The location in the consolidated statements of income and comprehensive income and amounts of gains and losses related to derivative and nonderivative instruments designated as net investment hedges are as follows. There were no0 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		Ineffective Portion of Gain (Loss) on
	Comprehensive Income		Instrument and Amount Excluded
	on Effective Portion of		from Effectiveness Testing
Three months ended September 30, 2017	Instrument		Recognized in Income

						Pretax Gain (Loss) Recognized				Amount of Gain (Loss) Excluded
						as Cumulative Translation within				from Effectiveness Testing
						Other Comprehensive Income				Recognized in Income
							Three months ended March 31,			Three months ended March 31,
						2021		2020			2021		2020
(Millions)	Amount		Location	Amount		Amount		Amount		Location	Amount		Amount
Foreign currency denominated debt	$	(179)	N/A	$	—	$	167	$	15	Cost of sales	$	—	$	—
Foreign currency forward contracts		(9)	Cost of sales		1		2		1	Cost of sales		(1)		5
Total	$	(188)		$	1	$	169	$	16		$	(1)	$	5

Nine months ended September 30, 2017

Comprehensive Income

Instrument and Amount Excluded

(Millions)

Amount

Location

Amount

Foreign currency denominated debt

$
(570)

N/A

$
—

Foreign currency forward contracts

(36)

Cost of sales

6

Total

$
(606)

$
6


~~Three months ended September 30, 2016~~	~~Comprehensive Income~~		~~Instrument and Amount Excluded~~
~~(Millions)~~	~~Amount~~		~~Location~~	~~Amount~~
~~Foreign currency denominated debt~~	$	~~(55)~~	~~N/A~~	$	—
~~Foreign currency forward contracts~~		~~(14)~~	~~Cost of sales~~		—
~~Total~~	$	~~(69)~~		$	—

Nine months ended September 30, 2016

Comprehensive Income

Instrument and Amount Excluded

(Millions)

Amount

Location

Amount

Foreign currency denominated debt

$
(105)

N/A

$
—

Foreign currency forward contracts

(41)

Cost of sales

1

Total

$
(146)

$
1

Derivatives Not Designated as Hedging Instruments:

Derivatives not designated as hedging instruments include dedesignated foreign currency forward and option contracts that formerly were designated in cash flow hedging relationships (as referenced in the Cash Flow Hedges section above). In addition, 3M enters into foreign ~~exchange forward~~currency contracts that are not designated in ~~hedge~~hedging relationships to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany transactions and to further mitigate short-term currency impacts. In addition, the Company enters into commodity price swaps to offset, in part, fluctuations in costs associated with the use of certain 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.

The Company revised amounts previously presented in the table below for the gain (loss) on derivatives recognized in income for the three and nine months ended September 30, 2016 relative to foreign currency forward contracts. This immaterial correction decreased the previously presented amount of the gain recognized in income in the disclosure table below by $4 million and $22 million for the three and nine months ended September 30, 2016, respectively. This revision had no impact on the Company’s consolidated results of operations, financial condition, or cash flows.

~~Table of Contents~~

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


	Three months ended September 30, 2017			Nine months ended September 30, 2017
	Gain (Loss) on Derivative Recognized in			Gain (Loss) on Derivative Recognized in
	Income			Income

							Gain (Loss) on Derivative Recognized in Income
							Three months ended March 31,
								2021		2020
(Millions)	Location	Amount		Location	Amount		Location	Amount		Amount
Foreign currency forward/option contracts	Cost of sales	$	3	Cost of sales	$	8	Cost of sales	$	—	$	4
Foreign currency forward contracts	Interest expense		(67)	Interest expense		(163)	Interest expense		22		(16)
Total		$	(64)		$	(155)		$	22	$	(12)

Three months ended September 30, 2016

Nine months ended September 30, 2016

Gain (Loss) on Derivative Recognized in

Gain (Loss) on Derivative Recognized in

Income

Income

(Millions)

Location

Amount


Location

Amount

Foreign currency forward/option contracts

Cost of sales

$
(1)

Cost of sales

$
(7)

Foreign currency forward contracts

Interest expense

17

Interest expense

41

Total

$
16

$
34

3123

Table of Contents

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

The location in the consolidated statement of income and pre-tax amounts recognized in income related to derivative instruments designated in a cash flow or fair value hedging relationship are as follows:


	Location and Amount of Gain (Loss) Recognized in Income				Location and Amount of Gain (Loss) Recognized in Income
	Three months ended March 31, 2021				Three months ended March 31, 2020
(Millions)	Cost of sales		Other expense (income), net		Cost of sales		Other expense (income), net
Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of cash flow or fair value hedges are recorded	$	4,525	$	49	$	4,109	$	75

The effects of cash flow and fair value hedging:
Gain or (loss) on cash flow hedging relationships:
Foreign currency forward/option contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income	$	(7)	$	—	$	18	$	—
Interest rate contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into income		—		(2)		—		(2)

Gain or (loss) on fair value hedging relationships:
Interest rate contracts:
Hedged items	$	—	$	2	$	—	$	(2)
Derivatives designated as hedging instruments		—		(2)		—		2

Table of Contents

Location and Fair Value Amount of Derivative Instruments

The following tables summarize the fair value of 3M’s derivative instruments, excluding nonderivative instruments used as hedging instruments, and their location in the consolidated balance sheet. Notional amounts below are presented at period end foreign exchange rates, except for certain interest rate swaps, which are presented using the ~~contract~~ inception date’s foreign exchange rate. Additional information with respect to the fair value of derivative instruments is included in Note ~~11.~~13.


	Gross		Assets			Liabilities
September 30, 2017	Notional			Fair			Fair
(Millions)	Amount		Location	Value Amount		Location	Value Amount

									Gross		Assets			Liabilities
									Notional			Fair			Fair
March 31, 2021 (Millions)									Amount		Location	Value Amount		Location	Value Amount
Derivatives designated as
hedging instruments
Foreign currency forward/option contracts	$	2,215	Other current assets	$	12	Other current liabilities	$	80	$	1,656	Other current assets	$	36	Other current liabilities	$	38
Foreign currency forward/option contracts		1,431	Other assets		24	Other liabilities		52		685	Other assets		21	Other liabilities		10
Interest rate swap contracts		450	Other current assets		—	Other current liabilities		1
Interest rate swap contracts		1,303	Other assets		22	Other liabilities		2
Interest rate contracts										403	Other current assets		5	Other current liabilities		—
Total derivatives designated as hedging instruments				$	58		$	135				$	62		$	48


Derivatives not designated as
hedging instruments
Foreign currency forward/option contracts	$	6,414	Other current assets	$	19	Other current liabilities	$	47	$	3,487	Other current assets	$	22	Other current liabilities	$	15
Total derivatives not designated as hedging instruments				$	19		$	47				$	22		$	15


Total derivative instruments				$	77		$	182				$	84		$	63


	Gross		Assets			Liabilities
	Notional			Fair			Fair
December 31, 2020 (Millions)	Amount		Location	Value Amount		Location	Value Amount
Derivatives designated as
hedging instruments
Foreign currency forward/option contracts	$	1,630	Other current assets	$	14	Other current liabilities	$	67
Foreign currency forward/option contracts		669	Other assets		10	Other liabilities		25
Interest rate contracts		403	Other current assets		7	Other current liabilities		—
Total derivatives designated as hedging instruments				$	31		$	92

Derivatives not designated as
hedging instruments
Foreign currency forward/option contracts	$	3,166	Other current assets	$	13	Other current liabilities	$	14
Total derivatives not designated as hedging instruments				$	13		$	14

Total derivative instruments				$	44		$	106

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 ~~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 ~~September 30, 2017,~~March 31, 2021, 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

~~Table of Contents~~

downgraded to a predetermined rating). The Company does not anticipate nonperformance by any of these counterparties.

Table of Contents

3M has elected to present the fair value of derivative assets and liabilities within the Company’s consolidated balance sheet on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. However, the following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties. For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period based on the 3M entity that is a party to the transactions. Derivatives not subject to master netting agreements are not eligible for net presentation. As of the applicable dates presented below, no cash collateral had been received or pledged related to these derivative instruments.

Offsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties


			Gross Amounts not Offset in the
			Consolidated Balance Sheet that are Subject
	Gross Amount of		to Master Netting Agreements
	Derivative Assets		Gross Amount of
	Presented in the		Eligible Offsetting
September 30, 2017	Consolidated		Recognized		Cash Collateral		Net Amount of
(Millions)	Balance Sheet		Derivative Liabilities		Received		Derivative Assets

											Gross Amounts not Offset in the
											Consolidated Balance Sheet that are Subject
									Gross Amount of		to Master Netting Agreements
									Derivative Assets		Gross Amount of
									Presented in the		Eligible Offsetting		Cash
									Consolidated		Recognized		Collateral		Net Amount of
March 31, 2021 (Millions)									Balance Sheet		Derivative Liabilities		Received		Derivative Assets
Derivatives subject to master netting agreements	$	77	$	34	$	—	$	43	$	84	$	34	$	—	$	50
Derivatives not subject to master netting agreements		—						—		—						—
Total	$	77					$	43	$	84					$	50


December 31, 2016
(Millions)

December 31, 2020 (Millions)
Derivatives subject to master netting agreements	$	259	$	39	$	—	$	220	$	44	$	11	$	—	$	33
Derivatives not subject to master netting agreements		—						—		—						—
Total	$	259					$	220	$	44					$	33

Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties


			Gross Amounts not Offset in the
			Consolidated Balance Sheet that are Subject
	Gross Amount of		to Master Netting Agreements
	Derivative Liabilities		Gross Amount of
	Presented in the		Eligible Offsetting
September 30, 2017	Consolidated		Recognized		Cash Collateral		Net Amount of
(Millions)	Balance Sheet		Derivative Assets		Pledged		Derivative Liabilities

											Gross Amounts not Offset in the
											Consolidated Balance Sheet that are Subject
									Gross Amount of		to Master Netting Agreements
									Derivative Liabilities		Gross Amount of
									Presented in the		Eligible Offsetting		Cash		Net Amount of
									Consolidated		Recognized		Collateral		Derivative
March 31, 2021 (Millions)									Balance Sheet		Derivative Assets		Pledged		Liabilities
Derivatives subject to master netting agreements	$	182	$	34	$	—	$	148	$	63	$	34	$	—	$	29
Derivatives not subject to master netting agreements		—						—		—						—
Total	$	182					$	148	$	63					$	29


December 31, 2016
(Millions)

December 31, 2020 (Millions)
Derivatives subject to master netting agreements	$	93	$	39	$	—	$	54	$	106	$	11	$	—	$	95
Derivatives not subject to master netting agreements		2						2		—						—
Total	$	95					$	56	$	106					$	95

~~Table of Contents~~

Currency Effects

3M estimates that year-on-year foreign currency transaction effects, including hedging impacts, decreased pre-tax income by approximately ~~$34 million and $99~~$10 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively.~~March 31, 2021. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate ~~risks and any impacts from swapping Venezuelan bolivars into U.S. dollars.~~risks.

Table of Contents

NOTE ~~11.~~13. Fair Value Measurements

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

In addition to the information above, refer to Note 15 in 3M’s 2020 Annual Report on Form 10-K for 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 independentqualitative discussion 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.

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

~~For 3M,~~ assets and liabilities that are measured at fair value on a recurring ~~basis primarily relate to available-for-sale marketable securities~~ and certain derivative instruments. 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 recurringnonrecurring basis, ~~for the three and nine months ended September 30, 2017 and 2016.~~

~~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~~by 3M, and ~~liabilities measured at fair value.~~

~~Available-for-sale marketable securities — except certain U.S. municipal securities:~~

Marketable securities, except certain U.S. municipal securities, are valued utilizing multiple sources. A weighted average market price is used for these securities. Market prices are obtained for these securities from a variety of industry standard data providers, security master files from large financial institutions, and other third-party sources. These multiple prices are used as inputs into a distribution-curve-based algorithm to determine the daily fair value to be used. 3M classifies U.S. treasury securities as level 1, while all other marketable securities (excluding certain U.S. municipal securities) are classified as level 2. Marketable securities are discussed further in Note 7.

~~Available-for-sale marketable securities — certain U.S. municipal securities only:~~

In both 2016 and 2014, 3M obtained municipal bonds from the City of Nevada, Missouri, which represents 3M’s only U.S. municipal securities holding as of September 30, 2017 and December 31, 2016. Due to the nature of this security,categorization within the valuation method utilized will include the financial health 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, and as such has been classified as a level 3 security.

~~Table of Contents~~

~~Derivative instruments:~~

~~The Company’s derivative assets and liabilities within the scope~~framework of ASC ~~815,~~ ~~Derivatives and Hedging~~, are required to be recorded at fair value. The Company’s derivatives that are recorded at fair value include foreign currency forward and option contracts, 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.820.

3M has determined that foreign currency forwards, commodity price swaps, currency swaps, foreign currency options, 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 or 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.

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


			Fair Value Measurements

											Fair Value Measurements
Description	Fair Value at		Using Inputs Considered as						Fair Value at		Using Inputs Considered as
(Millions)	September 30, 2017		Level 1		Level 2		Level 3		March 31, 2021		Level 1		Level 2		Level 3
Assets:
Available-for-sale:
Marketable securities:
Corporate debt securities	$	10	$	—	$	10	$	—	$	7	$	—	$	7	$	—
Commercial paper		446		—		446		—		384		—		384		—
Certificates of deposit/time deposits		84		—		84		—		7		—		7		—
Asset-backed securities:
Automobile loan related		14		—		14		—
Credit card related		29		—		29		—
U.S. treasury securities										100		100		—		—
U.S. municipal securities		20		—		—		20		34		—		—		34
Derivative instruments — assets:
Foreign currency forward/option contracts		55		—		55		—		79		—		79		—
Interest rate swap contracts		22		—		22		—

Interest rate contracts										5		—		5		—

Liabilities:
Derivative instruments — liabilities:
Foreign currency forward/option contracts		179		—		179		—		63		—		63		—
Interest rate swap contracts		3		—		3		—


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

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

3527

Table of Contents

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

—

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~~(level 3).


	Three months ended				Nine months ended

									Three months ended
Marketable securities — certain U.S. municipal securities only	September 30,				September 30,				March 31,
(Millions)	2017		2016		2017		2016		2021		2020
Beginning balance	$	20	$	18	$	20	$	12	$	34	$	46
Total gains or losses:
Included in earnings		—		—		—		—		0		0
Included in other comprehensive income		—		—		—		—		0		0
Purchases and issuances		—		—		—		6		0		10
Sales and settlements		—		—		—		—		0		(19)
Transfers in and/or out of level 3		—		—		—		—		0		0
Ending balance	$	20	$	18	$	20	$	18	$	34	$	37

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

In addition, the plan assets of 3M’s pension and postretirement benefit plans are measured at fair value on a recurring basis (at least annually). Refer to Note 1113 in 3M’s ~~Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016~~2020 Annual Report on Form ~~10-K).~~10-K.

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

Disclosures are required for certain assets and liabilities that are measured at fair value, ~~including those~~but are recognized and disclosed at fair value on a nonrecurring basis in periods subsequent to initial recognition. For 3M, such measurements of fair value relate primarily to ~~long-lived asset impairments. During the nine months ended September 30, 2017, the Company recognized approximately $40 million in~~indefinite-lived and long-lived asset impairments, ~~related to its Electronics~~goodwill impairments, and ~~Energy business segment, with~~adjustment in carrying value of equity securities for which the ~~complete carrying amount~~measurement 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 no0 material ~~long-lived asset~~ impairments of assets or adjustments to equity securities using the measurement alternative for the three months ended ~~September 30, 2017~~March 31, 2021. 3M reflected an immaterial charge related to impairment of certain indefinite-lived assets and a net charge of $22 million related to adjustment to the carrying value of equity securities using the measurement alternative during the three ~~and nine~~ months ended ~~September 30, 2016.~~March 31, 2020.

~~Table of Contents~~

Fair Value of Financial Instruments:

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

September 30, 2017

December 31, 2016

Carrying

Fair

Carrying

Fair

March 31, 2021

December 31, 2020

Carrying

Fair

Carrying

Fair

(Millions)

Value

Value

Long-term debt, excluding current portion

10,828

11,336

10,678

11,168

16,819

18,277

17,989

20,496

The fair values reflected above consider the terms of the related debt absent the impacts of ~~derivative and~~ derivative/hedging activity. The carrying amount of long-term debt referenced above is impacted by certain fixed-to-floating interest rate swaps that are designated as fair value hedges and by the designation of certain fixed rate Eurobond securities issued by the Company as hedging instruments of the Company’s net investment in its European subsidiaries. ~~Many~~A number of 3M’s fixed-rate bonds were trading at a premium at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 due to the ~~low~~lower interest rates and ~~tightening~~tighter credit spreads compared to issuance levels.

Table of ~~3M’s credit spreads.~~Contents

NOTE ~~12.~~14. Commitments and Contingencies

Legal Proceedings:

The Company and some of its subsidiaries are involved in numerous claims and lawsuits, principally in the United States, and regulatory proceedings worldwide. These claims, lawsuits and proceedings include, ~~various~~but are not limited to, products liability (involving products that the Company now or formerly manufactured and sold), intellectual property, commercial, antitrust, federal False Claims Act, securities, and ~~commercial claims~~state and ~~lawsuits, including those brought under the antitrust laws, and~~federal environmental ~~proceedings.~~laws. Unless otherwise stated, the Company is vigorously defending all such ~~litigation.~~litigation and proceedings. From time to time, the Company also receives subpoenas or requests for information from various government agencies. The Company generally responds to such subpoenas and requests in a cooperative, thorough and timely manner. These responses sometimes require time and effort and can result in considerable costs being incurred by the Company. Such subpoenas and requests can also lead to the assertion of claims or the commencement of administrative, civil or criminal legal proceedings against the Company and others, as well as to settlements. The outcomes of legal proceedings and regulatory matters are often difficult to predict. Any determination that the Company’s operations or activities are not, or were not, in compliance with applicable laws or regulations could result in the imposition of fines, civil or criminal penalties, and equitable remedies, including disgorgement, suspension or debarment or injunctive relief. Additional information about the Company’s process for disclosure and recording of liabilities and insurance receivables related to legal proceedings can be found in Note 1416 “Commitments and Contingencies” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016 as updated by the Company’s Current Report on Form 8-K dated May 4, 2017.~~2020.

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

Respirator Mask/Asbestos Litigation

As of ~~September 30, 2017,~~March 31, 2021, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in various courts that purport to represent approximately ~~2,330~~2,179 individual claimants, compared to approximately ~~2,660~~2,075 individual claimants with actions pending at December 31, ~~2016.~~2020.

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

~~Table of Contents~~

The Company’s current volume of new and pending matters is substantially lower than it experienced at the peak of filings in 2003. The Company expects that filing of claims by unimpaired claimants in the future will continue to be at much lower levels than in the past. Accordingly, the number of claims alleging more serious injuries, including mesothelioma, ~~and~~ other malignancies, and black lung disease, will represent a greater percentage of total claims than in the past. ~~The~~Over the past twenty plus years, the Company has prevailed in ~~all twelve cases taken to trial, including ten~~15 of the ~~eleven~~16 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 in 2018 described below). In ~~August 2016,~~2018, 3M received a ~~unanimous defense~~jury verdict ~~from~~in its favor in 2 lawsuits – 1 in California state court in February and the other in Massachusetts state court in December – both involving allegations that 3M respirators were defective and failed to protect the plaintiffs against asbestos fibers. In April 2018, a jury in state court in Kentucky infound 3M’s ~~first respirator trial involving~~8710 respirators failed to protect 2 coal miners from coal mine ~~dust. The estate~~dust and awarded compensatory damages of approximately $2 million and punitive damages totaling $63 million. In August 2018, the trial court entered judgment and the Company appealed. During March and April 2019, the Company agreed in principle to settle 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 harmful~~ coal mine ~~dust. The~~dust 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 from~~April 2018 in the Kentucky case mentioned above. That settlement was completed in 2019, and the appeal has been dismissed. In October 2020, 3M defended a respirator case before a jury in ~~state court~~King County, Washington, involving a former shipyard worker who alleged 3M’s 8710 respirator was defective and that 3M acted negligently in ~~Kentucky in 3M’s second respirator trial involving coal mine dust.~~failing to protect him against asbestos fibers. The jury ~~ultimately determined~~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 ~~claims were barred by the statute of limitations.~~mesothelioma. The plaintiff has filed a ~~motion for a new trial.~~notice of appeal.

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

Table of Contents

establish that their medical conditions, even if significant, are attributable to the Company’s respiratory protection products. Nonetheless, the Company’s litigation experience indicates that claims of persons ~~with malignant conditions~~alleging more serious injuries, including mesothelioma, other malignancies, and black lung disease, are costlier to resolve than the claims of unimpaired persons, and it therefore believes the average cost of resolving pending and future claims on a per-claim basis will continue to be higher than it experienced in prior periods when the vast majority of claims were asserted by medically unimpaired claimants. In addition, during the second half of 2020 and as of March 31, 2021, the Company has experienced an increase in the number of cases filed that allege injuries from exposures to coal mine dust.

As previously reported, the State of West Virginia, through its Attorney General, filed a complaint in 2003 against the Company and two other manufacturers of respiratory protection products in the Circuit Court of Lincoln County, West Virginia, and amended its complaint in 2005. The amended complaint seeks substantial, but unspecified, compensatory damages primarily for reimbursement of the costs allegedly incurred by the State for worker’s compensation and healthcare benefits provided to all workers with occupational pneumoconiosis and unspecified punitive damages. ~~The case was inactive from~~In October 2019, the ~~fourth quarter of 2007 until late 2013, other than a case management conference in March 2011.~~court granted the State’s motion to sever its unfair trade practices claim. In ~~November 2013,~~January 2020, the ~~State~~manufacturers filed a ~~motion to bifurcate~~petition with the ~~lawsuit into separate liability and damages proceedings. At~~West Virginia Supreme Court, challenging the ~~hearing on the motion, the court declined to bifurcate the lawsuit. No~~trial court’s rulings; that petition was denied in November 2020. NaN liability has been recorded for this matter because the Company believes that liability is not probable and estimable at this time. In addition, the Company is not able to estimate a possible loss or range of loss given the lack of any meaningful discovery responses by the State of West Virginia, the otherwise minimal activity in this case, and the ~~fact that the complaint asserts~~assertions 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 ~~might~~may allocate to each defendant if the case iswere ultimately tried.

Respirator Mask/Asbestos Liabilities and Insurance ~~Receivables:~~Receivables

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

Developments may occur that could affect the Company’s estimate of its liabilities. These developments include, but are not limited to, significant changes in (i) the key assumptions underlying the Company’s accrual, including, the number

~~Table of Contents~~

of future claims, the nature and mix of those claims, the average cost of defending and resolving claims, and in maintaining trial readiness (ii) trial and appellate outcomes, (iii) the law and procedure applicable to these claims, and (iv) the financial viability of other co-defendants and insurers.

As a result of its review of its respirator mask/asbestos liabilities, of pending and expected lawsuits and of the cost of resolving claims of persons who claim more serious injuries, including mesothelioma, other malignancies, and black lung disease, the Company increased its accruals in the first three months of 2021 for respirator mask/asbestos liabilities by $36 million. In the first ~~nine months~~quarter of ~~2017,~~2021, the Company made payments for legal ~~fees~~defense costs and settlements of ~~$44~~$19 million related to the respirator mask/asbestos ~~litigation, $10~~litigation. As previously disclosed, during the first quarter of 2019, the Company recorded a pre-tax charge of $313 million ~~of which occurred~~in conjunction with an increase in the ~~third quarter~~accrual as a result of ~~2017.~~the March and April 2019 settlements-in-principle of the coal mine dust lawsuits mentioned above and the Company’s assessment of other then current and expected coal mine dust lawsuits (including the costs to resolve all then current and expected coal mine dust lawsuits in Kentucky and West Virginia at the time of the charge). As of ~~September 30, 2017,~~March 31, 2021, the Company had an accrual for respirator mask/asbestos liabilities (excluding Aearo accruals) of ~~$551~~$679 million. This accrual represents the Company’s best estimate of probable loss and reflects an estimation period for future claims that may be filed against the Company approaching the year 2050. The Company cannot estimate the amount or upper end of the range of amounts by which the liability may exceed the accrual the Company has established because of the (i) inherent difficulty in projecting the number of claims that have not yet been asserted or the time period in which future claims may be asserted, (ii) the complaints nearly always assert claims against multiple defendants where the damages alleged are typically not attributed to individual defendants so that a defendant’s share of liability may turn on the law of joint and several liability, which can vary by state, (iii) the multiple factors described above that the Company considers in estimating its liabilities, and (iv) the several possible developments described above that may occur that could affect the Company’s estimate of liabilities.

Table of Contents

As of ~~September 30, 2017,~~March 31, 2021, the Company’s receivable for insurance recoveries related to the respirator mask/asbestos litigation was $4 million. The Company ~~is seeking~~continues to seek coverage under the policies of certain insolvent and other insurers. Once those claims for coverage are resolved, the Company will have collected substantially all of its remaining insurance coverage for respirator mask/asbestos claims.

Respirator Mask/Asbestos Litigation — Aearo Technologies

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

As of ~~September 30, 2017,~~March 31, 2021, Aearo and/or other companies that previously owned and operated Aearo’s respirator business (American Optical Corporation, Warner-Lambert LLC, AO Corp. and Cabot Corporation (“Cabot”)) are named defendants, with multiple co-defendants, including the Company, in numerous lawsuits in various courts in which plaintiffs allege use of mask and respirator products and seek damages from Aearo and other defendants for alleged personal injury from workplace exposures to asbestos, silica-related, coal mine dust, or other occupational dusts found in products manufactured by other defendants or generally in the workplace.

As of ~~September 30, 2017,~~March 31, 2021, the Company, through its Aearo subsidiary, had accruals of ~~$18~~$27 million for product liabilities and defense costs related to current and future Aearo-related asbestos, silica-related and ~~silica-related~~coal mine dust claims. This accrual represents the Company’s best estimate of Aearo’s probable loss and reflects an estimation period for future claims that may be filed against Aearo approaching the year 2050. The accrual was reduced by $37 million during the second quarter of 2020 after paying Aearo’s share of certain settlements under the informal arrangement described below. The accrual reflects the Company’s assessment of pending and expected lawsuits, its review of its respirator mask/asbestos liabilities, and the cost of resolving claims of persons who claim more serious injuries. Responsibility for legal costs, as well as for settlements and judgments, is currently shared in an informal arrangement among Aearo, Cabot, American Optical Corporation and a subsidiary of Warner Lambert and their respective insurers (the “Payor Group”). Liability is allocated among the parties based on the number of years each company sold respiratory products under the “AO Safety” brand and/or owned the AO Safety Division of American Optical Corporation and the alleged years of exposure of the individual plaintiff.

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

~~Table of Contents~~

In 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.

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

Because of the inherent difficulty in projecting the number of claims that have not yet been asserted, the complexity of allocating responsibility for future claims among the Payor Group, and the several possible developments that may occur that could affect the

Table of Contents

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

Environmental Matters and Litigation

The Company’s operations are subject to environmental laws and regulations including those pertaining to air emissions, wastewater discharges, toxic substances, and the handling and disposal of solid and hazardous wastes enforceable by national, state, and local authorities around the world, and private parties in the United States and abroad. These laws and regulations provide, under certain circumstances, a basis for the remediation of contamination, for capital investment in pollution control equipment, for restoration of or compensation for damages to natural resources, and for personal injury and property damage claims. The Company has incurred, and will continue to incur, costs and capital expenditures in complying with these laws and regulations, defending personal injury and property damage claims, and modifying its business operations in light of its environmental responsibilities. In its effort to satisfy its environmental responsibilities and comply with environmental laws and regulations, the Company has established, and periodically updates, policies relating to environmental standards of performance for its operations worldwide.

