3M CO [MMM] Filings

10-Q 1 mmm-20210930.htm 10-Q mmm-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

Commission file number: 1-3285

3M COMPANY

(Exact name of registrant as specified in its charter)


Delaware						41-0417775
(State or other jurisdiction of incorporation)						(IRS Employer Identification No.)

3M Center, St. Paul, Minnesota						55144-1000
(Address of Principal Executive Offices)						(Zip Code)

(Registrant’s Telephone Number, Including Area Code) (651) 733-1110

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

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.

1.500% Notes due 2026

MMM26

New York Stock Exchange

0.375% Notes due 2022

MMM22A

New York Stock Exchange

0.950% Notes due 2023

MMM23

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 SWX Swiss Exchange.

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 ☒ No ☐

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 ☒ No ☐

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. ☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding at September 30, 2021
Common Stock, $0.01 par value per share						576,252,803 shares

Table of Contents

3M COMPANY

Form 10-Q for the Quarterly Period Ended September 30, 2021


	TABLE OF CONTENTS	BEGINNING PAGE
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements	3
	Index to Financial Statements:
	Consolidated Statement of Income	3
	Consolidated Statement of Comprehensive Income	4
	Consolidated Balance Sheet	5
	Consolidated Statement of Cash Flows	6
	Notes to Consolidated Financial Statements	7
	Note 1. Significant Accounting Policies	7
	Note 2. Revenue	10
	Note 3. Acquisitions and Divestitures	13
	Note 4. Goodwill and Intangible Assets	13
	Note 5. Restructuring Actions	15
	Note 6. Supplemental Income Statement Information	16
	Note 7. Supplemental Equity and Comprehensive Income Information	17
	Note 8. Income Taxes	20
	Note 9. Marketable Securities	21
	Note 10. Long-Term Debt and Short-Term Borrowings	21
	Note 11. Pension and Postretirement Benefit Plans	22
	Note 12. Derivatives	23
	Note 13. Fair Value Measurements	27
	Note 14. Commitments and Contingencies	30
	Note 15. Stock-Based Compensation	48
	Note 16. Business Segments	51

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53
	Index to Management’s Discussion and Analysis:
	Overview	53
	Results of Operations	62
	Performance by Business Segment	64
	Financial Condition and Liquidity	69
	Cautionary Note Concerning Factors That May Affect Future Results	74

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	75

ITEM 4.	Controls and Procedures	75

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	77

ITEM 1A.	Risk Factors	77

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81

ITEM 3.	Defaults Upon Senior Securities	81

ITEM 4.	Mine Safety Disclosures	82

ITEM 5.	Other Information	82

ITEM 6.	Exhibits	82

Table of Contents

3M COMPANY

FORM 10-Q

For the Quarterly Period Ended September 30, 2021

PART I. Financial Information

Item 1. Financial Statements.

3M Company and Subsidiaries

Consolidated Statement of Income

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
(Millions, except per share amounts)	2021		2020		2021		2020
Net sales	$	8,942	$	8,350	$	26,743	$	23,601

Operating expenses
Cost of sales	4,853		4,303		14,097		12,217
Selling, general and administrative expenses	1,819		1,677		5,373		5,039
Research, development and related expenses	482		461		1,520		1,422
Gain on sale of businesses	—		—		—		(389)
Total operating expenses	7,154		6,441		20,990		18,289
Operating income	1,788		1,909		5,753		5,312

Other expense (income), net	31		83		113		248

Income before income taxes	1,757		1,826		5,640		5,064
Provision for income taxes	324		391		1,058		1,016
Income of consolidated group	1,433		1,435		4,582		4,048

Income (loss) from unconsolidated subsidiaries, net of taxes	4		(1)		7		(1)
Net income including noncontrolling interest	1,437		1,434		4,589		4,047

Less: Net income (loss) attributable to noncontrolling interest	3		4		7		3

Net income attributable to 3M	$	1,434	$	1,430	$	4,582	$	4,044

Weighted average 3M common shares outstanding — basic	579.6		577.8		580.3		577.2
Earnings per share attributable to 3M common shareholders — basic	$	2.47	$	2.47	$	7.90	$	7.01

Weighted average 3M common shares outstanding — diluted	586.3		582.4		587.1		581.6
Earnings per share attributable to 3M common shareholders — diluted	$	2.45	$	2.45	$	7.81	$	6.95

