Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Company's unaudited condensed consolidated and combined financial statements and corresponding notes elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis provides information management believes to be relevant to understanding the financial condition and results of operations of Solventum Corporation ("Solventum," or the "Company") for the six months ended June 30, 2024 and 2023. For a full understanding of our financial condition and results of operations, the below discussion should be read alongside the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Registration Statement on Form 10 as filed with the Securities and Exchange Commission (the "SEC") on March 11, 2024, which became effective on March 13, 2024 (the "Information Statement"). This discussion contains forward-looking statements that are based upon current expectations and are subject to uncertainty and changes in circumstances. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Risk Factors.” Actual results may differ materially from these expectations. See "Cautionary Note Regarding Forward-Looking Statements."

All amounts discussed are in millions of U.S. dollars, unless otherwise indicated. Certain columns and rows within tables may not add up due to the use of rounded numbers.

Unless the context otherwise requires, references to "Solventum" and the "Company" refer to (i) 3M's Health Care Business prior to the Spin-Off as a carve-out business of 3M with related condensed combined financial statements and (ii) Solventum Corporation and its subsidiaries following the Spin-Off with related condensed consolidated financial statements.

Transition to Standalone Company

Solventum utilized allocations and carve-out methodologies through the date of the Spin-Off to prepare historical combined financial statements and condensed combined financial statements. The condensed combined financial statements herein for periods prior to the Spin-Off may not be indicative of the Company's future performance, do not necessarily include the actual expenses that would have been incurred by Solventum, and may not reflect our results of operations, financial position, and cash flows had we been a separate, standalone company during the historical periods presented.

In particular, Solventum benefited from 3M’s long operating history, reputation and well-known brand. Following the separation, Solventum is operating under its own brand, and accordingly may be negatively impacted due to the loss of benefits conferred by 3M’s brand recognition and reputation. In addition, the debt obligations incurred by Solventum in connection with the separation will adversely affect its profitability and could affect its ability to use its cash flow for investing in the business, strategic transactions, including mergers and acquisitions, and returning capital. See Note 1, "Organization and Basis of Presentation" to the condensed consolidated and combined financial statements and Item II, Part 1A "Risk Factors" for additional information.

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

• Overview

• Results of Operations

• Performance by Business Segment

• Financial Condition and Liquidity

Overview

Our Business

Solventum is a leading global healthcare company developing, manufacturing, and commercializing a broad portfolio of solutions that leverages deep material science, data science, and digital capabilities to address critical customer and patient needs. We constantly seek to enable the improvement of standards of care and move healthcare forward with innovation powered by insights, clinical intelligence, technology, and manufacturing expertise. Our 70+ year history of discovering and innovating advanced solutions has helped us solve our customers’ toughest challenges and become a trusted partner.

Operating Segments and Sales Change Information

Solventum manages its operations in four business segments: MedSurg, Dental Solutions, Health Information Systems, and Purification and Filtration.

References are made to organic sales change, which is defined as the change in net sales, absent the separate impacts on sales from foreign currency translation and acquisitions, net of divestitures. Other, as comprised in the tables below, include acquisition and divestiture-related activities. Acquisitions include non-health care related supply agreements that conveyed from 3M to the Company at Spin-Off and sales from new supply agreements with 3M that commenced at Spin-Off. Divestiture impacts include lost sales from the sale of the Company's dental anesthetics business that was sold in August 2023 as well as lost sales of certain health care businesses retained by 3M India in connection with the Spin-Off. Solventum believes this information is useful to investors and management in understanding ongoing operations and in analysis of ongoing operating trends.

Sales and operating income by business segment:

The following tables contain sales and operating results by business segment for all periods presented. The Company's use of the term "NM" reflects results considered not material due to not having material activity in comparable prior years. Refer to the section entitled "—Performance by Business Segment" below for discussion of sales change and operating performance. Refer to Note 15 to the condensed consolidated and combined financial statements for additional information on business segments.

