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What changed in 3M's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of 3M's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+320 added−308 removedSource: 10-K (2024-02-07) vs 10-K (2023-02-08)

Top changes in 3M's 2023 10-K

320 paragraphs added · 308 removed · 234 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

30 edited+7 added−6 removed14 unchanged
Biggest changeIn particular, these include, among others, statements relating to: • worldwide economic, political, regulatory, international trade, geopolitical, capital markets and other external conditions, such as interest rates, monetary policy, financial conditions of our suppliers and customers, trade restrictions such as tariffs and retaliatory counter measures, inflation, recession, military conflicts, and natural and other disasters or climate change affecting the operations of the Company or our suppliers and customers, • risks related to unexpected events such as the public health crises associated with the coronavirus (COVID-19) global pandemic, • liabilities and the outcome of contingencies related to certain fluorochemicals known as "PFAS," as well as matters related to the Company's plans to discontinue the use of PFAS, • the Company’s strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position, • competitive conditions and customer preferences, • foreign currency exchange rates and fluctuations in those rates, • new business opportunities, product and service development, and future performance or results of current or anticipated products and services, • fluctuations in the costs and availability of purchased components, compounds, raw materials and energy, • information technology systems including implementation of an enterprise resource planning (ERP) system, • security breaches and other disruptions to information technology infrastructure, • the scope, nature or impact of acquisition, strategic alliance and divestiture activities, • operational execution, including inability to generate productivity improvements as estimated, • future levels of indebtedness, common stock repurchases and capital spending, • future access to credit markets and the cost of credit, • pension and postretirement obligation assumptions and future contributions, • asset impairments, • tax liabilities and effects of changes in tax rates, laws or regulations, • the proposed spin-off of the Company's Health Care business to establish two separate public companies, • the voluntary chapter 11 proceedings initiated by the Company's Aearo Entities, and • laws and regulations, as well as legal compliance risks (including third-party risks), and legal and regulatory proceedings related to the same, including with regards to environmental matters and product liability, in the United States and other countries in which we operate.
Biggest changeIn particular, these include, among others, statements relating to: • worldwide economic, political, regulatory, international trade, geopolitical, capital markets and other external conditions, such as interest rates, monetary policy, financial conditions of our suppliers and customers, trade restrictions such as tariffs and retaliatory counter measures, inflation, recession, military conflicts, and natural and other disasters or climate change affecting the operations of the Company or our suppliers and customers, • liabilities and the outcome of contingencies related to certain fluorochemicals known as "PFAS," as well as matters related to the Company's plans to discontinue the use of PFAS, • risks related to the proposed class-action settlement (“PWS Settlement”) to resolve claims by public water systems in the United States regarding PFAS, including whether court approval of the PWS Settlement will be obtained, whether the number of plaintiffs that opt out of the PWS Settlement will exceed current expectations or will exceed the level that would permit 3M to terminate the PWS Settlement (and whether 3M will elect to terminate the PWS Settlement if this occurs), whether the PWS Settlement is appealed, the timing and amount of payments made under the PWS Settlement, and the impact of the PWS Settlement on other PFAS-related matters, • the Company’s strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position, • competitive conditions and customer preferences, • foreign currency exchange rates and fluctuations in those rates, • new business opportunities, product and service development, and future performance or results of current or anticipated products and services, • fluctuations in the costs and availability of purchased components, compounds, raw materials and energy, • information technology systems including implementation of an enterprise resource planning (ERP) system, • security breaches and other disruptions to information technology infrastructure, • the scope, nature or impact of acquisition, strategic alliance and divestiture activities, • operational execution, including inability to generate productivity improvements and impact of organizational restructuring activities, • future levels of indebtedness, common stock repurchases and capital spending, • future access to credit markets and the cost of credit, • pension and postretirement obligation assumptions and future contributions, • asset impairments, • tax liabilities and effects of changes in tax rates, laws or regulations, • the proposed spin-off of the Company's Health Care business to establish two separate public companies, • matters relating to Combat Arms Earplugs (“CAE”), including those related to the August 2023 settlement that is intended to resolve, to the fullest extent possible, all litigation and alleged claims involving the CAE sold or manufactured by the Company's subsidiary Aearo Technologies and certain of its affiliates (“Aearo Entities”) and/or 3M (“CAE Settlement”), including, but not limited to, whether the anticipated full participation by plaintiffs in the CAE Settlement will be achieved, whether the number of plaintiffs who participate in the CAE Settlement will meet the full participation expectations or will fall below the level that would permit 3M to terminate the CAE Settlement (and whether 3M will elect to terminate the CAE Settlement if this occurs), whether there will be a significant number of future claims by plaintiffs that decline to participate in the CAE Settlement, whether the CAE Settlement is appealed or challenged, the filing and outcome of additional litigation, if any, relating to the products that are the subject of the CAE Settlement, or changes in laws or regulations related to the CAE products or CAE settlement, and • laws and regulations, as well as legal compliance risks (including third-party risks), and legal and regulatory proceedings related to the same, including with regards to environmental matters and product liability, in the United States and other countries in which we operate.
The reportable segments are Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. 3M’s four business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources.
The reportable segments are Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. 3M’s business segments bring together common or related 3M technologies, enhancing the development of innovative products and services and providing for efficient sharing of business resources.
The Company files annual reports, quarterly reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934 (Exchange Act). 3M also makes available free of charge through its website (http://investors.3M.com) the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.
The Company files annual reports, quarterly reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934 (Exchange Act). 3M also makes available free of charge through its website (https://investors.3M.com) the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.
Words such as “plan,” “expect,” “aim,” “believe,” “project,” “target,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could,” “forecast” and other words and terms of similar meaning, typically identify such forward-looking statements.
Words such as “plan,” “expect,” “aim,” “believe,” “project,” “target,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could,” "would," “forecast” and other words and terms of similar meaning, typically identify such forward-looking statements.
Refer to segment descriptions summarized below (Financial information and other disclosures relating to 3M’s business segments and operations in major geographic areas are provided in the Notes to Consolidated Financial Statements): 4 T able of Contents Business Segment Safety and Industrial Transportation and Electronics Health Care Consumer Underlying divisions/businesses Refer to Note 2 for disaggregated revenue information • Abrasives • Automotive aftermarket • Closure and masking systems • Electrical markets • Industrial adhesives and tapes • Personal safety • Roofing granules • Advanced materials • Automotive and aerospace • Commercial solutions • Display materials and systems • Electronics materials solutions • Transportation safety • Health information systems • Medical solutions • Oral care • Separation and purification sciences • Food safety (divested in 2022) • Consumer health and safety • Home care • Home improvement • Stationery and office Representative revenue-generating activities, products or services • Industrial abrasives and finishing for metalworking applications • Autobody repair solutions • Closure systems for personal hygiene products, masking, and packaging materials • Electrical products and materials for construction and maintenance, power distribution and electrical original equipment manufacturers (OEMs) • Structural adhesives and tapes • Respiratory, hearing, eye and fall protection solutions • Natural and color-coated mineral granules for shingles • Advanced ceramic solutions • Attachment tapes, films, sound and temperature management for transportation vehicles • Premium large format graphic films for advertising and fleet signage • Light management films and electronics assembly solutions • Packaging and interconnection solutions • Reflective signage for highway, and vehicle safety • Health care procedure coding and reimbursement software • Skin, wound care, and infection prevention products and solutions • Dentistry and orthodontia solutions • Filtration and purification systems • Consumer bandages, braces, supports and consumer respirators • Cleaning products for the home • Retail abrasives, paint accessories, car care DIY products, picture hanging and consumer air quality solutions • Stationery products Some seasonality impacts this business segment related to back-to-school, generally in the third quarter of each year Example brands/offerings • 3M™ Cubitron™ II abrasives • Scotch-Brite™ Abrasives • Scotch & Temflex Vinyl Tapes, Scotchkote Coatings, Dynatel locators, Scotchcast resins • Collision repair and paint spray products • Reclosable fasteners; tapes and label materials for durable goods • Electrical infrastructure products; medium voltage cable accessories and insulation tapes • 3M ™ VHB™ Bonding tapes; Scotch® masking, packaging and filament tapes • Disposable respirators and fall protection products • Scotchgard™ Protector for shingles • 3M™ Nextel™ Ceramic fibers and textiles • Thinsulate™ Acoustic Insulation products and automotive components • 3M™ Novec™ Engineered Fluids • 3M™ Scotchlite™ graphic films, 3M™ Scotchcal™ and 3M™ Controltac™ Commercial graphics • Electronic display enhancement films and optically clear adhesives • Electronic interconnect products • 3M™ Diamond Grade™ DG3 reflective sheeting for transportation safety • 3M™ 360 Encompass™ medical coding systems • 3M ™ Tegaderm™ wound dressings, V.A.C.® Therapy Systems and disposable respirators in the health care channel • 3M™ Filtek™ and 3M™ RelyX™ dental filing materials and cements; 3M™ Clarity™ aligners • Biopharma and other filtration systems, bags, capsules and components • ACE™ , FUTURO™ and Nexcare™ personal health care products • Scotch-Brite™ cleaning supplies, sponges, brushes, and scouring pads; Scotchgard™ products • Scotch® tapes and other products, Filtrete™ filters and Command™ adhesive products • Post-it® products Representative market trends or opportunities • Personal safety • Connected bodyshop • Grid modernization • Robotics and automation • Automotive/mobility • Electronic materials • Semiconductor • Graphic and architectural films • Wound care • Healthcare IT • Biopharma filtration • Home improvement • Consumer safety & well-being • Package protection & shipping • Appearance auto care Distribution 3M products are sold through numerous distribution channels, including directly to users and through numerous e-commerce and traditional wholesalers, retailers, jobbers, distributors and dealers in a wide variety of trades in many countries around the world.
Refer to segment descriptions summarized below (Financial information and other disclosures relating to 3M’s business segments and operations in major geographic areas are provided in the Notes to Consolidated Financial Statements): Business Segment Safety and Industrial Transportation and Electronics Health Care Consumer Underlying divisions/businesses Refer to Note 2 for disaggregated revenue information • Abrasives • Automotive aftermarket • Closure and masking systems • Electrical markets • Industrial adhesives and tapes • Personal safety • Roofing granules • Advanced materials • Automotive and aerospace • Commercial solutions • Display materials and systems • Electronics materials solutions • Transportation safety • Health information systems • Medical solutions • Oral care • Separation and purification sciences • Food safety (divested in 2022) • Construction and home improvement markets • Home, health and auto care • Stationery and office Representative revenue-generating activities, products or services • Industrial abrasives and finishing for metalworking applications • Autobody repair solutions • Closure systems for personal hygiene products, masking, and packaging materials • Electrical products and materials for construction and maintenance, power distribution and electrical original equipment manufacturers (OEMs) • Structural adhesives and tapes • Respiratory, hearing, eye and fall protection solutions • Natural and color-coated mineral granules for shingles • Advanced ceramic solutions • Attachment/bonding, films, sound and temperature management for transportation vehicles • Premium large format graphic films for advertising and fleet signage • Light management films and electronics assembly solutions • Chip packaging and interconnection solutions • Semiconductor production materials • Solutions for data centers • Reflective signage for highway, and vehicle safety • Health care procedure coding and reimbursement software • Skin, wound care, and infection prevention products and solutions • Dentistry and orthodontia solutions • Filtration and purification systems • Consumer bandages, braces, supports and consumer respirators • Cleaning products for the home • Retail abrasives, paint accessories, car care DIY products, picture hanging and consumer air quality solutions • Stationery products Some seasonality impacts this business segment related to back-to-school, generally in the third quarter of each year Example brands/offerings • 3M™ Cubitron™ II abrasives • Scotch-Brite™ Abrasives • Scotch & Temflex Vinyl Tapes, Scotchkote Coatings, Dynatel locators, Scotchcast resins • Collision repair and paint spray products • Reclosable fasteners; tapes and label materials for durable goods • Electrical infrastructure products; medium voltage cable accessories and insulation tapes • 3M ™ VHB™ Bonding tapes; Scotch® masking, packaging and filament tapes • Disposable respirators and fall protection products • Scotchgard™ Protector for shingles • 3M™ Nextel™ Ceramic fibers and textiles • Thinsulate™ Acoustic Insulation products and automotive components • 3M™ Novec™ Engineered Fluids • 3M™ Scotchlite™ graphic films, 3M™ Scotchcal™ and 3M™ Controltac™ Commercial graphics • Electronic display enhancement films and optically clear adhesives • Electronic interconnect products • 3M™ Diamond Grade™ DG3 reflective sheeting for transportation safety • 3M™ 360 Encompass™ medical coding systems • 3M ™ Tegaderm™ wound dressings, V.A.C.® Therapy Systems and disposable respirators in the health care channel • 3M™ Filtek™ and 3M™ RelyX™ dental filing materials and cements; 3M™ Clarity™ aligners • Biopharma and other filtration systems, bags, capsules and components • ACE™ , FUTURO™ and Nexcare™ personal health care products • Scotch-Brite™ cleaning supplies, sponges, brushes, and scouring pads; Scotchgard™ products • Scotch® tapes and other products, Filtrete™ filters and Command™ adhesive products • Post-it® products Representative market trends or opportunities • Personal safety • Connected bodyshop • Grid modernization • Robotics and automation • Automotive electrification • Data center solutions • Extended reality • Semiconductor • Graphic and architectural films • Wound care • Healthcare IT • Biopharma filtration • Home improvement • Consumer safety & well-being • Package protection & shipping • Appearance auto care Distribution : 3M products are sold through numerous distribution channels, including directly to users and through numerous e-commerce and traditional wholesalers, retailers, jobbers, distributors and dealers in a wide variety of trades in many countries around the world.
The Company places consistent emphasis on environmental responsibility. 3M has made, and plans to continue making, necessary expenditures for compliance with applicable laws and regulations. 3M is also involved in remediation actions relating to environmental matters from past operations at certain sites (refer to “Environmental Matters and Litigation” in Note 16, Commitments and Contingencies).
The Company places consistent emphasis on environmental responsibility. 3M has made, and plans to continue making, necessary expenditures for compliance with applicable laws and regulations. 3M is also involved in remediation actions relating to environmental matters from past operations at certain sites (refer to “Environmental Matters and Litigation” in Note 18, Commitments and Contingencies).
Although an estimate of certain nearer-term capital expenditures is provided above, 3M cannot predict with certainty whether future costs of compliance with government regulations (including environmental regulations) will have a material effect on its capital expenditures, earnings or competitive position. 7 T able of Contents Information about our Executive Officers Following is a list of the executive officers of 3M, and their age, present position, the year elected to their present position and other positions they have held during the past five years.
Although an estimate of certain nearer-term capital expenditures is provided above, 3M cannot predict with certainty whether future costs of compliance with government regulations (including environmental regulations) will have a material effect on its capital expenditures, earnings or competitive position. 7 Table of Contents Information about our Executive Officers : Following is a list of the executive officers of 3M, and their age, present position, the year elected to their present position and other positions they have held during the past five years.
In this document, for any references to Note 1 through Note 19, refer to the Notes to Consolidated Financial Statements in Item 8. Available Information The Securities and Exchange Commission (SEC) maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC.
In this document, for any references to Note 1 through Note 21, refer to the Notes to Consolidated Financial Statements in Item 8. Available Information : The Securities and Exchange Commission (SEC) maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC.
Important information as to these factors can be found in this document, including, among others, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings of “Overview,” “Financial Condition and Liquidity” and annually in “Critical Accounting Estimates.” Discussion of these factors is incorporated by reference from Part I, Item 1A, “Risk Factors,” of this document, and should be considered an integral part of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For additional information concerning factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 10-K, 10-Q and 8-K filed with the SEC from time to time. 9 T able of Contents
Important information as to these factors can be found in this document, including, among others, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the headings of “Overview,” “Financial Condition and Liquidity” and annually in “Critical Accounting Estimates.” Discussion of these factors is incorporated by reference from Part I, Item 1A, “Risk Factors,” of this document, and should be considered an integral part of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For additional information concerning factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 10-K, 10-Q and 8-K filed with the SEC from time to time.
The Company may also make forward-looking statements in other reports filed with the Securities and Exchange Commission, in materials delivered to shareholders and in press releases. In addition, the Company’s representatives may from time to time make oral forward-looking statements. Forward-looking statements relate to future events and typically address the Company’s expected future business and financial performance.
The Company may also make forward-looking statements in other reports filed with the United States Securities and Exchange Commission ("SEC"), in materials delivered to shareholders and in press releases. In addition, the Company’s representatives may from time to time make oral forward-looking statements. Forward-looking statements relate to future events and typically address the Company’s expected future business and financial performance.
The Company continuously evaluates opportunities to raise safety and health standards, visiting sites to identify and manage environmental health and safety risks; evaluating compliance with regulatory requirements and 3M policy; and maintaining a global security operation for the protection of facilities and people on 3M sites. 3M also promotes a culture of health and well-being through disease prevention programs, on-site clinical services, employee assistance programs, and comprehensive health care benefits.
The Company continuously evaluates opportunities to raise safety and health standards, training site leaders and conducting site visits to identify and manage environmental health and safety risks; evaluating compliance with regulatory requirements and 3M policy; and maintaining a global security operation for the protection of facilities and people on 3M sites. 3M also promotes a culture of health and well-being through disease prevention programs, on-site clinical services, employee assistance programs, and comprehensive health care benefits.
