UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

Commission file number: 1-3285

3M COMPANY

(Exact name of registrant as specified in its charter)

Delaware	41-0417775
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)
3M Center, St. Paul, Minnesota	55144-1000
(Address of Principal Executive Offices)	(Zip Code)
(Registrant’s Telephone Number, Including Area Code) (651) 733-1110 Not Applicable
(Former Name or Former Address, if Changed Since Last Report) Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $.01 Per Share	MMM	New York Stock Exchange, Inc.
	MMM	Chicago Stock Exchange, Inc.
1.500% Notes due 2026	MMM26	New York Stock Exchange, Inc.
Floating Rate Notes due 2020		New York Stock Exchange, Inc.
0.375% Notes due 2022	MMM22A	New York Stock Exchange, Inc.
0.950% Notes due 2023	MMM23	New York Stock Exchange, Inc.
1.750% Notes due 2030	MMM30	New York Stock Exchange, Inc.
1.500% Notes due 2031	MMM31	New York Stock Exchange, Inc.

Note: The common stock of the Registrant is also traded on the SWX Swiss Exchange.

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

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

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

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

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

Class	Outstanding at June 30, 2019
Common Stock, $0.01 par value per share	575,279,050 shares

3M COMPANY

Form 10-Q for the Quarterly Period Ended June 30, 2019

	TABLE OF CONTENTS	BEGINNING PAGE
PART I	FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Index to Financial Statements:
	Consolidated Statement of Income	3
	Consolidated Statement of Comprehensive Income	4
	Consolidated Balance Sheet	5
	Consolidated Statement of Cash Flows	6
	Notes to Consolidated Financial Statements
	Note 1. Significant Accounting Policies	7
	Note 2. Revenue	11
	Note 3. Acquisitions and Divestitures	13
	Note 4. Goodwill and Intangible Assets	15
	Note 5. Restructuring Actions and Exit Activities	16
	Note 6. Supplemental Income Statement Information	18
	Note 7. Supplemental Equity and Comprehensive Income Information	18
	Note 8. Income Taxes	22
	Note 9. Marketable Securities	23
	Note 10. Long-Term Debt and Short-Term Borrowings	24
	Note 11. Pension and Postretirement Benefit Plans	24
	Note 12. Derivatives	25
	Note 13. Fair Value Measurements	32
	Note 14. Commitments and Contingencies	35
	Note 15. Leases	47
	Note 16. Stock-Based Compensation	51
	Note 17. Business Segments	54
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Index to Management’s Discussion and Analysis:
	Overview	57
	Results of Operations	65
	Performance by Business Segment	69
	Financial Condition and Liquidity	76
	Cautionary Note Concerning Factors That May Affect Future Results	82
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	82
ITEM 4.	Controls and Procedures	83
PART II	OTHER INFORMATION
ITEM 1.	Legal Proceedings	84
ITEM 1A.	Risk Factors	84
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86
ITEM 3.	Defaults Upon Senior Securities	87
ITEM 4.	Mine Safety Disclosures	87
ITEM 5.	Other Information	87
ITEM 6.	Exhibits	87

2

3M COMPANY

FORM 10-Q

For the Quarterly Period Ended June 30, 2019

PART I. Financial Information

Item 1. Financial Statements.

3M Company and Subsidiaries

Consolidated Statement of Income

(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
(Millions, except per share amounts)	2019		2018		2019		2018
Net sales	$	8,171	$	8,390	$	16,034	$	16,668
Operating expenses
Cost of sales		4,313		4,227		8,623		8,463
Selling, general and administrative expenses		1,686		1,800		3,634		4,373
Research, development and related expenses		470		468		947		954
Gain on sale of businesses		—		(506)		(8)		(530)
Total operating expenses		6,469		5,989		13,196		13,260
Operating income		1,702		2,401		2,838		3,408
Other expense (income), net		256		51		304		93
Income before income taxes		1,446		2,350		2,534		3,315
Provision for income taxes		315		488		510		847
Net income including noncontrolling interest	$	1,131	$	1,862	$	2,024	$	2,468
Less: Net income attributable to noncontrolling interest		4		5		6		9
Net income attributable to 3M	$	1,127	$	1,857	$	2,018	$	2,459
Weighted average 3M common shares outstanding — basic		577.7		591.4		577.6		593.8
Earnings per share attributable to 3M common shareholders — basic	$	1.95	$	3.14	$	3.49	$	4.14
Weighted average 3M common shares outstanding — diluted		586.1		604.2		587.3		608.5
Earnings per share attributable to 3M common shareholders — diluted	$	1.92	$	3.07	$	3.44	$	4.04

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

3

3M Company and Subsidiaries

Consolidated Statement of Comprehensive Income

(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
(Millions)	2019		2018		2019		2018
Net income including noncontrolling interest	$	1,131	$	1,862	$	2,024	$	2,468
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment		123		(496)		200		(329)
Defined benefit pension and postretirement plans adjustment		196		114		280		230
Cash flow hedging instruments		(38)		162		(32)		101
Total other comprehensive income (loss), net of tax		281		(220)		448		2
Comprehensive income (loss) including noncontrolling interest		1,412		1,642		2,472		2,470
Comprehensive (income) loss attributable to noncontrolling interest		(5)		(1)		(7)		(4)
Comprehensive income (loss) attributable to 3M	$	1,407	$	1,641	$	2,465	$	2,466

