mmm-20221231

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 1-3285

3M COMPANY

State of Incorporation: Delaware

I.R.S. Employer Identification No. 41-0417775

Principal executive offices: 3M Center, St. Paul, Minnesota 55144

Telephone number: (651) 733-1110

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par Value $.01 Per Share

MMM

New York Stock Exchange

MMM

Chicago Stock Exchange, Inc.

0.950% Notes due 2023

MMM23

New York Stock Exchange

1.500% Notes due 2026

MMM26

New York Stock Exchange

1.750% Notes due 2030

MMM30

New York Stock Exchange

1.500% Notes due 2031

MMM31

New York Stock Exchange

Note: The common stock of the registrant is also traded on the SIX Swiss Exchange.

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No o

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b) o

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

The aggregate market value of voting stock held by nonaffiliates of the registrant, computed by reference to the closing price and shares outstanding, was approximately $63.3 billion as of January 31, 2023 (approximately $73.7 billion as of June 30, 2022, the last business day of the registrant’s most recently completed second quarter).

Shares of common stock outstanding at January 31, 2023: 550.5 million

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Company’s definitive proxy statement (to be filed pursuant to Regulation 14A within 120 days after Registrant’s fiscal year-end of December 31, 2022) for its annual meeting to be held on May 9, 2023, are incorporated by reference in this Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14.

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3M COMPANY

FORM 10-K

For the Year Ended December 31, 2022

Pursuant to Part IV, Item 16, a summary of Form 10-K content follows, including hyperlinked cross-references (in the EDGAR filing). This allows users to easily locate the corresponding items in Form 10-K, where the disclosure is fully presented. The summary does not include certain Part III information that will be incorporated by reference from the proxy statement, which will be filed after this Form 10-K filing.


		Beginning Page
PART I
ITEM 1	Business	4
ITEM 1A	Risk Factors	10
ITEM 1B	Unresolved Staff Comments	16
ITEM 2	Properties	16
ITEM 3	Legal Proceedings	17
ITEM 4	Mine Safety Disclosures	17
PART II
ITEM 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
ITEM 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	MD&A is designed to provide a reader of 3M’s financial statements with a narrative from the perspective of management. 3M’s MD&A is presented in eight sections:
	Overview	19
	Results of Operations	27
	Performance by Business Segment	28
	Performance by Geographic Area	33
	Critical Accounting Estimates	34
	New Accounting Pronouncements	36
	Financial Condition and Liquidity	37
	Financial Instruments	42
ITEM 7A	Quantitative and Qualitative Disclosures About Market Risk	42
ITEM 8	Financial Statements and Supplementary Data	43
	Index to Financial Statements	43
	Management’s Responsibility for Financial Reporting	44
	Management’s Report on Internal Control Over Financial Reporting	44
	Report of Independent Registered Public Accounting Firm	45
	Consolidated Statement of Income for years ended December 31, 2022, 2021 and 2020	48
	Consolidated Statement of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020	49
	Consolidated Balance Sheet at December 31, 2022 and 2021	50
	Consolidated Statement of Changes in Equity for the years ended December 31, 2022, 2021 and 2020	51
	Consolidated Statement of Cash Flows for the years ended December 31, 2022, 2021 and 2020	52
	Notes to Consolidated Financial Statements	53
	Note 1. Significant Accounting Policies	53
	Note 2. Revenue	59
	Note 3. Acquisitions and Divestitures	61
	Note 4. Goodwill and Intangible Assets	63

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	Note 5. Restructuring Actions	64
	Note 6. Supplemental Income Statement Information	67
	Note 7. Supplemental Balance Sheet Information	68
	Note 8. Supplemental Equity and Comprehensive Income Information	69
	Note 9. Supplemental Cash Flow Information	70
	Note 10. Income Taxes	71
	Note 11. Marketable Securities	74
	Note 12. Long-Term Debt and Short-Term Borrowings	75
	Note 13. Pension and Postretirement Benefit Plans	77
	Note 14. Derivatives	87
	Note 15. Fair Value Measurements	92
	Note 16. Commitments and Contingencies	94
	Note 17. Leases	116
	Note 18. Stock-Based Compensation	118
	Note 19. Business Segments and Geographic Information	121
ITEM 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	125
ITEM 9A	Controls and Procedures	125
ITEM 9B	Other Information	125
ITEM 9C	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	125
PART III
ITEM 10	Directors, Executive Officers and Corporate Governance	126
ITEM 11	Executive Compensation	126
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	127
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	127
ITEM 14	Principal Accounting Fees and Services	127
PART IV
ITEM 15	Exhibits, Financial Statement Schedules	128
ITEM 16	Form 10-K Summary	130

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3M COMPANY

ANNUAL REPORT ON FORM 10-K

For the Year Ended December 31, 2022

PART I

Item 1. Business.

3M Company was incorporated in 1929 under the laws of the State of Delaware to continue operations begun in 1902. The Company’s ticker symbol is MMM. As used herein, the term “3M” or “Company” includes 3M Company and its subsidiaries unless the context indicates otherwise. 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. The public can obtain any documents that the Company files with the SEC at http://www.sec.gov. 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.

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. 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. 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. 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). 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):

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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. 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.

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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. The ability to recruit, retain, develop, protect, and fairly compensate its global workforce are enablers of 3M’s success. This includes four general categories of focus: Health and Safety; Development; Diversity, Equity and Inclusion; and Compensation and Benefits.

Health and Safety

3M is committed to the safety, health, and well-being of its employees. 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.

Development

Developing employees contributes to growing 3M’s business. 3M maintains talent and succession planning processes, including regular review by the Company’s chief executive officer (CEO) and reporting up through the Board of Directors. 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. With the Company’s global online employee learning platform, employees are able to access unique, just-in-time development resources in over 15 languages to support their career aspirations and advance their skills.

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. 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.

Compensation and Benefits

3M has a trust-based approach to work that empowers employees to work where and when they can best achieve their goals, which supports attraction and retention of talent around the globe. In addition to a professional and flexible work environment that promotes innovation, well-being, and rewards performance, 3M’s total compensation for employees includes a variety of components that support sustainable employment and the ability to build a strong financial future, including competitive market-based pay and comprehensive benefits. In addition to earning a base salary, eligible employees are compensated for their contributions to the Company’s goals with both short-term cash incentives and long-term equity-based incentives. Through its global pay philosophy, principles and consistent implementation, 3M is committed to providing fair and equitable pay for employees. Eligible full-time employees in the United States also have access to medical, dental, and vision plans; savings and retirement plans; a 3M employee stock purchase plan; and other resources. Some of these benefits can also be available to regular part-time employees who work at least 20 hours a week. 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. The Company experienced raw material price inflation and constrained supply throughout the global marketplace and continued to deploy productivity projects to minimize the impact. 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. Overall, on a consolidated basis, 3M experienced net raw material price inflation in 2022.

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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. 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. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies in the country.

The Company believes that its trademarks, patents, and trade secrets provide an important competitive advantage in many of its businesses. In general, no single patent or group of related patents is in itself essential to the Company as a whole or to any of the Company’s business segments.

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. Food and Drug Administration (FDA) and similar foreign agencies, U.S. federal healthcare program-related laws and regulations, such as the False Claims Act, anti-kickback laws and the Sunshine Act.

3M’s manufacturing operations are affected by national, state and local environmental laws and regulations 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).

Environmental expenditures relating to existing conditions caused by past operations that do not contribute to current or future revenues are expensed. Reserves for liabilities for anticipated remediation costs are recorded on an undiscounted basis when they are probable and reasonably estimable, generally no later than the completion of feasibility studies, the Company’s commitment to a plan of action, or approval by regulatory agencies. 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. 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.

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.

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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. 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).

Name

Age

Present Position

Year Elected to Present Position

Other Positions Held during 2018 - 2022

Michael F. Roman

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. Banovetz

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

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

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. Gibbons

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. Hammes

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. Khandpur

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. Lavers

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

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

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. Rhodes

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. Vale

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

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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 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. 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. In 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.

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. 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.

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Item 1A. Risk Factors.

Provided below is a cautionary discussion of what we believe to be the most important risk factors applicable to the Company. 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.

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. Further escalation of specific trade tensions, including those between the U.S. and China, or more broadly in global trade conflict, could adversely impact the Company's business and operations around the world. The Company's business is also impacted by social, political, and labor conditions in locations in which the Company or its suppliers or customers operate; adverse changes in the availability and cost of capital; monetary policy; interest rates; inflation; recession; commodity prices; currency volatility or exchange control; ability to expatriate earnings; and other laws and regulations in the jurisdictions in which the Company or its suppliers or customers operate. 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. 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. 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.

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. 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. 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. 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. 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.

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* 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.

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. For a discussion of the impact of foreign currency exchange rates on the Company, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Risks Related to Legal and Regulatory Proceedings

* The Company faces liabilities related to certain fluorochemicals, which could adversely impact our results.

As previously reported, governments in the United States and internationally have increasingly been regulating a broad group of perfluoroalkyl and polyfluoroalkyl substances produced by the Company, collectively known as “PFAS.” 3M has noticed several global regulatory trends related to PFAS, including declining emission standards and limits set as to the presence of certain compounds in various media, and the inclusion of a broadening group of PFAS. 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. Environmental Protection Agency (EPA)), and international agencies in their review of the environmental and health effects of certain PFAS produced by the Company.

The PFAS group contains several categories and classes of durable chemicals and materials with properties that include oil, water, temperature, chemical, and fire resistance, as well as electrical insulating properties. The strength of the carbon-fluorine bond also means that these compounds do not easily degrade. These characteristics have made PFAS substances critical to the manufacture of electronic devices such as cell phones, tablets, and semi-conductors. They are also used to help prevent contamination of medical products like surgical gowns and drapes. Commercial aircraft and low-emissions vehicles also rely on PFAS technology. PFAS compounds are manufactured by various companies, including 3M, and are used in everyday products, including some manufactured by 3M. 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. 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. 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. 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. In 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.

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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. Various factors or developments in these and other disclosed actions could result in future charges that could have a material adverse effect on 3M. For example, we recorded a pre-tax charge of $897 million, inclusive of legal fees and other related obligations, in the first quarter of 2018 with respect to the settlement of a matter brought by the State of Minnesota involving the presence of PFAS in the groundwater, surface water, fish or other aquatic life, and sediments in the state. 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. 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 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. 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. The Company is also subject to compliance risks related to legal or regulatory requirements, contract requirements, policies and practices, or other matters that require or encourage the Company and its suppliers, vendors, or channel parties, to conduct business in a certain way. 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.

The Company's results of operations could be adversely impacted if the costs to comply with these evolving treaties, laws, regulations, and requirements are greater than projected by 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 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. Although the Company maintains general liability insurance to mitigate monetary exposure, the amount of liability that may result from certain of these risks may not always be covered by, or could exceed, the applicable insurance coverage. Various factors or developments can lead the Company to change current estimates of liabilities and related insurance receivables where applicable, or make such estimates for matters previously not susceptible of reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory developments or changes in applicable law. 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. The Company also relies on patent and other intellectual property protection, and challenges to the Company’s intellectual property rights, or claims that the Company’s activities interfere with the intellectual property rights of a third party, could cause the Company to incur significant expenses to assert or defend against such claims, could result in reduced revenue, and could damage the Company’s reputation, any of which could have an adverse effect 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.

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Risks Related to Our Products and Customer Preferences

* The Company’s results are affected by competitive conditions and customer preferences.

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.

This ability is subject to difficulties or delays in product development, such as the inability to identify viable new products, obtain adequate intellectual property protection, or gain market acceptance of new products. 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.

The Company depends on various components, compounds, raw materials, and energy (including oil and natural gas and their derivatives) supplied by others for the manufacturing of its products. 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. 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. 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.

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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. 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.

In the ordinary course of business, the Company relies on centralized and local information technology networks and systems, some of which are provided, hosted, or managed by vendors and other third parties, to process, transmit, and store electronic information, and to manage or support a variety of businesses. Additionally, the Company collects and stores certain data, including proprietary business information, and has access to confidential or personal information in certain of our businesses that is subject to privacy and cybersecurity laws, regulations, and customer-imposed controls. 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. 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. 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. 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. 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. 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. 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.

The Company monitors its business portfolio and organizational structure and has made and may continue to make acquisitions, strategic alliances, divestitures, and changes to its organizational structure. With respect to acquisitions and strategic alliances, future results will be affected by, as applicable, the Company’s ability to integrate acquired businesses quickly and obtain the anticipated synergies and the Company's ability to operationalize and derive anticipated benefits from alliances. 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. Any of the foregoing could adversely affect the Company’s future results.

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* 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. 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. 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. In addition, the ability to adapt to business model and other changes, including responding to evolving customer needs and service expectations, are important, and, if not done successfully, could negatively impact the Company’s ability to win new business and enhance revenue and 3M’s brand. 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.

Risks Related to Financial and Capital Markets and Tax Matters

* The Company's defined benefit pension and postretirement plans are subject to financial market risks that could adversely impact our results.

The performance of financial markets and discount rates impact the Company's funding obligations under its defined benefit plans. 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.

The Company’s credit ratings are important to 3M’s cost of capital. The major rating agencies routinely evaluate the Company’s credit profile and assign debt ratings to 3M. This evaluation is based on a number of factors, which include financial strength, business and financial risk, as well as transparency with rating agencies and timeliness of financial reporting. 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 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 Company’s business is subject to tax-related external conditions, such as tax rates, tax laws and regulations, changing political environments in the U.S. and foreign jurisdictions that impact tax examination, and assessment and enforcement approaches. In addition, changes in tax laws including further regulatory developments arising from U.S. or international tax reform legislation could result in a tax expense or benefit recorded to the Company’s Consolidated Statement of Earnings. In connection with the Base Erosion and Profit Shifting (BEPS) Integrated Framework provided by Organization for Economic Cooperation and Development (OECD), determination of multi-jurisdictional taxation rights and the rate of tax applicable to certain types of income may be subject to potential change. 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.

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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.

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. This represents a change in strategy for managing the Combat Arms Version 2 earplugs and Aearo respirator mask/asbestos alleged litigation liabilities. 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. 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. 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.

On July 26, 2022, the Company announced its intent to spin off its Health Care business, resulting in two standalone public companies, in a transaction that is intended to be tax-free for the Company’s stockholders for U.S. federal income tax purposes. 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 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. Any delay in the completion of the spin-off or any change to the anticipated terms of the transaction could reduce the expected benefits of the transaction, or delay the time at which such benefits are realized. There can also be no assurance that the anticipated benefits of the transaction will be realized if the spin-off is completed, or that the costs or dis-synergies of the transaction (including costs of related restructuring transactions), will not exceed the anticipated amounts. Whether or not the spin-off is ultimately completed, the pendency of the transaction may impose challenges on the Company and its business, including potential business disruption; the diversion of management time on matters relating to the transaction; the impact on the Company’s ability to retain talent; and potential impacts on the Company’s relationships with its customers, employees, regulators, and other counterparties. In addition, while it is intended that the transaction would be tax-free to the Company’s stockholders for U.S. federal income tax purposes, there is no assurance that the transactions will qualify for this treatment. If the spin-off was ultimately determined to be taxable, the Company, the Health Care business, or the Company’s stockholders could incur income tax liabilities that could be significant. Any of these factors could negatively impact our business, financial condition, results of operations, cash flows, and the price of our common stock.

Item 1B. Unresolved Staff Comments.

None.

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. Internationally, 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.

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Item 3. Legal Proceedings.

Discussion of legal matters is incorporated by reference from Part II, Item 8, Note 16, “Commitments and Contingencies,” of this document, and should be considered an integral part of Part I, Item 3, “Legal Proceedings.”

Item 4. Mine Safety Disclosures.

Pursuant to Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), the Company is required to disclose, in connection with the mines it operates, information concerning mine safety violations or other regulatory matters in its periodic reports filed with the SEC. The 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.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Equity compensation plans’ information is incorporated by reference from Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this document, and should be considered an integral part of Item 5. 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. 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. In November 2018, 3M’s Board of Directors replaced the Company’s February 2016 repurchase program with a new repurchase program. This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date.

Issuer 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.

(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.

Item 6. [Reserved].

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of 3M’s financial statements with a narrative from the perspective of management. 3M’s MD&A is presented in eight sections:

•Overview

•Results of Operations

•Performance by Business Segment

•Performance by Geographic Area

•Critical Accounting Estimates

•New Accounting Pronouncements

•Financial Condition and Liquidity

•Financial Instruments

Forward-looking statements in Item 7 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to the section entitled “Cautionary Note Concerning Factors That May Affect Future Results” in Item 1 and the risk factors provided in Item 1A for discussion of these risks and uncertainties).

Additional information about results of operations and financial condition for 2021 and 2020 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in 3M's Current Report on Form 8-K dated April 26, 2022 (which updated 3M's 2021 Annual Report on Form 10-K).

OVERVIEW

3M is a diversified global manufacturer, technology innovator and marketer of a wide variety of products and services. Effective in the first quarter of 2022, 3M made the following changes:

•Changes in measure of segment operating performance used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income). See additional information in Note 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.

Information provided herein reflects the impact of these changes for all periods presented.

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

3M is impacted by the global pandemic and related effects associated with the coronavirus (COVID-19). Risk factors with respect to COVID-19 can be found in Item 1A “Risk Factors” in this document. Given the diversity of 3M’s businesses, some of the factors relative to COVID-19 increase the demand for 3M products, while others decrease demand or make it more difficult for 3M to serve customers. Certain resulting impacts are referenced in various discussions within this Item 7. Overall, the impact of the COVID-19 pandemic on 3M’s consolidated results of operations was primarily driven by factors related to changes in demand for products and disruption in global supply chains. 3M is not able to predict the extent to which the COVID-19 pandemic may have a material effect on its consolidated results of operations or financial condition.

In 2022, 3M's costs for significant litigation (see Certain amounts adjusted for special items - (non-GAAP measures section below) totaled approximately $2.3 billion pre-tax and included, among things, pre-tax charges associated with steps toward resolving Combat Arms Earplugs litigation and associated with additional commitments to address PFAS-related matters at its Zwijndrecht, Belgium site (approximately $1.3 billion and $355 million, respectively, in 2022). These matters are further discussed in Note 16. In 2022, 3M also completed the split-off of its Food Safety Division business resulting in a pre-tax gain of $2.7 billion and committed to a plan to exit PFAS manufacturing by the end of 2025 resulting in a 2022 pre-tax charge of $0.8 billion related to impairment as discussed in Note 15. See Certain amounts adjusted for special items - (non-GAAP measures) section below for additional discussion of these and other special items.

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3M Belgium has experienced interruptions to portions of the manufacturing at its site in Zwijndrecht, Belgium, as more fully discussed in Note 16. As discussed in Note 16, 3M Belgium received agreement with authorities in June 2022 to begin the process toward restarting operations at the Zwijndrecht facility. 3M Belgium has provided information required by the Flemish environmental authorities to receive agreement from the authorities to restart operations, and has done so for production or sampling purposes. Belgian government authorities continue to maintain oversight of these operations and compliance with applicable requirements. In December 2022, 3M Belgium received an official infraction report from the Flemish Environmental Inspectorate and continues to work with the government authorities to comply with applicable legal requirements. See further discussion in Note 16.

3M is also impacted by the Russia-Ukraine conflict. In light of a number of factors, 3M suspended operations of its subsidiaries in Russia in March 2022, the net sales of which were less than one percent of 3M’s consolidated net sales for 2021. Further, in September 2022, management committed to a plan to exit and dispose of the related net assets through an intended sale of the subsidiaries. The associated charge in 2022 related to this action is further discussed in Note 15. 3M also has other operations that source certain raw materials from suppliers in Russia and have experienced related supply disruption due to the conflict. Further supply disruption could lead to downstream customer impacts.

Though 3M monitors relevant factors as well as options to mitigate potential impacts, it is not able to predict the extent to which these circumstances may have a material effect on 3M’s consolidated results of operations or financial condition. Relevant risk factors can be found in Item 1A “Risk Factors” in this Annual Report on Form 10-K.

Operating income margin and earnings per share attributable to 3M common shareholders – diluted:

The following table provides the increases (decreases) in operating income margins and diluted earnings per share.


		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”. These exclude special items. These non-GAAP measures are further described and reconciled to the most directly comparable GAAP financial measures in the Certain amounts adjusted for special items - (non-GAAP measures) section below.

A discussion related to the components of year-on-year changes in operating income margin and earnings per diluted share follows:

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Organic growth/productivity and other:

•In 2022, the following components impacted operating margins and earnings per diluted share year-on-year:

•Declines in disposable respirator demand year-on-year negatively impacted operating margins by 0.3 percent and earnings per share by $0.29.

