Picture of 3M Co logo

MMM 3M Co News Story

0.000.00%
us flag iconLast trade - 00:00
IndustrialsBalancedLarge CapSuper Stock

REG - 3M Company - 3rd Quarter Results




 



RNS Number : 5092Q
3M Company
28 October 2021
 

Click on, or paste the following link into your web browser, to view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/5092Q_1-2021-10-28.pdf

 

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 September 30, 2021

 

Commission file number: 1-3285

 

3M COMPANY

(Exact name of registrant as specified in its charter)

Delaware

 

41-0417775

(State or other jurisdiction of incorporation)

 

(IRS Employer Identification No.)

 

 

 

3M Center, St. Paul, Minnesota

 

55144-1000

(Address of Principal Executive Offices)

 

(Zip Code)

 

 

 

(Registrant's Telephone Number, Including Area Code) (651) 733-1110

 

 

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, Par Value $.01 Per Share

 

MMM

 

New York Stock Exchange

 

 

MMM

 

Chicago Stock Exchange, Inc.

1.500% Notes due 2026

 

MMM26

 

New York Stock Exchange

0.375% Notes due 2022

 

MMM22A

 

New York Stock Exchange

0.950% Notes due 2023

 

MMM23

 

New York Stock Exchange

1.750% Notes due 2030

 

MMM30

 

New York Stock Exchange

1.500% Notes due 2031

 

MMM31

 

New York Stock Exchange

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

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

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

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

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

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

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

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

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

Class

 

Outstanding at September 30, 2021

Common Stock, $0.01 par value per share

 

576,252,803 shares

 

 

 

 

3M COMPANY

Form 10-Q for the Quarterly Period Ended September 30, 2021

 

TABLE OF CONTENTS

BEGINNING

PAGE

PART I

FINANCIAL INFORMATION

 

 

 

 

ITEM 1.

Financial Statements

4

 

Index to Financial Statements:

 

 

Consolidated Statement of Income

4

 

Consolidated Statement of Comprehensive Income

5

 

Consolidated Balance Sheet

6

 

Consolidated Statement of Cash Flows

7

 

Notes to Consolidated Financial Statements

8

 

Note 1. Significant Accounting Policies

8

 

Note 2. Revenue

11

 

Note 3. Acquisitions and Divestitures

13

 

Note 4. Goodwill and Intangible Assets

14

 

Note 5. Restructuring Actions

15

 

Note 6. Supplemental Income Statement Information

17

 

Note 7. Supplemental Equity and Comprehensive Income Information

17

 

Note 8. Income Taxes

21

 

Note 9. Marketable Securities

22

 

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

22

 

Note 11. Pension and Postretirement Benefit Plans

23

 

Note 12. Derivatives

24

 

Note 13. Fair Value Measurements

28

 

Note 14. Commitments and Contingencies

30

 

Note 15. Stock-Based Compensation

49

 

Note 16. Business Segments

52

 

 

 

ITEM 2.

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

54

 

Index to Management's Discussion and Analysis:

 

 

Overview

54

 

Results of Operations

63

 

Performance by Business Segment

65

 

Financial Condition and Liquidity

71

 

Cautionary Note Concerning Factors That May Affect Future Results

76

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

77

 

 

 

ITEM 4.

Controls and Procedures

77

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

ITEM 1.

Legal Proceedings

79

 

 

 

ITEM 1A.

Risk Factors

79

 

 

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

83

 

 

 

ITEM 3.

Defaults Upon Senior Securities

84

 

 

 

ITEM 4.

Mine Safety Disclosures

84

 

 

 

ITEM 5.

Other Information

84

 

 

 

ITEM 6.

Exhibits

84

 

 

3M COMPANY

FORM 10-Q

For the Quarterly Period Ended September 30, 2021

PART I. Financial Information


Item 1. Financial Statements.


 


3M Company and Subsidiaries

Consolidated Statement of Income

(Unaudited)

 

 

Three months ended
September 30,

 

Nine months ended
September 30,

(Millions, except per share amounts)

 

2021

 

2020

 

2021

 

2020

Net sales

 

$

8,942 

 

 

$

8,350 

 

 

$

26,743 

 

 

$

23,601 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Cost of sales

 

4,853 

 

 

4,303 

 

 

14,097 

 

 

12,217 

 

Selling, general and administrative expenses

 

1,819 

 

 

1,677 

 

 

5,373 

 

 

5,039 

 

Research, development and related expenses

 

482 

 

 

461 

 

 

1,520 

 

 

1,422 

 

Gain on sale of businesses

 

 

 

 

 

 

 

(389)

 

Total operating expenses

 

7,154 

 

 

6,441 

 

 

20,990 

 

 

18,289 

 

Operating income

 

1,788 

 

 

1,909 

 

 

5,753 

 

 

5,312 

 

 

 

 

 

 

 

 

 

 

Other expense (income), net

 

31 

 

 

83 

 

 

113 

 

 

248 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

1,757 

 

 

1,826 

 

 

5,640 

 

 

5,064 

 

Provision for income taxes

 

324 

 

 

391 

 

 

1,058 

 

 

1,016 

 

Income of consolidated group

 

1,433 

 

 

1,435 

 

 

4,582 

 

 

4,048 

 

 

 

 

 

 

 

 

 

 

Income (loss) from unconsolidated subsidiaries, net of taxes

 

 

 

(1)

 

 

 

 

(1)

 

Net income including noncontrolling interest

 

1,437 

 

 

1,434 

 

 

4,589 

 

 

4,047 

 

 

 

 

 

 

 

 

 

 

Less: Net income (loss) attributable to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to 3M

 

$

1,434 

 

 

$

1,430 

 

 

$

4,582 

 

 

$

4,044 

 

 

 

 

 

 

 

 

 

 

Weighted average 3M common shares outstanding - basic

 

579.6 

 

 

577.8 

 

 

580.3 

 

 

577.2 

 

Earnings per share attributable to 3M common shareholders - basic

 

$

2.47 

 

 

$

2.47 

 

 

$

7.90 

 

 

$

7.01 

 

 

 

 

 

 

 

 

 

 

Weighted average 3M common shares outstanding - diluted

 

586.3 

 

 

582.4 

 

 

587.1 

 

 

581.6 

 

Earnings per share attributable to 3M common shareholders - diluted

 

$

2.45 

 

 

$

2.45 

 

 

$

7.81 

 

 

$

6.95 

 

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

 

3M Company and Subsidiaries

Consolidated Statement of Comprehensive Income

(Unaudited)



Three months ended
September 30,


Nine months ended
September 30,

(Millions)


2021


2020


2021


2020

Net income including noncontrolling interest


$

1,437 



$

1,434 



$

4,589 



$

4,047 


Other comprehensive income (loss), net of tax:









Cumulative translation adjustment


(302)



271 



(354)



(67)


Defined benefit pension and postretirement plans adjustment


119 



116 



359 



271 


Cash flow hedging instruments


48 



(71)



95 



(60)


Total other comprehensive income (loss), net of tax


(135)



316 



100 



144 


Comprehensive income (loss) including noncontrolling interest


1,302 



1,750 



4,689 



4,191 


Comprehensive (income) loss attributable to noncontrolling interest


(2)



(5)



(6)



(1)


Comprehensive income (loss) attributable to 3M


$

1,300 



$

1,745 



$

4,683 



$

4,190 


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


3M Company and Subsidiaries

Consolidated Balance Sheet

(Unaudited)

(Dollars in millions, except per share amount)


September 30,
2021


December 31,
2020

Assets





Current assets





Cash and cash equivalents


$

4,878 



$

4,634 


Marketable securities - current


855 



404 


Accounts receivable - net of allowances of $212 and $233


4,916 



4,705 


Inventories





Finished goods


2,324 



2,081 


Work in process


1,436 



1,226 


Raw materials and supplies


1,190 



932 


Total inventories


4,950 



4,239 


Prepaids


501 



675 


Other current assets


326 



325 


Total current assets


16,426 



14,982 


Property, plant and equipment


27,211 



26,650 


Less: Accumulated depreciation


(17,888)



(17,229)


Property, plant and equipment - net


9,323 



9,421 


Operating lease right of use assets


840 



864 


Goodwill


13,597 



13,802 


Intangible assets - net


5,426 



5,835 


Other assets


2,666 



2,440 


Total assets


$

48,278 



$

47,344 


Liabilities





Current liabilities





Short-term borrowings and current portion of long-term debt


$

1,972 



$

806 


Accounts payable


2,862 



2,561 


Accrued payroll


1,019 



747 


Accrued income taxes


278 



300 


Operating lease liabilities - current


262 



256 


Other current liabilities


3,242 



3,278 


Total current liabilities


9,635 



7,948 


Long-term debt


16,193 



17,989 


Pension and postretirement benefits


3,987 



4,405 


Operating lease liabilities


580 



609 


Other liabilities


3,353 



3,462 


Total liabilities


33,748 



34,413 


Commitments and contingencies (Note 14)





Equity





3M Company shareholders' equity:





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





Shares outstanding - September 30, 2021: 576,252,803





Shares outstanding - December 31, 2020: 577,749,638





Additional paid-in capital


6,383 



6,162 


Retained earnings


45,361 



43,821 


Treasury stock, at cost:


(29,673)



(29,404)


Shares at September 30, 2021: 367,780,253





Shares at December 31, 2020: 366,283,418





Accumulated other comprehensive income (loss)


(7,620)



(7,721)


Total 3M Company shareholders' equity


14,460 



12,867 


Noncontrolling interest


70 



64 


Total equity


14,530 



12,931 


Total liabilities and equity


$

48,278 



$

47,344 


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


3M Company and Subsidiaries

Consolidated Statement of Cash Flows

(Unaudited)



Nine months ended
September 30,

(Millions)


2021


2020

Cash Flows from Operating Activities





Net income including noncontrolling interest


$

4,589 



$

4,047 


Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities





Depreciation and amortization


1,408 



1,413 


Company pension and postretirement contributions


(121)



(122)


Company pension and postretirement expense


137 



232 


Stock-based compensation expense


227 



216 


Gain on sale of businesses




(389)


Deferred income taxes


(155)



(57)


Changes in assets and liabilities





Accounts receivable


(324)



113 


Inventories


(823)



43 


Accounts payable


340 



(48)


Accrued income taxes (current and long-term)


(41)



146 


Other - net


212 




Net cash provided by (used in) operating activities


5,449 



5,598 







Cash Flows from Investing Activities





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


(1,047)



(1,079)


Proceeds from sale of PP&E and other assets


44 



29 


Acquisitions, net of cash acquired




(25)


Purchases of marketable securities and investments


(1,810)



(1,069)


Proceeds from maturities and sale of marketable securities and investments


1,363 



1,239 


Proceeds from sale of businesses, net of cash sold




576 


Other - net


18 




Net cash provided by (used in) investing activities


(1,432)



(321)







Cash Flows from Financing Activities





Change in short-term debt - net




(138)


Repayment of debt (maturities greater than 90 days)


(450)



(2,477)


Proceeds from debt (maturities greater than 90 days)




1,745 


Purchases of treasury stock


(1,261)



(366)


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


566 



325 


Dividends paid to shareholders


(2,572)



(2,540)


Other - net


(21)



(47)


Net cash provided by (used in) financing activities


(3,733)



(3,498)







Effect of exchange rate changes on cash and cash equivalents


(40)



(11)







Net increase (decrease) in cash and cash equivalents


244 



1,768 


Cash and cash equivalents at beginning of year


4,634 



2,353 


Cash and cash equivalents at end of period


$

4,878 



$

4,121 


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


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.

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 below for additional information.

•      Change in measure of segment operating performance used by 3M's chief operating decision maker-impacting 3M's disclosed measure of segment profit/loss (business segment operating income). See additional information in Note 16.

•      Change in alignment of certain products within 3M's Consumer business segment-creating the Consumer Health and Safety Division. See additional information in Note 16.

Change in Accounting Principle for Determining Net Periodic Pension and Postretirement Plan Cost

In the first quarter of 2021, 3M changed the method it uses to calculate the market-related value of fixed income securities included in its pension and other postretirement plan assets. The market-related value is used to determine the expected return on plan assets and the amortization of net unamortized actuarial gains or losses expense components of net periodic benefit cost. The Company previously used the calculated value approach for all plan assets, deferring over three years the impact on these amounts of asset gains or losses that differed from expected returns. 3M changed to the fair value approach for calculating market-related value for the fixed income class of plan assets, which does not involve deferring the impact of excess plan asset gains or losses in the determination of these two components of net periodic benefit cost. 3M considers the use of the fair value approach preferable to the calculated value approach as it results in a more current reflection of impacts of changes in value of these plan assets in the determination of net periodic benefit cost. Additionally, given the plans' liability-driven investment strategy whereby the changes in value of the fixed income plan assets should offset changes in the value of the plans' liabilities, this approach more closely aligns the expected return on plan assets expense component with the value reflected in the plans' funded status. This change was applied retrospectively to all periods presented within 3M's financial statements. The change did not impact consolidated operating income or net cash provided by operating activities but did impact the previously reported portion of pension and postretirement net periodic benefit cost (benefit) that was included within non-operating other expense (income) along with related consolidated income items such as net income and earnings per share. Other impacts included related changes to previously reported consolidated other comprehensive income, retained earnings, accumulated other comprehensive income (loss), and associated line items within the determination of net cash provided by operating activities. For classes of plan assets other than fixed income investments, the Company continues to use the calculated value approach to determine their market-related value.

The adoption of this change impacted previously reported amounts included herein as indicated in the tables below.

 

Consolidated Statement of Income











Three months ended
September 30, 2020


Nine months ended
September 30, 2020

(Millions, except per share amounts)


Under Prior

Method


As Adjusted


Under Prior

Method


As Adjusted

Other expense (income), net


$

104


$

83


$

311


$

248










Income before income taxes


1,805


1,826


5,001


5,064

Provision for income taxes


387


391


1,002


1,016

Income of consolidated group


1,418


1,435


3,999


4,048










Net income including noncontrolling interest


1,417


1,434


3,998


4,047

Net income attributable to 3M


1,413


1,430


3,995


4,044

Earnings per share attributable to 3M common shareholders - basic


$

2.45


$

2.47


$

6.92


$

7.01

Earnings per share attributable to 3M common shareholders - diluted


$

2.43


$

2.45


$

6.87


$

6.95

 

Consolidated Statement of Comprehensive Income











Three months ended
September 30, 2020


Nine months ended
September 30, 2020

(Millions)


Under Prior

Method


As Adjusted


Under Prior

Method


As Adjusted

Net income including noncontrolling interest


$

1,417


$

1,434


$

3,998


$

4,047

Other comprehensive income (loss), net of tax:









Defined benefit pension and postretirement plans adjustment


127


116


304


271

Total other comprehensive income (loss), net of tax


327


316


177 



144 


Comprehensive income (loss) including noncontrolling interest


1,744


1,750


4,175


4,191

Comprehensive income (loss) attributable to 3M


1,739


1,745


4,174


4,190

 

Consolidated Balance Sheet







As of December 31, 2020

(Millions)


Under Prior

Method


As Adjusted

Retained earnings


$

43,761


$

43,821

Accumulated other comprehensive income (loss)


(7,661)



(7,721)


 

Consolidated Statement of Cash Flows







Nine months ended
September 30, 2020

(Millions)


Under Prior

Method


As Adjusted

Net income including noncontrolling interest


$

3,998


$

4,047

Company pension and postretirement expense


295


232

Other - net


(10)




The cumulative adjustment as of January 1, 2020, the beginning of the earliest period presented in the consolidated financial statements included herein, was a $5 million reduction to each of retained earnings and accumulated other comprehensive loss.

