Log in
E-mail
Password
Show password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

3M COMPANY

(MMM)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

3M : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

07/27/2021 | 02:59pm EDT
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
the following sections:

 ? Overview


 ? Results of Operations

? Performance by Business Segment

? Financial Condition and Liquidity

? Cautionary Note Concerning Factors That May Affect Future Results





Forward-looking statements in Part I, Item 2 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 Part I, Item 2 and the risk factors provided in Part II, Item 1A for
discussion of these risks and uncertainties).



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 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 detailed discussion in Note 1.

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.




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.



Consideration of COVID-19:


As described in the Overview-Consideration of COVID-19 section of Part II, Item
7 of the Company's 2020 Annual Report on Form 10-K, 3M is impacted by the global
pandemic and related effects associated with the coronavirus (COVID-19). In
addition, risk factors with respect to COVID-19, can be found in Item 1A "Risk
Factors" in this Quarterly Report on Form 10-Q. Given the diversity

                                       54

Table of Contents


of 3M's businesses, some of the factors described in that Overview-Consideration
of COVID-19 section have increased the demand for 3M products, while others have
decreased demand or made it more difficult for 3M to serve customers.



Overall, 3M experienced broad-based growth across all business segments and
geographic areas in the second quarter of 2021, benefiting from continued
improvements in certain end markets including home improvement, oral care and
industrial along with healthcare elective procedure volumes increasing as
COVID-19 related hospitalizations declined. 3M's total sales increased 24.7% and
16.7% year-on-year in the second quarter and first six months of 2021,
respectively. Organic local-currency sales increased 21.4% and 14.3%
year-on-year in the second quarter and first six months of 2021, respectively.
3M experienced the strongest sales growth in Transportation and Electronics and
Health Care. While COVID-related respirator sales increased year-on-year in the
second quarter and first six months of 2021, they are estimated to have
negatively impacted year-on-year second quarter organic local-currency sales
growth by approximately 1 percent as they grew at a slower rate than the rest of
the Company. For the first six months of 2021, they positively impacted
year-on-year organic-local currency sales growth by approximately 1 percent. In
the second quarter of 2020, as effects of COVID-19 set-in, weak demand in a
number of end markets negatively impacted oral care, automotive and aerospace,
automotive aftermarket, commercial solutions, stationery and office, and
businesses aligned to general industrial applications such as industrial
adhesives and tapes and abrasives. At the same time, 2020 demand was increasing
in areas such as personal safety, home improvement, general cleaning,
semiconductor, data center, and biopharma filtration.



3M's operating income margins decreased 2.3 percentage points year-on-year in
the second quarter and remained flat the first six months of 2021. Factoring out
the impact on operating income of special items as described in the Certain
amounts adjusted for special items - (non-GAAP measures) section below,
operating income margins increased 2.4 and 2.1 percentage points to 22.0 and
22.3 percent for the second quarter and first six months of 2021, respectively,
when compared to 2020. Various COVID-19 implications contributed in part to
these results.



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 as described or referenced
above. While it is not feasible to identify or quantify all the other direct and
indirect implications on 3M's results of operations, below are factors that 3M
believes have also affected its result for second quarter and first six months
of 2021 when compared to 2020:



Factors contributing to charges or other impacts:

Increased raw materials and logistics costs during the first half of 2021 from

? ongoing COVID-19 related supply chain challenges further magnified in February

2021 by winter storm Uri in the United States.

? Period expenses of unabsorbed manufacturing costs and increased expected credit

losses on customer receivables in the second quarter of 2020.

Restructuring actions addressing structural enterprise costs and operations in

? certain end markets as a result of the COVID-19 pandemic and related economic

impact resulting in a second quarter 2020 charge of $58 million.

? Committed financial support in the second quarter of 2020 to various

COVID-relief and medical research initiatives.

Charge of $22 million in the first quarter of 2020 related to equity securities

as discussed in the "Assets and Liabilities that are Measured at Fair Value on

? a Nonrecurring Basis" section of Note 13 that use the measurement alternative

   described therein in addition to an immaterial pre-tax charge related to
   impairment of certain indefinite lived tradenames.



Factors providing benefits or other impacts:

In 2020 ongoing cost management in discretionary spending in areas such as

? travel, professional services, and advertising/merchandising resulting in lower

spending.

? Continued productivity efforts, including year-on-year savings from

restructuring actions taken in 2020

Government-sponsored COVID-response stimulus and relief initiatives in 2020,

? including certain employee retention benefits under the Coronavirus Aid, Relief

and Economic Security (CARES) Act in the United States.

? Lower incentive compensation and self-insured medical visit/insurance expense

in 2020.

Accelerated vacation usage policies in the second quarter of 2020 which

? benefited the second quarter of 2020, but provided a penalty in the second half

   of 2020.



Refer to the Financial Condition and Liquidity section below for more information on the Company's liquidity position.



                                       55

  Table of Contents
Due to the speed with which the COVID-19 situation continues to develop and
evolve and the uncertainty of its duration and the timing of recovery, 3M is not
able at this time to predict the extent to which the COVID-19 pandemic may have
a material effect on its consolidated results of operations or financial
condition.



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 for the three and six months ended June 30, 2021 and 2020.




                                                       Three months ended              Six months ended
                                                          June 30, 2021                  June 30, 2021
                                                  Percent of      Earnings per    Percent of     Earnings per
                                                   net sales     diluted share     net sales    diluted share
Same period last year                                 24.3 %     $         2.25       22.3 %    $         4.50
Significant litigation-related charges/benefits          -                    -        0.1              (0.07)
Gain/loss on sale of businesses                      (5.4)               (0.52)      (2.6)              (0.52)
Divestiture-related restructuring actions              0.7                 0.08        0.4                0.08
Same period last year, excluding special items        19.6 %     $         1.81       20.2 %    $         3.99
Increase/(decrease) due to:
Organic growth/productivity and other                  4.1                 0.89        2.8                1.23
Selling price and raw material impact                (1.4)               (0.17)      (0.8)              (0.17)
Acquisitions/divestitures                            (0.1)               (0.02)          -              (0.05)
Foreign exchange impacts                             (0.2)                 0.08        0.1                0.21
Other expense (income), net                            N/A                 0.06        N/A                0.09
Income tax rate                                        N/A               (0.03)        N/A                0.12
Shares of common stock outstanding                     N/A               (0.03)        N/A              (0.06)
Current period, excluding special items               22.0 %     $        
2.59       22.3 %    $         5.36
None                                                     -                    -          -                   -
Current period                                        22.0 %     $         2.59       22.3 %    $         5.36




Operating income margins decreased 2.3 percentage points in the second quarter
of 2021 and remained flat for the first six months of 2021 when compared to the
same period last year. For the second quarter of 2021, net income attributable
to 3M was $1.5 billion, or $2.59 per diluted share compared to $1.3 billion or
$2.25 per diluted share in the same period last year, an increase of 15.1
percent on a per diluted share basis. For the first six months of 2021 net
income attributable to 3M was $3.1 billion, or $5.36 per diluted share compared
to $2.6 billion or $4.50 per diluted share in the same period last year, an
increase of 19.1 percent on a per diluted share basis.