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

4

3M Company and Subsidiaries

Consolidated Balance Sheet

(Unaudited)

	June 30,		December 31,
(Dollars in millions, except per share amount)	2019		2018
Assets
Current assets
Cash and cash equivalents	$	2,849	$	2,853
Marketable securities — current		139		380
Accounts receivable — net		5,374		5,020
Inventories
Finished goods		1,980		2,120
Work in process		1,348		1,292
Raw materials and supplies		972		954
Total inventories		4,300		4,366
Prepaids		949		741
Other current assets		440		349
Total current assets		14,051		13,709
Property, plant and equipment		25,565		24,873
Less: Accumulated depreciation		(16,567)		(16,135)
Property, plant and equipment — net		8,998		8,738
Operating lease right of use assets		879		—
Goodwill		10,574		10,051
Intangible assets — net		2,964		2,657
Other assets		1,503		1,345
Total assets	$	38,969	$	36,500
Liabilities
Current liabilities
Short-term borrowings and current portion of long-term debt	$	892	$	1,211
Accounts payable		2,130		2,266
Accrued payroll		604		749
Accrued income taxes		223		243
Operating lease liabilities — current		247		—
Other current liabilities		3,169		2,775
Total current liabilities		7,265		7,244
Long-term debt		14,914		13,411
Pension and postretirement benefits		2,761		2,987
Operating lease liabilities		619		—
Other liabilities		3,268		3,010
Total liabilities	$	28,827	$	26,652
Commitments and contingencies (Note 14)
Equity
3M Company shareholders’ equity:
Common stock par value, $.01 par value; 944,033,056 shares issued	$	9	$	9
Additional paid-in capital		5,812		5,643
Retained earnings		41,362		40,636
Treasury stock, at cost: 368,754,006 shares at June 30, 2019; 367,457,888 shares at December 31, 2018		(29,828)		(29,626)
Accumulated other comprehensive income (loss)		(7,272)		(6,866)
Total 3M Company shareholders’ equity		10,083		9,796
Noncontrolling interest		59		52
Total equity	$	10,142	$	9,848
Total liabilities and equity	$	38,969	$	36,500

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

5

3M Company and Subsidiaries

Consolidated Statement of Cash Flows

(Unaudited)

	Six months ended
	June 30,
(Millions)	2019		2018
Cash Flows from Operating Activities
Net income including noncontrolling interest	$	2,024	$	2,468
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities
Depreciation and amortization		751		762
Company pension and postretirement contributions		(88)		(261)
Company pension and postretirement expense		176		204
Stock-based compensation expense		182		208
Gain on sale of businesses		(5)		(530)
Deferred income taxes		(74)		(1)
Loss on deconsolidation of Venezuelan subsidiary		162		—
Changes in assets and liabilities
Accounts receivable		(258)		(606)
Inventories		75		(337)
Accounts payable		(173)		(12)
Accrued income taxes (current and long-term)		(163)		234
Other — net		101		(87)
Net cash provided by (used in) operating activities		2,710		2,042
Cash Flows from Investing Activities
Purchases of property, plant and equipment (PP&E)		(812)		(669)
Proceeds from sale of PP&E and other assets		3		96
Acquisitions, net of cash acquired		(704)		13
Purchases of marketable securities and investments		(751)		(964)
Proceeds from maturities and sale of marketable securities and investments		1,005		1,636
Proceeds from sale of businesses, net of cash sold		6		806
Other — net		18		(11)
Net cash provided by (used in) investing activities		(1,235)		907
Cash Flows from Financing Activities
Change in short-term debt — net		(441)		774
Repayment of debt (maturities greater than 90 days)		(871)		(6)
Proceeds from debt (maturities greater than 90 days)		2,265		6
Purchases of treasury stock		(1,101)		(2,537)
Proceeds from issuance of treasury stock pursuant to stock option and benefit plans		365		305
Dividends paid to shareholders		(1,660)		(1,612)
Other — net		(34)		(26)
Net cash provided by (used in) financing activities		(1,477)		(3,096)
Effect of exchange rate changes on cash and cash equivalents		(2)		(105)
Net increase (decrease) in cash and cash equivalents		(4)		(252)
Cash and cash equivalents at beginning of year		2,853		3,053
Cash and cash equivalents at end of period	$	2,849	$	2,801

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

6

3M Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1. Significant Accounting Policies

Basis of Presentation

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

As described in Note 17, effective in the second quarter of 2019, the Company realigned its former five business segments into four to enable the Company to better serve global customers and markets. In addition, certain product lines were moved to better align with their respective end customers. Earlier in the first quarter of 2019, the Company changed its business segment reporting in its continuing effort to improve the alignment of businesses around markets and customers. These changes included the realignment of certain customer account activity in various countries (affecting dual credit reporting), creation of the Closure and Masking Systems and Medical Solutions divisions, and certain other actions that impacted segment reporting. Segment information presented herein reflects the impact of these changes for all periods presented.

