non-divestiture-related restructuring~~ charges ~~of $23 million and $82 million, respectively, as further~~related to equity securities (as discussed in the “Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis” section of Note ~~5. In addition, 3M’s defined benefit pension~~13), partially offset by increased legal and ~~postretirement service-cost expense allocation to Corporate and Unallocated increased year-on-year.~~

reserve adjustment costs.

Operating Business Segments:

Information related to 3M’s business segments ~~for both the third quarter and first nine months of 2020 and 2019 are~~is presented in the tables that ~~follow.~~follow with additional context in the corresponding narrative below the tables. Organic local-currency sales include both organic volume impacts plus selling price impacts. Acquisition impacts, if any, are measured separately for the first twelve months post-transaction. The divestiture impacts, if any, foreign currency translation impacts and total sales change are also provided for each business segment. Any references to EMEA relate to Europe, Middle East and Africa on a combined basis.

Refer to the preceding “Sales and operating income by geographic area” section for organic local-currency sales growth by business segment within major geographic areas.

Refer to 3M’s ~~2019~~2020 Annual Report on Form 10-K, Item 1, Business, for discussion of 3M products that are included in each business segment.

Safety and Industrial Business:

Three months ended

Nine months ended

September 30,

September 30,


2020

2019

2020

2019

Sales (millions)

$
3,024

$
2,829

$
8,627

$
8,729

Sales change analysis:

Organic local-currency

6.9
%

(3.4)
%

0.9
%

(3.6)
%

Divestitures

(0.4)

(0.8)

(0.8)

(1.9)

Translation

0.4

(1.6)

(1.3)

(2.5)

Total sales change

6.9
%

(5.8)
%

(1.2)
%

(8.0)
%

Business segment operating income (millions)

$
823

$
647

$
2,185

$
1,931

Percent change

27.2
%

(6.5)
%

13.2
%

(12.7)
%

Percent of sales

27.2
%

22.9
%

25.3
%

22.1
%


	Three months ended September 30,					Nine months ended September 30,
	2021			2020		2021			2020
Sales (millions)	$	3,235		$	3,017	$	9,816		$	8,601
Sales change analysis:
Organic local-currency	6.1		%			11.0		%
Translation	1.1					3.1
Total sales change	7.2		%			14.1		%

Business segment operating income (millions)	$	620		$	774	$	2,149		$	2,091
Percent change	(19.9)		%			2.8		%
Percent of sales	19.2		%	25.7 %		21.9		%	24.3		%

~~Table of Contents~~

Third quarter ~~2020~~2021 results:

Sales in Safety and Industrial totaled ~~$3.0~~$3.2 billion, up ~~6.9~~7.2 percent in U.S. dollars. Organic local-currency and other sales ~~increased 6.9 percent, divestitures decreased sales by 0.4 percent, and foreign currency translation increased sales by 0.4 percent.~~

change elements are included in the table above.

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.~~

Sales increased in abrasives, industrial adhesives and tapes, electrical markets, closure and masking systems, and automotive aftermarket driven by continued robust industrial manufacturing activity along with prior year pandemic-related impacts.

•Sales declined in roofing granules and personal safety against strong comparisons from prior year and declines due to prior year's strong COVID-related respiratory demand.

Table of Contents

Business segment operating ~~income:~~

●

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

income margins decreased year-on-year due to ongoing increases in raw materials, logistics and litigation-related costs along with manufacturing productivity impacts, partially offset by leverage on sales growth.

First nine months ~~2020~~2021 results:

Sales in Safety and Industrial totaled ~~$8.6~~$9.8 billion, ~~down 1.2~~up 14.1 percent in U.S. dollars. Organic local-currency and other sales ~~increased 0.9 percent, divestitures decreased sales by 0.8 percent, and foreign currency translation decreased sales by 1.3 percent.~~

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.~~

Sales increased in abrasives, industrial adhesives and tapes, automotive aftermarket, roofing granules, electrical markets, personal safety, and closure and masking systems.

•Growth was driven by improving general industrial manufacturing activity and other end-market demand along with pandemic-related respirator mask demand in the first quarter of 2021.

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.~~

income margins decreased year-on-year due to rising raw materials, logistics and litigation-related costs along with manufacturing productivity impacts, partially offset by sales growth leverage.

~~Table of Contents~~

Transportation and Electronics Business:

Three months ended

Nine months ended

September 30,

September 30,


2020

2019

2020

2019

Sales (millions)

$
2,314

$
2,500

$
6,489

$
7,305

Sales change analysis:

Organic local-currency

(7.1)
%

(3.5)
%

(9.8)
%

(2.8)
%

Divestitures

(1.2)

—

(1.0)

—

Translation

0.9

(1.0)

(0.4)

(1.9)

Total sales change

(7.4)
%

(4.5)
%

(11.2)
%

(4.7)
%

Business segment operating income (millions)

$
552

$
637

$
1,416

$
1,747

Percent change

(13.2)
%

(12.3)
%

(18.9)
%

(14.7)
%

Percent of sales

23.9
%

25.4
%

21.8
%

23.9
%


	Three months ended September 30,					Nine months ended September 30,
	2021			2020		2021			2020
Sales (millions)	$	2,450		$	2,316	$	7,463		$	6,492
Sales change analysis:
Organic local-currency	5.1		%			12.4		%
Translation	0.7					2.6
Total sales change	5.8		%			15.0		%

Business segment operating income (millions)	$	465		$	514	$	1,602		$	1,338
Percent change	(9.4)		%			19.8		%
Percent of sales	19.0		%	22.2 %		21.5		%	20.6		%

Third quarter ~~2020~~2021 results:

Sales in Transportation and Electronics totaled ~~$2.3~~$2.5 billion, ~~down 7.4~~up 5.8 percent in U.S. dollars. Organic local-currency and other sales ~~decreased 7.1 percent, divestitures decreased sales by 1.2 percent, and foreign currency translation increased sales by 0.9 percent.~~

change elements are included in the table above.

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.~~

Sales increased in advanced materials, commercial solutions, automotive and aerospace and transportation safety; sales decreased in electronics.

•Sales increased in automotive and aerospace with year-on-year growth in car and light truck build rates as premium vehicle production increased where 3M has higher content per vehicle, a year-on-year increase in sell-in of 3M products versus change in build rate, and continued penetration gains into new platforms.

•Sales increased in commercial solutions, advanced materials and transportation safety from return to workplace trends.

•Sales decreased in electronics due to ongoing semiconductor constraints on customers and pandemic-related impacts.

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.~~

income margins decreased year-on-year due to strong leverage on sales growth, more than offset by increases in raw materials and logistic costs along with manufacturing productivity impacts.

First nine months ~~2020~~2021 results:

Sales in Transportation and Electronics totaled ~~$6.5~~$7.5 billion, ~~down 11.2~~up 15.0 percent in U.S. dollars. Organic local-currency and other sales ~~decreased 9.8 percent, divestitures decreased sales by 1.0 percent, and foreign currency translation decreased sales by 0.4 percent.~~

change elements are included in the table above.

Table of Contents

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. 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 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.

•Sales increased in automotive and aerospace, advanced materials, commercial solutions, electronics and transportation safety.

•Sales increased in automotive and aerospace from improving automotive-end market activity and increases in car and light truck builds and factors mentioned above relative to third quarter results.

~~Table of Contents~~•

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

~~Divestitures:~~

●

~~In January 2020, 3M completed the sale of its advanced ballistic-protection business. Refer to Note 3 for details.~~

•

Sales increased in commercial solutions, advanced materials and transportation safety due to increased advertising spend and return to workplace trends.

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.

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 along with manufacturing productivity impacts.

Health Care Business:

Three months ended

Nine months ended


September 30,

September 30,


2020

2019

2020

2019


Sales (millions)

$
2,160

$
1,721

$
6,088

$
5,290

Sales change analysis:

Organic local-currency

8.1
%

2.1
%

(1.3)
%

2.1
%

Acquisitions

23.4

4.4

20.9

3.8

Divestitures

(7.1)

—

(3.7)

—

Translation

1.1

(1.7)

(0.8)

(2.5)

Total sales change

25.5
%

4.8
%

15.1
%

3.4
%

Business segment operating income (millions)

$
508

$
459

$
1,270

$
1,401

Percent change

10.6
%

(3.1)
%

(9.4)
%

(2.7)
%

Percent of sales

23.5
%

26.7
%

20.9
%

26.5
%


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Sales (millions)	$	2,249		$	2,160		$	6,775		$	6,087
Sales change analysis:
Organic local-currency	3.3		%				11.4		%
Divestitures	—						(2.7)
Translation	0.8						2.6
Total sales change	4.1		%				11.3		%

Business segment operating income (millions)	$	529		$	493		$	1,614		$	1,246
Percent change	7.2		%				29.6		%
Percent of sales	23.5		%	22.8		%	23.8		%	20.5		%

Third quarter ~~2020~~2021 results:

Sales in Health Care totaled $2.2 billion, up ~~25.5~~4.1 percent in U.S. dollars. Organic local-currency and other 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.~~

change elements are included in the table above.

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.~~

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

~~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.~~

•

Sales increased in oral care as dental procedures continued to be near pre-COVID levels, in food safety as food service activity returned, and in separation and purification due to ongoing demand for biopharma filtration solutions for COVID-related vaccine and therapeutics.

•Sales increased in health information systems driven by strong growth in clinician solutions.

•Sales decreased in medical solutions due to the continued decline in demand for COVID-related respirators along with the pace of hospital elective procedure volumes coming in at the low end of industry expectations.

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.

income margins increased year-on-year due to leverage on sales growth, partially offset by increasing raw materials and logistics costs, manufacturing productivity impacts, along with increased investments in growth.

