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

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

•Overview

•Results of Operations

•Performance by Business Segment

•Performance by Geographic Area

•Critical Accounting Estimates

•New Accounting Pronouncements

•Financial Condition and Liquidity

•Financial Instruments

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

Additional information about results of operations and financial condition for 2020 and 2019 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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 19.

•Change in alignment of certain products within 3M’s Consumer business segment—creating the Consumer Health and Safety Division. See additional information in Note 19.

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

Consideration of COVID-19:

3M is impacted by the global pandemic and related effects associated with the coronavirus (COVID-19). Risk factors with respect to COVID-19 can be found in Item 1A “Risk Factors” in this document. Given the diversity of 3M’s businesses, some of the factors relative to COVID-19 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 organic growth across business segments and all geographies in 2021 despite global supply challenges. 3M’s total sales increased 9.9% for the full year 2021 when compared to 2020. Organic sales increased 8.8% for the full year 2021 when compared to 2020. In 2021, COVID-related respirator sales negatively impacted year-on-year organic sales growth by approximately 0.2% as they grew at a slower rate than the rest of the Company. Given the diversity of 3M's businesses, the impact of COVID-19 varied across the Company. In 2020, 3M experienced strong sales in personal safety, as well as in other areas such as home improvement, general cleaning, semiconductor, data center, and biopharma filtration while businesses aligned to general industrial applications with strength in abrasives and industrial adhesives and tapes. At the same time, weakness in several end markets, while improving, contributed in part to sales declines in a number of 3M's businesses such as oral care, automotive and aerospace, advanced materials, commercial solutions, stationery and office,

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automotive aftermarket. Refer to the Performance by Business Segment section later in MD&A for additional discussion of sales by segment.

3M’s operating income margins decreased 1.5 percentage points year-on-year for the year ending December 31, 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 decreased 0.5 percentage points to 20.8 percent for the year ending December 31, 2021 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. 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 2021 results when compared to 2020:

Factors contributing to charges or other impacts:

•Increased raw materials and logistics costs from ongoing COVID-19 related global supply chain challenges further magnified by extreme weather events, such as February 2021 winter storm Uri in the United States.

•Cost management in discretionary spending in areas such as travel, professional services, and advertising/merchandising resulting in lower spending 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.

Factors providing benefits or other impacts:

•Continued productivity efforts, including year-on-year savings from restructuring actions taken in 2020 and 2021.

•Period expenses of unabsorbed manufacturing costs and increased expected credit losses on customer receivables in 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 2020 charge of $58 million.

•Committed financial support in 2020 to various COVID-relief and medical research initiatives.

•Charge of $22 million in 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 15 that use the measurement alternative described therein in addition to an immaterial pre-tax charge related to impairment of certain indefinite lived tradenames.

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

Due to the speed with which the COVID-19 situation is developing and evolving 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.

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

The following table provides the increase (decrease) in operating income margins and diluted earnings per share for 2021 compared to the same period last year, in addition to 2020 compared to 2019. As applicable, certain items in the table reflect specific income tax rates associated therewith.

Percent of net sales Earnings per diluted share

Significant litigation-related charges/benefits — 2.4 (0.07) 1.01

Gain/loss on sale of businesses (1.2) (0.4) (0.52) (0.22)

Divestiture-related restructuring actions 0.2 — 0.08 —

Loss on deconsolidation of Venezuelan subsidiary N/A N/A — 0.28

Same period last year, excluding special items 21.3 % 21.2 % $ 8.85 $ 8.79

Increase/(decrease) due to:

Organic growth/productivity and other 0.3 — 0.89 (0.27)

Selling price and raw material impact (0.8) 0.7 (0.27) 0.36

Acquisitions/divestitures — (0.5) (0.05) (0.10)

Foreign exchange impacts — (0.1) 0.16 (0.08)

Other expense (income), net N/A N/A 0.27 0.15

Income tax rate N/A N/A 0.32 (0.04)

Shares of common stock outstanding N/A N/A (0.05) 0.04

Current period, excluding special items 20.8 % 21.3 % $ 10.12 $ 8.85

Significant litigation-related charges/benefits — — — 0.07

Gain/loss on sale of businesses — 1.2 — 0.52

Divestiture-related restructuring actions — (0.2) — (0.08)

The Company refers to various “adjusted” amounts or measures on an “adjusted basis”. These exclude special items. These non-GAAP measures are further described and reconciled to the most directly comparable GAAP financial measures in the Certain amounts adjusted for special items - (non-GAAP measures) section below.

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

Organic growth/productivity and other:

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

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

•Certain changes in legal reserve charges year-over-year. 3M regularly reviews and updates its associated liabilities and is involved in various trials and defense preparation as discussed in Note 16.

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

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

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

•COVID-impacts recognized on certain assets in 2020.

•In 2020, lower organic volume growth as a result of significant COVID-19 related impacts, in addition to COVID-related net factors described in the preceding Overview—Consideration of COVID-19 section, decreased both earnings per diluted share and operating income margin year-on-year. 3M also experienced year-over-year increased costs as a result of the regular review of its respirator mask liabilities and certain follow-on accelerated depreciation

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following some of the restructuring in 2019 and 2020. Partially offsetting these increased costs were year-on-year net gains related to certain property sales (in 2020 within Safety and Industrial and in 2019 within Corporate and Unallocated), lower non divestiture-related restructuring charges year-on-year, in addition to benefits recognized in 2020 related to the restructuring and other actions taken in 2019 (and the adjustments thereto in 2020) along with continued cost management and productivity efforts.

•On a combined basis, higher defined benefit pension and postretirement service cost increased expense year-on-year for both 2021 and 2020.

Selling price and raw material impact:

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

•In 2020, higher selling prices in addition to lower raw material cost impacts benefited operating income margins year-on-year

Acquisitions/divestitures:

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

•Acquisition impacts, which are measured for the first twelve months post-transaction, relate to the acquisitions of M*Modal (first quarter 2019), and Acelity (fourth quarter 2019). The net impacts related to these acquisitions included income from operations, more than offset by transaction and integration costs. Financing costs related to these acquisitions is also included.

Foreign exchange impacts:

•Foreign currency impacts (net of hedging) increased operating income by approximately $103 million and decreased operating income by approximately $62 million (or an increase in pre-tax earnings of approximately $119 million and a decrease in pre-tax earnings of approximately $57 million) year-on-year for 2021 and 2020, respectively. These estimates include: (a) the effects of year-on-year changes in exchange rates on translating current period functional currency profits into U.S. dollars and on current period non-functional currency denominated purchases or transfers of goods between 3M operations, and (b) year-on-year changes in transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks. Prior to 2021, for (a) 3M used prior year functional currency profits and non-functional currency purchase/transfer information as the base in determining these amounts. Comparative prior period amounts have been updated to reflect this updated methodology.