•Remaining organic growth/productivity and other impacts resulted in a net year-on-year benefit $0.85 to earnings per share and 1.3 percent to operating margins which was impacted by the following:

◦Benefits from strong pricing, spending discipline and 2021 restructuring actions

◦Manufacturing headwinds from global supply chain challenges; geopolitical impacts due to the Russia/Ukraine conflict as well as ongoing COVID-related challenges in China

◦Second quarter of 2021 benefit of $91 million pre-tax ($0.12 per share after tax) from the impact of the favorable decision of the Brazilian Supreme Court regarding the calculation of past social taxes

◦Increased investments in growth, productivity and sustainability

•In 2021, organic volume growth and ongoing cost management increased operating income margins and earnings per diluted share year-on-year offset by manufacturing headwinds from global supply chain challenges and increased compensation/benefit costs. The following also impacted results or provide additional information:

•2021 benefit of $91 million pre-tax ($0.12 per share after tax) from a favorable Brazilian Supreme Court decision that concluded on the impact of state value-added tax when determining Brazil’s federal sales-based social tax—essentially lowering the social tax that 3M should have paid in prior periods.

•3M continued prioritization of investments in growth and sustainability.

•2021 benefit from higher selling prices, restructuring actions taken in 2020 and positive/negative impact of year-over-year change in non-divestiture-related restructuring charges, net of adjustments, for respective periods. Note 5 provides additional information relative to restructuring actions.

•Lower year-on-year net gains related to certain property sales.

•COVID-impacts recognized on certain assets in 2020.

•In 2021, higher defined benefit pension and postretirement service cost increased expense year-on-year.

Raw material impact:

•In 2022, 3M continued to experience inflationary pressures with year-on-year increases in raw material and logistics costs driven by many geopolitical, logistics, and disruptive events that caused imbalance in the global supply chain.

•In 2021, 3M experienced higher raw material, logistics, and outsourced manufacturing costs from strong end-market demand, ongoing COVID-19 and related global supply chain challenges that were further magnified by extreme weather events, such as February 2021 winter storm Uri in the U.S.

Acquisitions/divestitures:

•Divestiture impacts in 2022 include lost income from divested businesses and remaining stranded costs (net of transition arrangement income). 3M completed the split-off of the Food Safety business in September 2022 (discussed in Note 3). The impact also includes lost income from deconsolidation of the Aearo Entities in July 2022 (discussed in Note 16).

•Divestiture impacts in 2021 are primarily comprised of the lost income from the divestiture of the Company’s drug delivery business (sale completed in May 2020).

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. These estimates include: (a) the effects of year-on-year changes in exchange rates on translating current period functional currency profits into U.S. dollars and on current period non-functional currency denominated purchases or transfers of goods between 3M operations, and (b) year-on-year changes in transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

Other expense (income), net:

•Lower income related to higher non-service cost components of pension and postretirement expense increased expense year-on-year for 2022. Higher income related to non-service cost components of pension and postretirement expense decreased expense year-on-year for 2021.

•Interest expense (net of interest income) decreased in 2022 compared to the same period year-on-year driven by debt maturities in the ordinary course and interest income on invested cash.

•Interest expense (net of interest income) decreased in 2021 compared to the same period year-on-year due in part to interest expense savings from early debt extinguishment actions in 2020.

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Income tax rate:

•Certain items above reflect specific income tax rates associated therewith. Overall, the effective tax rates for 2022, 2021, and 2020 were 9.6 percent, 17.8 percent, and 19.7 percent, respectively. These reflect a decrease of 8.2 percentage points from 2021 to 2022 and a decrease of 1.9 percentage points from 2020 to 2021. The primary factors that decreased the Company's effective tax rate for 2022 were the tax efficient structure associated with the gain on split-off of the Food Safety business (see Note 3). The primary factors that decreased the Company's effective tax rate in 2021 were geographical income mix and favorable adjustments in 2021 related to impacts of U.S. international tax provisions.

•On an adjusted basis (as discussed below), the effective tax rates for 2022, 2021, and 2020 were 17.7 percent, 18.1 percent, and 20.5 percent, respectively. These reflect a decrease of 0.4 percent percentage points from 2021 to 2022 and a decrease of 2.4 percentage points from 2020 to 2021.

Shares of common stock outstanding:

•Lower shares outstanding increased earnings per share per diluted share for 2022, while higher shares outstanding decreased earnings per share diluted share for 2021.

Certain amounts adjusted for special items - (non-GAAP measures):

In addition to reporting financial results in accordance with U.S. GAAP, 3M also provides non-GAAP measures that adjust for the impacts of special items. For the periods presented, special items include the items described below. Operating income, segment operating income (loss), income before taxes, net income, earnings per share, and the effective tax rate are all measures for which 3M provides the reported GAAP measure and a measure adjusted for special items. The adjusted measures are not in accordance with, nor are they a substitute for, GAAP measures. While the Company includes certain items in its measure of segment operating performance, it also considers these non-GAAP measures in evaluating and managing its operations. The Company believes that discussion of results adjusted for special items is useful to investors in understanding underlying business performance, while also providing additional transparency to the special items. Special items impacting operating income are reflected in Corporate and Unallocated, except as described below with respect to net costs for significant litigation and PFAS manufacturing exit costs. The determination of these items may not be comparable to similarly titled measures used by other companies.

In the first quarter of 2022, the Company changed the extent of matters and charges/benefits it includes within special items with respect to net costs for significant litigation. Previously, 3M included net costs, when significant, associated with changes in accrued liabilities related to respirator mask/asbestos litigation and PFAS-related other environmental matters, along with the associated tax impacts. These non-GAAP measure changes involved including net costs for litigation related to 3M’s Combat Arms Earplugs, expanding net costs to include external legal fees and insurance recoveries associated with the applicable matters in addition to changes in accrued liabilities, and to include all such net costs for the applicable matters, not just when considered significant. Information provided herein reflects the impact of these changes for all periods presented.

Special items for the periods presented include:

Net costs for significant litigation:

•These relate to 3M's respirator mask/asbestos, PFAS-related other environmental, and Combat Arms Earplugs matters (as discussed in Note 16). Net costs include the impacts of any changes in accrued liabilities, external legal fees, and insurance recoveries, along with associated tax impacts. Prior to initiating voluntary chapter 11 bankruptcy proceedings in July 2022, net costs related to Combat Arms Earplugs and Aearo-respirator mask/asbestos matters along with non-Aearo respirator mask/asbestos matters were reflected as special items in the Safety and Industrial business segment. 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 associated with PFAS-related other environmental matters are primarily reflected as corporate special items in Corporate and Unallocated.

Divestiture costs:

•These include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture.

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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. In 2020, 3M recorded a gain primarily related to the divestiture of its Drug Delivery business. Refer to Note 3 for further details.

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. 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.

PFAS manufacturing exit costs:

•These costs relate to 3M's December 2022 commitment to a plan to exit PFAS manufacturing by the end of 2025. Charges for the applicable period relate to asset impairments. These charges were reflected within the Transportation and Electronics business segment. Refer to Note 15 for further details.

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	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)	%

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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. 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 Note 19 for additional information on business segments.














	2022						2021						% change
(Dollars in millions)	Net Sales		% of Total		Operating Income (Loss)		Net Sales		% of Total		Operating Income (Loss)		Net Sales		Operating Income (Loss)
Business Segments
Safety and Industrial	$	11,604	33.9	%	$	1,199	$	11,981	33.9	%	$	2,466	(3.2)	%	(51.4)	%
Transportation and Electronics	8,902		26.0		1,012		9,262		26.2		1,880		(3.9)		(46.2)
Health Care	8,421		24.6		1,815		8,597		24.3		2,037		(2.0)		(10.9)
Consumer	5,298		15.5		994		5,513		15.6		1,162		(3.9)		(14.4)
Corporate and Unallocated	4		—		1,519		2		—		(176)
Total Company	$	34,229	100.0	%	$	6,539	$	35,355	100.0	%	$	7,369	(3.2)	%	(11.3)	%










	Year ended December 31, 2022
Worldwide Sales Change By Business Segment	Organic sales		Acquisitions		Divestitures		Translation		Total sales change
Safety and Industrial	1.0	%	—	%	—	%	(4.2)	%	(3.2)	%
Transportation and Electronics	1.2		—		(0.5)		(4.6)		(3.9)
Health Care	3.2		—		(1.4)		(3.8)		(2.0)
Consumer	(0.9)		—		(0.4)		(2.6)		(3.9)
Total Company	1.2		—		(0.5)		(3.9)		(3.2)

Sales by geographic area:

Percent change information compares the years ended December 31, 2022 and 2021 with the same prior year period, unless otherwise indicated. Additional discussion of business segment results is provided in the Performance by Business Segment section.












	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		%

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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. Total sales in Mexico increased 8 percent which included increased organic sales of 12 percent. In Canada, total sales increased 9 percent which included increased organic sales of 13 percent. In Brazil, total sales increased 15 percent which included increased organic sales of 12 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.

•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. Total sales in Mexico increased 18 percent which included increased organic sales of 16 percent. In Canada, total sales increased 18 percent which included increased organic sales of 11 percent. In Brazil, total sales increased 18 percent which included increased organic sales of 22 percent. In the Asia Pacific geographic area, China total sales increased 17 percent which included increased organic sales of 11 percent. In Japan, total sales were flat which included increased organic sales of 2 percent.

Managing currency risks:

The stronger U.S. dollar had a negative impact on sales in full year 2022 compared to the same periods last year. 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. 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. Thus, this risk is largely managed via local operational actions using natural hedging tools as discussed above. In either case, 3M’s hedging approach is designed to mitigate a portion of foreign currency risk and reduce volatility, ultimately allowing time for 3M’s businesses to respond to changes in the marketplace.

Financial condition:

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

In November 2018, 3M’s Board of Directors replaced the Company’s February 2016 repurchase program with a new repurchase program. This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date. In 2022, the Company purchased $1.5 billion of its own stock, compared to $2.2 billion of stock purchases in 2021. As of December 31, 2022, approximately $4.2 billion remained available under the authorization. In February 2023, 3M’s Board of Directors declared a first-quarter 2023 dividend of $1.50 per share, an increase of 1 percent. This marked the 65th consecutive year of dividend increases for 3M.

Raw materials:

Refer to the section entitled “Raw materials” in Item 1 for discussion of 3M's sources and availability of raw materials in 2022.

Pension and postretirement defined benefit/contribution plans:

On a worldwide basis, 3M’s pension and postretirement plans were 96 percent funded at year-end 2022. The primary U.S. qualified pension plan, which is approximately 70 percent of the worldwide pension obligation, was 97 percent funded and the international pension plans were 116 percent funded. The U.S. non-qualified pension plan is not funded due to tax considerations and other factors. Asset returns in 2022 for the primary U.S. qualified pension plan were -17.4 percent, as 3M strategically invests in both growth assets and fixed income matching assets to manage its funded status. For the primary U.S. qualified pension plan, the expected long-term rate of return on an annualized basis for 2023 is 7.5 percent. The primary U.S. qualified pension plan year-end 2022 discount rate was 5.18%, up 2.29 percentage points from the year-end 2021 discount rate of 2.89%. The increase in U.S. discount rates resulted in a decreased valuation of the projected benefit obligation (PBO). The primary U.S. qualified pension plan’s funded status remained at 97% as of December 31, 2022 due to the lower PBO resulting from the discount rate increase, offset by the negative returns of the plan's assets. 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. 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. 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.

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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.

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.

Cost of Sales:

Cost of sales, measured as a percent of sales, increased in 2022 when compared to the same period last year. Increases were primarily due to 2022 special item costs for significant litigation from additional commitments to address PFAS-related matters at 3M's Zwijndrecht, Belgium site (discussed in Note 16), higher raw materials and logistics costs, manufacturing productivity headwinds which were further magnified by the shutdown of certain operations in Belgium and progress on restarting previously-idled operations, and investments in growth, productivity and sustainability. On a percent of sales basis, these increases were partially offset by increases in selling prices.

Selling, General and Administrative Expenses:

SG&A, measured as a percent of sales, increased in 2022 when compared to the same period last year. SG&A was impacted by increased 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, certain impairment costs related to exiting PFAS manufacturing (see Note 15), costs related to exiting Russia (see Note 15), divestiture-related restructuring charges (see Note 5), and continued investment in key growth initiatives. These increases were partially offset by restructuring benefits and ongoing general 3M cost management.

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.

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.

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 15 for further details.

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Other Expense (Income), Net:

See Note 6 for a detailed breakout of this line item.

Interest expense (net of interest income) decreased in 2022 compared to the same period year-on-year driven by debt maturities in the ordinary course and interest income on invested cash. Interest expense (net of interest income) decreased in 2021 compared to the same period year-on-year due in part to interest expense savings from early debt extinguishment actions in 2020.

The non-service pension and postretirement net benefit decreased $49 million and increased $163 million in 2022 and 2021, respectively. 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.

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.

The tax rate can vary from quarter to quarter due to discrete items, such as the settlement of income tax audits, changes in tax laws, and employee share-based payment accounting; as well as recurring factors, such as the geographic mix of income before taxes.

Refer to Note 10 for further discussion of income taxes.

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. In the fourth quarter of 2022, 3M sold its remaining ownership interest in Kindeva resulting in an immaterial gain.

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. 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. 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. 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 reportable segments are Safety and Industrial; Transportation and Electronics; Health Care; and Consumer.

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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. Corporate and Unallocated operating income includes “corporate special items” and “other corporate expense-net”. Corporate special items include net costs for significant litigation associated with Combat Arms Earplugs and Aearo-respirator mask/asbestos matters during the chapter 11 bankruptcy period (which began in July 2022) and with PFAS-related other environmental matters (see Note 16). 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. 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 also includes costs and income from transition supply, manufacturing and service arrangements with Neogen Corporation following the split-off of 3M's Food Safety business in 2022 and with the acquirer of the former Drug Delivery business following its 2020 divestiture. Items classified as revenue from this activity are included in Corporate and Unallocated net sales. Because Corporate and Unallocated includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

Corporate and Unallocated operating expenses decreased in 2022, when compared to the same period last year. The subsections below provide additional information.

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 item net costs decreased in 2022 year over year primarily due to the gain on divestiture associated with the 2022 split-off of the Food Safety business (discussed in Note 3) partially offset by additional commitments in 2022 to address PFAS-related matters, including at 3M's Zwijndrecht, Belgium site (discussed in Note 16).

Other Corporate Expense - Net

Other corporate operating expenses, net, increased when compared to the same period last year primarily due to a $91 million pre-tax benefit from the impact of the favorable decision of the Brazilian Supreme Court included in the second quarter of 2021 regarding the calculation of past social taxes.

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.

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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. 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. 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. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section for additional details.

Year 2022 results:

Sales in Safety and Industrial were down 3.2 percent in U.S. dollars.

On an organic sales basis:

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

•Growth from continued improving general industrial manufacturing activity and other end-market demand was partially offset by the disposable respirator sales decline within personal safety, which negatively impacted year-on-year organic growth by 4.5 percentage points.

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. Margins were also impacted by increased raw materials and logistics costs, manufacturing productivity headwinds, partially offset by selling price actions, spending discipline and restructuring actions. Adjusting for special item costs for significant litigation (non-GAAP measure), business segment operating income margins decreased year-on-year as displayed above.

Year 2021 results:

Sales in Safety and Industrial were up 9.2 percent in U.S. dollars.

On an organic sales basis:

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

•Growth was driven by improving general industrial manufacturing activity and other end-market demand partially offset by prior-year strong pandemic-related respirator mask demand.

Business segment operating income margins decreased year-on-year due to increases in raw materials, logistics and special item costs for significant litigation; lower gain on sale of properties; and manufacturing productivity impacts that were partially offset by sales growth leverage, and benefits from restructuring actions and lower related charges. Adjusting for special item costs for significant litigation (non-GAAP measure), business segment operating income margins decreased year-on-year as displayed above.

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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. 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.

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.

Divestitures:

•Divestiture impact relates to lost Transportation and Electronics sales year-on-year from deconsolidation of the Aearo Entities in July 2022.

Business segment operating income margins decreased year-on-year due to special item charges for PFAS manufacturing exit costs related to asset impairments (discussed in Note 15) resulting in a 2022 fourth quarter pre-tax charge of $0.8 billion. Margins were also impacted by increased raw materials and logistics costs, manufacturing productivity headwinds which were further magnified by the shutdown of certain operations in Belgium and investments in auto electrification, partially offset by selling price actions, strong spending discipline and restructuring actions. Adjusting for special item PFAS manufacturing exit costs (non-GAAP measure), business segment operating income margins increased year-on-year as displayed above.

Year 2021 results:

Sales in Transportation and Electronics were up 10.2 percent in U.S. dollars.

On an organic sales basis:

•Sales increased in advanced materials, commercial solutions, automotive and aerospace, electronics and transportation safety.

•Growth benefited from improving automotive-end market activity such as increases in car and light truck builds, strong demand in data center, semiconductor, interconnect and consumer electronics markets and increased advertising spend and return to workplace trends partially offset by impacts from semiconductor supply chain constraints.

Business segment operating income margins increased year-on-year due to sales growth leverage, benefits from restructuring actions and lower related charges, and COVID impacts recognized on certain assets in 2020 that were partially offset by increases in raw materials and logistic costs, manufacturing productivity impacts, and increased compensation and benefit costs.

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Health Care Business (24.6% of consolidated sales):



	2022			2021
Sales (millions)	$	8,421		$	8,597
Sales change analysis:
Organic sales	3.2		%	10.2		%

Divestitures	(1.4)			(2.0)
Translation	(3.8)			1.6
Total sales change	(2.0)		%	9.8		%

Business segment operating income (millions)	$	1,815		$	2,037
Percent change	(10.9)		%	22.5		%
Percent of sales	21.6		%	23.7		%

Year 2022 results:

Sales in Health Care were down 2.0 percent in U.S. dollars.

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.

Divestitures:

•Divestiture impact relates to the lost sales year-on-year from the divestiture from the Food Safety Division split-off transaction and combination with Neogen completed in the third quarter of 2022.

Business segment operating income margins decreased year-on-year due to increased raw materials and logistics costs along with manufacturing productivity headwinds, investments in the business and transaction-related costs associated with the announced divestiture of the food safety business (see Note 3), partially offset by sales growth (including selling price actions), strong spending discipline and restructuring actions.

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.

On an organic sales basis:

•Sales increased in oral care, separation and purification, food safety, health information systems and medical solutions.

•Growth benefited from higher year-on-year dental procedures, continued high demand for biopharma filtration solutions for COVID-related vaccine and therapeutic development and manufacturing, rising elective procedure volumes in the first six months of 2021 and due to improving hospital information technology investments.

Divestitures:

•In May 2020, 3M completed the sale of substantially all of its drug delivery business.

Business segment operating income margins increased year-on-year due to sales growth leverage and benefits from restructuring actions and lower related charges that were partially offset by supply chain disruptions, increases in raw materials and logistics costs, deal-related costs associated with the announced divestiture of the food safety business (see Note 3), manufacturing productivity impacts, increased compensation and benefit costs, and increased investments in growth.

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Consumer Business (15.5% of consolidated sales):



	2022			2021
Sales (millions)	$	5,298		$	5,513
Sales change analysis:
Organic sales	(0.9)		%	9.8		%

Divestitures	(0.4)			—
Translation	(2.6)			1.0
Total sales change	(3.9)		%	10.8		%

Business segment operating income (millions)	$	994		$	1,162
Percent change	(14.4)		%	3.8		%
Percent of sales	18.8		%	21.1		%

Year 2022 results:

Sales in Consumer were down 3.9 percent in U.S. dollars.

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. These impacts were partially offset by demand for Scotch BlueTM painter’s tape, Scotch-BriteTM, and Post-it®-solutions.

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.

On an organic sales basis:

•Sales increased in stationery and office, home improvement, consumer health and safety and home care.

•Growth driven by continued strength in the market with strong demand for CommandTM adhesives, FiltreteTM air quality solutions, MeguiarsTM auto care and Scotch BlueTM painter’s tape and from ongoing strength in demand for packaging and shipping products, Post-it®-solutions and Scotch® brand office tapes as the business laps last year’s COVID-related comparisons.

Business segment operating income margins decreased year-on-year as a result of increases in raw materials, logistics, and outsourced hardgoods manufacturing costs, manufacturing productivity impacts, and increased compensation and benefit costs that more than offset leverage from sales growth and benefits from restructuring actions and lower related charges.

PERFORMANCE BY GEOGRAPHIC AREA

While 3M manages its businesses globally and believes its business segment results are the most relevant measure of performance, the Company also utilizes geographic area data as a secondary performance measure. Export sales are generally reported within the geographic area where the final sales to 3M customers are made. A portion of the products or components sold by 3M’s operations to its customers are exported by these customers to different geographic areas. As customers move their operations from one geographic area to another, 3M’s results will follow. Thus, net sales in a particular geographic area are not indicative of end-user consumption in that geographic area. Financial information related to 3M operations in various geographic areas is provided in Note 2 and Note 19.

Refer to the “Overview” section for a summary of net sales by geographic area and business segment.

