Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of 3M’s financial statements with a narrative from the perspective of management. 3M’s MD&A is presented in the following sections:
• Overview
• Results of Operations
• Performance by Business Segment
• Performance by Geographic Area
• Critical Accounting Estimates
• New Accounting Pronouncements
• Financial Condition and Liquidity
• Financial Instruments
Forward-looking statements in Item 7 may involve risks and uncertainties that could cause results to differ materially from those projected (refer to the section entitled Cautionary Note Concerning Factors That May Affect Future Results in Item 1 and the risk factors provided in Item 1A for discussion of these risks and uncertainties).
Additional information about results of operations and financial condition for 2024 and 2023 (including the detailed discussion of the prior year 2024 to 2023 year-over-year changes) can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations sections in 3M's Annual Report on Form 10-K for the year ended December 31, 2024.
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Overview
3M is a diversified global manufacturer, technology innovator and marketer of a wide variety of products and services. As discussed in Note 1, certain changes are reflective in this document for all applicable periods presented.
As discussed in Note 2, on April 1, 2024, 3M completed the separation of its Health Care business (the Separation) through a pro rata distribution of 80.1% of the outstanding shares of Solventum Corporation (Solventum) to 3M stockholders. As a result, Solventum became an independent public company, 3M no longer consolidated Solventum into 3M’s financial results and the historical net income of Solventum, and applicable assets and liabilities included in the Separation were reported in 3M's consolidated financial statements as discontinued operations.
3M manages its continuing operations in three operating business segments: Safety and Industrial; Transportation and Electronics; and Consumer. From a geographic perspective, EMEA refers to Europe, the Middle East, and Africa on a combined basis.
Unless otherwise noted, any sales change analysis compares 2025 with 2024, year-on-year (YoY).
Financial highlights for 2025 and 2024:
GAAP
Adjusted (a)
GAAP
Adjusted (a)
Net sales (millions)
Total sales change
Organic sales change (b)
(a) The Company refers to various "adjusted" amounts or measures on an “adjusted" basis. These exclude special items. These non-GAAP measures are further described and reconciled to the most directly comparable GAAP financial measures in the Certain amounts adjusted for special items - (non-GAAP measures) section below.
(b) Organic sales change (which includes both organic volume and selling price impacts), is defined as the change in net sales, absent the impacts from foreign currency translation and acquisitions, net of divestitures. 3M believes this information is useful to investors and management in understanding ongoing operations and in analysis of ongoing operating trends.
Net sales change was driven by strength in safety and general industrial and supported by commercial excellence and new product introductions. These were partially offset by known softness in auto aftermarket, roofing granules, commercial vehicles, and consumer, and the YoY impact of the manufactured PFAS products special item.
GAAP
Adjusted (a)
GAAP
Adjusted (a)
Operating income margin
YoY change in operating income margin
ppts
ppts
ppts
ppts
GAAP operating margins were affected by the YoY impact of special items. These primarily included an increase in net costs for significant litigation impacting operating income from the 2025 PFAS-related New Jersey Settlement and updates to site remediation obligations (discussed in Note 17), partially offset by increased insurance recoveries; manufactured PFAS products impacts; a 2025 charge associated with divestiture activity (discussed in Note 4); and 2025 transformation costs.
Outside of special items, both GAAP and adjusted operating margins reflect benefits from growth, productivity, and lower restructuring costs (apart from the transformation costs special item), partially offset by growth investments and tariff impacts. Additionally, margins YoY were impacted by cost dis-synergies (from the exit of PFAS manufacturing and 2024 spin of Solventum); by transition service agreement reimbursement from Solventum, which began in the second quarter of 2024; and by the lower extent of stock-based compensation grants (see the Certain Expenses Impacting Multiple Line Items within Results of Operation discussion below).
GAAP
Adjusted (a)
GAAP
Adjusted (a)
Earning per diluted share (EPS)
YoY change in EPS
GAAP EPS YoY was affected by the net impact of special items. In addition to special items relative to operating income discussed above, this primarily included the YOY impact of the change in value of Solventum ownership, a $0.8 billion pre-tax pension settlement charge in 2024 (as discussed in Note 13), and the YOY impact of imputed interest associated with obligations resulting from significant litigation.
Outside of special items, both GAAP and adjusted EPS reflect the impact of the other operating income items discussed above, as well as a 2025 gain on the sale of an investment (see the Income from Unconsolidated Subsidiaries, Net of Taxes discussion below) and the impact of lower share count. These were partially offset by higher non-operating net interest expense and pension expense (both apart from special items).
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3M completed its exit of PFAS manufacturing at the end of 2025 as discussed in Part I, Item 1A, “Risk Factors” of this document. Decisions or circumstances associated with the extent and type of remaining activity at particular locations and impacts on assets and potential obligations, among other factors, could result in additional expenses.
Results of Operations
Net Sales: Percent change information compares 2025 and 2024, unless otherwise indicated. Discussion of business segment results is provided in the Performance by Business Segment section. Information regarding sales by geographic area is included below.
Americas
Asia Pacific
EMEA
Worldwide
Net sales (millions)
% of worldwide sales
Components of net sales change:
Organic sales (b)
Divestitures (c)
Translation
Total sales change
Americas
Asia Pacific
EMEA
Worldwide
Net sales (millions)
% of worldwide sales
Components of net sales change:
Organic sales (b)
Acquisitions (c)
Divestitures (c)
Translation
Total sales change
(c) Acquisition and divestiture sales change impacts are measured separately for the first twelve months post-transaction and, beginning April 2024, include, within divestitures, the impact of commercial agreements associated with the separation of Solventum.
