REG - 3M Company - 1st Quarter Results <Origin Href="QuoteRef">MMM.N</Origin> - Part 4

3M CoAnnouncement

05/05/2017 07:05

- Part 4: For the preceding part double click  ID:nRSE2620Ec 

environmental contamination at current or former facilities and at off-site
locations. The Company has identified numerous locations, most of which are in the United States, at which it may have some
liability. Please refer to the section entitled "Environmental Liabilities and Insurance Receivables" that follows for
information on the amount of the accrual. 
 
Environmental Matters 
 
As previously reported, the Company has been voluntarily cooperating with ongoing reviews by local, state, federal
(primarily the U.S. Environmental Protection Agency (EPA)), and international agencies of possible environmental and health
effects of various perfluorinated compounds, including perfluorooctanyl compounds such as perfluorooctanoate ("PFOA"),
perfluorooctane sulfonate ("PFOS"), or similar compounds ("PFCs"). As a result of its phase-out decision in May 2000, the
Company no longer manufactures perfluorooctanyl compounds. The company ceased manufacturing and using the vast majority of
these compounds within approximately two years of the phase-out announcement, and ceased all manufacturing and the last
significant use of this chemistry by the end of 2008. Through its ongoing life cycle management and its raw material
composition identification processes associated with the Company's policies covering the use of all persistent and
bio-accumulative materials, the Company continues to control or eliminate the presence of certain PFCs in purchased
materials or as byproducts in some of 3M's fluorochemical manufacturing processes, products, and waste streams. 
 
Regulatory activities concerning PFOA and/or PFOS continue in the United States, Europe and elsewhere, and before certain
international bodies. These activities include gathering of exposure and use information, risk assessment, and
consideration of regulatory approaches. In October 2016, the European Commission notified the World Trade Organization of a
draft regulation to restrict PFOA and its related substances under the EU's REACH Regulation (Registration, Evaluation,
Authorization, and Restriction of Chemicals). If adopted, the regulation would restrict PFOA and its related substances to
concentrations no greater than 25 parts per billion in constituents of other substances, in mixtures, and in articles. As
the database of studies of both chemicals has expanded, the EPA has developed human health effects documents summarizing
the available data from these studies. In February 2014, the EPA initiated external peer review of its draft human health
effects documents for PFOA and PFOS. The peer review panel met in August 2014. In May 2016, the EPA announced lifetime
health advisory levels for PFOA and PFOS at 70 parts per trillion (superseding the provisional levels established by the
EPA in 2009 of 400 parts per trillion for PFOA and 200 parts per trillion for PFOS). Where PFOA and PFOS are found
together, EPA recommends that the concentrations be added together, and the lifetime health advisory for PFOA and PFOS
combined is also 70 parts per trillion. Lifetime health advisories, while not enforceable, serve as guidance and are
benchmarks for determining if concentrations of chemicals in tap water from public utilities are safe for public
consumption. In an effort to collect exposure information under the Safe Drinking Water Act, the EPA published on May 2,
2012 a list of unregulated substances, including six PFCs, required to be monitored during the period 2013-2015 by public
water system suppliers to determine the extent of their occurrence. Through July 2016, the EPA reported results for 4,909
public water supplies nationwide. Based on the 2016 lifetime health advisory, 13 public water supplies exceed the level for
PFOA and 46 exceed the level for PFOS. A technical advisory issued by EPA in September 2016 on laboratory analysis of
drinking water samples stated that 65 public water supplies had exceeded the combined level for PFOA and PFOS. These
results are based on one or more samples collected during the period 2012-2015 and do not necessarily reflect current
conditions of these public water supplies. EPA reporting does not identify the sources of the PFOA and PFOS in the public
water supplies. 
 
The Company is continuing to make progress in its work, under the supervision of state regulators, to address its historic
disposal of PFC-containing waste associated with manufacturing operations at the Decatur, Alabama, Cottage Grove,
Minnesota, and Cordova, Illinois plants. 
 
As previously reported, the Company entered into a voluntary remedial action agreement with the Alabama Department of
Environmental Management (ADEM) to address the presence of PFCs in the soil at the Company's manufacturing facility in
Decatur, Alabama. Pursuant to a permit issued by ADEM, for approximately twenty years, the Company incorporated its
wastewater treatment plant sludge containing PFCs in fields at its Decatur facility. After a review of the available
options to address the presence of PFCs in the soil, ADEM agreed that the preferred remediation option is to use a
multilayer cap over the former sludge incorporation areas on the manufacturing site with subsequent groundwater migration
controls and treatment. Implementation of that plan continues and is expected to be completed in 2018. 
 
The Company continues to work with the Minnesota Pollution Control Agency (MPCA) pursuant to the terms of the previously
disclosed May 2007 Settlement Agreement and Consent Order to address the presence of certain PFCs in the soil and
groundwater at former disposal sites in Washington County, Minnesota (Oakdale and Woodbury) and at the Company's
manufacturing facility at Cottage Grove, Minnesota. Under this agreement, the Company's principal obligations include (i)
evaluating releases of certain PFCs from these sites and proposing response actions; (ii) providing treatment or
alternative drinking water upon identifying any level exceeding a Health Based Value ("HBV") or Health Risk Limit ("HRL")
(i.e., the amount of a chemical in drinking water determined by the Minnesota Department of Health (MDH) to be safe for
human consumption over a lifetime) for certain PFCs for which a HBV and/or HRL exists as a result of contamination from
these sites; (iii) remediating identified sources of other PFCs at these sites that are not controlled by actions to
remediate PFOA and PFOS; and (iv) sharing information with the MPCA about certain perfluorinated compounds. During 2008,
the MPCA issued formal decisions adopting remedial options for the former disposal sites in Washington County, Minnesota
(Oakdale and Woodbury). In August 2009, the MPCA issued a formal decision adopting remedial options for the Company's
Cottage Grove manufacturing facility. During the spring and summer of 2010, 3M began implementing the agreed upon remedial
options at the Cottage Grove and Woodbury sites. 3M commenced the remedial option at the Oakdale site in late 2010. At each
location the remedial options were recommended by the Company and approved by the MPCA. Remediation work has been completed
at the Oakdale and Woodbury sites, and they are in an operational maintenance mode. Remediation will continue at the
Cottage Grove site during 2017. 
 
