3M CO [MMM] Filings

10-Q 1 mmm-20220630.htm 10-Q mmm-20220630

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 June 30, 2022

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.

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 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 June 30, 2022
Common Stock, $0.01 par value per share						569,603,928 shares

Table of Contents

3M COMPANY

Form 10-Q for the Quarterly Period Ended June 30, 2022

TABLE OF CONTENTS

BEGINNING

PAGE

PART I

FINANCIAL INFORMATION

ITEM 1.

Financial Statements

Index to Financial Statements:

Consolidated Statement of Income

Consolidated Statement of Comprehensive Income (Loss)

Consolidated Balance Sheet

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

Note 1. Significant Accounting Policies

Note 2. Revenue

Note 3. Acquisitions and Divestitures

Note 4. Goodwill and Intangible Assets

Note 5. Restructuring Actions

Note 6. Supplemental Income Statement Information

Note 7. Supplemental Equity and Comprehensive Income Information

Note 8. Income Taxes

Note 9. Marketable Securities

Note 10. Long-Term Debt and Short-Term Borrowings

Note 11. Pension and Postretirement Benefit Plans

Note 12. Derivatives

Note 13. Fair Value Measurements

Note 14. Commitments and Contingencies

Note 15. Stock-Based Compensation

Note 16. Business Segments

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Index to Management’s Discussion and Analysis:

Overview

Results of Operations

Performance by Business Segment

Financial Condition and Liquidity

Cautionary Note Concerning Factors That May Affect Future Results

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

ITEM 4.

Controls and Procedures

Unregistered Sales of Equity Securities and Use of Proceeds

ITEM 3.

Defaults Upon Senior Securities

ITEM 4.

Mine Safety Disclosures

3M COMPANY

FORM 10-Q

For the Quarterly Period Ended June 30, 2022

PART I. Financial Information

Item 1. Financial Statements.

3M Company and Subsidiaries

Consolidated Statement of Income

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
(Millions, except per share amounts)	2022		2021		2022		2021
Net sales	$	8,702	$	8,950	$	17,531	$	17,801

Operating expenses
Cost of sales	5,093		4,719		9,919		9,244
Selling, general and administrative expenses	3,023		1,746		4,905		3,554
Research, development and related expenses	476		514		956		1,038

Total operating expenses	8,592		6,979		15,780		13,836
Operating income	110		1,971		1,751		3,965

Other expense (income), net	50		33		88		82

Income before income taxes	60		1,938		1,663		3,883
Provision for income taxes	(23)		415		279		734
Income of consolidated group	83		1,523		1,384		3,149

Income (loss) from unconsolidated subsidiaries, net of taxes	(1)		2		1		3
Net income including noncontrolling interest	82		1,525		1,385		3,152

Less: Net income (loss) attributable to noncontrolling interest	4		1		8		4

Net income attributable to 3M	$	78	$	1,524	$	1,377	$	3,148

Weighted average 3M common shares outstanding — basic	571.0		581.0		571.6		580.7
Earnings per share attributable to 3M common shareholders — basic	$	0.14	$	2.62	$	2.41	$	5.42

Weighted average 3M common shares outstanding — diluted	572.7		588.6		573.8		587.4
Earnings per share attributable to 3M common shareholders — diluted	$	0.14	$	2.59	$	2.40	$	5.36

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)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
(Millions)	2022		2021		2022		2021
Net income including noncontrolling interest	$	82	$	1,525	$	1,385	$	3,152
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment	(705)		170		(876)		(52)
Defined benefit pension and postretirement plans adjustment	85		121		172		240
Cash flow hedging instruments	88		(11)		87		47
Total other comprehensive income (loss), net of tax	(532)		280		(617)		235
Comprehensive income (loss) including noncontrolling interest	(450)		1,805		768		3,387
Comprehensive (income) loss attributable to noncontrolling interest	—		—		(3)		(4)
Comprehensive income (loss) attributable to 3M	$	(450)	$	1,805	$	765	$	3,383