Other expense (income), net:

•Higher income related to non-service cost components of pension and postretirement expense decreased expense year-on-year for both 2021 and 2020.

•Interest expense (net of interest income) decreased in 2021 compared to the same periods year-on-year. 2021 interest expense also included an early debt extinguishment pre-tax charge in the first quarter of 2021.

•Interest expense (net of interest income) increased in 2020, as a result of higher U.S. average debt balances and lower year-on-year interest income driven by lower average interest rates on cash balances. 2020 interest expense also included an early debt extinguishment charge in conjunction with the repayment of notes in December 2020.

Income tax rate:

•Certain items above reflect specific income tax rates associated therewith. Overall, the effective tax rates for 2021, 2020, and 2019 were 17.8 percent, 19.7 percent, and 19.7 percent, respectively. These reflect a decrease of 1.9 percentage points from 2020 to 2021 and a flat comparison from 2019 to 2020.

•On an adjusted basis (as discussed below), the effective tax rates for 2021, 2020, and 2019 were 17.8 percent, 20.3 percent, and 20.2 percent, respectively. These reflect a decrease of 2.5 percentage points from 2020 to 2021 and an increase of 0.1 percentage points from 2019 to 2020.

•The primary factors that decreased the Company's effective tax rate in 2021 were geographical income mix and favorable adjustments in 2021 related to impacts of U.S. international tax provisions. Refer to Note 10 for additional details.

Shares of common stock outstanding:

•Higher shares outstanding decreased earnings per share per diluted share for 2021, while lower shares outstanding increased earnings per share diluted share for 2020.

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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 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 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 lawsuit. These items, in aggregate, resulted in a $39 million after tax benefit.

•In 2019, the Company recorded significant litigation-related charges of $762 million ($590 million after tax) related to PFAS matters ($449 million pre-tax) and coal mine dust respirator mask lawsuits ($313 million pre-tax). These charges are further discussed in Note 16.

Gain/loss on sale of businesses:

•In 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 and 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.

•In the first quarter of 2019, 3M recorded a gain related to the sale of certain oral care technology comprising a business in addition to reflecting an earnout on a previous divestiture, which together resulted in a net gain of $8 million ($7 million after tax). In the second quarter of 2019, as a result of a “held for sale” tax benefit related to the legal entities associated with the pending divestiture of the Company’s gas and flame detection business, 3M recorded an after-tax gain of $43 million. In the third quarter of 2019, 3M recorded a gain related to the divestiture of the Company’s gas and flame detection business and an immaterial impact as a result of measuring a disposal group at the lower of its carrying amount or fair value less cost to sell, which in aggregate resulted in a pre-tax gain of $106 million ($79 million after tax).

Divestiture-related restructuring actions:

•In 2020, following the divestiture of substantially all of the drug delivery business (see Note 3) management approved and committed to undertake certain restructuring actions addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business. As a result, 3M recorded a pre-tax charge of $55 million ($46 million after tax) and made a subsequent immaterial adjustment thereto. Refer to Note 5 for further details.

Loss on deconsolidation of Venezuelan subsidiary:

•In 2019, 3M recorded a pre-tax charge of $162 million related to the deconsolidation of the Company’s Venezuelan subsidiary as further discussed in Note 1.

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Adjustments for special items:

Loss on deconsolidation of Venezuelan subsidiary — 162 — 162 0.28

Adjustments for special items:

Significant litigation-related charges/benefits 17 17 56 (39) (0.07)

Divestiture-related restructuring actions 55 55 9 46 0.08

Adjustments for special items:

None

Year 2021 sales and operating income by business segment:

The following tables contain sales and operating income results by business segment for the years ended December 31, 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 19 for additional information on business segments, including Elimination of Dual Credit.

Business Segments

Corporate and Unallocated 2 — (176) (2) — 91

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Safety and Industrial 7.8 % — % — % 2.0 % 9.8 %

Transportation and Electronics 9.0 — — 1.6 10.6

Year 2021 sales results by geographic area

Percent change information compares the year ended December 31, 2021 with the same period last year, unless otherwise indicated.

Americas AsiaPacific Europe,Middle East& Africa OtherUnallocated Worldwide

Components of net sales change:

Acquisitions — — — —

Divestitures (0.6) — (1.1) (0.5)

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

•In the Americas geographic area, U.S. total sales increased 8 percent which included increased organic sales of 8 percent. Total sales in Mexico increased 18 percent which included increased organic sales of 16 percent. In Canada, total sales increased 18 percent which included increased organic sales of 11 percent. In Brazil, total sales increased 18 percent which included increased organic sales of 22 percent.

•In the Asia Pacific geographic area, China total sales increased 17 percent which included increased organic sales of 11 percent. In Japan, total sales were flat which included increased organic sales of 2 percent.

Year 2020 sales results by geographic area

Percent change information compares the full year 2020 with the full year 2019, unless otherwise indicated.

Americas AsiaPacific Europe,Middle East& Africa OtherUnallocated Worldwide

Components of net sales change:

Total sales change 2.5 % (2.3) % (1.9) % 0.1 %

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

•In the Americas geographic area, U.S. total sales increased 6 percent which included increased organic sales of 1 percent. Total sales decreased 14 percent in Mexico which included decreased organic sales of 12 percent. In Canada,

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total sales decreased 1 percent which included decreased organic sales of 4 percent. In Brazil, total sales decreased 17 percent which included increased organic sales of 7 percent.

•In the Asia Pacific geographic area, China total sales increased 4 percent which included increased organic sales of 3 percent. In Japan, total sales decreased 3 percent which included decreased organic sales of 7 percent.

Managing currency risks:

The weaker U.S. dollar had a positive impact on sales in full year 2021 compared to the same period last year. Net of the Company’s hedging strategy, foreign currency positively impacted earnings for full year 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, hard currency-indexed billings, and localizing source of supply. 3M also uses financial hedges to mitigate currency risk. In the case of more liquid currencies, 3M hedges a portion of its aggregate exposure, using a 12, 24 or 36 month horizon, depending on the currency in question. For less liquid currencies, financial hedging is frequently more expensive with more limitations on tenor. Thus, this risk is largely managed via local operational actions using natural hedging tools as discussed above. In either case, 3M’s hedging approach is designed to mitigate a portion of foreign currency risk and reduce volatility, ultimately allowing time for 3M’s businesses to respond to changes in the marketplace.