In August 2014, the Illinois EPA approved a request by the Company to establish a groundwater management zone at its
manufacturing facility in Cordova, Illinois, which includes ongoing pumping of impacted site groundwater, groundwater
monitoring and routine reporting of results. 
 
The Company cannot predict what additional regulatory actions arising from the foregoing proceedings and activities, if
any, may be taken regarding such compounds or the consequences of any such actions. 
 
Environmental Litigation 
 
As previously reported, a former employee filed a purported class action lawsuit in 2002 in the Circuit Court of Morgan
County, Alabama (the St. John case), seeking unstated damages and alleging that the plaintiffs suffered fear, increased
risk, subclinical injuries, and property damage from exposure to certain perfluorochemicals at or near the Company's
Decatur, Alabama, manufacturing facility. The court in 2005 granted the Company's motion to dismiss the named plaintiff's
personal injury-related claims on the basis that such claims are barred by the exclusivity provisions of the state's
Workers Compensation Act. The plaintiffs' counsel filed an amended complaint in November 2006, limiting the case to
property damage claims on behalf of a purported class of residents and property owners in the vicinity of the Decatur
plant. In June 2015, the plaintiffs filed an amended complaint adding additional defendants, including BFI Waste Management
Systems of Alabama, LLC; BFI Waste Management of North America, LLC; the City of Decatur, Alabama; Morgan County, Alabama;
Municipal Utilities Board of Decatur; and Morgan County, Alabama, d/b/a Decatur Utilities. 
 
In 2005, the judge in a second purported class action lawsuit filed by three residents of Morgan County, Alabama, seeking
unstated compensatory and punitive damages involving alleged damage to their property from emissions of certain
perfluorochemical compounds from the Company's Decatur, Alabama, manufacturing facility that formerly manufactured those
compounds (the Chandler case) granted the Company's motion to abate the case, effectively putting the case on hold pending
the resolution of class certification issues in the St. John case. Despite the stay, plaintiffs filed an amended complaint
seeking damages for alleged personal injuries and property damage on behalf of the named plaintiffs and the members of a
purported class. No further action in the case is expected unless and until the stay is lifted. 
 
In February 2009, a resident of Franklin County, Alabama, filed a purported class action lawsuit in the Circuit Court of
Franklin County (the Stover case) seeking compensatory damages and injunctive relief based on the application by the
Decatur utility's wastewater treatment plant of wastewater treatment sludge to farmland and grasslands in the state that
allegedly contain PFOA, PFOS and other perfluorochemicals. The named plaintiff seeks to represent a class of all persons
within the State of Alabama who have had PFOA, PFOS, and other perfluorochemicals released or deposited on their property.
In March 2010, the Alabama Supreme Court ordered the case transferred from Franklin County to Morgan County. In May 2010,
consistent with its handling of the other matters, the Morgan County Circuit Court abated this case, putting it on hold
pending the resolution of the class certification issues in the St. John case. 
 
In October 2015, West Morgan-East Lawrence Water & Sewer Authority (Water Authority) filed an individual complaint against
3M Company, Dyneon, L.L.C, and Daikin America, Inc., in the U.S. District Court for the Northern District of Alabama. The
complaint also includes representative plaintiffs who brought the complaint on behalf of themselves, and a class of all
owners and possessors of property who use water provided by the Water Authority and five local water works to which the
Water Authority supplies water (collectively, the "Water Utilities"). The complaint seeks compensatory and punitive damages
and injunctive relief based on allegations that the defendants' chemicals, including PFOA and PFOS from their manufacturing
processes in Decatur, have contaminated the water in the Tennessee River at the water intake, and that the chemicals cannot
be removed by the water treatment processes utilized by the Water Authority. In September 2016, the court granted 3M's
motion to dismiss plaintiffs' trespass claims with prejudice, negligence claims for personal injuries, and private nuisance
claims, and denied the motion to dismiss the plaintiffs' negligence claims for property damage, public nuisance, abatement
of nuisance, battery and wantonness. 
 
In June 2016, the Tennessee Riverkeeper, Inc. (Riverkeeper), a non-profit corporation, filed a lawsuit in the U.S. District
Court for the Northern District of Alabama against 3M; BFI Waste Systems of Alabama; the City of Decatur, Alabama; and the
Municipal Utilities Board of Decatur, Morgan County, Alabama. The complaint alleges that the defendants violated the
Resource Conservation and Recovery Act in connection with the disposal of certain PFCs through their ownership and
operation of their respective sites. The complaint further alleges such practices may present an imminent and substantial
endangerment to health and/or the environment and that Riverkeeper has suffered and will continue to suffer irreparable
harm caused by defendants' failure to abate the endangerment unless the court grants the requested relief, including
declaratory and injunctive relief. The Company believes that the complaint lacks merit. 
 