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

Table of Contents

3M Company and Subsidiaries

Consolidated Statement of Comprehensive Income

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
(Millions)	2021		2020		2021		2020
Net income including noncontrolling interest	$	1,437	$	1,434	$	4,589	$	4,047
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	(302)		271		(354)		(67)
Defined benefit pension and postretirement plans adjustment	119		116		359		271
Cash flow hedging instruments	48		(71)		95		(60)
Total other comprehensive income (loss), net of tax	(135)		316		100		144
Comprehensive income (loss) including noncontrolling interest	1,302		1,750		4,689		4,191
Comprehensive (income) loss attributable to noncontrolling interest	(2)		(5)		(6)		(1)
Comprehensive income (loss) attributable to 3M	$	1,300	$	1,745	$	4,683	$	4,190

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

Table of Contents

3M Company and Subsidiaries

Consolidated Balance Sheet

(Unaudited)


(Dollars in millions, except per share amount)	September 30, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	4,878	$	4,634
Marketable securities — current	855		404
Accounts receivable — net of allowances of $212 and $233	4,916		4,705
Inventories
Finished goods	2,324		2,081
Work in process	1,436		1,226
Raw materials and supplies	1,190		932
Total inventories	4,950		4,239
Prepaids	501		675
Other current assets	326		325
Total current assets	16,426		14,982
Property, plant and equipment	27,211		26,650
Less: Accumulated depreciation	(17,888)		(17,229)
Property, plant and equipment — net	9,323		9,421
Operating lease right of use assets	840		864
Goodwill	13,597		13,802
Intangible assets — net	5,426		5,835
Other assets	2,666		2,440
Total assets	$	48,278	$	47,344
Liabilities
Current liabilities
Short-term borrowings and current portion of long-term debt	$	1,972	$	806
Accounts payable	2,862		2,561
Accrued payroll	1,019		747
Accrued income taxes	278		300
Operating lease liabilities — current	262		256
Other current liabilities	3,242		3,278
Total current liabilities	9,635		7,948
Long-term debt	16,193		17,989
Pension and postretirement benefits	3,987		4,405
Operating lease liabilities	580		609
Other liabilities	3,353		3,462
Total liabilities	33,748		34,413
Commitments and contingencies (Note 14)
Equity
3M Company shareholders’ equity:
Common stock par value, $.01 par value; 944,033,056 shares issued	9		9
Shares outstanding - September 30, 2021: 576,252,803
Shares outstanding - December 31, 2020: 577,749,638
Additional paid-in capital	6,383		6,162
Retained earnings	45,361		43,821
Treasury stock, at cost:	(29,673)		(29,404)
Shares at September 30, 2021: 367,780,253
Shares at December 31, 2020: 366,283,418
Accumulated other comprehensive income (loss)	(7,620)		(7,721)
Total 3M Company shareholders’ equity	14,460		12,867
Noncontrolling interest	70		64
Total equity	14,530		12,931
Total liabilities and equity	$	48,278	$	47,344

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

Table of Contents

3M Company and Subsidiaries

Consolidated Statement of Cash Flows

(Unaudited)


	Nine months ended September 30,
(Millions)	2021		2020
Cash Flows from Operating Activities
Net income including noncontrolling interest	$	4,589	$	4,047
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities
Depreciation and amortization	1,408		1,413
Company pension and postretirement contributions	(121)		(122)
Company pension and postretirement expense	137		232
Stock-based compensation expense	227		216
Gain on sale of businesses	—		(389)
Deferred income taxes	(155)		(57)
Changes in assets and liabilities
Accounts receivable	(324)		113
Inventories	(823)		43
Accounts payable	340		(48)
Accrued income taxes (current and long-term)	(41)		146
Other — net	212		4
Net cash provided by (used in) operating activities	5,449		5,598

Cash Flows from Investing Activities
Purchases of property, plant and equipment (PP&E)	(1,047)		(1,079)
Proceeds from sale of PP&E and other assets	44		29
Acquisitions, net of cash acquired	—		(25)
Purchases of marketable securities and investments	(1,810)		(1,069)
Proceeds from maturities and sale of marketable securities and investments	1,363		1,239
Proceeds from sale of businesses, net of cash sold	—		576
Other — net	18		8
Net cash provided by (used in) investing activities	(1,432)		(321)

Cash Flows from Financing Activities
Change in short-term debt — net	4		(138)
Repayment of debt (maturities greater than 90 days)	(450)		(2,477)
Proceeds from debt (maturities greater than 90 days)	1		1,745
Purchases of treasury stock	(1,261)		(366)
Proceeds from issuance of treasury stock pursuant to stock option and benefit plans	566		325
Dividends paid to shareholders	(2,572)		(2,540)
Other — net	(21)		(47)
Net cash provided by (used in) financing activities	(3,733)		(3,498)