Earnings Per Share

The difference in the weighted average 3M shares outstanding for calculating basic and diluted earnings per share attributable to 3M common shareholders is a result of the dilution associated with the Company's stock-based compensation plans. Certain options outstanding under these stock-based compensation plans were not included in the computation of diluted earnings per share attributable to 3M common shareholders because they would have had an anti-dilutive effect of 7.9 million average options for the three months ended September 30, 2021; 7.7 million average options for the nine months ended September 30, 2021; 18.8 million average options for the three months ended September 30, 2020; 19.6 million average options for the nine months ended September 30, 2020). The computations for basic and diluted earnings per share follow:

Earnings Per Share Computations



Three months ended
September 30,


Nine months ended
September 30,

(Amounts in millions, except per share amounts)


2021


2020


2021


2020

Numerator:









Net income attributable to 3M


$

1,434 



$

1,430 



$

4,582 



$

4,044 











Denominator:









Denominator for weighted average 3M common shares outstanding - basic


579.6 



577.8 



580.3 



577.2 


Dilution associated with the Company's stock-based compensation plans


6.7 



4.6 



6.8 



4.4 


Denominator for weighted average 3M common shares outstanding - diluted


586.3 



582.4 



587.1 



581.6 











Earnings per share attributable to 3M common shareholders - basic


$

2.47 



$

2.47 



$

7.90 



$

7.01 


Earnings per share attributable to 3M common shareholders - diluted


$

2.45 



$

2.45 



$

7.81 



$

6.95 


New Accounting Pronouncements

Refer to Note 1 in 3M's 2020 Annual Report on Form 10-K for a more detailed discussion of the standards in the tables that follow, except for those pronouncements issued subsequent to the most recent Form 10-K filing date for which separate, more detailed discussion is provided below as applicable.

Standards Adopted During the Current Fiscal Year

Standard

Relevant Description

Effective Date for 3M

Impact and Other Matters

ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740)

Eliminates certain existing exceptions related to the general approach in ASC 740 relating to franchise taxes, reducing complexity in the interim-period accounting for year-to-date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combination that result in a step-up in the tax basis of goodwill.

January 1, 2021

Adoption of this ASU did not have a material impact on 3M's consolidated results of operations and financial condition.

ASU No. 2020-01, Clarifying the Interactions between Topic 321, Investments-Equity Securities, Topic 323, Investments-Equity Method and Joint Ventures, and Topic 815, Derivatives and Hedging

Clarifies when accounting for certain equity securities, a Company should consider observable transactions before applying or upon discontinuing the equity method of accounting for the purposes of applying the measurement alternative.

Indicates when determining the accounting for certain derivatives, a Company should not consider if the underlying securities would be accounted for under the equity method or fair value option.

January 1, 2021

Adoption of this ASU did not have a material impact on 3M's consolidated results of operations and financial condition.

ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on

Financial Reporting and ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope

Provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as LIBOR which is being phased out beginning at the end of 2021, to alternate reference rates, such as SOFR.

Effective upon ASU issuances in 2020 & 2021

With the beginning of the phase out of LIBOR at the end of 2021, 3M continues to evaluate commercial contracts that may utilize LIBOR and will continue to monitor developments during the LIBOR transition period.

 


NOTE 2. Revenue

Contract Balances:

Deferred revenue primarily relates to revenue that is recognized over time for one-year software license contracts. Deferred revenue (current portion) as of September 30, 2021 and December 31, 2020 was $467 million and $498 million, respectively. Approximately $90 million and $410 million of the December 31, 2020 balance was recognized as revenue during the three and nine months ended September 30, 2021, respectively, while approximately $100 million and $370 million of the December 31, 2019 balance was recognized as revenue during the three and nine months ended September 30, 2020, respectively.

Operating Lease Revenue:

Net sales includes rental revenue from durable medical devices as part of operating lease arrangements (reported within the Medical Solutions Division), which was $148 million and $153 million during the three months ended September 30, 2021 and 2020, respectively, and $433 million and $428 million during the nine months ended September 30, 2021 and 2020.

Disaggregated revenue information:

The Company views the following disaggregated disclosures as useful to understanding the composition of revenue recognized during the respective reporting periods:



Three months ended
September 30,


Nine months ended
September 30,

Net Sales (Millions)


2021


2020


2021


2020

Abrasives


$

362


$

289


$

1,067


$

861

Automotive Aftermarket


314


308


939


794

Closure and Masking Systems


264


242


761


745

Electrical Markets


322


285


948


824

Industrial Adhesives and Tapes


760


643


2,289


1,859

Personal Safety


1,105


1,136


3,475


3,220

Roofing Granules


109


113


338


294

Other Safety and Industrial


(1)


1


(1)


4

Total Safety and Industrial Business Segment


3,235


3,017


9,816


8,601










Advanced Materials


305


247


925


771

Automotive and Aerospace


439


410


1,424


1,126

Commercial Solutions


457


391


1,349


1,148

Electronics


1,000


1,025


3,040


2,772

Transportation Safety


250


245


727


678

Other Transportation and Electronics


(1)



(2)


(2)



(3)


Total Transportation and Electronics Business Segment


2,450


2,316


7,463


6,492










Drug Delivery


-


-


-


146

Food Safety


96


83


279


252

Health Information Systems


309


280


897


833

Medical Solutions


1,241


1,251


3,783


3,471

Oral Care


359


320


1,086


741

Separation and Purification Sciences


244


221


733


639

Other Health Care




5


(3)



5

Total Health Care Business Group


2,249


2,160


6,775


6,087










Consumer Health and Safety


152


139


465


431

Home Care


278


268


829


796

Home Improvement


699


644


1,988


1,711

Stationery and Office


355


318


992


843

Other Consumer


41


43


106


112

Total Consumer Business Group


1,525


1,412


4,380


3,893










Corporate and Unallocated


3


(2)




(1)

Elimination of Dual Credit


(520)



(553)



(1,693)



(1,471)


Total Company


$

8,942


$

8,350


$

26,743


$

23,601

 



Three months ended September 30, 2021

Net Sales (Millions)


Americas


Asia Pacific


Europe, Middle

East and Africa


Other

Unallocated


Worldwide

Safety and Industrial


$

1,710


$

828


$

698


$

(1)


$

3,235

Transportation and Electronics


728


1,367


355




2,450

Health Care


1,357


425


467




2,249

Consumer


1,135


241


149


-


1,525

Corporate and Unallocated


1


-


1


1


3

Elimination of Dual Credit


(239)



(219)



(62)



-


(520)


Total Company


$

4,692


$

2,642


$

1,608


$



$

8,942

 



Nine months ended September 30, 2021

Net Sales (Millions)


Americas


Asia Pacific


Europe, Middle

East and Africa


Other

Unallocated


Worldwide

Safety and Industrial


$

5,077


$

2,465


$

2,275


$

(1)


$

9,816

Transportation and Electronics


2,096


4,239


1,129


(1)



7,463

Health Care


4,001


1,263


1,512


(1)



6,775

Consumer


3,165


765


450


-


4,380

Corporate and Unallocated


1


-


1





Elimination of Dual Credit


(738)



(666)



(290)



1


(1,693)


Total Company


$

13,602


$

8,066


$

5,077


$

(2)



$

26,743

 



Three months ended September 30, 2020

Net Sales (Millions)


Americas


Asia Pacific


Europe, Middle

East and Africa


Other

Unallocated


Worldwide

Safety and Industrial


$

1,618


$

702


$

696


$



$

3,017

Transportation and Electronics


641


1,358


317


-


2,316

Health Care


1,335


377


447




2,160

Consumer


1,032


231


148


1


1,412

Corporate and Unallocated




-


-


(2)


(2)

Elimination of Dual Credit


(279)



(194)



(80)



-


(553)


Total Company


$

4,347


$

2,474


$

1,528


$

1


$

8,350

 



Nine months ended September 30, 2020

Net Sales (Millions)


Americas


Asia Pacific


Europe, Middle

East and Africa


Other

Unallocated


Worldwide

Safety and Industrial


$

4,500


$

2,063


$

2,038


$



$

8,601

Transportation and Electronics


1,848


3,711


933


-


6,492

Health Care


3,690


1,091


1,306




6,087

Consumer


2,801


697


395




3,893

Corporate and Unallocated


(1)



-


-


-


(1)

Elimination of Dual Credit


(716)



(533)



(222)



-


(1,471)


Total Company


$

12,122


$

7,029


$

4,450


$



$

23,601

Americas included United States net sales to customers of $3.9 billion and $3.7 billion for the three months ended September 30, 2021 and 2020, respectively, and $11.3 billion and $10.2 billion for the nine months ended September 30, 2021 and 2020, respectively.


NOTE 3. Acquisitions and Divestitures

Refer to Note 3 in 3M's 2020 Annual Report on Form 10-K for more information on relevant pre-2021 acquisitions and divestitures.

Acquisitions:

3M makes acquisitions of certain businesses from time to time that are aligned with its strategic intent with respect to, among other factors, growth markets and adjacent product lines or technologies. Goodwill resulting from business combinations is largely attributable to the existing workforce of the acquired businesses and synergies expected to arise after 3M's acquisition of these businesses.

2021 acquisitions:

There were no acquisitions that closed during the nine months ended September 30, 2021.

2020 acquisitions:

There were no acquisitions that closed during the year ended December 31, 2020.

Divestitures:

3M may divest certain businesses from time to time based upon review of the Company's portfolio considering, among other items, factors relative to the extent of strategic and technological alignment and optimization of capital deployment, in addition to considering if selling the businesses results in the greatest value creation for the Company and for shareholders.

2021 divestitures:

There were no divestitures that closed during the nine months ended September 30, 2021.

2020 divestitures:

During 2020, as described in Note 3 in 3M's 2020 Annual Report on Form 10-K, the Company divested its advanced ballistic-protection business, substantially all of its drug delivery business, and a small dermatology products business.

Operating income and held for sale amounts:

The aggregate operating income of applicable businesses held for sale with respect to the first nine months of 2020 was $40 million.


NOTE 4. Goodwill and Intangible Assets

There was no goodwill recorded from acquisitions during the first nine months of 2021. The amounts in the "Translation and other" row in the following table primarily relate to changes in foreign currency exchange rates. The goodwill balance by business segment as of December 31, 2020 and September 30, 2021, follow:

Goodwill

(Millions)


Safety and Industrial


Transportation and

Electronics


Health Care


Consumer


Total Company

Balance as of December 31, 2020


$

4,687


$

1,858


$

6,992


$

265


$

13,802

Translation and other


(43)



(21)



(133)



(8)



(205)


Balance as of September 30, 2021


$

4,644


$

1,837


$

6,859


$

257


$

13,597

Accounting standards require that goodwill be tested for impairment annually and between annual tests in certain circumstances such as a change in reporting units or the testing of recoverability of a significant asset group within a reporting unit. At 3M, reporting units correspond to a division.

As described in Note 16, effective in the first quarter of 2021, the Company changed its business segment reporting. For any product 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.

Acquired Intangible Assets

The carrying amount and accumulated amortization of acquired finite-lived intangible assets, in addition to the balance of non-amortizable intangible assets, as of September 30, 2021, and December 31, 2020, follow:

(Millions)


September 30,
2021


December 31,
2020

Customer related intangible assets


$

4,229 



$

4,280 


Patents


516 



537 


Other technology-based intangible assets


2,112 



2,114 


Definite-lived tradenames


1,172 



1,178 


Other amortizable intangible assets


104 



104 


Total gross carrying amount


8,133 



8,213 







Accumulated amortization - customer related


(1,563)



(1,422)


Accumulated amortization - patents


(500)



(512)


Accumulated amortization - other technology-based


(789)



(638)


Accumulated amortization - definite-lived tradenames


(431)



(385)


Accumulated amortization - other


(79)



(79)


Total accumulated amortization


(3,362)



(3,036)







Total finite-lived intangible assets - net


4,771 



5,177 







Non-amortizable intangible assets (primarily tradenames)


655 



658 


Total intangible assets - net


$

5,426 



$

5,835 


Certain tradenames acquired by 3M are not amortized because they have been in existence for over 60 years, have a history of leading-market share positions, have been and are intended to be continuously renewed, and the associated products of which are expected to generate cash flows for 3M for an indefinite period of time. As discussed in Note 13, 3M reflected an immaterial charge related to impairment of certain indefinite-lived assets in the first quarter of 2020.

Amortization expense for the three and nine months ended September 30, 2021 and 2020 follows:



Three months ended
September 30,


Nine months ended
September 30,

(Millions)


2021


2020


2021


2020

Amortization expense


$

131 



$

137 



$

398 



$

405 


Expected amortization expense for acquired amortizable intangible assets recorded as of September 30, 2021:

(Millions)


Remainder of 2021


2022


2023


2024


2025


2026


After

2026

Amortization expense


$

131 



$

514 



$

486 



$

458 



$

428 



$

420 



$

2,334 


The preceding expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency exchange rates, impairment of intangible assets, accelerated amortization of intangible assets and other events. 3M expenses the costs incurred to renew or extend the term of intangible assets.


NOTE 5. Restructuring Actions

2021 and 2020 Restructuring Actions:

Operational/Marketing Capability Restructuring:

As described in Note 5 in 3M's 2020 Annual Report on Form 10-K, in late 2020, 3M announced it would undertake certain actions to further enhance its operations and marketing capabilities to take advantage of certain global market trends while de-prioritizing investments in slower-growth end markets. During the fourth quarter of 2020, management approved and committed to undertake associated restructuring actions impacting approximately 2,100 positions resulting in a pre-tax charge of $137 million. In the first nine months of 2021, management approved and committed to undertake additional actions under this initiative resulting in pre-tax charges of $14 million, $43 million, and $50 million in the first, second, and third quarters of 2021, respectively. Remaining activities related to the restructuring actions approved and committed under this initiative are expected to be largely completed through the first quarter of 2022. 3M expects further actions under this initiative through early 2022. This aggregate initiative, begun in 2020 and continuing through early 2022, is expected to impact approximately 3,100 positions worldwide with an expected pre-tax charge of $300 million to $325 million over that period. The related first nine months of 2021 restructuring charges were recorded in the income statement as follows:

(Millions)


First Nine Months of 2021

Cost of sales


$

18

Selling, general and administrative expenses


74

Research, development and related expenses


15

Total operating income impact


$

107

The business segment operating income impact of these restructuring charges is summarized as follows:



First Nine Months of 2021

(Millions)


Employee-Related

Safety and Industrial


$

28

Transportation and Electronics


23

Health Care


18

Consumer


6

Corporate and Unallocated


32

Total Operating Expense


$

107

Restructuring actions, including cash and non-cash impacts, follow:

(Millions)


Employee-Related

Accrued restructuring action balance as of December 31, 2020


$

101

Incremental expense incurred in the first quarter of 2021


14

Incremental expense incurred in the second quarter of 2021


43

Incremental expense incurred in the third quarter of 2021


50 


Cash payments


(94)


Adjustments


(8)


Accrued restructuring action balances as of September 30, 2021


$

106

Divestiture-Related Restructuring

As described in Note 5 in 3M's 2020 Annual Report on Form 10-K, during the second quarter of 2020, following the divestiture of substantially all of the drug delivery business, management approved and committed to undertake certain restructuring actions addressing corporate functional costs and manufacturing footprint across 3M in relation to the magnitude of amounts previously allocated/burdened to the divested business. These actions affected approximately 1,300 positions worldwide and resulted in a second quarter 2020 pre-tax charge of $55 million, within Corporate and Unallocated.

Divestiture-related restructuring actions, including cash and non-cash impacts, follow:

(Millions)


Employee-Related


Asset-Related and Other


Total

Accrued divestiture-related restructuring action balances as of December 31, 2020


$

15


$

9


$

24

Cash payments


(5)



-


(5)


Adjustments


(1)



-


(1)


Accrued divestiture-related restructuring action balances as of June 30, 2021


$

9


$

9


$

18

Remaining activities related to this divestiture-related restructuring were largely completed in the third quarter of 2021.

Other Restructuring

As described in Note 5 in 3M's 2020 Annual Report on Form 10-K, in the second quarter of 2020, management approved and committed to undertake certain restructuring actions addressing structural enterprise costs and operations in certain end markets as a result of the COVID-19 pandemic and related economic impacts. These actions affected approximately 400 positions worldwide and resulted in a second quarter 2020 pre-tax charge of $58 million.

Restructuring actions, including cash and non-cash impacts, follow:

(Millions)


Employee-Related

Accrued restructuring action balances as of December 31, 2020


$

24

Cash payments


(4)


Adjustments


(9)


Accrued restructuring action balances as of March 31, 2021


$

11

Remaining activities related to this restructuring were largely completed in the second quarter of 2021.


NOTE 6. Supplemental Income Statement Information

Other expense (income), net consists of the following:



Three months ended
September 30,


Nine months ended
September 30,

(Millions)


2021


2020


2021


2020

Interest expense


$

117


$

128


$

370


$

388

Interest income


(6)



(5)



(18)



(24)


Pension and postretirement net periodic benefit cost (benefit)


(80)



(40)



(239)



(116)


Total


$

31


$

83


$

113


$

248

Interest expense includes an early debt extinguishment pre-tax charge of approximately $11 million in the first quarter of 2021.

