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MMM 3M

Filed: 27 Jul 21, 2:55pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

Commission file number: 1-3285

3M COMPANY

(Exact name of registrant as specified in its charter)

Delaware

41-0417775

(State or other jurisdiction of incorporation)

(IRS Employer Identification No.)

3M Center, St. Paul, Minnesota

55144-1000

(Address of Principal Executive Offices)

(Zip Code)

(Registrant’s Telephone Number, Including Area Code) (651) 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.

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

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

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

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

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

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

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

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

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

Class

Outstanding at June 30, 2021

Common Stock, $0.01 par value per share

578,638,253 shares

3M COMPANY

Form 10-Q for the Quarterly Period Ended June 30, 2021

TABLE OF CONTENTS

BEGINNING
PAGE

PART I

FINANCIAL INFORMATION

ITEM 1.

Financial Statements

3

Index to Financial Statements:

Consolidated Statement of Income

3

Consolidated Statement of Comprehensive Income

4

Consolidated Balance Sheet

5

Consolidated Statement of Cash Flows

6

Notes to Consolidated Financial Statements

7

Note 1. Significant Accounting Policies

7

Note 2. Revenue

9

Note 3. Acquisitions and Divestitures

12

Note 4. Goodwill and Intangible Assets

12

Note 5. Restructuring Actions

14

Note 6. Supplemental Income Statement Information

16

Note 7. Supplemental Equity and Comprehensive Income Information

16

Note 8. Income Taxes

20

Note 9. Marketable Securities

20

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

21

Note 11. Pension and Postretirement Benefit Plans

21

Note 12. Derivatives

22

Note 13. Fair Value Measurements

29

Note 14. Commitments and Contingencies

31

Note 15. Stock-Based Compensation

49

Note 16. Business Segments

52

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

54

Index to Management’s Discussion and Analysis:

Overview

54

Results of Operations

63

Performance by Business Segment

65

Financial Condition and Liquidity

70

Cautionary Note Concerning Factors That May Affect Future Results

76

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

77

ITEM 4.

Controls and Procedures

77

PART II

OTHER INFORMATION

ITEM 1.

Legal Proceedings

78

ITEM 1A.

Risk Factors

78

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

82

ITEM 3.

Defaults Upon Senior Securities

83

ITEM 4.

Mine Safety Disclosures

83

ITEM 5.

Other Information

83

ITEM 6.

Exhibits

83

2

3M COMPANY

FORM 10-Q

For the Quarterly Period Ended June 30, 2021

PART I. Financial Information

Item 1. Financial Statements.

3M Company and Subsidiaries

Consolidated Statement of Income

(Unaudited)

    

Three months ended 

    

Six months ended 

 

June 30,

June 30,

(Millions, except per share amounts)

    

2021

    

2020

    

2021

2020

 

Net sales

$

8,950

$

7,176

$

17,801

$

15,251

Operating expenses

Cost of sales

 

4,719

 

3,805

 

9,244

 

7,914

Selling, general and administrative expenses

 

1,746

 

1,594

 

3,554

 

3,362

Research, development and related expenses

 

514

 

424

 

1,038

 

961

Gain on sale of businesses

(387)

(389)

Total operating expenses

 

6,979

 

5,436

 

13,836

 

11,848

Operating income

 

1,971

 

1,740

 

3,965

 

3,403

Other expense (income), net

 

33

 

90

 

82

 

165

Income before income taxes

 

1,938

 

1,650

 

3,883

 

3,238

Provision for income taxes

 

415

 

347

 

734

 

625

Income of consolidated group

1,523

1,303

3,149

2,613

Income (loss) from unconsolidated subsidiaries, net of taxes

2

3

Net income including noncontrolling interest

1,525

1,303

3,152

2,613

Less: Net income (loss) attributable to noncontrolling interest

 

1

 

(3)

 

4

 

(1)

Net income attributable to 3M

$

1,524

$

1,306

$

3,148

$

2,614

Weighted average 3M common shares outstanding — basic

 

581.0

 

577.0

 

580.7

 

576.9

Earnings per share attributable to 3M common shareholders — basic

$

2.62

$

2.26

$

5.42

$

4.53

Weighted average 3M common shares outstanding — diluted

 

588.6

 

580.8

 

587.4

 

581.2

Earnings per share attributable to 3M common shareholders — diluted

$

2.59

$

2.25

$

5.36

$

4.50

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

3

3M Company and Subsidiaries

Consolidated Statement of Comprehensive Income

(Unaudited)

    

Three months ended 

    

Six months ended 

June 30,

June 30,

(Millions)

    

2021

    

2020

    

2021

    

2020

Net income including noncontrolling interest

$

1,525

$

1,303

$

3,152

$

2,613

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

 

170

 

106

 

(52)

 

(338)

Defined benefit pension and postretirement plans adjustment

 

121

 

47

 

240

 

155

Cash flow hedging instruments

 

(11)

 

(36)

 

47

 

11

Total other comprehensive income (loss), net of tax

 

280

 

117

 

235

 

(172)

Comprehensive income (loss) including noncontrolling interest

 

1,805

 

1,420

 

3,387

 

2,441

Comprehensive (income) loss attributable to noncontrolling interest

 

 

3

 

(4)

 

4

Comprehensive income (loss) attributable to 3M

$

1,805

$

1,423

$

3,383

$

2,445

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

4

3M Company and Subsidiaries

Consolidated Balance Sheet

(Unaudited)

    

June 30,

    

December 31,

 

(Dollars in millions, except per share amount)

    

2021

    

2020

 

Assets

Current assets

Cash and cash equivalents

$

4,695

$

4,634

Marketable securities — current

 

805

 

404

Accounts receivable — net of allowances of $230 and $233

 

4,991

 

4,705

Inventories

Finished goods

 

2,356

 

2,081

Work in process

 

1,342

 

1,226

Raw materials and supplies

 

1,144

 

932

Total inventories

 

4,842

 

4,239

Prepaids

633

675

Other current assets

 

377

 

325

Total current assets

 

16,343

 

14,982

Property, plant and equipment

 

27,132

 

26,650

Less: Accumulated depreciation

 

(17,774)

 

(17,229)

Property, plant and equipment — net

 

9,358

 

9,421

Operating lease right of use assets

872

864

Goodwill

 

13,722

 

13,802

Intangible assets — net

 

5,572

 

5,835

Other assets

 

2,440

 

2,440

Total assets

$

48,307

$

47,344

Liabilities

Current liabilities

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

$

1,981

$

806

Accounts payable

 

2,931

 

2,561

Accrued payroll

 

832

 

747

Accrued income taxes

 

247

 

300

Operating lease liabilities — current

268

256

Other current liabilities

 

3,181

 

3,278

Total current liabilities

 

9,440

 

7,948

Long-term debt

 

16,267

 

17,989

Pension and postretirement benefits

 

4,184

 

4,405

Operating lease liabilities

603

 

609

Other liabilities

 

3,297

 

3,462

Total liabilities

$

33,791

$

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 - June 30, 2021: 578,638,253

Shares outstanding - December 31, 2020: 577,749,638

Additional paid-in capital

 