In July 2016, the City of Lake Elmo filed a lawsuit in the U.S. District Court for the District of Minnesota against 3M
alleging that the City suffered damages from drinking water supplies contaminated with PFCs, including costs to construct
alternative sources of drinking water. 
 
In September 2016, the Water Works and Sewer Board of the City of Gadsden, Alabama filed a lawsuit in the Circuit Court of
Etowah County Alabama against 3M and various carpet manufacturers. The complaint alleges that PFCs from the defendants'
facilities contaminated the Coosa River as its raw water source for drinking water and seeks unstated damages for the
installation and operation of a filtration system, expenses to monitor PFC levels, and lost profits and sales. 
 
In November 2016, the Town of Barnstable, Massachusetts filed an individual action in the U.S. District Court for the
District of Massachusetts seeking unstated compensatory and punitive damages and other relief against 3M and other
suppliers of AFFF for alleged contamination of the aquifer supplying drinking water to the Hyannis water system. The town
seeks to recover costs associated with the investigation, treatment, remediation, and monitoring of drinking water supplies
allegedly contaminated with certain PFCs used in AFFF. In January 2017, the County of Barnstable, Massachusetts, filed an
individual action in the U.S. District Court for the District of Massachusetts seeking unstated compensatory and punitive
damages and other relief (including indemnification and contribution in connection with claims asserted against the County
by the Town of Barnstable) against 3M and other suppliers of AFFF for alleged contamination of the aquifer supplying
drinking water to the Hyannis water system. 
 
In January 2017, several hundred plaintiffs sued 3M, its subsidiary Dyneon, and Daikin American (Defendants) in Lawrence
and Morgan Counties, Alabama. The plaintiffs are owners of property, residents, and holders of property interests who
receive their water from the West Morgan-East Lawrence Water and Sewer Authority (Authority). They assert common law claims
for negligence, nuisance, trespass, wantonness, and battery, and they seek injunctive relief and punitive damages. The
plaintiffs contend that the defendants own and operate manufacturing and disposal facilities in Decatur that have released
and continue to release PFOA, PFOS and related chemicals into the groundwater and surface water of their sites, resulting
in discharge into the Tennessee River. The plaintiffs also contend that the defendants have discharged into Bakers Creek
and the Decatur Utilities Dry Creek Wastewater Treatment Plant, which, in turn, discharges wastewater containing these
chemicals into the Tennessee River. The plaintiffs contend that, as a result the alleged discharges, the water supplied by
the Authority to the plaintiffs was, and is, contaminated with PFOA, PFOS, and related chemicals at a level dangerous to
humans. 
 
As of March 31, 2017, nine purported class actions were filed against 3M and other defendants in federal or state courts -
three in federal court in Colorado, five in federal court in Pennsylvania, and one in state court in New York. An
individual complaint was also filed in the federal court in Pennsylvania. The complaints seek unstated damages and other
remedies, such as medical monitoring, and allege that the plaintiffs suffered personal injury and property damage from
drinking water supplies contaminated with certain PFCs used in Aqueous Film Forming Foam (AFFF) at current or former
airports and air force military bases located in Colorado, Pennsylvania, and New York. 
 
In December 2010, the State of Minnesota, by its Attorney General Lori Swanson, acting in its capacity as trustee of the
natural resources of the State of Minnesota, filed a lawsuit in Hennepin County District Court against 3M to recover
damages (including unspecified assessment costs and reasonable attorney's fees) for alleged injury to, destruction of, and
loss of use of certain of the State's natural resources under the Minnesota Environmental Response and Liability Act
(MERLA) and the Minnesota Water Pollution Control Act (MWPCA), as well as statutory nuisance and common law claims of
trespass, nuisance, and negligence with respect to the presence of PFCs in the groundwater, surface water, fish or other
aquatic life, and sediments (the "NRD Lawsuit"). The State also seeks declarations under MERLA that 3M is responsible for
all damages the State may suffer in the future for injuries to natural resources from releases of PFCs into the
environment, and under MWPCA that 3M is responsible for compensation for future loss or destruction of fish, aquatic life,
and other damages. 
 
In November 2011, the Metropolitan Council filed a motion to intervene and a complaint in the NRD Lawsuit seeking
compensatory damages and other legal, declaratory and equitable relief, including reasonable attorneys' fees, for costs and
fees that the Metropolitan Council alleges it will be required to assess at some time in the future if the MPCA imposes
restrictions on Metropolitan Council's PFOS discharges to the Mississippi River, including the installation and maintenance
of a water treatment system. The Metropolitan Council's intervention motion was based on several theories, including common
law negligence, and statutory claims under MERLA for response costs, and under the Minnesota Environmental Rights Act
(MERA) for declaratory and equitable relief against 3M for PFOS and other PFC pollution of the waters and sediments of the
Mississippi River. 3M did not object to the motion to intervene. In January 2012, 3M answered the Metropolitan Council's
complaint and filed a counterclaim alleging that the Metropolitan Council discharges PFCs to the Mississippi River and
discharges PFC-containing sludge and bio solids from one or more of its wastewater treatment plants onto agricultural lands
and local area landfills. Accordingly, 3M's complaint against the Metropolitan Council asks that if the court finds that
the State is entitled to any of the damages it seeks, 3M be awarded contribution and apportionment from the Metropolitan
Council, including attorneys' fees, under MERLA, and contribution from and liability for the Metropolitan Council's
proportional share of damages awarded to the State under the MWPCA, as well as under statutory nuisance and common law
theories of trespass, nuisance, and negligence. 3M also seeks declaratory relief under MERA. 
 