Effect of exchange rate changes on cash and cash equivalents	(40)		(11)

Net increase (decrease) in cash and cash equivalents	244		1,768
Cash and cash equivalents at beginning of year	4,634		2,353
Cash and cash equivalents at end of period	$	4,878	$	4,121

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

Table of Contents

3M Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1. Significant Accounting Policies

Basis of Presentation

The interim consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair statement of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. These adjustments consist of normal, recurring items. The results of operations for any interim period are not necessarily indicative of results for the full year. The interim consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Annual Report on Form 10-K.

Effective in the first quarter of 2021, 3M made the following changes. Information provided herein reflects the impact of these changes for all periods presented.

•Change in accounting principle for net periodic pension and postretirement plan cost. See below for additional information.

•Change 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 16.

•Change in alignment of certain products within 3M’s Consumer business segment—creating the Consumer Health and Safety Division. See additional information in Note 16.

Change in Accounting Principle for Determining Net Periodic Pension and Postretirement Plan Cost

In the first quarter of 2021, 3M changed the method it uses to calculate the market-related value of fixed income securities included in its pension and other postretirement plan assets. The market-related value is used to determine the expected return on plan assets and the amortization of net unamortized actuarial gains or losses expense components of net periodic benefit cost. The Company previously used the calculated value approach for all plan assets, deferring over three years the impact on these amounts of asset gains or losses that differed from expected returns. 3M changed to the fair value approach for calculating market-related value for the fixed income class of plan assets, which does not involve deferring the impact of excess plan asset gains or losses in the determination of these two components of net periodic benefit cost. 3M considers the use of the fair value approach preferable to the calculated value approach as it results in a more current reflection of impacts of changes in value of these plan assets in the determination of net periodic benefit cost. Additionally, given the plans’ liability-driven investment strategy whereby the changes in value of the fixed income plan assets should offset changes in the value of the plans’ liabilities, this approach more closely aligns the expected return on plan assets expense component with the value reflected in the plans’ funded status. This change was applied retrospectively to all periods presented within 3M’s financial statements. The change did not impact consolidated operating income or net cash provided by operating activities but did impact the previously reported portion of pension and postretirement net periodic benefit cost (benefit) that was included within non-operating other expense (income) along with related consolidated income items such as net income and earnings per share. Other impacts included related changes to previously reported consolidated other comprehensive income, retained earnings, accumulated other comprehensive income (loss), and associated line items within the determination of net cash provided by operating activities. For classes of plan assets other than fixed income investments, the Company continues to use the calculated value approach to determine their market-related value.

Table of Contents

The adoption of this change impacted previously reported amounts included herein as indicated in the tables below.


Consolidated Statement of Income
	Three months ended September 30, 2020				Nine months ended September 30, 2020
(Millions, except per share amounts)	Under Prior Method		As Adjusted		Under Prior Method		As Adjusted
Other expense (income), net	$	104	$	83	$	311	$	248

Income before income taxes	1,805		1,826		5,001		5,064
Provision for income taxes	387		391		1,002		1,016
Income of consolidated group	1,418		1,435		3,999		4,048

Net income including noncontrolling interest	1,417		1,434		3,998		4,047
Net income attributable to 3M	1,413		1,430		3,995		4,044
Earnings per share attributable to 3M common shareholders — basic	$	2.45	$	2.47	$	6.92	$	7.01
Earnings per share attributable to 3M common shareholders — diluted	$	2.43	$	2.45	$	6.87	$	6.95


Consolidated Statement of Comprehensive Income
	Three months ended September 30, 2020				Nine months ended September 30, 2020
(Millions)	Under Prior Method		As Adjusted		Under Prior Method		As Adjusted
Net income including noncontrolling interest	$	1,417	$	1,434	$	3,998	$	4,047
Other comprehensive income (loss), net of tax:
Defined benefit pension and postretirement plans adjustment	127		116		304		271
Total other comprehensive income (loss), net of tax	327		316		177		144
Comprehensive income (loss) including noncontrolling interest	1,744		1,750		4,175		4,191
Comprehensive income (loss) attributable to 3M	1,739		1,745		4,174		4,190


Consolidated Balance Sheet
	As of December 31, 2020
(Millions)	Under Prior Method		As Adjusted
Retained earnings	$	43,761	$	43,821
Accumulated other comprehensive income (loss)	(7,661)		(7,721)


Consolidated Statement of Cash Flows
	Nine months ended September 30, 2020
(Millions)	Under Prior Method		As Adjusted
Net income including noncontrolling interest	$	3,998	$	4,047
Company pension and postretirement expense	295		232
Other — net	(10)		4

The cumulative adjustment as of January 1, 2020, the beginning of the earliest period presented in the consolidated financial statements included herein, was a $5 million reduction to each of retained earnings and accumulated other comprehensive loss.