~~Table of Contents~~

First nine months ~~2020~~2021 results:

Sales in Health Care totaled ~~$6.1~~$6.8 billion, up ~~15.1~~11.3 percent in U.S. dollars. Organic local-currency and other 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.~~

change elements are included in the table above.

Table of Contents

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:~~

●

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

•Sales increased in oral care driven by higher year-on-year dental procedures and in separation and purification from continued high demand for biopharma filtration solutions for COVID-related vaccine and therapeutic development and manufacturing.

•Sales increased in medical solutions from rising elective procedure volumes in the first six months of 2021 and strong respirator demand in the first quarter of 2021.

•Sales increased in health information systems due to improving hospital information technology investments.

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.~~

•

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.

income margins increased year-on-year due to sales growth leverage, partially offset by supply chain disruptions, rising raw materials and logistics costs, manufacturing productivity impacts, and increased investments in growth.

Consumer Business:

Three months ended

Nine months ended


September 30,

September 30,


2020

2019

2020

2019


Sales (millions)

$
1,417

$
1,342

$
3,911

$
3,862

Sales change analysis:

Organic local-currency

5.5
%

3.4
%

2.1
%

2.1
%

Translation

0.1

(0.9)

(0.8)

(1.5)

Total sales change

5.6
%

2.5
%

1.3
%

0.6
%

Business segment operating income (millions)

$
358

$
313

$
914

$
821

Percent change

14.7
%

3.1
%

11.4
%

0.2
%

Percent of sales

25.3
%

23.3
%

23.4
%

21.3
%


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Sales (millions)	$	1,525		$	1,412		$	4,380		$	3,893
Sales change analysis:
Organic local-currency	7.6 %						10.8		%
Translation	0.5						1.7
Total sales change	8.1 %						12.5		%

Business segment operating income (millions)	$	332		$	343		$	932		$	886
Percent change	(3.3)		%				5.2		%
Percent of sales	21.7		%	24.3		%	21.3		%	22.7		%

Third quarter ~~2020~~2021 results:

Sales in Consumer totaled ~~$1.4~~$1.5 billion, ~~an increase of 5.6~~up 8.1 percent in U.S. dollars. Organic local-currency and other sales ~~increased 5.5 percent and foreign currency translation increased sales by 0.1 percent.~~

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 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 increased in stationery and office, consumer health and safety, home improvement and home care.

•Sales increased in stationery and office supplies as the business laps last year’s COVID-related comparisons and due to a strong back-to-school consumer demand and holiday-related sell-in for Scotch®-branded packaging and shipping products, Post-it®-solutions and Scotch®-branded home and office tapes.

•Sales increased in consumer health and safety as last year’s COVID-related impacts are lapped.

●

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

•Sales increased in home care due to continued strength in home cleaning.

Sales in Consumer totaled ~~$3.9~~$4.4 billion, ~~an increase~~up of ~~1.3~~12.5 percent in U.S. dollars. Organic local-currency and other sales ~~increased 2.1 percent and foreign currency translation decreased sales by 0.8 percent.~~

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.~~

•

Sales increased in stationery and office, home improvement, consumer health and safety and home care.

•Sales increased in home improvement driven by continued strength in home improvement with strong demand for CommandTM adhesives, FiltreteTM air quality solutions, MeguiarsTM auto care and Scotch BlueTM painter’s tape.

•Sales increased in stationery and office supplies from ongoing strength in consumer demand for packaging and shipping products, Post-it®-solutions and Scotch® brand office tapes as the business laps last year’s COVID-related comparisons.

•Sales also increased in consumer health and safety as the global economy impacted by COVID continues to evolve versus 2020 and in home care due to consumer demand for home cleaning products and solutions.

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.~~

income margins decreased year-on-year as a result of rising raw materials, logistics and outsourced hardgoods manufacturing costs, and higher investments in advertising and merchandising, partially offset by 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~~returns on invested capital remains the first priority for capital deployment. This includes research and development, capital expenditures, and commercialization capability. Organic investments will be supplemented by complementary acquisitions. The Company also continues to actively manage its portfolio to maximize value for shareholders. ~~Given uncertainty arising from COVID-19,~~3M repurchased shares in the ~~Company~~first nine months of 2021, after having suspended repurchases under its board-approved share repurchase program ~~effective March 2020. 3M will continue~~(with other repurchase activity limited to ~~return cash to shareholders through dividends and will consider whether to resume share repurchases once~~3M’s stock compensation plans) in the ~~COVID-19 impacts are better known. 3M maintains strong liquidity and further added to its liquidity position through the issuance~~first quarter of ~~$1.75 billion in registered notes in March~~ 2020. To fund cash needs in the United States, the Company relies on ongoing cash flow from U.S. operations, access to capital markets and repatriation of the earnings of its foreign affiliates that are not considered to be permanently reinvested.For those international earnings still considered to be reinvested indefinitely, the Company currently has no plans or intentions to repatriate these funds for U.S. operations. See Note 810 in 3M’s 2020 Annual Report on Form 10-K for further information on earnings considered to be reinvested indefinitely.

~~3M’s~~

3M maintains a strong liquidity profile. The company’s primary short-term liquidity needs are met through cash on hand and U.S. commercial paper issuances. 3M believes it will have continuous access to the commercial paper market. 3M’s commercial paper program permits the Company to have a maximum of $5 billion outstanding with a maximum maturity of 397 days from date of issuance. ~~At September 30, 2020, there was~~The Company had no commercial paper ~~issued and outstanding, compared to $150 million~~ outstanding at September 30, 2021 and December 31, ~~2019.~~

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 &and Poor’s.

The Company’s total debt was ~~$0.7 billion~~$630 million lower at September 30, ~~2020~~2021 when compared to December 31, ~~2019.~~2020. Decreases in debt ~~include the repayment of aggregate $445 million principal amount of Third Lien Notes subject~~were largely due 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~~

~~Table of Contents~~

~~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~~2021 early redemption via make-whole call offers of ~~$1.75 billion of registered notes.~~$450 million in debt. For discussion of repayments of and proceeds from debt refer to the following “Cash Flows from Financing Activities” section.

As discussed in Note 10, during the second and third quarters of 2021, 3M entered into interest rate swaps that converted part of the Company’s $1.0 billion and $650 million principal amount of fixed rate notes due 2049 and 2050, respectively, into floating rate debt for the portion of their terms through mid-2028.

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. 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 ~~is in the process of reviewing~~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 ~~impact~~ assessment and monitor regulatory developments during the transition period.

Table of Contents

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. This replaced 3M’s previous shelf registration dated February 24, 2017. 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,~~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). Information with respect to long-term debt issuances and maturities for the periods presented is included in Note 10 of this Form 10-Q and Note 12 of 3M’s ~~2019~~2020 Annual Report on Form 10-K.

The Company has a $3.0 billion five-year revolving credit facility expiring in November 2024. 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~~which was renewed in November ~~2020.~~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.~~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,~~2021, this ratio was approximately 1719 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~~$268 million in stand-alone letters of credit and bank guarantees issued and outstanding at September 30, ~~2020.~~2021. These instruments are utilized in connection with normal business activities.

Cash, cash equivalents and marketable securities:

At September 30, ~~2020,~~2021, 3M had ~~$4.6~~$5.8 billion of cash, cash equivalents and marketable securities, of which approximately ~~$2.9~~$4.9 billion was held by the Company’s foreign subsidiaries and approximately ~~$1.7~~$0.9 billion was held in the United States. These balances are invested in bank instruments and other high-quality fixed income securities. At December 31, ~~2019,~~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 in$2.3 billion was held by the United ~~States totaled approximately $2.4 billion and $100 million, respectively.~~States. The increase from December 31, ~~2019~~2020 primarily resulted from ~~$1.75 billion~~strong cash flow from operations offset by ongoing dividend payments, purchases of ~~debt~~treasury stock, capital expenditures, and the ~~Company issued~~March 2021 early redemption via make-whole call offers of $450 million in ~~March 2020 in light of the uncertain impact of the COVID-19 pandemic.~~

debt.

~~Table of Contents~~

Net Debt (non-GAAP measure):

Net debt is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. The Company defines net debt as total debt less the total of cash, cash equivalents and current and long-term marketable securities. 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~~2021 and December 31, ~~2019.~~

(Millions)

September 30, 2020

December 31, 2019

Change

Total debt

$
19,598

$
20,313

$
(715)

Less: Cash, cash equivalents and marketable securities

4,595

2,494

2,101

Net debt (non-GAAP measure)

$
15,003

$
17,819

$
(2,816)

2020.


(Millions)	September 30, 2021		December 31, 2020		Change
Total debt	$	18,165	$	18,795	$	(630)
Less: Cash, cash equivalents and marketable securities	5,763		5,068		695
Net debt (non-GAAP measure)	$	12,402	$	13,727	$	(1,325)

Refer to the preceding “Total Debt” and “Cash, Cash Equivalents and Marketable Securities” sections for additional details.

Table of Contents

Balance Sheet:

3M’s strong balance sheet and liquidity provide the Company with significant flexibility to fund its numerous opportunities going forward. The Company will continue to invest in its operations to drive growth, including continual review of acquisition opportunities.

The Company uses working capital measures that place emphasis and focus on certain working capital assets, such as accounts receivable and inventory activity.

Working capital (non-GAAP measure):

(Millions)

September 30, 2020

December 31, 2019

Change

Current assets

$
14,110

$
12,971

$
1,139

Less: Current liabilities

7,410

9,222

(1,812)

Working capital (non-GAAP measure)

$
6,700

$
3,749

$
2,951


(Millions)	September 30, 2021		December 31, 2020		Change
Current assets	$	16,426	$	14,982	$	1,444
Less: Current liabilities	9,635		7,948		1,687
Working capital (non-GAAP measure)	$	6,791	$	7,034	$	(243)

Various assets and liabilities, including cash and short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs. Working capital is not defined under U.S. generally accepted accounting principles and may not be computed the same as similarly titled measures used by other companies. The Company defines working capital as current assets minus current liabilities. 3M believes working capital is meaningful to investors as a measure of operational efficiency and short-term financial health.