In April 2012, 3M filed a motion to disqualify the State of Minnesota's counsel, Covington & Burling, LLP (Covington). In
October 2012, the court granted 3M's motion to disqualify Covington as counsel to the State and the State and Covington
appealed the court's disqualification to the Minnesota Court of Appeals. In July 2013, the Minnesota Court of Appeals
affirmed the district court's disqualification order. In October 2013, the Minnesota Supreme Court granted both the State's
and Covington's petition for review of the decision of the Minnesota Court of Appeals. In April 2014, the Minnesota Supreme
Court affirmed in part, reversed in part, and remanded the case to the district court for further proceedings. The district
court took evidence on the disqualification issues at a hearing in October 2015. In February 2016, the district court ruled
that Covington violated the professional ethics rule against representing a client (here the State of Minnesota) in the
same or substantially related matter where that person's interests are materially adverse to the interests of a former
client (3M). The district court, however, denied 3M's motion to disqualify Covington because it further found that 3M
impliedly waived by delaying to assert the conflict. Other activity in the case, which had been stayed pending the outcome
of the disqualification issue, has resumed. Trial is scheduled to begin in January 2018. In a separate but related action,
the Company filed suit in the Ramsey County District Court against Covington for breach of its fiduciary duties to the
Company and for breach of contract arising out of Covington's representation of the State of Minnesota in the NRD Lawsuit.
In September 2016, the court granted 3M's motion for leave to amend the complaint to plead punitive damages. In February
2017, Covington settled this lawsuit with a payment by Covington or its insurer to 3M that is not material to 3M's results
of operations or financial condition. 
 
For environmental litigation matters described in this section for which a liability, if any, has been recorded, the
Company believes the amount recorded, as well as the possible loss or range of loss in excess of the established accrual is
not material to the Company's consolidated results of operations or financial condition. For those matters for which a
liability has not been recorded, the Company believes any such liability is not probable and estimable and the Company is
not able to estimate a possible loss or range of loss at this time. 
 
Environmental Liabilities and Insurance Receivables 
 
As of March 31, 2017, the Company had recorded liabilities of $36 million for estimated "environmental remediation" costs
based upon an evaluation of currently available facts with respect to each individual site and also recorded related
insurance receivables of $8 million. The Company records liabilities for remediation costs on an undiscounted basis when
they are probable and reasonably estimable, generally no later than the completion of feasibility studies or the Company's
commitment to a plan of action. Liabilities for estimated costs of environmental remediation, depending on the site, are
based primarily upon internal or third-party environmental studies, and estimates as to the number, participation level and
financial viability of any other potentially responsible parties, the extent of the contamination and the nature of
required remedial actions. The Company adjusts recorded liabilities as further information develops or circumstances
change. The Company expects that it will pay the amounts recorded over the periods of remediation for the applicable sites,
currently ranging up to 20 years. 
 
As of March 31, 2017, the Company had recorded liabilities of $29 million for "other environmental liabilities" based upon
an evaluation of currently available facts to implement the Settlement Agreement and Consent Order with the MPCA, the
remedial action agreement with ADEM, and to address trace amounts of perfluorinated compounds in drinking water sources in
the City of Oakdale, Minnesota, as well as presence in the soil and groundwater at the Company's manufacturing facilities
in Decatur, Alabama, and Cottage Grove, Minnesota, and at two former disposal sites in Washington County, Minnesota
(Oakdale and Woodbury). The Company expects that most of the spending will occur over the next four years. During the first
quarter of 2017, the Company collected from its insurer the outstanding receivable of $15 million related to "other
environmental liabilities." 
 
It is difficult to estimate the cost of environmental compliance and remediation given the uncertainties regarding the
interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental contamination
and the existence of alternative cleanup methods. Developments may occur that could affect the Company's current
assessment, including, but not limited to: (i) changes in the information available regarding the environmental impact of
the Company's operations and products; (ii) changes in environmental regulations, changes in permissible levels of specific
compounds in drinking water sources, or changes in enforcement theories and policies, including efforts to recover natural
resource damages; (iii) new and evolving analytical and remediation techniques; (iv) success in allocating liability to
other potentially responsible parties; and (v) the financial viability of other potentially responsible parties and
third-party indemnitors. For sites included in both "environmental remediation liabilities" and "other environmental
liabilities," at which remediation activity is largely complete and remaining activity relates primarily to operation and
maintenance of the remedy, including required post-remediation monitoring, the Company believes the exposure to loss in
excess of the amount accrued would not be material to the Company's consolidated results of operations or financial
condition. However, for locations at which remediation activity is largely ongoing, the Company cannot estimate a possible
loss or range of loss in excess of the associated established accruals for the reasons described above. 
 
Other Matters 
 
Department of Labor Investigation 
 
The U.S. Department of Labor (DOL) notified 3M in April 2015 that it had commenced an investigation of 3M's pension plan
pursuant to the federal Employee Retirement Income Security Act of 1974, as amended (ERISA). The DOL has stated its
investigation relates to certain private equity investments, plan expenses, securities lending, and distributions of plan
benefits. In response to certain DOL requests, 3M produced documents and made employees available for interviews. In
December 2016, the DOL issued certain subpoenas to 3M and 3M Investment Management Corp. relating to this investigation. 3M
has produced additional responsive documents and is cooperating with the DOL in its investigation. The DOL has not provided
a timeline for the completion of its investigation. 
 