The Company refers to various 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.

On an adjusted basis, operating margins increased 2.4 percentage points to 22.0
percent in the second quarter of 2021 when compared to the same period last
year. For the first six months of 2021, operating margins increased 2.1
percentage points to 22.3 percent when compared to the same period last year.
Net income attributable to 3M was $1.5 billion, or $2.59 per diluted share
versus $1.0 billion, or $1.81 per diluted share in the same period last year,
which was an increase of 43.5 percent on a per diluted share basis. On an
adjusted basis for the first six months of 2021, net income attributable to 3M
was $3.1 billion, or $5.36 per diluted share versus $2.3 billion, or $3.99 per
diluted share for the same period last year, which was an increase of 34.4
percent on a per diluted share basis.



                                       56

  Table of Contents

Additional discussion related to the components of the year-on-year change in earnings per diluted share follows:

Organic growth/productivity and other:

Higher organic volume growth, ongoing cost management, and improved

? productivity increased operating income margins and earnings per diluted share

year-on-year for both the second quarter and first six months of 2021. The

following also impacted results:

Second quarter of 2021 benefit of $91 million pre-tax ($0.12 per share after

tax) from a favorable Brazilian Supreme Court decision that concluded on the

o 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.

Certain increased legal and reserve adjustments costs year-over-year. 3M

o regularly reviews and updates its associated liabilities and is involved in

various trials and defense preparation as discussed in Note 14.

2021 benefit from restructuring actions taken in 2020 and positive/negative

o 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.

o COVID-impacts recognized on certain assets in the first quarter of 2020.

o On a combined basis, higher defined benefit pension and postretirement service

   cost expense year-on-year.



Selling price and raw material impact:

Higher raw material and logistics costs from strong end-market demand and

COVID-impacted manufacturing and supply chain disruptions that were further

? magnified by February 2021 winter storm Uri in the U.S. These factors were

partially offset by higher selling prices for both the second quarter and first

   six months of 2021.




Acquisitions/divestitures:

? Divestiture impacts are 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) increased operating income by

approximately $49 million and $139 million (or pre-tax earnings by

approximately $60 million and $155 million) year-on-year for the second quarter

? and first six months of 2021, respectively. This estimate includes the effect

of translating profits from local currencies into U.S. dollars; the impact of

currency fluctuations on the transfer of goods between 3M operations in the

United States and abroad; and transaction gains and losses, including

derivative instruments designed to reduce foreign currency exchange rate risks.





Other expense (income), net:

Higher income related to non-service cost components of pension and

? postretirement expense, decreased expense year-on-year for both the second

quarter and first six months of 2021.

Interest expense (net of interest income) decreased slightly for the second

? quarter of 2021 and remained flat for the first six months of 2021 compared to

   the same periods year-on-year.




Income tax rate:

Certain items above reflect specific income tax rates associated therewith.

Overall, the effective tax rate for the second quarter and first six months of

? 2021 was 21.5 percent and 18.9 percent, respectively, largely consistent with

21.0 percent and 19.3 percent for the same periods, respectively, in prior

year.

On an adjusted basis, the effective tax rate for the second quarter and first

? six months of 2021 was 21.5 percent and 18.9 percent, respectively, an increase

of 0.8 and decrease of 1.8 percentage points compared to the same periods

   year-on-year.



Shares of common stock outstanding:

? Higher shares outstanding decreased earnings per share year-on-year for both

   the second quarter and first six months of 2021.



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




In addition to reporting financial results in accordance with U.S. GAAP, the
Company 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 (measure of segment operating performance), income
before taxes, net income, earnings per share, and the effective tax rate are all

                                       57

  Table of Contents

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. The Company considers these non-GAAP
measures in evaluating and managing the Company's operations. The Company
believes that discussion of results adjusted for these items is meaningful to
investors as it provides a useful analysis of ongoing underlying operating
trends. The determination of these items may not be comparable to similarly
titled measures used by other companies. Special items include:



Significant litigation-related charges/benefits:

In the first quarter of 2020, 3M recorded a net pre-tax charge of $17 million

($13 million after tax) related to PFAS (certain perfluorinated compounds)

matters. The charge was more than offset by a reduction in tax expense of $52

? million related to resolution of tax treatment with authorities regarding the

previously disclosed 2018 agreement reached with the State of Minnesota that

   resolved the Natural Resources Damages (NRD) lawsuit. These items, in
   aggregate, resulted in a $39 million after tax benefit.



Gain/loss on sale of businesses:

In the first quarter of 2020, 3M recorded a pre-tax gain of $2 million ($1

million loss after tax) related to the sale of its advanced

? ballistic-protection business and recognition of certain contingent

consideration. In the second quarter of 2020, 3M recorded a pre-tax gain of

$387 million ($304 million after tax) related to the sale of its drug delivery

   business. Refer to Note 3 for further details.



Divestiture-related restructuring actions:

In the second quarter 2020, following the divestiture of substantially all of

the drug delivery business 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. As a result, 3M

   recorded a pre-tax charge of $55 million ($46 million after tax). Refer to Note
   5 for further details.




                                       58

  Table of Contents


                                                                                                                                                Earnings
                                                                                                                                                   per
                                                                                                                                                 diluted
                                                                 Income                                           Net Income       Earnings       share
(Dollars in millions, except    Operating       Operating        Before    

Provision for Effective Tax Attributable to Per Diluted percent per share amounts)

                Income      Income Margin       Taxes       Income Taxes         Rate               3M             Share       change
Three months ended June 30,
2020 GAAP                       $     1,740       24.3 %        $    1,650     $         347       21.0 %      $          1,306    $     2.25
Adjustments for special
items:
Gain/loss on sale of
businesses                            (387)                          (387)              (83)                              (304)        (0.52)
Divestiture-related
restructuring actions                    55                             55                 9                                 46          0.08
Three months ended June 30,
2020 adjusted amounts
(non-GAAP measures)             $     1,408       19.6 %        $    1,318 

$ 273 20.7 % $ 1,048 $ 1.81


Three months ended June 30,
2021 GAAP                       $     1,971       22.0 %        $    1,938     $         415       21.5 %      $          1,524    $     2.59      15.1 %
Adjustments for special
items:
None
Three months ended June 30,
2021 adjusted amounts
(non-GAAP measures)             $     1,971       22.0 %        $    1,938     $         415       21.5 %      $          1,524    $     2.59      43.5 %