Working capital ~~increased $3.0~~decreased $0.2 billion compared with December 31, ~~2019.~~2020. Balance changes in current assets increased working capital by ~~$1.2~~$1.4 billion, driven largely by increases ~~to cash~~in inventory, marketable securities and ~~cash equivalents, partially offset by decreases in account receivable and inventory.~~accounts receivable. Balance changes in current liabilities ~~increased~~decreased working capital by ~~$1.8~~$1.7 billion, primarily due to ~~decreases~~increases in ~~short-term borrowing and the current portion~~current-portion of long-term ~~debt.~~

debt and accounts payable.

Accounts receivable ~~decreased $168~~increased $211 million ~~compared to December 31, 2019, primarily due to lower sales in 2020 in relation to sales in the fourth quarter 2019~~ and inventory increased ~~expected credit losses on customer receivables related to COVID-19 uncertainty. Inventory decreased $150~~$711 million, respectively, from December 31, ~~2019~~2020, primarily as a result of ~~actions taken to reduce inventory in light~~increased sequential sales and related operating activity from that of ~~slower growth conditions in several key end-markets, changes in channel inventory levels~~late 2020 partially offset by ~~customers related to impacts from COVID-19 and improving sequential organic sales volumes in the third quarter. Inventory~~foreign currency translation impacts. Current portion of long-term debt increased based on underlying debt maturities while accounts payable also ~~decreased~~increased as a result of ~~the divestiture~~increased sequential operating activity from that of ~~the drug delivery business.~~

late 2020 partially offset by foreign currency translation impacts.

~~Table of Contents~~

Cash Flows:

Cash flows from operating, investing and financing activities are provided in the tables that follow. Individual amounts in the Consolidated Statement of Cash Flows exclude the effects of acquisitions, divestitures and exchange rate impacts on cash and cash equivalents, which are presented separately in the cash flows. Thus, the amounts presented in the following operating, investing and financing activities tables reflect changes in balances from period to period adjusted for these effects.

Table of Contents

Cash Flows from Operating Activities:

Nine months ended

September 30,

(Millions)

2020

2019

Net income including noncontrolling interest

$
3,998

$
3,612

Depreciation and amortization

1,413

1,130

Company pension and postretirement contributions

(122)

(129)

Company pension and postretirement expense

295

242

Stock-based compensation expense

216

230

Gain on sale of businesses

(389)

(111)

Income taxes (deferred and accrued income taxes)

89

(141)

Loss on deconsolidation of Venezuelan subsidiary

—

162

Accounts receivable

113

(14)

Inventories

43

255

Accounts payable

(48)

(222)

Other — net

(10)

(282)

Net cash provided by (used in) operating activities

$
5,598

$
4,732


	Nine months ended September 30,
(Millions)	2021		2020
Net income including noncontrolling interest	$	4,589	$	4,047
Depreciation and amortization	1,408		1,413
Company pension and postretirement contributions	(121)		(122)
Company pension and postretirement expense	137		232
Stock-based compensation expense	227		216
Gain on sale of businesses	—		(389)
Income taxes (deferred and accrued income taxes)	(196)		89
Accounts receivable	(324)		113
Inventories	(823)		43
Accounts payable	340		(48)
Other — net	212		4
Net cash provided by (used in) operating activities	$	5,449	$	5,598

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,~~2021, cash flows provided by operating activities ~~increased $0.9 billion~~decreased $149 million compared to the same period last year, with this ~~increase~~decrease primarily due to ~~cost saving actions taken in response to COVID-19 and lower year-on-year significant litigation-related charges~~working capital changes and the timing of ~~associated payments.~~income tax payments offset by higher net income year-on-year. The combination of accounts receivable, inventories and accounts payable decreased operating cash flow by $807 million and increased ~~working capital~~operating cash flow by $108 million in the first nine months of 2021 and 2020, ~~compared to the working capital increases of $19 million in the first nine months of 2019.~~respectively. 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,

(Millions)

2020

2019

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

$
(1,079)

$
(1,161)

Proceeds from sale of PP&E and other assets

29

91

Acquisitions, net of cash acquired

(25)

(704)

Purchases and proceeds from maturities and sale of marketable securities and investments, net

170

348

Proceeds from sale of businesses, net of cash sold

576

236

Other — net

8

45

Net cash provided by (used in) investing activities

$
(321)

$
(1,145)


	Nine months ended September 30,
(Millions)	2021		2020
Purchases of property, plant and equipment (PP&E)	$	(1,047)	$	(1,079)
Proceeds from sale of PP&E and other assets	44		29
Acquisitions, net of cash acquired	—		(25)
Purchases and proceeds from maturities and sale of marketable securities and investments, net	(447)		170
Proceeds from sale of businesses, net of cash sold	—		576
Other — net	18		8
Net cash provided by (used in) investing activities	$	(1,432)	$	(321)

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~~2021 capital spending to be approximately ~~$1.4~~$1.5 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

~~Table of Contents~~

~~reduces~~ continues to invest in growth, productivity and sustainability. In 2020, 3M reduced overall spending in light of uncertainty regarding ~~COVID-19,~~ COVID-19—resulting in full year capital spending of $1.5 billion—but ~~continues~~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.

Table of Contents

3M invests in renewal and maintenance programs, which pertain to cost reduction, cycle time, maintaining and renewing current capacity, eliminating pollution, and compliance. Costs related to maintenance, ordinary repairs, and certain other items are expensed. 3M also invests in growth, which adds to capacity, driven by new products, both through expansion of current facilities and new facilities. Finally, 3M also invests in other initiatives, such as information technology (IT), laboratory facilities, and a continued focus on investments in sustainability.

Refer to Note 3 for information on acquisitions and divestitures. 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~~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 ~~2019~~2020 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.

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. Purchases of investments include additional survivor benefit insurance, plus investments in equity securities.

Cash Flows from Financing Activities:

Nine months ended

September 30,

(Millions)

2020

2019

Change in short-term debt — net

$
(138)

$
(466)

Repayment of debt (maturities greater than 90 days)

(2,477)

(871)

Proceeds from debt (maturities greater than 90 days)

1,745

6,116

Total cash change in debt

$
(870)

$
4,779

Purchases of treasury stock

(366)

(1,243)

Proceeds from issuances of treasury stock pursuant to stock option and benefit plans

325

437

Dividends paid to shareholders

(2,540)

(2,488)

Other — net

(47)

(158)

Net cash provided by (used in) financing activities

$
(3,498)

$
1,327


	Nine months ended September 30,
(Millions)	2021		2020
Change in short-term debt — net	$	4	$	(138)
Repayment of debt (maturities greater than 90 days)	(450)		(2,477)
Proceeds from debt (maturities greater than 90 days)	1		1,745
Total cash change in debt	(445)		(870)
Purchases of treasury stock	(1,261)		(366)
Proceeds from issuances of treasury stock pursuant to stock option and benefit plans	566		325
Dividends paid to shareholders	(2,572)		(2,540)
Other — net	(21)		(47)
Net cash provided by (used in) financing activities	$	(3,733)	$	(3,498)

Total debt was approximately ~~$19.6~~$18.2 billion at September 30, ~~2020~~2021 and ~~$20.3~~$18.8 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. Increases2020. Decreases in debt ~~related~~were largely due to the March ~~2020 issuance~~2021 early redemption of ~~$1.75 billion~~$450 million in ~~registered notes. Outstanding~~debt maturing in 2022 via make-whole call offers. The Company had no commercial paper ~~was zero~~outstanding at September 30, ~~2020, as compared to $150 million at~~2021 and December 31, ~~2019. During the third quarter of 2020, the Company paid the outstanding balances on their Japanese yen and and euro credit facilities.~~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. 3M’s primary short-term liquidity needs are met through cash on hand and U.S. 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. In November 2018, 3M’s Board of Directors replaced the Company’s February 2016 repurchase program with a new repurchase program. 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,~~2021, the Company purchased ~~$366 million~~$1.3 billion of its own ~~stock prior~~stock. 3M repurchased shares, after having suspended repurchases (with other repurchase activity limited to 3M’s ~~suspension~~stock compensation plans) in the first quarter of ~~its share repurchase program in late March.~~2020. For more information, refer to the table titled “Issuer Purchases of Equity Securities” in Part II, Item 2. The Company does not utilize derivative instruments linked to the Company’s stock.

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3M has paid dividends each year since 1916. In February ~~2020,~~2021, 3M’s Board of Directors declared a first-quarter ~~2020~~2021 dividend of ~~$1.47~~$1.48 per share, an increase of 21 percent. This is equivalent to an annual dividend of ~~$5.88~~$5.92 per share and marked the 62^nd63rd consecutive year of dividend increases. In May ~~2020,~~and August 2021, 3M’s Board of Directors declared a ~~second-quarter 2020~~second and third quarter 2021 dividend of ~~$1.47~~$1.48 per ~~share. In August 2020, 3M’s Board of Directors declared a third-quarter 2020 dividend of $1.47 per share.~~

share for each quarter.

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.