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

Environmental Matters

As previously reported, the Company has been voluntarily cooperating with ongoing reviews by local, state, federal (primarily the U.S. Environmental Protection Agency (EPA)), and international agencies of possible environmental and health effects of various perfluorinated compounds, including ~~perfluorooctanyl compounds such as~~ perfluorooctanoate ~~(“PFOA”)~~(PFOA), perfluorooctane sulfonate ~~(“PFOS”)~~(PFOS), perfluorohexane sulfonate (PFHxS), or ~~similar compounds (“PFCs”)~~other per- and polyfluoroalkyl substances (collectively PFAS). As a result of its phase-out decision in May 2000, the Company no longer manufactures ~~perfluorooctanyl~~certain PFAS compounds including PFOA, PFOS, PFHxS, and their pre-cursor compounds. The ~~company~~Company ceased manufacturing and

~~Table of Contents~~

using the vast majority of these compounds within approximately two years of the phase-out announcement and ceased all manufacturing and the last significant use of this chemistry by the end of 2008. The Company continues to manufacture a variety of shorter chain length PFAS compounds, including, but not limited to, pre-cursor compounds to perfluorobutane sulfonate (PFBS). These compounds are used as input materials to a variety of products, including engineered fluorinated fluids, fluoropolymers and fluorelastomers, as well as surfactants, additives, and coatings. Through its ongoing life cycle management and its raw material composition identification processes associated with the Company’s policies covering the use of all persistent and bio-accumulative materials, the Company continues to review, control or eliminate the presence of certain ~~PFCs~~PFAS in purchased materials or as byproducts in some of 3M’s current fluorochemical manufacturing processes, products, and waste streams.

Regulatory activities concerning ~~PFOA and/or PFOS~~PFAS continue in the United States, Europe and elsewhere, and before certain international bodies. These activities include gathering of exposure and use information, risk assessment, and consideration of regulatory approaches. In the European Union, where 3M has manufacturing facilities in countries such as Germany and Belgium, recent regulatory activities have included preliminary work on various restrictions under the Regulation concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), including the restriction of PFAS in certain usages and a broader restriction of PFAS as a class. As of December 2020, PFOA is subject to certain restrictions under EU’s Persistent Organic Pollutants (POPs) Recast Regulation. With respect to the applicability of the newly enacted POPs to certain manufacturing processes that create PFOA as an unintended and unavoidable byproduct designed to be removed through an emulsifier recycling process, Dyneon, a 3M subsidiary that operates a facility at Gendorf, Germany, proactively consulted with the relevant German regulatory authority. In response to the authority’s view that POPs may apply to those processes, Dyneon continues to communicate its position regarding POPs’ applicability, share technical process improvements that are in progress and discuss potential options if an agreement is not reached on the applicability of POPs.

In the United States, as the database of studies of both PFOA and PFOS has expanded, the EPA has developed human health effects documents summarizing the available data from these studies. In February 2014, the EPA initiated external peer review of its draft human health effects documents for PFOA and PFOS. The peer review panel met in August 2014. In May 2016, the EPA announced lifetime health advisory levels for PFOA and PFOS at 70 parts per trillion (ppt) (superseding the provisional levels established by the

Table of Contents

EPA in 2009 of 400 ppt for PFOA and 200 ppt for PFOS). Where PFOA and PFOS are found together, EPA recommends that the concentrations be added together, and the lifetime health advisory for PFOA and PFOS combined is also 70 ppt. Lifetime health advisories, ~~while not enforceable, serve as guidance~~which are non-enforceable and ~~are benchmarks for determining if~~non-regulatory, provide information about concentrations of ~~chemicals in tap~~drinking water ~~from public utilities~~contaminants at which adverse health effects are ~~safe for public consumption. In an effort~~not expected to occur over the specified exposure duration. To collect exposure information under the Safe Drinking Water Act, the EPA published on May 2, 2012 a list of unregulated substances, including ~~six PFCs,~~6 PFAS chemicals, required to be monitored during the period 2013-2015 by public water system suppliers to determine the extent of their occurrence. Through January 2017, the EPA reported results for 4,920 public water supplies nationwide. Based on the 2016 lifetime health advisory, 13 public water supplies exceed the level for PFOA and 46 exceed the level for PFOS (unchanged from the July 2016 EPA summary). A technical advisory issued by EPA in September 2016 on laboratory analysis of drinking water samples stated that 65 public water supplies had exceeded the combined level for PFOA and PFOS. These results are based on ~~one~~1 or more samples collected during the period 2012-2015 and do not necessarily reflect current conditions of these public water supplies. EPA reporting does not identify the sources of the PFOA and PFOS in the public water supplies.

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

As previously reported, the Company entered into a voluntary remedial action agreement with the Alabama Department of Environmental Management (ADEM) to ~~address~~remediate the presence of ~~PFCs~~PFAS 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 its~~historic (1978-1998) incorporation of wastewater treatment plant ~~sludge containing PFCs in fields at its Decatur facility. After a review~~sludge. 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 ~~over~~on the former sludge incorporation ~~areas on~~areas. Further remediation activities, including certain on-site and off-site investigations and studies, will be conducted in accordance with the ~~manufacturing site with subsequent groundwater migration controls and treatment. Implementation of that plan continues and is expected to be completed~~July 2020 Interim Consent Order described below in ~~2018.~~the “Other PFAS-related Matters” section.

The Company continues to work with the Minnesota Pollution Control Agency (MPCA) pursuant to the terms of the previously disclosed May 2007 Settlement Agreement and Consent Order to address the presence of certain ~~PFCs~~PFAS in the soil and groundwater at former disposal sites in Washington County, Minnesota (Oakdale and Woodbury) and at the Company’s manufacturing facility at Cottage Grove, Minnesota. Under this agreement, the Company’s principal obligations include (i) evaluating releases of certain ~~PFCs~~PFAS from these sites and proposing response actions; (ii) providing treatment or alternative drinking water upon identifying any level exceeding a Health Based Value ~~(“HBV”)~~(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) to be safe for human consumption over a lifetime) for certain ~~PFCs~~PFAS for which a HBV and/or HRL exists as a result of contamination from these sites; (iii) remediating identified sources of other ~~PFCs~~PFAS at these sites that are not controlled by actions to remediate PFOA and PFOS; and (iv) sharing information with the MPCA about certain perfluorinated compounds. During 2008, the MPCA issued formal decisions adopting remedial options for the former disposal sites in Washington County, Minnesota (Oakdale and Woodbury). In August 2009, the MPCA issued a formal decision adopting remedial options for the Company’s Cottage Grove manufacturing facility. During the spring and summer of 2010, 3M began implementing the agreed upon remedial options at the Cottage Grove and Woodbury sites.

~~Table of Contents~~

3M commenced the remedial option at the Oakdale site in late 2010. At each location the remedial options were recommended by the Company and approved by the MPCA. Remediation work has been completed at the Oakdale and Woodbury sites, and they are in an operational maintenance mode. Remediation ~~will continue~~work has been substantially completed at the Cottage Grove site, ~~during 2017.~~with operational and maintenance activities ongoing.

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

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

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

Table of Contents

“hazardous substances” under CERCLA. In November 2018, the EPA asked for public comment on draft toxicity assessments for 2 PFAS compounds, including PFBS. In April 2021, EPA released an updated toxicity assessment for PFBS. In February 2019, the EPA issued a PFAS Action Plan that outlines short- and long-term actions the EPA is taking to address PFAS – actions that include developing a national drinking water determination for PFOA and PFOS, strengthening enforcement authorities and evaluating cleanup approaches, nationwide drinking water monitoring for PFAS, expanding scientific knowledge for understanding and managing risk from PFAS, and developing consistent risk communication tools for communicating with other agencies and the public. With respect to groundwater contaminated with PFOA and PFOS, the EPA issued interim recommendations in December 2019, providing guidance for screening levels and preliminary remediation goals for groundwater that is a current or potential drinking water source, to inform final clean-up levels of contaminated sites. In February 2020, the EPA provided notice and requested public comment on certain preliminary determinations to regulate PFOA and PFOS under the Safe Drinking Water Act (SDWA). In June 2020, 3M submitted comments on EPA’s preliminary determinations to regulate PFOA and PFOS under the SDWA.

EPA announced in its Spring 2020 Regulatory Agenda, released in June 2020, that it intended to publish a notice of proposed rulemaking to designate PFOA and PFOS as hazardous substances under CERCLA in August 2020. In November 2020, EPA announced it was developing of a new analytical method to test for PFAS in wastewater and other environmental media. In December 2020, EPA released 2 new guidance documents related to PFAS. First, it issued a Draft Compliance Guide for Imported Articles Containing Surface Coatings Subject to the Long-Chain Perfluoroalkyl Carboxylate and Perfluoroalkyl Sulfonate Chemical Substances Significant New Use Rule. Second, EPA released for public comment interim guidance on destroying and disposing of certain PFAS and PFAS-containing materials. 3M has submitted comments on both guidance documents.

In March 2021, EPA published its intention to initiate a process to develop a national primary drinking water regulation for PFOA and PFOS; the process will include further analyses, scientific review and opportunities for public comment. EPA also announced in January 2021 that it will issue an advance notice of proposed rulemaking (ANPR) to solicit public comment on whether the agency should take additional regulatory steps to address PFAS contamination, including designating PFOA and PFOS and other PFAS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and seeking comment on whether PFOA and PFOS and other PFAS should be subject to regulation as hazardous waste under the Resource Conservation and Recovery Act (RCRA). EPA indicated it will also issue an ANPR to collect information regarding manufacturers of PFAS and the presence and treatment of PFAS in discharges from these facilities. In January 2021, the new federal Administration withdrew this EPA ANPR announcement. EPA also separately issued an ANPR in March 2021 to collect information regarding manufacturers of PFAS and the presence and treatment of PFAS in discharges from these facilities.

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

Several state legislatures and state agencies have been evaluating or have taken actions related to cleanup standards, groundwater values or drinking water values for PFOS, PFOA, and other PFAS, and 3M has submitted various responsive comments. Those states include the following:

Vermont finalized drinking water standards for a combination of PFOA, PFOS and 3 other PFAS in March 2020. New Jersey finalized drinking water standards and designated PFOA and PFOS as hazardous substances in June 2020. New York established drinking water standards for PFOA and PFOS in July 2020. New Hampshire established drinking water standards by legislation for certain PFAS, including PFOS and PFOA, in July 2020. Michigan implemented final drinking water standards for certain PFAS, including PFOS and PFOA, in August 2020. Massachusetts published final regulations establishing a drinking water standard relating to 6 combined PFAS in October 2020. Some other states have also been evaluating or have taken actions relating to PFOA, PFOS and other PFAS in products such as food packaging, carpets and other products. For example, in March 2021, California proposed listing PFOA and PFOS as carcinogens under its Proposition 65 law.

In October 2020, 3M and several other parties filed notices of appeal in the appellate division of the Superior Court of New Jersey to challenge the validity of the New Jersey PFOS and PFOA regulations. In January 2021, the appellate division of the court denied the

Table of Contents

group’s motion to stay the regulations, and the parties are proceeding to litigation on the merits. In March 2021, 3M and several other parties filed a lawsuit against the New York State Department of Health, urging that drinking water levels set by the agency for PFOS and PFOA be vacated.

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

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

As previously reported, a former employee filed a ~~purported~~putative class action lawsuit ~~in 2002~~against 3M, BFI Waste Management Systems of Alabama, and others in the Circuit Court of Morgan County, Alabama (the ~~St. John~~“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 parties have agreed to continue to stay the St. John case, pending ongoing mediation between the parties involved in this case and another case discussed below. NaN additional putative class actions filed in the same court ~~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 provisions of the state’s Workers Compensation Act. The plaintiffs’ counsel filed an amended complaint in November 2006, limiting the case to property damage claims on behalf of a purported class ofcertain 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,~~plant seeking unstated compensatory and punitive damages involving alleged damage to their property from emissions of certain perfluorochemical compounds from the Company’s Decatur, Alabama, manufacturing facility that formerly manufactured those compoundsrelief on similar grounds (the Chandler ~~case) granted~~case and the ~~Company’s motion to abate the~~Stover case, ~~effectively putting the case on hold~~respectively) are stayed 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 of the named plaintiffs and the members of a purported class. No further action in the case is expected unless and until the stay is lifted.

In February 2009, a resident of Franklin County, Alabama, filed a purported class action lawsuit in the Circuit Court of Franklin County (the Stover case) seeking compensatory damages and injunctive relief based on the application by the Decatur utility’s wastewater treatment plant of wastewater treatment sludge to farmland and grasslands in the state that allegedly contain PFOA, PFOS and other perfluorochemicals. The named plaintiff seeks to represent a class of 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~~

~~Table of Contents~~

5 local water works to which the Water Authority supplies water (collectively, the “Water Utilities”). The complaint seeks compensatory and punitive damages and injunctive relief based on allegations that the defendants’ chemicals, including PFOA and PFOS from their manufacturing processes in Decatur, have contaminated the water in the Tennessee River at the water intake, and that the chemicals cannot be removed by the water treatment processes utilized by the Water Authority. In ~~September 2016,~~April 2019, 3M and the ~~court granted 3M’s motion~~Water Authority settled the lawsuit for $35 million, which will fund a new water filtration system, with 3M indemnifying the Water Authority from liability resulting from the resolution of the currently pending and future lawsuits against the Water Authority alleging liability or damages related to ~~dismiss plaintiffs’ trespass~~3M PFAS. The putative class claims ~~with prejudice, negligence claims for personal injuries,~~brought by the representative plaintiffs who were supplied drinking water by the Water Authority (the “Lindsey” case) remain. The parties are in active discussions regarding a negotiated resolution, and ~~private nuisance claims, and denied~~ the ~~motion to dismiss the plaintiffs’ negligence claims for property damage, public nuisance, abatement of nuisance, battery and wantonness.~~case is currently stayed.

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

In ~~July~~August 2016, a group of over 200 plaintiffs filed a putative class action against West Morgan-East Lawrence Water and Sewer Authority (Water Authority), 3M, Dyneon, Daikin, BFI, and the City of ~~Lake Elmo filed a lawsuit~~Decatur in state court in Lawrence County, Alabama (the “Billings” case). Plaintiffs are residents of Lawrence, Morgan and other counties who are or have been customers of the ~~U.S. District Court for~~Water Authority. They contend defendants have released PFAS that contaminate the ~~District of Minnesota against 3M alleging that the City suffered damages from~~Tennessee River and, in turn, their drinking water, ~~supplies contaminated with PFCs, including costs~~causing damage to ~~construct alternative sources of drinking water. Trial is scheduled to begin in January 2019.~~

~~In September 2016, the Water Works~~their health 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 November 2016, the Town of Barnstable, Massachusetts 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.properties. In January 2017, the ~~County of Barnstable, Massachusetts, filed an individual action~~court 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 contaminationSt. John case, discussed above, stayed this litigation pending resolution of the ~~aquifer supplying drinking water~~St. John case. Plaintiffs in the Billings case have amended their complaint numerous times to add additional plaintiffs. There are now approximately 4,000 named plaintiffs. Mediation in the ~~Hyannis water system.~~Billings case is ongoing, but plaintiffs have moved to lift the stay, and that motion is set for hearing in May 2021.

In January 2017, several hundred plaintiffs sued 3M, ~~its subsidiary~~ Dyneon and Daikin ~~American~~America in Lawrence and Morgan Counties, ~~Alabama.~~Alabama (the “Owens” case). The plaintiffs are owners of property, residents, and holders of property interests who receive their water from the West Morgan-East Lawrence Water and Sewer Authority ~~(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

Table of Contents

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,~~ discharges ~~wastewater containing these chemicals~~ into the Tennessee River. The plaintiffs contend that, as a result of the alleged discharges, the water supplied by the Water Authority to the plaintiffs was, and is, contaminated with PFOA, PFOS and related chemicals at a level dangerous to humans. The court denied a motion by co-defendant Daikin to stay this case pending resolution of the St. John case, and the case is progressing through discovery.

In ~~May~~November 2017, a putative class action (the “King” case) was filed against 3M, Dyneon, Daikin America and the West Morgan-East Lawrence Water and Sewer Authority (Water Authority) in the U.S. District Court for the Northern District of Alabama. The plaintiffs are residents of Lawrence and Morgan County, Alabama who receive their water from the Water Authority and seek injunctive relief, attorneys’ fees, compensatory and punitive damages for their alleged personal injuries. The plaintiffs contend that the defendants own and operate manufacturing and disposal facilities in Decatur, Alabama that have released and continue to release PFOA, PFOS and related chemicals into the groundwater and surface water of their sites, resulting in discharges into the Tennessee River. The plaintiffs contend that, as a result of the alleged discharges, the water supplied by the Water Authority to the plaintiffs was, and is, contaminated with PFOA, PFOS and related chemicals at a level dangerous to humans. In November 2019, the King plaintiffs amended their complaint to withdraw all class allegations. Since then, the plaintiffs have added 37 new individual plaintiffs and voluntarily dismissed 5 plaintiffs (for a total of 55 plaintiffs). The case is scheduled for trial in June 2022, but the plaintiffs have sought to extend the case deadlines. The parties negotiated a revised schedule and proposed a July 2023 trial date, pending the court’s approval. Discovery in this case is proceeding.

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

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

Litigation Related to Historical PFAS Manufacturing Operations in Minnesota

In July 2016, the City of ~~Centre, Alabama~~Lake Elmo filed a lawsuit in the ~~Circuit~~U.S. District Court for the District of ~~Cherokee County Alabama~~Minnesota 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.

~~Table of Contents~~

As of September 30, 2017, eleven purported class actions have been filed against 3M and other defendants in federal or state courts - three in federal court in Colorado, four in federal court in Pennsylvania, and four in state court in New York. An individual complaint also has been filed in the federal court in Pennsylvania. The complaints seek unstated damages and other remedies, such as medical monitoring, and allegealleging that the ~~plaintiffs~~City suffered ~~personal injury and property damage~~damages from drinking water supplies contaminated with ~~certain PFCs used in Aqueous Film Forming Foam (AFFF) at current or former airports~~PFAS, including costs to construct alternative sources of drinking water. In April 2019, 3M and ~~air force military bases located in Colorado, Pennsylvania, and New York.~~the City of Lake Elmo agreed to settle the lawsuit for less than $5 million.

State Attorneys General Litigation related to PFAS

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

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

Table of Contents

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

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

New Jersey.In March 2019, the New Jersey Attorney General filed 2 actions against 3M, DuPont, and Chemours on behalf of ~~PFCs into~~ the ~~environment,~~New Jersey Department of Environmental Protection (NJDEP), the NJDEP’s commissioner, and ~~under MWPCA that~~the New Jersey Spill Compensation Fund regarding alleged discharges at 2 DuPont facilities in Pennsville, New Jersey (Salem County) and Parlin, New Jersey (Middlesex County). 3M is ~~responsible~~included as a defendant in both cases because it allegedly supplied PFOA to DuPont for ~~compensation~~use at the facilities at issue. Both cases expressly seek to have the defendants pay all costs necessary to investigate, remediate, assess, and restore the affected natural resources of New Jersey. DuPont removed these cases to federal court. In June 2020, the court consolidated the 2 actions, along with 2 others brought by the NJDEP relating to the DuPont facilities, for ~~future loss or destruction~~case management and pretrial purposes. In August 2020, the NJDEP filed second amended complaints. 3M has moved to dismiss those complaints. The parties have exchanged written discovery requests. The case is in early stages of ~~fish, aquatic life,~~litigation.

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

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

Vermont.In ~~November 2011,~~June 2019, the ~~Metropolitan Council~~Vermont Attorney General filed 2 lawsuits alleging contamination of the state’s drinking water supplies and other natural resources by PFAS chemicals. The first lawsuit was filed against 3M and 10 co-defendants, alleging PFAS contamination resulting from the use of AFFF products at several sites around the state. This case was removed to federal court and transferred to the AFFF MDL. The second suit asserts PFAS contamination from non-AFFF sources and names 3M and several entities related to DuPont and Chemours as defendants. This suit is proceeding in state court. In May 2020, the court denied the defendants’ motion to dismiss, but dismissed the state’s trespass claim as to property the state does not own. The parties are now engaged in discovery.

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

Table of Contents

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

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

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

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

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

Aqueous Film Forming Foam (AFFF) Environmental Litigation

3M manufactured and marketed AFFF for use in firefighting at airports and military bases from approximately 1963 to 2002. As of March 31, 2021, 1,076 lawsuits (including 26 putative class actions) alleging injuries or damages by AFFF use have been filed against 3M (along with other defendants) in various state and federal courts. As further described below, a vast majority of these pending cases are in a federal Multi-District Litigation (MDL) court in South Carolina. Additional AFFF cases continue to be filed in or transferred to the MDL. The Company also continues to defend certain AFFF cases that remain in state court and be in discussions with pre-suit claimants for possible resolutions where appropriate.

In December 2018, the U.S. Judicial Panel on Multidistrict Litigation (JPML) granted motions to transfer and consolidate all AFFF cases pending in federal courts to the U.S. District Court for the District of South Carolina to be managed in an MDL proceeding to centralize pre-trial proceedings. The parties in the ~~NRD Lawsuit seeking compensatory damages~~MDL are currently in the process of conducting discovery. An initial pool of 10 water supplier cases was selected in February 2021 for case-specific fact discovery as potential bellwether cases. After completion of such discovery, the parties and the MDL court will select a smaller set of these cases for expert discovery and to be tried as bellwethers.

In June 2019, several subsidiaries of Valero Energy Corporation, an independent petroleum refiner, filed 8 AFFF cases against 3M and other ~~legal, declaratory~~defendants, including DuPont/Chemours, National Foam, Buckeye Fire Equipment, and ~~equitable relief,~~Kidde-Fenwal, in various state courts. Plaintiffs seek damages that allegedly have been or will be incurred in investigating and remediating PFAS contamination at their properties and replacing or disposing of AFFF products containing long-chain PFAS. NaN of these cases have been removed to federal court and transferred to the AFFF MDL. NaN cases remain pending in state courts where they are in early stages of litigation, after Valero dismissed its Ohio state court action without prejudice in October 2019. The parties in the state court cases have agreed to stay all 5 cases until September 2021.

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

As of March 31, 2021, the Company is aware of 6 other AFFF suits originally filed in various state courts across the country in which the Company has been named a defendant. The Company is assessing whether these cases may be removed to federal court and transferred to the AFFF MDL. Separately, the Company is aware of pre-suit claims by other parties related to the use and disposal of

Table of Contents

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

Other PFAS-related Product and Environmental Litigation

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

In New York, 3M is defending 40 individual cases and 1 putative class action filed in the U.S. District Court for the Northern District of New York and 4 additional cases filed in New York state court against 3M, Saint-Gobain Performance Plastics Corp. (Saint-Gobain), Honeywell International Inc. and E.I. DuPont De Nemours and Co. (DuPont). The plaintiffs allege that 3M manufactured and sold PFOA that was used for manufacturing purposes at Saint-Gobain’s and Honeywell’s facilities located in the Village of Hoosick Falls and the Town of Hoosick. The plaintiffs claim that the ~~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~~drinking water around Hoosick Falls became contaminated with unsafe levels of PFOA due 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 pollutionactivities of the ~~waters~~defendants and ~~sediments of the Mississippi River. 3M did not object~~allege that they suffered bodily injury due to the ~~motion~~ingestion and inhalation of PFOA. The 4 state court cases also include Tonaga, Inc. (Taconic) as a defendant and make similar allegations related to ~~intervene. In January 2012, 3M answered the Metropolitan Council’s complaint~~Taconic’s facility in neighboring Petersburg. The plaintiffs seek unstated compensatory, consequential, and filed a counterclaim alleging that the Metropolitan Council discharges 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 thepunitive 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~~attorneys’ fees and ~~common law theories~~costs. 3M has answered the complaints in these individual cases, which are now proceeding through discovery. In the putative class action, briefings on class certification have been completed and the parties are engaging in mediation efforts. 3M is also defending 12 individual cases in New York filed by Nassau County drinking water providers in the U.S. District Court for the Eastern District of ~~trespass, nuisance,~~New York. The plaintiffs in these cases allege that 3M, DuPont, and ~~negligence.~~additional unnamed defendants are responsible for the contamination of plaintiffs’ water supply sources with various PFAS compounds. DuPont’s motion to transfer these cases to the AFFF MDL was denied in March 2020. 3M ~~also sought declaratory relief under MERA.~~ has filed answers in the cases in which it has been served. Preliminary discovery is ongoing.

In ~~May 2017,~~Michigan, 1 consolidated putative class action is pending in the ~~Metropolitan Council paid~~U.S. District Court for the Western District of Michigan against 3M ~~approximately $1 million~~ and ~~agreed~~Wolverine World Wide (Wolverine). The action arises from Wolverine’s allegedly improper disposal of materials and wastes, including 3M Scotchgard, related to Wolverine’s shoe manufacturing operations. Plaintiffs allege Wolverine used 3M Scotchgard in its manufacturing process and that chemicals from 3M’s product contaminated the environment and drinking water sources after disposal. In January 2021, 3M moved to dismiss certain claims in the complaint, and the case remains in early stages of litigation. The court has set a trial date in January 2022. In addition to the consolidated federal court putative class action, as of March 31, 2021, 3M is a defendant in approximately 277 private individual actions in Michigan state court based on similar allegations. These cases are coordinated for pre-trial purposes. NaN of these cases were selected over time for bellwether trials. In January 2020, the court issued the first round of dispositive motion rulings related to the first 2 bellwether cases, including dismissing the second bellwether case entirely and dismissing certain plaintiffs’ medical monitoring and risk of future disease claims, and granting summary judgment to the defendants on 1 plaintiff’s cholesterol injury claims. The parties settled the first bellwether case in early 2020. In June 2020, the court denied the plaintiffs’ motion to reconsider the dismissal of the second bellwether case, and the plaintiffs have appealed the decision to the state appellate court. In January 2021, the court granted summary judgment in favor of the defendants in 1 of 3 remaining bellwether cases. The plaintiffs in this dismissed bellwether case have also appealed the dismissal to the state appellate court. The remaining 2 bellwether trials are preliminarily scheduled for October 2021. The parties have engaged in mediation efforts in both the putative class action and the state court mass action cases.

Wolverine also filed a third-party complaint against 3M in a suit by the State of Michigan and intervenor townships that sought to compel Wolverine to investigate and address contamination associated with its historic disposal activity. 3M filed an answer and counterclaims to Wolverine’s third-party complaint in June 2019. In September and October 2019, the parties (including 3M as third-party defendant) engaged in mediation. In December 2019, the State of Michigan, the intervening townships, and Wolverine announced that they had tentatively resolved the State and townships’ claims against Wolverine in exchange for a $70 million payment and certain future remediation measures by Wolverine. In February 2020, the court approved a Consent Decree that

Table of Contents

memorializes Wolverine’s ongoing remediation obligations and the State’s and intervening townships’ covenants not to bring further lawsuits as to the remediated area. 3M has been formally designated as a “Contributing Party,” and as such, the State’s and townships’ covenants will also apply to 3M. AsIn February 2020, 3M and Wolverine executed an agreement to resolve the legal claims between the 2 companies. Pursuant to the agreement, 3M made a one-time financial contribution of $55 million in March 2020 to support Wolverine’s past and ongoing efforts to address PFAS remediation under Wolverine’s Consent Decree with the State and the townships. This amount was part of 3M’s charge taken in the fourth quarter of 2019 as discussed below in the “Environmental Liabilities and Insurance Receivables” section.

3M is also a defendant, together with Georgia-Pacific as co-defendant, in a putative class action in federal court in Michigan brought by residents of Parchment, who allege that the municipal drinking water was contaminated from waste generated by a paper mill owned by Georgia-Pacific’s corporate predecessor. The defendants’ motion to dismiss certain claims in the complaint was denied in January 2021. A trial date is set for January 2022. The parties have engaged in mediation and in April 2021 reached a preliminary settlement agreement, subject to court approval, under which 3M ~~agreed~~and Georgia-Pacific would pay an amount and be released from plaintiffs’ putative class action claims. Separately, as a result of discussions among Georgia-Pacific, 3M and municipalities near Parchment, Georgia-Pacific and 3M contributed to a fund in November 2020 to provide expanded municipal water service in the area. These municipalities released 3M from claims relating to or arising out of the extension of municipal water or the alleged PFAS contamination in the area of that extension. 3M’s portion relative to the preliminary agreement and contribution above was not material.