                                                                                                                                Earnings
                                                                                                                                  per
                                                                        Provision                                    Earnings   diluted
                                            Operating       Income         for                       Net Income        Per       share
(Dollars in millions,           Operating    Income         Before       Income     Effective       Attributable     Diluted    percent
except per share amounts)        Income      Margin          Taxes        Taxes     Tax Rate           to 3M          Share      change
Six months ended June 30,
2020 GAAP                     $     3,403        22.3 %   $   3,238   $       625        19.3 %   $        2,614   $     4.50
Adjustments for special
items:
Significant
litigation-related
charges/benefits                       17                        17            56                           (39)       (0.07)
Gain/loss on sale of
businesses                          (389)                     (389)          (86)                          (303)       (0.52)
Divestiture-related
restructuring actions                  55                        55             9                             46         0.08
Six months ended June 30,
2020 adjusted amounts
(non-GAAP measures)           $     3,086        20.2 %   $   2,921   $       604        20.7 %   $        2,318   $     3.99

Six months ended June 30,
2021 GAAP                     $     3,965        22.3 %   $   3,883   $       734        18.9 %   $        3,148   $     5.36       19.1 %
Adjustments for special
items:
None                                    -                         -             -                              -            -
Six months ended June 30,
2021 adjusted amounts
(non-GAAP measures)           $     3,965        22.3 %   $   3,883   $       734        18.9 %   $        3,148   $     5.36       34.4 %






                                       59

  Table of Contents

Sales and operating income by business segment:

The following tables contain sales and operating income results by business
segment for the three and six months ended June 30, 2021 and 2020. Refer to the
section entitled "Performance by Business Segment" later in MD&A for additional
discussion concerning 2021 versus 2020 results, including Corporate and
Unallocated. Refer to Note 16 for additional information on business segments,
including Elimination of Dual Credit.




                                        Three months ended June 30,
                                         2021                 2020               % change
                                    Net       Oper.       Net      Oper.     Net       Oper.
(Dollars in millions)              Sales     Income      Sales    Income    Sales      Income
Business Segments
Safety and Industrial             $ 3,254    $   718    $ 2,657   $   623    22.4 %      15.3 %
Transportation and Electronics      2,482        546      1,937       360  
 28.1        51.6
Health Care                         2,278        576      1,823       301    24.9        91.9
Consumer                            1,482        311      1,231       278    20.4        11.8
Corporate and Unallocated               1       (42)          1       297       -           -
Elimination of Dual Credit          (547)      (138)      (473)     (119)       -           -
Total Company                     $ 8,950    $ 1,971    $ 7,176   $ 1,740    24.7 %      13.2 %





                                            Six months ended June 30,
                                           2021                   2020                % change
                                      Net        Oper.       Net        Oper.      Net       Oper.
(Dollars in millions)                Sales      Income      Sales      Income     Sales      Income
Business Segments
Safety and Industrial              $   6,581    $ 1,529    $  5,584    $ 1,317     17.8 %      16.1 %
Transportation and Electronics         5,013      1,137       4,176       
824     20.0        38.0
Health Care                            4,526      1,085       3,927        753     15.2        44.2
Consumer                               2,855        600       2,481        543     15.1        10.6
Corporate and Unallocated                (1)       (89)           1        198        -           -
Elimination of Dual Credit           (1,173)      (297)       (918)      (232)        -           -
Total Company                      $  17,801    $ 3,965    $ 15,251    $ 3,403     16.7 %      16.5 %





                                                       Three months ended June 30, 2021
Worldwide Sales Change           Organic local-                                                   Total sales
By Business Segment              currency sales    Acquisitions    Divestitures    Translation      change
Safety and Industrial                      17.6 %             - %             - %          4.8 %         22.4 %
Transportation and Electronics             24.2               -            
  -            3.9           28.1
Health Care                                23.2               -           (2.6)            4.3           24.9
Consumer                                   17.8               -               -            2.6           20.4
Total Company                              21.4 %             - %         (0.7) %          4.0 %         24.7 %





                                                        Six months ended June 30, 2021
Worldwide Sales Change           Organic local-                                                   Total sales
By Business Segment              currency sales    Acquisitions    Divestitures    Translation      change
Safety and Industrial                      13.7 %             - %             - %          4.1 %         17.8 %
Transportation and Electronics             16.4               -            
  -            3.6           20.0
Health Care                                15.8               -           (4.3)            3.7           15.2
Consumer                                   12.8               -               -            2.3           15.1
Total Company                              14.3 %             - %         (1.1) %          3.5 %         16.7 %




                                       60

  Table of Contents

Sales by geographic area:

Percent change information compares the second quarter and first six months of
2021 with the same period last year, unless otherwise indicated. Additional
discussion of business segment results is provided in the Performance by
Business Segment section.




                                                                Three months ended June 30, 2021
                                                                          Europe,
                                                             Asia       Middle East         Other
                                              Americas     Pacific       & Africa        Unallocated      Worldwide
Net sales (millions)                         $    4,582    $  2,655    $       1,714    $         (1)    $     8,950
% of worldwide sales                               51.2 %      29.7 %           19.1 %              -          100.0 %
Components of net sales change:
Volume - organic                                   25.3 %      15.9 %           19.8 %              -           21.3 %
Price                                               0.3       (0.5)              0.3                -            0.1
Organic local-currency sales                       25.6        15.4             20.1                -           21.4
Acquisitions                                          -           -                -                -              -
Divestitures                                      (0.7)           -            (1.6)                -          (0.7)
Translation                                         1.2         4.8             10.2                -            4.0
Total sales change                                 26.1 %      20.2 %           28.7 %              -           24.7 %

Total sales change:
Safety and Industrial                              22.3 %      25.5 %           19.7 %              -           22.4 %
Transportation and Electronics                     34.9 %      20.1 %      
    50.5 %              -           28.1 %
Health Care                                        24.0 %      20.2 %           31.8 %              -           24.9 %
Consumer                                           20.8 %      13.6 %           29.6 %              -           20.4 %

Organic local-currency sales change:
Safety and Industrial                              20.8 %      18.4 %           10.2 %              -           17.6 %
Transportation and Electronics                     33.8 %      16.7 %      
    38.8 %              -           24.2 %
Health Care                                        25.3 %      13.8 %           26.4 %              -           23.2 %
Consumer                                           19.7 %       8.7 %           19.2 %              -           17.8 %



Additional information beyond what is included in the preceding table is as follows:

In the Americas geographic area, U.S. total sales increased 21 percent and

organic-local currency sales increased 22 percent. Total sales in Mexico

? increased 66 percent and organic local-currency sales increased 60 percent. In

Canada, total sales increased 52 percent and organic local-currency sales

   increased of 37 percent. In Brazil, total sales increased 58 percent and
   organic local-currency sales increased 54 percent.



In the Asia Pacific geographic area, China total sales increased 20 percent and

? organic local-currency sales increased 12 percent. In Japan, total sales

   increased 10 percent and organic local-currency sales increased 12 percent.