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Free Cash Flow (non-GAAP measure):

Free cash flow and free cash flow conversion are not defined under U.S. generally accepted accounting principles (GAAP). Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion are meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication of the strength of the company and its ability to generate cash. ~~The first quarter~~Free cash flow and free cash flow conversion vary across quarters throughout the year. Below find a recap 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~~and “Cash Flows from Investing Activities” sections for discussion of ~~additional~~ items that impacted the operating cash flow and purchases of PP&E components of the calculation of free cash flow. Refer to the ~~proceeding “Cash Flows from Investing Activities”~~preceding “Results of Operations” section for discussion ~~on capital spending for property, plant and equipment.~~

Nine months ended

September 30,

(Millions)

2020

2019

Major GAAP Cash Flow Categories

Net cash provided by (used in) operating activities

$
5,598

$
4,732

Net cash provided by (used in) investing activities

(321)

(1,145)

Net cash provided by (used in) financing activities

(3,498)

1,327

Free Cash Flow (non-GAAP measure)

Net cash provided by (used in) operating activities

$
5,598

$
4,732

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

(1,079)

(1,161)

Free cash flow

$
4,519

$
3,571

Net income attributable to 3M

$
3,995

$
3,601

Free cash flow conversion

113
%

99
%

of items that impacted the net income attributable to 3M component of the calculation of free cash flow conversion.


	Nine months ended September 30,
(Millions)	2021			2020
Major GAAP Cash Flow Categories
Net cash provided by (used in) operating activities	$	5,449		$	5,598
Net cash provided by (used in) investing activities	(1,432)			(321)
Net cash provided by (used in) financing activities	(3,733)			(3,498)

Free Cash Flow (non-GAAP measure)
Net cash provided by (used in) operating activities	$	5,449		$	5,598
Purchases of property, plant and equipment	(1,047)			(1,079)
Free cash flow	4,402			4,519
Net income attributable to 3M	$	4,582		$	4,044
Free cash flow conversion	96		%	112		%

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CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company may also make forward-looking statements in other reports filed with the Securities and Exchange Commission, in materials delivered to shareholders and in press releases. In addition, the Company’s representatives may from time to time make oral forward-looking statements.

Forward-looking statements relate to future events and typically address the Company’s expected future business and financial performance. Words such as “plan,” “expect,” “aim,” “believe,” “project,” “target,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could,” “forecast” and other words and terms of similar meaning, typically identify such forward-looking statements. In particular, these include, among others, statements relating to:

●

worldwide economic, political, regulatory, 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,

●

~~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,~~

●

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

●

~~competitive conditions and customer preferences,~~

●

~~foreign currency exchange rates and fluctuations in those rates,~~

●

~~new business opportunities, product development, and future performance or results of current or anticipated products,~~

●

~~fluctuations in the costs and availability of purchased components, compounds, raw materials and energy,~~

●

~~Information technology systems including ERP system roll-out and implementations,~~

●

~~Security breaches and other disruptions to information technology infrastructure,~~

●

~~the scope, nature or impact of acquisition, strategic alliance and divestiture activities,~~

●

~~Operational execution, including inability to generate productivity improvements as estimated,~~

●

~~future levels of indebtedness, common stock repurchases and capital spending,~~

●

~~future availability of and access to credit markets,~~

●

~~pension and postretirement obligation assumptions and future contributions,~~

●

~~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.~~

•

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,

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

•competitive conditions and customer preferences,

•foreign currency exchange rates and fluctuations in those rates,

•new business opportunities, product development, and future performance or results of current or anticipated products,

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•fluctuations in the costs and availability of purchased components, compounds, raw materials and energy,

•Information technology systems including ERP system roll-out and implementations,

•Security breaches and other disruptions to information technology infrastructure,

•the scope, nature or impact of acquisition, strategic alliance and divestiture activities,

•operational execution, including inability to generate productivity improvements as estimated,

•future levels of indebtedness, common stock repurchases and capital spending,

•future availability of and access to credit markets,

•pension and postretirement obligation assumptions and future contributions,

•asset impairments,

•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.

Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those reflected in any such forward-looking statements depending on a variety of factors. Important information as to these factors can be found in this document, including, among others, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings of “Overview,” “Financial Condition and Liquidity” and annually in “Critical Accounting Estimates.” Discussion of these factors is incorporated by reference from Part II, Item 1A, “Risk Factors,” of this document, and should be considered an integral part of Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For additional information concerning factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 10-K, 10-Q and 8-K filed with the SEC from time to time.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

In the context of Item 3, 3M is exposed to market risk due to the risk of loss arising from adverse changes in foreign currency exchange rates, interest rates and commodity prices. Changes in those factors could impact the Company’s results of operations and financial condition. For a discussion of sensitivity analysis related to these types of market risks, refer to Part II, Item 7A, Quantitative

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and Qualitative Disclosures About Market Risk, in 3M’s ~~2019~~2020 Annual Report on Form 10-K. There have been no material changes in information that would have been provided in the context of Item 3 from the end of the preceding year until September 30, ~~2020.~~2021. However, the Company does provide risk management discussion in various places in this Quarterly Report on Form 10-Q, primarily in the Derivatives note.

Item 4. Controls and Procedures.

a. The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

b. There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company is implementing an enterprise resource planning (“ERP”) system on a worldwide basis, which is expected to improve the efficiency of certain financial and related transaction processes. The gradual implementation is expected to occur in phases over the next several years. The implementation of a worldwide ERP system will likely affect the processes that constitute ~~our~~the Company’s internal control over financial reporting and will require testing for effectiveness.

The Company completed implementation with respect to various processes/sub-processes in certain subsidiaries/locations, including aspects relative to the United States, and will continue to roll out the ERP system over the next several years. As with any new information technology application ~~we implement,~~the Company implements, this application, along with the internal controls over financial reporting included in this process, was appropriately considered within the testing for effectiveness with respect to the implementation in these instances. WeThe Company concluded, as part of its evaluation described in the above paragraphs, that the

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implementation of the ERP system in these circumstances has not materially affected ~~our~~its internal control over financial reporting.

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3M COMPANY

FORM 10-Q

For the Quarterly Period Ended September 30, ~~2020~~

2021

PART II. Other Information

Item 1. Legal Proceedings.

Discussion of legal matters is incorporated by reference from Part I, Item 1, Note 14, “Commitments and Contingencies” of this document, and should be considered an integral part of Part II, Item 1, “Legal Proceedings.”

Item 1A. Risk Factors.

Provided below is a cautionary discussion of what we believe to be the most important risk factors applicable to the Company. Discussion of these factors is incorporated by reference into and considered an integral part of Part I, Item 2, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.”

Risks Related to the Global Economy and Public Health Crises

* The Company’s results are impacted by the effects of, and changes in, worldwide economic, political, regulatory, international trade and other external conditions.

The Company operates in more than 70 countries and derives approximately 60 percent of its revenues from outside the United States, and, accordingly, the Company’s business is subject to global competition and geopolitical risks that are beyond its control, such as disruptions in financial markets, economic downturns, government actions impacting international trade agreements, imposing trade restrictions such as tariffs, and retaliatory counter measures, inflation, government deficit reduction and other austerity measures in specific countries or regions, or in the various industries in which the Company operates; social, political or labor conditions in specific countries or regions; or adverse changes in the availability and cost of capital, interest rates, ~~tax related matters such as tax rates, tax laws, changing political environments in the U.S. and foreign jurisdictions that impact tax examination, assessment and enforcement approaches,~~ or exchange control, ability to expatriate earnings and other regulations in the jurisdictions in which the Company operates. Climate change, as well as related environmental and social regulations, may negatively impact the Company or its customers and suppliers, in terms of availability and cost of natural resources, sources and supply of energy, product demand and manufacturing, and the health and well-being of individuals and communities in which we operate.

* The Company is subject to risks related to public health crises such as the global pandemic associated withthe coronavirus (COVID-19).

3M, as a global company, is impacted by public health crises such as the global pandemic associated with COVID-19. The outbreak has significantly increased economic and demand uncertainty. In addition, 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, and government-ordered vaccine mandates, have impacted and will continue to impact 3M’s operations. In these challenging and dynamic circumstances, 3M ~~is working~~continues to work to protect its employees and the public, maintain business continuity and sustain its operations, including ensuring the safety and protection of approximately 50,000 people who work in our 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. Even with 3M’s accelerated production at its global facilities combined with capacity from other manufacturers, the industry-wide challenge is that global demand for N95 and other respirators continues to exceed the industries’ ability to deliver. Within individual regions and countries around the world, 3M is working with governments, distributors and others to prioritize supplies to the most critical customer and public health needs. 3M’s manufacturing, supply chain and distribution protocols have, for example, been impacted by the need to prioritize rated orders issued by the Federal Emergency Management Agency pursuant to the U.S. Defense Production Act. In addition, trade barriers, export restrictions and other similar measures imposed by national governments also negatively impact the supplies of personal protection equipment including those made by 3M going into the most needed areas. COVID-19 has also affected the ability of suppliers and vendors to provide products and services to 3M. Some of these COVID-related factors have increased demand for certain 3M products, while others have decreased demand from certain end markets or could make it more difficult for 3M to serve customers. 3M has received reports of price gouging, counterfeiting and other illegal or fraudulent activities involving its N95 respirators, has taken legal action in several states and continues to work with state, federal and international law enforcement to protect the public and 3M against those who seek

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to exploit 3M’s brand and reputation and defraud others. Furthermore, COVID-19 has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates. For example, COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and could adversely impact access to capital. As economies start to reopen in certain parts of the world, workplace safety, for the Company and others, will increasingly become a focus of concern. As part of the return to work process at the Company, the Company could face additional privacy and data security risks in various

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countries related to the collection of data regarding employees and contractors with respect to COVID-19 testing, temperature checks, contact tracing, and ~~contact tracing.~~vaccination status. Due to the speed and scope with which the COVID 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.

* Foreign currency exchange rates and fluctuations in those rates may affect the Company’s ability to realize projected growth rates in its sales and earnings.