Financial condition:

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

In November 2018, 3M’s Board of Directors replaced the Company’s February 2016 repurchase program with a new repurchase program. This new program authorizes the repurchase of up to $10 billion of 3M’s outstanding common stock, with no pre-established end date. In 2021, the Company purchased $2.2 billion of its own stock and $0.4 billion in 2020. As of December 31, 2021, approximately $5.6 billion remained available under the authorization. In February 2022, 3M’s Board of Directors declared a first-quarter 2022 dividend of $1.49 per share, an increase of 1 percent. This marked the 64th consecutive year of dividend increases for 3M.

Raw materials:

Refer to the section entitled “Raw materials” in Item 1 for discussion of 3M's sources and availability of raw materials in 2021.

Pension and postretirement defined benefit/contribution plans:

On a worldwide basis, 3M’s pension and postretirement plans were 93 percent funded at year-end 2021. The primary U.S. qualified pension plan, which is approximately 67 percent of the worldwide pension obligation, was 97 percent funded and the international pension plans were 101 percent funded. The U.S. non-qualified pension plan is not funded due to tax considerations and other factors. Asset returns in 2021 for the primary U.S. qualified pension plan were 6.7%, as 3M strategically invests in both growth assets and fixed income matching assets to manage its funded status. For the primary U.S. qualified pension plan, the expected long-term rate of return on an annualized basis for 2022 is 6.00%. The primary U.S. qualified pension plan year-end 2021 discount rate was 2.89%, up 0.34 percentage points from the year-end 2020 discount rate of 2.55%. The increase in U.S. discount rates resulted in an decreased valuation of the projected benefit obligation (PBO). The primary U.S. qualified pension plan’s funded status increased 5 percentage point in 2021 due to the lower PBO resulting from the discount rate increase. Additional detail and discussion of international plan asset returns and discount rates is provided in Note 13 (Pension and Postretirement Benefit Plans).

3M expects to contribute approximately $100 million to $200 million of cash to its global defined benefit pension and postretirement plans in 2022. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2022. 3M expects global defined benefit pension and postretirement expense in 2022 to decrease by approximately $20 million pre-tax when compared to 2021. Refer to “Critical Accounting Estimates” within MD&A and Note 13 (Pension and Postretirement Benefit Plans) for additional information concerning 3M’s pension and post-retirement plans.

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.

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Operating Expenses:

Selling, general and administrative expenses (SG&A) 20.4 21.5 (1.1)

Research, development and related expenses (R&D) 5.6 5.8 (0.2)

Gain on sale of businesses — (1.2) 1.2

Operating income margin 20.8 % 22.3 % (1.5) %

Pension and postretirement service cost expense is recorded in cost of sales, SG&A, and R&D. Refer to Note 13 (Pension and Postretirement Plans) for the service cost components of net periodic benefit costs.

The Company is continuing the ongoing deployment of an enterprise resource planning (ERP) system on a worldwide basis, with these investments impacting cost of sales, SG&A, and R&D.

Cost of Sales:

Cost of sales includes manufacturing, engineering and freight costs.

Cost of sales, measured as a percent of sales, increased in 2021 when compared to 2020 due to higher raw material, logistics and outsourced manufacturing costs; manufacturing productivity impacts from global supply chain challenges; increased compensation and benefit costs; increased adjustments to other environmental liabilities; and increased investments in growth, productivity and sustainability. Cost of sales was also impacted by year-over-year changes in restructuring charges, net of restructuring benefits. Year-over-year cost increases were partially offset by lower COVID-related net impacts taken in 2021 versus last year, including period expenses of unabsorbed manufacturing costs taken in 2020.

Selling, General and Administrative Expenses:

SG&A, measured as a percent of sales, decreased in 2021 when compared to 2020. SG&A was impacted by increased litigation-related costs, compensation and benefit costs, and spending on key growth initiatives. SG&A was also impacted by year-over-year changes in restructuring charges, net of restructuring benefits. Cost increases were 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.

Research, Development and Related Expenses:

R&D, measured as a percent of sales, decreased in 2021 when compared to 2020. 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 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. Additionally, in 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.

Other Expense (Income), Net:

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

Interest expense (net of interest income) decreased during 2021 and increased during 2020. The decrease in 2021 was due to lower U.S. average debt balances and the impact of interest rate swaps placed during the year. 2021 interest expense also included an early debt extinguishment pre-tax charge in the first quarter of 2021. The increase in 2020 was due to higher U.S. average debt balances and lower year-on-year interest income driven by lower average interest rates on cash balances. 2020 interest expense also included an early debt extinguishment charge in conjunction with the repayment of notes in December 2020.

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The non-service pension and postretirement net benefit increased $163 million and $135 million in 2021 and 2020, respectively. The higher year-on-year benefit in 2021 was primarily due to decreased expense from lower discount rates applicable to 2021. Refer to Note 13 for additional details.

Provision for Income Taxes:

Effective tax rate 17.8 % 19.7 %

Factors that impacted the tax rates between years are further discussed in the Overview section above and in Note 10.

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

Refer to Note 10 for further discussion of income taxes.

Income (Loss) from Unconsolidated Subsidiaries, Net of Taxes:

Income (loss) from unconsolidated subsidiaries, net of taxes $ 10 $ (5)

Income (loss) from unconsolidated subsidiaries, net of taxes, is attributable to the Company’s accounting under the equity method for ownership interests in certain entities such as Kindeva following 3M's divestiture of the drug delivery business in 2020.

Net Income (Loss) Attributable to Noncontrolling Interest:

Net income (loss) attributable to noncontrolling interest $ 8 $ 4

Net income (loss) attributable to noncontrolling interest represents the elimination of the income or loss attributable to non-3M ownership interests in 3M consolidated entities. The primary noncontrolling interest relates to 3M India Limited, of which 3M’s effective ownership is 75 percent.

PERFORMANCE BY BUSINESS SEGMENT

Item 1, Business Segments, provides an overview of 3M’s business segments. In addition, disclosures relating to 3M’s business segments are provided in Note 19. Effective in the first quarter of 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 19 for additional details).

Information provided herein reflects the impact of these changes for all periods presented. 3M manages its operations in four business segments. The reportable segments are Safety and Industrial; Transportation and Electronics; Health Care; and Consumer.

Corporate and Unallocated:

In addition to these four business segments, 3M assigns certain costs to “Corporate and Unallocated,” which is presented separately in the preceding business segments table and in Note 19. Corporate and Unallocated operating income includes “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

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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.