Operating Expenses:
(Percent of net sales)
Change
Cost of sales
Selling, general and administrative expenses (SG&A)
Research, development and related expenses (R&D)
Loss on business divestitures
Operating income margin
Cost of Sales measured as a percent of sales: Increases in 2025 were primarily due to foreign currency impacts; tariffs; the exit of manufactured PFAS products; and net costs for significant litigation for updates to site remediation obligations partially, offset by ongoing procurement and logistics savings; and quality cost improvement. Additionally, cost of sales in 2025, was impacted by cost dis-synergies (from the exit of PFAS manufacturing and 2024 spin of Solventum). Decreases in 2024 were primarily due to ongoing manufacturing productivity, procurement and logistics savings net of inflation, along with lower YoY restructuring charges compared to 2023. See also Certain Expenses Impacting Multiple Line Items within Results of Operations subsection further below.
SG&A measured as a percent of sales: Decreases in 2025 were primarily impacted by lower YoY restructuring charges, ongoing cost discipline and productivity, and benefits from insurance recoveries in 2025. These were partially offset by net costs for significant litigation impacting operating income from the 2025 PFAS-related New Jersey Settlement. Additionally, in 2025, SG&A was impacted by the transition service agreement reimbursement, and cost dis-synergies (from the exit of PFAS manufacturing and 2024 spin of Solventum). Decreases in 2024 were primarily driven by lower YoY net costs for significant litigation and restructuring charges compared to 2023. See also Certain Expenses Impacting Multiple Line Items within Results of Operations subsection further below.
R&D measured as a percent of sales: 3M continues to invest in a range of R&D activities from application development, product and manufacturing support, product development and technology development aimed at disruptive innovations. R&D spending also reflects the Company's continued focus on innovation through growth investments and new product introduction. See also Certain Expenses Impacting Multiple Line Items within Results of Operations subsection further below.
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Loss on Business Divestitures measured as a percent of sales : Applicable information is discussed in Note 4, including a write-down for a business classified as held for sale in 2025.
Other Expense (Income), Net: See Note 7 for a detailed breakout of this line item.
Interest expense (net of interest income) : decreased in 2025 compared to the same period YoY and increased in 2024 compared to the same period YoY.
• The decrease in 2025 was impacted by reduced imputed interest associated with obligations resulting from significant litigation (discussed in Note 17) partially offset by lower interest income.
• The increase in 2024 was primarily driven by the addition of imputed interest associated with the obligations resulting from the PWS Settlement and the CAE Settlement in the second and third quarters of 2023, respectively (discussed in Note 17), partially offset by additional interest income.
The non-service pension and postretirement net cost : decreased by approximately $0.7 billion in 2025 and increased by approximately $0.9 billion in 2024.
• These changes were largely due to the $0.8 billion pension settlement charge in 2024, which occurred as a result of transferring a portion of U.S. pension payment obligations and related plan assets to an insurance company (see Note 13). See also Certain Expenses Impacting Multiple Line Items within Results of Operations subsection further below.
Solventum ownership - change in value : decreased by approximately $1.2 billion in 2025 and increased by approximately $1.6 billion in 2024.
Provision for Income Taxes:
(Percent of pre-tax income)
Effective tax rate
Adjusted effective tax rate (a)
The primary factors that increased the Company's 2025 effective tax rate when compared to 2024 were the tax impact of 3M's retained ownership interest in Solventum and net costs of significant litigation. The primary factors impacting 2024 were the effective tax rate benefit on the change in value of 3M's retained ownership interest in Solventum, offset by the effective tax rate on the PWS Settlement and the CAE Settlement (discussed in Note 17).
Income from Unconsolidated Subsidiaries, Net of Taxes:
(Millions)
Income from unconsolidated subsidiaries, net of taxes
Income from unconsolidated subsidiaries, net of taxes, is attributable to the Company’s accounting under the equity method for ownership interests in certain entities. In 2025, 3M sold its interest in one of these investments, resulting in a pre-tax gain of $47 million. Because this was an ownership disposition, the impact of taxes thereon was reflected separately in provision for income taxes.
Net Income Attributable to Noncontrolling Interest:
(Millions)
Net income attributable to noncontrolling interest
Net income attributable to noncontrolling interest represents the elimination of the income or loss attributable to non-3M ownership interests in 3M consolidated entities. The primary noncontrolling interest relates to 3M India Limited, of which 3M’s effective ownership is 75 percent.
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Certain Expenses Impacting Multiple Line Items within Results of Operations:
Stock compensation is discussed in Note 19 and impacts cost of sales, SG&A, and R&D. YoY stock compensation expense was impacted by the lower extent of the 2025 annual grant.
Pre-tax defined benefit pension and postretirement service cost expense impacts cost of sales, SG&A, and R&D while the non-service cost component of pension and postretirement benefits impacts the other expense (income), net line item. Refer to Note 13 for additional information.
On a continuing operations basis, pre-tax stock compensation expense and defined benefit pension and postretirement expense for the periods presented were the following:
Pre-tax amounts (millions)
Stock compensation expense
Defined benefit pension and postretirement benefit expense
Service cost
Non-service cost (benefit)
Total defined pension and postretirement expense
In 2024, 3M recorded a non-cash pension settlement charge, part of non-service cost above, as a result of transferring a portion of its U.S. pension payment obligations and related plan assets to an insurance company (as discussed in Note 13).
The Company continues to make investments in the implementation of new business systems and solutions, including enterprise resource planning, with the amortization relating to these investments impacting cost of sales, SG&A, and R&D.
Managing currency risks: 3M utilizes a number of tools to manage the impact of changes in foreign currency exchange rates including natural hedges such as pricing, productivity, hard currency, hard currency-indexed billings, and localizing source of supply. 3M also uses certain derivative instruments (with a tenor up to ten years) and non-derivative instruments to mitigate currency risk. As described in Note 15, these include instruments designated as cash flow hedges, net investment hedges or not designated in formal hedge relationships.