6,337

 

6,162

Retained earnings

 

44,824

 

43,821

Treasury stock, at cost:

 

(29,236)

 

(29,404)

Shares at June 30, 2021: 365,394,803

Shares at December 31, 2020: 366,283,418

Accumulated other comprehensive income (loss)

 

(7,486)

 

(7,721)

Total 3M Company shareholders’ equity

 

14,448

 

12,867

Noncontrolling interest

 

68

 

64

Total equity

$

14,516

$

12,931

Total liabilities and equity

$

48,307

$

47,344

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

5

3M Company and Subsidiaries

Consolidated Statement of Cash Flows

(Unaudited)

    

Six months ended 

June 30,

(Millions)

    

2021

    

2020

Cash Flows from Operating Activities

Net income including noncontrolling interest

$

3,152

$

2,613

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

Depreciation and amortization

 

932

 

932

Company pension and postretirement contributions

 

(85)

 

(77)

Company pension and postretirement expense

 

92

 

155

Stock-based compensation expense

 

184

 

172

Gain on sale of businesses

(389)

Deferred income taxes

 

91

 

41

Changes in assets and liabilities

Accounts receivable

 

(337)

 

241

Inventories

 

(644)

 

(198)

Accounts payable

 

411

 

(269)

Accrued income taxes (current and long-term)

 

(141)

 

273

Other — net

 

(80)

 

(376)

Net cash provided by (used in) operating activities

 

3,575

 

3,118

Cash Flows from Investing Activities

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

 

(704)

 

(711)

Proceeds from sale of PP&E and other assets

 

43

 

16

Acquisitions, net of cash acquired

 

 

(25)

Purchases of marketable securities and investments

 

(1,188)

 

(634)

Proceeds from maturities and sale of marketable securities and investments

 

786

 

976

Proceeds from sale of businesses, net of cash sold

 

 

573

Other — net

 

20

 

7

Net cash provided by (used in) investing activities

 

(1,043)

 

202

Cash Flows from Financing Activities

Change in short-term debt — net

 

4

 

(132)

Repayment of debt (maturities greater than 90 days)

 

(450)

 

(1,146)

Proceeds from debt (maturities greater than 90 days)

 

1

 

1,745

Purchases of treasury stock

 

(734)

 

(366)

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

 

480

 

236

Dividends paid to shareholders

 

(1,716)

 

(1,693)

Other — net

 

(19)

 

(45)

Net cash provided by (used in) financing activities

 

(2,434)

 

(1,401)

Effect of exchange rate changes on cash and cash equivalents

 

(37)

 

(53)

Net increase (decrease) in cash and cash equivalents

 

61

 

1,866

Cash and cash equivalents at beginning of year

 

4,634

 

2,353

Cash and cash equivalents at end of period

$

4,695

$

4,219

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

6

3M Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1. Significant Accounting Policies

Basis of Presentation

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

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

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

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

In the first quarter of 2021, 3M changed the method it uses to calculate the market-related value of fixed income securities included in its pension and other postretirement plan assets. The market-related value is used to determine the expected return on plan assets and the amortization of net unamortized actuarial gains or losses expense components of net periodic benefit cost. The Company previously used the calculated value approach for all plan assets, deferring over three years the impact on these amounts of asset gains or losses that differed from expected returns. 3M changed to the fair value approach for calculating market-related value for the fixed income class of plan assets, which does not involve deferring the impact of excess plan asset gains or losses in the determination of these two components of net periodic benefit cost. 3M considers the use of the fair value approach preferrable to the calculated value approach as it results in a more current reflection of impacts of changes in value of these plan assets in the determination of net periodic benefit cost. Additionally, given the plans’ liability-driven investment strategy whereby the changes in value of the fixed income plan assets should offset changes in the value of the plans’ liabilities, this approach more closely aligns the expected return on plan assets expense component with the value reflected in the plans’ funded status. This change was applied retrospectively to all periods presented within 3M’s financial statements. The change did not impact consolidated operating income or net cash provided by operating activities but did impact the previously reported portion of pension and postretirement net periodic benefit cost (benefit) that was included within non-operating other expense (income) along with related consolidated income items such as net income and earnings per share. Other impacts included related changes to previously reported consolidated other comprehensive income, retained earnings, accumulated other comprehensive income (loss), and associated line items within the determination of net cash provided by operating activities. For classes of plan assets other than fixed income investments, the Company continues to use the calculated value approach to determine their market-related value.

7

The adoption of this change impacted previously reported amounts included herein as indicated in the tables below.

Consolidated Statement of Income

Three months ended 

Six months ended 

June 30, 2020

June 30, 2020

Under Prior

    

Under Prior

(Millions, except per share amounts)

Method

As Adjusted

Method

As Adjusted

Other expense (income), net

$

111

$

90

$

207

$

165

Income before income taxes

$

1,629

$

1,650

$

3,196

$

3,238

Provision for income taxes

342

347

615

625

Income of consolidated group

$

1,287

$

1,303

$

2,581

$

2,613

Net income including noncontrolling interest

$

1,287

$

1,303

$

2,581

$

2,613

Net income attributable to 3M

$

1,290

$

1,306

$

2,582

$

2,614

Earnings per share attributable to 3M common shareholders — basic

$

2.24

$

2.26

$

4.48

$

4.53

Earnings per share attributable to 3M common shareholders — diluted

$

2.22

$

2.25

$

4.44

$

4.50

Consolidated Statement of Comprehensive Income

Three months ended 

Six months ended 

June 30, 2020

June 30, 2020

Under Prior

    

Under Prior

(Millions)

Method

As Adjusted

Method

As Adjusted

Net income including noncontrolling interest

$

1,287

$

1,303

$

2,581

$

2,613

Other comprehensive income (loss), net of tax:

Defined benefit pension and postretirement plans adjustment

$

58

$

47

$

177

$

155

Total other comprehensive income (loss), net of tax

$

128

$

117

$

(150)

$

(172)

Comprehensive income (loss) including noncontrolling interest

$

1,415

$

1,420

$

2,431

$

2,441

Comprehensive income (loss) attributable to 3M

$

1,418

$

1,423

$

2,435

$

2,445

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

Six months ended 

June 30, 2020

Under Prior

(Millions)

Method

As Adjusted

Net income including noncontrolling interest

$

2,581

$

2,613

Company pension and postretirement expense

$

197

$

155

Other — net

$

(386)

$

(376)

The cumulative adjustment as of January 1, 2020, the beginning of the earliest period presented in the consolidated financial statements included herein, was a $5 million reduction to each of retained earnings and accumulated other comprehensive loss.

