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SECURITIES EXCHANGE ACT OF 1934
2023
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SECURITIES REGISTERED PURSUANT TO SECTION
Title of each class | Trading Symbol(s) | Name of each exchange | ||||||||||||
Common Stock, Par Value $.01 Per Share
| MMM | New York Stock Exchange | ||||||||||||
| MMM | Chicago Stock Exchange, Inc. | |||||||||||||
| 1.500% Notes due 2026
| MMM26 | New York Stock Exchange | ||||||||||||
| 1.750% Notes due 2030 | MMM30 | New York Stock Exchange | ||||||||||||
| 1.500% Notes due 2031 | MMM31 | New York Stock Exchange Chicago Stock Exchange, Inc.
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ☒
Large accelerated filer | x | Accelerated filer | o | Non-accelerated filer | o | Smaller reporting company | ☐ | Emerging growth company | |||||||||||||||||||||
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Pursuant to Part IV, Item 16, a summary of Form 10-K content follows, including hyperlinked cross-references (in the EDGAR filing). This allows users to easily locate the corresponding items in Form 10-K, where the disclosure is fully presented. The summary does not include certain Part III information that will be incorporated by reference from the proxy statement, which will be filed after this Form 10-K filing.
| TABLE OF CONTENTS | PAGE | |||||||
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||||
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk | ||||||||
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| TABLE OF CONTENTS | PAGE | |||||||
Item 9. Changes in and Disagreements | ||||||||
Item 10. Directors, Executive Officers and Corporate Governance | ||||||||
Item 13. Certain Relationships and Related Transactions, and Director Independence | ||||||||
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3M COMPANY
2023
Distribution : 3M products are sold through numerous distribution channels, including directly to users and through numerous e-commerce and traditional wholesalers, retailers, jobbers, distributors and dealers in a wide variety of trades in many countries around the world. Management believes the confidence of wholesalers, retailers, jobbers, distributors and dealers in 3M and its products — a confidence developed through long association with skilled marketing and sales representatives — has contributed significantly to 3M’s position in the marketplace and to its growth. Licenses Environmental Law Compliance : The Company’s business operations are subject to various governmental regulations in the U.S. and internationally, including, among others, those related to product liability; antitrust; intellectual property; environmental, health, and safety; tax; the U.S. Foreign Corrupt Practices Act and other anti-bribery laws, international import and export requirements and 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, such as the False Claims Act, anti-kickback laws and the Sunshine Act. Name Age Present Position Year Elected Other Positions Held During 2013-2017 Inge. G. Thulin 64 Chairman of the Board, President and Chief Executive Officer 2012 John P. Banovetz 50 Senior Vice President, Research and Development and Chief Technology Officer 2017 Managing Director, DACH Region, 2016-2017 Vice President, Corporate Research Laboratory, Research and Development, 2015-2016 Global Business Director, Industrial Adhesives and Tapes Division, 2012-2015 James L. Bauman 58 Executive Vice President, Industrial Business Group 2017 Executive Vice President, Electronics and Energy Business Group, 2015-2017 Senior Vice President, Business Transformation, Americas, 2015 Senior Vice President, Asia Pacific, 2012-2014 Julie L. Bushman 56 Executive Vice President, International Operations 2017 Senior Vice President, Business Transformation and Information Technology, 2013-2017 Executive Vice President, Safety and Graphics, 2012-2013 Name Age Present Position Year Elected Other Positions Held During 2013-2017 Joaquin Delgado 57 Executive Vice President, Consumer Business Group 2016 Executive Vice President, Health Care Business Group 2012-2016 Ivan K. Fong 56 Senior Vice President, Legal Affairs and General Counsel 2012 Nicholas C. Gangestad 53 Senior Vice President and Chief Financial Officer 2014 Vice President, Corporate Controller and Chief Accounting Officer, 2011-2014 Eric D. Hammes 43 Senior Vice President, Business Transformation & Information Technology 2017 Vice President, Corporate Controller and Chief Accounting Officer, 2014-2017 Vice President, Finance, International and Staff Operations, 2013-2014 Finance Director, Health Care Business, 2012-2013 Paul A. Keel 48 Senior Vice President, Business Development and Marketing-Sales 2017 Senior Vice President, Supply Chain, 2014-2017 Managing Director, 3M United Kingdom-Ireland Region, 2013-2014 Vice President and General Manager, Skin and Wound Care Division, 2010-2013 Ashish K. Khandpur 50 Executive Vice President, Electronics & Energy Business Group 2017 Senior Vice President, Research and Development, and Chief Technology Officer, 2014-2017 Vice President and General Manager, Personal Safety Division, 2014 Vice President, Research and Development, Industrial Business Group, 2013 Jon T. Lindekugel 53 Senior Vice President, Supply Chain 2017 Senior Vice President, Business Development and Marketing-Sales, 2015-2017 Senior Vice President, Business Development, 2014-2015 President, Health Information Systems Inc., 2008-2014 Frank R. Little 57 Executive Vice President, Safety and Graphics Business Group 2013 Vice President and General Manager, Personal Safety Division, 2013 Kristen M. Ludgate 55 Senior Vice President, Corporate Communications and Enterprise Services 2018 Vice President, Global Human Resources Business Operations, Human Resources, 2017-2018 Vice President, Associate General Counsel and Chief Compliance Officer, Compliance and Business Conduct, 2015-2017 Associate General Counsel, Labor and Employment, Office of General Counsel, 2013-2015 Marlene M. McGrath 55 Senior Vice President, Human Resources 2012 Michael F. Roman 58 Chief Operating Officer and Executive Vice President 2017 Executive Vice President, Industrial Business Group, 2014-2017 Senior Vice President, Business Development, 2013-2014 Vice President and General Manager, Industrial Adhesives and Tapes Division, 2011-2013 Hak Cheol Shin 60 Vice Chair and Executive Vice President 2017 Executive Vice President, International Operations, 2011-2017 Michael G. Vale 51 Executive Vice President, Health Care Business Group 2016 Executive Vice President, Consumer Business Group, 2012-2016 Cautionary Note Concerning Factors That May Affect Future Results operate. For a discussion of the impact of foreign currency exchange rates on the Company, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." * The Company Securities (Per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter Year 2017 High $ 193.50 $ 214.57 $ 214.65 $ 244.23 $ 244.23 2017 Low 173.55 188.62 197.17 210.03 173.55 2016 High $ 167.50 $ 175.14 $ 182.27 $ 180.06 $ 182.27 2016 Low 134.64 163.17 173.51 163.85 134.64 Securities: Issuer Purchases of Equity Securities 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, 2017 1,245,580 $ 177.61 1,245,347 $ 6,835 February 1-28, 2017 1,038,362 $ 182.41 1,037,719 $ 6,645 March 1-31, 2017 1,168,893 $ 190.75 1,168,893 $ 6,422 Total January 1-March 31, 2017 3,452,835 $ 183.50 3,451,959 $ 6,422 April 1-30, 2017 934,900 $ 191.64 933,463 $ 6,244 May 1-31, 2017 1,017,290 $ 197.80 1,017,000 $ 6,042 June 1-30, 2017 396,770 $ 208.83 396,770 $ 5,960 Total April 1-June 30, 2017 2,348,960 $ 197.21 2,347,233 $ 5,960 July 1-31, 2017 431,272 $ 205.00 431,272 $ 5,871 August 1-31, 2017 572,552 $ 204.69 572,552 $ 5,754 September 1-30, 2017 893,559 $ 209.62 893,559 $ 5,567 Total July 1-September 30, 2017 1,897,383 $ 207.08 1,897,383 $ 5,567 October 1-31, 2017 982,356 $ 220.27 980,804 $ 5,351 November 1-30, 2017 621,143 $ 231.38 621,143 $ 5,207 December 1-31, 2017 575,924 $ 237.86 575,924 $ 5,070 Total October 1-December 31, 2017 2,179,423 $ 228.08 2,177,871 $ 5,070 Total January 1-December 31, 2017 9,878,601 $ 201.13 9,874,446 $ 5,070 Item 6. (Dollars in millions, except per share amounts) 2017 2016 2015 2014 2013 Years ended December 31: Net sales $ 31,657 $ 30,109 $ 30,274 $ 31,821 $ 30,871 Net income attributable to 3M 4,858 5,050 4,833 4,956 4,659 Per share of 3M common stock: Net income attributable to 3M — basic 8.13 8.35 7.72 7.63 6.83 Net income attributable to 3M — diluted 7.93 8.16 7.58 7.49 6.72 Cash dividends declared per 3M common share 4.70 4.44 3.075 3.59 3.395 Cash dividends paid per 3M common share 4.70 4.44 4.10 3.42 2.54 At December 31: Total assets $ 37,987 $ 32,906 $ 32,883 $ 31,374 $ 33,304 Long-term debt (excluding portion due within one year) and long-term capital lease obligations 12,156 10,723 8,799 6,764 4,367 Operations References are made to organic sales change (which include both organic volume impacts and selling price impacts), which is defined as the change in net sales, absent the separate impacts on sales from foreign currency translation and acquisitions, net of divestitures. Acquisition and divestiture sales change impacts, if any, are measured separately for the first twelve months post-transaction. 3M believes this information is useful to investors and management in understanding ongoing operations and in analysis of ongoing operating trends. Three months ended Year ended (Earnings per diluted share) December 31, 2017 December 31, 2017 December 31, 2016 Same period last year $ 1.88 $ 8.16 $ 7.58 Increase/(decrease) in earnings per share - diluted, due to: Organic growth/other productivity 0.33 0.86 0.16 Acquisitions and divestitures (0.02) 0.54 0.14 Incremental strategic investments (0.06) (0.51) 0.14 Legal - respirator mask actuarial reserve (0.07) (0.07) — Foreign exchange impacts — (0.13) (0.14) Shares of common stock outstanding — 0.08 0.24 Other net interest (0.09) (0.10) (0.05) Income tax rate, excluding Tax Cuts and Jobs Act (TCJA) 0.13 0.34 0.09 Current period, excluding TCJA $ 2.10 $ 9.17 $ 8.16 TCJA enactment impact (1.25) (1.24) — Current period $ 0.85 $ 7.93 $ 8.16 below. additional discussion). In addition, 3M recorded certain related accelerated depreciation. Three months ended December 31, 2017 Q4 2016 Q4 2017 Adjusted income, earnings per share, & effective tax rate (non-GAAP measures) (Dollars in millions, except per share amounts) Reported GAAP Measure Reported GAAP Measure Adjustment for TCJA Adjusted Non-GAAP Measure Operating income $ 1,665 $ 1,821 $ — $ 1,821 Income before taxes $ 1,610 $ 1,672 $ — $ 1,672 Provision for income taxes $ 454 $ 1,147 $ (762) $ 385 Effective tax rate 28.2 % 68.6 % 23.0 % Net income attributable to 3M $ 1,155 $ 523 $ 762 $ 1,285 Earnings per diluted share $ 1.88 $ 0.85 $ 1.25 $ 2.10 Earnings per diluted share percent change % 11.7 % Year ended December 31, 2017 Year End 2016 Year End 2017 Adjusted income, earnings per share, & effective tax rate (non-GAAP measures) (Dollars in millions, except per share amounts) Reported GAAP Measure Reported GAAP Measure Adjustment for TCJA Adjusted Non-GAAP Measure Operating income $ 7,223 $ 7,820 $ — $ 7,820 Income before taxes $ 7,053 $ 7,548 $ — $ 7,548 Provision for income taxes $ 1,995 $ 2,679 $ (762) $ 1,917 Effective tax rate 28.3 % 35.5 % 25.4 % Net income attributable to 3M $ 5,050 $ 4,858 $ 762 $ 5,620 Earnings per diluted share $ 8.16 $ 7.93 $ 1.24 $ 9.17 Earnings per diluted share percent change % % Three months ended Three months ended 2017 vs 2016 December 31, 2017 December 31, 2016 % change Net % of Oper. Net % of Oper. Net Oper. (Dollars in millions) Sales Total Income Sales Total Income Sales Income Business Segments Industrial $ 2,718 34.0 % $ 527 $ 2,543 34.7 % $ 558 6.9 % (5.5) % Safety and Graphics 1,545 19.3 406 1,343 18.3 271 15.0 50.0 Health Care 1,474 18.4 464 1,390 19.0 413 6.0 12.3 Electronics and Energy 1,321 16.6 334 1,175 16.0 325 12.5 2.6 Consumer 1,174 14.7 269 1,094 14.9 229 7.3 17.6 Corporate and Unallocated (4) — (127) 2 — (83) — — Elimination of Dual Credit (238) (3.0) (52) (218) (2.9) (48) — — Total Company $ 7,990 100.0 % $ 1,821 $ 7,329 100.0 % $ 1,665 9.0 % 9.4 % Three months ended December 31, 2017 Organic Worldwide local- Total Sales Change Analysis currency sales By Business Segment sales Acquisitions Divestitures Translation change Industrial 3.9 % — % — % 3.0 % 6.9 % Safety and Graphics 10.7 10.2 (9.1) 3.2 15.0 Health Care 3.1 0.1 — 2.8 6.0 Electronics and Energy 11.0 — (0.3) 1.8 12.5 Consumer 5.4 — — 1.9 7.3 Total Company 6.0 % 1.8 % (1.5) % 2.7 % 9.0 % 2017 vs 2016 2017 2016 % change Net % of Oper. Net % of Oper. Net Oper. (Dollars in millions) Sales Total Income Sales Total Income Sales Income Business Segments Industrial $ 10,911 34.5 % $ 2,289 $ 10,399 34.5 % $ 2,395 4.9 % (4.4) % Safety and Graphics 6,148 19.4 2,067 5,881 19.5 1,423 4.5 45.3 Health Care 5,813 18.4 1,781 5,566 18.5 1,763 4.4 1.0 Electronics and Energy 5,159 16.3 1,254 4,643 15.4 1,041 11.1 20.4 Consumer 4,589 14.5 993 4,484 14.9 1,065 2.3 (6.8) Corporate and Unallocated 1 — (352) 7 — (272) — — Elimination of Dual Credit (964) (3.1) (212) (871) (2.8) (192) — — Total Company $ 31,657 100.0 % $ 7,820 $ 30,109 100.0 % $ 7,223 5.1 % 8.3 % Year ended December 31, 2017 Worldwide Sales Change Organic local- Total sales By Business Segment currency sales Acquisitions Divestitures Translation change Industrial 4.9 % — % (0.5) % 0.5 % 4.9 % Safety and Graphics 6.1 2.2 (4.3) 0.5 4.5 Health Care 3.9 — — 0.5 4.4 Electronics and Energy 11.0 — (0.2) 0.3 11.1 Consumer 1.7 — — 0.6 2.3 Total Company 5.2 % 0.4 % (1.0) % 0.5 % 5.1 % area: Percent change information compares the Three months ended December 31, 2017 Europe, Latin United Asia Middle East America/ Other States Pacific & Africa Canada Unallocated Worldwide Net sales (millions) $ 3,081 $ 2,474 $ 1,684 $ 756 $ (5) $ 7,990 % of worldwide sales 38.5 % 31.0 % 21.1 % 9.4 % — 100.0 % Components of net sales change: Volume — organic 3.1 % 12.0 % 5.4 % 1.2 % — 5.8 % Price (0.3) (0.1) 1.4 1.3 — 0.2 Organic local-currency sales 2.8 11.9 6.8 2.5 — 6.0 Acquisitions 2.2 0.7 3.2 0.7 — 1.8 Divestitures (2.0) (0.7) (1.7) (1.5) — (1.5) Translation — 2.5 8.8 2.3 — 2.7 Total sales change 3.0 % 14.4 % 17.1 % 4.0 % — 9.0 % Total sales change: Industrial 0.5 % 10.9 % 15.4 % 6.8 % — 6.9 % Safety and Graphics 9.8 % 21.1 % 28.1 % (0.2) % — 15.0 % Health Care 1.1 % 14.4 % 11.7 % 6.1 % — 6.0 % Electronics and Energy 6.1 % 15.8 % 13.4 % 0.6 % — 12.5 % Consumer 4.7 % 11.0 % 16.9 % 8.3 % — 7.3 % Organic local-currency sales change: Industrial 0.5 % 8.1 % 6.1 % 4.7 % — 3.9 % Safety and Graphics 9.4 % 18.2 % 12.4 % 0.7 % — 10.7 % Health Care 1.0 % 10.9 % 3.3 % 3.8 % — 3.1 % Electronics and Energy 7.2 % 14.6 % 6.0 % (1.6) % — 11.0 % Consumer 4.7 % 7.5 % 7.9 % 5.5 % — 5.4 % Year ended December 31, 2017 Europe, Latin United Asia Middle East America/ Other States Pacific & Africa Canada Unallocated Worldwide Net sales (millions) $ 12,372 $ 9,809 $ 6,456 $ 3,033 $ (13) $ 31,657 % of worldwide sales 39.1 % 31.0 % 20.4 % 9.5 % — % Components of net sales change: Volume — organic 2.8 % 11.5 % 2.5 % 2.5 % — 5.2 % Price (0.3) (0.3) 0.7 1.1 — — Organic local-currency sales 2.5 11.2 3.2 3.6 — 5.2 Acquisitions 0.5 0.2 0.7 0.2 — 0.4 Divestitures (1.5) (0.4) (0.8) (1.4) — (1.0) Translation — (0.1) 1.7 2.2 — 0.5 Total sales change 1.5 % 10.9 % 4.8 % 4.6 % — 5.1 % Total sales change: Industrial 3.0 % 7.3 % 5.9 % 4.9 % — 4.9 % Safety and Graphics 1.3 % 8.8 % 8.4 % 0.6 % — 4.5 % Health Care 3.7 % 8.6 % 1.4 % 9.3 % — 4.4 % Electronics and Energy 1.0 % 16.9 % 2.2 % 3.1 % — 11.1 % Consumer 0.2 % 7.8 % 1.7 % 7.2 % — 2.3 % Organic local-currency sales change: Industrial 3.9 % 7.9 % 4.2 % 3.2 % — 4.9 % Safety and Graphics 4.2 % 10.5 % 6.6 % 2.6 % — 6.1 % Health Care 3.7 % 8.5 % 0.2 % 7.0 % — 3.9 % Electronics and Energy 2.0 % 17.0 % — % 1.4 % — 11.0 % Consumer 0.2 % 7.0 % (0.2) % 4.2 % — 1.7 % Year ended December 31, 2016 Europe, Latin United Asia Middle East America/ Other States Pacific & Africa Canada Unallocated Worldwide Net sales (millions) $ 12,188 $ 8,847 $ 6,163 $ 2,901 $ 10 $ 30,109 % of worldwide sales 40.5 % 29.4 % 20.5 % 9.6 % — % Components of net sales change: Volume — organic 0.7 % (2.5) % (0.6) % (2.4) % — (0.8) % Price (0.2) (0.3) 1.0 6.1 — 0.7 Organic local-currency sales 0.5 (2.8) 0.4 3.7 — (0.1) Acquisitions 1.3 0.7 1.7 1.3 — 1.2 Divestitures (0.6) (0.2) (0.7) (0.3) — (0.4) Translation — 0.2 (2.5) (7.4) — (1.2) Total sales change 1.2 % (2.1) % (1.1) % (2.7) % — (0.5) % Total sales change: Industrial (1.6) % 0.9 % 2.8 % (2.2) % — 0.1 % Safety and Graphics 6.9 % 1.6 % (2.7) % — % — 2.5 % Health Care 3.0 % 8.2 % (2.4) % (1.2) % — 2.1 % Electronics and Energy (1.9) % (11.4) % (2.6) % (9.2) % — (8.4) % Consumer 2.4 % 7.2 % (8.2) % (5.9) % — 1.2 % Organic local-currency sales change: Industrial (2.1) % (0.7) % 1.8 % 4.8 % — (0.1) % Safety and Graphics 2.9 % 1.4 % 0.2 % 4.2 % — 2.1 % Health Care 2.6 % 8.0 % 1.2 % 6.9 % — 3.6 % Electronics and Energy (1.9) % (11.4) % (1.0) % (2.3) % — (7.8) % Consumer 2.4 % 6.0 % (6.2) % 0.1 % — 1.8 % Total sales in Mexico increased marketplace. Raw materials: Three months ended December 31, 2017 Year ended December 31, 2017 Divestiture impacts and strategic investments net benefit/(cost) (in millions, except per share amounts) Pre-tax impact Impact per diluted share after-tax Pre-tax impact Impact per diluted share after-tax Divestiture impacts: 2017 divestiture gains $ 96 $ 586 Less: prior year divestiture gains (71) (111) Year-on-year lost operating loss/(income) from divested businesses 1 (1) Year-on-year divestiture impacts, net of operating loss/(income) $ 26 $ 0.05 $ 474 $ 0.61 Strategic investments: 2017 portfolio and footprint optimization activities: Restructuring actions and exit activities, net of adjustments $ (20) $ (143) Asset charges and accelerated depreciation (40) (180) Other costs (4) (30) Less: prior year portfolio and footprint optimization activities 19 40 Year-on-year portfolio and footprint optimization (45) $ (0.05) (313) $ (0.39) Incremental year-on-year growth initiatives (6) (100) Total incremental strategic investments $ (51) $ (0.06) $ (413) $ (0.51) Year-on-year divestiture impacts and strategic investments net benefit/(cost) $ (25) $ (0.01) $ 61 $ 0.10 Three months ended Year ended (Millions) December 31, 2017 December 31, 2017 Industrial $ (79) $ (193) Safety and Graphics 93 553 Health Care 6 (43) Electronics and Energy (40) (120) Consumer 2 (86) Corporate and Unallocated (7) (50) Total pretax divestiture gains, net of strategic investments $ (25) $ 61 Net Sales: Refer to the preceding 2017 versus 2016 versus (Percent of net sales) 2017 2016 2015 2016 2015 Cost of sales 50.6 % 49.9 % 50.9 % 0.7 % (1.0) % Selling, general and administrative expenses 20.8 20.7 20.6 0.1 0.1 Research, development and related expenses 5.8 5.8 5.8 — — Gain on sale of businesses (1.9) (0.4) (0.2) (1.5) (0.2) Operating income margin 24.7 % 24.0 % 22.9 % 0.7 % 1.1 % R&D. pre-tax charge of approximately $1.2 billion was reflected in 2022, discussed in Note 18), certain impairment costs related to exiting PFAS manufacturing (see Note 17), costs related to exiting Russia (see Note 17), divestiture-related restructuring charges (see Note 5), restructuring benefits and ongoing general 3M cost management. Three months ended Year ended (Percent of net sales) December 31, 2017 December 31, 2017 December 31, 2016 Same period last year 22.7 % 24.0 % 22.9 % Increase/(decrease) in operating income margin, due to: Organic volume/other productivity 1.5 1.1 (1.0) Acquisitions and divestitures (0.3) 1.4 0.2 Incremental strategic investments (0.7) (1.4) 0.1 Selling price and raw material impact 0.4 0.4 1.0 Foreign exchange impacts (0.6) (0.5) (0.2) Pension and postretirement benefit costs (0.2) (0.3) 1.0 Current period 22.8 % 24.7 % 24.0 % Advanced Materials reporting unit (within the Transportation and Electronics business) in 2022. Refer to Note 17 for further details. Refer to Note 14 for additional details. (Percent of pre-tax income) 2017 2016 2015 Effective tax rate 35.5 % 28.3 % 29.1 % Net Income (Loss) Attributable to Noncontrolling Interest: (Millions) 2017 2016 2015 Net income attributable to noncontrolling interest $ 11 $ 8 $ 8 19,21, refer to the Notes to Consolidated Financial Statements in Item 8.SECSecurities and Exchange Commission (SEC) maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that the Company files with the SEC at http:https://www.sec.gov. The Company files annual reports, quarterly reports, proxy statements and other documents with the Securities and Exchange Commission (SEC)SEC under the Securities Exchange Act of 1934 (Exchange Act). The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.(http:(https://investors.3M.com) the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.businesses: Industrial; businesses: Safety and Graphics;Industrial; Transportation and Electronics; Health Care; Electronics and Energy; and Consumer. In July 2022, 3M announced its intention to spin off the Health Care business as a separate public company (see Note 3 for additional information). 3M is among the leading manufacturers of products for many of the markets it serves. Most 3M products involve expertise in product development, manufacturing and marketing, and are subject to competition from products manufactured and sold by other technologically oriented companies.At December 31, 2017, the Company employed 91,536 people (full-time equivalents), with 36,958 employed in the United States and 54,578 employed internationally.As described in Notes 3 and 17, effective in the first quarter of 2017, the Company changed its business segment reporting in its continuing effort to improve the alignment of its businesses around markets and customers. Business segment information presented herein reflects the impact of these changes for all periods presented.fivefour business segments. The reportable segments are Industrial, Safety and Graphics,Industrial, Transportation and Electronics, Health Care, Electronics and Energy, and Consumer. 3M’s five 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. FinancialIn July 2022, 3M announced its intention to spin off the Health Care business as a separate public company (see Note 3 for additional information). Refer to segment descriptions summarized below (Financial information and other disclosures relating to 3M’s business segments and operations in major geographic areas are provided in the Notes to Consolidated Financial Statements.Industrial Business: The Industrial segment serves a broad range of markets, such as automotive original equipment manufacturer (OEM) and automotive aftermarket (auto body shops and retail), electronics and automotive electrification, appliance, paper and printing, packaging, food and beverage, and construction. Industrial products include tapes, a wide variety of coated, non-woven and bonded abrasives, adhesives, advanced ceramics, sealants, specialty materials, purification (filtration products), closure systems for personal hygiene products, acoustic systems products, and4Business Segment Safety and Industrial Transportation and Electronics Health Care Consumer Representative revenue-generating activities, products or services Example brands/offerings Representative market trends or opportunities components and products that are used in the manufacture, repair and maintenance of automotive, marine, aircraft and specialty vehicles. 3M is also a leading global supplier of precision grinding technology serving customers in the area of hard-to-grind precision applications in industrial, automotive, aircraft and cutting tools. 3M develops and produces advanced technical ceramics for demanding applications in the automotive, oil and gas, solar, industrial, electronics and defense industries. In August 2015, 3M acquired assets and liabilities associated with Polypore International, Inc.’s Separations Media business, a leading provider of microporous membranes and modules for filtration in the life sciences, industrial and specialty segments. In the first quarter of 2016, 3M sold the assets of its pressurized polyurethane foam adhesives business, and in October 2016 sold the assets of its adhesive-backed temporary protective films business.Major industrial products include vinyl, polyester, foil and specialty industrial tapes and adhesives; Scotch® Masking Tape, Scotch® Filament Tape and Scotch® Packaging Tape; packaging equipment; 3M™ VHB™ Bonding Tapes; conductive, low surface energy, sealants, hot melt, spray and structural adhesives; reclosable fasteners; label materials for durable goods; coated, nonwoven and microstructured surface finishing and grinding abrasives for the industrial market; a comprehensive line of filtration products for the separation, clarification and purification of fluids and gases; and fluoroelastomers for seals, tubes and gaskets in engines.Major industrial products used in the transportation industry include insulation components, including Thinsulate™ Acoustic Insulation and components for cabin noise reduction and catalytic converters; functional and decorative graphics; abrasion-resistant films; adhesives; sealants; masking tapes; fasteners and tapes for attaching nameplates, trim, moldings, interior panels and carpeting; coated, nonwoven and microstructured finishing and grinding abrasives; structural adhesives; and other specialty materials. In addition, 3M provides paint finishing and detailing products, including a complete system of cleaners, dressings, polishes, waxes and other products.Safety and Graphics Business: The Safety and Graphics segment serves a broad range of markets that increase the safety and productivity of people, facilities and systems. Major product offerings include personal protection products, such as respiratory, hearing, eye and fall protection equipment; commercial solutions, including commercial graphics sheeting and systems, architectural design solutions for surfaces, and cleaning and protection products for commercial establishments; transportation safety solutions, such as retroreflective sign sheeting; and roofing granules for asphalt shingles. In August 2015, 3M acquired Capital Safety Group S.A.R.L., a leading global provider of fall protection equipment. As discussed in Note 2, in October 2017, 3M completed the acquisition of the underlying legal entities and associated assets of Scott Safety, a premier manufacturer of innovative products, including self-contained breathing apparatus systems, gas and flame detection instruments, and other safety devices that complement 3M’s personal safety portfolio. In January 2017, 3M sold the assets of its safety prescription eyewear business.This segment’s products include personal protection products, such as certain disposable and reusable respirators, fall protection equipment, personal protective equipment, head and face protection, body protection, hearing protection and protective eyewear, plus reflective materials that are widely used on apparel, footwear and accessories, enhancing visibility in low-light situations.Major commercial graphics products include films, inks, and related products used to produce graphics for vehicles, signs and interior surfaces.In transportation safety, 3M provides reflective sheeting used on highway signs, vehicle license plates, construction work-zone devices, trucks and other vehicles, and also provides pavement marking systems. In December 2015, 3M sold Faab Fabricauto, a French manufacturer of license plates and signage solutions, and in the first quarter of 2016 completed the sale of its library systems business. As discussed in Note 2, in May 2017, 3M completed the related sale or transfer of control, as applicable, of its identity management business. In June 2017, 3M also completed the sale of its tolling and automated license/number plate recognition business and in October 2017, sold its electronic monitoring business.Other segment products include spill-control sorbents; nonwoven abrasive materials for floor maintenance and commercial cleaning; floor matting; and natural and color-coated mineral granules for asphalt shingles.5Health Care Business: The Health Care segment serves markets that include medical clinics and hospitals, pharmaceuticals, dental and orthodontic practitioners, health information systems, and food manufacturing and testing. Products and services provided to these and other markets include medical and surgical supplies, skin health and infection prevention products, oral care solutions (dental and orthodontic products), health information systems, inhalation and transdermal drug delivery systems, and food safety products. In March 2015, 3M acquired Ivera Medical Corp., a manufacturer of health care products that disinfect and protect devices used for access into a patient’s bloodstream.In advanced wound management, 3M is a supplier of medical tapes, dressings, wound closure products, orthopedic casting materials, in addition to acute wound care, skin integrity and disinfecting port protection products. In infection prevention, 3M markets a variety of surgical drapes, masks and preps, electrodes, stethoscopes, as well as sterilization assurance equipment and patient warming solutions designed to prevent hypothermia in surgical settings. Other products include drug delivery systems, such as metered-dose inhalers, transdermal skin patches and related components. Oral care solutions include restoratives, adhesives, finishing and polishing products, crowns, impression materials, preventive sealants, professional tooth whiteners, prophylaxis and orthodontic appliances, as well as digital workflow solutions to transform traditional impression and analog processes. In health information systems, 3M develops and markets computer software for hospital coding and data classification, and provides related consulting services. 3M provides food safety products that make it faster and easier for food processors to test the microbiological quality of food. As discussed in Note 2, in September 2017, 3M purchased all of the ownership interests of Elution Technologies, LLC, a Vermont-based manufacturer of test kits that help enable food and beverage companies ensure their products are free from certain potentially harmful allergens such as peanuts, soy or milk.Electronics and Energy Business: The Electronics and Energy segment serves customers in electronics and energy markets, including solutions that improve the dependability, cost-effectiveness, and performance of electronic devices; electrical products, including infrastructure protection; telecommunications networks; and power generation and distribution.This segment’s electronics solutions include the display materials and systems business, which provides films that serve numerous market segments of the electronic display industry. 3M provides distinct products for five market segments, including products for: 1) LCD computer monitors 2) LCD televisions 3) handheld devices such as cellular phones and tablets 4) notebook PCs and 5) automotive displays. This segment also provides desktop and notebook computer screen filters that address display light control, privacy, and glare reduction needs. Major electronics products also include packaging and interconnection devices; high performance fluids and abrasives used in the manufacture of computer chips, and for cooling electronics and lubricating computer hard disk drives; and high-temperature and display tapes. Flexible circuits use electronic packaging and interconnection technology, providing more connections in less space, and are used in ink-jet printer cartridges, cell phones and electronic devices. This segment also includes touch systems products, including touch screens, touch monitors, and touch sensor components. In December 2016, 3M sold the assets of its cathode battery technology out-licensing business.This segment’s energy solutions include electrical products, including infrastructure protection, telecommunications, and renewable energy. This segment serves the world’s electrical and telecommunications markets, including electrical utilities, electrical construction, maintenance and repair, original equipment manufacturers (OEM), telecommunications central office, outside plant and enterprise, as well as aerospace, military, automotive and medical markets, with products that enable the efficient transmission of electrical power and speed the delivery of information. Products in this segment include pressure sensitive tapes and resins, electrical insulation, a wide array of fiber-optic and copper-based telecommunications systems for rapid deployment of fixed and wireless networks, as well as the 3M™ Aluminum Conductor Composite Reinforced (ACCR) electrical power cable that increases transmission capacity for existing power lines. This segment also includes renewable energy component solutions for the solar and wind power industries, as well as infrastructure products solutions that provide municipalities both protection and detection solutions for electrical, oil, natural gas, water, rebar and other infrastructure assets.Consumer Business: The Consumer segment serves markets that include consumer retail, office retail, office business to business, home improvement, drug and pharmacy retail, and other markets. Products in this segment include office6supply products, stationery products, home improvement products (do-it-yourself), home care products, protective material products, certain consumer retail personal safety products, and consumer health care products.Major consumer products include Scotch® brand products, such as Scotch® Magic™ Tape, Scotch® Glue Stick and Scotch® Cushioned Mailer; Post-it® Products, such as Post-it® Flags, Post-it® Note Pads, Post-it® Labeling & Cover-up Tape, and Post-it® Pop-up Notes and Dispensers; home improvement products, including surface-preparation and wood-finishing materials, Command™ Adhesive Products and Filtrete™ Filters for furnaces and air conditioners; home care products, including Scotch-Brite® Scour Pads, Scotch-Brite® Scrub Sponges, Scotch-Brite® Microfiber Cloth products, O-Cel-O™ Sponges; protective material products, such as Scotchgard™ Fabric Protectors; certain maintenance-free respirators; certain consumer retail personal safety products, including safety glasses, hearing protectors, and 3M Thinsulate™ Insulation, which is used in jackets, pants, gloves, hats and boots to keep people warm; Nexcare™ Adhesive Bandages; and ACE® branded (and related brands) elastic bandage, supports and thermometer product lines.ResearchPatentsResearch51,000 employed internationally. The ability to recruit, retain, develop, protect, and product development constitutes an important partfairly compensate its global workforce are enablers of 3M’s activitiessuccess. This includes four general categories of focus: Health and Safety; Development; Diversity, Equity and Inclusion; and Compensation and Benefits.beenpublicly committed to advance global diversity in management across all dimensions, with additional specific goals to increase the Company’s diversity with underrepresented groups. 3M supports these values with an internal CEO Inclusion Council, a major driverforum led by senior management to advance diversity, equity, and inclusion initiatives. The Company also plans to invest $50 million over 2020 to 2025 to address racial opportunity gaps through workforce development initiatives in the communities in which its employees live and 3M business operates. The Company is on pace, having delivered over $39 million through 2023.sales and profit growth. Research, development and related expenses totaled $1.850 billion in 2017, $1.735 billion in 2016 and $1.763 billion in 2015. Research and development, covering basic scientific researchtotal compensation for employees includes a variety of components that support sustainable employment and the application of scientific advancesability to build a strong financial future, including competitive market-based pay and comprehensive benefits. In addition to earning a base salary, eligible employees are compensated for their contributions to the Company’s goals with both short-term cash incentives and long-term equity-based incentives. Through its global pay philosophy, principles and consistent implementation, 3M is committed to providing fair and equitable pay for employees. Eligible full-time employees in the developmentUnited States also have access to medical, dental, and vision plans; savings and retirement plans; a 3M employee stock purchase plan; and other resources. Some of newthese benefits can also be available to regular part-time employees who work at least 20 hours a week. Programs and improved products and their uses, totaled $1.335 billion in 2017, $1.225 billion in 2016 and $1.223 billion in 2015. Related expenses primarily include technical support; internally developed patent costs, which include costs and fees incurred to prepare, file, secure and maintain patents; amortizationbenefits differ internationally for a variety of externally acquired patents and externally acquired in-process research and development; and gains/losses associated with certain corporate approved investments in R&D-related ventures,reasons, such as equity methodlocal legal requirements, market practices, and negotiations with works councils, trade unions, and other employee representative bodies.impairments.patents.patents or trade secrets. Patents applicable to specific products extend for varying periods according to the date of patent application filing or patent grant and the legal term of patents in the various countries where patent protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies in the country.Raw MaterialsIn 2017, the Company continued to manage year-on-year raw material input costs, benefiting from input management, reformulations,multi-sourcing activities. These efforts more than offset increasing costs in certain raw material categories in oil-derivative chemical feedstock markets. Oil-derivative cost increases also impact other feedstock categories, including petroleum based materials, minerals, metals and wood pulp based products. To date, the Company is receiving sufficient quantities of all raw materials to meet its reasonably foreseeable production requirements. It is difficult to predict future shortages of raw materials or the impact any such shortages would have. 3M has avoided disruption to its manufacturing operations through careful management of existing raw material inventories, strategic7relationships with key suppliers, and development and qualification of additional supply sources. 3M manages spend category price risks through negotiated supply contracts, price protection agreements and commodity price swaps.laws.laws and regulations. 3M is also involved in remediation actions relating to environmental matters from past operations at certain sites (refer to “Environmental Matters and Litigation” in Note 15,18, Commitments and Contingencies).2017,2023, 3M expended about $33approximately $316 million foron capital projects related to protecting the environment. This amount excludes expenditures for remediation actions relating to existing matters caused by past operations that do not contribute to current or future revenues, which are expensed. Capital expenditures for environmental purposes have includedas defined below. Capital projects for environmental purposes include waste reduction and pollution control devices —programs such as wastewater treatment plant improvements,water usage reduction and water quality improvement equipment, scrubbers, containment structures, solvent recovery units and thermal oxidizers — at new and existing facilities constructed or upgraded in the normal course of business. Consistent with the Company’s emphasis on environmental responsibility, capitaloxidizers. Capital expenditures (other than for remediation projects) for knownsimilar projects are presently expected to be about $66approach approximately $365 million over the next two years for new or expanded programs to build facilities or modify manufacturing processes to minimize waste2024 and reduce emissions.While the Company2025 in aggregate.thewhether future costs of such cleanup activities, capital expenditures or operating costs forcompliance with government regulations (including environmental compliance, the Company does not believe theyregulations) will have a material effect on its capital expenditures, earnings or competitive position.Name Age Present Position Year Elected to Present Position Other Positions Held during 2019 - 2023 Michael F. Roman 64 Chairman of the Board and Chief Executive Officer 2019 Chief Executive Officer, 2018-2019 Monish Patolawala 54 President, Chief Financial Officer 2023 John P. Banovetz 56 Executive Vice President, Chief Technology Officer and Environmental Responsibility 2023 Senior Vice President, Chief Technology Officer and Environmental Responsibility, 2021
Senior Vice President, Innovation and Stewardship and Chief Technology Officer, 2020
Senior Vice President of Research and Development and Chief Technology Officer, 2017-2019Karina Chavez 50 Group President, Consumer 2023 Torie Clarke 64 Executive Vice President and Chief Public Affairs Officer 2023 Zoe Dickson 50 Executive Vice President and Chief Human Resources Officer 2021 Senior Vice President, Talent, Learning and Insights, 2021
Vice President, Organization Effectiveness and Talent, Human Resources, 2020-2021
Vice President, Organization Effectiveness, Human Resources 2019-2020
Vice President, Global Human Resources Business Operations, Human Resources 2018-2019Peter D. Gibbons 62 Group President, Enterprise Operations 2021 Chief Executive Officer, Tirehub, 2018-2021 Chris Goralski 52 Group President, Safety & Industrial 2023 Bryan Hanson 57 Chief Executive Officer, Healthcare 2023 Mark Murphy 55 Executive Vice President, Chief Information and Digital Officer 2021 Kevin H. Rhodes 61 Executive Vice President, Chief Legal Affairs Officer 2022 Senior Vice President and Deputy General Counsel, 2021
Vice President and Deputy General Counsel, 2019-2021
President and Chief Intellectual Property Counsel, Office of Intellectual Property Counsel and 3M Innovative Properties 2008-2019 2018).