3M’s hedging approach is designed to mitigate a portion of foreign currency risk and reduce volatility, ultimately allowing time for 3M’s businesses to respond to changes in the marketplace.
Raw materials: Refer to the section entitled Raw materials in Item 1 for discussion of 3M's sources and availability of raw materials in 2025.
Pension and postretirement defined benefit plans: On a worldwide basis, 3M’s pension and postretirement plans were 98 percent funded at year-end 2025. The primary U.S. qualified pension plan, which is approximately 62 percent of the worldwide pension obligation, was 94 percent funded and the international pension plans were 124 percent funded. The U.S. non-qualified pension plan is not funded due to tax considerations and other factors. 3M strategically invests in both growth assets and fixed income matching assets to manage its funded status. For the primary U.S. qualified pension plan, the expected long-term rate of return for 2026 is 8.0 percent. The U.S. pension plans' year-end 2025 discount rate was 5.41%, a decrease from the year-end 2024 discount rate of 5.64%. The decrease in U.S. discount rates resulted in an increased valuation of the projected benefit obligation (PBO). Additional detail and discussion of international plan asset returns and discount rates is provided in Note 13 (Pension and Postretirement Benefit Plans).
In 2026, the Company expects to contribute an amount in the range of $100 million to $150 million of cash to its U.S. and international retirement plans. Refer to “Critical Accounting Estimates” within MD&A and Note 13 (Pension and Postretirement Benefit Plans) for additional information concerning 3M’s pension and post-retirement plans.
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Performance by Business Segment
Disclosures relating to 3M’s business segments are provided in Note 20. 3M manages its continuing operations in three business segments. The reportable segments are Safety and Industrial; Transportation and Electronics; and Consumer.
Safety and Industrial Business (45.6% of consolidated sales):
Sales (millions)
Sales change analysis:
Organic sales (b)
Translation
Total sales change
Business segment operating income (millions)
Percent change
Percent of sales
Year 2025 results: Sales in Safety and Industrial were up 3.9 percent in U.S. dollars.
Organic sales increased in electrical markets, industrial adhesives and tapes, personal safety, abrasives and industrial specialties, driven by demand in key underlying markets and commercial excellence; challenges in roofing granules and automotive aftermarket resulted in decreased sales.
Business segment operating income margins increased year-on-year primarily driven by benefits from growth, productivity and lower restructuring costs. These benefits were partially offset by continued growth investments in the business and cost dis-synergies due to the exit of PFAS manufacturing and 2024 spin of Solventum.
Adjusting for special item costs for significant litigation (non-GAAP measure) related to respirator mask/asbestos, business segment operating income margins increased YoY from 23.1 percent to 25.4 percent. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below for additional details.
Year 2024 results: Sales in Safety and Industrial were flat in U.S. dollars.
Organic sales increased in roofing granules, industrial adhesives and tapes and in electrical markets due to strong demand for bonding solutions and residential roof replacements, were flat in automotive aftermarket and personal safety, and decreased in industrial specialties and abrasives as industrial end-market demand remained mixed and cautious, including weaker EMEA industrial and manufacturing conditions.
Business segment operating income margins increased year-on-year primarily driven by benefits from growth, productivity and spending discipline partially offset by translation, growth investments and dis-synergies due to the spin of Solventum.
Adjusting for special item costs for significant litigation (non-GAAP measure) related to respirator mask/asbestos, business segment operating income margins increased YoY from 22.0 percent to 23.1 percent. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below for additional details.
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Transportation and Electronics Business (33.2% of consolidated sales):
Sales (millions)
Sales change analysis:
Organic sales (b)
Acquisitions (c)
Divestitures (c)
Translation
Total sales change
Business segment operating income (millions)
Percent change
Percent of sales
Year 2025 results: Sales in Transportation and Electronics were down 1.3 percent in U.S. dollars.
Organic sales increased in commercial branding and transportation and decreased in advanced materials, electronics, and automotive and aerospace, driven by commercial excellence, while growth was negatively impacted by headwinds related to PFAS manufactured products (impacting electronics and advanced materials), the automotive OEM business, and commercial vehicles.
Divestitures:
• Impact relates to the lost sales year-on-year from a divestiture discussed in Note 4.
Business segment operating income margins decreased YoY due to challenging comparison against last year's strong share gains from spec-in wins and new product introductions in automotive and consumer electronics, continued growth investments in the business, and cost dis-synergies due to the exit of PFAS manufacturing and 2024 spin of Solventum, partially offset by benefits from growth, productivity and lower restructuring costs. PFAS manufacturing losses increased YoY as manufacturing concluded in 2025. PFAS manufacturing results were also negatively impacted by updates to depreciable lives and salvage values of remaining treatment-related assets based on site disposition activities.
Adjusted for special item PFAS manufacturing products (non-GAAP measure), sales of $7,603 million were up 2.3 percent YoY in U.S. dollars, or up 2.0 percent organically; while business segment operating income margins decreased YoY from 23.2 percent to 22.7 percent. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below for additional details.
Year 2024 results: Sales in Transportation and Electronics were down 1.4 percent in U.S. dollars.
Organic sales increased in electronics driven by new product launches and spec-wins that supported share gains, were flat in commercial branding and transportation, and decreased in advanced materials due to headwinds in PFAS manufactured products (which also negatively impacted electronics) and in automotive and aerospace from lower automotive OEM build rates.
Acquisitions/divestitures:
• Divestiture and acquisition impacts relate to lost/gained Transportation and Electronics sales year-on-year from the Aearo Entities. In the third quarter of 2022, 3M deconsolidated the Aearo Entities and, in the second quarter of 2023, reconsolidated those entities. For each of the 12-months post-deconsolidation and post-reconsolidation, impacts are each reflected separately as divestiture and acquisition, respectively.