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Geographic Area Supplemental Information


	Employees as of December 31,		Capital Spending				Property, Plant and Equipment - net as of December 31,
(Millions, except Employees)	2022	2021	2022		2021		2022		2021
Americas	54,000	56,000	$	1,321	$	1,046	$	6,066	$	5,864
Asia Pacific	18,000	18,000	182		216		1,389		1,582
Europe, Middle East and Africa	20,000	21,000	246		341		1,723		1,983
Total Company	92,000	95,000	$	1,749	$	1,603	$	9,178	$	9,429

Employment:

Employment decreased in 2022 when compared to 2021. The above table includes the impact of acquisitions, net of divestitures and other actions.

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. 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. As stated in Note 1, the preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make certain estimates and assumptions. Such estimates and assumptions are subject to inherent uncertainties which may result in actual amounts differing from these estimates.

The Company considers the items below to be critical accounting estimates. Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the Company. Senior management has discussed the development, selection and disclosure of its critical accounting estimates with the Audit Committee of 3M’s Board of Directors.

Legal Proceedings:

Assessments of lawsuits and claims can involve a series of complex judgments about future events, the outcomes of which are inherently uncertain, and can rely heavily on estimates and assumptions. 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.

Pension and Postretirement Obligations:

The Company applies certain estimates for the discount rates and expected return on plan assets in determining its defined benefit pension and postretirement obligations and related net periodic benefit costs. The below further describes these estimates. 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.

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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. The Company measures the present value of these future benefits by projecting benefit payment cash flows for each future period and discounting these cash flows back to the December 31 measurement date, using the yields of a portfolio of high quality, fixed-income debt instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits. Service cost and interest cost are measured separately using the spot yield curve approach applied to each corresponding obligation. Service costs are determined based on duration-specific spot rates applied to the service cost cash flows. The interest cost calculation is determined by applying duration-specific spot rates to the year-by-year projected benefit payments. The spot yield curve approach does not affect the measurement of the total benefit obligations as the change in service and interest costs offset the actuarial gains and losses recorded in other comprehensive income. Changes in expected benefit payment and service cost cash flows, as well as ongoing changes in market activity and yields, cause these rates to be subject to uncertainty.

Using this methodology, the Company determined discount rates for its plans as follow:


	U.S. Qualified Pension		International Pension (weighted average)		U.S. 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. 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. The weighted average expected return for the international pension plans is 4.61% for 2023 compared to 3.86% for 2022. Changes in asset allocation and market performance over time, among other factors, cause these estimates to be subject to uncertainty.

For the year ended December 31, 2022, the Company recognized consolidated defined benefit pre-tax pension and postretirement service cost expense of $426 million and a benefit of $248 million related to all non-service pension and postretirement net benefit costs (after settlements, curtailments, special termination benefits and other) for a total consolidated defined benefit pre-tax pension and postretirement expense of $178 million, down from $206 million in 2021.

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.

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. 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.

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Impairment testing for goodwill is done at a reporting unit level, with all goodwill assigned to a reporting unit. Reporting units are one level below the business segment level, but are required to be combined when reporting units within the same segment have similar economic characteristics. 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. 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. A discounted cash flow analysis involves key assumptions including projected sales, EBITDA margins, capital expenditures, and discount rates. Changes in reporting unit earnings, comparable company information, and expected future cash flows, as well as underlying market and overall economic conditions, among other factors, make these estimates subject to uncertainty.

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. 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.

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.

Assessments of Long-Lived Assets:

The Company makes certain estimates and judgments in impairment assessments of long-lived assets. As discussed in Note 1, long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. An impairment loss is recognized when the carrying amount exceeds the estimated undiscounted future cash flows expected to result from the use of the asset group and its eventual disposition. The amount of the impairment is based on the excess of the asset group’s carrying value over its fair value. 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. 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.

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 Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due. The Company follows guidance provided by ASC 740, Income Taxes, a subset of which relates to uncertainty in income taxes, to record these liabilities (refer to Note 10 for additional information). The Company adjusts these reserves in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the tax liabilities. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. 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.

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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. Investing in 3M’s business to drive organic growth and deliver strong returns on invested capital remains the first priority for capital deployment. This includes research and development, capital expenditures, and commercialization capability. The Company also continues to actively manage its portfolio through acquisitions and divestitures to maximize value for shareholders. 3M expects to continue returning cash to shareholders through dividends and share repurchases. To fund cash needs in the United States, the Company relies on ongoing cash flow from U.S. operations, access to capital markets and repatriation of the earnings of its foreign affiliates that are not considered to be permanently reinvested. For those international earnings still considered to be reinvested indefinitely, the Company currently has no plans or intentions to repatriate these funds for U.S. operations. See Note 10 for further information on earnings considered to be reinvested indefinitely.

3M maintains a strong liquidity profile. The Company’s primary short-term liquidity needs are met through cash on hand and U.S. commercial paper issuances. 3M believes it will have continuous access to the commercial paper market. 3M’s commercial paper program permits the Company to have a maximum of $5 billion outstanding with a maximum maturity of 397 days from date of issuance. The Company had no commercial paper outstanding at December 31, 2022 and December 31, 2021.

Total debt:

The strength of 3M’s credit profile and significant ongoing cash flows provide 3M proven access to capital markets. Additionally, the Company’s debt maturity profile is staggered to help ensure refinancing needs in any given year are reasonable in proportion to the total portfolio. 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 total debt was lower at December 31, 2022 when compared to December 31, 2021. 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. For discussion of repayments of and proceeds from debt refer to the following “Cash Flows from Financing Activities” section.

In July 2017, the United Kingdom’s Financial Conduct Authority announced that it would no longer require banks to submit rates for the London InterBank Offered Rate (“LIBOR”) after 2021. In November 2020, the ICE Benchmark Administration (IBA), LIBOR’s administrator, proposed extending the publication of USD LIBOR through June 2023. Subsequently, in March of 2021, IBA ceased publication of certain LIBOR rates after December 31, 2021. USD LIBOR rates that did not cease on December 31, 2021 will continue to be published through June 30, 2023. The Company has reviewed its debt securities, bank facilities, derivative instruments, and commercial contracts that may utilize LIBOR as the reference rate. 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. 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. 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). Information with respect to long-term debt issuances and maturities for the periods presented is included in Note 12.

As disclosed in Note 12, 3M had debt financing facilities providing commitments for term loans and potential bridge financing aggregating $1.0 billion related to the Food Safety Division split-off transaction and combination with Neogen (discussed in Note 3). The debt commitments also included a $150 million revolving credit facility for the Food Safety business. Coincident with completion of the September 2022 split-off, the Food Safety business term loan borrowings funded the cash payment to 3M discussed in Note 3. The bridge financing component of these facilities was terminated early and not utilized. Obligations under the commitments (including the $150 million revolving credit facility) transferred with the Food Safety business and became those of Neogen.

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Cash, cash equivalents and marketable securities:

At December 31, 2022, 3M had $3.9 billion of cash, cash equivalents and marketable securities, of which approximately $2.7 billion was held by the Company’s foreign subsidiaries and approximately $1.2 billion was held in the United States. 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. The decrease from December 31, 2021 primarily resulted from cash flow from operations and Food Safety transaction-related cash consideration and earlier borrowings (see Note 3) offset by ongoing dividend payments, purchases of treasury stock, capital expenditures, and the fixed-rate medium-term note maturities in 2022.

Net Debt (non-GAAP measure):

Net debt is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. 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.


	December 31,
(Millions)	2022		2021		Change
Total debt	$	15,939	$	17,363	$	(1,424)
Less: Cash, cash equivalents and marketable securities	3,916		4,792		(876)
Net debt (non-GAAP measure)	$	12,023	$	12,571	$	(548)

Refer to the preceding “Total Debt” and “Cash, Cash Equivalents and Marketable Securities” sections for additional details.

Balance Sheet:

3M’s strong balance sheet and liquidity provide the Company with significant flexibility to fund its numerous opportunities going forward. The Company will continue to invest in its operations to drive growth, including continual review of acquisition opportunities.

The Company uses working capital measures that place emphasis and focus on certain working capital assets, such as accounts receivable and inventory activity.

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 is not defined under U.S. generally accepted accounting principles and may not be computed the same as similarly titled measures used by other companies. The Company defines working capital as current assets minus current liabilities. 3M believes working capital is meaningful to investors as a measure of operational efficiency and short-term financial health.

Working capital decreased $1.2 billion compared with December 31, 2021. Balance changes in current assets decreased working capital by $0.7 billion, driven largely by decreases in cash and cash equivalents. Balance changes in current liabilities decreased working capital by $0.5 billion, primarily due to increases in short-term borrowings and current-portion of long-term debt offset by decreases in accrued payroll.

Inventory increased $387 million from December 31, 2021, primarily as a result of increased underlying operating activity partially offset by foreign currency translation impacts. Current portion of long-term debt increased as upcoming debt maturities now considered current were partially offset by the bond maturities in 2022, while accounts payable also increased as a result of increased sequential operating activity partially offset by foreign currency translation impacts.

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Cash Flows:

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

Cash Flows from Operating Activities:



Year ended December 31, (Millions)	2022		2021
Net income including noncontrolling interest	$	5,791	$	5,929
Depreciation and amortization	1,831		1,915
Long-lived and indefinite-lived asset impairment expense	618		—
Goodwill impairment expense	271		—
Company pension and postretirement contributions	(158)		(180)
Company pension and postretirement expense	178		206
Stock-based compensation expense	263		274
Gain on business divestitures	(2,724)		—
Income taxes (deferred and accrued income taxes)	(710)		(410)
Accounts receivable	(105)		(122)
Inventories	(629)		(903)
Accounts payable	111		518
Other — net	854		227
Net cash provided by (used in) operating activities	$	5,591	$	7,454

Cash flows from operating activities can fluctuate significantly from period to period, as working capital movements, tax timing differences and other items can significantly impact cash flows.

In 2022, cash flows provided by operating activities decreased $1,863 million compared to the same period last year, with this decrease primarily due to lower net income and the cash impact from capitalization of R&D for U.S. tax purposes. The combination of accounts receivable, inventories and accounts payable decreased operating cash flow by $623 million in 2022, compared to an operating cash flow decrease of $507 million in 2021. Additional discussion on working capital changes is provided earlier in the “Financial Condition and Liquidity” section. The 2022 second quarter pre-tax charge of approximately $1.2 billion related to steps toward resolving Combat Arms Earplugs litigation (discussed in Note 16) largely impacted the 2022 net income component above, with offsets in the other-net and deferred tax elements. The 2022 non-cash impairment expenses added back to net income in arriving at net cash provided by operating activities above primarily relate to 3M's commitment to a plan to exit per- and polyfluoroalkyl substance (PFAS) manufacturing as described in Note 15.

Cash Flows from Investing Activities:



Year ended December 31, (Millions)	2022		2021
Purchases of property, plant and equipment (PP&E)	$	(1,749)	$	(1,603)
Proceeds from sale of PP&E and other assets	200		51

Purchases and proceeds from maturities and sale of marketable securities and investments, net	11		204
Proceeds from sale of businesses, net of cash sold	13		—
Cash payment from Food Safety business split-off, net of divested cash	478		—
Other — net	1		31
Net cash provided by (used in) investing activities	$	(1,046)	$	(1,317)

Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency. 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.

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3M invests in renewal and maintenance programs, which pertain to cost reduction, cycle time, maintaining and renewing current capacity, eliminating pollution, and compliance. Costs related to maintenance, ordinary repairs, and certain other items are expensed. 3M also invests in growth, which adds to capacity, driven by new products, both through expansion of current facilities and new facilities. Finally, 3M also invests in other initiatives, such as information technology (IT), laboratory facilities, and a continued focus on investments in sustainability.

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.

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 investments include additional survivor benefit insurance, plus investments in equity securities.

Cash Flows from Financing Activities:



Year ended December 31, (Millions)	2022		2021
Change in short-term debt — net	$	340	$	(2)
Repayment of debt (maturities greater than 90 days)	(1,179)		(1,144)
Proceeds from debt (maturities greater than 90 days)	1		1
Total cash change in debt	(838)		(1,145)
Purchases of treasury stock	(1,464)		(2,199)
Proceeds from issuances of treasury stock pursuant to stock option and benefit plans	381		639
Dividends paid to shareholders	(3,369)		(3,420)
Other — net	(60)		(20)
Net cash provided by (used in) financing activities	$	(5,350)	$	(6,145)

2022 Debt Activity:

Total debt was approximately $15.9 billion at December 31, 2022 and $17.4 billion at December 31, 2021. 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. In conjunction with the Food Safety Division split-off transaction and combination with Neogen (discussed in Note 3), the associated non-cash debt-for-debt exchange in the third quarter of 2022 reduced then-outstanding 3M commercial paper indebtedness of $350 million (borrowed earlier in the year) which became new term-debt obligations of Neogen. Net commercial paper issuances in addition to repayments and borrowings by international subsidiaries are largely reflected in “Change in short-term debt – net” in the preceding table. 3M’s primary short-term liquidity needs are met through cash on hand and U.S. commercial paper issuances. Refer to Note 12 for more detail regarding debt.

2021 Debt Activity:

Decreases in debt were largely due to the March 2021 early redemption of $450 million in debt maturing in 2022 via make-whole call offers and the November 2021 repayment of 600 million euros aggregate principal amount of Eurobonds that matured. The Company had no commercial paper outstanding at December 31, 2021 and December 31, 2020. Net commercial paper issuances in addition to repayments and borrowings by international subsidiaries are largely reflected in “Change in short-term debt – net” in the preceding table.

Repurchases of Common Stock:

Repurchases of common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes. In 2022, the Company purchased $1,464 million of its own stock. For more information, refer to the table titled “Issuer Purchases of Equity Securities” in Part II, Item 5. The Company does not utilize derivative instruments linked to the Company’s stock.

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Dividends Paid to Shareholders:

3M has paid dividends since 1916. In February 2023, 3M’s Board of Directors declared a first-quarter 2023 dividend of $1.50 per share, an increase of 1 percent. This is equivalent to an annual dividend of $6.00 per share and marked the 65th consecutive year of dividend increases.

Other cash flows from financing activities may include various other items, such as cash paid associated with certain derivative instruments, distributions to or sales of noncontrolling interests, changes in overdraft balances, and principal payments for finance leases.

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. 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 believes free cash flow and free cash flow conversion are meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication of the strength of the company and its ability to generate cash. Free cash flow and free cash flow conversion vary across quarters throughout the year. 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. 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.



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. Future cash payments for interest on long-term debt is approximately $6 billion.

•Commitments and contingencies—Refer to Note 16.

•Operating and finance leases—Refer to Note 17.

3M purchases the majority of its materials and services as needed, with no unconditional commitments. In limited circumstances, in the normal course of business, 3M enters into unconditional purchase obligations with various vendors that may take the form of, for example, take or pay contracts in which 3M guarantees payment to ensure availability to 3M of certain materials or services or to ensure ongoing efforts on capital projects. The Company expects to receive underlying materials or services for these purchase obligations. To the extent the limited amount of these purchase obligations fluctuates, it largely trends with normal-course changes in regular operating activities. Additionally, contractual capital commitments represent a small part of the Company’s expected capital spending.

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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. The Company manages interest rate risks using a mix of fixed and floating rate debt. To help manage borrowing costs, the Company may enter into interest rate swaps. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The Company manages commodity price risks through negotiated supply contracts and price protection agreements.

Refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, for further discussion of foreign exchange rates risk, interest rates risk, commodity prices risk and value at risk analysis.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

In the context of Item 7A, 3M is exposed to market risk due to the risk of loss arising from adverse changes in foreign currency exchange rates, interest rates and commodity prices. Changes in those factors could impact the Company’s results of operations and financial condition. Senior management provides oversight for risk management and derivative activities, determines certain of the Company’s financial risk policies and objectives, and provides guidelines for derivative instrument utilization. Senior management also establishes certain associated procedures relative to control and valuation, risk analysis, counterparty credit approval, and ongoing monitoring and reporting.

The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency swaps, and forward and option contracts. However, the Company’s risk is limited to the fair value of the instruments. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial institutions as counterparties. The Company does not anticipate nonperformance by any of these counterparties.

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. The Company enters into foreign exchange forward and option contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactions are designated as cash flow hedges. 3M may de-designate these cash flow hedge relationships in advance of the occurrence of the forecasted transaction. 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. In addition, 3M enters into foreign currency contracts that are not designated in hedging relationships to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances. 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. 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. 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.

Interest Rates Risk:

The Company may be impacted by interest rate volatility with respect to existing debt and future debt issuances. 3M manages interest rate risk and expense using a mix of fixed and floating rate debt. In addition, the Company may enter into interest rate swaps that are designated and qualify as fair value hedges. 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. 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.

Commodity Prices Risk:

The Company manages commodity price risks through negotiated supply contracts and price protection agreements.

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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. 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. 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.


	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. 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. Global energy exposure includes energy costs used in 3M production and other facilities, primarily electricity and natural gas.

Item 8. Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm (PCAOB ID 238)

Consolidated Financial Statements

Index to Financial Statements

A complete summary of Form 10-K content, including the index to financial statements, is found at the beginning of this document.

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Management’s Responsibility for Financial Reporting

Management is responsible for the integrity and objectivity of the financial information included in this report. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Where necessary, the financial statements reflect estimates based on management’s judgment.

Management has established and maintains a system of internal control over financial reporting for the Company and its subsidiaries. This system and its established accounting procedures and related controls are designed to provide reasonable assurance that assets are safeguarded, that the books and records properly reflect all transactions, that policies and procedures are implemented by qualified personnel, and that published financial statements are properly prepared and fairly presented. The Company’s system of internal control over financial reporting is supported by widely communicated written policies, including business conduct policies, which are designed to require all employees to maintain high ethical standards in the conduct of Company affairs. Internal auditors continually review the accounting and control system.

3M Company

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Management conducted an assessment of the Company’s internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on the assessment, management concluded that, as of December 31, 2022, the Company’s internal control over financial reporting is effective.

The Company’s internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.

3M Company

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of 3M Company

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of 3M Company and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income (loss), of changes in equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Legal Proceedings

As described in Note 16 to the consolidated financial statements, management records liabilities for legal proceedings in those instances where it can reasonably estimate the amount of the loss and when the loss is probable. Where the reasonable estimate of the probable loss is a range, management records as an accrual in its financial statements the most likely estimate of the loss, or the low end of the range if there is no one best estimate. Management either discloses the amount of a possible loss or range of loss in excess of established accruals if estimable, or states that such an estimate cannot be made. Management discloses significant legal proceedings even where liability is not probable or the amount of the liability is not estimable, or both, if management believes there is at least a reasonable possibility that a loss may be incurred.

The principal considerations for our determination that performing procedures relating to legal proceedings is a critical audit matter are the significant judgment by management when assessing the likelihood of a loss being incurred and when estimating the loss or range of loss for each claim, which in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s assessment of the liabilities and disclosures associated with legal proceedings.

Tax-free Determination of the Split-Off of the Food Safety Division

As described in Note 3 to the consolidated financial statements, the Company completed the split-off of the Food Safety Division business in a transaction that involved a Reverse Morris Trust structure. Management has determined that the Food Safety Division split-off involving the Reverse Morris Trust structure and certain internal business separation transactions (the split-off and certain internal business separation transactions referred to together as the “Transactions”) qualify as tax-free for U.S. federal income tax purposes. In making these determinations, management applied U.S. federal tax law to relevant facts and circumstances and obtained a favorable private letter ruling from the Internal Revenue Service, third party tax opinions, and other external tax advice related to the concluded tax treatment. The applicable facts and circumstances that existed at the time of the Transactions may be reviewed as part of an audit by the Internal Revenue Service. If the completed Transactions were later determined to fail to qualify for tax-free treatment for U.S. federal income tax purposes, the Company could be subject to significant liabilities, and there could be material adverse impacts on the Company’s business, financial condition, results of operations and cash flows in future reporting periods.

The principal considerations for our determination that performing procedures relating to the tax-free determination of the Transactions is a critical audit matter are (i) the significant judgment by management in applying relevant tax laws and regulations in determining the Transactions qualify as tax-free, and (ii) the significant impact to the financial statements if these tax-free determinations were determined to be inappropriate by the relevant taxing authorities. This in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to the tax-free determination of the Transactions. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

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Property, Plant and Equipment and Goodwill Impairment Assessments for the Advanced Materials Division

As described in Notes 1, 4, and 15 to the consolidated financial statements, the Company’s consolidated property, plant and equipment balance was $9.2 billion and goodwill balance was $12.8 billion as of December 31, 2022, and the Advanced Materials Division makes up a portion of these balances. Management tests property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss recorded is calculated by the excess of the asset’s carrying value over its fair value. Management also tests goodwill for impairment annually in the fourth quarter of each year, and tests for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. The impairment loss is measured as the amount by which the carrying value of the reporting unit’s net assets exceeds its estimated fair value, not to exceed the carrying value of the reporting unit’s goodwill. In December 2022, the Company committed to a plan to exit per- and polyfluoroalkyl substance (PFAS) manufacturing by the end of 2025. As a result, the Company recorded a pre-tax charge of $0.8 billion in the fourth quarter of 2022, related to the impairment of long-lived assets ($0.5 billion - primarily associated with property, plant and equipment) and impairment of goodwill ($0.3 billion) for the Advanced Materials Division. Underlying fair values were determined primarily using discounted cash flow models based on assumptions of projected sales, EBITDA margins, capital expenditures, discount rate and other applicable items.