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

(Unaudited)


(Dollars in millions, except per share amount)	June 30, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	2,722	$	4,564
Marketable securities — current	262		201
Accounts receivable — net of allowances of $196 and $189	4,914		4,660
Inventories
Finished goods	2,446		2,196
Work in process	1,788		1,577
Raw materials and supplies	1,411		1,212
Total inventories	5,645		4,985
Prepaids	588		654
Other current assets	383		339
Total current assets	14,514		15,403
Property, plant and equipment	27,013		27,213
Less: Accumulated depreciation	(17,694)		(17,784)
Property, plant and equipment — net	9,319		9,429
Operating lease right of use assets	835		858
Goodwill	13,064		13,486
Intangible assets — net	4,993		5,288
Other assets	2,909		2,608
Total assets	$	45,634	$	47,072
Liabilities
Current liabilities
Short-term borrowings and current portion of long-term debt	$	2,257	$	1,307
Accounts payable	3,273		2,994
Accrued payroll	704		1,020
Accrued income taxes	228		260
Operating lease liabilities — current	256		263
Other current liabilities	3,178		3,191
Total current liabilities	9,896		9,035
Long-term debt	14,019		16,056
Pension and postretirement benefits	2,638		2,870
Operating lease liabilities	584		591
Other liabilities	4,681		3,403
Total liabilities	31,818		31,955
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 - June 30, 2022: 569,603,928
Shares outstanding - December 31, 2021: 571,845,478
Additional paid-in capital	6,607		6,429
Retained earnings	45,269		45,821
Treasury stock, at cost:	(30,781)		(30,463)
Shares at June 30, 2022: 374,429,128
Shares at December 31, 2021: 372,187,578
Accumulated other comprehensive income (loss)	(7,362)		(6,750)
Total 3M Company shareholders’ equity	13,742		15,046
Noncontrolling interest	74		71
Total equity	13,816		15,117
Total liabilities and equity	$	45,634	$	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 Cash Flows

(Unaudited)


	Six months ended June 30,
(Millions)	2022		2021
Cash Flows from Operating Activities
Net income including noncontrolling interest	$	1,385	$	3,152
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities
Depreciation and amortization	921		932
Company pension and postretirement contributions	(80)		(85)
Company pension and postretirement expense	83		92
Stock-based compensation expense	182		184

Deferred income taxes	(451)		91
Changes in assets and liabilities
Accounts receivable	(457)		(337)
Inventories	(837)		(644)
Accounts payable	401		411
Accrued income taxes (current and long-term)	(9)		(141)
Other — net	1,000		(80)
Net cash provided by (used in) operating activities	2,138		3,575

Cash Flows from Investing Activities
Purchases of property, plant and equipment (PP&E)	(808)		(704)
Proceeds from sale of PP&E and other assets	56		43

Purchases of marketable securities and investments	(518)		(1,188)
Proceeds from maturities and sale of marketable securities and investments	456		786
Proceeds from sale of businesses, net of cash sold	13		—
Other — net	(13)		20
Net cash provided by (used in) investing activities	(814)		(1,043)

Cash Flows from Financing Activities
Change in short-term debt — net	344		4
Repayment of debt (maturities greater than 90 days)	(1,179)		(450)
Proceeds from debt (maturities greater than 90 days)	1		1
Purchases of treasury stock	(773)		(734)
Proceeds from issuance of treasury stock pursuant to stock option and benefit plans	227		480
Dividends paid to shareholders	(1,700)		(1,716)
Other — net	(22)		(19)
Net cash provided by (used in) financing activities	(3,102)		(2,434)

Effect of exchange rate changes on cash and cash equivalents	(64)		(37)

Net increase (decrease) in cash and cash equivalents	(1,842)		61
Cash and cash equivalents at beginning of year	4,564		4,634
Cash and cash equivalents at end of period	$	2,722	$	4,695

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

(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 Current Report on Form 8-K dated April 26, 2022 (which updated 3M's 2021 Annual Report on Form 10-K).