Capital projects for environmental purposes include waste reduction and pollution control programs such as, water usage reduction and water quality improvement equipment, scrubbers, containment structures, solvent recovery units and thermal oxidizers. Capital expenditures for similar projects are presently expected to approach approximately $646 million for 2023 and 2024 in aggregate.
Capital projects for environmental purposes include waste reduction and pollution control programs such as water usage reduction and water quality improvement equipment, scrubbers, containment structures, solvent recovery units and thermal oxidizers. Capital expenditures for similar projects are presently expected to approach approximately $365 million for 2024 and 2025 in aggregate.
No family relationships exist among any of the executive officers named, nor is there any undisclosed arrangement or understanding pursuant to which any person was selected as an officer. This information is presented in the table below as of the date of the 10-K filing (February 8, 2023).
No family relationships exist among any of the executive officers named, nor is there any undisclosed arrangement or understanding pursuant to which any person was selected as an officer. This information is presented in the table below as of the date of the 10-K filing (February 7, 2024).
Environmental expenditures for capital projects that contribute to current or future operations generally are capitalized and depreciated over their estimated useful lives. In 2022, 3M expended approximately $317 million on capital projects for environmental purposes as defined below.
Environmental expenditures for capital projects that contribute to current or future operations generally are capitalized and depreciated over their estimated useful lives. In 2023, 3M expended approximately $316 million on capital projects for environmental purposes as defined below.
Most 3M products involve expertise in product development, manufacturing and marketing, and are subject to competition from products manufactured and sold by other technologically oriented companies. Business Segments 3M manages its operations in four business segments.
Most 3M products involve expertise in product development, manufacturing and marketing, and are subject to competition from products manufactured and sold by other technologically oriented companies. 4 Table of Contents Business Segments : 3M manages its operations in four business segments.
The public can obtain any documents that the Company files with the SEC at http://www.sec.gov.
The public can obtain any documents that the Company files with the SEC at https://www.sec.gov.
Management believes the confidence of wholesalers, retailers, jobbers, distributors and dealers in 3M and its products — a confidence developed through long association with skilled marketing and sales representatives — has contributed significantly to 3M’s position in the marketplace and to its growth. 5 T able of Contents Resources Human Capital On December 31, 2022, the Company employed approximately 92,000 people (full-time equivalents), with approximately 37,000 employed in the United States and 55,000 employed internationally.
Management believes the confidence of wholesalers, retailers, jobbers, distributors and dealers in 3M and its products — a confidence developed through long association with skilled marketing and sales representatives — has contributed significantly to 3M’s position in the marketplace and to its growth. 5 Table of Contents Resources Human Capital : On December 31, 2023, the Company employed approximately 85,000 people (full-time equivalents), with approximately 34,000 employed in the United States and 51,000 employed internationally.
The Company also plans to invest $50 million over 2020 to 2025 to address racial opportunity gaps through workforce development initiatives in the communities in which its employees live and 3M business operates.
The Company also plans to invest $50 million over 2020 to 2025 to address racial opportunity gaps through workforce development initiatives in the communities in which its employees live and 3M business operates. The Company is on pace, having delivered over $39 million through 2023.
Diversity, Equity and Inclusion A diverse, global workforce and inclusive culture that provides fair and equitable opportunities helps 3M remain competitive, advance its innovation culture, and serve customers. 3M focuses on attracting and advancing top talent and has publicly committed to advance global diversity in management across all dimensions, with additional specific goals to continue advancing pay equity and to increase the Company’s diversity with underrepresented groups. 3M supports these values with an internal CEO Inclusion Council, a forum led by senior management to advance diversity, equity, and inclusion initiatives.
Additionally, 3M focuses on attracting and advancing top talent and has publicly committed to advance global diversity in management across all dimensions, with additional specific goals to increase the Company’s diversity with underrepresented groups. 3M supports these values with an internal CEO Inclusion Council, a forum led by senior management to advance diversity, equity, and inclusion initiatives.
General 3M is a diversified technology company with a global presence in the following businesses : Safety and Industrial; Transportation and Electronics; Health Care; and Consumer. 3M is among the leading manufacturers of products for many of the markets it serves.
General : 3M is a diversified technology company with a global presence in the following businesses : Safety and Industrial; Transportation and Electronics; Health Care; and Consumer.
Government Regulation and Environmental Law Compliance The Company’s business operations are subject to various governmental regulations in the U.S. and internationally, including, among others, those related to product liability; antitrust; intellectual property; environmental, health, and safety; tax; the U.S. Foreign Corrupt Practices Act and other anti-bribery laws, international import and export requirements and trade sanctions compliance; regulations of the U.S.
Government Regulation and Environmental Law Compliance : The Company’s business operations are subject to various governmental regulations in the U.S. and internationally, including, among others, those related to product liability; antitrust; intellectual property; environmental, health, and safety; tax; the U.S.
The Company’s research and development activities generate a steady stream of inventions that are covered by new patents or trade secrets. Patents applicable to specific products extend for varying periods according to the date of patent application filing or patent grant and the legal term of patents in the various countries where patent protection is obtained.
Patents applicable to specific products extend for varying periods according to the date of patent application filing or patent grant and the legal term of patents in the various countries where patent protection is obtained.
Vale 56 Group President, Safety & Industrial Business Group 2021 Executive Vice President, Safety & Industrial Business Group, 2019-2021 Executive Vice President, Health Care Business Group, 2016-2019 8 T able of Contents Cautionary Note Concerning Factors That May Affect Future Results This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Rhodes 61 Executive Vice President, Chief Legal Affairs Officer 2022 Senior Vice President and Deputy General Counsel, 2021 Vice President and Deputy General Counsel, 2019-2021 President and Chief Intellectual Property Counsel, Office of Intellectual Property Counsel and 3M Innovative Properties 2008-2019 8 Table of Contents Cautionary Note Concerning Factors That May Affect Future Results This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
The Company assumes no obligation to update or revise any forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those reflected in any such forward-looking statements depending on a variety of factors.
The Company assumes no obligation to update or revise any forward-looking statements. 9 Table of Contents Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties.
Programs and benefits differ internationally for a variety of reasons, such as local legal requirements, market practices, and negotiations with works councils, trade unions, and other employee representative bodies. Raw Materials In 2022, many geopolitical, logistics, and disruptive events caused imbalance in the global supply chain, similar to the past few years.
Programs and benefits differ internationally for a variety of reasons, such as local legal requirements, market practices, and negotiations with works councils, trade unions, and other employee representative bodies. Raw Materials : In 2023, global supply chains moved towards greater balance, with disruptions driven from more isolated factors than in the prior year.
Banovetz 55 Executive Vice President, Chief Technology Officer and Environmental Responsibility 2021 Senior Vice President, Chief Technology Officer and Environmental Responsibility, 2021 Senior Vice President, Innovation and Stewardship and Chief Technology Officer, 2020 Senior Vice President of Research and Development and Chief Technology Officer, 2017-2019 Karina Chavez 49 Senior Vice President and Chief Strategy Officer 2021 Senior Vice President, Customer Operations, 2020-2021 Global Business Director, Home Improvement Business, 2017-2020 Zoe Dickson 49 Executive Vice President and Chief Human Resources Officer 2021 Senior Vice President, Talent, Learning and Insights, 2021 Vice President, Organization Effectiveness and Talent, Human Resources, 2020-2021 Vice President, Organization Effectiveness, Human Resources 2019-2020 Vice President, Global Human Resources Business Operations, Human Resources 2018-2019 HR Director, Consumer Business Group 2016-2018 Peter D.
Banovetz 56 Executive Vice President, Chief Technology Officer and Environmental Responsibility 2023 Senior Vice President, Chief Technology Officer and Environmental Responsibility, 2021 Senior Vice President, Innovation and Stewardship and Chief Technology Officer, 2020 Senior Vice President of Research and Development and Chief Technology Officer, 2017-2019 Karina Chavez 50 Group President, Consumer 2023 Senior Vice President and Chief Strategy Officer, 2021-2023 Senior Vice President, Customer Operations, 2020-2021 Global Business Director, Home Improvement Business, 2017-2020 Torie Clarke 64 Executive Vice President and Chief Public Affairs Officer 2023 Independent communications and crisis management consultant, 2017-2023 Board member, The Rumsfeld Foundation, 2016 - present Senior Advisory Committee Member, John F.
The Company has a suite of high-potential leadership development programs which brings a consistent approach to leadership development. 3M also has development programs for managers and supervisors and provides learning opportunities for all employees, in addition to regular coaching and support from their supervisor.
The Company provides leadership development experiences through job-based or project-based assignments, assessment and coaching, and targeted skill-development where leaders are given the opportunity to learn, apply, and share their skills. 3M also has prioritized learning journeys for managers and supervisors and provides opportunities for all employees to learn, in addition to regular coaching and support from their supervisor.
Name Age Present Position Year Elected to Present Position Other Positions Held during 2018 - 2022 Michael F. Roman 63 Chairman of the Board and Chief Executive Officer 2019 Chief Executive Officer, 2018-2019 Chief Operating Officer and Executive Vice President, 2017-2018 Executive Vice President, Industrial Business Group, 2014-2017 John P.
Name Age Present Position Year Elected to Present Position Other Positions Held during 2019 - 2023 Michael F.
Overall, on a consolidated basis, 3M experienced net raw material price inflation in 2022. 6 T able of Contents Patents, Trademarks and Licenses The Company’s products are sold around the world under various trademarks. The Company also owns, or holds licenses to use, numerous U.S. and foreign patents.
Overall, 3M experienced year-over-year market inflation in 2023 driven by the carryover of 2022 impacts, and effects of a historically strong labor market. Market price risks were partially mitigated via negotiated supply contracts. 6 Table of Contents Patents, Trademarks and Licenses : The Company’s products are sold around the world under various trademarks.
Lavers 59 Group President, Consumer Business Group and Interim Group President, Health Care Business Group 2022 Executive Vice President, Consumer Business Group, 2020-2021 Vice President and General Manager, Automotive and Aerospace Solutions Division, 2019-2020 Vice President and General Manager, Construction and Home Improvement Division, 2015-2019 Mark Murphy 54 Executive Vice President, Chief Information and Digital Officer 2021 Chief Information Officer, Abbott Laboratories, 2020-2021 Global Chief Information Officer and Vice President, BTS, Abbott Laboratories, 2018-2020 Medical Devices Chief Information Officer and Divisional VP, Abbott Laboratories, 2017-2018 Monish Patolawala 53 Executive Vice President, Chief Financial and Transformation Officer 2021 Senior Vice President and Chief Financial Officer 2020-2021 Chief Financial Officer, Health Care and Vice President, Operational Transformation, General Electric, 2019-2020 Chief Financial Officer, Health Care, General Electric, 2015-2019 Kevin H.
Roman 64 Chairman of the Board and Chief Executive Officer 2019 Chief Executive Officer, 2018-2019 Monish Patolawala 54 President, Chief Financial Officer 2023 Executive Vice President, Chief Financial and Transformation Officer, 2021-2023 Senior Vice President and Chief Financial Officer 2020-2021 Chief Financial Officer, Health Care and Vice President, Operational Transformation, General Electric, 2019-2020 Chief Financial Officer, Health Care, General Electric, 2015-2019 John P.
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The Company experienced raw material price inflation and constrained supply throughout the global marketplace and continued to deploy productivity projects to minimize the impact.
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In July 2022, 3M announced its intention to spin off the Health Care business as a separate public company (see Note 3 for additional information). 3M is among the leading manufacturers of products for many of the markets it serves.
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To help manage disruption in its manufacturing operations, 3M deployed careful management of existing raw material inventories, strategic relationships with key suppliers, and qualification of additional supply sources. 3M manages spend category price risks through negotiated supply contracts and price protection agreements. In addition, 3M evaluates suppliers’ conformance with environmental and social compliance requirements.
Added
Diversity, Equity and Inclusion: A diverse, global workforce and inclusive culture that provides fair and equitable opportunities helps 3M remain competitive, advance its innovation culture, and serve customers. 3M has gender, race/ethnicities pay parity in all geographies, and processes in place to ensure this is maintained.
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Gibbons 61 Group President, Enterprise Operations 2021 Chief Executive Officer, Tirehub, 2018-2021 Executive Vice President, Global Development and Product Supply & CSCO, Mattel, Inc, 2013-2018 Eric D.
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The Company also owns, or holds licenses to use, numerous U.S. and foreign patents. The Company’s research and development activities generate a steady stream of inventions that are covered by new patents or trade secrets.
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Hammes 48 Executive Vice President, Chief Country Governance and Services Officer 2021 Senior Vice President, Manufacturing & Supply Chain, 2019-2021 Senior Vice President, Business Transformation & Information Technology, 2017-2019 Vice President, Corporate Controller and Chief Accounting Officer, 2014-2017 Ashish K.
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Foreign Corrupt Practices Act and other anti-bribery laws, international import and export requirements and trade sanctions compliance; regulations of the U.S.
Removed
Khandpur 55 Group President, Transportation & Electronics 2021 Executive Vice President, Transportation & Electronic Business Group, 2019-2021 Executive Vice President, Electronics & Energy Business Group, 2017-2019 Senior Vice President, Research and Development, and Chief Technology Officer, 2014-2017 Jeffrey R.
Added
Kennedy School at Harvard University, 2007 - present Zoe Dickson 50 Executive Vice President and Chief Human Resources Officer 2021 Senior Vice President, Talent, Learning and Insights, 2021 Vice President, Organization Effectiveness and Talent, Human Resources, 2020-2021 Vice President, Organization Effectiveness, Human Resources 2019-2020 Vice President, Global Human Resources Business Operations, Human Resources 2018-2019 Peter D.
Removed
Rhodes 60 Executive Vice President, Chief Legal Affairs Officer 2022 Senior Vice President and Deputy General Counsel, 2021 Vice President and Deputy General Counsel, 2019-2021 President and Chief Intellectual Property Counsel, Office of Intellectual Property Counsel and 3M Innovative Properties 2008-2019 Michael G.
Added
Gibbons 62 Group President, Enterprise Operations 2021 Chief Executive Officer, Tirehub, 2018-2021 Chris Goralski 52 Group President, Safety & Industrial 2023 President, Industrial Adhesives & Tapes Division, 2020-2023 Vice President, Environmental Stewardship, Research & Development, 2018-2020 Bryan Hanson 57 Chief Executive Officer, Healthcare 2023 Chairman of the Board and Chief Executive Officer, Zimmer Biomet, 2021-2023 Chief Executive Officer, Zimmer Biotmet, 2017-2021 Mark Murphy 55 Executive Vice President, Chief Information and Digital Officer 2021 Chief Information Officer, Abbott Laboratories, 2020-2021 Global Chief Information Officer and Vice President, BTS, Abbott Laboratories, 2018-2020 Kevin H.
Added
Actual future results and trends may differ materially from historical results or those reflected in any such forward-looking statements depending on a variety of factors.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

46 edited+26 added−8 removed33 unchanged
Biggest changeIn addition, these two announced actions (the “exit”) involve risks, including the actual timing, costs, and financial impact of such exit; the Company’s ability to complete such exit, on the anticipated timing or at all; potential governmental or regulatory actions relating to PFAS manufacturing and production, or the Company’s exit plans; the Company’s ability to identify and manufacture acceptable substitutes for the discontinued products, and the possibility that such substitutes will not achieve the anticipated or desired commercial or operational results; potential litigation relating to the Company’s exit plans; and the possibility that the planned exit will involve greater costs than anticipated, or otherwise have negative impacts on the Company’s relationships with its customers and other counterparties. 11 T able of Contents 3M currently is defending lawsuits concerning various PFAS-related products and chemistries, and is subject to unasserted and asserted claims and governmental regulatory proceedings and inquiries related to the production and use of PFAS in a variety of jurisdictions, as discussed in Note 16, “Commitments and Contingencies,” within the Notes to Consolidated Financial Statements. 3M has seen increased public and private lawsuits being filed on behalf of states, counties, cities, and utilities alleging, among other things, harm to the general public and damages to natural resources, some of which are pending in the Aqueous Film Forming Foam (AFFF) multi-district litigation and some of which are pending in other jurisdictions.
Biggest changeIn such instances, the Company intends to continue to evaluate the adoption of third-party products that do not contain PFAS to the extent such products are available and such adoption is feasible. 11 Table of Contents 3M currently is defending lawsuits concerning various PFAS-related products and chemistries, and is subject to unasserted and asserted claims and governmental regulatory proceedings and inquiries related to the production and use of PFAS in a variety of jurisdictions, as discussed in Note 18, “Commitments and Contingencies,” within the Notes to Consolidated Financial Statements. 3M has seen increased public and private lawsuits being filed on behalf of states, counties, cities, and utilities alleging, among other things, harm to the general public and damages to natural resources, some of which are pending in the Aqueous Film Forming Foam (AFFF) multi-district litigation and some of which are pending in other jurisdictions.
