3M CO

The section entitled Business Segmentsin Item 1 provides an overview of 3M’s business segments. In addition, disclosures relating to 3M’s business segments are provided in Note 22. As discussed in Note 22, 3M made changes to the composition of segment information reviewed by 3M's chief operating decision maker (CODM) effective in the second quarter of 2024 largely as a result of the separation of Solventum and changes within its business segments effective in the first quarter of 2024. Information provided herein reflects the impact of these changes for all applicable periods presented. 3M manages its continuing operations in three business segments. The reportable segments are Safety and Industrial; Transportation and Electronics; and Consumer.

Safety and Industrial Business (44.6% of consolidated sales):

The preceding table also displays business segment operating income (loss) information adjusted for special items. For Safety and Industrial these adjustments include net costs related to respirator mask/asbestos (Aearo-related and non-Aearo related). During the voluntary Aearo chapter 11 bankruptcy period (which began in July 2022 and ended in June 2023), net costs related to Aearo-respirator mask/asbestos matters were reflected as corporate special items in Corporate and Unallocated while those associated with non-Aearo respirator mask/asbestos matters continued to be reflected as special items in the Safety and Industrial business segment. Prior to the bankruptcy, costs associated with Combat Arms Earplugs matters were reflected in the Safety and Industrial business segment (rather than reflected in Corporate and Unallocated—see Note 22 for additional information). Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details.

Sales in Safety and Industrial were flat in U.S. dollars.

•Sales increased in roofing granules, industrial adhesives and tapes and in electrical markets, were flat in automotive aftermarket and personal safety, and decreased in industrial specialties and abrasives.

•Industrial end market demand was mixed as end user and channel remain cautious, including weaker EMEA industrial and manufacturing environment. Growth primarily driven by strength in bonding solutions for electronic devices, cable accessories, auto body repair and roofing granules driven by replacement demand for residential roofs.

Business segment operating income margins increased year-on-year primarily driven by benefits from growth, productivity and spending discipline partially offset by translation, growth investments and dis-synergies due to the spin of Solventum. Adjusting for special item costs for significant litigation (non-GAAP measure), business segment operating income margins increased year-on-year as displayed above.

Sales in Safety and Industrial were down 5.6 percent in U.S. dollars.

•Sales increased in roofing granules and automotive aftermarket; decreased in personal safety, industrial specialties, industrial adhesives and tapes, abrasives and electrical markets.

•Growth was held back by the disposable respirator sales decline within personal safety along with the exit of Russia (which, together, negatively impacted year-on-year organic growth by 5.2 percentage points); declines within industrial adhesives and tapes due to consumer electronics softness, industrial specialties was down as consumers pulled back on discretionary spending impacting e-commerce shipments (slowing down in packaging and shipping activity).

Business segment operating income margins increased year-on-year primarily due to lower special item costs for significant litigation. 2022 was impacted by a pre-tax charge of approximately $1.2 billion related to steps toward resolving Combat Arms Earplugs litigation. Margins were also impacted by aggressive spending discipline, benefits from restructuring, pricing and productivity actions offset by the lower sales volume, higher restructuring costs, inflation impacts, investments in the business and China-related challenges. Adjusting for special item costs for significant litigation (non-GAAP measure), business segment operating income margins were consistent year-on-year.

Transportation and Electronics Business (34.1% of consolidated sales):

The preceding table also displays business segment sales (and sales change) and operating income (loss) information adjusted for special items. For Transportation and Electronics these adjustments include the sales and estimates of income regarding PFAS manufactured products that 3M plans to exit by the end of 2025. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details.

Sales in Transportation and Electronics were down 1.4 percent in U.S. dollars. Adjusting for special item PFAS manufactured products (non-GAAP measure), sales were up 3.1 percent in U.S. dollars.

•Sales increased in electronics, were flat in commercial branding and transportation, and decreased in advanced materials, and in automotive and aerospace.

•Growth was negatively impacted by headwinds related to PFAS manufactured products and automotive OEM build rates, partially offset by new product launches and spec-wins that drove share gain.

•Divestiture and acquisition impacts relate to lost/gained Transportation and Electronics sales year-on-year from the Aearo Entities. In the third quarter of 2022, 3M deconsolidated the Aearo Entities and, in the second quarter of 2023, reconsolidated those entities. For each of the 12-months post-deconsolidation and post-reconsolidation, impacts are each reflected separately as divestiture and acquisition, respectively.

Business segment operating income margins increased year-on-year driven by benefits from non-PFAS manufacturing growth and productivity, spending discipline, and restructuring partially offset by dis-synergies due to the spin of Solventum. Margins were also impacted by decreasing PFAS manufacturing. Adjusting for special item PFAS manufactured products (non-GAAP measure), business segment operating income margins increased year-on-year as displayed above.

Sales in Transportation and Electronics were down 4.5 percent in U.S. dollars. Adjusting for special item PFAS manufactured products (non-GAAP measure), sales were down 4.5 percent in U.S. dollars.

•Sales increased in automotive and aerospace, were flat in commercial branding and transportation and decreased in electronics and advanced materials.

•Growth continued to be held back by consumer electronics end-market weakness.