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

In ~~April 2012,~~California, 3M and other defendants were named as defendants in an action brought in federal court by Golden State Water Company, alleging PFAS contamination of certain wells located in its water systems. 3M filed a motion to ~~disqualify the State of Minnesota’s counsel, Covington & Burling, LLP (Covington). In October 2012,~~dismiss in November 2020 and in January 2021, the court granted defendants’ motion to dismiss the case for lack of personal jurisdiction. In February 2021, the plaintiffs voluntarily dismissed their action without prejudice and filed a new case in the AFFF MDL court. Separately, in December 2020, the Orange County Water District and 10 additional local water providers sued 3M, Decra Roofing and certain DuPont-related entities in California state court, alleging PFAS contamination of the plaintiffs’ water sources and also referring to 3M's industrial minerals facility in Corona, California as a potential source of contamination. The plaintiffs filed an amended complaint, and 3M filed a demurrer to the amended complaint in March 2021. In April 2021, the court denied 3M’s demurrer, and the case remains in early stages of litigation. In February 2021, the City of Corona and a local utility authority filed a lawsuit in California state court against 3M and other defendants, alleging PFAS contamination from 3M products generally as well as from 3M’s Corona facility and roofing granules products.

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

In New Jersey, 3M is a defendant in an action brought in federal court by Middlesex Water Company, alleging PFAS contamination of its water wells. 3M’s motion to 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 remandedtransfer the case to the ~~district~~AFFF MDL was denied. 3M has moved to dismiss the complaint, and the case is currently in discovery. In addition, 3M, together with several co-defendants, is defending 2 federal court cases by multiple

Table of Contents

individuals with private drinking water wells near DuPont and Solvay facilities that were allegedly supplied with PFAS by 3M. Plaintiffs seek medical monitoring and damages. 3M has filed a motion to dismiss in the first of those actions and the motion was denied. In January 2021, certain plaintiffs in that lawsuit severed their claims in order to be represented by different counsel in what is now a separate case, which remains in early stages of litigation. The second case is in early stages of litigation. 3M and other defendants are also defending 3 federal court cases brought by individuals who live near the DuPont and Solvay facilities, alleging personal injury caused by PFAS exposure. Those cases are in early stages of litigation. In September 2020, a federal court case was filed against 3M on behalf of the Borough of Hopatcong, alleging general PFAS contamination of its public water supply. In December 2020, 3M filed a motion to dismiss the Hopatcong matter. In January 2021, another case of this nature was filed in federal court on behalf of Pequannock Township. 3M has filed a motion to dismiss this case.

In October 2018, 3M and other defendants, including DuPont and Chemours, were named in a putative class action in the U.S. District Court for ~~further proceedings.~~the Southern District of Ohio brought by the named plaintiff, a firefighter allegedly exposed to PFAS chemicals through his use of firefighting foam, purporting to represent a putative class of all U.S. individuals with detectable levels of PFAS in their blood. The ~~district~~plaintiff brings claims for negligence, battery, and conspiracy and seeks injunctive relief, including an order “establishing an independent panel of scientists” to evaluate PFAS. 3M and other entities jointly filed a motion to dismiss in February 2019. In September 2019, the court ~~took evidence on~~denied the ~~disqualification issues at a hearing in October 2015.~~defendants’ motion to dismiss. In February ~~2016,~~2020, 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~~transfer 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~~AFFF MDL. In December 2020, the defendants filed their joint opposition to the class certification motion filed earlier by the plaintiff. The plaintiffs filed a reply brief in support of class certification in March 2021.

In West Virginia, 3M and ~~for breach~~other entities were originally named as defendants in a state court action brought by Weirton Area Water Board that alleges PFAS contamination of ~~contract arising out~~local water supplies. This case was been removed to federal court where the defendants filed various motions to dismiss the complaint based on pleading deficiencies and lack of ~~Covington’s representation of the State of Minnesota in the NRD Lawsuit.~~personal jurisdiction. In ~~September 2016,~~November 2020, the court granted ~~3M’s~~some of the personal jurisdiction motions, denied other personal jurisdiction motions (including 3M’s) and ordered the remaining parties to engage in discovery on jurisdiction. In December 2020, the court denied the defendants’ non-jurisdictional motion to dismiss. In January 2021, the plaintiffs amended its complaint to include allegations related to AFFF, and the case was transferred to the AFFF MDL court, where it remains in early stages of litigation.

Other PFAS-related Matters

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

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

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

As part of ongoing work with the EPA and ADEM to address compliance matters at the Decatur facility, the Company discovered it had not fully characterized its PFAS discharge in its NPDES permit. In September 2019, the Company disclosed the matter to the EPA

4441

Table of Contents

~~leave~~and ADEM and announced that it had elected to ~~amend~~temporarily idle certain other manufacturing processes at 3M Decatur. The Company is reviewing its operations at the ~~complaint to plead punitive damages. In February 2017, Covington settled this lawsuit with~~plant, has installed wastewater treatment controls and has restarted idled processes.

As a ~~payment by Covington or its insurer to 3M that is not material to 3M’s results of operations or financial condition.~~

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

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

In addition, as part of its ongoing evaluation of regulatory compliance at its Cordova, Illinois facility, the Company discovered it had not fully characterized its PFAS discharge in its NPDES permit for the Cordova facility. In November 2019, the Company disclosed this matter to the EPA, and in January 2020 disclosed this matter to the Illinois Environmental Protection Agency (IEPA). The Company continues to work with the EPA and IEPA to address these issues from the Cordova facility. In December 2020, the EPA requested certain documents and information related to TSCA compliance at the facility. In February and April 2021, the EPA requested certain documents and information related to RCRA compliance at this facility. The Company is cooperating and producing documents and information in response to these requests.

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

Separately, in June 2020, the Company reported to EPA and MPCA that it had not fully complied with elements of the inspection, characterization and waste stream profile verification process of the Waste and Feedstream Analysis Plan (WAP/FAP) of its Resource Conservation and Recovery Act (RCRA) permit for its Cottage Grove incinerator. In July 2020, the Company received an information request from MPCA related to the June 2020 disclosure, to which the Company responded in September 2020. The Company continues to work with the MPCA to address WAP/FAP implementation issues disclosed in June 2020. In January 2021, the Company received a notice of violation (NOV) from MPCA related to, among other matters, the above-described Clean Water Act and RCRA issues.  The Company is cooperating with MPCA to address the issues that are the subject of the NOV.

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

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

Table of Contents

Other Environmental Litigation

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

For ~~those~~environmental matters ~~for which a~~and litigation described above, unless otherwise described below, 0 liability has ~~not~~ been recorded as the Company believes ~~any such~~ liability in those matters is not probable and estimable and the Company is not able to estimate a possible loss or range of possible loss at this time. The Company’s environmental liabilities and insurance receivables are described below.

Environmental Liabilities and Insurance Receivables

The Company periodically examines whether the contingent liabilities related to the environmental matters and litigation described above are probable and estimable based on experience and developments in those matters. During the first three months of 2021, the Company increased its accrual for PFAS-related other environmental liabilities by $55 million and made related payments of $8 million. During the first quarter of 2019, the EPA issued its PFAS Action Plan and the Company settled the litigation with the Water Authority (both matters are described in more detail above). The Company completed a comprehensive review with the assistance of environmental consultants and other experts regarding environmental matters and litigation related to historical PFAS manufacturing operations in Minnesota; Alabama; Gendorf, Germany; and at 4 former landfills in Alabama. As a result of these developments and of that review, the Company increased its accrual for “other environmental liabilities” by $235 million pre-tax (including the settlement with the Water Authority) in the first quarter of 2019. During the fourth quarter of 2019, 3M updated its evaluation of certain customer-related PFAS litigation based on continued, productive settlement discussions with multiple parties. As previously disclosed, 3M has been engaged in mediation and resolution negotiations in multiple PFAS cases. In addition, during the fourth quarter of 2019, the Company updated its assessment of environmental matters and litigation related to its historical PFAS manufacturing operations and expanded its evaluation of other 3M sites that may have used certain PFAS-containing materials and locations at which they were disposed. As a result of these actions during the fourth quarter the Company recorded a pre-tax charge of $214 million. As of ~~September 30, 2017,~~March 31, 2021, the Company had recorded liabilities of ~~$38~~$463 million for “other environmental liabilities.” The accruals represent the Company’s best estimate of the probable loss in connection with the environmental matters and PFAS-related litigation described above. The Company is not able to estimate a possible loss or range of possible loss in excess of the established accruals at this time.

As of March 31, 2021, the Company had recorded liabilities of $24 million for estimated non-PFAS related “environmental remediation” costs ~~based upon an evaluation of currently~~to clean up, treat, or remove hazardous substances at current or former 3M manufacturing or third-party sites. The Company evaluates available facts with respect to each individual site each quarter and ~~also recorded 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 September 30, 2017, the Company had recorded liabilities of $27 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.”

It is difficult to estimate the cost of environmental compliance and remediation given the uncertainties regarding the interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental contamination and the existence of alternative cleanup methods. Developments may occur that could affect the Company’s current assessment, including, but not limited to: (i) changes in the information available regarding the environmental impact of the Company’s operations and products; (ii) changes in environmental regulations, changes in permissible levels of specific compounds in drinking water sources, or changes in enforcement theories and policies, including efforts to recover natural resource damages; (iii) new and evolving analytical and remediation techniques; (iv) success in allocating liability to other potentially responsible parties; and (v) the financial viability of other potentially responsible parties and third-party indemnitors. For sites included in both “environmental remediation liabilities” and “other environmental liabilities,” at which remediation activity is largely complete and remaining activity relates primarily to

Table of Contents

operation and maintenance of the remedy, including required post-remediation monitoring, the Company believes the exposure to loss in excess of the amount accrued would not be material to the Company’s consolidated results of operations or financial condition. However, for locations at which remediation activity is largely ongoing, the Company cannot estimate a possible loss or range of loss in excess of the associated established accruals for the reasons described above.

~~Table of Contents~~

~~Other Matters~~

~~Department of Labor Investigation~~

The ~~U.S. Department~~Company has both pre-1986 general and product liability occurrence coverage and post-1985 occurrence reported product liability and other environmental coverage for environmental matters and litigation. As of ~~Labor (DOL) notified 3M in April 2015 that it had commenced an investigation of 3M’s pension plan pursuant~~March 31, 2021, the Company’s receivable for insurance recoveries related to the ~~federal Employee Retirement Income Security Act~~environmental matters and litigation was $8 million. Various factors could affect the timing and amount of ~~1974, as amended (ERISA). The DOL has stated its investigation relates to certain private equity investments, plan expenses, securities lending,~~recovery of this and distributions of plan benefits. In response to certain DOL requests, 3M produced documents and made employees available for interviews. In December 2016, the DOL issued certain subpoenas to 3M and 3M Investment Management Corp. relating to this investigation. 3M has produced additional responsive documents and is cooperating with the DOL in its investigation. 3M anticipates that the DOL will conclude its investigationfuture expected increases in the ~~first half~~receivable, including (i) delays in or avoidance of ~~2018.~~payment by insurers; (ii) the extent to which insurers may become insolvent in the future, (iii) the outcome of negotiations with insurers, and (iv) the scope of the insurers’ purported defenses and exclusions to avoid coverage.

��

Product Liability Litigation

~~One customer obtained~~Aearo Technologies sold Dual-Ended Combat Arms – Version 2 earplugs starting in about 2003. 3M acquired Aearo Technologies in 2008 and sold these earplugs from 2008 through 2015, when the product was discontinued. In December 2018, a military veteran filed an ~~order~~individual lawsuit against 3M in the ~~French courts against 3M Purification SAS (a French subsidiary)~~San Bernardino Superior Court in ~~October 2011 appointing an expert to determine~~California alleging that he sustained personal injuries while serving in the ~~amount of commercial loss and property damage allegedly~~military caused by ~~allegedly defective 3M filters used in the customer’s manufacturing process. An Austrian subsidiary~~3M’s Dual-Ended Combat Arms earplugs – Version 2. The plaintiff asserts claims of ~~this same customer also filed a claim against 3M Austria GmbH (an Austrian subsidiary)~~product liability and ~~3M Purification SAS in the Austrian courts in September 2012 seeking~~fraudulent misrepresentation and concealment. The plaintiff seeks various damages, ~~for the same issue. The Company reached an agreement in principle to settle those two cases~~including medical and ~~finalized the settlement during the second quarter~~related expenses, loss of ~~2017. The amounts agreed to in each of these settlements were not material to the Company’s consolidated results of operations or financial condition.~~income, and punitive damages.

As of ~~September 30, 2017,~~March 31, 2021, the Company is a named defendant in approximately 3,349 lawsuits (including 14 putative class actions) in various state and federal courts that purport to represent approximately 12,700 individual claimants making similar allegations. In April 2019, the U.S. Judicial Panel on Multidistrict Litigation granted motions to transfer and consolidate all cases pending in federal courts to the U.S. District Court for the Northern District of Florida to be managed in a multi-district litigation (MDL) proceeding to centralize pre-trial proceedings. Discovery is underway. The plaintiffs and 3M filed preliminary summary judgment motions on the government contractor defense. In July 2020, the court granted the plaintiffs’ summary judgment motion and denied the defendants’ summary judgment motion, ruling that plaintiffs’ claims are not barred by the government contractor defense. The court denied the Company’s request to immediately certify the summary judgment ruling for appeal to the U.S. Court of Appeals for the Eleventh Circuit. In December 2020, the MDL court granted the plaintiffs’ motion to consolidate 3 plaintiffs for the first bellwether trial, which began in March 2021. Individual trials for the next 2 bellwether plaintiffs are scheduled to proceed in May and June of 2021. Discovery in the next 20 bellwether cases in the MDL court is ongoing and is scheduled to be complete by the end of 2021.

3M is also defending lawsuits brought by non-military plaintiffs in state court in Hennepin County, Minnesota. 3M removed these actions to federal court and the federal court remanded them to state court in March 2020. The Company has appealed the remand orders to the U.S. Court of Appeals for the Eighth Circuit. Oral argument on the first remand order appeal is scheduled for June 2021. There are approximately 40 lawsuits involving approximately ~~3,850~~800 plaintiffs ~~(compared to approximately 1,260 plaintiffs at December 31, 2016), most of which are~~ pending in ~~federal or~~the state court. The state court actions will be subject to a bellwether case selection process. The first trial in ~~Minnesota,~~Hennepin County is scheduled for August 2021.

NaN liability has been recorded for these matters because the Company believes that any such liability is not probable and estimable at this time.

As of March 31, 2021, the Company was a named defendant in ~~which~~26 lawsuits in the United States involving 27 plaintiffs and 1 Canadian putative class action with a single named plaintiff, alleging that the Bair Hugger™ patient warming system caused a surgical site infection.

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

Table of ~~Tennessee is a putative nationwide class action.~~ Contents

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

Among the 26 remaining lawsuits in the United States, 23 are in the MDL court and 3 are in state court. The MDL has stayed all 23 remaining lawsuits pending the appeal of the summary judgment decision. In February 2020, the MDL court remanded 2 cases to state court in Jackson County, Missouri that combined Bair Hugger product liability claims with medical malpractice claims. There is also 1 case in Hidalgo County, Texas that combines Bair Hugger product liability claims with medical malpractice claims. In August 2019, the MDL court enjoined the individual plaintiff from pursuing his claims in Texas state court because he had previously filed and dismissed a claim in the MDL. That plaintiff has appealed the order to the U.S. Court of Appeals for the Eighth Circuit, which heard oral argument on this appeal in March 2021. The Texas state court has ~~set~~stayed the entire case while the appeal is pending.

As previously disclosed, 3M had been named a ~~trial-ready date~~defendant in 61 cases in Minnesota state court. In January 2018, the ~~second quarter of 2018 for the two federal court bellwether cases. The parties are negotiating a trial date for the remaining~~Minnesota state court ~~bellwether candidate.~~ excluded plaintiffs’ experts and granted 3M’s motion for summary judgment on general causation. The Minnesota Court of Appeals affirmed the state court orders in their entirety and the Minnesota Supreme Court denied plaintiffs’ petition for review and entered the finial dismissal in 2019, effectively ending the Minnesota state court cases.

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

NaN liability has been recorded for ~~this matter~~the Bair Hugger™ litigation 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 September 30, 2017, there are two lawsuits pending that were brought by dentists and dental practices against 3M. The complaints allege 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. One lawsuit, pending in the U.S. District Court for the District of Minnesota, is a

~~Table of Contents~~

class action that names 39 plaintiffs and seeks certification of a class of dentists in the United States and its territories, and alternatively seeks subclasses in 13 states. The other lawsuit is an individual complaint against 3M in Madison County, Illinois.

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

Stockholder Litigation

In July 2019, Heavy & General Laborers’ Locals 472 & 172 Welfare Fund filed a putative securities class action against 3M Company, its former Chairman and CEO, current Chairman and CEO, and former CFO in the U.S. District Court for the District of New Jersey. In August 2019, an individual plaintiff filed a similar putative securities class action in the same district. Plaintiffs allege that defendants made false and misleading statements regarding 3M's exposure to liability associated with PFAS and bring claims for damages under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 against all defendants, and under Section 20(a) of the Securities and Exchange Act of 1934 against the individual defendants. In October 2019, the court consolidated the securities class actions and appointed a group of lead plaintiffs.In January 2020, the defendants filed a motion to transfer venue to the U.S. District Court for the District of Minnesota. In August 2020, the court denied the motion to transfer venue, and in September 2020, the defendants filed a petition for writ of mandamus to the U.S. Court of Appeals for the Third Circuit. In November 2020, the federal Court of Appeals granted 3M’s petition for a writ of mandamus and directed the New Jersey federal court to transfer the action to the Minnesota federal court. The defendants filed a motion to dismiss the action in January 2021, which is not yet briefed. The suit is in the early stages of litigation.

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

Table of Contents

In August 2020, a stockholder who had previously submitted a books and records demand filed an additional follow-on derivative lawsuit in the U.S. District Court for the District of New Jersey against 3M and several of its current and former executives and directors. This derivative lawsuit, having been transferred to Minnesota federal court, also relies on similar factual allegations as the putative securities class action discussed above. In February 2021, an additional stockholder derivative lawsuit was filed in the District of Minnesota, making similar factual allegations as the putative securities class action discussed above.

Federal False Claims Act / Qui Tam Litigation

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

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

In October 2016, the KCI Defendants filed counterclaims in the Godecke case, asserting breach of contract and conversion. In August 2017, the relator-plaintiff’s fraud claim in the Godecke case was dismissed in favor of the KCI defendants. In January 2018, the district court stayed the retaliation claim and the KCI Defendants' counterclaims pending the relator-plaintiff’s appeal. In September 2019, the U.S. Court of Appeals for the Ninth Circuit reversed and remanded the case to the district court for further proceedings. In March 2021, the court held another status conference and allowed the KCI defendants to send an official request for information and documents to the government, but the court has not ordered further discovery to commence. Separately, in June 2019, following discovery, the district court in the second case (the “Hartpence case”) entered summary judgment in the KCI Defendants’ favor on all of the relator-plaintiff’s claims. The relator-plaintiff then filed an appeal in the U.S. Court of Appeals for the Ninth Circuit. Oral argument in the Hartpence case was held in July 2020. The appellate court’s opinion remains pending.

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

Compliance Matter

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

Table of Contents

NOTE ~~13.~~15. Stock-Based Compensation

The 3M 2016 Long-Term Incentive Plan ~~(LTIP), as discussed in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K),~~ provides for the issuance or delivery of up to 123,965,000 shares of 3M common stock pursuant to awards granted under the plan. Awards may be issued in the form of incentive stock options, nonqualified stock options, ~~progressive stock options,~~ stock appreciation rights, restricted stock, restricted stock units, other stock awards, and performance units and performance shares.~~The~~ As of March 31, 2021, the remaining ~~total~~ shares available for grant under the LTIP Program are ~~30,232,906 as of September 30, 2017.~~10.7 million.

The Company’s annual stock option and restricted stock unit grant is made in February to provide a strong and immediate link between the performance of individuals during the preceding year and the size of their annual stock compensation grants. The grant to eligible employees uses the closing stock price on the grant date. Accounting rules require recognition of expense under a non-substantive vesting period approach, requiring ~~the full recognition of~~ compensation expense ~~by the date~~recognition when an employee is eligible to ~~retire if awards become fully vested upon retirement. Under the LTIP, 3M employees~~retire. Employees are considered eligible to retire at age 55 and after having completed ten years of service. This retiree-eligible population represents 35 percent of the ~~2017~~ annual grant stock-based compensation ~~award expense dollars;~~expense; therefore, higher stock-based compensation expense is recognized in the first ~~quarter of each fiscal year.~~quarter.

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

Amounts recognized in the financial statements with respect to stock-based compensation programs, which include stock options, restricted stock, restricted stock units, performance shares and the General Employees’ Stock Purchase Plan (GESPP), are provided in the following table. Capitalized stock-based compensation amounts were not material for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~2020.

Stock-Based Compensation Expense


	Three months ended
	March 31,
(Millions)	2021		2020
Cost of sales	$	22	$	22
Selling, general and administrative expenses		84		73
Research, development and related expenses		25		25
Stock-based compensation expenses	$	131	$	120
Income tax benefits		(51)		(39)
Stock-based compensation expenses (benefits), net of tax	$	80	$	81

Three months ended

Nine months ended

September 30,

September 30,

(Millions)

2017

2016

2017

2016

Cost of sales

$
9

$
8

$
41

$
39

Selling, general and administrative expenses

45

36

186

166

Research, development and related expenses

6

7

39

39

Stock-based compensation expenses

$
60

$
51

$
266

$
244

Income tax benefits

$
(35)

$
(49)

$
(257)

$
(248)

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

$
25

$
2

$
9

$
(4)

~~Table of Contents~~

Stock Option Program

The following table summarizes stock option activity during the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2021:


				Weighted
				Average
		Weighted		Remaining	Aggregate
	Number of	Average		Contractual	Intrinsic Value
(Options in thousands)	Options	Exercise Price		Life (months)	(millions)
Under option —
January 1	35,401	$	156.23
Granted	3,612		175.04
Exercised	(2,323)		104.16
Forfeited	(104)		174.71
March 31	36,586	$	161.34	68	$	1,299
Options exercisable
March 31	28,819	$	158.58	57	$	1,126

Weighted

Average




Weighted

Remaining

Aggregate

Number of

Average

Contractual

Intrinsic Value

Options

Exercise Price

Life (months)

(millions)

Under option —

January 1

36,196,232

$
112.07

Granted:

Annual

5,409,628

175.93

Exercised

(5,203,405)

90.05

Canceled

(137,827)

161.38

September 30

36,264,628

$
124.57

72

$
3,095

Options exercisable

September 30

25,532,812

$
107.67

59

$
2,610

Table of Contents

Stock options vest over a period from one year to three years with the expiration date at 10 years from date of grant. As of ~~September 30, 2017,~~March 31, 2021, there was ~~$85~~$93 million of compensation expense that has yet to be recognized related to non-vested stock option based awards. This expense is expected to be recognized over the remaining weighted-average vesting period of 2225 months. The total intrinsic values of stock options exercised were ~~$526~~$180 million and ~~$573~~$98 million during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. Cash received from options exercised was ~~$468~~$240 million and ~~$630~~$100 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. The Company’s actual tax benefits realized for the tax deductions related to the exercise of employee stock options were ~~$179~~$38 million and ~~$212~~$20 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively.

For the primary ~~2017~~2021 annual stock option grant, the weighted average fair value at the date of grant was calculated using the Black-Scholes option-pricing model and the assumptions that follow.

Stock Option Assumptions


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

Annual

2017

Exercise price

$
175.76

Risk-free interest rate

2.1
%
Dividend yield

2.5
%
Expected volatility

17.3
%
Expected life (months)

78

Black-Scholes fair value

$
23.51

Expected volatility is a statistical measure of the amount by which a stock price is expected to fluctuate during a period. For the ~~2017~~2021 annual grant date, the Company estimated the expected volatility based upon the ~~average~~following three 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 ~~life~~term assumption is based on the weighted average of historical grants.

~~Table of Contents~~

Restricted Stock and Restricted Stock Units

The following table summarizes restricted stock and restricted stock unit activity during the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2021:

Weighted

Average

Number of

Grant Date

Awards

Fair Value

Nonvested balance —

As of January 1

2,185,046

$
145.64

Granted

Annual

604,256

176.10

Other

2,986

179.64

Vested

(761,484)

126.78

Forfeited

(39,352)

157.63

As of September 30

1,991,452

$
161.90



		Weighted
		Average
	Number of	Grant Date
(Shares in thousands)	Shares	Fair Value
Nonvested balance —
As of January 1	1,722	$	189.78
Granted	721		175.09
Vested	(433)		232.62
Forfeited	(33)		173.54
As of March 31	1,977	$	175.31

As of ~~September 30, 2017,~~March 31, 2021, there was ~~$93~~$141 million of compensation expense that has yet to be recognized related to non-vested restricted stock ~~units~~ and restricted ~~stock.~~stock units. This expense is expected to be recognized over the remaining weighted-average vesting period of 2227 months. The total fair value of restricted stock ~~units~~ and restricted stock units that vested during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 was ~~$135~~$78 million and ~~$145~~$88 million, respectively. The Company’s actual tax benefits realized for the tax deductions related to the vesting of restricted stock ~~units~~ and restricted stock units was ~~$44~~$14 million and ~~$54~~$16 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively.

Restricted stock units granted generally vest three years following the grant date assuming continued employment. Dividend equivalents equal to the dividends payable on the same number of shares of 3M common stock accrue on these restricted stock units during the vesting period, although no0 dividend equivalents are paid on any of these restricted stock units that are forfeited prior to the vesting date. Dividends are paid out in cash at the vest date on restricted stock units. Since the rights to dividends are forfeitable, there is no0 impact on basic earnings per share calculations. Weighted average restricted stock unit shares outstanding are included in the computation of diluted earnings per share.

Table of Contents

Performance Shares

Instead of restricted stock units, the Company makes annual grants of performance shares to members of its executive management. The ~~2017~~2021 performance criteria for these performance shares (organic volume growth, return on invested capital, free cash flow conversion, and ~~earning~~earnings per share growth) were selected because the Company believes that they are important drivers of long-term stockholder value. The number of shares of 3M common stock that could actually be delivered at the end of the three-year performance period may be anywhere from 0% to 200% of each performance share granted, depending on the performance of the Company during such performance period. When granted, these performance shares are awarded at 100% of the estimated number of shares at the end of the three-year performance period and are reflected under “Granted” in the table below. Non-substantive vesting requires that expense for the performance shares be recognized over one or three years depending on when each individual became a 3M executive. The ~~2017~~ performance share ~~grant accrues dividends,~~grants accrue dividends; therefore, the grant date fair value is equal to the closing stock price on the date of grant. Since the rights to dividends are forfeitable, there is no impact on basic earnings per share calculations. Weighted average performance shares whose performance period is complete are included in computation of diluted earnings per share.

~~Table of Contents~~

The following table summarizes performance share activity during the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2021:


		Weighted
		Average
	Number of	Grant Date
	Awards	Fair Value


					Weighted
					Average
				Number of	Grant Date
(Shares in thousands)				Shares	Fair Value
Undistributed balance —
As of January 1	656,278	$	142.98	423	$	188.61
Granted	198,910		190.84	163		176.41
Distributed	(313,942)		124.88	(115)		228.80
Performance change	107,034		173.58	17		178.43
Forfeited	(10,769)		169.38	(4)		172.92
As of September 30	637,511	$	171.52
As of March 31				484	$	174.75

As of ~~September 30, 2017,~~March 31, 2021, there was ~~$36~~$40 million of compensation expense that has yet to be recognized related to performance shares. This expense is expected to be recognized over the remaining weighted-average earnings period of 1021 months. The total fair ~~values~~value of performance shares that were distributed were ~~$55~~$22 million and ~~$54~~$35 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. The Company’s actual tax benefits realized for the tax deductions related to the distribution of performance shares were ~~$15~~$4 million and $7 million for ~~both~~ the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~2020, respectively.

