3M CO

3M is a diversified global manufacturer, technology innovator and marketer of a wide variety of products and services. Effective in the first quarter of 2024, 3M made certain changes within its business segments. The changes are described in Note 17. While they impacted the composition and names of certain divisions within 3M's business segments, they did not change the overall composition of segments or the measure of segment operating performance used by 3M’s chief operating decision maker (CODM). Information provided herein reflects the impact of these changes for all periods presented.

3M manages its operations in four operating business segments: Safety and Industrial; Transportation and Electronics; Health Care; and Consumer. As discussed in Note 3, on April 1, 2024, 3M completed the previously announced separation of its Health Care business (the Separation) through a pro rata distribution of 80.1% of the outstanding shares of Solventum Corporation (Solventum) to 3M stockholders. As a result of the Separation, Solventum became an independent public company and 3M will no longer consolidate Solventum into 3M’s financial results. In connection with the Separation, the historical net income of Solventum and applicable assets and liabilities included in the Separation will be reported in 3M's consolidated financial statements as discontinued operations beginning in the second quarter of 2024.

From a geographic perspective, any references to EMEA refer to Europe, Middle East and Africa on a combined basis. References are made to organic sales change (which include both organic volume impacts and selling price impacts), which is defined as the change in net sales, absent the separate impacts on sales from foreign currency translation and acquisitions, net of divestitures. Acquisition and divestiture sales change impacts, if any, are measured separately for the first twelve months post-transaction. 3M believes this information is useful to investors and management in understanding ongoing operations and in analysis of ongoing operating trends.

3M is impacted by certain special items such as costs for significant litigation and the sales and income associated with manufactured PFAS products. See Certain amounts adjusted for special items - (non-GAAP measures) section below for additional discussion of these and other special items, including references therein to where further information is provided.

Additional information regarding certain items impacting pre-2024 periods that may also be relevant in 2024 can be found in the Overview section of Part II, Item 7 as well as in further sections of 3M’s 2023 Annual Report on Form 10-K.

Earnings (loss) per share attributable to 3M common shareholders – diluted: The following table provides the increases (decreases) in diluted earnings (loss) per share.

The Company refers to various "adjusted" 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.

A discussion related to the components of year-on-year changes in earnings (loss) per diluted share follows:

Total organic growth/productivity and other:

•For the first quarter of 2024, the following components impacted earnings per diluted share year-on-year:

◦Timing of stock-based compensation grants to be incurred in the second quarter of 2024 versus the first quarter of 2023 due to Solventum spin (further discussed in "Results of Operations" section) resulted in a net year-on-year benefit of $0.15 per share.

◦Nonrecurring items including gain on property sales resulted in a net year-on-year increase of $0.08 per share

◦Remaining organic growth/productivity and other impacts resulted in a net year-on-year increase of $0.42 per share which was impacted by the following:

▪Benefits from productivity, sourcing actions, restructuring and spending discipline

▪Investments in growth, productivity, and sustainability

Restructuring and related charges:

•3M recorded restructuring pre-tax charges of $104 million in the first quarter of 2024 compared to $52 million in the same period last year (refer to Note 5 for additional discussion). In addition, 3M recorded adjustments to previous accruals and certain related accelerated depreciation.

Foreign exchange impacts:

•Foreign currency impacts (net of hedging) decreased operating income by approximately $63 million (or decreased pre-tax income by approximately $65 million) year-on-year for 2024. These estimates include: (a) the effects of year-on-year changes in exchange rates on translating current period functional currency profits into U.S. dollars and on current period non-functional currency denominated purchases or transfers of goods between 3M operations, and (b) year-on-year changes in transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

Acquisitions/divestitures:

•Impacts primarily relate to reconsolidation of Aearo entities.

◦In the third quarter of 2022, 3M deconsolidated the Aearo Entities and, in the second quarter of 2023, reconsolidated those entities (discussed in Note 16). For each of the 12-months post-deconsolidation and post-reconsolidation, impacts are each reflected separately as divestiture and acquisition, respectively.

Other expense (income), net:

•Interest expense (net of interest income) included in other expense (income), net as presented above decreased for the first quarter of 2024 compared to the same period year-on-year.

•Lower income related to non-service cost components of pension and postretirement expense increased expense year-on-year for the first quarter of 2024.

Income tax rate:

•Certain items above reflect specific income tax rates associated therewith. Overall, the effective tax rate for the first quarter of 2024 was 24.7 percent, an increase from 17.7 percent in the prior year. The primary factors that increased the Company's effective tax rate for first quarter 2024 were nonrecurring deferred tax benefits in 2023 as compared to 2024's decreased tax benefits related to significant litigation and stock-based compensation, as well as tax costs of entity structuring associated with the separation of Solventum.