Pension and postretirement net periodic benefit costs described in the table above include all components of defined benefit plan net periodic benefit costs except service cost, which is reported in various operating expense lines. Refer to Note 11 for additional details on the components of pension and postretirement net periodic benefit costs.


NOTE 7. Supplemental Equity and Comprehensive Income Information

Cash dividends declared and paid totaled $1.48 and $1.47 per share for the first, second, and third quarters of 2021 and 2020, respectively, or $4.44 and $4.41 per share for the first nine months of 2021 and 2020, respectively.

Consolidated Changes in Equity

Three months ended September 30, 2021





3M Company Shareholders



(Millions)


Total


Common

Stock and

Additional

Paid-in

Capital


Retained

Earnings


Treasury

Stock


Accumulated

Other

Comprehensive

Income

(Loss)


Non-

controlling

Interest

Balance at June 30, 2021


$

14,516


$

6,346


$

44,824


$

(29,236)



$

(7,486)



$

68














Net income


1,437




1,434






3

Other comprehensive income (loss), net of tax:













Cumulative translation adjustment


(302)








(301)


(1)


Defined benefit pension and post-retirement plans adjustment


119








119


-

Cash flow hedging instruments


48 









48 



-

Total other comprehensive income (loss), net of tax


(135)











Dividends declared


(856)





(856)








Stock-based compensation


46


46









Reacquired stock


(563)







(563)






Issuances pursuant to stock option and benefit plans


85




(41)



126





Balance at September 30, 2021


$

14,530


$

6,392


$

45,361


$

(29,673)



$

(7,620)



$

70

Nine months ended September 30, 2021





3M Company Shareholders



(Millions)


Total


Common

Stock and

Additional

Paid-in

Capital


Retained

Earnings


Treasury

Stock


Accumulated

Other

Comprehensive

Income

(Loss)


Non-

controlling

Interest

Balance at December 31, 2020


$

12,931


$

6,171


$

43,821


$

(29,404)



$

(7,721)



$

64














Net income


4,589




4,582






7

Other comprehensive income (loss), net of tax:













Cumulative translation adjustment


(354)









(353)



(1)

Defined benefit pension and post-retirement plans adjustment


359








359


-

Cash flow hedging instruments


95








95


-

Total other comprehensive income (loss), net of tax


100











Dividends declared


(2,572)





(2,572)








Stock-based compensation


221


221









Reacquired stock


(1,305)







(1,305)






Issuances pursuant to stock option and benefit plans


566




(470)



1,036





Balance at September 30, 2021


$

14,530


$

6,392


$

45,361


$

(29,673)



$

(7,620)



$

70

Three months ended September 30, 2020





3M Company Shareholders



(Millions)


Total


Common

Stock and

Additional

Paid-in

Capital


Retained

Earnings


Treasury

Stock


Accumulated

Other

Comprehensive

Income

(Loss)


Non-

controlling

Interest

Balance at June 30, 2020


$

10,925


$

6,083


$

42,786


$

(29,699)



$

(8,303)



$

58














Net income


1,434




1,430







Other comprehensive income (loss), net of tax:













Cumulative translation adjustment


271








270


1

Defined benefit pension and post-retirement plans adjustment


116








116


-

Cash flow hedging instruments


(71)









(71)



-

Total other comprehensive income (loss), net of tax


316











Dividends declared


(847)





(847)








Stock-based compensation


42


42









Reacquired stock


(1)






(1)





Issuances pursuant to stock option and benefit plans


90




(40)



130





Balance at September 30, 2020


$

11,959


$

6,125


$

43,329


$

(29,570)



$

(7,988)



$

63

Nine months ended September 30, 2020





3M Company Shareholders



(Millions)


Total


Common

Stock and

Additional

Paid-in

Capital


Retained

Earnings


Treasury

Stock


Accumulated

Other

Comprehensive

Income

(Loss)


Non-

controlling

Interest

Balance at December 31, 2019


$

10,126


$

5,916


$

42,130


$

(29,849)



$

(8,134)



$

63














Net income


4,047




4,044







Other comprehensive income (loss), net of tax:













Cumulative translation adjustment


(67)









(65)



(2)


Defined benefit pension and post-retirement plans adjustment


271








271


-

Cash flow hedging instruments


(60)








(60)


-

Total other comprehensive income (loss), net of tax


144 












Dividends declared


(2,540)





(2,540)








Purchase of subsidiary shares


(1)











(1)


Stock-based compensation


209


209









Reacquired stock


(357)







(357)






Issuances pursuant to stock option and benefit plans


331




(305)



636





Balance at September 30, 2020


$

11,959


$

6,125


$

43,329


$

(29,570)



$

(7,988)



$

63

Changes in Accumulated Other Comprehensive Income (Loss) Attributable to 3M by Component

Three months ended September 30, 2021

(Millions)


Cumulative

Translation

Adjustment


Defined Benefit

Pension and

Postretirement

Plans

Adjustment


Cash Flow

Hedging

Instruments,

Unrealized

Gain (Loss)


Total

Accumulated

Other

Comprehensive

Income (Loss)

Balance at June 30, 2021, net of tax:


$

(1,502)



$

(5,858)



$

(126)



$

(7,486)


Other comprehensive income (loss), before tax:









Amounts before reclassifications


(286)


-


44 



(242)

Amounts reclassified out


-


158


18


176

Total other comprehensive income (loss), before tax


(286)


158


62 



(66)

Tax effect


(15)


(39)



(14)


(68)


Total other comprehensive income (loss), net of tax


(301)


119


48 



(134)

Balance at September 30, 2021, net of tax:


$

(1,803)



$

(5,739)



$

(78)



$

(7,620)


Nine months ended September 30, 2021

(Millions)


Cumulative

Translation

Adjustment


Defined Benefit

Pension and

Postretirement

Plans

Adjustment


Cash Flow

Hedging

Instruments,

Unrealized

Gain (Loss)


Total

Accumulated

Other

Comprehensive

Income (Loss)

Balance at December 31, 2020, net of tax:


$

(1,450)



$

(6,098)



$

(173)



$

(7,721)


Other comprehensive income (loss), before tax:









Amounts before reclassifications


(303)



-


84


(219)

Amounts reclassified out


-


477


39


516

Total other comprehensive income (loss), before tax


(303)



477


123


297

Tax effect


(50)



(118)



(28)



(196)


Total other comprehensive income (loss), net of tax


(353)



359


95


101

Balance at September 30, 2021, net of tax:


$

(1,803)



$

(5,739)



$

(78)



$

(7,620)


Three months ended September 30, 2020

(Millions)


Cumulative

Translation

Adjustment


Defined Benefit

Pension and

Postretirement

Plans

Adjustment


Cash Flow

Hedging

Instruments,

Unrealized

Gain (Loss)


Total

Accumulated

Other

Comprehensive

Income (Loss)

Balance at June 30, 2020, net of tax:


$

(2,234)



$

(6,049)



$

(20)


$

(8,303)


Other comprehensive income (loss), before tax:









Amounts before reclassifications


237




(72)



165

Amounts reclassified out


-


149


(21)



128

Total other comprehensive income (loss), before tax


237


149


(93)



293

Tax effect


33


(33)



22


22 


Total other comprehensive income (loss), net of tax


270


116


(71)



315

Balance at September 30, 2020, net of tax:


$

(1,964)



$

(5,933)



$

(91)



$

(7,988)


Nine months ended September 30, 2020

(Millions)


Cumulative

Translation

Adjustment


Defined Benefit

Pension and

Postretirement

Plans

Adjustment


Cash Flow

Hedging

Instruments,

Unrealized

Gain (Loss)


Total

Accumulated

Other

Comprehensive

Income (Loss)

Balance at December 31, 2019, net of tax:


$

(1,899)



$

(6,204)



$

(31)



$

(8,134)


Other comprehensive income (loss), before tax:









Amounts before reclassifications


(98)



(80)



(10)


(188)


Amounts reclassified out


-


446


(68)



378

Total other comprehensive income (loss), before tax


(98)



366


(78)


190 


Tax effect


33


(95)



18 



(44)


Total other comprehensive income (loss), net of tax


(65)



271


(60)


146 


Balance at September 30, 2020, net of tax


$

(1,964)



$

(5,933)



$

(91)



$

(7,988)


Income taxes are not provided for foreign translation relating to permanent investments in international subsidiaries, but tax effects within cumulative translation do include impacts from items such as net investment hedge transactions. Reclassification adjustments are made to avoid double counting in comprehensive income items that are subsequently recorded as part of net income.

Reclassifications out of Accumulated Other Comprehensive Income Attributable to 3M

Details about Accumulated Other

Comprehensive Income Components


Amount Reclassified from

Accumulated Other Comprehensive Income


Location on Income

Statement



Three months ended September 30,


Nine months ended September 30,


(Millions)


2021


2020


2021


2020


Defined benefit pension and postretirement plans adjustments











Gains (losses) associated with defined benefit pension and postretirement plans amortization











Transition asset


$

(1)



$

(1)


$

(2)



$

(2)



See Note 11

Prior service benefit


15


15


45


46


See Note 11

Net actuarial loss


(172)



(162)



(518)



(487)



See Note 11

Curtailments/Settlements




(1)



(2)



(3)



See Note 11

Total before tax


(158)



(149)



(477)



(446)




Tax effect


39


33


118


108


Provision for income taxes

Net of tax


(119)



(116)



(359)



(338)




Cash flow hedging instruments gains (losses)











Foreign currency forward/option contracts


(15)



23


(32)



74


Cost of sales

Interest rate contracts


(3)



(2)



(7)



(6)



Interest expense

Total before tax


(18)



21


(39)



68



Tax effect


4


(5)



9


(16)



Provision for income taxes

Net of tax


(14)



16


(30)



52



Total reclassifications for the period, net of tax


$

(133)



$

(100)



$

(389)



$

(286)




 


NOTE 8. Income Taxes

The effective tax rate for the third quarter of 2021 was 18.4 percent, compared to 21.5 percent in the third quarter of 2020, a decrease of 3.1 percentage points. The effective tax rate for the first nine months of 2021 was 18.8 percent compared to 20.1 percent in the first nine months of 2020, a decrease of 1.3 percentage points. The primary factor that decreased the Company's effective tax rate was favorable adjustments in 2021 related to impacts of U.S. international tax provisions.

The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of September 30, 2021 and December 31, 2020 are $1,105 million and $1,145 million, respectively. It is reasonably possible that the amount of unrecognized tax benefits could significantly change within the next 12 months. At this time, the Company is not able to estimate the range by which these potential events could impact 3M's unrecognized tax benefits in the next 12 months.

As of September 30, 2021 and December 31, 2020, the Company had valuation allowances of $158 million and $135 million on its deferred tax assets, respectively.


NOTE 9. Marketable Securities

The Company invests in asset-backed securities, certificates of deposit/time deposits, commercial paper, and other securities. The following is a summary of amounts recorded on the Consolidated Balance Sheet for marketable securities (current and non-current).

(Millions)


September 30, 2021


December 31, 2020

Corporate debt securities


$



$


Commercial paper


501 



237 


Certificates of deposit/time deposits


45 



31 


U.S. treasury securities


305 



125 


U.S. municipal securities





Current marketable securities


855 



404 







U.S. municipal securities


30 



30 


Non-current marketable securities


30 



30 







Total marketable securities


$

885 



$

434 


At September 30, 2021 and December 31, 2020, gross unrealized, gross realized, and net realized gains and/or losses (pre-tax) were not material.

The balances at September 30, 2021 for marketable securities by contractual maturity are shown below. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(Millions)


September 30, 2021

Due in one year or less


$

855 


Due after one year through five years


15 


Due after five years through ten years


15 


Total marketable securities


$

885 


 


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

In March 2021, 3M, via a make-whole call offer, redeemed $450 million principal amount of 2.75% notes due 2022. The Company recorded an early debt extinguishment pre-tax charge of approximately $11 million within interest expense. This charge reflected the differential between the carrying value and the amount paid to reacquire the notes and related expenses.

During the second and third quarters of 2021, 3M entered into interest rate swaps with an aggregate notional amount of $800 million. These swaps converted $500 million and $300 million of 3M'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 with an interest rate based on a three-month LIBOR index.

2020 issuances, maturities, and extinguishments of short- and long-term debt are described in Note 5 in 3M's 2020 Annual Report on Form 10-K.

The Company had no commercial paper outstanding at September 30, 2021 and December 31, 2020.

Future Maturities of Long-term Debt

Maturities of long-term debt in the table below reflect the impact of put provisions associated with certain debt instruments and are net of the unamortized debt issue costs such that total maturities equal the carrying value of long-term debt as of September 30, 2021. The maturities of long-term debt for the periods subsequent to September 30, 2021 are as follows (in millions):

Remainder of

2021


2022


2023


2024


2025


2026


After

2026


Total

$

754


$

1,253


$

1,942


$

1,100


$

1,792


$

1,511


$

9,797


$

18,149

 


NOTE 11. Pension and Postretirement Benefit Plans

As discussed in Note 1, effective in the first quarter of 2021, 3M made a change in accounting principle for net periodic pension and postretirement plan cost. This impacted the expected return on plan assets and the amortization of net unamortized actuarial gains or losses expense components of net periodic benefit cost. This change was applied retrospectively to all periods presented within 3M's financial statements.

The service cost component of defined benefit net periodic benefit cost is recorded in cost of sales; selling, general and administrative expenses; and research, development and related expenses. The other components of net periodic benefit cost are reflected in other expense (income), net. Components of net periodic benefit cost and other supplemental information for the three and nine months ended September 30, 2021 and 2020 follow:

Benefit Plan Information



Three months ended September 30,



Qualified and Non-qualified

Pension Benefits


Postretirement

Benefits



United States

International


(Millions)


2021


2020


2021


2020


2021


2020

Net periodic benefit cost (benefit)













Operating expense













Service cost


$

72 



$

66 



$

41 



$

39 



$

12 



$

11 


Non-operating expense













Interest cost


90 



124 



25 



31 



11 



16 


Expected return on plan assets


(264)



(263)



(81)



(77)



(19)



(20)


Amortization of transition asset













Amortization of prior service benefit


(6)



(6)





(1)



(9)



(8)


Amortization of net actuarial loss


132 



123 



26 



28 



14 



11 


Settlements, curtailments, special termination benefits and other













Total non-operating expense (benefit)


(48)



(22)



(29)



(18)



(3)




Total net periodic benefit cost (benefit)


$

24 



$

44 



$

12 



$

21 



$



$

11 


 



Nine months ended September 30,



Qualified and Non-qualified

Pension Benefits


Postretirement

Benefits



United States

International


(Millions)


2021


2020


2021


2020


2021


2020

Net periodic benefit cost (benefit)













Operating expense













Service cost


$

216


$

197


$

125


$

115


$

35


$

33

Non-operating expense













Interest cost


270


373


75


95


33


48

Expected return on plan assets


(792)



(786)



(244)



(232)



(58)



(60)


Amortization of transition asset


-


-


2


2


-


-

Amortization of prior service benefit


(18)



(18)



(2)



(4)



(25)



(24)


Amortization of net actuarial loss


396


368


80


85


42


34

Settlements, curtailments, special termination benefits and other


-


-


-


-


2


3

Total non-operating expense (benefit)


(144)



(63)



(89)



(54)



(6)



1

Total net periodic benefit cost (benefit)


$

72


$

134


$

36


$

61


$

29


$

34

For the nine months ended September 30, 2021 contributions totaling $118 million were made to the Company's U.S. and international pension plans and $3 million to its postretirement plans. For total year 2021, the Company expects to contribute approximately $200 million of cash to its global defined benefit pension and postretirement plans. The Company does not have a required minimum cash pension contribution obligation for its U.S. plans in 2021. Future contributions will depend on market conditions, interest rates and other factors. 3M's annual measurement date for pension and postretirement assets and liabilities is December 31 each year, which is also the date used for the related annual measurement assumptions.


NOTE 12. Derivatives

The Company uses interest rate swaps, currency swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity price fluctuations. Note 14 in 3M's 2020 Annual Report on Form 10-K explains the types of derivatives and financial instruments used by 3M, how and why 3M uses such instruments, and how such instruments are accounted for.It also contains information regarding previously initiated contracts or instruments.