~~Table of Contents~~

NOTE ~~14.~~16. Business Segments

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

3M discloses business segment operating income as its measure of segment profit/loss, reconciled to both total 3M operating income and ~~pre-tax~~ income ~~relates to interest~~before taxes. Business segment operating income includes dual credit for certain related operating income (as described below in “Elimination of Dual Credit”). Business segment operating income excludes certain expenses and ~~interest expense, which~~income that are not allocated to business ~~segments.~~segments (as described below in “Corporate and Unallocated”). Additionally, the following special items are excluded from business segment operating income and, instead, are included within Corporate and Unallocated: significant litigation-related charges/benefits, gain/loss on sale of businesses (see Note 3), and divestiture-related restructuring actions (see Note 5).

Effective in the first quarter of ~~2017,~~2021, the measure of segment operating performance used by 3M’s CODM changed and, as a result, 3M’s disclosed measure of segment profit/loss (business segment operating income) was updated. The change to business segment

Table of Contents

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

Changes in cost attribution

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

Continued alignment of customer account activity

As part of 3M’s ~~continuing effort to improve the alignment of its businesses around markets and customers~~regular customer-focus initiatives, the Company ~~made the following changes:~~

~~Integrated the former Renewable Energy Division into existing divisions;~~

~~Combined two divisions to form the Automotive and Aerospace Solutions Division; and~~

~~Consolidated U.S. customer account activity - impacting dual credit reporting~~

~~Integration of former Renewable Energy Division~~

~~The (i) solar and wind and (ii) energy product lines (along with~~realigned 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~~(“sales district”) to correlate with the primary divisional product offerings in various countries and reduce complexity for customers when interacting with multiple 3M businesses. This impacted the amount of dual credit ~~reporting~~certain business segments receive as a result of sales district attribution.

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.

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

The financial information presented herein reflects the impact of the preceding ~~business segment reporting~~ changes for all periods presented.

Business Segment Information


	Three months ended
(Millions)	March 31,
Net Sales	2021		2020
Safety and Industrial	$	3,327	$	2,927
Transportation and Electronics		2,531		2,239
Health Care		2,248		2,104
Consumer		1,373		1,250
Corporate and Unallocated		(2)		—
Elimination of Dual Credit		(626)		(445)
Total Company	$	8,851	$	8,075

Operating Performance
Safety and Industrial	$	811	$	694
Transportation and Electronics		591		464
Health Care		509		452
Consumer		289		265
Elimination of Dual Credit		(159)		(113)
Total business segment operating income	$	2,041	$	1,762
Corporate and Unallocated
Special items:
Significant litigation-related (charges)/benefits		—		(17)
Gain/(loss) on sale of businesses		—		2
Other corporate expense - net		(47)		(84)
Total Corporate and Unallocated		(47)		(99)
Total Company operating income	$	1,994	$	1,663

Other expense/(income), net	$	49	$	75
Income before income taxes	$	1,945	$	1,588

5150

Table of Contents

Corporate and Unallocated

~~Business Segment Information~~

Three months ended

Nine months ended

September 30,

September 30,

(Millions)

2017

2016

2017

2016

Net Sales

Industrial

$
2,764

$
2,603

$
8,193

$
7,856

Safety and Graphics

1,529

1,500

4,603

4,538

Health Care

1,476

1,371

4,339

4,176

Electronics and Energy

1,414

1,250

3,838

3,468

Consumer

1,236

1,210

3,415

3,390

Corporate and Unallocated

1

2

5

5

Elimination of Dual Credit

(248)

(227)

(726)

(653)

Total Company

$
8,172

$
7,709

$
23,667

$
22,780

Operating Income

Industrial

$
614

$
595

$
1,762

$
1,837

Safety and Graphics

410

372

1,661

1,152

Health Care

471

431

1,317

1,350

Electronics and Energy

394

304

920

716

Consumer

307

317

724

836

Corporate and Unallocated

(100)

(65)

(225)

(189)

Elimination of Dual Credit

(55)

(50)

(160)

(144)

Total Company

$
2,041

$
1,904

$
5,999

$
5,558

Corporate and ~~unallocated~~Unallocated operating income includes ~~a variety~~“special items” and “other corporate expense-net”. Special items include significant litigation-related charges/benefits, gain/loss on sale of ~~miscellaneous~~businesses, and divestiture-related restructuring costs. Other corporate expense-net includes items such as net costs related to limited unallocated corporate ~~investment gains~~staff and ~~losses, certain derivative gains and losses, certain insurance-related gains and losses,~~centrally managed material resource centers of expertise costs, certain litigation and environmental expenses largely related to legacy products/businesses not allocated to business segments, corporate ~~restructuring charges~~philanthropic activity, and ~~certain under- or over-absorbed~~other net costs ~~(e.g. pension, stock-based compensation)~~ that ~~the Company~~3M may choose not to allocate directly to its business segments. Other corporate expense-net also includes costs and income from contract manufacturing, transition services and other arrangements with the acquirer of the Communication Markets Division following its 2018 divestiture through 2019 and the acquirer of the former Drug Delivery business following its 2020 divestiture. Items classified as revenue from this activity are included in Corporate and Unallocated net sales. Because ~~this category~~Corporate and Unallocated includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

Elimination of Dual Credit

3M business segment reporting measures include dual credit to business segments for certain ~~U.S.~~ sales and related operating income. Management evaluates each of its ~~five~~4 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 respect to 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~~privacy screen protection products are primarily sold by the ~~Personal Safety~~Display Materials and Systems Division within the ~~Safety~~Transportation and ~~Graphics~~Electronics business segment; however, acertain sales ~~district~~districts within the ~~Industrial~~Consumer business segment ~~provides~~provide the ~~contact~~customer account activity for sales of the product to particular ~~customers in the U.S. market.~~customers. In this example, the non-primary selling segment ~~(Industrial)~~(Consumer) would also receive credit for the associated net sales initiated ~~though~~through its sales district and the related approximate operating income. The assigned operating income related to dual credit activity may differ from operating income that would result from actual costs associated with such sales. The offset to the dual credit business segment reporting is reflected as a reconciling item entitled “Elimination of Dual Credit,” such that sales and operating income ~~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.~~

5251

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM*

~~To the Shareholders and Board of Directors of 3M Company:~~

~~We have reviewed the accompanying consolidated balance sheetof 3M Company and its subsidiaries~~as of September 30, 2017, and the related consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2017 and 2016 and the consolidated statements of cash flows for the nine-month periods ended September 30, 2017 and 2016. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

~~We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedbalance sheet as of December 31, 2016, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows~~for the year then ended (not presented herein), and in our report dated February 9, 2017, except with respect to our opinion on the consolidated financial statements insofar as it relates to the business segment reporting changes discussed in Notes 3 and 16 as to which the date is May 4, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2016, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

~~/s/ PricewaterhouseCoopers LLP~~

~~PricewaterhouseCoopers LLP~~

~~Minneapolis, Minnesota~~

~~October 31, 2017~~

*Pursuant to Rule 436(c) of the Securities Act of 1933 (“Act”) this should not be considered a “report” within the meaning of Sections 7 and 11 of the Act and the independent registered public accounting firm liability under Section 11 does not extend to it.

~~Table of Contents~~

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

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

●

Overview

●

Results of Operations

●

Performance by Business Segment

●

Financial Condition and Liquidity

●

Cautionary Note Concerning Factors That May Affect Future Results

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

OVERVIEW

~~OVERVIEW~~

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

As described in 3M’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2017 and June 30, 2017, and also in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K), effective Effective in the first quarter of ~~2017,~~2021, 3M made the Company changed its business segment reporting in its continued effort to improve the alignment of businesses around markets and customers. These changes included the integration of the former Renewable Energy Division into existing divisions, the combination of two divisions to form the Automotive and Aerospace Solutions Division, and consolidation of U.S. customer account activity, impacting dual credit reporting. Business segment information presentedfollowing changes. Information provided herein reflects the impact of these changes for all periods presented. Refer to Note 14 for additional detail. This quarterly report on Form 10-Q should be read in conjunction with the Company’s consolidated statements and notes included in its Current Report on Form 8-K dated May 4, 2017.

●

Change in accounting principle for net periodic pension and postretirement plan cost. See detailed discussion in Note 1.

●

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

●

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

3M manages its operations in ~~five~~four operating business segments: ~~Industrial;~~ Safety and ~~Graphics;~~Industrial; Transportation and Electronics; Health Care; ~~Electronics and Energy;~~ and Consumer. From a geographic perspective, any references to EMEA refer to Europe, Middle East and Africa on a combined basis. ~~Any references~~

Consideration of COVID-19:

As described in the Overview—Consideration of COVID-19 section of Part II, Item 7 of the Company’s 2020 Annual Report on Form 10-K, 3M is impacted by the global pandemic and related effects associated with the coronavirus (COVID-19). In addition, risk factors with respect to ~~“Membrana” refer~~COVID-19, can be found in Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q. Given the diversity of 3M’s businesses, some of the factors described in that Overview—Consideration of COVID-19 section have increased the demand for 3M products, while others have decreased demand or made it more difficult for 3M to serve customers.

Overall, 3M experienced broad-based growth across all business segments in the first quarter of 2021, benefiting from continued improvements in certain end markets. 3M’s total sales increased 9.6% year-on-year in the first quarter of 2021 with organic local-currency sales growth of 8.0%. 3M experienced the strongest sales growth in personal safety, as well as in other areas such as home improvement, oral care, electronics, and separation and purification sciences. COVID-related respirator sales are estimated to have impacted year-on-year organic local-currency sales growth by approximately 2.4 percent for the first quarter of 2021. In the first quarter of 2020, as effects of COVID-19 emerged, weak demand in a number of end markets began to negatively impact oral care, automotive OEM and aftermarket, general industrial, commercial solutions and stationery and office, while demand was increasing in areas such as personal safety, home improvement, general cleaning, food safety and biopharma filtration.

3M’s operating income margins increased 1.9 percentage points year-on-year in the first quarter of 2021. Factoring out the impact on operating income of special items as described in the Certain amounts adjusted for special items - (non-GAAP measures) section below, operating income margins increased 1.7 points to 22.5 percent for the first quarter of 2021 when compared to 2020. Various COVID-19 implications contributed in part to these results.

Overall, the impact of the COVID-19 pandemic on 3M’s consolidated results of operations was primarily driven by factors related to changes in demand for products and disruption in global supply chains as described or referenced above. While it is not feasible to identify or quantify all the other direct and indirect implications on 3M’s results of operations, below are factors that 3M believes have also affected its result for first quarter of 2021 when compared to 2020:

Table of Contents

Factors contributing to charges:

●

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

●

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

●

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

Factors providing benefits or other impacts:

●

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

●

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

Refer to the ~~former Separations Media business acquired by~~Financial Condition and Liquidity section below for more information on the Company’s liquidity position.

Due to the speed with which the COVID-19 situation continues to develop and evolve and the uncertainty of its duration and the timing of recovery, 3M ~~from Polypore in 2015.~~is not able at this time to predict the extent to which the COVID-19 pandemic may have a material effect on its consolidated results of operations or financial condition.

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

The following table provides a summary of the ~~increase (decrease)~~increases (decreases) in operating income margins and diluted earnings per share for the three months ~~and nine months~~ ended ~~September 30, 2017 compared to 2016.~~March 31, 2021.

Three months ended

Nine months ended

(Earnings per diluted share)

September 30, 2017

September 30, 2017

Same period last year

$
2.15

$
6.28

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

Organic growth/productivity

0.23

0.53

Foreign exchange impacts

(0.03)

(0.12)

Income tax rate

0.01

0.21

Shares of common stock outstanding/net interest

0.02

0.08

Divestiture gains

—

0.56

Operating loss/(income) from divested businesses

0.01

—

Incremental strategic investments

(0.06)

(0.46)

Current period

$
2.33

$
7.08


	Three months ended
	March 31, 2021
	Percent of		Earnings per
	net sales		diluted share
Same period last year	20.6	%	$	2.25
Significant litigation-related charges/benefits	0.2			(0.06)
Gain/loss on sale of businesses	—			—
Same period last year, excluding special items	20.8	%	$	2.19
Increase/(decrease) due to:
Organic growth/productivity and other	1.5			0.34
Selling price and raw material impact	(0.2)			(0.01)
Acquisitions/divestitures	—			(0.03)
Foreign exchange impacts	0.4			0.13
Other expense (income), net	N/A			0.03
Income tax rate	N/A			0.14
Shares of common stock outstanding	N/A			(0.02)
Current period, excluding special items	22.5	%	$	2.77
None	—			—
Current period	22.5	%	$	2.77

~~Earnings per diluted share~~Operating income margins increased ~~18 cents (or 8.4 percent) and 80 cents (or 12.7 percent)~~1.9 percentage points in the ~~third quarter and~~ first ~~nine~~three months of ~~2017, respectively,~~2021 when compared to the same ~~periods~~period last year. ~~Organic growth/productivity includes~~For the first quarter of 2021, net income attributable to 3M was $1.62 billion, or $2.77 per diluted share, versus $1.31 billion, or $2.25 per diluted share, in the same period last year, an increase of 23.1 percent on a per diluted share basis.

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

On an adjusted basis, operating margins increased 1.7 percentage points to 22.5 percent in the first three months of 2021 when compared to the same period last year. Net income attributable to 3M on an adjusted basis was $1.62 billion, or $2.77 per diluted

5453

Table of Contents

benefits from higher organic local-currency sales, raw material cost decreases, 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 both the third quarter and first nine months of 2017, organic growth was the primary driver for the year-on-year benefit.

Foreign currency impacts (net of hedging) decreased pre-tax earnings by approximately $29 million and $108 million year-on-year in the third quarter and first nine months of 2017, respectively, excluding the impact of foreign currency changes on tax rates. This is equivalent to a year-on-year decrease of 3 cents and 12 centsshare, versus $1.27 billion, or $2.19 per diluted share, for the ~~third quarter and first nine months of 2017, respectively.~~

~~The effective income tax rate was 28.3 percent in the third quarter of 2017, a decrease of 0.2 percentage points versus~~same period last year’s third quarter, and 26.1 percent in the first nine months of 2017, a decline of 2.2 percentage points versus last year’s first nine months. The third quarter and first nine months 2017 change in tax rate was driven by a number of factors as referenced in Note 6.

Lower shares outstanding, partially offset by higher interest expense, increased earnings per share. Weighted-average diluted shares outstanding in the third quarter and first nine months of 2017 declined 1.0 percent and 1.3 percent year-on-year, respectively, which benefited earnings per share. The decrease in the outstanding weighted-average diluted shares relates to the Company’s purchase of $380 million and $1.6 billion of its own stock in the third quarter and first nine months of 2017, respectively. Higher net interest expense was largely due to higher U.S. average debt balances and higher interest rates.

The third quarter and first nine months of 2017 had year-on-year operating income impacts from the following divestitures: Polyfoam and the remaining portion 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), and identity management business and tolling and automated license/number plate recognition business (both in the second quarter of 2017).

There was no incremental gain on divestiture impact during the third quarter of 2017. The pre-tax operating income increase during the first nine months of 2017 was approximately $450 million year-on-year, which is equivalent to a year-on-yearyear, an increase of ~~56 cents~~26.8 percent on a per diluted share ~~(largely~~basis.

Additional discussion related to the ~~identify management business).~~components of the year-on-year change in operating income margins and earnings per diluted share follows:

~~Divestiture lost operating loss/~~Organic growth/productivity and other:

●

Higher organic volume growth, ongoing cost management, and improved productivity increased operating income margins and earnings per diluted share year-on-year. In addition, the first quarter of 2021 compared to 2020 benefited from restructuring in 2020, net of additional actions in 2021, and COVID-impacts recognized on certain assets in the first quarter of 2020.

●

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

Selling price and raw material impact:

●

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

Acquisitions/divestitures:

●

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

Foreign exchange impacts:

●

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

Other expense (income) ~~impacts, which are measured~~, net:

●

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

●

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

Income tax rate:

●

Certain items above reflect specific income tax rates associated therewith. Overall, the effective tax rate for the first quarter of 2021 was 16.4 percent, a decrease of 1.1 percentage points year-on-year.

●

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

Shares of common stock outstanding:

●

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

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

In addition to reporting financial results in accordance with U.S. GAAP, the Company also provides non-GAAP measures that adjust for the ~~first twelve months post-transaction, increased pre-tax earnings by approximately $10 million and decreased pre-tax earnings by approximately $2 million for~~impacts of special items. For the ~~third quarter and first nine months of 2017, respectively.~~

periods presented, special items include the items described below. Operating income (measure of segment operating performance), income before taxes, net income, earnings per share, and the effective tax rate are all measures for which 3M provides the reported GAAP measure and a measure adjusted for special items. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. The Company considers these non-GAAP measures in evaluating and managing the Company’s operations. The Company believes that discussion of results ~~include year-on-year incremental strategic investments that decreased pre-tax earnings~~adjusted for these items is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. The determination of these items may not be comparable to similarly titled measures used by ~~approximately $48 million and $362 million in the third quarter and first nine months~~other companies. Special items include:

Gain/loss from sale of 2017, respectively. These incremental strategic investments are comprised of 3M’s investments in growth initiatives and optimization of its portfolio and supply chain footprint. Additional discussion on strategic investments is provided later within “Divestitures and Strategic Investments” and also within the “Results of Operations” section.

businesses:

5554

Table of Contents

●

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

Significant litigation-related charges/benefits:

●

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


(Dollars in millions, except per share amounts)		Operating Income	Operating Income Margin			Income Before Taxes		Provision for Income Taxes	Effective Tax Rate			Net Income Attributable to 3M		Earnings Per Diluted Share	Earnings per diluted share percent change
Three months ended March 31, 2020 GAAP	$	1,663	20.6	%	$	1,588	$	278	17.5	%	$	1,308	$	2.25
Adjustments for special items:
Significant litigation-related charges/benefits		17				17		56				(39)		(0.06)
Gain/loss on sale of businesses		(2)				(2)		(3)				1		—
Three months ended March 31, 2020 adjusted amounts (non-GAAP measures)	$	1,678	20.8	%	$	1,603	$	331	20.7	%	$	1,270	$	2.19

Three months ended March 31, 2021 GAAP	$	1,994	22.5	%	$	1,945	$	319	16.4	%	$	1,624	$	2.77	23.1	%
Adjustments for special items:
None
Three months ended March 31, 2021 adjusted amounts (non-GAAP measures)	$	1,994	22.5	%	$	1,945	$	319	16.4	%	$	1,624	$	2.77	26.8	%

Sales and operating income by business segment:

The following tables contain sales and operating income results by business segment for the three months ended March 31, 2021 and ~~nine months ended September 30, 2017 and 2016. In addition to the discussion below, refer~~2020. Refer to the section entitled “Performance by Business Segment” later in MD&A for ~~a more detailed~~additional discussion ~~of the sales and operating income~~concerning 2021 versus 2020 results, ~~of the Company and its respective business segments (including~~including Corporate and ~~Unallocated).~~Unallocated. Refer to Note 1416 for additional information on business segments, including Elimination of Dual Credit. ~~Further discussion of the Company’s operating income results is in the section entitled “Operating Income” within the “Results of Operations” section.~~


	Three months ended September 30,
	2017				2016				% change
	Net		Oper.		Net		Oper.		Net		Oper.

													Three months ended March 31,
													2021				2020				% change
													Net		Oper.		Net		Oper.		Net		Oper.
(Dollars in millions)	Sales		Income		Sales		Income		Sales		Income		Sales		Income		Sales		Income		Sales		Income
Business Segments
Industrial	$	2,764	$	614	$	2,603	$	595	6.2	%	3.1	%
Safety and Graphics		1,529		410		1,500		372	1.9	%	10.5	%
Safety and Industrial													$	3,327	$	811	$	2,927	$	694	13.7	%	16.8	%
Transportation and Electronics														2,531		591		2,239		464	13.1		27.4
Health Care		1,476		471		1,371		431	7.7	%	9.3	%		2,248		509		2,104		452	6.8		12.6
Electronics and Energy		1,414		394		1,250		304	13.1	%	29.9	%
Consumer		1,236		307		1,210		317	2.2	%	(3.2)	%		1,373		289		1,250		265	9.8		9.4
Corporate and Unallocated		1		(100)		2		(65)	—		—			(2)		(47)		—		(99)	—		—
Elimination of Dual Credit		(248)		(55)		(227)		(50)	—		—			(626)		(159)		(445)		(113)	—		—
Total Company	$	8,172	$	2,041	$	7,709	$	1,904	6.0	%	7.2	%	$	8,851	$	1,994	$	8,075	$	1,663	9.6	%	19.9	%

Three months ended September 30, 2017


Organic







Worldwide

local-

Total

Sales Change Analysis

currency

sales

By Business Segment

sales

Divestitures

Translation

change

Industrial

6.1
%
(0.6)
%
0.7
%
6.2
%
Safety and Graphics

6.0

(4.9)

0.8

1.9

Health Care

6.9

—

0.8

7.7

Electronics and Energy

13.2

(0.1)

—

13.1

Consumer

1.9

—

0.3

2.2

Total Company

6.6
%
(1.2)
%
0.6
%
6.0
%

Sales in U.S. dollars in the third quarter of 2017 increased 6.0 percent compared to the same period in 2016, with increases in organic local-currency sales (which includes organic volume impacts plus selling price impacts) and foreign currency translation, partially offset by divestiture impacts. Total company organic local-currency sales increased 6.6 percent, with growth in all business segments. Worldwide operating income margins for the third quarter of 2017 were 25.0 percent, compared to 24.7 percent for the third quarter of 2016, with operating income margins greater than 22 percent across all five business segments.

Divestitures reduced third quarter sales growth by 1.2 percent. As part of its ongoing portfolio management process, 3M sold its protective films business and cathode battery technology out-license business (both in fourth quarter 2016). In addition, 3M sold its prescription safety eyewear business (January 2017), its identify management business (May 2017), and its tolling and automated license/number plate recognition business (June 2017). Refer to Note 2 in the Consolidated Financial Statements for additional detail.

5655

Table of Contents

Nine months ended September 30,

2017

2016

% change


Net

Oper.

Net

Oper.

Net

Oper.

(Dollars in millions)

Sales

Income

Sales

Income

Sales

Income

Business Segments

Industrial

$
8,193

$
1,762

$
7,856

$
1,837

4.3
%
(4.1)
%
Safety and Graphics

4,603

1,661

4,538

1,152

1.4
%
44.2
%
Health Care

4,339

1,317

4,176

1,350

3.9
%
(2.4)
%
Electronics and Energy

3,838

920

3,468

716

10.6
%
28.5
%
Consumer

3,415

724

3,390

836

0.7
%
(13.4)
%
Corporate and Unallocated

5

(225)

5

(189)

—

—

Elimination of Dual Credit

(726)

(160)

(653)

(144)

—

—

Total Company

$
23,667

$
5,999

$
22,780

$
5,558

3.9
%
7.9
%


	Three months ended March 31, 2021
Worldwide Sales Change	Organic local-								Total sales
By Business Segment	currency sales		Acquisitions		Divestitures		Translation		change
Safety and Industrial	10.3	%	—	%	—	%	3.4	%	13.7	%
Transportation and Electronics	9.8		—		—		3.3		13.1
Health Care	9.3		—		(5.6)		3.1		6.8
Consumer	7.8		—		—		2.0		9.8
Total Company	8.0	%	—	%	(1.4)	%	3.0	%	9.6	%

Nine months ended September 30, 2017


Organic







Worldwide

local-

Total

Sales Change Analysis

currency

sales

By Business Segment

sales

Divestitures

Translation

change

Industrial

5.2
%
(0.6)
%
(0.3)
%
4.3
%
Safety and Graphics

4.6

(3.0)

(0.2)

1.4

Health Care

4.1

—

(0.2)

3.9

Electronics and Energy

11.0

(0.2)

(0.2)

10.6

Consumer

0.5

—

0.2

0.7

Total Company

5.0
%
(0.9)
%
(0.2)
%
3.9
%

Sales in U.S. dollars in the first nine months of 2017 increased 3.9 percent, with an increase in organic local-currency sales partially offset by divestiture and foreign currency translation impacts. Total company organic local-currency sales increased 5.0 percent, with growth in all business segments. All five of 3M’s business segments achieved operating income margins in excess of 21 percent. Worldwide operating income margins for the first nine months of 2017 were 25.3 percent, compared to 24.4 percent for the first nine months of 2016, helped by a net benefit from divestiture gains, net of lost operating income, partially offset by incremental strategic investments. Organic volume growth also benefited results.

In the first quarter of 2016, 3M completed the sale of the remaining portions of its library systems business. Also, in the first quarter of 2016, 3M divested the assets of 3M’s pressurized polyurethane foam adhesives business (formerly known as Polyfoam). These businesses were formerly part of the Company’s Safety and Graphics business and Industrial business, respectively. Additional acquisition and divestiture impacts that impacted the first nine months ended September 30, 2017 are provided in the preceding third quarter discussion.

~~Table of Contents~~

Sales by geographic area:

Percent change information compares the ~~third quarter and~~ first ~~nine~~three months of ~~2017~~2021 with the same ~~periods~~period last year, unless otherwise indicated. ~~From a geographic perspective, any references to EMEA refer to Europe, Middle East and Africa on a combined basis.~~ Additional discussion of ~~geographic area impacts by~~ business segment results is provided in the Performance by Business Segment section.


	Three months ended September 30, 2017
							Europe,			Latin
	United			Asia			Middle East			America/			Other
	States			Pacific			& Africa			Canada			Unallocated		Worldwide

																		Three months ended March 31, 2021
																								Europe,
																					Asia			Middle East			Other
																		Americas			Pacific			& Africa			Unallocated		Worldwide
Net sales (millions)	$	3,223		$	2,580		$	1,589		$	784		$	(4)	$	8,172		$	4,328		$	2,769		$	1,755		$	(1)	$	8,851
% of worldwide sales		39.4	%		31.6	%		19.4	%		9.6	%		—		100.0	%		48.9	%		31.3	%		19.8	%		—		100.0	%
Components of net sales change:
Volume — organic		3.8	%		13.4	%		3.3	%		4.4	%		—		6.6	%		5.1	%		13.3	%		4.5	%		—		7.3	%
Price		(0.2)			(0.6)			0.7			0.9			—		—			1.2			(0.5)			1.0			—		0.7
Organic local-currency sales		3.6			12.8			4.0			5.3			—		6.6			6.3			12.8			5.5			—		8.0
Acquisitions																			—			—			—			—		—
Divestitures		(1.6)			(0.5)			(0.8)			(2.1)			—		(1.2)			(1.6)			—			(3.0)			—		(1.4)
Translation		—			(1.5)			4.2			2.4			—		0.6			(0.2)			5.3			7.9			—		3.0
Total sales change		2.0	%		10.8	%		7.4	%		5.6	%		—		6.0	%		4.5	%		18.1	%		10.4	%		—		9.6	%


Total sales change:
Industrial		4.0	%		6.4	%		9.6	%		7.2	%		—		6.2	%
Safety and Graphics		(3.0)	%		6.2	%		8.7	%		(0.6)	%		—		1.9	%
Safety and Industrial																			11.9	%		15.5	%		15.6	%		—		13.7	%
Transportation and Electronics																			(3.7)	%		24.0	%		7.9	%		—		13.1	%
Health Care		8.5	%		7.4	%		5.2	%		10.7	%		—		7.7	%		2.4	%		14.6	%		13.2	%		—		6.8	%
Electronics and Energy		(1.8)	%		19.2	%		4.8	%		8.3	%		—		13.1	%
Consumer		1.1	%		5.3	%		1.6	%		5.6	%		—		2.2	%		8.6	%		11.5	%		14.9	%		—		9.8	%


Organic local-currency sales change:
Industrial		5.0	%		8.7	%		5.2	%		5.6	%		—		6.1	%
Safety and Graphics		3.1	%		11.0	%		7.7	%		4.2	%		—		6.0	%
Safety and Industrial																			12.3	%		8.7	%		7.4	%		—		10.3	%
Transportation and Electronics																			(3.5)	%		19.9	%		0.3	%		—		9.8	%
Health Care		8.5	%		8.8	%		1.6	%		8.6	%		—		6.9	%		7.6	%		7.6	%		15.5	%		—		9.3	%
Electronics and Energy		(1.5)	%		20.0	%		0.9	%		6.2	%		—		13.2	%
Consumer		1.1	%		7.1	%		(2.2)	%		2.7	%		—		1.9	%		8.7	%		5.2	%		7.0	%		—		7.8	%

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

●

In the Americas geographic area, U.S. total sales increased 5 percent and organic-local currency sales increased 7 percent. Total sales in Mexico decreased 1 percent and organic local-currency sales decreased 2 percent. In Canada, total sales increased 6 percent and organic local-currency sales remained flat. In Brazil, total sales remained flat while organic local-currency sales increased 18 percent, as foreign currency translation impacts offset organic local-currency sales growth.