to Present
Position8
to Present
Position9·the Company’s strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position,
•worldwide economic, political, regulatory, international trade, geopolitical, capital markets and other external conditions, such as interest rates, monetary policy, financial conditions of our suppliers and customers, trade restrictions such as tariffs and retaliatory counter measures, inflation, recession, military conflicts, and natural and other disasters or climate change affecting the operations of the Company or our suppliers and customers,·worldwide economic, political, and capital markets conditions, such as interest rates, foreign currency exchange rates, financial conditions of our suppliers and customers, and natural and other disasters or climate change affecting the operations of the Company or our suppliers and customers,
•liabilities and the outcome of contingencies related to certain fluorochemicals known as "PFAS," as well as matters related to the Company's plans to discontinue the use of PFAS,·new business opportunities, product development, and future performance or results of current or anticipated products,
•risks related to the proposed class-action settlement (“PWS Settlement”) to resolve claims by public water systems in the United States regarding PFAS, including whether court approval of the PWS Settlement will be obtained, whether the number of plaintiffs that opt out of the PWS Settlement will exceed current expectations or will exceed the level that would permit 3M to terminate the PWS Settlement (and whether 3M will elect to terminate the PWS Settlement if this occurs), whether the PWS Settlement is appealed, the timing and amount of payments made under the PWS Settlement, and the impact of the PWS Settlement on other PFAS-related matters,·the scope, nature or impact of acquisition, strategic alliance and divestiture activities,
•the Company’s strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position,·the outcome of contingencies, such as legal and regulatory proceedings,
•competitive conditions and customer preferences,·future levels of indebtedness, common stock repurchases and capital spending,
•foreign currency exchange rates and fluctuations in those rates,·future availability of and access to credit markets,
•new business opportunities, product and service development, and future performance or results of current or anticipated products and services,·pension and postretirement obligation assumptions and future contributions,
•fluctuations in the costs and availability of purchased components, compounds, raw materials and energy,·asset impairments,
•information technology systems including implementation of an enterprise resource planning (ERP) system,·tax liabilities,
•security breaches and other disruptions to information technology infrastructure,·information technology security, and
•the scope, nature or impact of acquisition, strategic alliance and divestiture activities,·the effects of changes in tax (including the newly enacted Tax Cuts and Jobs Act), environmental and other laws and regulations in the United States and other countries in which we operate.ConditionsCondition and Results of Operations.”ResultsThe Company’s results are impacted by the effects of, and changes in, worldwide economic, political, regulatory, international trade, geopolitical, and capital marketsother external conditions.operates in more than 70 countries and derives approximately 6054 percent of its revenues from outside the United States. TheStates, and, accordingly, the Company’s operations and the execution of its business isstrategies and plans are subject to global competition and economic and geopolitical risks and may be adversely affected by factors in the United States and other countries that are beyond its control, such as, slower economic growth,among other things, disruptions in financial markets, economic downturns, military conflicts, terrorism, public health emergencies, political changes and trends such as protectionism, economic nationalism resulting in the form of either containedgovernment actions impacting international trade agreements or widespread recessionary10conditions, inflation, elevated unemployment levels, sluggish or uneven recovery,imposing trade restrictions such as tariffs and retaliatory counter measures, and government deficit reduction and other austerity measures in specific countrieslocations or regions, or in the various industries in which the Company operates;operates. Further escalation of specific trade tensions, including those between the U.S. and China, or more broadly in global trade conflict, could adversely impact the Company's business and operations around the world. The Company's business is also impacted by social, political, orand labor conditions in specific countries or regions; natural and other disasters or climate change affecting the operations oflocations in which the Company or its suppliers or customers and suppliers; oroperate; adverse changes in the availability and cost of capital,capital; monetary policy; interest rates, tax rates, tax laws,rates; inflation; recession; commodity prices; currency volatility or exchange control,control; ability to expatriate earningsearnings; and other laws and regulations in the jurisdictions in which the Company operates.* Changeor its suppliers or customers operate. For example, changes in local economic condition or outlooks, such as lower economic growth rates in China, Europe, or other key markets, impact the Company’s credit ratingsdemand or profitability of the Company's products.increase costresult in, among other things, cyberattacks, supply chain disruptions, higher energy and other commodity costs, lower consumer demand, and changes to foreign exchange rates and financial markets, any of funding. The Company’s credit ratings are important to 3M’s cost of capital. The major rating agencies routinely evaluatewhich may adversely affect the Company’s credit profile and assign debt ratings to 3M. This evaluation is based on a number of factors, which include financial strength,Company's business and financial risk,supply chain.transparency with rating agenciesnatural disasters, may negatively impact the Company or its customers and timelinesssuppliers, in terms of financial reporting. 3M currently has an AA- credit rating with a stable outlook from Standard & Poor’savailability and has an A1 credit rating with a stable outlook from Moody’s Investors Service. The Company’s credit ratings have served to lower 3M’s borrowingcost of natural resources, sources and supply of energy, product demand and manufacturing, compliance costs, and facilitate access to a varietythe health and well-being of lenders. The addition of further leverage to the Company’s capital structure could impact 3M’s credit ratingsindividuals and communities 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.* 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 bywe or our suppliers or 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; and (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.6054 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.growth objectives are largely dependentability to complete such exit on the anticipated timing and market acceptance of its new product offerings, including itsor at all; potential governmental or regulatory actions relating to PFAS or the Company’s exit plans; the Company’s ability to continually renewidentify and manufacture, or procure from third parties if possible, acceptable options for PFAS-containing materials in 3M's supply chain; the possibility that such non-PFAS options are not available or that such substitutes may not achieve the anticipated or desired commercial, financial or operational results; potential litigation relating to the Company’s exit plans or to any products that include third-party manufactured materials containing PFAS that are incorporated into the products the Company sells; and the possibility that the planned exit will involve greater costs than anticipated, may not be feasible, may not be feasible on the timeframe initially predicted, or may otherwise have negative impacts on the Company’s relationships with its pipelinecustomers and other counterparties.new2025. 3M is also working to discontinue the use of PFAS across its product portfolio by the end of 2025. 3M has already eliminated the PFAS use in certain product categories, and has made progress across its product portfolio in a variety of applications. With respect to PFAS-containing products not manufactured by 3M but manufactured by companies other than 3M in the Company's supply chains, the Company continues to evaluate the availability of third-party products that do not contain PFAS. Depending on the availability and feasibility of such third-party products not containing PFAS, the Company continues to evaluate whether there may be some circumstances in which the use of PFAS-containing materials manufactured by third parties and used in certain applications in 3M’s product portfolios, such as lithium ion batteries and printed circuit boards widely used in commerce across a variety of industries, may continue beyond 2025. In such instances, the Company intends to continue to evaluate the adoption of third-party products that do not contain PFAS to the extent such products are available and such adoption is feasible.bring those productsunasserted and asserted claims and governmental regulatory proceedings and inquiries related to market. This ability may be adversely affectedthe production and use of PFAS in a variety of jurisdictions, as discussed in Note 18, “Commitments and Contingencies,” within the Notes to Consolidated Financial Statements. 3M has seen increased public and private lawsuits being filed on behalf of states, counties, cities, and utilities alleging, among other things, harm to the general public and damages to natural resources, some of which are pending in the Aqueous Film Forming Foam (AFFF) multi-district litigation and some of which are pending in other jurisdictions. Various factors or developments in these and other disclosed actions could result in future charges that could have a material adverse effect on 3M. 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 difficultiesthe State of Minnesota involving the presence of PFAS in the groundwater, surface water, fish or delaysother aquatic life, and sediments in product development, suchthe state. In addition, as described in greater detail in Note 18, “Commitments and Contingencies,” within the inabilityNotes to identify viable new products, obtain adequate intellectual property protection, or gain market acceptanceConsolidated Financial Statements, in June 2023, the Company entered into a proposed class-action settlement (“PWS Settlement”) to resolve a wide range of new products. Theredrinking water claims by public water systems in the United States regarding any PFAS, subject to court approval. If the court approves the PWS Settlement and all conditions in the PWS Settlement are no guarantees that new productsmet, 3M will provepay $10.5 billion to $12.5 billion in total to resolve the claims released by the PWS Settlement, with payments to be commercially successful.*made from 2023 through 2036, in exchange for a release of certain claims, as described further in Note 18. The Company’s future results are subjectPWS Settlement gives 3M the option to fluctuations interminate the costsPWS Settlement if the numbers of eligible class members opting out of the PWS Settlement exceed specified levels. Unexpected events related to the PWS Settlement, including whether court approval of the PWS Settlement will be obtained, whether the number of plaintiffs that opt out of the PWS Settlement will exceed current expectations or will exceed the level that would permit 3M to terminate the PWS Settlement (and whether 3M will elect to terminate the PWS Settlement if this occurs), whether the PWS Settlement is appealed, and availabilitythe impact of purchased components, compounds, raw materials and energy, including oil and natural gas and their derivatives, due to shortages, increased demand, supply interruptions, currency exchange risks, natural disasters andthe PWS Settlement on other 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. It is possible that any of its supplier relationships could be interrupted due to natural and other disasters and other events, or be terminated in the future. Any sustained interruption in the Company’s receipt of adequate suppliesPFAS-related matters could have a material adverse effect on the Company’s results of operations, cash flows or its consolidated financial position.In addition, whileAny of 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 notforegoing could have a material adverse effect on the Company.* 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 monitorsCompany’s results of operations, cash flows or 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,11future results will be affected by the Company’s ability to integrate acquired businesses quickly and obtain the anticipated synergies.* The Company’s future results may be affected if the Company generates fewer productivity improvements than estimated. 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 enterprise resource planning (ERP) system on a worldwide basis. There can be no assurance that all of the projected productivity improvements will be realized.employs information technology systemsis subject to support its business, including ongoing phased implementation of an ERP systemrisks related to international, federal, state, and local treaties, laws, and regulations, as part of business transformation on a worldwide basis over the next several years. Security breacheswell as compliance risks related to legal or regulatory requirements, contract requirements, policies and practices, or other disruptions to the Company’s information technology infrastructure could interfere with the Company’s operations, compromise information belonging tomatters that require or encourage the Company or its customers, suppliers, and employees, exposing the Companyvendors, or channel partners to liability which could adversely impact the Company’sconduct business and reputation. In the ordinary coursein a certain way. The outcome of business, the Company relies on information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. Additionally, the Company collects and stores certain data, including proprietary business information, and may have access to confidential or personal information in certain of our businesses that is subject to privacy and security laws, regulations and customer-imposed controls. Despite our cybersecurity 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 may still be vulnerable to damage, disruptions or shutdowns due to attacks by hackers, breaches, employee error or malfeasance, power outages, computer viruses, telecommunication or utility failures, systems failures, service or cloud provider breaches, natural disasters or other catastrophic events. It is possible for such vulnerabilities to remain undetected for an extended period, up to and including several years. While we have experienced, and expect to continue to experience, these types of threats to the Company’s information technology networks and infrastructure, none of them to date has had a material impact to the Company. There may be other challenges and risks as the Company upgrades and standardizes its ERP system on a worldwide basis. Any such events could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in 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 risks, there can be no guarantee that all costs or losses incurred will be fully insured.* 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 relevant 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.* The Company’s future results may be affected by various legal and regulatory proceedings related to compliance with these treaties, laws, regulations, and legal compliancerequirements could have a material adverse effect on the Company's reputation, ability to execute its strategy and its results of operations.liability,liability; securities and corporate laws; antitrust and competition laws; intellectual property,property; environmental, health, and safety; tax; the U.S. Foreign Corrupt Practices Act (FCPA) and other anti-bribery, anti-corruption laws; international import and export requirements and 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, and the Sunshine Act; and other matters. The Company is also subject to compliance risks related to legal or regulatory requirements, contract requirements, policies and practices, or other matters.matters that require or encourage the Company and its suppliers, vendors, or channel parties, to conduct business in a certain way. Legal compliance risks also include third-party risks where the Company’s suppliers, vendors, or channel partners, or trade associations to which the Company belongs, have business practices that are inconsistent with 3M’s Supplier Responsibility Code, 3M performance requirements, or with legal requirements.legal proceedingstreaties, laws, regulations, and requirements are difficult to reliably predict, may differ from the Company’s expectations, becauseand have resulted and may in the outcomesfuture result in, one or more of the following: criminal or civil sanctions, including fines; limitations on the extent to which the Company can conduct business; employee and business partner terminations due to policy violations; and private rights of action that result in litigation exposure, including regulatory matters, are often difficultexpenses and costs incurred in connection with settlement or court proceedings, for the Company. In addition, detecting, investigating and resolving actual or alleged violations of these acts is expensive and could consume significant time and attention of our senior management. Although the Company maintains general liability insurance to reliably predict.mitigate monetary exposure, 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 or its consolidated financial position. In addition, negative publicity related to the matters noted above or other matters involving the Company may negatively impact the Company’s reputation. The Company also relies on patent and other intellectual property protection, and challenges to the Company’s intellectual property rights, or claims that the Company’s activities interfere with the intellectual property rights of a third party, could cause the Company to incur significant expenses to assert or defend against such claims, could result in reduced revenue, and could damage the Company’s reputation, any particular period.of which could have an adverse effect on the Company. For a more detailed discussion of the legal proceedings involving the Company and the associated accounting estimates, see the discussion in Note 1518, “Commitments and Contingencies”Contingencies,” within the Notes to Consolidated Financial Statements.12
* The Company’s results are affected by competitive conditions and customer preferences.8060 manufacturing facilities in 2928 states. Internationally, the Company operates 12581 manufacturing and converting facilities in 3728 countries.intersegmentinter-segment cooperation, properties are often used by multiple business segments.15,18, “Commitments and Contingencies,” of this document, and should be considered an integral part of Part I, Item 3, “Legal Proceedings.”For the year 2017, theThe information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Act is included in Exhibit 95 to this annual report.13Securities.2018,2024, there were 78,33159,783 shareholders of record. 3M’s stock ticker symbol is MMM and is listed on the New York Stock Exchange, Inc. (NYSE), the Chicago Stock Exchange, Inc., and the SWXSIX Swiss Exchange. Cash dividends declared and paid totaled $1.175$1.50 and $1.11$1.49 per share for each quarter in 20172023 and 2016,2022, respectively. Stock price comparisons follow:Stock price comparisons (NYSE composite transactions)SecuritiesFebruary 2016,November 2018, 3M’s Board of Directors authorizedreplaced 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.14(registered (registered pursuant to Section 12 of the Exchange Act)(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.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, 2023 1,445 $ 113.34 — $ 4,157 February 1 - 28, 2023 1,240 117.49 — 4,157 March 1 - 31, 2023 — — — 4,157 January 1 - March 31, 2023 2,685 115.25 — April 1 - 30, 2023 — — — 4,157 May 1 - 31, 2023 — — — 4,157 June 1 - 30, 2023 — — — 4,157 April 1 - June 30, 2023 — — — July 1 - 31, 2023 — — — 4,157 August 1 - 31, 2023 — — — 4,157 September 1 - 30, 2023 — — — 4,157 July 1 - September 30, 2023 — — — October 1 - 31, 2023 — — — 4,157 November 1 - 30, 2023 — — — 4,157 December 1 - 31, 2023 — — — 4,157 October 1 - December 31, 2023 — — — January 1 - December 31, 2023 2,685 115.25 — (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.15Selected Financial Data.Cash dividends declared and paid totaled $1.175 and $1.11 per share for each quarter in 2017 and 2016, respectively. 3M typically declares and pays dividends in the same quarter. In December 2013 and 2014, 3M declared dividends that were paid in the following first quarter.16Operations.·Overview
•Overview·Results of Operations
•Results of Operations·Performance by Business Segment
•Performance by Business Segment·Performance by Geographic Area
•Performance by Geographic Area·Critical Accounting Estimates
•Critical Accounting Estimates·New Accounting Pronouncements
•New Accounting Pronouncements·Financial Condition and Liquidity
•Financial Condition and Liquidity·Financial Instruments“CautionaryCautionary Note Concerning Factors That May Affect Future Results”Results in Item 1 and the risk factors provided in Item 1A for discussion of these risks and uncertainties).As described in Note 17, effectiveEffective in the first quarter of 2017,2023, 3M improvedmade the alignmentfollowing changes:its businesses around marketssegment operating performance and customers. Segmentsegment composition used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income (loss))—and realignment of 3M's Consumer business segment from four divisions to three divisions. See additional information presentedin Note 21. 3M's disclosed disaggregated revenue was also updated as a result of these changes. See additional information in Note 2.fivefour operating business segments: Industrial; Safety and Graphics;Industrial; Transportation and Electronics; Health Care; Electronics and Energy; and Consumer. In July 2022, 3M announced its intention to spin off the Health Care business as a separate public company (see Note 3 for additional information). The Company continues to make progress on the Health Care business spin-off. The transaction is expected to be completed in the first half of 2024 and is subject to satisfaction of customary conditions, including final approval from the 3M Board of Directors and receipt of regulatory approvals, discussed in Note 3. The completion of the spin will enable the creation of two world-class public companies well positioned to pursue their respective growth plans, tailor capital allocation strategies, and create long-term value for shareholders. (EPS) attributable to 3M common shareholders – diluted:The following table provides the increase (decrease)increases (decreases) in diluted earnings (loss) per share for the fourth quarter and year 2017 compared to the same period last year, in addition to 2016 compared to 2015.Year 2017 and fourth quarter EPS:For the fourth quarter of 2017, net income attributable to 3M was $523 million, or $0.85 per diluted share, compared to $1.155 billion, or $1.88 per diluted share, in the fourth quarter of 2016, a decrease of 54.8 percent on a per diluted share.17Earnings (loss) per diluted share Year ended December 31, 2023 2022 Same period last year $ 10.18 $ 10.12 Net costs for significant litigation 3.20 0.61 Divestiture costs 0.08 — Gain on business divestitures (4.73) — Divestiture-related restructuring actions 0.05 — Russia exit charges 0.20 — Manufactured PFAS products 0.90 (0.18) Total special items (0.30) 0.43 Same period last year, excluding special items $ 9.88 $ 10.55 Increase/(decrease) due to: Total organic growth/productivity and other 0.30 0.22 Restructuring and related charges (0.62) 0.16 Raw material impact (0.24) (0.99) Foreign exchange impacts (0.17) (0.39) Acquisitions/divestitures (0.06) (0.05) Other expense (income), net (0.06) 0.02 Income tax rate — 0.06 Shares of common stock outstanding 0.21 0.30 Current period, excluding special items 9.24 9.88 Net costs for significant litigation (21.00) (3.20) Divestiture costs (0.68) (0.08) Gain on business divestitures 0.05 4.73 Divestiture-related restructuring actions — (0.05) Russia exit (charges) benefits 0.04 (0.20) Manufactured PFAS products (0.28) (0.90) Total special items (21.87) 0.30 Current period $ (12.63) $ 10.18 Excluding the $762 million impact related to the enactment of the Tax Cuts and Jobs Act (TCJA), net income was $1.285 billion, or $2.10 per diluted share, an increase of 11.7 percent on a per diluted share basis compared to the fourth quarter of 2016. For the full year 2017, net income attributable to 3M was $4.858 billion, or $7.93 per diluted share, compared to $5.050 billion, or $8.16 per diluted share, for the full year 2016, a decrease of 2.8 percent on a per diluted share basis. Excluding the 2017 impact related to TCJA, net income was $5.620 billion, or $9.17 per diluted share, an increase of 12.4 percent on a per diluted share basis compared to 2016. The Company refers to various "adjusted" amounts or measures excluding the 2017 net impact of enactment of the Tax Cuts and Jobs Act.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 that follows.2017 includes benefitsdisposable respirator demand year-on-year and the 2022 exit of operations in Russia negatively impacted earnings (loss) per share by $0.43.organic local-currencyselling prices and ongoing productivity actionsraw material cost decreases from sourcing cost reduction projects,volumes (particularly electronics/consumer retail); investments in growth, productivity, and business transformation, which is having a positive impact on 3M’s productivity efforts. These benefits were partially offset by higher defined benefit pension expenses. During bothsustainability; manufacturing/supply chain headwinds; inflation impacts; China; and Europe's geopolitical impactsfourth quarter and full year 2017, organic growth and productivity were the primary drivers for the year-on-year benefit.Acquisitions and divestitures decreasedfollowing components impacted earnings per diluted share by 2 centsyear-on-year:for the fourth quarter of 2017, while increasingnegatively impacted earnings per diluted share by 54 cents$0.29.forbenefit $0.51 to earnings per share which was impacted by the full year 2017. Acquisitionfollowing:which are measured for the first twelve months post-transaction, relate primarilydue to the acquisitionRussia/Ukraine conflict as well as ongoing COVID-related challenges in ChinaScott Safety (fourth quarter 2017). The net$91 million pre-tax ($0.12 per share after tax) from the impact related to Scott Safety includes income from operations, more than offset by the transaction and integration costs of the acquisition. Interest expense related to financing costs of Scott Safety are also included. The net impact related to Scott Safety was equivalent to a year-on-year decrease of 7 cents per diluted share. Full year 2017 had year-on-year operating income impacts from the following divestitures: Polyfoam and the remaining portionfavorable decision of the library system business (both in first quarter 2016), protective films business and cathode battery technology out-license business (both in fourth quarter 2016), prescription safety eyewear business (January 2017), identity management business and tolling and automated license/number plate recognition business (both inBrazilian Supreme Court regarding the second quartercalculation of 2017), and electronic monitoring business (fourth quarter 2017). The incremental year-on-year pre-tax gain on divestiture impact, net of lost operating loss/(income) during the fourth quarter of 2017 was $26 million, or approximately 5 cents per diluted share. For the full year 2017, the year-on-year net pre-tax increase from divestitures was approximately $474 million, which is equivalent to a year-on-year increase of 61 cents per diluted share (primarily related to the identity management business). Additional discussion on divestitures is provided later within the “Divestitures and Strategic Investments” section.Operating income results include year-on-year incremental strategic investments that decreased pre-tax earnings by approximately $51 million and $413 million in the fourth quarter and full year 2017, respectively. These incremental strategic investments are comprised of 3M’spast social taxesinitiativesproductivity and optimizationsustainabilitysupply chain footprint. Additional discussion on strategic investments is provided later within the “Divestituresrelated charges:Strategic Investments” section.In the fourth quarter of 2017, as a result of the Company’s regular review of its respirator mask/asbestos liabilities, the Company increased its accruals. This incremental increase resulted$59 million in a year-on-year decrease of 7 cents per diluted share. Refer2023 and 2022, respectively, (refer to Note 155 for more details.approximately $3 million and $111 millioninterest income on invested cash.fourth quarterordinary course and full year 2017, respectively, excludinginterest income on invested cash.foreign currency changesthe Food Safety business. The primary factor that decreased the Company's effective tax rate in 2022 was the tax efficient structure associated with the gain on split-off of the Food Safety business (see Note 3).rates. This had a minimal impactrates for 2023, 2022, and 2021 were 17.5 percent, 17.5 percent, and 18.1 percent, respectively.diluted share in the fourth quarter of 2017, and is equivalent to a year-on-year decrease of 13 cents per diluted share for the full year 2017.Weighted-average diluted shares outstanding in the fourth quarter2023 and full year 2017 declined 0.1 percent and 1.0 percent year-on-year, respectively, which benefited earnings per share. The Company purchased $504 million and $2.1 billion of its own stock in the fourth quarter and full year 2017, respectively.Other net interest decreased earnings per share for both fourth quarter and full year 2017, largely due to the loss on extinguishment of debt, higher U.S. average balances, and higher interest rates. The early extinguishment of debt resulted in a charge of $96 million, which contributed to a year-on-year decrease of 11 cents per diluted share for both the fourth quarter and full year 2017. Additionally, the portion of interest expense related to the financing costs of18acquiring Scott Safety, which was equivalent to a year-on-year decrease of 2 cents per diluted share, is included in the acquisitions and divestitures impact described above.As discussed in the section below, the Company recorded a net tax expense of $762 million related to the enactment of the TCJA, which was equivalent to a decrease of $1.25 per diluted share in the fourth quarter of 2017. The effective tax rate for the fourth quarter 2017 was 68.6 percent, an increase of 40.4 percentage points versus 2016. Excluding the impact of TCJA, the effective income tax rate was 23.0 percent in the fourth quarter 2017, a decrease of 5.2 percentage points versus 2016. For the full year 2017, the effective tax rate was 35.5 percent, an increase of 7.2 percentage points versus 2016. Excluding the impact of TCJA, the effective income tax rate was 25.4 percent in the full year 2017, a decrease of 2.9 percentage points versus 2016. Excluding the impact of TCJA, the fourth quarter and full year 2017 change in tax rate was driven largely by increasing benefits from our supply chain centers of expertise, favorable geographic mix and other items, as referenced in Note 9.Income, earnings per share, and effective tax rateCertain amounts adjusted for impacts of the Tax Cuts and Jobs Act (TCJA)special items - (non-GAAP measures):During the fourth quarter of 2017, 3M recorded a net tax expense of $762 million related to the enactment of the Tax Cuts and Jobs Act (TCJA). The expense is primarily related to the TCJA’s transition tax on previously unremitted earnings of non-U.S. subsidiaries and is net of remeasurement of 3M’s deferred tax assets and liabilities considering the TCJA’s newly enacted tax rates and certain other impacts. This provisional amount is subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as provided by recent SEC guidance. See additional information in Note 9. In addition to reporting financial results in accordance with U.S. GAAP, the Company3M also provides certain non-GAAP measures that adjust for the net impact of enactment of the TCJA. This item represents a significant charge that impacted the Company’s financial results. Income, earnings per share, and the effective tax rate are all measures for which 3M provides the reported GAAP measure and an adjusted measure. The adjustedmeasures. These measures are not in accordance with, nor are they a substitute for GAAP measures. The Company considers these non-GAAP measures, in evaluating and managing the Company’s operations. The Company believes that discussion of results adjusted for this item is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. The determination of this item may not be comparable to similarly titled measures used by other companies.(54.8) 19(2.8) 12.4 Year 2016 EPS:For total year 2016, productivity and other increased earnings, helped by lower defined benefit pension and postretirement expenses, higher selling prices, lower raw material costs, and productivity benefits related to the fourth quarter 2015 restructuring. These benefits were partially offset by the impact of flat organic sales and lower asset utilization.Acquisition and divestiture impacts, which are measuredCertain measures adjust for the first twelve months post-transaction, relatedimpacts of special items. Special items for the periods presented include the items described below. Because 3M provides certain information with respect to business segments, it is noteworthy that special items impacting operating income (loss) are reflected in Corporate and Unallocated, except as described below with respect to net costs for significant litigation and manufactured PFAS products items.acquisitionsresults of Membrana and Capital Safety (third quarter 2015) and Semfinder (September 2016), and the divestitures of Polyfoam (first quarter 2016), the library systems business (fourth quarter 2015/first quarter 2016), and the license plate converting businessmanufactured PFAS products in France (fourth quarter 2015).arriving at results, adjusted for special items. In addition, in the fourth quarter of 2016,2022, 3M soldrecorded a charge for PFAS manufacturing exit costs and included it as an adjustment in arriving at results, adjusted for special items. The 2023 non-GAAP measure change involved expanding the assetsextent of adjustment to include the sales and estimates of income (including exit costs) and associated activity regarding manufactured PFAS products that 3M plans to exit by the end of 2025. The information herein reflects the impacts of these changes for all periods presented.GAAP amounts for which a measure adjusted for special items is also provided: Reasons 3M believes the measure is useful: Considered, in addition to segment operating performance, in evaluating and managing operations; useful in understanding underlying business performance, provides additional transparency to special items protective filmsdental local anesthetic business partially offset by a loss associated with a previously contingent indemnification obligation from a 2020 divestiture. Refer to Note 3 for further details.cathode battery technology out-licensing business. OnFood Safety business with Neogen Corporation.combined basis,gain on final disposal of net assets in Russia. Previously, in the third quarter of 2022, 3M recorded a charge primarily related to impairment of these acquisition/divestiture year-on-year impacts resultedassets in a 14 centsconnection with management's committed exit and disposal plan. Refer to Note 17 for further details.Year ended December 31, 2021 (Dollars in millions, except per share amounts) Net sales Operating income (loss) Operating income (loss) margin Income (loss) before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) attributable to 3M Earnings per diluted share Safety and Industrial GAAP amounts $ 2,460 20.5 % Adjustments for special items: Net costs for significant litigation 249 Total special items 249 Adjusted amounts (non-GAAP measures) $ 2,709 22.6 % Transportation and Electronics GAAP amounts $ 9,262 $ 1,869 20.2 % Adjustments for special items: Manufactured PFAS products (1,258) (135) Total special items (1,258) (135) Adjusted amounts (non-GAAP measures) $ 8,004 $ 1,734 21.7 % Total Company GAAP amounts $ 35,355 $ 7,369 20.8 % $ 7,204 $ 1,285 17.8 % $ 5,921 $ 10.12 Adjustments for special items: Net costs for significant litigation — 463 463 104 359 0.61 Manufactured PFAS products (1,258) (135) (135) (29) (106) (0.18) Total special items (1,258) 328 328 75 253 0.43 Adjusted amounts (non-GAAP measures) $ 34,097 $ 7,697 22.6 % $ 7,532 $ 1,360 18.1 % $ 6,174 $ 10.55 Year ended December 31, 2022 (Dollars in millions, except per share amounts) Net sales Sales change Operating income (loss) Operating income (loss) margin Income (loss) before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) attributable to 3M Earnings per diluted share Earnings (loss) per diluted share percent change Safety and Industrial GAAP amounts $ 1,135 9.8 % Adjustments for special items: Net costs for significant litigation 1,414 Total special items 1,414 Adjusted amounts (non-GAAP measures) $ 2,549 22.0 % Transportation and Electronics GAAP amounts $ 8,902 (3.9) % $ 973 10.9 % Adjustments for special items: Manufactured PFAS products (1,351) 631 Total special items (1,351) 631 Adjusted amounts (non-GAAP measures) $ 7,551 (5.6) % $ 1,604 21.2 % Total Company GAAP amounts $ 34,229 (3.2) % $ 6,539 19.1 % $ 6,392 $ 612 9.6 % $ 5,777 $ 10.18 1 % Adjustments for special items: Net costs for significant litigation — 2,291 2,291 476 1,815 3.20 Manufactured PFAS products (1,351) 631 631 121 510 0.90 Gain on business divestitures — (2,724) (2,724) (39) (2,685) (4.73) Russia exit charges (benefits) — 109 109 (2) 111 0.20 Divestiture-related restructuring actions — 41 41 9 32 0.05 Divestiture costs — 60 60 13 47 0.08 Total special items (1,351) 408 408 578 (170) (0.30) Adjusted amounts (non-GAAP measures) $ 32,878 (3.6) % $ 6,947 21.1 % $ 6,800 $ 1,190 17.5 % $ 5,607 $ 9.88 (6) % Year ended December 31, 2023 (Dollars in millions, except per share amounts) Net sales Sales change Operating income (loss) Operating income (loss) margin Income (loss) before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) attributable to 3M Earnings (loss) per diluted share Earnings (loss) per diluted share percent change Safety and Industrial GAAP amounts $ 2,324 21.2 % Adjustments for special items: Net costs for significant litigation 84 Total special items 84 Adjusted amounts (non-GAAP measures) $ 2,408 22.0 % Transportation and Electronics GAAP amounts $ 8,501 (4.5) % $ 1,312 15.4 % Adjustments for special items: Manufactured PFAS products (1,289) 205 Total special items (1,289) 205 Adjusted amounts (non-GAAP measures) $ 7,212 (4.5) % $ 1,517 21.0 % Total Company GAAP amounts $ 32,681 (4.5) % $ (9,128) (27.9) % $ (9,688) $ (2,691) 27.8 % $ (6,995) $ (12.63) N/M Adjustments for special items: — 14,869 15,245 3,615 11,630 21.00 Manufactured PFAS products (1,289) 205 205 50 155 0.28 Gain on business divestitures — (36) (36) (11) (25) (0.05) Russia exit charges (benefits) — (18) (18) 3 (21) (0.04) Divestiture costs — 496 496 118 378 0.68 Total special items (1,289) 15,516 15,892 3,775 12,117 21.87 Adjusted amounts (non-GAAP measures) $ 31,392 (4.5) % $ 6,388 20.3 % $ 6,204 $ 1,084 17.5 % $ 5,122 $ 9.24 (6) % share benefit to earningsloss per share in 2016, driven by solid performances from 2015 acquisitions and year-on-year divestiture gains. Refer to Note 2 for further discussionperiods of these acquisition/divestiture impacts.Restructuring actions (included within incremental strategic investments in the preceding table) resulted in an after-tax charge of 14 cents per diluted share in 2015, which provided a year-on-year benefit in 2016.Foreign exchange impacts (net of hedging) decreased pre-tax earnings by approximately $127 million year-on-year in 2016, excluding the impact of foreign currency changes on tax rates. This was equivalent to a year-on-year decrease of 14 cents per diluted share for 2016.Weighted-average diluted shares outstanding in 2016 declined 3 percent versus 2015, which benefited earnings per share. The benefits from share repurchases,resulting net of issuances, were partially offset by the adoption of ASU No. 2016-09, which increased the calculated number of diluted shares in 2016.Higher average debt balances led to an increase in interest expense year-on-year in 2016.The income tax rate was 28.3 percent in 2016, a decline of 0.8 percentage points versus last year. The 2016 change in tax rate was driven by a number of factors as referenced in Note 9, including the first quarter 2016 adoption of Accounting Standards Update (ASU) No. 2016-09 (discussed in Note 1).20
losses.Fourth quarter 2017 salesYear ended December 31, 2022 Sales Change Organic sales Acquisitions Divestitures Translation Total sales change Total Company 1.2 % — % (0.5) % (3.9) % (3.2) % Remove manufactured PFAS products special item impact (0.4) — — — (0.4) Adjusted total Company (non-GAAP measures) 0.8 % — % (0.5) % (3.9) % (3.6) % Transportation and Electronics 1.2 % — % (0.5) % (4.6) % (3.9) % Remove manufactured PFAS products special item impact (2.2) — — 0.5 (1.7) Adjusted Transportation and Electronics (non-GAAP measures) (1.0) % — % (0.5) % (4.1) % (5.6) % Year ended December 31, 2023 Sales Change Organic sales Acquisitions Divestitures Translation Total sales change Total Company (3.2) % 0.2 % (0.9) % (0.6) % (4.5) % Remove manufactured PFAS products special item impact — — (0.1) 0.1 — Adjusted total Company (non-GAAP measures) (3.2) % 0.2 % (1.0) % (0.5) % (4.5) % Transportation and Electronics (3.5) % 0.7 % (0.7) % (1.0) % (4.5) % Remove manufactured PFAS products special item impact — 0.2 (0.2) — — Adjusted Transportation and Electronics (non-GAAP measures) (3.5) % 0.9 % (0.9) % (1.0) % (4.5) % results by business segment for the fourth quarters of 2017 and 2016, followed by additional discussion of business segment results.From a business segment perspective, 3M achieved both total sales growth and organic local-currency sales growth (which includes organic volume and selling price impacts) in all five business segments. Operating income margins were 22.8 percent, with four of five business segments above 22 percent.·In Industrial, total sales increased 6.9 percent, or 3.9 percent on an organic local currency basis, with organic sales growth in abrasives, automotive and aerospace solutions, industrial adhesives and tapes, automotive aftermarket, and separation and purification. Organic sales declined in advanced materials. Operating income margins were 19.4 percent, down 2.5 percentage points, with the decline driven by incremental strategic investments and a fourth quarter 2016 gain on sale of the temporary protective films business.·In Safety and Graphics, total sales increased 15.0 percent, or 10.7 percent on an organic local currency basis. Organic sales grew in all businesses, led by personal safety, roofing granules, and transportation safety. Operating income margins were 26.3 percent, up 6.1 percentage points, with 2.4 percentage points of this increase driven by divestitures, partially offset by acquisitions and incremental strategic investments.·In Health Care, total sales increased 6.0 percent, or 3.1 percent on an organic local currency sales basis. Organic sales grew in food safety, health information systems, medical consumables, and oral care. Organic sales declined in drug delivery systems. Operating income margins were 31.5 percent, up 1.8 percentage points.·In Electronics and Energy, total sales increased 12.5 percent, or 11.0 percent on an organic local currency basis. Electronics-related organic sales increased 14 percent, with growth in both electronics materials solutions and display materials and systems. Energy-related organic sales increased 4 percent as growth in electrical markets was partially offset by declines in telecommunications markets. Operating income margins were 25.2 percent, down 2.5 percentage points. The fourth quarter 2016 gain on sale of intellectual property and fourth quarter 2017 incremental strategic investments negatively impacted operating income margins by 3.3 percentage points.21·In Consumer, total sales increased 7.3 percent, or 5.4 percent on an organic local currency basis. Organic sales grew in consumer health care, home improvement, and stationery and office, while sales in home care were flat. Operating income margins were 22.9 percent, up 2.0 percentage pointsYear 2017 sales and operating income by business segment:The following tables contain sales and operating income(loss) results by business segment for the years ended December 31, 20172023 and 2016.2022. Refer to the section entitled “PerformancePerformance by Business Segment”Segment later in MD&A for additional discussion concerning both 20172023 versus 2016 results and 2016 versus 20152022 results, including Corporate and Unallocated. Refer to Note 1721 for additional information on business segments, including Eliminationsegments.2023 2022 % change (Dollars in millions) Net Sales % of Total Operating Income (Loss) Net Sales % of Total Operating Income (Loss) Net Sales Operating Income (Loss) Business Segments Safety and Industrial $ 10,956 33.5 % $ 2,324 $ 11,604 33.9 % $ 1,135 (5.6) % 104.7 % Transportation and Electronics 8,501 26.0 1,312 8,902 26.0 973 (4.5) 34.9 Health Care 8,195 25.1 1,603 8,427 24.6 1,799 (2.8) (10.9) Consumer 5,026 15.4 904 5,292 15.5 978 (5.0) (7.6) Corporate and Unallocated 3 — (15,271) 4 — 1,654 Total Company $ 32,681 100.0 % $ (9,128) $ 34,229 100.0 % $ 6,539 (4.5) N/M Year ended December 31, 2023 Worldwide Sales Change
By Business SegmentOrganic sales Acquisitions Divestitures Translation Total sales change Safety and Industrial (5.1) % — % — % (0.5) % (5.6) % Transportation and Electronics (3.5) 0.7 (0.7) (1.0) (4.5) Health Care 0.7 — (3.1) (0.4) (2.8) Consumer (4.7) — (0.1) (0.2) (5.0) Total Company (3.2) 0.2 (0.9) (0.6) (4.5) Dual Credit.22Fourth-quarter 2017 sales resultsSales by geographic area/business segment:fourth quarter 2017years ended December 31, 2023 with the same period lastprior year unless otherwise indicated. From a geographic perspective, any references to EMEA refer to Europe, Middle East and Africa on a combined basis.Additional information beyond what is included in the preceding table is as follows:·In the Asia Pacific geographic area, where 3M’s Electronics and Energy business is concentrated, sales benefited from strengthened demand across most electronics market segments in addition to strong growth in 3M’s Safety and Graphics business. In China/Hong Kong, total sales increased 21 percent and organic local-currency sales increased 18 percent. In Japan, total sales increased 6 percent, as organic local-currency sales growth of 7 percent was partially offset by foreign currency translation impacts.·In the EMEA geographic area, Central/East Europe and Middle East/Africa had total sales increase by 14 percent, with organic local-currency sales increases of 12 percent. West Europe total sales grew 18 percent, driven by foreign currency translation impacts, in addition to organic local-currency sales growth of 5 percent.·In the Latin America/Canada geographic area, total sales increased 7 percent in Mexico, driven by foreign currency translation impacts, in addition to organic local-currency sales growth of 3 percent. In Canada, total sales increased 13 percent, driven by organic local-currency sales growth of 8 percent. In Brazil, total sales and organic local-currency sales increased 3 percent.Selling prices were up 0.2 percent year-on-year for the fourth quarter of 2017. In Asia Pacific, strong volume growth in electronics had a negative impact on price. EMEA and Latin America/Canada had price growth, while U.S. selling prices declined slightly.23Year 2017 sales results by geographic area/business segment:Percent change information compares the full year 2017 with the same period, last year, unless otherwise indicated. Additional discussion of business segment results is provided in the Performance by Business Segment section.100.0 Year ended December 31, 2023 Americas Asia Pacific Europe, Middle East & Africa Other Unallocated Worldwide Net sales (millions) $ 18,375 $ 8,463 $ 5,843 $ — $ 32,681 % of worldwide sales 56.2 % 25.9 % 17.9 % 100.0 % Components of net sales change: Organic sales 0.4 (10.5) (2.2) (3.2) Acquisitions 0.3 0.1 — 0.2 Divestitures (0.9) (0.9) (0.9) (0.9) Translation 0.1 (3.2) 1.7 (0.6) Total sales change (0.1) % (14.5) % (1.4) % (4.5) % Year ended December 31, 2022 Americas Asia Pacific Europe, Middle East & Africa Other Unallocated Worldwide Net sales (millions) $ 18,400 $ 9,901 $ 5,928 $ — $ 34,229 % of worldwide sales 53.8 % 28.9 % 17.3 % 100.0 % Components of net sales change: Organic sales 2.6 0.3 (0.6) 1.2 Divestitures (0.6) (0.4) (0.6) (0.5) Translation (0.3) (6.5) (9.8) (3.9) Total sales change 1.7 % (6.6) % (11.0) % (3.2) % tabletables is as follows:·In the Asia Pacific geographic area, where 3M’s Electronics and Energy business is concentrated, sales benefited from strengthened demand across most electronics market segments, in addition to strong growth in 3M’s Safety and Graphics business. Total sales in China/Hong Kong grew 16 percent and Japan grew 5 percent. On an organic local-currency sales basis, China/Hong Kong grew 18 percent and Japan grew 8 percent.·In the EMEA geographic area, Central/East Europe and Middle East/Africa•For 2023, in the Americas geographic area, U.S. total sales and organic local-currency grew 5 percent. West Europe total sales grew 5 percent, with organic local-currency sales growth of 3 percent along with an increase related to foreign currency translation.·In the Latin America/Canada geographic area, total sales increased 4 percent in Mexico, as organic local-currency sales growth of 6 percent was partially offset by divestitures. In Canada, total sales increased 8 percent, with organic-local currency sales growth of 7 percent. In Brazil total sales growth of 9 percent was driven by foreign currency translation, while organic local-currency sales increased 2 percent.Foreign currency translation increased year-on-year sales by 0.5 percent, with the translation-related sales increase in Latin America/Canada and EMEA partially offset by the decreases in Asia Pacific. Selling prices were flat year-on-year for 2017.which included flat organic sales. Total sales in Mexico increased 12 percent which included increased organic sales of 10 percent. In Canada, total sales decreased 9 percent which included decreased organic sales of 5 percent. In Brazil, total sales increased 4 percent which included increased organic sales of 3 percent. In the Asia Pacific strong volume growth in electronics had a negative impact on price. Latin America/Canada and EMEA had price growth, while the U.S. selling prices declined slightly.24Year 2016 sales results by geographic area/business segment:Percent change information compares the full year 2016 with the full year 2015, unless otherwise indicated. Additional discussion of business segment results is provided•For 2022, in the Performance by Business Segment section.100.0 Sales totaled $30.1 billion, a decreaseAmericas geographic area, U.S. total sales were flat which included increased organic sales of 0.5 percent from 2015. Organic local-currency sales declined 0.1 percent, with organic volume declines of 0.8 percent largely offset by selling price increases of 0.71 percent. Acquisitions added 1.2 percent to sales, while divestitures reduced sales by 0.4 percent. Foreign currency translation reduced sales by 1.2 percent year-on-year.1.28 percent which included increased organic sales of 12 percent. In Canada, total sales increased 9 percent which included increased organic sales of 13 percent. In Brazil, total sales increased 15 percent which included increased organic sales of 12 percent. In the Asia Pacific geographic area, China total sales decreased 6 percent which included decreased organic sales of 3 percent. In Japan, total sales decreased 12 percent which included increased organic sales of 2 percent.United States, and declined 1.1 percent in EMEA, 2.1 percent in Asia Pacific, and 2.7 percent in Latin America/Canada. Organic local-currency sales grew 3.7 percent in Latin America/Canada, 0.5 percent in the United States, 0.4 percent in EMEA, and declined 2.8 percent in Asia Pacific.3M generated $6.2 billion of operating cash flow in 2017, a decrease of $422 million when compared to 2016. This followed an increase of $242 million when comparing 2016 to 2015. “FinancialFinancial Condition and Liquidity”Liquidity later in MD&A for a discussion of items impacting cash flows.February 2016,November 2018, 3M’s Board of Directors authorizedreplaced 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. This program hasstock, with no pre-established end date. In 2017,2023, the Company purchased $2.1 billion$33 million of its own stock, compared to purchases of $3.8 billion in 2016 and $5.2 billion in 2015. The Company expects to purchase $2.0 billion to $5.0$1.5 billion of its own stock purchases in 2018.2022. As of December 31, 2023, approximately $4.2 billion remained available under the authorization. In January 2018,February 2024, 3M’s Board of Directors declared a first-quarter 20182024 dividend of $1.36$1.51 per share, an increase of 161 percent. This marked the 60th consecutive year of dividend increases for 3M. The Company has an AA- credit rating,25with a stable outlook, from Standard & Poor’s and an A1 credit rating, with a stable outlook, from Moody’s Investors Service. The Company generates significant ongoing cash flow and has proven access to capital markets funding throughout business cycles.In 2017,Refer to the Company continued to manage year-on-year raw material input costs, benefiting from input management, reformulations,section entitled Raw materials in Item 1 for discussion of 3M's sources and multi-sourcing activities. These efforts more than offset increasing costs in certain raw material categories in oil-derivative chemical feedstock markets. Oil-derivative cost increases also impact other feedstock categories, including petroleum based materials, minerals, metals and wood pulp based products. To date, the Company is receiving sufficient quantities of all raw materials to meet its reasonably foreseeable production requirements. It is difficult to predict future shortagesavailability of raw materials or the impact any such shortages would have. 3M has avoided disruption to its manufacturing operations through careful managementin 2023.8794 percent funded at year-end 2017.2023. The primary U.S. qualified pension plan, which is approximately 6769 percent of the worldwide pension obligation, was 94 percent funded and the international pension plans were 90114 percent funded. The U.S. non-qualified pension plan is not funded due to tax considerations and other factors. Asset returns in 20172023 for the primary U.S. qualified pension plan were 12.4%,10.4 percent, as 3M strategically invests in both growth assets and fixed income matching assets to manage its funded status. For the primary U.S. qualified pension plan, the expected long-term rate of return on an annualized basis for 20182024 is 7.25%, consistent with 2017.7.75 percent. The primary U.S. qualified pension plan year-end 20172023 discount rate was 3.68%4.98%, down 0.53 percentage20 basis points from the year-end 20162022 discount rate of 4.21%5.18%. The decrease in U.S. discount rates resulted in ana increased valuation of the projected benefit obligation (PBO). The primary U.S. qualified pension plan’s funded status increased 4 percentage points in 2017decreased to 94% as strong plan assets returns and $800 million in contributions increased asset values in excess of December 31, 2023 due to the higher PBO due toresulting from the significant discount rate decline.decrease and the mortality table update discussed in Note 14, partially offset by the postive returns of the plan's assets. Additional detail and discussion of international plan asset returns and discount rates is provided in Note 1214 (Pension and Postretirement Benefit Plans).$300$100 million to $500$200 million of cash to its global defined benefit pension and postretirement plans in 2018.2024. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2018.2024. 3M expects global defined benefit pension and postretirement expense in 2018 (before settlements, curtailments, special termination benefits and other)2024 to increase by approximately $76$75 million pre-tax when compared to 2017.2023. Refer to “Critical Accounting Estimates” within MD&A and Note 1214 (Pension and Postretirement Benefit Plans) for additional information concerning 3M’s pension and post-retirement plans.Divestitures and strategic investments:In both the fourth quarter and full year2017, the Company continued to accelerate investments in growth initiatives and footprint optimization. In addition, the Company divested certain businesses as it continued to focus its portfolio on opportunities that create greater value for its shareholders. As shown below, these divestitures and strategic investments led to a net year-on-year decrease of approximately $0.01 per diluted share and a benefit of $0.10 per diluted share, respectively, for the three months and year ended December 31, 2017:26The total pre-tax year-on-year divestiture impacts, net of strategic investments from the table above, are further detailed below by business group:2017 announced and 2018 closed divestitures:In December 2017, 3M announced it had reached an agreement to sell substantially all of its Communications Markets Division, which consists of optical fiber and copper passive connectivity solutions, structured cabling solutions, and telecommunications system integration services. The business has annual global sales of approximately $400 million. The Company expects a pre-tax gain of approximately $500 million in 2018 as a result of this divestiture. 3M expects to realize a gain of approximately $0.40 per diluted share from this transaction, net of actions related to this divestiture. Refer to Note 2 for additional discussion.In February 2018, 3M closed on the sale of certain personal safety product offerings primarily focused on noise, environmental, and heat stress monitoring. This business has annual sales of approximately $15 million. The transaction is expected to result in a pre-tax gain of less than $20 million that will be reported within the Company’s Safety and Graphics business. Refer to Note 2 for additional discussion.27“Overview”Overview section and the “PerformancePerformance by Business Segment”Segment section later in MD&A for additional discussion of sales change.(Percent of net sales) 2023 2022 Change Cost of sales 56.5 % 56.2 % 0.3 % Selling, general and administrative expenses (SG&A) 65.9 26.5 39.4 Research, development and related expenses (R&D) 5.6 5.4 0.2 Gain on business divestitures (0.1) (8.0) 7.9 Goodwill impairment expense — 0.8 (0.8) Operating income (loss) margin (27.9) % 19.1 % (47.0) % Operating income margins increased2017 versus 2016, driven by gains from salethe implementation of businesses, partially offset bynew business systems and solutions, including enterprise resource planning, with these investments impacting cost of sales, increases. A number of factors impact the various income statement line items, such as raw material cost management, strategic investments, divestitures, foreign currency, cost management,SG&A, and pension and postretirement effects. Expanded discussion of each of the income statement line items follows in the various sections below. Pension and postretirement expense is recorded in cost of sales; selling, general and administrative expenses (SG&A); and research, development and related expenses (R&D). In total, 3M’s defined benefit pension and postretirement expense increased $82 million in 2017, compared to a decrease of $305 million in 2016. Refer to Note 12 (Pension and Postretirement Plans) for components of net periodic benefit cost and the assumptions used to determine net cost.The Company is investing in 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 enterprise resource planning (ERP) system on a worldwide basis.In 2017, as referenced above in the “Divestitures and strategic investments” section, 3M incurred $413 million in incremental strategic actions, primarily reported within the cost of sales and SG&A income statement line items.Of these strategic investments, 3M incurred $96 million (net of adjustments) in restructuring actions and $47 million in exit activities during 2017. In addition, in the fourth quarter of 2015, 3M incurred $114 million in restructuring charges. Refer to Note 4 for additional information on the impact to operating expenses.includes manufacturing, engineering and freight costs.Cost of salesmeasured as a percent of sales, increased during 2017in 2023 when compared to 2022. Increases were primarily due to incremental strategic investments in growth, productivity portfolio actions and footprint optimization, foreign currency effects (netsustainability; restructuring charges, and carryover impact of hedge impacts) and higher defined benefit pension expense. This wasenergy cost inflation partially offset by alower year-on-year reduction in raw material inputnet costs as a result offor significant litigation to address certain PFAS-related matters at 3M's Zwijndrecht, Belgium site, higher selling prices, spending discipline, sourcing cost reduction projects. actions and restructuring benefits.prices were flat year-on-year for the full year 2017.Cost of salesGeneral and Administrative Expenses: decreasedincreased in 2016 due to the combination of selling price increases and raw material cost decreases, as selling prices increased net sales by 0.7 percent and raw material cost deflation was favorable by approximately 3.5 percent year-on-year. In addition, cost of sales as a percent of sales benefited from lower defined benefit pension and postretirement costs. Fourth quarter 2015 restructuring charges also provided a favorable year-on-year comparison.28Selling, General and Administrative Expenses:SG&A increased $350 million year-on year, or 5.6 percent, during 2017 due to incremental strategic investments and higher defined benefit pension expense. SG&A decreased $7 million, or 0.1 percent, in 20162023 when compared to 2015, with 2016 results benefiting from foreign currency translation,2022. SG&A in 2023 was primarily impacted by pre-tax charges of $10.3 billion and productivity benefits$4.2 billion in the second and third quarters related to the fourth quarter 2015 restructuring. In addition,PWS Settlement and the CAE Settlement, respectively (both discussed in Note 18). SG&A in 2016 benefited from lower defined benefit pension and postretirement expense. Fourth quarter 2015was also impacted by restructuring charges also provided(see Note 5), divestiture costs (related to separating and preparing the Health Care business for spin-off) and continued investment in key growth initiatives. These impacts were partially offset by 2022 net costs for significant litigation to address Combat Arms Earplugs litigation matters (for which a favorable year-on-year comparison.R&D increased $115 million year-on-year and decreased $28 million year-on-year in 2017 and 2016, respectively. 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. was 5.8 percentincreased in 2017, 2016, and 2015.Gain on Sale of Businesses:In 2017, 3M sold the assets of its safety prescription eyewear business, completed the related sale or transfer of control, as applicable, of its identity management business, sold its tolling and automated license/number plate recognition and electronic monitoring businesses, and sold the assets of its electrical marking/labeling business. On a combined basis, these divestitures resulted in a gain on the sale of businesses of $586 million. 3M also divested certain businesses in 2016 and 2015, resulting in gains of $111 million and $47 million, respectively. Refer to Note 2 for additional detail on these divestitures.Operating Income Margin: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 2017 and 2016.Year 2017 and fourth quarter operating income:Operating income margins increased 0.1 percentage points in the fourth quarter of 2017 and increased 0.7 percentage points for the full year 20172023 when compared to the same periods last year.2022. 3M benefitedcontinues to invest in a range of R&D activities from higher organic local-currency sales growthapplication development, product and productivity, partially offsetmanufacturing support, product development and technology development aimed at disruptive innovations. R&D was also impacted by actuarial adjustments to the Company’s respirator mask/asbestos liability accrual. Acquisitions and divestitures consistrestructuring charges.the transactions and integration costs, net of income, that relate to the acquisition of Scott Safety, in addition to the year-on-year divestiture gains (refer to Note 2) and non-repeating operating losses from divested businesses, which combined, reduced operating margins in the fourth quarter of 2017 and benefited operating income margins for the full year 2017. Items that reduced operating margins were incremental strategic investments in growth, productivity and portfolio actions, in addition to charges related to 3M’s optimization of its portfolio and supply chain footprint. For full year 2017, the benefit from year-on-year divestiture gains and non-repeating net operating losses from divested businesses (primarily$36 million related to the sale of Identityassets associated with its dental local anesthetic business net of a previous contingent indemnification obligation from a 2020 divestiture. In 2022, 3M recorded a pre-tax gain of $2.7 billion related to the split-off and combination of its Food Safety business with Neogen Corporation. Refer to Note 3 for further details.29Management) was partially offset by the impact of the Scott Safety acquisition noted earlier. 3M also benefited from raw material sourcing cost reduction projects. Lastly, operating margins were reduced by foreign currency effects (net of hedge impacts) and higher year-on-year defined benefit pension expense. Year 2016 operating income:Operating income margins were 24.0 percent in 2016 compared to 22.9 percent in 2015, an increase of 1.1 percentage points. 3M benefited from the combination of higher selling prices and lower raw material costs, plus lower year-on-year defined benefit pension and postretirement expense. Acquisitions and divestitures had a favorable impact on operating margins. This included solid performances from both the Capital Safety and Membrana acquisitions. Divestiture impacts relate to the Polyfoam business, the library systems business, and the license plate converting business in France. In addition, in the fourth quarter of 2016, 3M sold the assets of its protective films business and its cathode battery technology out-licensing business. Items that reduced operating income margins included 2016 strategic investments, as 3M took actions to better optimize its manufacturing footprint and accelerated growth investments across its businesses. Foreign currency impacts (net of hedging) also reduced operating income margins. Organic volume, productivity, and other decreased operating margins asGoodwill Impairment Expense: As a result of lower asset utilization, primarily in the Industrial,3M's commitment to exit per- and Electronics and Energy businesses. Also,polyfluoroalkyl substance (PFAS) manufacturing, 3M had an unfavorable arbitration ruling on an insurance claim, commercial litigation settlements related to Andover Healthcare and TransWeb, and accruals for respirator mask/asbestos liabilities. These declines within organic volume, productivity, and other were partially offset by 2015 restructuring charges, which providedrecorded a favorable year-on-year comparison, and productivity benefits in 2016goodwill impairment charge related to the 2015 restructuring actions.56 for a detailed breakout of this line item.during 2017in 2023 compared to 2022 driven by the addition of imputed interest associated with the obligations resulting from the PWS Settlement and 2016the CAE Settlement (discussed in Note 18).average debt balances and higher U.S. borrowing costs. In addition, in October 2017, via cash tender offers, 3M repurchased $305 million aggregate principal amount of its outstanding notes. The Company recorded an early debt extinguishment charge of $96 million in the fourth quarter of 2017, which was included within interest expense. Capitalized interest related to property, plant and equipment construction in progress is recorded as a reduction to interest expense. Capitalized interest was $12 million, $10 million, and $13 million, in 2017, 2016 and 2015, respectively.Interest income increased year-on-year in both 2017 and 2016costs due to higher average interestdiscount rates as of the year-end 2022, partially offset by a reduction in actuarial loss amortization, which was driven by the lower discount rates.(Percent of pre-tax income/loss) (Percent of pre-tax income/loss) (Percent of pre-tax income/loss) 2023 2022 Effective tax rate 27.8 % 9.6 % The effective tax rate for 2017 was 35.5 percent, compared to 28.3 percent in 2016, an increase of 7.2 percentage points. The effective tax rate for 2016 was 28.3 percent, compared to 29.1 percent in 2015, a decrease of 0.8 percentage points. The changes inwere impacted by many factors, including the enactment of the Tax Cuts and Jobs Act (TCJA) in December 2017 asare further describeddiscussed in the Overview “Income, earnings per share, and effective tax rate adjusted for impacts of the Tax Cuts and Jobs Act (TCJA) -(non-GAAP measures)” section above and in Note 9. During the fourth quarter10.2017, 3M recorded aTaxes:(Millions) 2023 2022 Income (loss) from unconsolidated subsidiaries, net of taxes $ 18 $ 11 tax expense of $762 million relatedtaxes, is attributable to the enactment ofCompany’s accounting under the TCJA. The expense is primarily related to the TCJA’s transition tax on previously unremitted earnings of non-U.S. subsidiaries and is net of remeasurement of 3M’s deferred tax assets and liabilities considering the TCJA’s newly enacted tax rates andequity method for ownership interests in certain other impacts. This provisional amount is subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as provided by recent SEC guidance.The TCJA establishes new tax laws that will also affect 2018 and future periods, including, but not limited to: 1) reduction of the U.S. federal corporate tax rate from 35 percent to 21 percent, 2) the creation of the base erosion anti-abuse tax (BEAT), 3) the creation of a new provision designed to tax global intangible low-taxed income (GILTI), 4) a30general elimination of U.S. federal income taxes on dividends from foreign subsidiaries, 5) limitations on the use of foreign tax credits to reduce the U.S. income tax liability, 6) limitations on the deductibility of certain executive compensation, and 7) the repeal of the domestic production activity deduction. Considering the impacts of the TCJA and other factors, the Company currently estimates its effective tax rate for 2018 will be approximately 20 to 22 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, measurement period adjustment effects on the provisional items and remaining analyses to complete noted in Note 9 related to the 2017 impact of the TCJA, employee share-based payment accounting; as well as recurring factors, such as the geographic mix of income before taxes.Refer to Note 9 for further discussion of income taxes.(Millions) (Millions) 2023 2022 Net income (loss) attributable to noncontrolling interest
Currency Effects:
3M estimates that year-on-year currency effects, including hedging impacts, decreased pre-tax income
PERFORMANCE BY BUSINESS SEGMENT
For a detailed discussion of the markets served and types of products offered by 3M’s business segments see Item 1, Business Segments. Financial information and other disclosures are provided in the Notes to the Consolidated Financial Statements.Note 21. Effective in the first quarter of 2017,2023, the measure of segment operating performance and segment composition used by 3M’s chief operating decision maker (CODM) changed and, as parta result, 3M’s disclosed measure of 3M’s continuing effortsegment profit/loss (business segment operating income (loss)) was updated for all comparative periods presented. The change to improvebusiness segment operating income (loss) aligns with the alignment of its businesses around marketsupdate to how the CODM assesses performance and customers,allocates resources for the Company made the following changes:
Integration of former Renewable Energy Division
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Creation of Automotive and Aerospace Solutions Division
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31
Consolidation of U.S. customer account activity - impacting dual credit reporting
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Business segment information presentedInformation provided herein reflects the impact of these changes for all periods presented. 3M manages its operations in fivefour business segments. The reportable segments are Industrial; Safety and Graphics;Industrial; Transportation and Electronics; Health Care; Electronics and Energy; and Consumer.
Corporate and UnallocatedExpense - Net:
charges (see Note 5).
Each of 3M’s business segments were impacted by the following pre-tax amounts:
Incremental divestiture gains, net of strategic investments charges, by business segment:
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(Millions) |
| 2017 |
| |
Industrial |
|
| (193) |
|
Safety and Graphics |
|
| 553 |
|
Health Care |
|
| (43) |
|
Electronics and Energy |
|
| (120) |
|
Consumer |
|
| (86) |
|
Corporate and Unallocated |
|
| (50) |
|
Total |
| $ | 61 |
|
32
Restructuring charge by business segment:
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(Millions) |
| Fourth Quarter 2015 |
| |
Industrial |
|
| 42 |
|
Safety and Graphics |
|
| 11 |
|
Health Care |
|
| 9 |
|
Electronics and Energy |
|
| 12 |
|
Consumer |
|
| 3 |
|
Corporate and Unallocated |
|
| 37 |
|
Total |
| $ | 114 |
|
Information related to 3M’s business segments is presented in the tables that follow. Organic local-currency salesfollow with additional context in the corresponding narrative below the tables.
| 2023 | 2022 | |||||||||||||||||||||||||||||||
| Sales (millions) | $ | 10,956 | $ | 11,604 | ||||||||||||||||||||||||||||
| Sales change analysis: | ||||||||||||||||||||||||||||||||
| Organic sales | (5.1) | % | 1.0 | % | ||||||||||||||||||||||||||||
| Translation | (0.5) | (4.2) | ||||||||||||||||||||||||||||||
| Total sales change | (5.6) | % | (3.2) | % | ||||||||||||||||||||||||||||
| Business segment operating income (millions) | $ | 2,324 | $ | 1,135 | ||||||||||||||||||||||||||||
| Percent change | 104.7 | % | (53.9) | % | ||||||||||||||||||||||||||||
| Percent of sales | 21.2 | % | 9.8 | % | ||||||||||||||||||||||||||||
| Adjusted business segment operating income (millions) (non-GAAP measure) | $ | 2,408 | $ | 2,549 | ||||||||||||||||||||||||||||
| Percent change | (5.5) | % | (5.9) | % | ||||||||||||||||||||||||||||
| Percent of sales | 22.0 | % | 22.0 | % | ||||||||||||||||||||||||||||
The following discusses total year resultsIndustrial business segment (rather than reflected in Corporate and Unallocated--see Note 21 for 2017 compared to 2016 and 2016 compared to 2015, for each business segment.additional information). Refer to the preceding year 2017 and 2016 sales results by geographic area/business segment sections
Industrial Business (34.5% of consolidated sales):
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| 2017 |
| 2016 |
| 2015 |
| |||
Sales (millions) |
|
| $ | 10,911 |
| $ | 10,399 |
| $ | 10,388 |
|
Sales change analysis: |
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Organic local-currency |
|
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| 4.9 | % |
| (0.1) | % |
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Acquisitions |
|
|
| — |
|
| 1.6 |
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Divestitures |
|
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| (0.5) |
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| (0.3) |
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Translation |
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| 0.5 |
|
| (1.1) |
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Total sales change |
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| 4.9 | % |
| 0.1 | % |
|
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|
|
|
|
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Operating income (millions) |
|
| $ | 2,289 |
| $ | 2,395 |
| $ | 2,277 |
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Percent change |
|
|
| (4.4) | % |
| 5.2 | % |
|
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Percent of sales |
|
|
| 21.0 | % |
| 23.0 | % |
| 21.9 | % |
Sales in Industrial totaled $10.9 billion, up 4.9 percent in U.S. dollars. Organic local-currency sales increased 4.9 percent, divestitures reduced sales by 0.5 percent, and foreign currency translation increased sales by 0.5 percent.
On an organic local-currency sales basis:
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Acquisitions and divestitures:
|
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Operating income:
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33
Year 2016 results:
Sales totaled $10.4 billion, up 0.1 percent in U.S. dollars. Organic local-currency sales were flat, acquisitions added 1.6 percent, divestitures reduced sales by 0.3 percent, and foreign currency translation reduced sales by 1.1 percent. The flat organic local-currency sales impact reflected economic challenges in the global industrial sector. Industrial rebounded in the fourth quarter of 2016, when it reflected 4.5 percent organic local-currency sales growth.
On an organic local-currency sales basis:
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Acquisitions and divestitures:
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Operating income:
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Safety and Graphics Business (19.4% of consolidated sales):
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| 2017 |
| 2016 |
| 2015 |
| |||
Sales (millions) |
|
| $ | 6,148 |
| $ | 5,881 |
| $ | 5,736 |
|
Sales change analysis: |
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Organic local-currency |
|
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| 6.1 | % |
| 2.1 | % |
|
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Acquisitions |
|
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| 2.2 |
|
| 3.9 |
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Divestitures |
|
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| (4.3) |
|
| (1.8) |
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|
|
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Translation |
|
|
| 0.5 |
|
| (1.7) |
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Total sales change |
|
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| 4.5 | % |
| 2.5 | % |
|
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Operating income (millions) |
|
| $ | 2,067 |
| $ | 1,423 |
| $ | 1,332 |
|
Percent change |
|
|
| 45.3 | % |
| 6.8 | % |
|
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Percent of sales |
|
|
| 33.6 | % |
| 24.2 | % |
| 23.2 | % |
Year 2017 results:
Sales in Safety and Graphics totaled $6.1Industrial were down 5.6 percent in U.S. dollars.
| 2023 | 2022 | |||||||||||||||||||||||||||||||
| Sales (millions) | $ | 8,501 | $ | 8,902 | ||||||||||||||||||||||||||||
| Sales change analysis: | ||||||||||||||||||||||||||||||||
| Organic sales | (3.5) | % | 1.2 | % | ||||||||||||||||||||||||||||
| Acquisitions | 0.7 | — | ||||||||||||||||||||||||||||||
| Divestitures | (0.7) | (0.5) | ||||||||||||||||||||||||||||||
| Translation | (1.0) | (4.6) | ||||||||||||||||||||||||||||||
| Total sales change | (4.5) | % | (3.9) | % | ||||||||||||||||||||||||||||
| Business segment operating income (millions) | $ | 1,312 | $ | 973 | ||||||||||||||||||||||||||||
| Percent change | 34.9 | % | (48.0) | % | ||||||||||||||||||||||||||||
| Percent of sales | 15.4 | % | 10.9 % | |||||||||||||||||||||||||||||
| Adjusted sales (millions) (non-GAAP measure) | $ | 7,212 | $ | 7,551 | ||||||||||||||||||||||||||||
| Sales change analysis: | ||||||||||||||||||||||||||||||||
| Organic sales | (3.5) | % | (1.0) | % | ||||||||||||||||||||||||||||
| Acquisitions | 0.9 | — | ||||||||||||||||||||||||||||||
| Divestitures | (0.9) | (0.5) | ||||||||||||||||||||||||||||||
| Translation | (1.0) | (4.1) | ||||||||||||||||||||||||||||||
| Total sales change | (4.5) | % | (5.6) | % | ||||||||||||||||||||||||||||
| Adjusted business segment operating income (millions) (non-GAAP measure) | $ | 1,517 | $ | 1,604 | ||||||||||||||||||||||||||||
| Percent change | (5.4) | % | (7.6) % | |||||||||||||||||||||||||||||
| Percent of sales | 21.0 | % | 21.2 % | |||||||||||||||||||||||||||||
On an organic local-currency sales basis:
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34
Acquisitions and divestitures:
|
|
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|
|
|
|
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|
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Operating income:
|
|
Year 2016 results:
Sales totaled $5.9 billion, up 2.5were down 4.5 percent in U.S. dollars. Organic local-currency sales increased 2.1 percent, and foreign currency translation reduced sales by 1.7 percent. Acquisitions added 3.9 percent, while divestitures reduced sales by 1.8 percent.