Earnings Per Share

The difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is a result of the dilution associated with the Company’s stock-based compensation plans. Certain options outstanding under these stock-based compensation plans were not included in the computation of diluted earnings per share attributable to 3M common shareholders because they would have had an anti-dilutive effect (6.3 million average options for the three months ended June 30, 2021; 7.5 million average options for the six months ended June 30, 2021; 20.9 million average options for the

8

three months ended June 30, 2020; 20.0 million average options for the six months ended June 30, 2020). The computations for basic and diluted earnings per share follow:

Earnings Per Share Computations

    

Three months ended 

    

Six months ended 

June 30,

June 30,

(Amounts in millions, except per share amounts)

    

2021

    

2020

    

2021

    

2020

Numerator:

Net income attributable to 3M

$

1,524

$

1,306

$

3,148

$

2,614

Denominator:

Denominator for weighted average 3M common shares outstanding basic

 

581.0

 

577.0

 

580.7

 

576.9

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

 

7.6

 

3.8

 

6.7

 

4.3

Denominator for weighted average 3M common shares outstanding diluted

 

588.6

 

580.8

 

587.4

 

581.2

Earnings per share attributable to 3M common shareholders basic

$

2.62

$

2.26

$

5.42

$

4.53

Earnings per share attributable to 3M common shareholders diluted

$

2.59

$

2.25

$

5.36

$

4.50

New Accounting Pronouncements

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

Standards Adopted During the Current Fiscal Year

Standard

Relevant Description

Effective Date for 3M

Impact and Other Matters

ASU No. 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.

NOTE 2. Revenue

Contract Balances:

Deferred revenue primarily relates to revenue that is recognized over time for one-year software license contracts. Deferred revenue (current portion) as of June 30, 2021 and December 31, 2020 was $475 million and $498 million, respectively. Approximately $140 million and $320 million of the December 31, 2020 balance was recognized as revenue during the three and six months ended June 30,

9

2021, respectively, while approximately $110 million and $270 million of the December 31, 2019 balance was recognized as revenue during the three and six months ended June 30, 2020, respectively.

Operating Lease Revenue:

Net sales includes rental revenue from durable medical devices as part of operating lease arrangements (reported within the Medical Solutions Division), which was $145 million and $133 million during the three months ended June 30, 2021 and 2020, respectively, and $285 million and $275 million during the six months ended June 30, 2021 and 2020.

Disaggregated revenue information:

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

Three months ended 

Six months ended 

June 30,

June 30,

Net Sales (Millions)

2021

    

2020

    

2021

    

2020

Abrasives

$

353

$

242

$

705

$

572

Automotive Aftermarket

313

202

625

486

Closure and Masking Systems

254

235

497

503

Electrical Markets

319

251

626

539

Industrial Adhesives and Tapes

761

545

1,529

1,216

Personal Safety

1,133

1,095

2,370

2,084

Roofing Granules

121

86

229

181

Other Safety and Industrial

1

3

Total Safety and Industrial Business Segment

$

3,254

$

2,657

$

6,581

$

5,584

Advanced Materials

$

304

$

236

$

620

$

524

Automotive and Aerospace

469

268

985

716

Commercial Solutions

454

327

892

757

Electronics

998

884

2,040

1,747

Transportation Safety

259

222

477

433

Other Transportation and Electronics

(2)

(1)

(1)

Total Transportation and Electronics Business Segment

$

2,482

$

1,937

5,013

$

4,176

Drug Delivery

$

$

41

$

$

146

Food Safety

95

78

183

169

Health Information Systems

299

276

588

553

Medical Solutions

1,275

1,067

2,542

2,220

Oral Care

364

144

727

421

Separation and Purification Sciences

248

216

489

418

Other Health Care

(3)

1

(3)

Total Health Care Business Group

$

2,278

$

1,823

$

4,526

$

3,927

Consumer Health and Safety

$

163

$

120

$

313

$

292

Home Care

272

257

551

528

Home Improvement

666

564

1,289

1,067

Stationery and Office

352

257

637

525

Other Consumer

29

33

65

69

Total Consumer Business Group

$

1,482

$

1,231

$

2,855

$

2,481

Corporate and Unallocated

$

1

$

1

$

(1)

$

1

Elimination of Dual Credit

(547)

(473)

(1,173)

(918)

Total Company

$

8,950

$

7,176

$

17,801

$

15,251

10

Three months ended June 30, 2021

Net Sales (Millions)

    

Americas

Asia Pacific

    

Europe, Middle East and Africa

    

Other Unallocated

    

Worldwide

Safety and Industrial

$

1,670

$

814

$

770

$

$

3,254

Transportation and Electronics

 

718

 

1,382

 

383

 

(1)

 

2,482

Health Care

1,333

430

516

(1)

2,278

Consumer

 

1,081

 

246

 

155

 

 

1,482

Corporate and Unallocated

 

1

 

 

 

 

1

Elimination of Dual Credit

 

(221)

 

(217)

 

(110)

 

1

 

(547)

Total Company

$

4,582

$

2,655

$

1,714

$

(1)

$

8,950

Six months ended June 30, 2021

Net Sales (Millions)

    

Americas

Asia Pacific

    

Europe, Middle East and Africa

    

Other Unallocated

    

Worldwide

Safety and Industrial

$

3,367

$

1,637

$

1,577

$

$

6,581

Transportation and Electronics

 

1,368

 

2,872

 

774

 

(1)

 

5,013

Health Care

2,644

838

1,045

(1)

4,526

Consumer

 

2,030

 

524

 

301

 

 

2,855

Corporate and Unallocated

 

 

 

 

(1)

 

(1)

Elimination of Dual Credit

 

(499)

 

(447)

 

(228)

 

1

 

(1,173)

Total Company

$

8,910

$

5,424

$

3,469

$

(2)

$

17,801

Three months ended June 30, 2020

Net Sales (Millions)

    

Americas

Asia Pacific

    

Europe, Middle East and Africa

    

Other Unallocated

    

Worldwide

Safety and Industrial

$

1,365

$

649

$

644

$

(1)

$

2,657

Transportation and Electronics

 

532

 

1,151

 

254

 

 

1,937

Health Care

1,074

358

392

(1)

1,823

Consumer

 

895

 

216

 

120

 

 

1,231

Corporate and Unallocated

 

(2)

 

 

 

3

 

1

Elimination of Dual Credit

 

(231)

 

(164)

 

(78)

 

 

(473)

Total Company

$

3,633

$

2,210

$

1,332

$

1

$

7,176

Six months ended June 30, 2020

Net Sales (Millions)

    

Americas

Asia Pacific

    

Europe, Middle East and Africa

    

Other Unallocated

    

Worldwide

Safety and Industrial

$

2,882

$

1,361

$

1,342

$

(1)

$

5,584

Transportation and Electronics

 

1,207

 

2,353

 

616

 

 

4,176

Health Care

2,355

714

859

(1)

3,927

Consumer

 

1,769

 

466

 

247

 

(1)

 

2,481

Corporate and Unallocated

 

(1)

 

 

 

2

 

1

Elimination of Dual Credit

 

(437)

 

(339)

 

(142)

 

 

(918)

Total Company

$

7,775

$

4,555

$

2,922

$

(1)

$

15,251

Americas included United States net sales to customers of $3.8 billion and $3.1 billion for the three months ended June 30, 2021 and 2020, respectively, and $7.4 billion and $6.6 billion for the six months ended June 30, 2021 and 2020, respectively.

11

NOTE 3. Acquisitions and Divestitures

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

Acquisitions:

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

2021 acquisitions:

There were 0 acquisitions that closed during the six months ended June 30, 2021.