Changes to Significant Accounting Policies

The following significant accounting policies have been added or changed since the Company’s 2018 Annual Report on Form 10-K.

Leases: As described in the “New Accounting Pronouncements” section, 3M adopted Accounting Standards Update (ASU) No. 2016-02, Leases, and other related ASUs (collectively, Accounting Standards Codification (ASC) 842) on January 1, 2019, using the modified retrospective method of adoption. This ASU replaced previous lease accounting guidance. The Company’s accounting policy with respect to leases and additional disclosure relative to ASC 842 are included in Note 15.

Income Taxes: As described in the “New Accounting Pronouncements” section, 3M adopted ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The Company’s accounting policy for income taxes has been updated to indicate the uses of the portfolio approach for releasing income tax effects from accumulated other comprehensive loss.

Foreign Currency Translation

Local currencies generally are considered the functional currencies outside the United States. Assets and liabilities for operations in local-currency environments are translated at month-end exchange rates of the period reported. Income and expense items are translated at month-end exchange rates of each applicable month. Cumulative translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity.

3M has a subsidiary in Venezuela, the financial statements of which were remeasured as if its functional currency were that of its parent because Venezuela’s economic environment is considered highly inflationary. The operating income of this subsidiary was immaterial as a percent of 3M’s consolidated operating income for 2018. The Venezuelan government sets official rates of exchange and conditions precedent to purchase foreign currency at these rates with local currency. The government has also operated various expanded secondary currency exchange mechanisms that have been eliminated and replaced from time to time. Such rates and conditions have been and continue to be subject to change. During the third quarter of 2018, the Venezuelan government effected a conversion of its currency to the Sovereign Bolivar (VES), essentially equating to its previous Venezuelan Bolivar divided by 100,000. For the periods presented through May 2019, the financial statements of 3M’s Venezuelan subsidiary were remeasured utilizing the rate associated with the secondary auction mechanism, Tipo de Cambio Complementario (DICOM), or its predecessor.

7

Note 1 in 3M’s 2018 Annual Report on Form 10-K provides additional information the Company considers in determining the exchange rate used relative to its Venezuelan subsidiary as well as factors which could lead to its deconsolidation. As described therein, a need to deconsolidate the Company’s Venezuelan subsidiary’s operations results from a lack of exchangeability of VES-denominated cash coupled with an acute degradation in the ability to make key operational decisions due to government regulations in Venezuela. 3M continued to review changes in these underlying factors such as the ability to access various exchange mechanisms; the impact of government regulations on the Company’s ability to manage its Venezuelan subsidiary’s capital structure, purchasing, product pricing, and labor relations; and the current political and economic situation within Venezuela. In light of circumstances, including the country’s unstable environment and heightened unrest leading to sustained lack of demand, and expectation that these circumstances will continue for the foreseeable future, during May 2019, 3M concluded it no longer met the criteria of control in order to continue consolidating its Venezuelan operations. As a result, as of May 31, 2019, the Company began reflecting its interest in the Venezuelan subsidiary as an equity investment that does not have a readily determinable fair value. This resulted in a pre-tax charge of $162 million within other expense (income) in the second quarter of 2019. The charge primarily relates to $144 million of foreign currency translation losses associated with foreign currency movements before Venezuela was accounted for as a highly inflationary economy and pension elements previously included in accumulated other comprehensive loss along with write-down of intercompany receivable and investment balances associated with this subsidiary. Beginning May 31, 2019, 3M’s consolidated balance sheets and statements of operations no longer include the Venezuelan entity’s operations other than an immaterial equity investment and associated loss or income thereon largely only to the extent, if any, that 3M provides support or materials and receives funding or dividends.

3M has subsidiaries in Argentina, the operating income of which was less than one half of one percent of 3M’s consolidated operating income for 2018. Based on various indices, Argentina’s cumulative three-year inflation rate exceeded 100 percent in the second quarter of 2018, thus being considered highly inflationary. As a result, beginning in the third quarter of 2018, the financial statements of the Argentine subsidiaries were remeasured as if their functional currency were that of their parent. As of June 30, 2019, the Company had a balance of net monetary assets denominated in Argentine pesos (ARS) of approximately 200 million ARS and the exchange rate was approximately 43 ARS per U.S. dollar.

Earnings Per Share

The difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is a result of the dilution associated with the Company’s stock-based compensation plans. Certain options outstanding under these stock-based compensation plans were not included in the computation of diluted earnings per share attributable to 3M common shareholders because they would have had an anti-dilutive effect (6.7 million average options for the three months ended June 30, 2019; 6.0 million average options for the six months ended June 30, 2019; 3.5 million average options for the three months ended June 30, 2018; 2.7 million average options for the six months ended June 30, 2018). The computations for basic and diluted earnings per share follow:

Earnings Per Share Computations