●

In the Asia Pacific geographic area, ~~where 3M’s Electronics and Energy business is concentrated,~~China total sales ~~benefited from strengthened demand across most electronics market segments. In China/Hong Kong, both total sales~~increased 39 percent and organic local-currency sales increased 2332 percent. In Japan, total sales ~~declined~~increased 1 percent ~~as organic local-currency sales growth of 5 percent was more than offset by foreign currency translation impacts.~~

~~In the EMEA geographic area, Central/East Europe and Middle East/Africa had both total sales~~ and organic local-currency sales ~~increases of 8~~decreased 1 percent. ~~West Europe total sales grew 7 percent, driven by foreign currency translation impacts, in addition to organic local-currency sales growth of 3 percent.~~

In the Latin America/Canada geographic area, total sales increased 8 percent in Mexico, driven by organic local-currency sales growth of 5 percent. In Canada, total sales increased 16 percent, driven by organic local-currency sales growth of 14 percent. In Brazil, total sales growth of 2 percent was driven by foreign currency translation impact, as organic local-currency sales growth was flat.

Selling prices were flat year-on-year for the third quarter of 2017, compared to a year-on-year decrease of 0.3 percent for the second quarter of 2017. In 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.

Foreign currency translation increased year-on-year sales by 0.6 percent, with translation-related sales increases in both EMEA and Latin America/Canada. In Asia Pacific, the U.S. dollar was weaker compared to the third quarter of 2016 by

~~Table of Contents~~

8 percent versus the Japanese Yen, while the Chinese Yuan was flat. In EMEA, the U.S. dollar was stronger compared to the third quarter of 2016 by 6 percent versus the Euro, while the British Pound was flat.

Nine months ended September 30, 2017

Europe,

Latin

United

Asia

Middle East

America/

Other


States

Pacific

& Africa

Canada

Unallocated

Worldwide

Net sales (millions)

$
9,291

$
7,335

$
4,771

$
2,277

$
(7)

$
23,667

% of worldwide sales

39.3
%

31.0
%

20.1
%

9.6
%

—

100.0
%
Components of net sales change:

Volume — organic

2.6
%

11.4
%

1.4
%

2.8
%

—

5.1
%
Price

(0.3)

(0.4)

0.5

1.0

—

(0.1)

Organic local-currency sales

2.3

11.0

1.9

3.8

—

5.0

Divestitures

(1.3)

(0.3)

(0.5)

(1.3)

—

(0.9)

Translation

—

(1.0)

(0.4)

2.2

—

(0.2)

Total sales change

1.0
%

9.7
%

1.0
%

4.7
%

—

3.9
%

Total sales change:

Industrial

3.9
%

6.1
%

3.0
%

4.3
%

—

4.3
%
Safety and Graphics

(1.2)
%

5.4
%

2.4
%

0.8
%

—

1.4
%
Health Care

4.7
%

6.9
%

(1.7)
%

10.4
%

—

3.9
%
Electronics and Energy

(0.6)
%

17.2
%

(1.2)
%

4.0
%

—

10.6
%
Consumer

(1.2)
%

6.7
%

(2.8)
%

6.9
%

—

0.7
%

Organic local-currency sales change:

Industrial

5.0
%

7.8
%

3.7
%

2.6
%

—

5.2
%
Safety and Graphics

2.8
%

8.3
%

4.9
%

3.2
%

—

4.6
%
Health Care

4.7
%

7.8
%

(0.6)
%

8.1
%

—

4.1
%
Electronics and Energy

0.4
%

17.8
%

(1.7)
%

2.5
%

—

11.0
%
Consumer

(1.2)
%

6.8
%

(2.6)
%

3.9
%

—

0.5
%

~~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. Total sales in China/Hong Kong grew 15 percent and Japan grew 5 percent. On an organic local-currency sales basis, China/Hong Kong grew 18 percent and Japan grew 9 percent.

In the EMEA geographic area, Central/East Europe and Middle East/Africa total sales and organic local-currency grew 2 percent. West Europe total sales grew 1 percent, as organic local-currency sales growth of 2 percent was partially offset by foreign currency translation.

In the Latin America/Canada geographic area, total sales increased 4 percent in Mexico, as organic local-currency sales growth of 7 percent was partially offset by foreign currency translation and divestitures. In Canada, both total sales and organic-local currency sales grew 6 percent. In Brazil total sales growth of 11 percent was driven by foreign currency translation, while organic local-currency sales increased 1 percent.

~~Foreign currency translation reduced year-on-year sales by 0.2 percent, with the translation-related sales increase in Latin America/Canada more than offset by the decreases in EMEA and Asia Pacific.~~

Managing currency risks:

The ~~stronger~~weaker U.S. dollar had a ~~negative~~positive impact on sales ~~and~~in the first three months of 2021 compared to the same period last year. Net of the Company’s hedging strategy, foreign currency positively impacted earnings in the first ~~nine months~~quarter of ~~2017.~~2021 compared to the same

Table of Contents

period last year. 3M utilizes a number of tools to ~~hedge~~manage currency risk related to ~~earnings. 3M uses~~earnings including natural hedges such as pricing, productivity, hard currency and hard currency-indexed billings, and localizing source of supply. 3M also uses financial hedges to mitigate

~~Table of Contents~~

currency risk. In the case of more liquid currencies, 3M hedges a portion of its aggregate exposure, using a 12, 24 or 36 month horizon, depending on the currency in question. For less liquid currencies, financial hedging is frequently more expensive with more limitations on tenor. Thus, this risk is largely managed via local operational actions using natural hedging tools as discussed above. In either case, 3M’s hedging approach is designed to mitigate a portion of foreign currency risk and reduce volatility, ultimately allowing time for 3M’s businesses to respond to changes in the marketplace.

Financial condition:

3M generated ~~$4.380~~$1.7 billion of operating cash flows in the first ~~nine~~three months of ~~2017, a decrease~~2021, an increase of ~~$73~~$475 million when compared to the first ~~nine~~three months of ~~2016.~~2020, with this increase year-on-year primarily driven by higher net income as a result of strong organic sales growth and ongoing cost management. Refer to the section entitled “Financial Condition and Liquidity” later in MD&A for a discussion of items impacting cash flows.

In ~~February 2016,~~November 2018, 3M’s Board of Directors ~~authorized~~replaced the Company’s February 2016 repurchase program with a new repurchase program. This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date. In the first ~~nine~~three months of ~~2017,~~2021, the Company purchased ~~$1.6 billion~~$231 million of its own stock, compared to ~~$2.8 billion~~$365 million of stock purchases in the first ~~nine~~three months of ~~2016.~~2020. As of ~~September 30, 2017,~~March 31, 2021, approximately ~~$5.6~~$7.5 billion remained available under the ~~February 2016~~ authorization. ~~The Company expects to purchase $2.0 billion to $2.5 billion of its own stock in 2017.~~ In February ~~2017,~~2021, 3M’s Board of Directors declared a first-quarter ~~2017~~2021 dividend of ~~$1.175~~$1.48 per share, an increase of 61 percent. This marked the ~~59th~~63^rd consecutive year of dividend increases for 3M. In May 2017, 3M’s Board of Directors declared a second quarter 2017 dividend of $1.175 per share. In August 2017, 3M’s Board of Directors declared a third quarter 2017 dividend of $1.175 per share.

3M currently ~~has an AA- credit rating with a stable outlook from Standard & Poor’s and~~ has an A1 credit rating with a ~~stable~~negative outlook from Moody’s Investors ~~Service.~~Service and has an A+ credit rating with Standard & Poor’s with a negative outlook. The Company generates significant ongoing cash flow and has proven access to capital markets funding throughout business cycles.

3M expects to contribute approximately ~~$300 million to $500~~$200 million of cash to its global defined benefit pension and postretirement plans in ~~2017.~~2021. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in ~~2017.~~2021.

~~Table of Contents~~

~~Divestitures and Strategic Investments:~~

In both the third quarter and first nine months of 2017, the Company continued to execute on accelerating 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 $0.05 per diluted share and a benefit of $0.10 per diluted share, respectively, for the three and nine months ended September 30, 2017.

Three months ended September 30, 2017

Nine months ended September 30, 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

$
—

$
490

Less: prior year divestiture gains

—

(40)

Year-on-year lost operating loss/(income) from divested businesses

10

(2)

Year-on-year divestiture impacts, net of lost operating loss/(income)

$
10

$
0.01

$
448

$
0.56

Strategic investments:

2017 portfolio and footprint optimization activities:

Restructuring actions and exit activities

$
—

$
(123)

Asset charges and accelerated depreciation

(24)

(140)

Other costs

(11)

(26)

Less: prior year portfolio and footprint optimization activities

6

21

Year-on-year portfolio and footprint optimization

(29)

$
(0.04)

(268)

$
(0.34)

Incremental year-on-year growth initiatives

(19)

(94)

Total incremental strategic investments

$
(48)

$
(0.06)

$
(362)

$
(0.46)

Year-on-year divestiture impacts and strategic investments net benefit/(cost)

$
(38)

$
(0.05)

$
86

$
0.10

~~The total pre-tax year-on-year divestiture impacts, net of strategic investments from the table above, are further detailed below by business group:~~

Three months ended

Nine months ended

(Millions)

September 30, 2017

September 30, 2017

Industrial

$
(12)

$
(114)

Safety and Graphics

5

460

Health Care

(4)

(49)

Electronics and Energy

(7)

(80)

Consumer

(13)

(88)

Corporate and Unallocated

(7)

(43)

Total pretax divestiture gains, net of strategic investments

$
(38)

$
86

~~Table of Contents~~

~~Fourth Quarter 2017 Items:~~

In October 2017, 3M sold its electronic monitoring business to an affiliate of Apax Partners for $200 million, net of cash sold and closing and other adjustments. 3M expects a pre-tax gain of approximately $100 million (or 12 cents per diluted share) in the fourth quarter of 2017 as a result of this divestiture. Refer to Note 2 for additional details.

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, net of closing and other adjustments. The income from on-going operations, net of acquisition and integration costs, is expected to decrease earnings in the fourth quarter of 2017 by approximately 8 cents per diluted share. Refer to Note 2 for additional details.

During the fourth quarter of 2017, a debt extinguishment charge of approximately $95 million related to the repurchase of $305 million aggregate principal amount of the Company’s high coupon debt via tender offers is expected to decrease earnings by approximately 11 cents per diluted share. Refer to Note 8 for additional details.

Additionally in the fourth quarter of 2017, the Company will recognize additional incremental strategic investments comprised of growth initiatives and portfolio and footprint optimization charges. These incremental strategic investments are expected to decrease fourth quarter 2017 earnings year-on-year by approximately 6 cents to 10 cents per diluted share.

RESULTS OF OPERATIONS

Net Sales:

Refer to the preceding ~~sections entitled “Sales~~“Overview” section and ~~operating income~~the “Performance by ~~business segment” and “Sales and operating income by geographic area”~~Business Segment” section later in MD&A for additional discussion of sales change.

Operating Expenses:

Three months ended

Nine months ended

September 30,

September 30,

(Percent of net sales)

2017

2016

Change

2017

2016

Change

Cost of sales

49.4
%
49.9
%
(0.5)
%
50.5
%
49.7
%
0.8
%

Selling, general and administrative expenses

19.9

19.9

—

20.4

20.3

0.1

Research, development and related expenses

5.7

5.5

0.2

5.9

5.8

0.1

Gain from sale of businesses

—

—

—

(2.1)

(0.2)

(1.9)

Operating income

25.0
%
24.7
%
0.3
%
25.3
%
24.4
%
0.9
%


	Three months ended
	March 31,
(Percent of net sales)	2021		2020		Change
Cost of sales	51.1	%	50.9	%	0.2	%
Selling, general and administrative expenses (SG&A)	20.5		21.9		(1.4)
Research, development and related expenses (R&D)	5.9		6.6		(0.7)
Gain on sale of businesses	—		—		—
Operating income margin	22.5	%	20.6	%	1.9	%

3M expects global defined benefit pension and postretirement service cost expense in ~~2017 (before settlements, curtailments, special termination benefits and other)~~2021 to increase by approximately ~~$74~~$40 million pre-tax when compared to ~~2016,~~2020, which impacts cost of sales; selling, general and administrative expenses (SG&A); and research, development and related expenses (R&D). Refer to 3M’s Current Report on Form 8-K dated May 4, 2017 (MD&A section entitled Critical Accounting Estimates — Pension and Postretirement Obligations and Note 11, Pension and Postretirement Benefit Plans) for background concerning the change to the spot yield curve approach and other factors that will impact pension and postretirement expenses in 2017. The year-on-year increase in defined benefit pension and postretirement service cost expense for the ~~third quarter and~~ first ~~nine~~three months of ~~2017~~2021 was ~~$20~~approximately $10 million.

For total year 2020, the Company recognized consolidated defined benefit pre-tax pension and postretirement service cost expense of $456 million and ~~$64~~a benefit of $134 million ~~respectively.~~

related to all non-service pension and postretirement net benefit costs (after settlements,

6257

Table of Contents

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

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

The Company is investing in an initiative called business transformation, with these investments impacting cost of sales, SG&A, and R&D. Business transformation encompasses the ongoing multi-year phased implementation of an enterprise resource planning (ERP) system on a worldwide basis, as well as changes in processes and internal/external service delivery across 3M.

In both the three and nine months ended September 30, 2017, strategic investments in growth initiatives, portfolio actions and footprint optimization, in addition to gains on divestitures, impacted 3M’s operating expenses. The table below reflects actual amounts within the period and does not include any year-on-year impacts.

Three months ended

Nine months ended

(Millions)

September 30, 2017

September 30, 2017

Cost of sales

$
18

$
220

Selling, general and administrative expenses

57

185

Research, development and related charges

—

9

Gain on sale of businesses

—

(490)

Total

$
75

$
(76)

Cost of Sales:

~~Cost of sales includes manufacturing, engineering and freight costs.~~

Cost of sales, measured as a percent of sales, decreased in the third quarter of 2017, helped by 6.6 percent organic sales volume growth and an approximate 1 percent year-on-year reduction in raw material input costs as a result of input management. This decrease was partially offset by year-on-year charges related to 3M’s optimization of its portfolio and supply chain footprint, foreign currency effects (net of hedge impacts), and higher defined benefit pension expense.

Cost of sales, measured as a percent of sales, increased in first three months of 2021. Increases in the first ~~nine~~three months of ~~2017 due~~2021 primarily related to ~~incremental strategic investments~~higher raw material and logistics costs from COVID-19 impacted manufacturing and supply chain disruptions, further magnified by February 2021 winter storm Uri in ~~productivity, portfolio actions and footprint optimization, foreign currency effects (net of hedge impacts)~~the U.S., ~~and higher defined benefit pension expense. This was~~ partially offset by ~~an approximate 1.5~~higher selling prices.

Selling, General and Administrative Expenses:

SG&A in dollars increased 2.3 percent ~~year-on-year reduction~~ in ~~raw material input~~the first three months of 2021, when compared to the same period last year. The increase in the first three months of 2021 primarily increased net costs as a result of ~~input~~the regular review of 3M’s respirator mask liabilities, higher litigation and environmental costs, continued spending on key initiatives, partially offset by ongoing general cost management. ~~Selling prices~~As a percent of sales, SG&A decreased ~~net sales year-on-year by 0.1 percent~~as a result of continued discretionary spending cost management.

Research, Development and Related Expenses:

R&D in dollars decreased $13 million in the first ~~nine~~three months of ~~2017.~~

~~Selling, General and Administrative Expenses:~~

~~SG&A in dollars increased 6.1 percent and 4.5 percent in the third quarter and first nine months of 2017, respectively,~~2021, when compared to the same period last year, ~~impacted by incremental strategic investments and higher defined benefit pension expense.~~

~~Research, Development and Related Expenses:~~

~~R&D in dollars increased $36 million and $93 million in the third quarter and first nine months of 2017, respectively, compared to the same period last year.~~as 3M continued to invest in its key initiatives, including R&D aimed at disruptive innovation programs with the potential to create entirely new markets and disrupt existing markets. The overall decrease in spending is primarily driven by the May 2020 divestiture of the drug delivery business and other indirect spending reductions.

Gain on Sale of Businesses:

~~In January 2017, 3M completed~~During the ~~sale~~first quarter of assets related to its safety prescription eyewear business to HOYA Vision Care. 3M received proceeds of $53 million for this transaction and recognized, net of assets sold, transaction and other costs,2020, the Company recorded a pre-tax gain of ~~$29~~$2 million ~~which was reported within the Company’s Safety and Graphics business.~~

~~In May 2017, 3M completed~~($1 million loss after tax) related to the sale of its ~~identity management~~advanced ballistic-protection business ~~to Gemalto N.V. In June 2017, 3M completed the sale~~and recognition of its tolling and automated license/number plate recognition business to Neology, Inc. 3M received proceeds of $833 million, or $809 million net of cash sold, and reflected a pre-tax gain of $461 million as a result of these two

~~Table of Contents~~

~~divestitures in the second quarter of 2017, which was reported within the Company’s Safety and Graphics business. For more details, refer~~certain contingent consideration. Refer to Note 2.3 for additional details on divestitures.

Other Expense (Income), Net:

~~In the first quarter~~See Note 6 for a detailed breakout of ~~2016, 3M completed the sale~~this line item.

Interest expense (net of ~~the remainder of the assets of 3M’s library systems business to One Equity Partners Capital Advisors L.P. (OEP). Also~~interest income) increased in the first quarter of 2016, 3M completed the sale of its pressurized polyurethane foam adhesives business (formerly known as Polyfoam) to Innovative Chemical Products Group, a portfolio company of Audax Private Equity. 3M received proceeds of $56 million for these transactions and recognized a pre-tax gain of $40 million as a result of these two divestitures in the first quarter of 2016. These businesses were formerly part of the Company’s Safety and Graphics business and Industrial business, respectively. Refer to Note 2 in 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K) for more information on 3M’s acquisitions and divestitures.

~~Operating Income:~~

~~3M uses operating income as one of its primary business segment performance measurement tools. Refer to the table below for a reconciliation of operating income margins for the~~ three months ~~and nine months ended September 30, 2017 versus the same periods last year.~~

Three months ended

Nine months ended

(Percent of net sales)

September 30, 2017

September 30, 2017

Same period last year

24.7
%
24.4
%
Increase/(decrease) in operating income margin, due to:

Organic volume/productivity

0.9

0.8

Selling price and raw material impact

0.3

0.3

Foreign exchange impacts

(0.4)

(0.4)

Pension and postretirement benefit costs

(0.3)

(0.3)

Divestiture gains

—

1.9

Operating loss/(income) from divested businesses

0.4

0.1

Incremental strategic investments

(0.6)

(1.5)

Current period

25.0
%
25.3
%

~~Operating income margins increased 0.3 percentage points in the third quarter~~ of ~~2017 and increased 0.9 percentage points in the first nine months of 2017 when~~2021 compared to the same ~~periods last year. 3M benefited from year-on-year divestiture gains (refer~~period in 2020 due to Note 2), non-repeating net operating losses from divested businesses, higher organic local-currency sales growth and productivity. 3M also benefited from raw material cost decreases. Items that reduced operating income margins included year-on-year incremental strategic investments in growth, productivity and portfolio actions, in addition to chargesan early debt extinguishment charge related to ~~3M’s optimization~~make-whole call offers on $450 million of ~~its portfolio~~debt in March 2021.

The non-service pension and ~~supply chain footprint. Additional items that reduced operating margins included foreign currency effects (net of hedge impacts) and higher year-on-year defined~~postretirement net benefit ~~pension expense.~~

~~Interest Expense and Income:~~

Three months ended

Nine months ended

September 30,

September 30,

(Millions)

2017

2016

2017

2016

Interest expense

$
57

$
50

$
156

$
135

Interest income

(13)

(8)

(33)

(20)

Total

$
44

$
42

$
123

$
115

~~Interest expense was higher~~increased approximately $40 million in the ~~third quarter and~~ first ~~nine~~three months of ~~2017~~2021 compared to the same ~~periods last year, largely due to higher U.S. average debt balances and higher interest rates. Interest income was higher~~period in ~~the third quarter and first nine months of 2017 compared to the same periods last year, due to higher average cash balances and cash yields.~~2020.

~~Table of Contents~~

Provision for Income Taxes:


	Three months ended
	March 31,
(Percent of pre-tax income)	2021		2020
Effective tax rate	16.4	%	17.5	%

Three months ended

Nine months ended

September 30,

September 30,

(Percent of pre-tax income)

2017

2016

2017

2016

Effective tax rate

28.3
%
28.5
%
26.1
%
28.3
%

~~The effective tax rate for the third quarter~~Table of ~~2017 was 28.3 percent, compared to 28.5 percent in the third quarter of 2016, a decrease of 0.2 percentage points.~~ Contents

The effective tax rate for the first ~~nine~~three months of ~~2017~~2021 was ~~26.1~~16.4 percent, compared to ~~28.3~~17.5 percent in the first ~~nine~~three months ~~of 2016,~~2020, a decrease of ~~2.2~~1.1 percentage points. ~~The changes in~~Factors that impacted the tax rates between years are ~~impacted by many factors, as described~~ further discussed in the Overview section above and in Note 6.8.

~~The Company~~3M currently ~~anticipates~~estimates its ~~2017 full-year~~effective tax rate ~~will~~for 2021 to be ~~26.0~~approximately 20 to ~~27.0~~21 percent. The tax rate can vary from quarter to quarter due to discrete items, such as the settlement of income tax audits, ~~and~~ changes in tax laws, and employee share-based payment accounting; as well as recurring factors, such as the geographic mix of income before ~~taxes and foreign currency effects.~~taxes.

Refer to Note 8 for further discussion of income taxes.

Income from Unconsolidated Subsidiaries, Net of Taxes:

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

Net Income Attributable to Noncontrolling Interest:


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

									Three months ended
									March 31,
(Millions)	2017		2016		2017		2016		2021		2020
Net income attributable to noncontrolling interest	$	4	$	2	$	9	$	7
Net income (loss) attributable to noncontrolling interest									$	3	$	2

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

Currency Effects:

3M estimates that year-on-year currency effects, including hedging impacts, ~~decreased~~increased pre-tax income by ~~$29 million and $108~~approximately $95 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively.~~March 31, 2021. 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 and any impacts from swapping Venezuelan bolivars into U.S. dollars.~~risks. 3M estimates that year-on-year ~~derivative and other~~foreign currency transaction effects, including hedging impacts, decreased pre-tax income by approximately $10 million for the three months ended March 31, 2021. These estimates include transaction gains and losses, ~~decreased pre-tax income by $34 million and $99 million~~including derivative instruments designed to reduce foreign currency exchange rate risks. Refer to Note 12 in the Consolidated Financial Statements for ~~the three and nine months ended September 30, 2017, respectively.~~additional information concerning 3M’s hedging activities.

Significant Accounting ~~Policies and Critical Accounting Estimates:~~Policies:

Information regarding new accounting standards is included in Note 1 to the Consolidated Financial Statements. ~~In addition, refer to the Critical Accounting Estimates section within MD&A of 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K).~~

~~Table of Contents~~

PERFORMANCE BY BUSINESS SEGMENT

Disclosures relating to 3M’s business segments are provided in Note ~~14.~~16. Effective in the first quarter of ~~2017,~~2021, the measure of segment operating performance used by 3M’s chief operating decision maker (CODM) changed and, as ~~part~~a result, 3M’s disclosed measure of ~~3M’s continuing effort~~segment profit/loss (business segment operating income) was updated for all comparative periods presented. The change to ~~improve~~business segment operating income aligns with the ~~alignment~~update to how the CODM assesses performance and allocates resources for the Company’s business segments (see Note 16 for additional details).

Table of ~~its businesses around markets and customers, the Company made the following changes:~~Contents

~~Integration of former Renewable Energy Division~~

3M’s former Renewable Energy Division (RED) has been integrated into existing divisions within the Electronics and Energy business segment and Safety and Graphics business segment. 3M is committed to leadership in sustainability and to enabling the advancement of energy solutions into the future. Integrating RED’s offerings into larger divisions already serving these segments will provide increased scale and build on strength by leveraging 3M’s existing brands, go-to-market capabilities, and relationships to support growth objectives.

~~Creation of Automotive and Aerospace Solutions Division~~

3M created the Automotive and Aerospace Solutions Division, which combined the former Automotive Division and Aerospace and Commercial Transportation Division, which were both within the Industrial business segment. Combining the strengths along with the deep industry knowledge of each business will enable this new division to utilize shared technology platforms and processes to deliver a broader set of innovative solutions, along with world-class quality and service to 3M’s customers. This combination will help accelerate the Company’s profitable growth and market relevance across the automotive, aerospace and commercial transportation industries.

~~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. This improved alignment reduces the complexity for customers when interacting with multiple businesses within 3M, creating a better customer experience. 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 with respect to a particular product sold in the U.S. The alignment of U.S. customer accounts to fewer, more focused sales districts changed the attribution of dual credit across 3M’s business segments.

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

Corporate and Unallocated:

In addition to these ~~five~~four business segments, 3M assigns certain costs to “Corporate and Unallocated,” which is presented separately in the preceding business segments table and in Note ~~14.~~16. Corporate and Unallocated operating income includes ~~a variety~~“special items” and “other corporate expense-net”. Special items include significant litigation-related charges/benefits, gain/loss on sale of ~~miscellaneous~~businesses, and divestiture-related restructuring costs. Other corporate expense-net includes items such as net costs related to limited unallocated corporate ~~investment gains~~staff and ~~losses, certain derivative gains and losses, certain insurance-related gains and losses,~~centrally managed material resource centers of expertise costs, certain litigation and environmental expenses largely related to legacy products/businesses not allocated to business segments, corporate ~~restructuring charges~~philanthropic activity, and ~~certain under- or over-absorbed~~other net costs ~~(e.g. pension, stock-based compensation)~~ that ~~the Company determines~~3M may choose not to allocate directly to its business segments. Other corporate expense-net also includes costs and income from contract manufacturing, transition services and other arrangements with the acquirer of the Communication Markets Division following its 2018 divestiture through 2019 and the acquirer of the former Drug Delivery business following its 2020 divestiture. Items classified as revenue from this activity are included in Corporate and Unallocated net sales. Because ~~this category~~Corporate and Unallocated includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

Corporate and Unallocated operating expenses ~~increased by $35 million and $36 million~~decreased in the ~~third quarter and~~ first ~~nine~~three months of ~~2017, respectively,~~2021, when compared to the same period last year. ~~In both~~

Special Items

Refer to the ~~first~~Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of significant litigation-related charges/benefits, gain/loss on sale of businesses, and ~~second quarters of 2017, a portion of the severance~~divestiture-related restructuring actions ~~were~~that are reflected in Corporate and Unallocated. ~~In addition, 3M’s defined benefit pension and postretirement expense allocation to~~

Other Corporate ~~and Unallocated increased by $8 million and $27 million, respectively,~~Expense - Net

Other corporate operating expenses, net, decreased in the ~~third quarter and~~ first ~~nine~~three months of ~~2017~~2021, when compared to the same ~~periods~~period last ~~year.~~year primarily due to lower overall corporate staff spending and first quarter 2020 charges related to equity securities (as discussed in the “Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis” section of Note 13), partially offset by increased 2021 legal expenses.