Product Liability Litigation 
 
One customer obtained an order in the French courts against 3M Purification SAS (a French subsidiary) in October 2011
appointing an expert to determine the amount of commercial loss and property damage allegedly caused by allegedly defective
3M filters used in the customer's manufacturing process. An Austrian subsidiary of this same customer also filed a claim
against 3M Austria GmbH (an Austrian subsidiary) and 3M Purification SAS in the Austrian courts in September 2012 seeking
damages for the same issue. The Company reached an agreement in principle to settle those two cases and expects to finalize
the settlement during the second quarter of 2017. The amounts agreed to in each of these settlements were not material to
the Company's consolidated results of operations or financial condition. 
 
As of March 31, 2017, the Company is a named defendant in lawsuits involving approximately 1,790 plaintiffs (compared to
approximately 1,260 plaintiffs at December 31, 2016), most of which are pending in federal or state court in Minnesota, in
which the plaintiffs claim they underwent various joint arthroplasty, cardiovascular, and other surgeries and later
developed surgical site infections due to the use of the Bair Hugger patient warming system. The complaints seek damages
and other relief based on theories of strict liability, negligence, breach of express and implied warranties, failure to
warn, design and manufacturing defect, fraudulent and/or negligent misrepresentation/concealment, unjust enrichment, and
violations of various state consumer fraud, deceptive or unlawful trade practices and/or false advertising acts. One case,
from the U.S. District Court for the Western District of Tennessee is a putative nationwide class action. The U.S. Judicial
Panel on Multidistrict Litigation (MDL) granted the plaintiffs' motion to transfer and consolidate all cases pending in
federal courts to the U.S. District Court for the District of Minnesota to be managed in a multi-district proceeding during
the pre-trial phase of the litigation. In June 2016, the Company was served with a putative class action filed in the
Ontario Superior Court of Justice for all Canadian residents who underwent various joint arthroplasty, cardiovascular, and
other surgeries and later developed surgical site infections due to the use of the Bair Hugger patient warming system. The
representative plaintiff seeks relief (including punitive damages) under Canadian law based on theories similar to those
asserted in the MDL. The Bair Hugger product line was acquired by 3M as part of the 2010 acquisition of Arizant, Inc., a
leading manufacturer of patient warming solutions designed to prevent hypothermia and maintain normal body temperature in
surgical settings. No liability has been recorded for this matter because the Company believes that any such liability is
not probable and estimable at this time. 
 
In September 2011, 3M Oral Care launched Lava Ultimate CAD/CAM dental restorative material. The product was originally
indicated for inlay, onlay, veneer, and crown applications. In June 2015, 3M Oral Care voluntarily removed crown
applications from the product's instructions for use, following reports from dentists of patients' crowns debonding,
requiring additional treatment. The product remains on the market for other applications. 3M communicated with the U.S.
Food and Drug Administration, as well as regulators outside the United States. 3M also informed customers and distributors
of its action, offered to accept return of unused materials and provide refunds. As of March 31, 2017, there are three
lawsuits pending that were brought by dentists and dental practices against 3M. The complaints allege 3M marketed and sold
defective Lava Ultimate material used for dental crowns to dentists and, under various theories, seek monetary damages
(replacement costs and business reputation loss), punitive damages, disgorgement of profits, injunction from marketing and
selling Lava Ultimate for use in dental crowns, statutory penalties, and attorneys' fees and costs. One lawsuit, pending in
the U.S. District Court for the District of Minnesota, names 39 plaintiffs and seeks certification of a class action of
dentists in the United States and its territories, and alternatively seeks subclasses in 13 states. The other two lawsuits
are individual complaints against 3M - one in Madison County, Illinois and the other in the U.S. District Court for the
District of Minnesota. 
 
For product liability litigation matters described in this section for which a liability has been recorded, the Company
believes the amount recorded is not material to the Company's consolidated results of operations or financial condition. In
addition, the Company is not able to estimate a possible loss or range of loss in excess of the established accruals at
this time. 
 
NOTE 11.  Stock-Based Compensation 
 
The 3M 2016 Long-Term Incentive Plan, as discussed in 3M's 2016 Annual Report on Form 10-K, provides for the issuance or
delivery of up to 123,965,000 shares of 3M common stock pursuant to awards granted under the plan. Awards may be issued in
the form of incentive stock options, nonqualified stock options, progressive stock options, stock appreciation rights,
restricted stock, restricted stock units, other stock awards, and performance units and performance shares. The remaining
total shares available for grant under LTIP Program are 29,802,945 as of March 31, 2017. 
 
The Company's annual stock option and restricted stock unit grant is made in February to provide a strong and immediate
link between the performance of individuals during the preceding year and the size of their annual stock compensation
grants. The grant to eligible employees uses the closing stock price on the grant date. Accounting rules require
recognition of expense under a non-substantive vesting period approach, requiring compensation expense recognition when an
employee is eligible to retire. Employees are considered eligible to retire at age 55 and after having completed ten years
of service. This retiree-eligible population represents 35 percent of the 2017 annual grant stock-based compensation award
expense dollars; therefore, higher stock-based compensation expense is recognized in the first quarter. 
 
In addition to the annual grants, the Company makes other minor grants of stock options, restricted stock units and other
stock-based grants. The Company issues cash settled restricted stock units and stock appreciation rights in certain
countries. These grants do not result in the issuance of common stock and are considered immaterial by the Company. 
 
Amounts recognized in the financial statements with respect to stock-based compensation programs, which include stock
options, restricted stock, restricted stock units, performance shares and the General Employees' Stock Purchase Plan
(GESPP), are provided in the following table. Capitalized stock-based compensation amounts were not material for the three
months ended March 31, 2017 and 2016. 
 