Business segment operating income margins increased year-on-year driven by benefits from non-PFAS manufacturing growth and productivity, spending discipline, and restructuring partially offset by dis-synergies due to the spin of Solventum. Margins were also impacted by decreased PFAS manufacturing.
Adjusting for special item PFAS manufactured products (non-GAAP measure), sales of $7,435 million were up 3.1 percent YoY in U.S. dollars, or up 3.4 percent organically; while business segment operating income margins increased YoY from 21.0 percent to 23.2 percent. Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below for additional details.
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Consumer Business (19.7% of consolidated sales):
Sales (millions)
Sales change analysis:
Organic sales (b)
Translation
Total sales change
Business segment operating income (millions)
Percent change
Percent of sales
Year 2025 results: Sales in Consumer were down 0.2 percent in U.S. dollars.
Organic sales increased in consumer safety and well-being and home and auto care, driven by new product launches, service improvements, and increased advertising and merchandising investment; while soft consumer discretionary spending contributed to flat sales in home improvement and decreased sales in packaging and expression.
Business segment operating income margins increased YoY driven by benefits from growth, productivity, and lower restructuring costs partially offset by continued growth investments in the business and cost dis-synergies due to the exit of PFAS manufacturing and 2024 spin of Solventum.
Year 2024 results: Sales in Consumer were down 1.9 percent in U.S. dollars.
Organic sales increased in home improvement, and decreased in home and auto care, packaging and expression and consumer safety and well-being, driven by softness in consumer discretionary spending along with product portfolio and geographic prioritization.
Business segment operating income margins increased year-on-year driven by benefits from productivity actions, portfolio initiatives, and spending discipline partially offset by organic decline and dis-synergies due to the spin of Solventum.
Corporate and Other: Outside of 3M's reportable segments, 3M has Corporate and Other which is not a reportable business segment as it does not meet the segment reporting criteria. Because Corporate and Other includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis. Corporate and Other is further described in Note 20.
Refer to the Certain amounts adjusted for special items - (non-GAAP measures) section below and Note 20 for details on the components of corporate special items and their impact. Corporate-level income, net, increased YoY in 2025, primarily due to the extent of transition arrangement income from divested businesses (and associated costs) largely related to Solventum's April 2024 Separation as well as the extent of non-discontinued operations-eligible former Solventum-allocated costs included in Corporate and Other prior to the Separation. Corporate-level expense, net, decreased YoY in 2024, primarily due to the extent of non-discontinued operations-eligible former Solventum-allocated costs included in Corporate and Other prior to Solventum's April 2024 Separation.
Performance by Geographic Area
While 3M manages its businesses globally and believes its business segment results are the most relevant measure of performance, the Company also utilizes geographic area data as a secondary performance measure. Export sales are generally reported within the geographic area where the final sales to 3M customers are made. A portion of the products or components sold by 3M’s operations to its customers are exported by these customers to different geographic areas. As customers move their operations from one geographic area to another, 3M’s results will follow. Thus, net sales in a particular geographic area are not indicative of end-user consumption in that geographic area. Financial information related to 3M operations in various geographic areas is provided in Note 3 and Note 20.
Refer to the Overview section for a summary of net sales by geographic area and business segment.
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Geographic Area Supplemental Information
Employees as of December 31,
Capital spending
Property, plant and equipment -net - as of December 31,
(Millions, except employees)
Americas
Asia Pacific
Europe, Middle East and Africa
Total Company
Employment: Employment decreased in 2025 when compared to 2024. The above table, as applicable, includes the impact of acquisitions, net of divestitures, and other actions.
Capital Spending/Property, Plant and Equipment - Net: Amounts relative to these items in the above table relate to 3M's continuing operations and do not include amounts associated with discontinued operations (refer to Note 2 for the amount attributed to discontinued operations).YoY changes in capital spending primarily reflect the timing of project execution and the scale of underlying initiatives. Capital spending is also discussed later in MD&A in the section entitled Cash Flows from Investing Activities .
Certain amounts adjusted for special items - (non-GAAP measures)
In addition to reporting financial results in accordance with U.S. GAAP, 3M also provides certain non-GAAP measures. These measures are not in accordance with, nor are they a substitute for GAAP measures, and may not be comparable to similarly titled measures used by other companies.
Certain measures adjust for the impacts of special items. Special items for the periods presented include the items described in the section entitled “Description of special items”. Because 3M provides certain information with respect to business segments, it is noteworthy that special items impacting operating income (loss) are reflected in Corporate and Other, except as described with respect to net costs for significant litigation and manufactured PFAS products items in the “Description of special items” section. The reconciliations below, therefore, also include impacted segments as applicable.
This document contains measures for which 3M provides the reported GAAP measure and a non-GAAP measure adjusted for special items. The document also contains additional measures which are not defined under U.S. GAAP. These measures and reasons 3M believes they are useful to investors (and, as applicable, used by 3M) include:
GAAP amounts for which a measure adjusted for special items is also provided:
Reasons 3M believes the measure is useful
• Net sales (and sales change)
Considered, in addition to segment operating performance, in evaluating and managing operations; useful in understanding underlying business performance, provides additional transparency to special items
• Operating income (loss), segment operating income (loss) and operating income (loss) margin
• Income from continuing operations before taxes
• Provision for income taxes and effective tax rate
• Net income from continuing operations
• EPS from continuing operations
Special items for the periods presented include:
Net costs for significant litigation:
• These relate to 3M's respirator mask/asbestos (which include Aearo and non-Aearo items), PFAS-related other environmental, and Combat Arms Earplugs matters (as discussed in Note 17). Net costs include the impacts of changes in accrued liabilities (including interest imputation on applicable settlement obligations), legal costs, and insurance recoveries, along with the associated tax impacts. Associated tax impacts of significant litigation include impacts on Foreign Derived Intangible Income (FDII), Global Intangible Low Taxed Income (GILTI), foreign tax credits, and tax costs of repatriation. 3M does not consider the elements of the net costs associated with these matters to be normal, operating expenses related to the Company’s ongoing operations, revenue generating activities, business strategy, industry, and regulatory environment. Net costs related to respirator mask/asbestos are reflected as special items in the Safety and Industrial business segment while those impacting operating income (loss) associated with PFAS-related other environmental and Combat Arms Earplugs matters are reflected as corporate special items in Corporate and Other.