The principal considerations for our determination that performing procedures relating to the property, plant and equipment and goodwill impairment assessments for the Advanced Materials Division is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the Advanced Materials Division asset group and reporting unit, which in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to the appropriateness of management’s discounted cash flow models and reasonableness of management’s significant assumptions related to projected sales, EBITDA margins, capital expenditures, and discount rate and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s property, plant and equipment and goodwill impairment assessments for the Advanced Materials Division, including controls over management’s identification of events or changes in circumstances that indicate an impairment of an asset group or reporting unit has occurred and controls over the determination of the fair value estimates of the Advanced Materials Division asset group and reporting unit. These procedures also included, among others, testing management’s process for determining the fair value estimates of the Advanced Materials Division asset group and reporting unit, evaluating the appropriateness of the discounted cash flow models, and evaluating the reasonableness of management’s significant assumptions related to projected sales, EBITDA margins, capital expenditures, and discount rate. Evaluating management’s assumptions related to projected sales, EBITDA margins, and capital expenditures involved evaluating whether the assumptions used were reasonable considering the current and past performance of the Advanced Materials Division, external market and industry data, evidence obtained in other areas of the audit and the Company’s objectives and strategies. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the discounted cash flow models and evaluating the reasonableness of the discount rate.

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota

February 8, 2023

We have served as the Company’s auditor since 1975.

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3M Company and Subsidiaries

Consolidated Statement of Income

Years ended December 31



(Millions, except per share amounts)	2022		2021		2020
Net sales	$	34,229	$	35,355	$	32,184

Operating expenses
Cost of sales	19,232		18,795		16,605
Selling, general and administrative expenses	9,049		7,197		6,929
Research, development and related expenses	1,862		1,994		1,878
Gain on business divestitures	(2,724)		—		(389)
Goodwill impairment expense	271		—		—
Total operating expenses	27,690		27,986		25,023
Operating income	6,539		7,369		7,161

Other expense (income), net	147		165		366

Income before income taxes	6,392		7,204		6,795
Provision for income taxes	612		1,285		1,337
Income of consolidated group	5,780		5,919		5,458

Income (loss) from unconsolidated subsidiaries, net of taxes	11		10		(5)
Net income including noncontrolling interest	5,791		5,929		5,453

Less: Net income (loss) attributable to noncontrolling interest	14		8		4

Net income attributable to 3M	$	5,777	$	5,921	$	5,449

Weighted average 3M common shares outstanding — basic	566.0		579.0		577.6
Earnings per share attributable to 3M common shareholders — basic	$	10.21	$	10.23	$	9.43

Weighted average 3M common shares outstanding — diluted	567.6		585.3		582.2
Earnings per share attributable to 3M common shareholders — diluted	$	10.18	$	10.12	$	9.36

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

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3M Company and Subsidiaries

Consolidated Statement of Comprehensive Income (Loss)

Years ended December 31



(Millions)	2022		2021		2020
Net income including noncontrolling interest	$	5,791	$	5,929	$	5,453
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	(893)		(494)		447
Defined benefit pension and postretirement plans adjustment	915		1,345		106
Cash flow hedging instruments	47		119		(142)
Total other comprehensive income (loss), net of tax	69		970		411
Comprehensive income (loss) including noncontrolling interest	5,860		6,899		5,864
Comprehensive (income) loss attributable to noncontrolling interest	(6)		(7)		(2)
Comprehensive income (loss) attributable to 3M	$	5,854	$	6,892	$	5,862

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

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3M Company and Subsidiaries

Consolidated Balance Sheet

At December 31


(Dollars in millions, except per share amount)	2022		2021
Assets
Current assets
Cash and cash equivalents	$	3,655	$	4,564
Marketable securities — current	238		201
Accounts receivable — net of allowances of $174 and $189	4,532		4,660
Inventories
Finished goods	2,497		2,196
Work in process	1,606		1,577
Raw materials and supplies	1,269		1,212
Total inventories	5,372		4,985
Prepaids	435		654
Other current assets	456		339
Total current assets	14,688		15,403
Property, plant and equipment	25,998		27,213
Less: Accumulated depreciation	(16,820)		(17,784)
Property, plant and equipment — net	9,178		9,429
Operating lease right of use assets	829		858
Goodwill	12,790		13,486
Intangible assets — net	4,699		5,288
Other assets	4,271		2,608
Total assets	$	46,455	$	47,072
Liabilities
Current liabilities
Short-term borrowings and current portion of long-term debt	$	1,938	$	1,307
Accounts payable	3,183		2,994
Accrued payroll	692		1,020
Accrued income taxes	259		260
Operating lease liabilities — current	261		263
Other current liabilities	3,190		3,191
Total current liabilities	9,523		9,035
Long-term debt	14,001		16,056
Pension and postretirement benefits	1,966		2,870
Operating lease liabilities	580		591
Other liabilities	5,615		3,403
Total liabilities	31,685		31,955
Commitments and contingencies (Note 16)
Equity
3M Company shareholders’ equity:
Common stock par value, $.01 par value; 944,033,056 shares issued	9		9
Shares outstanding - December 31, 2022: 549,245,105
Shares outstanding - December 31, 2021: 571,845,478
Additional paid-in capital	6,691		6,429
Retained earnings	47,950		45,821
Treasury stock, at cost:	(33,255)		(30,463)


Accumulated other comprehensive income (loss)	(6,673)		(6,750)
Total 3M Company shareholders’ equity	14,722		15,046
Noncontrolling interest	48		71
Total equity	14,770		15,117
Total liabilities and equity	$	46,455	$	47,072

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

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3M Company and Subsidiaries

Consolidated Statement of Changes in Equity

Years ended December 31


			3M Company Shareholders
(Dollars in millions, except per share amounts)	Total		Common Stock and Additional Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest
Balance at December 31, 2019	$	10,126	$	5,916	$	42,130	$	(29,849)	$	(8,134)	$	63
Net income	5,453				5,449						4
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	447								449		(2)
Defined benefit pension and post-retirement plans adjustment	106								106
Cash flow hedging instruments - unrealized gain (loss)	(142)								(142)
Total other comprehensive income (loss), net of tax	411
Dividends declared ($5.88 per share, Note 8)	(3,388)				(3,388)
Purchase of non-controlling interest	(1)										(1)
Stock-based compensation	255		255
Reacquired stock	(358)						(358)
Issuances pursuant to stock options and benefit plans	433				(370)		803
Balance at December 31, 2020	12,931		6,171		43,821		(29,404)		(7,721)		64
Net income	5,929				5,921						8
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	(494)								(493)		(1)
Defined benefit pension and post-retirement plans adjustment	1,345								1,345
Cash flow hedging instruments - unrealized gain (loss)	119								119
Total other comprehensive income (loss), net of tax	970
Dividends declared ($5.92 per share, Note 8)	(3,420)				(3,420)

Stock-based compensation	267		267
Reacquired stock	(2,199)						(2,199)
Issuances pursuant to stock options and benefit plans	639				(501)		1,140
Balance at December 31, 2021	15,117		6,438		45,821		(30,463)		(6,750)		71
Net income	5,791				5,777						14
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	(893)								(885)		(8)
Defined benefit pension and post-retirement plans adjustment	915								915
Cash flow hedging instruments - unrealized gain (loss)	47								47
Total other comprehensive income (loss), net of tax	69
Dividends declared ($5.96 per share, Note 8)	(3,369)				(3,369)
Stock-based compensation	262		262
Reacquired stock	(1,464)						(1,464)
Dividend to noncontrolling interest	(29)										(29)
Split-off of Food Safety business	(1,988)						(1,988)
Issuances pursuant to stock options and benefit plans	381				(279)		660
Balance at December 31, 2022	$	14,770	$	6,700	$	47,950	$	(33,255)	$	(6,673)	$	48


Supplemental share information	2022	2021	2020
Treasury stock
Beginning balance	372,187,578	366,283,418	368,848,221
Reacquired stock	10,865,635	11,834,681	2,286,109
Split-off of Food Safety business	15,989,536	—	—
Issuances pursuant to stock options and benefit plans	(4,254,798)	(5,930,521)	(4,850,912)
Ending balance	394,787,951	372,187,578	366,283,418

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

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3M Company and Subsidiaries

Consolidated Statement of Cash Flows

Years ended December 31



(Millions)	2022		2021		2020
Cash Flows from Operating Activities
Net income including noncontrolling interest	$	5,791	$	5,929	$	5,453
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities
Depreciation and amortization	1,831		1,915		1,911
Long-lived and indefinite-lived asset impairment expense	618		—		6
Goodwill impairment expense	271		—		—
Company pension and postretirement contributions	(158)		(180)		(156)
Company pension and postretirement expense	178		206		322
Stock-based compensation expense	263		274		262
Gain on business divestitures	(2,724)		—		(389)
Deferred income taxes	(663)		(166)		(165)
Changes in assets and liabilities
Accounts receivable	(105)		(122)		165
Inventories	(629)		(903)		(91)
Accounts payable	111		518		252
Accrued income taxes (current and long-term)	(47)		(244)		132
Other — net	854		227		411
Net cash provided by (used in) operating activities	5,591		7,454		8,113

Cash Flows from Investing Activities
Purchases of property, plant and equipment (PP&E)	(1,749)		(1,603)		(1,501)
Proceeds from sale of PP&E and other assets	200		51		128
Acquisitions, net of cash acquired	—		—		(25)
Purchases of marketable securities and investments	(1,250)		(2,202)		(1,579)
Proceeds from maturities and sale of marketable securities and investments	1,261		2,406		1,811
Proceeds from sale of businesses, net of cash sold	13		—		576
Cash payment from Food Safety business split-off, net of divested cash	478		—		—
Other — net	1		31		10
Net cash provided by (used in) investing activities	(1,046)		(1,317)		(580)

Cash Flows from Financing Activities
Change in short-term debt — net	340		(2)		(143)
Repayment of debt (maturities greater than 90 days)	(1,179)		(1,144)		(3,482)
Proceeds from debt (maturities greater than 90 days)	1		1		1,750
Purchases of treasury stock	(1,464)		(2,199)		(368)
Proceeds from issuance of treasury stock pursuant to stock option and benefit plans	381		639		429
Dividends paid to shareholders	(3,369)		(3,420)		(3,388)
Other — net	(60)		(20)		(98)
Net cash provided by (used in) financing activities	(5,350)		(6,145)		(5,300)

Effect of exchange rate changes on cash and cash equivalents	(104)		(62)		48

Net increase (decrease) in cash and cash equivalents	(909)		(70)		2,281
Cash and cash equivalents at beginning of year	4,564		4,634		2,353
Cash and cash equivalents at end of period	$	3,655	$	4,564	$	4,634

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

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3M Company and Subsidiaries

Notes to Consolidated Financial Statements

NOTE 1. Significant Accounting Policies

Consolidation: 3M is a diversified global manufacturer, technology innovator and marketer of a wide variety of products. All applicable subsidiaries are consolidated. All intercompany transactions are eliminated. As used herein, the term “3M” or “Company” refers to 3M Company and subsidiaries unless the context indicates otherwise.

3M deconsolidated the Aearo Entities in the third quarter of 2022. See additional information in Note 16.

Basis of presentation: Certain amounts in the prior years’ consolidated financial statements have been reclassified to conform to the current year presentation.

Effective in the first quarter of 2022, 3M made changes in the measure of segment operating performance used by 3M’s chief operating decision maker—impacting 3M’s disclosed measure of segment profit/loss (business segment operating income). See additional information in Note 19. 3M's disclosed disaggregated revenue was also updated as a result of the changes in segment reporting. See additional information in Note 2. Information provided herein reflects the impact of these changes for all periods presented.

Foreign currency translation: Local currencies generally are considered the functional currencies outside the United States. Exceptions include 3M’s subsidiaries in Argentina and, beginning in the second quarter of 2022, in Turkey, the economy of which also became highly inflationary. The operating income and balances of underlying net monetary assets denominated in Turkish lira are not material to 3M. The financial statements of these subsidiaries are remeasured as if their functional currency is that of their parent. Assets and liabilities for operations in local-currency environments are translated at month-end exchange rates of the period reported. Income and expense items are translated at average monthly currency exchange rates in effect during the period. Cumulative translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity.

Use of estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company considered the coronavirus (COVID-19) related impacts on its estimates, as appropriate, within its consolidated financial statements and there may be changes to those estimates in future periods. 3M believes that the accounting estimates are appropriate after giving consideration to the increased uncertainties surrounding the severity and duration of the COVID-19 pandemic. Such estimates and assumptions are subject to inherent uncertainties which may result in actual amounts differing from these estimates.

Cash and cash equivalents: Cash and cash equivalents consist of cash and temporary investments with maturities of three months or less when acquired.

Marketable securities: Marketable securities include available-for-sale debt securities and are recorded at fair value. Cost of securities sold use the first in, first out (FIFO) method. The classification of marketable securities as current or non-current is based on the availability for use in current operations. 3M reviews impairments associated with its marketable securities in accordance with the measurement guidance provided by ASC 320, Investments-Debt Securities and ASC 326-30, Available-for-Sale Debt Securities, when determining whether a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. An impairment relating to credit losses is recorded through an allowance for credit losses. The allowance is limited by the amount that the fair value is less than the amortized cost basis. A change in the allowance for credit losses is recorded into earnings in the period of the change. Any impairment that has not been recorded through an allowance for credit losses is recorded through accumulated other comprehensive income as a component of shareholders’ equity. The factors considered in determining whether a credit loss exists can include the extent to which fair value is less than the amortized cost basis, changes in the credit quality of the underlying loan obligors, credit ratings actions, as well as other factors. When a credit loss exists, the Company compares the present value of cash flows expected to be collected from the debt security with the amortized cost basis of the security to determine what allowance amount, if any, should be recorded. Amounts are reclassified out of accumulated other comprehensive income and into earnings upon sale or a change in the portions of impairment related to credit losses and not related to credit losses.

Investments: All equity securities that do not result in consolidation and are not accounted for under the equity method are measured at fair value with changes therein reflected in net income. 3M utilizes the measurement alternative for equity investments that do not have readily determinable fair values and measures these investments at cost less impairment plus or minus observable price changes in orderly transactions. The balance of these securities is disclosed in Note 7.

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Other assets: Other assets include deferred income taxes, product and other insurance receivables, the cash surrender value of life insurance policies, medical equipment in rental arrangements utilized primarily by hospitals and other medical clinics, prepaid pension and postretirement and other long-term assets. Investments in life insurance policies are reported at the amount that could be realized under contract at the balance sheet date, with any changes in cash surrender value or contract value during the period accounted for as an adjustment of premiums paid. Cash outflows and inflows associated with life insurance activity are included in “Purchases of marketable securities and investments” and “Proceeds from maturities and sale of marketable securities and investments,” respectively.

Inventories: Inventories are stated at the lower of cost or net realizable value (NRV), which is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Cost is generally determined on a first-in, first-out basis.

Property, plant and equipment: Property, plant and equipment, including capitalized interest and internal direct engineering costs, are recorded at cost. Depreciation of property, plant and equipment generally is computed using the straight-line method based on the estimated useful lives of the assets. The estimated useful lives of buildings and improvements primarily range from ten to forty years, with the majority in the range of twenty to forty years. The estimated useful lives of machinery and equipment primarily range from three to fifteen years, with the majority in the range of five to ten years. Fully depreciated assets other than capitalized internally developed software are retained in property, plant and equipment and accumulated depreciation accounts until disposal. Upon disposal, assets and related accumulated depreciation are removed from the accounts and the net amount, less proceeds from disposal, is charged or credited to operations. Property, plant and equipment amounts are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis. 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.

Conditional asset retirement obligations: A liability is initially recorded at fair value for an asset retirement obligation associated with the retirement of tangible long-lived assets in the period in which it is incurred if a reasonable estimate of fair value can be made. Conditional asset retirement obligations exist for certain long-term assets of the Company. The obligation is initially measured at fair value using expected present value techniques. Over time the liabilities are accreted for the change in their present value and the initial capitalized costs are depreciated over the remaining useful lives of the related assets. The asset retirement obligation liability was $177 million and $176 millions at December 31, 2022 and 2021, respectively.

Goodwill: Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is not amortized. Goodwill is tested for impairment annually in the fourth quarter of each year, and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit level, with all goodwill assigned to a reporting unit. Reporting units are one level below the business segment level, but are required to be combined when reporting units within the same segment have similar economic characteristics. 3M did not combine any of its reporting units for impairment testing. The impairment loss is measured as the amount by which the carrying value of the reporting unit’s net assets exceeds its estimated fair value, not to exceed the carrying value of the reporting unit’s goodwill. 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 or, in some cases, based on a discounted cash flow analysis. Companies have the option to first assess qualitative factors to determine whether the fair value of a reporting unit is not “more likely than not” less than its carrying amount, which is commonly referred to as “Step 0”. 3M has chosen not to apply Step 0 for its annual goodwill assessments.

Intangible assets: Intangible asset types include customer related, patents, other technology-based, tradenames and other intangible assets acquired from an independent party. Intangible assets with a definite life are amortized over a period ranging from six to twenty years on a systematic and rational basis (generally straight line) that is representative of the asset’s use. The estimated useful lives vary by category, with customer-related largely between twelve to nineteen years, patents largely between eight to thirteen years, other technology-based largely between six to ten years, definite lived tradenames largely between eleven and twenty years, and other intangibles largely ten years. Intangible assets are removed from their respective gross asset and accumulated amortization accounts when they are no longer in use. Refer to Note 4 for additional details on the gross amount and accumulated amortization of the Company’s intangible assets. Costs related to internally developed intangible assets, such as patents, are expensed as incurred, within “Research, development and related expenses.”

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Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. An impairment loss is recognized when the carrying amount exceeds the estimated undiscounted cash flows from the asset’s or asset group’s ongoing use and eventual disposition. If an impairment is identified, the amount of the impairment loss recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis.

Intangible assets with an indefinite life, namely certain tradenames, are not amortized. Indefinite-lived intangible assets are tested for impairment annually in the third quarter of each year, and are tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. An impairment loss would be recognized when the fair value is less than the carrying value of the indefinite-lived intangible asset.

Restructuring actions: Restructuring actions generally include significant actions involving employee-related severance charges, contract termination costs, and impairment or accelerated depreciation/amortization of assets associated with such actions. Employee-related severance charges are largely based upon distributed employment policies and substantive severance plans. These charges are reflected in the quarter when the actions are probable and the amounts are estimable, which typically is when management approves the associated actions. Severance amounts for which affected employees in certain circumstances are required to render service in order to receive benefits at their termination dates were measured at the date such benefits were communicated to the applicable employees and recognized as expense over the employees’ remaining service periods. Contract termination and other charges primarily reflect costs to terminate a contract before the end of its term (measured at fair value at the time the Company provided notice to the counterparty) or costs that will continue to be incurred under the contract for its remaining term without economic benefit to the Company.

Revenue (sales) recognition: The Company sells a wide range of products to a diversified base of customers around the world and has no material concentration of credit risk or significant payment terms extended to customers. The vast majority of 3M’s customer arrangements contain a single performance obligation to transfer manufactured goods as the promise to transfer the individual goods is not separately identifiable from other promises in the contracts and, therefore, not distinct. However, to a limited extent 3M also enters into customer arrangements that involve intellectual property out-licensing, multiple performance obligations (such as equipment, installation and service), software with coterminous post-contract support, services and non-standard terms and conditions.

The Company recognizes revenue in light of the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. Revenue is recognized when control of goods has transferred to customers. For the majority of the Company’s customer arrangements, control transfers to customers at a point-in-time when goods/services have been delivered as that is generally when legal title, physical possession and risks and rewards of goods/services transfer to the customer. In limited arrangements, control transfers over time as the customer simultaneously receives and consumes the benefits as 3M completes the performance obligation(s).

Revenue is recognized at the transaction price which the Company expects to be entitled. When determining the transaction price, 3M estimates variable consideration applying the portfolio approach practical expedient under ASC 606. The main sources of variable consideration for 3M are customer rebates, trade promotion funds, and cash discounts. These sales incentives are recorded as a reduction to revenue at the time of the initial sale using the most-likely amount estimation method. The most-likely amount method is based on the single most likely outcome from a range of possible consideration outcomes. The range of possible consideration outcomes are primarily derived from the following inputs: sales terms, historical experience, trend analysis, and projected market conditions in the various markets served. Because 3M serves numerous markets, the sales incentive programs offered vary across businesses, but the most common incentive relates to amounts paid or credited to customers for achieving defined volume levels or growth objectives. There are no material instances where variable consideration is constrained and not recorded at the initial time of sale. Free goods are accounted for as an expense and recorded in cost of sales. Product returns are recorded as a reduction to revenue based on anticipated sales returns that occur in the normal course of business. 3M primarily has assurance-type warranties that do not result in separate performance obligations. Sales, use, value-added, and other excise taxes are not recognized in revenue. The Company has elected to present revenue net of sales taxes and other similar taxes.