Corporate and Unallocated net operating loss increased in 2021 when compared to 2020 primarily related to the pre-tax gain of $387 million included in special items in 2020 as a result of 3M's divestiture of its drug delivery business (see Note 3 for additional details).

Special Items

Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section and Note 5 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 decreased in 2021 when compared to 2020. The decrease was 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, continued 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 15), partially offset by increased 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.

The following discusses total year results for 2021 compared to 2020 and 2020 compared to 2019 for each business segment.

Safety and Industrial Business (36.4% of consolidated sales):

Sales change analysis:

Organic sales 7.8 % 3.4 %

Divestitures — (0.6)

Translation 2.0 (0.7)

Total sales change 9.8 % 2.1 %

Business segment operating income (millions) $ 2,692 $ 2,784

Percent change (3.3) % 17.3 %

Year 2021 results:

Sales in Safety and Industrial were up 9.8 percent in U.S. dollars.

On an organic sales basis:

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

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

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Business segment operating income margins decreased year-on-year due to increases in raw materials, logistics and litigation-related costs; lower gain on sale of properties; and manufacturing productivity impacts that were partially offset by sales growth leverage, lower year-on-year respirator mask reserve increases, and benefits from restructuring actions and lower related charges.

Year 2020 results:

Sales in Safety and Industrial were up 2.1 percent in U.S. dollars.

On an organic sales basis:

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

•Strong growth related to unprecedented demand for respirators as a result of the COVID-19 pandemic was partially offset by softness that impacted sales growth across most of the Company’s general industrial-related portfolio.

Divestitures:

•2019 divestitures that impacted 2020 results relate to the August 2019 sale of the gas and flame detection business.

Business segment operating income margins increased 3.0% year-on-year primarily related to strong productivity, continued cost discipline and benefits from certain property sale, 2019 restructuring and other actions.

Transportation and Electronics Business (27.6% of consolidated sales):

Sales change analysis:

Organic sales 9.0 % (7.0) %

Divestitures — (1.1)

Total sales change 10.6 % (7.9) %

Business segment operating income (millions) $ 2,008 $ 1,814

Year 2021 results:

Sales in Transportation and Electronics were up 10.6 percent in U.S. dollars.

On an organic sales basis:

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

•Sales increased in automotive and aerospace from improving automotive-end market activity and increases in car and light truck builds, partially offset by impacts from semiconductor supply chain constraints.

•Sales increased in electronics due to strong demand in data center, semiconductor, interconnect and consumer electronics markets, partially offset by impacts from semiconductor supply chain constraints.

•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, benefits from restructuring actions and lower related charges, and COVID impacts recognized on certain assets in 2020 that were partially offset by increases in raw materials and logistic costs, manufacturing productivity impacts, and increased compensation and benefit costs.

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Year 2020 results:

Sales in Transportation and Electronics were down 7.9 percent in U.S. dollars.

On an organic sales basis:

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

•Electronics-related growth was led by demand for semiconductor, data center, and factory automation end-markets, and was partially offset by softness in the consumer electronics end-market.

•Automotive and aerospace was primarily impacted by the decline in global car and light truck builds. Commercial solutions and transportation safety were impacted by soft-end markets such as hospitality, advertising and highway infrastructure due to social distancing and work-from-home protocols as a result of COVID-19.

Divestitures:

•In January 2020, 3M completed the sale of its advanced ballistic-protection business. Refer to Note 3 for details.

Business segment operating income margins decreased 1.6%, primarily related to lower sales and reduced productivity in key end-markets due to COVID-19 related impacts, partially offset by continued cost discipline and benefits from 2019 restructuring actions.

Health Care Business (25.6% of consolidated sales):

Sales change analysis:

Organic sales 8.6 % 1.0 %

Acquisitions — 15.5

Divestitures (1.9) (4.1)

Translation 1.7 (0.1)

Total sales change 8.4 % 12.3 %

Business segment operating income (millions) $ 2,150 $ 1,790

Percent change 20.1 % (0.3) %

Year 2021 results:

Sales in Health Care were up 8.4 percent in U.S. dollars.

On an organic sales basis:

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

•Sales increased in oral care driven by higher year-on-year dental procedures 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 in the first six months of 2021 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 and benefits from restructuring actions and lower related charges that were partially offset by supply chain disruptions, increases in raw materials

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and logistics costs, deal-related costs associated with the announced divestiture of the food safety business (see Note 3), manufacturing productivity impacts, increased compensation and benefit costs, and increased investments in growth.

Year 2020 results:

Sales in Health Care were up 12.3 percent in U.S. dollars.

On an organic sales basis:

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

•Increases in healthcare volumes benefited both medical solutions and oral care after significant disruptions in the second quarter, with strong pandemic-related demand for disposable respirators resulting in increased sales for medical solutions, while oral care sales decreased year-on-year. In addition, health information systems decreased due to hospitals remaining cautious relative to their information technology investments.

Acquisitions:

•In February 2019, 3M acquired M*Modal, a leading healthcare technology provider of cloud-based, conversational artificial intelligence-powered systems that help physicians efficiently capture and improve the patient narrative.

•In October 2019, 3M completed the acquisition of Acelity Inc. and its KCI subsidiaries, a leading global medical technology company focused on advanced wound care and specialty surgical applications.

Divestitures:

•In the first quarter of 2019, the Company sold certain oral care technology comprising a business.

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

Business segment operating income margins decreased 2.7% year-on-year, driven by impacts related to the Acelity acquisition in addition to significant sales declines in oral care during the second quarter of 2020, partially offset by continued cost discipline and benefits from 2019 restructuring and other costs.

Consumer Business (16.6% of consolidated sales):

Sales change analysis:

Organic sales 9.3 % 4.0 %

Translation 1.0 (0.5)

Total sales change 10.3 % 3.5 %

Business segment operating income (millions) $ 1,248 $ 1,203

Percent change 3.7 % 11.9 %

Year 2021 results:

Sales in Consumer were up 10.3 percent in U.S. dollars.

On an organic sales basis:

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

•Sales increased in home improvement driven by continued strength in the market with strong demand for CommandTM adhesives, FiltreteTM air quality solutions, MeguiarsTM auto care and Scotch BlueTM painter’s tape.

•Sales increased in stationery and office from ongoing strength in demand for packaging and shipping products, Post-it®-solutions and Scotch® brand office tapes as the business laps last year’s COVID-related comparisons.

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

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Year 2020 results:

Sales in Consumer were up 3.5 percent in U.S. dollars.

On an organic sales basis:

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

•Stationery and office declined year-on-year as a result of many business offices and schools remaining partially or fully closed due to the pandemic.