Table of Contents

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 a result of the dilution associated with the Company’s stock-based compensation plans. Certain options outstanding under these stock-based compensation plans 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 of 7.9 million average options for the three months ended September 30, 2021; 7.7 million average options for the nine months ended September 30, 2021; 18.8 million average options for the three months ended September 30, 2020; 19.6 million average options for the nine months ended September 30, 2020). The computations for basic and diluted earnings per share follow:

Earnings Per Share Computations


	Three months ended September 30,				Nine months ended September 30,
(Amounts in millions, except per share amounts)	2021		2020		2021		2020
Numerator:
Net income attributable to 3M	$	1,434	$	1,430	$	4,582	$	4,044

Denominator:
Denominator for weighted average 3M common shares outstanding – basic	579.6		577.8		580.3		577.2
Dilution associated with the Company’s stock-based compensation plans	6.7		4.6		6.8		4.4
Denominator for weighted average 3M common shares outstanding – diluted	586.3		582.4		587.1		581.6

Earnings per share attributable to 3M common shareholders – basic	$	2.47	$	2.47	$	7.90	$	7.01
Earnings per share attributable to 3M common shareholders – diluted	$	2.45	$	2.45	$	7.81	$	6.95

Table of Contents

New Accounting Pronouncements

Refer to Note 1 in 3M’s 2020 Annual Report on Form 10-K for a more detailed discussion of the standards in the tables that follow, except for those pronouncements issued subsequent to the most recent Form 10-K filing date for which separate, more detailed discussion is provided below as applicable.


Standards Adopted During the Current Fiscal Year
Standard	Relevant Description	Effective Date for 3M	Impact and Other Matters
ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740)	Eliminates certain existing exceptions related to the general approach in ASC 740 relating to franchise taxes, reducing complexity in the interim-period accounting for year-to-date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combination that result in a step-up in the tax basis of goodwill.	January 1, 2021	Adoption of this ASU did not have a material impact on 3M’s consolidated results of operations and financial condition.
ASU No. 2020-01, Clarifying the Interactions between Topic 321, Investments—Equity Securities, Topic 323, Investments—Equity Method and Joint Ventures, and Topic 815, Derivatives and Hedging	Clarifies when accounting for certain equity securities, a Company should consider observable transactions before applying or upon discontinuing the equity method of accounting for the purposes of applying the measurement alternative. Indicates when determining the accounting for certain derivatives, a Company should not consider if the underlying securities would be accounted for under the equity method or fair value option.	January 1, 2021	Adoption of this ASU did not have a material impact on 3M’s consolidated results of operations and financial condition.
ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope	Provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as LIBOR which is being phased out beginning at the end of 2021, to alternate reference rates, such as SOFR.	Effective upon ASU issuances in 2020 & 2021	With the beginning of the phase out of LIBOR at the end of 2021, 3M continues to evaluate commercial contracts that may utilize LIBOR and will continue to monitor developments during the LIBOR transition period.

NOTE 2. Revenue

Contract Balances:

Deferred revenue primarily relates to revenue that is recognized over time for one-year software license contracts. Deferred revenue (current portion) as of September 30, 2021 and December 31, 2020 was $467 million and $498 million, respectively. Approximately $90 million and $410 million of the December 31, 2020 balance was recognized as revenue during the three and nine months ended September 30, 2021, respectively, while approximately $100 million and $370 million of the December 31, 2019 balance was recognized as revenue during the three and nine months ended September 30, 2020, respectively.

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 $148 million and $153 million during the three months ended September 30, 2021 and 2020, respectively, and $433 million and $428 million during the nine months ended September 30, 2021 and 2020.

Table of Contents

Disaggregated revenue information:

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


	Three months ended September 30,				Nine months ended September 30,
Net Sales (Millions)	2021		2020		2021		2020
Abrasives	$	362	$	289	$	1,067	$	861