For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using 3M’s best estimate of the standalone selling price of each distinct good or service in the contract.

The Company did not recognize any material revenue in the current reporting period for performance obligations that were fully satisfied in previous periods.

The Company does not have material unfulfilled performance obligation balances for contracts with an original length greater than one year in any years presented. Additionally, the Company does not have material costs related to obtaining a contract with amortization periods greater than one year for any year presented.

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3M applies ASC 606 utilizing the following allowable exemptions or practical expedients:

•Exemption to not disclose the unfulfilled performance obligation balance for contracts with an original length of one year or less.

•Practical expedient relative to costs of obtaining a contract by expensing sales commissions when incurred because the amortization period would have been one year or less.

•Portfolio approach practical expedient relative to estimation of variable consideration.

•“Right to invoice” practical expedient based on 3M’s right to invoice the customer at an amount that reasonably represents the value to the customer of 3M’s performance completed to date.

•Election to present revenue net of sales taxes and other similar taxes.

•Sales-based royalty exemption permitting future intellectual property out-licensing royalty payments to be excluded from the otherwise required remaining performance obligations disclosure

The Company recognizes revenue from the rental of durable medical devices in accordance with the guidance of ASC 842, Leases. The Company recognizes rental revenue based on the length of time a device is used by the patient/organization, (i) at the contracted rental rate for contracted customers and (ii) generally, retail price for non-contracted customers. The leases are short-term in nature, generally providing for daily or monthly pricing, and are all classified as operating leases.

Accounts receivable and allowances: Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains allowances for bad debts, cash discounts, and various other items. The allowances for bad debts and cash discounts are based on the best estimate of the amount of expected credit losses in existing accounts receivable and anticipated cash discounts. The Company determines the allowances based on historical write-off experience, current expectations of future credit losses informed by industry and regional economic data, and historical cash discounts. The Company reviews the allowances monthly. The allowances for bad debts as well as the provision for credit losses, write-off activity and recoveries for the periods presented are not material. The Company does not have any significant off-balance-sheet credit exposure related to its customers. The Company has long-term customer receivables that do not have significant credit risk, and the origination dates of which are typically not older than five years. These long-term receivables are subject to an allowance methodology similar to other receivables.

Advertising and merchandising: These costs are charged to operations in the period incurred, and totaled $323 million, $327 million and $278 million in 2022, 2021 and 2020, respectively.

Research, development and related expenses: These costs are charged to operations in the period incurred and are shown on a separate line of the Consolidated Statement of Income. Research, development and related expenses totaled $1.9 billion, $2.0 billion and $1.9 billion in 2022, 2021 and 2020, respectively. Research and development expenses, covering basic scientific research and the application of scientific advances in the development of new and improved products and their uses, totaled $1.1 billion, $1.2 billion and $1.1 billion in 2022, 2021 and 2020, respectively. Related expenses primarily include technical support; internally developed patent costs, which include costs and fees incurred to prepare, file, secure and maintain patents; amortization of externally acquired patents and externally acquired in-process research and development; and gains/losses associated with certain corporate approved investments in R&D-related ventures.

Internal-use software: The Company capitalizes direct costs of services used in the development of, and external software acquired for use as, internal-use software. Amounts capitalized are amortized over a period of three to seven years, generally on a straight-line basis, unless another systematic and rational basis is more representative of the software’s use. Amounts are reported as a component of either machinery and equipment or finance leases within property, plant and equipment. Fully depreciated internal-use software assets are removed from property, plant and equipment and accumulated depreciation accounts.

Environmental: Environmental expenditures relating to existing conditions caused by past operations that do not contribute to current or future revenues are expensed. Reserves for liabilities related to anticipated remediation costs are recorded on an undiscounted basis when they are probable and reasonably estimable, generally no later than the completion of feasibility studies, the Company’s commitment to a plan of action, or approval by regulatory agencies. Environmental expenditures for capital projects that contribute to current or future operations generally are capitalized and depreciated over their estimated useful lives.

Income taxes: The provision for income taxes is determined using the asset and liability approach. Under this approach, deferred income taxes represent the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities. The Company records a valuation allowance to reduce its deferred tax assets when uncertainty regarding their realizability exists. As of December 31, 2022 and December 31, 2021, the Company had valuation allowances of $115 million and $142 million on its deferred tax assets, respectively. The Company recognizes and measures its uncertain tax positions based on the rules under ASC 740, Income Taxes.

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Earnings per share: The difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is the result of the dilution associated with the Company’s stock-based compensation plans. Certain options outstanding under these stock-based compensation plans during the years 2022, 2021 and 2020 were not included in the computation of diluted earnings per share attributable to 3M common shareholders because they would have had an anti-dilutive effect (30.3 million average options for 2022, 7.8 million average options for 2021, and 18.1 million average options for 2020). The computations for basic and diluted earnings per share follow:

Earnings Per Share Computations



(Amounts in millions, except per share amounts)	2022		2021		2020
Numerator:
Net income attributable to 3M	$	5,777	$	5,921	$	5,449

Denominator:
Denominator for weighted average 3M common shares outstanding – basic	566.0		579.0		577.6
Dilution associated with the Company’s stock-based compensation plans	1.6		6.3		4.6
Denominator for weighted average 3M common shares outstanding – diluted	567.6		585.3		582.2

Earnings per share attributable to 3M common shareholders – basic	$	10.21	$	10.23	$	9.43
Earnings per share attributable to 3M common shareholders – diluted	$	10.18	$	10.12	$	9.36

Stock-based compensation: The Company recognizes compensation expense for its stock-based compensation programs, which include stock options, restricted stock, restricted stock units (RSUs), performance shares, and the General Employees’ Stock Purchase Plan (GESPP). Under applicable accounting standards, the fair value of share-based compensation is determined at the grant date and the recognition of the related expense is recorded over the period in which the share-based compensation vests. However, with respect to income taxes, the related deduction from taxes payable is based on the award’s intrinsic value at the time of exercise (for an option) or on the fair value upon vesting of the award (for RSUs), which can be either greater (creating an excess tax benefit) or less (creating a tax deficiency) than the deferred tax benefit recognized as compensation cost is recognized in the financial statements. These excess tax benefits/deficiencies are recognized as income tax benefit/expense in the statement of income and, within the statement of cash flows, are classified in operating activities in the same manner as other cash flows related to income taxes. The extent of excess tax benefits/deficiencies is subject to variation in 3M stock price and timing/extent of RSU vestings and employee stock option exercises.

Comprehensive income: Total comprehensive income and the components of accumulated other comprehensive income (loss) are presented in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Changes in Equity. Accumulated other comprehensive income (loss) is composed of foreign currency translation effects (including hedges of net investments in international companies), defined benefit pension and postretirement plan adjustments, unrealized gains and losses on available-for-sale debt securities, and unrealized gains and losses on cash flow hedging instruments. The Company uses the portfolio approach for releasing income tax effects from accumulated other comprehensive income.

Derivatives and hedging activities: All derivative instruments within the scope of ASC 815, Derivatives and Hedging, are recorded on the balance sheet at fair value. The Company uses interest rate swaps, currency swaps, and foreign currency forward and option contracts to manage risks generally associated with foreign exchange rate and interest rate volatility. All hedging instruments that qualify for hedge accounting are designated and effective as hedges, in accordance with U.S. generally accepted accounting principles. If the underlying hedged transaction ceases to exist, all changes in fair value of the related derivatives that have not been settled are recognized in current earnings. Instruments that do not qualify for hedge accounting are marked to market with changes recognized in current earnings. Cash flows from derivative instruments are classified in the statement of cash flows in the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationships. The Company does not hold or issue derivative financial instruments for trading purposes and is not a party to leveraged derivatives.

Credit risk: The Company is exposed to credit loss in the event of nonperformance by counterparties in interest rate swaps, currency swaps, and forward and option contracts. However, the Company’s risk is limited to the fair value of the instruments. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial institutions as counterparties. 3M enters into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions. A master netting arrangement may allow each counterparty to net settle amounts owed between a 3M entity and the counterparty as a result of multiple, separate derivative transactions. The Company does not anticipate nonperformance by any of these counterparties. 3M has elected to present the fair value of derivative assets and liabilities within the Company’s consolidated balance sheet on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation.

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Fair value measurements: 3M follows ASC 820, Fair Value Measurements and Disclosures, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under the standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy is broken down into three levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Acquisitions: The Company accounts for business acquisitions in accordance with ASC 805, Business Combinations. This standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard prescribe, among other things, the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration) and the exclusion of transaction and acquisition-related restructuring costs from acquisition accounting. In addition to business combinations, 3M periodically acquires certain tangible and/or intangible assets and purchases interests in certain enterprises that do not otherwise qualify for accounting as business combinations. These transactions are largely reflected as additional asset purchase and investment activity.

Leases: 3M determines if an arrangement is a lease upon inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of an asset includes the right to obtain substantially all of the economic benefits of the underlying asset and the right to direct how and for what purpose the asset is used. 3M determines certain service agreements that contain the right to use an underlying asset are not leases because 3M does not control how and for what purpose the identified asset is used. Examples of such agreements include master supply agreements, product processing agreements, warehouse and distribution services agreements, power purchase agreements, and transportation purchase agreements.

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is 3M’s incremental borrowing rate or, if available, the rate implicit in the lease. 3M determines the incremental borrowing rate for leases using a portfolio approach based primarily on the lease term and the economic environment of the applicable country or region.

As a lessee, the Company leases distribution centers, office space, land, and equipment. Certain 3M lease agreements include rental payments adjusted annually based on changes in an inflation index. 3M’s leases do not contain material residual value guarantees or material restrictive covenants. Lease expense is recognized on a straight-line basis over the lease term.

Certain leases include one or more options to renew, with terms that can extend the lease term up to five years. 3M includes options to renew the lease as part of the right of use lease asset and liability when it is reasonably certain the Company will exercise the option. In addition, certain leases contain fair value purchase and termination options with an associated penalty. In general, 3M is not reasonably certain to exercise such options.

For the measurement and classification of its lease agreements, 3M groups lease and non-lease components into a single lease component for all underlying asset classes. Variable lease payments primarily include payments for non-lease components, such as maintenance costs, payments for leased assets used beyond their noncancellable lease term as adjusted for contractual options to terminate or renew, additional payments related to a subsequent adjustment in an inflation index, and payments for non-components such as sales tax. Certain 3M leases contain immaterial variable lease payments based on number of units produced.

Related Party Activity:

Other than the amounts due by and between the Aearo Entities and related entities (as described in Note 16), 3M does not have any material related party activity.

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New Accounting Pronouncements

The table below provides summaries of applicable new accounting pronouncements issued, but not yet adopted by 3M:


Standards Issued and Not Yet Adopted
Standard	Relevant Description	Effective Date for 3M	Impact and Other Matters
ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers	Issued in October 2021. Requires acquiring entities to apply ASC 606 to recognize and measure contract assets and liabilities acquired through a business combination.	January 1, 2023	This guidance is applicable to all business combinations occurring after the effective date.
ASU No. 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Obligations	Issued in September 2022. Requires a buyer in a supplier finance program to disclose the key terms of the program, amount of outstanding obligations, and a rollforward of obligations confirmed and subsequently paid.	January 1, 2023, except rollforward disclosure which is not effective until the year-end December 31, 2024	As this ASU relates to disclosures only, there will be no impact to 3M’s consolidated results of operations and financial condition.

NOTE 2. Revenue

Contract Balances:

Deferred revenue primarily relates to revenue that is recognized over time for one-year software license contracts. Refer to Note 7 for deferred revenue balances as of December 31, 2022 and 2021. Approximately $500 million of the December 31, 2021 balance was recognized as revenue during the year ended December 31, 2022, while approximately $470 million of the December 31, 2020 balance was recognized as revenue during the year ended December 31, 2021.

Operating Lease Revenue:

Net sales includes rental revenue from durable medical devices as part of operating lease arrangements (reported within the Medical Solutions Division), which was $577 million, $582 million, and $586 million for the years ended December 31, 2022, 2021, and 2020 respectively.

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Disaggregated revenue information:

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


	Year ended December 31,
Net Sales (Millions)		2022		2021		2020
Abrasives		$	1,343	$	1,296	$	1,077
Automotive Aftermarket		1,209		1,164		1,028
Closure and Masking Systems		1,046		1,033		993
Electrical Markets		1,304		1,229		1,093
Industrial Adhesives and Tapes		2,331		2,353		2,000
Personal Safety		3,916		4,470		4,408
Roofing Granules		455		428		389
Other Safety and Industrial		—		8		(16)
Total Safety and Industrial Business Segment		11,604		11,981		10,972

Advanced Materials		1,205		1,200		1,029
Automotive and Aerospace		1,754		1,756		1,522
Commercial Solutions		1,751		1,717		1,486
Electronics		3,359		3,673		3,497
Transportation Safety		833		907		880
Other Transportation and Electronics		—		9		(8)
Total Transportation and Electronics Business Segment		8,902		9,262		8,406

Drug Delivery		—		—		146
Food Safety		244		368		337
Health Information Systems		1,259		1,220		1,140
Medical Solutions		4,581		4,632		4,288
Oral Care		1,353		1,420		1,071
Separation and Purification Sciences		960		956		848
Other Health Care		24		1		2
Total Health Care Business Group		8,421		8,597		7,832

Consumer Health and Safety		569		588		540
Home Care		1,046		1,074		1,043
Home Improvement		2,392		2,548		2,260
Stationery and Office		1,291		1,306		1,132
Other Consumer		—		(3)		1
Total Consumer Business Group		5,298		5,513		4,976

Corporate and Unallocated		4		2		(2)
Total Company		$	34,229	$	35,355	$	32,184


	Year ended December 31,
Net Sales (Millions)		2022		2021		2020
Americas		$	18,400	$	18,097	$	16,525
Asia Pacific		9,901		10,600		9,569
Europe, Middle East and Africa		5,928		6,660		6,109
Other Unallocated		—		(2)		(19)
Worldwide		$	34,229	$	35,355	$	32,184

Americas included United States net sales to customers of $15.0 billion, $15.0 billion and $13.9 billion in 2022, 2021 and 2020, respectively. Asia Pacific included China/Hong Kong net sales to customers of $3.8 billion, $4.0 billion and $3.5 billion in 2022, 2021 and 2020, respectively.

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NOTE 3. Acquisitions and Divestitures

Acquisitions:

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

2022 acquisitions:

There were no acquisitions that closed during the year ended December 31, 2022.

2021 acquisitions:

There were no acquisitions that closed during the year ended December 31, 2021.

2020 acquisitions:

There were no acquisitions that closed during the year ended December 31, 2020.

Divestitures:

3M may divest certain businesses from time to time based upon review of the Company’s portfolio considering, among other items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders. As discussed in Note 19 (Business Segments), gains/losses on business divestitures are reflected in Corporate and Unallocated.

2022 divestitures and previously announced divestitures:

In March 2022, 3M completed the sale of its floor products business in Western Europe, formerly part of the Consumer business, for immaterial proceeds that approximated the business's book value.

In July 2022, 3M announced its intention to spin off the Health Care business as a separate public company. 3M expects to initially retain an ownership position of 19.9% in the business, which 3M intends to monetize over time. The Company expects to complete the transaction, which is intended to be tax-free for U.S. federal income tax purposes, by year-end 2023. The transaction is subject to customary conditions, including final approval from the 3M Board of Directors, regulatory approvals and rulings, and satisfactory completion of financing, among other items. Because the intended transaction is a spin-off, the Health Care business is not classified as held for sale.

In September 2022, 3M completed the split-off and combination of its Food Safety Division business (formerly part of the Health Care business segment) with Neogen Corporation in a transaction that involved a Reverse Morris Trust structure intended to make the split-off tax-efficient to 3M and 3M's shareholders for U.S. federal income tax purposes. As a result of the transaction, 3M reflected a pre-tax gain of $2.7 billion based on aggregate consideration of $2.8 billion. Under the terms of the underlying agreements, aggregate consideration included 3M shares exchanged and $1.0 billion ($828 million after closing and other adjustments) funded from debt that became obligations of Neogen. The cash and non-cash consideration components are further described below.

•$2.0 billion representing the value of 16 million 3M common shares accepted by 3M that reduced shares outstanding through a fully-subscribed exchange offer. The exchange ultimately resulted in subscribed 3M shareholders owning 50.1% of the common shares of Neogen.

•$828 million in cash and non-cash components funded from debt that became obligations of Neogen.

◦$478 million, net of divested cash, as a cash payment to 3M funded from Food Safety business borrowings coincident with the transaction that became obligations of Neogen. This amount is reflected in the investing section on the consolidated statement of cash flows. The amount was subject to closing and other adjustments and included cash paid to 3M for direct sales of certain net assets of the Food Safety business to Neogen.

◦$350 million as part of a non-cash debt-for-debt exchange that reduced then-outstanding 3M commercial paper indebtedness and became new term-debt obligations of Neogen.

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3M determined that the split-off involving the Reverse Morris Trust structure and certain internal business separation transactions qualify as tax-free for U.S. federal income tax purposes. In making these determinations, 3M applied U.S. federal tax law to relevant facts and circumstances and obtained a favorable private letter ruling from the Internal Revenue Service, third party tax opinions, and other external tax advice related to the concluded tax treatment. The applicable facts and circumstances that existed at the time of the Reverse Morris Trust split-off transactions may be reviewed as part of an audit by the Internal Revenue Service. If the completed transactions were later determined to fail to qualify for tax-free treatment for U.S. federal income tax purposes, the Company could be subject to significant liabilities, and there could be material adverse impacts on the Company’s business, financial condition, results of operations and cash flows in future reporting periods.

Net sales information relative to the Food Safety Division is included in Note 2. Neogen and 3M entered into certain limited-term agreements related to post-divestiture transition supply, manufacturing and services and into certain longer-term commercial supply and distributor arrangements.

2021 divestitures:

There were no divestitures that closed during the year ended December 31, 2021.

2020 divestitures:

In January 2020, 3M completed the sale of its advanced ballistic-protection business, formerly part of the Transportation and Electronics business, to Avon Rubber p.l.c for $86 million in cash and recognized certain contingent consideration from the outcome of pending tenders. Further contingent consideration of less than $25 million may be recognized depending on outcomes in the future. The business, with annual sales of approximately $85 million, consists of ballistic helmets, body armor, flat armor and related helmet-attachment products serving government and law enforcement. 3M reflected immaterial impacts in the third quarter of 2019 as a result of measuring this disposal group at the lower of its carrying amount or fair value less cost to sell and in the first quarter 2020 related to completion of the divestiture and recognition of contingent consideration.

In May 2020, 3M completed the sale of substantially all of its Drug Delivery Division business, formerly part of the Health Care business, to an affiliate of Altaris Capital Partners, LLC for $617 million in consideration including $487 million of cash, approximately $70 million in the form of an interest-bearing security, and approximately $60 million in the form of a 17 percent noncontrolling interest in the new company, Kindeva Drug Delivery (Kindeva). Non-cash consideration was valued at time of initial recognition on an income-based approach using relevant estimated future cash flows and applicable market interest rates while considering impacts of restrictions related to transferability. The divested business had annual sales of approximately $380 million. 3M retained its transdermal drug delivery components business. 3M reflected a pre-tax gain of $387 million as a result of the divestiture. The Company reflected its ownership interest in Kindeva using the equity method of accounting incorporating the recording of 3M’s share of earnings/losses on a lag-basis based on availability of Kindeva financial statements. As a result, income/loss from this unconsolidated subsidiary began to be reflected in 3M’s financial statements in the third quarter of 2020. Kindeva and 3M entered into certain limited-term agreements related to post-divestiture transition and supply services. In the fourth quarter of 2022, 3M sold its remaining ownership interest in Kindeva resulting in an immaterial gain.

In the third quarter of 2020, 3M completed the sale of a small dermatology products business, formerly part of the Health Care business, for immaterial proceeds that approximated the business’s book value.

Operating income and held-for-sale amounts:

With respect to the businesses above, operating income information of the Health Care business segment, inclusive of the Food Safety Division and Drug Delivery Division, is included in Note 19. Further, with the respect to these businesses, there were immaterial amounts of assets and liabilities associated with disposal groups classified as held-for-sale as of December 31, 2021 and no such amounts as of December 31, 2022. Information related to other held-for-sale disposal groups is included in Note 15.

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NOTE 4. Goodwill and Intangible Assets

Goodwill

There was no goodwill recorded from acquisitions during 2022 and 2021. The amounts in the “Translation and other” column in the following table primarily relate to changes in foreign currency exchange rates.