Any cybersecurity incident or information technology network disruption could result in numerous negative consequences, including the risk of legal claims or proceedings, investigations or enforcement actions by U.S., state, or foreign regulators; liabilities or penalties under applicable laws and regulations, including privacy laws and regulations in the U.S. and other jurisdictions; interference with the Company’s operations; the incurrence of remediation costs; loss of intellectual property protection; the loss of customer, supplier, or employee relationships; and damage to the Company’s reputation, any of which could adversely affect the Company’s business.
Any cybersecurity incident or information or operational technology network disruption could result in numerous negative consequences, including the risk of legal claims or proceedings, investigations or enforcement actions by U.S., state, or foreign regulators; liabilities or penalties under applicable laws and regulations, including privacy laws and regulations in the U.S. and other jurisdictions; interference with the Company’s operations; the incurrence of remediation costs; loss of intellectual property protection; the loss of customer, supplier, or employee relationships; and damage to the Company’s reputation, any of which could adversely affect the Company’s business.
Security and data breaches, cyberattacks, and other cybersecurity incidents involving the Company’s information technology systems and infrastructure could disrupt or interfere with the Company’s operations; result in the compromise and misappropriation of proprietary and confidential information belonging to the Company or its customers, suppliers, and employees; and expose the Company to numerous expenses, liabilities, and other negative consequences, any or all of which could adversely impact the Company’s business, reputation, and results of operations.
Security and data breaches, cyberattacks, and other cybersecurity incidents involving the Company’s information technology systems, networks and infrastructure could disrupt or interfere with the Company’s operations; result in the compromise and misappropriation of proprietary and confidential information belonging to the Company or its customers, suppliers, and employees; and expose the Company to numerous expenses, liabilities, and other negative consequences, any or all of which could adversely impact the Company’s business, reputation, and results of operations.
Demand for the Company’s products, which impacts revenue and profit margins, is affected by, among other things, (i) the development and timing of the introduction of competitive products; (ii) the Company’s pricing strategies; (iii) changes in customer order patterns, such as changes in the levels of inventory maintained by customers, vendors, or channel partners; (iv) changes in customers’ preferences for our products, including the success of products offered by our competitors, and changes in customer designs for their products that can affect the demand for some of the Company’s products; and (v) changes in the business environment related to disruptive technologies, such as artificial intelligence, block-chain, expanded analytics, and other enhanced learnings from increasing volume of available data. * The Company’s growth objectives are largely dependent on the timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new products and to bring those products to market.
Demand for the Company’s products, which impacts revenue and profit margins, is affected by, among other things, (i) the development and timing of the introduction of competitive products; (ii) the Company’s pricing strategies; (iii) changes in customer order patterns, such as changes in the levels of inventory maintained by customers, vendors, or channel partners; (iv) changes in customers’ preferences for our products, including the success of products offered by our competitors, and changes in customer designs for their products that can affect the demand for some of the Company’s products; and (v) changes in the business environment related to disruptive technologies, such as artificial intelligence and machine learning technologies, block-chain, expanded analytics, and other enhanced learnings from increasing volume of available data. * The Company’s growth objectives are largely dependent on the timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new products and to bring those products to market.
The outcome of legal and regulatory proceedings related to compliance with these treaties, laws, regulations, and requirements could have a material adverse effect on the Company's ability to execute its strategy and its results of operations.
The outcome of legal and regulatory proceedings related to compliance with these treaties, laws, regulations, and requirements could have a material adverse effect on the Company's reputation, ability to execute its strategy and its results of operations.
Because the Company’s financial statements are denominated in U.S. dollars and approximately 60 percent of the Company’s revenues are derived from outside the United States, the Company’s results of operations and its ability to realize projected growth rates in sales and earnings could be adversely affected if the U.S. dollar strengthens significantly against foreign currencies.
Because the Company’s financial statements are denominated in U.S. dollars and approximately 54 percent of the Company’s revenues are derived from outside the United States, the Company’s results of operations and its ability to realize projected growth rates in sales and earnings could be adversely affected if the U.S. dollar strengthens significantly against foreign currencies.
As science and technology evolve and advance, and in response to evolving knowledge and the understanding that certain PFAS compounds had the potential to build up over time, 3M announced in 2000 that we would voluntarily phase out production of two PFAS substances, perfluorooctanoate (PFOA) and perfluorooctane sulfonate (PFOS) globally as a precautionary measure.
As science and technology evolve and advance, and in response to evolving knowledge and the understanding that certain PFAS compounds had the potential to build up over time, 3M announced in 2000 that it would voluntarily phase out production of two PFAS substances, perfluorooctanoate (PFOA) and perfluorooctane sulfonate (PFOS) globally as a precautionary measure.
Significant changes in market interest rates, decreases in the fair value of plan assets and investment losses on plan assets, and legislative or regulatory changes relating to defined benefit plan funding may increase the Company's funding obligations and adversely impact its results of operations and cash flows. * Change in the Company’s credit ratings could increase cost of funding.
Significant changes in market interest rates, decreases in the fair value of plan assets and investment losses on plan assets, and legislative or regulatory changes relating to defined benefit plan funding may increase the Company's funding obligations and adversely impact its results of operations and cash flows. * Change in the Company’s credit ratings or increases in benchmark interest rates could increase cost of funding.
For example, changes in local economic condition or outlooks, such as lower economic growth rates in China, Europe, or other key markets, impact the demand or profitability of the Company's products. The global economy has been impacted by the military conflict between Russia and Ukraine.
For example, changes in local economic condition or outlooks, such as lower economic growth rates in China, Europe, or other key markets, impact the demand or profitability of the Company's products. The global economy has been impacted by military conflicts, including the conflict between Russia and Ukraine.
There are no guarantees that new products will prove to be commercially successful. * The Company’s future results are subject to vulnerability with respect to materials and fluctuations in the costs and availability of purchased components, compounds, raw materials, energy, and labor due to shortages, increased demand and wages, logistics, supply chain interruptions, manufacturing site disruptions, regulatory developments, natural disasters, and other disruptive factors.
There are no guarantees that new products will prove to be commercially successful. 13 Table of Contents * The Company’s future results are subject to vulnerability with respect to materials and fluctuations in the costs and availability of purchased components, compounds, raw materials, energy, and labor due to shortages, increased demand and wages, logistics, supply chain interruptions, manufacturing site disruptions, regulatory developments, natural disasters, and other disruptive factors.
Supplier relationships have been and could be interrupted in the future due to supplier material shortage, climate impacts, natural and other disasters, and other disruptive events such as military conflicts, or be terminated.
Supplier relationships have been and could be interrupted in the future due to supplier material shortage, climate impacts and severe weather events, natural and other disasters, and other disruptive events such as military conflicts, or be terminated.
Operational challenges, including those related to customer service, pace of change and productivity improvements, could have a material adverse effect on the Company’s business, financial conditions and results of operations.
Operational challenges, including those related to customer service, pace of change and productivity improvements, could have a material adverse effect on the Company’s business, financial condition, and results of operations.
The spin-off will be subject to the satisfaction of a number of conditions, including final approval by the Company’s board of directors, the filing and effectiveness of a Form 10 registration statement, the receipt of a private letter ruling from the Internal Revenue Service and a tax opinion from external counsel, and other customary conditions.
The spin-off will be subject to the satisfaction of a number of conditions, including the filing and effectiveness of a Form 10 registration statement, receipt of a private letter ruling from the Internal Revenue Service and a tax opinion from external counsel, satisfactory completion of financing, final approval by the Company’s Board of Directors, and other customary conditions.
Despite our cybersecurity measures, it is possible for security vulnerabilities or a cyberattack to remain undetected for an extended time period, up to and including several years, and the prioritization of decisions with respect to security measures and remediation of known vulnerabilities that we and the vendors and other third parties upon which we rely make may prove inadequate to protect against attacks.
Despite our cybersecurity counter measures, it is possible for security vulnerabilities or a cyberattack to remain undetected for an extended time period, up to and including several months, and the prioritization of decisions with respect to security measures and remediation of known vulnerabilities that we and the vendors and other third parties upon which we rely make may prove inadequate to protect against these attacks.
Discussion of these factors is incorporated by reference into and considered an integral part of Part II, Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.” Risks Related to the Global Economy and Public Health Crises * The Company’s results are impacted by the effects of, and changes in, worldwide economic, political, regulatory, international trade, geopolitical, and other external conditions.
Discussion of these factors is incorporated by reference into and considered an integral part of Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Risks Related to the Global Economy and External Conditions * The Company’s results are impacted by the effects of, and changes in, worldwide economic, political, regulatory, international trade, geopolitical, and other external conditions.
Third parties and threat actors, including organized criminals, nation-state, or nation-state supported actors, regularly attempt to gain unauthorized access to the Company’s information technology networks and infrastructure, data, and other information, and many such attempts are increasingly sophisticated.
Third parties and threat actors, including organized criminals, nation-state entities, and/or nation-state supported actors, regularly attempt to gain unauthorized access to the Company’s information and operational technology networks and infrastructure, data, and other information, and many such attempts are becoming increasingly sophisticated.
A future adverse ruling, settlement, or unfavorable development could result in future charges that could have a material adverse effect on the Company’s results of operations or cash flows. In addition, negative publicity related to the matters noted above or other matters involving the Company may negatively impact the Company’s reputation.
A future adverse ruling, settlement, or unfavorable development could result in future charges that could have a material adverse effect on the Company’s results of operations or cash flows or its consolidated financial position. In addition, negative publicity related to the matters noted above or other matters involving the Company may negatively impact the Company’s reputation.
Any sustained interruption in the Company’s receipt of adequate supplies, supply chain disruptions impacting the distribution of products, or disruption to key manufacturing sites’ operations due to natural and other disasters or events, such as government actions relating to discharge or emission permits or other legal or regulatory requirements, could have a material adverse effect on the Company.
Any sustained interruption in the Company’s receipt of adequate supplies, supply chain disruptions impacting the distribution of products, or disruption to key manufacturing sites’ operations due to natural and other disasters or events, such as government actions relating to discharge or emission permits or other legal or regulatory requirements, could have a material adverse effect on the Company and its ability to fulfill supply obligations to its customers.
Developments in these and other global regulatory trends may require additional actions by 3M, including investigation, remediation, and compliance, or may result in additional litigation and enforcement action costs. The Company has been voluntarily cooperating with various local, state, federal (primarily the U.S.
Developments in these and other global regulatory trends may require additional actions by 3M, including investigation, remediation, and compliance, or may result in additional litigation and enforcement action costs. 10 Table of Contents The Company has been voluntarily cooperating with various local, state, federal (primarily the U.S.
The Company operates in more than 70 countries and derives approximately 60 percent of its revenues from outside the United States, and, accordingly, the Company’s operations and the execution of its business strategies and plans are subject to global competition and economic and geopolitical risks that are beyond its control, such as, among other things, disruptions in financial markets, economic downturns, military conflicts, public health emergencies such as COVID-19, political changes and trends such as protectionism, economic nationalism resulting in government actions impacting international trade agreements or imposing trade restrictions such as tariffs and retaliatory counter measures, and government deficit reduction and other austerity measures in locations or industries in which the Company operates.
The Company derives approximately 54 percent of its revenues from outside the United States, and, accordingly, the Company’s operations and the execution of its business strategies and plans are subject to global competition and economic and geopolitical risks that are beyond its control, such as, among other things, disruptions in financial markets, economic downturns, military conflicts, terrorism, public health emergencies, political changes and trends such as protectionism, economic nationalism resulting in government actions impacting international trade agreements or imposing trade restrictions such as tariffs and retaliatory counter measures, and government deficit reduction and other austerity measures in locations or industries in which the Company operates.
Despite our cybersecurity and business continuity measures (including employee and third-party training, monitoring of networks and systems, patching, maintenance, and backup of systems and data), the Company’s information technology networks and infrastructure are still potentially susceptible to attack, compromise, damage, disruption, or shutdown, including as a result of the exploitation of known or unknown hardware or software vulnerabilities in our systems or in the systems of our vendors and third-party service providers, the introduction of computer viruses or ransomware, service or cloud provider disruptions or security breaches, phishing attempts, employee error or malfeasance, power outages, telecommunication or utility failures, systems failures, natural disasters, or other catastrophic events.
Despite our cybersecurity and business continuity counter measures (including employee and third-party training, monitoring of networks and systems, patching, maintenance, and backup of systems and data), the Company’s information and operational technology systems, networks and infrastructure are still potentially susceptible to cyber-attack, insider threat, compromise, damage, disruption, or shutdown, including as a result of the exploitation of known or unknown hardware or software vulnerabilities, or zero day attacks, in our systems or the systems of our vendors and third-party service providers, the introduction of computer viruses, malware or ransomware, service or cloud provider disruptions or security breaches, phishing attempts, employee error or malfeasance, power outages, telecommunication or utility failures, systems failures, natural disasters, or other catastrophic events.
There can be no assurance that we will realize the benefits of such activities, or that such activities will not result in unexpected consequences, such as a reduced ability to generate sales or provide the experience that our customers, suppliers, vendors, and channel partners expect from us.
There can be no assurance that we will realize the benefits of such activities, or that such activities will not result in unexpected or negative consequences, such as a reduced ability to generate sales; a relationship impact with employees; or a reduced ability to provide the experience that our customers, suppliers, vendors, and channel partners expect from us.
The Company recognized a $0.8 billion pre-tax charge in the fourth quarter of 2022 associated with this announcement related to asset impairments, and will incur additional expenses in connection with its exit activities.
The Company recognized a $0.8 billion pre-tax charge in the fourth quarter of 2022 associated with this announcement related to asset impairments, and will incur additional expenses in connection with the 2022 PFAS Announcement.
These geopolitical tensions could result in, among other things, cyberattacks, further supply chain disruptions impacting downstream customers, higher energy costs, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect the Company's business and supply chain.
These geopolitical tensions could result in, among other things, cyberattacks, supply chain disruptions, higher energy and other commodity costs, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect the Company's business and supply chain.
While we and third parties we utilize have experienced, and expect to continue to experience, cyberattacks on and breaches and disruptions of the Company’s and the third parties' information technology systems and infrastructure, we do not believe that any such incidents to date have had a material impact on the Company.
While we and third parties we utilize have experienced, and expect to continue to experience, cyberattacks that may lead to other disruptions of the Company’s and the third parties' information and operational technology systems and infrastructure, we do not believe that any such incidents to date have had a material impact on the Company.
For a more detailed discussion of the legal proceedings involving the Company and the associated accounting estimates, see the discussion in Note 16, “Commitments and Contingencies,” within the Notes to Consolidated Financial Statements. 12 T able of Contents Risks Related to Our Products and Customer Preferences * The Company’s results are affected by competitive conditions and customer preferences.
For a more detailed discussion of the legal proceedings involving the Company and the associated accounting estimates, see the discussion in Note 18, “Commitments and Contingencies,” within the Notes to Consolidated Financial Statements. Risks Related to Our Products and Customer Preferences * The Company’s results are affected by competitive conditions and customer preferences.
The Company’s increased adoption of remote working, initially driven by the pandemic, also introduces additional threats and risk of disruptions to our information technology networks and infrastructure.
The Company’s increased adoption of remote working, initially driven by the COVID-19 health pandemic, also introduces additional threats and risk of disruptions to our information technology systems, networks and infrastructure.
Although the Company maintains insurance coverage for various cybersecurity and business continuity risks, there can be no guarantee that all costs or losses incurred will be fully insured. * Acquisitions, strategic alliances, divestitures, and other strategic events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring, could affect future results.
Although the Company maintains insurance coverage for various cybersecurity and business continuity risks, there can be no guarantee that all costs, damages, expenses or losses incurred will be fully insured. 14 Table of Contents * Acquisitions, strategic alliances, divestitures, and other strategic events resulting from portfolio management actions and other evolving business strategies could affect future results.
Any of the foregoing could adversely affect the Company’s future results. 14 T able of Contents * The Company’s future results may be affected by its operational execution, including scenarios where the Company generates fewer productivity improvements than planned. The Company’s financial results depend on the successful execution of its business operating plans.
Any of the foregoing could adversely affect the Company’s future results. * The Company’s future results may be affected by its operational execution, including through organizational restructurings and scenarios where the Company generates fewer productivity improvements than planned. The Company’s financial results depend on the successful execution of its business operating plans.
In addition, the outcome of legal and regulatory proceedings related to compliance with these treaties, laws, regulations, and requirements are difficult to reliably predict, may differ from the Company’s expectations, and can result in, among other things, criminal or civil sanctions, including fines; limitations on the extent to which the Company can conduct business; and private rights of action that result in litigation exposure, including expenses and costs incurred in connection with settlement or court proceedings, for the Company.
In addition, the outcome of legal and regulatory proceedings related to compliance with these treaties, laws, regulations, and requirements are difficult to reliably predict, may differ from the Company’s expectations, and have resulted and may in the future result in, one or more of the following: criminal or civil sanctions, including fines; limitations on the extent to which the Company can conduct business; employee and business partner terminations due to policy violations; and private rights of action that result in litigation exposure, including expenses and costs incurred in connection with settlement or court proceedings, for the Company.
As of December 2022, 3M has a credit rating of A1, stable outlook from Moody's Investors Service, and a credit rating of A+, CreditWatch negative from S&P Global Ratings. The Company’s credit ratings have served to lower 3M’s borrowing costs and facilitate access to a variety of lenders.