                                       61

  Table of Contents


                                                                 Six months ended June 30, 2021
                                                                          Europe,
                                                             Asia       Middle East         Other
                                              Americas     Pacific       & Africa        Unallocated      Worldwide
Net sales (millions)                         $    8,910    $  5,424    $       3,469    $         (2)    $    17,801
% of worldwide sales                               50.0 %      30.5 %           19.5 %              -          100.0 %
Components of net sales change:
Volume - organic                                   14.5 %      14.5 %           11.4 %              -           13.9 %
Price                                               0.8       (0.5)              0.7                -            0.4
Organic local-currency sales                       15.3        14.0             12.1                -           14.3
Acquisitions                                          -           -                -                -              -
Divestitures                                      (1.2)           -            (2.4)                -          (1.1)
Translation                                         0.5         5.1              9.0                -            3.5
Total sales change                                 14.6 %      19.1 %           18.7 %              -           16.7 %

Total sales change:
Safety and Industrial                              16.8 %      20.2 %           17.6 %              -           17.8 %
Transportation and Electronics                     13.3 %      22.1 %      
    25.5 %              -           20.0 %
Health Care                                        12.2 %      17.4 %           21.7 %              -           15.2 %
Consumer                                           14.8 %      12.5 %           22.0 %              -           15.1 %

Organic local-currency sales change:
Safety and Industrial                              16.3 %      13.2 %            8.8 %              -           13.7 %
Transportation and Electronics                     12.9 %      18.3 %      
    16.2 %              -           16.4 %
Health Care                                        15.8 %      10.7 %           20.7 %              -           15.8 %
Consumer                                           14.3 %       6.9 %           12.9 %              -           12.8 %



Additional information beyond what is included in the preceding table is as follows:

In the Americas geographic area, U.S. total sales increased 13 percent and

organic-local currency sale increased 14 percent. Total sales in Mexico

? increased 24 percent and organic local-currency sales increased 22 percent. In

Canada, total sales increased 27 percent and organic local-currency sales

increased 16 percent. In Brazil, total sales increased 24 percent and organic

   local-currency sales increased 33 percent.



In the Asia Pacific geographic area, China total sales increased 29 percent and

? organic local-currency sales increased 22 percent. In Japan, total sales

increased 5 percent and organic local-currency sales increased 5 percent.





Managing currency risks:

The weaker U.S. dollar had a positive impact on sales in the second quarter and
first six months of 2021 compared to the same periods last year. Net of the
Company's hedging strategy, foreign currency positively impacted earnings in the
second quarter and first six months of 2021 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 and 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:



3M generated $3.6 billion of operating cash flows in the first six months of
2021, an increase of $457 million when compared to the first six months of 2020,
with this increase year-on-year primarily driven by higher net income as a
result of strong organic sales

                                       62

Table of Contents


growth and ongoing cost management. 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 the first six months of 2021, the Company purchased
$734 billion of its own stock, compared to $366 million of stock purchases in
the first six months of 2020. As of June 30, 2021, approximately $7.0 billion
remained available under the authorization. In February 2021, 3M's Board of
Directors declared a first-quarter 2021 dividend of $1.48 per share, an increase
of 1 percent. This marked the 63rd consecutive year of dividend increases for
3M. In May 2021, 3M's Board of Directors declared a second-quarter dividend
of
$1.48 per share.


3M currently has an A1 credit rating with a negative outlook from Moody's Investors Service and has an A+ credit rating with Standard & Poor's with a negative outlook. The Company generates significant ongoing cash flow and has proven access to capital markets funding throughout business cycles.




3M expects to contribute approximately $200 million of cash to its global
defined benefit pension and postretirement plans in 2021. The Company does not
have a required minimum cash pension contribution obligation for its U.S. plans
in 2021.



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:




                                      Three months ended             Six months ended
                                            June 30,                     June 30,
(Percent of net sales)              2021      2020     Change     2021      2020    Change
Cost of sales                        52.7 %    53.0 %   (0.3) %    51.9 %    52.0 %  (0.1) %
Selling, general and
administrative expenses (SG&A)       19.6      22.2     (2.6)      20.0    
 22.0    (2.0)
Research, development and
related expenses (R&D)                5.7       5.9     (0.2)       5.8       6.3    (0.5)
Gain on sale of businesses              -     (5.4)       5.4         -     (2.6)      2.6
Operating income margin              22.0 %    24.3 %   (2.3) %    22.3 %    22.3 %      - %




3M expects global defined benefit pension and postretirement service cost
expense in 2021 to increase by approximately $40 million pre-tax when compared
to 2020, which impacts cost of sales; selling, general and administrative
expenses (SG&A); and research, development and related expenses (R&D). The
year-on-year increase in defined benefit pension and postretirement service cost
expense for the second quarter and first six months of 2021 was approximately
$11 million and $22 million, respectively.



For total year 2020, the Company recognized consolidated defined benefit pre-tax
pension and postretirement service cost expense of $456 million and a benefit of
$134 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 $322 million.



For total year 2021, defined benefit pension and postretirement service cost
expense is anticipated to total approximately $500 million while non-service
pension and postretirement net benefit cost is anticipated to be a benefit of
approximately $295 million, for a total consolidated defined benefit pre-tax
pension and postretirement expense of approximately $200 million, a decrease in
expense of approximately $120 million compared to 2020.



The Company is investing in an initiative called business transformation, with
these investments impacting cost of sales, SG&A, and R&D. Business
transformation encompasses the ongoing multi-year phased implementation of an
enterprise resource planning (ERP) system on a worldwide basis, as well as
changes in processes and internal/external service delivery across 3M.

                                       63

  Table of Contents

Cost of Sales:



Cost of sales, measured as a percent of sales, decreased in the second quarter
and first six months of 2021 when compared to the same periods last year.
Decreases primarily related to lower COVID-related net impacts taken in the
first half of 2021 versus the same period last year, including period expenses
of unabsorbed manufacturing costs taken in the second quarter of 2020. These
were partially offset by higher raw material and logistics costs and increased
adjustments to other environmental liabilities in the first half of 2021.



Selling, General and Administrative Expenses:

SG&A in dollars increased 9.6 percent and 5.8 percent in the second quarter and
first six months of 2021, respectively, when compared to the same period last
year. These results reflect increased legal and reserve adjustment costs,
continued spending on key initiatives, partially offset by the impact of the
favorable decision of the Brazilian Supreme Court in the second quarter of 2021
regarding the calculation of past social taxes and ongoing general 3M cost
management. Prior year also included a number of COVID-related net impacts as
described in the Overview- Consideration of COVID-19 section above. As a percent
of sales, SG&A decreased for both the second quarter and first six months of
2021 as a result of continued discretionary spending cost management.