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|
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Acquisitions
|
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
| 2016 |
| 2015 |
| |||
Sales (millions) |
| $ | 5,813 |
| $ | 5,566 |
| $ | 5,449 |
|
Sales change analysis: |
|
|
|
|
|
|
|
|
|
|
Organic local-currency |
|
| 3.9 | % |
| 3.6 | % |
|
|
|
Acquisitions |
|
| — |
|
| 0.2 |
|
|
|
|
Translation |
|
| 0.5 |
|
| (1.7) |
|
|
|
|
Total sales change |
|
| 4.4 | % |
| 2.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (millions) |
| $ | 1,781 |
| $ | 1,763 |
| $ | 1,730 |
|
Percent change |
|
| 1.0 | % |
| 1.9 | % |
|
|
|
Percent of sales |
|
| 30.6 | % |
| 31.7 | % |
| 31.7 | % |
35
| 2023 | 2022 | |||||||||||||||||||||||||||||||
| Sales (millions) | $ | 8,195 | $ | 8,427 | ||||||||||||||||||||||||||||
| Sales change analysis: | ||||||||||||||||||||||||||||||||
| Organic sales | 0.7 | % | 3.2 | % | ||||||||||||||||||||||||||||
| Divestitures | (3.1) | (1.4) | ||||||||||||||||||||||||||||||
| Translation | (0.4) | (3.8) | ||||||||||||||||||||||||||||||
| Total sales change | (2.8) | % | (2.0) | % | ||||||||||||||||||||||||||||
| Business segment operating income (millions) | $ | 1,603 | $ | 1,799 | ||||||||||||||||||||||||||||
| Percent change | (10.9) | % | (11.5) | % | ||||||||||||||||||||||||||||
| Percent of sales | 19.6 | % | 21.4 | % | ||||||||||||||||||||||||||||
Year 20172023 results:
|
|
Acquisitions:
|
|
Operating income:
|
|
|
|
|
|
|
|
Acquisitions:
|
|
Operating income:
|
|
|
|
Electronics
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
| 2016 |
| 2015 |
| |||
Sales (millions) |
| $ | 5,159 |
| $ | 4,643 |
| $ | 5,069 |
|
Sales change analysis: |
|
|
|
|
|
|
|
|
|
|
Organic local-currency |
|
| 11.0 | % |
| (7.8) | % |
|
|
|
Divestitures |
|
| (0.2) |
|
| — |
|
|
|
|
Translation |
|
| 0.3 |
|
| (0.6) |
|
|
|
|
Total sales change |
|
| 11.1 | % |
| (8.4) | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (millions) |
| $ | 1,254 |
| $ | 1,041 |
| $ | 1,083 |
|
Percent change |
|
| 20.4 | % |
| (3.9) | % |
|
|
|
Percent of sales |
|
| 24.3 | % |
| 22.4 | % |
| 21.4 | % |
36
| 2023 | 2022 | |||||||||||||||||||||||||||||||
| Sales (millions) | $ | 5,026 | $ | 5,292 | ||||||||||||||||||||||||||||
| Sales change analysis: | ||||||||||||||||||||||||||||||||
| Organic sales | (4.7) | % | (0.9) | % | ||||||||||||||||||||||||||||
| Divestitures | (0.1) | (0.4) | ||||||||||||||||||||||||||||||
| Translation | (0.2) | (2.6) | ||||||||||||||||||||||||||||||
| Total sales change | (5.0) | % | (3.9) | % | ||||||||||||||||||||||||||||
| Business segment operating income (millions) | $ | 904 | $ | 978 | ||||||||||||||||||||||||||||
| Percent change | (7.6) | % | (15.9) | % | ||||||||||||||||||||||||||||
| Percent of sales | 18.0 | % | 18.5 | % | ||||||||||||||||||||||||||||
Year 20172023 results:
Total sales within the electronics-related businesses were up 16 percent while energy-related businesses were up 2 percent.
|
|
|
|
Divestitures:
|
|
|
|
|
|
Operating income:
|
|
Total sales within the electronics-related and energy-related businesses decreased 10 percent and 4 percent, respectively.
|
|
|
|
Divestitures:
|
|
Operating income:
|
|
|
|
|
|
37
Consumer Business (14.5% of consolidated sales):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 |
| 2016 |
| 2015 |
| |||
Sales (millions) |
|
| $ | 4,589 |
| $ | 4,484 |
| $ | 4,429 |
|
Sales change analysis: |
|
|
|
|
|
|
|
|
|
|
|
Organic local-currency |
|
|
| 1.7 | % |
| 1.8 | % |
|
|
|
Translation |
|
|
| 0.6 |
|
| (0.6) |
|
|
|
|
Total sales change |
|
|
| 2.3 | % |
| 1.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (millions) |
|
| $ | 993 |
| $ | 1,065 |
| $ | 1,048 |
|
Percent change |
|
|
| (6.8) | % |
| 1.6 | % |
|
|
|
Percent of sales |
|
|
| 21.6 | % |
| 23.7 | % |
| 23.7 | % |
Year 2017 results:
Sales in Consumer totaled $4.6 billion, up 2.3 percent in U.S. dollars. Organic local-currency sales increased 1.7 percent, while foreign currency translation increased sales by 0.6 percent.
On an organic local-currency sales basis:
|
|
|
|
Operating income:
|
|
Year 2016 results:
Consumer sales totaled $4.5 billion, up 1.2 percent in U.S. dollars. Organic local-currency sales increased 1.8 percent, and foreign currency translation reduced sales by 0.6 percent.
On an organic local-currency sales basis:
|
|
Operating income:
|
|
|
|
PERFORMANCE BY GEOGRAPHIC AREA
While 3M manages its businesses globally and believes its business segment results are the most relevant measure of performance, the Company also utilizes geographic area data as a secondary performance measure. Export sales are generally reported within the geographic area where the final sales to 3M customers are made. A portion of the products or components sold by 3M’s operations to its customers are exported by these customers to different geographic areas. As customers move their operations from one geographic area to another, 3M’s results will follow. Thus, net sales in a particular geographic area are not indicative of end-user consumption in that geographic area. Financial information related to 3M operations in various geographic areas is provided in Note 18.
2 and Note 21.
38
Geographic Area Supplemental Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
|
|
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|
|
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|
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|
|
| Property, Plant and |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equipment - net |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Employees as of December 31, |
| Capital Spending |
| as of December 31, |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Employees as of December 31, | Employees as of December 31, | Capital Spending for years ended December 31, | Property, Plant and Equipment - net as of December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Millions, except Employees) |
| 2017 |
| 2016 |
| 2015 |
| 2017 |
| 2016 |
| 2015 |
| 2017 |
| 2016 |
| (Millions, except Employees) | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
United States |
| 36,958 |
| 35,748 |
| 35,973 |
| $ | 852 |
| $ | 834 |
| $ | 936 |
| $ | 4,891 |
| $ | 4,914 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Americas | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asia Pacific |
| 18,283 |
| 18,124 |
| 17,642 |
|
| 209 |
|
| 228 |
|
| 172 |
|
| 1,672 |
|
| 1,573 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe, Middle East and Africa |
| 20,869 |
| 20,203 |
| 20,563 |
|
| 256 |
|
| 294 |
|
| 249 |
|
| 1,798 |
|
| 1,512 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Latin America and Canada |
| 15,426 |
| 17,509 |
| 15,268 |
|
| 56 |
|
| 64 |
|
| 104 |
|
| 505 |
|
| 517 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Company |
| 91,536 |
| 91,584 |
| 89,446 |
| $ | 1,373 |
| $ | 1,420 |
| $ | 1,461 |
| $ | 8,866 |
| $ | 8,516 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
other actions.
Activities
.The Company believes its most critical accounting estimates relate to legal proceedings, the Company’s pension and postretirement obligations, asset impairments and income taxes.Company. Senior management has discussed the development, selection and disclosure of its critical accounting estimates with the Audit Committee of 3M’s Board of Directors.
Pension and Postretirement Obligations:
3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The primary U.S. defined-benefit pension plan was closed to new participants effective January 1, 2009. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance with Accounting Standard Codification (ASC) 715, Compensation — Retirement Benefits,450,
39
as an asset or liability in its statement of financial position and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income, which is a component of stockholders’ equity. While the company believes the valuation methods used to determine the fair value of plan assets are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. See Note 12 for additional discussion of actuarial assumptions used in determining defined benefit pension and postretirement health care liabilitiesobligations and expenses.
Pension benefits associated withrelated net periodic benefit costs. The below further describes these plans are generally based primarilyestimates. Note 14 provides the weighted averages of these assumptions as of applicable dates and for respective periods and additional information on each participant’s years of service, compensation,how the rates were determined.
yields, cause these rates to be subject to uncertainty.
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
|
| U.S. Qualified Pension |
| International Pension (weighted average) |
| U.S. Postretirement Medical |
| ||||||||||||||||||||||||||||||||||||
December 31, 2017 Liability: |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
| U.S. Qualified Pension | U.S. Qualified Pension | International Pension (weighted average) | U.S. Postretirement Medical | ||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 Liability: | |||||||||||||||||||||||||||||||||||||||||||
Benefit obligation |
| 3.68 | % | 2.41 | % | 3.60 | % | ||||||||||||||||||||||||||||||||||||
2018 Net Periodic Benefit Cost Components: |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
| Benefit obligation | |||||||||||||||||||||||||||||||||||||||||||
| Benefit obligation | 4.98 | % | 3.99 | % | 4.94 | % | |||||||||||||||||||||||||||||||||||||
| 2024 Net Periodic Benefit Cost Components: | |||||||||||||||||||||||||||||||||||||||||||
| Service cost | |||||||||||||||||||||||||||||||||||||||||||
| Service cost | |||||||||||||||||||||||||||||||||||||||||||
Service cost |
| 3.78 | % | 2.28 | % | 3.77 | % | 5.08 | % | 3.67 | % | 5.08 | % | ||||||||||||||||||||||||||||||
Interest cost |
| 3.35 | % | 2.14 | % | 3.20 | % | Interest cost | 4.97 | % | 3.99 | % | 4.87 | % | |||||||||||||||||||||||||||||
Another significant element in determining the Company’s pension expense in accordance with ASC 715 is the
2023. Changes in asset allocation and market performance over time, among other factors, cause these estimates to be subject to uncertainty.
2023.
40
used to measure plan liabilities and 2017 net periodic benefit cost. The table assumes all other factors are held constant, including the slope of the discount rate yield curves.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Increase (Decrease) in Net Periodic Benefit Cost |
| ||||||||||
|
| Discount Rate |
| Expected Return on Assets |
| ||||||||
(Millions) |
| -0.25% |
| +0.25% |
| -0.25% |
| +0.25% |
| ||||
U.S. pension plans |
| $ | 34 |
| $ | (33) |
| $ | 38 |
| $ | (38) |
|
International pension plans |
|
| 24 |
|
| (23) |
|
| 16 |
|
| (16) |
|
Asset Impairments:
goodwill. As of December 31, 2017, net property, plant and equipment totaled $8.9 billion and net identifiable intangible assets totaled $2.9 billion. Management makes estimates and assumptions in preparing the consolidated financial statements for which actual results will emerge over long periods of time. This includes the recoverability of long-lived assets employed in the business, including assets of acquired businesses. These estimates and assumptions are closely monitored by management and periodically adjusted as circumstances warrant. For instance, expected asset lives may be shortened or an impairment recorded based on a change in the expected use of the asset or performance of the related asset group.
Of the $2.9 billion in net identifiable intangible assets, $0.6 billion relates to indefinite-lived tradenames, primarily Capital Safety, whose tradenames ($520 million at acquisition date) have been in existence for over 55 years (refer to Note 2 for more detail). The primary valuation technique used in estimating the fair value of indefinite lived intangible assets (tradenames) is a discounted cash flow approach. Specifically, a relief of royalty rate is applied to estimated sales, with the resulting amounts then discounted using an appropriate market/technology discount rate. The relief of royalty rate is the estimated royalty rate a market participant would pay to acquire the right to market/produce the product. If the resulting discounted cash flows are less than the book value of the indefinite lived intangible asset, impairment exists, and the asset value must be written down. Based on impairment testing in the third quarter of 2017, no impairment was indicated. The discounted cash flows related to the Capital Safety tradename exceeded its book value by more than 15 percent.
2023, 3M goodwill totaled approximately $10.5 billion as of December 31, 2017. 3M’s annual goodwill$12.9 billion. Goodwill is tested for impairment testing is performedannually in the fourth quarter of each year. year and is tested between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. If future non-cash asset impairment charges are taken, 3M would expect that only a portion of the goodwill would be impaired.
An impairment loss would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit, and the loss would equal that difference. The estimated fair value of a reporting unit is determined based on a market approach using earnings for the reporting unit multiplied by a price/earnings ratio for comparable industry groups, or by usingcompany information such as EBITDA (earnings before interest, taxes, depreciation and amortization) multiples. 3M also performs a discounted cash flow analysis. 3M typically usesanalysis for certain reporting units if the price/earnings ratiomarket approach for stable and growing businesses that have a long history and track record of generating positive operating income and cash flows. 3M uses the discounted cash flow approach for start-up, loss position and declining businesses, in addition to using for businesses where the price/earnings ratio valuation method indicates additional review is warranted. 3M also usesA discounted cash flow as an additional tool for businesses that may be growing at a slower rate than planned due to economic or other conditions.
As described in Note 17, effective in the first quarter of 2017, 3M made business segment reporting changes. For any product moves that resultedanalysis involves key assumptions including projected sales, EBITDA margins, capital expenditures, and discount rates. Changes in reporting unit changes,earnings, comparable company information, and expected future cash flows, as well as underlying market and overall economic conditions, among other factors, make these estimates subject to uncertainty.
units. As of October 1, 2017,2023, 3M had 2420 primary reporting units, with ten reporting units accounting for approximately 8695 percent of the goodwill. These ten reporting units were comprised of the following divisions: Advanced Materials, Communication Markets,Abrasives, Display Materials and Systems, Electronics Materials Solutions, Health Information Systems, Industrial Adhesives and
41
Tapes, Infection Prevention,Medical Solutions, Oral Care, Solutions, Personal Safety, Separation and Purification Sciences, and Transportation Safety. The estimated fair value for all reporting units was in excess of carrying value by approximately 40 percent or more. 3M’s market value at both December 31, 2017, and September 30, 2017, was significantly in excess of its shareholders’ equity of approximately $12 billion.
As discussed in Note 2, 3M announced the sale of substantially all of its Communication Markets division, which is expected to close in 2018, which will result in an associated goodwill reduction of approximately $270 million upon sale.
In 2017, 3M determined fair values using either an industry price-earnings ratio approach or a discounted cash flows analysis. Where applicable, 3M used a weighted-average discounted cash flow analysis for certain divisions, using projected cash flows that were weighted based on different sales growth and terminal value assumptions, among other factors. The weighting was based on management’s estimates of the likelihood of each scenario occurring.
Factors which could result in future impairment charges include, among others, changes in worldwide economic conditions, changes in competitive conditions and customer preferences, and fluctuations in foreign currency exchange rates. These risk factors are discussed in Item 1A, “Risk Factors,” of this document. In addition, changes in the weighted average cost of capital could also impact impairment testing results. As indicated above, during the first quarter of 2017, the Company completedunit.
Income Taxes:
Tax Positions:
The extent of 3M’s operations involves dealing with uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due. The Company follows guidance provided by ASC 740, Income Taxes,During the fourth quarter of 2017, 3M recorded a net tax expense related to the enactment of the Tax Cuts and Jobs Act (TCJA). The expense is primarily related to the TCJA’s transition tax on previously unremitted earnings of non-U.S. subsidiaries and is net of remeasurement of 3M’s deferred tax assets and liabilities considering the TCJA’s newly enacted tax rates and certain other impacts. As discussed in Note 9, this expense is a provisional amount and is subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as provided by recent SEC guidance.
42
Information regarding new accounting pronouncements is included in Note 1 to the Consolidated Financial Statements.
3M’s
outstanding at December 31, 2023, compared to no commercial paper outstanding as of December 31, 2022.
debt:
The strength of 3M’sFitch.
As of December 31, 2017,2023, the total amount of debt issued as part of the medium-term notes program (Series F), inclusive of debt issued in 2011, 2012, 2014, 2015, 2016,February 2019 and the 2017 debt referenced above,prior years is approximately $13.1$17.6 billion (utilizing the foreign exchange rates applicable at the time of issuance for the Euroeuro denominated debt). Information with respect to long-term debt issuances and maturities for the periods presented is included in Note 11.
13.
43
agreement, facility, 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(based on amounts defined in the amended 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 December 31, 2017,2023, this ratio was approximately 2915 to 1. Debt covenants do not restrict the payment of dividends. Apart from the committed facilities, an additional $288
marketable securities:
At December 31,States. The increase from December 31, 2022 primarily resulted from cash flow from operations.
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
| December 31, |
|
| 2017 versus |
| |||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||||
| (Millions) | |||||||||||||||||||||||||||||||||||||
| (Millions) | |||||||||||||||||||||||||||||||||||||
(Millions) |
| 2017 |
| 2016 |
| 2016 |
| 2023 | 2022 | Change | |||||||||||||||||||||||||||
Total debt |
| $ | 13,949 |
| $ | 11,650 |
| $ | 2,299 |
| |||||||||||||||||||||||||||
Less: Cash, cash equivalents and marketable securities |
|
| 4,156 |
|
| 2,695 |
|
| 1,461 |
| |||||||||||||||||||||||||||
Net debt (non-GAAP measure) |
| $ | 9,793 |
| $ | 8,955 |
| $ | 838 |
| |||||||||||||||||||||||||||
activity.
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
|
| December 31, |
|
| 2017 versus |
| |||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||||
| (Millions) | |||||||||||||||||||||||||||||||||||||
| (Millions) | |||||||||||||||||||||||||||||||||||||
(Millions) |
|
| 2017 |
|
| 2016 |
|
| 2016 |
| 2023 | 2022 | Change | ||||||||||||||||||||||||
Current assets |
| $ | 14,277 |
| $ | 11,726 |
| $ | 2,551 |
| |||||||||||||||||||||||||||
Less: Current liabilities |
|
| 7,687 |
|
| 6,219 |
|
| 1,468 |
| |||||||||||||||||||||||||||
Working capital (non-GAAP measure) |
| $ | 6,590 |
| $ | 5,507 |
| $ | 1,083 |
| |||||||||||||||||||||||||||
44
Working capital increased $1.1decreased $4.1 billion during 2017 when compared towith December 31, 2016. Current asset balance2022. Balance changes in current assets increased working capital by $2.6$1.7 billion, driven largely by increases in cash/cash and cash equivalents and marketable securities,partially offset by decreases in addition to higher accounts receivable and inventories (discussed further below). Current liability balanceinventories. Balance changes in current liabilities decreased working capital by $1.5$5.8 billion, largelyprimarily due to increases in short-term borrowings, with commercial paper outstandingthe current portion of $745 million at December 31, 2017 compared to none outstanding at December 31, 2016.
Accounts Receivableobligations resulting from the PWS Settlement and Inventory Turns (non-GAAP measures):
Accounts receivable and inventory turns are not defined under U.S. generally accepted accounting principles and may not be computed the same as similarly titled measures used by other companies. 3M defines accounts receivable turns as quarterly net sales multiplied by 4 divided by ending accounts receivable – net, and defines inventory turns as quarterly manufacturing cost multiplied by 4 divided by ending inventory. 3M believes accounts receivable turns is meaningful to investors as a measure of how efficiently the Company manages credit and collects from its customers. For inventory turns calculation purposes, manufacturing cost is defined as cost of sales less freight and engineering costs. 3M believes inventory turns is meaningful to investors as a measure of how quickly inventory is sold. Details of these calculations follow.
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable turns (non-GAAP measure) |
| December 31, |
|
| 2017 versus |
| ||||
(Millions, except turns) |
|
| 2017 |
|
| 2016 |
|
| 2016 |
|
Quarterly net sales |
| $ | 7,990 |
| $ | 7,329 |
| $ | 661 |
|
Ending accounts receivable - net |
| $ | 4,911 |
| $ | 4,392 |
| $ | 519 |
|
Accounts receivable turns |
|
| 6.51 |
|
| 6.67 |
|
| (0.16) |
|
|
|
|
|
|
|
|
|
|
|
|
Inventory turns (non-GAAP measure) |
| December 31, |
|
| 2017 versus |
| ||||
(Millions, except turns) |
|
| 2017 |
|
| 2016 |
|
| 2016 |
|
Quarterly cost of sales |
| $ | 4,080 |
| $ | 3,716 |
| $ | 364 |
|
Less: Freight and engineering |
| $ | 172 |
| $ | 160 |
| $ | 12 |
|
Manufacturing cost |
| $ | 3,908 |
| $ | 3,556 |
| $ | 352 |
|
Ending inventory |
| $ | 4,034 |
| $ | 3,385 |
| $ | 649 |
|
Inventory turns |
|
| 3.88 |
|
| 4.20 |
|
| (0.32) |
|
Accounts receivable increased $519 million year-on-yearCAE Settlement (discussed in 2017, primarily due to increased sales. In addition, foreign currency impacts increased 2017 accounts receivable by $215 million and acquisitions, net of divestitures, increased accounts receivable by $57 million. As a result, accounts receivable turns decreased 2 percent versus 2016.
Inventory increased $649 million year-on-year in 2017. Foreign currency impacts increased 2017 inventory by $210 million and acquisitions, net of divestitures, increased inventory by $51 million. Higher fourth quarter sales contributed to a 10 percent increase in cost of sales, while inventory increased 19 percent, which combined contributed to an 8 percent decrease in inventory turns.
On a seasonal basis, both accounts receivable and inventory turns are historically higher at year-end, driven by lower year-end accounts receivable and inventory balances.
45
Return on Invested Capital (non-GAAP measure):
Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation. The calculation is provided in the below table.
In 2017, ROICCash Flows: Discussions of 21.3 percent was lower than both 2016 and 2015. This decrease related to the net impact of the enactment of the TCJA and increases in commercial paper borrowings in conjunction with the December 2017 U.S. defined benefit pension plan contribution, which combined reduced ROIC by 3 percentage points in 2017.
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 |
|
|
|
|
|
|
|
|
|
|
|
(Millions) |
| 2017 |
| 2016 |
| 2015 |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
Return on Invested Capital (non-GAAP measure) |
|
|
|
|
|
|
|
|
|
|
|
Net income including non-controlling interest |
| $ | 4,869 |
| $ | 5,058 |
| $ | 4,841 |
|
|
Interest expense (after-tax) (1) |
|
| 208 |
|
| 143 |
|
| 106 |
|
|
Adjusted net income (Return) |
| $ | 5,077 |
| $ | 5,201 |
| $ | 4,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shareholders' equity (including non-controlling interest) (2) |
| $ | 11,627 |
| $ | 11,316 |
| $ | 12,484 |
|
|
Average short-term and long-term debt (3) |
|
| 12,156 |
|
| 11,725 |
|
| 9,266 |
|
|
Average invested capital |
| $ | 23,783 |
| $ | 23,041 |
| $ | 21,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on invested capital (non-GAAP measure) |
|
| 21.3 | % |
| 22.6 | % |
| 22.7 | % |
|
|
|
|
|
|
| �� |
|
|
|
|
|
(1) Effective income tax rate used for interest expense |
|
| 35.5 | % |
| 28.3 | % |
| 29.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Calculation of average equity (includes non-controlling interest) |
|
|
|
|
|
|
|
|
|
|
|
Ending total equity as of: |
|
|
|
|
|
|
|
|
|
|
|
March 31 |
| $ | 11,040 |
| $ | 11,495 |
| $ | 13,673 |
|
|
June 30 |
|
| 11,644 |
|
| 11,658 |
|
| 12,851 |
|
|
September 30 |
|
| 12,202 |
|
| 11,769 |
|
| 11,945 |
|
|
December 31 |
|
| 11,622 |
|
| 10,343 |
|
| 11,468 |
|
|
Average total equity |
| $ | 11,627 |
| $ | 11,316 |
| $ | 12,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) Calculation of average debt |
|
|
|
|
|
|
|
|
|
|
|
Ending short-term and long-term debt as of: |
|
|
|
|
|
|
|
|
|
|
|
March 31 |
| $ | 11,711 |
| $ | 11,139 |
| $ | 6,566 |
|
|
June 30 |
|
| 11,301 |
|
| 11,749 |
|
| 8,484 |
|
|
September 30 |
|
| 11,663 |
|
| 12,361 |
|
| 11,216 |
|
|
December 31 |
|
| 13,949 |
|
| 11,650 |
|
| 10,797 |
|
|
Average short-term and long-term debt |
| $ | 12,156 |
| $ | 11,725 |
| $ | 9,266 |
|
|
Cash Flows:
Cashcash flows from operating, investing and financing activities are provided in the tablessections 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.
46
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31 |
|
|
|
|
|
|
|
|
|
|
(Millions) |
| 2017 |
| 2016 |
| 2015 |
| |||
Net income including noncontrolling interest |
| $ | 4,869 |
| $ | 5,058 |
| $ | 4,841 |
|
Depreciation and amortization |
|
| 1,544 |
|
| 1,474 |
|
| 1,435 |
|
Company pension and postretirement contributions |
|
| (967) |
|
| (383) |
|
| (267) |
|
Company pension and postretirement expense |
|
| 333 |
|
| 251 |
|
| 556 |
|
Stock-based compensation expense |
|
| 324 |
|
| 298 |
|
| 276 |
|
Gain on sale of businesses |
|
| (586) |
|
| (111) |
|
| (47) |
|
Income taxes (deferred and accrued income taxes) |
|
| 1,074 |
|
| 108 |
|
| (349) |
|
Excess tax benefits from stock-based compensation |
|
| — |
|
| — |
|
| (154) |
|
Accounts receivable |
|
| (245) |
|
| (313) |
|
| (58) |
|
Inventories |
|
| (387) |
|
| 57 |
|
| 3 |
|
Accounts payable |
|
| 24 |
|
| 148 |
|
| 9 |
|
Other — net |
|
| 257 |
|
| 75 |
|
| 175 |
|
Net cash provided by operating activities |
| $ | 6,240 |
| $ | 6,662 |
| $ | 6,420 |
|
Cash flows from operating activities can fluctuate significantly from period to period, as pension funding decisions,working capital movements, tax timing differences and other items such as litigation payments can significantly impact cash flows.
In 2016, cash flows provided by operating activities increased $242 million compared to the same period in 2015, with this increase primarily due to lower year-on-year cash taxes and higher net income. These items were partially offset by higher Company pension contributions. The combination of accounts receivable, inventories and accounts payable increased working capital by $108 million in 2016, compared to working capital increase of $46 million in 2015. Gain on sale of businesses in the preceding table reflects an adjustment for divestiture gains in 2016 (discussed in Note 2), as cash divestiture activity is presented as proceeds from sale of businesses within investing activities, not operating activities.
those periods.
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 |
|
|
|
|
|
|
|
|
|
|
(Millions) |
| 2017 |
| 2016 |
| 2015 |
| |||
Purchases of property, plant and equipment (PP&E) |
| $ | (1,373) |
| $ | (1,420) |
| $ | (1,461) |
|
Proceeds from sale of PP&E and other assets |
|
| 49 |
|
| 58 |
|
| 33 |
|
Acquisitions, net of cash acquired |
|
| (2,023) |
|
| (16) |
|
| (2,914) |
|
Purchases and proceeds from maturities and sale of marketable securities and investments, net |
|
| (798) |
|
| (163) |
|
| 1,300 |
|
Proceeds from sale of businesses, net of cash sold |
|
| 1,065 |
|
| 142 |
|
| 123 |
|
Other — net |
|
| (6) |
|
| (4) |
|
| 102 |
|
Net cash used in investing activities |
| $ | (3,086) |
| $ | (1,403) |
| $ | (2,817) |
|
47
Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency. The Company expects 20182024 capital spending to be approximately $1.5 billion to $1.8$1.7 billion as 3M continues to invest in its businesses.
growth, productivity and sustainability.
Investments includeda continued expansion and sustainment of current and new facilities across many geographies, focusingfocus on growth, productivity and capacity. Other investments include IT systems and infrastructure, particularly the ongoing multi-year phased implementation of an ERP system on a worldwide basis. Additional specific investments in 2015 included a new state-of-the-art, four story, 400,000 square foot research facility at 3M Center in St. Paul, Minnesota.
sustainability.
Acquisitions, net of cash acquired, in 2017 primarily includes the purchase of Scott Safety. In 2015, this amount consisted mostly of the Capital Safety and Membrana acquisitions. Proceeds from sale of businesses in 2017 primarily relate to the divestiture of the assets of the prescription safety eyewear, identity management, tolling and automated license/number plate recognition and electronic monitoring businesses within the Safety and Graphics business segment. Proceeds from sale of businesses in 2016 related to the divestiture of the assets of the pressurized polyurethane foam adhesives business (formerly known as Polyfoam) within the Industrial business segment and the completion of the divestiture of the Library business within the Safety and Graphics business segment. In addition, in the fourth quarter of 2016, 3M sold the assets of its protective films business within the Industrial business segment and its cathode battery technology out-licensing business within the Electronics and Energy business segment.
securities.
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 |
|
|
|
|
|
|
|
|
|
|
(Millions) |
| 2017 |
| 2016 |
| 2015 |
| |||
Change in short-term debt — net |
| $ | 578 |
| $ | (797) |
| $ | 860 |
|
Repayment of debt (maturities greater than 90 days) |
|
| (962) |
|
| (992) |
|
| (800) |
|
Proceeds from debt (maturities greater than 90 days) |
|
| 1,987 |
|
| 2,832 |
|
| 3,422 |
|
Total cash change in debt |
| $ | 1,603 |
| $ | 1,043 |
| $ | 3,482 |
|
Purchases of treasury stock |
|
| (2,068) |
|
| (3,753) |
|
| (5,238) |
|
Proceeds from issuances of treasury stock pursuant to stock option and benefit plans |
|
| 734 |
|
| 804 |
|
| 635 |
|
Dividends paid to stockholders |
|
| (2,803) |
|
| (2,678) |
|
| (2,561) |
|
Excess tax benefits from stock-based compensation |
|
| — |
|
| — |
|
| 154 |
|
Other — net |
|
| (121) |
|
| (42) |
|
| (120) |
|
Net cash used in financing activities |
| $ | (2,655) |
| $ | (4,626) |
| $ | (3,648) |
|
48
2017 Debt Activity:
The Company’s totalTotal debt was $2.3approximately $16.0 billion higher at December 31, 2017 when compared to2023 and $15.9 billion at December 31, 2016. Increases in debt related to October 2017 debt2022. Maturities of $1.8 billion of fixed-rate notes were offset by net issuances of $2.0 billion, commercial paper of $745 million$1.8 billion (issuance and subsequent repayments/reissuances). The gross commercial paper issuances and repayments, in addition to repayments of the fixed-rate notes, are largely reflected in “Proceeds from debt (maturities greater than 90 days)” and "Repayment of debt (maturities greater than 90 days)". The Company had $1.8 billion in commercial paper outstanding at year end 2017,December 31, 2023, compared to no commercial paper outstanding as of December 31, 2022. 3M’s primary short-term liquidity needs are met through cash on hand and U.S. commercial paper issuances. Refer to Note 13 for more detail regarding debt.
Proceeds from debt for 2017 primarily related to the October 2017 issuance of $650 million aggregate principal amount of 5.5-year fixed rate medium-term notes due 2023 with a coupon rate of 2.25%, $850 million aggregate principal amount of 10-year fixed rate medium-term notes due 2027 with a coupon rate of 2.875%, and $500 million aggregate principal amount of 30-year fixed rate medium-term notes due 2047 with a coupon rate of 3.625%. Refer to Note 11 for more detail of these debt issuances.
In October 2017, via cash tender offers, 3M repurchased $305 million aggregate principal amount of its outstanding notes. This included $110 million of its $330 million principal amount of 6.375% notes due 2028 and $195 million of its $750 million principal amount of 5.70% notes due 2037. The Company recorded an early debt extinguishment charge of $96 million in the fourth quarter of 2017 within interest expense associated with the differential between the carrying value and the amount paid to acquire the tendered notes and related expenses.
2016 Debt Activity:
Total debt at December 31, 2016 increased $853 million when compared to year-end 2015, with the increase primarily due to May 2016 debt issuances (approximately $1.1 billion at issue date exchange rates) and September 2016 debt issuances of approximately $1.75 billion. This increase was partially offset by the repayment of $1 billion aggregate principal amount of medium-term notes due September 2016 along with the net impact of repayments and borrowings by international subsidiaries, primarily Japan and Korea (approximately $0.8 million decrease), which is reflected in “Change in short-term debt—net” in the preceding table. Foreign exchange rate changes also impacted debt balances.
Proceeds from debt for 2016 primarily related to the May 2016 issuance of 500 million Euro aggregate principal amount of 5.75-year fixed rate medium-term notes due February 2022 with a coupon rate of 0.375% and 500 million Euro aggregate principal amount of 15-year fixed rate medium-term notes due 2031 with a coupon rate of 1.50%. In September 2016, 3M issued $600 million aggregate principal amount of five-year fixed rate medium-term notes due 2021 with a coupon rate of 1.625%, $650 million aggregate principal amount of 10-year fixed rate medium-term notes due 2026 with a coupon rate of 2.250%, and $500 million aggregate principal amount of 30-year fixed rate medium-term notes due 2046 with a coupon rate of 3.125%. All of these 2016 issuances were under the medium-term notes program (Series F).
2015 Debt Activity:
In 2015, the change in short-term debt primarily related to bank borrowings by international subsidiaries, primarily Japan and Korea. Repayment of debt primarily related to debt assumed (and paid off) as part of the Capital Safety acquisition. Proceeds from debt primarily related to the May 2015 issuance of 650 million Euros aggregate principal amount of five-year floating rate medium-term notes due 2020, 600 million Euros aggregate principal amount of eight-year fixed rate medium-term notes due 2023, and 500 million Euros aggregate principal amount of fifteen-year fixed rate medium-term notes due 2030, which in the aggregate total approximately $1.9 billion at issue date exchange rates. In addition, August 2015 issuances included $450 million aggregate principal amount of three-year fixed rate medium-term notes due 2018, $500 million aggregate principal amount of five-year fixed rate medium-term notes due 2020, and $550 million aggregate principal amount of 10-year fixed rate medium-term notes due 2025, which in aggregate total $1.5 billion.
49
Repurchases of Common Stock:
Stock:
Cash dividends paid to shareholders totaled $2.803 billion ($4.70 per share) in 2017, $2.678 billion ($4.44 per share) in 2016, and $2.561 billion ($4.10 per share) in 2015.
In 2017, free cash flow conversion was impacted by enactment of the TCJA, along with an additional U.S. pension contribution of $600 million that 3M made following the signing of tax reform. On a combined basis, these items benefited free cash flow conversion by 3 percentage points. conversion.
| Year ended December 31, (Millions) | 2023 | 2022 | ||||||||||||
| Major GAAP Cash Flow Categories | ||||||||||||||
| Net cash provided by (used in) operating activities | $ | 6,680 | $ | 5,591 | ||||||||||
| Net cash provided by (used in) investing activities | (1,207) | (1,046) | ||||||||||||
| Net cash provided by (used in) financing activities | (3,147) | (5,350) | ||||||||||||
| Free Cash Flow (non-GAAP measure) | ||||||||||||||
| Net cash provided by (used in) operating activities | $ | 6,680 | $ | 5,591 | ||||||||||
| Purchases of property, plant and equipment | (1,615) | (1,749) | ||||||||||||
| Free cash flow | 5,065 | 3,842 | ||||||||||||
| Net income (loss) attributable to 3M | $ | (6,995) | $ | 5,777 | ||||||||||
| Free cash flow conversion | N/M | 66 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31 |
|
|
|
|
|
|
|
|
|
|
(Millions) |
| 2017 |
| 2016 |
| 2015 |
| |||
Major GAAP Cash Flow Categories |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
| $ | 6,240 |
| $ | 6,662 |
| $ | 6,420 |
|
Net cash provided by (used in) investing activities |
|
| (3,086) |
|
| (1,403) |
|
| (2,817) |
|
Net cash used in financing activities |
|
| (2,655) |
|
| (4,626) |
|
| (3,648) |
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow (non-GAAP measure) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
| $ | 6,240 |
| $ | 6,662 |
| $ | 6,420 |
|
Purchases of property, plant and equipment (PP&E) |
|
| (1,373) |
|
| (1,420) |
|
| (1,461) |
|
Free cash flow |
| $ | 4,867 |
| $ | 5,242 |
| $ | 4,959 |
|
Net income attributable to 3M |
| $ | 4,858 |
| $ | 5,050 |
| $ | 4,833 |
|
Free cash flow conversion |
|
| 100 | % |
| 104 | % |
| 103 | % |
50
Off-Balance Sheet Arrangements and Contractual Obligations:
As of December 31, 2017, the Company has not utilized special purpose entities to facilitate off-balance sheet financing arrangements. •Tax obligations—Refer to the section entitled “Warranties/Guarantees” in Note 1510.
contingencies—Refer to Note 18. In addition to guarantees, other matters discussed therein, Note 18 references that the Company expects to pay up to $12.5 billion in the aggregate from 2023 through 2036 pursuant to the terms of the PWS Settlement and expects to pay up to $6.0 billion in the aggregate from 2023 to 2029 pursuant to the terms of the CAE Settlement. Note 7 provides further information regarding amounts due under these settlements. See the settlement agreements that are included in the exhibit list to this filing for additional information.
A summary of the Company’s significant contractual obligations as of December 31, 2017, follows:
Contractual Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Payments due by year |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| After |
| |
(Millions) |
| Total |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| 2022 |
| |||||||
Total debt (Note 11) |
| $ | 13,949 |
| $ | 1,853 |
| $ | 692 |
| $ | 1,368 |
| $ | 1,333 |
| $ | 1,191 |
| $ | 7,512 |
|
Interest on long-term debt |
|
| 3,375 |
|
| 269 |
|
| 256 |
|
| 251 |
|
| 241 |
|
| 212 |
|
| 2,146 |
|
Operating leases (Note 15) |
|
| 1,098 |
|
| 258 |
|
| 212 |
|
| 160 |
|
| 106 |
|
| 88 |
|
| 274 |
|
Capital leases (Note 15) |
|
| 76 |
|
| 12 |
|
| 10 |
|
| 9 |
|
| 6 |
|
| 5 |
|
| 34 |
|
Tax Cuts and Jobs Act (TCJA) transition tax payments (Note 9) |
|
| 745 |
|
| 122 |
|
| 59 |
|
| 59 |
|
| 59 |
|
| 111 |
|
| 335 |
|
Unconditional purchase obligations and other |
|
| 1,561 |
|
| 1,032 |
|
| 211 |
|
| 150 |
|
| 99 |
|
| 56 |
|
| 13 |
|
Total contractual cash obligations |
| $ | 20,804 |
| $ | 3,546 |
| $ | 1,440 |
| $ | 1,997 |
| $ | 1,844 |
| $ | 1,663 |
| $ | 10,314 |
|
Long-term debt payments due in 2018, 2019, and 2020 include floating rate notes totaling $54 million, $71 million, and $95 million, respectively, as a result of put provisions associated with these debt instruments.
During the fourth quarter of 2017, 3M recorded a net tax expense related to the enactment of the Tax Cuts and Jobs Act (TCJA). The expense is primarily related to the TCJA’s transition tax. The transition tax is payable over 8 years at the election of the taxpayer. As discussed in Note 9, this balance is a provisional amount and is subject to adjustment during the measurement period of up to one year following the December 2017 enactment of the TCJA, as provided by recent SEC guidance.
Unconditional purchase obligations are defined as agreements to purchase goods or services that are enforceable and legally binding on the Company. Included in the unconditional purchase obligations category above are certain obligations related to take or pay contracts, capital commitments, service agreements and utilities. These estimates include both unconditional purchase obligations with terms in excessvarious vendors that may take the form of, one year and normal ongoing purchase obligations with terms of less than one year. Many of these commitments relate tofor example, take or pay contracts in which 3M guarantees payment to ensure availability to 3M of productscertain materials or services that are soldor to customers.ensure ongoing efforts on capital projects. The Company expects to receive consideration (productsunderlying materials or services)services for these unconditional purchase obligations. ContractualTo the extent the limited amount of these purchase obligations fluctuates, it largely trends with normal-course changes in regular operating activities. Additionally, contractual capital commitments are included in the preceding table, but these commitments represent a small part of the Company’s expected capital spending. The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those items for which the Company is contractually obligated. The majority of 3M’s products and services are purchased as needed, with no unconditional commitment. For this reason, these amounts will not provide a reliable indicator of the Company’s expected future cash outflows on a stand-alone basis.
Other obligations, included in the preceding table within the caption entitled “Unconditional purchase obligations and other,” include the current portion of the liability for uncertain tax positions under ASC 740, which is expected to be paid out in cash in the next 12 months. The Company is not able to reasonably estimate the timing of the long-term payments, other than the transition tax prescribed under the Tax Cuts and Jobs Act (TCJA) which is separately included in the table
51
above, or the amount by which the liability will increase or decrease over time; therefore, the long-term portion of the net tax liability of $523 million is excluded from the preceding table. Refer to Note 9 for further details.
As discussed in Note 12, the Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2018 and Company contributions to its U.S. and international pension plans are expected to be largely discretionary in future years; therefore, amounts related to these plans are not included in the preceding table.
Financial Instruments
agreements.