The goodwill balance by business segment follows:


(Millions)	Safety and Industrial		Transportation and Electronics		Health Care		Consumer		Total Company
Balance as of December 31, 2020	$	4,687	$	1,858	$	6,992	$	265	$	13,802


Translation and other	(65)		(33)		(206)		(12)		(316)
Balance as of December 31, 2021	$	4,622	$	1,825	$	6,786	$	253	$	13,486

Divestiture activity	—		—		(16)		—		(16)
Goodwill impairment	—		(271)		—		—		(271)
Translation and other	(113)		(53)		(255)		12		(409)
Balance as of December 31, 2022	$	4,509	$	1,501	$	6,515	$	265	$	12,790

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

As described in Note 19, effective in the first quarter of 2022, the Company changed its business segment reporting. For any product changes that resulted in reporting unit changes, the Company applied the relative fair value method to determine the impact on goodwill of the associated reporting units, the results of which were immaterial. Goodwill balances reported above reflect these business segment reporting changes in the earliest period presented. The Company also completed its annual goodwill impairment test in the fourth quarter of 2022 for all reporting units and determined that no impairment existed. Additionally, in December 2022, as a result of 3M's commitment to a plan to exit per- and polyfluoroalkyl substance (PFAS) manufacturing as described in Note 15, 3M recorded a goodwill impairment charge of $0.3 billion related to the Advanced Materials reporting unit (within the Transportation and Electronics business) resulting in no remaining goodwill for that reporting unit. This also represents the Company's accumulated goodwill impairment losses as of December 31, 2022.

Acquired Intangible Assets

The carrying amount and accumulated amortization of acquired finite-lived intangible assets, in addition to the balance of non-amortizable intangible assets follow:


	December 31,
(Millions)	2022		2021
Customer related intangible assets	$	4,062	$	4,216
Patents	426		513
Other technology-based intangible assets	2,081		2,111
Definite-lived tradenames	1,166		1,171
Other amortizable intangible assets	84		105
Total gross carrying amount	7,819		8,116

Accumulated amortization — customer related	(1,747)		(1,616)
Accumulated amortization — patents	(421)		(500)
Accumulated amortization — other technology-based	(1,000)		(839)
Accumulated amortization — definite-lived tradenames	(509)		(447)
Accumulated amortization — other	(60)		(79)
Total accumulated amortization	(3,737)		(3,481)

Total finite-lived intangible assets — net	4,082		4,635

Non-amortizable intangible assets (primarily tradenames)	617		653
Total intangible assets — net	$	4,699	$	5,288

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Certain tradenames acquired by 3M are not amortized because they have been in existence for over 60 years, have a history of leading-market share positions, have been and are intended to be continuously renewed, and the associated products of which are expected to generate cash flows for 3M for an indefinite period of time.

As discussed in Note 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 in the fourth quarter of 2022 related to impairment of long-lived assets and an immaterial charge related to impairment of indefinite-lived assets.

Amortization expense follows:


	Year ended December 31,
(Millions)		2022		2021		2020
Amortization expense		$	498	$	529	$	537

Expected amortization expense for acquired amortizable intangible assets recorded as of December 31, 2022 follows:


(Millions)	2023		2024		2025		2026		2027		After 2027
Amortization expense	$	479	$	451	$	421	$	415	$	390	$	1,926

The preceding expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment of intangible assets, accelerated amortization of intangible assets and other events. 3M expenses the costs incurred to renew or extend the term of intangible assets.

NOTE 5. Restructuring Actions

2020 through 2022 Restructuring Action

Operational/Marketing Capability Restructuring:

In late 2020, 3M announced it would undertake certain actions beginning in the fourth quarter of 2020 to further enhance its operations and marketing capabilities to take advantage of certain global market trends while de-prioritizing investments in slower-growth end markets, resulting in a pre-tax charge of $137 million. In 2021, management approved and committed to undertake additional actions under this initiative resulting in a 2021 pre-tax charge of $124 million. In the first quarter of 2022, management approved and committed to undertake the remaining actions under this initiative resulting in a pre-tax charge of $18 million. This initiative, beginning in 2020 and ending with committed first quarter 2022 actions, impacted approximately 3,100 positions worldwide with a pre-tax charge of approximately $280 million over that period. The related restructuring charges for periods presented were recorded in the income statement as follows:



(Millions)	2022		2021		2020
Cost of sales	$	—	$	19	$	51
Selling, general and administrative expenses	12		88		79
Research, development and related expenses	6		17		7
Total operating income impact	$	18	$	124	$	137

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



	2022		2021		2020
(Millions)	Employee-Related		Employee-Related		Employee Related		Asset-Related and Other		Total

Safety and Industrial	$	2	$	30	$	36	$	7	$	43
Transportation and Electronics	4		24		16		12		28
Health Care	2		21		23		3		26
Consumer	2		7		10		1		11
Corporate and Unallocated	8		42		16		13		29
Total Operating Expense	$	18	$	124	$	101	$	36	$	137

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


(Millions)	Employee-Related		Asset-Related and Other		Total
Expense incurred in the fourth quarter of 2020	$	101	$	36	$	137
Non-cash changes	—		(36)		(36)
Accrued restructuring action balances as of December 31, 2020	101		—		101
Incremental expense incurred in 2021	124		—		124
Cash payments	(127)		—		(127)
Adjustments	(11)		—		(11)
Accrued restructuring action balance as of December 31, 2021	87		—		87
Incremental expense incurred in the first quarter of 2022	18		—		18
Cash payments	(84)		—		(84)
Adjustments	(9)		—		(9)
Accrued restructuring action balances as of June 30, 2022	$	12	$	—	$	12

Remaining activities related to this restructuring were largely completed in the third quarter of 2022.

2022 Restructuring Actions:

Divestiture-Related Restructuring

During the third quarter of 2022, following the Food Safety Division split-off transaction and combination with Neogen completed in September 2022 (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 business.

These actions affected approximately 850 positions worldwide and resulted in a third quarter 2022 pre-tax charge of $41 million, within Corporate and Unallocated. The divestiture-related restructuring actions were recorded in the income statement as follows:


(Millions)	2022
Cost of sales	$	3
Selling, general and administrative expenses	36
Research, development and related expenses	2
Total operating income impact	$	41

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


(Millions)	Employee-Related
Expense incurred in the third quarter of 2022	41
Cash payments	(31)
Accrued restructuring action balances as of December 31, 2022	$	10

Remaining activities related to this divestiture-related restructuring are expected to be largely completed through the first half of 2023.

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2020 Restructuring Actions:

Divestiture-Related Restructuring

During the second quarter of 2020, following the divestiture of substantially all of the drug delivery business (see Note 3) management approved and committed to undertake certain restructuring actions addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business. These actions affected approximately 1,300 positions worldwide and resulted in a second quarter 2020 pre-tax charge of $55 million, within Corporate and Unallocated. The divestiture-related restructuring actions were recorded in the income statement as follows:


(Millions)	2020
Cost of sales	$	42
Selling, general and administrative expenses	12
Research, development and related expenses	1
Total operating income impact	$	55

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


(Millions)	Employee-Related		Asset-Related and Other		Total
Expense incurred in the second quarter of 2020	$	32	$	23	$	55
Non-cash changes	—		(14)		(14)
Cash payments	(14)		—		(14)
Adjustments	(3)		—		(3)
Accrued restructuring action balance as of December 31, 2020	15		9		24
Cash Payments	(5)		—		(5)
Adjustments	(1)		—		(1)
Accrued restructuring action balance as of June 30, 2021	$	9	$	9	$	18

Remaining activities related to this divestiture-related restructuring were largely completed in the third quarter of 2021.

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Other Restructuring

Additionally, in the second quarter of 2020, management approved and committed to undertake certain restructuring actions addressing structural enterprise costs and operations in certain end markets as a result of the COVID-19 pandemic and related economic impacts. These actions affected approximately 400 positions worldwide and resulted in a second quarter 2020 pre-tax charge of $58 million. The restructuring charges were recorded in the income statement as follows:


(Millions)	2020
Cost of sales	$	13
Selling, general and administrative expenses	37
Research, development and related expenses	8
Total operating income impact	$	58

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


	2020
(Millions)	Employee-Related		Asset-Related and Other		Total
Safety and Industrial	$	7	$	—	$	7
Transportation and Electronics	11		—		11
Health Care	12		—		12
Consumer	5		—		5
Corporate and Unallocated	—		23		23
Total Operating Expense	$	35	$	23	$	58

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


(Millions)	Employee-Related		Asset-Related		Total
Expense incurred in the second quarter of 2020	$	35	$	23	$	58
Non-cash changes	—		(23)		(23)
Cash payments	(2)		—		(2)
Adjustments	(9)		—		(9)
Accrued restructuring action balances as of December 31, 2020	24		—		24
Cash Payments	(4)		—		(4)
Adjustments	(9)		—		(9)
Accrued restructuring action balances as of March 31, 2021	$	11	$	—	$	11

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

NOTE 6. Supplemental Income Statement Information

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



(Millions)	2022		2021		2020
Interest expense	$	462	$	488	$	529
Interest income	(67)		(26)		(29)
Pension and postretirement net periodic benefit cost (benefit)	(248)		(297)		(134)
Total	$	147	$	165	$	366

Interest expense includes an early debt extinguishment pre-tax charge of approximately $11 million and $10 million in 2021 and 2020, respectively.

Pension and postretirement net periodic benefit costs described in the table above include all components of defined benefit plan net periodic benefit costs except service cost, which is reported in various operating expense lines. Refer to Note 13 for additional details on the components of pension and postretirement net periodic benefit costs.

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NOTE 7. Supplemental Balance Sheet Information

Additional supplemental balance sheet information is provided in the table that follows.


(Millions)	2022		2021
Other current assets
Derivative assets-current	$	162	$	78
Insurance related (receivables, prepaid expenses and other)	103		110
Other	191		151
Total other current assets	$	456	$	339

Property, plant and equipment - at cost
Land	$	255	$	312
Buildings and leasehold improvements	7,560		8,086
Machinery and equipment	16,455		17,305
Construction in progress	1,728		1,510
Gross property, plant and equipment	25,998		27,213
Accumulated depreciation	(16,820)		(17,784)
Property, plant and equipment - net	$	9,178	$	9,429

Other assets
Deferred income taxes	$	959	$	581
Prepaid pension and post retirement	1,225		943
Insurance related receivables and other	73		51
Cash surrender value of life insurance policies	265		261
Equity method investments	81		129
Equity and other investments	886		133
Other	782		510
Total other assets	$	4,271	$	2,608

Other current liabilities
Accrued rebates	$	751	$	731
Deferred revenue	538		529
Derivative liabilities	31		23
Employee benefits and withholdings	247		219
Contingent liability claims and other	534		487
Property, sales-related and other taxes	224		326
Pension and postretirement benefits	77		78
Other	788		798
Total other current liabilities	$	3,190	$	3,191

Other liabilities
Long term income taxes payable	$	1,051	$	1,324
Employee benefits	386		400
Contingent liability claims and other	2,179		872
Finance lease obligations	75		93
Deferred income taxes	559		458
Other	1,365		256
Total other liabilities	$	5,615	$	3,403

Certain items in the table above include balances as of December 31, 2022 associated with the deconsolidated Aearo Entities as discussed further in Note 16. These include:

•$0.7 billion asset balance in "equity and other investments" (within other assets).

•$0.3 billion in "other" (within other assets).

•$1.2 billion accrued liability largely reflected within "contingent liability claims and other" (within other liabilities).

•$0.9 billion in "other" (within other liabilities).

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NOTE 8. Supplemental Equity and Comprehensive Income Information

Common stock ($.01 par value per share) of 3 billion shares is authorized, with 944,033,056 shares issued as of December 31, 2022, 2021 and 2020. Preferred stock, without par value, of 10 million shares is authorized but unissued.

Cash dividends declared and paid totaled $1.49, $1.48, and $1.47 per share for each quarter in 2022, 2021 and 2020, respectively, which resulted in total year declared and paid dividends of $5.96, $5.92, and $5.88 per share, respectively.

Dividend to noncontrolling interest in 2022 of $29 million related to dividend paid by 3M India Limited, of which 3M’s effective ownership is 75 percent.

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


(Millions)	Cumulative Translation Adjustment		Defined Benefit Pension and Postretirement Plans Adjustment		Cash Flow Hedging Instruments, Unrealized Gain (Loss)		Total Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2019, net of tax:	$	(1,899)	$	(6,204)	$	(31)	$	(8,134)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	387		(582)		(113)		(308)
Amounts reclassified out	—		619		(71)		548
Total other comprehensive income (loss), before tax	387		37		(184)		240
Tax effect	62		69		42		173
Total other comprehensive income (loss), net of tax	449		106		(142)		413
Balance at December 31, 2020, net of tax:	(1,450)		(6,098)		(173)		(7,721)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	(428)		1,223		108		903
Amounts reclassified out	—		658		47		705
Total other comprehensive income (loss), before tax	(428)		1,881		155		1,608
Tax effect	(65)		(536)		(36)		(637)
Total other comprehensive income (loss), net of tax	(493)		1,345		119		971
Balance at December 31, 2021, net of tax:	$	(1,943)	$	(4,753)	$	(54)	$	(6,750)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	(850)		866		159		175
Amounts reclassified out	—		458		(98)		360
Total other comprehensive income (loss), before tax	(850)		1,324		61		535
Tax effect	(35)		(409)		(14)		(458)
Total other comprehensive income (loss), net of tax	(885)		915		47		77
Balance at December 31, 2022, net of tax:	$	(2,828)	$	(3,838)	$	(7)	$	(6,673)

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

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Reclassifications out of Accumulated Other Comprehensive Income Attributable to 3M


Details about Accumulated Other Comprehensive Income Components		Amount Reclassified from Accumulated Other Comprehensive Income							Location on Income Statement
	Year ended December 31,
(Millions)			2022		2021		2020
Defined benefit pension and postretirement plans adjustments
Gains (losses) associated with defined benefit pension and postretirement plans amortization
Transition asset			$	(2)	$	(2)	$	(2)	Other (expense) income, net
Prior service benefit			55		60		62		Other (expense) income, net
Net actuarial loss			(493)		(689)		(659)		Other (expense) income, net
Curtailments/Settlements			(18)		(27)		(20)		Other (expense) income, net
Total before tax			(458)		(658)		(619)
Tax effect			108		160		148		Provision for income taxes
Net of tax			(350)		(498)		(471)
Cash flow hedging instruments gains (losses)
Foreign currency forward/option contracts			107		(38)		80		Cost of sales
Interest rate contracts			(9)		(9)		(9)		Interest expense
Total before tax			98		(47)		71
Tax effect			(23)		11		(17)		Provision for income taxes
Net of tax			75		(36)		54
Total reclassifications for the period, net of tax			$	(275)	$	(534)	$	(417)

NOTE 9. Supplemental Cash Flow Information


(Millions)	2022		2021		2020
Cash income tax payments, net of refunds	$	1,320	$	1,695	$	1,351
Cash interest payments	440		472		524

Cash interest payments include interest paid on debt and finance lease balances. Cash interest payments exclude the cash paid for early debt extinguishment costs. Additional details are described in Note 12.

Individual amounts in the Consolidated Statement of Cash Flows exclude the impacts of acquisitions, divestitures and exchange rate impacts, which are presented separately.

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NOTE 10. Income Taxes

Income Before Income Taxes


(Millions)	2022		2021		2020
United States	$	3,861	$	3,716	$	3,795
International	2,531		3,488		3,000
Total	$	6,392	$	7,204	$	6,795

Provision for Income Taxes


(Millions)	2022		2021		2020
Currently payable
Federal	$	606	$	756	$	720
State	76		104		123
International	621		597		632
Deferred
Federal	(612)		(219)		(44)
State	(76)		(25)		(17)
International	(2)		72		(77)
Total	$	612	$	1,285	$	1,337

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Components of Deferred Tax Assets and Liabilities


(Millions)	2022		2021
Deferred tax assets:
Accruals not currently deductible
Employee benefit costs	$	232	$	237
Product and other claims	610		257
Miscellaneous accruals	117		157
Pension costs	7		351
Stock-based compensation	259		249
Advanced payments	173		286
Net operating/capital loss/state tax credit carryforwards	120		120
Foreign tax credits	112		115
Research and experimentation capitalization	418		—
Lease liabilities	210		219
Product and other insurance receivables	—		48
Inventory	95		68
Other	—		31
Gross deferred tax assets	2,353		2,138
Valuation allowance	(115)		(142)
Total deferred tax assets	2,238		1,996

Deferred tax liabilities:
Product and other insurance receivables	(3)		—
Accelerated depreciation	(586)		(665)
Intangible assets	(901)		(985)
Currency translation	(69)		—
Right-of-use asset	(210)		(222)
Other	(69)		—
Total deferred tax liabilities	(1,838)		(1,872)

Net deferred tax assets	$	400	$	124

The net deferred tax assets are included as components of Other Assets and Other Liabilities within the Consolidated Balance Sheet. See Note 7 “Supplemental Balance Sheet Information” for further details.

As of December 31, 2022, the Company had tax effected operating losses, capital losses, and tax credit carryovers for federal (approximately $112 million), state (approximately $79 million), and international (approximately $40 million), with all amounts before limitation impacts and valuation allowances. Federal tax attribute carryovers will expire after one to ten years, the state after one to eleven years, and the international after one year to an indefinite carryover period. As of December 31, 2022, the Company has provided $115 million of valuation allowance against certain of these deferred tax assets based on management’s determination that it is more-likely-than-not that the tax benefits related to these assets will not be realized.

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Reconciliation of Effective Income Tax Rate


	2022		2021		2020
Statutory U.S. tax rate	21.0	%	21.0	%	21.0	%
Food Safety divestiture	(8.4)		—		—
State income taxes - net of federal benefit	—		0.9		1.2
International income taxes - net	(0.4)		(1.2)		(1.2)
Global Intangible Low Taxed Income (GILTI)	0.7		0.7		0.8
Foreign Derived Intangible Income (FDII)	(2.3)		(3.1)		(1.8)
U.S. research and development credit	(1.0)		(0.7)		(1.0)
Reserves for tax contingencies	—		0.6		0.5
Employee share-based payments	(0.2)		(0.6)		(0.5)
All other - net	0.2		0.2		0.7
Effective worldwide tax rate	9.6	%	17.8	%	19.7	%

The effective tax rate for 2022, 2021, and 2020 were 9.6 percent, 17.8 percent, and 19.7 percent, respectively. These reflect a decrease of 8.2 percentage points from 2021 to 2022 and a decrease of 1.9 percentage points from 2020 to 2021. The primary factor that decreased the effective tax rate for 2022 was the tax efficient structure associated with the gain on the split-off of the Food Safety business. The primary factors that decreased the effective tax rate for 2021 in comparison to 2020 were geographical income mix and favorable adjustments in 2021 related to impacts of U.S. international tax provisions.

The 2017 Tax Cuts and Jobs Act (TCJA) involved a transition tax that is payable over eight years beginning in 2018. As of December 31, 2022 and December 31, 2021, 3M reflected $380 million and $508 million, respectively, in long term income taxes payable. As of December 31, 2022 and December 31, 2021, 3M reflected $126 million and $68 million, respectively, payable within one year associated with the transition tax.

The IRS has completed its field examination of the Company’s U.S. federal income tax returns through 2018, but the years 2005 through 2017 have not closed as the Company is in the process of resolving issues identified during those examinations. In addition to the U.S. federal examination, there is also audit activity in several U.S. state and foreign jurisdictions where the Company is subject to ongoing tax examinations and governmental assessments, which could be impacted by evolving political environments in those jurisdictions. As of December 31, 2022, no taxing authority proposed significant adjustments to the Company’s tax positions for which the Company is not adequately reserved.

It is reasonably possible that the amount of unrecognized tax benefits could significantly change within the next 12 months. The Company has ongoing federal, state and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may be challenged by local tax authorities and not fully sustained. These uncertain tax positions are reviewed on an ongoing basis and adjusted in light of facts and circumstances including progression of tax audits, developments in case law and closing statutes of limitation. At this time, the Company is not able to estimate the range by which these potential events could impact 3M’s unrecognized tax benefits within the next 12 months.