•Sales showed continued strength in the Company’s CommandTM, FiltreteTM, Scotch BlueTM, Scotch BriteTM, and MeguiarsTM brands.

Business segment operating income margins increased 1.6% year-on-year as a result of strong organic sales growth and continued cost discipline.

PERFORMANCE BY GEOGRAPHIC AREA

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

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

Geographic Area Supplemental Information

Employment:

Employment remained consistent in 2021 when compared to 2020. The above table includes the impact of acquisitions, net of divestitures and other actions.

Capital Spending/Net Property, Plant and Equipment:

Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency. 3M is increasing its investment in manufacturing and sourcing capability in order to more closely align its product capability with its sales in major geographic areas in order to best serve its customers throughout the world with proprietary, automated, efficient, safe and sustainable processes. Capital spending is discussed in more detail later in MD&A in the section entitled “Cash Flows from Investing Activities.”

CRITICAL ACCOUNTING ESTIMATES

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

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

Legal Proceedings:

Assessments of lawsuits and claims can involve a series of complex judgments about future events, the outcomes of which are inherently uncertain, and can rely heavily on estimates and assumptions. The Company accrues an estimated liability for legal proceeding claims that are both probable and reasonably estimable in accordance with Accounting Standard Codification (ASC) 450, Contingencies. Please refer to the section entitled “Process for Disclosure and Recording of Liabilities Related to Legal Proceedings” (contained in “Legal Proceedings” in Note 16) for additional information about such estimates.

Pension and Postretirement Obligations:

The Company applies certain estimates for the discount rates and expected return on plan assets in determining its defined benefit pension and postretirement obligations and related net periodic benefit costs. The below further describes these estimates. Note 13 provides the weighted averages of these assumptions as of applicable dates and for respective periods and additional information on how the rates were determined.

Discount rate

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

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

2022 Net Periodic Benefit Cost Components:

Expected return on plan assets

The expected return on plan assets for the primary U.S. qualified pension plan is based on strategic asset allocation of the plan, long-term capital market return expectations, and expected performance from active investment management. For the primary U.S. qualified pension plan, the expected long-term rate of return on an annualized basis for 2022 is 6.00%, a decrease from 6.50% in 2021. Return on assets assumptions for international pension and other post-retirement benefit plans are calculated on a plan-by-plan basis using plan asset allocations and expected long-term rate of return assumptions. The weighted average expected return for the international pension plans is 3.86% for 2022 compared to 4.36% for 2021. Changes in asset allocation and market performance over time, among other factors, cause these estimates to be subject to uncertainty.

For the year ended December 31, 2021, the Company recognized consolidated defined benefit pre-tax pension and postretirement service cost expense of $503 million and a benefit of $297 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 $206 million, down from $322 million in 2020.

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In 2022, defined benefit pension and postretirement service cost expense is anticipated to total approximately $435 million while non-service pension and postretirement net benefit costs is anticipated to be a benefit of approximately $250 million, for a total consolidated defined benefit pre-tax pension and postretirement expense of $185 million, a decrease of approximately $20 million compared to 2021.

The table below summarizes the impact on 2022 pension expense for the U.S. and international pension plans of a 0.25 percentage point increase/decrease in the expected long-term rate of return on plan assets and discount rate assumptions used to measure plan liabilities and 2021 net periodic benefit cost. The table assumes all other factors are held constant, including the slope of the discount rate yield curves.

Increase (Decrease) in Net Periodic Benefit Cost

Discount Rate Expected Return on Assets

U.S. pension plans $ 35 $ (34) $ 40 $ (40)

International pension plans 14 (7) 19 (19)

Goodwill and Certain Long-Lived Assets:

The Company makes certain estimates and judgments in relation to goodwill and certain long-lived assets. Those include considerations made in the valuation of certain acquired identifiable definite-lived and indefinite-lived assets as a result of business combinations as well as considerations in impairment assessments of goodwill.

Acquisition of certain identifiable definite-lived and indefinite-lived assets

In conjunction with an acquisition of a business, the Company records identifiable definite-lived and indefinite-lived intangible assets acquired at their respective fair values as of the date of acquisition. The corresponding fair value estimates for these assets acquired include projected future cash flows, associated discount rates used to calculate present value, asset life cycles, royalty rates, and customer retention rates. The fair value calculated for indefinite-lived intangible assets such as certain tradenames, in addition to intangible assets that are definite-lived such as patents, customer relationships, tradenames and other technology-based assets may change during the finalization of the purchase price allocation, due to the significant estimates used in determining their fair value. As a result, the Company may make adjustments to the provisional amounts recorded for certain items as part of the purchase price allocation subsequent to the acquisition, not to exceed one year after the acquisition date, until the purchase accounting allocation is finalized. Changes in factors that may impact projected future cash flows, discount rates, customer preferences, and other estimates above, as well as underlying market and overall economic conditions, among other items, cause these estimates to be subject to uncertainty.

Assessments of goodwill

As of December 31, 2021, 3M goodwill totaled approximately $13.5 billion. Goodwill is tested for impairment annually in the fourth quarter of each year, as further discussed below, and is tested between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. If future non-cash asset impairment charges are taken, 3M would expect that only a portion of the goodwill would be impaired.

Impairment testing for goodwill is done at a reporting unit level, with all goodwill assigned to a reporting unit. Reporting units are one level below the business segment level, but are required to be combined when reporting units within the same segment have similar economic characteristics. At 3M, reporting units correspond to a division. 3M did not combine any of its reporting units for impairment testing. An impairment loss would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit, and the loss would equal that difference. The estimated fair value of a reporting unit is determined based on a market approach using comparable company information such as EBITDA (earnings before interest, taxes, depreciation and amortization) multiples. 3M also performs a discounted cash flow analysis for certain reporting units where the market approach indicates additional review is warranted. Where applicable, the discounted cash flow analysis uses projected cash flows that are based on sales growth and terminal value assumptions, among other factors. Changes in reporting unit earnings, comparable company information, and expected future cash flows, as well as underlying market and overall economic conditions, among other factors, make these estimates subject to uncertainty.

As described in Note 19, effective in the first quarter of 2021, the Company changed its business segment reporting. For changes that resulted in reporting unit changes, the Company applied the relative fair value method to determine the impact on goodwill of the associated reporting units, the results of which were immaterial. In conjunction with the change in segment reporting, 3M completed an assessment indicating no resulting goodwill impairment existed. The discussion that follows relates

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to the separate fourth quarter 2021 annual impairment test and is in the context of the reporting unit structure that existed at that time.