2020 acquisitions:

There were 0 acquisitions that closed during the year ended December 31, 2020.

Divestitures:

3M may divest certain businesses from time to time based upon review of the Company’s portfolio considering, among other items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders.

2021 divestitures:

There were 0 divestitures that closed during the six months ended June 30, 2021.

2020 divestitures:

During 2020, as described in Note 3 in 3M’s 2020 Annual Report on Form 10-K, the Company divested its advanced ballistic-protection business, substantially all of its drug delivery business, and a small dermatology products business.

Operating income and held for sale amounts:

The aggregate operating income of applicable businesses held for sale with respect to the first six months of 2020 was $38 million.

NOTE 4. Goodwill and Intangible Assets

There was 0 goodwill recorded from acquisitions during the first six months of 2021. The amounts in the “Translation and other” row in the following table primarily relate to changes in foreign currency exchange rates. The goodwill balance by business segment as of December 31, 2020 and June 30, 2021, follow:

Goodwill

(Millions)

Safety and Industrial

Transportation and Electronics

Health Care

Consumer

Total Company

Balance as of December 31, 2020

$

4,687

$

1,858

$

6,992

$

265

$

13,802

Translation and other

(7)

(8)

(59)

(6)

(80)

Balance as of June 30, 2021

$

4,680

$

1,850

$

6,933

$

259

$

13,722

12

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

As described in Note 16, effective in the first quarter of 2021, the Company changed its business segment reporting. For any product changes that resulted in reporting unit changes, the Company applied the relative fair value method to determine the impact on goodwill of the associated reporting units, the results of which were immaterial.

Acquired Intangible Assets

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

    

June 30,

    

December 31,

 

(Millions)

    

2021

    

2020

 

Customer related intangible assets

$

4,276

$

4,280

Patents

 

518

 

537

Other technology-based intangible assets

 

2,115

 

2,114

Definite-lived tradenames

 

1,173

 

1,178

Other amortizable intangible assets

 

107

 

104

Total gross carrying amount

$

8,189

$

8,213

Accumulated amortization — customer related

 

(1,539)

 

(1,422)

Accumulated amortization — patents

 

(500)

 

(512)

Accumulated amortization — other technology-based

 

(739)

 

(638)

Accumulated amortization — definite-lived tradenames

 

(414)

 

(385)

Accumulated amortization — other

 

(81)

 

(79)

Total accumulated amortization

$

(3,273)

$

(3,036)

Total finite-lived intangible assets — net

$

4,916

$

5,177

Non-amortizable intangible assets (primarily tradenames)

 

656

 

658

Total intangible assets — net

$

5,572

$

5,835

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

Amortization expense for the three and six months ended June 30, 2021 and 2020 follows:

    

Three months ended 

    

Six months ended 

 

June 30,

June 30,

(Millions)

    

2021

    

2020

    

2021

2020

 

Amortization expense

$

134

$

134

$

267

$

268

Expected amortization expense for acquired amortizable intangible assets recorded as of June 30, 2021:

Remainder of

After

 

(Millions)

2021

2022

2023

2024

2025

2026

2026

 

Amortization expense

$

262

$

516

$

487

$

459

$

429

$

421

$

2,342

The preceding expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment of intangible assets,

13

accelerated amortization of intangible assets and other events. 3M expenses the costs incurred to renew or extend the term of intangible assets.

NOTE 5. Restructuring Actions

2020 and 2021 Restructuring Actions:

Operational/Marketing Capability Restructuring:

As described in Note 5 in 3M’s 2020 Annual Report on Form 10-K, in late 2020, 3M announced it would undertake certain actions to further enhance its operations and marketing capabilities to take advantage of certain global market trends while de-prioritizing investments in slower-growth end markets. During the fourth quarter of 2020, management approved and committed to undertake associated restructuring actions impacting approximately 2,100 positions resulting in a pre-tax charge of $137 million. In the first six months of 2021, management approved and committed to undertake additional actions under this initiative resulting in a pre-tax charge of $14 million and $43 million in the first and second quarter of 2021, respectively. Remaining activities related to the restructuring actions approved and committed under this initiative are expected to be largely completed through the first quarter of 2022. 3M expects further actions under this initiative through 2021. This aggregate initiative, begun in 2020 and continuing through 2021, is expected to impact approximately 2,900 positions worldwide with an expected pre-tax charge of $250 to $300 million over that period. The related first six months of 2021 restructuring charges were recorded in the income statement as follows:

(Millions)

First Six Months of 2021

Cost of sales

$

12

Selling, general and administrative expenses

 

32

Research, development and related expenses

 

13

Total operating income impact

$

57

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

First Six Months of 2021

(Millions)

    

Employee-Related

Safety and Industrial

$

9

Transportation and Electronics

12

Health Care

8

Consumer

4

Corporate and Unallocated

 

24

Total Operating Expense

$

57

14

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

(Millions)

    

Employee-Related

    

Accrued restructuring action balances as of December 31, 2020

$

101

Incremental expense incurred in the first quarter of 2021

14

Incremental expense incurred in the second quarter of 2021

43

Cash payments

 

(67)

Adjustments

(5)

Accrued restructuring action balances as of June 30, 2021

$

86

Divestiture-Related Restructuring

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

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

(Millions)

    

Employee-Related

    

Asset-Related and Other

    

Total

 

Accrued divestiture-related restructuring action balances as of December 31, 2020

$

15

$

9

$

24

Cash payments

(5)

(5)

Adjustments

(1)

(1)

Accrued divestiture-related restructuring action balances as of June 30, 2021

$

9

$

9

$

18

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

Other Restructuring

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

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

(Millions)

    

Employee-Related

 

Accrued restructuring action balances as of December 31, 2020

$

24

Cash payments

(4)

Adjustments

(9)

Accrued restructuring action balances as of March 31, 2021

$

11

Remaining activities related to this restructuring were largely completed in the second quarter of 2021.

15

NOTE 6. Supplemental Income Statement Information

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

    

Three months ended 

    

Six months ended 

June 30,

June 30,

(Millions)

2021

    

2020

    

2021

2020

Interest expense

$

121

$

137

$

253

$

260

Interest income

 

(8)

 

(9)

 

(12)

 

(19)

Pension and postretirement net periodic benefit cost (benefit)

(80)

(38)

(159)

(76)

Total

$

33

$

90

$

82

$

165

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

Pension and postretirement net periodic benefit costs described in the table above include all components of defined benefit plan net periodic benefit costs except service cost, which is reported in various operating expense lines. Refer to Note 11 for additional details on the components of pension and postretirement net periodic benefit costs.

NOTE 7. Supplemental Equity and Comprehensive Income Information

Cash dividends declared and paid totaled $1.48 and $1.47 per share for the first and second quarters 2021 and 2020, respectively, or $2.96 and $2.94 per share for the first six months of 2021 and 2020, respectively.