instruments. Interest Rates Risk: The Company may be impacted by interest rate volatility with respect to existing debt and future debt issuances. 3M manages interest rate risk and expense using a mix of fixed and floating rate debt. In addition, the Company may enter into interest rate swaps that are designated and qualify as fair value hedges. swap agreements. Adverse impact on after-tax Positive impact on after-tax earnings earnings (Millions) 2017 2016 2017 2016 Foreign exchange rates $ (242) $ (245) $ 253 $ 264 Interest rates (15) (13) 14 (2) Commodity prices (3) (2) 3 1 2023. Definition and Limitations of Internal Control over Financial Reporting (Loss) (Millions, except per share amounts) 2017 2016 2015 Net sales $ 31,657 $ 30,109 $ 30,274 Operating expenses Cost of sales 16,001 15,040 15,383 Selling, general and administrative expenses 6,572 6,222 6,229 Research, development and related expenses 1,850 1,735 1,763 Gain on sale of businesses (586) (111) (47) Total operating expenses 23,837 22,886 23,328 Operating income 7,820 7,223 6,946 Other expense (income), net 272 170 123 Income before income taxes 7,548 7,053 6,823 Provision for income taxes 2,679 1,995 1,982 Net income including noncontrolling interest $ 4,869 $ 5,058 $ 4,841 Less: Net income attributable to noncontrolling interest 11 8 8 Net income attributable to 3M $ 4,858 $ 5,050 $ 4,833 Weighted average 3M common shares outstanding — basic 597.5 604.7 625.6 Earnings per share attributable to 3M common shareholders — basic $ 8.13 $ 8.35 $ 7.72 Weighted average 3M common shares outstanding — diluted 612.7 618.7 637.2 Earnings per share attributable to 3M common shareholders — diluted $ 7.93 $ 8.16 $ 7.58 Cash dividends paid per 3M common share $ 4.70 $ 4.44 $ 4.10 (Loss) (Millions) 2017 2016 2015 Net income including noncontrolling interest $ 4,869 $ 5,058 $ 4,841 Other comprehensive income (loss), net of tax: Cumulative translation adjustment 373 (331) (586) Defined benefit pension and postretirement plans adjustment 52 (524) 489 Cash flow hedging instruments, unrealized gain (loss) (203) (33) 25 Total other comprehensive income (loss), net of tax 222 (888) (72) Comprehensive income (loss) including noncontrolling interest 5,091 4,170 4,769 Comprehensive (income) loss attributable to noncontrolling interest (14) (6) (6) Comprehensive income (loss) attributable to 3M $ 5,077 $ 4,164 $ 4,763 December 31, December 31, (Dollars in millions, except per share amount) 2017 2016 Assets Current assets Cash and cash equivalents $ 3,053 $ 2,398 Marketable securities — current 1,076 280 Accounts receivable — net of allowances of $103 and $88 4,911 4,392 Inventories Finished goods 1,915 1,629 Work in process 1,218 1,039 Raw materials and supplies 901 717 Total inventories 4,034 3,385 Prepaids 937 821 Other current assets 266 450 Total current assets 14,277 11,726 Property, plant and equipment 24,914 23,499 Less: Accumulated depreciation (16,048) (14,983) Property, plant and equipment — net 8,866 8,516 Goodwill 10,513 9,166 Intangible assets — net 2,936 2,320 Other assets 1,395 1,178 Total assets $ 37,987 $ 32,906 Liabilities Current liabilities Short-term borrowings and current portion of long-term debt $ 1,853 $ 972 Accounts payable 1,945 1,798 Accrued payroll 870 678 Accrued income taxes 310 299 Other current liabilities 2,709 2,472 Total current liabilities 7,687 6,219 Long-term debt 12,096 10,678 Pension and postretirement benefits 3,620 4,018 Other liabilities 2,962 1,648 Total liabilities $ 26,365 $ 22,563 Commitments and contingencies (Note 15) Equity 3M Company shareholders’ equity: Common stock par value, $.01 par value $ 9 $ 9 Shares outstanding - 2017: 594,884,237 Shares outstanding - 2016: 596,726,278 Additional paid-in capital 5,352 5,061 Retained earnings 39,115 37,907 Treasury stock (25,887) (25,434) Accumulated other comprehensive income (loss) (7,026) (7,245) Total 3M Company shareholders’ equity 11,563 10,298 Noncontrolling interest 59 45 Total equity $ 11,622 $ 10,343 Total liabilities and equity $ 37,987 $ 32,906 3M Company Shareholders Common Accumulated Stock and Other Additional Comprehensive Non- Paid-in Retained Treasury Income controlling (Dollars in millions, except per share amounts) Total Capital Earnings Stock (Loss) Interest Balance at December 31, 2014 $ 12,863 $ 4,388 $ 34,038 $ (19,307) $ (6,289) $ 33 Net income 4,841 4,833 8 Other comprehensive income (loss), net of tax: Cumulative translation adjustment (586) (584) (2) Defined benefit pension and post-retirement plans adjustment 489 489 — Cash flow hedging instruments - unrealized gain (loss) 25 25 — Total other comprehensive income (loss), net of tax (72) Dividends declared ($3.075 per share, Note 7) (1,913) (1,913) Stock-based compensation, net of tax impacts 412 412 Reacquired stock (5,304) (5,304) Issuances pursuant to stock option and benefit plans 641 (662) 1,303 Balance at December 31, 2015 $ 11,468 $ 4,800 $ 36,296 $ (23,308) $ (6,359) $ 39 Net income 5,058 5,050 8 Other comprehensive income (loss), net of tax: Cumulative translation adjustment (331) (329) (2) Defined benefit pension and post-retirement plans adjustment (524) (524) — Cash flow hedging instruments - unrealized gain (loss) (33) (33) — Total other comprehensive income (loss), net of tax (888) Dividends declared ($4.44 per share, Note 7) (2,678) (2,678) Stock-based compensation 270 270 Reacquired stock (3,699) (3,699) Issuances pursuant to stock option and benefit plans 812 (761) 1,573 Balance at December 31, 2016 $ 10,343 $ 5,070 $ 37,907 $ (25,434) $ (7,245) $ 45 Net income 4,869 4,858 11 Other comprehensive income (loss), net of tax: Cumulative translation adjustment 373 370 3 Defined benefit pension and post-retirement plans adjustment 52 52 — Cash flow hedging instruments - unrealized gain (loss) (203) (203) — Total other comprehensive income (loss), net of tax 222 Dividends declared ($4.70 per share, Note 7) (2,803) (2,803) Stock-based compensation 291 291 Reacquired stock (2,044) (2,044) Issuances pursuant to stock option and benefit plans 744 (847) 1,591 Balance at December 31, 2017 $ 11,622 $ 5,361 $ 39,115 $ (25,887) $ (7,026) $ 59 Supplemental share information 2017 2016 2015 Treasury stock Beginning balance 347,306,778 334,702,932 308,898,462 Reacquired stock 10,209,963 22,602,748 34,072,584 Issuances pursuant to stock options and benefit plans (8,367,922) (9,998,902) (8,268,114) Ending balance 349,148,819 347,306,778 334,702,932 (Millions) 2017 2016 2015 Cash Flows from Operating Activities Net income including noncontrolling interest $ 4,869 $ 5,058 $ 4,841 Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities Depreciation and amortization 1,544 1,474 1,435 Company pension and postretirement contributions (967) (383) (267) Company pension and postretirement expense 333 251 556 Stock-based compensation expense 324 298 276 Gain on sale of businesses (586) (111) (47) Deferred income taxes 107 7 395 Excess tax benefits from stock-based compensation — — (154) Changes in assets and liabilities Accounts receivable (245) (313) (58) Inventories (387) 57 3 Accounts payable 24 148 9 Accrued income taxes (current and long-term) 967 101 (744) Other — net 257 75 175 Net cash provided by operating activities 6,240 6,662 6,420 Cash Flows from Investing Activities Purchases of property, plant and equipment (PP&E) (1,373) (1,420) (1,461) Proceeds from sale of PP&E and other assets 49 58 33 Acquisitions, net of cash acquired (2,023) (16) (2,914) Purchases of marketable securities and investments (2,152) (1,410) (652) Proceeds from maturities and sale of marketable securities and investments 1,354 1,247 1,952 Proceeds from sale of businesses, net of cash sold 1,065 142 123 Other — net (6) (4) 102 Net cash used in investing activities (3,086) (1,403) (2,817) Cash Flows from Financing Activities Change in short-term debt — net 578 (797) 860 Repayment of debt (maturities greater than 90 days) (962) (992) (800) Proceeds from debt (maturities greater than 90 days) 1,987 2,832 3,422 Purchases of treasury stock (2,068) (3,753) (5,238) Proceeds from issuance of treasury stock pursuant to stock option and benefit plans 734 804 635 Dividends paid to shareholders (2,803) (2,678) (2,561) Excess tax benefits from stock-based compensation — — 154 Other — net (121) (42) (120) Net cash used in financing activities (2,655) (4,626) (3,648) Effect of exchange rate changes on cash and cash equivalents 156 (33) (54) Net increase (decrease) in cash and cash equivalents 655 600 (99) Cash and cash equivalents at beginning of year 2,398 1,798 1,897 Cash and cash equivalents at end of period $ 3,053 $ 2,398 $ 1,798 3M Company and Subsidiaries changes for all periods presented. credit losses. value. The 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. 2021, respectively. Environmental: (Amounts in millions, except per share amounts) 2017 2016 2015 Numerator: Net income attributable to 3M $ 4,858 $ 5,050 $ 4,833 Denominator: Denominator for weighted average 3M common shares outstanding – basic 597.5 604.7 625.6 Dilution associated with the Company’s stock-based compensation plans 15.2 14.0 11.6 Denominator for weighted average 3M common shares outstanding – diluted 612.7 618.7 637.2 Earnings per share attributable to 3M common shareholders – basic $ 8.13 $ 8.35 $ 7.72 Earnings per share attributable to 3M common shareholders – diluted $ 7.93 $ 8.16 $ 7.58 Stock-based compensation:The Company recognizes compensation expense for its stock-based compensation programs, which include stock options, restricted stock, restricted stock units (RSUs), performance shares, and the General Employees’ Stock Purchase Plan (GESPP). Under applicable accounting standards, the fair value of share-based compensation is determined at the grant date and the recognition of the related expense is recorded over the period in which the share-based compensation vests. Derivatives and hedging programs. $15.0 billion in 2023, 2022 and 2021, respectively. Asia Pacific included China/Hong Kong net sales to customers of $3.2 billion, $3.8 billion and $4.0 billion in 2023, 2022 and 2021, respectively. 2017 Acquisition Activity Finite-Lived Intangible-Asset (Millions) Scott Weighted-Average Asset (Liability) Safety Other Total Lives (Years) Accounts receivable $ 100 $ — $ 100 Inventory 79 — 79 Other current assets 10 — 10 Property, plant, and equipment 74 — 74 Purchased finite-lived intangible assets: Customer related intangible assets 439 3 442 Other technology-based intangible assets 125 2 127 Definite-lived tradenames 285 — 285 Other amortizable intangible assets — 1 1 Purchased goodwill 1,296 6 1,302 Accounts payable and other liabilities (100) — (100) Deferred tax asset/(liability) (297) — (297) Net assets acquired $ 2,011 $ 12 $ 2,023 Supplemental information: Cash paid $ 2,020 $ 12 $ 2,032 Less: Cash acquired 9 — 9 Cash paid, net of cash acquired $ 2,011 $ 12 $ 2,023 2015 Acquisition Activity Finite-Lived Intangible-Asset (Millions) Capital Polypore Separations Weighted-Average Asset (Liability) Safety Media (Membrana) Other Total Lives (Years) Accounts receivable $ 66 $ 30 $ 7 $ 103 Inventory 63 35 4 102 Other current assets 10 1 1 12 Property, plant, and equipment 36 128 7 171 Purchased finite-lived intangible assets: Customer related intangible assets 445 270 40 755 Patents 44 11 7 62 Other technology-based intangible assets 85 42 1 128 Definite-lived tradenames 26 6 1 33 Other amortizable intangible assets — — 2 2 Purchased indefinite-lived intangible assets 520 — — 520 Purchased goodwill 1,764 636 95 2,495 Accounts payable and other liabilities, net of other assets (105) (122) (5) (232) Interest bearing debt (766) — — (766) Deferred tax asset/(liability) (464) — (7) (471) Net assets acquired $ 1,724 $ 1,037 $ 153 $ 2,914 Supplemental information: Cash paid $ 1,758 $ 1,037 $ 154 $ 2,949 Less: Cash acquired 34 — 1 35 Cash paid, net of cash acquired $ 1,724 $ 1,037 $ 153 $ 2,914 sale. December 31, December 31, (Millions) 2017 2016 Accounts receivable $ 25 $ 25 Property, plant and equipment (net) 20 25 Intangible assets — 35 Deferred revenue (other current liabilities) — 35 Dec. 31, 2016 2016 Dec. 31, 2017 2017 2017 Dec. 31, 2015 acquisition translation 2016 acquisition divestiture translation 2017 (Millions) Balance activity and other Balance activity activity and other Balance Industrial $ 2,573 $ — $ (37) $ 2,536 $ — $ — $ 142 $ 2,678 Safety and Graphics 3,342 41 (59) 3,324 1,296 (323) 122 4,419 Health Care 1,624 12 (27) 1,609 6 — 67 1,682 Electronics and Energy 1,510 — (21) 1,489 — — 35 1,524 Consumer 200 — 8 208 — — 2 210 Total Company $ 9,249 $ 53 $ (136) $ 9,166 $ 1,302 $ (323) $ 368 $ 10,513 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 December 31, December 31, (Millions) 2017 2016 Customer related intangible assets $ 2,332 $ 1,939 Patents 561 602 Other technology-based intangible assets 583 524 Definite-lived tradenames 678 420 Other amortizable intangible assets 207 211 Total gross carrying amount $ 4,361 $ 3,696 Accumulated amortization — customer related (874) (797) Accumulated amortization — patents (489) (497) Accumulated amortization — other technology based (292) (302) Accumulated amortization — definite-lived tradenames (256) (236) Accumulated amortization — other (162) (173) Total accumulated amortization $ (2,073) $ (2,005) Total finite-lived intangible assets — net $ 2,288 $ 1,691 Non-amortizable intangible assets (primarily tradenames) 648 629 Total intangible assets — net $ 2,936 $ 2,320 (Millions) 2017 2016 2015 Amortization expense $ 238 $ 262 $ 229 After (Millions) 2018 2019 2020 2021 2022 2022 Amortization expense $ 252 $ 242 $ 231 $ 221 $ 208 $ 1,134 Second Quarter 2017 (Millions) Employee-Related Industrial $ 39 Safety and Graphics 9 Health Care 2 Electronics and Energy 7 Consumer 36 Corporate and Unallocated 6 Total Expense $ 99 (Millions) Second Quarter 2017 Cost of sales $ 86 Selling, general and administrative expenses 5 Research, development and related expenses 8 Total $ 99 (Millions) Employee-Related Expense incurred in the second quarter of 2017 $ 99 Cash payments (8) Adjustments (3) Accrued restructuring action balances as of December 31, 2017 $ 88 2015 (Millions) Employee-Related Asset-Related Total Industrial $ 30 $ 12 $ 42 Safety and Graphics 11 — 11 Health Care 9 — 9 Electronics and Energy 8 4 12 Consumer 3 — 3 Corporate and Unallocated 37 — 37 Total Expense $ 98 $ 16 $ 114 (Millions) 2015 Cost of sales 40 Selling, general and administrative expenses 62 Research, development and related expenses 12 Total $ 114 (Millions) Employee-Related Asset-Related Total Expense incurred $ 98 $ 16 $ 114 Non-cash changes (8) (16) (24) Cash payments (27) — (27) Accrued restructuring action balances as of December 31, 2015 $ 63 $ — $ 63 Cash payments (57) — (57) Accrued restructuring action balances as of December 31, 2016 $ 6 $ — $ 6 Cash payments (6) — (6) Accrued restructuring action balances as of December 31, 2017 $ — $ — $ — (Millions) 2017 2016 2015 Interest expense $ 322 $ 199 $ 149 Interest income (50) (29) (26) Total $ 272 $ 170 $ 123 (Millions) 2017 2016 Other current assets Derivative assets-current $ 37 $ 148 Insurance related (receivables, prepaid expenses and other) 71 109 Other 158 193 Total other current assets $ 266 $ 450 Property, plant and equipment - at cost Land $ 348 $ 341 Buildings and leasehold improvements 7,681 7,252 Machinery and equipment 15,907 14,935 Construction in progress 843 809 Capital leases 135 162 Gross property, plant and equipment 24,914 23,499 Accumulated depreciation (16,048) (14,983) Property, plant and equipment - net $ 8,866 $ 8,516 Other assets Deferred income taxes $ 511 $ 422 Prepaid pension and post retirement 237 52 Insurance related receivables and other 63 68 Cash surrender value of life insurance policies 241 236 Equity method investments 70 60 Cost method and other investments 80 68 Other 193 272 Total other assets $ 1,395 $ 1,178 Other current liabilities Accrued rebates $ 516 $ 458 Deferred income 513 551 Derivative liabilities 135 92 Employee benefits and withholdings 208 155 Contingent liability claims and other 179 201 Property, sales-related and other taxes 277 248 Pension and postretirement benefits 69 66 Other 812 701 Total other current liabilities $ 2,709 $ 2,472 Other liabilities Long term income taxes payable $ 1,287 $ 244 Employee benefits 319 256 Contingent liability claims and other 727 719 Capital lease obligations 60 45 Deferred income 37 15 Deferred income taxes 235 145 Other 297 224 Total other liabilities $ 2,962 $ 1,648 Defined Benefit Cash Flow Total Pension and Hedging Accumulated Cumulative Postretirement Instruments, Other Translation Plans Unrealized Comprehensive (Millions) Adjustment Adjustment Gain (Loss) Income (Loss) Balance at December 31, 2014, net of tax: $ (1,095) $ (5,293) $ 99 $ (6,289) Other comprehensive income (loss), before tax: Amounts before reclassifications (447) 367 212 132 Amounts reclassified out — 537 (174) 363 Total other comprehensive income (loss), before tax (447) 904 38 495 Tax effect (137) (415) (13) (565) Total other comprehensive income (loss), net of tax (584) 489 25 (70) Balance at December 31, 2015, net of tax: $ (1,679) $ (4,804) $ 124 $ (6,359) Other comprehensive income (loss), before tax: Amounts before reclassifications (244) (1,122) 57 (1,309) Amounts reclassified out — 421 (109) 312 Total other comprehensive income (loss), before tax (244) (701) (52) (997) Tax effect (85) 177 19 111 Total other comprehensive income (loss), net of tax (329) (524) (33) (886) Balance at December 31, 2016, net of tax: $ (2,008) $ (5,328) $ 91 $ (7,245) Other comprehensive income (loss), before tax: Amounts before reclassifications 91 (600) (311) (820) Amounts reclassified out — 483 (7) 476 Total other comprehensive income (loss), before tax 91 (117) (318) (344) Tax effect 279 169 115 563 Total other comprehensive income (loss), net of tax 370 52 (203) 219 Balance at December 31, 2017, net of tax: $ (1,638) $ (5,276) $ (112) $ (7,026) Amounts Reclassified from Details about Accumulated Other Accumulated Other Comprehensive Income Comprehensive Income Components Year ended December 31, Location on Income (Millions) 2017 2016 2015 Statement Gains (losses) associated with defined benefit pension and postretirement plans amortization Transition asset $ — $ 1 $ 1 See Note 12 Prior service benefit 89 92 79 See Note 12 Net actuarial loss (570) (506) (626) See Note 12 Curtailments/Settlements (2) (8) 9 See Note 12 Total before tax (483) (421) (537) Tax effect 116 148 176 Provision for income taxes Net of tax $ (367) $ (273) $ (361) Cash flow hedging instruments gains (losses) Foreign currency forward/option contracts $ 8 $ 110 $ 178 Cost of sales Commodity price swap contracts — — (2) Cost of sales Interest rate swap contracts (1) (1) (2) Interest expense Total before tax 7 109 174 Tax effect (3) (39) (63) Provision for income taxes Net of tax $ 4 $ 70 $ 111 Total reclassifications for the period, net of tax $ (363) $ (203) $ (250) (Millions) 2017 2016 2015 Cash income tax payments, net of refunds $ 1,604 $ 1,888 $ 2,331 Cash interest payments 214 194 134 (Millions) 2017 2016 2015 United States $ 4,149 $ 4,366 $ 4,399 International 3,399 2,687 2,424 Total $ 7,548 $ 7,053 $ 6,823 (Millions) 2017 2016 2015 Currently payable Federal $ 1,022 $ 1,192 $ 1,338 State 59 75 101 International 722 733 566 Tax Cuts and Jobs Act (TCJA) non-current transition tax provision 623 — — Deferred Federal 162 (3) (55) State 15 9 6 International 76 (11) 26 Total $ 2,679 $ 1,995 $ 1,982 Components of (Millions) 2017 2016 Deferred tax assets: Accruals not currently deductible Employee benefit costs $ 178 $ 195 Product and other claims 204 326 Miscellaneous accruals 98 92 Pension costs 760 1,217 Stock-based compensation 210 302 Net operating/capital loss carryforwards 89 93 Foreign tax credits 32 22 Currency translation 59 — Inventory 51 53 Gross deferred tax assets 1,681 2,300 Valuation allowance (81) (47) Total deferred tax assets $ 1,600 $ 2,253 Deferred tax liabilities: Product and other insurance receivables $ (6) $ (27) Accelerated depreciation (447) (730) Intangible amortization (784) (903) Currency translation — (276) Other (87) (40) Total deferred tax liabilities $ (1,324) $ (1,976) Net deferred tax assets $ 276 $ 277 As displayed in the table above, as of December 31, 2017 2016 2015 Statutory U.S. tax rate 35.0 % 35.0 % 35.0 % State income taxes - net of federal benefit 0.8 0.9 1.1 International income taxes - net (6.3) (2.7) (3.9) U.S. TCJA - net impacts 10.1 — — U.S. research and development credit (0.7) (0.5) (0.5) Reserves for tax contingencies 2.2 0.2 (1.0) Domestic Manufacturer’s deduction (1.8) (1.8) (1.8) Employee share-based payments (3.2) (2.8) (0.1) All other - net (0.6) — 0.3 Effective worldwide tax rate 35.5 % 28.3 % 29.1 % tax. resolving issues identified during those examinations. Currently, the Company is under examination by the IRS for its U.S. federal income tax returns for the years being ultimately realized upon settlement. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (UTB) is as follows: (Millions) 2017 2016 2015 Gross UTB Balance at January 1 $ 319 $ 381 $ 583 Additions based on tax positions related to the current year 119 67 77 Additions for tax positions of prior years 149 43 140 Reductions for tax positions of prior years (38) (66) (399) Settlements (3) (95) (4) Reductions due to lapse of applicable statute of limitations (16) (11) (16) Gross UTB Balance at December 31 $ 530 $ 319 $ 381 Net UTB impacting the effective tax rate at December 31 $ 526 $ 333 $ 369 2021. December 31, December 31, (Millions) 2017 2016 Corporate debt securities $ 14 $ 10 Commercial paper 899 14 Certificates of deposit/time deposits 76 197 U.S. municipal securities 3 3 Asset-backed securities: Automobile loan related 16 31 Credit card related 68 18 Other — 7 Asset-backed securities total 84 56 Current marketable securities $ 1,076 $ 280 U.S. municipal securities $ 27 $ 17 Non-current marketable securities $ 27 $ 17 Total marketable securities $ 1,103 $ 297 (Millions) December 31, 2017 Due in one year or less $ 1,071 Due after one year through five years 18 Due after five years through ten years 14 Total marketable securities $ 1,103 Currency/ Effective Final (Millions) Fixed vs. Interest Maturity Carrying Value Description / 2017 Principal Amount Floating Rate Date 2017 2016 Medium-term note (repaid in 2017) USD Fixed — % — $ — $ 649 Medium-term note (500 million Euros) Euro Floating — % 600 523 Medium-term note ($450 million) USD Floating 1.50 % 448 448 Medium-term note ($600 million) USD Floating 1.63 % 596 598 Medium-term note ($25 million) USD Fixed 1.74 % 25 25 Medium-term note (650 million Euros) Euro Floating — % 779 680 Medium-term note ($300 million) USD Floating 1.58 % 296 297 Medium-term note ($200 million) USD Floating 1.49 % 198 199 Eurobond (300 million Euros) Euro Floating — % 378 336 Eurobond (300 million Euros) Euro Fixed 1.97 % 358 312 Medium-term note ($600 million) USD Fixed 1.63 % 598 598 Medium-term note (500 million Euros) Euro Fixed 0.45 % 597 520 Medium-term note ($600 million) USD Fixed 2.17 % 595 593 Medium-term note (600 million Euros) Euro Fixed 1.14 % 712 619 Medium-term note ($650 million) USD Fixed 2.26 % 647 — Medium-term note ($550 million) USD Fixed 3.04 % 546 546 Medium-term note (750 million Euros) Euro Fixed 1.71 % 885 770 Medium-term note ($650 million) USD Fixed 2.25 % 641 640 Medium-term note ($850 million) USD Fixed 2.95 % 839 — 30-year debenture ($220 million) USD Fixed 6.01 % 227 342 Medium-term note (500 million Euros) Euro Fixed 1.90 % 589 512 Medium-term note (500 million Euros) Euro Fixed 1.54 % 595 518 30-year bond ($555 million) USD Fixed 5.73 % 550 743 Floating rate note ($96 million) USD Floating 1.29 % 95 96 Medium-term note ($325 million) USD Fixed 4.05 % 313 313 Floating rate note ($55 million) USD Floating 1.21 % 54 54 Medium-term note ($500 million) USD Fixed 3.13 % 473 473 Medium-term note ($500 million) USD Fixed 3.68 % 491 — Other borrowings Various 1.26 % 2018-2040 73 74 Total long-term debt $ 13,198 $ 11,478 Less: current portion of long-term debt 1,102 800 Long-term debt (excluding current portion) $ 12,096 $ 10,678 Post-Swap Borrowing (Long-Term Debt, Including Current Portion) 2017 2016 Carrying Effective Carrying Effective (Millions) Value Interest Rate Value Interest Rate Fixed-rate debt $ 9,681 2.45 % $ 8,372 2.42 % Floating-rate debt 3,517 0.76 % 3,106 0.48 % Total long-term debt, including current portion $ 13,198 $ 11,478 Effective Carrying Value (Millions) Interest Rate 2017 2016 Current portion of long-term debt 0.67 % $ 1,102 $ 800 U.S. dollar commercial paper 1.50 % 745 — Other borrowings 5.35 % 6 172 Total short-term borrowings and current portion of long-term debt $ 1,853 $ 972 Debt: After 2018 2019 2020 2021 2022 2022 Total $ 1,102 $ 692 $ 1,368 $ 1,333 $ 1,191 $ 7,512 $ 13,198 Long-Term Debt Issuances The Company has made deposits for its defined benefit plans with independent trustees. Trust funds and deposits with insurance companies are maintained to provide pension benefits to plan participants and their beneficiaries. There are no plan assets in the non-qualified plan due to its nature. For its U.S. postretirement health care benefit plans, inclusive of plans related to supplement/excess benefits for employees impacted by particular relocations and other matters, that individually and in the aggregate are not significant and which are not included in the tables that follow. The obligations for these plans are included within other liabilities in the Company’s consolidated balance sheet and aggregated to less than Qualified and Non-qualified Pension Benefits Postretirement United States International Benefits (Millions) 2017 2016 2017 2016 2017 2016 Change in benefit obligation Benefit obligation at beginning of year $ 16,202 $ 15,856 $ 6,625 $ 6,322 $ 2,259 $ 2,216 Acquisitions/Transfers — — 3 (5) — — Service cost 268 259 142 133 52 54 Interest cost 565 575 157 171 80 79 Participant contributions — — 8 8 — — Foreign exchange rate changes — — 667 (472) 3 7 Plan amendments — 5 6 (4) (6) — Actuarial (gain) loss 1,263 427 170 724 127 7 Benefit payments (936) (919) (276) (245) (105) (104) Settlements, curtailments, special termination benefits and other (2) (1) — (7) — — Benefit obligation at end of year $ 17,360 $ 16,202 $ 7,502 $ 6,625 $ 2,410 $ 2,259 Change in plan assets Fair value of plan assets at beginning of year $ 14,081 $ 13,966 $ 5,617 $ 5,669 $ 1,356 $ 1,367 Acquisitions/Transfers — — 2 — — — Actual return on plan assets 1,693 779 714 512 143 90 Company contributions 852 259 112 121 3 3 Participant contributions — — 8 8 — — Foreign exchange rate changes — — 560 (444) — — Benefit payments (936) (919) (276) (245) (105) (104) Settlements, curtailments, special termination benefits and other (4) (4) — (4) — — Fair value of plan assets at end of year $ 15,686 $ 14,081 $ 6,737 $ 5,617 $ 1,397 $ 1,356 Funded status at end of year $ (1,674) $ (2,121) $ (765) $ (1,008) $ (1,013) $ (903) Qualified and Non-qualified Pension Benefits Postretirement United States International Benefits (Millions) 2017 2016 2017 2016 2017 2016 Amounts recognized in the Consolidated Balance Sheet as of Dec. 31, Non-current assets $ 4 $ 4 $ 233 $ 48 $ — $ — Accrued benefit cost Current liabilities (53) (52) (12) (10) (4) (4) Non-current liabilities (1,625) (2,073) (986) (1,046) (1,009) (899) Ending balance $ (1,674) $ (2,121) $ (765) $ (1,008) $ (1,013) $ (903) Qualified and Non-qualified Pension Benefits Postretirement United States International Benefits (Millions) 2017 2016 2017 2016 2017 2016 Amounts recognized in accumulated other comprehensive income as of Dec. 31, Net transition obligation (asset) $ — $ — $ — $ — $ — $ — Net actuarial loss (gain) 5,921 5,704 1,720 1,933 774 761 Prior service cost (credit) (175) (198) (40) (56) (163) (214) Ending balance $ 5,746 $ 5,506 $ 1,680 $ 1,877 $ 611 $ 547 Qualified and Non-qualified Pension Plans United States International (Millions) 2017 2016 2017 2016 Projected benefit obligation $ 17,350 $ 16,202 $ 2,687 $ 2,590 Accumulated benefit obligation 16,260 15,149 2,449 2,351 Fair value of plan assets 15,671 14,081 1,731 1,635 Qualified and Non-qualified Pension Benefits Postretirement United States International Benefits (Millions) 2017 2016 2015 2017 2016 2015 2017 2016 2015 Net periodic benefit cost (benefit) Service cost $ 268 $ 259 $ 293 $ 142 $ 133 $ 154 $ 52 $ 54 $ 75 Interest cost 565 575 655 157 171 206 80 79 98 Expected return on plan assets (1,035) (1,043) (1,069) (293) (308) (308) (86) (90) (91) Amortization of transition asset — — — — (1) (1) — — — Amortization of prior service benefit (23) (24) (24) (13) (13) (13) (53) (55) (42) Amortization of net actuarial loss 388 354 409 126 91 144 56 61 73 Settlements, curtailments, special termination benefits and other 2 4 2 4 4 (6) (4) — 1 Net periodic benefit cost (benefit) after settlements, curtailments, special termination benefits and other $ 165 $ 125 $ 266 $ 123 $ 77 $ 176 $ 45 $ 49 $ 114 Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss Amortization of transition asset — — — — 1 1 — — — Prior service cost (benefit) — 5 — 6 (5) 10 (1) — (212) Amortization of prior service benefit 23 24 24 13 13 13 53 55 42 Net actuarial (gain) loss 605 692 312 (248) 512 (270) 69 8 (23) Amortization of net actuarial loss (388) (354) (409) (126) (91) (144) (56) (61) (73) Foreign currency — — — 167 (93) (174) — — (1) Total recognized in other comprehensive (income) loss $ 240 $ 367 $ (73) $ (188) $ 337 $ (564) $ 65 $ 2 $ (267) Total recognized in net periodic benefit cost (benefit) and other comprehensive (income) loss $ 405 $ 492 $ 193 $ (65) $ 414 $ (388) $ 110 $ 51 $ (153) Qualified and Non-qualified Pension Benefits Postretirement (Millions) United States International Benefits Amortization of transition (asset) obligation $ — $ — $ — Amortization of prior service cost (benefit) (23) (13) (40) Amortization of net actuarial (gain) loss 503 116 62 Total amortization expected over the next fiscal year $ 480 $ 103 $ 22 Qualified and Non-qualified Pension Benefits Postretirement United States International Benefits 2017 2016 2015 2017 2016 2015 2017 2016 2015 Discount rate 3.68 % 4.21 % 4.47 % 2.41 % 2.54 % 3.12 % 3.79 % 4.26 % 4.48 % Compensation rate increase 4.10 % 4.10 % 4.10 % 2.89 % 2.90 % 2.90 % N/A N/A N/A Qualified and Non-qualified Pension Benefits Postretirement United States International Benefits 2017 2016 2015 2017 2016 2015 2017 2016 2015 Discount rate - service cost 4.42 % 4.70 % 4.10 % 2.32 % 2.84 % 3.11 % 4.50 % 4.70 % 4.07 % Discount rate - interest cost 3.61 % 3.73 % 4.10 % 2.25 % 2.72 % 3.11 % 3.80 % 3.80 % 4.07 % Expected return on assets 7.25 % 7.50 % 7.75 % 5.16 % 5.77 % 5.90 % 6.48 % 6.91 % 6.91 % Compensation rate increase 4.10 % 4.10 % 4.10 % 2.90 % 2.90 % 3.33 % N/A N/A N/A assumption is based on the strategic asset allocation of the plan, long term capital market return expectations and expected performance from active investment management. The The Society of Actuaries did not release an update to the Scale MP-2021 in 2022 or 2023. For the December 31, 2023 annual valuation, the Company updated the plans' mortality assumption to use the Pri-2012 Mortality Table with White Collar Adjustment. The December 31, 2023 update resulted in an approximate $450 million increase to the U.S. pension PBO and U.S. accumulated postretirement benefit obligations. Qualified and Non-qualified Pension Benefits Postretirement (Millions) United States International Benefits 2018 Benefit Payments $ 1,074 $ 237 $ 139 2019 Benefit Payments 1,090 251 148 2020 Benefit Payments 1,102 260 157 2021 Benefit Payments 1,110 278 166 2022 Benefit Payments 1,126 285 174 Next five years 5,724 1,640 843 Plan Asset Management : 3M’s investment strategy for its pension and postretirement plans is to manage the funds on a going-concern basis. The primary goal of the trust funds is to meet the obligations as required. The secondary goal is to earn the highest rate of return possible, without jeopardizing its primary goal, and without subjecting the Company to an undue amount of contribution risk. Fund returns are used to help finance present and future obligations to the extent possible within actuarially determined funding limits and tax-determined asset limits, thus reducing the potential need for additional contributions from 3M. The investment strategy has used long duration cash bonds and derivative instruments to offset a significant portion of the interest rate sensitivity of U.S. pension liabilities. U.S. Pension Plans and Postretirement Benefit Plan Assets : In order to achieve the investment objectives in the U.S. pension plans and U.S. postretirement benefit plans, the investment policies include a target strategic asset allocation. The investment policies allow some tolerance around the target in recognition that market fluctuations and illiquidity of some investments may cause the allocation to a specific asset class to vary from the target allocation, potentially for long periods of time. Acceptable ranges have been designed to allow for deviation from strategic targets and to allow for the opportunity for tactical over- and under-weights. The portfolios will normally be rebalanced when the quarter-end asset allocation deviates from acceptable ranges. The allocation is reviewed regularly by the named fiduciary of the plans. Approximately Fair Value Measurements Using Inputs Considered as Fair Value at (Millions) Level 1 Level 2 Level 3 Dec. 31, Asset Class 2017 2016 2017 2016 2017 2016 2017 2016 Equities U.S. equities $ 1,568 $ 1,522 $ — $ — $ — $ — $ 1,568 $ 1,522 Non-U.S. equities 1,527 1,179 — — — — 1,527 1,179 Index and long/short equity funds* 422 414 Total Equities $ 3,095 $ 2,701 $ — $ — $ — $ — $ 3,517 $ 3,115 Fixed Income U.S. government securities $ 2,666 $ 1,701 $ 484 $ 560 $ — $ — $ 3,150 $ 2,261 Non-U.S. government securities — — 168 146 — — 168 146 Preferred and convertible securities 4 4 2 1 — — 6 5 U.S. corporate bonds 10 10 2,904 3,392 — — 2,914 3,402 Non-U.S. corporate bonds — — 614 672 — — 614 672 Derivative instruments — (1) 110 (31) — — 110 (32) Other* 8 7 Total Fixed Income $ 2,680 $ 1,714 $ 4,282 $ 4,740 $ — $ — $ 6,970 $ 6,461 Private Equity Derivative instruments $ — $ — $ — $ — $ (7) $ (83) $ (7) $ (83) Growth equity 34 19 — — — — 34 19 Partnership investments* 2,062 2,188 Total Private Equity $ 34 $ 19 $ — $ — $ (7) $ (83) $ 2,089 $ 2,124 Absolute Return Derivative instruments $ — $ — $ — $ (7) $ — $ — $ — $ (7) Fixed income and other 31 29 102 78 — — 133 107 Hedge fund/fund of funds* 1,871 1,793 Partnership investments* 335 296 Total Absolute Return $ 31 $ 29 $ 102 $ 71 $ — $ — $ 2,339 $ 2,189 Cash and Cash Equivalents Cash and cash equivalents $ 109 $ 55 $ 14 $ — $ 1 $ 2 $ 124 $ 57 Repurchase agreements and derivative margin activity — — (502) (545) — — (502) (545) Cash and cash equivalents, valued at net asset value* 1,402 931 Total Cash and Cash Equivalents $ 109 $ 55 $ (488) $ (545) $ 1 $ 2 $ 1,024 $ 443 Total $ 5,949 $ 4,518 $ 3,896 $ 4,266 $ (6) $ (81) $ 15,939 $ 14,332 Other items to reconcile to fair value of plan assets $ (253) $ (251) Fair value of plan assets $ 15,686 $ 14,081 Fair Value Measurements Using Inputs Considered as Fair Value at (Millions) Level 1 Level 2 Level 3 Dec. 31, Asset Class 2017 2016 2017 2016 2017 2016 2017 2016 Equities U.S. equities $ 465 $ 477 $ — $ — $ — $ — $ 465 $ 477 Non-U.S. equities 71 62 — — — — 71 62 Index and long/short equity funds* 45 40 Total Equities $ 536 $ 539 $ — $ — $ — $ — $ 581 $ 579 Fixed Income U.S. government securities $ 136 $ 102 $ 205 $ 191 $ — $ — $ 341 $ 293 Non-U.S. government securities — — 9 9 — — 9 9 U.S. corporate bonds — — 159 172 — — 159 172 Non-U.S. corporate bonds — — 35 36 — — 35 36 Derivative instruments — — 4 (1) — — 4 (1) Total Fixed Income $ 136 $ 102 $ 412 $ 407 $ — $ — $ 548 $ 509 Private Equity Derivative instruments $ — $ — $ — $ — $ — $ (3) $ — $ (3) Growth equity 2 1 — — — — 2 1 Partnership investments* 109 113 Total Private Equity $ 2 $ 1 $ — $ — $ — $ (3) $ 111 $ 111 Absolute Return Fixed income and other $ 1 $ 1 $ 4 $ 3 $ — $ — $ 5 $ 4 Hedge fund/fund of funds* 76 72 Partnership investments* 14 12 Total Absolute Return $ 1 $ 1 $ 4 $ 3 $ — $ — $ 95 $ 88 Cash and Cash Equivalents Cash and cash equivalents $ 34 $ 44 $ 1 $ 3 $ — $ — $ 35 $ 47 Repurchase agreements and derivative margin activity — — (20) (22) — — (20) (22) Cash and cash equivalents, valued at net asset value* 57 38 Total Cash and Cash Equivalents $ 34 $ 44 $ (19) $ (19) $ — $ — $ 72 $ 63 Total $ 709 $ 687 $ 397 $ 391 $ — $ (3) $ 1,407 $ 1,350 Other items to reconcile to fair value of plan assets $ (10) $ 6 Fair value of plan assets $ 1,397 $ 1,356 Publicly traded equities are valued at the closing price reported in the active market in which the individual securities are traded. Absolute return consists primarily of partnership interests in hedge funds, hedge fund of funds or other private fund vehicles. 2022. The fair values of the assets held by the international pension plans by asset class are as follows: Fair Value Measurements Using Inputs Considered as Fair Value at (Millions) Level 1 Level 2 Level 3 Dec. 31, Asset Class 2017 2016 2017 2016 2017 2016 2017 2016 Equities Growth equities $ 659 $ 605 $ 289 $ 214 $ — $ — $ 948 $ 819 Value equities 597 575 43 28 — — 640 603 Core equities 62 55 790 583 4 4 856 642 Equities, valued at net asset value* 21 16 Total Equities $ 1,318 $ 1,235 $ 1,122 $ 825 $ 4 $ 4 $ 2,465 $ 2,080 Fixed Income Domestic government $ 362 $ 340 $ 256 $ 202 $ 4 $ 3 $ 622 $ 545 Foreign government 168 142 338 353 — — 506 495 Corporate debt securities 63 51 1,072 888 10 9 1,145 948 Fixed income securities, valued at net asset value* 976 641 Total Fixed Income $ 593 $ 533 $ 1,666 $ 1,443 $ 14 $ 12 $ 3,249 $ 2,629 Private Equity Real estate $ 36 $ 29 $ 74 $ 62 $ 3 $ 3 $ 113 $ 94 Real estate, valued at net asset value* 36 34 Partnership investments* 68 63 Total Private Equity $ 36 $ 29 $ 74 $ 62 $ 3 $ 3 $ 217 $ 191 Absolute Return Derivatives $ — $ (4) $ 2 $ — $ — $ — $ 2 $ (4) Insurance — — — — 519 455 519 455 Other — — — — 7 6 7 6 Other, valued at net asset value* 1 — Hedge funds* 194 174 Total Absolute Return $ — $ (4) $ 2 $ — $ 526 $ 461 $ 723 $ 631 Cash and Cash Equivalents Cash and cash equivalents $ 67 $ 99 $ 34 $ 18 $ — $ — $ 101 $ 117 Cash and cash equivalents, valued at net asset value* 3 4 Total Cash and Cash Equivalents $ 67 $ 99 $ 34 $ 18 $ — $ — $ 104 $ 121 Total $ 2,014 $ 1,892 $ 2,898 $ 2,348 $ 547 $ 480 $ 6,758 $ 5,652 Other items to reconcile to fair value of plan assets $ (21) $ (35) Fair value of plan assets $ 6,737 $ 5,617 custodians. cash surrender values which is the amount the plan would receive if the contract was cashed out at year end. Derivative instruments consist of risks and are valued by the custodian using closing market swap curves and market derived input currency exchange rates decreased the balance by $42 million for a net decrease to this balance of $66 million. losses related to derivative instruments designated as cash flow or fair value hedges (along with similar information relative to the hedged items) and 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 below as applicable. The amortization of gains and losses on forward starting interest rate swaps is included in the tables below as part of the gain/(loss) Pretax Gain (Loss) Recognized in Pretax Gain (Loss) Income on Effective Portion of Ineffective Portion of Gain Recognized in Other Derivative as a Result of (Loss) on Derivative and Comprehensive Reclassification from Amount Excluded from Income on Effective Accumulated Other Effectiveness Testing Year ended December 31, 2017 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ (305) Cost of sales $ 8 Cost of sales $ — Interest rate swap contracts (6) Interest expense (1) Interest expense — Total $ (311) $ 7 $ — Year ended December 31, 2016 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ 58 Cost of sales $ 110 Cost of sales $ — Interest rate swap contracts (1) Interest expense (1) Interest expense — Total $ 57 $ 109 $ — Year ended December 31, 2015 Portion of Derivative Comprehensive Income Recognized in Income (Millions) Amount Location Amount Location Amount Foreign currency forward/option contracts $ 212 Cost of sales $ 178 Cost of sales $ — Commodity price swap contracts — Cost of sales (2) Cost of sales — Interest rate swap contracts — Interest expense (2) Interest expense — Total $ 212 $ 174 $ — Fair Value Hedges: For derivative instruments that are designated 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. calculated by reference to an agreed-upon notional principal amount. The mark-to-market of these 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. Gain (Loss) on Derivative Gain (Loss) on Hedged Item Year ended December 31, 2017 Recognized in Income Recognized in Income (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ (9) Interest expense $ 9 Total $ (9) $ 9 Year ended December 31, 2016 (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ (2) Interest expense $ 2 Total $ (2) $ 2 Year ended December 31, 2015 (Millions) Location Amount Location Amount Interest rate swap contracts Interest expense $ (2) Interest expense $ 2 Total $ (2) $ 2 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. The remainder of the change in value of such instruments is recorded in earnings. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. To the extent foreign currency denominated debt is not designated in or is 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 Pretax Gain (Loss) Recognized as Cumulative Translation within Other Ineffective Portion of Gain (Loss) on Comprehensive Income Instrument and Amount Excluded on Effective Portion of from Effectiveness Testing Year ended December 31, 2017 Instrument Recognized in Income (Millions) Amount Location Amount Foreign currency denominated debt $ (667) N/A $ — Foreign currency forward contracts (58) Cost of sales 7 Total $ (725) $ 7 Year ended December 31, 2016 Comprehensive Income Instrument and Amount Excluded (Millions) Amount Location Amount Foreign currency denominated debt $ 215 N/A $ — Foreign currency forward contracts (9) Cost of sales (3) Total $ 206 $ (3) Year ended December 31, 2015 (Millions) Amount Location Amount Foreign currency denominated debt $ 63 N/A $ — Foreign currency forward contracts 143 Cost of sales 11 Total $ 206 $ 11 Derivatives Not Designated as Hedging Instruments: Derivatives not designated as hedging instruments include Gain (Loss) on Derivative Recognized in Income Year ended Year ended Year ended December 31, December 31, December 31, 2017 2016 2015 (Millions) Location Amount Amount Amount Foreign currency forward/option contracts Cost of sales $ 11 $ (14) $ 5 Foreign currency forward contracts Interest expense (141) 9 82 Commodity price swap contracts Cost of sales — — (3) Total $ (130) $ (5) $ 84 Location, 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. Gross Assets Liabilities December 31, 2017 Notional Fair Fair (Millions) Amount Location Value Amount Location Value Amount Derivatives designated as hedging instruments Foreign currency forward/option contracts $ 2,204 Other current assets $ 7 Other current liabilities $ 109 Foreign currency forward/option contracts 1,392 Other assets 20 Other liabilities 56 Interest rate swap contracts 450 Other current assets — Other current liabilities 1 Interest rate swap contracts 1,503 Other assets 21 Other liabilities 6 Total derivatives designated as hedging instruments $ 48 $ 172 Derivatives not designated as hedging instruments Foreign currency forward/option contracts $ 4,974 Other current assets $ 30 Other current liabilities $ 25 Total derivatives not designated as hedging instruments $ 30 $ 25 Total derivative instruments $ 78 $ 197 Gross Assets Liabilities December 31, 2016 Notional Fair Fair (Millions) Amount Location Value Amount Location Value Amount Derivatives designated as hedging instruments Foreign currency forward/option contracts $ 2,160 Other current assets $ 107 Other current liabilities $ 9 Foreign currency forward/option contracts 1,459 Other assets 86 Other liabilities 3 Interest rate swap contracts 1,953 Other assets 25 Other current liabilities 1 Total derivatives designated as hedging instruments $ 218 $ 13 Derivatives not designated as hedging instruments Foreign currency forward/option contracts $ 5,655 Other current assets $ 41 Other current liabilities $ 82 Total derivatives not designated as hedging instruments $ 41 $ 82 Total derivative instruments $ 259 $ 95 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 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 December 31, 2017 Consolidated Recognized Cash Collateral Net Amount of (Millions) Balance Sheet Derivative Liabilities Received Derivative Assets Derivatives subject to master netting agreements $ 78 $ 27 $ — $ 51 Derivatives not subject to master netting agreements — — Total $ 78 $ 51 December 31, 2016 (Millions) Derivatives subject to master netting agreements $ 259 $ 39 $ — $ 220 Derivatives not subject to master netting agreements — — Total $ 259 $ 220 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 December 31, 2017 Consolidated Recognized Cash Collateral Net Amount of (Millions) Balance Sheet Derivative Assets Pledged Derivative Liabilities Derivatives subject to master netting agreements $ 197 $ 27 $ — $ 170 Derivatives not subject to master netting agreements — — Total $ 197 $ 170 December 31, 2016 (Millions) Derivatives subject to master netting agreements $ 93 $ 39 $ — $ 54 Derivatives not subject to master netting agreements 2 2 Total $ 95 $ 56 Effects: 3M uses various valuation techniques, which are primarily based upon the market and income approaches, with respect to financial assets and liabilities. Following is a description of the valuation methodologies used for the respective financial assets and liabilities measured at fair value. 12. only securities separately. instruments The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring Fair Value Measurements Description Fair Value at Using Inputs Considered as (Millions) December 31, 2017 Level 1 Level 2 Level 3 Assets: Available-for-sale: Marketable securities: Corporate debt securities $ 14 $ — $ 14 $ — Commercial paper 899 — 899 — Certificates of deposit/time deposits 76 — 76 — Asset-backed securities: Automobile loan related 16 — 16 — Credit card related 68 — 68 — U.S. municipal securities 30 — — 30 Derivative instruments — assets: Foreign currency forward/option contracts 57 — 57 — Interest rate swap contracts 21 — 21 — Liabilities: Derivative instruments — liabilities: Foreign currency forward/option contracts 190 — 190 — Interest rate swap contracts 7 — 7 — Fair Value Measurements Description Fair Value at Using Inputs Considered as (Millions) December 31, 2016 Level 1 Level 2 Level 3 Assets: Available-for-sale: Marketable securities: Corporate debt securities $ 10 $ — $ 10 $ — Commercial paper 14 — 14 — Certificates of deposit/time deposits 197 — 197 — Asset-backed securities: Automobile loan related 31 — 31 — Credit card related 18 — 18 — Other 7 — 7 — U.S. municipal securities 20 — — 20 Derivative instruments — assets: Foreign currency forward/option contracts 234 — 234 — Interest rate swap contracts 25 — 25 — Liabilities: Derivative instruments — liabilities: Foreign currency forward/option contracts 94 — 94 — Interest rate swap contracts 1 — 1 — Marketable securities — certain U.S. municipal securities only (Millions) 2017 2016 2015 Beginning balance $ 20 $ 12 $ 15 Total gains or losses: Included in earnings — — — Included in other comprehensive income — — — Purchases and issuances 13 12 — Sales and settlements (3) (4) (3) Transfers in and/or out of level 3 — — — Ending balance 30 20 12 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 14. other applicable items. Significant unobservable inputs used to estimate the fair values of the asset groupings included discount rates, which were 11% to 12%. Instruments December 31, 2017 December 31, 2016 Carrying Fair Carrying Fair (Millions) Value Value Value Value Long-term debt, excluding current portion $ 12,096 $ 12,535 $ 10,678 $ 11,168 Operating (Millions) Capital Leases Leases 2018 $ 12 $ 258 2019 10 212 2020 9 160 2021 6 106 2022 5 88 After 2022 34 274 Total $ 76 $ 1,098 Less: Amounts representing interest 3 Present value of future minimum lease payments 73 Less: Current obligations under capital leases 13 Long-term obligations under capital leases $ 60 Guarantees 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 litigation and proceedings. From time to time, the Company also receives subpoenas, investigative demands or requests for information from various government agencies in the United States and foreign countries. The Company generally responds 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 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. Proceedings: Based on experience and developments, the Company reexamines its estimates of probable liabilities and associated expenses and receivables each period, and whether a loss previously determined to not be reasonably estimable and/or not probable is now able to be reasonably estimated or has become probable. Where appropriate, the Company makes additions to or adjustments of its reasonably estimated losses and/or accruals. As a result, the current accruals and/or estimates of loss and the estimates of the potential impact on the Company’s consolidated financial position, results of operations and cash flows for the legal proceedings and claims pending against the Company will likely change over time. Litigation: 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. mesothelioma. In the second half of 2020 and into 2021, the Company experienced an increase in the number of cases filed that allege injuries from exposures to coal mine dust; that increase represents a substantial majority of the growth in case numbers referred to above. The rate of coal mine dust-related case filings decelerated in 2022 and, in 2023, continued to stay significantly lower than in 2021. 3M moved two cases involving over 400 plaintiffs to federal court based on, among others, the Class Action Fairness Act. The federal district court remanded the cases to state court. In March 2023, the Sixth Circuit Court of Appeals granted 3M's petition to review the remand order, and in April 2023 reversed the district court's remand order; accordingly, those cases will remain in federal court. 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 Technologies: 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. 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. Litigation: 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, accrual for such liabilities. supply. Oral argument on a motion to dismiss that was filed by 3M and the other defendants was adjourned. This matter is stayed pending approval of the PWS Settlement. 3M is also defending 22 individual cases in the U.S. District Court for the Eastern District of New York filed by various 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. 3M has filed answers in these cases, which are subject to the stay order issued pending approval of the PWS Settlement. which are below the limit of quantification. 3M is engaging with the MPCA and cannot at this time predict the outcome of such discussions. The Company’s environmental liabilities and insurance receivables are described below. manufactured by the Aearo Entities and/or 3M, as well as potential future claims. their entirety and the Minnesota Supreme Court denied plaintiffs’ petition for review and entered the final dismissal in 2019, effectively ending the Minnesota state court cases. available for grant under the LTIP Program are Due to the intended spin-off of the Health Care business (see Note 3), the 2024 annual grant will be made after the completion of the spin. Years ended December 31 (Millions) 2017 2016 2015 Cost of sales $ 49 $ 47 $ 46 Selling, general and administrative expenses 229 206 185 Research, development and related expenses 46 45 45 Stock-based compensation expenses $ 324 $ 298 $ 276 Income tax benefits $ (327) $ (272) $ (87) Stock-based compensation expenses (benefits), net of tax $ (3) $ 26 $ 189 Stock Option Program: The following table summarizes stock option 2017 2016 2015 Weighted Weighted Weighted Number of Average Number of Average Number of Average Options Exercise Price Options Exercise Price Options Exercise Price Under option — January 1 36,196,232 $ 112.07 38,552,445 $ 102.01 39,235,557 $ 90.38 Granted: Annual 5,409,628 175.93 5,591,727 147.99 5,529,544 165.91 Exercised (6,474,117) 90.37 (7,716,141) 86.76 (5,978,382) 83.74 Forfeited (166,579) 162.36 (231,799) 148.43 (234,274) 128.99 December 31 34,965,164 $ 125.73 36,196,232 $ 112.07 38,552,445 $ 102.01 Options exercisable December 31 24,281,464 $ 108.50 25,240,759 $ 95.65 27,262,062 $ 85.97 Annual 2017 2016 2015 Exercise price $ 175.76 $ 147.87 $ 165.94 Risk-free interest rate 2.1 % 1.5 % 1.5 % Dividend yield 2.5 % 2.5 % 2.5 % Expected volatility 17.3 % 20.8 % 20.1 % Expected life (months) 78 77 76 Black-Scholes fair value $ 23.51 $ 22.47 $ 23.98 Restricted Stock Units: The following table summarizes restricted stock 2017 2016 2015 Weighted Weighted Weighted Average Average Average Number of Grant Date Number of Grant Date Number of Grant Date Awards Fair Value Awards Fair Value Awards Fair Value Nonvested balance — As of January 1 2,185,046 $ 145.64 2,441,088 $ 127.47 2,817,786 $ 104.41 Granted Annual 604,256 176.10 749,068 148.20 671,204 165.86 Other 20,692 233.77 8,115 169.00 26,886 156.94 Vested (769,598) 127.21 (960,345) 101.64 (1,010,612) 89.99 Forfeited (46,590) 158.25 (52,880) 145.95 (64,176) 118.99 As of December 31 1,993,806 $ 162.60 2,185,046 $ 145.64 2,441,088 $ 127.47 Shares: The following table summarizes performance share 2017 2016 2015 Weighted Weighted Weighted Average Average Average Number of Grant Date Number of Grant Date Number of Grant Date Awards Fair Value Awards Fair Value Awards Fair Value Undistributed balance — As of January 1 656,278 $ 142.98 871,192 $ 120.89 1,099,752 $ 102.65 Granted 201,261 191.28 219,431 160.17 227,798 158.88 Distributed (313,942) 124.88 (367,428) 99.06 (323,938) 83.08 Performance change 154,774 173.91 (37,534) 155.98 (106,760) 127.70 Forfeited (12,498) 171.36 (29,383) 149.08 (25,660) 125.33 As of December 31 685,873 $ 171.90 656,278 $ 142.98 871,192 $ 120.89 respective years: 2017 2016 2015 Weighted Weighted Weighted Average Average Average Shares Exercise Price Shares Exercise Price Shares Exercise Price Options granted 877,705 $ 170.42 987,478 $ 140.06 1,007,669 $ 133.52 Options exercised (877,705) 170.42 (987,478) 140.06 (1,007,669) 133.52 Shares available for grant - December 31 26,239,152 27,116,857 28,104,335 The weighted-average fair value per option granted during 2021, respectively. and Geographic Information Effective in the first quarter of items described below. The financial information presented herein reflects the impact of Movement of certain businesses between segments Health Care Net Sales Operating Income (Millions) 2017 2016 2015 2017 2016 2015 Industrial $ 10,911 $ 10,399 $ 10,388 $ 2,289 $ 2,395 $ 2,277 Safety and Graphics 6,148 5,881 5,736 2,067 1,423 1,332 Health Care 5,813 5,566 5,449 1,781 1,763 1,730 Electronics and Energy 5,159 4,643 5,069 1,254 1,041 1,083 Consumer 4,589 4,484 4,429 993 1,065 1,048 Corporate and Unallocated 1 7 (2) (352) (272) (349) Elimination of Dual Credit (964) (871) (795) (212) (192) (175) Total Company $ 31,657 $ 30,109 $ 30,274 $ 7,820 $ 7,223 $ 6,946 Assets Depreciation & Amortization Capital Expenditures (Millions) 2017 2016 2015 2017 2016 2015 2017 2016 2015 Industrial $ 9,895 $ 9,140 $ 9,205 $ 432 $ 407 $ 374 $ 435 $ 360 $ 317 Safety and Graphics 9,874 7,626 7,709 275 277 258 184 228 207 Health Care 4,757 4,293 4,391 246 175 179 83 136 168 Electronics and Energy 4,395 4,418 4,645 175 229 279 165 200 203 Consumer 2,706 2,497 2,386 112 114 108 109 109 124 Corporate and Unallocated 6,360 4,932 4,547 304 272 237 397 387 442 Total Company $ 37,987 $ 32,906 $ 32,883 $ 1,544 $ 1,474 $ 1,435 $ 1,373 $ 1,420 $ 1,461 Information: Geographic area information is used by the Company as a secondary performance measure to manage its businesses. Export sales and certain income and expense items are generally reported within the geographic area where the final sales to 3M customers are made. Property, Plant and Net Sales Equipment - net (Millions) 2017 2016 2015 2017 2016 United States $ 12,372 $ 12,188 $ 12,049 $ 4,891 $ 4,914 Asia Pacific 9,809 8,847 9,041 1,672 1,573 Europe, Middle East and Africa 6,456 6,163 6,228 1,798 1,512 Latin America and Canada 3,033 2,901 2,982 505 517 Other Unallocated (13) 10 (26) — — Total Company $ 31,657 $ 30,109 $ 30,274 $ 8,866 $ 8,516 (Millions, except per-share amounts) First Second Third Fourth Year 2017 Quarter Quarter Quarter Quarter 2017 Net sales $ 7,685 $ 7,810 $ 8,172 $ 7,990 $ 31,657 Cost of sales 3,869 4,007 4,045 4,080 16,001 Net income including noncontrolling interest 1,326 1,585 1,433 525 4,869 Net income attributable to 3M 1,323 1,583 1,429 523 4,858 Earnings per share attributable to 3M common shareholders - basic 2.21 2.65 2.39 0.88 8.13 Earnings per share attributable to 3M common shareholders - diluted 2.16 2.58 2.33 0.85 7.93 (Millions, except per-share amounts) First Second Third Fourth Year 2016 Quarter Quarter Quarter Quarter 2016 Net sales $ 7,409 $ 7,662 $ 7,709 $ 7,329 $ 30,109 Cost of sales 3,678 3,799 3,847 3,716 15,040 Net income including noncontrolling interest 1,278 1,293 1,331 1,156 5,058 Net income attributable to 3M 1,275 1,291 1,329 1,155 5,050 Earnings per share attributable to 3M common shareholders - basic 2.10 2.13 2.20 1.93 8.35 Earnings per share attributable to 3M common shareholders - diluted 2.05 2.08 2.15 1.88 8.16 Disclosure 2023. Matters A B C Number of Weighted- Number of securities securities to be average exercise remaining available for issued upon price of future issuance under exercise of outstanding equity compensation outstanding options, plans (excluding options, warrants warrants and securities reflected in Plan Category and rights rights column (A)) Equity compensation plans approved by security holders Stock options 34,965,164 $ 125.73 — Restricted stock units 1,993,806 — Performance shares 685,873 — Non-employee director deferred stock units 240,101 — Total 37,884,944 30,125,144 Employee stock purchase plan — 26,239,152 Subtotal 37,884,944 56,364,296 Total 37,884,944 56,364,296 (3.1) (3.2) (4.1) (4.2) (10.1) (10.2) (10.3) (10.4) (10.5) (10.10) (23) (24) (31.1) (31.2) (32.1) (32.2) (95) (101.SCH) Inline XBRL Taxonomy Extension Schema (101.CAL) Inline XBRL Taxonomy Extension Calculation Linkbase (101.DEF) Inline XBRL Taxonomy Extension Definition Linkbase (101.LAB) Inline XBRL Taxonomy Extension Label Linkbase (101.PRE) Inline XBRL Taxonomy Extension Presentation Linkbase /s/ Chairman of the Board Thomas K. Brown Director Director Anne H. Chow Director Michael L. Eskew Director Director Amy E. Hood Director Director Gregory R. Page Director cause fluctuations in earningsimpact the Company’s results of operations and cash flows.financial condition. Senior management provides oversight for risk management and derivative activities, determines certain of the Company’s financial risk policies and objectives, and provides guidelines for derivative instrument utilization. Senior management also establishes certain associated procedures relative to control and valuation, risk analysis, counterparty credit approval, and ongoing monitoring and reporting.Theis exposed to credit lossperforms a sensitivity analysis based on hypothetical changes in foreign currency spot exchange rates and interest rates as further described in the event of nonperformance by counterpartiessections below. Note also that hypothetical changes in interest rate swaps, currency swaps, commodity price swaps,these rates were not applied to cash equivalents, accounts receivable, and forward and option contracts. However, the Company’s risk is limited to the fair valueaccounts payable, because of the short-term nature of these instruments. TheFurther, hypothetical changes were not applied to available-for-sale marketable securities as unrealized and realized gains or losses thereon are historically not material.actively monitorsmanages its risk exposure and to credit risk throughenhance the useinformation presented about 3M’s principal market risks. Information in this Item 7A relative to 2022 reflects the updated methodology.credit approvals and credit limits, and by selecting major international banksthis Form 10-K for additional discussion of foreign currency exchange, interest rates and financial institutions as counterparties. The Company does not anticipate nonperformance by any of these counterparties.dedesignatede-designate these cash flow hedge relationships in advance of the occurrence of the forecasted transaction. The maximum length of time over which 3M hedges its exposure to the variability in future cash flows of the forecasted transactions is 36 months. In addition, 3M enters into foreign currency forward contracts that are not designated in hedging relationships to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany activities (primarily associated with intercompany licensing arrangements and intercompany financing transactions).balances. As circumstances warrant, the Company also uses foreign currency forwardexchange contracts and foreign currency denominated debt as hedging instruments to hedge portions of the Company’s net investments in foreign operations. The dollar equivalent gross notionalAt December 31, 2023 and December 31, 2022, an instantaneous 10% change in applicable foreign currency spot exchange rates would have increased/decreased the aggregate fair value carrying amount of the Company’s foreign exchange forward and option contracts designated as either cash flow hedges or net investment hedges was $3.6 billion at December 31, 2017. The dollar equivalent gross notional amountby approximately $175 million and $187 million, respectively, and of the Company’s foreign exchange forward and option contracts not designatednon-functional currency denominated debt used as hedging instruments was $5.0 billion at December 31, 2017. In addition, as of December 31, 2017, the Company had 4.4 billion Euros in principal amount of foreign currency denominated debt designated as non-by approximately $192 million and $249 million, respectively.52derivative hedging instruments in certain net investment hedges as discussed in Note 13 in the “Net Investment Hedges” section.Under these arrangements,At December 31, 2023 and December 31, 2022, an instantaneous 100 basis point change in applicable interest rates would increase/decrease the Company agreesCompany's pre-tax earnings by approximately $13 million on an annualized basis as it relates to exchange, at specified intervals, the difference between fixed3M's floating-rate notes and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The dollar equivalent (based on inception date foreign currency exchange rates) gross notional amount of the Company’s interest rate swaps at December 31, 2017 was $2.0 billion. Additional details about 3M’s long-term debt can be found in Note 11, including references to information regarding derivatives and/or hedging instruments, further discussed in Note 13, associated with the Company’s long-term debt.agreements and commodity price swaps.agreements. 3M used commodity price swaps as cash flow hedges of forecasted commodity transactions to manage price volatility, but discontinued this practice in the first quarter of 2015. The related mark-to-market gain or loss on qualifying hedges was included in other comprehensive income to the extent effective, and reclassified into cost of sales in the period during which the hedged transaction affected earnings. The Company maydoes not enter into other commodity price swaps to offset, in part, fluctuation and costsderivative financial instruments associated with the use of certain commodities and precious metals. These instruments are not designated in hedged relationships and the extent to which they were outstanding at December 31, 2017 was not material.Value At Risk:The value at risk analysis is performed annually to assess the Company’s sensitivity to changes in currency rates, interest rates, and commodity prices. A Monte Carlo simulation technique was used to test the impact on after-tax earnings related to financial instruments (primarily debt), derivatives and underlying exposures outstanding at December 31, 2017. The model (third-party bank dataset) used a 95 percent confidence level over a 12-month time horizon. The exposure to changes in currency rates model used 9 currencies, interest rates related to two currencies, and commodity prices related to five commodities. This model does not purport to represent what actually will be experienced by the Company. This model does not include certain hedge transactions, because the Company believes their inclusion would not materially impact the results. The following table summarizes the possible adverse and positive impacts to after-tax earnings related to these exposures.In addition to the possible adverse and positive impacts discussed in the preceding table related to foreign exchange rates, recent historical information is as follows. 3M estimates that year-on-year currency effects, including hedging impacts, decreased pre-tax income by $111 million and $127 million in 2017 and 2016, 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 derivative and other transaction gains and losses decreased pre-tax income by approximately $152 million and $69 million in 2017 and 2016, respectively.An analysis of the global exposures related to purchased components and materials is performed at each year-end. A one percent price change would result in a pre-tax cost or savings of approximately $75 million per year. The global energy53exposure is such that a ten percent price change would result in a pre-tax cost or savings of approximately $40 million per year. Global energy exposure includes energy costs used in 3M production and other facilities, primarily electricity and natural gas. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 excluded Scott Safety, which was acquired by the Company in October 2017 in a purchase business combination. Scott Safety is a wholly-owned subsidiary whose total assets and total net sales both represented less than 1 percent of the Company’s consolidated financial statement amounts as of and for the year ended December 31, 2017. Companies are allowed to exclude acquisitions from their assessment of internal control over financial reporting during the first year of acquisition while integrating the acquired company under guidelines established by the Securities and Exchange Commission. Based on the assessment, management concluded that, as of December 31, 2017,2023, the Company’s internal control over financial reporting is effective.20172023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.54 Shareholders and Board of Directors and Shareholders of 3M Companysheetssheet of 3M Company and its subsidiaries (the “Company”) as of December 31, 20172023 and 2016,2022, and the related consolidated statements of income (loss), of comprehensive income (loss), of changes in equity and of cash flows for each of the three years in the period ended December 31, 2017,2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).20172023 and 2016,2022, and the results of theirits operations and theirits cash flows for each of the three years in the period ended December 31, 20172023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.Management'sManagement’s Report on Internal Control overOver Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Scott Safety from its assessment of internal control over financial reporting as of December 31, 2017 because it was acquired by the Company in a purchase business combination during 2017. We have also excluded Scott Safety from our audit of internal control over financial reporting. Scott Safety is a wholly-owned subsidiary whose total assets and total net sales excluded from management’s assessment and our audit of internal control over financial reporting both represent less than 1 percent of the related consolidated financial statement amounts as of and for the year ended December 31, 2017.558, 2018We have served as the Company’s auditor since 1975.56(Millions, except per share amounts) (Millions, except per share amounts) 2023 2022 2021 Operating expenses Operating expenses Cost of sales Cost of sales Gain on business divestitures Goodwill impairment expense Operating income (loss) Other expense (income), net Other expense (income), net Income (loss) before income taxes Income (loss) before income taxes Income (loss) before income taxes Provision (benefit) for income taxes Income (loss) of consolidated group Income (loss) from unconsolidated subsidiaries, net of taxes Income (loss) from unconsolidated subsidiaries, net of taxes Income (loss) from unconsolidated subsidiaries, net of taxes Net income (loss) including noncontrolling interest Less: Net income (loss) attributable to noncontrolling interest Less: Net income (loss) attributable to noncontrolling interest Less: Net income (loss) attributable to noncontrolling interest Net income (loss) attributable to 3M Net income (loss) attributable to 3M Net income (loss) attributable to 3M Weighted average 3M common shares outstanding — basic Weighted average 3M common shares outstanding — basic Earnings (loss) per share attributable to 3M common shareholders — basic Weighted average 3M common shares outstanding — diluted Weighted average 3M common shares outstanding — diluted Earnings (loss) per share attributable to 3M common shareholders — diluted 57(Millions) (Millions) 2023 2022 2021 Net income (loss) including noncontrolling interest Cumulative translation adjustment Cumulative translation adjustment Cash flow hedging instruments 58(Dollars in millions, except per share amount) 2023 2022 Current assets Current assets Cash and cash equivalents Cash and cash equivalents Finished goods Finished goods Operating lease right of use assets Current liabilities Current liabilities Short-term borrowings and current portion of long-term debt Short-term borrowings and current portion of long-term debt Operating lease liabilities — current Operating lease liabilities Commitments and contingencies (Note 18) Commitments and contingencies (Note 18) 3M Company shareholders’ equity: 3M Company shareholders’ equity: Common stock par value, $.01 par value; 944,033,056 shares issued Common stock par value, $.01 par value; 944,033,056 shares issued Common stock par value, $.01 par value; 944,033,056 shares issued Shares outstanding - December 31, 2022: 549,245,105 Shares outstanding - December 31, 2022: 549,245,105 Shares outstanding - December 31, 2022: 549,245,105 Additional paid-in capital Additional paid-in capital Treasury stock, at cost: Accumulated other comprehensive income (loss) Accumulated other comprehensive income (loss) 59Endedended December 313M Company Shareholders (Dollars in millions, except per share amounts) 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 5,929 5,921 8 Other comprehensive income (loss), net of tax 970 971 (1) Dividends declared ($5.92 per share, Note 8) (3,420) (3,420) Stock-based compensation 267 267 Reacquired stock (2,199) (2,199) Issuances pursuant to stock options and benefit plans 639 (501) 1,140 Balance at December 31, 2021 15,117 6,438 45,821 (30,463) (6,750) 71 Net income 5,791 5,777 14 Other comprehensive income (loss), net of tax 69 77 (8) Dividends declared ($5.96 per share, Note 8) (3,369) (3,369) Stock-based compensation 262 262 Reacquired stock (1,464) (1,464) Dividend to noncontrolling interest (29) (29) Split-off of Food Safety business (1,988) (1,988) Issuances pursuant to stock options and benefit plans 381 (279) 660 Balance at December 31, 2022 14,770 6,700 47,950 (33,255) (6,673) 48 Net income (loss) (6,979) (6,995) 16 Other comprehensive income (loss), net of tax (105) (105) — Dividends declared ($6.00 per share, Note 8) (3,311) (3,311) Stock-based compensation 265 265 Reacquired stock (33) (33) Dividend to noncontrolling interest (3) (3) Issuances pursuant to stock options and benefit plans 264 (165) 429 Balance at December 31, 2023 $ 4,868 $ 6,965 $ 37,479 $ (32,859) $ (6,778) $ 61 Supplemental share information 2023 2022 2021 Beginning balance Beginning balance Split-off of Food Safety business 60