Based on the annual test in the fourth quarter of 2021, no goodwill impairment was indicated for any of the reporting units.As of October 1, 2021, 3M had 22 primary reporting units, with ten reporting units accounting for approximately 94 percent of the goodwill. These ten reporting units were comprised of the following divisions: Advanced Materials, Display Materials and Systems, Electronics Materials Solutions, Health Information Systems, Industrial Adhesives and Tapes, Medical Solutions, Oral Care, Personal Safety, Separation and Purification Sciences, and Transportation Safety.

3M is a highly integrated enterprise, where businesses share technology and leverage common fundamental strengths and capabilities, thus many of 3M’s businesses could not easily be sold on a stand-alone basis. 3M’s focus on research and development has resulted in a portion of 3M’s value being comprised of internally developed businesses.

3M will continue to monitor its reporting units and asset groups in 2022 for any triggering events or other indicators of impairment.

Uncertainty in Income Tax Positions:

The extent of 3M’s operations involves dealing with uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due. The Company follows guidance provided by ASC 740, Income Taxes, a subset of which relates to uncertainty in income taxes, to record these liabilities (refer to Note 10 for additional information). The Company adjusts these reserves in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the tax liabilities. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary.

NEW ACCOUNTING PRONOUNCEMENTS

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

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. The Company also continues to actively manage its portfolio through acquisitions and divestitures to maximize value for shareholders. 3M expects to continue returning cash to shareholders through dividends and share repurchases. To fund cash needs in the United States, the Company relies on ongoing cash flow from U.S. operations, access to capital markets and repatriation of the earnings of its foreign affiliates that are not considered to be permanently reinvested. For those international earnings still considered to be reinvested indefinitely, the Company currently has no plans or intentions to repatriate these funds for U.S. operations. See Note 10 for further information on earnings considered to be reinvested indefinitely.

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

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.

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The Company’s total debt was lower at December 31, 2021 when compared to December 31, 2020. Decreases in debt are further described in Note 12 and were largely due to the March 2021 early redemption via make-whole call offers of $450 million in debt and the November 2021 repayment of 600 million euros aggregate principal amount of Eurobonds that matured. For discussion of repayments of and proceeds from debt refer to the following “Cash Flows from Financing Activities” section. As discussed in Note 12, during the second and third quarters 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 that utilize LIBOR as the reference rate and these agreements contain relevant fallback language. The Company’s analysis of its other commercial contracts found that such contracts, as a general practice, do not reference LIBOR. 3M will continue its assessment and monitor regulatory developments during the transition period.

Effective February 10, 2020, the Company updated its “well-known seasoned issuer” (WKSI) shelf registration statement, which registers an indeterminate amount of debt or equity securities for future issuance and sale. This replaced 3M’s previous shelf registration dated February 24, 2017. In May 2016, in connection with the WKSI shelf, 3M entered into an amended and restated distribution agreement relating to the future issuance and sale (from time to time) of the Company’s medium-term notes program (Series F), up to the aggregate principal amount of $18 billion, which was an increase from the previous aggregate principal amount up to $9 billion of the same Series.

As of December 31, 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 and credit facilities is included in Note 12.

Cash, Cash Equivalents and Marketable Securities:

At December 31, 2021, 3M had $4.8 billion of cash, cash equivalents and marketable securities, of which approximately $3.1 billion was held by the Company’s foreign subsidiaries and approximately $1.7 billion was held by 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 approximately $2.3 billion was held by the United States. The decrease from December 31, 2020 resulted from higher share repurchases of treasury stock, the March 2021 early redemption via make-whole call offers of $450 million in debt, and the November 2021 repayment of 600 million euros aggregate principal amount, partially offset by strong cash flow from operations.

Net Debt (non-GAAP measure):

Net debt is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. The Company defines net debt as total debt less the total of cash, cash equivalents and current and long-term marketable securities. 3M believes net debt is meaningful to investors as 3M considers net debt and its components to be important indicators of liquidity and financial position. The following table provides net debt as of December 31, 2021 and 2020.

December 31, Change

Less: Cash, cash equivalents and marketable securities 4,792 5,068 (276)

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

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Balance Sheet:

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

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

Working Capital (non-GAAP measure):

December 31, Change

Working capital (non-GAAP measure) $ 6,368 $ 7,034 (666)

Various assets and liabilities, including cash and short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs. Working capital is not defined under U.S. generally accepted accounting principles and may not be computed the same as similarly titled measures used by other companies. The Company defines working capital as current assets minus current liabilities. 3M believes working capital is meaningful to investors as a measure of operational efficiency and short-term financial health.

Working capital decreased $0.7 billion compared with December 31, 2020. Balance changes in current assets increased working capital, driven by increases in inventory, partially offset by decreases in marketable securities-current. Balance changes in current liabilities decreased working capital, primarily due to increases in short-term borrowing and the current portion of long-term debt and accounts payable.

Inventory increased from December 31, 2020, primarily as a result of increased underlying operating activity related to increased sales partially offset by foreign currency translation impacts, while marketable securities-current decreased from lower investments in commercial paper and U.S. treasury securities. Current portion of long-term debt increased based on underlying debt maturities while accounts payable also increased as a result of increased operating activity from that of late 2020 partially offset by foreign currency translation impacts.

Return on Invested Capital (non-GAAP measure):

Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation. The calculation is provided in the below table.

The increase in ROIC was driven by the increased operating income and the higher non-service pension and postretirement net benefit year-on-year.

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Return on Invested Capital (non-GAAP measure)

Net income including non-controlling interest $ 5,929 $ 5,453

Interest expense (after-tax) (1) 400 424

Adjusted net income (Return) $ 6,329 $ 5,877

Return on invested capital (non-GAAP measure) 19.5 % 18.4 %

(1) Effective income tax rate used for interest expense 17.8 % 19.7 %

(2) Calculation of average equity (includes non-controlling interest)

Ending total equity as of:

(3) Calculation of average debt

Ending short-term and long-term debt as of:

Average short-term and long-term debt $ 17,991 $ 20,413

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.

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Cash Flows from Operating Activities:

Net income including noncontrolling interest $ 5,929 $ 5,453

Depreciation and amortization 1,915 1,911

Company pension and postretirement contributions (180) (156)

Company pension and postretirement expense 206 322

Stock-based compensation expense 274 262

Gain on sale of businesses — (389)

Income taxes (deferred and accrued income taxes) (410) (33)

Net cash provided by operating activities $ 7,454 $ 8,113

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 2021, cash flows provided by operating activities decreased compared to the same period last year, with this decrease primarily due to working capital changes. The combination of accounts receivable, inventories and accounts payable decreased operating cash flow by $507 million in 2021, compared to an operating cash flow improvement of $326 million in 2020. Additional discussion on working capital changes is provided earlier in the “Financial Condition and Liquidity” section.