Because the Company’s financial statements are denominated in U.S. dollars and approximately 60 percent of the Company’s revenues are derived from outside the United States, the Company’s results of operations and its ability to realize projected growth rates in sales and earnings could be adversely affected if the U.S. dollar strengthens significantly against foreign currencies.

Risks Related to Legal and Regulatory Proceedings

* The Company faces liabilities related to certain fluorochemicals, which could adversely impact our results.

As previously reported, the Company has been voluntarily cooperating with various local, state, federal (primarily the U.S. Environmental Protection Agency (EPA)), and international agencies in their review of the environmental and health effects of a broad group of perfluoroalkyl and polyfluoroalkyl substances produced by the Company, collectively known as “PFAS.” The PFAS group contains several categories and classes of durable chemicals and materials with properties that include oil, water, temperature, chemical and fire resistance, as well as electrical insulating properties. The strength of the carbon-fluorine bond also means that these compounds do not easily degrade. These characteristics have made PFAS critical to the manufacture of electronic devices such as cell phones, tablets and semi-conductors. They are also used to help prevent infections in products like surgical gowns and drapes. Commercial aircraft and low-emissions vehicles also rely on PFAS technology. PFAS compounds are manufactured by various companies, including 3M, and are used in everyday products. As science and technology evolve and advance, and in response to evolving knowledge and the understanding that PFAS compounds had the potential to build up over time, 3M announced in 2000 that we would voluntarily phase out production of perfluorooctanoate (PFOA) and perfluorooctane sulfonate (PFOS) globally as a precautionary measure. We phased out of materials used to produce certain repellants and surfactant products, with most of these activities in the U.S. completed by the end of 2002. Phased out products included Aqueous Film Forming Foam (AFFF) and coatings for food packaging, for example. 3M currently is defending lawsuits concerning various PFAS-related products and chemistries, and is subject to unasserted and asserted claims and governmental regulatory proceedings and inquiries related to the production and use of PFAS in a variety of jurisdictions, as discussed in Note 14, “Commitments and Contingencies,” within the Notes to Consolidated Financial Statements. An adverse outcome in any one or more of these matters could be material to our financial results. For example, we recorded a pre-tax charge of $897 million, inclusive of legal fees and other related obligations, in the first quarter of 2018 with respect to the settlement of a matter brought by the State of Minnesota involving the presence of PFAS in the groundwater, surface water, fish or other aquatic life, and sediments in the state. Governmental inquiries or lawsuits involving PFAS could lead to our incurring liability for damages or other costs, civil or criminal proceedings, the imposition of fines and penalties, or other remedies, as well as restrictions on or added costs for our business operations going forward, including in the form of restrictions on discharges at our manufacturing facilities or otherwise.

* The Company’s future results may be affected by various asserted and unasserted legal and regulatory proceedings and legal compliance risks, including those involving product liability, antitrust, intellectual property, environmental, tax, the U.S. Foreign Corrupt Practices Act and other anti-bribery laws, U.S. trade sanctions compliance, regulations of the U.S. Food and Drug Administration (FDA) and similar foreign agencies, U.S. federal healthcare program-related laws and regulations including the False Claims Act, anti-kickback laws, the Sunshine Act, or other matters.Legal compliance risks also include third-party risks where the Company’s suppliers, vendors or channel partners have business practices that are inconsistent with 3M’s Supplier Responsibility Code, 3M performance requirements or with legal requirements.

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The outcome of these legal proceedings may differ from the Company’s expectations because the outcomes of litigation, including regulatory matters, are often difficult to reliably predict. Although the Company maintains general liability insurance, the amount of liability that may result from certain of these risks may not always be covered by, or could exceed, the applicable insurance coverage. Various factors or developments can lead the Company to change current estimates of liabilities and related insurance receivables where applicable, or make such estimates for matters previously not susceptible of reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory developments or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in future charges that could have a material adverse effect on the Company’s results of operations or cash flows in any particular period. In addition, negative

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publicity related to product liability, environmental, health and safety or other matters referenced above involving the Company may negatively impact the Company’s reputation. For a more detailed discussion of the legal proceedings involving the Company and the associated accounting estimates, see the discussion in Note 14, “Commitments and Contingencies,” within the Notes to Consolidated Financial Statements.

Risks Related to Our Products and Customer Preferences

* The Company’s results are affected by competitive conditions and customer preferences.

Demand for the Company’s products, which impacts revenue and profit margins, is affected by (i) the development and timing of the introduction of competitive products; (ii) the Company’s response to downward pricing to stay competitive; (iii) changes in customer order patterns, such as changes in the levels of inventory maintained by customers and the timing of customer purchases which may be affected by announced price changes, changes in the Company’s incentive programs, or the customer’s ability to achieve incentive goals; (iv) changes in customers’ preferences for our products, including the success of products offered by our competitors, and changes in customer designs for their products that can affect the demand for some of the Company’s products; and (v) changes in the business environment related to disruptive technologies, such as artificial intelligence, block-chain, expanded analytics and other enhanced learnings from increasing volume of available data.

* The Company’s growth objectives are largely dependent on the timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new products and to bring those products to market.

This ability is subject to difficulties or delays in product development, such as the inability to identify viable new products, obtain adequate intellectual property protection, or gain market acceptance of new products. There are no guarantees that new products will prove to be commercially successful.

* The Company’s future results are subject to vulnerability with respect to materials and fluctuations in the costs and availability of purchased components, compounds, raw materials, energy, and ~~energy,~~labor due to shortages, increased demand and wages, logistics, supply chain interruptions, manufacturing site disruptions, natural disasters and other disruptive factors.

The Company depends on various components, compounds, raw materials, and energy (including oil and natural gas and their derivatives) supplied by others for the manufacturing of its products. Supplier relationships have been and could be interrupted in the future due to supplier material shortage, climate impacts, natural and other disasters and other disruptive events, or be terminated. Any sustained interruption in the Company’s receipt of adequate supplies or disruption to key manufacturing sites’ operations due to natural and other disasters or events could have a material adverse effect on the Company. In addition, while the Company has a process to minimize volatility in component and material pricing, no assurance can be given that the Company will be able to successfully manage price fluctuations or that future price fluctuations or shortages will not have a material adverse effect on the Company.

Risks Related to Our Business

* The Company employs information technology systems to support its business, including ongoing phased implementation of an enterprise resource planning (ERP) system as part of business transformation on a worldwide basis over the next several years. Security breaches and other disruptions to the Company’s information technology infrastructure could interfere with the Company’s operations, compromise information belonging to the Company or its customers, suppliers, and employees, exposing the Company to liability which could adversely impact the Company’s business and reputation.

In the ordinary course of business, the Company relies on centralized and local information technology networks and systems, some of which are provided, hosted or managed by vendors and other third parties, to process, transmit and store electronic information, and to manage or support a variety of businesses. Additionally, the Company collects and stores certain data, including proprietary business information, and has access to confidential or personal information in certain of our businesses that is subject to privacy and ~~security~~cybersecurity laws, regulations and

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customer-imposed controls. Despite our cybersecurity and business continuity measures (including employee and third-party training, monitoring of networks and systems, patching, maintenance, and backup of systems and data), the Company’s information technology networks and infrastructure are still potentially vulnerable to the security risks of our vendors and third-party service providers, security breaches, damage, disruptions or shutdowns due to attacks by threat actors including nation-state actors, computer viruses, hardware, software, and system vulnerabilities, ransomware, service or cloud provider disruptions or security breaches, employee error or malfeasance, power outages, telecommunication or utility failures, systems failures, natural disasters or other catastrophic events. The Company’s increased adoption of remote working, ~~which was~~initially driven by the pandemic, may also introduce additional threats to our

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information technology networks and infrastructure. Despite our cybersecurity measures, it is possible for security vulnerabilities to remain undetected for an extended time period, ~~of time,~~ up to and including several years. While we have experienced, and expect to continue to experience, threats and disruptions to the Company’s information technology infrastructure, none of them to date has had a material impact to the Company. Any such threats or disruptions could result in legal claims or proceedings, disclosures to regulators, liability or penalties under privacy laws, interference with the Company’s operations, and damage to the Company’s reputation, which could adversely affect the Company’s business. Although the Company maintains insurance coverage for various cybersecurity and business continuity risks, there can be no guarantee that all costs or losses incurred will be fully insured.

* Acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring could affect future results.

The Company monitors its business portfolio and organizational structure and has made and may continue to make acquisitions, strategic alliances, divestitures and changes to its organizational structure. With respect to acquisitions, including, for example, the ~~recently completed~~ acquisition of Acelity, Inc. and its KCI subsidiaries (a leading global medical technology company), future results will be affected by the Company’s ability to integrate acquired businesses quickly and obtain the anticipated synergies. The Company realigned from five to four business segments, effective in April of 2019, to better serve its global customers and markets. Successful execution of the realignment and the associated adjustments of our portfolio and business operating model, as well as other organizational changes, will be important to the Company’s future results.

* The Company’s future results may be affected by its operational execution, including scenarios where the Company generates fewer productivity improvements than estimated.

The Company’s financial results depend on the successful execution of its business operating plans. The Company utilizes various tools, such as Lean Six Sigma, and engages in ongoing global business transformation. Business transformation is defined as changes in processes and internal/external service delivery across 3M to move to more efficient business models to improve operational efficiency and productivity, while allowing 3M to serve customers with greater speed and efficiency. This is enabled by the ongoing multi-year phased implementation of an ERP system. There can be no assurance that all of the projected productivity improvements will be realized. In addition, the ability to adapt to business model and other changes and agility to respond to customer needs and service expectations are important, which, if not done successfully, could negatively impact the Company’s ability to win new business and enhance revenue and 3M’s brand. Operational challenges, including those related to customer service, pace of change and productivity improvements, could have a material adverse effect on the Company’s business, financial conditions and results of operations.