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.(Millions) 2023 2022 2021 Cash Flows from Operating Activities Net income (loss) including noncontrolling interest $ (6,979) $ 5,791 $ 5,929 Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by operating activities Depreciation and amortization 1,987 1,831 1,915 Long-lived and indefinite-lived asset impairment expense — 618 — Goodwill impairment expense — 271 — Company pension and postretirement contributions (152) (158) (180) Company pension and postretirement expense 145 178 206 Stock-based compensation expense 274 263 274 Gain on business divestitures (36) (2,724) — Deferred income taxes (3,855) (663) (166) Changes in assets and liabilities Accounts receivable (170) (105) (122) Inventories 567 (629) (903) Accounts payable 138 111 518 Accrued income taxes (current and long-term) (218) (47) (244) Other — net 14,979 854 227 Net cash provided by (used in) operating activities 6,680 5,591 7,454 Cash Flows from Investing Activities Purchases of property, plant and equipment (PP&E) (1,615) (1,749) (1,603) Proceeds from sale of PP&E and other assets 119 200 51 Purchases of marketable securities and investments (1,466) (1,250) (2,202) Proceeds from maturities and sale of marketable securities and investments 1,660 1,261 2,406 Proceeds from sale of businesses, net of cash sold 60 13 — Cash payment from Food Safety business split-off, net of divested cash — 478 — Other — net 35 1 31 Net cash provided by (used in) investing activities (1,207) (1,046) (1,317) Cash Flows from Financing Activities Change in short-term debt — net 205 340 (2) Repayment of debt (maturities greater than 90 days) (3,086) (1,179) (1,144) Proceeds from debt (maturities greater than 90 days) 2,835 1 1 Purchases of treasury stock (33) (1,464) (2,199) Proceeds from issuance of treasury stock pursuant to stock option and benefit plans 264 381 639 Dividends paid to shareholders (3,311) (3,369) (3,420) Other — net (21) (60) (20) Net cash provided by (used in) financing activities (3,147) (5,350) (6,145) Effect of exchange rate changes on cash and cash equivalents (48) (104) (62) Net increase (decrease) in cash and cash equivalents 2,278 (909) (70) Cash and cash equivalents at beginning of year 3,655 4,564 4,634 Cash and cash equivalents at end of period $ 5,933 $ 3,655 $ 4,564 61 All subsidiaries are consolidated. All intercompany transactions are eliminated. As used herein, the term “3M” or “Company” refers to 3M Company and subsidiaries unless the context indicates otherwise.Basis of presentation: Certain amounts in the prior years’reclassifiedprepared in accordance with generally accepted accounting principles in the United States. Preparation of the consolidated financial statements requires management to conformmake estimates and assumptions that affect amounts reported in the consolidated financial statements and notes. Such estimates and assumptions are subject to inherent uncertainties which may result in actual amounts differing from these estimates.current year presentation.Foreign currency translation:second quarter of 2023, 3M re-consolidated the Aearo Technology and certain of its related entities (collectively, the "Aearo Entities") as a result of the court dismissal of their voluntary bankruptcy proceedings. 3M had previously deconsolidated these entities in the third quarter of 2022. See additional information in Note 18.States.States, with the exception of subsidiaries operating in highly inflationary economies, which are not material to 3M. 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 month-endaverage monthly currency exchange rates of each applicable month.in effect during the period. Cumulative translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity.3M has a subsidiaryVenezuela, the prior years’ consolidated financial statements have been reclassified to conform to the current year presentation. Effective in the first quarter of which are remeasured under Accounting Standards Codification (ASC) 830, Foreign Currency Matters, as if its functional currency were that2023, 3M made changes in the measure of its parent because Venezuela’s economic environment is considered highly inflationary. Thesegment operating performance and segment composition used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income (loss)). Also effective in the first quarter of this subsidiary is immaterial2023, 3M's Consumer business segment re-aligned from four divisions to three divisions, see additional information in Note 21. 3M's disclosed disaggregated revenue was also updated as a percent of 3M’s consolidated operating income for 2017. The Venezuelan government sets official rates of exchange and conditions precedent to purchase foreign currency at these rates with local currency. The government also operates various expanded secondary currency exchange mechanisms that have been eliminated and replaced from time to time. Such rates and conditions have been and continue to be subject to change. For the periods presented, the financial statements of 3M’s Venezuelan subsidiary were remeasured utilizing the rate associated with the secondary auction mechanism, Tipo de Cambio Complementario, which was redesigned by the Venezuelan government in June 2017 (DICOM2), or its predecessor. During the same periods, the Venezuelan government’s official exchange was Tipo de Cambio Protegido (DIPRO), or its predecessor. 3M’s usesresult of these rates were based upon evaluation of a number of factors including, but not limited to, the exchange rate the Company’s Venezuelan subsidiary may legally use to convert currency, settle transactions or pay dividends; the probability of accessing and obtaining currency by use of a particular rate or mechanism; and the Company’s intent and ability to use a particular exchange mechanism. The Company continues to monitor these circumstances. Changeschanges, see additional information in applicable exchange rates or exchange mechanisms may continue in the future. These changes could impact the rate of exchange applicable to remeasure the Company’s net monetary assets (liabilities) denominated in Venezuelan Bolivars (VEF). As of December 31, 2017, the Company had a balance of net monetary assets denominated in VEF of less than 10 billion VEF and the DIPRO and DICOM2 exchange rates were approximately 10 VEF and 3,300 VEF per U.S. dollar, respectively.A need to deconsolidate the Company’s Venezuelan subsidiary’s operations may result from a lack of exchangeability of VEF-denominated cash coupled with an acute degradation in the ability to make key operational decisions due to government regulations in Venezuela. 3M monitors factors such as its ability to access various exchange mechanisms;Note 2. Information provided herein reflects the impact of government regulations on the Company’s ability to manage its Venezuelan subsidiary’s capital structure, purchasing, product pricing, and labor relations; and the current political and economic situation within Venezuela. Based upon a review of factors as of December 31, 2017, the Company continues to consolidate its Venezuelan subsidiary. As of December 31, 2017, the balance of accumulated other comprehensive loss associated with this subsidiary was approximately $145 million and the amount of intercompany receivables due from this subsidiary and its total equity balance were not significant.Use of estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.cash equivalents:Cash Equivalents: Cash and cash equivalents consist of cash and temporary investments with maturities of three months or less when acquired.62Marketable securities:Investments:3M invests in marketable and equity securities. Marketable securities include available-for-sale debt securities and are recorded at fair value. Costvalue with unrealized gains and losses recorded as a component of securities sold use the first in, first out (FIFO) method.accumulated other comprehensive income. The classification of marketable securities as current or non-current is based on the availability for use in current operations. All equity securities that do not result in consolidation and are not accounted for under the equity method are measured at fair value with changes therein reflected in net income. 3M reviews impairmentsutilizes the measurement alternative for equity investments that do not have readily determinable fair values and measures these investments at cost less impairment plus or minus observable price changes in orderly transactions. The balances associated with its marketableequity securities are disclosed in accordance withNote 7.measurement guidance provided by ASC 320, Investments-Debt and Equity Securities, when determiningallowance for credit losses is recorded into earnings in the classificationperiod of the change. Any impairment as “temporary” or “other-than-temporary”. A temporary impairment charge results inthat has not been recorded through an unrealized loss beingallowance for credit losses is recorded inthrough accumulated other comprehensive income as a component of shareholders’ equity. Such an unrealized loss does not reduce net income for the applicable accounting period because the loss is not viewed as other-than-temporary. The factors evaluated to differentiate between temporary and other-than-temporary include the projected future cash flows, credit ratings actions, and assessment of the credit quality of the underlying collateral, as well as other factors. Amounts are reclassified out of accumulated other comprehensive income and into earnings upon sale or “other-than-temporary” impairment.Investments: Investments primarily include equity method, cost method,a change in the portions of impairment related to credit losses and available-for-sale equity investments. Available-for-sale investments are recorded at fair value at each reporting date and subjectnot related to ASC 320, as described above.Other assets: Other assets include deferred income taxes, product and other insurance receivables, the cash surrender value of life insurance policies, and other long-term assets. Investments in life insurance are reported at the amount that could be realized under contract at the balance sheet date, with any changes in cash surrender value or contract value during the period accounted for as an adjustment of premiums paid. Cash outflows and inflows associated with life insurance activity are included in “Purchases of marketable securities and investments” and “Proceeds from maturities and sale of marketable securities and investments,” respectively.market, with costnet realizable value (NRV), which is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Cost is generally determined on a first-in, first-out basis.plantPlant and equipment:Equipment (PPE) and Definite-Lived Intangible Assets: Property, plant and equipment, including capitalized interest and internal direct engineering costs, are recorded at cost. The Company capitalizes direct costs of services used in the development of, and external software acquired for use as, internal-use software. These software amounts are reported as a component of machinery and equipment within PPE. Depreciation of property, plant and equipmentPPE generally is computed using the straight-line method basedmethod. Refer to Note 7 for depreciable life and additional details on PPE. Internal-use software elements of PPE are depreciated over a period of three to seven years. 3M records capital-related government grants earned as reductions to the estimated useful livescost of PPE 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.The estimated useful lives of buildingsCosts related to internally developed intangible assets, such as patents, are expensed as incurred, within “Research, development and improvements primarily range from ten to forty years, with the majority in the range of twenty to forty years. The estimated useful lives of machinery and equipment primarily range from three to fifteen years, with the majority in the range of five to ten years. related expenses”.assetsPPE other than capitalized internally developed software are retained in property, plant and equipmentPPE and accumulated depreciation accounts until disposal. Upon disposal, assets and related accumulated depreciation are removed from the accounts and the net amount, less proceeds from disposal, is charged or credited to operations. Property, plantDefinite-lived intangible assets are removed from their respective gross asset and equipment amountsaccumulated amortization accounts when they are no longer in use.An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss recorded is calculated by the excess of the asset’s (asset group's) carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis.asset retirement obligations: Asset Retirement Obligations:A liability is initially recorded at fair value for an asset retirement obligation associated with the retirement of tangible long-lived assets in the period in which it is incurred if a reasonable estimate of fair value can be made. Conditional asset retirement obligations exist for certain long-term assets of the Company. The obligation is initially measured at fair value using expected present value techniques. Over time the liabilities are accreted for the change in their present value and the initial capitalized costs are depreciated over the remaining useful lives of the related assets. The asset retirement obligation liability was $106$190 million and $111$177 million at December 31, 20172023 and 2016,2022, respectively.Goodwill: is the excess of cost of an acquired entity over the amounts assigned toand Indefinite-Lived Intangible Assets: Goodwill and indefinite-lived intangible assets acquired(namely certain tradenames), are not amortized and liabilities assumed in a business combination. Goodwill is not amortized. Goodwill is testedare assessed for impairment annually in the fourth(fourth quarter of each year, and is tested for impairment between annual tests ifthird quarter, respectively) and whenever an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is doneperformed at a reporting unit level,63with all goodwill assigned which at 3M, corresponds to a reporting unit. Reporting units are one level below the business segment level, but are required to be combined when reporting units within the same segment have similar economic characteristics. 3M did not combine any of its reporting units for impairment testing. Thedivision. An impairment loss is measured as the amount by whichrecognized when the carrying value of the reporting unit’s net assets exceeds its estimated fair value. The estimated fair value of a reporting unit is determined based on a market approach using earnings for the reporting unit multiplied by a price/earnings ratio for comparable industry groups,company information such as EBITDA (earnings before interest, taxes, depreciation and amortization) multiples or, by usingin some cases, based on a discounted cash flow analysis. Companies have the option to first assess qualitative factors to determine whether the fair value of a reporting unit is not “more likely than not” less than its carrying amount, which is commonly referred to as “Step 0”. 3M has chosen not to apply Step 0 for its annual goodwill assessments.Intangible assets: Intangible asset types include customer related, patents, other technology-based, tradenames and other intangible assets acquired from an independent party. Intangible assets with a definite life are amortized over a period ranging from one to twenty years on a systematic and rational basis (generally straight line) that is representative of the asset’s use. The estimated useful lives vary by category, with customer related largely between eight to seventeen years, patents largely between five to thirteen years, other technology-based largely between two to fifteen years, definite lived tradenames largely between three and twenty years, and other intangibles largely between two to ten years. Costs related to internally developed intangible assets, such as patents, are expensed as incurred, primarily in “Research, development and related expenses.”Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. An impairment loss is recognized for an indefinite-lived intangible asset when the carrying amount of an asset exceeds the estimated undiscounted cash flows used in determining theits fair value of the asset. The amount of the impairment loss recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally(generally determined usingon a discounted cash flow analysis.Intangible assets with an indefinite life, namely certain tradenames, are not amortized. Indefinite-lived intangible assets are tested for impairment annually, and are tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. An impairment loss generally would be recognized when the fair valuebasis) is less than theits carrying value of the indefinite-lived intangible asset.actions:Actions: Restructuring actions generally include significant actions involving employee-related severance charges, contract termination costs, and impairment or accelerated depreciation/amortization of assets associated with such actions. Employee-related severance charges are largely based upon distributed employment policies and substantive severance plans. These charges are reflected in the quarter when the actions are probable and the amounts are estimable, which typically is when management approves the associated actions. Severance amounts for which affected employees werein certain circumstances are required to render service in order to receive benefits at their termination dates were measured at the date such benefits were communicated to the applicable employees and recognized as expense over the employees’ remaining service periods. Contract termination and other charges primarily reflect costs to terminate a contract before the end of its term (measured at fair value at the time the Company provided notice to the counterparty) or costs that will continue to be incurred under the contract for its remaining term without economic benefit to the Company. Asset impairment charges related to intangible assets and property, plant and equipment reflect the excess of the assets’ carrying values over their fair values.(sales) recognition:(Sales) Recognition: The Company sells a wide range of products to a diversified base of customers around the world and has no material concentration of credit risk. risk or significant payment terms extended to customers. The vast majority of 3M’s customer arrangements contain a single performance obligation to transfer manufactured goods. However, to a limited extent 3M also enters into customer arrangements that involve intellectual property out-licensing, multiple performance obligations (such as equipment, installation and service), software with coterminous post-contract support, services and non-standard terms and conditions.ownership have substantively transferredgoods/services transfer to customers. This condition normallythe customer. In limited arrangements, control transfers over time as the customer simultaneously receives and consumes the benefits as 3M completes the performance obligation(s).met whenrecognized at the product has been delivered or upon performancetransaction price which the Company expects to be entitled. When determining the transaction price, 3M estimates variable consideration applying the portfolio approach practical expedient. The main sources of services. The Company records estimated reductionsvariable consideration for 3M are customer rebates, trade promotion funds, and cash discounts. These sales incentives are recorded as a reduction to revenue or records expense for customer and distributor incentives, primarily comprised of rebates and free goods, at the time of the initial sale. These sales incentives are accounted for in accordance with ASC 605, Revenue Recognition.sale using the most-likely amount estimation method. The estimated reductions of revenue for rebates aremost-likely amount method is based on the single most likely outcome from a range of possible consideration outcomes (derived from sales terms, historical experience, trend analysis, and projected market conditions in the various markets served. Since the Company serves numerous markets, the rebate programs offered vary across businesses, but theserved). The most common incentive relates to amounts paid or credited to customers for achieving defined volume levels or growth objectives. There are no material instances where variable consideration is constrained and not recorded at the initial time of sale. Free goods are accounted for as an expense and recorded in cost of sales. Product returns are recorded as a reduction to revenue based on anticipated sales returns that occur in the normal course of business. 3M primarily has assurance-type warranties that do not result in separate performance obligations. Sales, use, value-added, and other excise taxes are not recognized in revenue. The Company has elected to present revenue net of sales taxes and other similar taxes.64vast majority ofCompany applies the “right to invoice” practical expedient based on 3M’s sales agreements are for standard products and services withright to invoice the customer acceptance occurring upon delivery ofat an amount that reasonably represents the product or performance of the service. However, to a limited extent 3M also enters into agreements that involve multiple elements (such as equipment, installation and service), software, or non-standard terms and conditions.For non-software multiple-element arrangements, the Company recognizes revenue for delivered elements when they have stand-alone value to the customer theyof 3M’s performance completed to date.acceptedone year or less as the Company does not have material costs related to obtaining a contract with amortization periods greater than one year for any year presented.customer,patient/organization, (i) at the contracted rental rate for contracted customers and (ii) generally, retail price for which therenon-contracted customers. The leases are only customary refundshort-term in nature, generally providing for daily or return rights. Arrangement consideration is allocated to the deliverables by use of the relative selling price method. The selling price used for each deliverable is based on vendor-specific objective evidence (VSOE) if available, third-party evidence (TPE) if VSOE is not available, or estimated selling price if neither VSOE nor TPE is available. Estimated selling price is determined in a manner consistent with that used to establish the price to sell the deliverable on a standalone basis. In addition to the preceding conditions, equipment revenue is not recorded until the installation has been completed if equipment acceptance is dependent upon installation or if installation is essential to the functionality of the equipment. Installation revenuesmonthly pricing, and are not recorded until installation has been completed.For arrangements (or portions of arrangements) falling within software revenue recognition standardsall classified as operating leases.that do not involve significant production, modification, or customization, revenue for each software or software-related element is recognized when the Company has VSOE of the fair value of all of the undelivered elements and applicable criteria have been met for the delivered elements. When the arrangements involve significant production, modification or customization, long-term construction-type accounting involving proportional performance is employed.For prepaid service contracts, sales revenue is recognized on a straight-line basis over the term of the contract, unless historical evidence indicates the costs are incurred on other than a straight-line basis. License fee revenue is recognized as earned, and no revenue is recognized until the inception of the license term.On occasion, agreements will contain milestones, or 3M will recognize revenue based on proportional performance. For these agreements, and depending on the specifics, 3M may recognize revenue upon completion of a substantive milestone, or in proportion to costs incurred to date compared with the estimate of total costs to be incurred.Accounts receivable and allowances: Allowances:product returns and various other items. The allowanceitems for doubtful accounts and product returns is based on the best estimate of the amount of probablepotential credit losses in existing accounts receivable and anticipated sales returns.losses. The Company determines the allowances based on historical write-off experience, current expectations of future credit losses informed by industry and regional economic data, and historical sales returns.cash discounts. The Company reviews the allowanceallowances monthly. The allowances for doubtful accounts monthly.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.merchandising:Merchandising: These costs are charged to operations in the period incurred, and totaled $411$265 million, $323 million and $327 million in 2017, $385 million in 20162023, 2022 and $368 million in 2015.developmentDevelopment and related expenses:Related Expenses: These costs are charged to operations in the period incurred and are shown on a separate line of the Consolidated Statement of Income. Research, development and related expenses totaled $1.850$1.8 billion, $1.9 billion and $2.0 billion in 2017, $1.735 billion in 20162023, 2022 and $1.763 billion in 2015.2021, respectively. Research and development expenses, covering basic scientific research and the application of scientific advances in the development of new and improved products and their uses, totaled $1.335$1.0 billion, $1.1 billion and $1.2 billion in 2017, $1.225 billion in 20162023, 2022 and $1.223 billion in 2015.2021, respectively. Related expenses primarily include technical support; internally developed patent costs, which include costs and fees incurred to prepare, file, secure and maintain patents; amortization of externally acquired patents and externally acquired in-process research and development; and gains/losses associated with certain corporate approved investments in R&D-related ventures, such as equity method effects and impairments.Internal-use software: The Company capitalizes direct costs of services used in the development of, and external software acquired for use as, internal-use software. Amounts capitalized are amortized over a period of three to seven years, generally on a straight-line basis, unless another systematic and rational basis is more representative of the software’s use. Amounts are reported as a component of either machinery and equipment or capital leases within65property, plant and equipment. Fully depreciated internal-use software assets are removed from property, plant and equipment and accumulated depreciation accounts. Environmental expenditures relating to existing conditions caused by past operations that do not contribute to current or future revenues are expensed. Reserves for liabilities related to anticipated environmental related remediation costs are recorded on an undiscounted basis when they are probable and reasonably estimable, generally no later than the completion of feasibility studies, the Company’s commitment to a plan of action, or approval by regulatory agencies. Environmental expenditurescosts for capital projects that contribute to current or future operations generally are capitalized and depreciated over their estimated useful lives.As of December 31, 2017 and 2016, the Company had valuation allowances of $81 million and $47 million on its deferred tax assets, respectively. The increase in valuation allowance at December 31, 2017 relates to certain U.S. and international jurisdictions with taxable loss or tax credit carryforwards that are expected to expire prior to utilization. The Company recognizes and measures its uncertain tax positions based on the rules under ASC 740, Income Taxes.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 the resultthe dilution associated with the Company’s stock-based compensation plans. Certain options outstanding under these stock-based compensation plans during the years 2017, 2016 and 2015 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 (0.8 million average options for 2017, 3.6 million average options for 2016, and 5.0 million average options for 2015). The computations for basic and diluted earnings per share for the years ended December 31 follow:Earnings Per Share Computations However, with respect to income taxes, the related deduction from taxes payable is based on the award’s intrinsic value at the time of exercise (for an option) or on the fair value upon vesting of the award (for RSUs), which can be either greater (creating an excess tax benefit) or less (creating a tax deficiency) than the deferred tax benefit recognized as compensation cost is recognized in the financial statements. Beginning in 2016, as a result of 3M’s adoption of Accounting Standards Update (ASU) No. 2016-09, Improvements to Employee Share-Based Payment Accounting, these excess tax benefits/deficiencies are recognized as income tax benefit/expense in the statement of income and, within the statement of cash flows, are classified in operating activities in the same manner as other cash flows related to income taxes. The extent of excess tax benefits/deficiencies is subject to variation in 3M stock price and timing/extent of RSU vestings and employee stock option exercises. Prior to 2016, excess tax benefits were66recognized in additional paid-in capital within equity, and, with respect to statement of cash flows, were reflected as a financing cash inflow. Based on the adoption methodology of ASU No. 2016-09 applied, periods prior to 2016 were not changed.Comprehensive income: Total comprehensive income and the components of accumulated other comprehensive income (loss) are presented in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Changes in Equity. Accumulated other comprehensive income (loss) is composed of foreign currency translation effects (including hedges of net investments in international companies), defined benefit pension and postretirement plan adjustments, unrealized gains and losses on available-for-sale debt and equity securities, and unrealized gains and losses on cash flow hedging instruments.hedging activities:Hedging Activities: All derivative instruments within the scope of ASC 815, Derivatives and Hedging, are recorded on the balance sheet at fair value. The Company uses interest rate swaps, currency and commodity price swaps, and foreign currency forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity market volatility. All hedging instruments that qualify for hedge accounting are designated and effective as hedges, in accordance with U.S. generally accepted accounting principles. If the underlying hedged transaction ceases to exist, all changes in fair value of the related derivatives that have not been settled are recognized in current earnings. Instruments that do not qualify for hedge accounting are marked to market with changes recognized in current earnings. Cash flows from derivative instruments are classified in the statement of cash flows in the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationships. The Company does not hold or issue derivative financial instruments for trading purposes and is not a party to leveraged derivatives.Credit risk: The Company is exposed to credit loss in See Note 16 for more information on the event of nonperformance by counterparties in interest rate swaps, currency swaps, commodity price swaps,Company's derivative instruments 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 may allow each counterparty to net settle amounts owed between a 3M entity and the counterparty as a result of multiple, separate derivative transactions. 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.value measurements: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. Under the standard, fairFair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.Acquisitions: The Company accountsbusiness acquisitions in accordance with ASC 805, Business Combinations. This standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisionsperiod of this standard prescribe, among67other things, the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration) and the exclusion of transaction and acquisition-related restructuring costs from acquisition accounting.New Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers, and in August 2015 issued ASU No. 2015-14, which amended the standard as to effective date. The ASU provides a single comprehensive model to be used in the accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The standard’s stated core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitledtime in exchange for those goods or services. To achieve this core principleconsideration. 3M determines certain service agreements that contain the ASU includes provisions within a five step model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction priceright to the performance obligations, and recognizing revenue when (or as)use an entity satisfies a performance obligation. The standard also specifies the accounting for some costs to obtain or fulfill a contract with a customer and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. During 2016, the FASB also issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net); ASU No. 2016-10, Identifying Performance Obligations and Licensing; ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients, and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers which amend ASU No. 2014-09. These amendments include clarification of principal versus agent guidance in situations in which a revenue transaction involves a third party in providing goods or services to a customer. In such circumstances, an entity must determine whether the nature of its promise to the customer is to provide the underlying goods or services (i.e., the entity is the principal in the transaction) or to arrange for the third party to provide the underlying goods or services (i.e., the entity is the agent in the transaction). The amendments clarify, in terms of identifying performance obligations, how entities would determine whether promised goods or services are separately identifiable from other promises in a contract and, therefore, would be accounted for separately. The guidance allows entities to disregard goods or services that are immaterial in the context of a contract and provides an accounting policy election to account for shipping and handling activities as fulfillment costs rather than as additional promised services. With regard to licensing, the amendments clarify how an entity would evaluate the nature of its promise in granting a license of intellectual property, which determines whether the entity recognizes revenue over time or at a point in time. The amendments also address implementation issues relative to transition (adding a practical expedient for contract modifications and clarifying what constitutes a completed contract when employing full or modified retrospective transition methods), collectability, noncash consideration, and the presentation of sales and other similar-type taxes (allowing entities to exclude sales-type taxes collected from transaction price). Finally, the amendments provide additional guidance in the areas of disclosure of performance obligations, provisions for losses on certain types of contracts, scoping, and other areas. Overall, ASU No. 2014-09, as amended, provides for either full retrospective adoption or a modified retrospective adoption by which it is applied only to the most current period presented. For 3M, the ASU is effective January 1, 2018 and the Company has concluded that it will utilize the modified retrospective method of adoption. The Company has completed analyses, executed project management relative to the process of adopting this ASU, and conducted detailed contract reviews to complete necessary adjustments to existing accounting policies and quantify the ASU’s effect. For most of 3M’s revenue arrangements, there are no impacts as these transactionsasset are not accounted for under industry-specific guidance that will be superseded by the ASU and generally consist of a single performance obligation to transfer promised goods or services.leases because 3M also engages in some arrangements for which software industry-specific guidance (which the ASU supersedes) is presently utilized. The Company also considered these arrangements in the detailed contract reviews that have been conducted. While 3M will provide expanded disclosures as a result of ASU No. 2014-09, it does not expect this standard to have a material impact on its consolidated results of operationscontrol how and financial condition.In February 2015,for what purpose the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis, which changes guidance related to both the variable interest entity (VIE) and voting interest entity (VOE) consolidation models. With respect to the VIE model, the standard changes, among other things, the identification of variable interests associated with fees paid to a decision maker or service provider, the VIE characteristics for a limited partner or similar entity, and the primary beneficiary determination. With respect to the VOE model, the ASU eliminates the presumption that a68general partner controls a limited partnership or similar entity unless the presumption can otherwise be overcome. Under the new guidance, a general partner would largely not consolidate a partnership or similar entity under the VOE model. The Company adopted this ASU effective January 1, 2016. Because 3M did not have significant involvement with entities subject to consolidation considerations impacted by the VIE model changes or with limited partnerships potentially impacted by the VOE model changes, the adoption did not have a material impact on the Company’s consolidated results of operations and financial condition.In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Arrangement, which requires a customer to determine whether a cloud computing arrangement contains a software license. If the arrangement contains a software license, the customer would account for fees related to the software license element in a manner consistent with accounting for the acquisition of other acquired software licenses. If the arrangement does not contain a software license, the customer would account for the arrangement as a service contract. An arrangement would contain a software license element if both (1) the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty and (2) it is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software. 3M adopted this ASU prospectively to arrangements entered into, or materially modified beginning January 1, 2016. The adoption did not have a material impact on 3M’s consolidated results of operations and financial condition.In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which modifies existing requirements regarding measuring inventory at the lower of cost or market. Under existing standards, the market amount requires consideration of replacement cost, net realizable value (NRV), and NRV less an approximately normal profit margin. The new ASU replaces market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This eliminates the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. 3M adopted this standard prospectively beginning January 1, 2017. The adoption did not have a material impact on 3M’s consolidated results of operations and financial condition. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which revises the accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The new guidance requires the fair value measurement of investments in equity securities and other ownership interests in an entity, including investments in partnerships, unincorporated joint ventures and limited liability companies (collectively, equity securities) that do not result in consolidation and are not accounted for under the equity method. Entities will need to measure these investments and recognize changes in fair value in net income. Entities will no longer be able to recognize unrealized holding gains and losses on equity securities they classify under current guidance as available-for-sale in other comprehensive income (OCI). They also will no longer be able to use the cost method of accounting for equity securities that do not have readily determinable fair values. Instead, for these types of equity investments that do not otherwise qualify for the net asset value practical expedient, entities will be permitted to elect a practicability exception and measure the investment at cost less impairment plus or minus observable price changes (in orderly transactions). The ASU also establishes an incremental recognition and disclosure requirement related to the presentation of fair value changes of financial liabilities for which the fair value option (FVO) has been elected. Under this guidance, an entity would be required to separately present in OCI the portion of the total fair value change attributable to instrument-specific credit risk as opposed to reflecting the entire amount in earnings. This provision does not apply to derivative instruments required to be measured at fair value with changes in fair value recognized in current earnings. For 3M, this standard is effective beginning January 1, 2018 via a cumulative-effect adjustment to beginning retained earnings, except for guidance relative to equity securities without readily determinable fair values which is applied prospectively. Because the Company has historically held limited amounts of equity securities (less than $75 million in aggregate at December 31, 2017), and has not elected the FVO with respect to material financial liabilities, it does not expect this standard to have a material impact on its consolidated results of operations and financial condition.In February 2016, the FASB issued ASU No. 2016-02, Leases, replacing existingOperating lease accounting guidance. The new standard introduces a lessee model that would require entities to recognizeright-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used is 3M’s incremental borrowing rate or, if available, the rate implicit in the lease. 3M determines the incremental borrowing rate for most leases but recognize expensesusing a portfolio approach based primarily on the lease term and the economic environment of the applicable country or region.income statementsnoncancellable lease term as adjusted for contractual options to terminate or renew, additional payments related to a subsequent adjustment in a manner similar to current accounting. The ASUan inflation index, and payments for non-components such as sales tax. Certain 3M leases contain immaterial variable lease payments based on number of units produced.makehave any material related party activity.69fundamental changesNew Accounting Pronouncements: The table below provides summaries of applicable new accounting pronouncements issued, but not yet adopted by 3M.Standards Issued and Not Yet Adopted Standard Relevant Description Effective Date for 3M Impact and Other Matters Issued in September 2022. Requires a buyer in a supplier finance program to disclose the key terms of the program, amount of outstanding obligations, and a rollforward of obligations confirmed and subsequently paid. January 1, 2023, except rollforward disclosure which is not effective until the year-end December 31, 2024 As this ASU relates to disclosures only, there will be no impact to 3M’s consolidated results of operations and financial condition. Issued in November 2023. Requires incremental disclosures to provide more disaggregated expense information about a Company's reportable segments. Year-end December 31, 2024 As this ASU relates to disclosures only, there will be no impact to 3M’s consolidated results of operations and financial condition. Issued in December 2023. Requires disaggregated information about a Company's effective tax rate reconciliation as well as information on income taxes paid. Year-end December 31, 2025 As this ASU relates to disclosures only, there will be no impact to 3M’s consolidated results of operations and financial condition. existing lessor accounting. However, it modifies what qualifies as a sales-type and direct financing lease and related accounting and aligns a number of the underlying principles with those of the new revenue standard, ASU No. 2014-09, such as evaluating how collectability should be considered and determining when profit can be recognized. The guidance eliminates existing real estate-specific provisions and requires expanded qualitative and quantitative disclosures. The standard requires modified retrospective transition by which itthat is applied at the beginning of the earliest comparative period presented in the year of adoption. For 3M, the ASU is effective January 1, 2019. Information under existing lease guidance with respectrecognized over time for one-year software license contracts. Refer to rent expenseNote 7 for operating leases and the Company’s minimum lease payments for capital and operating leases with non-cancelable terms in excess one yeardeferred revenue balances as of December 31, 2017 is included in Note 15. 2023 and 2022. Approximately $520 million of the December 31, 2022 balance was recognized as revenue during the year ended December 31, 2023, while approximately $500 million of the December 31, 2021 balance was recognized as revenue during the year ended December 31, 2022.is currently assessing this ASU’s impact on 3M’s consolidated resultsviews the following disaggregated disclosures as useful to understanding the composition of operationsrevenue recognized during the respective reporting periods:Net Sales by Division (millions) 2023 2022 2021 Abrasives $ 1,327 $ 1,343 $ 1,296 Automotive Aftermarket 1,237 1,209 1,164 Closure and Masking Systems 962 1,046 1,033 Electrical Markets 1,285 1,304 1,229 Industrial Adhesives and Tapes 2,164 2,331 2,353 Personal Safety 3,487 3,916 4,470 Roofing Granules 494 455 428 Other Safety and Industrial — — 8 Total Safety and Industrial Business Segment 10,956 11,604 11,981 Advanced Materials 1,167 1,205 1,200 Automotive and Aerospace 1,925 1,754 1,756 Commercial Solutions 1,723 1,751 1,717 Electronics 2,863 3,359 3,673 Transportation Safety 823 833 907 Other Transportation and Electronics — — 9 Total Transportation and Electronics Business Segment 8,501 8,902 9,262 Food Safety — 244 368 Health Information Systems 1,219 1,259 1,220 Medical Solutions 4,625 4,581 4,632 Oral Care 1,329 1,327 1,396 Separation and Purification Sciences 951 992 984 Other Health Care 71 24 1 Total Health Care Business Group 8,195 8,427 8,601 Construction and Home Improvement Markets 2,221 2,346 2,465 Home, Health and Auto Care 1,583 1,655 1,741 Stationery and Office 1,222 1,291 1,306 Other Consumer — — (3) Total Consumer Business Group 5,026 5,292 5,509 Corporate and Unallocated 3 4 2 Total Company $ 32,681 $ 34,229 $ 35,355 Net Sales by Geographic Area (millions) 2023 2022 2021 Americas $ 18,375 $ 18,400 $ 18,097 Asia Pacific 8,463 9,901 10,600 Europe, Middle East and Africa 5,843 5,928 6,660 Other Unallocated — — (2) Worldwide $ 32,681 $ 34,229 $ 35,355 financial condition.March 2016,August 2023, 3M completed the FASB issued ASU No. 2016-06, Contingent Put and Call Options in Debt Instruments. This ASU clarifies guidance used to determine if debt instruments that contain contingent put or call options would require separationsale of assets associated with its dental local anesthetic business (part of the embedded put or call featureHealth Care business) to Pierrel S.p.A. for approximately $60 million in cash. The dental local anesthetic business had annual sales of approximately $30 million. The gain on this transaction, net of a loss associated with a previous contingent indemnification obligation from a 2020 divestiture, resulted in a 2023 net pre-tax gain of $36 million.debt instrument and trigger accounting for the featureHealth Care business as a derivative with changesseparate public company. 3M expects to initially retain an ownership position of 19.9% in fair value recorded through income. Under the new guidance, fewer put or call options embedded in debt instruments would require derivative accounting. Forbusiness, which 3M this ASU was effective January 1, 2017.intends to monetize over time. The Company’s outstanding debt with embedded put provisions did not require separate derivative accounting under existing guidance. As a result, the adoption of this standard did not have a material impact on the Company’s consolidated results of operations and financial condition.In March 2016, the FASB issued ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting, which eliminates the existing requirement to apply the equity method of accounting retrospectively (revising prior periods as if the equity method had always been applied) when an entity obtains significant influence over a previously held investment. The new guidance would require the investor to apply the equity method prospectively from the date the investment qualifies for the equity method. The investor would add the carrying value of the existing investment to the cost of any additional investment to determine the initial cost basis of the equity method investment. For 3M, this ASU was effective January 1, 2017 on a prospective basis. 3M will apply this guidance to investments that transition to the equity method after the adoption date.In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial instruments within its scope. The new standard 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. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. With respect to available-for-sale (AFS) debt securities, the ASU amends the current other-than-temporary impairment model. 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. However, rather than also reflecting that credit loss amount as a permanent reduction in cost (amortized cost) basis of that AFS debt security, the ASU requires that credit losses be reflected as an allowance. As a result, under certain circumstances, a recovery in value could result in previous allowances, or portions thereof, reversing back into income. For 3M, this ASU is effective January 1, 2020, with early adoption permitted. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently assessing this ASU’s impact on 3M’s consolidated result of operations and financial condition.In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, whichspin-off transaction is intended to reduce diversity in practice in how certain cash receiptsbe tax-free for U.S. federal income tax purposes and payments are presentedis subject to customary conditions, including the filing and classified in theeffectiveness of a Form 10 registration statement, receipt of cash flows. The standard provides guidance in a number of situations including, among others, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceedsprivate letter ruling from the settlementInternal Revenue Service and a tax opinion from external counsel, satisfactory completion of insurance claims,financing, and distributions received from equity method investees. The ASU also provides guidance for classifying cash receipts and payments that have aspects of more than one class of cash flows. The Company early adopted ASU No. 2016-15 as of January 1, 2017. Since the associated changes in classification were immaterial to all70prior periods presented, no impact was reflected infinal approval by the Company’s pre-2017 consolidated resultsBoard of operations and financial condition presented.In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which modifies existing guidance and is intended to reduce diversity in practice with respect to the accounting for the income tax consequences of intra-entity transfers of assets. The ASU indicates that the current exception to income tax accounting that requires companies to defer the income tax effects of certain intercompany transactions would apply only to intercompany inventory transactions. That is, the exception would no longer apply to intercompany sales and transfers of other assets (e.g., intangible assets). Under the existing exception, income tax expense associated with intra-entity profits in an intercompany sale or transfer of assets is eliminated from earnings. Instead, that cost is deferred and recorded on the balance sheet (e.g., as a prepaid asset) until the assets leave the consolidated group. Similarly, the entity is prohibited from recognizing deferred tax assets for the increases in tax bases due to the intercompany sale or transfer. For 3M, this ASU is effective January 1, 2018. The standard requires modified retrospective transition with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. Upon adoption, a company would write off any income tax effects that had been deferred from past intercompany transactions involving non-inventory assets to opening retained earnings. In addition, an entity would record deferred tax assets with an offset to opening retained earnings for amounts that entity had previously not recognized under existing guidance but would recognize under the new guidance. Based on deferred tax amounts related to applicable past intercompany transactions as of December 31, 2017, the Company does not expect this ASU to have a material impact on 3M’s consolidated results of operations and financial condition.In October 2016, the FASB issued ASU No. 2016-17, Interests Held through Related Parties That Are under Common Control, which modifies existing guidance with respect to how a decision maker that holds an indirect interest in a variable interest entity (VIE) through a common control party determines whether it is the primary beneficiary of the VIE as part of the analysis of whether the VIE would need to be consolidated. Under the ASU, a decision maker would need to consider only its proportionate indirect interest in the VIE held through a common control party. Previous guidance had required the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. As a result of the ASU, in certain cases, previous consolidation conclusions may change. For 3M, the standard was effective January 1, 2017 with retrospective application to January 1, 2016. 3M does not have significant involvement with entities subject to consolidation considerations impacted by VIE model factors. As a result, the adoption of this ASU did not have a material impact on the Company’s consolidated results of operations and financial condition.In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which clarifies guidance on the classification and presentation of restricted cash in the statement of cash flows. Under the ASU, changes in restricted cash and restricted cash equivalents would be included along with those of cash and cash equivalents in the statement of cash flows. As a result, entities would no longer present transfers between cash/equivalents and restricted cash/equivalents in the statement of cash flows. In addition, a reconciliation between the balance sheet and the statement of cash flows would be disclosed when the balance sheet includes more than one line item for cash/equivalents and restricted cash/equivalents. The Company early adopted ASU No. 2016-18 as of January 1, 2017. Due to the immaterial use of restricted cash and restricted cash equivalents, no impact was reflected in the Company’s pre-2017 consolidated results of operations and financial condition presented.In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The ASU requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs. The standard also narrows the definition of outputs. The definition of a business affects areas of accounting such as acquisitions, disposals and goodwill. Under the new guidance, fewer acquired sets are expected to be considered businesses. For 3M, this ASU is effective January 1, 2018 on a prospective basis with early adoption permitted. 3M would apply this guidance to applicable transactions after the adoption date.71In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. Under the new standard, goodwill impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. For 3M, this ASU is effective prospectively to impairment tests beginning January 1, 2020, with early adoption permitted. 3M adopted this ASU in the fourth quarter of 2017 in conjunction with its annual goodwill impairment testing. The adoption did not have an impact on 3M’s consolidated results of operations and financial condition.In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. This ASU addresses scope-related questions that arose after the FASB issued its revenue guidance in ASU No. 2014-09, Revenue from Contracts with Customers. The new standard clarifies the accounting for derecognition of nonfinancial assets and defines what is considered an in substance nonfinancial asset. Nonfinancial assets largely relate to items such as real estate, ships and intellectual property that do not constitute a business. The new ASU impacts entities derecognizing (e.g. selling) nonfinancial assets (or in substance nonfinancial assets), including partial interests therein, when the purchaser is not a customer. Under the new guidance, the seller would apply certain recognition and measurement principles of ASU No. 2014-09, Revenue from Contracts with Customers, even though the purchaser is not a customer. For 3M, this new standard is effective coincident with the Company’s January 1, 2018 adoption of ASU No. 2014-09. The Company does not expect this ASU to have a material impact on 3M’s consolidated results of operations and financial condition.In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU changes how employers that sponsor defined benefit pension and/or other postretirement benefit plans present the net periodic benefit cost in the income statement. Under the new standard, only the service cost component of net periodic benefit cost would be included in operating expenses and only the service cost component would be eligible for capitalization into assets such as inventory. All other net periodic benefit costs components (such as interest, expected return on plan assets, prior service cost amortization and actuarial gain/loss amortization) would be reported outside of operating income. For 3M, this ASU is effective January 1, 2018 on a retrospective basis; however, guidance limiting the capitalization to only the service cost component is applied on prospective basis. The components of 3M’s net periodic defined benefit pension and postretirement benefit costs are presented in Note 12. These include components totaling a benefit of $129 million, $195 million, and a detriment of $34 million, for the fiscal years 2017, 2016, and 2015, respectively, that would no longer be included within operating expenses and instead would be reported outside of income from operations under the new standard. Further, the capitalization of service cost change is not expected to have a material impact on 3M’s consolidated results of operations and financial condition.In March 2017, the FASB issued ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium. Under existing standards, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. The new guidance shortens the amortization period to the earliest call date for certain callable debt securities that have explicit, noncontingent call features and are callable at a fixed price and preset date. The amendments do not require an accounting change for securities held at a discount. For 3M, this ASU is effective January 1, 2019 with a modified retrospective transition resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Early adoption is permitted. 