•Divestiture and acquisition impacts relate to lost/gained Transportation and Electronics sales year-on-year from the Aearo Entities. In the third quarter of 2022, 3M deconsolidated the Aearo Entities and, in the second quarter of 2023, reconsolidated those entities. For each of the 12-months post-deconsolidation and post-reconsolidation, impacts are each reflected separately as divestiture and acquisition, respectively.

Business segment operating income margins increased year-on-year due to lower operating losses on PFAS manufactured products. In 2022, PFAS manufacturing products results included an $0.8 billion asset impairment charge. Margins were also impacted by lower sales volumes, inflation impacts, investments in the business, higher restructuring costs, manufacturing and supply chain headwinds and China-related challenges partially offset by benefits from aggressive spending discipline, pricing and productivity actions. Adjusting for special item PFAS manufacturing exit costs (non-GAAP measure), business segment operating income margins decreased year-on-year.

Consumer Business (20.1% of consolidated sales):

Sales in Consumer were down 1.9 percent in U.S. dollars.

•Sales increased in home improvement, and decreased in home and auto care, packaging and expression and consumer safety and well-being.

•Growth was negatively impacted by softness in consumer discretionary spending along with product portfolio and geographic prioritization.

Business segment operating income margins increased year-on-year driven by benefits from productivity actions, portfolio initiatives, and spending discipline partially offset by organic decline and dis-synergies due to the spin of Solventum.

Sales in Consumer were down 5.0 percent in U.S. dollars.

•Sales decreased in consumer safety and well-being, packaging and expression, home improvement and in home and auto care.

•Growth was negatively impacted as consumers have shifted their spending patterns to more non-discretionary items.

Business segment operating income margins decreased year-on-year from lower sales volumes, inflation impacts, investments, manufacturing and supply chain headwinds, and higher restructuring costs partially offset by benefits from aggressive spending discipline, pricing, productivity actions and restructuring.

Corporate and Unallocated and Other: Outside of 3M's reportable operating segments, 3M has Corporate and Unallocated and Other which are not reportable business segments as they do not meet the segment reporting criteria. Because Corporate and Unallocated and Other include a variety of miscellaneous items, they are subject to fluctuation on a quarterly and annual basis. Corporate and Unallocated and Other are presented separately in the preceding business segments table and in Note 22.

•Corporate and Unallocated operating income (loss) includes “corporate special items” and “other corporate expense-net”.

◦Corporate special items include net costs for significant litigation impacting operating income (loss) associated with PFAS-related other environmental and Combat Arms Earplugs matters. In addition, during the voluntary chapter 11 bankruptcy period (which began in July 2022 and ended in June 2023), costs associated with the Aearo portion of respirator mask/asbestos matters were also included in corporate special items. Prior to the bankruptcy, costs associated with Combat Arms Earplugs matters were not included in the Corporate net costs for significant litigation special item, instead being reflected in the Safety and Industrial business segment. Corporate special items for the periods presented also include divestiture costs, gain on business divestitures, divestiture-related restructuring actions and Russia exit charges/benefits. Divestiture costs include costs that were not eligible to be part of discontinued operations related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture.

▪Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of special items for additional information on the components of corporate special items. Corporate special item net costs decreased year-over-year in 2024, primarily due to lower net costs for significant litigation associated with Corporate and Unallocated. Corporate special item net costs increased year-over-year in 2023, primarily due to increased net costs for significant litigation as a result of pre-tax charges of $10.3 billion and $4.2 billion in the second and third quarters of 2023 related to the PWS Settlement and the CAE Settlement, respectively (both discussed in Note 19), and lower gains on business divestitures.

◦Other corporate expense-net includes certain enterprise and governance activities resulting in unallocated corporate costs and other activity and net costs that 3M may choose not to allocate directly to its business segments. Other corporate expense-net also includes costs previously allocated to Solventum prior to the Separation that were not eligible to be part of discontinued operations, commercial activity with Solventum post-Separation, and certain operations of the former Health Care business segment retained by 3M.

▪Other corporate operating expenses, net, decreased year-over-year in 2024 primarily due to the extent of non-discontinued operations-eligible former Solventum-allocated costs included in Corporate and Unallocated prior to Solventum's April 2024 Separation. Other corporate operating expenses, net, increased year-over-year in 2023 primarily due to higher restructuring charges (see Note 6).

•Other:

◦This category principally reflects activity associated with:

▪Operations of businesses of the former Health Care segment divested prior to the Separation and therefore not reflected as discontinued operations within 3M's financial statements, along with limited-duration supply agreements with those previous divestitures.

▪Transition arrangement agreements (e.g. fees charged by 3M, net of underlying costs) related to divested businesses, including those related to the Separation, as well as other applicable divestitures.

◦Operating income categorized as "Other" decreased year-over-year in 2024 primarily due to the extent of transition arrangement income from divested businesses (and associated costs) largely related to Solventum, which separated in April 2024. Operating income categorized as "Other" decreased year-over-year in 2023 as a result of divestiture of the Food Safety Division and dental local anesthetic businesses (both formerly part of the "Other" category) and the extent of transition arrangement income from divested businesses other than Solventum.