Risks Related to Financial and Capital Markets

and Tax Matters

* The Company's defined benefit pension and postretirement plans are subject to financial market risks that could adversely impact our results.

The performance of financial markets and discount rates impact the Company's funding obligations under its defined benefit plans. Significant changes in market interest rates, decreases in the fair value of plan assets and investment losses on plan assets, and legislative or regulatory changes relating to defined benefit plan funding may increase the Company's funding obligations and adversely impact its results of operations and cash flows.

~~Table of Contents~~

* Change in the Company’s credit ratings could increase cost of funding.

The Company’s credit ratings are important to 3M’s cost of capital. The major rating agencies routinely evaluate the Company’s credit profile and assign debt ratings to 3M. This evaluation is based on a number of factors, which include financial strength, business and financial risk, as well as transparency with rating agencies and timeliness of financial reporting. 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 credit ratings have served to lower 3M’s borrowing costs and facilitate access to a variety of lenders. The addition of further leverage to the Company’s capital structure could impact 3M’s credit ratings in the future. Failure to maintain strong investment grade ratings would adversely affect the Company’s cost of funding and could adversely affect liquidity and access to capital markets.

Table of Contents

* Changes in tax rates, laws or regulations could adversely impact our financial results.

The Company’s business is subject to tax-related external conditions, such as tax rates, tax laws and regulations, changing political environments in the U.S. and foreign jurisdictions that impact tax examination, assessment and enforcement approaches. In addition, changes in tax laws including further regulatory developments arising from U.S. tax reform legislation and/or regulations around the world could result in a tax expense or benefit recorded to the Company’s Consolidated Statement of Earnings. In connection with the Base Erosion and Profit Shifting (BEPS) Integrated Framework provided by Organization for Economic Cooperation and Development (OECD), determination of multi-jurisdictional taxation rights and the rate of tax applicable to certain types of income may be subject to potential change. Due to uncertainty of the regulation changes and other tax-related factors stated above, it is currently not possible to assess the ultimate impact of these actions on our financial statements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

Repurchases of 3M common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes. In November 2018, 3M’s Board of Directors replaced the Company’s February 2016 repurchase program with a new repurchase program. This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date.

Issuer Purchases of Equity

Securities (registered pursuant to

Section 12 of the Exchange Act)

Maximum

Approximate

Dollar Value of

Total Number of

Shares that May

Shares Purchased

Yet Be Purchased

Total Number of

Average Price

as Part of Publicly

under the Plans

Shares Purchased

Paid per

Announced Plans

or Programs

Period

(1)

Share

or Programs (2)

(Millions)

January 1-31, 2020

567,358

$
175.01

567,162

$
7,973

February 1-29, 2020

752,388

$
157.29

750,262

$
7,855

March 1-31, 2020

723,676

$
140.55

723,676

$
7,753

Total January 1-March 31, 2020

2,043,422

$
156.28

2,041,100

$
7,753

April 1-30, 2020

86

$
133.13

—

$
7,753

May 1-31, 2020

—

$
—

—

$
7,753

June 1-30, 2020

—

$
—

—

$
7,753

Total April 1-June 30, 2020

86

$
114.18

—

$
7,753

July 1-31, 2020

—

$
—

—

$
7,753

August 1-31, 2020

—

$
—

—

$
7,753

September 1-30, 2020

779

$
172.38

—

$
7,753

Total July 1-September 30, 2020

779

$
172.38

—

$
7,753

Total January 1-September 30, 2020

2,044,287

$
156.29

2,041,100

$
7,753


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (Millions)
January 1 - 31, 2021	582	$	176.96	—	$	7,753
February 1 - 28, 2021	494,988	177.92		493,702	7,665
March 1 - 31, 2021	669,754	187.05		669,754	7,540
January 1 - March 31, 2021	1,165,324	183.17		1,163,456	7,540
April 1 - 30, 2021	556,060	197.41		556,060	7,430
May 1 - 31, 2021	844,500	202.50		844,500	7,259
June 1 - 30, 2021	1,097,327	199.03		1,097,327	7,041
April 1 - June 30, 2021	2,497,887	199.84		2,497,887	7,041
January 1 - June 30, 2021	3,663,211	194.54		3,661,343	7,041
July 1 - 31, 2021	387,011	199.54		387,011	6,964
August 1 - 31, 2021	444,821	197.32		444,821	6,876
September 1 - 30, 2021	2,180,441	181.88		2,180,441	6,479
July 1 - September 30, 2021	3,012,273	186.43		3,012,273	6,479
January 1 - September 30, 2021	6,675,484	190.88		6,673,616	6,479

____________________

(1)The total number of shares purchased includes: (i) shares purchased under the Board’s authorizations described above, and (ii) shares purchased in connection with the exercise of stock options.

~~(1)~~

~~The total number of shares purchased includes: (i) shares purchased under the Board’s authorizations described above, and (ii) shares purchased in connection with the exercise of stock options.~~

(2)

~~(2)~~

The total number of shares purchased as part of publicly announced plans or programs includes shares purchased under the Board’s authorizations described above.

~~Table of Contents~~

Item 3. Defaults Upon Senior Securities. — No matters require disclosure.

Table of Contents

Item 4. Mine Safety ~~Disclosures~~.Disclosures. Pursuant to Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), the Company is required to disclose, in connection with the mines it operates, information concerning mine safety violations or other regulatory matters in its periodic reports filed with the SEC. The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Act is included in Exhibit 95 to this quarterly report.

Item 5. Other Information.— No matters require disclosure.

Item 6. Exhibits.



(31.1)	~~(31.1)~~	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
(31.2)	~~(31.2)~~	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
(32.1)	~~(32.1)~~	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
(32.2)	~~(32.2)~~	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
(95)	~~(95)~~	Mine Safety Disclosures.
(101.INS)	~~(101.INS)~~	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
(101.SCH)	~~(101.SCH)~~	Inline XBRL Taxonomy Extension Schema Document
(101.CAL)	~~(101.CAL)~~	Inline XBRL Taxonomy Extension Calculation Linkbase Document
(101.DEF)	~~(101.DEF)~~	Inline XBRL Taxonomy Extension Definition Linkbase Document
(101.LAB)	~~(101.LAB)~~	Inline XBRL Taxonomy Extension Label Linkbase Document
(101.PRE)	~~(101.PRE)~~	Inline XBRL Taxonomy Extension Presentation Linkbase Document
(104)	~~(104)~~	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

3M COMPANY

(Registrant)

~~Date: October 27, 2020~~

		~~Monish Patolawala,~~

	Date: October 26, 2021
		By	By	/s/ Monish Patolawala

~~Senior~~			Monish Patolawala,

		Executive Vice President and Chief Financial and Transformation Officer
~~(Mr.~~ (Mr. Patolawala is a Principal Financial Officer and has
been duly authorized to sign on behalf of the Registrant.)


Delaware						41-0417775
(State or other jurisdiction of incorporation)						(IRS Employer Identification No.)

3M Center,, St. Paul,, Minnesota						55144-1000
(Address of Principal Executive Offices)						(Zip Code)

(Registrant’s Telephone Number, Including Area Code) (~~651~~) (651) 733-1110 ~~Not Applicable~~

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)


Class						Outstanding at September 30, ~~2020~~ 2021
Common Stock, $0.01 par value per share						~~576,821,878~~576,252,803 shares


	TABLE OF CONTENTS	BEGINNING PAGE
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements	3
	Index to Financial Statements:
	Consolidated Statement of Income	3
	Consolidated Statement of Comprehensive Income	4
	Consolidated Balance Sheet	5
	Consolidated Statement of Cash Flows	6
	Notes to Consolidated Financial Statements	7
	Note 1. Significant Accounting Policies	7
	Note 2. Revenue	10
	Note 3. Acquisitions and Divestitures	13
	Note 4. Goodwill and Intangible Assets	14 13
	Note 5. Restructuring Actions	16 15
	Note 6. Supplemental Income Statement Information	18 16
	Note 7. Supplemental Equity and Comprehensive Income Information	19 17
	Note 8. Income Taxes	23 20
	Note 9. Marketable Securities ~~and Held-to-Maturity Debt Securities~~	24 21
	Note 10. Long-Term Debt and Short-Term Borrowings	24 21
	Note 11. Pension and Postretirement Benefit Plans	25 22
	Note 12. Derivatives	27 23
	Note 13. Fair Value Measurements	34 27
	Note 14. Commitments and Contingencies	36 30
	Note 15. Stock-Based Compensation	52 48
	Note 16. Business Segments	55 51

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53
	Index to Management’s Discussion and Analysis:
	Overview	58 53
	Results of Operations	67 62
	Performance by Business Segment	71 64
	Financial Condition and Liquidity	77 69
	Cautionary Note Concerning Factors That May Affect Future Results	83 74

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	83 75

ITEM 4.	Controls and Procedures	84 75

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	85 77

ITEM 1A.	Risk Factors	85 77

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89 81

ITEM 3.	Defaults Upon Senior Securities	90 81

ITEM 4.	Mine Safety Disclosures	90 82

ITEM 5.	Other Information	90 82

ITEM 6.	Exhibits	90 82


	Three months ended				Nine months ended
	September 30,				September 30,
(Millions, except per share amounts)	2020		2019		2020		2019
Net sales	$	8,350	$	7,991	$	23,601	$	24,025
Operating expenses
Cost of sales		4,303		4,188		12,217		12,811
Selling, general and administrative expenses		1,677		1,455		5,039		5,089
Research, development and related expenses		461		443		1,422		1,390
Gain on sale of businesses		—		(106)		(389)		(114)
Total operating expenses		6,441		5,980		18,289		19,176
Operating income		1,909		2,011		5,312		4,849