~~Table of Contents~~

Operating Business Segments:

Information related to 3M’s business segments ~~for the third quarter and first nine months of 2017 and 2016~~ is presented in the tables that ~~follow.~~follow with additional context in the corresponding narrative below the tables. Organic local-currency sales include both organic volume impacts plus selling price impacts. Acquisition impacts, if any, are measured separately for the first twelve months post-transaction. The divestiture impacts, if any, foreign currency translation impacts and total sales change are also provided for each business segment. Any references to EMEA relate to Europe, Middle East and Africa on a combined basis.

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

~~Industrial Business:~~

Three months ended

Nine months ended

September 30,

September 30,


2017

2016

2017

2016

Sales (millions)

$
2,764

$
2,603

$
8,193

$
7,856

Sales change analysis:

Organic local-currency

6.1
%

(1.3)
%

5.2
%

(1.5)
%

Acquisitions

—

1.6

—

2.1

Divestitures

(0.6)

(0.2)

(0.6)

(0.2)

Translation

0.7

0.7

(0.3)

(1.2)

Total sales change

6.2
%

0.8
%

4.3
%

(0.8)
%

Operating income (millions)

$
614

$
595

$
1,762

$
1,837

Percent change

3.1
%

1.9
%

(4.1)
%

2.2
%

Percent of sales

22.2
%

22.9
%

21.5
%

23.4
%

~~The Industrial segment serves a broad range~~Refer to 3M’s 2020 Annual Report on Form 10-K, Item 1, Business, for discussion of markets, such as automotive original equipment manufacturer (OEM) and automotive aftermarket (auto body shops and retail), electronics, 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, 3M ~~purification (filtration products), closure systems for personal hygiene products, acoustic systems products, and components and~~ products that are ~~used~~included in ~~the manufacture, repair~~each business segment.

Table of Contents

Safety 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.Industrial Business:


	Three months ended
	March 31,
	2021			2020
Sales (millions)	$	3,327		$	2,927
Sales change analysis:
Organic local-currency		10.3	%
Translation		3.4
Total sales change		13.7	%

Business segment operating income (millions)	$	811		$	694
Percent change		16.8	%
Percent of sales		24.4	%		23.7	%

~~Third Quarter 2017~~First quarter 2021 results:

Sales in Safety and Industrial totaled ~~$2.8~~$3.3 billion, up ~~6.2~~13.7 percent in U.S. dollars. Organic local-currency and other sales ~~increased 6.1 percent, divestitures reduced sales by 0.6 percent, and foreign currency translation increased sales by 0.7 percent.~~change elements are included in the table above.

On an organic local-currency sales basis:

●

Sales ~~grew~~increased in ~~all businesses, led by advanced materials,~~personal safety, roofing granules, industrial adhesives and tapes, automotive aftermarket, electrical markets, and ~~separations~~abrasives; sales declined in closure and ~~purification sciences.~~

masking systems.

●

~~Abrasives,~~Growth includes benefits from continued pandemic-related respirator mask demand, improving general industrial manufacturing activity and ~~automotive and aerospace solutions also showed positive growth, with strong performance in automotive OEM platforms.~~

other end-market demand contributing to sales increases.

~~Acquisitions~~Business segment operating income margins increased year-on-year due to sales growth leverage, partially offset by rising raw materials, logistics and ~~divestitures:~~

~~In October 2016, 3M sold the assets of its temporary protective films business.~~

~~In January 2016, 3M completed its sale of the assets of 3M’s pressurized polyurethane foam adhesives business (formerly known as Polyfoam).~~

~~Table of Contents~~

Acquisition sales growth in 2016 related to the August 2015 acquisition of Membrana, a leading provider of microporous membranes and modules for filtration in the life sciences, industrial, and specialty segments.

legal costs.

~~Operating income:~~

~~Operating income margins decreased 0.7 percentage points, as third quarter footprint and portfolio actions reduced year-on-year operating income margins by 0.4 percentage points.~~

Transportation and Electronics Business:


	Three months ended
	March 31,
	2021			2020
Sales (millions)	$	2,531		$	2,239
Sales change analysis:
Organic local-currency		9.8	%
Translation		3.3
Total sales change		13.1	%

Business segment operating income (millions)	$	591		$	464
Percent change		27.4	%
Percent of sales		23.3	%		20.7	%

First ~~Nine Months 2017~~quarter 2021 results:

Sales in ~~Industrial~~Transportation and Electronics totaled $8.2 billion, up 4.3 percent in U.S. dollars. Organic local-currency sales increased 5.2 percent, divestitures reduced sales by 0.6 percent, and foreign currency translation reduced sales by 0.3 percent.

~~On an organic local-currency sales basis:~~

~~Sales grew in all businesses, led by advanced materials, automotive and aerospace solutions, and industrial adhesives and tapes.~~

~~Acquisitions and divestitures:~~

~~In October 2016, 3M sold the assets of its temporary protective films business.~~

~~In January 2016, 3M completed its sale of the assets of 3M’s pressurized polyurethane foam adhesives business (formerly known as Polyfoam).~~

~~Operating income:~~

Operating income margins decreased 1.9 percentage points, as divestiture impacts related to the first quarter 2016 sale of the Polyfoam business resulted in a net year-on-year operating income margin reduction of 0.4 percentage points. In addition, incremental strategic investments decreased first nine months margins by 0.9 percentage points.

~~Safety and Graphics Business:~~

Three months ended

Nine months ended

September 30,

September 30,


2017

2016

2017

2016

Sales (millions)

$
1,529

$
1,500

$
4,603

$
4,538

Sales change analysis:

Organic local-currency

6.0
%

1.5
%

4.6
%

2.1
%

Acquisitions

—

2.0

—

5.1

Divestitures

(4.9)

(2.1)

(3.0)

(2.2)

Translation

0.8

0.4

(0.2)

(1.9)

Total sales change

1.9
%

1.8
%

1.4
%

3.1
%

Operating income (millions)

$
410

$
372

$
1,661

$
1,152

Percent change

10.5
%

11.7
%

44.2
%

9.4
%

Percent of sales

26.8
%

24.8
%

36.1
%

25.4
%

The Safety and Graphics segment serves a broad range of markets that increase the safety, security and productivity of people, facilities and systems. Major product offerings include personal protection products, such as respiratory, hearing, eye and fall protection equipment; traffic safety solutions, such as retroreflective sign sheeting; commercial solutions, including commercial graphics sheeting and systems, architectural design solutions for surfaces, and cleaning and protection products for commercial establishments; and roofing granules for asphalt shingles.

~~Table of Contents~~

~~Third Quarter 2017 results:~~

Sales in Safety and Graphics totaled $1.5 billion, up 1.9 percent in U.S. dollars. Organic local-currency sales increased 6.0 percent, divestitures reduced sales by 4.9 percent, and foreign currency translation increased sales by 0.8 percent.

~~On an organic local-currency sales basis:~~

~~Sales increases were led by personal safety, which continued to experience strong demand.~~

~~Sales also increased in roofing granules and transportation safety, while commercial solutions declined.~~

~~Acquisitions and divestitures:~~

~~Acquisition sales growth in 2016 reflected the acquisition of Capital Safety in August 2015. Capital Safety is a leading global provider of fall protection equipment.~~

~~In January 2017, 3M sold its safety prescription eyewear business.~~

In May 2017, 3M closed on the sale and transfer of control of its identity management business. In June 2017, 3M completed the sale of its tolling and automated license/number plate recognition business.

~~Operating income:~~

Operating income margins increased 2.0 percentage points, benefiting from higher organic sales volume, partially offset by third quarter footprint and portfolio actions, which resulted in a year-on-year operating income margin reduction of 0.6 percentage points.

~~First Nine Months 2017 results:~~

Sales in Safety and Graphics totaled $4.6 billion, up 1.4 percent in U.S. dollars. Organic local-currency sales increased 4.6 percent, divestitures reduced sales by 3.0 percent, and foreign currency translation reduced sales by 0.2 percent.

~~On an organic local-currency sales basis:~~

~~Sales growth was led by personal safety.~~

~~Roofing granules and transportation safety showed positive growth, while commercial solutions was flat.~~

~~Acquisitions and divestitures:~~

~~Acquisition sales growth in 2016 reflected the acquisition of Capital Safety in August 2015. Capital Safety is a leading global provider of fall protection equipment.~~

~~In the first quarter of 2016, 3M divested the remainder of the library systems business.~~

~~In January 2017, 3M sold its safety prescription eyewear business.~~

In the second quarter of 2017, 3M finalized the sale of its identity management business and tolling and automated license/number plate recognition business. 3M recorded a pre-tax gain of approximately $461 million as a result of these two divestitures.

~~Operating income:~~

Operating income margins increased 10.7 percentage points, largely driven by year-on-year divestiture gains that were partially offset by acquisition charges and incremental strategic investments, which combined resulted in a net operating income margin benefit of 9.7 percentage points.

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, net of closing and other adjustments. This business will be reported within the Company’s Safety and Graphics business. Refer to Note 2 for additional details.

Also in October 2017, 3M completed the sale of its electronic monitoring business. The Company expects to reflect a pre-tax gain of approximately $100 million in the fourth quarter of 2017 as a result of this divestiture; which will be reported within the Safety and Graphics business. Refer to Note 2 for additional details.

~~Table of Contents~~

~~Health Care Business:~~

Three months ended

Nine months ended


September 30,

September 30,


2017

2016

2017

2016


Sales (millions)

$
1,476

$
1,371

$
4,339

$
4,176

Sales change analysis:

Organic local-currency

6.9
%

1.6
%

4.1
%

4.3
%

Acquisitions

—

—

—

0.3

Translation

0.8

(0.4)

(0.2)

(1.8)

Total sales change

7.7
%

1.2
%

3.9
%

2.8
%

Operating income (millions)

$
471

$
431

$
1,317

$
1,350

Percent change

9.3
%

(0.5)
%

(2.4)
%

5.0
%

Percent of sales

31.9
%

31.5
%

30.4
%

32.3
%

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, inhalation and transdermal drug delivery systems, oral care solutions (dental and orthodontic products), health information systems, and food safety products.

~~Third Quarter 2017 results:~~

~~Sales in Health Care totaled $1.5 billion, up 7.7 percent in U.S. dollars. Organic local-currency sales increased 6.9 percent and foreign currency translation increased sales by 0.8 percent.~~

~~On an organic local-currency sales basis:~~

Sales increased in all businesses, led by drug delivery systems, food safety, medical consumables (which is comprised of the critical and chronic care business and infection prevention business), and oral care.

~~Sales also increased in health information systems.~~

~~In developing markets, Health Care organic local-currency sales growth was led by China/Hong Kong and Latin America.~~

~~Acquisitions:~~

~~In September 2017, 3M acquired Elution Technologies, LLC, a manufacturer of food safety test kids. Refer to Note 2 for additional details.~~

~~Operating income:~~

Operating income margins increased 0.4 percentage points year-on-year, helped by organic local-currency sales growth. Incremental strategic investments, primarily related to accelerating future growth opportunities, reduced margins by 0.3 percentage points.

~~First Nine Months 2017 results:~~

~~Sales in Health Care totaled $4.3 billion, up 3.9 percent in U.S. dollars. Organic local-currency sales increased 4.1 percent and foreign currency translation reduced sales by 0.2 percent.~~

~~On an organic local-currency sales basis:~~

~~Sales increased in drug delivery systems, food safety, medical consumables (which is comprised of the critical and chronic care and infection prevention businesses) and oral care.~~

~~Sales declined slightly in health information systems.~~

~~Table of Contents~~

~~Acquisitions:~~

Acquisition sales growth in 2016 related to the March 2015 purchase of Ivera Medical Corp. Ivera is a manufacturer of health care products that disinfect and protect devices used for access into a patient’s bloodstream.

~~In September 2017, 3M acquired Elution Technologies, LLC, a manufacturer of food safety test kids.~~

~~Operating income:~~

Operating income margins decreased 1.9 percent year-on-year, as incremental strategic investments, primarily related to accelerating future growth opportunities, reduced margins by 1.1 percentage points.

~~Electronics and Energy Business:~~

Three months ended

Nine months ended

September 30,

September 30,


2017

2016

2017

2016

Sales (millions)

$
1,414

$
1,250

$
3,838

$
3,468

Sales change analysis:

Organic local-currency

13.2
%

(7.9)
%

11.0
%

(10.0)
%

Divestitures

(0.1)

—

(0.2)

—

Translation

—

0.6

(0.2)

(0.6)

Total sales change

13.1
%

(7.3)
%

10.6
%

(10.6)
%

Operating income (millions)

$
394

$
304

$
920

$
716

Percent change

29.9
%

(9.5)
%

28.5
%

(18.4)
%

Percent of sales

27.9
%

24.3
%

24.0
%

20.6
%

The Electronics and Energy segment includes 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 optical film solutions for the electronic display industry; high-performance fluids and abrasives; high-temperature and display tapes; flexible circuits, which use electronic packaging and interconnection technology; and touch systems products. This segment’s energy solutions include pressure sensitive tapes and resins; electrical insulation; infrastructure products that provide both protection and detection solutions; a wide array of fiber-optic and copper-based telecommunications systems; and renewable energy component solutions for the solar and wind power industries.

~~Third Quarter 2017 results:~~

~~Sales in Electronics and Energy totaled $1.4~~$2.5 billion, up 13.1 percent in U.S. dollars. Organic local-currency and other sales ~~increased 13.2 percent, divestitures reduced sales by 0.1 percent, and foreign currency translation was flat.~~change elements are included in the table above.

~~Total sales within the electronics-related businesses were up 18 percent and energy-related businesses sales were up 3 percent. Total sales increased 19 percent in Asia Pacific.~~

On an organic local-currency sales basis:

●

Sales increased ~~18 percent~~ in ~~3M’s~~ electronics-related businesses ~~with~~due to strong demand in data center, semiconductor, interconnect and consumer electronics markets.

●

Sales increased in automotive and aerospace solutions and advanced materials driven by improving automotive end-market activity, and increases in ~~both display materials~~car and systems and electronics materials solutions, as the businesses drove increased inclusion in OEM platforms globally, including semiconductor manufacturing, electronic assembly, data center and automotive electrification.

light truck builds.

Table of Contents

~~Sales increased 2 percent in 3M’s energy-related businesses, as sales increases in electrical markets were partially offset by sales declines in telecommunications.~~

●

~~Sales increased 20 percent in Asia Pacific, where 3M’s electronics business is concentrated.~~

Transportation safety was flat year-on-year due to a slow 2021 start to roadway industry construction projects; commercial solutions sales decreased due to continued negative pandemic-related impacts on advertising spend and demand for workplace cleaning and safety products and solutions.

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

~~Table of Contents~~

~~Divestitures:~~

~~In December 2016, 3M sold the assets of its cathode battery technology out-licensing business, with annual sales of approximately $10 million.~~

Health Care Business:

~~Operating income:~~

Operating income margins increased 3.6 percentage points, driven by underlying productivity gains related to organic local-currency sales growth. Incremental strategic investments reduced margins by 0.3 percentage points.


	Three months ended
	March 31,
	2021			2020
Sales (millions)	$	2,248		$	2,104
Sales change analysis:
Organic local-currency		9.3	%
Divestitures		(5.6)
Translation		3.1
Total sales change		6.8	%

Business segment operating income (millions)	$	509		$	452
Percent change		12.6	%
Percent of sales		22.7	%		21.5	%

First ~~Nine Months 2017~~quarter 2021 results:

Sales in ~~Electronics and Energy~~Health Care totaled ~~$3.8~~$2.2 billion, up ~~10.6~~6.8 percent in U.S. dollars. Organic local-currency and other sales ~~increased 11.0 percent, divestitures reduced sales by 0.2 percent, and foreign currency translation reduced sales by 0.2 percent.~~change elements are included in the table above.

~~Total sales within the electronics-related businesses were up 17 percent while energy-related businesses were flat. Total sales increased 17 percent in Asia Pacific.~~

On an organic local-currency sales basis:

●

Sales increased ~~17 percent~~ in ~~3M’s electronics-related businesses, with increases in both display materials~~oral care, separation and ~~systems~~purification, medical solutions, and ~~electronics materials~~health information systems. Growth was driven by higher year-on-year dental industry activity, continued high demand for biopharma filtration solutions ~~as the businesses drove increased inclusion in OEM platforms in addition to strengthened~~for COVID-related vaccine and therapeutic development and manufacturing, continued strong respirator demand, ~~in consumer electronics.~~

~~Sales were flat in 3M’s energy-related businesses, as sales growth in electrical markets was offset by declines in telecommunications.~~

~~Sales increased 18 percent in Asia Pacific, where 3M’s electronics business is concentrated.~~

~~Divestitures:~~

~~In December 2016, 3M sold the assets of its cathode battery~~and improving hospital information technology ~~out-licensing business, with annual sales of approximately $10 million.~~

~~Operating income:~~

~~Operating income margins increased 3.4 percentage points, as benefits from higher organic volume were~~investments, partially offset by ~~first nine months~~year-on-year declines in elective healthcare procedure volumes.

●

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

Divestitures:

●

In May 2020, 3M completed the sale of ~~2017 footprint and portfolio actions. These actions resulted in a year-on-year operating income margin reduction~~substantially all of ~~1.9 percentage points.~~

its drug delivery business.

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

Three months ended

Nine months ended


September 30,

September 30,


2017

2016

2017

2016


Sales (millions)

$
1,236

$
1,210

$
3,415

$
3,390

Sales change analysis:

Organic local-currency

1.9
%

2.9
%

0.5
%

2.7
%

Translation

0.3

1.1

0.2

(0.8)

Total sales change

2.2
%

4.0
%

0.7
%

1.9
%

Operating income (millions)

$
307

$
317

$
724

$
836

Percent change

(3.2)
%

8.2
%

(13.4)
%

5.5
%

Percent of sales

24.8
%

26.2
%

21.2
%

24.7
%

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 office supply products, stationery products, construction and home improvement products (do-it-yourself), home care products, protective material products, certain consumer retail personal safety products, and consumer health care products.

7262

Table of Contents

Consumer Business:


	Three months ended
	March 31,
	2021			2020
Sales (millions)	$	1,373		$	1,250
Sales change analysis:
Organic local-currency		7.8	%
Translation		2.0
Total sales change		9.8	%

Business segment operating income (millions)	$	289		$	265
Percent change		9.4	%
Percent of sales		21.1	%		21.2	%

~~Third Quarter 2017~~First quarter 2021 results:

Sales in Consumer totaled ~~$1.2~~$1.4 billion, ~~up 2.2~~an increase of 9.8 percent in U.S. dollars. Organic local-currency and other sales ~~increased 1.9 percent, while foreign currency translation increased sales by 0.3 percent.~~change elements are included in the table above.

On an organic local-currency sales basis:

●

Sales ~~grew~~increased in ~~consumer health care,~~ home improvement and ~~home care.~~

~~Strong performance in consumer brands, such as Command~~TM ~~damage-free mounting, ScotchBlue~~TM ~~painter’s tape and Filtrete~~TM ~~home filtration products, helped drive organic growth year-on-year.~~

~~The~~ stationery and office ~~supplies business declined due to continued channel inventory adjustments, primarily in the U.S. office retail and wholesale market.~~

~~Operating income:~~

~~Operating income margins declined 1.4 percentage points year-on-year, in part due to incremental strategic investments, which reduced margins by 1.1 percentage points.~~

~~First Nine Months 2017 results:~~

~~Sales in Consumer totaled $3.4 billion, up 0.7 percent in U.S. dollars. Organic local-currency sales increased 0.5 percent, while foreign currency translation increased sales by 0.2 percent.~~

~~On an organic local-currency sales basis:~~

~~Sales grew~~supplies. Growth in home improvement ~~consumer health care,~~was driven by continued strong demand for Command^TM adhesives, Filtrete^TM air quality solutions and ~~home care.~~

~~The~~Scotch Blue^TM painter’s tape. Growth in stationery and office ~~supplies business declined~~was led by ongoing strength in consumer demand for packaging and shipping products and Scotch^® brand office tapes as prior year remote work and school trends begin to be lapped.

●

Home care experienced continued growth due to ~~channel inventory adjustments, primarily in~~consumer demand for home cleaning products and solutions. Consumer health and safety declined as the ~~U.S. office retail and wholesale market.~~

global economy impacted by COVID continues to evolve versus 2020.

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

~~Operating income margins declined 3.5 percentage points year-on-year, in part due to incremental strategic investments, which reduced margins by 2.6 percentage points.~~

FINANCIAL CONDITION AND LIQUIDITY

~~3M continues its transition to a better-optimized capital structure and is adding leverage at a measured pace.~~ The strength and stability of 3M’s business model and strong free cash flow capability, together with proven capital markets access, ~~enable~~provides financial flexibility and enables the Company to ~~implement this strategy.~~invest through business cycles. Investing in 3M’s ~~businesses~~business to drive organic growth and deliver strong returns on invested capital remains the first priority for capital ~~deployment, including~~deployment. This includes research and development, capital expenditures, and commercialization capability. ~~Investment in organic growth~~Organic investments will be supplemented by complementary acquisitions. The Company also continues to actively manage its portfolio to maximize value for shareholders. 3M ~~will also continue~~repurchased shares in the first three months of 2021, after having suspended repurchases under its board-approved share repurchase program (with other repurchase activity limited to ~~return~~3M’s stock compensation plans) in the first quarter of 2020. To fund cash ~~to shareholders through dividends and share repurchases. Sources for cash availability~~needs in the United States, ~~such as~~the Company relies on ongoing cash flow from U.S. operations, ~~and~~ access to capital markets ~~have historically been sufficient~~and repatriation of the earnings of its foreign affiliates that are not considered to ~~fund dividend payments to shareholders and share repurchases, as well as funding U.S. acquisitions and other items as needed.~~be permanently reinvested. For those international earnings still considered to be reinvested indefinitely, the Company currently has no plans or intentions to repatriate these funds for U.S. operations. ~~However, if these international funds are needed for operations in the U.S., 3M would be required to accrue and pay U.S. taxes to repatriate them.~~ See Note 810 in 3M’s ~~Current~~2020 Annual Report on Form ~~8-K dated May 4, 2017,~~10-K for further information on earnings considered to be reinvested indefinitely.

~~3M’s~~3M maintains a strong liquidity profile. The company’s primary short-term liquidity needs are met through cash on hand and U.S. commercial paper issuances. 3M believes it will have continuous access to the commercial paper market. 3M’s commercial paper program permits the Company to have a maximum of $5 billion outstanding with a maximum maturity of 397 days from date of issuance. ~~At September 30, 2017, there was approximately $225 million in~~The Company had no commercial paper ~~issued and outstanding.~~

~~Table of Contents~~

~~Total Debt:~~

~~The Company’s total debt was approximately $11.7 billion~~outstanding at ~~both September 30, 2017~~March 31, 2021 and December 31, 2016. In May 2016, 3M issued 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).2020.

In September 2016, 3M repaid $1 billion aggregate principal amount of fixed rate medium-term notes that matured. In June 2017, 3M repaid $650 million aggregate principal amount of fixed rate medium-term notes that matured.Total debt:

In October 2017, 3M issued $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%.

~~The proceeds from the debt issuance will be used to fund the notes repurchase described below, the purchase of Scott Safety (refer to Note 2 for details), and for general corporate purposes.~~

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% notes due 2028 and $195 million of its $750 million principal amount of 5.70% notes due 2037. The Company will reflect an early debt extinguishment charge of approximately $95 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.

As of September 30, 2017, 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 and the 2016 debt referenced above (excluding the October 2017 issuance above), is approximately $11.1 billion (utilizing the foreign exchange rates applicable at the time of issuance for the Euro denominated debt). Information with respect to long-term debt issuances and maturities for the periods presented is included in Note 10 of 3M’s Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016 Annual Report on Form 10-K) .

The strength of 3M’s ~~capital structure~~credit profile and significant ongoing cash flows provide 3M proven access to capital markets. Additionally, the Company’s debt maturity profile is staggered to help ensure refinancing needs in any given year are reasonable in proportion to the

Table of Contents

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

The Company’s ~~ongoing~~total debt was $0.6 billion lower at March 31, 2021 when compared to December 31, 2020. Decreases in debt were largely due to the March 2021 early redemption via make-whole call offers of $450 million in debt. For discussion of repayments of and proceeds from debt refer to the following “Cash Flows from Financing Activities” section.

In July 2017, the United Kingdom’s Financial Conduct Authority announced that it would no longer require banks to submit rates for the London InterBank Offered Rate (“LIBOR”) after 2021. In November 2020, the ICE Benchmark Administration (IBA), LIBOR’s administrator, proposed extending the publication of USD LIBOR through June 2023. Subsequently, in March of 2021, IBA stated it will cease publication of certain LIBOR rates after December 31, 2021. USD LIBOR rates that do not cease on December 31,2021 will continue to be published through June 30, 2023. The Company has reviewed its debt securities, bank facilities, and derivative instruments and continues to evaluate commercial contracts that may utilize LIBOR as the reference rate. 3M will continue its assessment and monitor regulatory developments during the transition ~~to a more optimized capital structure, financed with additional low-cost debt, could impact 3M’s credit rating in the future.~~ period.

Effective February ~~24, 2017,~~10, 2020, the Company updated its “well-known seasoned issuer” (WKSI) shelf registration statement, which registers an indeterminate amount of debt or equity securities for future issuance and sale. This replaced 3M’s previous shelf registration dated ~~May 16, 2014.~~February 24, 2017. In May 2016, in connection with the WKSI shelf, 3M entered into an amended and restated distribution agreement relating to the future issuance and sale (from time to time) of the Company’s medium-term notes program (Series F), up to the aggregate principal amount of $18 billion, which was an increase from the previous aggregate principal amount up to $9 billion of the same Series.

InAs of March ~~2016, 3M amended~~31, 2021, the total amount of debt issued as part of the medium-term notes program (Series F), inclusive of debt issued in February 2019 and ~~restated its existing $2.25~~prior years is approximately $17.6 billion (utilizing the foreign exchange rates applicable at the time of issuance for the euro denominated debt). Additionally, the August 2019 and March 2020 debt was issued under the WKSI shelf registration, but not as part of the medium-term notes program (Series F). Information with respect to long-term debt issuances and maturities for the periods presented is included in Note 10 of this Form 10-Q and Note 12 of 3M’s 2020 Annual Report on Form 10-K.

The Company has a $3.0 billion five-year revolving credit facility expiring in ~~August 2019 to a $3.75 billion five-year~~November 2024. 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 ~~lenders’~~lender’s discretion), bringing the total facility up to ~~$5.0~~$4.0 billion. ~~This revolving~~In addition, 3M entered into a $1.25 billion 364-day credit facility, iswhich was renewed in November 2020 with an expiration date of November 2021. The 364-day credit agreement includes a provision under which 3M may convert any advances outstanding on the maturity date into term loans with a maturity date one year later. These credit facilities were undrawn at ~~September 30, 2017.~~March 31, 2021. Under both the ~~$3.75~~$3.0 billion and $1.25 billion credit ~~agreement,~~agreements, the Company is required to maintain its EBITDA to Interest Ratio as of the end of each fiscal quarter at not

~~Table of Contents~~

less than 3.0 to 1. This is calculated (as defined in the agreement) as the ratio of consolidated total EBITDA for the four consecutive quarters then ended to total interest expense on all funded debt for the same period. At ~~September 30, 2017,~~March 31, 2021, this ratio was approximately 4218 to 1. Debt covenants do not restrict the payment of dividends. ~~Apart from the committed facilities, $290~~

The Company also had $266 million in stand-alone letters of credit and bank guarantees ~~were also~~ issued and outstanding at ~~September 30, 2017.~~March 31, 2021. These ~~lines of credit~~instruments are utilized in connection with normal business activities.

Cash, ~~Cash Equivalents~~cash equivalents and ~~Marketable Securities:~~marketable securities:

At ~~September 30, 2017,~~March 31, 2021, 3M had ~~$3.4~~$5.2 billion of cash, cash equivalents and marketable securities, of which approximately ~~$3.3~~$3.0 billion was held by the Company’s foreign subsidiaries and approximately ~~$140 million~~$2.2 billion was held by the United States. These balances are invested in bank instruments and other high-quality fixed income securities. At December 31, ~~2016,~~2020, 3M had $5.1 billion of cash, cash equivalents and marketable securities, of which approximately $2.8 billion was held by the Company’s foreign subsidiaries and $2.3 billion was held by the United ~~States totaled approximately $2.35 billion~~States. The increase from December 31, 2020 primarily resulted from strong cash flow from operations offset by ongoing dividend payments, capital expenditures, and ~~$350~~the March 2021 early redemption via make-whole call offers of $450 million ~~respectively.~~in debt.