Research, Development and Related Expenses:

R&D in dollars increased $90 million and $77 million in the second quarter and
first six months of 2021, respectively, when compared to the same period last
year, as 3M continued to invest in its key initiatives, including R&D aimed at
disruptive innovation programs with the potential to create entirely new markets
and disrupt existing markets.



Gain on Sale of Businesses:

During the first quarter of 2020, the Company recorded a pre-tax gain of $2
million ($1 million loss after tax) related to the sale of its advanced
ballistic-protection business and recognition of certain contingent
consideration. During the second quarter of 2020, the Company recorded a pre-tax
gain of $387 million ($304 after tax) related to the sale of substantially all
of its drug delivery business. Refer to Note 3 for additional details on
divestitures.



Other Expense (Income), Net:

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

Interest expense (net of interest income) decreased slightly for the second
quarter and remained flat for the first six months of 2021 compared to the same
periods year-on-year. Interest expense includes an early debt extinguishment
pre-tax charge in the first quarter of 2021.



The non-service pension and postretirement net benefit increased approximately
$42 million and $83 million in the second quarter and first six months of 2021,
respectively, compared to the same period in 2020.



Provision for Income Taxes:




                                Three months ended        Six months ended
                                      June 30,                 June 30,
(Percent of pre-tax income)      2021          2020        2021        2020
Effective tax rate                 21.5 %        21.0 %      18.9 %      19.3 %



The effective tax rate for the second quarter and first six months of 2021 was 21.5 percent and 18.9 percent, respectively, largely consistent with 21.0 percent and 19.3 percent for the same periods, respectively, in prior year.

3M currently estimates its effective tax rate for 2021 to be approximately 20 to
21 percent. 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.

                                       64

Table of Contents

Refer to Note 8 for further discussion of income taxes.

Income from Unconsolidated Subsidiaries, Net of Taxes:




                                         Three months ended                        Six months ended
                                              June 30,                                  June 30,
(Millions)                          2021                    2020               2021                  2020
Income (loss) from
unconsolidated
subsidiaries, net of taxes     $             2         $             -    $            3        $            -



Income (loss) from unconsolidated subsidiaries, net of taxes, is primarily
attributable to the Company's ownership interest in Kindeva using the equity
method of accounting following 3M's divestiture of the drug delivery business in
2020.


Net Income (Loss) Attributable to Noncontrolling Interest:




                                       Three months ended                      Six months ended
                                            June 30,                               June 30,
(Millions)                          2021                 2020              2021                 2020
Net income (loss)
attributable to
noncontrolling interest        $            1       $          (3)    $    
       4       $          (1)



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.

Significant Accounting Policies:

Information regarding new accounting standards is included in Note 1 to the Consolidated Financial Statements.

PERFORMANCE BY BUSINESS SEGMENT




Disclosures relating to 3M's business segments are provided in Note 16.
Effective in the first quarter of 2021, 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 16 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.



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 16. Corporate and Unallocated operating
income includes "special items" and "other corporate expense-net". Special items
include significant litigation-related charges/benefits, gain/loss on sale of
businesses, and divestiture-related restructuring costs. 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, certain litigation and environmental expenses largely related to legacy
products/businesses not allocated to business segments, 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 contract manufacturing, transition services and other arrangements with the
acquirer of the Communication Markets Division following its 2018 divestiture
through 2019 and 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.



                                       65

  Table of Contents

Corporate and Unallocated operating expenses increased in the second quarter and first six months of 2021, when compared to the same period last year.

Special Items


Refer to the Certain amounts adjusted for special items - (non-GAAP measures)
section for additional details on the impact of significant litigation-related
charges/benefits, gain/loss on sale of businesses, and divestiture-related
restructuring actions that are reflected in Corporate and Unallocated.



Other Corporate Expense - Net


Other corporate operating expenses, net, increased and decreased in the second
quarter and first six months of 2021, respectively, 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 in the second quarter
of 2021 regarding the calculation of past social taxes, lower overall corporate
staff spending and first quarter 2020 charges related to equity securities (as
discussed in the "Assets and Liabilities that are Measured at Fair Value on a
Nonrecurring Basis" section of Note 13), offset by increased 2021 legal and
reserve adjustment costs.



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.
Organic local-currency sales include both organic volume impacts plus selling
price impacts. Acquisition impacts, if any, are measured separately for the
first twelve months post-transaction. The divestiture impacts, if any, foreign
currency translation impacts and total sales change are also provided for each
business segment. Any references to EMEA relate to Europe, Middle East and
Africa on a combined basis.



Refer to the preceding "Sales and operating income by geographic area" section for organic local-currency sales growth by business segment within major geographic areas.

Refer to 3M's 2020 Annual Report on Form 10-K, Item 1, Business, for discussion of 3M products that are included in each business segment.

Safety and Industrial Business:




                                  Three months ended                 Six months ended
                                        June 30,                         June 30,
                                 2021              2020            2021             2020
Sales (millions)              $     3,254       $    2,657      $     6,581      $    5,584
Sales change analysis:
Organic local-currency               17.6 %                            13.7 %
Translation                           4.8                               4.1
Total sales change                   22.4 %                            17.8 %

Business segment operating
income (millions)             $       718       $      623      $     1,529      $    1,317
Percent change                       15.3 %                            16.1 %
Percent of sales                     22.1 %           23.4 %           23.2 %          23.6 %




Second quarter 2021 results:



Sales in Safety and Industrial totaled $3.3 billion, up 22.4 percent in U.S.
dollars. Organic local-currency and other sales change elements are included in
the table above.


On an organic local-currency sales basis:

Sales increased in automotive aftermarket, roofing granules, abrasives,

? industrial adhesives and tapes, electrical markets, and closure and masking

driven by continued end market strength (industrial, automotive, electronics

and construction) and prior year pandemic impacts.


                                       66

  Table of Contents

Sales declined in personal safety as growth in head, face, hearing, fall

? protection and disposable respirator growth was more than offset by declines

   across the rest of the respiratory protection portfolio.



Business segment operating income margins decreased year-on-year due to increases in raw materials, logistics and ongoing legal costs partially offset by leverage on sales growth.

First six months 2021 results:




Sales in Safety and Industrial totaled $6.6 billion, up 17.8 percent in U.S.
dollars. Organic local-currency and other sales change elements are included in
the table above.


On an organic local-currency sales basis:

Sales increased in roofing granules, automotive aftermarket, industrial

? adhesives and tapes, abrasives, electrical markets, and personal safety; sales

declined in closure and masking.

Growth was driven by improving general industrial manufacturing activity and

? other end-market demand along with pandemic-related respirator mask demand in

   the first quarter of 2021.



Business segment operating income margins decreased year-on-year due to rising raw materials, logistics and legal costs partially offset by sales growth leverage.