•On an adjusted basis (as discussed below), the effective tax rate for the first quarter of 2024 was 20.5 percent, an increase of 2.8 percentage points compared to the same period year-on-year. The primary factors were nonrecurring deferred tax benefits in 2023 and decreased tax benefits from stock-based compensation in 2024.

Shares of common stock outstanding:

•Higher shares outstanding decreased earnings per share year-on-year for the first quarter of 2024.

Certain amounts adjusted for special items - (non-GAAP measures): In addition to reporting financial results in accordance with U.S. GAAP, 3M also provides certain non-GAAP measures. These measures are not in accordance with, nor are they a substitute for GAAP measures, and may not be comparable to similarly titled measures used by other companies.

Certain measures adjust for the impacts of special items. Special items for the periods presented include the items described below. Because 3M provides certain information with respect to business segments, it is noteworthy that special items impacting operating income (loss) are reflected in Corporate and Unallocated, except as described below with respect to net costs for significant litigation and manufactured PFAS products items.

This document contains measures for which 3M provides the reported GAAP measure and a non-GAAP measure adjusted for special items. These measures and reasons 3M believes they are useful to investors (and, as applicable, used by 3M) include:

Special items for the periods presented include:

Net costs for significant litigation:

•These relate to 3M's respirator mask/asbestos (which include Aearo and non-Aearo items), PFAS-related other environmental, and Combat Arms Earplugs matters (as discussed in Note 16). Net costs include the impacts of changes in accrued liabilities (including interest imputation on applicable settlement obligations), external legal fees, and insurance recoveries, along with the associated tax impacts. 3M does not consider the elements of the net costs associated with these matters to be normal, operating expenses related to the Company’s ongoing operations, revenue generating activities, business strategy, industry, and regulatory environment. Net costs related to respirator mask/asbestos are reflected as special items in the Safety and Industrial business segment while those impacting operating income (loss) associated with PFAS-related other environmental and Combat Arms Earplugs matters are reflected as corporate special items in Corporate and Unallocated. In addition, during the voluntary chapter 11 bankruptcy period (which began in July 2022 and ended in June 2023—see Note 16), costs associated with the Aearo portion of respirator mask/asbestos matters were reflected in corporate special items in Corporate and Unallocated. Prior to the bankruptcy, costs associated with Combat Arms Earplugs matters were reflected as part of special items in the Safety and Industrial business segment.

Divestiture costs:

•These include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture, including net tax costs of entity structuring associated with the separation of Solventum. These also include interest expense on debt issued by Solventum for the period outstanding prior to the April 1, 2024 completion of the separation of Solventum from 3M.

Manufactured PFAS products:

•These amounts relate to sales and estimates of income (loss) regarding manufactured PFAS products that 3M plans to exit by the end of 2025 included within the Transportation and Electronics business segment. Along with other costs in arriving at this associated income, these amounts include estimates of costs of sales of $230 million and $276 million for the three months ended March 31, 2024 and 2023, respectively. Estimated income does not contemplate impacts on non-operating items such as net interest income/expense and the non-service cost components portion of defined benefit plan net periodic benefit costs.

Sales and operating income (loss) by business segment: The following tables contain sales and operating income (loss) results by business segment for the three months ended March 31, 2024 and 2023. Refer to the section entitled Performance by Business Segment later in MD&A for additional discussion concerning 2024 versus 2023 results, including Corporate and Unallocated. Refer to Note 17 for additional information on business segments.

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of special items on sales (and sales change) and operating income (loss) by business segment.

Sales by geographic area: Percent change information compares the three months ended March 31, 2024 with the same prior year period, unless otherwise indicated. Additional discussion of business segment results is provided in the Performance by Business Segment section.

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

•For the first quarter of 2024, in the Americas geographic area, U.S. total sales were flat which included decreased organic sales of 1 percent. Total sales in Mexico increased 10 percent which included increased organic sales of 1 percent. In Canada, total sales decreased 3 percent which included decreased organic sales of 4 percent. In Brazil, total sales were flat which included decreased organic sales of 5 percent. In the Asia Pacific geographic area, China total sales increased 5 percent which included increased organic sales of 8 percent. In Japan, total sales decreased 14 percent which included decreased organic sales of 4 percent.

Financial condition: Refer to the section entitled Financial Condition and Liquidity later in MD&A for a discussion of items impacting cash flows.

In November 2018, 3M’s Board of Directors replaced the Company’s February 2016 repurchase program with a new repurchase program. This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date. In the first three months of 2024, the Company purchased $21 million of its own stock, compared to $29 million of stock purchases in the first three months of 2023. As of March 31, 2024, approximately $4.2 billion remained available under the authorization. In February 2024, 3M’s Board of Directors declared a first-quarter 2024 dividend of $1.51 per share, an increase of 1 percent.