The Company recognizes the amount of tax benefit that has a greater than 50 percent likelihood of being ultimately realized upon settlement. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (UTB) is as follows:

Federal, State and Foreign Tax


(Millions)	2022		2021		2020
Gross UTB Balance at January 1	$	1,071	$	1,113	$	1,167

Additions based on tax positions related to the current year	115		91		74
Additions for tax positions of prior years	36		22		106
Additions related to recent acquisitions	—		—		—
Reductions for tax positions of prior years	(138)		(60)		(173)
Settlements	(118)		(57)		(8)
Reductions due to lapse of applicable statute of limitations	(39)		(38)		(53)

Gross UTB Balance at December 31	$	927	$	1,071	$	1,113

Net UTB that would impact the effective tax rate at December 31	$	965	$	1,112	$	1,145

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The total amount of UTB, if recognized, would affect the effective tax rate by $965 million as of December 31, 2022, $1,112 million as of December 31, 2021, and $1,145 million as of December 31, 2020. The ending net UTB results from adjusting the gross balance for deferred items, interest and penalties, and deductible taxes. The net UTB is included as components of Other Assets, Accrued Income Taxes, and Other Liabilities within the Consolidated Balance Sheet.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in tax expense. The Company recognized in the consolidated statement of income on a gross basis approximately $1 million of expense, $14 million of expense, and $21 million of expense in 2022, 2021, and 2020, respectively. The amount of interest and penalties recognized may be an expense or benefit due to new or remeasured unrecognized tax benefit accruals. At December 31, 2022, and December 31, 2021, accrued interest and penalties in the consolidated balance sheet on a gross basis were $116 million and $140 million, respectively. Included in these interest and penalty amounts are interest and penalties related to tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

As a result of certain employment commitments and capital investments made by 3M, income from certain foreign operations in the following countries is subject to reduced tax rates or, in some cases, is exempt from tax for years through the following: China (2022), Switzerland (2026), Brazil (2029) and Singapore (2032). The income tax benefits attributable to the tax status of these subsidiaries are estimated to be $170 million (30 cents per diluted share) in 2022, $204 million (36 cents per diluted share) in 2021, and $163 million (28 cents per diluted share) in 2020.

As of December 31, 2022, the Company has approximately $16.0 billion of undistributed earnings in its foreign subsidiaries. Approximately $8.0 billion of these earnings are no longer considered permanently reinvested. The incremental tax cost to repatriate these earnings to the US is immaterial. The Company has not provided deferred taxes on approximately $8.0 billion of undistributed earnings from non-U.S. subsidiaries as of December 31, 2022 which are indefinitely reinvested in operations. Because of the multiple avenues by which to repatriate the earnings to minimize tax cost, and because a large portion of these earnings are not liquid, it is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

NOTE 11. Marketable Securities

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


(Millions)	2022		2021

Commercial paper	$	213	$	109
Certificates of deposit/time deposits	21		14
U.S. treasury securities	—		75
U.S. municipal securities	4		3
Current marketable securities	238		201

U.S. municipal securities	23		27
Non-current marketable securities	23		27

Total marketable securities	$	261	$	228

At December 31, 2022 and 2021, gross unrealized, gross realized, and net realized gains and/or losses (pre-tax) were not material.

The balances at December 31, 2022 for marketable securities by contractual maturity are shown below. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.


(Millions)	2022
Due in one year or less	$	238
Due after one year through five years	15
Due after five years through ten years	8
Total marketable securities	$	261

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NOTE 12. Long-Term Debt and Short-Term Borrowings

The following debt tables reflect effective interest rates, which include the impact of interest rate swaps, as of December 31, 2022. If the debt was issued on a combined basis, the debt has been separated to show the impact of the fixed versus floating effective interest rates. Carrying value includes the impact of debt issuance costs and fair value hedging activity. Long-term debt and short-term borrowings as of December 31 consisted of the following:

Long-Term Debt


(Millions)	Currency/ Fixed vs. Floating	Effective Interest Rate		Final Maturity Date	Carrying Value
Description / 2022 Principal Amount					2022		2021
Medium-term note (repaid in 2022)	EUR Fixed	—	%	2022	—		567
Medium-term note (repaid in 2022)	USD Fixed	—	%	2022	—		599
Registered note ($500 million)	USD Fixed	1.86	%	2023	500		499
Medium-term note ($650 million)	USD Fixed	2.26	%	2023	650		649
Medium-term note (€600 million)	EUR Fixed	1.14	%	2023	639		679
Medium-term note ($300 million)	USD Fixed	3.30	%	2024	300		299
Medium-term note ($500 million)	USD Fixed	2.98	%	2024	501		501
Medium-term note ($300 million)	USD Floating	4.81	%	2024	300		300
Registered note ($750 million)	USD Fixed	2.12	%	2025	747		746
Registered note ($500 million)	USD Fixed	2.67	%	2025	499		498
Medium-term note ($550 million)	USD Fixed	3.04	%	2025	549		548
Medium-term note ($650 million)	USD Fixed	2.37	%	2026	646		645
Medium-term note (€750 million)	EUR Fixed	1.65	%	2026	792		842
Floating rate note ($19 million)	USD Floating	4.37	%	2027	18		19
Medium-term note ($850 million)	USD Fixed	2.95	%	2027	845		844
30-year debenture ($220 million)	USD Fixed	6.44	%	2028	223		224
Floating rate note ($150 million)	USD Floating	6.49	%	2028	129		147
Floating rate note ($150 million)	USD Floating	6.44	%	2028	129		147
Floating rate note ($250 million)	USD Floating	6.69	%	2028	211		240
Floating rate note ($150 million)	USD Floating	6.64	%	2028	127		144
Floating rate note ($100 million)	USD Floating	6.73	%	2028	84		96
Medium-term note ($600 million)	USD Fixed	3.62	%	2028	598		598
Medium-term note ($800 million)	USD Fixed	3.38	%	2029	797		797
Registered note ($1 billion)	USD Fixed	2.50	%	2029	989		988
Registered note ($600 million)	USD Fixed	3.09	%	2030	596		596
Medium-term note (€500 million)	EUR Fixed	1.90	%	2030	526		560
Medium-term note (€500 million)	EUR Fixed	1.54	%	2031	530		563
30-year bond ($555 million)	USD Fixed	5.73	%	2037	552		551
Floating rate note ($52 million)	USD Floating	4.16	%	2040	52		52
Floating rate note ($96 million)	USD Floating	4.16	%	2041	96		96
Medium-term note ($325 million)	USD Fixed	4.05	%	2044	315		315
Floating rate note ($54 million)	USD Floating	4.16	%	2044	53		53
Medium-term note ($500 million)	USD Fixed	3.37	%	2046	478		477
Medium-term note ($500 million)	USD Fixed	3.68	%	2047	492		492
Medium-term note ($650 million)	USD Fixed	4.07	%	2048	638		638
Medium-term note ($500 million)	USD Fixed	3.78	%	2048	504		505
Registered note ($500 million)	USD Fixed	3.37	%	2049	486		485
Registered note ($350 million)	USD Fixed	3.72	%	2050	346		346
Other borrowings	Various	0.09	%	2023-2029	2		2
Total long-term debt					15,939		17,347
Less: current portion of long-term debt					1,938		1,291
Long-term debt (excluding current portion)					$	14,001	$	16,056

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Post-Swap Borrowing (Long-Term Debt, Including Current Portion)


	2022				2021
(Millions)	Carrying Value		Effective Interest Rate		Carrying Value		Effective Interest Rate
Fixed-rate debt	$	14,738	2.93	%	$	16,053	2.80	%
Floating-rate debt	1,201		5.70	%	1,294		1.43	%
Total long-term debt, including current portion	$	15,939			$	17,347

Short-Term Borrowings and Current Portion of Long-Term Debt


	Effective Interest Rate		Carrying Value
(Millions)			2022		2021
Current portion of long-term debt	1.93	%	$	1,938	$	1,291

Other borrowings	—	%	—		16
Total short-term borrowings and current portion of long-term debt			$	1,938	$	1,307

Other short-term borrowings primarily consisted of bank borrowings by international subsidiaries.

Future Maturities of Long-term Debt

Maturities of long-term debt in the table below reflect the impact of put provisions associated with certain debt instruments and are net of the unamortized debt issue costs such that total maturities equal the carrying value of long-term debt as of December 31, 2022. The maturities of long-term debt for the periods subsequent to December 31, 2022 are as follows (in millions):


2023		2024		2025		2026		2027		After 2027		Total
$	1,938	$	1,100	$	1,865	$	1,438	$	845	$	8,753	$	15,939

As a result of put provisions associated with certain debt instruments, long-term debt payments due in 2023 include floating rate notes totaling $149 million (classified as current portion of long-term debt).

Credit Facilities

3M has an amended and restated $3.0 billion five year revolving credit facility expiring in November 2024. The revolving credit agreement includes a provision under which 3M may request an increase of up to $1.0 billion (at lender’s discretion), bringing the total facility up to $4.0 billion. In addition, 3M entered into a $1.25 billion 364-day credit facility, which was renewed in November 2022 with an expiration date of November 2023. The 364-day credit agreement includes a provision under which 3M may convert any advances outstanding on the maturity date into term loans having a maturity date one year later. These credit facilities were undrawn at December 31, 2022. Under both the $3.0 billion and $1.25 billion credit agreements, the Company is required to maintain its EBITDA to Interest Ratio as of the end of each fiscal quarter at not less than 3.0 to 1. This is calculated (as defined in the agreement) as the ratio of consolidated total EBITDA for the four consecutive quarters then ended to total interest expense on all funded debt for the same period. At December 31, 2022, this ratio was approximately 19 to 1. Debt covenants do not restrict the payment of dividends.

In December 2021 and June 2022, 3M entered into debt financing facilities providing commitments for term loans and potential bridge financing aggregating $1.0 billion related to the Food Safety Division split-off transaction and combination with Neogen (discussed in Note 3). The debt commitments also included a $150 million revolving credit facility for the Food Safety business. Coincident with completion of the September 2022 split-off, the Food Safety business term loan borrowings funded the cash payment to 3M discussed in Note 3. The bridge financing component of these facilities was terminated early and not utilized. Obligations under the commitments (including the $150 million revolving credit facility) transferred with the Food Safety business and became those of Neogen.

Other Credit Facilities

The Company also had an additional $318 million in stand-alone letters of credit and bank guarantees issued and outstanding at December 31, 2022. These instruments are utilized in connection with normal business activities.

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Long-Term Debt Issuances and Fixed-to-Floating Interest Rate Swaps

The principal amounts, interest rates and maturity dates of individual long-term debt issuances can be found in the long-term debt table found at the beginning of this note.

During the second and third quarters of 2021, 3M entered into interest rate swaps with an aggregate notional amount of $800 million. These swaps converted $500 million and $300 million of 3M’s $1 billion and $650 million principal amount of fixed rate notes due 2049 and 2050, respectively, into floating rate debt for the portion of their terms through mid-2028 with an interest rate based on a three-month LIBOR index.

In March 2020, 3M issued $1.75 billion aggregate principal amount of fixed rate registered notes. These were comprised of $500 million of 5-year notes due 2025 with a coupon rate of 2.65%, $600 million of 10-year notes due 2030 with a coupon rate of 3.05%, and $650 million of 30-year notes due 2050 with a coupon rate of 3.70%.

Long-Term Debt Maturities and Extinguishments

In February 2022, 3M repaid 500 million euros aggregate principal amount of fixed-rate medium-term notes that matured. In June 2022, 3M repaid $600 million aggregate principal amount of fixed-rate medium-term notes that matured.

In November 2021, 3M repaid 600 million euros aggregate principal amount of Eurobonds that matured.

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

In December 2020, 3M, via make-whole-call offers, repaid $1 billion aggregate principal amount of its outstanding notes. This included $400 million aggregate principal amount of 3.00% notes and $600 million aggregate principal amount of 1.625% notes, both of which were due to mature in 2021. The Company recorded an early debt extinguishment pre-tax charge of approximately $10 million within interest expense. This charge reflected the differential between the carrying value and the amount paid to reacquire the notes and related expenses.

In May 2020, 3M repaid $650 million euros aggregate principal amount of floating-rate medium-term notes that matured. In August 2020, 3M repaid $500 million aggregate principal amount of floating-rate medium-term notes that matured.

Floating Rate Notes

At various times, 3M has issued floating rate notes containing put provisions. 3M would be required to repurchase these securities at various prices ranging from 99 percent to 100 percent of par value according to the reduction schedules for each security. In December 2004, 3M issued a forty-year $60 million floating rate note, with a rate based on a floating LIBOR index (noting contracts will be modified to apply a new reference rate where applicable). Under the terms of this floating rate note due in 2044, holders have an annual put feature at 100 percent of par value from 2014 and every anniversary thereafter until final maturity. Under the terms of the floating rate notes due in 2027, 2040 and 2041, holders have put options that commence ten years from the date of issuance and each third anniversary thereafter until final maturity at prices ranging from 99 percent to 100 percent of par value. For the periods presented, 3M was required to repurchase an immaterial amount of principal on the aforementioned floating rate notes.

NOTE 13. Pension and Postretirement Benefit Plans

3M has company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. In total, 3M has over 75 defined benefit plans in 28 countries. Pension benefits associated with these plans generally are based on each participant’s years of service, compensation, and age at retirement or termination. The primary U.S. defined-benefit pension plan was closed to new participants effective January 1, 2009. The Company also provides certain postretirement health care and life insurance benefits for its U.S. employees who reach retirement age while employed by the Company and were employed by the Company prior to January 1, 2016. Most international employees and retirees are covered by government health care programs. The cost of company-provided postretirement health care plans for international employees is not material and is combined with U.S. amounts in the tables that follow.

The Company has made deposits for its defined benefit plans with independent trustees. Trust funds and deposits with insurance companies are maintained to provide pension benefits to plan participants and their beneficiaries. There are no plan assets in the non-qualified plan due to its nature. For its U.S. postretirement health care and life insurance benefit plans, the Company has set aside amounts at least equal to annual benefit payments with an independent trustee.

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The Company also sponsors employee savings plans under Section 401(k) of the Internal Revenue Code. These plans are offered to substantially all regular U.S. employees. For eligible employees hired prior to January 1, 2009, employee 401(k) contributions of up to 5% of eligible compensation matched in cash at rates of 45% or 60%, depending on the plan in which the employee participates. Employees hired on or after January 1, 2009, receive a cash match of 100% for employee 401(k) contributions of up to 5% of eligible compensation and receive an employer retirement income account cash contribution of 3% of the participant’s total eligible compensation. All contributions are invested in a number of investment funds pursuant to the employees’ elections. Employer contributions to the U.S. defined contribution plans were $241 million, $231 million and $201 million for 2022, 2021 and 2020, respectively. 3M subsidiaries in various international countries also participate in defined contribution plans. Employer contributions to the international defined contribution plans were $108 million, $117 million and $103 million for 2022, 2021 and 2020, respectively.

In the second quarter of 2020, as a result of the divestiture of the drug delivery business, the Company recognized a curtailment in its United Kingdom Pension Plan. The resulting re-measurement of the pension plan funded status reduced long-term prepaid pension and post retirement assets (located within “other assets” of the Company’s balance sheet) by approximately $80 million, which was offset within accumulated other comprehensive income (located within the equity section of the Company’s balance sheet). The expense impact of this re-measurement was immaterial for the second quarter of 2020 and subsequent periods.

The following tables include a reconciliation of the beginning and ending balances of the benefit obligation and the fair value of plan assets as well as a summary of the related amounts recognized in the Company’s consolidated balance sheet as of December 31 of the respective years. 3M also has certain non-qualified unfunded pension and postretirement benefit plans, inclusive of plans related to supplement/excess benefits for employees impacted by particular relocations and other matters, that individually and in the aggregate are not significant and which are not included in the tables that follow. The obligations for these plans are included within other liabilities in the Company’s consolidated balance sheet and aggregated to less than $51 million as of December 31, 2022 and 2021.


	Qualified and Non-Pension Benefits								Postretirement Benefits
	United States				International
(Millions)	2022		2021		2022		2021		2022		2021
Change in benefit obligation
Benefit obligation at beginning of year	$	18,104	$	19,376	$	7,942	$	8,770	$	2,281	$	2,397
Acquisitions/Transfers	—		—		—		—		—		—
Service cost	256		286		128		164		42		53
Interest cost	417		360		125		98		52		43
Participant contributions	—		—		7		10		—		—
Foreign exchange rate changes	—		—		(567)		(325)		1		(4)
Plan amendments	—		—		8		1		—		—
Actuarial (gain) loss	(3,777)		(588)		(2,240)		(433)		(458)		(89)
Benefit payments	(1,495)		(1,330)		(266)		(298)		(115)		(113)
Settlements, curtailments, special termination benefits and other	—		—		(65)		(45)		(6)		(6)
Benefit obligation at end of year	$	13,505	$	18,104	$	5,072	$	7,942	$	1,797	$	2,281
Change in plan assets
Fair value of plan assets at beginning of year	16,953		17,127		8,016		8,194		1,353		1,376
Acquisitions/Transfers	—		—		—		—		—		—
Actual return on plan assets	(2,875)		1,079		(1,286)		321		(218)		93
Company contributions	65		77		90		100		3		3
Participant contributions	—		—		7		10		—		—
Foreign exchange rate changes	—		—		(602)		(265)		—		—
Benefit payments	(1,495)		(1,330)		(266)		(298)		(115)		(113)
Settlements, curtailments, special termination benefits and other	—		—		(68)		(46)		(6)		(6)
Fair value of plan assets at end of year	$	12,648	$	16,953	$	5,891	$	8,016	$	1,017	$	1,353
Funded status at end of year	$	(857)	$	(1,151)	$	819	$	74	$	(780)	$	(928)

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Amounts recognized in the Consolidated Balance Sheet as of December 31, (Millions)	Qualified and Non-qualified Pension Benefits								Postretirement Benefits
	United States				International
	2022		2021		2022		2021		2022		2021
Non-current assets	$	—	$	—	$	1,225	$	943	$	—	$	—
Accrued benefit cost
Current liabilities	(52)		(59)		(14)		(14)		(11)		(5)
Non-current liabilities	(805)		(1,092)		(392)		(855)		(769)		(923)
Ending balance	$	(857)	$	(1,151)	$	819	$	74	$	(780)	$	(928)


Amounts recognized in accumulated other comprehensive income as of December 31, (Millions)	Qualified and Non-qualified Pension Benefits								Postretirement Benefits
	United States				International
	2022		2021		2022		2021		2022		2021
Net transition obligation (asset)	$	—	$	—	$	4	$	6	$	—	$	—
Net actuarial loss (gain)	4,616		4,991		157		960		332		538
Prior service cost (credit)	(56)		(80)		10		3		(166)		(197)
Ending balance	$	4,560	$	4,911	$	171	$	969	$	166	$	341

The balance of amounts recognized for international plans in accumulated other comprehensive income as of December 31 in the preceding table are presented based on the foreign currency exchange rate on that date.

The pension accumulated benefit obligation represents the actuarial present value of benefits based on employee service and compensation as of the measurement date and does not include an assumption about future compensation levels. The following table summarizes the total accumulated benefit obligations, the accumulated benefit obligations and fair value of plan assets for defined benefit pension plans with accumulated benefit obligations in excess of plan assets, and the projected benefit obligation and fair value of plan assets for defined benefit pension plans with projected benefit obligation in excess of plan assets as of December 31:


	Qualified and Non-qualified Pension Plans
	United States				International
(Millions)	2022		2021		2022		2021
Accumulated benefit obligation	$	12,967	$	17,305	$	4,814	$	7,484
Plans with accumulated benefit obligation in excess of plan assets
Accumulated benefit obligation	$	402	$	514	$	775	$	2,843
Fair value of plan assets	—		—		427		2,194
Plans with projected benefit obligation in excess of plan assets
Projected benefit obligation	$	13,505	$	18,104	$	851	$	3,204
Fair value of plan assets	12,648		16,953		442		2,335

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Components of net periodic cost and other amounts recognized in other comprehensive income

The service cost component of defined benefit net periodic benefit cost is recorded in cost of sales, selling, general and administrative expenses, and research, development and related expenses. As discussed in Note 6, the other components of net periodic benefit cost are reflected in other expense (income), net. Components of net periodic benefit cost and other supplemental information for the years ended December 31 follow:


	Qualified and Non-qualified Pension Benefits												Postretirement Benefits
	United States						International
(Millions)	2022		2021		2020		2022		2021		2020		2022		2021		2020
Net periodic benefit cost (benefit)
Operating expense
Service cost	$	256	$	286	$	261	$	128	$	164	$	152	$	42	$	53	$	43
Non-operating expense
Interest cost	417		360		499		125		98		117		52		43		62
Expected return on plan assets	(963)		(1,055)		(1,046)		(271)		(326)		(306)		(72)		(78)		(80)
Amortization of transition asset	—		—		—		2		2		2		—		—		—
Amortization of prior service benefit	(24)		(24)		(24)		—		(3)		(5)		(31)		(33)		(33)
Amortization of net actuarial loss	424		529		491		29		104		121		40		56		47
Settlements, curtailments, special termination benefits and other	12		24		16		10		3		1		2		3		3
Total non-operating expense (benefit)	(134)		(166)		(64)		(105)		(122)		(70)		(9)		(9)		(1)
Total net periodic benefit cost (benefit)	$	122	$	120	$	197	$	23	$	42	$	82	$	33	$	44	$	42
Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss
Amortization of transition asset	$	—	$	—	$	—	$	(2)	$	(2)	$	(2)	$	—	$	—	$	—
Prior service cost (benefit)	—		—		—		8		1		—		—		—		—
Amortization of prior service benefit	24		24		24		—		3		5		31		33		33
Net actuarial (gain) loss	61		(614)		760		(689)		(434)		(358)		(166)		(104)		108
Amortization of net actuarial loss	(424)		(529)		(491)		(29)		(104)		(121)		(40)		(56)		(47)
Foreign currency	—		—		—		(82)		(71)		79		2		(1)		(7)
Settlements, curtailments, special termination benefits and other	(12)		(23)		(16)		(4)		(1)		(1)		(2)		(3)		(3)
Total recognized in other comprehensive (income) loss	$	(351)	$	(1,142)	$	277	$	(798)	$	(608)	$	(398)	$	(175)	$	(131)	$	84
Total recognized in net periodic benefit cost (benefit) and other comprehensive (income) loss	$	(229)	$	(1,022)	$	474	$	(775)	$	(566)	$	(316)	$	(142)	$	(87)	$	126

Weighted-average assumptions used to determine benefit obligations as of December 31


	Qualified and Non-qualified Pension Benefits												Postretirement Benefits
	United States						International
	2022		2021		2020		2022		2021		2020		2022		2021		2020
Discount rate	5.18	%	2.89	%	2.55	%	4.39	%	1.80	%	1.38	%	5.25	%	2.88	%	2.50	%
Compensation rate increase	3.37	%	3.21	%	3.21	%	2.86	%	2.86	%	2.88	%	N/A		N/A		N/A

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Weighted-average assumptions used to determine net cost for years ended December 31


	Qualified and Non-qualified Pension Benefits												Postretirement Benefits
	United States						International
	2022		2021		2020		2022		2021		2020		2022		2021		2020
Discount rate - service cost	3.10	%	2.81	%	3.41	%	1.64	%	1.23	%	1.61	%	3.11	%	3.21	%	3.45	%
Discount rate - interest cost	2.38	%	1.92	%	2.87	%	1.62	%	1.13	%	1.61	%	2.59	%	2.20	%	3.00	%
Expected return on assets	6.00	%	6.50	%	6.75	%	3.86	%	4.36	%	4.70	%	5.77	%	6.15	%	6.32	%
Compensation rate increase	3.21	%	3.21	%	3.21	%	2.86	%	2.88	%	2.88	%	N/A		N/A		N/A

The Company provides eligible retirees in the U.S. postretirement health care benefit plans to a savings account benefits-based plan. The contributions provided by the Company to the health savings accounts increase 3 percent per year for employees who retired prior to January 1, 2016 and increase 1.5% for employees who retire on or after January 1, 2016. Therefore, the Company no longer has material exposure to health care cost inflation.