Cash Flows from Investing Activities:

Purchases of property, plant and equipment (PP&E) $ (1,603) $ (1,501)

Proceeds from sale of PP&E and other assets 51 128

Acquisitions, net of cash acquired — (25)

Proceeds from sale of businesses, net of cash sold — 576

Net cash provided by (used in) investing activities $ (1,317) $ (580)

Investments in property, plant and equipment enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency. In 2020, 3M reduced overall spending in light of uncertainty regarding COVID-19, but continued to invest in expanding the Company’s ability to increase production of respiratory products to meet worldwide demand. The Company expects increased capital spending in 2022 as 3M continues to invest in growth, productivity and sustainability.

3M records capital-related government grants earned as reductions to the cost of property, plant and equipment; and associated unpaid liabilities and grant proceeds receivable are considered non-cash changes in such balances for purposes of preparation of statement of cash flows.

3M invests in renewal and maintenance programs, which pertain to cost reduction, cycle time, maintaining and renewing current capacity, eliminating pollution, and compliance. 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,

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in 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 sales 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. In 2020 these included the maturity of the held-to-maturity debt security that was purchased to satisfy the redemption of the Third Lien Notes (which matured in May 2020). Refer to Note 11 for more details about 3M’s diversified marketable securities portfolio.

Cash Flows from Financing Activities:

Change in short-term debt — net $ (2) $ (143)

Repayment of debt (maturities greater than 90 days) (1,144) (3,482)

Proceeds from debt (maturities greater than 90 days) 1 1,750

Total cash change in debt $ (1,145) $ (1,875)

Purchases of treasury stock (2,199) (368)

Dividends paid to stockholders (3,420) (3,388)

Other — net (20) (98)

Net cash used in financing activities $ (6,145) $ (5,300)

2021 Debt Activity:

Decreases in debt were largely due to the March 2021 early redemption of $450 million in debt maturing in 2022 via make-whole call offers and the November 2021 repayment of 600 million euros aggregate principal amount of Eurobonds that matured. The Company had no commercial paper outstanding at December 31, 2021 and December 31, 2020. Net commercial paper issuances in addition to repayments and borrowings by international subsidiaries are largely reflected in “Change in short-term debt – net” in the preceding table. 3M’s primary short-term liquidity needs are met through cash on hand and U.S. commercial paper issuances. Refer to Note 12 for more detail regarding debt.

2020 Debt Activity:

Decreases in debt related to the repayment of debt primarily consisting of the aggregate $445 million principal amount of Third Lien Notes and the 650 million euros and $500 million aggregate principal amount of floating-rate medium-term notes that matured in May 2020 and August 2020, respectively. During the third quarter of 2020, the Company paid the outstanding balances on their Japanese yen and euro credit facilities. In addition, $1.0 billion aggregate principal amount of notes maturing in September 2021 were repaid in December 2020 via make-whole-call offers. Increases in debt were related to the March 2020 issuance of $1.75 billion in registered notes. Outstanding commercial paper decreased $150 million from December 31, 2019 to December 31, 2020.

Repurchases of Common Stock:

Repurchases of common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes. In 2021, the Company purchased $2.2 billion of its own stock. 3M repurchased shares, 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 5. The Company does not utilize derivative instruments linked to the Company’s stock.

Dividends Paid to Shareholders:

3M has paid dividends since 1916. In February 2022, 3M’s Board of Directors declared a first-quarter 2022 dividend of $1.49 per share, an increase of 1 percent. This is equivalent to an annual dividend of $5.96 per share and marked the 64th consecutive year of dividend increases.

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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 cash overdraft balances, and principal payments for finance leases.

Free Cash Flow (non-GAAP measure):

Free cash flow and free cash flow conversion are not defined under U.S. generally accepted accounting principles (GAAP). Therefore, they should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines free cash flow as net cash provided by operating activities less purchases of property, plant and equipment. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. The Company believes free cash flow and free cash flow conversion are meaningful to investors as they are useful measures of performance and the Company uses these measures as an indication of the strength of the company and its ability to generate cash. Free cash flow and free cash flow conversion vary across quarters throughout

the year. Below find a recap of free cash flow and free cash flow conversion.

Refer to the preceding “Cash Flows from Operating Activities” and “Cash Flows from Investing Activities” sections for discussion of items that impacted the operating cash flow and purchases of PP&E components of the calculation of free cash flow. Refer to the preceding “Results of Operations” section for discussion of items that impacted the net income attributable to 3M component of the calculation of free cash flow conversion.

Free cash flow conversion decreased in 2021 compared to 2020 as net income attributable to 3M increased while free cash flow decreased.

Major GAAP Cash Flow Categories

Net cash provided by (used in) operating activities $ 7,454 $ 8,113

Net cash provided by (used in) investing activities (1,317) (580)

Net cash provided by (used in) financing activities (6,145) (5,300)

Free Cash Flow (non-GAAP measure)

Net cash provided by (used in) operating activities $ 7,454 $ 8,113

Purchases of property, plant and equipment (1,603) (1,501)

Free cash flow conversion 99 % 121 %

Material Cash Requirement from Known Contractual and Other Obligations:

3M’s material cash requirements from known contractual and other obligations primarily relate to following, for which information on both a short-term and long-term basis is provided in the indicated notes to the consolidated financial statements:

•Tax obligations—Refer to Note 10.

•Debt—Refer to Note 12. Future cash payments for interest on long-term debt is approximately $6 billion.

•Commitments and contingencies—Refer to Note 16.

•Operating and finance leases—Refer to Note 17.

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

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FINANCIAL INSTRUMENTS

The Company enters into foreign exchange forward contracts, options and swaps to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies and to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances. The Company manages interest rate risks using a mix of fixed and floating rate debt. To help manage borrowing costs, the Company may enter into interest rate swaps. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The Company manages commodity price risks through negotiated supply contracts and price protection agreements.

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

Item 7A.Quantitativeand Qualitative Disclosures About Market Risk.