Transportation and Electronics Business:



                                  Three months ended                 Six months ended
                                        June 30,                         June 30,
                                 2021              2020            2021             2020
Sales (millions)              $     2,482       $    1,937      $     5,013      $    4,176
Sales change analysis:
Organic local-currency               24.2 %                            16.4 %
Translation                           3.9                               3.6
Total sales change                   28.1 %                            20.0 %

Business segment operating
income (millions)             $       546       $      360      $     1,137      $      824
Percent change                       51.6 %                            38.0 %
Percent of sales                     22.0 %           18.6 %           22.7 %          19.7 %




Second quarter 2021 results:


Sales in Transportation and Electronics totaled $2.5 billion, up 28.1 percent in U.S. dollars. Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

Sales increased in automotive and aerospace with year-on-year growth in car and

? light truck build rates in regions where 3M has higher content per vehicle, a

year-on-year increase in sell-in of 3M products versus change in build rate,

and continued penetration gains into new platforms.

? Sales increased in commercial solutions, advanced materials and transportation

safety from return to workplace trends.

Sales increased in electronics driven by continued strength in semiconductor,

? factory automation and data centers along with consumer electronic devices,

   namely tablets and TV's.




Business segment operating income margins increased year-on-year due to strong
leverage on sales growth, partially offset by increases in raw materials and
logistic costs.


First six months 2021 results:

Sales in Transportation and Electronics totaled $5.0 billion, up 20.0 percent in U.S. dollars. Organic local-currency and other sales change elements are included in the table above.

                                       67

  Table of Contents


On an organic local-currency sales basis:

Sales increased in automotive and aerospace from improving automotive-end

? market activity and increases in car and light truck builds and factors

mentioned above relative to second quarter results.

? Sales increased in electronics due to strong demand in data center,

semiconductor, interconnect and consumer electronics markets.

? Sales increased in commercial solutions, advanced materials and transportation

safety due to increased advertising spend and return to workplace trends.

Business segment operating income margins increased year-on-year due to sales growth leverage and COVID impacts recognized on certain assets in 2020, partially offset by rising raw materials and logistic costs.

Health Care Business:




                                  Three months ended                 Six months ended
                                        June 30,                         June 30,
                                 2021              2020            2021             2020
Sales (millions)              $     2,278       $    1,823      $     4,526      $    3,927
Sales change analysis:
Organic local-currency               23.2 %                            15.8 %
Divestitures                        (2.6)                             (4.3)
Translation                           4.3                               3.7
Total sales change                   24.9 %                            15.2

Business segment operating
income (millions)             $       576       $      301      $     1,085      $      753
Percent change                       91.9 %                            44.2 %
Percent of sales                     25.3 %           16.5 %           24.0 %          19.2 %



Second quarter 2021 results:

Sales in Health Care totaled $2.3 billion, up 24.9 percent in U.S. dollars. Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

Sales increased in oral care as patient visits returned to pre-COVID levels, in

? food safety as food service activity returned along with continued strong

growth from new product introductions, and in medical solutions due to rising

   elective procedure volumes as COVID-related hospitalizations declined.

Sales increased in separation and purification due to continued demand for

? biopharma solutions for COVID-related vaccine and therapeutics along with

improving demand trends for water filtration solutions.

? Sales increased in health information systems driven by strong growth in

   clinician solutions.




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 leverage on sales growth, partially offset by increasing raw materials and logistics costs along with increased investments in growth.

First six months 2021 results:

Sales in Health Care totaled $4.5 billion, up 15.2 percent in U.S. dollars. Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

                                       68

  Table of Contents

Sales increased in oral care driven by higher year-on-year dental industry

? activity and in separation and purification from continued high demand for

biopharma filtration solutions for COVID-related vaccine and therapeutic

development and manufacturing.

? Sales increased in medical solutions from rising elective procedure volumes and

strong respirator demand in the first quarter of 2021.

? Sales increased in health information systems 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, partially offset by supply chain disruptions, rising raw materials and logistics costs along with increased investments in growth.

Consumer Business:




                                  Three months ended                 Six months ended
                                        June 30,                         June 30,
                                 2021              2020            2021             2020
Sales (millions)              $     1,482       $    1,231      $     2,855      $    2,481
Sales change analysis:
Organic local-currency               17.8 %                            12.8 %
Translation                           2.6                               2.3
Total sales change                   20.4 %                            15.1 %

Business segment operating
income (millions)             $       311       $      278      $       600      $      543
Percent change                       11.8 %                            10.6 %
Percent of sales                     21.0 %           22.6 %           21.0 %          21.9 %



Second quarter 2021 results:

Sales in Consumer totaled $1.5 billion, an increase of 20.4 percent in U.S. dollars. Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

Sales increased in stationery and office supplies as the business laps last

year's COVID-related comparisons, continued strength in consumer demand for

? Scotch®-branded packaging and shipping products, along with improved sell-in

trends in Post-it®-solutions and Scotch®-branded home and office tapes as

retailers prepare for back-to-school and return-to-workplace.

Sales increased in consumer health and safety as last year's COVID-related

? impacts are lapped along with improved supply of safety products for retail

customers.

Sales increased in home improvement as the business continued to experience

? strong demand in many of our category leading franchises particularly for

CommandTM adhesives, FiltreteTM air quality solutions, and MeguiarsTM auto care

solutions.

? Sales increased in home care due to continued strength in home cleaning.

Business segment operating income margins decreased year-on-year as a result of increased costs for raw materials, logistics and outsourced hardgoods manufacturing costs, along with rising investments in advertising and merchandising, more than offset leverage from sales growth.

First six months 2021 result:


                                       69

Table of Contents

Sales in Consumer totaled $2.9 billion, an increase of 15.1 percent in U.S. dollars. Organic local-currency and other sales change elements are included in the table above.

On an organic local-currency sales basis:

Sales increased in home improvement driven by continued strength in home

? improvement with strong demand for CommandTM adhesives, FiltreteTM air quality

solutions, MeguiarsTM auto care and Scotch BlueTM painter's tape.

Sales increased in stationery and office supplies from ongoing strength in

? consumer demand for packaging and shipping products and Scotch® brand office

tapes as the business laps last year's COVID-related comparisons.

Sales also increased in consumer health and safety as the global economy

? impacted by COVID continues to evolve versus 2020 and in home care due to

   consumer demand for home cleaning products and solutions.




Business segment operating income margins decreased year-on-year as a result of
rising raw materials, logistics and outsourced hardgoods manufacturing costs,
and higher investments in advertising and merchandising, partially offset by
sales growth leverage.


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, provides financial
flexibility and enables the Company to invest through business cycles. 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. Organic investments will be supplemented by complementary
acquisitions. The Company also continues to actively manage its portfolio to
maximize value for shareholders. 3M repurchased shares in the first six months
of 2021, after having suspended repurchases under its board-approved share
repurchase program (with other repurchase activity limited to 3M's stock
compensation plans) in the first quarter of 2020. 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 in 3M's 2020 Annual Report on Form 10-K 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 June 30, 2021
and
December 31, 2020.