The Company’s credit ratings have served to lower 3M’s borrowing costs and facilitate access to a variety of lenders. As of the date of this report, 3M has a credit rating of A3, negative outlook from Moody's Investors Service, a credit rating of BBB+, CreditWatch negative from S&P Global Ratings, and a credit rating of A-, stable outlook from Fitch.
Governmental inquiries, lawsuits, or laws and regulations involving PFAS could lead to our incurring liability for damages or other costs, civil or criminal proceedings, the imposition of fines and penalties, or other remedies, including orders to conduct remediation, as well as restrictions on or added costs for our business operations going forward, including in the form of restrictions on discharges at our manufacturing facilities, requiring the installation of control technologies, suspension or shutdown of facility operations, switching costs in seeking alternative sources of supply, potential customer damage claims due to supply disruptions or otherwise, and reporting requirements or bans on PFAS and PFAS-containing products manufactured by the Company. * The Company is subject to risks related to international, federal, state, and local treaties, laws, and regulations, as well as compliance risks related to legal or regulatory requirements, contract requirements, policies and practices, or other matters that require or encourage the Company or its suppliers, vendors, or channel partners to conduct business in a certain way.
Governmental inquiries, lawsuits, or laws and regulations involving PFAS could lead to our incurring liability for damages or other costs, civil or criminal proceedings, the imposition of fines and penalties, or other remedies, including orders to conduct remediation, as well as restrictions on or added costs for our business operations going forward, including in the form of restrictions on discharges at our manufacturing facilities, requiring the installation of control technologies, suspension or shutdown of facility operations, switching costs in seeking alternative sources of supply, potential customer damage claims due to supply disruptions or otherwise, and reporting requirements or bans on PFAS and PFAS-containing products manufactured by the Company.
The addition of further leverage to the Company’s capital structure could impact 3M’s credit ratings in the future. Failure to maintain strong investment grade ratings would adversely affect the Company’s cost of funding and could adversely affect liquidity and access to capital markets. * Changes in tax rates, laws, or regulations could adversely impact our financial results.
The addition of further leverage to the Company’s capital structure could impact 3M’s credit ratings in the future. Failure to maintain strong investment grade ratings and further downgrades by the ratings agencies, would adversely affect the Company’s cost of funding and could adversely affect liquidity and access to capital markets.
We phased out of materials used to produce certain repellants and surfactant products, with most of these activities in the U.S. completed by the end of 2002. Phased out products included Aqueous Film Forming Foam (AFFF) and certain coatings for food packaging, for example.
Most of the phase out activities in the United States were completed by the end of 2002. The phase out included materials used to produce certain repellents and surfactant products, and products including Aqueous Film Forming Foam (AFFF) and certain coatings for food packaging, for example.
Food and Drug Administration (FDA) and similar foreign agencies; U.S. federal healthcare program-related laws and regulations including the False Claims Act, anti-kickback laws, and the Sunshine Act; and other matters.
Foreign Corrupt Practices Act (FCPA) and other anti-bribery, anti-corruption laws; international import and export requirements and trade sanctions compliance; regulations of the U.S. Food and Drug Administration (FDA) and similar foreign agencies; U.S. federal healthcare program-related laws and regulations including the False Claims Act, anti-kickback laws, and the Sunshine Act; and other matters.
Due to the evolving nature of global tax laws and regulations and compliance approaches, it is currently not possible to assess the ultimate impact of these actions on our financial statements, but these actions could have an adverse impact on the Company's financial results. 15 T able of Contents Risks Related to the Voluntary Chapter 11 Proceedings Initiated by the Company’s Aearo Entities * The Company is subject to risks related to its subsidiaries’ chapter 11 proceedings.
Due to the evolving nature of global tax laws and regulations and compliance approaches, it is currently not possible to assess the ultimate impact of these actions on our financial statements, but these actions could have an adverse impact on the Company's financial results.
Divestitures may include continued financial involvement in the divested businesses, such as through guarantees or other financial arrangements, following the transaction, will result in the loss of revenue associated with the businesses that are divested, and may result in unexpected liabilities through indemnification or other risk-shifting mechanisms in the applicable divestiture agreement.
Divestitures may include continued involvement in the divested businesses, such as through transitional or longer-term supply or distribution arrangements, following the transaction, and may result in unexpected liabilities through indemnification or other risk-shifting mechanisms in the applicable divestiture agreement.
The Company utilizes various tools, such as continuous improvement, to improve productivity and reduce expenses and engages in ongoing global business transformation to improve operational efficiency, productivity, and the speed and efficiency with which it serves customers. This is enabled by the ongoing multi-year phased implementation of an ERP system.
The Company utilizes various tools, such as continuous improvement, to improve productivity and reduce expenses and engages in ongoing global business transformation, including restructurings from time to time, to streamline its operations, improve operational efficiency, productivity, and the speed and efficiency with which it serves customers.
In addition, there can be no assurance that the Company's processes to minimize volatility in component and material pricing will be successful or that future price fluctuations or shortages will not have a material adverse effect on the Company. 13 T able of Contents Risks Related to Our Business * The Company employs information technology systems to support its business and collect, store, and use proprietary and confidential information, including ongoing phased implementation of an enterprise resource planning (ERP) system as part of business transformation on a worldwide basis over the next several years.
Risks Related to Our Business * The Company employs information including operational technology systems to support its business and to collect, store, and/or use proprietary and confidential information, including ongoing phased implementation of an enterprise resource planning (ERP) system as part of its business transformation on a worldwide basis over the next several years.
The failure to satisfy all of the required conditions, many of which are outside of the Company’s control, could delay the completion of the spin-off relative to the anticipated timeline or prevent it from occurring.
The failure to satisfy all of the required conditions, as well as additional factors such as conditions in the equity and debt markets, other external conditions, developments or challenges involving the intended spin-off, the Company or any of its businesses, many of which are outside of the Company’s control, could delay the completion of the spin-off relative to the anticipated timeline or prevent it from occurring.
The U.S. and other governments have imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. 3M suspended operations of its subsidiaries in Russia in March 2022 and, in September 2022, committed to a plan to exit the related net assets through an intended sale of the subsidiaries. 3M also has other operations that source certain raw materials from suppliers in Russia and has experienced related supply disruption due to the conflict.
The U.S. and other governments have imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. 3M suspended operations of its subsidiaries in Russia in March 2022 and completed a sale of the related assets in June 2023.
The Company continues to review, control, or eliminate the presence of certain PFAS in purchased materials, as intended substances in products, or as byproducts of some of 3M’s current manufacturing processes, products, and waste streams. 3M announced in December 2022 it will take two actions: exiting all PFAS manufacturing by the end of 2025; and working to discontinue the use of PFAS across its product portfolio by the end of 2025. 3M’s decision is based on careful consideration and a thorough evaluation of the evolving external landscape, including multiple factors such as accelerating regulatory trends focused on reducing or eliminating the presence of PFAS in the environment and changing stakeholder expectations.
Following the phase out of PFOA and PFOS production, the Company has continued to review, control, or eliminate the presence of certain PFAS in purchased materials, as intended substances in products, or as byproducts of some of 3M’s current manufacturing processes, products, and waste streams. 3M announced in December 2022 it will take two actions with respect to PFAS (2022 PFAS Announcement): exiting all PFAS manufacturing by the end of 2025; and working to discontinue the use of PFAS across its product portfolio by the end of 2025. 3M continues to make progress toward these goals, as discussed further below.
Climate change, as well as related environmental and social regulations, may negatively impact the Company or its customers and suppliers, in terms of availability and cost of natural resources, sources and supply of energy, product demand and manufacturing, and the health and well-being of individuals and communities in which we or our suppliers or customers operate. * Unexpected events, such as those related to the coronavirus (COVID-19) public health crisis, may increase the Company's cost of doing business and disrupt the Company's operations. 3M, as a global company, is impacted by unexpected events, including war, acts of terrorism, public health crises (such as the COVID-19 pandemic), civil unrest, natural disasters, and severe weather in the locations in which the Company or its suppliers or customers operate, and these events have adversely affected, and could in the future adversely affect, the Company's operations and financial performance.
Climate change and severe weather events, including related environmental and social regulations, as well as natural disasters, may negatively impact the Company or its customers and suppliers, in terms of availability and cost of natural resources, sources and supply of energy, product demand and manufacturing, compliance costs, and the health and well-being of individuals and communities in which we or our suppliers or customers operate. * Foreign currency exchange rates and fluctuations in those rates may affect the Company’s ability to realize projected growth rates in its sales and earnings.
Due to the inherent uncertainty of litigation, the Company cannot predict the timing, outcome, or financial impact of this matter, or any other ongoing or future litigation. Risks Related to the Planned Spin-off of the Company’s Health Care Business * The Company is subject to risks related to its plan to spin off its Health Care business .
Risks Related to the Planned Spin-off of the Company’s Health Care Business * The Company is subject to risks related to its plan to spin off its Health Care business .
The Company is subject to risks related to international, federal, state, and local treaties, laws, and regulations, including those involving product liability; antitrust; intellectual property; environmental, health, and safety; tax; the U.S. Foreign Corrupt Practices Act and other anti-bribery laws; international import and export requirements and trade sanctions compliance; regulations of the U.S.
The Company operates globally, including in some jurisdictions that pose potentially elevated risks of fraud or corruption or increased risk of internal control issues, and is subject to risks related to international, federal, state, and local treaties, laws, and regulations, including those involving product liability; securities and corporate laws; antitrust and competition laws; intellectual property; environmental, health, and safety; tax; the U.S.
Legal compliance risks also include third-party risks where the Company’s suppliers, vendors, or channel partners have business practices that are inconsistent with 3M’s Supplier Responsibility Code, 3M performance requirements, or with legal requirements.
Legal compliance risks also include third-party risks where the Company’s suppliers, vendors, or channel partners, or trade associations to which the Company belongs, have business practices that are inconsistent with 3M’s Supplier Responsibility Code, 3M performance requirements, or with legal requirements. 12 Table of Contents The failure to comply with the FCPA and other anti-bribery and anti-corruption laws and regulations could result in significant civil fines and penalties or criminal sanctions against the Company, which could have a material adverse effect on our business, reputation, operating results and financial condition.
Removed
For example, the global pandemic associated with COVID-19, including related evolving governmental responses to the pandemic, has significantly increased economic and demand uncertainty, and has impacted and will continue to impact 3M’s operations, including its supply chain and its manufacturing and distribution capabilities.
Added
In addition, the 2022 PFAS Announcement involves risks, including: the actual timing, costs, and financial impact of such exit; the Company’s ability to complete such exit on the anticipated timing or at all; potential governmental or regulatory actions relating to PFAS or the Company’s exit plans; the Company’s ability to identify and manufacture, or procure from third parties if possible, acceptable options for PFAS-containing materials in 3M's supply chain; the possibility that such non-PFAS options are not available or that such substitutes may not achieve the anticipated or desired commercial, financial or operational results; potential litigation relating to the Company’s exit plans or to any products that include third-party manufactured materials containing PFAS that are incorporated into the products the Company sells; and the possibility that the planned exit will involve greater costs than anticipated, may not be feasible, may not be feasible on the timeframe initially predicted, or may otherwise have negative impacts on the Company’s relationships with its customers and other counterparties.
Removed
Although COVID-19 increased demand for certain 3M products, it also resulted in decreased demand from certain end markets, made it more difficult for 3M to serve customers, and resulted in conditions that had the potential to damage 3M's reputation, including third-party price gouging, counterfeiting, and other illegal or fraudulent activities involving 3M's products.
Added
As stated above, 3M is progressing toward exiting all PFAS manufacturing by the end of 2025. 3M is also working to discontinue the use of PFAS across its product portfolio by the end of 2025. 3M has already eliminated the PFAS use in certain product categories, and has made progress across its product portfolio in a variety of applications.
Removed
Furthermore, COVID-19 has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates.
Added
With respect to PFAS-containing products not manufactured by 3M but manufactured by companies other than 3M in the Company's supply chains, the Company continues to evaluate the availability of third-party products that do not contain PFAS.
Removed
As the pandemic evolves, demand for personal protection products such as disposable respirators has experienced a decline from prior levels. 3M is not able to predict the impact of unexpected events, such as the COVID-19 pandemic, and unexpected events may have a material adverse effect on 3M's consolidated results of operations or financial condition. 10 T able of Contents * Foreign currency exchange rates and fluctuations in those rates may affect the Company’s ability to realize projected growth rates in its sales and earnings.
Added
Depending on the availability and feasibility of such third-party products not containing PFAS, the Company continues to evaluate whether there may be some circumstances in which the use of PFAS-containing materials manufactured by third parties and used in certain applications in 3M’s product portfolios, such as lithium ion batteries and printed circuit boards widely used in commerce across a variety of industries, may continue beyond 2025.
Removed
On July 26, 2022, Aearo Technologies and certain of its related entities (“Aearo Entities"), all wholly owned subsidiaries of the Company, voluntarily initiated chapter 11 proceedings seeking bankruptcy court supervision to establish a trust – funded by the Company – to address potential liabilities related to Dual-Ended Combat Arms – Version 2 earplugs and mask/respirator products historically manufactured and sold by Aearo Entities.
Added
In addition, as described in greater detail in Note 18, “Commitments and Contingencies,” within the Notes to Consolidated Financial Statements, in June 2023, the Company entered into a proposed class-action settlement (“PWS Settlement”) to resolve a wide range of drinking water claims by public water systems in the United States regarding any PFAS, subject to court approval.
Removed
This represents a change in strategy for managing the Combat Arms Version 2 earplugs and Aearo respirator mask/asbestos alleged litigation liabilities.
Added
If the court approves the PWS Settlement and all conditions in the PWS Settlement are met, 3M will pay $10.5 billion to $12.5 billion in total to resolve the claims released by the PWS Settlement, with payments to be made from 2023 through 2036, in exchange for a release of certain claims, as described further in Note 18.
Removed
Aearo Entities were acquired by the Company in 2008 and they, along with its related subsidiaries, have operated as Company subsidiaries since that time. 3M has entered into a funding agreement with Aearo Entities and committed to fund a trust to satisfy all claims determined to be entitled to compensation, and to support Aearo Entities as they continue to operate during the chapter 11 proceedings.
Added
The PWS Settlement gives 3M the option to terminate the PWS Settlement if the numbers of eligible class members opting out of the PWS Settlement exceed specified levels.
Removed
There are a number of risks and uncertainties associated with the chapter 11 proceedings, including, among others, those related to: legal risks related to the chapter 11 proceedings; potential impacts to the Company’s reputation and relationships with its customers, suppliers, federal contracting officials, employees, regulators, and other counterparties and community members; impacts to the Company’s liquidity or results of operations, including risks related to the amount that will be necessary to fully and finally resolve all of the Company’s obligations to make payments to resolve such claims under the terms of its funding and indemnification agreement with Aearo Entities; the costs of chapter 11 proceedings and length of time necessary to resolve the cases; and Aearo Entities’ ability to reach acceptable agreements with claimants and navigate the chapter 11 proceedings to obtain approval and consummation of a plan of reorganization.
Added
Unexpected events related to the PWS Settlement, including whether court approval of the PWS Settlement will be obtained, whether the number of plaintiffs that opt out of the PWS Settlement will exceed current expectations or will exceed the level that would permit 3M to terminate the PWS Settlement (and whether 3M will elect to terminate the PWS Settlement if this occurs), whether the PWS Settlement is appealed, and the impact of the PWS Settlement on other PFAS-related matters could have a material adverse effect on the Company’s results of operations, cash flows or its consolidated financial position.
Added
Any of the foregoing could have a material adverse effect on the Company’s results of operations, cash flows or its consolidated financial position. * The Company is subject to risks related to international, federal, state, and local treaties, laws, and regulations, as well as compliance risks related to legal or regulatory requirements, contract requirements, policies and practices, or other matters that require or encourage the Company or its suppliers, vendors, or channel partners to conduct business in a certain way.
Added
These laws and regulations prohibit corrupt payments by the Company's employees, suppliers, vendors, channel partners or agents. The Company is also required to maintain accurate books and records and adequate internal controls under the FCPA's accounting provisions.
Added
From time to time, the Company receives reports internally and externally, via various reporting channels deployed by its Ethics and Compliance function or otherwise (such as shareholder communications), about business and other activities that raise compliance or other legal or litigation issues.
Added
The Company has in the past, and in the future could be, required to investigate such reports and cooperate with U.S. and foreign regulatory authorities in such investigations, audit, monitor compliance or alter its practices as part of such investigations, and the Company has in the past and may in the future be required to pay fines or penalties related to its practices.
Added
While the Company maintains and implements U.S. and international compliance programs, including policies and procedures, training, and internal controls designed to reduce the risk of noncompliance, the Company's employees, suppliers, vendors, channel partners or agents may violate such policies and procedures and engage in practices that contravene relevant laws and regulations.
Added
In addition, detecting, investigating and resolving actual or alleged violations of these acts is expensive and could consume significant time and attention of our senior management.
Added
In addition, some of our suppliers are limited- or sole-source suppliers, and our ability to meet our obligations to customers depends on the performance, product quality, and stability of such suppliers and the Company's ability to source adequate alternatives in a cost-effective manner.