Stock-Based Compensation Expense 
 
                                                                                                          
                                                             Three months ended         
                                                             March 31,                  
 (Millions)                                                  2017                       2016     
 Cost of sales                                               $                   23           $  23       
 Selling, general and administrative expenses                                    98              96       
 Research, development and related expenses                                      26              25       
                                                                                                          
 Stock-based compensation expenses                           $                   147          $  144      
                                                                                                          
 Income tax benefits                                         $                   (148)        $  (127)    
                                                                                                          
 Stock-based compensation expenses (benefits), net of tax    $                   (1)          $  17       
 
 
Stock Option Program 
 
The following table summarizes stock option activity during the three months ended March 31, 2017: 
 
                                                                                                                    
                                       Weighted                                                         
                                                                              Average                               
                                       Weighted                Remaining               Aggregate           
                        Number of      Average                 Contractual             Intrinsic Value     
                        Options        Exercise Price          Life (months)           (millions)          
 Under option -                                                                                                     
 January 1              36,196,232     $               112.07                                                       
 Granted:                                                                                                           
 Annual                 5,409,628                      175.93                                                       
 Exercised              (3,037,302)                    89.29                                                        
 Canceled               (42,849)                       156.38                                                       
 March 31               38,525,709     $               122.78                 76                        $  2,641    
 Options exercisable                                                                                                
 March 31               27,691,364     $               106.36                 63                        $  2,353    
 
 
Stock options vest over a period from one year to three years with the expiration date at 10 years from date of grant. As
of March 31, 2017, there was $125 million of compensation expense that has yet to be recognized related to non-vested stock
option based awards. This expense is expected to be recognized over the remaining weighted-average vesting period of 25
months. The total intrinsic values of stock options exercised were $286 million and $253 million during the three months
ended March 31, 2017 and 2016, respectively. Cash received from options exercised was $271 million and $315 million for the
three months ended March 31, 2017 and 2016, respectively. The Company's actual tax benefits realized for the tax deductions
related to the exercise of employee stock options were $106 million and $93 million for the three months ended March 31,
2017 and 2016, respectively. 
 
For the primary 2017 annual stock option grant, the weighted average fair value at the date of grant was calculated using
the Black-Scholes option-pricing model and the assumptions that follow. 
 
Stock Option Assumptions 
 
                                                
                             Annual          
                             2017            
 Exercise price              $       175.76     
 Risk-free interest rate             2.1     %  
 Dividend yield                      2.5     %  
 Expected volatility                 17.3    %  
 Expected life (months)              78         
 Black-Scholes fair value    $       23.51      
 
 
Expected volatility is a statistical measure of the amount by which a stock price is expected to fluctuate during a period.
For the 2017 annual grant date, the Company estimated the expected volatility based upon the average of the most recent one
year volatility, the median of the term of the expected life rolling volatility, the median of the most recent term of the
expected life volatility of 3M stock, and the implied volatility on the grant date. The expected term assumption is based
on the weighted average of historical grants. 
 
Restricted Stock and Restricted Stock Units 
 
The following table summarizes restricted stock and restricted stock unit activity during the three months ended March 31,
2017: 
 
                                                           
                                     Weighted            
                                     Average             
                        Number of    Grant Date          
                        Awards       Fair Value          
 Nonvested balance -                                       
 As of January 1        2,185,046    $           145.64    
 Granted                                                   
 Annual                 604,256                  176.10    
 Other                  571                      175.17    
 Vested                 (724,705)                127.57    
 Forfeited              (12,014)                 153.49    
 As of March 31         2,053,154    $           160.94    
 
 
As of March 31, 2017, there was $133 million of compensation expense that has yet to be recognized related to non-vested
restricted stock units and restricted stock. This expense is expected to be recognized over the remaining weighted-average
vesting period of 26 months. The total fair value of restricted stock units and restricted stock that vested during the
three months ended March 31, 2017 and 2016 was $127 million and $133 million, respectively. The Company's actual tax
benefits realized for the tax deductions related to the vesting of restricted stock units and restricted stock was $47
million and $50 million for the three months ended March 31, 2017 and 2016, respectively. 
 
Restricted stock units granted generally vest three years following the grant date assuming continued employment. Dividend
equivalents equal to the dividends payable on the same number of shares of 3M common stock accrue on these restricted stock
units during the vesting period, although no dividend equivalents are paid on any of these restricted stock units that are
forfeited prior to the vesting date. Dividends are paid out in cash at the vest date on restricted stock units. Since the
rights to dividends are forfeitable, there is no impact on basic earnings per share calculations. Weighted average
restricted stock unit shares outstanding are included in the computation of diluted earnings per share. 
 
Performance Shares 
 
Instead of restricted stock units, the Company makes annual grants of performance shares to members of its executive
management. The 2017 performance criteria for these performance shares (organic volume growth, return on invested capital,
free cash flow conversion, and earning per share growth) were selected because the Company believes that they are important
drivers of long-term stockholder value. The number of shares of 3M common stock that could actually be delivered at the end
of the three-year performance period may be anywhere from 0% to 200% of each performance share granted, depending on the
performance of the Company during such performance period. Non-substantive vesting requires that expense for the
performance shares be recognized over one or three years depending on when each individual became a 3M executive. The 2017
performance share grant accrues dividends, therefore the grant date fair value is equal to the closing stock price on the
date of grant. Since the rights to dividends are forfeitable, there is no impact on basic earnings per share calculations.
Weighted average performance shares whose performance period is complete are included in computation of diluted earnings
per share. 
 