Table of Contents

Net Debt (non-GAAP measure):

Net debt is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. The Company defines net debt as total debt less the total of cash, cash equivalents and current and long-term marketable securities. 3M believes net debt is meaningful to investors as 3M considers net debt and its components to be important indicators of liquidity and financial position. The following table provides net debt as of ~~September 30, 2017,~~March 31, 2021 and December 31, ~~2016.~~2020.



(Millions)	September 30, 2017		December 31, 2016		Change		March 31, 2021		December 31, 2020		Change
Total debt	$	11,663	$	11,650	$	13	$	18,187	$	18,795	$	(608)
Less: Cash, cash equivalents and marketable securities		3,434		2,695		739		5,168		5,068		100
Net debt (non-GAAP measure)	$	8,229	$	8,955	$	(726)	$	13,019	$	13,727	$	(708)

InRefer to the ~~first nine months of 2017, net debt decreased by $726 million to a net debt balance of $8.2 billion, impacted by the increase in cash~~preceding “Total Debt” and ~~cash equivalents~~“Cash, Cash Equivalents and ~~marketable securities.~~ Marketable Securities” sections for additional details.

Balance Sheet:

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

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

Working ~~Capital~~capital (non-GAAP measure):

(Millions)

September 30, 2017

December 31, 2016

Change

Current assets

$
13,656

$
11,726

$
1,930

Less: Current liabilities

(6,598)

(6,219)

(379)

Working capital (non-GAAP measure)

$
7,058

$
5,507

$
1,551



(Millions)	March 31, 2021		December 31, 2020		Change
Current assets	$	15,345	$	14,982	$	363
Less: Current liabilities		(8,363)		(7,948)		(415)
Working capital (non-GAAP measure)	$	6,982	$	7,034	$	(52)

Various assets and liabilities, including cash and short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs. Working capital is not defined under U.S. generally accepted accounting principles and may not be computed the same as similarly titled measures used by other companies. The Company defines working capital as current assets minus current liabilities. Working capital increased $1.551 billion compared to December 31, 2016. Current asset balance changes increased working capital by $1.930 billion, driven by increases in accounts receivable, and inventories (discussed further below), plus increases in cash. Current liability balance changes decreased working capital by $379 million, largely due to increases in other current liabilities and accrued payroll,

~~Table of Contents~~

~~partially offset by decreases in short-term debt.~~ 3M believes working capital is meaningful to investors as a measure of operational efficiency and short-term financial health.

~~Accounts Receivable~~Working capital as of March 31, 2021 was largely consistent with December 31, 2020. Balance changes in current assets increased working capital by $0.4 billion, driven largely by increases in inventory, accounts receivable and ~~Inventory Turns (non-GAAP measures):~~marketable securities offset by decreases in prepaids. Balance changes in current liabilities decreased working capital by $0.4 billion, primarily due to increases in current-portion of long-term debt and accounts payable, offset by decrease in accrued payroll and other current liabilities.

Accounts receivable and inventory ~~turns are not defined under U.S. generally accepted accounting principles~~increased $112 million 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$219 million, respectively, from December 31, 2020, primarily as a ~~measure~~result of ~~how efficiently the Company manages credit~~increased sequential sales and ~~collects~~related operating activity from ~~its customers. For inventory turns calculation purposes, manufacturing cost is defined as cost~~that of ~~sales less freight and engineering costs. 3M believes inventory turns is meaningful to investors~~late 2020 partially offset by foreign currency translation impacts. Current portion of long-term debt increased based on underlying debt maturities while accounts payable also increased as a ~~measure~~result of ~~how quickly inventory is sold. Details~~increased sequential operating activity from that of ~~these calculations follow.~~late 2020 partially offset by foreign currency translation impacts. Accrued payroll decreased as accrued annual incentive compensation was paid in early 2021.

Accounts receivable turns (non-GAAP measure)

(Millions, except turns)

September 30, 2017

December 31, 2016

Quarterly net sales

$
8,172

$
7,329

Ending accounts receivable - net

$
5,156

$
4,392

Accounts receivable turns

6.34

6.67

Inventory turns (non-GAAP measure)

(Millions, except turns)

September 30, 2017

December 31, 2016

Quarterly cost of sales

$
4,045

$
3,716

Less: Freight and engineering

$
165

$
160

Manufacturing cost

$
3,880

$
3,556

Ending inventory

$
3,975

$
3,385

Inventory turns

3.91

4.20

Concerning accounts receivable, higher September 2017 sales compared to December 2016 sales contributed to the accounts receivable increase. 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.

Cash Flows:

Cash flows from operating, investing and financing activities are provided in the tables that follow. Individual amounts in the Consolidated Statement of Cash Flows exclude the effects of acquisitions, divestitures and exchange rate impacts on cash and cash equivalents, which are presented ~~as separate line items within~~separately in the ~~statement of~~ 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.

7665

Table of Contents

Cash Flows from Operating Activities:


	Nine months ended
	September 30,

					Three months ended
					March 31,
(Millions)	2017		2016		2021		2020


Net income including noncontrolling interest	$	4,344	$	3,902	$	1,627	$	1,310
Depreciation and amortization		1,195		1,090		460		440
Company pension contributions		(311)		(320)
Company postretirement contributions		(3)		(3)
Company pension expense		207		144
Company postretirement expense		37		36
Company pension and postretirement contributions						(47)		(39)
Company pension and postretirement expense						47		77
Stock-based compensation expense		266		244		131		120
Gain on sale of businesses		(490)		(40)		—		(2)
Income taxes (deferred and accrued income taxes)		144		55		58		97
Accounts receivable		(595)		(469)		(205)		(143)
Inventories		(436)		(15)		(304)		(207)
Accounts payable		(25)		(107)		155		12
Other — net		47		(64)		(234)		(452)
Net cash provided by operating activities	$	4,380	$	4,453
Net cash provided by (used in) operating activities					$	1,688	$	1,213

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

In the first ~~nine~~three months of ~~2017,~~2021, cash flows provided by operating activities ~~decreased $73~~increased $475 million compared to the same period last ~~year. Factors that decreased operating cash flows were increases in accounts receivable~~year, with this increase primarily due to overall sales growth and ~~inventories.~~continued spending discipline leading to higher net income year-on-year. The combination of accounts receivable, inventories and accounts payable ~~increased working capital~~decreased operating cash flow by ~~$1.056 billion in the first nine months of 2017, compared to the working capital increases of $591~~$354 million in the first ~~nine~~three months of ~~2016.~~2021, compared to an operating cash flow decrease of $338 million in the first three months of 2020. Additional discussion on working capital changes is provided earlier in the “Financial Condition and Liquidity” section.

Cash Flows from Investing Activities:


	Nine months ended
	September 30,

					Three months ended
					March 31,
(Millions)	2017		2016		2021		2020


Purchases of property, plant and equipment (PP&E)	$	(914)	$	(984)	$	(310)	$	(332)
Proceeds from sale of PP&E and other assets		18		18		32		7
Acquisitions, net of cash acquired		(12)		(17)		—		(25)
Purchases and proceeds from maturities and sale of marketable securities and investments, net		(310)		(242)		(110)		(111)
Proceeds from sale of businesses, net of cash sold		862		56		—		86
Other — net		2		(4)		19		—
Net cash used in investing activities	$	(354)	$	(1,173)
Net cash provided by (used in) investing activities					$	(369)	$	(375)

Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency. The Company expects 2021 capital spending to be approximately $1.8 billion to $2.0 billion as 3M continues to invest in growth, productivity and sustainability. In 2020, 3M reduced overall spending in light of uncertainty regarding COVID-19—resulting in full year capital spending of $1.5 billion—but continued to invest in expanding the Company’s ability to increase production of respiratory products to meet worldwide demand.

3M records capital-related government grants earned as reductions to the cost of property, plant and equipment; and associated unpaid liabilities and grant proceeds receivable are considered non-cash changes in such balances for purposes of preparation of statement of cash flows.

Table of Contents

3M invests in renewal and maintenance programs, which pertain to cost reduction, cycle time, maintaining and renewing current capacity, eliminating pollution, ~~reduction,~~ and compliance. Costs related to maintenance, ordinary repairs, and certain other items are expensed. 3M also invests in growth, which adds to capacity, driven by new ~~growth capacity,~~products, both through expansion of current facilities and ~~by building~~ new facilities. Finally, 3M also invests in ~~corporate~~other initiatives, such as information technology (IT), laboratory facilities, and ~~information technology (IT). The Company expects 2017 capital spending to be approximately $1.4 billion.~~a continued focus on investments in sustainability.

Refer to Note 23 for information on acquisitions and divestitures. The Company is actively considering additional acquisitions, investments and strategic alliances, and from time to time may also divest certain businesses. Acquisitions, net of cash acquired, in the first three months of 2020 primarily relate to the payment made for contingent consideration in regards to the Acelity acquisition. Proceeds from sale of businesses in ~~the first nine months of 2017~~2020 primarily relate to the ~~divestiture~~sale of the ~~assets of the prescription safety~~

~~Table of Contents~~

~~eyewear, identity management, and tolling and automated license/number plate recognition businesses within the Safety and Graphics business segment.~~Company’s advanced ballistic-protection business.

Purchases of marketable securities and investments and proceeds from maturities and sale of marketable securities and investments are primarily attributable to ~~asset-backed securities,~~ certificates of deposit/time deposits, commercial paper, and other securities, which are classified as available-for-sale. Refer to Note 79 for more details about 3M’s diversified marketable securities portfolio. Purchases of investments include additional survivor benefit insurance, plus ~~cost method and~~investments in equity ~~investments.~~securities.

Cash Flows from Financing Activities:


	Nine months ended
	September 30,

					Three months ended
					March 31,
(Millions)	2017		2016		2021		2020


Change in short-term debt — net	$	60	$	(498)	$	6	$	462
Repayment of debt (maturities greater than 90 days)		(650)		(992)		(450)		—
Proceeds from debt (maturities greater than 90 days)		—		2,832		—		1,745
Total cash change in debt	$	(590)	$	1,342	$	(444)	$	2,207
Purchases of treasury stock		(1,564)		(2,829)		(231)		(365)
Proceeds from issuances of treasury stock pursuant to stock option and benefit plans		582		741		293		149
Dividends paid to shareholders		(2,104)		(2,014)		(858)		(847)
Other — net		(23)		(20)		(11)		(36)
Net cash used in financing activities	$	(3,699)	$	(2,780)
Net cash provided by (used in) financing activities					$	(1,251)	$	1,108

Total debt was approximately ~~$11.7~~$18.2 billion at ~~both September 30, 2017~~March 31, 2021 and ~~year-end 2016. Changes~~$18.8 billion at December 31, 2020. Decreases in ~~short-term~~ debt ~~includes~~were largely due to the ~~net impact~~March 2021 early redemption of $450 million in debt maturing in 2022 via make-whole call offers. The Company had no commercial paper outstanding at March 31, 2021 and December 31, 2020. Net commercial paper issuances in addition to repayments and borrowings by international subsidiaries are largely reflected in ~~addition to~~“Change in short-term debt – net” in the preceding table. 3M’s primary short-term liquidity needs are met through cash on hand and U.S. commercial paper issuances. 2020 issuances, ~~if any. Refer to the preceding “Total Debt” section for discussion~~maturities, and extinguishments of ~~repayment of~~short-and long-term debt ~~and proceeds from debt issuances.~~are described in Note 5 in 3M’s 2020 Annual Report on Form 10-K.

Repurchases of common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes. In ~~February 2016,~~November 2018, 3M’s Board of Directors ~~authorized~~replaced the Company’s February 2016 repurchase program with a new repurchase program. This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date. ~~The~~In first three months of 2021, the Company ~~expects full-year 2017 gross share~~purchased $0.2 billion of its own stock. 3M repurchased shares in 2021, after having suspended repurchases ~~will be~~(with other repurchase activity limited to 3M’s stock compensation plans) in the ~~range~~first quarter of ~~$2.0 billion to $2.5 billion.~~2020. For more information, refer to the table titled “Issuer Purchases of Equity Securities” in Part II, Item 2. The Company does not utilize derivative instruments linked to the Company’s stock.

3M has paid dividends each year since 1916. In February ~~2017,~~2021, 3M’s Board of Directors declared a first-quarter ~~2017~~2021 dividend of ~~$1.175~~$1.48 per share, an increase of 61 percent. This is equivalent to an annual dividend of ~~$4.70~~$5.92 per share and marked the ~~59th~~63^rd consecutive year of dividend increases for 3M. In May 2017, 3M’s Board of Directors declared a second-quarter 2017 dividend of $1.175 per share. In August 2017, 3M’s Board of Directors declared a third-quarter 2017 dividend of $1.175 per share.increases.

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

Table of Contents

Free Cash Flow (non-GAAP measure):

Free cash flow and free cash flow conversion are not defined under U.S. generally accepted accounting principles (GAAP). Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and

~~Table of Contents~~

free cash flow conversion are meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication of the strength of the company and its ability to generate cash. The first quarter of each year is typically 3M’s seasonal low for free cash flow and free cash flow conversion. Below find a recap of free cash flow and free cash flow conversion.

Refer to the preceding “Cash Flows from Operating Activities” and “Cash Flows from Investing Activities” sections for discussion of items that impacted the ~~nine months ended September 30, 2017~~operating cash flow and ~~2016.~~purchases of PP&E components of the calculation of free cash flow. Refer to the preceding “Results of Operations” section for discussion of items that impacted the net income attributable to 3M component of the calculation of free cash flow conversion.


	Nine months ended
	September 30,

							Three months ended
							March 31,
(Millions)	2017			2016			2021			2020

Major GAAP Cash Flow Categories
Net cash provided by operating activities	$	4,380		$	4,453
Net cash provided by (used in) operating activities							$	1,688		$	1,213
Net cash provided by (used in) investing activities		(354)			(1,173)			(369)			(375)
Net cash used in financing activities		(3,699)			(2,780)

Net cash provided by (used in) financing activities								(1,251)			1,108

Free Cash Flow (non-GAAP measure)
Net cash provided by operating activities	$	4,380		$	4,453
Purchases of property, plant and equipment (PP&E)		(914)			(984)
Net cash provided by (used in) operating activities							$	1,688		$	1,213
Purchases of property, plant and equipment								(310)			(332)
Free cash flow	$	3,466		$	3,469		$	1,378		$	881
Net income attributable to 3M	$	4,335		$	3,895		$	1,624		$	1,308
Free cash flow conversion		80	%		89	%		85	%		67	%

7968

Table of Contents

CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS

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

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

~~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, and~~●worldwide economic, political, regulatory, international trade, capital markets and other external conditions, such as interest rates, financial conditions of our suppliers and customers, trade restrictions such as tariffs in addition to retaliatory counter measures, inflation, and natural and other disasters or climate change affecting the operations of the Company or our suppliers and customers,
● risks related to public health crises such as the global pandemic associated with the coronavirus (COVID-19),
● liabilities related to certain fluorochemicals and the outcome of contingencies,

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

●

competitive conditions and customer preferences,

●

foreign currency exchange rates ~~financial conditions of our suppliers~~ and ~~customers, and natural and other disasters or climate change affecting the operations of the Company or its suppliers and customers,~~

fluctuations in those rates,

●

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

●

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

●

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

●

Security breaches and other disruptions to information technology infrastructure,

●

the scope, nature or impact of ~~acquisitions,~~acquisition, strategic ~~alliances~~alliance and ~~divestitures,~~

divestiture activities,

●

~~the outcome of contingencies, such~~operational execution, including inability to generate productivity improvements as ~~legal and regulatory proceedings,~~

estimated,

●

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

●

future availability of and access to credit markets,

●

pension and postretirement obligation assumptions and future contributions,

●

asset impairments,

●

tax liabilities

~~information technology security,~~ and

~~the~~ effects of changes in tax ~~environmental~~rates, laws or regulations, and ~~other laws and regulations in the United States and other countries in which we operate.~~

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

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

Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those reflected in any such forward-looking statements depending on a variety of factors. Important information as to these factors can be found in this document, including, among others, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings of “Overview,” “Financial Condition and Liquidity” and annually in “Critical Accounting Estimates.” Discussion of these factors is incorporated by reference from Part ~~II,~~I, Item 1A, “Risk Factors,” of this document, and should be considered an integral part of Part I,II, Item 2,7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For additional information concerning factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 10-K, 10-Q and 8-K filed with the SEC from time to time.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

In the context of Item 3, 3M is exposed to market risk due to the risk of loss arising from adverse changes in foreign currency exchange rates, interest rates and commodity prices. Changes in those factors could impact the Company’s results of operations and financial condition. For a discussion of sensitivity analysis related to these types of market risks, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in 3M’s ~~Current Report on Form 8-K dated May 4, 2017 (which updated 3M’s 2016~~2020 Annual Report on Form ~~10-K).~~10-K. There have been no material changes in information that would have been provided in the context of Item 3 from the end of the preceding year until ~~September 30, 2017.~~March 31, 2021. However, the Company does provide risk management discussion in various places in this Quarterly Report on Form 10-Q, primarily in the Derivatives note.

~~Table of Contents~~

Item 4. Controls and Procedures.

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

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

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

The Company completed implementation with respect to ~~elements of certain~~various processes/sub-processes in ~~limited~~certain subsidiaries/locations, including aspects relative to the United States, and will continue to roll out the ERP system over the next several years. As with any new information technology application ~~we implement,~~the Company implements, this application, along with the internal controls over financial reporting included in this process, was appropriately considered within the testing for effectiveness with respect to the implementation in these instances. WeThe Company concluded, as part of its evaluation described in the above paragraphs, that the implementation of the ERP system in these circumstances has not materially affected ~~our~~its internal control over financial reporting.

8170

Table of Contents

3M COMPANY

FORM 10-Q

For the Quarterly Period Ended ~~September 30, 2017~~March 31, 2021

PART II. Other Information

Item 1. Legal Proceedings.

Discussion of legal matters is incorporated by reference from Part I, Item 1, Note ~~12,~~14, “Commitments and Contingencies” of this document, and should be considered an integral part of Part II, Item 1, “Legal Proceedings.”

Item 1A. Risk Factors.

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

Risks Related to the Global Economy and Public Health Crises

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

The Company operates in more than 70 countries and derives approximately 60 percent of its revenues from outside the United ~~States. The~~States, and, accordingly, the Company’s business is subject to global competition 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,~~ disruptions in financial markets, economic downturns, ~~in the form of either contained or widespread recessionary conditions,~~government actions impacting international trade agreements, imposing trade restrictions such as tariffs, and retaliatory counter measures, inflation, ~~elevated unemployment levels, sluggish or uneven recovery,~~ government deficit reduction and other austerity measures in specific countries or regions, or in the various industries in which the Company operates; social, political or labor conditions in specific countries or regions; ~~natural and other disasters or climate change affecting the operations of the Company or its customers and suppliers;~~ or adverse changes in the availability and cost of capital, interest rates, ~~tax rates, tax laws,~~ or exchange control, ability to expatriate earnings and other regulations in the jurisdictions in which the Company operates.

* Change in the Company’s credit ratings could increase cost of funding. The Company’s credit ratings are important to 3M’s cost of capital. The major rating agencies routinely evaluate the Company’s credit profile and assign debt ratings to 3M. This evaluation is based on a number of factors, which include financial strength, business and financial risk, Climate change, as well as ~~transparency~~related environmental and social regulations, may negatively impact the Company or its customers and suppliers, in terms of availability and cost of natural resources, sources and supply of energy, product demand and manufacturing, and the health and well-being of individuals and communities in which we operate.

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

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

Table of Contents

economies of affected countries, including negatively impacting economic growth, the proper functioning of financial ~~reporting. 3M currently~~and capital markets, foreign currency exchange rates, and interest rates. For example, COVID-19 has ~~an AA- credit rating with a stable outlook from Standard & Poor’s~~led to disruption 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 borrowing costs and facilitate access to a variety of lenders. The Company’s ongoing transition to a better-optimized capital structure, financed with additional low-cost debt, could impact 3M’s credit ratingvolatility in the ~~future. Failure to maintain strong investment grade ratings would adversely affect~~global capital markets, which increases the ~~Company’s~~ cost of ~~funding~~capital and could adversely ~~affect liquidity and~~impact access to ~~capital markets.~~

* The Company’s results are affected by competitive conditions and customer preferences. ~~Demand~~capital. As economies start to reopen in certain parts of the world, workplace safety, for the ~~Company’s products, which impacts revenue~~Company and ~~profit margins, is affected by (i) the development and timing~~others, will increasingly become a focus of concern. As part of the ~~introduction~~return to work process at the Company, the Company could face additional privacy and data security risks related to the collection of ~~competitive products; (ii)~~data regarding employees and contractors with respect to COVID-19 testing, temperature checks, and contact tracing. Due to the ~~Company’s response to downward pricing to stay competitive; (iii) changes in customer order patterns, such as changes in~~speed and scope with which the ~~levels~~COVID situation is developing and evolving and the uncertainty of ~~inventory maintained by customers~~its duration and the timing of ~~customer purchases~~recovery, 3M is not able at this time to predict the extent to which the COVID-19 pandemic may ~~be affected by announced price changes, changes in the Company’s incentive programs,~~have a material effect on its consolidated results of operations 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.financial condition.

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

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

Risks Related to Legal and Regulatory Proceedings

~~Table of Contents~~

* The Company’s growth objectives are largely dependent on the timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new products and to bring those products to market. This ability may be adversely affected by difficulties or delays in product development, such as the inability to identify viable new products, obtain adequate intellectual property protection, or gain market acceptance of new products. There are no guarantees that new products will prove to be commercially successful.

* The Company’s future results are subject to fluctuations in the costs and availability 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 and 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 duefaces liabilities related to natural and other disasters and other events, or be terminated in the future. Any sustained interruption in the Company’s receipt of adequate supplies could have a material adverse effect on the Company. In addition, while the Company has a process to minimize volatility in component and material pricing, no assurance can be given that the Company will be able to successfully manage price fluctuations or that future price fluctuations or shortages will not have a material adverse effect on the Company.

* Acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring could affect future results. The Company monitors its business portfolio and organizational structure and has made and may continue to make acquisitions, strategic alliances, divestitures and changes to its organizational structure. With respect to acquisitions, future 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.

* The Company employs information technology systems to support its business, including ongoing phased implementation of an ERP system as part of business transformation on a worldwide basis over the next several years. Security breaches and other disruptions to the Company’s information technology infrastructure could interfere with the Company’s operations, compromise information belonging to the Company and its customers, suppliers, and employees, exposing the Company to liabilitycertain fluorochemicals, which could adversely impact ~~the Company’s business and reputation.~~ ~~In the ordinary course of business,~~our results.

As previously reported, the Company ~~relies~~has been voluntarily cooperating with various local, state, federal (primarily the U.S. Environmental Protection Agency (EPA)), and international agencies in their review of the environmental and health effects of a broad group of perfluoroalkyl and polyfluoroalkyl substances produced by the Company, collectively known as “PFAS.” The PFAS group contains several categories and classes of durable chemicals and materials with properties that include oil, water, temperature, chemical and fire resistance, as well as electrical insulating properties. The strength of the carbon-fluorine bond also means that these compounds do not easily degrade. These characteristics have made PFAS critical to the manufacture of electronic devices such as cell phones, tablets and semi-conductors. They are also used to help prevent infections in products like surgical gowns and drapes. Commercial aircraft and low-emissions vehicles also rely on ~~information~~PFAS technology. PFAS compounds are manufactured by various companies, including 3M, and are used in everyday products. As science and technology ~~networks~~evolve and ~~systems, some~~advance, and in response to evolving knowledge and the understanding that PFAS compounds had the potential to build up over time, 3M announced in 2000 that we would voluntarily phase out production of ~~which are managed~~perfluorooctanoate (PFOA) and perfluorooctane sulfonate (PFOS) globally as a precautionary measure. We phased out of materials used to produce certain repellants and surfactant products, with most of these activities in the U.S. completed by ~~third parties,~~the end of 2002. Phased out products included Aqueous Film Forming Foam (AFFF) and coatings for food packaging, for example. 3M currently is defending lawsuits concerning various PFAS-related products and chemistries, and is subject to ~~process, transmit~~unasserted and ~~store electronic information,~~asserted claims and governmental regulatory proceedings and inquiries related to ~~manage or support~~the production and use of PFAS in a variety of ~~business processes~~jurisdictions, as discussed in Note 14, “Commitments and ~~activities. Additionally,~~Contingencies,” within the ~~Company collects~~Notes to Consolidated Financial Statements. An adverse outcome in any one or more of these matters could be material to our financial results. For example, we recorded a pre-tax charge of $897 million, inclusive of legal fees and ~~stores certain data, including proprietary business information, and may have access~~other related obligations, in the first quarter of 2018 with respect to ~~confidential or personal information~~the settlement of a matter brought by the State of Minnesota involving the presence of PFAS 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, and maintenance of backup and protective systems) which are continuously reviewed and upgraded, the Company’s information technology networks and infrastructure may still be vulnerable to damage, disruptions or shutdowns due to attack by hackers or breaches, employee error or malfeasance, power outages, computer viruses, telecommunication or utility failures, systems failures, service providers including cloud services, natural disastersgroundwater, surface water, fish or other ~~catastrophic events. It is possible for such vulnerabilities to remain undetected for an extended period, up to~~aquatic life, 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

~~Table of Contents~~

~~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~~sediments in the ~~fair value~~state. Governmental inquiries or lawsuits involving PFAS could lead to our incurring liability for damages or other costs, civil or criminal proceedings, the imposition of ~~plan assets~~fines and ~~investment losses~~penalties, or other remedies, as well as restrictions on ~~plan assets, and relevant legislative~~ or ~~regulatory changes relating to defined benefit plan funding may increase~~added costs for our business operations going forward, including in the ~~Company’s funding obligations and adversely impact its results~~form of ~~operations and cash flows.~~restrictions on discharges at our manufacturing facilities or otherwise.

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

The outcome of these legal proceedings may differ from the Company’s expectations because the outcomes of litigation, including regulatory matters, are often difficult to reliably predict. Although the Company maintains general liability insurance, the amount of

Table of Contents

liability that may result from certain of these risks may not always be covered by, or could exceed, the applicable insurance coverage. Various factors or developments can lead the Company to change current estimates of liabilities and related insurance receivables where applicable, or make such estimates for matters previously not susceptible of reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory developments or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in future charges that could have a material adverse effect on the Company’s results of operations or cash flows in any particular period. In addition, negative publicity related to product liability, environmental, health and safety or other matters referenced above involving the Company may negatively impact the Company’s reputation. For a more detailed discussion of the legal proceedings involving the Company and the associated accounting estimates, see the discussion in Note 1214, “Commitments and ~~Contingencies”~~Contingencies,” within the Notes to Consolidated Financial Statements.

Risks Related to Our Products and Customer Preferences

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

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

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

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

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

Risks Related to Our Business

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

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

8473

Table of Contents

employee and third-party training, monitoring of networks and systems, patching, maintenance, and backup of systems and data), the Company’s information technology networks and infrastructure are still potentially vulnerable to the security risks of our vendors and third-party service providers, security breaches, damage, disruptions or shutdowns due to attacks by threat actors including nation-state actors, computer viruses, hardware, software, and system vulnerabilities, ransomware, service or cloud provider disruptions or security breaches, employee error or malfeasance, power outages, telecommunication or utility failures, systems failures, natural disasters or other catastrophic events. The Company’s increased adoption of remote working, initially driven by the pandemic, may also introduce additional threats to our information technology networks and infrastructure. Despite our cybersecurity measures, it is possible for security vulnerabilities to remain undetected for an extended time period, up to and including several years. While we have experienced, and expect to continue to experience, threats and disruptions to the Company’s information technology infrastructure, none of them to date has had a material impact to the Company. Any such threats or disruptions could result in legal claims or proceedings, liability or penalties under privacy laws, interference with the Company’s operations, and damage to the Company’s reputation, which could adversely affect the Company’s business. Although the Company maintains insurance coverage for various cybersecurity and business continuity risks, there can be no guarantee that all costs or losses incurred will be fully insured.