Consolidated Changes in Equity

Three months ended June 30, 2021

3M Company Shareholders

 

Common

Accumulated

 

Stock and

Other

 

Additional

Comprehensive

Non-

 

Paid-in

Retained

Treasury

Income

controlling

 

(Millions)

    

Total

    

Capital

    

Earnings

    

Stock

    

(Loss)

    

Interest

 

Balance at March 31, 2021

 

$

13,828

 

$

6,292

 

$

44,255

 

$

(29,020)

 

$

(7,767)

 

$

68

Net income

 

1,525

 

1,524

 

1

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

 

170

 

171

 

(1)

Defined benefit pension and post-retirement plans adjustment

 

121

 

121

 

Cash flow hedging instruments

 

(11)

 

(11)

 

Total other comprehensive income (loss), net of tax

 

280

Dividends declared

 

(858)

 

(858)

Stock-based compensation

 

54

 

54

Reacquired stock

 

(499)

 

(499)

Issuances pursuant to stock option and benefit plans

 

186

 

(97)

 

283

Balance at June 30, 2021

 

$

14,516

 

$

6,346

 

$

44,824

 

$

(29,236)

 

$

(7,486)

 

$

68

16

Six months ended June 30, 2021

3M Company Shareholders

 

Common

Accumulated

 

Stock and

Other

 

Additional

Comprehensive

Non-

 

Paid-in

Retained

Treasury

Income

controlling

 

(Millions)

    

Total

    

Capital

    

Earnings

    

Stock

    

(Loss)

    

Interest

 

Balance at December 31, 2020

 

$

12,931

 

$

6,171

 

$

43,821

 

$

(29,404)

 

$

(7,721)

 

$

64

Net income

 

3,152

 

3,148

 

4

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

 

(52)

 

(52)

 

Defined benefit pension and post-retirement plans adjustment

 

240

 

240

 

Cash flow hedging instruments

 

47

 

47

 

Total other comprehensive income (loss), net of tax

 

235

Dividends declared

 

(1,716)

 

(1,716)

Stock-based compensation

 

175

 

175

Reacquired stock

 

(742)

 

(742)

Issuances pursuant to stock option and benefit plans

 

481

 

(429)

 

910

Balance at June 30, 2021

 

$

14,516

 

$

6,346

 

$

44,824

 

$

(29,236)

 

$

(7,486)

 

$

68

Three months ended June 30, 2020

3M Company Shareholders

 

Common

Accumulated

 

Stock and

Other

 

Additional

Comprehensive

Non-

 

Paid-in

Retained

Treasury

Income

controlling

 

(Millions)

    

Total

    

Capital

    

Earnings

    

Stock

    

(Loss)

    

Interest

 

Balance at March 31, 2020

 

$

10,214

 

$

6,033

 

$

42,356

 

$

(29,817)

 

$

(8,420)

 

$

62

Net income

 

1,303

 

1,306

 

(3)

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

 

106

 

106

 

Defined benefit pension and post-retirement plans adjustment

 

47

 

47

 

Cash flow hedging instruments

 

(36)

 

(36)

 

Total other comprehensive income (loss), net of tax

 

117

Dividends declared

 

(846)

 

(846)

Purchase of subsidiary shares

(1)

(1)

Stock-based compensation

 

50

 

50

Reacquired stock

 

 

Issuances pursuant to stock option and benefit plans

 

88

 

(30)

 

118

Balance at June 30, 2020

 

$

10,925

 

$

6,083

 

$

42,786

 

$

(29,699)

 

$

(8,303)

 

$

58

17

Six months ended June 30, 2020

3M Company Shareholders

 

Common

Accumulated

 

Stock and

Other

 

Additional

Comprehensive

Non-

 

Paid-in

Retained

Treasury

Income

controlling

 

(Millions)

    

Total

    

Capital

    

Earnings

    

Stock

    

(Loss)

    

Interest

 

Balance at December 31, 2019

 

$

10,126

 

$

5,916

 

$

42,130

 

$

(29,849)

 

$

(8,134)

 

$

63

Net income

 

2,613

 

2,614

 

(1)

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment

 

(338)

 

(335)

 

(3)

Defined benefit pension and post-retirement plans adjustment

 

155

 

155

 

Cash flow hedging instruments

 

11

 

11

 

Total other comprehensive income (loss), net of tax

 

(172)

Dividends declared

 

(1,693)

 

(1,693)

Purchase of subsidiary shares

(1)

(1)

Stock-based compensation

 

167

 

167

Reacquired stock

 

(356)

 

(356)

Issuances pursuant to stock option and benefit plans

 

241

 

(265)

 

506

Balance at June 30, 2020

 

$

10,925

 

$

6,083

 

$

42,786

 

$

(29,699)

 

$

(8,303)

 

$

58

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

Three months ended June 30, 2021

    

    

    

    

 

Defined Benefit

Cash Flow

Total

 

Pension and

Hedging

Accumulated

 

Cumulative

Postretirement

Instruments,

Other

 

Translation

Plans

Unrealized

Comprehensive

 

(Millions)

Adjustment

Adjustment

Gain (Loss)

Income (Loss)

 

Balance at March 31, 2021, net of tax:

$

(1,673)

$

(5,979)

$

(115)

$

(7,767)

Other comprehensive income (loss), before tax:

Amounts before reclassifications

 

159

 

 

(26)

 

133

Amounts reclassified out

 

 

160

 

12

 

172

Total other comprehensive income (loss), before tax

 

159

 

160

 

(14)

 

305

Tax effect

 

12

 

(39)

 

3

 

(24)

Total other comprehensive income (loss), net of tax

 

171

 

121

 

(11)

 

281

Balance at June 30, 2021, net of tax:

$

(1,502)

$

(5,858)

$

(126)

$

(7,486)

Six months ended June 30, 2021

    

    

    

    

 

Defined Benefit

Cash Flow

Total

 

Pension and

Hedging

Accumulated

 

Cumulative

Postretirement

Instruments,

Other

 

Translation

Plans

Unrealized

Comprehensive

 

(Millions)

Adjustment

Adjustment

Gain (Loss)

Income (Loss)

 

Balance at December 31, 2020, net of tax:

$

(1,450)

$

(6,098)

$

(173)

$

(7,721)

Other comprehensive income (loss), before tax:

Amounts before reclassifications

 

(17)

 

 

40

 

23

Amounts reclassified out

 

 

319

 

21

 

340

Total other comprehensive income (loss), before tax

 

(17)

 

319

 

61

 

363

Tax effect

 

(35)

 

(79)

 

(14)

 

(128)

Total other comprehensive income (loss), net of tax

 

(52)

 

240

 

47

 

235

Balance at June 30, 2021, net of tax:

$

(1,502)

$

(5,858)

$

(126)

$

(7,486)

18

Three months ended June 30, 2020

    

    

    

    

 

Defined Benefit

Cash Flow

Total

 

Pension and

Hedging

Accumulated

 

Cumulative

Postretirement

Instruments,

Other

 

Translation

Plans

Unrealized

Comprehensive

 

(Millions)

Adjustment

Adjustment

Gain (Loss)

Income (Loss)

 

Balance at March 31, 2020, net of tax:

$

(2,340)

$

(6,096)

$

16

$

(8,420)

Other comprehensive income (loss), before tax:

Amounts before reclassifications

 

104

 

(80)

 

(15)

 