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

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

Foreign Exchange Rates Risk:

Foreign currency exchange rates and fluctuations in those rates may affect the Company’s net investment in foreign subsidiaries and may cause fluctuations in cash flows related to foreign denominated transactions. 3M is also exposed to the translation of foreign currency earnings to the U.S. dollar. The Company enters into foreign exchange forward and option contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies. These transactions are designated as cash flow hedges. 3M may de-designate these cash flow hedge relationships in advance of the occurrence of the forecasted transaction. The maximum length of time over which 3M hedges its exposure to the variability in future cash flows of the forecasted transactions is 36 months. In addition, 3M enters into foreign currency contracts that are not designated in hedging relationships to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances. As circumstances warrant, the Company also uses foreign currency forward contracts and foreign currency denominated debt as hedging instruments to hedge portions of the Company’s net investments in foreign operations. The dollar equivalent gross notional amount of the Company’s foreign exchange forward and option contracts designated as either cash flow hedges or net investment hedges was $2.6 billion at December 31, 2021. The dollar equivalent gross notional amount of the Company’s foreign exchange forward and option contracts not designated as hedging instruments was $3.7 billion at December 31, 2021. In addition, as of December 31, 2021, the Company had €2.9 billion in principal amount of foreign currency denominated debt designated as non-derivative hedging instruments in certain net investment hedges as discussed in Note 14 in the “Net Investment Hedges” section.

Interest Rates Risk:

The Company may be impacted by interest rate volatility with respect to existing debt and future debt issuances. 3M manages interest rate risk and expense using a mix of fixed and floating rate debt. In addition, the Company may enter into interest rate swaps that are designated and qualify as fair value hedges. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The dollar equivalent (based on inception date foreign currency exchange rates) gross notional amount of the Company’s interest rate swaps at December 31, 2021 was $800 million. Additional details about 3M’s long-term debt can be found in Note 12, including references to information regarding derivatives and/or hedging instruments, further discussed in Note 14, associated with the Company’s long-term debt.

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Commodity Prices Risk:

The Company manages commodity price risks through negotiated supply contracts and price protection agreements. The related mark-to-market gain or loss on qualifying hedges was included in other comprehensive income to the extent effective, and reclassified into cost of sales in the period during which the hedged transaction affected earnings.

Value At Risk:

The value at risk analysis is performed annually to assess the Company’s sensitivity to changes in currency rates, interest rates, and commodity prices. A Monte Carlo simulation technique was used to test the impact on after-tax earnings related to debt instruments, interest rate derivatives and underlying foreign exchange and commodity exposures outstanding at December 31, 2021. The model (third-party bank dataset) used a 95 percent confidence level over a 12-month time horizon. This model does not purport to represent what actually will be experienced by the Company. In 2021, the model was expanded to cover all of 3M’s currencies and hedging activity versus previously including 3M’s nine primary currencies excluding hedges. Prior period amounts have been updated to reflect the current period’s revised methodology. The following table summarizes the possible adverse and positive impacts to after-tax earnings related to these exposures.

Adverse impact on after-tax earnings Positive impact on after-tax earnings

Interest rates (2) (1) 2 2

Commodity prices (21) (1) 14 (2)

An analysis of the global exposures related to purchased components and materials is performed at each year-end. A one percent price change would result in a pre-tax cost or savings of approximately $90 million per year. The global energy exposure is such that a ten percent price change would result in a pre-tax cost or savings of approximately $40 million per year. Global energy exposure includes energy costs used in 3M production and other facilities, primarily electricity and natural gas.

Item 8.Financial Statementsand Supplementary Data.

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

Consolidated Financial Statements

Index to FinancialStatements

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

Management’s Responsibilityfor Financial Reporting

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

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

3M Company

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Management’s Reporton Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Management conducted an assessment of the Company’s internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on the assessment, management concluded that, as of December 31, 2021, the Company’s internal control over financial reporting is effective.

The Company’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein, which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.

3M Company

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Reportof Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of 3M Company

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of 3M Company and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Notes 1 and 8 to the consolidated financial statements, the Company changed the manner in which it accounts for net periodic pension and postretirement plan cost in 2021 and the manner in which it accounts for leases in 2019, respectively.

Basis for Opinions

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

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

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

Definition and Limitations of Internal Control over Financial Reporting

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

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

Critical Audit Matters

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

Legal Proceedings

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

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

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s evaluation of the liability related to legal proceedings, including controls over determining the likelihood of a loss and whether the amount of loss can be reasonably estimated, as well as financial statement disclosures. These procedures also included, among others, obtaining and evaluating the letters of audit inquiry with internal and external legal counsel, evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable, and evaluating the sufficiency of the Company’s disclosures related to legal proceedings.

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota

February 9, 2022

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

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3M Company and Subsidiaries

Consolidated Statement of Income

Years ended December 31

Operating expenses

Selling, general and administrative expenses 7,197 6,929 7,029

Gain on sale of businesses — (389) (114)

Income (loss) from unconsolidated subsidiaries, net of taxes 10 (5) —

Net income including noncontrolling interest 5,929 5,453 4,529

Less: Net income (loss) attributable to noncontrolling interest 8 4 12

Weighted average 3M common shares outstanding — basic 579.0 577.6 577.0

Weighted average 3M common shares outstanding — diluted 585.3 582.2 585.1

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

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3M Company and Subsidiaries

Consolidated Statement of Comprehensive Income

Years ended December 31

Net income including noncontrolling interest $ 5,929 $ 5,453 $ 4,529

Other comprehensive income (loss), net of tax:

Cumulative translation adjustment (494) 447 211

Defined benefit pension and postretirement plans adjustment 1,345 106 (507)

Cash flow hedging instruments 119 (142) (72)

Total other comprehensive income (loss), net of tax 970 411 (368)

Comprehensive income (loss) including noncontrolling interest 6,899 5,864 4,161

Comprehensive (income) loss attributable to noncontrolling interest (7) (2) (11)

Comprehensive income (loss) attributable to 3M $ 6,892 $ 5,862 $ 4,150

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

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3M Company and Subsidiaries

Consolidated Balance Sheet

At December 31

(Dollars in millions, except per share amount) 2021 2020

Assets

Current assets

Cash and cash equivalents $ 4,564 $ 4,634

Marketable securities — current 201 404

Inventories

Raw materials and supplies 1,212 932

Property, plant and equipment — net 9,429 9,421

Operating lease right of use assets 858 864

Liabilities

Current liabilities

Short-term borrowings and current portion of long-term debt $ 1,307 $ 806

Operating lease liabilities — current 263 256

Pension and postretirement benefits 2,870 4,405

Operating lease liabilities 591 609

Commitments and contingencies (Note 16)

Equity

3M Company shareholders’ equity:

Common stock par value, $.01 par value; 944,033,056 shares issued 9 9

Accumulated other comprehensive income (loss) (6,750) (7,721)

Noncontrolling interest 71 64

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