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Gain/loss on business divestitures:
• In 2025, 3M reflected a net write-down for a business classified as held for sale and completed a divestiture for immaterial proceeds slightly below the business's book value. In 2023, 3M recorded a gain related to the sale of its dental local anesthetic business partially offset by a loss associated with a contingent indemnification obligation from an earlier divestiture. See Note 4 for additional information.
Divestiture costs:
• These include limited costs that were not eligible to be included within discontinued operations related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture. As a result of completion of the April 2024 separation of Solventum, this includes the tax cost of updating 3M’s previous indefinite reinvestment plans on past unrepatriated earnings through the period of the Separation’s close and to tax positions retained by 3M.
Manufactured PFAS products:
• These amounts relate to sales and estimates of income (loss) regarding manufactured PFAS products that 3M exited by the end of 2025, included within the Transportation and Electronics business segment. Estimated income does not contemplate impacts on non-operating items such as net interest income/expense and the non-service cost components portion of defined benefit plan net periodic benefit costs.
Russia exit benefits:
• In 2023, 3M recorded a gain on final disposal of net assets in Russia.
Pension risk transfer charge:
• In 2024, 3M recorded a non-cash pension settlement charge reflected in other expense (income), net as a result of transferring a portion of its U.S. pension payment obligations and related plan assets to an insurance company (as discussed in Note 13).
Solventum ownership - change in value:
• This amount relates to the change in value of 3M's retained ownership interest in Solventum common stock reflected in other expense (income), net.
Transformation costs:
• These represent net costs associated with 3M's transformation program, intended as a structural redesign of longer-term manufacturing, distribution, and business process services and locations. Accordingly, 3M does not consider the nature or effect of this program to be normal, operating expenses related to the Company’s ongoing operations, revenue generating activities, and day-to-day business strategy. Net costs include restructuring and other related items such as site closure, sale, moving and set-up, accelerated depreciation, and program management.
Amounts from continuing operations
(Dollars in millions, except per share amounts)
Net sales
Operating income (loss)
Operating income (loss) margin
Income (loss) before taxes
Provision (benefit) for income taxes
Effective tax rate
Net income (loss) attributable to 3M
Earnings (loss) per diluted share
Safety and Industrial
GAAP amounts
Adjustments for special items:
Net costs for significant litigation
Adjusted amounts (non-GAAP measures)
Transportation and Electronics
GAAP amounts
Adjustments for special items:
Manufactured PFAS products
Adjusted amounts (non-GAAP measures)
Total Company
GAAP amounts
Adjustments for special items:
Net costs for significant litigation
Gain on business divestitures
Divestiture costs
Manufactured PFAS products
Russia exit benefits
Total special items
Adjusted amounts (non-GAAP measures)
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Amounts from continuing operations
(Dollars in millions, except per share amounts)
Net sales
Operating income
Operating income margin
Income before taxes
Provision for income taxes
Effective tax rate
Net income attributable to 3M
EPS
Safety and Industrial
GAAP amounts
Adjustments for special items:
Net costs for significant litigation
Adjusted amounts (non-GAAP measures)
Transportation and Electronics
GAAP amounts
Adjustments for special items:
Manufactured PFAS products
Adjusted amounts (non-GAAP measures)
Total Company
GAAP amounts
Adjustments for special items:
Net costs for significant litigation
Divestiture costs
Manufactured PFAS products
Pension risk transfer charge
Solventum ownership - change in value
Total special items
Adjusted amounts (non-GAAP measures)
Amounts from continuing operations
(Dollars in millions, except per share amounts)
Net sales
Sales change
Operating income
Operating income margin
Income before taxes
Provision for income taxes
Effective tax rate
Net income attributable to 3M
EPS
EPS percent change
Safety and Industrial
GAAP amounts
Adjustments for special items:
Net costs for significant litigation
Adjusted amounts (non-GAAP measures)
Transportation and Electronics
GAAP amounts
Adjustments for special items:
Manufactured PFAS products
Adjusted amounts (non-GAAP measures)
Total Company
GAAP amounts
Adjustments for special items:
Net costs for significant litigation
Loss on business divestitures
Manufactured PFAS products
Solventum ownership - change in value
Transformation costs
Total special items
Adjusted amounts (non-GAAP measures)
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Sales change
Organic sales
Acquisitions
Divestitures
Translation
Total sales change
Total Company
Remove manufactured PFAS products special item impact
Adjusted total Company (non-GAAP measures)
Transportation and Electronics
Remove manufactured PFAS products special item impact
Adjusted Transportation and Electronics (non-GAAP measures)
Sales change
Organic sales
Acquisitions
Divestitures
Translation
Total sales change
Total Company
Remove manufactured PFAS products special item impact
Adjusted total Company (non-GAAP measures)
Transportation and Electronics
Remove manufactured PFAS products special item impact
Adjusted Transportation and Electronics (non-GAAP measures)
Critical Accounting Estimates
Information regarding significant accounting policies is included in Note 1 to the consolidated financial statements. As stated in Note 1, the preparation of financial statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make certain estimates and assumptions. Such estimates and assumptions are subject to inherent uncertainties which may result in actual amounts differing from these estimates.