9

Amounts reclassified out

 

 

147

 

(31)

 

116

Total other comprehensive income (loss), before tax

 

104

 

67

 

(46)

 

125

Tax effect

 

2

 

(20)

 

10

 

(8)

Total other comprehensive income (loss), net of tax

 

106

 

47

 

(36)

 

117

Balance at June 30, 2020, net of tax:

$

(2,234)

$

(6,049)

$

(20)

$

(8,303)

Six months ended June 30, 2020

    

    

    

    

 

Defined Benefit

Cash Flow

Total

 

Pension and

Hedging

Accumulated

 

Cumulative

Postretirement

Instruments,

Other

 

Translation

Plans

Unrealized

Comprehensive

 

(Millions)

Adjustment

Adjustment

Gain (Loss)

Income (Loss)

 

Balance at December 31, 2019, net of tax:

$

(1,899)

$

(6,204)

$

(31)

$

(8,134)

Other comprehensive income (loss), before tax:

Amounts before reclassifications

 

(335)

 

(80)

 

62

 

(353)

Amounts reclassified out

 

 

297

 

(47)

 

250

Total other comprehensive income (loss), before tax

 

(335)

 

217

 

15

 

(103)

Tax effect

 

 

(62)

 

(4)

 

(66)

Total other comprehensive income (loss), net of tax

 

(335)

 

155

 

11

 

(169)

Balance at June 30, 2020, net of tax

$

(2,234)

$

(6,049)

$

(20)

$

(8,303)

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

Reclassifications out of Accumulated Other Comprehensive Income Attributable to 3M

Amount Reclassified from

 

Details about Accumulated Other

Accumulated Other Comprehensive Income

Comprehensive Income Components

Three months ended June 30,

Six months ended June 30,

Location on Income

 

(Millions)

2021

    

2020

    

2021

    

2020

Statement

 

Defined benefit pension and postretirement plans adjustments

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

Transition asset

$

(1)

$

$

(1)

 

$

(1)

 

See Note 11

Prior service benefit

15

16

30

 

31

 

See Note 11

Net actuarial loss

(173)

(162)

(346)

(325)

See Note 11

Curtailments/Settlements

 

(1)

 

(1)

 

(2)

 

 

(2)

 

See Note 11

Total before tax

 

(160)

 

(147)

 

(319)

 

(297)

Tax effect

 

39

 

33

 

79

 

 

75

 

Provision for income taxes

Net of tax

$

(121)

$

(114)

$

(240)

$

(222)

Cash flow hedging instruments gains (losses)

Foreign currency forward/option contracts

$

(10)

$

33

$

(17)

 

$

51

 

Cost of sales

Interest rate contracts

 

(2)

 

(2)

 

(4)

 

 

(4)

 

Interest expense

Total before tax

 

(12)

 

31

 

(21)

 

47

Tax effect

 

3

 

(7)

 

5

 

 

(11)

 

Provision for income taxes

Net of tax

$

(9)

$

24

$

(16)

$

36

Total reclassifications for the period, net of tax

$

(130)

$

(90)

$

(256)

$

(186)

19

NOTE 8. Income Taxes

The IRS has completed its field examination of the Company’s U.S. federal income tax returns through 2018, but the years 2005 through 2017 have not closed as the Company is in the process of resolving issues identified during those examinations. In addition to the U.S. federal examination, there is also audit activity in several U.S. state and foreign jurisdictions where the Company is subject to ongoing tax examinations and governmental assessments, which could be impacted by evolving political environments in those jurisdictions. As of June 30, 2021, no taxing authority proposed significant adjustments to the Company’s tax positions for which the Company is not adequately reserved.

It is reasonably possible that the amount of unrecognized tax benefits could significantly change within the next 12 months. At this time, the Company is not able to estimate the range by which these potential events could impact 3M’s unrecognized tax benefits in the next 12 months. The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of June 30, 2021 and December 31, 2020 are $1,090 million and $1,145 million, respectively.

As of June 30, 2021 and December 31, 2020, the Company had valuation allowances of $150 million and $135 million on its deferred tax assets, respectively.

The effective tax rate for the second quarter and first six months of 2021 was 21.5 percent and 18.9 percent, respectively, largely consistent with 21.0 percent and 19.3 percent for the same periods, respectively, in prior year.

NOTE 9. Marketable Securities

The Company invests in asset-backed securities, certificates of deposit/time deposits, commercial paper, and other securities. The following is a summary of amounts recorded on the Consolidated Balance Sheet for marketable securities (current and non-current).

(Millions)

June 30, 2021

December 31, 2020

 

Corporate debt securities

$

7

$

7

Commercial paper

502

237

Certificates of deposit/time deposits

 

13

 

31

U.S. treasury securities

280

125

U.S. municipal securities

 

3

 

4

Current marketable securities

$

805

$

404

U.S. municipal securities

$

31

$

30

Non-current marketable securities

$

31

$

30

Total marketable securities

$

836

$

434

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

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

(Millions)

    

June 30, 2021

 

Due in one year or less

$

805

Due after one year through five years

 

15

Due after five years through ten years

 

16

Total marketable securities

$

836

20

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

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

In the second quarter of 2021, 3M entered into interest rate swaps with a notional amount of $650 million. These swaps converted $500 million and $150 million of 3M’s $1.0 billion and $650 million principal amount of fixed rate notes due 2049 and 2050, respectively, into floating rate debt for the portion of their terms through mid-2028 with an interest rate based on a three-month LIBOR index.

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

The Company had 0 commercial paper outstanding at June 30, 2021 and December 31, 2020.

Future Maturities of Long-term Debt

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

Remainder of

    

    

    

    

    

    

After

    

 

2021

2022

2023

2024

2025

2026

2026

Total

 

$

770

$

1,265

$

1,956

$

1,100

$

1,791

$

1,529

$

9,821

$

18,232

NOTE 11. Pension and Postretirement Benefit Plans

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

The service cost component of defined benefit net periodic benefit cost is recorded in cost of sales; selling, general and administrative expenses; and research, development and related expenses. The other components of net periodic benefit cost are reflected in other

21

expense (income), net. Components of net periodic benefit cost and other supplemental information for the three and six months ended June 30, 2021 and 2020 follow:

Benefit Plan Information

Three months ended June 30,

Qualified and Non-qualified

Pension Benefits

Postretirement

United States

International

Benefits

(Millions)

    

2021

    

2020

    

2021

    

2020

    

2021

    

2020

Net periodic benefit cost (benefit)

Operating expense

Service cost

$

72

$

65

$

42

$

38

$

11

$

11

Non-operating expense

Interest cost

$

90

$

125

$

25

$

33

$

11

$

16

Expected return on plan assets

 

(264)

 

(261)

 

(82)

 

(78)

 

(20)

 

(20)

Amortization of transition asset

 

 

 

1

 

 

 

Amortization of prior service benefit

 

(6)

 

(6)

 

(1)

 

(2)

 

(8)

 

(8)

Amortization of net actuarial loss

132

122

27

29

14

11

Settlements, curtailments, special termination benefits and other

 

 

 

 

 

1

 

1

Total non-operating expense (benefit)