Additional information with respect to derivatives is included elsewhere as follows:

•      Impact on other comprehensive income of nonderivative hedging and derivative instruments is included in Note 7.

•      Fair value of derivative instruments is included in Note 13.

•      Derivatives and/or hedging instruments associated with the Company's long-term debt are described in Note 12 in 3M's 2020 Annual Report on Form 10-K.

 

Refer to the section below titled Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments for details on the location within the consolidated statements of income for amounts of gains and losses related to derivative instruments designated as cash flow or fair value hedges (along with similar information relative to the hedged items) and derivatives not designated as hedging instruments. Additional information relative to cash flow hedges, fair value hedges, net investment hedges and derivatives not designated as hedging instruments is included below as applicable.

Cash Flow Hedges:

As of September 30, 2021, the Company had a balance of $78 million associated with the after-tax net unrealized loss associated with cash flow hedging instruments recorded in accumulated other comprehensive income. This includes a remaining balance of $102 million (after-tax loss) related to the forward starting interest rate swap and treasury rate lock contracts, which will be amortized over the respective lives of the notes. Based on exchange rates as of September 30, 2021, of the total after-tax net unrealized balance as of September 30, 2021, 3M expects to reclassify approximately $4 million after-tax net unrealized gain over the next 12 months (with the impact offset by earnings/losses from underlying hedged items).

 

The amount of pretax gain (loss) recognized in other comprehensive income related to derivative instruments designated as cash flow hedges is provided in the following table.



Pretax Gain (Loss) Recognized in Other Comprehensive Income on Derivative



Three months ended September 30,


Nine months ended September 30,

(Millions)


2021


2020


2021


2020

Foreign currency forward/option contracts


$

44 



$

(72)



$

84


$

(8)

Interest rate contracts


-


-


-


(2)


Total


$

44 



$

(72)



$

84


$

(10)

Fair Value Hedges:

During the second and third quarters of 2021, 3M entered into interest rate swaps with an aggregate notional amount of $800 million. These swaps converted $500 million and $300 million of 3M'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 with an interest rate based on a three-month LIBOR index as a hedge of its exposure to changes in fair value that are attributable to interest rate risk.

The following amounts were recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges:

(Millions)


Carrying Value of the

Hedged Liabilities


Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Value of the Hedged Liabilities

Location on the Consolidated Balance Sheet


September 30, 2021


December 31, 2020


September 30, 2021


December 31, 2020

Short-term borrowings and current portion of long-term debt


$

353


$

373


$

1


$

5

Long-term debt


1,008


225


8


6

Total


$

1,361


$

598


$

9


$

11

Net Investment Hedges:

At September 30, 2021, the total notional amount of foreign exchange forward contracts designated in net investment hedges was approximately 150 million euros, along with a principal amount of long-term debt instruments designated in net investment hedges totaling 3.5 billion euros. The maturity dates of these derivative and nonderivative instruments designated in net investment hedges range from 2021 to 2031.

 

The amount of gain (loss) excluded from effectiveness testing recognized in income relative to instruments designated in net investment hedge relationships is not material. The amount of pretax gain (loss) recognized in other comprehensive income related to derivative and nonderivative instruments designated as net investment hedges are as follows.



Pretax Gain (Loss) Recognized as Cumulative Translation within Other Comprehensive Income



Three months ended September 30,


Nine months ended September 30,

(Millions)


2021


2020


2021


2020

Foreign currency denominated debt


$

83 



$

(154)



$

195


$

(150)

Foreign currency forward contracts




(3)


4


2

Total


$

86 



$

(157)



$

199


$

(148)

Statement of Income Location and Impact of Cash Flow and Fair Value Derivative Instruments and Derivatives Not Designated as Hedging Instruments

The location in the consolidated statement of income and pre-tax amounts recognized in income related to derivative instruments designated in cash flow or fair value hedging relationships and for derivatives not designated as hedging instruments are as follows:



Location and Amount of Gain (Loss) Recognized in Income



Three months ended September 30,


Nine months ended September 30,



Cost of sales


Other expense

(income), net


Cost of sales


Other expense

(income), net

(Millions)


2021


2020


2021


2020


2021


2020


2021


2020

Information regarding cash flow and fair value hedging relationships:

















Total amounts of income and expense line items presented in the consolidated statement of income in which the effects of derivatives are recorded


$

4,853


$

4,303


$

31


$

83


$

14,097


$

12,217


$

113


$

248

Gain or (loss) on cash flow hedging relationships:

















Foreign currency forward/option contracts:

















Amount of gain or (loss) reclassified from accumulated other comprehensive income into income


(15)



23


-


-


(32)



74


-


-

Interest rate contracts:

















Amount of gain or (loss) reclassified from accumulated other comprehensive income into income


-


-


(3)



(2)



-


-


(7)



(6)


Gain or (loss) on fair value hedging relationships:

















Interest rate contracts:

















Hedged items


-


-






-


-


3



Derivatives designated as hedging instruments


-


-


(1)


(3)



-


-


(3)


(3)


















Information regarding derivatives not designated as hedging instruments:

















Gain or (loss) on derivatives not designated as instruments:

















Foreign currency forward/option contracts


-




(35)


29 



-




(7)



 

Location, Fair Value, and Gross Notional Amounts of Derivative Instruments

The following tables summarize the fair value of 3M's derivative instruments, excluding nonderivative instruments used as hedging instruments, and their location in the consolidated balance sheet. Notional amounts below are presented at period end foreign exchange rates, except for certain interest rate swaps, which are presented using the inception date's foreign exchange rate.



Gross

Notional

Amount


Assets


Liabilities

September 30, 2021 (Millions)



Location


Fair

Value Amount


Location


Fair

Value Amount

Derivatives designated as hedging instruments











Foreign currency forward/option contracts


1,796 



Other current assets


$

41 



Other current liabilities


$

17 


Foreign currency forward/option contracts


792 



Other assets


31 



Other liabilities



Interest rate contracts


403 



Other current assets




Other current liabilities



Interest rate contracts


800 



Other assets




Other liabilities



Total derivatives designated as hedging instruments






76 





20 













Derivatives not designated as hedging instruments











Foreign currency forward/option contracts


5,269 



Other current assets




Other current liabilities


20 


Total derivatives not designated as hedging instruments










20 













Total derivative instruments






$

84 





$

40 


 



Gross

Notional

Amount


Assets


Liabilities

December 31, 2020 (Millions)



Location


Fair

Value Amount


Location


Fair

Value Amount

Derivatives designated as hedging instruments











Foreign currency forward/option contracts


1,630 



Other current assets


$

14 



Other current liabilities


$

67 


Foreign currency forward/option contracts


669 



Other assets


10 



Other liabilities


25 


Interest rate contracts


403 



Other current assets




Other current liabilities



Total derivatives designated as hedging instruments






31 





92 













Derivatives not designated as hedging instruments











Foreign currency forward/option contracts


3,166 



Other current assets


13 



Other current liabilities


14 


Total derivatives not designated as hedging instruments






13 





14 













Total derivative instruments






$

44 





$

106 


Credit Risk and Offsetting of Assets and Liabilities of Derivative Instruments

3M enters into master netting arrangements with counterparties when possible to mitigate credit risk in derivative transactions. These arrangements may allow each counterparty to net settle amounts owed between a 3M entity and the counterparty as a result of multiple, separate derivative transactions. 3M also has associated credit support agreements in place with its primary derivative counterparties which, among other things, provide the circumstances under which either party is required to post eligible collateral (when the market value of transactions covered by these agreements exceeds specified thresholds or if a counterparty's credit rating has been downgraded to a predetermined rating). The Company does not anticipate nonperformance by any of these counterparties.

3M has elected to present the fair value of derivative assets and liabilities within the Company's consolidated balance sheet on a gross basis even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. However, the following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties. For each counterparty, if netted, the Company would offset the asset and liability balances of all derivatives at the end of the reporting period based on the 3M entity that is a party to the transactions. Derivatives not subject to master netting agreements are not eligible for net presentation.

Offsetting of Financial Assets under Master Netting Agreements with Derivative Counterparties



Gross Amount of Derivative Assets Presented in the

Consolidated

Balance Sheet


Gross Amounts not Offset in the

Consolidated Balance Sheet that are Subject to Master Netting Agreements


September 30, 2021 (Millions)



Gross Amount of Eligible Offsetting

Recognized

Derivative

Liabilities


Cash

Collateral

Received


Net Amount of

Derivative Assets

Derivatives subject to master netting agreements


$

84


$

20


$

-


$

64

Derivatives not subject to master netting agreements


-






-

Total


$

84






$

64

 

December 31, 2020 (Millions)









Derivatives subject to master netting agreements


$

44


$

11


$

-


$

33

Derivatives not subject to master netting agreements


-






-

Total


$

44






$

33

Offsetting of Financial Liabilities under Master Netting Agreements with Derivative Counterparties



Gross Amount of

Derivative

Liabilities

Presented in the

Consolidated

Balance Sheet


Gross Amounts not Offset in the

Consolidated Balance Sheet that are

Subject to Master Netting Agreements



September 30, 2021 (Millions)



Gross Amount of

Eligible Offsetting

Recognized

Derivative Assets


Cash

Collateral

Pledged


Net Amount of

Derivative

Liabilities

Derivatives subject to master netting agreements


$

40 



$

20 



$



$

20 


Derivatives not subject to master netting agreements









Total


$

40 







$

20 


 

December 31, 2020 (Millions)









Derivatives subject to master netting agreements


$

106 



$

11 



$



$

95 


Derivatives not subject to master netting agreements









Total


$

106 







$

95 


Currency Effects

3M estimates that year-on-year foreign currency transaction effects, including hedging impacts, decreased pre-tax income by approximately $36 million and $94 million for the three and nine months ended September 30, 2021, respectively. These estimates include transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.


NOTE 13. Fair Value Measurements

3M follows ASC 820, Fair Value Measurements and Disclosures, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis.

In addition to the information above, refer to Note 15 in 3M's 2020 Annual Report on Form 10-K for a qualitative discussion of the assets and liabilities that are measured at fair value on a recurring and nonrecurring basis, a description of the valuation methodologies used by 3M, and categorization within the valuation framework of ASC 820.

The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis.

Description


Fair Value at

September 30, 2021


Fair Value Measurements

Using Inputs Considered as

(Millions)



Level 1


Level 2


Level 3

Assets:









Available-for-sale:









Marketable securities:









Corporate debt securities


$



$



$



$


Commercial paper


501 





501 




Certificates of deposit/time deposits


45 





45 




U.S. treasury securities


305 



305 






U.S. municipal securities


34 







34 


Derivative instruments - assets:









Foreign currency forward/option contracts


80 





80 




Interest rate contracts


















Liabilities:









Derivative instruments - liabilities:









Foreign currency forward/option contracts


40 





40 




 

Description


Fair Value at

December 31, 2020


Fair Value Measurements

Using Inputs Considered as

(Millions)



Level 1


Level 2


Level 3

Assets:









Available-for-sale:









Marketable securities:









Corporate debt securities


$



$



$



$


Commercial paper


237 





237 




Certificates of deposit/time deposits


31 





31 




U.S. treasury securities


125 



125 






U.S. municipal securities


34 







34 


Derivative instruments - assets:









Foreign currency forward/option contracts


37 





37 




Interest rate contracts


















Liabilities:









Derivative instruments - liabilities:









Foreign currency forward/option contracts


106 





106 




The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the table above that used significant unobservable inputs (level 3).

Marketable securities - certain U.S. municipal securities only


Three months ended
September 30,


Nine months ended
September 30,

(Millions)


2021


2020


2021


2020

Beginning balance


$

34 



$

37 



$

34 



$

46 


Total gains or losses:









Included in earnings









Included in other comprehensive income









Purchases and issuances








10 


Sales and settlements








(19)


Transfers in and/or out of level 3









Ending balance


$

34 



$

37 



$

34 



$

37 


Change in unrealized gains or losses for the period included in earnings for securities held at the end of the reporting period









In addition, the plan assets of 3M's pension and postretirement benefit plans are measured at fair value on a recurring basis (at least annually). Refer to Note 13 in 3M's 2020 Annual Report on Form 10-K.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis:

Disclosures are required for certain assets and liabilities that are measured at fair value, but are recognized and disclosed at fair value on a nonrecurring basis in periods subsequent to initial recognition. For 3M, such measurements of fair value relate primarily to indefinite-lived and long-lived asset impairments, goodwill impairments, and adjustment in carrying value of equity securities for which the measurement alternative of cost less impairment plus or minus observable price changes is used. There were no material impairments of assets or adjustments to equity securities using the measurement alternative for the three and nine months ended September 30, 2021. 3M reflected an immaterial charge related to impairment of certain indefinite-lived assets and a net charge of $22 million related to adjustment to the carrying value of equity securities using the measurement alternative during the first quarter of 2020. There were no material impairments of assets or adjustments to equity securities using the measurement alternative for the three months ended September 30, 2020.

Fair Value of Financial Instruments:

The Company's financial instruments include cash and cash equivalents, marketable securities, accounts receivable, certain investments, accounts payable, borrowings, and derivative contracts. The fair values of cash equivalents, accounts receivable, accounts payable, and short-term borrowings and current portion of long-term debt approximated carrying values because of the short-term nature of these instruments. Available-for-sale marketable securities, in addition to certain derivative instruments, are recorded at fair values as indicated in the preceding disclosures. To estimate fair values (classified as level 2) for its long-term debt, the Company utilized third-party quotes, which are derived all or in part from model prices, external sources, market prices, or the third-party's internal records. Information with respect to the carrying amounts and estimated fair values of these financial instruments follow:



September 30, 2021


December 31, 2020

(Millions)


Carrying

Value


Fair

Value


Carrying

Value


Fair

Value

Long-term debt, excluding current portion


$

16,193 



$

17,836 



$

17,989 



$

20,496 


The fair values reflected above consider the terms of the related debt absent the impacts of derivative/hedging activity. The carrying amount of long-term debt referenced above is impacted by certain fixed-to-floating interest rate swaps that are designated as fair value hedges and by the designation of certain fixed rate Eurobond securities issued by the Company as hedging instruments of the Company's net investment in its European subsidiaries. A number of 3M's fixed-rate bonds were trading at a premium at September 30, 2021 and December 31, 2020 due to the lower interest rates and tighter credit spreads compared to issuance levels.


NOTE 14. Commitments and Contingencies

Legal Proceedings:

The Company and some of its subsidiaries are involved in numerous claims and lawsuits, principally in the United States, and regulatory proceedings worldwide. These claims, lawsuits and proceedings include, but are not limited to, products liability (involving products that the Company now or formerly manufactured and sold), intellectual property, commercial, antitrust, federal False Claims Act, securities, and environmental laws in the United States and other jurisdictions. Unless otherwise stated, the Company is vigorously defending all such litigation and proceedings. From time to time, the Company also receives subpoenas or requests for information from various government agencies. The Company generally responds to such subpoenas and requests in a cooperative, thorough and timely manner. These responses sometimes require time and effort and can result in considerable costs being incurred by the Company. Such subpoenas and requests can also lead to the assertion of claims or the commencement of administrative, civil or criminal legal proceedings against the Company and others, as well as to settlements. The outcomes of legal proceedings and regulatory matters are often difficult to predict. Any determination that the Company's operations or activities are not, or were not, in compliance with applicable laws or regulations could result in the imposition of fines, civil or criminal penalties, and equitable remedies, including disgorgement, suspension or debarment or injunctive relief. Additional information about the Company's process for disclosure and recording of liabilities and insurance receivables related to legal proceedings can be found in Note 16 "Commitments and Contingencies" in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

The following sections first describe the significant legal proceedings in which the Company is involved, and then describe the liabilities and associated insurance receivables the Company has accrued relating to its significant legal proceedings.

Respirator Mask/Asbestos Litigation

As of September 30, 2021, the Company is a named defendant, with multiple co-defendants, in numerous lawsuits in various courts that purport to represent approximately 3,096 individual claimants, compared to approximately 2,075 individual claimants with actions pending December 31, 2020.