The following table summarizes performance share activity during the three months ended March 31, 2017: 
 
                                                               
                                         Weighted            
                                         Average             
                            Number of    Grant Date          
                            Awards       Fair Value          
 Undistributed balance -                                       
 As of January 1            656,278      $           142.98    
 Granted                    181,898                  189.75    
 Distributed                (312,173)                124.63    
 Performance change         110,965                  174.05    
 Forfeited                  (1,682)                  159.53    
 As of March 31             635,286      $           170.77    
 
 
As of March 31, 2017, there was $51 million of compensation expense that has yet to be recognized related to performance
shares. This expense is expected to be recognized over the remaining weighted-average earnings period of 12 months. The
total fair values of performance shares that were distributed were $55 million and $54 million for the three months ended
March 31, 2017 and 2016, respectively. The Company's actual tax benefits realized for the tax deductions related to the
distribution of performance shares were $15 million for both the three months ended March 31, 2017 and 2016. 
 
NOTE 12.  Business Segments 
 
3M's businesses are organized, managed and internally grouped into segments based on differences in markets, products,
technologies and services. 3M manages its operations in five business segments: Industrial; Safety and Graphics; Health
Care; Electronics and Energy; and Consumer. 3M's five business segments bring together common or related 3M technologies,
enhancing the development of innovative products and services and providing for efficient sharing of business resources.
Transactions among reportable segments are recorded at cost. 3M is an integrated enterprise characterized by substantial
intersegment cooperation, cost allocations and inventory transfers. Therefore, management does not represent that these
segments, if operated independently, would report the operating income information shown. The difference between operating
income and pre-tax income relates to interest income and interest expense, which are not allocated to business segments. 
 
Effective in the first quarter of 2017, as part of 3M's continuing effort to improve the alignment of its businesses around
markets and customers the Company made the following changes: 
 
1.     Integrated the former Renewable Energy Division into existing divisions; 
 
2.     Combined two divisions to form the Automotive and Aerospace Solutions Division; and 
 
3.     Consolidated U.S. customer account activity - impacting dual credit reporting 
 
Integration of former Renewable Energy Division 
 
·      The (a) solar and wind and (b) energy product lines (along with certain technology previously included in Corporate
and Unallocated) of the former Renewable Energy Division (RED) were integrated into the existing Electrical Markets
Division and Electronics Materials and Solutions Division, respectively, within the Electronics and Energy business
segment. In addition, the former RED's window film product lines were moved into the Commercial Solutions Division within
the Safety and Graphics business segment. This change resulted in a decrease in previously reported net sales and operating
income for total year 2016 of $203 million and $38 million, respectively, in the Electronics and Energy segment. These
decreases were offset by a $207 million and $29 million increase in previously reported total year 2016 net sales and
operating income, respectively, in the Safety and Graphics business segment and a $4 million decrease and $9 million
increase in previously reported net sales and operating income, respectively, in Corporate and Unallocated. 
 
Creation of Automotive and Aerospace Solutions Division 
 
·      The former Automotive Division and Aerospace and Commercial Transportation Division (both within the Industrial
business segment) were combined to create the Automotive and Aerospace Solutions Division. Because this realignment was
within the Industrial business segment, it had no impact on business segment reporting. 
 
Consolidation of U.S. customer account activity - impacting dual credit reporting 
 
·      The Company consolidated its customer account activity in the U.S. into more centralized sales districts to better
serve customers. As discussed further below, 3M business segment reporting measures include dual credit to business
segments for certain U.S. sales and related operating income. This dual credit is based on which business segment provides
customer account activity ("sales district") with respect to a particular product sold in the U.S. Previously, a customer
in the U.S. may have been aligned to several sales districts associated with multiple divisions or segments based on the
individual products the customer purchased across 3M's portfolio. The alignment of U.S. customer accounts to fewer, more
focused sales districts therefore changed the attribution of dual credit across 3M's business segments. As a result,
previously reported aggregate business segment net sales and operating income for total year 2016 increased $163 million
and $36 million, respectively, offset by similar increases in the elimination of dual credit net sales and operating income
amounts. 
 
The financial information presented herein reflects the impact of the preceding product line reporting change between
business segments for all periods presented. 
 
Business Segment Information 
 
                                                                            
                               Three months ended         
                               March 31,                  
 (Millions)                    2017                       2016     
 Net Sales                                                                  
 Industrial                    $                   2,709        $  2,599    
 Safety and Graphics                               1,527           1,477    
 Health Care                                       1,423           1,391    
 Electronics and Energy                            1,210           1,089    
 Consumer                                          1,042           1,050    
 Corporate and Unallocated                         2               -        
 Elimination of Dual Credit                        (228)           (197)    
 Total Company                 $                   7,685        $  7,409    
                                                                            
 Operating Income                                                           
 Industrial                    $                   625          $  622      
 Safety and Graphics                               399             359      
 Health Care                                       434             457      
 Electronics and Energy                            225             195      
 Consumer                                          222             238      
 Corporate and Unallocated                         (81)            (40)     
 Elimination of Dual Credit                        (50)            (43)     
 Total Company                 $                   1,774        $  1,788    
 
 
Corporate and unallocated operating income includes a variety of miscellaneous items, such as corporate investment gains
and losses, certain derivative gains and losses, certain insurance-related gains and losses, certain litigation and
environmental expenses, corporate restructuring charges and certain under- or over-absorbed costs (e.g. pension,
stock-based compensation) that the Company may choose not to allocate directly to its business segments. Because this
category includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis. 
 