The Company considers the items below to be critical accounting estimates. Critical accounting estimates are those estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the Company. Senior management has discussed the development, selection and disclosure of its critical accounting estimates with the Audit Committee of 3M’s Board of Directors.
Legal Proceedings: Assessments of lawsuits and claims can involve a series of complex judgments about future events, the outcomes of which are inherently uncertain, and can rely heavily on estimates and assumptions. The Company accrues an estimated liability for legal proceeding claims that are both probable and reasonably estimable in accordance with Accounting Standard Codification (ASC) 450, Contingencies . Please refer to the section entitled Process for Disclosure and Recording of Liabilities Related to Legal Proceedings (contained in Legal Proceedings in Note 17) for additional information about such estimates.
Pension and Postretirement Obligations: The Company applies certain estimates for the discount rates and expected return on plan assets in determining its defined benefit pension and postretirement obligations and related net periodic benefit costs. The below further describes these estimates. Note 13 provides the weighted averages of these assumptions as of applicable dates and for respective periods and additional information on how the rates were determined.
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Discount rate
The defined benefit pension and postretirement obligation represents the present value of the benefits that employees are entitled to in the future for services already rendered as of the measurement date. The annual measurement date is December 31. The Company measures the present value of these future benefits by projecting benefit payment cash flows for each future period and discounting these cash flows back to the measurement date, using the yields of a portfolio of high quality, fixed-income debt instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits. Service cost and interest cost are measured separately using the spot yield curve approach applied to each corresponding obligation. Service costs are determined based on duration-specific spot rates applied to the service cost cash flows. The interest cost calculation is determined by applying duration-specific spot rates to the year-by-year projected benefit payments. The spot yield curve approach does not affect the measurement of the total benefit obligations as the change in service and interest costs offset the actuarial gains and losses recorded in other comprehensive income. Changes in expected benefit payment and service cost cash flows, as well as ongoing changes in market activity and yields, cause these rates to be subject to uncertainty.
Using this methodology, the Company determined discount rates for its plans as follow:
Weighted average
U.S. Pension
International Pension
Postretirement Benefits
December 31, 2025 Liability:
Benefit obligation
2025 Net Periodic Benefit Cost Components:
Service cost
Interest cost
Expected return on plan assets
The expected return on plan assets for the primary U.S. qualified pension plan is based on strategic asset allocation of the plan, long-term capital market return expectations, and expected performance from active investment management. For the primary U.S. qualified pension plan, the expected long-term rate of return for 2026 is 8.0 percent, no change from the 8.0% in 2025. Return on assets assumptions for international pension and other post-retirement benefit plans are calculated on a plan-by-plan basis using plan asset allocations and expected long-term rate of return assumptions. The weighted average expected return for the international pension plans is 5.33% for 2026 compared to 5.0% for 2025. Changes in asset allocation and market performance over time, among other factors, cause these estimates to be subject to uncertainty.
In 2025, the Company recognized pre-tax defined benefit pension and postretirement benefit service cost expense of $168 million and non-service pension and postretirement net benefit costs (including settlements, curtailments, special termination benefits and other) of $104 million for a total pre-tax continuing operations defined benefit pension and postretirement expense of $272 million, down from $1,022 million in 2024. The 2024 amounts include $0.8 billion pension settlement charge associated the pension risk transfer special item (discussed in Note 13).
Assessments of Goodwill: The Company makes certain estimates and judgments in impairment assessments of goodwill. As of December 31, 2025, 3M goodwill totaled approximately $6.4 billion. Goodwill is tested for impairment annually in the fourth quarter of each year and is tested between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. If future non-cash asset impairment charges are taken, 3M would expect that only a portion of the goodwill would be impaired.
Impairment testing for goodwill is done at a reporting unit level, with all goodwill assigned to a reporting unit. Reporting units are one level below the operating segment level, but are required to be combined when reporting units within the same segment have similar economic characteristics. At 3M, reporting units correspond to a division. 3M did not combine any of its reporting units for impairment testing. An impairment loss would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit, and the loss would equal that difference. The estimated fair value of a reporting unit is determined based on a market approach using comparable company information such as EBITDA (earnings before interest, taxes, depreciation and amortization) multiples. 3M also performs a discounted cash flow analysis for certain reporting units if the market approach indicates additional review is warranted. A discounted cash flow analysis involves key assumptions including projected sales, EBITDA margins, capital expenditures, and discount rates. Changes in reporting unit earnings, comparable company information, and expected future cash flows, as well as underlying market and overall economic conditions, among other factors, make these estimates subject to uncertainty.
Based on the annual test in the fourth quarter of 2025 completed as of October 1, 2025, no goodwill impairment was indicated for any of the reporting units. As of October 1, 2025, 3M had 16 primary reporting units, with five reporting units accounting for approximately 85 percent of the goodwill. These five reporting units were comprised of the following divisions: Commercial Branding and Transportation, Display Materials and Systems, Electronics Materials Solutions, Industrial Adhesives and Tapes, and Personal Safety.
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Uncertainty in Income Tax Positions: The extent of 3M’s operations involves dealing with uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due. The Company follows guidance provided by ASC 740, Income Taxes , a subset of which relates to uncertainty in income taxes, to record these liabilities (refer to Note 9 for additional information). The Company adjusts these reserves in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the tax liabilities. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary.
New Accounting Pronouncements
Information regarding new accounting pronouncements is included in Note 1 to the Consolidated Financial Statements.
Financial Condition and Liquidity
The strength and stability of 3M’s business model and strong free cash flow capability, together with proven capital markets access, provide financial flexibility to deploy capital in accordance with the Company's stated priorities and meet needs associated with contractual commitments and other obligations. Investing in 3M’s business to drive organic growth and deliver strong returns on invested capital remains the first priority for capital deployment. This includes research and development, capital expenditures, and commercialization capability. The Company also continues to actively manage its portfolio through acquisitions and divestitures to maximize value for shareholders. 3M expects to continue returning cash to shareholders through dividends and share repurchases. To fund cash needs in the United States, the Company relies on ongoing cash flow from U.S. operations, access to capital markets and repatriation of the earnings of its foreign affiliates that are not considered to be permanently reinvested. For those international earnings considered to be reinvested indefinitely, the Company currently has no plans or intentions to repatriate these funds for U.S. operations.