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. 3M currently has an A1 credit
rating with a negative outlook from Moody's Investors Service and an A+ credit
rating with negative outlook from Standard and Poor's.



The Company's total debt was $547 million lower at June 30, 2021 when compared
to December 31, 2020. Decreases in debt were largely due to the March 2021 early
redemption via make-whole call offers of $450 million in debt. For discussion of
repayments of and proceeds from debt refer to the following "Cash Flows from
Financing Activities" section. As discussed in Note 10, in the second quarter of
2021, 3M entered into interest rate swaps that converted part of the Company's
$1.0 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.



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 stated it will cease
publication of certain LIBOR rates after December 31, 2021. USD LIBOR rates that
do not cease on December 31,2021 will continue to be published through June 30,
2023. The Company has reviewed its debt securities, bank facilities, and
derivative instruments and continues to evaluate commercial contracts that may
utilize LIBOR as the reference rate. 3M will continue its assessment and monitor
regulatory developments during the transition period.



                                       70

  Table of Contents

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 June 30, 2021, 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). Additionally,
the August 2019 and March 2020 debt was issued under the WKSI shelf
registration, but not as part of the medium-term notes program (Series F).
Information with respect to long-term debt issuances and maturities for the
periods presented is included in Note 10 of this Form 10-Q and Note 12 of 3M's
2020 Annual Report on Form 10-K.



The Company has a $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 2020 with
an expiration date of November 2021. The 364-day credit agreement includes a
provision under which 3M may convert any advances outstanding on the maturity
date into term loans with a maturity date one year later. These credit
facilities were undrawn at June 30, 2021. 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 June 30, 2021, this ratio was
approximately 19 to 1. Debt covenants do not restrict the payment of dividends.



The Company also had $271 million in stand-alone letters of credit and bank guarantees issued and outstanding at June 30, 2021. These instruments are utilized in connection with normal business activities.

Cash, cash equivalents and marketable securities:




At June 30, 2021, 3M had $5.5 billion of cash, cash equivalents and marketable
securities, of which approximately $4.3 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, 2020, 3M had $5.1 billion of cash, cash
equivalents and marketable securities, of which approximately $2.8 billion was
held by the Company's foreign subsidiaries and $2.3 billion was held by the
United States. The increase from December 31, 2020 primarily resulted from
strong cash flow from operations offset by ongoing dividend payments, purchases
of treasury stock, capital expenditures, and the March 2021 early redemption via
make-whole call offers of $450 million in debt.



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 June 30,
2021 and December 31, 2020.




(Millions)                                      June 30, 2021      December 31, 2020       Change
Total debt                                     $        18,248    $            18,795    $     (547)
Less: Cash, cash equivalents and marketable
securities                                               5,531                  5,068            463
Net debt (non-GAAP measure)                    $        12,717    $        
   13,727    $   (1,010)



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



                                       71

  Table of Contents

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):





(Millions)                            June 30, 2021     December 31, 2020    Change
Current assets                       $        16,343   $            14,982   $ 1,361
Less: Current liabilities                      9,440                 7,948     1,492
Working capital (non-GAAP measure)   $         6,903   $             7,034 
 $ (131)




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 as of June 30, 2021 was largely consistent with December 31,
2020. Balance changes in current assets increased working capital by $1.4
billion, driven largely by increases in inventory, marketable securities and
accounts receivable. Balance changes in current liabilities decreased working
capital by $1.5 billion, primarily due to increases in current-portion of
long-term debt and accounts payable.



Accounts receivable and inventory increased $286 million and $603 million,
respectively, from December 31, 2020, primarily as a result of increased
sequential sales and related operating activity from that of late 2020 partially
offset by foreign currency translation impacts. Current portion of long-term
debt increased based on underlying debt maturities while accounts payable also
increased as a result of increased sequential operating activity from that of
late 2020 partially offset by foreign currency translation impacts.

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.



                                       72

  Table of Contents

Cash Flows from Operating Activities:




                                                         Six months ended
                                                             June 30,
(Millions)                                                2021        2020

Net income including noncontrolling interest           $    3,152    $ 

2,613

Depreciation and amortization                                 932        

932

Company pension and postretirement contributions             (85)       

(77)

Company pension and postretirement expense                     92        

155

Stock-based compensation expense                              184        

172

Gain on sale of businesses                                      -      

(389)

Income taxes (deferred and accrued income taxes)             (50)        314
Accounts receivable                                         (337)        241
Inventories                                                 (644)      (198)
Accounts payable                                              411      (269)
Other - net                                                  (80)      (376)

Net cash provided by (used in) operating activities $ 3,575 $ 3,118





Cash flows from operating activities can fluctuate significantly from period to
period, as pension funding decisions, tax timing differences and other items can
significantly impact cash flows.



In the first six months of 2021, cash flows provided by operating activities
increased $457 million compared to the same period last year, with this increase
primarily due to overall sales growth and continued spending discipline leading
to higher net income year-on-year, offset by working capital changes and the
timing of income tax payments. The combination of accounts receivable,
inventories and accounts payable decreased operating cash flow by $570 million
and $226 million in the first six months of 2021 and 2020, respectively. In
addition, operating cash flows for the first six months of 2020 benefited from
the deferral of income tax payments into the third quarter of 2020. This
deferral did not repeat in 2021. Additional discussion on working capital
changes is provided earlier in the "Financial Condition and Liquidity" section.



Cash Flows from Investing Activities:




                                                               Six months ended
                                                                   June 30,
(Millions)                                                    2021           2020

Purchases of property, plant and equipment (PP&E) $ (704) $

(711)

Proceeds from sale of PP&E and other assets                         43     

16

Acquisitions, net of cash acquired                                   -     

(25)

Purchases and proceeds from maturities and sale of marketable securities and investments, net

                       (402)      

342

Proceeds from sale of businesses, net of cash sold                   -     

573

Other - net                                                         20     

7

Net cash provided by (used in) investing activities $ (1,043) $

      202




Investments in property, plant and equipment enable growth across many diverse
markets, helping to meet product demand and increasing manufacturing efficiency.
The Company expects 2021 capital spending to be approximately $1.8 billion to
$2.0 billion as 3M continues to invest in growth, productivity and
sustainability. In 2020, 3M reduced overall spending in light of uncertainty
regarding COVID-19-resulting in full year capital spending of $1.5 billion-but
continued to invest in expanding the Company's ability to increase production of
respiratory products to meet worldwide demand.



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.



                                       73

  Table of Contents

3M invests in renewal and maintenance programs, which pertain to cost reduction,
cycle time, maintaining and renewing current capacity, eliminating pollution,
and compliance. 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. The Company is
actively considering additional acquisitions, investments and strategic
alliances, and from time to time may also divest certain businesses.
Acquisitions, net of cash acquired, in the first three months of 2020 primarily
relate to the payment made for contingent consideration in regards to the
Acelity acquisition. Proceeds from sale of businesses in 2020 primarily relate
to the sale of the Company's advanced ballistic-protection business and its
drug
delivery business.