The vast majority of the lawsuits and claims resolved by and currently pending against the Company allege use of some of the Company's mask and respirator products and seek damages from the Company and other defendants for alleged personal injury from workplace exposures to asbestos, silica, coal mine dust or other occupational dusts found in products manufactured by other defendants or generally in the workplace. A minority of the lawsuits and claims resolved by and currently pending against the Company generally allege personal injury from occupational exposure to asbestos from products previously manufactured by the Company, which are often unspecified, as well as products manufactured by other defendants, or occasionally at Company premises.

The Company's current volume of new and pending matters is substantially lower than it experienced at the peak of filings in 2003. The Company expects that filing of claims by unimpaired claimants in the future will continue to be at much lower levels than in the past. Accordingly, the number of claims alleging more serious injuries, including mesothelioma, other malignancies, and black lung disease, will represent a greater percentage of total claims than in the past. Over the past twenty plus years, the Company has prevailed in fifteen of the sixteen cases tried to a jury (including the lawsuits in 2018 described below). In 2018, 3M received a jury verdict in its favor in two lawsuits - one in California state court in February and the other in Massachusetts state court in December - both involving allegations that 3M respirators were defective and failed to protect the plaintiffs against asbestos fibers. In April 2018, a jury in state court in Kentucky found 3M's 8710 respirators failed to protect two coal miners from coal mine dust and awarded compensatory damages of approximately $2 million and punitive damages totaling $63 million. In August 2018, the trial court entered judgment and the Company appealed. During March and April 2019, the Company agreed in principle to settle a substantial majority of the then-pending coal mine dust lawsuits in Kentucky and West Virginia for $340 million, including the jury verdict in April 2018 in the Kentucky case mentioned above. That settlement was completed in 2019, and the appeal has been dismissed. In October 2020, 3M defended a respirator case before a jury in King County, Washington, involving a former shipyard worker who alleged 3M's 8710 respirator was defective and that 3M acted negligently in failing to protect him against asbestos fibers. The jury delivered a complete defense verdict in favor of 3M, concluding that the 8710 respirator was not defective in design or warnings and any conduct by 3M was not a cause of plaintiff's mesothelioma. The plaintiff's appeal is pending.

The Company has demonstrated in these past trial proceedings that its respiratory protection products are effective as claimed when used in the intended manner and in the intended circumstances. Consequently, the Company believes that claimants are unable to establish that their medical conditions, even if significant, are attributable to the Company's respiratory protection products. Nonetheless, the Company's litigation experience indicates that claims of persons alleging more serious injuries, including mesothelioma, other malignancies, and black lung disease, are costlier to resolve than the claims of unimpaired persons, and it therefore believes the average cost of resolving pending and future claims on a per-claim basis will continue to be higher than it experienced in prior periods when the vast majority of claims were asserted by medically unimpaired claimants. In addition, during the second half of 2020 and through September 30, 2021, the Company has experienced an increase in the number of cases filed that allege injuries from exposures to coal mine dust.

As previously reported, the State of West Virginia, through its Attorney General, filed a complaint in 2003 against the Company and two other manufacturers of respiratory protection products in the Circuit Court of Lincoln County, West Virginia, and amended its complaint in 2005. The amended complaint seeks substantial, but unspecified, compensatory damages primarily for reimbursement of the costs allegedly incurred by the State for worker's compensation and healthcare benefits provided to all workers with occupational pneumoconiosis and unspecified punitive damages. In October 2019, the court granted the State's motion to sever its unfair trade practices claim. In January 2020, the manufacturers filed a petition with the West Virginia Supreme Court, challenging the trial court's rulings; that petition was denied in November 2020. No liability has been recorded for this matter because the Company believes that liability is not probable and reasonably estimable at this time. In addition, the Company is not able to estimate a possible loss or range of loss given the lack of any meaningful discovery responses by the State of West Virginia, the otherwise minimal activity in this case, and the assertions of claims against two other manufacturers where a defendant's share of liability may turn on the law of joint and several liability and by the amount of fault, if any, a jury may allocate to each defendant if the case were ultimately tried.

Respirator Mask/Asbestos Liabilities and Insurance Receivables

The Company regularly conducts a comprehensive legal review of its respirator mask/asbestos liabilities. The Company reviews recent and historical claims data, including without limitation, (i) the number of pending claims filed against the Company, (ii) the nature and mix of those claims (i.e., the proportion of claims asserting usage of the Company's mask or respirator products and alleging exposure to each of asbestos, silica, coal or other occupational dusts, and claims pleading use of asbestos-containing products allegedly manufactured by the Company), (iii) the costs to defend and resolve pending claims, and (iv) trends in filing rates and in costs to defend and resolve claims, (collectively, the "Claims Data"). As part of its comprehensive legal review, the Company regularly provides the Claims Data to a third party with expertise in determining the impact of Claims Data on future filing trends and costs. The third party assists the Company in estimating the costs to defend and resolve pending and future claims. The Company uses these estimates to develop its best estimate of probable liability.

Developments may occur that could affect the Company's estimate of its liabilities. These developments include, but are not limited to, significant changes in (i) the key assumptions underlying the Company's accrual, including, the number of future claims, the nature and mix of those claims, the average cost of defending and resolving claims, and in maintaining trial readiness (ii) trial and appellate outcomes, (iii) the law and procedure applicable to these claims, and (iv) the financial viability of other co-defendants and insurers.

As a result of its review of its respirator mask/asbestos liabilities, of pending and expected lawsuits and of the cost of resolving claims of persons who claim more serious injuries, including mesothelioma, other malignancies, and black lung disease, the Company increased its accruals in the first nine months of 2021 for respirator mask/asbestos liabilities by $80 million. In the first nine months of 2021, the Company made payments for legal defense costs and settlements of $87 million related to the respirator mask/asbestos litigation. As previously disclosed, during the first quarter of 2019, the Company recorded a pre-tax charge of $313 million in conjunction with an increase in the accrual as a result of the March and April 2019 settlements-in-principle of the coal mine dust lawsuits mentioned above and the Company's assessment of other then current and expected coal mine dust lawsuits (including the costs to resolve all then current and expected coal mine dust lawsuits in Kentucky and West Virginia at the time of the charge). As of September 30, 2021, the Company had an accrual for respirator mask/asbestos liabilities (excluding Aearo accruals) of $655 million. This accrual represents the Company's best estimate of probable loss and reflects an estimation period for future claims that may be filed against the Company approaching the year 2050. The Company cannot estimate the amount or upper end of the range of amounts by which the liability may exceed the accrual the Company has established because of the (i) inherent difficulty in projecting the number of claims that have not yet been asserted or the time period in which future claims may be asserted, (ii) the complaints nearly always assert claims against multiple defendants where the damages alleged are typically not attributed to individual defendants so that a defendant's share of liability may turn on the law of joint and several liability, which can vary by state, (iii) the multiple factors described above that the Company considers in estimating its liabilities, and (iv) the several possible developments described above that may occur that could affect the Company's estimate of liabilities.

As of September 30, 2021, the Company's receivable for insurance recoveries related to the respirator mask/asbestos litigation was $4 million. The Company continues to seek coverage under the policies of certain insolvent and other insurers. Once those claims for coverage are resolved, the Company will have collected substantially all of its remaining insurance coverage for respirator mask/asbestos claims.

Respirator Mask/Asbestos Litigation - Aearo Technologies

On April 1, 2008, a subsidiary of the Company acquired the stock of Aearo Holding Corp., the parent of Aearo Technologies ("Aearo"). Aearo manufactured and sold various products, including personal protection equipment, such as eye, ear, head, face, fall and certain respiratory protection products.

As of September 30, 2021, Aearo and/or other companies that previously owned and operated Aearo's respirator business (American Optical Corporation, Warner-Lambert LLC, AO Corp. and Cabot Corporation ("Cabot")) are named defendants, with multiple co-defendants, including the Company, in numerous lawsuits in various courts in which plaintiffs allege use of mask and respirator products and seek damages from Aearo and other defendants for alleged personal injury from workplace exposures to asbestos, silica-related, coal mine dust, or other occupational dusts found in products manufactured by other defendants or generally in the workplace.

As of September 30, 2021, the Company, through its Aearo subsidiary, had accruals of $29 million for product liabilities and defense costs related to current and future Aearo-related asbestos, silica-related and coal mine dust claims. This accrual represents the Company's best estimate of Aearo's probable loss and reflects an estimation period for future claims that may be filed against Aearo approaching the year 2050. The accrual was reduced by $37 million during the second quarter of 2020 after paying Aearo's share of certain settlements under the informal arrangement described below. The accrual reflects the Company's assessment of pending and expected lawsuits, its review of its respirator mask/asbestos liabilities, and the cost of resolving claims of persons who claim more serious injuries. Responsibility for legal costs, as well as for settlements and judgments, is currently shared in an informal arrangement among Aearo, Cabot, American Optical Corporation and a subsidiary of Warner Lambert and their respective insurers (the "Payor Group"). Liability is allocated among the parties based on the number of years each company sold respiratory products under the "AO Safety" brand and/or owned the AO Safety Division of American Optical Corporation and the alleged years of exposure of the individual plaintiff.

Aearo's share of the contingent liability is further limited by an agreement entered into between Aearo and Cabot on July 11, 1995. This agreement provides that, so long as Aearo pays to Cabot a quarterly fee of $100,000, Cabot will retain responsibility and liability for, and indemnify Aearo against, any product liability claims involving exposure to asbestos, silica, or silica products for respirators sold prior to July 11, 1995. Because of the difficulty in determining how long a particular respirator remains in the stream of commerce after being sold, Aearo and Cabot have applied the agreement to claims arising out of the alleged use of respirators involving exposure to asbestos, silica or silica products prior to January 1, 1997. With these arrangements in place, Aearo's potential liability is limited to exposures alleged to have arisen from the use of respirators involving exposure to asbestos, silica, or silica products on or after January 1, 1997. To date, Aearo has elected to pay the quarterly fee. Aearo could potentially be exposed to additional claims for some part of the pre-July 11, 1995 period covered by its agreement with Cabot if Aearo elects to discontinue its participation in this arrangement, or if Cabot is no longer able to meet its obligations in these matters.

Developments may occur that could affect the estimate of Aearo's liabilities. These developments include, but are not limited to: (i) significant changes in the number of future claims, (ii) significant changes in the average cost of resolving claims, (iii) significant changes in the legal costs of defending these claims, (iv) significant changes in the mix and nature of claims received, (v) trial and appellate outcomes, (vi) significant changes in the law and procedure applicable to these claims, (vii) significant changes in the liability allocation among the co-defendants, (viii) the financial viability of members of the Payor Group including exhaustion of available insurance coverage limits, and/or (ix) a determination that the interpretation of the contractual obligations on which Aearo has estimated its share of liability is inaccurate. The Company cannot determine the impact of these potential developments on its current estimate of Aearo's share of liability for these existing and future claims. If any of the developments described above were to occur, the actual amount of these liabilities for existing and future claims could be significantly larger than the amount accrued.

Because of the inherent difficulty in projecting the number of claims that have not yet been asserted, the complexity of allocating responsibility for future claims among the Payor Group, and the several possible developments that may occur that could affect the estimate of Aearo's liabilities, the Company cannot estimate the amount or range of amounts by which Aearo's liability may exceed the accrual the Company has established.

Environmental Matters and Litigation

The Company's operations are subject to environmental laws and regulations including those pertaining to air emissions, wastewater discharges, toxic substances, and the handling and disposal of solid and hazardous wastes enforceable by national, state, and local authorities around the world, and private parties in the United States and abroad. These laws and regulations provide, under certain circumstances, a basis for the remediation of contamination, for capital investment in pollution control equipment, for restoration of or compensation for damages to natural resources, and for personal injury and property damage claims. The Company has incurred, and will continue to incur, costs and capital expenditures in complying with these laws and regulations, defending personal injury and property damage claims, and modifying its business operations in light of its environmental responsibilities. In its effort to satisfy its environmental responsibilities and comply with environmental laws and regulations, the Company has established, and periodically updates, policies relating to environmental standards of performance for its operations worldwide.

Under certain environmental laws, including the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and similar state laws, the Company may be jointly and severally liable, typically with other companies, for the costs of remediation of 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 for such liabilities.

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 perfluorooctanoate (PFOA), perfluorooctane sulfonate (PFOS), perfluorohexane sulfonate (PFHxS), or other per- and polyfluoroalkyl substances (collectively PFAS). As a result of its phase-out decision in May 2000, the Company no longer manufactures certain PFAS compounds including PFOA, PFOS, PFHxS, and their pre-cursor 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. The Company continues to manufacture a variety of shorter chain length PFAS compounds, including, but not limited to, pre-cursor compounds to perfluorobutane sulfonate (PFBS). These compounds are used as input materials to a variety of products, including engineered fluorinated fluids, fluoropolymers and fluorelastomers, as well as surfactants, additives, and coatings. 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 review, control or eliminate the presence of certain PFAS in purchased materials or as byproducts in some of 3M's current fluorochemical manufacturing processes, products, and waste streams.

PFAS Regulatory Activity

Regulatory activities concerning PFAS 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 the European Union, where 3M has manufacturing facilities in countries such as Germany and Belgium, recent regulatory activities have included both preliminary and on-going work on various restrictions under the Regulation concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), including the restriction of PFAS in certain usages and a broader restriction of PFAS as a class. As of the second half of 2020, PFOA is subject to broad restrictions under the EU's Persistent Organic Pollutants (POPs) Regulation. Dyneon, a 3M subsidiary that operates a facility at Gendorf, Germany, has a recycling process for a critical emulsifier from which small amounts of PFOA are present after recycling, as an unintended and unavoidable byproduct of certain earlier process steps. The recycling process removes and concentrates the PFOA for incineration in accordance with applicable waste law. With respect to the applicability of the recently enacted POPs, Dyneon proactively consulted with the relevant German regulatory authority regarding process improvements underway that are designed to ensure compliance with the PFOA limits in the recycled material. In October 2021, Dyneon also discussed with the authority technical complexities it had recently discovered in achieving PFOA reductions. The engagement is ongoing. 

 

In addition, as previously disclosed, 3M Belgium, a subsidiary of the Company, has been working with the Public Flemish Waste Agency (OVAM) for several years to investigate and remediate historical PFOA contaminations at and near its facility in Zwijndrecht, Antwerp, Belgium. In connection with a ring road construction project (the Oosterweel Project) in Antwerp that has involved extensive soil work, an investigative committee with judicial investigatory powers was formed in June 2021 by the Flemish Parliament to investigate PFAS found in the soil and groundwater near 3M's Zwijndrecht facility. The Company testified at Flemish parliamentary committee hearings in June and September 2021 on PFAS-related matters. The Flemish Parliament, the Minister of the Environment, and regulatory authorities have initiated investigations and demands for information related to the release of PFAS from the Zwijndrecht facility. The Company is cooperating with the authorities in the investigations and information requests. Separately, as previously disclosed, the Company is aware that certain residents of Zwijndrecht have filed a criminal complaint with an Antwerp investigatory judge against 3M Belgium, alleging it had unlawfully abandoned waste in violation of its environmental care obligations. 3M Belgium has not been served with any such complaint.

 

In August 2021, the Flemish Government served 3M Belgium with a notice of intent to impose a safety measure (wastewater discharge stoppage) and issued an infraction report alleging permit and/or legal violations in connection with the discharge of certain specific PFAS compounds for alleged lack of specific authorization. Following discussions with the government officials, 3M Belgium implemented a focused safety measure that would allow continued production activities and plans to contest through appeal the underlying legal and factual basis for the safety measure. Separately, the permitting authority has initiated a process to tighten the wastewater discharge limits immediately, and a hearing was held on the limits and discharge permit. An adverse permit action, and an unsuccessful appeal thereof, could adversely impact the facility's normal operations. In September 2021, the Flemish Government served 3M Belgium with a notice of intent to impose an administrative measure related to the removal and potential remediation of soil piles on 3M's Zwijndrecht site. Also in September 2021, the Flemish Region issued a notice of default alleging violations of environmental laws and seeking PFAS-related information, indemnity and a remediation plan for soil and water impacts due to PFAS originating from the Zwijndrecht facility. In September 2021, 3M responded to the notice of default and announced a plan to invest up to 125 million euros in the next three years in actions related to the Zwijndrecht community, including support for an ongoing off-site descriptive soil investigation and appropriate soil remediation, support for local commercial farmers impacted by restrictions on sale of agricultural products, and enhancements to site discharge control technologies.