3M maintains a strong liquidity profile. The Company’s primary short-term liquidity needs can be met through cash on hand and U.S. commercial paper issuances. 3M believes it will have continuous access to the commercial paper market. 3M’s commercial paper program permits the Company to have a maximum of $5 billion outstanding with a maximum maturity of 397 days from date of issuance. The Company had no commercial paper outstanding as of December 31, 2025 and 2024.
Total debt: The strength of 3M’s credit profile and significant ongoing cash flows provide 3M proven access to capital markets. Additionally, the Company’s debt maturity profile is staggered to help ensure refinancing needs in any given year are reasonable in proportion to the total portfolio. As of the date of this report, 3M had the following credit ratings:
Credit rating agency
Long-term rating
Outlook
Moody's Investors Service
Stable
S&P Global Ratings
BBB+
Stable
Fitch Ratings
Stable
The Company’s total debt at December 31, 2025, decreased when compared to December 31, 2024, due to debt maturities with an aggregate principal amount of $1.8 billion, partially offset by the issuance of $1.1 billion in aggregate principal amount of debt, and a $0.2 billion impact from foreign currency remeasurement. For discussion of repayments of and proceeds from debt refer to the following Cash Flows from Financing Activities section.
Information with respect to long-term debt issuances and maturities for the periods presented is included in Note 12.
3M has a principal amount of long-term debt of $1.5 billion which will mature in 2026. The Company's financial condition and liquidity enable it to address these obligations by refinancing, redemption or some combination thereof.
3M has a $4.25 billion five-year revolving credit facility that expires in May 2028. The revolving credit agreement includes a provision under which 3M may request an increase of up to $1.0 billion (at lenders' discretion), bringing the total facility up to $5.25 billion. The credit facility was undrawn at December 31, 2025. Under the $4.25 billion credit facility, the Company is required to maintain its EBITDA to Interest Ratio as of the end of each fiscal quarter at not less than 3.0 to 1. This is calculated (based on amounts defined in the amended agreement) as the ratio of consolidated total EBITDA for the four consecutive quarters then ended to total interest expense on all funded debt for the same period. At December 31, 2025, 3M was in compliance with this requirement. Debt covenants do not restrict the payment of dividends.
The Company also had $0.6 billion in stand-alone letters of credit, bank guarantees, and other similar instruments issued and outstanding at December 31, 2025. These instruments are utilized in connection with normal business activities.
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Cash, cash equivalents and marketable securities: Cash, cash equivalents and marketable securities are invested in bank instruments and other high quality securities. The table below provides the breakout of the balance between the Company's foreign subsidiaries and the United States as of December 31, 2025 and December 31, 2024.
(Billions)
December 31, 2025
December 31, 2024
Foreign subsidiaries
United States
Total cash, cash equivalents and marketable securities
The decrease from December 31, 2024, was impacted by $3.4 billion in payments associated with PFAS-related environmental liabilities and the CAE legal settlement (as discussed in Note 17), $3.3 billion in purchases of treasury stock, $1.8 billion in debt maturities, and $1.6 billion in dividend payments. The uses of cash were partially offset by proceeds of $1.6 billion from issuances of treasury shares pursuant to option/benefit plans, $1.1 billion from debt issuance proceeds, and $0.6 billion from the sale of a portion of 3M's interest in Solventum.
Current equity investments: Current equity investments consist of 3M's ownership interest in Solventum Corporation. As of December 31, 2025, 3M owned approximately 15% of Solventum's common stock, with a fair value of $2.0 billion. In August 2025, 3M sold a portion of its holdings, for proceeds of $0.6 billion, and classified its remaining interest as current equity investments (part of other current assets). As previously disclosed, 3M expects to sell its ownership in Solventum within five years of its 2024 spin-off. Sales of 3M's retained stake are subject to regulatory and other restrictions.
Balance Sheet: 3M’s strong balance sheet and liquidity provide the Company with significant flexibility to fund its numerous opportunities going forward. The Company will continue to invest in its operations to drive growth, including continual review of acquisition opportunities.
The Company uses working capital measures that place emphasis and focus on certain working capital assets, such as accounts receivable and inventory activity.
Working capital (non-GAAP measure):
(Millions)
December 31, 2025
December 31, 2024
Change
Current assets
Less: Current liabilities
Working capital (non-GAAP measure)
Various assets and liabilities, including cash and short-term debt, can fluctuate significantly from month to month depending on short-term liquidity needs. Working capital is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies. The Company defines working capital as current assets minus current liabilities. 3M believes working capital is meaningful to investors as a measure of operational efficiency and short-term financial health.
Working capital increased from December 31, 2024, primarily due to lower balances of current liabilities related to PFAS-related environmental liabilities and the CAE legal settlement, short-term borrowings and current portions of long-term debt and higher current assets driven by the 2025 classification of 3M's remaining interest in Solventum within current equity investments (as discussed above) and increases in accounts receivable. This increase was partially offset by declines in cash, cash equivalents, and marketable securities.
Cash Flows: Discussions of cash flows from operating, investing and financing activities are provided in the sections that follow. The Consolidated Statements of Cash Flows include the results of continuing and discontinued operations and, therefore, also include cash and cash equivalents associated with Solventum through its April 2024 separation from 3M that were presented in current assets of discontinued operations in the 3M Consolidated Balance Sheet.