Added
The Company could incur contractual penalties, experience a deterioration in customer relationships, or suffer harm to its reputation if the Company is unable to fulfill its obligations to customers, any of which could have a material adverse effect on the Company.
Added
In addition, there can be no assurance that the Company's processes to minimize volatility in component and material pricing will be successful or that future price fluctuations or shortages will not have a material adverse effect on the Company.
Added
Workforce restructuring activities impact business groups, functions, and geographies, and the structural reorganization is expected to reduce the size of the corporate center, simplify supply chain, streamline 3M's geographic footprint, reduce layers of management, further align business go-to-market models to customers, and reduce manufacturing roles to align with production volumes, with the goal of improving the Company's longer-term outlook in overall performance.
Added
Since the Company’s announcements of the PWS Settlement and CAE Settlements, Moody’s Investor Service downgraded 3M's’s credit rating twice from A1 to A3 (and downgraded 3M's short-term credit rating from P-1 to P-2). Similarly, S&P Global Ratings downgraded the Company’s credit rating twice from A to BBB+ (and downgraded the Company’s short-term credit rating from A-1 to A-2).
Added
In addition, interest expense could increase due to a rise in interest rates. 15 Table of Contents * Changes in tax rates, laws, or regulations could adversely impact our financial results.
Added
Risks Related to the Company’s Aearo Entities and Combat Arms Earplug Settlement * The Company is subject to risks related to the Company's Aearo Entities and CAE Settlement.
Added
As previously disclosed, and as discussed further in Note 18, “Commitments and Contingencies,” within the Notes to Consolidated Financial Statements, Aearo Technologies sold Dual-Ended Combat Arms – Version 2 earplugs starting in about 1999. 3M acquired Aearo Technologies in 2008 and sold these earplugs from 2008 through 2015, when the product was discontinued. 3M and Aearo Technologies believe the Combat Arms Earplugs were effective and safe when used properly, but nevertheless faced significant litigation relating to the earplugs.
Added
In August 2023, the Company and the Aearo Entities entered into a settlement arrangement (as amended, the “CAE Settlement”) which is structured to promote participation by claimants and is intended to resolve, to the fullest extent possible, all litigation and alleged claims involving the CAE sold or manufactured by the Aearo Entities and/or 3M.
Added
Pursuant to the CAE Settlement, 3M will contribute a total amount of $6.0 billion between 2023 and 2029.
Added
The actual amount, payment terms, and dates are subject to satisfaction of certain participation thresholds claimants must meet, including that at least 98% of individuals with actual or potential litigation claims involving the CAE (calculated as described in the CAE Settlement) must have enrolled in the CAE Settlement and provided 3M with a full release of any and all claims involving the CAE.
Added
The CAE Settlement is subject to risk and uncertainties, including, but not limited to, whether the anticipated full participation by plaintiffs in the CAE Settlement will be achieved, whether the number of plaintiffs who participate in the CAE Settlement will meet the full participation expectations or will fall below the level that would permit 3M to terminate the CAE Settlement (and whether 3M will elect to terminate the CAE Settlement if this occurs), whether there will be a significant number of future claims by plaintiffs that decline to participate in the CAE Settlement, whether the CAE Settlement is appealed or challenged, the filing and outcome of additional litigation, if any, relating to the products that are the subject of the CAE Settlement, or changes in laws or regulations related to the CAE products or the CAE Settlement.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeInternationally, the Company operates 83 manufacturing and converting facilities in 28 countries. 3M owns the majority of its physical properties. 3M’s physical facilities are highly suitable for the purposes for which they were designed. Because 3M is a global enterprise characterized by substantial inter-segment cooperation, properties are often used by multiple business segments. 16 T able of Contents
Biggest changeInternationally, the Company operates 81 manufacturing and converting facilities in 28 countries. 3M owns the majority of its physical properties. 3M’s physical facilities are highly suitable for the purposes for which they were designed. Because 3M is a global enterprise characterized by substantial inter-segment cooperation, properties are often used by multiple business segments.
Item 2. Properties. In the U.S., 3M’s general offices, corporate research laboratories, and certain division laboratories are located in St. Paul, Minnesota. The Company operates 61 manufacturing facilities in 29 states.
Item 2. Properties In the U.S., 3M’s general offices, corporate research laboratories, and certain division laboratories are located in St. Paul, Minnesota. The Company operates 60 manufacturing facilities in 28 states.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed1 unchanged
Biggest changeThe information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Act is included in Exhibit 95 to this annual report. 17 T able of Contents PART II
Biggest changeThe information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Act is included in Exhibit 95 to this annual report. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed2 unchanged
Biggest changeIssuer Purchases of Equity Securities (registered pursuant to Section 12 of the Exchange Act) Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (Millions) January 1 - 31, 2022 1,458,623 $ 176.61 1,458,623 $ 5,329 February 1 - 28, 2022 1,445,206 147.03 1,441,534 5,117 March 1 - 31, 2022 1,871,301 145.61 1,871,301 4,845 January 1 - March 31, 2022 4,775,130 155.51 4,771,458 April 1 - 30, 2022 — — — 4,845 May 1 - 31, 2022 — — — 4,845 June 1 - 30, 2022 — — — 4,845 April 1 - June 30, 2022 — — — July 1 - 31, 2022 — — — 4,845 August 1 - 31, 2022 — — — 4,845 September 1 - 30, 2022 1,665,747 114.10 1,665,747 4,655 July 1 - September 30, 2022 1,665,747 114.10 1,665,747 October 1 - 31, 2022 2,831,831 114.21 2,831,831 4,331 November 1 - 30, 2022 1,002,117 126.87 1,002,117 4,204 December 1 - 31, 2022 378,006 125.91 378,006 4,157 October 1 - December 31, 2022 4,211,954 118.27 4,211,954 January 1 - December 31, 2022 10,652,831 134.31 10,649,159 ____________________ (1) The total number of shares purchased includes: (i) shares purchased under the Board’s authorizations described above, and (ii) shares purchased in connection with the exercise of stock options.
Biggest changeIssuer Purchases of Equity Securities (registered pursuant to Section 12 of the Exchange Act) Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (Millions) January 1 - 31, 2023 1,445 $ 113.34 — $ 4,157 February 1 - 28, 2023 1,240 117.49 — 4,157 March 1 - 31, 2023 — — — 4,157 January 1 - March 31, 2023 2,685 115.25 — April 1 - 30, 2023 — — — 4,157 May 1 - 31, 2023 — — — 4,157 June 1 - 30, 2023 — — — 4,157 April 1 - June 30, 2023 — — — July 1 - 31, 2023 — — — 4,157 August 1 - 31, 2023 — — — 4,157 September 1 - 30, 2023 — — — 4,157 July 1 - September 30, 2023 — — — October 1 - 31, 2023 — — — 4,157 November 1 - 30, 2023 — — — 4,157 December 1 - 31, 2023 — — — 4,157 October 1 - December 31, 2023 — — — January 1 - December 31, 2023 2,685 115.25 — (1) The total number of shares purchased includes: (i) shares purchased under the Board’s authorizations described above, and (ii) shares purchased in connection with the exercise of stock options.
Cash dividends declared and paid totaled $1.49 and $1.48 per share for each quarter in 2022 and 2021, respectively. 3M typically declares and pays dividends in the same quarter. Issuer Purchases of Equity Securities Repurchases of 3M common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes.
Cash dividends declared and paid totaled $1.50 and $1.49 per share for each quarter in 2023 and 2022, respectively. 3M typically declares and pays dividends in the same quarter. Issuer Purchases of Equity Securities: Repurchases of 3M common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes.
At January 31, 2023, there were 62,488 shareholders of record. 3M’s stock ticker symbol is MMM and is listed on the New York Stock Exchange, Inc. (NYSE), the Chicago Stock Exchange, Inc., and the SIX Swiss Exchange.
At January 31, 2024, there were 59,783 shareholders of record. 3M’s stock ticker symbol is MMM and is listed on the New York Stock Exchange, Inc. (NYSE), the Chicago Stock Exchange, Inc., and the SIX Swiss Exchange.
(2) The total number of shares purchased as part of publicly announced plans or programs includes shares purchased under the Board’s authorizations described above.
(2) The total number of shares purchased as part of publicly announced plans or programs includes shares purchased under the Board’s authorizations described above. 18 Table of Contents Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

148 edited+48 added−48 removed40 unchanged
Biggest changeRefer to Note 15 for further details. 23 T able of Contents Operating Income (Loss) (Dollars in millions, except per share amounts) Safety and Industrial Safety and Industrial Margin Transportation and Electronics Transportation and Electronics Margin Total Company Total Company Margin Income Before Taxes Provision for Income Taxes Effective Tax Rate Net Income Attributable to 3M Earnings per Diluted Share Earnings per diluted share percent change Year ended December 31, 2020 GAAP $ 2,588 23.6% $ 1,701 20.2% $ 7,161 22.3 % $ 6,795 $ 1,337 19.7 % $ 5,449 $ 9.36 Adjustments for special items: Net costs for significant litigation 205 — 353 353 136 217 0.37 Gain on business divestitures — — (389) (389) (86) (303) (0.52) Divestiture-related restructuring actions — — 55 55 9 46 0.08 Total special items 205 — 19 19 59 (40) (0.07) Year ended December 31, 2020 adjusted amounts (non-GAAP measures) $ 2,793 25.5% $ 1,701 20.2% $ 7,180 22.3 % $ 6,814 $ 1,396 20.5 % $ 5,409 $ 9.29 Year ended December 31, 2021 GAAP $ 2,466 20.6% $ 1,880 20.3% $ 7,369 20.8 % $ 7,204 $ 1,285 17.8 % $ 5,921 $ 10.12 8 % Adjustments for special items: Net costs for significant litigation 249 — 463 463 104 359 0.61 Total special items 249 — 463 463 104 359 0.61 Year ended December 31, 2021 adjusted amounts (non-GAAP measures) $ 2,715 22.7% $ 1,880 20.3% $ 7,832 22.2 % $ 7,667 $ 1,389 18.1 % $ 6,280 $ 10.73 16 % Year ended December 31, 2022 GAAP $ 1,199 10.3% $ 1,012 11.4% $ 6,539 19.1 % $ 6,392 $ 612 9.6 % $ 5,777 $ 10.18 1 % Adjustments for special items: Net costs for significant litigation 1,414 — 2,291 2,291 476 1,815 3.20 Divestiture costs — — 60 60 13 47 0.08 Gain on business divestitures — — (2,724) (2,724) (39) (2,685) (4.73) Divestiture-related restructuring actions — — 41 41 9 32 0.05 Russia exit charges — — 109 109 (2) 111 0.20 PFAS manufacturing exit costs — 800 800 800 162 638 1.12 Total special items 1,414 800 577 577 619 (42) (0.08) Year ended December 31, 2022 adjusted amounts (non-GAAP measures) $ 2,613 22.5% $ 1,812 20.4% $ 7,116 20.8 % $ 6,969 $ 1,231 17.7 % $ 5,735 $ 10.10 (6) % 24 T able of Contents Sales and operating income (loss) by business segment: The following tables contain sales and operating income (loss) results by business segment for the years ended December 31, 2022 and 2021.
Biggest changeYear ended December 31, 2021 (Dollars in millions, except per share amounts) Net sales Operating income (loss) Operating income (loss) margin Income (loss) before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) attributable to 3M Earnings per diluted share Safety and Industrial GAAP amounts $ 2,460 20.5 % Adjustments for special items: Net costs for significant litigation 249 Total special items 249 Adjusted amounts (non-GAAP measures) $ 2,709 22.6 % Transportation and Electronics GAAP amounts $ 9,262 $ 1,869 20.2 % Adjustments for special items: Manufactured PFAS products (1,258) (135) Total special items (1,258) (135) Adjusted amounts (non-GAAP measures) $ 8,004 $ 1,734 21.7 % Total Company GAAP amounts $ 35,355 $ 7,369 20.8 % $ 7,204 $ 1,285 17.8 % $ 5,921 $ 10.12 Adjustments for special items: Net costs for significant litigation — 463 463 104 359 0.61 Manufactured PFAS products (1,258) (135) (135) (29) (106) (0.18) Total special items (1,258) 328 328 75 253 0.43 Adjusted amounts (non-GAAP measures) $ 34,097 $ 7,697 22.6 % $ 7,532 $ 1,360 18.1 % $ 6,174 $ 10.55 23 Table of Contents Year ended December 31, 2022 (Dollars in millions, except per share amounts) Net sales Sales change Operating income (loss) Operating income (loss) margin Income (loss) before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) attributable to 3M Earnings per diluted share Earnings (loss) per diluted share percent change Safety and Industrial GAAP amounts $ 1,135 9.8 % Adjustments for special items: Net costs for significant litigation 1,414 Total special items 1,414 Adjusted amounts (non-GAAP measures) $ 2,549 22.0 % Transportation and Electronics GAAP amounts $ 8,902 (3.9) % $ 973 10.9 % Adjustments for special items: Manufactured PFAS products (1,351) 631 Total special items (1,351) 631 Adjusted amounts (non-GAAP measures) $ 7,551 (5.6) % $ 1,604 21.2 % Total Company GAAP amounts $ 34,229 (3.2) % $ 6,539 19.1 % $ 6,392 $ 612 9.6 % $ 5,777 $ 10.18 1 % Adjustments for special items: Net costs for significant litigation — 2,291 2,291 476 1,815 3.20 Manufactured PFAS products (1,351) 631 631 121 510 0.90 Gain on business divestitures — (2,724) (2,724) (39) (2,685) (4.73) Russia exit charges (benefits) — 109 109 (2) 111 0.20 Divestiture-related restructuring actions — 41 41 9 32 0.05 Divestiture costs — 60 60 13 47 0.08 Total special items (1,351) 408 408 578 (170) (0.30) Adjusted amounts (non-GAAP measures) $ 32,878 (3.6) % $ 6,947 21.1 % $ 6,800 $ 1,190 17.5 % $ 5,607 $ 9.88 (6) % Year ended December 31, 2023 (Dollars in millions, except per share amounts) Net sales Sales change Operating income (loss) Operating income (loss) margin Income (loss) before taxes Provision (benefit) for income taxes Effective tax rate Net income (loss) attributable to 3M Earnings (loss) per diluted share Earnings (loss) per diluted share percent change Safety and Industrial GAAP amounts $ 2,324 21.2 % Adjustments for special items: Net costs for significant litigation 84 Total special items 84 Adjusted amounts (non-GAAP measures) $ 2,408 22.0 % Transportation and Electronics GAAP amounts $ 8,501 (4.5) % $ 1,312 15.4 % Adjustments for special items: Manufactured PFAS products (1,289) 205 Total special items (1,289) 205 Adjusted amounts (non-GAAP measures) $ 7,212 (4.5) % $ 1,517 21.0 % Total Company GAAP amounts $ 32,681 (4.5) % $ (9,128) (27.9) % $ (9,688) $ (2,691) 27.8 % $ (6,995) $ (12.63) N/M Adjustments for special items: Net costs for significant litigation 1 — 14,869 15,245 3,615 11,630 21.00 Manufactured PFAS products (1,289) 205 205 50 155 0.28 Gain on business divestitures — (36) (36) (11) (25) (0.05) Russia exit charges (benefits) — (18) (18) 3 (21) (0.04) Divestiture costs — 496 496 118 378 0.68 Total special items (1,289) 15,516 15,892 3,775 12,117 21.87 Adjusted amounts (non-GAAP measures) $ 31,392 (4.5) % $ 6,388 20.3 % $ 6,204 $ 1,084 17.5 % $ 5,122 $ 9.24 (6) % 1 For the per share amount, this includes adjusting-out the impact of this item causing weighted average shares outstanding to be the same for both basic and diluted loss per share in periods of resulting net losses. 24 Table of Contents Year ended December 31, 2022 Sales Change Organic sales Acquisitions Divestitures Translation Total sales change Total Company 1.2 % — % (0.5) % (3.9) % (3.2) % Remove manufactured PFAS products special item impact (0.4) — — — (0.4) Adjusted total Company (non-GAAP measures) 0.8 % — % (0.5) % (3.9) % (3.6) % Transportation and Electronics 1.2 % — % (0.5) % (4.6) % (3.9) % Remove manufactured PFAS products special item impact (2.2) — — 0.5 (1.7) Adjusted Transportation and Electronics (non-GAAP measures) (1.0) % — % (0.5) % (4.1) % (5.6) % Year ended December 31, 2023 Sales Change Organic sales Acquisitions Divestitures Translation Total sales change Total Company (3.2) % 0.2 % (0.9) % (0.6) % (4.5) % Remove manufactured PFAS products special item impact — — (0.1) 0.1 — Adjusted total Company (non-GAAP measures) (3.2) % 0.2 % (1.0) % (0.5) % (4.5) % Transportation and Electronics (3.5) % 0.7 % (0.7) % (1.0) % (4.5) % Remove manufactured PFAS products special item impact — 0.2 (0.2) — — Adjusted Transportation and Electronics (non-GAAP measures) (3.5) % 0.9 % (0.9) % (1.0) % (4.5) % Sales and operating income (loss) by business segment: The following tables contain sales and operating income (loss) results by business segment for the years ended December 31, 2023 and 2022.
Free Cash Flow (non-GAAP measure): Free cash flow and free cash flow conversion are not defined under U.S. generally accepted accounting principles (GAAP). Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies.