In the United States, the EPA has developed human health effects documents summarizing the available data studies of both PFOA and PFOS. In May 2016, the EPA announced lifetime health advisory levels for PFOA and PFOS at 70 parts per trillion (ppt) (superseding the provisional levels established by the EPA in 2009 of 400 ppt for PFOA and 200 ppt for PFOS). Where PFOA and PFOS are found together, EPA's lifetime health advisory for PFOA and PFOS combined is also 70 ppt. Lifetime health advisories, which are non-enforceable and non-regulatory, provide information about concentrations of drinking water contaminants at which adverse health effects are not expected to occur over the specified exposure duration.

The U.S. Agency for Toxic Substances and Disease Registry (ATSDR) within the Department of Health and Human Services released a draft Toxicological Profile for PFAS for public review and comment in June 2018. In the draft report, ATSDR proposed draft minimal risk levels (MRLs) for PFOS, PFOA and several other PFAS. An MRL is an estimate of the daily human exposure to a hazardous substance that is likely to be without appreciable risk of adverse non-cancer health effects over a specified duration of exposure. MRLs establish a screening level and are not intended to define cleanup or action levels for ATSDR or other agencies. In May 2021, ATSDR released a final toxicological profile for certain PFAS that preserved the draft MRLs. Earlier, in April 2021, EPA released a final toxicity assessment for PFBS.

As periodically required under the Safe Drinking Water Act (SDWA), the EPA published in May 2012 a list of unregulated substances, including six PFAS chemicals, required to be monitored during the period 2013-2015 by public water system suppliers to determine the extent of their occurrence. Through January 2017, the EPA reported results for 4,920 public water supplies nationwide. Based on the 2016 lifetime health advisory, 13 public water supplies exceeded the level for PFOA and 46 exceeded the level for PFOS (unchanged from the July 2016 EPA summary). 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. In March 2021, EPA proposed including 29 PFAS in the fifth version of the unregulated contaminant monitoring rule. If finalized, monitoring for these additional substances will occur between 2023 and 2025.

In February 2019, the EPA issued a PFAS Action Plan that outlines short- and long-term actions the EPA plans to take to address PFAS - actions that include developing a national drinking water determination for PFOA and PFOS, strengthening enforcement authorities and evaluating cleanup approaches, nationwide drinking water monitoring for PFAS, expanding scientific knowledge for understanding and managing risk from PFAS, and developing consistent risk communication tools for communicating with other agencies and the public. With respect to PFOA and PFOS in groundwater, EPA issued interim recommendations in December 2019, providing guidance for screening levels and preliminary remediation goals for groundwater that is a current or potential drinking water source, to inform final clean-up levels of contaminated sites.

EPA has taken a number of actions to advance its PFAS Action Plan and regulatory agenda and to comply with mandatory actions required by Congress in the National Defense Authorization Act for Fiscal Year 2020. EPA announced in its Spring 2020 Regulatory Agenda, released in June 2020, that it intended to publish a notice of proposed rulemaking to designate PFOA and PFOS as hazardous substances under CERCLA in August 2020. In November 2020, EPA announced it was developing a new analytical method to test for PFAS in wastewater and other environmental media. In December 2020, EPA released for public comment interim guidance on destroying and disposing of certain PFAS and PFAS-containing materials. The Company submitted comments on that draft guidance document. 

In March 2021, EPA published its intention to initiate a process to develop a national primary drinking water regulation for PFOA and PFOS; the process is expected to take several years and will include further analyses, scientific review and opportunities for public comment. EPA also issued an Advance Notice of Proposed Rulemaking (ANPR) in March 2021 to collect information regarding manufacturers of PFAS and the presence and treatment of PFAS in discharges from these manufacturing facilities. The Company responded to that ANPR in May 2021. EPA has also taken several actions to increase reporting and restrictions regarding PFAS under the Toxic Substances Control Act (TSCA) and the Toxics Release Inventory (TRI), which is a part of the Emergency Planning and Community Right-to-Know Act. EPA has added more than 170 PFAS to the list of substances that must be included in TRI reports as of July 2021. In June 2021, EPA published a proposed rule under TSCA that, if adopted, would require certain persons that manufacture (including import) or have manufactured PFAS in any year since 2011 to report information regarding PFAS uses, production volumes, disposal, exposures, and hazards. The Company submitted comments on the proposed rule during the public comment period, which ended in September 2021.

In October 2021, EPA released its "PFAS Strategic Roadmap: EPA's Commitments to Action 2021-2024," which presents EPA's integrated approach to PFAS, including investing in research to increase an understanding of PFAS, pursuing a comprehensive approach to proactively control PFAS exposures to humans and the environment, and broadening and accelerating the scope of clean-up of PFAS in the environment.The 2021-2024 Roadmap sets timelines by which EPA plans to take specific actions, including, among other items, publishing a national PFAS testing strategy, proposing to designate PFOA and PFOS as CERCLA hazardous substances, restricting PFAS discharges from industrial sources through Effluent Limitations Guidelines, publishing the final toxicity assessment for five additional PFAS, requiring water systems to test for 29 PFAS under the Safe Drinking Water Act, and publishing improved analytical methods in eight different environmental matrices to monitor 40 PFAS present in wastewater and stormwater discharges.

Several state legislatures and state agencies have been evaluating or have taken actions related to cleanup standards, groundwater values or drinking water values for PFOS, PFOA, and other PFAS, and 3M has submitted various responsive comments. Those states include the following:

•      Minnesota Department of Health in May 2017 stated that HBVs "are designed to reduce long-term health risks across the population and are based on multiple safety factors to protect the most vulnerable citizens, which makes them overprotective for most of the residents in our state." As of 2021, the current HBVs are 35 ppt for PFOA, 15 ppt for PFOS, 47 ppt for PFHxS and 2 ppb for PFBS. In February 2018, the MDH published reports finding no unusual rates of certain cancers or adverse birth outcomes (low birth rates or premature births) among residents of Washington and Dakota Counties in Minnesota.

•      California finalized drinking water standards for PFOA and PFOS in February 2020.

•      Vermont finalized drinking water standards for a combination of PFOA, PFOS and three other PFAS in March 2020.

•      New Jersey finalized drinking water standards and designated PFOA and PFOS as hazardous substances in June 2020.

•      New York established drinking water standards for PFOA and PFOS in July 2020.

•      New Hampshire established drinking water standards by legislation for certain PFAS, including PFOS and PFOA, in July 2020.

•      Michigan implemented final drinking water standards for certain PFAS, including PFOS and PFOA, in August 2020.

•      Massachusetts published final regulations establishing a drinking water standard relating to six combined PFAS in October 2020.

 

Some other states have also been evaluating or have taken actions relating to PFOA, PFOS and other PFAS in products such as food packaging, carpets and other products. For example, in October 2021, two bills were signed into law in California that prohibit the use of PFAS in children's products and in food packaging. Additionally, in March 2021, California proposed listing PFOA and PFOS as carcinogens, and PFDA, PFHXS, PFNA, and PFUNDA as reproductive toxicants under its Proposition 65 law.

 

In October 2020, 3M and several other parties filed notices of appeal in the appellate division of the Superior Court of New Jersey to challenge the validity of the New Jersey PFOS and PFOA regulations. In January 2021, the appellate division of the court denied the group's motion to stay the regulations. The parties completed briefing on the merits in October 2021. In March 2021, 3M filed a lawsuit against the New York State Department of Health, on the grounds that drinking water levels set by the agency for PFOS and PFOA should be vacated because they are arbitrary and did not comply with statutorily required processes. The court has scheduled oral argument on the merits for November 2021. In April 2021, 3M also filed a lawsuit against the Michigan Department of Environment, Great Lakes, and Energy (EGLE) to invalidate the drinking water standards EGLE promulgated under an accelerated timeline. EGLE moved to dismiss that lawsuit. In September 2021, the court denied EGLE's motion in part, and the parties are proceeding to litigation on the merits of the remaining claims.

The Company cannot predict what additional regulatory actions in the United States, Europe and elsewhere arising from the foregoing or other proceedings and activities, if any, may be taken regarding such compounds or the consequences of any such actions to the Company.

Litigation Related to Historical PFAS Manufacturing Operations in Alabama

As previously reported, a former employee filed a putative class action lawsuit against 3M, BFI Waste Management Systems of Alabama, and others in the Circuit Court of Morgan County, Alabama (the "St. John" case), seeking property damage from exposure to certain perfluorochemicals at or near the Company's Decatur, Alabama, manufacturing facility. The parties have agreed to continue to stay the St. John case, pending ongoing mediation between the parties involved in this case and another case discussed below. Two additional putative class actions filed in the same court by certain residents in the vicinity of the Decatur plant seeking relief on similar grounds (the Chandler case and the Stover case, respectively) are stayed pending the resolution of class certification issues in the St. John case. The Company is in discussions for negotiated resolutions with multiple parties regarding filed claims and pre-litigation disputes related to historical PFAS manufacturing operations in Alabama.

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 PFAS 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. This case has been stayed, pending ongoing mediation and discussions between the parties in conjunction with the St. John case.

In October 2021, 3M reached agreements in principle to resolve litigation with the Tennessee Riverkeeper organization, as well as the plaintiffs in the St. John (including Stover, Owens, and Chandler) matters. The agreements, if finalized and approved by the court, will complement the Interim Consent Order that 3M entered with ADEM in 2020. Key provisions of these agreements include 3M's continued environmental characterization, including sampling of environmental media, such as soil, ground water, and sediment, regarding the potential presence of PFAS at the 3M Decatur facility and legacy disposal sites, as well as supporting the execution of appropriate remedial actions. The estimate of committed actions and other costs are reflected in the Company's balance of accruals for PFAS-related "other environmental liabilities."

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. 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 April 2019, 3M and the Water Authority settled the lawsuit for $35 million, which will fund a new water filtration system, with 3M indemnifying the Water Authority from liability resulting from the resolution of the currently pending and future lawsuits against the Water Authority alleging liability or damages related to 3M PFAS. In October 2021, with respect to the putative class claims brought by the representative plaintiffs who were supplied drinking water by the Water Authority (the "Lindsey" case), the parties reached an agreement in principle, subject to court approval, to resolve the claims for an immaterial amount.

In August 2016, a group of over 200 plaintiffs filed a putative class action against West Morgan-East Lawrence Water and Sewer Authority (Water Authority), 3M, Dyneon, Daikin, BFI, and the City of Decatur in state court in Lawrence County, Alabama (the "Billings" case). Plaintiffs are residents of Lawrence, Morgan and other counties who are or have been customers of the Water Authority. They contend defendants have released PFAS that contaminate the Tennessee River and, in turn, their drinking water, causing damage to their health and properties. In January 2017, the court in the St. John case, discussed above, stayed this litigation pending resolution of the St. John case. Plaintiffs in the Billings case have amended their complaint numerous times to add additional plaintiffs. There are now approximately 4,000 named plaintiffs.

In January 2017, several hundred plaintiffs sued 3M, Dyneon and Daikin America in Lawrence and Morgan Counties, Alabama (the "Owens" case). 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 (Water 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 discharges into the Tennessee River. The plaintiffs contend that, as a result of the alleged discharges, the water supplied by the Water Authority to the plaintiffs was, and is, contaminated with PFOA, PFOS and related chemicals at a level dangerous to humans. The court denied a motion by co-defendant Daikin to stay this case pending resolution of the St. John case, and the case is progressing through discovery. The parties have engaged in negotiations to resolve the litigation.

In November 2017, a putative class action (the "King" case) was filed against 3M, Dyneon, Daikin America and the West Morgan-East Lawrence Water and Sewer Authority (Water Authority) in the U.S. District Court for the Northern District of Alabama. The plaintiffs are residents of Lawrence and Morgan County, Alabama who receive their water from the Water Authority and seek injunctive relief, attorneys' fees, compensatory and punitive damages for their alleged personal injuries. The plaintiffs contend that the defendants own and operate manufacturing and disposal facilities in Decatur, Alabama that have released and continue to release PFOA, PFOS and related chemicals into the groundwater and surface water of their sites, resulting in discharges into the Tennessee River. The plaintiffs contend that, as a result of the alleged discharges, the water supplied by the Water Authority to the plaintiffs was, and is, contaminated with PFOA, PFOS and related chemicals at a level dangerous to humans. In November 2019, the King plaintiffs amended their complaint to withdraw all class allegations. Since then, the plaintiffs have added 37 new individual plaintiffs and voluntarily dismissed five plaintiffs (for a total of 55 plaintiffs). The case is scheduled for trial in July 2023. Discovery in this case is proceeding.

In July 2019, 3M announced that it had initiated an investigation into the possible presence of PFAS in three closed municipal landfills in Decatur that accepted waste from 3M's Decatur plant and other companies in the 1960s through the 1980s. 3M has worked with the City of Decatur and other local and state entities such as Morgan County and Decatur Utilities as it conducted its investigation. In October 2021, 3M reached a collaborative agreement with the City of Decatur, Decatur Utilities and Morgan County, subject to their final approval, under which the Company will contribute approximately $99 million and also continue to address certain PFAS-related matters in the area. The contribution relates to initiatives to improve the quality of life and overall environment in Decatur, including community redevelopment and recreation projects by the City, County and Decatur Utilities. It also includes addressing PFAS matters at the Morgan County landfill and reimbursement of costs previously incurred related to PFAS remediation. In addition to the contribution, 3M will continue to address PFAS at certain other closed municipal sites at which the Company historically disposed waste and continue environmental characterization in the area. This work will complement the Interim Consent Order that 3M entered with ADEM in 2020 and includes sampling of environmental media, such as ground water, regarding the potential presence of PFAS at the 3M Decatur facility and legacy disposal sites as well as supporting the execution of any appropriate remedial actions. The contribution and estimate of committed actions are reflected in the Company's balance of accruals for PFAS-related "other environmental liabilities."

3M is also defending or has received notice of potential lawsuits in state and federal court brought by individual property owners who claim damages related to historical PFAS disposal at former area landfills near their properties. 3M continues to negotiate with property owners and has resolved for an immaterial amount some of the claims brought by them.

In September 2020, the City of Guin Water Works and Sewer Board (Guin WWSB) brought a lawsuit against 3M in Alabama state court alleging that PFAS contamination in the Guin water system stems from manufacturing operations at 3M's Guin facility and disposal activity at a nearby landfill. In this same month, Guin WWSB dismissed its lawsuit without prejudice and has been working with 3M to further investigate the presence of chemicals in the area. The parties, including the City of Guin are in discussions for a negotiated resolution.

Litigation Related to Historical PFAS Manufacturing Operations in Minnesota

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 PFAS, including costs to construct alternative sources of drinking water. In April 2019, 3M and the City of Lake Elmo agreed to settle the lawsuit for less than $5 million.

State Attorneys General Litigation related to PFAS

Minnesota. In December 2010, the State of Minnesota, by its Attorney General, filed a lawsuit in Hennepin County District Court against 3M seeking damages and injunctive relief with respect to the presence of PFAS in the groundwater, surface water, fish or other aquatic life, and sediments in the state of Minnesota (the "NRD Lawsuit"). In February 2018, 3M and the State of Minnesota reached a resolution of the NRD Lawsuit. Under the terms of the settlement, 3M agreed to provide an $850 million grant to the State for a special "3M Water Quality and Sustainability Fund." This Fund, which is administered by the State, will enable projects that support water sustainability in the Twin Cities East Metro region, such as continued delivery of water to residents and enhancing groundwater recharge to support sustainable growth. Other purposes of the grant include habitat and recreation improvements, such as fishing piers, trails, and open space preservation. 3M recorded a pre-tax charge of $897 million, inclusive of legal fees and other related obligations, in the first quarter of 2018 associated with the resolution of this matter.

In connection with the above referenced settlement, the Minnesota Pollution Control Agency and the Department of Natural Resources, as co-trustees of the Fund, released in September 2020 a conceptual drinking water supply plan for the communities in the East Metro area, seeking public comment on three recommended options for utilizing the Fund. In December 2020, 3M submitted preliminary comments on the co-trustees' draft conceptual drinking water supply plan to address legal and technical aspects of the draft plan. The Company and the State continue to discuss those aspects of the draft plan.