3M’s marketable security portfolio includes very limited instances of callable debt securities held at a premium. As a result, the Company does not expect this ASU to have a material impact on 3M’s consolidated results of operations and financial condition.In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting, that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as a modification. The general model for accounting for modifications of share-based payment awards is to record the incremental value arising from the changes as additional compensation cost. Under the new standard, fewer changes to the terms of an award would require accounting under this modification model. For 3M, this ASU is effective January 1, 2018, with early adoption permitted. Because the Company does not typically make changes to the terms or conditions of its issued share-based payment72awards, 3M does not expect this ASU to have a material impact on its consolidated results of operations and financial condition.In May 2017, the FASB issued ASU No. 2017-10, Determining the Customer of the Operation Services, that clarifies how an operating entity determines the customer of the operation services for transactions within the scope of a service concession arrangement. Service concession arrangements are typically agreements between a grantor and an operating entity whereby the operating entity will operate the grantor’s infrastructure (i.e. airports, roadways, bridges, and prisons) for a specified period of time. The operating entity also may be required to maintain the infrastructure and provide capital-intensive maintenance to enhance or extend its life. In such arrangements, typically the operation services (i.e. operation and maintenance of a roadway) would be used by third parties (i.e. drivers). The ASU clarifies that the grantor, not the third party, is the customer of the operation services in such arrangements. For 3M, this new standard is effective coincident with the Company’s January 1, 2018 adoption of ASU No. 2014-09. Because the Company is not typically a party to agreements within the scope of accounting for service concession arrangements, 3M does not expect this ASU to have a material impact on its consolidated results of operations and financial condition.In July 2017, the FASB issued ASU No. 2017-11, (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The new standard applies to issuers of financial instruments with down-round features. A down-round provision is a term in an equity-linked financial instrument (i.e. a freestanding warrant contract or an equity conversion feature embedded within a host debt or equity contract) that triggers a downward adjustment to the instrument’s strike price (or conversion price) if equity shares are issued at a lower price (or equity-linked financial instruments are issued at a lower strike price) than the instrument’s then-current strike price. The purpose of the feature is typically to protect the instrument’s counterparty from future issuances of equity shares at a more favorable price. The ASU amends (1) the classification of such instruments as liabilities or equity by revising the certain guidance relative to evaluating if they must be accounted for as derivative instruments and (2) the guidance on recognition and measurement of freestanding equity-classified instruments. For 3M, this ASU is effective January 1, 2019, with early adoption permitted. Because the Company has not issued financial instruments with down-round features, 3M does not expect this ASU to have a material impact on its consolidated results of operations and financial condition.In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities. The ASU amends existing guidance to simplify the application of hedge accounting in certain situations and allow companies to better align their hedge accounting with their risk management activities. Existing standards contain certain requirements for an instrument to qualify for hedge accounting relative to initial and ongoing assessments of hedge effectiveness. While an initial quantitative test to establish the hedge relationship is highly effective would still be required, the new ASU permits subsequent qualitative assessments for certain hedges instead of a quantitative test and expands the timeline for performing the initial quantitative assessment. The ASU also simplifies related accounting by eliminating the requirement to separately measure and report hedge ineffectiveness. Instead, for qualifying cash flow and net investment hedges, the entire change in fair value (including the amount attributable to ineffectiveness) will be recorded within other comprehensive income and reclassified to earnings in the same income statement line that is used to present the earnings effect of the hedged item when the hedged item affects earnings. For fair value hedges, generally, the entire change in fair value of the hedging instrument would also be presented in the same income statement line as the hedged item. The new standard also simplifies the accounting for fair value hedges of interest rate risks and expands an entity’s ability to hedge nonfinancial and financial risk components. In addition, the guidance also eases certain documentation requirements, modifies the accounting for components excluded from the assessment of hedge effectiveness, and requires additional tabular disclosures of derivative and hedge-related information. For 3M, this ASU is effective January 1, 2019, with a modified retrospective transition resulting in a cumulative-effect adjustment recorded to the opening balance of retained earnings as of the adoption date. Early adoption is permitted. The Company is currently assessing this ASU’s impact on 3M’s consolidated results of operations and financial condition.73NOTE 2. Acquisitions and DivestituresAcquisitions:3M makes acquisitions of certain businesses from time to time that are aligned with its strategic intent with respect to,Directors, 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.In addition to business combinations, 3M periodically acquires certain tangible and/or intangible assets and purchases interests in certain enterprises that do not otherwise qualify for accounting as business combinations. These transactions are largely reflected as additional asset purchase and investment activity.2017 acquisitions:In September 2017, 3M purchased all of the ownership interests of Elution Technologies, LLC, a Vermont-based manufacturer of test kits that help enable food and beverage companies ensure their products are free from certain potentially harmful allergens such as peanuts, soy or milk. Elution is reported within the Company’s Health Care business.In October 2017, 3M completed the acquisition of the underlying legal entities and associated assets of Scott Safety, which is headquartered in Monroe, North Carolina, from Johnson Controls for $2.0 billion of cash, net of cash acquired. Scott Safety is a premier manufacturer of innovative products, including self-contained breathing apparatus systems, gas and flame detection instruments, and other safety devices that complement 3M’s personal safety portfolio. The business had revenues of approximately $570 million in 2016. Scott Safety is reported within 3M’s Safety and Graphics business. The allocation of purchase consideration related to Scott Safety is considered preliminary with provisional amounts primarily related to intangible assets and certain tax-related, contingent liability and working capital items. 3M expects to finalizeclose the allocation of purchase price within the one year measurement-period following the acquisition.Pro forma information related to acquisitions has not been included because the impact on the Company’s consolidated results of operations was not considered material. The following table shows the impact on the consolidated balance sheet of the purchase price allocations related to 2017 acquisitions and assigned finite-lived intangible asset weighted-average lives.7415 10 17 5 Purchased identifiable finite-lived intangible assets related to acquisition activity in 2017 totaled $855 million. The associated finite-lived intangible assets acquired in 2017 will be amortized on a systematic and rational basis (generally straight line) over a weighted-average life of 15 years (lives ranging from four to 17 years). Acquired in-process research and development and identifiable intangible assets for which significant assumed renewals or extensions of underlying arrangements impacted the determination of their useful lives were not material.2016 acquisitions:In September 2016, 3M acquired all of the outstanding shares of Semfinder, headquartered in Kreuzlingen, Switzerland. Semfinder is a leading developer of precision software that enables efficient coding of medical procedures in multiple languages. The purchase price paid for these business combinations (net of cash acquired) during 2016 aggregated to $16 million. Semfinder is reported within 3M’s Health Care business.Adjustments in 2016 to the preliminary purchase price allocations of other acquisitions within the allocation period primarily related to the identification of contingent liabilities and certain tax-related items aggregating to approximately $35 million along with other balances related to the 2015 acquisition of Capital Safety Group S.A.R.L. The change to provisional amounts resulted in an immaterial impact to the results of operations in the third quarter of 2016, a portion of which related to earlier quarters in the measurement period.Purchased identifiable finite-lived intangible assets related to acquisition activity in 2016 totaled $4 million. The associated finite-lived intangible assets acquired in 2016 will be amortized on a systematic and rational basis (generally straight line) over a weighted-average life of 8 years (lives ranging from two to 20 years). Acquired in-process research and development and identifiable intangible assets for which significant assumed renewals or extensions of underlying arrangements impacted the determination of their useful lives were not material.2015 acquisitions:In March 2015, 3M purchased all of the outstanding shares of Ivera Medical Corp., headquartered in San Diego, California. Ivera Medical Corp. is a manufacturer of health care products that disinfect and protect devices used for access into a patient’s bloodstream and is reported within 3M’s Health Care business. In addition,transaction in the first quarterhalf of752015, 3M purchasedits businesses, which could delay the remaining interest in a former equity method investment reported within 3M’s Industrial business for an immaterial amount.In August 2015, 3M acquired allcompletion of the outstanding shares of Capital Safety Group S.A.R.L., with operating headquarters in Bloomington, Minnesota, from KKR & Co. L.P. for $1.7 billion, net of cash acquired. The net assets acquired included the assumption of $0.8 billion of debt. Capital Safety is a leading global provider of fall protection equipment and is reported within 3M’s Safety and Graphics business.In August 2015, 3M acquired the assets and liabilities associated with Polypore International, Inc.’s Separations Media business (hereafter referred to as Membrana), headquartered in Wuppertal, Germany, for $1.0 billion. Membrana is a leading provider of microporous membranes and modules for filtration in the life sciences, industrial and specialty segments and is reported within 3M’s Industrial business.The impact on the consolidated balance sheet of the purchase price allocations related to 2015 acquisitions and assigned weighted-average intangible asset lives, including adjustments relative to other acquisitions within the measurement period, follows. Adjustments in 2015 to the preliminary allocations primarily related to the identification and valuation of certain indefinite-lived intangible assets. The change to provisional amounts resulted in an immaterial impact to results of operations in the fourth quarter of 2015, a portion of which relates to earlier quarters in the measurement period.16 7 7 16 4 Purchased identifiable finite-lived intangible assets related to acquisition activity in 2015 totaled $1.0 billion. The associated finite-lived intangible assets acquired in 2015 will be amortized on a systematic and rational basis (generally straight line) over a weighted-average life of 14 years (lives ranging from two to 20 years). Indefinite-lived intangible assets of $520 million relate to certain tradenames associated with the Capital Safety acquisition which have been in existence for over 55 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. Acquired in-process research and development and identifiable intangible assets for which significant76assumed renewals or extensions of underlying arrangements impacted the determination of their useful lives were not material.Divestitures:3M may divest certain businesses from time to time based upon review of the Company’s portfolio considering, among other items, factorstransaction relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if sellinganticipated timeline. Because the businesses results inintended transaction is a spin-off, the greatest value creationHealth Care business is not classified as held for the Company and for shareholders.January 2015,March 2022, 3M completed the sale of its global Static Controlfloor products business to Desco Industries Inc., based in Chino, California. 2014 sales of this business were $46 million. This transaction was not considered material and was reported within 3M’s Electronics and Energy business.In the fourth quarter of 2015, 3M entered into agreements with One Equity Partners Capital Advisors L.P. (OEP) to sell the assets of 3M’s library systems business. The sales of the North American business and the majority of the business outside of North America closed in October and November 2015, respectively. The sale of the remainder of the library systems business closed in the first quarter of 2016 (discussed further below). In December 2015, 3M also completed the sale of Faab Fabricauto, a wholly-owned subsidiary of 3M, to Hills Numberplates Limited. The library systems business,Western Europe, formerly part of the former TrafficConsumer business, for immaterial proceeds that approximated the business's book value.and Security Division delivers circulation management solutions to library customers with on-premise hardware and software, maintenance and service, and an emerging cloud-based digital lending platform. Faab Fabricauto, alsobusiness (formerly part of the former Traffic SafetyHealth Care business segment) with Neogen Corporation in a transaction that involved a Reverse Morris Trust structure intended to make the split-off tax-efficient to 3M and Security Division, is a leading French manufacturer of license plates and signage solutions. The aggregate cash proceeds relative to the 2015 global library systems and Faab Fabricauto divestiture transactions was $104 million. The Company recorded within 3M’s Safety and Graphics business a net pre-tax gain of $40 million in 2015 as3M's shareholders for U.S. federal income tax purposes. As a result of the sale and any adjustmenttransaction, 3M reflected a pre-tax gain of carrying value.In$2.7 billion based on aggregate consideration of $2.8 billion. Under the first quarter of 2016, 3M completed the saleterms of the remainderunderlying agreements, aggregate consideration included 3M shares exchanged and $1.0 billion ($828 million after closing and other adjustments) funded from debt that became obligations of Neogen. The cash and non-cash consideration components are further described below.assetscommon shares of 3M’s library systems business to One Equity Partners Capital Advisors L.P. (OEP). 3M had previously sold the North American business and the majority of the business outside of North America to OEP in the fourth quarter of 2015 which was reported within 3M’s Safety and Graphics business. Also in the first quarter of 2016, 3M sold to Innovative Chemical Products Group, a portfolio company of Audax Private Equity, the assets of 3M’s pressurized polyurethane foam adhesives business (formerly known as Polyfoam). This business is a provider of pressurized polyurethane foam adhesive formulations and systems into the residential roofing, commercial roofing and insulation and industrial foam segments in the United States with annual sales of approximately $20 million and was reported within 3M’s Industrial business. The Company recorded a pre-tax gain of $40Neogen.the first quartercash and non-cash components funded from debt that became obligations of 2016 as a result of the sales of these businesses.In October 2016, 3M sold the assets of its temporary protective films business to Pregis LLC. This business, with annual sales of approximately $50 million, is a provider of adhesive-backed temporary protective films used in a broad range of industries and was reported within 3M’s Industrial business. In December 2016, 3M sold the assets of its cathode battery technology out-licensing business, with annual sales of approximately $10 million, to UMICORE. This business was reported within 3M’s Electronics and Energy business. The aggregate selling price relative to these two businesses was $86 million. The Company recorded a pre-tax gain of $71 million in the fourth quarter of 2016 as a result of the sales of these businesses.In January 2017, 3M sold the assets of its safety prescription eyewear business, with annual sales of approximately $45 million, to HOYA Vision Care. The Company recorded a pre-tax gain of $29 million in the first quarter of 2017 as a result of this sale, which was reported within the Company’s Safety and Graphics business.In May 2017, 3M completed the related sale or transfer of control, as applicable, of its identity management business to Gemalto N.V. This business, with 2016 sales of approximately $205 million, is a leading provider in identity management solutions, including biometric hardware and software that enable identity verification and authentication, as well as secure materials and document readers. In June 2017, 3M also completed the sale of its tolling and automated license/number plate recognition business, with annual sales of approximately $40 million, to Neology, Inc. 3M’s tolling and automated license/number plate recognition business includes RFID readers and tags, automatic vehicle77classification systems, lane controller and host software, and back office software and services. It also provides mobile and fixed cameras, software, and services in automated license/number plate recognition. 3M received proceeds of $833 million, or $809◦$478 million, net of divested cash, sold, and reflected a pre-tax gain of $458 million as a resultcash payment to 3M funded from Food Safety business borrowings coincident with the transaction that became obligations of these two divestitures, which was reported withinNeogen. This amount is reflected in the Company’s Safety and Graphics business.In October 2017, 3M sold its electronic monitoring business to an affiliate of Apax Partners. This business, with annual sales of approximately $95 million, is a provider of electronic monitoring technologies, serving hundreds of correctional and law enforcement agencies aroundinvesting section on the world. 3M received proceeds of $201 million, netconsolidated statement of cash sold, and reflected a pre-tax gain of $98 million in the fourth quarter of 2017 as a result of this divestiture, whichflows. The amount was reported within the Company’s Safety and Graphics business.In the fourth quarter of 2017, 3M sold the assets of an electrical marking/labeling business within its Electronics and Energy business. The former activity, proceeds and gain were not considered material.In December 2017, 3M agreed to sell substantially all of its Communication Markets Division to Corning Incorporated, for $900 million, subject to closing and other adjustments. This business, with annualadjustments and included cash paid to 3M for direct sales of approximately $400certain net assets of the Food Safety business to Neogen.consistsas part of optical fibera non-cash debt-for-debt exchange that reduced then-outstanding 3M commercial paper indebtedness and copper passive connectivity solutionsbecame new term-debt obligations of Neogen.telecommunications industry including 3M’s xDSL, FTTx,Internal Revenue Service, third party tax opinions, and structured cabling solutionsother external tax advice related to the concluded tax treatment. The applicable facts and in certain countries, telecommunications system integration services. This sale is expectedcircumstances that existed at the time of the Reverse Morris Trust split-off transactions may be reviewed as part of an audit by the Internal Revenue Service. If the completed transactions were later determined to close in 2018,fail to qualify for tax-free treatment for U.S. federal income tax purposes, the Company could be subject to consultation or information requirements with relevant works councilssignificant liabilities, and to customary closing conditions and regulatory approvals. The 3M expects a pre-tax gain of approximately $500 million as a result of this divestiture that willthere could be reported within the Company’s Electronics and Energy business.In February 2018, 3M closed on the sale of certain personal safety product offerings primarily focused on noise, environmental, and heat stress monitoring to TSI, Inc. This business has annual sales of approximately $15 million. The transaction is expected to result in a pre-tax gain of less than $20 million that will be reported within the Company’s Safety and Graphics business.The aggregate operating income of these businesses was approximately $45 million, $50 million and not significant in 2017, 2016 and 2015, respectively. The approximate amounts of major assets and liabilities associated with disposal groups classified as held-for-sale as of December 31, 2017 and December 31, 2016, included the following:In addition, approximately $270 million of goodwill was estimated to be attributable to disposal groups classified as held-for-sale as of both December 31, 2017 and December 31, 2016, based upon relative fair value. The amounts above have not been segregated and are classified within the existing corresponding line itemsmaterial adverse impacts on the Company’s consolidated balance sheet.783.4. Goodwill and Intangible AssetsPurchased goodwill from acquisitions totaled $1.3 billion in 2017, none of which is deductible for tax purposes. Purchased goodwill from acquisitions totaled $14 million in 2016, none of which is deductible for tax purposes. acquisition activitychange in the following table also includes the net impactcarrying amount of adjustments to the preliminary allocation of purchase price within the one year measurement-period following prior acquisitions, which increased goodwill by $39 million during 2016. business segment was as follows:(Millions) Safety and Industrial Transportation and Electronics Health Care Consumer Total Company Balance as of December 31, 2021 $ 4,622 $ 1,825 $ 6,786 $ 253 $ 13,486 Divestiture activity — — (16) — (16) Goodwill impairment — (271) — — (271) Translation and other (113) (53) (255) 12 (409) Balance as of December 31, 2022 $ 4,509 $ 1,501 $ 6,515 $ 265 $ 12,790 Divestiture activity — — (4) — (4) Translation and other 33 11 92 5 141 Balance as of December 31, 2023 $ 4,542 $ 1,512 $ 6,603 $ 270 $ 12,927 columnrow in the followingabove table primarily relate to changes in foreign currency exchange rates. The goodwill balance by business segment follows:GoodwillAccounting standards require that goodwill be tested for impairment annually and between annual tests in certain circumstances such as a change in reporting units ortesting of recoverability of a significant asset group within a reporting unit. At 3M, reporting units correspond to a division.As described in Note 17, effective in the first quarter of 2017, the Company changed its business segment reporting in its continuing effort to improve the alignment of its businesses around markets and customers. 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. During the first quarter of 2017, the Company completed its assessment of any potentialCompany's accumulated goodwill impairment for reporting units impacted by this new structure and determined that no impairment existed. loss is $0.3 billion. also completed its annual goodwill impairment test in the fourth quarter of 20172023 for all reporting units and determined that no impairment existed. In addition,As described in Note 21, effective in the first quarter of 2023, the Company hadchanged its business segment reporting.impairments ofremaining goodwill in prior years.for that reporting unit.79Assetsas of December 31, follow:December 31, December 31, (Millions) 2023 2022 Customer related (original lives largely 11 to 19 years) Patents (original lives largely 9 to 13 years) Other technology-based (original lives largely 6 to 20 years) Definite-lived tradenames (original lives largely 6 to 20 years) Other (original lives largely 10 years) Accumulated amortization — customer related Accumulated amortization — customer related Accumulated amortization — other technology-based Total finite-lived intangible assets — net Total finite-lived intangible assets — net Indefinite lived intangible assets (primarily tradenames) Indefinite lived intangible assets (primarily tradenames) Indefinite lived intangible assets (primarily tradenames) 5560 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.for the years ended December 31 follows:Year ended December 31, Year ended December 31, Year ended December 31, (Millions) (Millions) 2023 2022 2021 20172023 follows:(Millions) (Millions) 2024 2025 2026 2027 2028 After 2028 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. 80(Millions) 2023 Cost of sales $ 101 Selling, general and administrative expenses 304 Research, development and related expenses 32 Total operating income impact $ 437 2023 (Millions) Employee Related Asset-Related and Other Total Safety and Industrial $ 89 $ — $ 89 Transportation and Electronics 62 — 62 Health Care 22 — 22 Consumer 26 — 26 Corporate and unallocated 171 67 238 Total operating expense $ 370 $ 67 $ 437 (Millions) Employee-Related Asset-Related and Other Total Expense incurred in 2023 370 67 437 Non-cash changes — (67) (67) Adjustments (10) — (10) Cash payments (261) — (261) Accrued restructuring action balance as of December 31, 2023 $ 99 $ — $ 99 NOTE 4.2020 through 2022 Operational/Marketing Capability Restructuring ActionsActions: In 2020, 3M announced it would undertake certain actions to further enhance its operations and Exit Activities2017marketing capabilities to take advantage of certain global market trends while de-prioritizing investments in slower-growth end markets. In 2021, management approved and committed to undertake additional actions under this initiative resulting in a 2021 pre-tax charge of $124 million impacting all business segments (Corporate & Unallocated ($42 million), Safety and Industrial ($30 million), Transportation and Electronics ($24 million), Health Care ($21 million) and Consumer ($7 million)), of which $88 million was recorded in selling, general and administrative expense. In 2022, management approved and committed to undertake the remaining actions under this initiative resulting in a pre-tax charge of $18 million. The accrued restructuring action balance was $101 million at December 31, 2020, $87 million at December 31, 2021 and was completed in 2022. This initiative, beginning in 2020 and ending with 2022 actions, impacted approximately 3,100 positions worldwide with a pre-tax charge of approximately $280 million over that period.second quarter of 2017,Food Safety Division split-off transaction and combination with Neogen (see Note 3), management approved and committed to undertake certain restructuring actions primarily focused on portfolio and footprint optimization.addressing corporate functional costs across 3M in relation to the magnitude of amounts previously allocated to the divested business. These actions affected approximately 1,300850 positions worldwide and resulted in a second quarter 20172022 pre-tax charge of $99 million.$41 million primarily impacting selling, general and administrative expenses within Corporate and Unallocated. The related accrued restructuring balance as of December 31, 2022 was $10 million after associated payments during 2022. Remaining activities related to this divestiture-related restructuring are expected to bewere largely completed by the end of 2018.Restructuring charges are summarized by business segment as follows:The preceding restructuring charges were recorded in the income statement as follows:Restructuring actions, including cash and non-cash impacts, follow:2017 Exit Activities:Duringthrough the first quarterhalf of 2017, the Company recorded net pre-tax charges of $24 million related to exit activities. These charges related to employee reductions, primarily in Western Europe. During the fourth quarter of 2017, the Company recorded net pre-tax charges of $23 million related to exit activities. These charges related to employee reductions, primarily in the United States and Western Europe.2015 Restructuring Actions:During the fourth quarter of 2015, management approved and committed to undertake certain restructuring actions primarily focused on structural overhead, largely in the U.S. and slower-growing markets, with particular emphasis on Europe, Middle East, and Africa (EMEA) and Latin America. This impacted approximately 1,700 positions worldwide and resulted in a fourth-quarter 2015 pre-tax charge of $114 million.81Components of these restructuring charges are summarized by business segment as follows:The preceding restructuring charges were recorded in the income statement as follows:Components of these restructuring actions, including cash and non-cash impacts, follow:Non-cash changes include certain pension settlements and special termination benefits recorded in accrued defined benefit pension and postretirement benefits and accelerated deprecation resulting from the cessation of use of certain long-lived assets.(Millions) (Millions) 2023 2022 2021 Pension and postretirement net periodic benefit cost (benefit) The Company recorded an early debt extinguishment charge of approximately $96which was included within$462 million and $488 million in 2023, 2022 and 2021, respectively, related to outstanding debt. Beginning in 2023, interest expense also includes imputed interest associated with the obligations resulting from the PWS Settlement and the CAE Settlement (discussed in Note 18).fourth quartertable above include all components of 2017.defined benefit plan net periodic benefit cost (benefit) except service cost, which is reported in various operating expense lines. Refer to Note 14 for additional details on the components of pension and postretirement net periodic benefit cost (benefit).826.7. Supplemental Balance Sheet InformationAccounts payable (included as a separate line item in the Consolidated Balance Sheet) includes drafts payable on demand of $74 million at December 31, 2017, and $88 million at December 31, 2016. Accumulated depreciation for capital leases totaled $48 million and $89 million as of December 31, 2017, and 2016, respectively. (Millions) 2023 2022 Other current assets Derivative assets-current $ 73 $ 162 Insurance related (receivables, prepaid expenses and other) 114 103 Other 149 191 Total other current assets $ 336 $ 456 Property, plant and equipment - at cost Land $ 255 $ 255 Buildings and leasehold improvements (original lives 10 to 40 years) 7,908 7,560 Machinery and equipment (original lives 3 to 15 years) 16,855 16,455 Construction in progress 1,852 1,728 Gross property, plant and equipment 26,870 25,998 Accumulated depreciation (17,711) (16,820) Property, plant and equipment - net $ 9,159 $ 9,178 Other assets Deferred income taxes $ 4,918 $ 959 Prepaid pension and post retirement 1,253 1,225 Insurance related receivables and other 33 73 Cash surrender value of life insurance policies 270 265 Equity method investments 74 81 Equity and other investments 170 886 Other 412 782 Total other assets $ 7,130 $ 4,271 Other current liabilities Accrued rebates $ 804 $ 751 Deferred revenue 572 538 Derivative liabilities 34 31 Employee benefits and withholdings 257 247 Contingent liability claims and other 4,797 534 Property, sales-related and other taxes 217 224 Pension and postretirement benefits 79 77 Other 851 788 Total other current liabilities $ 7,611 $ 3,190 Other liabilities Long term income taxes payable $ 872 $ 1,051 Employee benefits 332 386 Contingent liability claims and other 12,158 2,179 Finance lease obligations 60 75 Deferred income taxes 528 559 Other 372 1,365 Total other liabilities $ 14,322 $ 5,615 833.03 billion shares is authorized, with 944,033,056 shares issued.issued as of December 31, 2023, 2022 and 2021. Preferred stock, without par value, of 10 million shares is authorized but unissued.$1.175$1.50, $1.49, and $1.11$1.48 per share for each quarter in 20172023, 2022 and 2016,2021, respectively, which resulted in total year declared and paid dividends of $4.70$6.00, $5.96, and $4.44$5.92 per share, respectively. In 2015, 3M’s Board of Directors declared a second, third, and fourth quarter dividend of $1.025 per share, which resultedtotal year 2015 declared dividends of $3.075 per share. In December 2014, 3M’s Board of Directors declared a first quarter 2015 dividend of $1.025 per share (paid in March 2015).Changes in Accumulated Other Comprehensive Income (Loss) Attributableaccumulated other comprehensive income (loss) attributable to 3M (AOCI), including the reclassifications out of AOCI by Component(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 (428) 1,223 108 903 Amounts reclassified out — 658 47 705 Total other comprehensive income (loss), before tax (428) 1,881 155 1,608 (65) (536) (36) (637) Total other comprehensive income (loss), net of tax (493) 1,345 119 971 Balance at December 31, 2021, net of tax: (1,943) (4,753) (54) (6,750) Other comprehensive income (loss), before tax: Amounts before reclassifications (850) 866 159 175 Amounts reclassified out — 458 (98) 360 Total other comprehensive income (loss), before tax (850) 1,324 61 535 (35) (409) (14) (458) Total other comprehensive income (loss), net of tax (885) 915 47 77 Balance at December 31, 2022, net of tax: $ (2,828) $ (3,838) $ (7) $ (6,673) Other comprehensive income (loss), before tax: Amounts before reclassifications 277 (763) 81 (405) Amounts reclassified out 54 252 (143) 163 Total other comprehensive income (loss), before tax 331 (511) (62) (242) (9) 131 15 137 Total other comprehensive income (loss), net of tax 322 (380) (47) (105) Balance at December 31, 2023, net of tax: $ (2,506) $ (4,218) $ (54) $ (6,778) (millions) 2023 2022 2021 Defined benefit pension and postretirement plans adjustment (60) $ (108) $ (160) Cash flow hedging instruments, unrealized gain/loss 33 23 (11) doesdo include impacts from items such as net investment hedge transactions. Reclassification adjustments are made to avoid double counting inThe Company uses the portfolio approach for releasing income tax effects from accumulated other comprehensive income.items that are also recorded(loss) into consolidated income (loss) include:income.(see Note 14).84Reclassifications out of Accumulated Other Comprehensive Income Attributable to 3M8.9. Supplemental Cash Flow Information(Millions) 2023 2022 2021 capitalfinance lease balances, including net interest payments/receipts related to accreted debt discounts/premiums, payment of debt issue costs, as well as net interest payments/receipts associated with interest rate swap contracts.balances. Cash interest payments exclude the cash paid for early debt extinguishment costs. Additional details are described in Note 11.Transactions related to investing and financing activities with significant non-cash components are as follows:·3M sold and leased-back, under a capital lease, certain recently constructed machinery and equipment in return for municipal bonds with the City Nevada, Missouri during 2017 and 2016 valued at approximately $13 million and $12 million, respectively, as of the transaction date.In addition, as discussed in Note 7, in the fourth quarterfollowing:(Millions) 2023 2022 2021 United States $ (12,091) $ 3,861 $ 3,716 International 2,403 2,531 3,488 Total $ (9,688) $ 6,392 $ 7,204 2014, 3M’s Board of Directors declared a first quarter 2015 dividend of $1.025 per share (paid in March 2015).the following:85(Millions) 2023 2022 2021 Currently payable Federal $ 376 $ 606 $ 756 State 78 76 104 International 679 621 597 Deferred Federal (3,074) (612) (219) State (504) (76) (25) International (246) (2) 72 Total $ (2,691) $ 612 $ 1,285 Income Before Income TaxesProvision for Income Taxes Deferred Tax Assets and LiabilitiesThe net deferred tax assets and (liabilities)are included as componentscomprised of Other Assets and Other Liabilities within the Consolidated Balance Sheet. See Note 6 “Supplemental Balance Sheet Information” for further details.86(Millions) 2023 2022 Deferred tax assets: Accruals not currently deductible Employee benefit costs $ 235 $ 232 Product and other claims 3,989 610 Miscellaneous accruals 160 117 Stock-based compensation 275 259 Advanced payments 76 173 Net operating/capital loss/state tax credit carryforwards 147 120 Foreign tax credits 164 112 Research and experimentation capitalization 657 418 Lease liabilities 192 210 Other 157 102 Gross deferred tax assets 6,052 2,353 Valuation allowance (706) (115) Total deferred tax assets 5,346 2,238 Deferred tax liabilities: Accelerated depreciation (535) (586) Intangible assets (226) (901) Right-of-use asset (194) (210) Other — (141) Total deferred tax liabilities (955) (1,838) Net deferred tax assets $ 4,391 $ 400 2017, the Company had tax effected operating losses, capital losses, and tax credit carryovers for federal (approximately $7 million), state (approximately $12 million), and international (approximately $70 million), with all amounts net before valuation allowances. The federal tax attribute carryovers will expire after 15 to 20 years, the state after 5 to 10 years, and the international after one to three years or have an indefinite carryover period. The tax attributes being carried over arise as certain jurisdictions may have tax losses or may have inabilities to utilize certain losses without the same type of taxable income. As of December 31, 2017,2023, the Company has provided $81$706 million of valuation allowance against certain of these deferred tax assets based on management’s determination that it is more-likely-than-not that the tax benefits related to these assets will not be realized.ReconciliationEffective Income Tax RateOther Assets and Other Liabilities within the Consolidated Balance Sheet. At December 31, 2023, 3M’s deferred tax assets, a component of other assets on the consolidated balance sheet, also included a balance of approximately $3.6 billion as a result of the 2023 pre-tax charges related to the PWS Settlement and the CAE Settlement (both discussed in Note 18). See Note 7 “Supplemental Balance Sheet Information” for further details.2023 2022 2021 Statutory U.S. tax rate 21.0 % 21.0 % 21.0 % Food Safety divestiture (8.4) — State income taxes - net of federal benefit 3.5 — 0.9 International income taxes - net 0.7 (0.4) (1.2) Global Intangible Low Taxed Income (GILTI) (0.4) 0.7 0.7 Foreign Derived Intangible Income (FDII) 1.1 (2.3) (3.1) U.S. research and development credit 0.6 (1.0) (0.7) Reserves for tax contingencies 0.5 — 0.6 Employee share-based payments (0.2) (0.6) All other - net 0.8 0.2 0.2 Effective worldwide tax rate 27.8 % 9.6 % 17.8 % raterates for 2017 was 35.52023, 2022, and 2021 were27.8 percent compared to 28.3on a pre-tax loss, 9.6 percent in 2016, an increase of 7.2 percentage points, impacted by several factors. Primaryon pre-tax income and 17.8 percent on pre-tax income, respectively.The primary factors that increasedimpacted the Company’s effective2023 rate were the charges related to the PWS Settlement and the CAE Settlement (as discussed in Note 18). The primary factors that impacted the 2022 rate were the charges related to steps toward resolving Combat Arms Earplugs litigation (as discussed in Note 18) and the tax rate includedefficient structure associated with the impacts due tosplit-off of the Food Safety business (as discussed in Note 3).being enacted in 2017 (see further information below) and remeasurements and establishment of 3M’s uncertain tax positions. Combined, these factors increased the Company’s effective tax rate by 12.1 percentage points. The increase was partially offset byinvolved a 4.9 percentage point decrease, which related to international taxes that were impacted by increasing benefits from the Company’s supply chain centers of expertise, changes to the geographic mix of income before taxes and prior year cash optimization actions, higher year-on-year excess tax benefit for employee share-based payment, increased benefits from the R&D tax credit, a reduction of state taxes, and other items.The effective tax rate for 2016 was 28.3 percent, compared to 29.1 percent in 2015, a decrease of 0.8 percentage points, impacted by several factors. Primary factors that decreased the Company’s effective tax rate included the recognition of excess tax benefits beginning in 2016 related to employee share-based payments (resulting from the adoption of ASU No. 2016-09, as discussed in Note 1) and a reduction in state taxes. Combined, these factors decreased the Company’s effective tax rate by 3.2 percentage points. The decrease was partially offset by a 2.4 percentage point increase, which related to remeasurements of 3M’s uncertain tax positions and international taxes that were impacted by changes to both the geographic mix of income before taxes and additional tax expense related to global cash optimization actions.The TCJA was enacted in December 2017. Among other things, the TCJA reduces the U.S. federal corporate tax rate from 35 percent to 21 percent beginning in 2018, requires companies to pay a one-time transition tax on previously unremitted earnings of non-U.S. subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. The SEC staff issued Staff Accounting Bulletin (SAB) 118, which provides guidance on accounting for enactment effects of the TCJA. SAB 118 provides a measurement period of up to one year from the TCJA’s enactment date for companies to complete their accounting under ASC 740. In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA.In connection with 3M’s initial analysis of the impact of the enactment of the TCJA, the Company recorded a net tax expense of $762 million in the fourth quarter of 2017. For various reasons that are discussed more fully below, including87the issuance of additional technical and interpretive guidance, 3M has not completed its accounting for the income tax effects of certain elements of the TCJA. However, with respect to the following, 3M was able to make reasonable estimates of the TCJA’s effects and, as such, recorded provisional amounts:Transition tax: The transition tax is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of the Company’s non-U.S. subsidiaries. To determine the amount of the transition tax, 3M must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. 3M was able to make a reasonable estimate of the transition tax and recorded a provisional obligation and additional income tax expense of $745 million in the fourth quarter of 2017. However, the Company is continuing to gather additional information and will consider additional technical guidance to more precisely compute and account for the amount of the transition tax. This amount may change when 3M finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalizes the amounts held in cash or other specified assets. The TCJA’s transition tax is payable over eight years beginning in 2018. As of December 31, 2017,2023 and December 31, 2022, 3M reflected $122reflected $218 million and $623$380 million, respectively, in current accrued income taxes and long term income taxes payable. As of December 31, 2023 and December 31, 2022, 3M reflected $189 million and $126 million, respectively, payable respectively.Remeasurement of deferred tax assets/liabilities and other impacts: 3M remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent under the TCJA. 3M is still analyzing certain aspects of the TCJA, considering additional technical guidance, and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. This includes the potential impacts of the global low-taxed income (“GILTI”) provision within the TCJA on deferred tax assets/liabilities. 3M also is considering other impacts of the 2017 enactment of the TCJA including, but not limited to effects on the Company’s indefinite reinvestment assertion. As discussed further below in this Note 9, 3M previously has not provided deferred taxes on unremitted earnings attributable to international companies that have been considered to be reinvested indefinitely. The full effects of underlying tax rates of the TCJA causes some reassessment of previous indefinite reinvestment assertionsone year associated with respect to certain jurisdictions. While 3M was able to make a reasonable estimate of these impacts, it may be affected by other analyses related to the TCJA, including, but not limited to, the calculation of the transition tax on deferred foreign income. The provisional amount recorded in the fourth quarter of 2017 related to deferred tax assets/liabilities and other impacts was a net additional income tax expense of $17 million.3M has not completed its full analysis with respect to the GILTI provision within the TCJA and is not yet able to make reasonable estimates of its related effects. Therefore, no provisional adjustments relative to GILTI were recorded. Currently, 3M has not yet elected a policy as to whether it will recognize deferred taxes for basis differences expected to reverse as GILTI or whether 3M will account for GILTI as period costs if and when incurred. 3M is not aware of other elements of the TCJA for which the Company was not yet able to make reasonable estimates of the enactment impact and for which it would continue accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the TCJA.The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2005. has completed its field examination of the Company’s U.S. federal income tax returns forthrough 2018, but the years 2005 through 2014. The Company protested certain IRS positions within these tax years and entered into the administrative appeals process with the IRS. In December 2012,2018 have not closed as the Company received a statutory notice of deficiency for the 2006 year. The Company filed a petition in Tax Courtis in the first quarterprocess of 2013 relating to the 2006 tax year.2015, 2016,ended 2019 and 2017. It is anticipated that the IRS will complete its examination of the Company for 2015 by the end of the third quarter of 2018, for 2016 by the end of the first quarter of 2018, and for 2017 by the end of the first quarter of 2019. As of December 31, 2017, the IRS has not proposed any significant adjustments to the Company’s tax positions for which the Company is not adequately reserved.88Payments relating to other proposed assessments arising from the 2005 through 2017 examinations may not be made until a final agreement is reached between the Company and the IRS on such assessments or upon a final resolution resulting from the administrative appeals process or judicial action.2020. In addition to the U.S. federal examination, there is also audit activity in several U.S. state and foreign jurisdictions where the Company is subject to ongoing tax examinations and governmental assessments, which could be impacted by evolving political environments in those jurisdictions.3M anticipates changes As of December 31, 2023, no taxing authority proposed significant adjustments to the Company’s tax positions for which the Company is not adequately reserved.due to thethat may be challenged by local tax authorities and not fully sustained. These uncertain tax positions are reviewed on an ongoing basis and adjusted in light of facts and circumstances including progression of tax audits, developments in case law and closing and resolutionstatutes of audit issues for various audit years mentioned above and closure of statutes. Currently,limitation. At this time, the Company is estimating a decrease innot able to estimate the range by which these potential events could impact 3M’s unrecognized tax benefits duringwithin the next 12 months asmonths. resultgreater than 50 percent likelihood of anticipated resolutions of audit issues.Federal, State and Foreign Tax(Millions) 2023 2022 2021 Additions based on tax positions related to the current year Additions based on tax positions related to the current year Reductions for tax positions of prior years Reductions for tax positions of prior years Gross UTB Balance at December 31 Gross UTB Balance at December 31 $526$884 million as of December 31, 2017, $333 million as of December 31, 2016, and $369 million as of December 31, 2015.2023. The ending net UTB results from adjusting the gross balance for items such as Federal, State, and non-U.S. deferred items, interest and penalties, and deductible taxes. The net UTB is included as components of Other Assets, Accrued Income Taxes, and Other Liabilities within the Consolidated Balance Sheet.$20$76 million of expense, $10$1 million of expense, and $2$14 million of expense in 2017, 2016,2023, 2022, and 2015,2021, respectively. The amount of interest and penalties recognized may be an expense or benefit due to new or remeasured unrecognized tax benefit accruals. At December 31, 2017,2023, and December 31, 2016,2022, accrued interest and penalties in the consolidated balance sheet on a gross basis were $68$188 million and $52$116 million, respectively. Included in these interest and penalty amounts are interest and penalties related to tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.manufacturing activitiesforeign operations in the following countries is subject to reduced tax rates or, in some cases, is exempt from tax for years through the following: Thailand (2018), China (2019), Korea (2019)(2025), Switzerland (2023)(2026), Brazil (2029) and Singapore (2025), and Brazil (2073)(2032). TheThe income tax benefits attributable to the tax status of these subsidiaries are estimated to be $228$112 million (37(20 cents per diluted share) in 2017, $1422023, $170 million (23(30 cents per diluted share) in 2016,2022, and $114$204 million (18(36 cents per diluted share) in 2015.unremittedapproximately $8.3 billion of undistributed earnings attributable to international companies that have been considered to be reinvested indefinitely. As noted above, the effects of the TCJA caused some reassessment of previous indefinite reinvestment assertions with respect to certain jurisdictions. While 3M was able to make a reasonable estimate of these impacts, it may be affected by other analyses related to the TCJA. The unremitted earnings relate to89ongoing operations and were approximately $15 billionfrom non-U.S. subsidiaries as of December 31, 2017.2023 which are indefinitely reinvested in operations. Because of the multiple avenues inby 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.(Amounts in millions, except per share amounts) 2023 2022 2021 Numerator: Net income (loss) attributable to 3M $ (6,995) $ 5,777 $ 5,921 Denominator: 553.9 566.0 579.0 Dilution associated with stock-based compensation plans — 1.6 6.3 553.9 567.6 585.3 Earnings (loss) per share attributable to 3M common shareholders — basic $ (12.63) $ 10.21 $ 10.23 Earnings (loss) per share attributable to 3M common shareholders — diluted $ (12.63) $ 10.18 $ 10.12 asset-backed securities, certificates of deposit/time deposits, commercial paper, and other securities. The following is a summary of amounts recorded on the Consolidated Balance Sheet for marketable securities (current and non-current).(Millions) 2023 2022 Commercial paper Commercial paper U.S. municipal securities U.S. municipal securities U.S. municipal securities U.S. municipal securities Total marketable securities Total marketable securities 20172023 and 2016,December 31, 2022, gross unrealized, gross realized, and net realized gains and/or losses (pre-tax) were not material.balancebalances at December 31, 2017,2023 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.3M has a diversified marketable securities portfolio. Within this portfolio, asset-backed securities primarily include interests in automobile loans, credit cards and other asset-backed securities. 3M’s investment policy allows investments in asset-backed securities with minimum credit ratings of Aa3 by Moody’s Investors Service or AA- by Standard & Poor’s or Fitch Ratings or DBRS. Asset-backed securities must be rated by at least two of the aforementioned rating agencies, one of which must be Moody’s Investors Service or Standard & Poor’s. At December 31, 2017, all asset-backed security investments were in compliance with this policy. Approximately 90 percent of all asset-backed security investments were rated AAA or A-1+ by Standard & Poor’s and/or Aaa or P-1 by Moody’s Investors Service and/or AAA or F1+ by Fitch Ratings. Interest rate risk and credit risk related to the underlying collateral may impact the value of investments in asset-backed securities, while factors such as general conditions in the overall credit market and the nature of the underlying collateral may affect the liquidity of investments in asset-backed securities. 3M does not(Millions) Due in one year or less $ 53 Due after one year through five years 11 Due after five years through ten years 9 Total marketable securities $ 73 90currently expect risk related to its holding in asset-backed securities to materially impact its financial condition or liquidity.11.13. Long-Term Debt and Short-Term Borrowings2017.2023. If the debt was issued on a combined basis, the debt has been separated to show the impact of the fixed versus floating effective interest rates. Carrying value includes the impact of debt issuance costs and fair value hedging activity. Long-term debt and short-term borrowings as of December 31 consisted of the following:Debt2018 2018 2019 2019 2020 2020 2020 2021 2021 2021 2022 2022 2023 2023 2025 2026 2026 2027 2028 2030 2031 2037 2041 2044 2044 2046 2047 91(Millions) Currency/ Fixed vs. Floating Effective Interest Rate Final Maturity Date Carrying Value Description / 2023 Principal Amount 2023 2022 Registered note (repaid in 2023) USD Fixed — % 2023 $ — $ 500 Medium-term note (repaid in 2023) USD Fixed — % 2023 — 650 Medium-term note (repaid in 2023) EUR Fixed — % 2023 — 639 Medium-term note ($300 million) USD Fixed 3.30 % 2024 300 300 Medium-term note ($500 million) USD Fixed 2.98 % 2024 500 501 Medium-term note ($300 million) USD Floating 5.96 % 2024 300 300 Registered note ($750 million) USD Fixed 2.12 % 2025 748 747 Registered note ($500 million) USD Fixed 2.67 % 2025 499 499 Medium-term note ($550 million) USD Fixed 3.04 % 2025 549 549 Medium-term note ($650 million) USD Fixed 2.37 % 2026 647 646 Medium-term note (€750 million) EUR Fixed 1.65 % 2026 821 792 Floating rate note ($19 million) USD Floating 5.22 % 2027 18 18 Medium-term note ($850 million) USD Fixed 2.95 % 2027 846 845 30-year debenture ($220 million) USD Fixed 6.44 % 2028 223 223 Floating rate note ($150 million) USD Floating 8.08 % 2028 131 129 Floating rate note ($150 million) USD Floating 8.03 % 2028 132 129 Floating rate note ($250 million) USD Floating 7.62 % 2028 216 211 Floating rate note ($150 million) USD Floating 7.57 % 2028 130 127 Floating rate note ($100 million) USD Floating 7.66 % 2028 86 84 Medium-term note ($300 million) USD Fixed 3.62 % 2028 598 598 Medium-term note ($800 million) USD Fixed 3.38 % 2029 798 797 Registered note ($1 billion) USD Fixed 2.50 % 2029 991 989 Registered note ($600 million) USD Fixed 3.09 % 2030 597 596 Medium-term note (€500 million) EUR Fixed 1.90 % 2030 546 526 Medium-term note (€500 million) EUR Fixed 1.54 % 2031 549 530 30-year bond ($555 million) USD Fixed 5.73 % 2037 552 552 Floating rate note ($52 million) USD Floating 5.31 % 2040 52 52 Floating rate note ($95 million) USD Floating 5.31 % 2041 94 96 Medium-term note ($325 million) USD Fixed 4.05 % 2044 316 315 Floating rate note ($53 million) USD Floating 5.31 % 2044 53 53 Medium-term note ($500 million) USD Fixed 3.37 % 2046 479 478 Medium-term note ($500 million) USD Fixed 3.68 % 2047 493 492 Medium-term note ($650 million) USD Fixed 4.07 % 2048 639 638 Medium-term note ($500 million) USD Fixed 3.78 % 2048 504 504 Registered note ($500 million) USD Fixed 3.37 % 2049 486 486 Registered note ($350 million) USD Fixed 3.72 % 2050 346 346 Other borrowings Various 0.11 % 2024-2029 1 2 Total long-term debt 14,240 15,939 Less: current portion of long-term debt 1,152 1,938 Long-term debt (excluding current portion) $ 13,088 $ 14,001 2023 2023 2022 (Millions) Carrying Value Effective Interest Rate Carrying Value Effective Interest Rate Fixed-rate debt $ 13,027 3.09 3.09 % $ 14,738 2.93 2.93 % Floating-rate debt 1,213 6.88 6.88 % 1,201 5.70 5.70 % Effective Interest Rate Effective Interest Rate Carrying Value (Millions) 2023 2022 Total short-term borrowings and current portion of long-term debt Total short-term borrowings and current portion of long-term debt In 2016, these were primarily related to Japan and Korea.Debtunaccretedunamortized debt issue costs such that total maturities equal the carrying value of long-term debt as of December 31, 2017.2023. The maturities of long-term debt for the periods subsequent to December 31, 20172023 are as follows (in millions):2024 2024 2024 2025 2026 2027 2028 After 2028 Total $ 1,152 $ 1,867 $ 1,563 $ 846 $ 818 $ 7,994 $ 14,240 Long-term2018, 2019, and 20202024 include floating rate notes totaling $54$53 million (classified as current portion of long-term debt), $71 million (included in other borrowings in the long-term debt table), and $95 million (included within the long-term debt table), respectively, as.result of put provisions associated with these debt instruments.Credit FacilitiesIn March 2016, 3M amended and restated its existing $2.25$4.25 billion five-year revolving credit facility expiring in August 2019 to a $3.75 billion five-year2028; the facility was amended in July and September 2023. The revolving credit facility expiring in March 2021. This credit agreement includes a provision under which 3M may request an increase of up to $1.25$1.0 billion (at lender’s discretion), bringing the total facility up to $5.0$5.25 billion. ThisThe agreement replaced the amended and restated $3.0 billion, five-year revolving credit agreement and the $1.25 billion 364-day credit facility that would have expired in November 2024 and November 2023, respectively. The credit facility was undrawn at December 31, 2017.2023. Under the $3.75$4.25 billion credit agreement,facility, 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(based on amounts defined in the amended 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 December 31, 2017,2023, this ratio was approximately 2915 to 1. Debt covenants do not restrict the payment of dividends.Apart from the committed revolving facility,$288$355 million in stand-alone letters of credit and bank guarantees were also issued and outstanding at December 31, 2017.2023. These instruments are utilized in connection with normal business activities.92The and Fixed-to-Floating Interest Rate Swaps: During 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 billion and $650 million principal amounts,amount of fixed rate notes due 2049 and 2050, respectively, into floating rate debt for the portion of their terms through mid-2028 with an original interest ratesrate based on a three-month LIBOR index, which has since been amended to a rate based on a SOFR index.maturity datesExtinguishments: In 2023, 3M repaid $500 million aggregate principal amount of individual long-term debt issuances can be found in the long-term debt table found at the beginning of this note.In October 2017, 3M issuedfixed-rate registered notes that matured, $650 million aggregate principal amount of 5.5-year fixed ratefixed-rate medium-term notes due 2023 with a coupon ratethat matured and 600 million euros aggregate principal amount of 2.25%, $850fixed-rate medium-term notes that matured.10-year fixed ratefixed-rate medium-term notes due 2027 with a coupon rate of 2.875%, and $500that matured.30-year fixed rate medium-term notes due 2047 with a coupon rate of 3.625%.In May 2016, 3M issued 1 billion Euros aggregate principal amount of medium-term notes. In September 2016, 3M issued $1.75 billion aggregate principal amount of medium-term notes.In May 2015, 3M issued 1.750 billion Euros aggregate principal amount of medium-term notes. In August 2015, 3M issued $1.500 billion aggregate principal amount of medium-term notes. Upon debt issuance, the Company entered into two interest rate swaps as fair value hedges of a portion of the fixed interest rate medium-term note obligation. The first converted aEurobonds that matured and redeemed $450 million three-year fixed rate note, and the second converted $300 million of a five-year fixed rate note included in this issuance to an interest rate based on a floating three-month LIBOR index.Long-Term Debt Maturities and ExtinguishmentsIn June 2017, 3M repaid $650 million aggregate principal amount of fixed rate medium-term notes that matured.In October 2017, 3M, via cash tender offers, repurchased $305 million aggregate principal amount of its outstanding notes. This included $110 million of its $330 million principal amount of 6.375%2.75% notes due 2028 and $195 million2022 via a make-whole-call offer.its $750 million principal amount of 5.70% notes due 2037. The Company recorded an early debt extinguishment charge of approximately $96 million in the fourth quarter of 2017 within interest expense, the cash outflow for which is recorded within other financing activities on the statement of cash flows. This charge reflected the differential between the carrying value and the amount paid to acquire the tendered notes and related expenses.In September 2016, 3M repaid $1 billion aggregate principal amount of medium-term notes.index.index (noting contracts have been modified to apply a new reference rate where applicable). Under the terms of this floating rate note due in 2044, holders have an annual put feature at 100 percent of par value from 2014 and every anniversary thereafter until final maturity. Under the terms of the floating rate notes due in 2027, 2040 and 2041, holders have put options that commence ten years from the date of issuance and each third anniversary thereafter until final maturity at prices ranging from 99 percent to 100 percent of par value. For the periods presented, 3M was required to repurchase an immaterial amount of principal on the aforementioned floating rate notes.7598 defined benefit plans in 2728 countries. Pension benefits associated with these plans generally are based on each participant’s years of service, compensation, and age at retirement or termination. The primary U.S. defined-benefit pension plan was closed to new participants effective January 1, 2009. In December 2023, the Company committed to the future freeze of U.S. defined benefit pension benefits for non-union U.S. employees, effective December 31, 2028. The Company also provides certain postretirement health care and life insurance benefits for its U.S. employees who reach retirement age while employed by the Company and were employed by the Company prior to January 1, 2016. Most international employees and retirees are covered by government health care programs. The cost of company-provided postretirement health care plans for international employees is not material and is combined with U.S. amounts in the tables that follow.93and life insurance benefit plans,plan, the Company has set aside amounts at least equal to annual benefit payments with an independent trustee.3M’s primary U.S. qualified defined benefit plan does not have a mandatory cash contribution because the Company has a significant credit balance from previous discretionary contributions that can be applied to any Pension Protection Act funding requirements.the employees’ elections. Employer contributions to the U.S. defined contribution plans were $159$241 million, $139$241 million and $165$231 million for 2017, 20162023, 2022 and 2015,2021, respectively. 3M subsidiaries in various international countries also participate in defined contribution plans. Employer contributions to the international defined contribution plans were $88$108 million, $87$108 million and $77$117 million for 2017, 20162023, 2022 and 2015,2021, respectively.As a result of changes made to its U.S. postretirement health care benefit plans in 2010, the Company has transitioned all current and future retirees to a savings account benefits-based plan. These changes became effective beginning January 1, 2013, for all Medicare eligible retirees and their Medicare eligible dependents and became effective beginning January 1, 2016, for all non-Medicare eligible retirees and their eligible dependents. In August 2015, 3M modified the 3M Retiree Welfare Benefit Plan postretirement medical benefit reducing the future benefit for participants not retired as of January 1, 2016. For participants retiring after January 1, 2016, the Retiree Medical Savings Account (RMSA) is no longer credited with interest and the indexation on both the RMSA and the Medicare Health Reimbursement Arrangement is reduced from 3 percent to 1.5 percent per year (for those employees who are eligible for these accounts). Also effective January 1, 2016, 3M no longer offers 3M Retiree Health Care Accounts to new hires.3M was informed in 2009, that the general partners of WG Trading Company, in which 3M’s benefit plans hold limited partnership interests, are the subject of a criminal investigation as well as civil proceedings by the SEC and CFTC (Commodity Futures Trading Commission). In March 2011, over the objections of 3M and six other limited partners of WG Trading Company, the district court judge ruled in favor of the court appointed receiver’s proposed distribution plan (and in April 2013, the United States Court of Appeals for the Second Circuit affirmed the district court’s ruling). The benefit plan trustee holdings of WG Trading Company interests were adjusted to reflect the decreased estimated fair market value, inclusive of estimated insurance proceeds, as of the annual measurement dates. In the first quarter of 2014, 3M and certain 3M benefit plans filed a lawsuit that was removed by the insurers to the U.S. District Court for the District of Minnesota against five insurers seeking insurance coverage for the WG Trading Company claim. In September 2015, the court ruled in favor of the defendant insurance companies on a motion for summary judgment and dismissed the lawsuit. In October 2015, 3M and the 3M benefit plans filed a notice of appeal to the United States Court of Appeals for the Eighth Circuit. In May 2017, the appellate court affirmed the lower court’s decision. The decision reduced U.S. pension and postretirement plan assets by $73 million at the December 31, 2017 measurement date and did not have a material adverse effect on the consolidated financial position of the Company.As part of a diversified investment strategy, the U.S. pension and postretirement benefit plans made investments in the natural gas fired power generation industry during the period 2011 through 2013. In April 2017, one of these entities, Panda Temple Power, LLC, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. This investment loss represented less than one percent of the fair value of the U.S. pension and postretirement plans’ assets and was reflected in the fair value measurement as of December 31, 2017.94$40$25 million as of December 31, 20172023 and 2016.95