Cash Flows from Operating Activities:
Cash flows from operating activities can fluctuate significantly from period to period, as working capital movements, tax timing differences and other items such as litigation payments can significantly impact cash flows.
In 2025, cash flows provided by operating activities increased by $0.5 billion compared to the same period last year, primarily driven by lower payments associated with PFAS-related environmental liabilities and the CAE legal settlement.
Cash Flows from Investing Activities:
Investments in PP&E enable growth across many diverse markets, helping to meet product demand and increasing manufacturing efficiency. 3M invested $0.9 billion on PP&E in 2025. The Company expects 2026 capital spending to be approximately $1.1 billion as 3M continues to invest in growth, productivity and sustainability.
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Purchases of marketable securities and investments and proceeds from maturities and sale of marketable securities and investments are primarily attributable to certificates of deposit/time deposits, commercial paper, and other securities, which are classified as available-for-sale. Proceeds also include those from sale of portions of 3M's remaining interest in Solventum Corporation. Refer to Note 11 for more details about 3M’s diversified marketable securities portfolio.
Cash Flows from Financing Activities:
2025 Debt Activity: Debt cash flow activity includes $1.8 billion aggregate principal amount of debt maturities partially offset by proceeds from issuance of $1.1 billion in aggregate principal amount of debt in 2025. Gross commercial paper issuances and repayments, in addition to repayments of the fixed-rate notes, are largely reflected in “Proceeds from debt (maturities greater than 90 days)” and "Repayment of debt (maturities greater than 90 days)". 3M’s primary short-term liquidity needs are met through cash on hand and U.S. commercial paper issuances. Refer to Note 12 for more detail regarding debt.
2024 Debt Activity: Debt cash flow activity includes proceeds from Solventum's issuance of $8.4 billion in aggregate principal amount of debt in the first quarter of 2024 partially offset by $2.9 billion in debt maturities, consisting of $1.1 billion of fixed- and floating-rate notes and $1.8 billion repayment of commercial paper borrowings. Gross commercial paper issuances and repayments, in addition to repayments of the fixed-rate notes, are largely reflected in “Proceeds from debt (maturities greater than 90 days)” and "Repayment of debt (maturities greater than 90 days)".
Repurchases of Common Stock: In February 2025, 3M’s Board of Directors replaced the Company’s 2018 repurchase program with a new repurchase program. This new program authorizes the repurchase of up to $7.5 billion of 3M’s outstanding common stock, with no pre-established end date. Repurchases of common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes. In 2025, the Company purchased $3.3 billion of its own stock, compared to $1.8 billion of stock purchases in 2024. As of December 31, 2025, approximately $4.6 billion remained available under the authorization. For more information, refer to the table titled “Issuer Purchases of Equity Securities” in Part II, Item 5. The Company also had $1.6 billion in proceeds from issuance of treasury stock pursuant to stock option and benefit plans in 2025.
Dividends Paid to Shareholders: 3M has paid dividend continuously since 1916. Cash dividends declared and paid totaled $0.73 per share for each quarter of 2025; $1.51 per share for the first quarter of 2024; and $0.70 per share for each of the second, third and fourth quarters of 2024. In February 2026, 3M's Board of Directors declared a first-quarter 2026 dividend of $0.78 per share, an increase of 7 percent.
Cash flows from financing activity in 2024 also include $0.6 billion of net cash transferred to Solventum associated with the close of the Separation (discussed in Note 2).
Other cash flows from financing activities may include various other items, such as cash paid associated with certain derivative instruments, distributions to or sales of noncontrolling interests, changes in overdraft balances, and principal payments for finance leases.
Material Cash Requirements from Known Contractual and Other Obligations: 3M’s material cash requirements from known contractual and other obligations primarily relate to the following, for which information on both a short-term and long-term basis is provided in the indicated notes to the consolidated financial statements:
• Tax obligations—Refer to Note 9.
• Debt—Refer to Note 12. Future cash payments for interest on long-term debt is approximately $5 billion.
• Commitments and contingencies—Refer to Note 17. In addition to other matters discussed therein, Note 17 references that the Company expects to pay up to $12.5 billion in the aggregate from 2023 through 2036 pursuant to the terms of the PWS Settlement and expects to pay up to $6.0 billion in the aggregate from 2023 to 2029 pursuant to the terms of the CAE Settlement. Through December 31, 2025, 3M has paid $8.2 billion in aggregate relating to these settlements. See the settlement agreements that are included in the exhibit list to this filing for additional information.
• Operating and finance leases—Refer to Note 18.
3M purchases the majority of its materials and services as needed, with no unconditional commitments. In limited circumstances, in the normal course of business, 3M enters into unconditional purchase obligations with various vendors that may take the form of, for example, take or pay contracts in which 3M guarantees payment to ensure availability to 3M of certain materials or services or to ensure ongoing efforts on capital projects. The Company expects to receive underlying materials or services for these purchase obligations. To the extent the limited amount of these purchase obligations fluctuates, it largely trends with normal-course changes in regular operating activities. Additionally, contractual capital commitments represent a small part of the Company’s expected capital spending.
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Financial Instruments
The Company enters into foreign exchange forward and option contracts to hedge against the effect of exchange rate fluctuations on cash flows denominated in foreign currencies and to offset, in part, the impacts of changes in value of various non-functional currency denominated items including certain intercompany financing balances. As circumstances warrant, the Company also uses foreign exchange contracts and foreign currency denominated debt as hedging instruments to hedge portions of the Company’s net investments in foreign operations. The Company manages interest rate risks using a mix of fixed and floating rate debt. To help manage borrowing costs, the Company may enter into interest rate swaps. Under these arrangements, the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. The Company manages commodity price risks through negotiated supply contracts and price protection agreements.
Refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, for further discussion of foreign exchange rates risk, interest rates risk and commodity prices risk.