New York. The State of New York, by its Attorney General, has filed four lawsuits (in June 2018, February 2019, July 2019, and November 2019) against 3M and other defendants seeking to recover the costs incurred in responding to PFAS contamination allegedly caused by Aqueous Film Forming Foam (AFFF) manufactured by 3M and others. Each of the four suits was filed in Albany County Supreme Court before being removed to federal court, and each has been transferred to the multi-district litigation (MDL) proceeding for AFFF cases, which is discussed further below. The state is seeking compensatory and punitive damages, and injunctive and equitable relief in the form of a monetary fund for the State's reasonably expected future damages, and/or requiring defendants to perform investigative and remedial work.

Ohio. In December 2018, the State of Ohio, by its Attorney General, filed a lawsuit in the Common Pleas Court of Lucas County, Ohio against 3M, Tyco Fire Products LP, Chemguard, Inc., Buckeye Fire Equipment Co., National Foam, Inc., and Angus Fire Armour Corp., seeking injunctive relief and compensatory and punitive damages for remediation costs and alleged injury to Ohio natural resources from AFFF manufacturers. This case was removed to federal court and transferred to the MDL.

New Jersey. In March 2019, the New Jersey Attorney General filed two actions against 3M, DuPont, and Chemours on behalf of the New Jersey Department of Environmental Protection (NJDEP), the NJDEP's commissioner, and the New Jersey Spill Compensation Fund regarding alleged discharges at two DuPont facilities in Pennsville, New Jersey (Salem County) and Parlin, New Jersey (Middlesex County). 3M is included as a defendant in both cases because it allegedly supplied PFOA to DuPont for use at the facilities at issue. Both cases expressly seek to have the defendants pay all costs necessary to investigate, remediate, assess, and restore the affected natural resources of New Jersey. DuPont removed these cases to federal court. In June 2020, the court consolidated the two actions, along with two others brought by the NJDEP relating to the DuPont facilities, for case management and pretrial purposes. In August 2020, the NJDEP filed second amended complaints. 3M has moved to dismiss those complaints. Discovery is proceeding in these cases.

In May 2019, the New Jersey Attorney General and NJDEP filed a lawsuit against 3M, DuPont, and six other companies, alleging natural resource damages from AFFF products and seeking damages, including punitive damages, and associated fees. This case was removed to federal court and transferred to the AFFF MDL.

New Hampshire. In May 2019, the New Hampshire Attorney General filed two lawsuits alleging contamination of the state's drinking water supplies and other natural resources by PFAS chemicals. The first lawsuit was filed against 3M and seven co-defendants, alleging PFAS contamination resulting from the use of AFFF products at several sites around the state. This case was removed to federal court and transferred to the AFFF MDL. The second suit asserts PFAS contamination from non-AFFF sources and names 3M, DuPont, and Chemours as defendants. In its June 2020 ruling on defendants' motions to dismiss, the court dismissed the state's trespass claim, but allowed several claims to proceed. In October 2020, the state amended its complaint to add a state commission as plaintiff and make a claim related to the state's drinking water and groundwater trust fund statute. In July 2021, the court granted defendants' motions to dismiss these amendments. In September 2021 the state filed its second amended complaint; the case remains in early stages of litigation.

Vermont. In June 2019, the Vermont Attorney General filed two lawsuits alleging contamination of the state's drinking water supplies and other natural resources by PFAS chemicals. The first lawsuit was filed against 3M and ten co-defendants, alleging PFAS contamination resulting from the use of AFFF products at several sites around the state. This case was removed to federal court and transferred to the AFFF MDL. The second suit asserts PFAS contamination from non-AFFF sources and names 3M and several entities related to DuPont and Chemours as defendants. This suit is proceeding in state court. In May 2020, the court denied the defendants' motion to dismiss, but dismissed the state's trespass claim as to property the state does not own. The parties are now engaged in discovery and have filed a joint motion to extend discovery schedule into 2023 and the court has set a trial-ready date in October 2023.

Michigan. In January 2020, the Michigan Attorney General filed a lawsuit in state court against 3M, Dyneon, DuPont, Chemours and others seeking injunctive and equitable relief and damages for alleged injury to Michigan public natural resources and its residents related to PFAS, excluding AFFF. The case was removed to federal court in March 2021 and subsequently transferred to the AFFF MDL. The state has filed a motion to remand the case to state court. In addition, in August 2020, the Michigan Attorney General filed two lawsuits against numerous AFFF manufacturers and distributors, and suppliers of PFAS to AFFF manufacturers. 3M is named a defendant in one of the lawsuits, filed in federal court, and the case has been transferred to the AFFF MDL, where it remains in early stages of litigation.

Guam. In September 2019, the Attorney General of Guam filed a lawsuit against 3M and other defendants relating to contamination of the territory's drinking water supplies and other natural resources by PFAS, allegedly resulting from the use of AFFF products at several sites around the island. This lawsuit has been removed to federal court and transferred to the AFFF MDL.

Commonwealth of Northern Mariana Islands. In December 2019, the Attorney General of the Commonwealth of Northern Mariana Islands, a U.S. territory, filed a lawsuit against 3M and other defendants relating to contamination of the territory's drinking water supplies and other natural resources by PFAS, allegedly resulting from the use of AFFF products. This lawsuit has been removed to federal court and transferred to the AFFF MDL.

Mississippi. In December 2020, the Mississippi Attorney General filed an AFFF-related PFAS lawsuit against 3M and other defendants directly with the AFFF MDL court in South Carolina. The lawsuit alleges injuries to the State's property and natural resources purportedly caused by PFAS contamination from AFFF use and seeks both compensatory and punitive damages.

Alaska. In April 2021, the State of Alaska filed a lawsuit against 3M and other defendants, alleging damages from the release of PFAS into the environment from a variety of products, including AFFF. This lawsuit was removed to federal court and transferred to the AFFF MDL in August 2021.

In addition to the above state attorneys general actions, several other states and the District of Columbia, through their attorneys general, have announced selection processes to retain outside law firms to bring PFSA-related lawsuits against certain manufacturers including the Company. In addition, the Company is in discussions with several state attorneys general and agencies, responding to information and other requests relating to PFAS matters and exploring potential resolution of some of the matters raised.

Aqueous Film Forming Foam (AFFF) Environmental Litigation

3M manufactured and marketed AFFF for use in firefighting at airports and military bases from approximately 1963 to 2002. As of September 30, 2021, 1,762 lawsuits (including 27 putative class actions) alleging injuries or damages by AFFF use have been filed against 3M (along with other defendants) in various state and federal courts. As further described below, a vast majority of these pending cases are in a federal Multi-District Litigation (MDL) court in South Carolina. Additional AFFF cases continue to be filed in or transferred to the MDL. The Company also continues to defend certain AFFF cases that remain in state court and be in discussions with pre-suit claimants for possible resolutions where appropriate.

In December 2018, the U.S. Judicial Panel on Multidistrict Litigation (JPML) granted motions to transfer and consolidate all AFFF cases pending in federal courts to the U.S. District Court for the District of South Carolina to be managed in an MDL proceeding to centralize pre-trial proceedings. The parties in the MDL are currently in the process of conducting discovery. An initial pool of ten water supplier cases was selected in February 2021 for case-specific fact discovery as potential bellwether cases. In October 2021, the parties and the MDL court selected three of these cases for additional fact and expert discovery and for potential trial as bellwether cases. The MDL court in August 2021 issued a scheduling order and set the first bellwether cases to begin trial on or after January 1, 2023.

In June 2019, several subsidiaries of Valero Energy Corporation, an independent petroleum refiner, filed eight AFFF cases against 3M and other defendants, including DuPont/Chemours, National Foam, Buckeye Fire Equipment, and Kidde-Fenwal, in various state courts. Plaintiffs seek damages that allegedly have been or will be incurred in investigating and remediating PFAS contamination at their properties and replacing or disposing of AFFF products containing long-chain PFAS. Two of these cases have been removed to federal court and transferred to the AFFF MDL. Five cases remain pending in state courts where they are in early stages of litigation, after Valero dismissed its Ohio state court action without prejudice in October 2019. The parties in the state court cases have agreed to stay all five cases until March 2022.

As of September 30, 2021, the Company is aware of six other AFFF suits outside the MDL in which the Company has been named a defendant. Three of these cases are pending in federal court.

Two subsidiaries of Husky Energy filed suit in April 2020 against 3M and other AFFF manufacturers in Wisconsin state court relating to alleged PFAS contamination from AFFF use at Husky facilities in Superior, Wisconsin and Lima, Ohio. The parties have entered into a tolling agreement deferring further action on the plaintiffs' claims. The plaintiffs filed a notice of dismissal without prejudice in September 2020.

Separately, the Company is aware of pre-suit claims or demands by other parties related to the use and disposal of AFFF, one of which purports to represent a large group of firefighters. The Company had discussions with certain potential pre-suit claimants and, as a result of such discussions, reached a negotiated resolution for an immaterial amount with the City of Bemidji in March 2021.

Other PFAS-related Product and Environmental Litigation

3M manufactured and sold various products containing PFOA and PFOS, including Scotchgard, for several decades. Starting in 2017, 3M has been served with individual and putative class action complaints in various state and federal courts alleging, among other things, that 3M's customers' improper disposal of PFOA and PFOS resulted in the contamination of groundwater or surface water. The plaintiffs in these cases generally allege that 3M failed to warn its customers about the hazards of improper disposal of the product. They also generally allege that contaminated groundwater has caused various injuries, including personal injury, loss of use and enjoyment of their properties, diminished property values, investigation costs, and remediation costs. Several companies have been sued along with 3M, including Saint-Gobain Performance Plastics Corp., Honeywell International Inc. f/k/a Allied-Signal Inc. and/or AlliedSignal Laminate Systems, Inc., Wolverine World Wide Inc., Georgia-Pacific LLC, E.I. DuPont De Nemours and Co., Chemours Co., and various carpet manufacturers.

In New York, 3M is defending 40 individual cases and one putative class action filed in the U.S. District Court for the Northern District of New York and four additional individual cases filed in New York state court against 3M, Saint-Gobain Performance Plastics Corp. (Saint-Gobain), Honeywell International Inc. and E.I. DuPont De Nemours and Co. (DuPont). Tonaga, Inc. (Taconic) is also a defendant in the state court actions. Plaintiffs allege that PFOA discharged from fabric coating facilities operated by non-3M entities (that allegedly had used PFOA-containing materials from 3M, among others) contaminated the drinking water in the Village of Hoosick Falls, the Town of Hoosick and Petersburg, New York. They assert various tort claims for personal injury and property damage and in some cases request medical monitoring. 3M has answered the complaints in these individual cases, which are now proceeding through discovery. In the federal court individual cases, the parties selected 24 claimants in May 2021 for a pool from which eight plaintiffs will be chosen for expert discovery and dispositive motions. At the conclusion of these motions, the court will determine which case(s) will continue toward trial. In the putative class action, certain parties, including 3M, reached an agreement to resolve litigation among the settling parties. The settlement agreement received preliminary approval from the district court in July 2021. Under the agreement, 3M, Saint-Gobain and Honeywell will collectively contribute to a fixed total amount of approximately $65 million to resolve the plaintiffs' claims and those of the proposed classes. 3M's contribution is not considered material 3M is also defending 12 individual cases in the U.S. District Court for the Eastern District of New York filed by Nassau and Suffolk County drinking water providers. The plaintiffs in these cases allege that products manufactured by 3M, DuPont, and additional unnamed defendants contaminated plaintiffs' water supply sources with various PFAS compounds. DuPont's motion to transfer these cases to the AFFF MDL was denied in March 2020. 3M has filed answers in these cases and discovery is ongoing.

In Michigan, one consolidated putative class action is pending in the U.S. District Court for the Western District of Michigan against 3M and Wolverine World Wide (Wolverine). The action arises from Wolverine's allegedly improper disposal of materials and wastes, including 3M Scotchgard, related to Wolverine's shoe manufacturing operations. Plaintiffs allege Wolverine used 3M Scotchgard in its manufacturing process and that chemicals from 3M's product contaminated the environment and drinking water sources after disposal. In June 2021, the court partially denied the defendants' motions to dismiss, by granting the motions to dismiss the negligence claim only insofar as the plaintiffs seek damages for personal injuries, as opposed to property damage. In September 2021, the plaintiffs filed a motion to amend the complaint, including to add four new named plaintiffs and putative class representatives. 3M and Wolverine filed a motion to strike the plaintiffs' motion for class certification and opposed plaintiffs' motion to amend the complaint. The court has set a trial date in April 2022. In addition to the consolidated federal court putative class action, as of September 30, 2021, 3M is a defendant in approximately 280 private individual actions in Michigan state court based on similar allegations. These cases are coordinated for pre-trial purposes. Five of these cases were selected over time for bellwether trials. In January 2020, the court issued the first round of dispositive motion rulings related to the first two bellwether cases, including dismissing the second bellwether case entirely and dismissing certain plaintiffs' medical monitoring and risk of future disease claims, and granting summary judgment to the defendants on one plaintiff's cholesterol injury claims. The parties settled the first bellwether case in early 2020 for an immaterial amount. In June 2020, the court denied the plaintiffs' motion to reconsider the dismissal of the second bellwether case, and the plaintiffs have appealed the decision to the state appellate court. In January 2021, the court granted summary judgment in favor of the defendants in one of three remaining bellwether cases. The plaintiffs in this dismissed bellwether case have also appealed the dismissal to the state appellate court. The Company has settled both remaining bellwether cases for an immaterial amount. An additional eight cases have been identified as a pool from which future bellwether cases will be selected. The parties have engaged in mediation efforts in the putative class action and are in discussions in certain state court mass action cases for negotiated resolutions.

Wolverine also filed a third-party complaint against 3M in a suit by the State of Michigan and intervenor townships that sought to compel Wolverine to investigate and address contamination associated with its historic disposal activity. 3M filed an answer and counterclaims to Wolverine's third-party complaint in June 2019. In September and October 2019, the parties (including 3M as third-party defendant) engaged in mediation. In December 2019, the State of Michigan, the intervening townships, and Wolverine announced that they had tentatively resolved the State and townships' claims against Wolverine in exchange for a $70 million payment and certain future remediation measures by Wolverine. In February 2020, the court approved a Consent Decree that memorializes Wolverine's ongoing remediation obligations and the State's and intervening townships' covenants not to bring further lawsuits as to the remediated area. 3M has been formally designated as a "Contributing Party," and as such, the State's and townships' covenants will also apply to 3M. In February 2020, 3M and Wolverine executed an agreement to resolve the legal claims between the two companies. Pursuant to the agreement, 3M made a one-time financial contribution of $55 million in March 2020 to support Wolverine's past and ongoing efforts to address PFAS remediation under Wolverine's Consent Decree with the State and the townships. This amount was part of 3M's charge taken in the fourth quarter of 2019 as discussed below in the "Environmental Liabilities and Insurance Receivables" section.

3M was also a defendant, together with Georgia-Pacific as co-defendant, in a putative class action in federal court in Michigan brought by residents of Parchment, who allege that the municipal drinking water was contaminated from waste generated by a paper mill owned by Georgia-Pacific's corporate predecessor. The defendants' motion to dismiss certain claims in the complaint was denied in January 2021. The parties engaged in mediation and in April 2021 reached a preliminary settlement agreement, subject to court approval, under which 3M and Georgia-Pacific would jointly pay an amount and be released from plaintiffs' putative class action claims. 3M's portion is not considered material. The court approved the settlement in September 2021. Separately, as a result of discussions among Georgia-Pacific, 3M and municipalities near Parchment, Georgia-Pacific and 3M contributed to a fund in November 2020 to provide expanded municipal water service in the area. These municipalities released 3M from claims relating to or arising out of the extension of municipal water or the alleged PFAS contamination in the area of that extension. 3M's portion relative to the preliminary agreement and contribution above was not material.

 

In Alabama and Georgia, 3M, together with multiple co-defendants, is defending three state court cases brought by municipal water utilities, relating to 3M's sale of PFAS-containing products to carpet manufacturers in Georgia. The plaintiffs in these cases allege that the carpet manufacturers improperly discharged PFAS into the surface water and groundwater, contaminating drinking water supplies of cities located downstream along the Coosa River, including Rome, Georgia and Centre and Gadsden, Alabama. The three water utility cases are proceeding through discovery. Another case originally filed in Georgia state court was brought by individuals asserting PFAS contamination by the Georgia carpet manufacturers and seeking economic damages and injunctive relief on behalf of a putative class of Rome and Floyd County water subscribers. This case has been removed to federal court, where 3M filed a motion to dismiss a series of amended complaints, resulting in the dismissal of plaintiffs' negligence claim against 3M. This case is proceeding through discovery. 3M, together with co-defendants, is also defending two putative class actions in federal court, where the plaintiffs seek relief on behalf of a class of individual ratepayers in Summerville, Georgia who allege their water supply was contaminated by PFAS discharged from a textile mill. In May 2021, the City of Summerville filed a motion to intervene in the lawsuit, which remains pending. 3M has moved to dismiss this case. This case remains in early stages of litigation.