3M business segment reporting measures include dual credit to business segments for certain U.S. sales and related
operating income. Management evaluates each of its five business segments based on net sales and operating income
performance, including dual credit U.S. reporting to further incentivize U.S. sales growth. As a result, 3M reflects
additional ("dual") credit to another business segment when the customer account activity ("sales district") with respect
to the particular product sold to the external customer in the U.S. is provided by a different business segment. This
additional dual credit is largely reflected at the division level. For example, certain respirators are primarily sold by
the Personal Safety Division within the Safety and Graphics business segment; however, a sales district within the
Industrial business segment provides the contact for sales of the product to particular customers in the U.S. market. In
this example, the non-primary selling segment (Industrial) would also receive credit for the associated net sales initiated
though its sales district and the related approximate operating income. The assigned operating income related to dual
credit activity may differ from operating income that would result from actual costs associated with such sales. The offset
to the dual credit business segment reporting is reflected as a reconciling item entitled "Elimination of Dual Credit,"
such that sales and operating income for the U.S. in total are unchanged. 
 
Certain sales and operating income results for electronic bonding product lines are equally divided between the Electronics
and Energy business segment and the Industrial business segment. 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM* 
 
To the Stockholders and Board of Directors of 3M Company: 
 
We have reviewed the accompanying consolidated balance sheet of 3M Company and its subsidiaries as of March 31, 2017, and
the related consolidated statements of income, comprehensive income, and cash flows for the three-month periods ended March
31, 2017 and 2016. These interim financial statements are the responsibility of the Company's management. 
 
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States).
A review of interim financial information consists principally of applying analytical procedures and making inquiries of
persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is
the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an
opinion. 
 
Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated
interim financial statements for them to be in conformity with accounting principles generally accepted in the United
States of America. 
 
We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheet as of December 31, 2016, and the related consolidated statements of income, comprehensive
income, changes in equity, and cash flows for the year then ended (not presented herein), and in our report dated February
9, 2017, we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information
set forth in the accompanying consolidated balance sheet information as of December 31, 2016, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it has been derived. 
 
                                 
 /s/ PricewaterhouseCoopers LLP  
                                 
 PricewaterhouseCoopers LLP      
 Minneapolis, Minnesota          
 May 3, 2017                     
 
 
*     Pursuant to Rule 436(c) of the Securities Act of 1933 ("Act") this should not be considered a "report" within the
meaning of Sections 7 and 11 of the Act and the independent registered public accounting firm liability under Section 11
does not extend to it. 
 
Item 2.  Management's Discussion 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 the
following sections: 
 
·      Overview 
 
·      Results of Operations 
 
·      Performance by Business Segment 
 
·      Financial Condition and Liquidity 
 
·      Cautionary Note Concerning Factors That May Affect Future Results 
 
Forward-looking statements in Part I, Item 2 may involve risks and uncertainties that could cause results to differ
materially from those projected (refer to the section entitled "Cautionary Note Concerning Factors That May Affect Future
Results" in Part I, Item 2 and the risk factors provided in Part II, Item 1A for discussion of these risks and
uncertainties). 
 
OVERVIEW 
 
3M is a diversified global manufacturer, technology innovator and marketer of a wide variety of products and services. As
more fully described in both the Performance by Business Segment section in MD&A and in Note 12, effective in the first
quarter of 2017, the Company changed its business segment reporting in its continued effort to improve the alignment of
businesses around markets and customers. These changes included the integration of the former Renewable Energy Division
into existing divisions, the combination of two divisions to form the Automotive and Aerospace Solutions Division, and
consolidation of U.S. customer account activity, impacting dual credit reporting. Business segment information presented
herein reflects the impact of these changes for all periods presented. 
 
3M manages its operations in five operating business segments: Industrial; Safety and Graphics; Health Care; Electronics
and Energy; and Consumer. From a geographic perspective, any references to EMEA refer to Europe, Middle East and Africa on
a combined basis. Any references to "Membrana" refer to the former Separations Media business acquired by 3M from Polypore
in 2015. 
 
Earnings per share attributable to 3M common shareholders - diluted: 
 
The following table provides the increase (decrease) in diluted earnings per share for the three-months ended March 31,
2017 compared to 2016. 
 
                                                                                               
                                                                 Three months ended          
 (Earnings per diluted share)                                    March 31, 2017              
 Same period last year                                           $                   2.05      
 Increase/(decrease) in earnings per share - diluted, due to:                                  
 Organic growth, productivity and other                                              0.22      
 Divestitures                                                                        (0.03)    
 Foreign exchange impacts                                                            (0.04)    
 Strategic investments                                                               (0.16)    
 Income tax rate                                                                     0.09      
 Shares of common stock outstanding                                                  0.03      
 Current period                                                  $                   2.16      
 
 
Earnings per diluted share increased 11 cents, or 5.4% in the first quarter of 2017 compared to the same period last year.
Organic growth, productivity and other include benefits from higher organic local-currency sales, lower raw material costs,
and business transformation, which is having a positive impact on 3M's productivity efforts. These benefits were partially
offset by higher defined benefit pension and postretirement expenses. 
 
Divestiture impacts, which are measured for the first twelve months post-transaction, related to the divestitures of
Polyfoam and the remaining portion of the library system business (both in first quarter 2016), and the divestitures of the
 protective films business and cathode battery technology out-license business (both in fourth quarter 2016). In addition,
3M sold its prescription safety eyewear business (January 2017). On a combined basis, lower year-on-year divestiture gains
in the first quarter of 2017 when compared to the first quarter of 2016 decreased earnings per share. 
 
Foreign currency impacts (net of hedging) decreased pre-tax earnings by approximately $34 million, or the equivalent of 4
cents per diluted share, excluding the impact of foreign currency changes on tax rates. 
 
Operating income results include year-on-year incremental strategic investments of $136 million, which included investments
to accelerate growth in core platforms in the 

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