(48)

(20)

(30)

(18)

(2)

Total net periodic benefit cost (benefit)

$

24

$

45

$

12

$

20

$

9

$

11

Six months ended June 30,

Qualified and Non-qualified

Pension Benefits

Postretirement

United States

International

Benefits

(Millions)

    

2021

    

2020

    

2021

    

2020

    

2021

    

2020

Net periodic benefit cost (benefit)

Operating expense

Service cost

$

144

$

131

$

84

$

76

$

23

$

22

Non-operating expense

Interest cost

$

180

$

249

$

50

$

64

$

22

$

32

Expected return on plan assets

 

(528)

 

(523)

 

(163)

 

(155)

 

(39)

 

(40)

Amortization of transition asset

 

 

 

1

 

1

 

 

Amortization of prior service benefit

 

(12)

 

(12)

 

(2)

 

(3)

 

(16)

 

(16)

Amortization of net actuarial loss

264

245

54

57

28

23

Settlements, curtailments, special termination benefits and other

 

 

 

 

 

2

 

2

Total non-operating expense (benefit)

(96)

(41)

(60)

(36)

(3)

1

Total net periodic benefit cost (benefit)

$

48

$

90

$

24

$

40

$

20

$

23

For the six months ended June 30, 2021 contributions totaling $83 million were made to the Company’s U.S. and international pension plans and $2 million to its postretirement plans. For total year 2021, the Company expects to contribute approximately $200 million of cash to its global defined benefit pension and postretirement plans. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2021. Future contributions will depend on market conditions, interest rates and other factors. 3M’s annual measurement date for pension and postretirement assets and liabilities is December 31 each year, which is also the date used for the related annual measurement assumptions.

NOTE 12. Derivatives

The Company uses interest rate swaps, currency swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations. The information that follows explains the various types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, how such instruments are accounted for, and how such instruments impact 3M’s financial position and performance.

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

Impact on other comprehensive income of nonderivative hedging and derivative instruments is included in Note 7.
Fair value of derivative instruments is included in Note 13.
Derivatives and/or hedging instruments associated with the Company’s long-term debt are described in Note 12 in 3M’s 2020 Annual Report on Form 10-K.

22

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

Cash Flow Hedges:

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

Cash Flow Hedging - Foreign Currency Forward and Option Contracts: The Company enters into foreign exchange forward and option contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactions are designated as cash flow hedges. The settlement or extension of these derivatives will result in reclassifications (from accumulated other comprehensive income) to earnings in the period during which the hedged transactions affect earnings. 3M may dedesignate these cash flow hedge relationships in advance of the occurrence of the forecasted transaction. The portion of gains or losses on the derivative instrument previously included in accumulated other comprehensive income for dedesignated hedges remains in accumulated other comprehensive income until the forecasted transaction occurs or becomes probable of not occurring. Changes in the value of derivative instruments after dedesignation are recorded in earnings and are included in the Derivatives Not Designated as Hedging Instruments section below. The maximum length of time over which 3M hedges its exposure to the variability in future cash flows of the forecasted transactions is 36 months.

Cash Flow Hedging - Interest Rate Contracts: The Company may use forward starting interest rate contracts and treasury rate lock contracts to hedge exposure to variability in cash flows from interest payments on forecasted debt issuances. The amortization of gains and losses on forward starting interest rate swaps is included in the tables below as part of the gain/(loss) reclassified from accumulated other comprehensive income into income. Additional information regarding previously issued but terminated interest rate contracts, which have related balances within accumulated other comprehensive income being amortized over the underlying life of related debt, can be found in Note 14 in 3M’s 2020 Annual Report on Form 10-K.

As of June 30, 2021, the Company had a balance of $126 million associated with the after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income. This includes a remaining balance of $104 million (after-tax loss) related to the forward starting interest rate swap and treasury rate lock contracts, which will be amortized over the respective lives of the notes. Based on exchange rates as of June 30, 2021, 3M expects to reclassify approximately $30 million over the next 12 months, $24 million over the remainder of 2021, $10 million in 2022 and $92 after 2022 of the after-tax net unrealized cash flow hedging losses to earnings (with the impact offset by earnings/losses from underlying hedged items).

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

Pretax Gain (Loss) Recognized in Other

Pretax Gain (Loss) Reclassified from Accumulated

Comprehensive Income on Derivative

Other Comprehensive Income into Income

Three months ended June 30,

Three months ended June 30,

2021

2020

2021

2020

(Millions)

    

Amount

Amount

Location

    

Amount

Amount

Foreign currency forward/option contracts

$

(26)

$

(15)

Cost of sales

$

(10)

$

33

Interest rate contracts

 

 

Interest expense

 

(2)

 

(2)

Total

$

(26)

$

(15)

$

(12)

$

31

Six months ended June 30,

Six months ended June 30,

2021

2020

2021

2020

(Millions)

    

Amount

Amount

Location

    

Amount

Amount

Foreign currency forward/option contracts

$

40

$

64

Cost of sales

$

(17)

$

51

Interest rate contracts

 

 

(2)

Interest expense

 

(4)

 

(4)

Total

$

40

$

62

$

(21)

$

47

23

Fair Value Hedges:

For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivatives as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.

Fair Value Hedging - Interest Rate Swaps: The Company manages interest expense using a mix of fixed and floating rate debt. To help manage borrowing costs, the Company may enter into interest rate swaps. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The mark-to-market of these fair value hedges is recorded as gains or losses in interest expense and is offset by the gain or loss of the underlying debt instrument, which also is recorded in interest expense. Additional information regarding designated interest rate swaps can be found in Note 14 in 3M’s 2020 Annual Report on Form 10-K.

In the second quarter of 2021, 3M entered into interest rate swaps with a notional amount of $650 million. These swaps converted $500 million and $150 million of 3M’s $1.0 billion and $650 million principal amount of fixed rate notes due 2049 and 2050, respectively, into floating rate debt for the portion of their terms through mid-2028 with an interest rate based on a three-month LIBOR index as a hedge of its exposure to changes in fair value that are attributable to interest rate risk.

Refer to the section below titled Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments for details on the location within the consolidated statements of income for amounts of gains and losses related to derivative instruments designated as fair value hedges and similar information relative to the hedged items for the three and six months ended June 30, 2021 and 2020.

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

Cumulative Amount of Fair Value Hedging

Carrying Value of the

Adjustment Included in the Carrying Value

(Millions)

Hedged Liabilities

of the Hedged Liabilities

Location on the Consolidated Balance Sheet

    

June 30, 2021

    

December 31, 2020

    

June 30, 2021

    

December 31, 2020

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

 

$

359

$

373

 

$

1

$

5

Long-term debt

862

225

10

6

Total

$

1,221

$

598

$

11

$

11

Net Investment Hedges:

The Company may use non-derivative (foreign currency denominated debt) and derivative (foreign exchange forward contracts) instruments to hedge portions of the Company’s investment in foreign subsidiaries and manage foreign exchange risk. For instruments that are designated and qualify as hedges of net investments in foreign operations and that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in cumulative translation within other comprehensive income. The remainder of the change in value of such instruments is recorded in earnings. Recognition in earnings of amounts previously recorded in cumulative translation is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. To the extent foreign currency denominated debt is not designated in or is dedesignated from a net investment hedge relationship, changes in value of that portion of foreign currency denominated debt due to exchange rate changes are recorded in earnings through their maturity date.