2022.Qualified and Non-Pension Benefits Postretirement Benefits United States International (Millions) 2023 2022 2023 2022 2023 2022 Change in benefit obligation Benefit obligation at beginning of year $ 13,505 $ 18,104 $ 5,072 $ 7,942 $ 1,797 $ 2,281 Acquisitions/Transfers — — — — — — Service cost 171 256 76 128 27 42 Interest cost 662 417 225 125 87 52 Participant contributions — — 9 7 — — Foreign exchange rate changes — — 208 (567) 10 1 Plan amendments — — (1) 8 — — Actuarial (gain) loss 779 (3,777) 298 (2,240) 124 (458) Benefit payments (1,504) (1,495) (258) (266) (142) (115) Settlements, curtailments, special termination benefits and other (115) — (58) (65) (6) (6) Benefit obligation at end of year $ 13,498 $ 13,505 $ 5,571 $ 5,072 $ 1,897 $ 1,797 Change in plan assets Fair value of plan assets at beginning of year 12,648 16,953 5,891 8,016 1,017 1,353 Acquisitions/Transfers — — — — — — Actual return on plan assets 1,144 (2,875) 426 (1,286) 102 (218) Company contributions 60 65 82 90 9 3 Participant contributions — — 9 7 — — Foreign exchange rate changes — — 241 (602) — — Benefit payments (1,504) (1,495) (258) (266) (142) (115) Settlements, curtailments, special termination benefits and other — — (50) (68) (6) (6) Fair value of plan assets at end of year $ 12,348 $ 12,648 $ 6,341 $ 5,891 $ 980 $ 1,017 Funded status at end of year $ (1,150) $ (857) $ 770 $ 819 $ (917) $ (780) Amounts recognized in the Consolidated Balance Sheet as of December 31, (Millions) Qualified and Non-qualified Pension Benefits Postretirement Benefits United States International 2023 2022 2023 2022 2023 2022 Non-current assets $ — $ — $ 1,253 $ 1,225 $ — $ — Accrued benefit cost Current liabilities (52) (52) (12) (14) (15) (11) Non-current liabilities (1,098) (805) (471) (392) (902) (769) Ending balance $ (1,150) $ (857) $ 770 $ 819 $ (917) $ (780) The balance of amounts recognized for international plans in accumulated other comprehensive income as of December 31 in the preceding table are presented based on the foreign currency exchange rate on that date.Amounts recognized in accumulated other comprehensive income as of December 31, (Millions) Qualified and Non-qualified Pension Benefits Postretirement Benefits United States International 2023 2022 2023 2022 2023 2022 Net transition obligation (asset) $ — $ — $ 3 $ 4 $ — $ — Net actuarial loss (gain) 4,809 4,616 316 157 423 332 Prior service cost (credit) (17) (56) 9 10 (135) (166) Ending balance $ 4,792 $ 4,560 $ 328 $ 171 $ 288 $ 166 obligation ofobligations, the U.S. pension plans was $16.270 billion and $15.149 billion at December 31, 2017 and 2016, respectively. The accumulated benefit obligationobligations and fair value of the international pension plans was $6.870 billion and $6.058 billion at December 31, 2017 and 2016, respectively.The following amounts relate toplan assets for defined benefit pension plans with accumulated benefit obligations in excess of plan assets, and the projected benefit obligation and fair value of plan assets for defined benefit pension plans with projected benefit obligation in excess of plan assets as of December 31:96Qualified and Non-qualified Pension Plans United States International (Millions) 2023 2022 2023 2022 Accumulated benefit obligation $ 13,073 $ 12,967 $ 5,275 $ 4,814 Plans with accumulated benefit obligation in excess of plan assets Accumulated benefit obligation $ 13,073 $ 402 $ 1,145 $ 775 Fair value of plan assets 12,348 — 761 427 Plans with projected benefit obligation in excess of plan assets Projected benefit obligation $ 13,498 $ 13,505 $ 1,272 $ 851 Fair value of plan assets 12,348 12,648 793 442 net periodicNet Periodic Cost and Other Amounts Recognized in Other Comprehensive Income:and other amounts recognized in other comprehensive incomeNetcomponent of defined benefit net periodic benefit cost is recorded in cost of sales, selling, general and administrative expenses, and research, development and related expenses. As discussed in Note 6, the other components of net periodic benefit cost are reflected in other expense (income), net. Components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive incomesupplemental information for the years ended December 31 follow:Qualified and Non-qualified Pension Benefits Qualified and Non-qualified Pension Benefits Postretirement Benefits United States (Millions) (Millions) 2023 2022 2021 2023 2022 2021 2023 2022 2021 Operating expense Operating expense Operating expense Service cost Service cost Non-operating expense Interest cost Interest cost Total non-operating expense (benefit) Total net periodic benefit cost (benefit) Amortization of transition asset Amortization of transition asset Settlements, curtailments, special termination benefits and other Amounts expectedbe amortized from accumulated other comprehensive income into net periodic benefit costs over the next fiscal yearThe Company primarily amortizes amounts recognized as prior service cost (benefit) over the average future service period of active employees at the date of the amendment.97Weighted-average assumptions used to determine benefit obligationsDetermine Benefit Obligations as of December 31Qualified and Non-qualified Pension Benefits Qualified and Non-qualified Pension Benefits Postretirement Benefits United States 2023 2023 2023 2022 2021 2023 2022 2021 2023 2022 2021 Discount rate 4.98 % 5.18 % 2.89 % 3.99 % 4.39 % 1.80 % 5.06 % 5.25 % 2.88 % Compensation rate increase 3.77 % 3.37 % 3.21 % 2.88 % 2.86 % 2.86 % N/A N/A Weighted-average assumptions useddetermine net costDetermine Net Cost for years endedYears Ended December 31:Qualified and Non-qualified Pension Benefits Qualified and Non-qualified Pension Benefits Postretirement Benefits United States 2023 2023 2023 2022 2021 2023 2022 2021 2023 2022 2021 Discount rate - service cost 5.26 % 3.10 % 2.81 % 4.06 % 1.64 % 1.23 % 5.39 % 3.11 % 3.21 % Discount rate - interest cost 5.11 % 2.38 % 1.92 % 4.39 % 1.62 % 1.13 % 5.25 % 2.59 % 2.20 % Expected return on assets 7.50 % 6.00 % 6.50 % 4.61 % 3.86 % 4.36 % 7.58 % 5.77 % 6.15 % Compensation rate increase 3.37 % 3.21 % 3.21 % 2.86 % 2.86 % 2.88 % N/A N/A 1.5 percent1.5% for employees who retire on or after January 1, 2016. Therefore, the Company no longer has material exposure to health care cost inflation.3.68%4.98% for the U.S. pension plans and 3.79%5.06% for the postretirement benefits to be appropriate for its U.S.benefit plans as of December 31, 2017,2023, which is a decrease of 0.530.20 percentage points and 0.47a decrease 0.19 percentage points, respectively, from the rates used as of December 31, 2016. For2022. A decrease in the internationaldiscount rate increases the Projected Benefit Obligation (PBO), the decrease in the discount rate as of December 31, 2023 resulted in an approximately $0.2 billion increase in benefit obligation for the U.S. pension and postretirement plans the discount rates also reflect the current rate at which the associated liabilities could be effectively settled at the end of the year. If the country has a deep market in corporate bonds theplans. matches the expected cash flows from the plan either to a portfolio of bonds that generate sufficient cash flow or a notional yield curve generated from available bond information. In countries that do not have a deep market in corporate bonds, government bonds are considered with a risk premium to approximate corporate bond yields. Beginning in 2016, 3M changed the method used to estimate the service and interest cost components of the net periodic pension and other postretirement benefit costs. The new method measures service cost and interest cost separately using the spot yield curve approach applied to each corresponding obligation. Service costs are determined based on duration-specific spot rates applied to the service cost cash flows. The interest cost calculation is determined by applying duration-specific spot rates to the year-by-year projected benefit payments. The spot yield curve approach does not affect the measurement of the total benefit obligations as the change in service and interest costs offset in the actuarial gains and losses recorded in other comprehensive income. The Company changed to the new method to provide a more precise measure of service and interest costs by improving the correlation between the projected benefit cash flows and the discrete spot yield curve rates. The Company accounted for this change as a change in estimate prospectively beginning in the first quarter of 2016. As a result of the change to the spot yield curve approach, 2016 annual defined benefit pension and postretirement net periodic benefit cost decreased approximately $180 million.7.25%7.50% in 2017.2023. Projected returns are based primarily on broad, publicly traded equity and fixed-income indices and forward-looking estimates of active portfolio and investment management. As of December 31, 2017,2023, the Company’s 20182024 expected long-term rate of return on U.S. plan assets is 7.25%, consistent with 2017.7.75%. The expected return9820172023 expected long-term rate of return is based on an asset allocation assumption of 25%11% global equities, 16%13% private equities, 41%63% fixed-income securities, and 18%13% absolute return investments independent of traditional performance benchmarks, along with positive returns from active investment management. The actual net rate of return on plan assets in 20172023 was 12.4%10.4%. In 20162022 the plan earned a rate of return of 5.8%-17.4% and in 20152021 earned a return of 0.7%6.7%. The average annual actual return on the plan assets over the past 10 and 25 years has been 7.0%7.1% and 9.4%8.0%, respectively. Return on assets assumptions for international pension and other post-retirement benefit plans are calculated on a plan-by-plan basis using plan asset allocations and expected long-term rate of return assumptions.As of December 31, 2014, the Company converted to the “RP 2014 Mortality Tables” and updated the mortality improvement scale it used for calculating the year-end 2014 U.S. defined benefit pension annuitant and postretirement obligations and 2015 expense. The impact of this change increased the year-end 2014 U.S. pension projected benefit obligation (PBO) by approximately $820 million and the U.S. accumulated postretirement benefit obligation by approximately $100 million. As of December 31, 2016,scalescales to Scale MP-2016, which was released by the Society of Actuaries in October 2016.Scale MP- 2021. The impact of this change decreased the year-end 2016 U.S. pension PBO by approximately $440 million and the U.S. accumulated postretirement benefit obligation by approximately $60 million. As of December 31, 2017, the Company updated the mortality improvement scale to Scale MP-2017. The2021 update resulted in a small decreasean immaterial increase to the U.S. pension PBO and U.S. accumulated postretirement benefit obligations.2017,2023, the Company contributed $964$143 million to its U.S. and international pension plans and $3$9 million to its postretirement plans. During 2016,2022, the Company contributed $380$155 million to its U.S. and international pension plans and $3 million to its postretirement plans. In 2018,2024, the Company expects to contribute an amount in the range of $300$100 million to $500$200 million of cash to its U.S. and international retirement plans. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2018.2024. Future contributions will depend on market conditions, interest rates and other factors.99Qualified and Non-qualified Pension Benefits Postretirement Benefits (Millions) United States International 2024 Benefit Payments $ 1,104 $ 277 $ 144 2025 Benefit Payments 1,105 287 155 2026 Benefit Payments 1,096 297 158 2027 Benefit Payments 1,088 311 160 2028 Benefit Payments 1,078 320 162 Next five years 5,064 1,654 745 1415 for descriptions of these levels. While the company believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.10046%83% of the postretirement benefit plan assets are in a 401(h) account. The 401(h) account assets are in the same trust as the primary U.S. pension plan and invested with the same investment objectives as the primary U.S. pension plan.Fair Value Measurements Using Inputs Considered as Investments Measured at Net Asset Value* Fair Value at December 31, Level 1 Level 2 Level 3 Asset Class (Millions) 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 U.S. Pension Plans Equities $ 1,246 $ 871 $ — $ — $ — $ — $ 174 $ 271 $ 1,420 $ 1,142 Fixed income 1,153 1,354 6,428 5,803 — — 16 91 7,597 7,248 Private equity — — — — — — 1,622 1,700 1,622 1,700 Absolute return 1 1 83 85 — — 1,314 1,794 1,398 1,880 Cash and cash equivalents 7 8 — 21 — — 741 789 748 818 Total $ 2,407 $ 2,234 $ 6,511 $ 5,909 $ — $ — $ 3,867 $ 4,645 $ 12,785 $ 12,788 Other items to reconcile to fair value of plan assets (437) (140) Fair value of plan assets $ 12,348 $ 12,648 Postretirement Benefit Plans Equities $ 118 $ 168 $ — $ — $ — $ — $ 11 $ 16 $ 129 $ 184 Fixed income 92 96 503 461 — — 1 5 596 562 Private equity — — — — — — 108 99 108 99 Absolute return — — 5 5 — — 87 105 92 110 Cash and cash equivalents 35 21 — 1 — — 49 46 84 68 Total $ 245 $ 285 $ 508 $ 467 $ — $ — $ 256 $ 271 $ 1,009 $ 1,023 Other items to reconcile to fair value of plan assets (29) (6) Fair value of plan assets $ 980 $ 1,017 101The fair values of the assets held by the postretirement benefit plans by asset class are as follows:*In accordance with ASC 820-10, certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The NAV is based on the fair value of the underlying assets owned by the fund, minus its liabilities then divided by the number of units outstanding and is determined by the investment manager or custodian of the fund. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the fair value of plan assets.derivative instruments such as credit default swaps, interest rate swapsU.S. government and futures contracts. Corporate debt includesgovernment agencies, corporate bonds and notes, asset backed securities, collateralized mortgage obligations, and private placements. Swapsplacements and derivative instruments are valued by the custodian using closing market swap curves and market derived inputs.investments. U.S. government and government agency bonds and notes are valued at the closing price reported in the active market in which the individual security is traded. Corporate bonds and notes, asset backed securities and collateralized mortgage obligations are valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks. Private placements are valued by the custodian using recognized pricing services and sources. The private equity portfolio is a diversified mix of derivativeDerivative instruments growth equity and partnership interests. Derivative investments are written options thatsuch as credit default swaps, interest rate swaps are valued by independent partiesthe custodian using closing market inputsswap curves and valuation models. Growth equity investmentsmarket derived inputs. Futures are valued at the closing price reported in the active market in which the individual securities arederivative is traded.102CorporateThe hedge funds are valued at NAV as described above. The private fund vehicles consist primarily of corporate debt instruments that are valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risk ratings.The balances of and changesplans’ and postretirement plans’ level 3plans assets for the periods ended December 31, 20172023 and 2016 were not material.7084 defined benefit plans in 26over 27 countries; however, there is significant variation in asset allocation policy from country to country. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment allocation process in each country. The Company provides standard funding and investment guidance to all international plans with more focused guidance to the larger plans.103Fair Value Measurements Using Inputs Considered as Investments Measured at Net Asset Value* Fair Value at December 31, Level 1 Level 2 Level 3 Asset Class (Millions) 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Equities $ 226 $ 288 $ 513 $ 252 $ 1 $ 2 $ 45 $ 1 $ 785 $ 543 Fixed income 148 134 3,501 3,542 2 4 719 623 4,370 4,303 Private equity — 2 58 50 2 2 361 384 421 438 Absolute return 10 8 1 1 583 439 189 259 783 707 Cash and cash equivalents 106 122 76 51 — — 1 2 183 175 Total $ 490 $ 554 $ 4,149 $ 3,896 $ 588 $ 447 $ 1,315 $ 1,269 $ 6,542 $ 6,166 Other items to reconcile to fair value of plan assets (201) (275) Fair value of plan assets $ 6,341 $ 5,891 (including mortgage backed and other debt)debt securities. Governments, corporate bonds and notes and mortgage backedThe debt securities are valued at the closing price reported if traded on an active market or at yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks.funds.funds which are valued at NAV as described above. Real estate consists of property funds and REITS (Real Estate Investment Trusts). REITS are valued at NAV with published prices provided by the closing price reported in the active market in which it is traded.instruments,instruments. Partnerships and hedge fund of funds and other alternative investments.are valued at NAV as described above. Insurance consists of insurance contracts, which are valued using104interest ratevarious swaps and bond futures that are used to help manage risks.TheIn 2023 the aggregate of net purchases and net unrealized gains and losses increased this balance by $48$138 million and $8 millionthe change in 2017 and 2016, respectively. Foreign currency exchange impactsrates increased this balance by $16$6 million in 2017for a net increase of $144 million. In 2022 the aggregate net purchases and net unrealized gains decreased this balance by $9$24 million and the change in 2016.13.15. Supplier Finance Program Obligationscurrency swaps, commodity price swaps, and foreign exchange forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity priceforeign exchange rate fluctuations. The information that follows explains the various types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, how such instruments are accounted for, and how such instruments impact 3M’s financial position and performance.the impactsderivatives is included elsewhere as follows:7. Additional information with respect to the fair8.14. References to information regarding derivatives17.madedescribed in Note 11.Types13.Derivatives/Income (Loss) Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments for details on the location within the consolidated statements of income (loss) for amounts of gains and Inclusion in Income/Other Comprehensive Income: the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.dedesignatede-designate these cash flow hedge relationships in advance of the occurrence of the forecasted transaction. The portion of gains or losses on the derivative instrument previously included in accumulated in other comprehensive income for dedesignatedde-designated hedges remains in accumulated other comprehensive income until the forecasted transaction occurs or becomes probable of not occurring. Changes in the value of derivative instruments after dedesignationde-designation are recorded in earnings and are included in the Derivatives Not Designated as Hedging Instruments section below. The maximum length of time over which 3M hedges its exposure to the variability in future cash flows of the forecasted transactions is 36 months. In the third and fourth quarters of 2014, the The Company entered intomay use forward starting interest rate swaps with notional amounts totaling 500 million Euros as acontracts and treasury rate lock contracts to hedge againstexposure to variability in cash flows from interest rate volatility associated with thepayments on forecasted issuance of fixed rate debt. 3M terminated these interest rate swaps upon issuance of 750 million Euros aggregate principal amount of twelve-year fixed rate notes in connection with 3M’s 1.250 billion Eurobond offering in November 2014. The termination resulted in an $8 million pre-tax ($5 million after-tax) loss within accumulated other comprehensive income that will be amortized over the twelve-year life of the notes.In the first six months of 2016, the Company entered into forward starting interest rate swaps that expired in December 2016 with an aggregate notional amount of $300 million as a hedge against interest rate volatility associated with a forecasted issuance of fixed rate debt. Upon issuance of medium-term notes in September 2016, 3M terminated these105interest rate swaps. The termination resulted in an immaterial loss within accumulated other comprehensive income that will be amortized over the respective lives of the debt. In the fourth quarter of 2016, the Company entered into forward starting interest rate swaps with a notional amount of $200 million as a hedge against interest rate volatility associated with a forecasted issuance of fixed rate debt.In the first, second, and third quarters of 2017, the Company entered into additional forward starting interest rate swaps with notional amounts of $200 million in each quarter as hedges against interest rate volatility associated with a forecasted issuance of fixed rate debt. Prior to the issuance of medium-term notes in October 2017, 3M terminated these interest rate swaps. The termination resulted in an immaterial loss within accumulated other comprehensive income that will be amortized over the respective lives of the debt.recognized in income on the effective portion of derivatives as a result of reclassificationreclassified from accumulated other comprehensive income into income.2017,2023, the Company had a balance of $112$54 million associated with the after taxafter-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income.income (loss). This includes a remaining balance of $8$87 million (after tax(after-tax loss) related to forward starting interest rate swaps,swap and treasury rate lock contracts terminated in 2019 concurrent with associated debt issuances, which will beis being amortized over the respective lives of the underlying notes. Based on exchange rates as of December 31, 2017,2023 of the total after-tax net unrealized balance as of December 31, 2023, 3M expects to reclassify approximately $64$26 million $30 million, and approximately $18 million of the after-tax net unrealized foreign exchange cash flow hedging losses to earnings in 2018, 2019, and after 2019, respectivelygain over the next 12 months (with the impact offset by earnings/losses from underlying hedged items).locationamount of pretax gain (loss) recognized in the consolidated statements of income andother comprehensive income and amounts of gains and losses(loss) related to derivative instruments designated as cash flow hedges areis 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 transaction.Pretax Gain (Loss) Recognized in Other Comprehensive Income (Loss) on Derivative (Millions) 2023 2022 2021 Foreign currency forward/option contracts $ 81 $ 159 $ 108 Swaps:Swaps: The Company manages interest expense using a mix of fixed and floating rate debt. To help manage borrowing costs, the Company may enter into interest rate swaps. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts106 These fair value hedges are highly effective and, thus, there is no impact on earnings due to hedge ineffectiveness.In November 2013,issued a Eurobond due in 2021 for a face amount of 600 million Euros. Upon debt issuance, 3M completed a fixed-to-floatingentered into interest rate swap on aswaps with an aggregate notional amount of 300$800 million. These swaps converted $500 million Euros as a fair value hedgeand $300 million of a portion of the fixed interest rate Eurobond obligation.In June 2014, 3M issued $9503M’s $1.0 billion and $650 million aggregate principal amount of medium-term notes. Uponfixed rate notes due 2049 and 2050, respectively, into floating rate debt issuance,for the Company entered intoportion of their terms through mid-2028 with an interest rate swap to convert $600 million of a $625 million note included in this issuance to anoriginal interest rate based on a floating three-month LIBOR index, aswhich has since been amended to a fair value hedge of a portion of the fixed interest rate medium-term note obligation.In August 2015, 3M issued $1.500 billion aggregate principal amount of medium-term notes. Upon debt issuance, the Company entered into two interest rate swaps as fair value hedges of a portion of the fixed interest rate medium-term note obligation. The first converted a $450 million three-year fixed rate note, and the second converted $300 million of a five-year fixed rate note included in this issuance to an interest rate based on a floating three-month LIBORSOFR index.In the fourth quarter of 2017, the Company entered into an interest rate swap with a notional amount of $200 million that converted the company’s fixed-rate medium-term note due 2020 into a floating-rate note as a hedge of its exposure to changes in the fair value that is attributable to interest rate risk.location infollowing amounts were recorded on the consolidated statements of income and amounts of gains and lossesbalance sheet related to derivative instruments designated ascumulative basis adjustments for active fair value hedges, and similar information relative to the hedged items are as follows:well as remaining amounts for discontinued fair value hedges: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 (Millions) December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 Long-term debt $ 918 $ 903 $ (84) $ (98) dedesignatedde-designated 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.107dedesignated,de-designated, 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.2017,2023, the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 150 million Euros and approximately 248 billion South Korean Won,euros, along with a principal amount of long-term debt instruments designated in net investment hedges totaling 4.41.8 billion Euros.euros. The maturity dates of these derivative and nonderivative instruments designated in net investment hedges range from 20182024 to 2031.locationamount of gain (loss) excluded from effectiveness testing recognized in the consolidated statementsincome relative to instruments designated in net investment hedge relationships is not material. The amount of income andpre-tax gain (loss) recognized in other comprehensive income and amounts of gains and losses(loss) related to derivative and nonderivative instruments designated as net investment hedges are as follows. There were no reclassifications of the effective portion of net investment hedges out of accumulated other comprehensive income into income for the periods presented in the table below.Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income (Loss) (Millions) 2023 2022 2021 Foreign currency denominated debt $ (86) $ 162 $ 296 Foreign currency forward contracts (5) 10 8 Total $ (91) $ 172 $ 304 108dedesignatedde-designated 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 that are not designated in hedging relationships to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany activities (primarily associated with intercompany licensing arrangements) and enters into commodity price swaps to offset, in part, fluctuations in costs associated with the use of certain commodities and precious metals.financing balances. 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.statementsstatement of income (loss) and pre-tax amounts of gains and lossesrecognized in income related to derivative instruments designated in cash flow or fair value hedging relationships and for derivatives not designated as hedging instruments are as follows:109Location and Amount of Gain (Loss) Recognized in Income (Loss) Cost of sales Other expense (income), net (Millions) 2023 2022 2021 2023 2022 2021 Information regarding cash flow and fair value hedging relationships: Total amounts of income and expense line items presented in the consolidated statement of income (loss) in which the effects of derivatives are recorded $ 18,477 $ 19,232 $ 18,795 $ 560 $ 147 $ 165 Gain or (loss) on cash flow hedging relationships: Foreign currency forward/option contracts: Amount of gain or (loss) reclassified from accumulated other comprehensive income (loss) into income 152 107 (38) — — — Interest rate contracts: Amount of gain or (loss) reclassified from accumulated other comprehensive income into income — — — (9) (9) (9) Gain or (loss) on fair value hedging relationships: Interest rate contracts: Hedged items — — — (15) 94 16 Derivatives designated as hedging instruments — — — 15 (94) (16) Information regarding derivatives not designated as hedging instruments: Gain or (loss) on derivatives not designated as instruments: Foreign currency forward/option contracts (9) (76) 5 21 45 (11) and Fair Value, Amountand Gross Notional Amounts of Derivative Instruments: Additional information with respect to the fair value of derivative instruments is included in Note 14.Gross Notional Amount Assets Liabilities (Millions) Location Fair Value Amount Location Fair Value Amount December 31, December 31, December 31, 2023 2022 2023 2022 2023 2022 Derivatives designated as hedging instruments Foreign currency forward/option contracts $ 2,109 $ 2,368 Other current assets $ 68 $ 89 Other current liabilities $ 27 $ 27 Foreign currency forward/option contracts 342 835 Other assets 11 55 Other liabilities 5 9 Interest rate contracts 800 800 Other assets — — Other liabilities 88 102 Total derivatives designated as hedging instruments 79 144 120 138 Derivatives not designated as hedging instruments Foreign currency forward/option contracts 1,023 2,816 Other current assets 5 73 Other current liabilities 7 4 Total derivatives not designated as hedging instruments 5 73 7 4 Total derivative instruments $ 84 $ 217 $ 127 $ 142 110 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 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 December 31, 2017, 3M has International Swaps and Derivatives Association (ISDA) agreements with 17 applicable banks and financial institutions which contain netting provisions. In addition to a master agreement with 3M supported by a primary counterparty’s parent guarantee, 3M also has associated credit support agreements in place with 16 of its primary derivative counterparties which, among other things, provide the circumstances under which either party is required to post eligible collateral (when the market value of transactions covered by these agreements exceeds specified thresholds or if a counterparty’s credit rating has been downgraded to a predetermined rating). The Company does not anticipate nonperformance by any of these counterparties.As ofFor the applicable datesperiods presented, below, no3M has not received cash collateral had been received or pledged related to thesefrom derivative instruments.111 Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet Gross Amount of Eligible Offsetting Recognized Derivative Liabilities Net Amount of Derivative Assets (Millions) December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 Derivatives subject to master netting agreements $ 84 $ 217 $ 30 $ 40 $ 54 $ 177 Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet Gross Amount of Eligible Offsetting Recognized Derivative Assets Net Amount of Derivative Liabilities (Millions) December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022 Derivatives subject to master netting agreements $ 127 $ 142 $ 30 $ 40 $ 97 $ 102 Foreign Effects$152$127 million in 20172022, and decreased pre-tax income by approximately $69$105 million in 2016.2021. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.14.17. Fair Value Measurements3M 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. Under the standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Derivatives include cash flow hedges, interest rate swaps and net investment hedges. The information in the following paragraphs and tables primarily addresses matters relative to these financial assets and liabilities. Separately, there were no material fair value measurements with respect to nonfinancial assets or liabilities that are recognized or disclosed at fair value in the Company’s financial statements on a recurring basis for 20172023 and 2016.2022.11210.only:bondssecurities with several cities in the City of Nevada, Missouri, which represent 3M’s only U.S. municipal securities holdingUnited States as of December 31, 2017.2023. Due to the nature of this security,these securities, the valuation method utilized will includereferences the financial healthcarrying value of the City of Nevada, any recent municipal bond issuances by Nevada, and macroeconomic considerations related to the direction of interest rates and the health of the overall municipal bond market,corresponding finance lease obligation, and as such, will be classified as a level 3 security.instruments: commodity price swaps, interest rate swaps, and net investment hedges where the hedging instrument is recorded at fair value. Net investment hedges that use foreign currency denominated debt to hedge 3M’s net investment are not impacted by the fair value measurement standard under ASC 820, as the debt used as the hedging instrument is marked to a value with respect to changes in spot foreign currency exchange rates and not with respect to other factors that may impact fair value.forwards, commodity price swaps, currency swaps, foreign currency options,forward and option contracts and interest rate swaps and cross-currency swaps will be considered level 2 measurements. 3M uses inputs other than quoted prices that are observable for the asset. These inputs include foreign currency exchange rates, volatilities, and interest rates. Derivative positions are primarily valued using standard calculations/models that use as their basis readily observable market parameters. Industry standard data providers are 3M’s primary source for forward and spot rate information for both interest rates and currency rates, with resulting valuations periodically validated through third-party or counterparty quotes and a net present value stream of cash flows model.113basis.114Fair Value at Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Level 3 Description (Millions) 2023 2022 2023 2022 2023 2022 2023 2022 Assets: Available-for-sale: Marketable securities: Commercial paper $ — $ 213 $ — $ — $ — $ 213 $ — $ — Certificates of deposit/time deposits 49 21 — — 49 21 — — U.S. municipal securities 24 27 — — — — 24 27 Derivative instruments — assets: Foreign currency forward/option contracts 84 217 — — 84 217 — — Liabilities: Derivative instruments — liabilities: Foreign currency forward/option contracts 39 40 — — 39 40 — — Interest rate contracts 88 102 — — 88 102 — —
The Company had no material activity with level 3 assets and liabilities during the periods presented.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).12.long-lived asset impairments. During 2017, the Company recognized approximately $61 million inindefinite-lived and long-lived asset impairments, within its Electronicsgoodwill impairments, and Energy and Industrial business segments, withadjustment in carrying value of equity securities for which the complete carrying amountmeasurement alternative of such assets written off and included in operating income results.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 periods presented except as described below.impairmentsgroupings/reporting units (both part of the Transportation and Electronics business) with impairment resulting for 2016the Advanced Materials Division. Underlying fair values were determined primarily using discounted cash flow models based on assumptions of projected sales, EBITDA margins, capital expenditures, discount rates and 2015.Instruments:December 31, 2023 December 31, 2023 December 31, 2022 (Millions) Carrying Value Fair Value Carrying Value Fair Value Many of 3M’s fixed-rate bonds were trading at a premium at December 31, 2017 and 2016 due to the low interest rates and tightening of 3M’s credit spreads.11515.18. Commitments and ContingenciesCapital and Operating Leases:Rental expense under operating leases was $343 million in 2017, $318 million in 2016 and $316 million in 2015. It is 3M’s practice to secure renewal rights for leases, thereby giving 3M the right, but not the obligation, to maintain a presence in a leased facility. 3M has two primary capital leases. The first, which became effective in April 2003, involves a building in the United Kingdom (with a lease term of 22 years). During the second quarter of 2003, 3M recorded a capital lease asset and obligation of approximately 33.5 million British Pound (GBP), or approximately $27 million at December 31, 2017, exchange rates. For the second, 3M sold and leased-back certain recently constructed machinery and equipment in return for municipal bonds with the City of Nevada, Missouri. 3M recorded a capital lease asset and obligation of approximately $13 million in 2017, $12 million in 2016, and $15 million in earlier years, with a lease term of 15 years.Minimum lease payments under capital and operating leases with non-cancelable terms in excess of one year as of December 31, 2017, were as follows:Unconditional Purchase Obligations:Unconditional purchase obligations are defined as an agreement to purchase goods or services that is enforceable and legally binding (non-cancelable, or cancelable only in certain circumstances). The Company estimates its total unconditional purchase obligation commitment (for those contracts with terms in excess of one year) as of December 31, 2017, at $800 million. Payments by year are estimated as follows: 2018 ($271 million), 2019 ($211 million), 2020 ($150 million), 2021 ($99 million), 2022 ($56 million) and after 2022 ($13 million). Many of these commitments relate to take or pay contracts, in which 3M guarantees payment to ensure availability of products or services that are sold to customers. The Company expects to receive consideration (products or services) for these unconditional purchase obligations. The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those items for which the Company is contractually obligated. The majority of 3M’s products and services are purchased as needed, with no unconditional commitment. For this reason, these amounts will not provide an indication of the Company’s expected future cash outflows related to purchases.Guarantees:$50$55 million at December 31, 2017,2023, and $47$48 million at December 31, 2016. 3M does2022. Further information on product warranties is not consider this amountdisclosed, as the Company considers the balance immaterial to be material. The fair valueits consolidated results of operations and financial condition. 3M guarantees of loans with third parties and other guarantee arrangements are not material.Related Party Activity:3M does not have any material related party activity.116include variousclaims, lawsuits and proceedings relate to matters including, but not limited to, products liability (involving products that the Company now or formerly manufactured and sold), intellectual property, and commercial, claims and lawsuits, including those brought under the antitrust, federal healthcare program related laws and regulations, such as the False Claims Act and anti-kickback laws, securities, and environmental proceedings.laws in the United States and other jurisdictions. Unless otherwise stated, the Company is vigorously defending all such litigation.and Insurance Receivables Related to Legal Proceedingswhether there arealleged actual damages, andall of which are otherwise subject to substantial uncertainties. Assessments of lawsuits and claims can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions. The categories of legal proceedings in which the Company is involved may include multiple lawsuits and claims, may be spread across multiple jurisdictions and courts which may handle the lawsuits and claims differently, may involve numerous and different types of plaintiffs, raising claims and legal theories based on specific allegations that may not apply to other matters, and may seek substantial compensatory and, in some cases, punitive, damages. These and other factors contribute to the complexity of these lawsuits and claims and make it difficult for the Company to predict outcomes and make reasonable estimates of any resulting losses. The Company's ability to predict outcomes and make reasonable estimates of potential losses is further influenced by the fact that a resolution of one or more matters within a category of legal proceedings may impact the resolution of other matters in that category in terms of timing, amount of liability, or both., and related guidance, and records liabilities for legal proceedings in those instances where it can reasonably estimate the amount of the loss and where liabilitywhen the loss is probable. Where the reasonable estimate of the probable loss is a range, the Company records as an accrual in its financial statements the most likely estimate of the loss, or the low end of the range if there is no one best estimate. The Company either discloses the amount of a possible loss or range of loss in excess of established accruals if estimable, or states that such an estimate cannot be made. The Company discloses significant legal proceedings even where liability is not probable or the amount of the liability is not estimable, or both, if the Company believes there is at least a reasonable possibility that a loss may be incurred.likelyrecognizable and expects to be recovered.receive in light of the loss recovery and/or gain contingency models under ASC 450, ASC 610-30, and related guidance. For those insured matterslegal proceedings where the Company has takenrecorded an accrual,accrued liability in its financial statements, the Company also records receivables for the amount of insurance that it expects to recover underconcludes as recognizable from the Company’s insurance program. For those insured matters where the Company has not takenrecorded an accrualaccrued liability because the liability is not probable or the amount of the liability is not estimable, or both, but where the Company has incurred an expense in defending itself, the Company records receivables for the amount of insurance that it expects to recoverconcludes as recognizable for the expense incurred.Because litigation is subject to inherent uncertainties, and unfavorable rulings or developments could occur, there can be no certainty that the Company may not ultimately incur charges in excess of presently recorded liabilities. 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 the period in which they are recorded. Although the Company cannot estimate its exposure to all legal proceedings, it currently believes, except as described below, that such future charges, if any, would not have a material adverse effect on the consolidated financial position of the Company. Based on experience and developments, the Company reexamines its estimates of probable liabilities and associated expenses and receivables each period, and whether it is able to estimate a liability previously determined to be not estimable and/or not probable. Where appropriate, the Company makes additions to or adjustments of its estimated liabilities. As a result, the current estimates of the potential impact on the Company’s consolidated financial position, results of operations and cash flows for the legal proceedings and claims pending against the Company could change in the future.Litigation2017,2023, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in various courts that purport to represent approximately 2,2304,042 individual claimants, compared to approximately 2,6604,028 individual claimants with actions pending at December 31, 2016.2022.117 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, and other malignancies, and black lung disease, will represent a greater percentage of total claims than in the past. TheOver the past twenty plus years, the Company has prevailed in all twelve cases taken to trial, including tensixteen of the elevenseventeen cases tried to verdict (such trials occurred in 1999, 2000, 2001, 2003, 2004, 2007, 2015, and the cases tried in 2016 and 2017–described below), and an appellate reversal in 2005 of the 2001 jury verdict adverse to the Company. The remaining case, tried in 2009, was dismissed by the court at the close of plaintiff’s evidence, based on the court’s legal finding that the plaintiff had not presented sufficient evidence to support a jury verdict.(including the lawsuits described below). In August 2016,2018, 3M received a unanimousjury verdict in its favor fromin two lawsuits – one in California state court in February and the other in Massachusetts state court in December – both involving allegations that 3M respirators were defective and failed to protect the plaintiffs against asbestos fibers. In April 2018, a jury in state court in Kentucky infound 3M’s first respirator trial involving8710 respirators failed to protect two coal miners from coal mine dust. The estatedust and awarded compensatory damages of approximately $2 million and punitive damages totaling $63 million. In August 2018, the trial court entered judgment and the Company appealed. In 2019, the Company settled a substantial majority of the plaintiff alleged that the 3M 8710 respirator is defective and caused his death because it did not protect him from harmfulthen-pending coal mine dust. Thedust lawsuits in Kentucky and West Virginia for $340 million, including the jury rejected plaintiff’s claim and returned a verdict finding no liability against 3M. The verdict is final as the plaintiff did not file an appeal. In September 2017, 3M received a unanimous verdict in its favor fromApril 2018 in the Kentucky case mentioned above, and the appeal was dismissed. In October 2020, 3M defended a respirator case before a jury in stateKing 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 appealed the verdict. In May 2022, the First Division intermediate appellate court in KentuckyWashington affirmed in part and reversed in part 3M’s second respirator trial involving coal mine dust. The jury ultimately determinedvictory, concluding that the trial court misapplied Washington law in instructing the jury about factual causation. The Washington Supreme Court declined to review the matter. More recently, in November 2023, a jury in Hawaii delivered a complete defense verdict in favor of 3M, concluding that 3M’s 8710 respirator was not a cause of plaintiff’s claims were barred by the statute of limitations. In November 2017, the court denied the plaintiff’s motion for a new trial. The plaintiff did not file an appeal, thereby ending the litigation.with malignant conditionsalleging more serious injuries, including mesothelioma, other malignancies, and black lung disease, are costlier to resolve than the claims of unimpaired persons, and it therefore believes the average cost of resolving pending and future claims on a per-claim basis will continue to be higher than it experienced in prior periods when the vast majority of claims were asserted by medically unimpaired claimants.The case was inactive fromIn October 2019, the fourthcourt granted the State’s motion to sever its unfair trade practices claim, which seeks civil penalties of up to $5,000 per violation under the state's Consumer Credit Protection Act relating to statements that the State contends were misleading about 3M’s respirators. In the first quarter of 2007 until late 2013, other than2023, a case management conference in March 2011. In November 2013,bench trial for the unfair trade practices claims was continued indefinitely. An expert witness retained by the State filedhas recently estimated that 3M sold over five million respirators into the state during the relevant time period, and the State alleges that each respirator sold constitutes a motion to bifurcateseparate violation under the lawsuit intoAct. 3M disputes the expert's estimates and the State's position regarding what constitutes a separate liabilityviolation of the Act. 3M has asserted various additional defenses, including that the Company's marketing did not violate the Act at any time, and damages proceedings. Atthat the hearing onState's claims are barred under the motion, the court declined to bifurcate the lawsuit.applicable statute of limitations. No liability has been recorded for any portion of 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 caseas to key issues, and the fact that the complaint assertsassertions of claims against two 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 mightfactfinder may allocate to each defendant if the case iswere ultimately tried.118these estimatesthis analysis to develop its best estimate of probable liability.the Company’sits review of its respirator mask/asbestos liabilities, of pending and as a resultexpected lawsuits and of the cost of resolving claims of persons who claim more serious injuries, including mesothelioma, and other malignancies, and black lung disease, the Company increased its accruals in 20172023 for respirator mask/asbestos liabilities by $71$57 million. In 2017,2023, the Company made payments for legal feesdefense costs and settlements of $58$88 million related to the respirator mask/asbestos litigation. As of December 31, 2017 and 2016,2023, the Company had an accrual for respirator mask/asbestos liabilities (excluding Aearo accruals) of $608 million and $595 million, respectively.$574 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 (i) 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 fact that 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.2017,2023, the Company’sCompany had an immaterial receivable for insurance recoveries related to the respirator mask/asbestos litigation was $4 million. Thelitigation. In addition, the Company is seekingcontinues 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.Technologiespurchasedacquired 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 December 31, 2017, 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 In July 2022, Aearo Technologies and certain of its related entities (collectively, the "Aearo Entities") voluntarily initiated chapter 11 proceedings under the U.S. Bankruptcy Code seeking court supervision to establish a resulttrust, funded by the Company, to efficiently and equitably satisfy all claims determined to be entitled to compensation (including the Aearo respirator mask/asbestos matters). The U.S. Bankruptcy Court had stayed the Aearo respirator mask/asbestos litigation matters during the chapter 11 proceedings. With the June 2023 dismissal of the reviewAearo bankruptcy that is described in the Aearo’s respirator mask/asbestos liabilities,litigation is no longer in effect. For additional information, see the Company increased Aearo’s accruals in 2017 fordiscussion within the section Product Liability Litigation with respect to Aearo Technologies Dual-Ended Combat Arms Earplugs.liabilities by $13 million. Asmatters. However, following the June 2023 dismissal of December 31, 2017,the Aearo bankruptcy, the Company, through its Aearo subsidiary, had accruals of $30$62 million as of December 31, 2023 for product liabilities and defense costs related to current and future Aearo-related asbestos, silica-related and silica-relatedcoal mine dust claims. This accrual represents the Company’s best estimate of Aearo’s probable loss and reflects an estimation period for future claims that may be filed against the Aearo approaching the year 2050. 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 Optical119In March 2012, Cabot CSC Corporation and Cabot Corporation filed a lawsuit against Aearo in the Superior Court of Suffolk County, Massachusetts seeking declaratory relief as to the scope of Cabot’s indemnity obligations under the July 11, 1995 agreement, including whether Cabot has retained liability for coal workers’ pneumoconiosis claims, and seeking damages for breach of contract. In 2014, the court granted Aearo’s motion for summary judgment on two claims, but declined to rule on two issues: the specific liability for certain known coal mine dust lawsuits; and Cabot’s claim for allocation of liability between injuries allegedly caused by exposure to coal mine dust and injuries allegedly caused by exposure to silica dust. Following additional discovery, the parties filed new motions for summary judgment. In February 2016, the court ruled in favor of Aearo on these two remaining issues, and ordered that Cabot, and not Aearo, is solely responsible for all liability for the coal mine dust lawsuits under the 1995 agreement. In May 2017, the Massachusetts Court of Appeals affirmed the trial court order in favor of Aearo.Litigationabroad.abroad may have rights of action. These laws and regulations provide,can form the basis of, under certain circumstances, a basisclaims for the investigation and remediation of contamination, for capital investment in pollution control equipment, for restoration of and/or compensation for damages to natural resources, and for personal injury and property damage claims.damages. The Company has incurred, and will continue to incur, costs and capital expenditures in complying with these laws and regulations, defending personal injury, natural resource, 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.120typicallysometimes with other companies,potentially responsible parties, for the costs of investigation and remediation of environmental contamination at current or former facilities and at off-site locations.locations where hazardous substances have been released or disposed of. The Company has identified numerous locations, mostmany of which are in the United States, at which it may have some liability.liability for remediation of contamination. Please refer to the section entitled “Environmental Liabilities and Insurance Receivables” that follows for information on the amount of the accrual.(EPA)("EPA")), and international agencies of possible environmental and health effects of various perfluorinated compounds, including perfluorooctanyl compounds such as perfluorooctanoate (“PFOA”("PFOA"), perfluorooctane sulfonate (“PFOS”("PFOS"), or similar compounds (“PFCs”perfluorohexane sulfonic acid ("PFHxS"), perfluorobutane sulfonate ("PFBS"), hexafluoropropylene oxide dimer acid ("HFPO-DA") and other per- and polyfluoroalkyl substances (collectively, "PFAS").itsa phase-out decision in May 2000, the Company no longer manufactures perfluorooctanylcertain PFAS compounds including PFOA, PFOS, PFHxS, and their precursor compounds. The companyCompany ceased manufacturing and using the vast majority of thesethose compounds within approximately two years of the phase-out announcement and ceased all manufacturing and the last significant use of this chemistrythose compounds by the end of 2008. The Company continues to manufacture a variety of shorter chain length PFAS compounds, including, but not limited to, precursor compounds to 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 PFCsPFAS in purchased materials, as intended substances in products, or as byproducts in some of 3M’s fluorochemicalcurrent manufacturing processes, products, and waste streams.PFOA and/or PFOS continuePFAS are accelerating in the United States, Europe and elsewhere, and before certain international bodies. These activities include gathering of exposure and use information, risk assessment activities, and considerationincreasingly stringent restrictions on various uses of PFAS in products and on PFAS in manufacturing emissions and environmental media, in some cases moving towards non-detectable limits for certain PFAS compounds. Regulatory limits for PFAS in emissions and in environmental media such as soil and water (including drinking water) are being set at increasingly low levels. Global regulations also appear to be increasingly focused on a broader group of PFAS, including PFAS compounds manufactured by 3M, used in current 3M products or generated as byproducts or degradation products from certain 3M production processes. If such activity continues, including as regulations become final and enforceable, 3M may incur material costs to comply with new regulatory approaches. Asrequirements or as a result of regulation-related litigation or additional enforcement actions. Such regulatory changes may also have an impact on 3M’s reputation and may also increase its costs and potential litigation exposure to the databaseextent legal defenses rely on regulatory thresholds, or changes in regulation influence public perception. Given divergent and rapidly evolving regulatory drinking water and other environmental standards, there is currently significant uncertainty about the potential costs to industry and communities associated with remediation and control technologies that may be required.studiesPFAS or certain PFAS compounds, including under the EU’s Registration, Evaluation, Authorization and Restriction of bothChemicals ("REACH") and the EU’s Persistent Organic Pollutants ("POPs") Regulation. PFOA, PFOS and PFOSPFHxS (and their related compounds) are listed under several Annexes of the POPs Regulation, resulting in a ban in manufacture, placing on the market and use as well as some waste management requirements of these substances in EU Member States. These substances have also been listed in the Stockholm Convention, which has expanded, the EPA has developed human health effects documents summarizing the available data from these studies.been ratified by more than 180 countries and aims for global elimination of certain listed substances (with narrow exceptions). In February 2014,2023, an EU-wide restriction on the EPAmanufacturing, use, placing on the market and import of certain perfluorocarboxylic acids (C9-C14 PFCAs), which are PFAS substances, also went into effect.external peer reviewinvestigations and demands for information related to the release of PFAS from the Zwijndrecht facility. 3M Belgium has cooperated with the authorities with respect to the investigations and information requests and is working with the authorities on an ongoing basis.draft human health effects documentsPFAS-related production processes at the Zwijndrecht site. In December 2023, Flemish authorities gave 3M Belgium approval to complete a PFAS-related production process for PFOAexisting raw materials. In January 2024, 3M Belgium also received guidance from the relevant Flemish authorities on steps necessary to process existing quantities of intermediate and PFOS.byproduct materials at the facility.peer review panel metagreement contains certain provisions ending litigation and providing certain releases of liability for 3M Belgium, while recognizing that the Flemish Government retains its authority to act in August 2014.the future to protect its citizenry, as specified in the agreement. In connection with these actions, the Company recorded a pre-tax charge of approximately $500 million in the first half of 2022, with approximately $355 million in the second quarter of 2022.2016,2023, OVAM confirmed the main findings of the resubmitted DSI for certain zones and set an October 2023 deadline to submit a remedial action plan related to these zones.announcedreleased final lifetime health advisory levels for PFBS (2,000 ppt) and HFPO-DA and its salts (“GenX”) (4 ppt), and interim lifetime health advisory levels for PFOA (.004 ppt) 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)(.02 ppt). Where PFOA and PFOS are found together, EPA recommends that the concentrations be added together, and the lifetime health advisory for PFOA and PFOS combined is also 70 ppt. Lifetime health advisories while not enforceable, serve as guidance and are benchmarks for determining ifintended to provide information about concentrations of chemicals in tapdrinking water from public utilitiescontaminants at which adverse health effects are safenot expected to occur over the specified exposure duration. In November 2022, EPA published its final Drinking Water Contaminant Candidates List 5 (CCL 5), which includes a broad group of PFAS that are not currently subject to national primary drinking water regulations but which EPA is considering for public consumption. In an effort to collect exposure informationregulation under the Safe Drinking Water Act ("SDWA").2, 20128, 2025.unregulated substances,products containing intentionally added PFAS that have been sold in the U.S. in the past two years in compliance with the law. 3M submitted an updated copy of that list to the Maine DEP in May 2023. In June 2023, Maine enacted legislation retroactive to January 1, 2023, that includes certain changes to the notification requirement in the original legislation, including six PFCs,an extension of the compliance date until January 2025.be monitored during the period 2013-2015 by public water system supplierswork to determine the extent of their occurrence. Through January 2017,any potential non-compliance, has made voluntary self-disclosures to states and customers as applicable, and has expressed its willingness to work with those states to address and resolve any potential non-compliance. The Company cannot predict at this time the EPAultimate outcome or actions that may be taken by those states.results3M has resolved numerous claims relating to alleged PFAS contamination of properties and water supplies by 3M’s Decatur, Alabama manufacturing facility. In November 2021, 3M and the City of Decatur, Decatur Utilities and Morgan County executed a collaborative agreement under which the Company agreed to contribute approximately $99 million and also to 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 certain PFAS matters at the Morgan County landfill and reimbursement of costs previously incurred related to PFAS remediation. 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 an Interim Consent Order that 3M entered with the Alabama Department of Environmental Management (“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 appropriate remedial actions.4,920mandamus with the Supreme Court of Alabama was denied in September 2023. The case is in early stages of discovery but is currently stayed as to 3M pending final approval of the proposed public water supplies nationwide. Based onsupplier class action settlement described below.2016 lifetime health advisory, 13City of Muscle Shoals, Alabama filed a lawsuit against 3M and several co-defendants alleging that discharge from operations in Decatur, Alabama has contaminated the Tennessee River, from which the City draws its drinking water. Defendants filed a joint motion to dismiss in March 2023. This case has been stayed pending final approval of the proposed public water supplier class action settlement described below. Also in February 2023, two individuals who opted out of an earlier class settlement filed suit in Alabama state court against 3M, alleging PFAS contamination of their property resulting from 3M’s operations in Decatur. 3M removed the case to federal court and answered the complaint in March 2023. The case is in early stages of discovery. In December 2023, several plaintiffs filed a personal injury action against 3M and other defendants, alleging exposure to PFAS from defendants' operations in Decatur.exceedand other natural resources by PFAS chemicals. As described above, one lawsuit was transferred to the levelAFFF MDL. The Company recently removed the other case to federal court and attempted to transfer it to the AFFF MDL, which was denied at this juncture in the litigation. In March 2023, the federal judge granted the state’s motion to remand the case back to state court. 3M has appealed that decision and oral argument was held in October 2023.PFOAthe release or threatened release of hazardous materials (which in Vermont includes certain PFAS compounds). The case was removed to federal court in January 2024. Prior to the filing of that Notice, the suit was proceeding in state court, and 46 exceed the level for PFOS (unchangedcourt had set a trial-ready date in March 2025. In October 2023, the State issued a letter to 3M and another entity requesting that an environmental investigation be conducted at the site of a facility in Rutland, Vermont that 3M owned from approximately 1955 until 1975. 3M responded to the July 2016 EPA summary). A technical advisory issuedState in November 2023.EPAPFAS compounds disposed of by, or discharged, or emitted from 3M's Cordova plant. The complaint requests monetary damages, injunctive relief, civil penalties, a testing program, and a public outreach and information sharing program. The case was removed to federal court and 3M moved to transfer it to the AFFF MDL, which was denied. In September 2023, the federal judge granted the state's motion to remand the case back to state court. 3M has appealed the remand.September 2016 on laboratory analysisIllinois state court, alleging contamination of a number of drinking water samples statedsystems and natural resource damages at several sites statewide, and seeking to recover monetary damages, injunctive relief for remediation, civil penalties and other relief. The complaint states that 65the Attorney General is not seeking damages for AFFF by this lawsuit. In April 2023, the Illinois Attorney General filed a lawsuit against 3M and other defendants alleging PFAS contamination of state natural resources from AFFF. Both cases have been removed to federal court and transferred to the AFFF MDL.supplies had exceededsystem cases) alleging injuries or damages from PFAS contamination or exposure allegedly caused 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 MDL court in South Carolina. Additional AFFF cases continue to be filed in or transferred to the combined levelMDL. Claims in the MDL are asserted by individuals, public water systems, putative class members, state and territorial sovereigns, and other entities. Plaintiffs seek a variety of relief in cases in the MDL, including, where applicable, damages for PFOApersonal injury, property damage, water treatment costs, medical monitoring, natural resource damages, and PFOS.punitive damages. The Company also continues to defend certain AFFF cases that remain in state court and is in discussions with pre-suit claimants for possible resolutions where appropriate.resultsinclude community water systems, which are basedpublic water systems that provide water for human use and consumption to a set population, and non-community water systems, which are public water systems that supply water to a varied population (for example, campgrounds or schools). There are approximately 50,000 community water systems in the United States. The MDL cases focus on oneAFFF, but the MDL also contains a number of cases with allegations related to the broader category of PFAS products. 3M and other defendants also face cases filed by approximately 40 public water systems outside of the MDL. Public water system cases include a variety of claims, including for product liability, negligence, and public nuisance. The cases seek damages for, among other things, remediation costs to remove PFAS from drinking water provided to communities, as well as punitive damages. The MDL court has repeatedly encouraged the parties in the MDL to negotiate to resolve cases, including these PWS cases. In October 2022, the court appointed a retired federal judge as mediator.more samples collected duringinvolving (i) PFAS that has entered or may enter drinking water or the period 2012-2015class member’s water system; (ii) the development, manufacture, formulation, distribution, sale, transportation, storage, loading, mixing, application, or use of PFAS or any product (including AFFF) manufactured with or containing PFAS; (iii) the transport, disposal, or arrangement for disposal of PFAS-containing waste or PFAS-containing wastewater, or a class member’s use of PFAS-containing water for irrigation or manufacturing; or (iv) representations about PFAS or any product (including AFFF) manufactured with or containing PFAS. The PWS Settlement would also require class members to release punitive- or exemplary-damages claims that arise out of conduct occurring at least in part before the PWS Settlement’s effective date and that relate to PFAS, or any product (including AFFF) manufactured with or containing PFAS.necessarily reflect current conditionshave a positive test result for the presence of PFAS in their drinking water (as defined by the PWS Settlement) as of the date of the PWS Settlement receive such a test result by the end of 2025.public water supplies. EPA reporting does not identifycases have been removed to federal court and transferred to the sourcesAFFF MDL, and one case was voluntarily dismissed. The five cases that remain pending in state courts are stayed by agreement of the parties.supplies.is continuingmade the required notifications on October 24, 2023. On January 9, 2024, the Company received a Notice of Violation and Enforcement Conference from the Wisconsin DNR. The Company plans to meet with the DNR to discuss the appropriate next steps. At this time, the Company cannot predict the ultimate outcome or actions that may be taken by Wisconsin DNR.address itsremediate historic disposal of PFC-containingPFAS-containing waste associated with manufacturing operations at theits Decatur, Alabama,Alabama; Cottage Grove, Minnesota,Minnesota; and Cordova, Illinois plants.Alabama Department of Environmental Management (ADEM)ADEM to addressremediate the presence of PFCsPFAS in the soil and groundwater at the Company’s manufacturing facility in Decatur, Alabama. Pursuant to a permit issued by ADEM, for approximately twenty years,Alabama associated with the Company incorporated itshistoric (1978-1998) incorporation of wastewater treatment plant sludge containing PFCs in fields at its Decatur facility. After a reviewsludge. With ADEM’s agreement, 3M substantially completed installation of the available options to address the presence of PFCs in the soil, ADEM agreed that the preferred remediation option is to use a multilayer cap overon the former sludge incorporation areasareas.subsequent groundwater migration controlsthe 2009 TSCA consent order and treatment. Implementationunpermitted discharges to the Tennessee River. The Company is cooperating and providing responsive documents with respect to this and other inquiries regarding its manufacturing facilities.that plan continuesspecific PFAS-related processes at the Cordova facility. The Company has completed the production of documents and information and is expectedcooperating with this inquiry.be completedthe 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 2018.121