Free Cash Flow (non-GAAP measure): Free cash flow and free cash flow conversion are not defined under U.S. generally accepted accounting principles (GAAP). Therefore, they should not be considered a substitute for income (loss) or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies.
The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M.
The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income (loss) attributable to 3M.
These ten reporting units were comprised of the following divisions: Advanced Materials, Display Materials and Systems, Electronics Materials Solutions, Health Information Systems, Industrial Adhesives and Tapes, Medical Solutions, Oral Care, Personal Safety, Separation and Purification Sciences, and Transportation Safety. 3M is a highly integrated enterprise, where businesses share technology and leverage common fundamental strengths and capabilities, thus many of 3M’s businesses could not easily be sold on a stand-alone basis. 3M’s focus on research and development has resulted in a portion of 3M’s value being comprised of internally developed businesses.
These ten reporting units were comprised of the following divisions: Abrasives, Display Materials and Systems, Electronics Materials Solutions, Health Information Systems, Industrial Adhesives and Tapes, Medical Solutions, Oral Care, Personal Safety, Separation and Purification Sciences, and Transportation Safety. 3M is a highly integrated enterprise, where businesses share technology and leverage common fundamental strengths and capabilities, thus many of 3M’s businesses could not easily be sold on a stand-alone basis. 3M’s focus on research and development has resulted in a portion of 3M’s value being comprised of internally developed businesses.
Refer to Note 3 for information on acquisitions and divestitures (including the cash payment from the Food Safety business split-off). The Company is actively considering additional acquisitions, investments and strategic alliances, and from time to time may also divest certain businesses.
Refer to Note 3 for information on acquisitions and divestitures (including the 2022 cash payment from the Food Safety business split-off). The Company is actively considering additional acquisitions, investments and strategic alliances, and from time to time may also divest certain businesses.
As discussed in Notes 4 and 15, in December 2022, as a result of 3M's commitment to a plan to exit per- and polyfluoroalkyl substance (PFAS) manufacturing, 3M recorded a charge related to impairment of long-lived assets. Underlying fair values were determined primarily using discounted cash flow models. Key assumptions included projected sales, EBITDA margins, capital expenditures, and discount rates.
As discussed in Notes 4 and 17, in December 2022, as a result of 3M's commitment to a plan to exit per- and polyfluoroalkyl substance (PFAS) manufacturing, 3M recorded a charge related to impairment of long-lived assets. Underlying fair values were determined primarily using discounted cash flow models. Key assumptions included projected sales, EBITDA margins, capital expenditures, and discount rates.
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.
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.
The estimated fair value of a reporting unit is determined based on a market approach using comparable company information such as EBITDA (earnings before interest, taxes, depreciation and amortization) multiples. 3M also performs a discounted cash flow analysis for certain reporting units where the market approach indicates additional review is warranted.
The estimated fair value of a reporting unit is determined based on a market approach using comparable company information such as EBITDA (earnings before interest, taxes, depreciation and amortization) multiples. 3M also performs a discounted cash flow analysis for certain reporting units if the market approach indicates additional review is warranted.
As of December 31, 2022, the total amount of debt issued as part of the medium-term notes program (Series F), inclusive of debt issued in February 2019 and prior years is approximately $17.6 billion (utilizing the foreign exchange rates applicable at the time of issuance for the euro denominated debt).
As of December 31, 2023, the total amount of debt issued as part of the medium-term notes program (Series F), inclusive of debt issued in February 2019 and prior years is approximately $17.6 billion (utilizing the foreign exchange rates applicable at the time of issuance for the euro denominated debt).
The primary noncontrolling interest relates to 3M India Limited, of which 3M’s effective ownership is 75 percent. PERFORMANCE BY BUSINESS SEGMENT Item 1, Business Segments, provides an overview of 3M’s business segments. In addition, disclosures relating to 3M’s business segments are provided in Note 19.
The primary noncontrolling interest relates to 3M India Limited, of which 3M’s effective ownership is 75 percent. Performance by Business Segment Item 1, Business Segments, provides an overview of 3M’s business segments. In addition, disclosures relating to 3M’s business segments are provided in Note 21.
Purchases of marketable securities and investments and proceeds from maturities and sale of marketable securities and investments are primarily attributable to certificates of deposit/time deposits, commercial paper, and other securities, which are classified as available-for-sale. Refer to Note 11 for more details about 3M’s diversified marketable securities portfolio.
Purchases of marketable securities and investments and proceeds from maturities and sale of marketable securities and investments are primarily attributable to certificates of deposit/time deposits, commercial paper, and other securities, which are classified as available-for-sale. Refer to Note 12 for more details about 3M’s diversified marketable securities portfolio.
The change to business segment operating income aligns with the update to how the CODM assesses performance and allocates resources for the Company’s business segments (see Note 19 for additional details). Information provided herein reflects the impact of these changes for all periods presented. 3M manages its operations in four business segments.
The change to business segment operating income (loss) aligns with the update to how the CODM assesses performance and allocates resources for the Company’s business segments (see Note 21 for additional details). Information provided herein reflects the impact of these changes for all periods presented. 3M manages its operations in four business segments.
On an organic sales basis: • Sales increased in stationery and office and home care, was flat in consumer health and safety, and decreased in home improvement. • Growth was impacted by softening trends in the Consumer retail business as consumers pulled back on discretionary spending and retailers took actions to reduce their inventories.
On an organic sales basis: • Sales increased in stationery and office and decreased in home improvement, and home health and auto care. • Growth was impacted by softening trends in the Consumer retail business as consumers pulled back on discretionary spending and retailers took actions to reduce their inventories.
Corporate special items also include divestiture costs, gain/loss on business divestitures (see Note 3), divestiture-related restructuring costs (see Note 5), and Russia exit costs (see Note 15). Divestiture costs include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture.
Corporate special items also include divestiture costs, gain/loss on business divestitures (see Note 3), divestiture-related restructuring costs (see Note 5), and Russia exit costs/benefits (see Note 17). Divestiture costs include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture.
Corporate Special Items Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of special items and to Note 19 for additional information on the components of corporate special items.
Corporate Special Items: Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details on the impact of special items and to Note 21 for additional information on the components of corporate special items.
Effective in the first quarter of 2022, the measure of segment operating performance used by 3M’s chief operating decision maker (CODM) changed and, as a result, 3M’s disclosed measure of segment profit/loss (business segment operating income) was updated for all comparative periods presented.
Effective in the first quarter of 2023, the measure of segment operating performance and segment composition used by 3M’s chief operating decision maker (CODM) changed and, as a result, 3M’s disclosed measure of segment profit/loss (business segment operating income (loss)) was updated for all comparative periods presented.
On an organic sales basis: • Sales increased in separation and purification, health information systems, food safety and medical solutions, and was flat in oral care. • Growth continues to be impacted by COVID-related trends on elective procedure volumes and ongoing inflationary pressures.
On an organic sales basis: • Sales increased in separation and purification, health information systems, food safety, and medical solutions and was flat in oral care. • Growth was impacted by COVID-related trends on elective procedure volumes and ongoing inflationary pressures.
Capital spending is discussed in more detail later in MD&A in the section entitled “Cash Flows from Investing Activities.” CRITICAL ACCOUNTING ESTIMATES Information regarding significant accounting policies is included in Note 1 to the consolidated financial statements.
Capital spending is discussed in more detail later in MD&A in the section entitled Cash Flows from Investing Activities . Critical Accounting Estimates Information regarding significant accounting policies is included in Note 1 to the consolidated financial statements.
In May 2016, in connection with the WKSI shelf, 3M entered into an amended and restated distribution agreement relating to the future issuance and sale (from time to time) of the Company’s medium-term notes program (Series F), up to the aggregate principal amount of $18 billion, which was an increase from the previous aggregate principal amount up to $9 billion of the same Series.
In May 2016, 3M entered into an amended and restated distribution agreement relating to the future issuance and sale (from time to time) of the Company’s medium-term notes program (Series F), up to the aggregate principal amount of $18 billion, which was an increase from the previous aggregate principal amount up to $9 billion of the same Series.
Below find a recap of free cash flow and free cash flow conversion. Refer to the preceding “Cash Flows from Operating Activities” and “Cash Flows from Investing Activities” sections for discussion of items that impacted the operating cash flow and purchases of PP&E components of the calculation of free cash flow.
Below find a recap of free cash flow and free cash flow conversion. Refer to the preceding Cash Flows from Operating Activities and Cash Flows from Investing Activities sections for discussion of items that impacted the operating cash flow and purchases of PP&E components of the calculation of free cash flow.
Business segment operating income margins decreased year-on-year due to special item costs for significant litigation primarily related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 16) resulting in a 2022 second quarter pre-tax charge of approximately $1.2 billion.
Business segment operating income margins decreased year-on-year due to special item costs for significant litigation primarily related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 18) resulting in a 2022 pre-tax charge of approximately $1.2 billion.
The reportable segments are Safety and Industrial; Transportation and Electronics; Health Care; and Consumer. 28 T able of Contents Corporate and Unallocated: In addition to these four business segments, 3M assigns certain costs to “Corporate and Unallocated,” which is presented separately in the preceding business segments table and in Note 19.
The reportable segments are Safety and Industrial; Transportation and Electronics; Health Care; and Consumer. 28 Table of Contents Corporate and Unallocated: In addition to these four business segments, 3M assigns certain costs to “Corporate and Unallocated,” which is presented separately in the preceding business segments table and in Note 21.
For the primary U.S. qualified pension plan, the expected long-term rate of return on an annualized basis for 2023 is 7.50%, an increase from 6.00% in 2022. Return on assets assumptions for international pension and other post-retirement benefit plans are calculated on a plan-by-plan basis using plan asset allocations and expected long-term rate of return assumptions.
For the primary U.S. qualified pension plan, the expected long-term rate of return on an annualized basis for 2024 is 7.75%, an increase from 7.50% in 2023. Return on assets assumptions for international pension and other post-retirement benefit plans are calculated on a plan-by-plan basis using plan asset allocations and expected long-term rate of return assumptions.
The Company expects 2023 capital spending to be approximately $1.5 billion to $1.8 billion as 3M continues to invest in growth, productivity and sustainability. 3M records capital-related government grants earned as reductions to the cost of property, plant and equipment; and associated unpaid liabilities and grant proceeds receivable are considered non-cash changes in such balances for purposes of preparation of statement of cash flows. 39 T able of Contents 3M invests in renewal and maintenance programs, which pertain to cost reduction, cycle time, maintaining and renewing current capacity, eliminating pollution, and compliance.
The Company expects 2024 capital spending to be approximately $1.5 billion to $1.7 billion as 3M continues to invest in growth, productivity and sustainability. 3M records capital-related government grants earned as reductions to the cost of property, plant and equipment; and associated unpaid liabilities and grant proceeds receivable are considered non-cash changes in such balances for purposes of preparation of statement of cash flows. 3M invests in renewal and maintenance programs, which pertain to cost reduction, cycle time, maintaining and renewing current capacity, eliminating pollution, and compliance.
Additional detail and discussion of international plan asset returns and discount rates is provided in Note 13 (Pension and Postretirement Benefit Plans). 3M expects to contribute approximately $100 million to $200 million of cash to its global defined benefit pension and postretirement plans in 2023.
Additional detail and discussion of international plan asset returns and discount rates is provided in Note 14 (Pension and Postretirement Benefit Plans). 3M expects to contribute approximately $100 million to $200 million of cash to its global defined benefit pension and postretirement plans in 2024.
Following the annual impairment test, as a result of 3M's December 2022 announced commitment to a plan to exit per- and polyfluoroalkyl substance (PFAS) manufacturing as described in Notes 4 and 15, 3M tested the Advanced Materials and Electronics Materials Solutions reporting units (within the Transportation and Electronics business) for impairment resulting in a goodwill impairment charge related to the Advanced Materials reporting unit. 3M will continue to monitor its reporting units and asset groups in 2023 for any triggering events or other indicators of impairment.
As a result of 3M's December 2022 announced commitment to a plan to exit per- and polyfluoroalkyl substance (PFAS) manufacturing as described in Notes 4 and 17, 3M tested the Advanced Materials and Electronics Materials Solutions reporting units (within the Transportation and Electronics business) for impairment resulting in a goodwill impairment charge related to the Advanced Materials reporting unit. 3M will continue to monitor its reporting units and asset groups in 2024 for any triggering events or other indicators of impairment.
Note 13 provides the weighted averages of these assumptions as of applicable dates and for respective periods and additional information on how the rates were determined. 34 T able of Contents Discount rate The defined benefit pension and postretirement obligation represents the present value of the benefits that employees are entitled to in the future for services already rendered as of the measurement date.
Note 14 provides the weighted averages of these assumptions as of applicable dates and for respective periods and additional information on how the rates were determined. Discount rate The defined benefit pension and postretirement obligation represents the present value of the benefits that employees are entitled to in the future for services already rendered as of the measurement date.
See additional information in Note 19. 3M's disclosed disaggregated revenue was also updated as a result of the changes in segment reporting. See additional information in Note 2. • Changes to non-GAAP measures - certain amounts adjusted for special items. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below for additional information.
See additional information in Note 21. 3M's disclosed disaggregated revenue was also updated as a result of these changes. See additional information in Note 2. • Changes to non-GAAP measures - certain amounts adjusted for special items. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below for additional information.
Additionally, contractual capital commitments represent a small part of the Company’s expected capital spending. 41 T able of Contents FINANCIAL INSTRUMENTS The Company enters into foreign exchange forward contracts, options and swaps to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies and to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances.
Additionally, contractual capital commitments represent a small part of the Company’s expected capital spending. 39 Table of Contents Financial Instruments 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 and to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances.
The Company accrues an estimated liability for legal proceeding claims that are both probable and reasonably estimable in accordance with Accounting Standard Codification (ASC) 450, Contingencies . Please refer to the section entitled “Process for Disclosure and Recording of Liabilities Related to Legal Proceedings” (contained in “Legal Proceedings” in Note 16) for additional information about such estimates.
The Company accrues an estimated liability for legal proceeding claims that are both probable and reasonably estimable in accordance with Accounting Standard Codification (ASC) 450, Contingencies . Please refer to the section entitled Process for Disclosure and Recording of Liabilities Related to Legal Proceedings (contained in Legal Proceedings in Note 18) for additional information about such estimates.
Divestiture-related restructuring actions: • In the third quarter of 2022, following the split-off of the Food Safety business, and in 2020, following the divestiture of the Drug Delivery business, (see Note 3) management approved and committed to undertake certain restructuring actions addressing corporate functional costs across 3M in relation to the magnitude of amounts previously allocated to the divested businesses.
Divestiture-related restructuring actions: • In the third quarter of 2022, following the split-off of the Food Safety business, management approved and committed to undertake certain restructuring actions addressing corporate functional costs across 3M in relation to the magnitude of amounts previously allocated to the divested businesses.
The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2023. 3M expects global defined benefit pension and postretirement expense in 2023 to decrease by approximately $30 million pre-tax when compared to 2022.
The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2024. 3M expects global defined benefit pension and postretirement expense in 2024 to increase by approximately $75 million pre-tax when compared to 2023.
Net Income (Loss) Attributable to Noncontrolling Interest: (Millions) 2022 2021 Net income (loss) attributable to noncontrolling interest $ 14 $ 8 Net income (loss) attributable to noncontrolling interest represents the elimination of the income or loss attributable to non-3M ownership interests in 3M consolidated entities.
Net Income (Loss) Attributable to Noncontrolling Interest: (Millions) 2023 2022 Net income (loss) attributable to noncontrolling interest $ 16 $ 14 Net income (loss) attributable to noncontrolling interest represents the elimination of the income or loss attributable to non-3M ownership interests in 3M consolidated entities.
Provision for Income Taxes: (Percent of pre-tax income) 2022 2021 Effective tax rate 9.6 % 17.8 % Factors that impacted the tax rates between years are further discussed in the Overview section above and in Note 10.
Provision (benefit) for Income Taxes: (Percent of pre-tax income/loss) 2023 2022 Effective tax rate 27.8 % 9.6 % Factors that impacted the tax rates between years are further discussed in the Overview section above and in Note 10.
Assessments of Goodwill: The Company makes certain estimates and judgments in impairment assessments of goodwill. As of December 31, 2022, 3M goodwill totaled approximately $12.8 billion.
Assessments of Goodwill: The Company makes certain estimates and judgments in impairment assessments of goodwill. As of December 31, 2023, 3M goodwill totaled approximately $12.9 billion.
Based on the annual test in the fourth quarter of 2022 completed as of October 1, 2022, no goodwill impairment was indicated for any of the reporting units. As of October 1, 2022, 3M had 21 primary reporting units, with ten reporting units accounting for approximately 94 percent of the goodwill.
Based on the annual test in the fourth quarter of 2023 completed as of October 1, 2023, no goodwill impairment was indicated for any of the reporting units. As of October 1, 2023, 3M had 20 primary reporting units, with ten reporting units accounting for approximately 95 percent of the goodwill.
These balances are invested in bank instruments and other high-quality fixed income securities. At December 31, 2021, 3M had $4.8 billion of cash, cash equivalents and marketable securities, of which approximately $3.1 billion was held by the Company’s foreign subsidiaries and $1.7 billion was held by the United States.