The Company determines the discount rate used to measure plan liabilities as of the December 31 measurement date for the pension and postretirement benefit plans, which is also the date used for the related annual measurement assumptions. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. The Company sets its rate to reflect the yield of a portfolio of high quality, fixed-income debt instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits. Using this methodology, the Company determined a discount rate of 5.18% for the U.S. pension plans and 5.25% for the postretirement benefit plans as of December 31, 2022, which is an increase of 2.29 percentage points and an increase 2.37 percentage points, respectively, from the rates used as of December 31, 2021. An increase in the discount rate decreases the Projected Benefit Obligation (PBO), the increase in the discount rate as of December 31, 2022 resulted in an approximately $4.5 billion lower benefit obligation for the U.S. pension and postretirement plans.

The Company measures service cost and interest cost separately using the spot yield curve approach applied to each corresponding obligation. Service costs are determined based on duration-specific spot rates applied to the service cost cash flows. The interest cost calculation is determined by applying duration-specific spot rates to the year-by-year projected benefit payments. The spot yield curve approach does not affect the measurement of the total benefit obligations as the change in service and interest costs offset in the actuarial gains and losses recorded in other comprehensive income.

For the primary U.S. qualified pension plan, the Company’s assumption for the expected return on plan assets was 6.00% in 2022. Projected returns are based primarily on broad, publicly traded equity and fixed-income indices and forward-looking estimates of active portfolio and investment management. As of December 31, 2022, the Company’s 2023 expected long-term rate of return on U.S. plan assets is 7.50%. The expected return assumption is based on the strategic asset allocation of the plan, long term capital market return expectations and expected performance from active investment management. The 2022 expected long-term rate of return is based on an asset allocation assumption of 10% global equities, 14% private equities, 60% fixed-income securities, and 16% absolute return investments independent of traditional performance benchmarks, along with positive returns from active investment management. The actual net rate of return on plan assets in 2022 was -17.4%. In 2021 the plan earned a rate of return of 6.7% and in 2020 earned a return of 13.6%. The average annual actual return on the plan assets over the past 10 and 25 years has been 5.2% and 7.1%, respectively. 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.

In 2021 the Company updated the mortality improvement scales to the Society of Actuaries Scale MP- 2021. The December 31, 2021 update resulted in an immaterial increase to the U.S. pension PBO and U.S. accumulated postretirement benefit obligations. The Society of Actuaries did not release an update to the Scale MP-2021 in 2022.

During 2022, the Company contributed $155 million to its U.S. and international pension plans and $3 million to its postretirement plans. During 2021, the Company contributed $177 million to its U.S. and international pension plans and $3 million to its postretirement plans. In 2023, the Company expects to contribute an amount in the range of $100 million to $200 million of cash to its U.S. and international retirement plans. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2023. Future contributions will depend on market conditions, interest rates and other factors.

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Future Pension and Postretirement Benefit Payments

The following table provides the estimated pension and postretirement benefit payments that are payable from the plans to participants.


	Qualified and Non-qualified Pension Benefits				Postretirement Benefits
(Millions)	United States		International
2023 Benefit Payments	$	1,057	$	262	$	142
2024 Benefit Payments	1,061		269		145
2025 Benefit Payments	1,065		284		148
2026 Benefit Payments	1,061		295		150
2027 Benefit Payments	1,059		307		154
Next five years	5,155		1,614		726

Plan Asset Management

3M’s investment strategy for its pension and postretirement plans is to manage the funds on a going-concern basis. The primary goal of the trust funds is to meet the obligations as required. The secondary goal is to earn the highest rate of return possible, without jeopardizing its primary goal, and without subjecting the Company to an undue amount of contribution risk. Fund returns are used to help finance present and future obligations to the extent possible within actuarially determined funding limits and tax-determined asset limits, thus reducing the potential need for additional contributions from 3M. The investment strategy has used long duration cash bonds and derivative instruments to offset a significant portion of the interest rate sensitivity of U.S. pension liabilities.

Normally, 3M does not buy or sell any of its own securities as a direct investment for its pension and other postretirement benefit funds. However, due to external investment management of the funds, the plans may indirectly buy, sell or hold 3M securities. The aggregate amount of 3M securities are not considered to be material relative to the aggregate fund percentages.

The discussion that follows references the fair value measurements of certain assets in terms of levels 1, 2 and 3. See Note 15 for descriptions of these levels. While the company believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

U.S. Pension Plans and Postretirement Benefit Plan Assets

In order to achieve the investment objectives in the U.S. pension plans and U.S. postretirement benefit plans, the investment policies include a target strategic asset allocation. The investment policies allow some tolerance around the target in recognition that market fluctuations and illiquidity of some investments may cause the allocation to a specific asset class to vary from the target allocation, potentially for long periods of time. Acceptable ranges have been designed to allow for deviation from strategic targets and to allow for the opportunity for tactical over- and under-weights. The portfolios will normally be rebalanced when the quarter-end asset allocation deviates from acceptable ranges. The allocation is reviewed regularly by the named fiduciary of the plans. Approximately 72% of the postretirement benefit plan assets are in a 401(h) account. The 401(h) account assets are in the same trust as the primary U.S. pension plan and invested with the same investment objectives as the primary U.S. pension plan.

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The fair values of the assets held by the U.S. pension plans by asset class are as follows:


	Fair Value Measurements Using Inputs Considered as												Fair Value at December 31,
	Level 1				Level 2				Level 3
Asset Class (Millions)	2022		2021		2022		2021		2022		2021		2022		2021
Equities
U.S. equities	$	501	$	1,875	$	—	$	—	$	—	$	—	$	501	$	1,875
Non-U.S. equities	370		1,465		—		—		—		—		370		1,465
Index and long/short equity funds*													271		404
Total Equities	871		3,340		—		—		—		—		1,142		3,744
Fixed Income
U.S. government securities	1,344		1,417		29		716		—		—		1,373		2,133
Non-U.S. government securities	—		—		70		89		—		—		70		89
Preferred and convertible securities	—		—		44		54		—		—		44		54
U.S. corporate bonds	—		11		4,789		4,620		—		—		4,789		4,631
Non-U.S. corporate bonds	—		—		871		883		—		—		871		883
Derivative instruments	10		11		—		6		—		—		10		17
Other*													91		132
Total Fixed Income	1,354		1,439		5,803		6,368		—		—		7,248		7,939
Private Equity
Growth equity	—		58		—		—		—		—		—		58
Partnership investments*													1,700		2,003
Total Private Equity	—		58		—		—		—		—		1,700		2,061
Absolute Return
Fixed income and other	1		1		85		166		—		—		86		167
Hedge fund/fund of funds*													1,297		1,943
Partnership investments*													497		617
Total Absolute Return	1		1		85		166		—		—		1,880		2,727
Cash and Cash Equivalents
Cash and cash equivalents	8		11		22		9		—		—		30		20
Repurchase agreements and derivative margin activity	—		—		(1)		—		—		—		(1)		—
Cash and cash equivalents, valued at net asset value*													789		678
Total Cash and Cash Equivalents	8		11		21		9		—		—		818		698
Total	$	2,234	$	4,849	$	5,909	$	6,543	$	—	$	—	$	12,788	$	17,169
Other items to reconcile to fair value of plan assets													(140)		(216)
Fair value of plan assets													$	12,648	$	16,953

* In accordance with ASC 820-10, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The NAV is based on the fair value of the underlying assets owned by the fund, minus its liabilities then divided by the number of units outstanding and is determined by the investment manager or custodian of the fund. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the fair value of plan assets.

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The fair values of the assets held by the postretirement benefit plans by asset class are as follows:


	Fair Value Measurements Using Inputs Considered as												Fair Value at December 31,
	Level 1				Level 2				Level 3
Asset Class (Millions)	2022		2021		2022		2021		2022		2021		2022		2021
Equities
U.S. equities	$	145	$	292	$	—	$	—	$	—	$	—	$	145	$	292
Non-U.S. equities	23		80		—		—		—		—		23		80
Index and long/short equity funds*													16		28
Total Equities	168		372		—		—		—		—		184		400
Fixed Income
U.S. government securities	96		109		73		180		—		—		169		289
Non-U.S. government securities	—		—		5		7		—		—		5		7
U.S. corporate bonds	—		1		322		291		—		—		322		292
Non-U.S. corporate bonds	—		—		61		59		—		—		61		59

Other*													5		7
Total Fixed Income	96		110		461		537		—		—		562		654
Private Equity
Growth equity	—		3		—		—		—		—		—		3
Partnership investments*													99		107
Total Private Equity	—		3		—		—		—		—		99		110
Absolute Return
Fixed income and other	—		—		5		9		—		—		5		9
Hedge fund/fund of funds*													76		102
Partnership investments*													29		32
Total Absolute Return	—		—		5		9		—		—		110		143
Cash and Cash Equivalents
Cash and cash equivalents	21		20		1		—		—		—		22		20
Cash and cash equivalents, valued at net asset value*													46		36
Total Cash and Cash Equivalents	21		20		1		—		—		—		68		56
Total	$	285	$	505	$	467	$	546	$	—	$	—	$	1,023	$	1,363
Other items to reconcile to fair value of plan assets													(6)		(10)
Fair value of plan assets													$	1,017	$	1,353

*In accordance with ASC 820-10, certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The NAV is based on the fair value of the underlying assets owned by the fund, minus its liabilities then divided by the number of units outstanding and is determined by the investment manager or custodian of the fund. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the fair value of plan assets.

Publicly traded equities are valued at the closing price reported in the active market in which the individual securities are traded.

Fixed income includes derivative instruments such as credit default swaps, interest rate swaps and futures contracts. Corporate debt includes bonds and notes, asset backed securities, collateralized mortgage obligations and private placements. Swaps and derivative instruments are valued by the custodian using closing market swap curves and market derived inputs. U.S. government and government agency bonds and notes are valued at the closing price reported in the active market in which the individual security is traded. Corporate bonds and notes, asset backed securities and collateralized mortgage obligations are valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks. Private placements are valued by the custodian using recognized pricing services and sources.

The private equity portfolio is a diversified mix of derivative instruments, growth equity and partnership interests. Growth equity investments are valued at the closing price reported in the active market in which the individual securities are traded.

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Absolute return consists primarily of partnership interests in hedge funds, hedge fund of funds or other private fund vehicles. Corporate debt instruments are valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risk ratings.

Other items to reconcile to fair value of plan assets include, interest receivables, amounts due for securities sold, amounts payable for securities purchased and interest payable.

There were no level 3 assets in the fair values of the U.S. pension and postretirement plans assets for the periods ended December 31, 2022 and 2021.

International Pension Plans Assets

Outside the U.S., pension plan assets are typically managed by decentralized fiduciary committees. The disclosure below of asset categories is presented in aggregate for over 70 defined benefit plans in over 25 countries; however, there is significant variation in asset allocation policy from country to country. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment allocation process in each country. The Company provides standard funding and investment guidance to all international plans with more focused guidance to the larger plans.

Each plan has its own strategic asset allocation. The asset allocations are reviewed periodically and rebalanced when necessary.

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The fair values of the assets held by the international pension plans by asset class are as follows:


	Fair Value Measurements Using Inputs Considered as												Fair Value at December 31,
	Level 1				Level 2				Level 3
Asset Class (Millions)	2022		2021		2022		2021		2022		2021		2022		2021
Equities
Growth equities	$	59	$	315	$	99	$	181	$	—	$	—	$	158	$	496
Value equities	164		328		11		15		—		—		175		343
Core equities	65		107		142		547		2		5		209		659
Equities, valued at net asset value*													1		2
Total Equities	288		750		252		743		2		5		543		1,500
Fixed Income
Domestic government	73		73		1,060		1,039		3		4		1,136		1,116
Foreign government	29		22		327		458		—		—		356		480
Corporate debt securities	32		32		2,155		2,389		1		10		2,188		2,431
Fixed income securities, valued at net asset value*													623		893
Total Fixed Income	134		127		3,542		3,886		4		14		4,303		4,920
Private Equity
Real estate	2		2		50		58		2		5		54		65
Real estate, valued at net asset value*													119		163
Partnership investments*													265		226
Total Private Equity	2		2		50		58		2		5		438		454
Absolute Return
Derivatives	—		—		1		20		—		—		1		20
Insurance	—		—		—		—		438		504		438		504
Other	8		7		—		—		1		6		9		13
Other, valued at net asset value*													—		—
Hedge funds*													259		535
Total Absolute Return	8		7		1		20		439		510		707		1,072
Cash and Cash Equivalents
Cash and cash equivalents	122		145		51		46		—		—		173		191
Cash and cash equivalents, valued at net asset value*													2		1
Total Cash and Cash Equivalents	122		145		51		46		—		—		175		192
Total	$	554	$	1,031	$	3,896	$	4,753	$	447	$	534	$	6,166	$	8,138
Other items to reconcile to fair value of plan assets													(275)		(122)
Fair value of plan assets													$	5,891	$	8,016

Equities consist primarily of mandates in public equity securities managed to various public equity indices. Publicly traded equities are valued at the closing price reported in the active market in which the individual securities are traded.

Fixed Income investments include domestic and foreign government, and corporate, (including mortgage backed and other debt) securities. Governments, corporate bonds and notes and mortgage backed securities are valued at the closing price reported if traded on an active market or at yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flow approach that utilizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks.

Private equity funds consist of partnership interests in a variety of funds. Real estate consists of property funds and REITS (Real Estate Investment Trusts). REITS are valued at the closing price reported in the active market in which it is traded.

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Absolute return consists of private partnership interests in hedge funds, insurance contracts, derivative instruments, hedge fund of funds, and other alternative investments. Insurance consists of insurance contracts, which are valued using cash surrender values which is the amount the plan would receive if the contract was cashed out at year end. Derivative instruments consist of various swaps and bond futures that are used to help manage risks.

Other items to reconcile to fair value of plan assets include the net of interest receivables, amounts due for securities sold, amounts payable for securities purchased and interest payable.

The balances of and changes in the fair values of the international pension plans’ level 3 assets consist primarily of insurance contracts under the absolute return asset class. In 2022 the aggregate of net purchases and net unrealized gains and losses decreased this balance by $24 million and the change in currency exchange rates decreased this balance by $42 million for a net decrease of $66 million. In 2021 the aggregate net purchases and net unrealized gains decreased this balance by $7 million and the change in currency exchange rates decreased the balance by $44 million for a net decrease to this balance of $51 million.

NOTE 14. Derivatives

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

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

•Impact on other comprehensive income of nonderivative hedging and derivative instruments is included in Note 8.

•Fair value of derivative instruments is included in Note 15.

•Derivatives and/or hedging instruments associated with the Company’s long-term debt are also described in Note 12.

Refer to the section below titled Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments for details on the location within the consolidated statements of income for amounts of gains and losses related to derivative instruments designated as cash flow or fair value hedges (along with similar information relative to the hedged items) and derivatives not designated as hedging instruments. Additional information relative to cash flow hedges, fair value hedges, net investment hedges and derivatives not designated as hedging instruments is included below as applicable.

Cash Flow Hedges:

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

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

Cash Flow Hedging — Interest Rate Contracts: The Company may use forward starting interest rate contracts and treasury rate lock contracts to hedge exposure to variability in cash flows from interest payments on forecasted debt issuances.

In March 2020, the Company entered into treasury rate lock contracts with a notional amount of $500 million that were terminated concurrently with the March 2020 issuance of registered notes as discussed in Note 12. The termination resulted in an immaterial net loss within accumulated other comprehensive income that will be amortized for the respective lives of the debt.

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In periods prior to 2020, the 3M entered into other forward starting interest rate swaps designated as hedges against interest rate volatility associated with forecasted issuances of fixed rate debt. These included swaps terminated in 2019 concurrent with associated debt issuances. These 2019 terminations resulted in a net loss of $143 million within accumulated other comprehensive income that is being amortized over the respective lives of the debt.

The amortization of gains and losses on forward starting interest rate swaps is included in the tables below as part of the gain/(loss) reclassified from accumulated other comprehensive income into income.

As of December 31, 2022, the Company had a balance of $7 million associated with the after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income. This includes a remaining balance of $94 million (after-tax loss) related to the forward starting interest rate swap and treasury rate lock contracts, which will be amortized over the respective lives of the notes. Based on exchange rates as of December 31, 2022, of the total after-tax net unrealized balance as of December 31, 2022, 3M expects to reclassify approximately $68 million after-tax net unrealized gain over the next 12 months (with the impact offset by earnings/losses from underlying hedged items).

The amount of pretax gain (loss) recognized in other comprehensive income related to derivative instruments designated as cash flow hedges is provided in the following table.


	Pretax Gain (Loss) Recognized in Other Comprehensive Income on Derivative

(Millions)	2022		2021		2020
Foreign currency forward/option contracts	$	159	$	108	$	(111)
Interest rate contracts	—		—		(2)
Total	$	159	$	108	$	(113)

Fair Value Hedges:

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

Fair Value Hedging - Interest Rate Swaps: The Company manages interest expense using a mix of fixed and floating rate debt. To help manage borrowing costs, the Company may enter into interest rate swaps. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The mark-to-market of these fair value hedges is recorded as gains or losses in interest expense and is offset by the gain or loss of the underlying debt instrument, which also is recorded in interest expense.

In November 2013, 3M issued a Eurobond which was due in 2021 for a face amount of 600 million euros. Upon debt issuance, 3M completed a fixed-to-floating interest rate swap on a notional amount of 300 million euros as a fair value hedge of a portion of the fixed interest rate Eurobond obligation. This interest rate swap matured in conjunction with the repayment of the Eurobond in November 2021.

In August 2015, 3M issued $1.5 billion aggregate principal amount of medium-term notes. Upon debt issuance, the Company entered into two interest rate swaps as fair value hedges of a portion of the fixed interest rate medium-term note obligation. The first converted a $450 million three-year fixed rate note that matured in August 2018 at which time the associated interest rate swap also matured, and the second converted $300 million of a five-year fixed rate note that matured in August 2020 at which time the associated interest rate swap also matured.

In the fourth quarter of 2017, the Company entered into an interest rate swap as a fair value hedge with a notional amount of $200 million that converted the company’s fixed-rate medium-term note that matured in August 2020 at which time the associated interest rate swap also matured.

In September 2018, the Company entered into an interest rate swap with a notional amount of $200 million that converted a portion of the Company’s $400 million aggregate principal amount of fixed rate medium-term notes due 2021 into a floating rate note with an interest rate based on a three-month LIBOR index as a hedge of its exposure to changes in fair value that are attributable to interest rate risk. The Company terminated this interest rate swap in conjunction with the early debt repayment in December 2020 of $400 million aggregate principal amount of fixed-rate medium notes further described in Note 12.