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

At June 30, 2021, the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 50 million euros, along with a principal amount of long-term debt instruments designated in net investment hedges totaling 3.5 billion euros. The maturity dates of these derivative and nonderivative instruments designated in net investment hedges range from 2021 to 2031.

24

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 no reclassifications of the effective portion of net investment hedges out of accumulated other comprehensive income into income for the periods presented in the table below.

���

Pretax Gain (Loss) Recognized 

Amount of Gain (Loss) Excluded

as Cumulative Translation within

from Effectiveness Testing

 Other Comprehensive Income

Recognized in Income

Three months ended June 30,

Three months ended June 30,

2021

2020

2021

2020

(Millions)

    

Amount

Amount

Location

Amount

Amount

Foreign currency denominated debt

$

(55)

$

(11)

Cost of sales

$

$

Foreign currency forward contracts

 

(1)

 

4

Cost of sales

 

1

 

Total

$

(56)

$

(7)

$

1

$

Six months ended June 30,

Six months ended June 30,

2021

2020

2021

2020

Six months ended June 30, 2021 (Millions)

    

Amount

Amount

Location

Amount

Amount

Foreign currency denominated debt

$

112

$

4

Cost of sales

$

$

Foreign currency forward contracts

 

1

 

5

Cost of sales

 

 

5

Total

$

113

$

9

$

$

5

Derivatives Not Designated as Hedging Instruments:

Derivatives not designated as hedging instruments include dedesignated foreign currency forward and option contracts that formerly were designated in cash flow hedging relationships (as referenced in the Cash Flow Hedges section above). In addition, 3M enters into foreign currency contracts that are not designated in hedging relationships to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany 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 location in the consolidated statement of income and amounts of gains and losses related to derivative instruments not designated as hedging instruments are as follows:

Gain (Loss) on Derivative Recognized in Income

Three months ended June 30,

Six months ended June 30,

2021

2020

2021

2020

(Millions)

    

Location

    

Amount

Amount

Amount

Amount

Foreign currency forward/option contracts

 

Cost of sales

$

$

(2)

$

$

2

Foreign currency forward contracts

 

Interest expense

 

6

 

(11)

 

28

 

(27)

Total

$

6

$

(13)

$

28

$

(25)

25

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 June 30, 2021

Six months ended June 30, 2021

(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

$

4,719

$

33

$

9,244

$

82

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

$

(10)

$

$

(17)

$

Interest rate contracts:

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

(2)

(4)

Gain or (loss) on fair value hedging relationships:

Interest rate contracts:

Hedged items

$

$

(2)

$

$

Derivatives designated as hedging instruments

2

Location and Amount of Gain (Loss) Recognized in Income

Location and Amount of Gain (Loss) Recognized in Income

Three months ended June 30, 2020

Six months ended June 30, 2020

(Millions)

Cost of sales

Other expense
(income), net

Cost of sales

Other expense
(income), net

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

$

3,805

$

90

$

7,914

$

165

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

$

33

$

$

51

$

Interest rate contracts:

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

(2)

(4)

Gain or (loss) on fair value hedging relationships:

Interest rate contracts:

Hedged items

$

$

2

$

$

Derivatives designated as hedging instruments

(2)

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

26

exchange rates, except for certain interest rate swaps, which are presented using the inception date’s foreign exchange rate. Additional information with respect to the fair value of derivative instruments is included in Note 13.

Gross

    

Assets

    

Liabilities

 

Notional

Fair

Fair

 

June 30, 2021 (Millions)

Amount

Location

Value Amount

Location

Value Amount

 

Derivatives designated as

hedging instruments

Foreign currency forward/option contracts

$

1,715

 

Other current assets

$

28

 

Other current liabilities

$

41

Foreign currency forward/option contracts

 

691

 

Other assets

 

21

 

Other liabilities

 

9

Interest rate contracts

 

403

 

Other current assets

 

3

 

Other current liabilities

 

Interest rate contracts

 

650

 

Other assets

 

4

 

Other liabilities

 

Total derivatives designated as hedging instruments

$

56

$

50

Derivatives not designated as

hedging instruments

Foreign currency forward/option contracts

$

4,242

 

Other current assets

$

19

 

Other current liabilities

$

22

Total derivatives not designated as hedging instruments

$

19

$

22

Total derivative instruments

$

75

$

72

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

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, 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 June 30, 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 downgraded to a predetermined rating). The Company does not anticipate nonperformance by any of these counterparties.

27

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 to Master Netting Agreements

Gross Amount of

Gross Amount of

Derivative Assets

Eligible Offsetting

Presented in the

Recognized

Cash

Consolidated

Derivative 

Collateral

Net Amount of

June 30, 2021 (Millions)

Balance Sheet

Liabilities

Received

Derivative Assets

Derivatives subject to master netting agreements

$

74

$

31

$

$

43

Derivatives not subject to master netting agreements

 

1

 

1

Total

$

75

$

44

December 31, 2020 (Millions)

Derivatives subject to master netting agreements

$

44

$

11

$

$

33

Derivatives not subject to master netting agreements

 

 

Total

$

44

$

33

Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties

Gross Amounts not Offset in the

    

Gross Amount of

    

Consolidated Balance Sheet that are 

    

Derivative

Subject to Master Netting Agreements

Liabilities

Gross Amount of

Presented in the

Eligible Offsetting

Cash

Net Amount of

Consolidated

Recognized

Collateral

Derivative

June 30, 2021 (Millions)

Balance Sheet

Derivative Assets

Pledged

Liabilities

Derivatives subject to master netting agreements

$

72

$

31

$

$

41

Derivatives not subject to master netting agreements

 

 

Total

$

72

$

41

December 31, 2020 (Millions)

Derivatives subject to master netting agreements

$

106

$

11

$

$

95

Derivatives not subject to master netting agreements

 

 

Total

$

106

$

95

Currency Effects

3M estimates that year-on-year foreign currency transaction effects, including hedging impacts, decreased pre-tax income by approximately $48 million and $58 million for the three and six months ended June 30, 2021, respectively. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

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NOTE 13. Fair Value Measurements

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

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

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

Fair Value Measurements

Description

Fair Value at

Using Inputs Considered as

(Millions)

    

June 30, 2021

    

Level 1

    

Level 2

    

Level 3

Assets:

Available-for-sale:

Marketable securities:

Corporate debt securities

$

7

$

$

7

$

Commercial paper

502

502

Certificates of deposit/time deposits

 

13

 

 

13

 

U.S. treasury securities

 

280

 

280

 

 

U.S. municipal securities

 

34

 

 

 

34

Derivative instruments — assets:

Foreign currency forward/option contracts

 

68

 

 

68

 

Interest rate contracts

 

7

 

 

7

 

Liabilities:

Derivative instruments — liabilities:

Foreign currency forward/option contracts

 

72

 

 

72

 

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