Cash, cash equivalents and marketable securities: At December 31, 2023, 3M had $6.0 billion of cash, cash equivalents and marketable securities, of which approximately $3.2 billion was held by the Company’s foreign subsidiaries and approximately $2.8 billion was held in the United States. These balances are invested in bank instruments and other high-quality fixed income securities.
Decreases in debt were largely due to the repayments of 500 million euros and $600 million aggregate principal amounts of fixed-rate medium-term notes in February 2022 and June 2022, respectively. The Company had no commercial paper outstanding at December 31, 2022 and 2021.
Refer to Note 13 for more detail regarding debt. 2022 Debt Activity : Decreases in debt were largely due to the repayments of 500 million euros and $600 million aggregate principal amounts of fixed-rate medium-term notes in February 2022 and June 2022, respectively. The Company had no commercial paper outstanding at December 31, 2022 and 2021.
The Company defines net debt as total debt less the total of cash, cash equivalents and current and long-term marketable securities. 3M believes net debt is meaningful to investors as 3M considers net debt and its components to be important indicators of liquidity and financial position. The following table provides net debt as of December 31, 2022 and 2021.
The Company defines net debt as total debt less the total of cash, cash equivalents and current and long-term marketable securities. 3M believes net debt is meaningful to investors as 3M considers net debt and its components to be important indicators of liquidity and financial position.
Capital Spending/Net Property, Plant and Equipment: Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency. 3M is increasing its investment in manufacturing and sourcing capability in order to more closely align its product capability with its sales in major geographic areas in order to best serve its customers throughout the world with proprietary, automated, efficient, safe and sustainable processes.
The above table includes the impact of acquisitions, net of divestitures and other actions. 33 Table of Contents Capital Spending/Net Property, Plant and Equipment: Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency. 3M is increasing its investment in manufacturing and sourcing capability in order to more closely align its product capability with its sales in major geographic areas in order to best serve its customers throughout the world with proprietary, automated, efficient, safe and sustainable processes.
Other corporate expense-net includes items such as net costs related to limited unallocated corporate staff and centrally managed material resource centers of expertise costs, corporate philanthropic activity, and other net costs that 3M may choose not to allocate directly to its business segments.
Other corporate expense-net includes items such as net costs related to limited unallocated corporate staff and centrally managed material resource centers of expertise costs, corporate philanthropic activity, gains/losses from sales of property, plant and equipment and other assets, and other net costs that 3M may choose not to allocate directly to its business segments.
Refer to the preceding “Results of Operations” section for discussion of items that impacted the net income attributable to 3M component of the calculation of free cash flow conversion.
Refer to the preceding Results of Operations section for discussion of items that impacted the net income (loss) attributable to 3M component of the calculation of free cash flow conversion.
Business segment operating income margins decreased year-on-year as a result of increased raw materials, logistics and outsourced hardgoods manufacturing costs along with manufacturing productivity headwinds and investments in the business, partially offset by sales growth (including selling price actions), strong spending discipline and restructuring actions. Year 2021 results: Sales in Consumer were up 10.8 percent in U.S. dollars.
Business segment operating income margins decreased year-on-year as a result of increased raw materials, logistics and outsourced hardgoods manufacturing costs along with manufacturing productivity headwinds and investments in the business, partially offset by sales growth (including selling price actions), strong spending discipline and restructuring actions.
Year ended December 31, (Millions) 2022 2021 Major GAAP Cash Flow Categories Net cash provided by (used in) operating activities $ 5,591 $ 7,454 Net cash provided by (used in) investing activities (1,046) (1,317) Net cash provided by (used in) financing activities (5,350) (6,145) Free Cash Flow (non-GAAP measure) Net cash provided by (used in) operating activities $ 5,591 $ 7,454 Purchases of property, plant and equipment (1,749) (1,603) Free cash flow 3,842 5,851 Net income attributable to 3M $ 5,777 $ 5,921 Free cash flow conversion 66 % 99 % Material Cash Requirements from Known Contractual and Other Obligations: 3M’s material cash requirements from known contractual and other obligations primarily relate to following, for which information on both a short-term and long-term basis is provided in the indicated notes to the consolidated financial statements: • Tax obligations—Refer to Note 10. • Debt—Refer to Note 12.
Year ended December 31, (Millions) 2023 2022 Major GAAP Cash Flow Categories Net cash provided by (used in) operating activities $ 6,680 $ 5,591 Net cash provided by (used in) investing activities (1,207) (1,046) Net cash provided by (used in) financing activities (3,147) (5,350) Free Cash Flow (non-GAAP measure) Net cash provided by (used in) operating activities $ 6,680 $ 5,591 Purchases of property, plant and equipment (1,615) (1,749) Free cash flow 5,065 3,842 Net income (loss) attributable to 3M $ (6,995) $ 5,777 Free cash flow conversion N/M 66 % Material Cash Requirements from Known Contractual and Other Obligations: 3M’s material cash requirements from known contractual and other obligations primarily relate to following, for which information on both a short-term and long-term basis is provided in the indicated notes to the consolidated financial statements: • Tax obligations—Refer to Note 10. • Debt—Refer to Note 13.
Refer to the section entitled “Performance by Business Segment” later in MD&A for additional discussion concerning 2022 versus 2021 results, including Corporate and Unallocated.
Refer to the section entitled Performance by Business Segment later in MD&A for additional discussion concerning 2023 versus 2022 results, including Corporate and Unallocated.
As discussed in Note 3, in July 2022, 3M announced its intention to spin off the Health Care business as a separate public company. 3M expects to initially retain a 19.9% ownership position in the Health Care business. Year 2021 results: Sales in Health Care were up 9.8 percent in U.S. dollars.
As discussed in Note 3, in the third quarter of 2022, 3M announced its intention to spin off the Health Care business as a separate public company. 3M expects to initially retain a 19.9% ownership position in the Health Care business. Year 2022 results: Sales in Health Care were down 2.0 percent in U.S. dollars.
Operating Business Segments: Information related to 3M’s business segments is presented in the tables that follow with additional context in the corresponding narrative below the tables. 29 T able of Contents Safety and Industrial Business (33.9% of consolidated sales): 2022 2021 Sales (millions) $ 11,604 $ 11,981 Sales change analysis: Organic sales 1.0 % 7.3 % Translation (4.2) 1.9 Total sales change (3.2 %) 9.2 % Business segment operating income (loss) (millions) $ 1,199 $ 2,466 Percent change (51.4 %) (4.7 %) Percent of sales 10.3 % 20.6 % Adjusted business segment operating income (millions) (non-GAAP measure) $ 2,613 $ 2,715 Percent change (3.7) % (2.8) % Percent of sales 22.5 % 22.7 % The preceding table also displays business segment operating income (loss) information adjusted for special items.
Operating Business Segments: Information related to 3M’s business segments is presented in the tables that follow with additional context in the corresponding narrative below the tables. 29 Table of Contents Safety and Industrial Business (33.5% of consolidated sales): 2023 2022 Sales (millions) $ 10,956 $ 11,604 Sales change analysis: Organic sales (5.1) % 1.0 % Translation (0.5) (4.2) Total sales change (5.6) % (3.2) % Business segment operating income (millions) $ 2,324 $ 1,135 Percent change 104.7 % (53.9) % Percent of sales 21.2 % 9.8 % Adjusted business segment operating income (millions) (non-GAAP measure) $ 2,408 $ 2,549 Percent change (5.5) % (5.9) % Percent of sales 22.0 % 22.0 % The preceding table also displays business segment operating income (loss) information adjusted for special items.
During the Aearo chapter 11 bankruptcy period (which began in July 2022 — see Note 16), net costs related to Combat Arms Earplugs and Aearo-respirator mask/asbestos matters are reflected as corporate special items in Corporate and Unallocated while those associated with non-Aearo respirator mask/asbestos matters continue to be reflected as special items in the Safety and Industrial business segment.
During the voluntary Aearo chapter 11 bankruptcy period (which began in July 2022 and ended in June 2023 —see Note 18), 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.
Year ended December 31, 2022 Americas Asia Pacific Europe, Middle East & Africa Other Unallocated Worldwide Net sales (millions) $ 18,400 $ 9,901 $ 5,928 $ — $ 34,229 % of worldwide sales 53.8 % 28.9 % 17.3 % 100.0 % Components of net sales change: Organic sales 2.6 0.3 (0.6) 1.2 Divestitures (0.6) (0.4) (0.6) (0.5) Translation (0.3) (6.5) (9.8) (3.9) Total sales change 1.7 % (6.6) % (11.0) % (3.2) % Year ended December 31, 2021 Americas Asia Pacific Europe, Middle East & Africa Other Unallocated Worldwide Net sales (millions) $ 18,097 $ 10,600 $ 6,660 $ (2) $ 35,355 % of worldwide sales 51.2 % 30.0 % 18.8 % 100.0 % Components of net sales change: Organic sales 9.8 8.5 6.3 8.8 Divestitures (0.6) — (1.1) (0.5) Translation 0.3 2.3 3.8 1.6 Total sales change 9.5 % 10.8 % 9.0 % 9.9 % 25 T able of Contents Additional information beyond what is included in the preceding tables is as follows: • For the full year 2022, in the Americas geographic area, U.S. total sales were flat which included increased organic sales of 1 percent.
Year ended December 31, 2023 Americas Asia Pacific Europe, Middle East & Africa Other Unallocated Worldwide Net sales (millions) $ 18,375 $ 8,463 $ 5,843 $ — $ 32,681 % of worldwide sales 56.2 % 25.9 % 17.9 % 100.0 % Components of net sales change: Organic sales 0.4 (10.5) (2.2) (3.2) Acquisitions 0.3 0.1 — 0.2 Divestitures (0.9) (0.9) (0.9) (0.9) Translation 0.1 (3.2) 1.7 (0.6) Total sales change (0.1) % (14.5) % (1.4) % (4.5) % Year ended December 31, 2022 Americas Asia Pacific Europe, Middle East & Africa Other Unallocated Worldwide Net sales (millions) $ 18,400 $ 9,901 $ 5,928 $ — $ 34,229 % of worldwide sales 53.8 % 28.9 % 17.3 % 100.0 % Components of net sales change: Organic sales 2.6 0.3 (0.6) 1.2 Divestitures (0.6) (0.4) (0.6) (0.5) Translation (0.3) (6.5) (9.8) (3.9) Total sales change 1.7 % (6.6) % (11.0) % (3.2) % Additional information beyond what is included in the preceding tables is as follows: • For 2023, in the Americas geographic area, U.S. total sales were flat which included flat organic sales.
Divestiture costs: • These include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture. 22 T able of Contents Gain on business divestitures: • In 2022, 3M recorded a gain related to the split-off and combination of its Food Safety business with Neogen Corporation.
Refer to Note 3 for further details. • In 2022, 3M recorded a gain related to the split-off and combination of its Food Safety business with Neogen Corporation. Divestiture costs: • These include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture.
Refer to “Critical Accounting Estimates” within MD&A and Note 13 (Pension and Postretirement Benefit Plans) for additional information concerning 3M’s pension and post-retirement plans. 26 T able of Contents RESULTS OF OPERATIONS Net Sales: Refer to the preceding “Overview” section and the “Performance by Business Segment” section later in MD&A for additional discussion of sales change.
Refer to “Critical Accounting Estimates” within MD&A and Note 14 (Pension and Postretirement Benefit Plans) for additional information concerning 3M’s pension and post-retirement plans. Results of Operations Net Sales: Refer to the preceding Overview section and the Performance by Business Segment section later in MD&A for additional discussion of sales change.
Refer to Note 5 for further details. Russia exit charges: • In the third quarter of 2022, 3M recorded a charge primarily related to impairment of net assets in Russia in connection with management's committed exit and disposal plan. Refer to Note 15 for further details.
Russia exit charges/benefits: • In the second quarter of 2023, 3M recorded a gain on final disposal of net assets in Russia. Previously, in the third quarter of 2022, 3M recorded a charge primarily related to impairment of these assets in connection with management's committed exit and disposal plan. Refer to Note 17 for further details.
Foreign exchange impacts: • Foreign currency impacts (net of hedging) decreased operating income by approximately $271 million and $103 million (or a decrease in pre-tax earnings of approximately $280 million and $119 million) year-on-year for 2022 and 2021, respectively.
Foreign exchange impacts: • Foreign currency impacts (net of hedging) increased operating loss by approximately $162 million and decreased operating income by approximately $271 million (or an increase of pre-tax loss by approximately $159 million and a decrease in pre-tax earnings of approximately $280 million) year-on-year for 2023 and 2022, respectively.
Goodwill is tested for impairment annually in the fourth quarter of each year and is tested between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired.
Goodwill is tested for impairment annually in the fourth quarter of each year and is tested between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. If future non-cash asset impairment charges are taken, 3M would expect that only a portion of the goodwill would be impaired.
In 2023, defined benefit pension and postretirement service cost expense is anticipated to total approximately $270 million while non-service pension and postretirement net benefit costs is anticipated to be a benefit of approximately $125 million, for a total consolidated defined benefit pre-tax pension and postretirement expense of approximately $145 million, a decrease of approximately $30 million compared to 2022.
In 2024, defined benefit pension and postretirement service cost expense is anticipated to total approximately $250 million while non-service pension and postretirement net benefit costs is anticipated to be a benefit of approximately $30 million, for a total consolidated defined benefit pre-tax pension and postretirement expense of approximately $220 million, an increase of approximately $75 million compared to 2023.
In the Asia Pacific geographic area, China total sales decreased 6 percent which included decreased organic sales of 3 percent. In Japan, total sales decreased 12 percent which included increased organic sales of 2 percent. • For the full year 2021, in the Americas geographic area, U.S. total sales increased 8 percent which included increased organic sales of 8 percent.
In the Asia Pacific geographic area, China total sales decreased 6 percent which included decreased organic sales of 3 percent. In Japan, total sales decreased 12 percent which included increased organic sales of 2 percent.
Adjusting for special item costs for significant litigation (non-GAAP measure), business segment operating income margins decreased year-on-year as displayed above. 30 T able of Contents Transportation and Electronics Business (26.0% of consolidated sales): 2022 2021 Sales (millions) $ 8,902 $ 9,262 Sales change analysis: Organic sales 1.2 % 8.7 % Divestitures (0.5) — Translation (4.6) 1.5 Total sales change (3.9) % 10.2 % Business segment operating income (millions) $ 1,012 $ 1,880 Percent change (46.2) % 10.6 % Percent of sales 11.4 % 20.3 % Adjusted business segment operating income (millions) (non-GAAP measure) $ 1,812 $ 1,880 Percent change (3.6) % 10.6 % Percent of sales 20.4 % 20.3 % The preceding table also displays business segment operating income (loss) information adjusted for special items.
Adjusting for special item costs for significant litigation (non-GAAP measure), business segment operating income margins decreased year-on-year as displayed above. 30 Table of Contents Transportation and Electronics Business (26.0% of consolidated sales): 2023 2022 Sales (millions) $ 8,501 $ 8,902 Sales change analysis: Organic sales (3.5) % 1.2 % Acquisitions 0.7 — Divestitures (0.7) (0.5) Translation (1.0) (4.6) Total sales change (4.5) % (3.9) % Business segment operating income (millions) $ 1,312 $ 973 Percent change 34.9 % (48.0) % Percent of sales 15.4 % 10.9 % Adjusted sales (millions) (non-GAAP measure) $ 7,212 $ 7,551 Sales change analysis: Organic sales (3.5) % (1.0) % Acquisitions 0.9 — Divestitures (0.9) (0.5) Translation (1.0) (4.1) Total sales change (4.5) % (5.6) % Adjusted business segment operating income (millions) (non-GAAP measure) $ 1,517 $ 1,604 Percent change (5.4) % (7.6) % Percent of sales 21.0 % 21.2 % The preceding table also displays business segment sales (and sales change) and operating income (loss) information adjusted for special items.
NEW ACCOUNTING PRONOUNCEMENTS Information regarding new accounting pronouncements is included in Note 1 to the Consolidated Financial Statements. 36 T able of Contents FINANCIAL CONDITION AND LIQUIDITY The strength and stability of 3M’s business model and strong free cash flow capability, together with proven capital markets access, provide financial flexibility to deploy capital in accordance with the Company's stated priorities and meet needs associated with contractual commitments and other obligations.
Financial Condition and Liquidity The strength and stability of 3M’s business model and strong free cash flow capability, together with proven capital markets access, provide financial flexibility to deploy capital in accordance with the Company's stated priorities and meet needs associated with contractual commitments and other obligations.
Goodwill Impairment Expense: As a result of 3M's commitment to exit per- and polyfluoroalkyl substance (PFAS) manufacturing, 3M recorded a goodwill impairment charge related to the Advanced Materials reporting unit (within the Transportation and Electronics business).
Refer to Note 3 for further details. 27 Table of Contents Goodwill Impairment Expense: As a result of 3M's commitment to exit per- and polyfluoroalkyl substance (PFAS) manufacturing, 3M recorded a goodwill impairment charge related to the Advanced Materials reporting unit (within the Transportation and Electronics business) in 2022. Refer to Note 17 for further details.