Other expense (income), net		104		45		311		349

Income before income taxes		1,805		1,966		5,001		4,500
Provision for income taxes		387		378		1,002		888
Income of consolidated group		1,418		1,588		3,999		3,612

Income (loss) from unconsolidated subsidiaries, net of taxes		(1)		—		(1)		—
Net income including noncontrolling interest		1,417		1,588		3,998		3,612

Less: Net income (loss) attributable to noncontrolling interest		4		5		3		11

Net income attributable to 3M	$	1,413	$	1,583	$	3,995	$	3,601

Weighted average 3M common shares outstanding — basic		577.8		576.5		577.2		577.2
Earnings per share attributable to 3M common shareholders — basic	$	2.45	$	2.75	$	6.92	$	6.24

Weighted average 3M common shares outstanding — diluted		582.4		583.0		581.6		585.9
Earnings per share attributable to 3M common shareholders — diluted	$	2.43	$	2.72	$	6.87	$	6.15


	September 30,		December 31,
(Dollars in millions, except per share amount)	2020		2019
Assets
Current assets
Cash and cash equivalents	$	4,121	$	2,353
Marketable securities — current		440		98
Accounts receivable — net of allowances of $228 and $161		4,623		4,791
Inventories
Finished goods		1,859		2,003
Work in process		1,224		1,194
Raw materials and supplies		901		937
Total inventories		3,984		4,134
Prepaids		516		704
Other current assets		426		891
Total current assets		14,110		12,971
Property, plant and equipment		26,452		26,124
Less: Accumulated depreciation		(17,236)		(16,791)
Property, plant and equipment — net		9,216		9,333
Operating lease right of use assets		844		858
Goodwill		13,535		13,444
Intangible assets — net		5,926		6,379
Other assets		1,759		1,674
Total assets	$	45,390	$	44,659
Liabilities
Current liabilities
Short-term borrowings and current portion of long-term debt	$	1,169	$	2,795
Accounts payable		2,208		2,228
Accrued payroll		721		702
Accrued income taxes		220		194
Operating lease liabilities — current		252		247
Other current liabilities		2,840		3,056
Total current liabilities		7,410		9,222

Long-term debt		18,429		17,518
Pension and postretirement benefits		3,679		3,911
Operating lease liabilities		605		607
Other liabilities		3,324		3,275
Total liabilities	$	33,447	$	34,533
Commitments and contingencies (Note 14)
Equity
3M Company shareholders’ equity:
Common stock par value, $.01 par value; 944,033,056 shares issued	$	9	$	9
Shares outstanding - September 30, 2020: 576,821,878
Shares outstanding - December 31, 2019: 575,184,835
Additional paid-in capital		6,116		5,907
Retained earnings		43,285		42,135
Treasury stock, at cost:		(29,570)		(29,849)
Shares at September 30, 2020: 367,211,178
Shares at December 31, 2019: 368,848,221
Accumulated other comprehensive income (loss)		(7,960)		(8,139)
Total 3M Company shareholders’ equity		11,880		10,063
Noncontrolling interest		63		63
Total equity	$	11,943	$	10,126
Total liabilities and equity	$	45,390	$	44,659


	Nine months ended
	September 30,
(Millions)	2020		2019
Cash Flows from Operating Activities
Net income including noncontrolling interest	$	3,998	$	3,612
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities
Depreciation and amortization		1,413		1,130
Company pension and postretirement contributions		(122)		(129)
Company pension and postretirement expense		295		242
Stock-based compensation expense		216		230
Gain on sale of businesses		(389)		(111)
Deferred income taxes		(57)		(88)
Loss on deconsolidation of Venezuelan subsidiary		—		162
Changes in assets and liabilities
Accounts receivable		113		(14)
Inventories		43		255
Accounts payable		(48)		(222)
Accrued income taxes (current and long-term)		146		(53)
Other — net		(10)		(282)
Net cash provided by (used in) operating activities		5,598		4,732

Cash Flows from Investing Activities
Purchases of property, plant and equipment (PP&E)		(1,079)		(1,161)
Proceeds from sale of PP&E and other assets		29		91
Acquisitions, net of cash acquired		(25)		(704)
Purchases of marketable securities and investments		(1,069)		(917)
Proceeds from maturities and sale of marketable securities and investments		1,239		1,265
Proceeds from sale of businesses, net of cash sold		576		236
Other — net		8		45
Net cash provided by (used in) investing activities		(321)		(1,145)

Cash Flows from Financing Activities
Change in short-term debt — net		(138)		(466)
Repayment of debt (maturities greater than 90 days)		(2,477)		(871)
Proceeds from debt (maturities greater than 90 days)		1,745		6,116
Purchases of treasury stock		(366)		(1,243)
Proceeds from issuance of treasury stock pursuant to stock option and benefit plans		325		437
Dividends paid to shareholders		(2,540)		(2,488)
Other — net		(47)		(158)
Net cash provided by (used in) financing activities		(3,498)		1,327

Effect of exchange rate changes on cash and cash equivalents		(11)		(36)

Net increase (decrease) in cash and cash equivalents		1,768		4,878
Cash and cash equivalents at beginning of year		2,353		2,853
Cash and cash equivalents at end of period	$	4,121	$	7,731


	Three months ended September 30, 2019
Net Sales (Millions)	Americas		Asia Pacific		Europe, Middle East and Africa		Other Unallocated		Worldwide
Safety and Industrial	$	1,497	$	706	$	626	$	—	$	2,829
Transportation and Electronics		749		1,388		362		1		2,500
Health Care		973		360		388		—		1,721
Consumer		975		228		140		(1)		1,342
Corporate and Unallocated		27		1		1		(1)		28
Elimination of Dual Credit		(185)		(193)		(52)		1		(429)
Total Company	$	4,036	$	2,490	$	1,465	$	—	$	7,991


(Millions)	Safety and Industrial		Transportation and Electronics		Health Care		Consumer		Total Company
Balance as of December 31, 2019	$	4,621	$	1,830	$	6,739	$	254	$	13,444
Acquisition activity		—		—		(34)		—		(34)
Divestiture activity		—		(10)		(19)		—		(29)
Translation and other		(7)		13		143		5		154
Balance as of September 30, 2020	$	4,614	$	1,833	$	6,829	$	259	$	13,535


	Remainder of												After
(Millions)	2020		2021		2022		2023		2024		2025		2025
Amortization expense	$	132	$	524	$	511	$	485	$	460	$	428	$	2,748


(Millions)	First Nine Months of 2021
Cost of sales	$	18
Selling, general and administrative expenses	74
Research, development and related expenses	15
Total operating income impact	$	107


(Millions)	Employee-Related
Accrued restructuring action balance as of December 31, 2020	$	101
Incremental expense incurred in the first quarter of 2021	14
Incremental expense incurred in the second quarter of 2021	43
Incremental expense incurred in the third quarter of 2021	50
Cash payments	(94)
Adjustments	(8)
Accrued restructuring action balances as of September 30, 2021	$	106


(Millions)	Second Quarter 2020
Cost of sales	$	42
Selling, general and administrative expenses		12
Research, development and related expenses		1
Total operating income impact	$	55


(Millions)	Employee-Related		Asset-Related and Other		Total
Expense incurred in the second quarter of 2020	$	32	$	23	$	55
Non-cash changes		—		(14)		(14)
Cash payments		(7)		—		(7)
Accrued divestiture-related restructuring action balances as of September 30, 2020	$	25	$	9	$	34


(Millions)	Employee-Related		Asset-Related		Total
Expense incurred in the second quarter of 2020	$	35	$	23	$	58
Non-cash changes		—		(23)		(23)
Adjustments		(9)		—		(9)
Accrued restructuring action balances as of September 30, 2020	$	26	$	—	$	26


(Millions)	Second Quarter 2019
Cost of sales	$	18
Selling, general and administrative expenses		89
Research, development and related expenses		5
Total operating income impact		112
Other expense (income), net		36
Total income before taxes impact	$	148


			3M Company Shareholders
			Common						Accumulated
			Stock and						Other
			Additional						Comprehensive		Non-
			Paid-in		Retained		Treasury		Income		controlling
(Millions)	Total		Capital		Earnings		Stock		(Loss)		Interest
Balance at June 30, 2020	$	10,915	$	6,083	$	42,759	$	(29,699)	$	(8,286)	$	58

Net income		1,417				1,413						4
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment		271								270		1
Defined benefit pension and post-retirement plans adjustment		127								127		—
Cash flow hedging instruments		(71)								(71)		—
Total other comprehensive income (loss), net of tax		327
Dividends declared		(847)				(847)
Stock-based compensation		42		42
Reacquired stock		(1)						(1)
Issuances pursuant to stock option and benefit plans		90				(40)		130
Balance at September 30, 2020	$	11,943	$	6,125	$	43,285	$	(29,570)	$	(7,960)	$	63


							Total
			Defined Benefit		Cash Flow		Accumulated
			Pension and		Hedging		Other
	Cumulative		Postretirement		Instruments,		Comprehensive
	Translation		Plans		Unrealized		Income
(Millions)	Adjustment		Adjustment		Gain (Loss)		(Loss)
Balance at June 30, 2020, net of tax:	$	(2,234)	$	(6,032)	$	(20)	$	(8,286)
Other comprehensive income (loss), before tax:
Amounts before reclassifications		237		—		(72)		165
Amounts reclassified out		—		163		(21)		142
Total other comprehensive income (loss), before tax		237		163		(93)		307
Tax effect		33		(36)		22		19
Total other comprehensive income (loss), net of tax		270		127		(71)		326
Balance at September 30, 2020, net of tax:	$	(1,964)	$	(5,905)	$	(91)	$	(7,960)


