Solventum Corp

The strength and stability of Solventum’s operating model and strong free cash flow capability, provides financial flexibility and enables the Company to invest through business cycles. Historically, Solventum has generated positive operating cash flows and a majority of such cash flows were transferred to 3M Company as part of 3M’s cash pooling arrangements, the effect of which is presented as net parent investment in our unaudited condensed combined financial statements.

Upon completion of the Spin-Off, we have ceased participation in 3M's cash pooling arrangement and our cash and cash equivalents are held and used solely for our own operations. Our capital structure, long-term commitments and sources of liquidity will change significantly from historical practices. For additional detail regarding changes to our capital structure, see section entitled “Description of Material Indebtedness” below.

Subsequent to the Spin-Off and under the terms of the Separation and Distribution Agreement, the Company anticipates making approximately $400 million of cash payments to complete the separation from 3M. The Company expects that this payment activity will be substantially complete by June 30, 2024.

Debt and Credit Facilities

On February 16, 2024, the Company entered into a five-year $2.0 billion unsecured revolving credit facility expiring in 2029, an 18-month senior unsecured term loan facility of $500 million and a three-year senior unsecured term loan facility of $1.0 billion (together the “Facilities”). In March 2024, the Company withdrew $1.48 billion under the Facilities. The funds from the facilities were transferred to 3M as partial consideration for the Spin-Off.

On February 27, 2024, Solventum issued $6.9 billion of senior notes in preparation for the payment of partial consideration to 3M Company in connection with the Spin-Off. Refer to Note 7 "Long-Term Debt and Short-Term Borrowings" in the unaudited condensed combined financial statements for more information on this issuance and transfer to 3M in connection with the Spin-Off.

Commercial Paper

On March 4, 2024, the Company entered into a commercial paper program that allows Solventum up to $2.0 billion aggregate principal amount of short-term notes to finance short-term liabilities. Any such issuance will mature within 364 days from date of issue. There was no commercial paper outstanding as of March 31, 2024.

Cash, cash equivalents and marketable securities

At March 31, 2024, Solventum had $996 million of cash and cash equivalents, of which approximately $423 million was held by the Company’s foreign subsidiaries and approximately $573 million was held in the United States. These balances are invested in bank instruments and other high-quality fixed income securities. At December 31, 2023, Solventum had $194 million of cash and cash equivalents, of which approximately $150 million was held by the Company’s foreign subsidiaries and $44 million was held in the United States. The increase from December 31, 2023 primarily resulted from cash retained after the direct and indirect cash payments to 3M after receiving proceeds from the offering of the notes, as further described in Note 7.

Cash Flows

Cash flows from operating, investing and financing activities are provided in the tables that follow. Individual amounts in the unaudited condensed combined statements of cash flows exclude the effect of exchange rate impacts on cash and cash equivalents, which are presented separately in the cash flows. Thus, the amounts presented in the following operating, investing and financing activities tables reflect changes in balances from period to period adjusted for these effects.

Cash Flows from Operating Activities:

In the first three months of 2024, cash flows provided by operating activities decreased compared to the first three months of 2023 primarily due to higher inventory and lower net income, partially offset by increases in accounts payable and decreases in accounts receivable. Both accounts payable and accounts receivable are impacted by the transition of customer and vendor management activities from 3M to the Company. Inventories were impacted by both timing and transition activities related to certain manufacturing and distribution operations from 3M.

Cash Flows from Investing Activities:

Purchases of property, plant and equipment increased in the first three months of 2024 as compared to the first three months of 2023 as the Company continues to invest in growth, productivity and sustainability.

Solventum invests in renewal and maintenance programs, which pertain to cost reduction, cycle time, maintaining and renewing current capacity, eliminating pollution, and compliance. Costs related to maintenance, ordinary repairs, and certain other items are expensed. The Company also invests in growth, which adds to capacity, driven by new products, both through expansion of current facilities and new facilities. Finally, the Company also invests in other initiatives, such as information technology, laboratory facilities, and a continued focus on investments in sustainability.

Cash Flows from Financing Activities:

Cash flows from financing activities increased in the first three months of 2024 compared to the same period in 2023 due to proceeds of long-term debt in the quarter, partially offset by higher net transfers to 3M.

Proceeds from debt of $8.3 billion were related to the first quarter issuance of $6.9 billion in senior notes and $1.5 billion in senior term loan credit facilities. The proceeds from these financing transactions were transferred to 3M in connection with transaction, other than the amounts retained in order to achieve the $600 million retained cash target. Solventum’s primary short-term liquidity needs are met through cash on hand and commercial paper issuances. Refer to Note 7 for more detail regarding debt.

Material Cash Requirement from Known Contractual and Other Obligations:

Solventum’s material cash requirements from known contractual and other obligations primarily relate to the following, for which information on both a short-term and long-term basis is provided in the indicated notes to the unaudited condensed combined financial statements and the audited combined financial statements included in the Information Statement:

•Tax obligations—Refer to Note 9 to the audited combined financial statements and Note 6 to the unaudited condensed combined financial statements.

•Debt—Refer to Note 7 to the unaudited condensed combined financial statements.

•Commitments and contingencies—Refer to Note 11 to the audited combined financial statements and Note 9 to the unaudited condensed combined financial statements.

•Operating leases—Refer to Note 12 to the audited combined financial statements.

•Separation and Distribution Agreement ("SDA")— Subsequent to the Spin-Off and under the terms of the SDA, the Company anticipates making approximately $400 million of cash payments to complete the Spin-Off. The Company expects that payment activity under the SDA will be substantially complete by June 30, 2024. Upon completing all required cash transfers under the SDA we expect to retain approximately $600 million of the Company's reported cash balance as of March 31, 2024.

Solventum purchases the majority of its materials and services as needed, with no unconditional commitments. In limited circumstances, in the normal course of business, the Company enters into unconditional purchase obligations with various vendors that may take the form of, for example, take or pay contracts in which the Company guarantees payment to ensure availability of certain materials or services or to ensure ongoing efforts on capital projects. The Company expects to receive underlying materials or services for these purchase obligations. To the extent the limited amount of these purchase obligations fluctuates, it largely trends with normal-course changes in regular operating activities. Additionally, contractual capital commitments represent a small part of the Company’s expected capital spending.