response to the request for information.TheIn Minnesota, the Company continues to work with the Minnesota Pollution Control Agency (MPCA)MPCA pursuant to the terms of thea previously disclosed May 2007 Settlement Agreement and Consent Order (SACO) to address the presence of certain PFCsPFAS compounds 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 PFCsPFAS compounds from these sites and proposing response actions; (ii) providing treatment or alternative drinking water upon identifying any level exceeding a Health Based Value (“HBV”("HBV") or Health Risk Limit (“HRL”("HRL") (i.e., the amount of a chemical in drinking water determined by the Minnesota Department of Health (MDH)MDH to be safe for human consumption over a lifetime) for certain PFCsPFAS compounds for which a HBV and/or HRL exists as a result of contamination from these sites; (iii) remediating identified sources of other PFCsPFAS compounds 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,In January 2024, the MPCAMinnesota Department of Health issued formal decisions adopting remedial optionsupdated, more stringent, HBVs for PFOA and PFOS. 3M is evaluating any potential impact of these developments on its obligations under the former disposal sites in Washington County, Minnesota (Oakdale and Woodbury). SACO. formal decision adopting remedial options for the Company’s Cottage Grove manufacturing facility. DuringIn the spring and summer of 2010, 3M began implementing the agreed uponapproved remedial options at the Cottage Grove and Woodbury sites.sites, and in late 2010, 3M commenced the approved remedial option at the Oakdale site in late 2010. At each location the remedial options were recommended by thesite. The Company has completed remediation work and approved by the MPCA. Remediation work has been completedcontinues with operational and maintenance activities at the Oakdale and Woodbury sites, and they are in an operational maintenance mode.sites. Remediation will continuework has been substantially completed at the Cottage Grove site, during 2018.In August 2014, the Illinois EPA approved a request bywith operational and maintenance activities ongoing.establish a groundwater management zoneamong other matters, the Company’s compliance with the Clean Water Act at its manufacturing facilityfacilities that manufacture, process, and use PFAS, including the Decatur, Cordova, and Cottage Grove facilities, and the Company has completed its production of responsive documents and information.Cordova, Illinois, which includes ongoing pumpingJune 2020, the Company reported to EPA and MPCA that it had not fully complied with elements of impacted site groundwater, groundwater monitoringthe inspection, characterization and routine reportingwaste stream profile verification process of results.Inthe Waste and Feedstream Analysis Plan (WAP/FAP) of its RCRA permit for its Cottage Grove incinerator. The Company and MPCA resolved the issues associated with the foregoing disclosure in a May 2017,2022 stipulation agreement, and permanently retired the MDH issued new HBVs for PFOS and PFOA. The new HBVs are 35 ppt for PFOA and 27 ppt for PFOS.Cottage Grove hazardous waste incinerator in December 2021. In connection with the now closed incinerator, the Company in December 2022 received from EPA a draft Consent Agreement and Penalty Order under the Clean Air Act, with a proposed civil penalty to resolve issues raised in a Finding of Violation issued in 2019. The Company and EPA resolved this matter in which the Company has agreed to pay an administrative civil penalty. In October 2021, the Company received information requests from MPCA seeking additional toxicological and other information related to certain PFAS compounds. The Company is cooperating with these inquiries and is producing documents and information in response to the requests.announcement,stormwater discharge from the MDH statedCottage Grove facility. The Company worked with MPCA to develop a plan to address its stormwater, which is embodied in an order issued by MPCA in December 2022.“Drinking water with PFOA and PFOS, eventhe Company is discharging stormwater containing PFAS at the levels above3M’s facility in Hutchinson, Minnesota. The Company is working with MPCA regarding the updated values, does not represent an immediate health risk. These values are designed to reduce long-term health risks acrossallegations in the population and are based on multiple safety factors to protect the most vulnerable citizens, which makes them overprotective for mostNotice of the residents in our state.” Violation.December 2017, the MDHJanuary 2024, MPCA issued a new HBVpre-publication notice of a draft Clean Water Act permit for perfluorobutane sulfonate (PFBS)3M’s Cottage Grove facility, with significantly revised limits on PFAS, some of 2 ppb.additional regulatory actions arising from the foregoing proceedings and activities, if any, may be taken regarding such compoundsby the regulatory agencies or the potential consequences of any such actions.Alabamato the Company.As previously reported,former employee filed a purported class action lawsuit in 2002 incomplaint seeking cost recovery and contribution towards the Circuit Courtcleaning up of Morgan County, Alabama (the “St. John case”), seeking unstated damages and alleging that the plaintiffs suffered fear, increased risk, subclinical injuries, and property damage from exposure to certain perfluorochemicals at or near the Company’s Decatur, Alabama, manufacturing facility. The court in 2005 granted the Company’s motion to dismiss the named plaintiff’s personal injury-related claims on the basis that such claims are barred by the exclusivity provisionsapproximately eight miles of the state’s Workers Compensation Act.Lower Passaic River in New Jersey. The plaintiffs’ counsel filed an amendedplaintiff, Occidental Chemical Corporation, alleges that it agreed to design and pay the estimated $165 million cost to remove and cap sediment containing eight chemicals of concern, including PCBs and dioxins. The complaint in November 2006, limitingseeks to spread those costs among the case to property damage claims on behalf of a purported class of residents and property owners in the vicinity of the Decatur plant. In June 2015, the plaintiffs filed an amended complaint adding additional defendants, including BFI Waste Management Systems of Alabama, LLC; BFI Waste Management of North America, LLC; the City of Decatur, Alabama; Morgan County, Alabama; Municipal Utilities Board of Decatur; and Morgan County, Alabama, d/b/a Decatur Utilities.In 2005, the judge -- in a second purported class action lawsuit filed by three residents of Morgan County, Alabama, seeking unstated compensatory and punitive damages involving alleged damage to their property from emissions of certain perfluorochemical compounds from theCompany. The Company’s Decatur, Alabama, manufacturing facility that formerly manufactured those compounds (the “Chandler case”) -- granted the Company’s motion to abate the case, effectively putting the case on hold pending the resolution of class certification issues in the St. John case. Despite the stay, plaintiffs filed an amended complaint seeking damages for alleged personal injuries and property damage on behalf of122the named plaintiffs and the members of a purported class. No further actioninvolvement in the case is expected unlessrelates to its past use of two commercial drum conditioning facilities in New Jersey. Whether, and untilto what extent, the stay is lifted.In February 2009, a resident of Franklin County, Alabama, filed a purported class action lawsuitCompany may be required to contribute to the costs at issue in the Circuit Courtcase remains to be determined.application byMPCA in November 2023 following an inspection, alleging violations relating to materials shipped in 2023 to a hazardous waste disposal facility. The Cottage Grove facility had self-reported this information to the Decatur utility’s wastewater treatment plantMPCA in September 2023. In December 2023, the Company provided a written response to the MPCA detailing what the Company believes to be the completion of wastewater treatment sludge to farmland and grasslandsall of the corrective actions identified in the stateAlleged Violation Letter (also including waste spills and container management). At this time, the Company cannot predict the ultimate outcome or actions that allegedly contain PFOA, PFOS and other perfluorochemicals. The named plaintiff seeks to represent a classmay be taken by MPCA.all persons within the State of Alabama who have had PFOA, PFOS, and other perfluorochemicals released or deposited on their property. In March 2010, the Alabama Supreme Court ordered the case transferred from Franklin County to Morgan County. In May 2010, consistent with its handling of the other matters, the Morgan County Circuit Court abated this case, putting it on hold pending the resolution of the 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 five 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 River1,2-propylenimine at the water intake,Cottage Grove facility. The Company is working to produce documents and that the chemicals cannot be removedinformation sought by the water treatment processes utilized by the Water Authority. In September 2016, the court granted 3M’s motion to dismiss plaintiffs’ trespass claimsthis request and cooperating with prejudice, negligence claims for personal injuries,this inquiry.private nuisance claims, and denied the motion to dismiss the plaintiffs’ negligence claims for property damage, public nuisance, abatement of nuisance, battery and wantonness.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 PFCs 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 endangermentlitigation described above, unless the court grants the requested relief, including declaratory and injunctive relief.In August 2016, a group of over 200 plaintiffs filed a 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. Plaintiffs are residents of Lawrence, Morgan and other counties who are or have been customers of the Water Authority. They contend defendants have released PFCs 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.In September 2016, the Water Works and Sewer Board of the City of Gadsden, Alabama filed a lawsuit in the Circuit Court of Etowah County Alabama against 3M and various carpet manufacturers. The complaint alleges that PFCs from the defendants’ facilities contaminated the Coosa River as its raw water source for drinking water and seeks unstated damages for the installation and operation of a filtration system, expenses to monitor PFC levels, and lost profits and sales.In January 2017, several hundred plaintiffs sued 3M, its subsidiary Dyneon, and Daikin America in Lawrence and Morgan Counties, Alabama. 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 discharge into the Tennessee River. The plaintiffs also contend that the defendants have discharged into Bakers Creek and the Decatur Utilities Dry Creek Wastewater Treatment Plant, which, in turn,123discharges wastewater containing these chemicals into the Tennessee River. The plaintiffs contend that, as a result 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 May 2017, the Water Works and Sewer Board of the Town of Centre, Alabama filed a lawsuit in the Circuit Court of Cherokee County Alabama against 3M, DuPont, and various carpet and textile manufacturers. The complaint alleges that PFCs from the defendants’ facilities contaminated the town’s raw water source for drinking water and seeks unstated damages for the installation and operation of a filtration system, expenses to monitor PFC levels, lost profits and sales, and injunctive relief.In November 2017, a purported class action was filed against 3M, its subsidiary 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. They assert various common law claims, including negligence, nuisance, wantonness, and fraudulent concealment, and they 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 that have released and continue to release PFOA, PFOS and related chemicals into the groundwater and surface water of their sites, resulting in discharge into the Tennessee River. The plaintiffs also contend that the defendants have discharged into the Decatur Utilities Dry Creek Wastewater Treatment Plant, which, in turn, discharges wastewater containing these chemicals into the Tennessee River. The plaintiffs contend that, as a result 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.Minnesota Environmental LitigationIn December 2010, the State of Minnesota, by its Attorney General Lori Swanson, acting in its capacity as trustee of the natural resources of the State of Minnesota, filed a lawsuit in Hennepin County District Court against 3M to recover damages (including unspecified assessment costs and reasonable attorney’s fees) for alleged injury to, destruction of, and loss of use of certain of the State’s natural resources under the Minnesota Environmental Response and Liability Act (MERLA) and the Minnesota Water Pollution Control Act (MWPCA), as well as statutory nuisance and common law claims of trespass, nuisance, and negligence with respect to the presence of PFCs in the groundwater, surface water, fish or other aquatic life, and sediments (the “NRD Lawsuit”). The State also seeks declarations under MERLA that 3M is responsible for all damages the State may suffer in the future for injuries to natural resources from releases of PFCs into the environment, and under MWPCA that 3M is responsible for compensation for future loss or destruction of fish, aquatic life, and other damages. In September 2017, the State’s damages expert submitted a report that contends the State incurred $5 billion in damages. In November 2017, the State of Minnesota filed a motion for leave to amend its complaint to seek punitive damages from 3M, and 3M filed a motion for summary judgment contending, among other things, that the State’s claims are barred by the applicable statute of limitations. A hearing on those motions was held in December 2017. In December 2017, the court urged the parties to attempt to resolve the litigation before trial, and in January 2018, the court appointed a mediator to facilitate that process. If the parties are not able to resolve the matter, the trial is scheduled to begin in February 2018. An adverse ruling or judgment, settlement, or unfavorable development in the NRD Lawsuit could result in future charges that could have a material adverse effect on the Company’s results of operations or cash flows in the period in which they are recorded and on the consolidated financial position of the Company. Nootherwise described below, no liability has been recorded becauseas the Company believes any such liability in those matters is not probable and estimable.In November 2011, the Metropolitan Council filed a motion to intervene and a complaint in the NRD Lawsuit seeking compensatory damages and other legal, declaratory and equitable relief, including reasonable attorneys’ fees, for costs and fees that the Metropolitan Council alleges it will be required to assess at some time in the future if the MPCA imposes restrictions on Metropolitan Council’s PFOS discharges to the Mississippi River, including the installation and maintenance of a water treatment system. The Metropolitan Council’s intervention motion was based on several theories, including common law negligence, and statutory claims under MERLA for response costs, and under the Minnesota Environmental Rights Act (MERA) for declaratory and equitable relief against 3M for PFOS and other PFC pollution of the waters and sediments of the Mississippi River. 3M did not object to the motion to intervene. In January 2012, 3M answered the Metropolitan Council’s complaint and filed a counterclaim alleging that the Metropolitan Council124discharges PFCs to the Mississippi River and discharges PFC-containing sludge and bio solids from one or more of its wastewater treatment plants onto agricultural lands and local area landfills. Accordingly, 3M’s complaint against the Metropolitan Council asked that if the court finds that the State is entitled to any of the damages it sought, 3M be awarded contribution and apportionment from the Metropolitan Council, including attorneys’ fees, under MERLA, and contribution from and liability for the Metropolitan Council’s proportional share of damages awarded to the State under the MWPCA, as well as under statutory nuisance and common law theories of trespass, nuisance, and negligence. 3M also sought declaratory relief under MERA. In May 2017, the Metropolitan Council paid 3M approximately $1 million and agreed to dismiss its claims against 3M. As part of the settlement agreement, 3M agreed to dismiss its claims against the Metropolitan Council.In April 2012, 3M filed a motion to disqualify the State of Minnesota’s counsel, Covington & Burling, LLP (Covington). In October 2012, the court granted 3M’s motion to disqualify Covington as counsel to the State, and the State and Covington appealed the court’s disqualification to the Minnesota Court of Appeals. In July 2013, the Minnesota Court of Appeals affirmed the district court’s disqualification order. In October 2013, the Minnesota Supreme Court granted both the State’s and Covington’s petition for review of the decision of the Minnesota Court of Appeals. In April 2014, the Minnesota Supreme Court affirmed in part, reversed in part, and remanded the case to the district court for further proceedings. The district court took evidence on the disqualification issues at a hearing in October 2015. In February 2016, the district court ruled that Covington violated the professional ethics rule against representing a client (here the State of Minnesota) in the same or substantially related matter where that person’s interests are materially adverse to the interests of a former client (3M). The district court, however, denied 3M’s motion to disqualify Covington because it further found that 3M impliedly waived by delaying to assert the conflict. Other activity in the case, which had been stayed pending the outcome of the disqualification issue, has resumed. Trial of the NRD Lawsuit is scheduled to begin in February 2018. In a separate but related action, the Company filed suit in the Ramsey County District Court against Covington for breach of its fiduciary duties to the Company and for breach of contract arising out of Covington’s representation of the State of Minnesota in the NRD Lawsuit. In September 2016, the court granted 3M’s motion for leave to amend the complaint to plead punitive damages. In February 2017, Covington settled this lawsuit with a payment by Covington or its insurer to 3M that is not material to 3M’s results of operations or financial condition.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 PFCs, including costs to construct alternative sources of drinking water. Trial is scheduled to begin in September 2019.Aqueous Film Forming Foam (AFFF) Litigation3M manufactured and marketed Aqueous Film Forming Foam (AFFF) for use in firefighting at airports and military bases from approximately 1963 to 2000. As of December 31, 2017, twelve purported class actions have been filed against 3M and other defendants in various state and federal courts in Pennsylvania, Colorado, and New York alleging that certain PFCs used in AFFF contaminated the soil and groundwater where AFFF was used at current or former airports and air force military bases located in Colorado, Pennsylvania, and New York. An individual complaint also has been filed in federal court Pennsylvania. The plaintiffs in these cases generally allege that contaminated groundwater has caused various injuries, including loss of use and enjoyment of their properties, diminished property values, investigation costs, and remediation costs. Some cases seek funds for medical monitoring. Several companies have been sued along with 3M, including Ansul Co. (acquired by Tyco, Inc.), Angus Fire, Buckeye Fire Protection Co., Chemguard, National Foam, Inc., United Technologies Corp.In November 2016, the Town of Barnstable, MA filed an individual action in the U.S. District Court for the District of Massachusetts seeking unstated compensatory and punitive damages and other relief against 3M and other suppliers of AFFF for alleged contamination of the aquifer supplying drinking water to the Hyannis water system. The town seeks to recover costs associated with the investigation, treatment, remediation, and monitoring of drinking water supplies allegedly contaminated with certain PFCs used in AFFF. In January 2017, the County of Barnstable, MA, filed an individual action in the U.S. District Court for the District of Massachusetts seeking unstated compensatory and punitive damages and other relief (including indemnification and contribution in connection with claims asserted against the County by the Town of Barnstable) against 3M and other suppliers of AFFF for alleged contamination of the aquifer supplying drinking water to the Hyannis water system.125In February 2017, husband and wife plaintiffs sued 3M and other defendants in federal court in Pennsylvania, alleging personal injury, loss of consortium and companionship, and associated damages.In March 2017, plaintiff residents of Suffolk County, Long Island filed a class action complaint in state court in Suffolk County New York, naming the County and 3M and other alleged manufacturers of AFFF products. The action was removed to the Eastern District of New York.In August 2017, three class action complaints were filed in state court in New York against 3M and other defendants including the Port Authority of New York and New Jersey. Plaintiffs allege PFC contamination of the local water supply linked to AFFF at Stewart Air National Guard Base and Stewart International Airport. The Port Authority is the leaseholder of the airport. All three cases have classes for diminution of property and medical monitoring. In September 2017, co-defendant Tyco removed all three cases to the U.S. District Court for the Southern District of New York.In October 2017, a class action complaint was filed in Suffolk County, New York against 3M and others regarding PFCs allegedly released at the Suffolk County Firematics Training Facility. In November 2017, co-defendant National Foam removed the case to the U.S. District Court for the Eastern District of New York.In December 2017, a complaint was filed by a group of 26 plaintiffs in Suffolk County, New York against 3M and others regarding PFCs allegedly released at Gabreski Airport.In December 2017, a complaint was filed by the Suffolk County Water District in December 2017 in the U.S. District Court for the Eastern District of New York against 3M and others regarding PFCs allegedly released at Gabreski Airport and Suffolk County Firematics Training Facility.Other Environmental LitigationIn September 2017, three complaints were filed in the U.S. District Court for the Northern District of New York against 3M, Saint-Gobain Performance Plastics Corp. (“Saint-Gobain”), Honeywell International Inc. (“Honeywell”) and E.I. DuPont De Nemours and Company. 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. 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. Plaintiffs seek unstated compensatory, consequential, and punitive damages, as well as attorneys’ fees and costs.On December 1, 2017, eight plaintiffs filed a 12-count class action against 3M, Wolverine World Wide and Waste Management, Inc., alleging negligence, trespass, intentional and negligent infliction of emotional distress, battery, products liability, public and private nuisance, fraudulent concealment, and unjust enrichment. Each count was filed against each defendant. The action arises from Wolverine’s allegedly improper disposal of materials and wastes related to their shoe manufacturing operations. Plaintiffs allege Wolverine used 3M Scotchgard in its manufacturing process and that chemicals from 3M’s product have contaminated the environment after being disposed of near drinking water sources.For environmental litigation matters described in this section for which a liability, if any, has been recorded, the Company believes the amount recorded, as well as the possible loss or range of loss in excess of the established accrual is not material to the Company’s consolidated results of operations or financial condition. For those matters for which a liability has not been recorded, the Company believes any such liability is not probable andreasonably estimable and the Company is not able to estimate a possible loss or range of possible loss at this time.2017,2023, the Company had recorded liabilities of $28$11.0 billion for “other environmental liabilities.” These amounts are reflected in the consolidated balance sheet within other current liabilities ($3.0 billion) and other liabilities ($8.0 billion). The accruals represent the Company’s estimate of the probable loss in connection with the environmental matters and PFAS-related matters and 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.based upon an evaluation of currentlyto 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 also126recorded related insurance receivables of $8 million. The Company records liabilities for remediation costs on an undiscounted basis when they are probable and reasonably estimable, generally no later than the completion of feasibility studies or the Company’s commitment to a plan of action. 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.As of December 31, 2017, the Company had recorded liabilities of $25 million for “other environmental liabilities” based upon an evaluation of currently available facts to implement the Settlement Agreement and Consent Order with the MPCA, the remedial action agreement with ADEM, and to address trace amounts of perfluorinated compounds in drinking water sources in the City of Oakdale, Minnesota, as well as presence in the soil and groundwater at the Company’s manufacturing facilities in Decatur, Alabama, and Cottage Grove, Minnesota, and at two former disposal sites in Washington County, Minnesota (Oakdale and Woodbury). The Company expects that most of the spending will occur over the next four years. During the first quarter of 2017, the Company collected from its insurer the outstanding receivable of $15 million related to “other environmental liabilities.”Other MattersDepartmentLabor InvestigationThe U.S. DepartmentDecember 31, 2023, the Company’s receivable for insurance recoveries related to the environmental matters and litigation was not material. Various factors could affect the timing and amount of Labor (DOL) notifiedrecovery 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.2015 that it had commenced an investigation of 3M’s pension plan pursuant2019, the JPML granted motions to transfer and consolidate all cases pending in federal courts to the federal Employee Retirement Income Security ActU.S. District Court for the Northern District of 1974, as amended (ERISA).Florida to be managed in an MDL proceeding to centralize pre-trial proceedings. The DOL has stated its investigation relatesplaintiffs and 3M filed preliminary summary judgment motions on the government contractor defense. In July 2020, 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 certain private equity investments, plan expenses, securities lending, and distributionsimmediately certify the summary judgment ruling for appeal to the U.S. Court of plan benefits. In response to certain DOL requests, 3M produced documents and made employees availableAppeals for interviews.the Eleventh Circuit. In December 2016,2020, the DOL issued certain subpoenascourt granted the plaintiffs’ motion to consolidate three plaintiffs for the first bellwether trial, which began in March 2021.Investment Management Corp. relatingfaced litigation from a significant number of claimants (in the range of 260,000 to this investigation.285,000 individual claimants). As noted in the Respirator Mask/Asbestos Litigation — Aearo Technologies section above, in July 2022, the Aearo Entities voluntarily initiated chapter 11 proceedings under the U.S. Bankruptcy Code seeking court supervision to establish a trust, funded by the Company, to efficiently and equitably satisfy all claims determined to be entitled to compensation associated with these matters and those described in the earlier section Respirator Mask/Asbestos Litigation — Aearo Technologies. 3M has produced additional responsive documents and is cooperatingentered into an agreement with the DOLAearo Entities to fund this trust and to support the Aearo Entities in its investigation.connection with the chapter 11 proceedings. 3M anticipates thatcommitted $1.0 billion to fund this trust and committed an additional $0.2 billion to fund projected related case expenses. Under the DOL will conclude its investigationterms of the agreement, the Company would provide additional funding if required by the Aearo Entities to resolve the matter as part of the chapter 11 proceeding. Related to these actions, 3M reflected a pre-tax charge of $1.2 billion (within selling, general and administrative expenses), inclusive of fees and net of related existing accruals, in the first half of 2018.Product Liability LitigationOne customer obtained an order in the French courts against 3M Purification SAS (a French subsidiary) in October 2011 appointing an expert to determine the amount of commercial loss and property damage allegedly caused by allegedly defective 3M filters used in the customer’s manufacturing process. An Austrian subsidiary of this same customer also filed a claim against 3M Austria GmbH (an Austrian subsidiary) and 3M Purification SAS in the Austrian courts in September 2012 seeking damages for the same issue. The Company reached an agreement in principle to settle those127two cases and finalized the settlement during the second quarter of 2017. The amounts agreed to2022.eachthe third quarter of these settlements were2022, resulting in a charge that was not material to 3M. Upon the Company’sfilings in late July 2022 in the U.S Bankruptcy Court for the Southern District of Indiana, all litigation against Aearo Entities that filed chapter 11 cases was automatically stayed.resultsbalance sheet amounts is included at the end of operationsthis Combat Arms litigation discussion.financial condition.2017,2023, the Company had an accrued liability of $5.0 billion related to Combat Arms Earplugs. This amount is reflected within contingent liability claims and other within other current liabilities ($1.5 billion) and within other liabilities ($3.5 billion) on 3M’s consolidated balance sheet. The accruals represent the Company’s estimate of the probable loss in connection with the CAE Settlement. The Company is not able to estimate a possible loss or range of possible loss in excess of the established accruals at this time. Additionally, as a result of reconsolidation in the second quarter of 2023 of the former deconsolidated Aearo Entities, the following balances on 3M’s consolidated balance sheet as of December 31, 2022 do not appear on the comparative consolidated balance sheet as of December 31, 2023:involving approximately 4,270 plaintiffs (compared to approximately 1,260 plaintiffs at December 31, 2016), most of which are pending in federal or state court in Minnesota, in which the plaintiffs claimUnited States and one Canadian putative class action with a single named plaintiff, alleging that they underwent various joint arthroplasty, cardiovascular, and other surgeries and later developed surgical site infections due to the use of the Bair Hugger™Hugger patient warming system.complaintsplaintiffs 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. One case, from the U.S. District Court for the Western District of Tennessee is a putative nationwide class action. U.S. Judicial Panel on Multidistrict Litigation (MDL) granted the plaintiffs’ motion to transfer and consolidateJPML consolidated all cases pending in federal courts to the U.S. District Court for the District of Minnesota to be managed in an 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 appealed that decision to the U.S. Court of Appeals for the Eighth Circuit. Plaintiffs also appealed a multi-district proceeding during2018 jury verdict in favor of 3M in the pre-trial phasefirst bellwether trial in the MDL and appealed the dismissal of another bellwether case. 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 sought further appellate en banc review by the full Eighth Circuit court. In November 2021, the Eighth Circuit court denied 3M’s petition for rehearing en banc. In February 2022, the Company filed a petition for a writ of certiorari in the U.S. Supreme Court. In May 2022, the U.S. Supreme Court declined 3M’s request to review the Eighth Circuit court’s decision. The MDL court has not yet issued a new case management order. Separately, in August 2021, the Eighth Circuit court affirmed the 2018 jury verdict in 3M’s favor in the only bellwether trial in the MDL.has set a trial-ready datetrials to potentially begin in May 2018 in one2024. The MDL court recommended remand to the courts where filed of the twobellwether cases not filed in Minnesota; the Joint Panel on Multi-District Litigation will consider that recommendation during the first quarter of 2024.bellwether cases. Atwas remanded in January 2024. Finally, a joint hearing beforeputative class action has been filed in Ramsey County, Minnesota, seeking economic damages for the U.S. District Courtuse of the Bair Hugger system in orthopedic surgeries and surgeries for medically obese people in Minnesota from May 2017 to the Minnesota Statepresent. The Ramsey County court on the parties’denied a motion to exclude each other’s experts,dismiss in August 2023. Three other state cases have been resolved in 2023, including a Missouri state court case that was voluntarily dismissed in June 2023 and 3M’s motion for summary judgment with respect to general causation, the federala Texas state court did not exclude the plaintiffs’ experts and denied 3M’s motion for summary judgment on general causation.case that was voluntarily dismissed in September 2023. in hearing the same arguments, excluded plaintiffs’ experts and granted 3M’s motion for summary judgment on general causation, dismissing all 61 cases pending beforecausation. The Minnesota Court of Appeals affirmed the state court orders in Minnesota.Hugger™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. The Bair Hugger™ product line was acquired by 3M as part of the 2010 acquisition of Arizant, Inc., a leading manufacturer of patient warming solutions designed to prevent hypothermia and maintain normal body temperature in surgical settings. No liability has been recorded for this matter because the Company believes that any such liability is not probable and estimable at this time.In September 2011, 3M Oral Care launched Lava Ultimate CAD/CAM dental restorative material. The product was originally indicated for inlay, onlay, veneer, and crown applications. In June 2015, 3M Oral Care voluntarily removed crown applications from the product’s instructions for use, following reports from dentists of patients’ crowns debonding, requiring additional treatment. The product remains on the market for other applications. 3M communicated with the U.S. Food and Drug Administration, as well as regulators outside the United States. 3M also informed customers and distributors of its action, offered to accept return of unused materials and provide refunds. As of December 31, 2017, there is one lawsuit pending in the U.S. District Court for the District of Minnesota that names 29 plaintiffs and seeks certification of a class of dentists in the United States and its territories, and alternatively seeks subclasses in 13 states. The complaint alleges 3M marketed and sold defective Lava Ultimate material used for dental crowns to dentists and, under various theories, seek monetary damages (replacement costs and business reputation loss), punitive damages, disgorgement of profits, injunction from marketing and selling Lava Ultimate for use in dental crowns, statutory penalties, and attorneys’ fees and costs.Company believes the amount recorded is not material to the Company’s consolidatedCompany's 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 accrualsrecorded liability at this time.(Millions) 2023 2022 2021 Operating lease cost $ 284 $ 295 $ 319 Variable lease cost 122 135 127 Total operating lease cost $ 406 $ 430 $ 446 December 31, (Millions unless noted) Location on face of Balance Sheet 2023 2022 Right of use assets Operating lease right of use assets $ 759 $ 829 Current liability Operating lease liabilities - current 225 261 Noncurrent liability Operating lease liabilities 534 580 Weighted average remaining lease term (in years): 5.4 5.5 Weighted average discount rate: 2.9 % 2.2 % (Millions) 2023 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: $ 286 $ 295 $ 317 Right of use assets obtained in exchange for operating lease liabilities: 285 261 342 (Millions) 2024 $ 247 2025 173 2026 118 2027 81 2028 53 After 2028 146 Total expected lease payments 818 Less: Amounts representing interest (59) Present value of future minimum lease payments 759 Less: Current obligations 225 Long-term obligations $ 534 provides, 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 December 31, 2017,2023, the remaining total shares12830,125,144,27 million and there were approximately 7,5008,600 participants with outstanding options, restricted stock, or restricted stock units.2017 annual grant stock-based compensation award expense dollars;expense; therefore, higher stock-based compensation expense is typically recognized in the first quarter.for disclosure purposes by the Company.Beginning in 2016, as a result of the Company’s application of ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, certain excess tax benefits at the time of exercise (for an option) or upon vesting (for restricted stock units) are recognized as income tax benefits in the statement of income. These amounts totaled $228 million and $184 million for 2017 and 2016, respectively, and are reflected in the “income tax benefits” line within the stock-based compensation table below.Stock-Based Compensation Expense129(Millions) 2023 2022 2021 Cost of sales $ 44 $ 48 $ 47 Selling, general and administrative expenses 186 169 185 Research, development and related expenses 44 46 42 Stock-based compensation expenses 274 263 274 Income tax benefits (45) (62) (100) Stock-based compensation expenses (benefits), net of tax $ 229 $ 201 $ 174 Programactivity for the years ended December 31:(Options in thousands) Number of Options Weighted Average Exercise Price Weighted Average
Remaining Contractual Life (months)Aggregate
Intrinsic Value
(millions)Under option — As of January 1, 2023 35,506 $ 166.97 Granted 1,667 116.87 Exercised (1,490) 101.54 Forfeited (1,000) 166.62 As of December 31, 2023 34,683 167.38 51 $ — Options exercisable As of December 31, 2023 29,754 $ 170.24 43 $ — 10ten years from date of grant. As of December 31, 2017,2023, there was $67$26 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 2018 months. For options outstanding at December 31, 2017, the weighted-average remaining contractual life was 70 months and the aggregate intrinsic value was $3.834 billion. For options exercisable at December 31, 2017, the weighted-average remaining contractual life was 56 months and the aggregate intrinsic value was $3.080 billion.total intrinsic values offollowing table summarizes additional information relative to stock options exercised during 2017, 2016 and 2015 was $703 million, $608 million and $465 million, respectively. Cash received from options exercised during 2017, 2016 and 2015 was $585 million, $665 million and $501 million, respectively. The Company’s actual tax benefits realized for the tax deductions related torespective years:(in millions) 2023 2022 2021 Cash received from options exercised $ 147 $ 205 $ 457 Intrinsic value of options exercised 29 116 325 Tax benefit realized related to options exercised 6 24 69 exercise of employee stock options for 2017, 2016 and 2015 was $238 million, $224 million and $172 million, respectively.The Company does not have a specific policy to repurchase common shares to mitigate the dilutive impact of options; however, the Company has historically made adequate discretionary purchases, based on cash availability, market trends, and other factors, to satisfyprimary annual stock option exercise activity.For annual options,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 Assumptions2023 2023 2022 2021 Risk-free interest rate 3.8 % 1.9 % 0.8 % Dividend yield 3.3 % 2.9 % 2.8 % Expected volatility 22.8 % 21.8 % 22.6 % Expected life (months) 84 83 For the 2017 annual grant date, the Company estimated the expectedExpected volatility is based upon the averagethree volatilities of the most recent one year volatility,3M stock: the median of the term of the expected life rolling volatility,volatility; the median of the most recent term of the expected life volatility of 3M stock,volatility; and the implied volatility on the grant date. The expected term assumption is based on the weighted average of historical grants.130and Restricted Stock Unitsand restricted stock unit activity for the years ended December 31:(Units in thousands) (Units in thousands) (Units in thousands) Nonvested balance — Nonvested balance — As of January 1, 2023 As of January 1, 2023 As of January 1, 2023 Granted Granted Vested Vested Forfeited Forfeited As of December 31, 2023 As of December 31, 2023 As of December 31, 2023 As of December 31, 2017, there was $78 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 22 months. The total fair value of restricted stock and restricted stock units that vested during 2017, 2016 and 2015 was $136 million, $149 million and $166 million, respectively. The Company’s actual tax benefits realized for the tax deductions related to the vesting of restricted stock and restricted stock units for 2017, 2016 and 2015 was $45 million, $56 million and $62 million, respectively.units, except for performance shares which do not earn dividends.units. Since the rights to dividends are forfeitable, there is no impact on basic earnings per share calculations. Weighted average restricted stock unit shares outstanding are included in the computation of diluted earnings per share.(in millions, except per-unit amounts) 2023 2022 2021 Weighted-average grant-date fair value of restricted stock units (per unit) that were granted $ 114.71 $ 160.24 $ 176.82 Intrinsic value of restricted stock units that vested $ 81 $ 88 $ 83 Tax benefit realized related to restricted stock units that vested 16 17 16 Shares20172023 performance criteria for these performance shares (organic volumesales growth, return on invested capital, free cash flow conversion,growth, 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 delivereddistributed 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. Prior to the 2016 performance share grant, performance shares did not accrue dividends during the performance period. Therefore, the grant date fair value was determined by reducing the closing stock price on the date of grant by the net present value of dividends during the performance period. The 2017 and 2016 performance share grants accrue dividends,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.131activity for the years ended December 31:(Shares in thousands) (Shares in thousands) (Shares in thousands) Undistributed balance — Undistributed balance — As of January 1, 2023 As of January 1, 2023 As of January 1, 2023 Granted Granted Distributed Distributed Performance change Performance change Forfeited Forfeited As of December 31, 2023 As of December 31, 2023 As of December 31, 2023 2017,2023, there was $25$3 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 1120 months.total fair value offollowing table summarizes additional information relative to performance shares that were distributed were $55 million for 2017 and $54 million for both 2016 and 2015. The Company’s actual tax benefits realized for the tax deductions related to the distribution of performance shares was $15 million per year for 2017, 2016 and 2015.(in millions, except per-share amounts) 2023 2022 2021 Weighted average grant date fair value per performance share that were granted $ 110.21 $ 144.77 $ 176.79 Intrinsic value of performance shares that were distributed $ 19 $ 21 $ 22 Tax benefit realized related to performance shares that were distributed 5 4 4 2017,2023, shareholders have approved 60 million shares for issuance under the Company’s GESPP. Substantially all employees are eligible to participate in the plan. Participants are granted options at 85% of market value at the date of grant. There are no GESPP shares under option at the beginning or end of each year because options are granted on the first business day and exercised on the last business day of the same month.General Employees’ Stock Purchase Plan2017, 20162023, 2022 and 20152021 was $30.07, $24.72$15.77, $21.20 and $23.56,$27.80, respectively. The fair value of GESPP options was based on the 15% purchase price discount. The Company recognized compensation expense for GESSPGESPP options of $26$21 million, $31 million, and $32 million in 2017, $24 million in 20162023, 2022 and $24 million in 2015.17.21. Business Segmentsfivefour business segments: Industrial; Safety and Graphics;Industrial; Transportation and Electronics; Health Care; Electronics and Energy; and Consumer. 3M’s fivefour 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.In July 2022, 3M announced its intention to spin off the Health Care business as a separate public company (see Note 3 for additional information). 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 operating income information shown. The difference betweenpre-tax income relates to interestbefore taxes. Business segment operating income (loss) excludes certain expenses and interest expense, whichincome that are not allocated to business segments.segments (as described below in “Corporate and Unallocated”).1322017,2023, the measure of segment operating performance and segment composition used by 3M’s chief operating decision maker (CODM) changed and, as parta result, 3M’s disclosed measure of 3M’s continuing effortsegment profit/loss (business segment operating income (loss)) was updated. The change to improvebusiness segment operating income (loss) aligns with the alignment of its businesses around marketsupdate to how the CODM assesses performance and customersallocates resources for the Company madeCompany’s business segments. The changes included the following changes:1.Integrated the former Renewable Energy Division into existing divisions;2.Combined two divisions to form the Automotive and Aerospace Solutions Division; and3.Consolidated U.S. customer account activity - impacting dual credit reportingIntegration of former Renewable Energy Division·The (i) solar and wind and (ii) energy product lines (along with certain technology previously included in Corporate and Unallocated) of the former Renewable Energy Division (RED) were integrated into the existing Electrical Markets Division and Electronics Materials Solutions Division, respectively, within the Electronics and Energy business segment. In addition, the former RED’s window film product lines were moved into the Commercial Solutions Division within the Safety and Graphics business segment. This change resulted in a decrease in previously reported net sales and operating income for total year 2016 of $203 million and $38 million, respectively, in the Electronics and Energy segment. These decreases were offset by a $207 million and $29 million increase in previously reported total year 2016 net sales and operating income, respectively, in the Safety and Graphics business segment and a $4 million decrease and $9 million increase in previously reported net sales and operating income, respectively, in Corporate and Unallocated.Creation of Automotive and Aerospace Solutions Division·The former Automotive Division and Aerospace and Commercial Transportation Division (both within the Industrial business segment) were combined to create the Automotive and Aerospace Solutions Division. Because this realignment was within the Industrial business segment, it had no impact on business segment reporting.Consolidation of U.S. customer account activity - impacting dual credit reporting·The Company consolidated its customer account activity in the U.S. into more centralized sales districts to better serve customers. As discussed further below, 3M business segment reporting measures include dual credit to business segments for certain U.S. sales and related operating income. This dual credit is based on which business segment provides customer account activity (“sales district”) with respect to a particular product sold in the U.S. Previously, a customer in the U.S. may have been aligned to several sales districts associated with multiple divisions or segments based on the individual products the customer purchased across 3M’s portfolio. The alignment of U.S. customer accounts to fewer, more focused sales districts therefore changed the attribution of dual credit across 3M’s business segments. As a result, previously reported aggregate business segment net sales and operating income for total year 2016 increased $163 million and $36 million, respectively, offset by similar increases in the elimination of dual credit net sales and operating income amounts.the precedingthese business segment reporting changes for all periods presented.133
3M updated its business segment operating performance measure to reflect all gains/lossesfrom sales of PPE and other assets within Corporate and Unallocated. Previously, certain of these gains/losses were included in 3M’s business segments’ operating performance.Business Segment Representative revenue-generating activities, products or services Business SegmentMajor ProductsTapes, coated, nonwoven abrasives and bonded abrasives, adhesives, advanced ceramics, sealants, specialty materials, filtration products, closurefinishing for metalworking applicationsacoustic systemsmasking, and packaging materialsautomotive components, abrasion-resistant films, structuraland materials for construction and maintenance, power distribution and electrical original equipment manufacturers (OEMs)paint finishing and detailing productsSafety and GraphicsPersonal protection products, transportation safety products, commercial graphics systems, commercial cleaning and protection products, floor matting, roofing granules for asphalt shingles,tapesproductssolutionsTransportation and Electronics Medicalsurgical supplies, skin healthreimbursement softwaredrug deliveryand solutions dental and orthodontic products, health information systems and food safety productsConsumer ElectronicsEnergyOptical films solutions for electronic displays, packaging and interconnection devices, insulating and splicing solutionsconsumer respiratorselectronics, telecommunications and electrical industries, touch screens and touch monitors, renewable energy component solutions, and infrastructure protectionhomeConsumerSponges, scouring pads, high-performance cloths, consumer and office tapes, repositionable notes, indexing systems, home improvement products, home care products, protective material products, picture hanging and consumer and office tapes and adhesivesNet Sales (Millions) 2023 2022 2021 Safety and Industrial $ 10,956 $ 11,604 $ 11,981 Transportation and Electronics 8,501 8,902 9,262 Health Care 8,195 8,427 8,601 Consumer 5,026 5,292 5,509 Corporate and Unallocated 3 4 2 Total Company $ 32,681 $ 34,229 $ 35,355 Operating Performance (Millions) 2023 2022 2021 Safety and Industrial $ 2,324 $ 1,135 $ 2,460 Transportation and Electronics 1,312 973 1,869 Health Care 1,603 1,799 2,034 Consumer 904 978 1,164 Total business segment operating income (loss) 6,143 4,885 7,527 Corporate and Unallocated Corporate special items: Net costs for significant litigation (14,785) (877) 214 Divestiture costs (496) (60) — Gain on business divestitures 36 2,724 — Divestiture-related restructuring actions — (41) — Russia exit (charges) benefits 18 (109) — Total corporate special items (15,227) 1,637 214 Other corporate (expense) income - net (44) 17 (372) Total Corporate and Unallocated (15,271) 1,654 (158) Total Company operating income (loss) (9,128) 6,539 7,369 Other expense/(income), net 560 147 165 Income (loss) before income taxes $ (9,688) $ 6,392 $ 7,204 Assets Depreciation & Amortization Capital Expenditures (Millions) 2023 2022 2023 2022 2021 2023 2022 2021 Safety and Industrial $ 11,212 $ 11,774 $ 530 $ 566 $ 593 $ 285 $ 512 $ 339 Transportation and Electronics 6,826 6,485 537 410 419 723 562 453 Health Care 13,315 13,364 597 623 636 228 272 249 Consumer 2,625 2,774 160 148 147 105 146 109 Corporate and Unallocated 16,602 12,058 163 84 120 274 257 453 Total Company $ 50,580 $ 46,455 $ 1,987 $ 1,831 $ 1,915 $ 1,615 $ 1,749 $ 1,603 unallocated operating income includesUnallocated. Accounts receivable and inventory are attributed based on underlying sales or activity. Property, plant and equipment are attributed to a variety of miscellaneousparticular business segment based on that item’s primary user while certain items such as corporate-shared headquarters/administrative centers, laboratories, distribution centers and enterprise software systems are reflected in Corporate and Unallocated. Intangible assets and goodwill are largely directly associated with a particular reporting unit and attributed on that basis. Business segment depreciation reflected above is based on the underlying usage of assets (while the particular asset itself may be entirely reflected within a different business segment’s asset balance as its primary user). This depreciation also includes allocated depreciation associated with a number of the assets reflected in Corporate and Unallocated as described above.investment gainsexpense-net”. Corporate special items include net costs for significant litigation impacting operating income (loss) associated with PFAS-related other environmental and losses, certain derivative gainsCombat Arms Earplugs matters. In addition, during the voluntary chapter 11 bankruptcy period (which began in July 2022 and losses, certain insurance-related gainsended in June 2023—see Note 18), costs associated with the Aearo portion of respirator mask/asbestos matters were also included in corporate special items. Prior to the bankruptcy, costs associated with Combat Arms Earplugs matters were not included in the Corporate net costs for significant litigation special item, instead being reflected in the Safety and losses, certain litigationIndustrial business segment. Corporate special items also include divestiture costs, gain/loss on business divestitures (see Note 3), divestiture-related restructuring costs (see Note 5), and environmental expenses,Russia exit costs/ benefits (see Note 17). Divestiture costs include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture. Other corporate restructuring chargesexpense-net includes items such as net costs related to limited unallocated corporate staff and certain under- or over-absorbedcentrally managed material resource centers of expertise costs, (e.g. pension, stock-based compensation)corporate philanthropic activity, gains/lossesfrom sales of PPE and other assets, and other net costs that the Company3M may choose not to allocate directly to its business segments. Other corporate expense-net also includes costs and income during the term of transition supply, manufacturing, and service arrangements with divested businesses. Items classified as revenue from this activity are included in Corporate and Unallocated net sales. Because this categoryCorporate and Unallocated includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.3M business segment reporting measures include dual credit to business segments for certain U.S. sales and related operating income. Management evaluates each of its five business segments based on net sales and operating income performance, including dual credit U.S. reporting to further incentivize U.S. sales growth. As a result, 3M reflects additional (“dual”) credit to another business segment when the customer account activity (“sales district”) with respect134to the particular product sold to the external customer in the U.S. is provided by a different business segment. This additional dual credit is largely reflected at the division level. For example, certain respirators are primarily sold by the Personal Safety Division within the Safety and Graphics business segment; however, a sales district within the Industrial business segment provides the contact for sales of the product to particular customers in the U.S. market. In this example, the non-primary selling segment (Industrial) would also receive credit for the associated net sales initiated though 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 for the U.S. in total are unchanged.Certain sales and operating income results for electronic bonding product lines are equally divided between the Electronics and Energy business segment and the Industrial business segment.Asia Pacific included China/Hong Kong Refer to Note 2 for geographic net sales to customers of $3.255 billion, $2.799 billionsales.Property, Plant and Equipment - net (Millions) 2023 2022 Americas $ 6,179 $ 6,066 Asia Pacific 1,267 1,389 Europe, Middle East and Africa 1,713 1,723 Total Company $ 9,159 $ 9,178 $2.945 billion in 2017, 2016,equipment (PPE) was $5,766 million and 2015,$5,662 million at December 31, 2023 and 2022, respectively. China/Hong Kong net property, plant and equipment (PP&E)PPE was $541$486 million and $520$518 million at December 31, 20172023 and 2016,2022, respectively.NOTE 19. Quarterly Data (Unaudited)Gross profit is calculated as net sales minus cost of sales. Fourth quarter and year 2017 were impacted by the enactment of the Tax Cuts and Jobs Act in December 2017, which reduced net income by $762 million and reduced diluted earnings per share by $1.25 in the fourth quarter and $1.24 for year 2017. Refer to Note 9 for additional details.135Disclosure.2017,2023, the Company’s internal control over financial reporting is effective. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 excluded Scott Safety, which was acquired by the Company in October 2017 in a purchase business combination. Scott Safety is a wholly-owned subsidiary whose total assets and total net sales represented less than 1 percent of the Company’s consolidated financial statement amounts as of and for the year ended December 31, 2017. Companies are allowed to exclude acquisitions from their assessment of internal control over financial reporting during the first year of acquisition while integrating the acquired company under guidelines established by the Securities and Exchange Commission. The Company’s internal control over financial reporting as of December 31, 20172023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.is implementingcontinues to implement new business systems and solutions, including an enterprise resource planning (“ERP”) system on a worldwide basis,(ERP), which isare expected to improve the efficiency of certain financial and related transactionbusiness processes. The gradual implementation isThese implementations are expected to occur on an on-going basis as opportunities and needs are identified and addressed. The implementations, in phases over the next several years. The implementation of a worldwide ERP system will likelycertain cases, may affect the processes that constitute ourthe Company’s internal control over financial reporting and will require testing for effectiveness.elements of certainvarious processes/sub-processes in limitedcertain subsidiaries/locations, including aspects relative to the United States, and will continue to roll-out the ERP systemimplementations over the next several years. As with any new information technology application we implement, this application,the Company implements, these applications, along with the internal controlscontrol over financial reporting included in this process, wasthese processes, were appropriately considered within the testing for effectiveness with respect to the implementation in these instances. WeThe Company concluded, as part of ourits evaluation described in the above paragraphs, that the implementation of ERP in these circumstances has not materially affected ourits internal control over financial reporting.1362017)2023) for its annual meeting to be held on May 8, 2018,14, 2024, are incorporated by reference in this Form 10-K.8, 201814, 2024 (“3M Proxy Statement”) and is incorporated by reference herein. Information about executive officers is included in Item 1 of this Annual Report on Form 10-K. The information required by Items 405, 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is contained under the captions “Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance Atgovernance at 3M — Board Membership Criteriamembership criteria — Identification, Evaluation,evaluation, and Selectionselection of Nominees,,nominees,” “—Nominees Proposed By Stockholders,Shareholder nominations,” “—Stockholder Nominations”,Shareholder nominations – advance notice bylaw,” “—Shareholder nominations – universal proxy rules,” and “—Proxy Access Nominations” and “—Role of the Nominating and Governance Committee”access nominations” and “Corporate Governance Atgovernance at 3M --– Board Committeescommittees – Audit Committee” of the 3M Proxy Statement and such information is incorporated by reference herein.(http:(https://www.3M.com/businessconduct)3M/en_US/ethics-compliance). At the same website, any future amendments to the code of ethics will also be posted. Any person may request a copy of the code of ethics, at no cost, by writing to us at the following address:3M Company 3M Center, Building 220-11W-09 St. Paul, MN 55144-1000 Attention: Senior Vice President, 3M Ethics & Compliance and Business ConductCompensation”compensation” (excluding the information under the caption “— Compensation and Talent Committee Report”report”) and “Director Compensationcompensation” and Stock Ownership Guidelines”“Stock retention requirement” of the 3M Proxy Statement. Such information is incorporated by reference.“Executive Compensation”Executive compensation section under the captions “Compensation and Talent Committee Report”report” and “Compensation and Talent Committee Interlocksinterlocks and Insider Participation”insider participation” of the 3M Proxy Statement. Such information (other than the Compensation and Talent Committee Report, which shall not be deemed to be “filed”) is incorporated by reference.137Matters.designationcaptions “Security Ownershipownership of Management”management” and “Security Ownershipownership of Certain Beneficial Owners”certain beneficial owners” in the 3M Proxy Statement and such information is incorporated by reference herein.20172023 follows:Equity Compensation Plans Information (1)(1)In column B, the weighted-average exercise price is only applicable to stock options. In column C, the number of securities remaining available for future issuance for stock options, restricted stock units, and stock awards for non-employee directors is approved in total and not individually with respect to these items.A B C Plan Category (options and shares in thousands) Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted- average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) Equity compensation plans approved by security holders Stock options 34,683 $ 167.38 — Restricted stock units 3,798 — Performance shares 360 — Non-employee director deferred stock units 242 — Total 39,083 26,648 Employee stock purchase plan — 18,945 Subtotal 39,083 45,593 Total 39,083 45,593 sectioncaptions “Corporate Governancegovernance at 3M” under the captions “Director Independence”3M — Board membership criteria — Director independence,” and “Related Person Transaction Policy“Corporate governance at 3M — Corporate governance practices and Procedures”policies — Related person transaction policy and procedures” of the 3M Proxy Statement and such information is incorporated by reference herein.Committee Matters”committee matters” under the designation “Audit Committee Policycommittee policy on Pre-Approvalpre-approval of Auditaudit and Permissible Non-Audit Servicespermissible non-audit services of the Independent Accounting Firm”independent accounting firm” and “Fees of the Independent Accounting Firm”independent accounting firm” in the 3M Proxy Statement and such information is incorporated by reference herein.138Exhibit numbers 10.1 through 10.26 are management contracts or compensatory plans or arrangements. See (b) Exhibits, which follow.indentures:indentures(4.3) (10.6)(10.7)(10.7)* (10.8)* (10.8)139(10.9)(10.11)(10.12)(10.13)(10.14)(10.15)(10.16)(10.17)(10.18)(10.19)(10.16)* (10.20)(10.21)(10.22)(10.20)* (10.23)(10.24)(10.25)(10.26)3Policy on Reimbursement of Incentive Compensation (effective May 11, 2010) is incorporated by reference from our Form 10-Q dated August 4, 2010.(10.27)(10.28)(10.26)* (10.27)* (10.28)* (10.29) (10.30) (10.31) (10.32) (10.33) (10.34) (12)(21)140
________________________(101.INS)(101.INS) Inline XBRL Instance Document.Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)Document.Document.Document.Document.
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)Summary.A Form 10-K summary is provided at the beginning of this document, with hyperlinked cross-references. This allows users to easily locate the corresponding items in Form 10-K, where the disclosure is fully presented. The summary does not include certain Part III information that is incorporated by reference from a future proxy statement filing.1413M COMPANY By Nicholas C. GangestadMonish Patolawala, Nicholas C. Gangestad,Senior Vice President and Chief Financial Officer (Principal Financial Officer) February 8, 20187, 20248, 2018.Signature Title SignatureTitleInge G. ThulinPresident and Chief Executive Officer
(PrincipalIppocratis VrohidisSondra L. BarbourDirectorVance D. CoffmanDirector David B. Dillon Herbert L. HenkelMuhtar KentDirectorEdward M. LiddyPatricia A. WoertzDirector Thomas Sweet Director Nicholas C. Gangestad,By /s/ Nicholas C. GangestadNicholas C. Gangestad, 142