	Amount Reclassified from
Details about Accumulated Other	Accumulated Other Comprehensive Income
Comprehensive Income Components	Three months ended September 30,				Nine months ended September 30,				Location on Income
(Millions)	2020		2019		2020		2019		Statement
Cumulative translation adjustment
Deconsolidation of Venezuelan subsidiary	$	—	$	—	$	—	$	(142)	Other income (expense), net
Total before tax		—		—		—		(142)
Tax effect		—		—		—		—	Provision for income taxes
Net of tax	$	—	$	—	$	—	$	(142)

Defined benefit pension and postretirement plans adjustments
Gains (losses) associated with defined benefit pension and postretirement plans amortization
Transition asset	$	(1)	$	—	$	(2)	$	—	See Note 11
Prior service benefit		15		18		46		50	See Note 11
Net actuarial loss		(176)		(119)		(530)		(358)	See Note 11
Curtailments/Settlements		(1)		—		(3)		—	See Note 11
Deconsolidation of Venezuelan subsidiary		—		—		—		(2)	Other income (expense), net
Total before tax		(163)		(101)		(489)		(310)
Tax effect		36		25		118		70	Provision for income taxes
Net of tax	$	(127)	$	(76)	$	(371)	$	(240)

Cash flow hedging instruments gains (losses)
Foreign currency forward/option contracts	$	23	$	22	$	74	$	50	Cost of sales
Interest rate contracts		(2)		(1)		(6)		(2)	Interest expense
Total before tax		21		21		68		48
Tax effect		(5)		(4)		(16)		(9)	Provision for income taxes
Net of tax	$	16	$	17	$	52	$	39
Total reclassifications for the period, net of tax	$	(111)	$	(59)	$	(319)	$	(343)


(Millions)	September 30, 2020			December 31, 2019
Corporate debt securities	$	7		$	—
Commercial paper		233			85
Certificates of deposit/time deposits		47			10
U.S. treasury securities		150			—
U.S. municipal securities		3			3
Current marketable securities	$	440	��	$	98

U.S. municipal securities	$	34		$	43
Non-current marketable securities	$	34		$	43

Total marketable securities	$	474		$	141


	Three months ended September 30,
	Qualified and Non-qualified
	Pension Benefits								Postretirement
	United States				International				Benefits
(Millions)	2020		2019		2020		2019		2020		2019
Net periodic benefit cost (benefit)
Operating expense
Service cost	$	66	$	63	$	39	$	32	$	11	$	10
Non-operating expense
Interest cost	$	124	$	155	$	31	$	40	$	16	$	20
Expected return on plan assets		(255)		(260)		(77)		(75)		(20)		(20)
Amortization of transition asset		—		—		1		—		—		—
Amortization of prior service benefit		(6)		(6)		(1)		(3)		(8)		(9)
Amortization of net actuarial loss		134		91		30		20		12		8
Settlements, curtailments, special termination benefits and other		—		—		—		—		1		—
Total non-operating expense (benefit)		(3)		(20)		(16)		(18)		1		(1)
Total net periodic benefit cost (benefit)	$	63	$	43	$	23	$	14	$	12	$	9


	Pretax Gain (Loss)
	Recognized in Other		Pretax Gain (Loss) Reclassified
	Comprehensive		from Accumulated Other
	Income on Derivative		Comprehensive Income into Income
Three months ended September 30, 2020 (Millions)	Amount		Location	Amount
Foreign currency forward/option contracts	$	(72)	Cost of sales	$	23
Interest rate contracts		—	Interest expense		(2)
Total	$	(72)		$	21


					Cumulative Amount of Fair Value Hedging
	Carrying Value of the				Adjustment Included in the Carrying Value
	Hedged Liabilities (in millions)				of the Hedged Liabilities (in millions)
Location on the Consolidated Balance Sheet	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Short-term borrowings and current portion of long-term debt	$	205	$	499	$	5	$	—
Long-term debt		581		775		13		22
Total	$	786	$	1,274	$	18	$	22


	Gross		Assets			Liabilities
	Notional			Fair			Fair
September 30, 2020 (Millions)	Amount		Location	Value Amount		Location	Value Amount
Derivatives designated as
hedging instruments
Foreign currency forward/option contracts	$	1,675	Other current assets	$	40	Other current liabilities	$	24
Foreign currency forward/option contracts		722	Other assets		23	Other liabilities		7
Interest rate contracts		200	Other current assets		5	Other current liabilities		—
Interest rate contracts		403	Other assets		8	Other liabilities		—
Total derivatives designated as hedging instruments				$	76		$	31

Derivatives not designated as
hedging instruments
Foreign currency forward/option contracts	$	3,697	Other current assets	$	19	Other current liabilities	$	15
Total derivatives not designated as hedging instruments				$	19		$	15

Total derivative instruments				$	95		$	46


	Gross Notional Amount	Assets			Liabilities
September 30, 2021 (Millions)		Location	Fair Value Amount		Location	Fair Value Amount
Derivatives designated as hedging instruments
Foreign currency forward/option contracts	1,796	Other current assets	$	41	Other current liabilities	$	17
Foreign currency forward/option contracts	792	Other assets	31		Other liabilities	3
Interest rate contracts	403	Other current assets	1		Other current liabilities	—
Interest rate contracts	800	Other assets	3		Other liabilities	—
Total derivatives designated as hedging instruments			76			20

Derivatives not designated as hedging instruments
Foreign currency forward/option contracts	5,269	Other current assets	8		Other current liabilities	20
Total derivatives not designated as hedging instruments			8			20

Total derivative instruments			$	84		$	40


			Gross Amounts not Offset in the
			Consolidated Balance Sheet that are Subject
	Gross Amount of		to Master Netting Agreements
	Derivative Assets		Gross Amount of
	Presented in the		Eligible Offsetting		Cash
	Consolidated		Recognized		Collateral		Net Amount of
September 30, 2020 (Millions)	Balance Sheet		Derivative Liabilities		Received		Derivative Assets
Derivatives subject to master netting agreements	$	95	$	27	$	—	$	68
Derivatives not subject to master netting agreements		—						—
Total	$	95					$	68


December 31, 2019 (Millions)
Derivatives subject to master netting agreements	$	142	$	14	$	—	$	128
Derivatives not subject to master netting agreements		—						—
Total	$	142					$	128


	Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet		Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
September 30, 2021 (Millions)			Gross Amount of Eligible Offsetting Recognized Derivative Liabilities		Cash Collateral Received		Net Amount of Derivative Assets
Derivatives subject to master netting agreements	$	84	$	20	$	—	$	64
Derivatives not subject to master netting agreements	—						—
Total	$	84					$	64


December 31, 2020 (Millions)
Derivatives subject to master netting agreements	$	44	$	11	$	—	$	33
Derivatives not subject to master netting agreements	—						—
Total	$	44					$	33


			Fair Value Measurements
Description	Fair Value at		Using Inputs Considered as
(Millions)	September 30, 2020		Level 1		Level 2		Level 3
Assets:
Available-for-sale:
Marketable securities:
Corporate debt securities	$	7	$	—	$	7	$	—
Commercial paper		233		—		233		—
Certificates of deposit/time deposits		47		—		47		—
U.S. treasury securities		150		150		—		—
U.S. municipal securities		37		—		—		37
Investments		5		5		—		—
Derivative instruments — assets:
Foreign currency forward/option contracts		82		—		82		—
Interest rate contracts		13		—		13		—

Liabilities:
Derivative instruments — liabilities:
Foreign currency forward/option contracts		46		—		46		—


	Three months ended				Nine months ended
Marketable securities — certain U.S. municipal securities only	September 30,				September 30,
(Millions)	2020		2019		2020		2019
Beginning balance	$	37	$	49	$	46	$	40
Total gains or losses:
Included in earnings		0		0		0		0
Included in other comprehensive income		0		0		0		0
Purchases and issuances		0		0		10		9
Sales and settlements		0		0		(19)		0
Transfers in and/or out of level 3		0		0		0		0
Ending balance	$	37	$	49	$	37	$	49
Change in unrealized gains or losses for the period included in earnings for securities held at the end of the reporting period		—		—		—		—


				Weighted
				Average
		Weighted		Remaining	Aggregate
	Number of	Average		Contractual	Intrinsic Value
(Options in thousands)	Options	Exercise Price		Life (months)	(millions)
Under option —
January 1	33,675	$	151.15
Granted:
Annual	4,741		157.26
Other	36		155.43
Exercised	(2,132)		91.51
Forfeited	(250)		179.87
September 30	36,070	$	155.28	65	$	643
Options exercisable
September 30	28,189	$	148.59	54	$	629


	Annual
	2020
Exercise price	$	157.24
Risk-free interest rate		1.5	%
Dividend yield		2.7	%
Expected volatility		19.7	%
Expected life (months)		78
Black-Scholes fair value	$	21.58


	Three months ended		Nine months ended
(Earnings per diluted share)	September 30, 2020		September 30, 2020
Same period last year	$	2.72	$	6.15
Significant litigation-related charges/benefits		—		0.72
Loss on deconsolidation of Venezuelan subsidiary		—		0.28
Gain/loss on sale of businesses		(0.14)		(0.22)
Same period last year, excluding special items	$	2.58	$	6.93
Increase/(decrease) in earnings per share - diluted, due to:
Organic growth/productivity and other		(0.08)		(0.31)
Acquisitions/divestitures		0.01		(0.11)
Foreign exchange impacts		—		(0.13)
Income tax rate		(0.08)		(0.07)
Shares of common stock outstanding		—		0.05
Current period, excluding special items	$	2.43	$	6.36
Significant litigation-related charges/benefits		—		0.07
Gain/loss on sale of businesses		—		0.52
Divestiture-related restructuring actions		—		(0.08)
Current period	$	2.43	$	6.87