 

In California, 3M and other defendants were named as defendants in an action brought in federal court by Golden State Water Company, alleging PFAS contamination of certain wells located in its water systems. 3M filed a motion to dismiss in November 2020 and in January 2021, the court granted defendants' motion to dismiss the case for lack of personal jurisdiction. In February 2021, the plaintiffs voluntarily dismissed their action without prejudice and filed a new case in the AFFF MDL court. Separately, in December 2020, the Orange County Water District and ten additional local water providers sued 3M, Decra Roofing and certain DuPont-related entities in California state court, alleging PFAS contamination of the plaintiffs' water sources and also referring to 3M's industrial minerals facility in Corona, California as a potential source of contamination. The plaintiffs filed an amended complaint, and 3M filed a demurrer to the amended complaint in March 2021. In April 2021, the court denied 3M's demurrer, and the case remains in early stages of litigation. In May 2021, the Orange County plaintiffs filed a second amended complaint. In June 2021, the case was removed to the U.S. District Court for the Central District of California where the plaintiffs moved to remand the case back to state court. The court granted plaintiffs' motion to remand. 3M has appealed the remand decision to the U.S. Court of Appeals for the Ninth Circuit, which is hearing the appeal on an expedited basis, with briefing scheduled to be completed in December 2021. Pending that appeal, in September 2021, the state court ordered that discovery can proceed against 3M. In February 2021, the City of Corona and a local utility authority filed a lawsuit in California state court against 3M and other defendants, alleging PFAS contamination from 3M products generally as well as from 3M's Corona facility and roofing granules products. Plaintiffs filed an amended complaint in June 2021. In July 2021, the case was removed to the U.S. District Court for the Central District of California. The federal court granted plaintiffs' motion to remand the action to state court. In October 2021, 3M filed a demurrer to the amended complaint in state court.

 

In Delaware, 3M, together with several co-defendants, is defending one putative class action brought by individuals alleging PFAS contamination of their water supply resulting from the operations of local metal plating facilities. Plaintiffs allege that 3M supplied PFAS to the metal plating facilities. DuPont, Chemours, and the metal platers have also been named as defendants. This case has been removed from state court to federal court, and plaintiffs have withdrawn its motion to remand to state court and filed an amended complaint. 3M has filed a motion to dismiss the amended complaint. In February 2021, the court raised the question whether subject matter jurisdiction under the Class Action Fairness Act was proper, issued an order requiring the parties to brief the issue and denied defendants' motions to dismiss with leave to renew pending the court's ruling on jurisdiction. Briefing on the jurisdictional question is complete, and oral argument was held in September 2021.

 

In New Jersey, 3M is a defendant in an action brought in federal court by Middlesex Water Company, alleging PFAS

contamination of its water wells. 3M's motion to transfer the case to the AFFF MDL was denied. 3M has moved to dismiss the complaint, and discovery closed in September 2021. The parties expect to engage in mediation. In September 2020, 3M was named a defendant in a similar lawsuit brought by the Borough of Hopatcong. In December 2020, 3M filed a motion to dismiss the Hopatcong matter. In January 2021, 3M was named a defendant in another similar lawsuit brought by the Pequannock Township. In March 2021, 3M filed a motion to dismiss the Pequannock matter. 3M, together with several co-defendants, is also defending twelve cases in New Jersey federal court brought by individuals with private drinking water wells near certain DuPont and Solvay facilities that were allegedly supplied with PFAS by 3M. Plaintiffs in seven of these cases seek medical monitoring and damages, while plaintiffs in the remaining cases seek damages for alleged personal injuries to themselves or their disabled adult children. 3M's motion to dismiss the earliest filed case, which seeks medical monitoring, was largely denied in February 2021. 3M has filed answers in these cases, which remain in early stages of litigation and have been coordinated for discovery purposes. A similar case was filed in federal court in August 2021, but that case has not yet been coordinated with the others for discovery, and 3M has not yet answered the complaint.

 

In October 2018, 3M and other defendants, including DuPont and Chemours, were named in a putative class action in the U.S. District Court for the Southern District of Ohio brought by the named plaintiff, a firefighter allegedly exposed to PFAS chemicals through his use of firefighting foam, purporting to represent a putative class of all U.S. individuals with detectable levels of PFAS in their blood. The plaintiff brings claims for negligence, battery, and conspiracy and seeks injunctive relief, including an order "establishing an independent panel of scientists" to evaluate PFAS. 3M and other entities jointly filed a motion to dismiss in February 2019. In September 2019, the court denied the defendants' motion to dismiss. In February 2020, the court denied 3M's motion to transfer the case to the AFFF MDL. Briefing on plaintiff's class certification motion is complete, and the court's ruling on class certification is pending.

Other PFAS-related Matters

In July 2019, the Company received a written request from the Subcommittee on Environment of the Committee on Oversight and Reform, U.S. House of Representatives, seeking certain documents and information relating to the Company's manufacturing and distribution of PFAS products. In September 2019, a 3M representative testified before and responded to questions from the Subcommittee on Environment with respect to PFAS and the Company's environmental stewardship initiatives. The Company continues to cooperate with the Subcommittee.

The Company continues to make progress in its work, under the supervision of state regulators, to remediate historic disposal of PFAS-containing waste associated with manufacturing operations at its Decatur, Alabama; Cottage Grove, Minnesota; and Cordova, Illinois plants.

As previously reported, the Illinois EPA in August 2014 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.

In Minnesota, 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 PFAS 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 PFAS 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 PFAS for which a HBV and/or HRL exists as a result of contamination from these sites; (iii) remediating identified sources of other PFAS 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. The Company has completed remediation work and continues with operational and maintenance activities at the Oakdale and Woodbury sites. Remediation work has been substantially completed at the Cottage Grove site, with operational and maintenance activities ongoing.

In Alabama, as previously reported, the Company entered into a voluntary remedial action agreement with the Alabama Department of Environmental Management (ADEM) to remediate the presence of PFAS in the soil and groundwater at the Company's manufacturing facility in Decatur, Alabama associated with the historic (1978-1998) incorporation of wastewater treatment plant sludge. With ADEM's agreement, 3M substantially completed installation of a multilayer cap on the former sludge incorporation areas. Further remediation activities, including certain on-site and off-site investigations and studies, will be conducted in accordance with the July 2020 Interim Consent Order described below.

The Company operates under a 2009 consent order issued under the federal Toxic Substances Control Act (TSCA) (the "2009 TSCA consent order") for the manufacture and use of two perfluorinated materials (FBSA and FBSEE) at its Decatur, Alabama site that does not permit release of these materials into "the waters of the United States." In March 2019, the Company halted the manufacture, processing, and use of these materials at the site upon learning that these materials may have been released from certain specified processes at the Decatur site into the Tennessee River. In April 2019, the Company voluntarily disclosed the releases to the U.S. Environmental Protection Agency (EPA) and the Alabama Department of Environmental Management (ADEM). During June and July 2019, the Company took steps to fully control the aforementioned processes by capturing all wastewater produced by the processes and by treating all air emissions. These processes have been back on-line and in operation since July 2019. The Company continues to cooperate with the EPA and ADEM in their investigations and will work with the regulatory authorities to demonstrate compliance with the release restrictions.

The Company is authorized to discharge wastewater from its Decatur plant pursuant to the terms of a Clean Water Act National Pollutant Discharge Elimination System (NPDES) permit issued by ADEM. The NPDES permit requires the Company to report on a monthly and quarterly basis the quality and quantity of pollutants discharged to the Tennessee River. In June 2019, as previously reported, the Company voluntarily disclosed to the EPA and ADEM that it had included incorrect values in certain of its monthly and quarterly reports. The Company has submitted the corrected values to both the EPA and ADEM.

As previously reported, as part of ongoing work with the EPA and ADEM to address compliance matters at the Decatur facility, the Company discovered it had not fully characterized its PFAS discharge in its NPDES permit. In September 2019, the Company disclosed the matter to the EPA and ADEM and announced that it had elected to temporarily idle certain other manufacturing processes at 3M Decatur. The Company is reviewing its operations at the plant, has installed wastewater treatment controls and has restarted idled processes.

As a result of the Company's discussions with ADEM to address these and other related matters in the state of Alabama, as previously reported,  3M and ADEM have agreed to the terms of an interim Consent Order in July 2020 to cover all PFAS-related wastewater discharges and air emissions from the Company's Decatur facility. Under the interim Consent Order, the Company's principal obligations include commitments related to (i) future ongoing site operations such as (a) providing certain notices or reports and performing various analytical and characterization studies and (b) future capital improvements; and (ii) remediation activities, including certain on-site and off-site investigations and studies. Obligations related to ongoing future site operations under the Consent Order will involve additional operating costs and capital expenditures over multiple years. As offsite investigation activities continue, additional remediation amounts may become probable and reasonably estimable in the future.

As previously reported, in December 2019, the Company received a grand jury subpoena from the U.S. Attorney's Office for the Northern District of Alabama for documents related to, among other matters, the Company's compliance with the 2009 TSCA consent order and unpermitted discharges to the Tennessee River. The Company is cooperating with this and other inquiries and is producing documents in response to requests.

In addition, as previously reported, as part of its ongoing evaluation of regulatory compliance at its Cordova, Illinois facility, the Company discovered it had not fully characterized its PFAS discharge in its NPDES permit for the Cordova facility. In November 2019, the Company disclosed this matter to the EPA, and in January 2020 disclosed this matter to the Illinois Environmental Protection Agency (IEPA). The Company continues to work with the EPA and IEPA to address these issues from the Cordova facility.

The Company is also reviewing operations at its other plants with similar manufacturing processes, such as the plant in Cottage Grove, Minnesota, to ensure those operations are in compliance with applicable environmental regulatory requirements and Company policies and procedures. As a result of these reviews, as previously reported, the Company discovered it had not fully characterized its PFAS discharge in its NPDES permit for the Cottage Grove facility. In March 2020, the Company disclosed this matter to the Minnesota Pollution Control Agency (MPCA) and the EPA. In July 2020, the Company received an information request from MPCA for documents and information related to, among other matters, the Company's compliance with the Clean Water Act at its Cottage Grove facility. The Company is cooperating with this inquiry and is producing documents and information in response to the request for information. The Company continues to work with the MPCA and EPA to address the discharges from the Cottage Grove facility.

Separately, as previously reported, in June 2020, the Company reported to EPA and MPCA that it had not fully complied with elements of the inspection, characterization and waste stream profile verification process of the Waste and Feedstream Analysis Plan (WAP/FAP) of its Resource Conservation and Recovery Act (RCRA) permit for its Cottage Grove incinerator. In July 2020, the Company received an information request from MPCA related to the June 2020 disclosure, to which the Company responded in September 2020. The Company continues to work with the MPCA to address WAP/FAP implementation issues disclosed in June 2020. In January 2021, the Company received a notice of violation (NOV) from MPCA related to, among other matters, the above-described Clean Water Act and RCRA issues. The Company is cooperating with MPCA to address the issues that are the subject of the NOV.

In February 2020, as previously reported, the Company received an information request from EPA for documents and information related to, among other matters, the Company's compliance with the Clean Water Act at its facilities that manufacture, process and use PFAS, including the Decatur, Cordova and Cottage Grove facilities. The Company is cooperating with this inquiry and is producing documents and information in response to the request for information.

The Company continues to work with relevant federal and state agencies (including EPA, the U.S. Department of Justice, state environmental agencies and state attorneys general) as it conducts these reviews and responds to information, inspection and other requests from the agencies. The Company cannot predict at this time the outcomes of resolving these compliance matters, what actions may be taken by the regulatory agencies or the potential consequences to the Company.

Other Environmental Litigation

In July 2018, the Company, along with more than 120 other companies, was served with a complaint seeking cost recovery and contribution towards the cleaning up of approximately eight miles of the Lower Passaic River in New Jersey. The plaintiff, Occidental Chemical Corporation, alleges that it agreed to design and pay the estimated $165 million cost to remove and cap sediment containing eight chemicals of concern, including PCBs and dioxins. The complaint seeks to spread those costs among the defendants, including the Company. The Company's involvement in the case relates to its past use of two commercial drum conditioning facilities in New Jersey. Whether, and to what extent, the Company may be required to contribute to the costs at issue in the case remains to be determined.

For environmental matters and litigation described above, unless otherwise described below, no liability has been recorded as the Company believes liability in those matters is not probable and reasonably estimable and the Company is not able to estimate a possible loss or range of possible loss at this time. The Company's environmental liabilities and insurance receivables are described below.

Environmental Liabilities and Insurance Receivables

The Company periodically examines whether the contingent liabilities related to the environmental matters and litigation described above are probable and reasonably estimable based on experience and ongoing developments in those matters, including discussions regarding negotiated resolutions. During the first nine months of  2021, as a result of recent developments in ongoing environmental matters and litigation, the Company increased its accrual for PFAS-related other environmental liabilities by $132 million since December 31, 2020 and made related payments of $53 million. As of September 30, 2021, the Company had recorded liabilities of $494 million for "other environmental liabilities." The accruals represent the Company's best estimate of the probable loss in connection with the environmental matters and PFAS-related litigation described above. The Company is not able to estimate a possible loss or range of possible loss in excess of the established accruals at this time.

As of September 30, 2021, the Company had recorded liabilities of $28 million for estimated non-PFAS related "environmental remediation" costs to clean up, treat, or remove hazardous substances at current or former 3M manufacturing or third-party sites. The Company evaluates available facts with respect to each individual site each quarter and 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 .

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 possible loss in excess of the associated established accruals for the reasons described above.

The Company has both pre-1986 general and product liability occurrence coverage and post-1985 occurrence reported product liability and other environmental coverage for environmental matters and litigation. As of September 30, 2021, the Company's receivable for insurance recoveries related to the environmental matters and litigation was $8 million. Various factors could affect the timing and amount of recovery of this and future expected increases in the receivable, including (i) delays in or avoidance of payment by insurers; (ii) the extent to which insurers may become insolvent in the future, (iii) the outcome of negotiations with insurers, and (iv) the scope of the insurers' purported defenses and exclusions to avoid coverage.

Product Liability Litigation

Aearo Technologies sold Dual-Ended Combat Arms - Version 2 earplugs starting in about 2003. 3M acquired Aearo Technologies in 2008 and sold these earplugs from 2008 through 2015, when the product was discontinued. In December 2018, a military veteran filed an individual lawsuit against 3M in the San Bernardino Superior Court in California alleging that he sustained personal injuries while serving in the military caused by 3M's Dual-Ended Combat Arms earplugs - Version 2. The plaintiff asserts claims of product liability and fraudulent misrepresentation and concealment. The plaintiff seeks various damages, including medical and related expenses, loss of income, and punitive damages.

As of September 30, 2021, the Company is a named defendant in approximately 3,522 lawsuits (including 14 putative class actions) in various state and federal courts that purport to represent approximately 13,437 individual claimants making similar allegations. In April 2019, the U.S. Judicial Panel on Multidistrict Litigation granted motions to transfer and consolidate all cases pending in federal courts to the U.S. District Court for the Northern District of Florida to be managed in a multi-district litigation (MDL) proceeding to centralize pre-trial proceedings. The plaintiffs and 3M filed preliminary summary judgment motions on the government contractor defense. In July 2020, the MDL court granted the plaintiffs' summary judgment motion and denied the defendants' summary judgment motion, ruling that plaintiffs' claims are not barred by the government contractor defense. The court denied the Company's request to immediately certify the summary judgment ruling for appeal to the U.S. Court of Appeals for the Eleventh Circuit. In December 2020, the court granted the plaintiffs' motion to consolidate three plaintiffs for the first bellwether trial, which began in March 2021.

In April 2021, 3M received an adverse jury verdict in the first bellwether trial. The jury awarded the t