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 16. 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.

Consolidation and 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.

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 31.9 million and 27.5 million average options for the three and six months ended June 30, 2022, respectively, and 6.3 million and 7.5 million average options for the three and six months ended June 30, 2021, respectively. The computations for basic and diluted earnings per share follow:

Earnings Per Share Computations


	Three months ended June 30,				Six months ended June 30,
(Amounts in millions, except per share amounts)	2022		2021		2022		2021
Numerator:
Net income attributable to 3M	$	78	$	1,524	$	1,377	$	3,148

Denominator:
Denominator for weighted average 3M common shares outstanding – basic	571.0		581.0		571.6		580.7
Dilution associated with the Company’s stock-based compensation plans	1.7		7.6		2.2		6.7
Denominator for weighted average 3M common shares outstanding – diluted	572.7		588.6		573.8		587.4

Earnings per share attributable to 3M common shareholders – basic	$	0.14	$	2.62	$	2.41	$	5.42
Earnings per share attributable to 3M common shareholders – diluted	$	0.14	$	2.59	$	2.40	$	5.36

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New Accounting Pronouncements

Refer to Note 1 to the Consolidated Financial Statements in 3M’s Current Report on Form 8-K dated April 26, 2022 (which updated 3M's 2021 Annual Report on Form 10-K) for a discussion of applicable standards issued and not yet adopted by 3M.

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 June 30, 2022 and December 31, 2021 was $503 million and $529 million, respectively. Approximately $140 million and $340 million of the December 31, 2021 balance was recognized as revenue during the three and six months ended June 30, 2022, respectively, while approximately $140 million and $320 million of the December 31, 2020 balance was recognized as revenue during the three and six months ended June 30, 2021, 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 $284 million during the three and six months ended June 30, 2022, respectively, and $145 million and $285 million during the three and six months ended June 30, 2021, respectively.

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 June 30,				Six months ended June 30,
Net Sales (Millions)	2022		2021		2022		2021
Abrasives	$	346	$	326	$	675	$	649
Automotive Aftermarket	289		294		584		588
Closure and Masking Systems	270		254		528		497
Electrical Markets	336		313		645		614
Industrial Adhesives and Tapes	586		599		1,207		1,197
Personal Safety	972		1,125		2,099		2,354
Roofing Granules	125		121		237		229
Other Safety and Industrial	—		(3)		—		—
Total Safety and Industrial Business Segment	2,924		3,029		5,975		6,128

Advanced Materials	307		302		612		617
Automotive and Aerospace	428		443		888		931
Commercial Solutions	448		441		902		868
Electronics	863		913		1,786		1,864
Transportation Safety	222		257		420		472
Other Transportation and Electronics	—		(1)		—		(1)
Total Transportation and Electronics Business Segment	2,268		2,355		4,608		4,751

Food Safety	89		94		181		181
Health Information Systems	309		299		609		588
Medical Solutions	1,169		1,166		2,297		2,259
Oral Care	357		363		711		723
Separation and Purification Sciences	255		247		505		487
Other Health Care	—		(4)		—		(4)
Total Health Care Business Group	2,179		2,165		4,303		4,234

Consumer Health and Safety	145		157		306		301
Home Care	261		268		535		540
Home Improvement	582		645		1,191		1,249
Stationery and Office	342		332		611		600
Other Consumer	—		(2)		—		(1)
Total Consumer Business Group	1,330		1,400		2,643		2,689

Corporate and Unallocated	1		1		2		(1)
Total Company	$	8,702	$	8,950	$	17,531	$	17,801


	Three months ended June 30,				Six months ended June 30,
Net Sales (Millions)	2022		2021		2022		2021
Americas	$	4,751	$	4,582	$	9,189	$	8,910
Asia Pacific	2,447		2,655		5,217		5,424
Europe, Middle East and Africa	1,504		1,714		3,125		3,469
Other Unallocated	—		(1)		—		(2)
Worldwide