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 9 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:




                                                              Six months ended
                                                                   June 30,
(Millions)                                                   2021           2020
Change in short-term debt - net                           $         4    $ 

(132)

Repayment of debt (maturities greater than 90 days)             (450)      

(1,146)

Proceeds from debt (maturities greater than 90 days)                1      
   1,745
Total cash change in debt                                 $     (445)    $       467
Purchases of treasury stock                                     (734)          (366)

Proceeds from issuances of treasury stock pursuant to stock option and benefit plans

                                    480       

236

Dividends paid to shareholders                                (1,716)      

(1,693)

Other - net                                                      (19)      

(45)

Net cash provided by (used in) financing activities $ (2,434) $

 (1,401)




Total debt was approximately $18.2 billion at June 30, 2021 and $18.8 billion at
December 31, 2020. 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.
The Company had no commercial paper outstanding at June 30, 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. 3M's primary short-term liquidity
needs are met through cash on hand and U.S. commercial paper issuances. 2020
issuances, maturities, and extinguishments of short-and long-term debt are
described in Note 5 in 3M's 2020 Annual Report on Form 10-K.



Repurchases of 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. In the first six months of 2021, the Company purchased $734 million of its
own stock. 3M repurchased shares in 2021, after having suspended repurchases
(with other repurchase activity limited to 3M's stock compensation plans) in the
first quarter of 2020. For more information, refer to the table titled "Issuer
Purchases of Equity Securities" in Part II, Item 2. The Company does not utilize
derivative instruments linked to the Company's stock.



3M has paid dividends each year since 1916. In February 2021, 3M's Board of
Directors declared a first-quarter 2021 dividend of $1.48 per share, an increase
of 1 percent. This is equivalent to an annual dividend of $5.92 per share and
marked the 63rd consecutive year of dividend increases. In May 2021, 3M's Board
of Directors declared a second-quarter 2021 dividend of $1.48 per share.



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.

                                       74

  Table of Contents


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. The first quarter
of each year is typically 3M's seasonal low for free cash flow and free cash
flow conversion. 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.




                                                        Six months ended
                                                             June 30,
(Millions)                                              2021         2020
Major GAAP Cash Flow Categories
Net cash provided by (used in) operating activities   $   3,575    $   3,118
Net cash provided by (used in) investing activities     (1,043)          202
Net cash provided by (used in) financing activities     (2,434)      (1,401)

Free Cash Flow (non-GAAP measure)
Net cash provided by (used in) operating activities   $   3,575    $   3,118
Purchases of property, plant and equipment                (704)        (711)
Free cash flow                                        $   2,871    $   2,407
Net income attributable to 3M                         $   3,148    $   2,614
Free cash flow conversion                                    91 %         92 %






                                       75

  Table of Contents

CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS

This Quarterly Report on Form 10-Q, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part I, Item 2,
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, capital markets
and other external conditions, such as interest rates, financial conditions of
our suppliers and customers, trade restrictions such as tariffs in addition to
retaliatory counter measures, inflation, and natural and other disasters or
climate change affecting the operations of the Company or our suppliers and
customers,

? risks related to public health crises such as the global pandemic associated

with the coronavirus (COVID-19),

? liabilities related to certain fluorochemicals and the outcome of

contingencies,

?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 development, and future performance or

results of current or anticipated products,

? fluctuations in the costs and availability of purchased components, compounds,

raw materials and energy,

? Information technology systems including ERP system roll-out and

implementations,

? 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 availability of and access to credit markets,

? pension and postretirement obligation assumptions and future contributions,



 ? asset impairments,


? tax liabilities and effects of changes in tax rates, laws or regulations, and

?legal and regulatory proceedings, legal compliance risks (including third-party risks) with regards to environmental, product liability and other laws and regulations 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 II, Item 1A, "Risk Factors," of this document, and should be considered an
integral part of Part I, Item 2, "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.



                                       76

  Table of Contents

© Edgar Online, source Glimpses

Stocks mentioned in the article
ChangeLast1st jan.
3M COMPANY -0.78% 180.065 Delayed Quote.3.83%
3M INDIA LIMITED -0.68% 25103.4 End-of-day quote.20.47%
All news about 3M COMPANY
09/173M : Wolfe Research Adjusts 3M's Price Target to $216 from $219, Keeps Underperf..
MT
09/173M : Jefferies Adjusts 3M's Price Target to $186 from $203, Keeps Hold Rating
MT
09/173M : UBS Cuts Price Target on 3M to $172 From $183, Maintains Sell Rating
MT
09/163M : 's Global Bonding Process Centers Help Customers Realize Their Automation A..
PR
09/133M : Stock Briefly Loses Ground After CFO Cautions on Inflation's Impact to Q3 O..
MT
09/10QIAGEN N : 3M, Qiagen to comply with Biden's COVID-19 vaccination, test mandate
RE
09/093M : Boron Nitride Cooling Fillers from 3M Used for Thermal Management in Advanc..
PR
09/093M Expands Their Line of Boron Nitride Cooling Fillers Applicable to Wide Arr..
CI
09/083M : Luxshare Technology Strike Limited Patent License Deal for Twin Axial Cable..
MT
09/083M : and Luxshare Technology Complete Agreement for Twin Axial Cable Technology ..
PR
More news
Analyst Recommendations on 3M COMPANY
More recommendations
Financials (USD)
Sales 2021 35 245 M - -
Net income 2021 5 917 M - -
Net Debt 2021 12 577 M - -
P/E ratio 2021 18,0x
Yield 2021 3,26%
Capitalization 105 B 105 B -
EV / Sales 2021 3,34x
EV / Sales 2022 3,17x
Nbr of Employees 95 000
Free-Float 61,2%
Chart 3M COMPANY
Duration : Period :
3M Company Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends 3M COMPANY
Short TermMid-TermLong Term
TrendsBearishBearishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 19
Last Close Price 181,49 $
Average target price 203,01 $
Spread / Average Target 11,9%
EPS Revisions
Managers and Directors
Michael F. Roman Chairman, President & Chief Executive Officer
Monish Patolawala Chief Financial Officer & Executive Vice President
John Patrick Banovetz CTO & EVP-Environmental Responsibility
Veena M. Lakkundi Senior VP-Strategy & Business Development
Michael A. Duran Vice President, Chief Ethics & Compliance Officer
Sector and Competitors
1st jan.Capi. (M$)
3M COMPANY3.83%105 017
BERKSHIRE HATHAWAY INC.19.72%626 422
HONEYWELL INTERNATIONAL INC.2.72%150 845
SIEMENS AG27.23%140 220
GENERAL ELECTRIC COMPANY16.28%110 276
ILLINOIS TOOL WORKS INC.5.89%67 998