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

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

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

Risks Related to Financial and Capital Markets and Tax Matters

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

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

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

The Company’s credit ratings are important to 3M’s cost of capital. The major rating agencies routinely evaluate the Company’s credit profile and assign debt ratings to 3M. This evaluation is based on a number of factors, which include financial strength, business and financial risk, as well as transparency with rating agencies and timeliness of financial reporting. 3M currently has an A1 credit rating with a negative outlook from Moody’s Investors Service and an A+ credit rating with a negative outlook from Standard & Poor’s. The

Table of Contents

Company’s credit ratings have served to lower 3M’s borrowing costs and facilitate access to a variety of lenders. The addition of further leverage to the Company’s capital structure could impact 3M’s credit ratings in the future. Failure to maintain strong investment grade ratings would adversely affect the Company’s cost of funding and could adversely affect liquidity and access to capital markets.

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

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

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

Issuer Purchases of Equity Securities

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

Issuer Purchases of Equity

Securities (registered pursuant to

Section 12 of the Exchange Act)


					Maximum
					Approximate
					Dollar Value of
				Total Number of	Shares that May
				Shares Purchased	Yet Be Purchased
	Total Number of	Average Price		as Part of Publicly	under the Plans
	Shares Purchased	Paid per		Announced Plans	or Programs
Period	(1)	Share		or Programs (2)	(Millions)
January 1-31, 2021	582	$	176.96	—	$	7,753
February 1-28, 2021	494,988	$	177.92	493,702	$	7,665
March 1-31, 2021	669,754	$	187.05	669,754	$	7,540
Total January 1-March 31, 2021	1,165,324	$	183.17	1,163,456	$	7,540

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

Total January 1-June 30, 2017

5,801,795

$
189.05

5,799,192

$
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

Total January 1-September 30, 2017

7,699,178

$
193.49

7,696,575

$
5,567

(1)

~~(1)~~

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

(2)

~~(2)~~

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

~~Table of Contents~~

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

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

Item 5. Other Information.

Disclosure Under Iran Threat Reduction and Syria Human Rights Act of 2012

Table of Contents

The Company is making the following disclosure under Section 13(r) of the Exchange Act:

Protection of Intellectual Property Rights in Iran Pursuant to Specific License

~~Item 5.~~ ~~Other Information.~~ ~~— No matters require disclosure.~~As part of its intellectual property (“IP”) protection efforts, 3M has obtained and maintains patents and trademarks in Iran. Periodically, 3M pays renewal fees, through IP service providers/counsel located in Germany, Dubai and Iran, to the Iran Intellectual Property Office (“IIPO”) for these patents and trademarks and has sought to prosecute and defend such trademarks. On January 15, 2020, OFAC granted 3M a specific license to make payments to IIPO at its account in Bank Melli, which was designated on November 5, 2018 by OFAC under its counter terrorism authority pursuant to Executive Order 13224. As authorized by OFAC’s specific license, in the quarter ended March 31, 2021, 3M paid $124 to IIPO as part of its intellectual property protection efforts in Iran. 3M plans to continue these activities, as authorized under the specific license.

Item 6. Exhibits.

(18)

	~~(12)~~	~~Calculation of ratio of earnings to fixed charges.~~Preferability Letter from PricewaterhouseCoopers LLP
(31.1)	~~(15)~~	~~A letter from the Company’s independent registered public accounting firm regarding unaudited interim consolidated financial statements.~~
	~~(31.1)~~	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
	(31.2)		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
	(32.1)		Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
	(32.2)		Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
	(95)		Mine Safety Disclosures.
	(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)
	(101.SCH)		Inline XBRL Taxonomy Extension Schema ~~Document.~~Document
	(101.CAL)		Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document.~~Document
	(101.DEF)		Inline XBRL Taxonomy Extension Definition Linkbase ~~Document.~~Document
	(101.LAB)		Inline XBRL Taxonomy Extension Label Linkbase ~~Document.~~Document
	(101.PRE)		Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document.~~Document
(104)		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

~~SIGNATURES~~

Table of Contents

SIGNATURES

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

3M COMPANY

(Registrant)

Date: ~~October 31, 2017~~April 27, 2021


	By	/s/ Monish Patolawala
		Monish Patolawala,

			By	~~/s/ Nicholas C. Gangestad~~
		~~Nicholas C. Gangestad,~~

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

8677


~~DELAWARE~~Delaware		41-0417775
(State or other jurisdiction of incorporation)		(~~I.R.S.~~IRS Employer
~~incorporation or organization)~~		Identification No.)

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

(Registrant’s Telephone Number, Including Area Code) (651) 733-1110 Not Applicable
(Former Name or Former Address, if Changed Since Last Report) Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $.01 Per Share	MMM	New York Stock Exchange, Inc.
	MMM	Chicago Stock Exchange, Inc.
1.500% Notes due 2026	MMM26	New York Stock Exchange, Inc.
0.375% Notes due 2022	MMM22A	New York Stock Exchange, Inc.
0.950% Notes due 2023	MMM23	New York Stock Exchange, Inc.
1.750% Notes due 2030	MMM30	New York Stock Exchange, Inc.
1.500% Notes due 2031	MMM31	New York Stock Exchange, Inc.


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐ ~~(Do not check if a smaller reporting company)~~		Smaller reporting company ☐
		Emerging growth company ☐


Class		Outstanding at ~~September 30, 2017~~March 31, 2021
Common Stock, $0.01 par value per share		~~595,608,108~~579,675,002 shares


	TABLE OF CONTENTS		BEGINNING PAGE
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements

	Index to Financial Statements:
	Consolidated Statement of Income	3
	Consolidated Statement of Comprehensive Income	4
	Consolidated Balance Sheet	5
	Consolidated Statement of Cash Flows	6
	Notes to Consolidated Financial Statements
	Note 1.Significant Accounting Policies	7
	Note 2. Revenue	10
	Note 3. Acquisitions and Divestitures	14 11
	Note 3.4. Goodwill and Intangible Assets	16 12
	Note 4.5. Restructuring Actions and Exit Activities	18 14
	Note 5.6. Supplemental Income Statement Information	15
	Note 7. Supplemental Equity and Comprehensive Income Information	19 16
	Note 6.8. Income Taxes	23 18
	Note 7.9. Marketable Securities	24 19
	Note 8.10. Long-Term Debt and Short-Term Borrowings	25 19
	Note 9.11. Pension and Postretirement Benefit Plans	26 20
	Note ~~10.~~12. Derivatives	27 20
	Note ~~11.~~13. Fair Value Measurements	34 27
	Note ~~12.~~14. Commitments and Contingencies	37 29
	Note ~~13.~~15. Stock-Based Compensation	47
	Note ~~14.~~16. Business Segments	51 49
	~~Report of Independent Registered Public Accounting Firm~~	53

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Index to Management’s Discussion and Analysis:
	Overview	54 52
	Results of Operations	62 57
	Performance by Business Segment	66 59
	Financial Condition and Liquidity	73 63
	Cautionary Note Concerning Factors That May Affect Future Results	80 69

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	80 70

ITEM 4.	Controls and Procedures	81 70

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	82 71

ITEM 1A.	Risk Factors	82 71

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85 75

ITEM 3.	Defaults Upon Senior Securities	86 75

ITEM 4.	Mine Safety Disclosures	86 75

ITEM 5.	Other Information	86 75

ITEM 6.	Exhibits	86 76


	Three months ended
	March 31,
(Millions, except per share amounts)	2021		2020
Net sales	$	8,851	$	8,075
Operating expenses
Cost of sales		4,525		4,109
Selling, general and administrative expenses		1,808		1,768
Research, development and related expenses		524		537
Gain on sale of businesses		—		(2)
Total operating expenses		6,857		6,412
Operating income		1,994		1,663

Other expense (income), net		49		75

Income before income taxes		1,945		1,588
Provision for income taxes		319		278
Income of consolidated group		1,626		1,310

Income (loss) from unconsolidated subsidiaries, net of taxes		1		—
Net income including noncontrolling interest		1,627		1,310

Less: Net income (loss) attributable to noncontrolling interest		3		2

Net income attributable to 3M	$	1,624	$	1,308

Weighted average 3M common shares outstanding — basic		580.5		576.8
Earnings per share attributable to 3M common shareholders — basic	$	2.80	$	2.27

Weighted average 3M common shares outstanding — diluted		586.3		581.5
Earnings per share attributable to 3M common shareholders — diluted	$	2.77	$	2.25


	March 31,		December 31,
(Dollars in millions, except per share amount)	2021		2020
Assets
Current assets
Cash and cash equivalents	$	4,636	$	4,634
Marketable securities — current		501		404
Accounts receivable — net of allowances of $231 and $233		4,817		4,705
Inventories
Finished goods		2,215		2,081
Work in process		1,249		1,226
Raw materials and supplies		994		932
Total inventories		4,458		4,239
Prepaids		535		675
Other current assets		398		325
Total current assets		15,345		14,982
Property, plant and equipment		26,705		26,650
Less: Accumulated depreciation		(17,465)		(17,229)
Property, plant and equipment — net		9,240		9,421
Operating lease right of use assets		871		864
Goodwill		13,654		13,802
Intangible assets — net		5,697		5,835
Other assets		2,373		2,440
Total assets	$	47,180	$	47,344
Liabilities
Current liabilities
Short-term borrowings and current portion of long-term debt	$	1,368	$	806
Accounts payable		2,670		2,561
Accrued payroll		655		747
Accrued income taxes		277		300
Operating lease liabilities — current		267		256
Other current liabilities		3,126		3,278
Total current liabilities		8,363		7,948

Long-term debt		16,819		17,989
Pension and postretirement benefits		4,231		4,405
Operating lease liabilities		609		609
Other liabilities		3,330		3,462
Total liabilities	$	33,352	$	34,413
Commitments and contingencies (Note 14)
Equity
3M Company shareholders’ equity:
Common stock par value, $.01 par value; 944,033,056 shares issued	$	9	$	9
Shares outstanding - March 31, 2021: 579,675,002
Shares outstanding - December 31, 2020: 577,749,638
Additional paid-in capital		6,283		6,162
Retained earnings		44,255		43,821
Treasury stock, at cost:		(29,020)		(29,404)
Shares at March 31, 2021: 364,358,054
Shares at December 31, 2020: 366,283,418
Accumulated other comprehensive income (loss)		(7,767)		(7,721)
Total 3M Company shareholders’ equity		13,760		12,867
Noncontrolling interest		68		64
Total equity	$	13,828	$	12,931
Total liabilities and equity	$	47,180	$	47,344


	September 30,		December 31,
(Dollars in millions, except per share amount)	2017		2016
Assets
Current assets
Cash and cash equivalents	$	2,831	$	2,398
Marketable securities — current		586		280
Accounts receivable — net		5,156		4,392
Inventories
Finished goods		1,962		1,629
Work in process		1,164		1,039
Raw materials and supplies		849		717
Total inventories		3,975		3,385
Other current assets		1,108		1,271
Total current assets		13,656		11,726
Marketable securities — non-current		17		17
Investments		139		128
Property, plant and equipment		24,659		23,499
Less: Accumulated depreciation		(16,001)		(14,983)
Property, plant and equipment — net		8,658		8,516
Goodwill		9,221		9,166
Intangible assets — net		2,175		2,320
Prepaid pension benefits		105		52
Other assets		1,266		981
Total assets	$	35,237	$	32,906
Liabilities
Current liabilities
Short-term borrowings and current portion of long-term debt	$	835	$	972
Accounts payable		1,824		1,798
Accrued payroll		856		678
Accrued income taxes		374		299
Other current liabilities		2,709		2,472
Total current liabilities		6,598		6,219

Long-term debt		10,828		10,678
Pension and postretirement benefits		3,748		4,018
Other liabilities		1,861		1,648
Total liabilities	$	23,035	$	22,563
Commitments and contingencies (Note 12)
Equity
3M Company shareholders’ equity:
Common stock par value, $.01 par value, 944,033,056 shares issued	$	9	$	9
Additional paid-in capital		5,302		5,061
Retained earnings		39,454		37,907
Treasury stock, at cost: 348,424,948 shares at September 30, 2017; 347,306,778 shares at December 31, 2016		(25,706)		(25,434)
Accumulated other comprehensive income (loss)		(6,913)		(7,245)
Total 3M Company shareholders’ equity		12,146		10,298
Noncontrolling interest		56		45
Total equity	$	12,202	$	10,343
Total liabilities and equity	$	35,237	$	32,906


Consolidated Statement of Income	Three months ended
	March 31, 2020
	Under Prior
(Millions, except per share amounts)	Method		As Adjusted
Other expense (income), net	$	96	$	75

Income before income taxes	$	1,567	$	1,588
Provision for income taxes		273		278
Income of consolidated group	$	1,294	$	1,310

Net income including noncontrolling interest	$	1,294	$	1,310
Net income attributable to 3M	$	1,292	$	1,308
Earnings per share attributable to 3M common shareholders — basic	$	2.24	$	2.27
Earnings per share attributable to 3M common shareholders — diluted	$	2.22	$	2.25


Consolidated Statement of Comprehensive Income	Three months ended
	March 31, 2020
	Under Prior
(Millions)	Method		As Adjusted
Net income including noncontrolling interest	$	1,294	$	1,310
Other comprehensive income (loss), net of tax:
Defined benefit pension and postretirement plans adjustment	$	119	$	108
Total other comprehensive income (loss), net of tax	$	(278)	$	(289)
Comprehensive income (loss) including noncontrolling interest	$	1,016	$	1,021
Comprehensive income (loss) attributable to 3M	$	1,017	$	1,022


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


Consolidated Statement of Cash Flows	Three months ended
	March 31, 2020
	Under Prior
(Millions)	Method		As Adjusted
Net income including noncontrolling interest	$	1,294	$	1,310
Company pension and postretirement expense	$	98	$	77
Other — net	$	(457)	$	(452)


	Three months ended
	March 31,
(Amounts in millions, except per share amounts)	2021		2020
Numerator:
Net income attributable to 3M	$	1,624	$	1,308

Denominator:
Denominator for weighted average 3M common shares outstanding – basic		580.5		576.8
Dilution associated with the Company’s stock-based compensation plans		5.8		4.7
Denominator for weighted average 3M common shares outstanding – diluted		586.3		581.5

Earnings per share attributable to 3M common shareholders – basic	$	2.80	$	2.27
Earnings per share attributable to 3M common shareholders – diluted	$	2.77	$	2.25



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


	Three months ended
	March 31,
Net Sales (Millions)	2021		2020
Abrasives	$	352	$	330
Automotive Aftermarket		312		284
Closure and Masking Systems		243		268
Electrical Markets		307		288
Industrial Adhesives and Tapes		768		671
Personal Safety		1,237		989
Roofing Granules		108		95
Other Safety and Industrial		—		2
Total Safety and Industrial Business Segment	$	3,327	$	2,927

Advanced Materials	$	316	$	288
Automotive and Aerospace		516		448
Commercial Solutions		438		430
Electronics		1,042		863
Transportation Safety		218		211
Other Transportation and Electronics		1		(1)
Total Transportation and Electronics Business Segment	$	2,531	$	2,239

Drug Delivery	$	—	$	105
Food Safety		88		91
Health Information Systems		289		277
Medical Solutions		1,267		1,153
Oral Care		363		277
Separation and Purification Sciences		241		202
Other Health Care		—		(1)
Total Health Care Business Group	$	2,248	$	2,104

Consumer Health and Safety	$	150	$	172
Home Care		279		271
Home Improvement		623		503
Stationery and Office		285		268
Other Consumer		36		36
Total Consumer Business Group	$	1,373	$	1,250

Corporate and Unallocated	$	(2)	$	—
Elimination of Dual Credit		(626)		(445)
Total Company	$	8,851	$	8,075


	Remainder
	of												After

															Remainder of												After
(Millions)	2017		2018		2019		2020		2021		2022		2022		2021		2022		2023		2024		2025		2026		2026
Amortization expense	$	49	$	192	$	183	$	174	$	162	$	148	$	602	$	395	$	514	$	488	$	458	$	428	$	421	$	2,338


	December 31, 2016		Acquisition		Divestiture		Translation		September 30, 2017
(Millions)	Balance		activity		activity		and other		Balance
Industrial	$	2,536	$	—	$	—	$	128	$	2,664
Safety and Graphics		3,324		—		(276)		98		3,146
Health Care		1,609		6		—		59		1,674
Electronics and Energy		1,489		—		—		37		1,526
Consumer		208		—		—		3		211
Total Company	$	9,166	$	6	$	(276)	$	325	$	9,221


(Millions)	Safety and Industrial		Transportation and Electronics		Health Care		Consumer		Total Company
Balance as of December 31, 2020	$	4,687	$	1,858	$	6,992	$	265	$	13,802
Translation and other		(29)		(14)		(98)		(7)		(148)
Balance as of March 31, 2021	$	4,658	$	1,844	$	6,894	$	258	$	13,654


(Millions)	First Quarter 2021
Cost of sales	$	1
Selling, general and administrative expenses		9
Research, development and related expenses		4
Total operating income impact	$	14


	First Quarter 2021
(Millions)	Employee-Related
Safety and Industrial	$	2
Transportation and Electronics		3
Health Care		1
Consumer		1
Corporate and Unallocated		7
Total Operating Expense	$	14


(Millions)	Employee-Related
Accrued restructuring action balances as of December 31, 2020	$	101
Incremental expense incurred in the first quarter of 2021	$	14
Cash payments		(14)
Accrued restructuring action balances as of March 31, 2021	$	101


(Millions)	Employee-Related		Asset-Related and Other		Total
Accrued divestiture-related restructuring action balances as of December 31, 2020	$	15	$	9	$	24
Cash payments		(1)		—		(1)
Adjustments		(1)		—		(1)
Accrued divestiture-related restructuring action balances as of March 31, 2021	$	13	$	9	$	22


	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)	Employee-Related
Expense incurred in the second quarter of 2017	$	99
Accrued restructuring action balances as of June 30, 2017	$	99
Cash payments		(3)
Accrued restructuring action balances as of September 30, 2017	$	96


			3M Company Shareholders
			Common						Accumulated
			Stock and						Other
			Additional						Comprehensive		Non-
			Paid-in		Retained		Treasury		Income		controlling

															3M Company Shareholders
															Common						Accumulated
															Stock and						Other
															Additional						Comprehensive		Non-
															Paid-in		Retained		Treasury		Income		controlling
(Millions)	Total		Capital		Earnings		Stock		(Loss)		Interest		Total		Capital		Earnings		Stock		(Loss)		Interest
Balance at June 30, 2017	$	11,644	$	5,253	$	38,793	$	(25,466)	$	(6,989)	$	53

Balance at December 31, 2020													$	12,931	$	6,171	$	43,821	$	(29,404)	$	(7,721)	$	64

Net income		1,433				1,429						4		1,627				1,624						3
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment		44								45		(1)		(222)								(223)		1
Defined benefit pension and post-retirement plans adjustment		80								80		—		119								119		—
Cash flow hedging instruments - unrealized gain (loss)		(49)								(49)		—
Cash flow hedging instruments														58								58		—
Total other comprehensive income (loss), net of tax		75												(45)
Dividends declared		(701)				(701)								(858)				(858)
Stock-based compensation		58		58										121		121
Reacquired stock		(394)						(394)						(243)						(243)
Issuances pursuant to stock option and benefit plans		87				(67)		154						295				(332)		627
Balance at September 30, 2017	$	12,202	$	5,311	$	39,454	$	(25,706)	$	(6,913)	$	56
Balance at March 31, 2021													$	13,828	$	6,292	$	44,255	$	(29,020)	$	(7,767)	$	68


							Total
			Defined Benefit		Cash Flow		Accumulated
			Pension and		Hedging		Other
	Cumulative		Postretirement		Instruments,		Comprehensive
	Translation		Plans		Unrealized		Income
(Millions)	Adjustment		Adjustment		Gain (Loss)		(Loss)
Balance at June 30, 2017, net of tax:	$	(1,786)	$	(5,167)	$	(36)	$	(6,989)
Other comprehensive income (loss), before tax:
Amounts before reclassifications		(29)		—		(80)		(109)
Amounts reclassified out		—		119		2		121
Total other comprehensive income (loss), before tax		(29)		119		(78)		12
Tax effect		74		(39)		29		64
Total other comprehensive income (loss), net of tax		45		80		(49)		76
Balance at September 30, 2017, net of tax:	$	(1,741)	$	(5,087)	$	(85)	$	(6,913)



	Amount Reclassified from

										Amount Reclassified from
Details about Accumulated Other	Accumulated Other Comprehensive Income									Accumulated Other Comprehensive Income
Comprehensive Income Components	Three months ended September 30,				Nine months ended September 30,				Location on Income	Three months ended March 31,				Location on Income
(Millions)	2017		2016		2017		2016		Statement	2021		2020		Statement
Gains (losses) associated with, defined benefit pension and postretirement plans amortization
Defined benefit pension and postretirement plans adjustments
Gains (losses) associated with defined benefit pension and postretirement plans amortization
Transition asset	$	—	$	—	$	—	$	1	See Note 9	$	—	$	(1)	See Note 11
Prior service benefit		21		22		65		69	See Note 9		15		15	See Note 11
Net actuarial loss		(140)		(125)		(422)		(377)	See Note 9		(173)		(163)	See Note 11
Curtailments/Settlements											(1)		(1)	See Note 11
Total before tax		(119)		(103)		(357)		(307)			(159)		(150)
Tax effect		39		36		116		104	Provision for income taxes		40		42	Provision for income taxes
Net of tax	$	(80)	$	(67)	$	(241)	$	(203)		$	(119)	$	(108)


Cash flow hedging instruments gains (losses)
Foreign currency forward/option contracts	$	(2)	$	24	$	21	$	105	Cost of sales	$	(7)	$	18	Cost of sales
Interest rate swap contracts		—		—		—		(1)	Interest expense
Interest rate contracts											(2)		(2)	Interest expense
Total before tax		(2)		24		21		104			(9)		16
Tax effect		—		(9)		(8)		(38)	Provision for income taxes		2		(4)	Provision for income taxes
Net of tax	$	(2)	$	15	$	13	$	66		$	(7)	$	12
Total reclassifications for the period, net of tax	$	(82)	$	(52)	$	(228)	$	(137)		$	(126)	$	(96)


	Three months ended September 30,
	Qualified and Non-qualified
	Pension Benefits								Postretirement
	United States				International				Benefits

													Three months ended March 31,
													Qualified and Non-qualified
													Pension Benefits								Postretirement
													United States				International				Benefits
(Millions)	2017		2016		2017		2016		2017		2016		2021		2020		2021		2020		2021		2020
Net periodic benefit cost (benefit)
Operating expense
Service cost	$	67	$	64	$	33	$	35	$	13	$	13	$	72	$	66	$	42	$	38	$	12	$	11
Non-operating expense
Interest cost		141		144		38		45		20		20	$	90	$	124	$	25	$	31	$	11	$	16
Expected return on plan assets		(259)		(261)		(69)		(78)		(21)		(23)		(264)		(262)		(81)		(77)		(19)		(20)
Amortization of transition (asset) obligation		—		—		—		—		—		—
Amortization of prior service cost (benefit)		(5)		(6)		(3)		(3)		(13)		(13)
Amortization of net actuarial (gain) loss		97		89		29		21		14		15
Amortization of transition asset														—		—		—		1		—		—
Amortization of prior service benefit														(6)		(6)		(1)		(1)		(8)		(8)
Amortization of net actuarial loss														132		123		27		29		14		11
Settlements, curtailments, special termination benefits and other		—		—		—		—		—		—		—		—		—		—		1		1
Net periodic benefit cost (benefit) after settlements, curtailments, special termination benefits and other	$	41	$	30	$	28	$	20	$	13	$	12
Total non-operating expense (benefit)														(48)		(21)		(30)		(17)		(1)		—
Total net periodic benefit cost (benefit)													$	24	$	45	$	12	$	21	$	11	$	11


			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
Three months ended September 30, 2017	Portion of Derivative		Comprehensive Income			Recognized in Income

									Pretax Gain (Loss) Recognized in Other				Pretax Gain (Loss) Reclassified from Accumulated
									Comprehensive Income on Derivative				Other Comprehensive Income into Income
									Three months ended March 31,				Three months ended March 31,
									2021		2020			2021		2020
(Millions)	Amount		Location	Amount		Location	Amount		Amount		Amount		Location	Amount		Amount
Foreign currency forward/option contracts	$	(77)	Cost of sales	$	(2)	Cost of sales	$	—	$	66	$	79	Cost of sales	$	(7)	$	18
Interest rate swap contracts		(3)	Interest expense		—	Interest expense		—
Interest rate contracts										—		(2)	Interest expense		(2)		(2)
Total	$	(80)		$	(2)		$	—	$	66	$	77		$	(9)	$	16


Three months ended September 30, 2016	Portion of Derivative		Comprehensive Income			Recognized in Income
(Millions)	Amount		Location	Amount		Location	Amount
Foreign currency forward/option contracts	$	(47)	Cost of sales	$	24	Cost of sales	$	—
Interest rate swap contracts		3	Interest expense		—	Interest expense		—
Total	$	(44)		$	24		$	—


Nine months ended September 30, 2016	Portion of Derivative		Comprehensive Income			Recognized in Income
(Millions)	Amount		Location	Amount		Location	Amount
Foreign currency forward/option contracts	$	(178)	Cost of sales	$	105	Cost of sales	$	—
Interest rate swap contracts		(2)	Interest expense		(1)	Interest expense		—
Total	$	(180)		$	104		$	—


	~~Gain (Loss) on Derivative~~			~~Gain (Loss) on Hedged Item~~
~~Three months ended September 30, 2017~~	~~Recognized in Income~~			~~Recognized in Income~~
~~(Millions)~~	~~Location~~	~~Amount~~		~~Location~~	~~Amount~~
~~Interest rate swap contracts~~	~~Interest expense~~	$	—	~~Interest expense~~	$	—
~~Total~~		$	—		$	—


					Cumulative Amount of Fair Value Hedging
	Carrying Value of the				Adjustment Included in the Carrying Value
(Millions)	Hedged Liabilities				of the Hedged Liabilities
Location on the Consolidated Balance Sheet	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Short-term borrowings and current portion of long-term debt	$	357	$	373	$	4	$	5
Long-term debt		225		225		5		6
Total	$	582	$	598	$	9	$	11


	Annual
	2017
Exercise price	$	175.76
Risk-free interest rate		2.1	%
Dividend yield		2.5	%
Expected volatility		17.3	%
Expected life (months)		78
Black-Scholes fair value	$	23.51


	Three months ended		Nine months ended
(Earnings per diluted share)	September 30, 2017		September 30, 2017
Same period last year	$	2.15	$	6.28
Increase/(decrease) in earnings per share - diluted, due to:
Organic growth/productivity		0.23		0.53
Foreign exchange impacts		(0.03)		(0.12)
Income tax rate		0.01		0.21
Shares of common stock outstanding/net interest		0.02		0.08
Divestiture gains		—		0.56
Operating loss/(income) from divested businesses		0.01		—
Incremental strategic investments		(0.06)		(0.46)
Current period	$	2.33	$	7.08


	Three months ended September 30, 2017
	Organic
Worldwide	local-						Total
Sales Change Analysis	currency						sales
By Business Segment	sales		Divestitures		Translation		change

Industrial	6.1	%	(0.6)	%	0.7	%	6.2	%
Safety and Graphics	6.0		(4.9)		0.8		1.9
Health Care	6.9		—		0.8		7.7
Electronics and Energy	13.2		(0.1)		—		13.1
Consumer	1.9		—		0.3		2.2
Total Company	6.6	%	(1.2)	%	0.6	%	6.0	%

Three months ended

March 31,

(Millions)

Income (loss) from unconsolidated subsidiaries, net of taxes