For Safety and Industrial these adjustments include net costs for respirator mask/asbestos (Aearo-related and non-Aearo related) and Combat Arms Earplugs litigation matters.
For Safety and Industrial these adjustments include net costs related to respirator mask/asbestos (Aearo-related and non-Aearo related).
Postretirement Medical December 31, 2022 Liability: Benefit obligation 5.18 % 4.39 % 5.13 % 2023 Net Periodic Benefit Cost Components: Service cost 5.27 % 4.06 % 5.26 % Interest cost 5.11 % 4.39 % 5.05 % Expected return on plan assets The expected return on plan assets for the primary U.S. qualified pension plan is based on strategic asset allocation of the plan, long-term capital market return expectations, and expected performance from active investment management.
Postretirement Medical December 31, 2023 Liability: Benefit obligation 4.98 % 3.99 % 4.94 % 2024 Net Periodic Benefit Cost Components: Service cost 5.08 % 3.67 % 5.08 % Interest cost 4.97 % 3.99 % 4.87 % Expected return on plan assets The expected return on plan assets for the primary U.S. qualified pension plan is based on strategic asset allocation of the plan, long-term capital market return expectations, and expected performance from active investment management.
If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary.
If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. New Accounting Pronouncements Information regarding new accounting pronouncements is included in Note 1 to the Consolidated Financial Statements.
Gain on Business Divestitures: In the third quarter of 2022, 3M recorded a pre-tax gain of $2.7 billion ($2.7 billion after tax) related to the split-off and combination of its Food Safety business with Neogen Corporation. Refer to Note 3 for further details.
In 2022, 3M recorded a pre-tax gain of $2.7 billion related to the split-off and combination of its Food Safety business with Neogen Corporation.
Research, Development and Related Expenses: R&D, measured as a percent of sales, decreased in 2022 when compared to the same period last year. 3M continues to invest in a range of R&D activities from application development, product and manufacturing support, product development and technology development aimed at disruptive innovations.
Research, Development and Related Expenses: R&D, measured as a percent of sales, increased in 2023 when compared to 2022. 3M continues to invest in a range of R&D activities from application development, product and manufacturing support, product development and technology development aimed at disruptive innovations. R&D was also impacted by restructuring charges.
Working capital (non-GAAP measure): December 31, (Millions) 2022 2021 Change Current assets $ 14,688 $ 15,403 $ (715) Less: Current liabilities 9,523 9,035 488 Working capital (non-GAAP measure) $ 5,165 $ 6,368 $ (1,203) Various assets and liabilities, including cash and short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs.
Working capital (non-GAAP measure): December 31, (Millions) 2023 2022 Change Current assets $ 16,379 $ 14,688 $ 1,691 Less: Current liabilities 15,297 9,523 5,774 Working capital (non-GAAP measure) $ 1,082 $ 5,165 $ (4,083) Various assets and liabilities, including cash and short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs.
In the case of more liquid currencies, 3M hedges a portion of its aggregate exposure, using a 12, 24 or 36 month horizon, depending on the currency in question. For less liquid currencies, financial hedging is frequently more expensive with more limitations on tenor.
In the case of more liquid currencies, 3M hedges a portion of its aggregate exposure, using a 12, 24 or 36 month horizon, depending on the currency. For less liquid currencies, financial hedging is frequently more expensive with more limitations on tenor. Thus, this risk is largely managed via local operational actions using natural hedging tools as discussed above.
Contracts will be modified to apply a new reference rate where applicable. Effective February 10, 2020, the Company updated its “well-known seasoned issuer” (WKSI) shelf registration statement, which registers an indeterminate amount of debt or equity securities for future issuance and sale. This replaced 3M’s previous shelf registration dated February 24, 2017.
Effective February 8, 2023, the Company updated its “well-known seasoned issuer” (WKSI) shelf registration statement, which registers an indeterminate amount of debt or equity securities for future issuance and sale. This replaced 3M’s previous shelf registration dated February 10, 2020.
The lower year-on-year benefit in 2022 was primarily due to higher interest costs due to higher discount rates as of the year-end 2021, lower expected returns on plan assets for 2023, partially offset by a reduction in actuarial loss amortization, which was driven by the lower discount rates. Refer to Note 13 for additional details.
The non-service pension and postretirement net benefit decreased $119 million in 2023. The lower year-on-year benefit in 2023 was primarily due to higher interest costs due to higher discount rates as of the year-end 2022, partially offset by a reduction in actuarial loss amortization, which was driven by the lower discount rates. Refer to Note 14 for additional details.
Cost of Sales: Cost of sales, measured as a percent of sales, increased in 2022 when compared to the same period last year.
Cost of Sales: Cost of sales, measured as a percent of sales, increased in 2023 when compared to 2022.
On an organic sales basis: • Sales increased in automotive and aerospace, commercial solutions and advanced materials, and decreased in transportation safety and electronics. • Growth was held back by weaker consumer electronics end-market demand and ongoing impacts of semiconductor supply chain constraints on automotive markets.
On an organic sales basis: • Sales increased in automotive and aerospace, commercial solutions, and advanced materials and decreased in electronics, and transportation safety. • Growth was held back by weaker consumer electronics end-market demand and ongoing impacts of semiconductor supply chain constraints on automotive markets. 31 Table of Contents Divestitures: • Divestiture impact relates to lost Transportation and Electronics sales year-on-year from deconsolidation of the Aearo Entities in July 2022.
During the bankruptcy period, net costs related to Combat Arms Earplugs and Aearo-respirator mask/asbestos matters are reflected as corporate special items in Corporate and Unallocated while those associated with non-Aearo respirator mask/asbestos matters continue to be reflected as special items in the Safety and Industrial business segment.
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.
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 the global pandemic and related effects associated with the coronavirus (COVID-19).
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.
Changes in underlying market and overall economic conditions, including changes in competitive conditions and customer preferences; operational execution of activities associated with these asset groupings; and items mentioned in Item 1A—Risk Factors with respect to 3M’s exit of PFAS manufacturing, among other factors, make these estimates subject to uncertainty.
Changes in underlying market and overall economic conditions, including changes in competitive conditions and customer preferences; operational execution of activities associated with these asset groupings; and items mentioned in Item 1A—Risk Factors with respect to 3M’s exit of PFAS manufacturing, among other factors, make these estimates subject to uncertainty. 35 Table of Contents Uncertainty in Income Tax Positions: The extent of 3M’s operations involves dealing with uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions.
Uncertainty in Income Tax Positions: The extent of 3M’s operations involves dealing with uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits.
The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits.
Income from Unconsolidated Subsidiaries, Net of Taxes: (Millions) 2022 2021 Income (loss) from unconsolidated subsidiaries, net of taxes $ 11 $ 10 Income (loss) from unconsolidated subsidiaries, net of taxes, is attributable to the Company’s accounting under the equity method for ownership interests in certain entities such as Kindeva following 3M's divestiture of the drug delivery business in 2020.
Income from Unconsolidated Subsidiaries, Net of Taxes: (Millions) 2023 2022 Income (loss) from unconsolidated subsidiaries, net of taxes $ 18 $ 11 Income (loss) from unconsolidated subsidiaries, net of taxes, is attributable to the Company’s accounting under the equity method for ownership interests in certain entities.
Year ended December 31, 2022 2021 Percent of net sales Earnings per diluted share Percent of net sales Earnings per diluted share Same period last year 20.8 % $ 10.12 22.3 % $ 9.36 Net costs for significant litigation 1.4 0.61 1.0 0.37 Gain on business divestitures — — (1.2) (0.52) Divestiture-related restructuring actions — — 0.2 0.08 Total special items 1.4 0.61 — (0.07) Same period last year, excluding special items 22.2 10.73 22.3 9.29 Increase/(decrease) due to: Total organic growth/productivity and other 1.0 0.56 0.7 1.07 Raw material impact (2.4) (1.13) (0.8) (0.27) Divestitures — (0.05) — (0.05) Foreign exchange impacts — (0.39) — 0.16 Other expense (income), net N/A 0.02 N/A 0.27 Income tax rate N/A 0.06 N/A 0.32 Shares of common stock outstanding N/A 0.30 N/A (0.06) Current period, excluding special items 20.8 10.10 22.2 10.73 Net costs for significant litigation (6.7) (3.20) (1.4) (0.61) Divestiture costs (0.2) (0.08) — — Gain on business divestitures 8.0 4.73 — — Divestiture-related restructuring actions (0.1) (0.05) — — Russia exit charges (0.3) (0.20) — — PFAS manufacturing exit costs (2.4) (1.12) — — Total special items (1.7) 0.08 (1.4) (0.61) Current period 19.1 % $ 10.18 20.8 % $ 10.12 The Company refers to various "adjusted" amounts or measures on an “adjusted basis”.
Earnings (loss) per diluted share Year ended December 31, 2023 2022 Same period last year $ 10.18 $ 10.12 Net costs for significant litigation 3.20 0.61 Divestiture costs 0.08 — Gain on business divestitures (4.73) — Divestiture-related restructuring actions 0.05 — Russia exit charges 0.20 — Manufactured PFAS products 0.90 (0.18) Total special items (0.30) 0.43 Same period last year, excluding special items $ 9.88 $ 10.55 Increase/(decrease) due to: Total organic growth/productivity and other 0.30 0.22 Restructuring and related charges (0.62) 0.16 Raw material impact (0.24) (0.99) Foreign exchange impacts (0.17) (0.39) Acquisitions/divestitures (0.06) (0.05) Other expense (income), net (0.06) 0.02 Income tax rate — 0.06 Shares of common stock outstanding 0.21 0.30 Current period, excluding special items 9.24 9.88 Net costs for significant litigation (21.00) (3.20) Divestiture costs (0.68) (0.08) Gain on business divestitures 0.05 4.73 Divestiture-related restructuring actions — (0.05) Russia exit (charges) benefits 0.04 (0.20) Manufactured PFAS products (0.28) (0.90) Total special items (21.87) 0.30 Current period $ (12.63) $ 10.18 The Company refers to various "adjusted" amounts or measures on an “adjusted basis.” These exclude special items.
Operating Expenses: (Percent of net sales) 2022 2021 Change Cost of sales 56.2 % 53.2 % 3.0 % Selling, general and administrative expenses (SG&A) 26.5 20.4 6.1 Research, development and related expenses (R&D) 5.4 5.6 (0.2) Gain on business divestitures (8.0) — (8.0) Goodwill impairment expense 0.8 — 0.8 Operating income margin 19.1 % 20.8 % (1.7) % The Company is continuing the ongoing deployment of an enterprise resource planning (ERP) system on a worldwide basis, with these investments impacting cost of sales, SG&A, and R&D.
Operating Expenses: (Percent of net sales) 2023 2022 Change Cost of sales 56.5 % 56.2 % 0.3 % Selling, general and administrative expenses (SG&A) 65.9 26.5 39.4 Research, development and related expenses (R&D) 5.6 5.4 0.2 Gain on business divestitures (0.1) (8.0) 7.9 Goodwill impairment expense — 0.8 (0.8) Operating income (loss) margin (27.9) % 19.1 % (47.0) % The Company continues to make investments in the implementation of new business systems and solutions, including enterprise resource planning, with these investments impacting cost of sales, SG&A, and R&D.
An impairment loss would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit, and the loss would equal that difference.
At 3M, reporting units correspond to a division. 3M did not combine any of its reporting units for impairment testing. An impairment loss would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit, and the loss would equal that difference.
Net of the Company’s hedging strategy, foreign currency negatively impacted earnings in full year 2022 compared to the same period last year. 3M utilizes a number of tools to manage currency risk related to earnings including natural hedges such as pricing, productivity, hard currency, hard currency-indexed billings, and localizing source of supply. 3M also uses financial hedges to mitigate currency risk.
Managing currency risks: 3M utilizes a number of tools to manage currency risk related to earnings including natural hedges such as pricing, productivity, hard currency, hard currency-indexed billings, and localizing source of supply. 3M also uses financial hedges to mitigate currency risk.
For Transportation and Electronics these adjustments include PFAS manufacturing exit costs. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details. Year 2022 results: Sales in Transportation and Electronics were down 3.9 percent in U.S. dollars.
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. Year 2023 results: Sales in Transportation and Electronics were down 4.5 percent in U.S. dollars.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+5 added−12 removed5 unchanged
Biggest changeCommodity Prices Risk: The Company manages commodity price risks through negotiated supply contracts and price protection agreements. 42 T able of Contents Value At Risk: The value at risk analysis is performed annually to assess the Company’s sensitivity to changes in currency rates, interest rates, and commodity prices.
Biggest changeCommodity Prices Risk: The Company manages commodity price risks through negotiated supply contracts and price protection agreements. 3M does not enter into derivative financial instruments associated with commodities. 40 Table of Contents
Foreign Exchange Rates Risk: Foreign currency exchange rates and fluctuations in those rates may affect the Company’s net investment in foreign subsidiaries and may cause fluctuations in cash flows related to foreign denominated transactions. 3M is also exposed to the translation of foreign currency earnings to the U.S. dollar.
Foreign Currency Exchange Rates Risk: Foreign currency exchange rates and fluctuations in those rates may affect the Company’s net investment in foreign subsidiaries and may cause fluctuations in cash flows related to foreign denominated transactions. 3M is also exposed to the translation of foreign currency earnings to the U.S. dollar.
As circumstances warrant, the Company also uses foreign currency forward contracts and foreign currency denominated debt as hedging instruments to hedge portions of the Company’s net investments in foreign operations.
As circumstances warrant, the Company also uses foreign exchange contracts and foreign currency denominated debt as hedging instruments to hedge portions of the Company’s net investments in foreign operations.
Removed
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.
Added
To quantify 3M’s primary market risk exposure, the Company performs a sensitivity analysis based on hypothetical changes in foreign currency spot exchange rates and interest rates as further described in the sections below. Note also that hypothetical changes in these rates were not applied to cash equivalents, accounts receivable, and accounts payable, because of the short-term nature of these instruments.
Removed
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. The Company does not anticipate nonperformance by any of these counterparties.
Added
Further, hypothetical changes were not applied to available-for-sale marketable securities as unrealized and realized gains or losses thereon are historically not material. 3M changed its methodology for quantifying market risk exposure in 2023 (previously utilized a value-at-risk analysis) to better align with how the Company manages its risk exposure and to enhance the information presented about 3M’s principal market risks.
Removed
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.
Added
Information in this Item 7A relative to 2022 reflects the updated methodology. Refer to Note 1. Significant Accounting Policies, Note 12. Marketable Securities, Note 13. Long-Term Debt and Short-Term Borrowings, Note 16. Derivatives and Note 17. Fair Value Measurements within Item 8 of this Form 10-K for additional discussion of foreign currency exchange, interest rates and financial instruments.
Removed
The dollar equivalent gross notional amount of the Company’s foreign exchange forward and option contracts designated as either cash flow hedges or net investment hedges was $3.2 billion at December 31, 2022. The dollar equivalent gross notional amount of the Company’s foreign exchange forward and option contracts not designated as hedging instruments was $2.8 billion at December 31, 2022.
Added
At December 31, 2023 and December 31, 2022, an instantaneous 10% change in applicable foreign currency spot exchange rates would have increased/decreased the aggregate fair value carrying amount of foreign exchange forward and option contracts by approximately $175 million and $187 million, respectively, and of non-functional currency denominated debt used as hedging instruments by approximately $192 million and $249 million, respectively.
Removed
In addition, as of December 31, 2022, the Company had €2.4 billion in principal amount of foreign currency denominated debt designated as non-derivative hedging instruments in certain net investment hedges as discussed in Note 14 in the “Net Investment Hedges” section.
Added
At December 31, 2023 and December 31, 2022, an instantaneous 100 basis point change in applicable interest rates would increase/decrease the Company's pre-tax earnings by approximately $13 million on an annualized basis as it relates to 3M's floating-rate notes and interest rate swap agreements.
Removed
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 dollar equivalent (based on inception date foreign currency exchange rates) gross notional amount of the Company’s interest rate swaps at December 31, 2022 was $800 million.
Removed
Additional details about 3M’s long-term debt can be found in Note 12, including references to information regarding derivatives and/or hedging instruments, further discussed in Note 14, associated with the Company’s long-term debt.
Removed
A Monte Carlo simulation technique was used to test the impact on after-tax earnings related to debt instruments, interest rate derivatives and underlying foreign exchange and commodity exposures outstanding at December 31, 2022. The model (third-party bank dataset) used a 95 percent confidence level over a 12-month time horizon.
Removed
This model does not purport to represent what actually will be experienced by the Company. The following table summarizes the possible adverse and positive impacts to after-tax earnings related to these exposures.
Removed
Adverse impact on after-tax earnings Positive impact on after-tax earnings (Millions) 2022 2021 2022 2021 Foreign exchange rates $ (315) $ (140) $ 314 $ 147 Interest rates (18) (2) 18 2 Commodity prices (5) (21) 7 14 An analysis of the global exposures related to purchased components and materials is performed at each year-end.
Removed
A one percent price change would result in a pre-tax cost or savings of approximately $85 million per year. The global energy exposure is such that a ten percent price change would result in a pre-tax cost or savings of approximately $45 million per year.
Removed
Global energy exposure includes energy costs used in 3M production and other facilities, primarily electricity and natural gas.

Other MMM 10-K year-over-year comparisons