Sales by Business Segment

						Three months ended June 30,
						2024						2023						Sales Change 2024 vs 2023
(Dollars in millions)						Net Sales						Net Sales						Total Sales Change						Translation						Other						Organic Sales
Segment Sales
MedSurg						$	1,162					$	1,161					0.1		%				(1.1)		%				(0.5)		%				1.8		%
Dental Solutions						331						351						(5.8)						(1.5)						(2.4)						(2.0)
Health Information Systems						328						316						3.5						(0.1)						—						3.6
Purification and Filtration						238						248						(3.6)						(1.6)						(1.2)						(0.9)
Corporate and Unallocated						22						—						NM						NM						NM						NM
Total Company						$	2,081					$	2,076					0.2		%				(1.1)		%				—%						1.3		%
						Six months ended June 30,
						2024						2023						Sales Change 2024 vs 2023
(Dollars in millions)						Net Sales						Net Sales						Total Sales Change						Translation						Other						Organic Sales
Segment Sales
MedSurg						$	2,281					$	2,284					(0.1)		%				(0.8)		%				(0.3)		%				1.0		%
Dental Solutions						666						692						(3.8)						(0.9)						(2.1)						(0.8)
Health Information Systems						645						632						2.0						—						—						2.0
Purification and Filtration						483						479						0.9						(1.1)						(0.6)						2.6
Corporate and Unallocated						22						—						NM						NM						NM						NM
Total Company						$	4,097					$	4,087					0.2		%				(0.7)		%				(0.1)		%				1.1		%

Operating Income by Business Segment

						Three months ended June 30,
(Dollars in millions)						2024						2023						2024 vs 2023 change
Segment Operating Income
MedSurg						$	214					$	269					(20.4)		%
Dental Solutions						90						124						(27.4)
Health Information Systems						111						96						15.6
Purification and Filtration						19						50						(62.0)
Corporate and Unallocated						(190)						(122)						55.7
Total Company						$	244					$	417					(41.5)		%
						Six months ended June 30,
(Dollars in millions)						2024						2023						2024 vs 2023 change
Segment Operating Income
MedSurg						$	435					$	522					(16.7)		%
Dental Solutions						200						235						(14.9)
Health Information Systems						212						190						11.6
Purification and Filtration						58						86						(32.6)
Corporate and Unallocated						(280)						(251)						11.6
Total Company						$	625					$	782					(20.1)		%

Sales by geographic area:

Percent change information compares the three and six months ended June 30, 2024 with the same period for the prior year, unless otherwise indicated.

						Three months ended June 30, 2024
						United States						International						Worldwide
Net sales (millions)						$	1,199					$	882					$	2,081
% of worldwide sales						57.6		%				42.4		%				100.0		%
Components of net sales change:
Total sales change						4.8		%				(5.4)		%				0.2		%
Translation						—						(2.4)						(1.1)
Other						0.3						(0.3)						—
Organic sales						4.5		%				(2.7)		%				1.3		%
						Six months ended June 30, 2024
						United States						International						Worldwide
Net sales (millions)						$	2,315					$	1,782					$	4,097
% of worldwide sales						56.5		%				43.5		%				100.0		%
Components of net sales change:
Total sales change						3.0		%				(3.2)		%				0.2		%
Translation						—						(1.6)						(0.7)
Other						0.1						(0.5)						(0.1)
Organic sales						2.9		%				(1.1)		%				1.1		%

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

Second quarter 2024 results

• In the United States both total sales and organic sales increased. Organic growth was led by MedSurg and Health Information Systems.

• In International, both total sales and organic sales decreased. Foreign currency translation negatively impacted total growth. Organic growth decline was led by MedSurg and Dental Solutions.

First six months 2024 results

• In the United States both total sales and organic sales increased. Organic growth was led by MedSurg and Health Information Systems.

• In International, both total sales and organic sales decreased. Foreign currency translation negatively impacted total growth. Organic growth decline was led by MedSurg, partially offset by growth in Purification and Filtration.

Managing currency risks

Prior to April 1, 2024, Solventum indirectly participated in 3M’s centrally managed hedging program, which utilizes a number of tools to manage currency risk including natural hedges such as pricing, productivity, hard currency, hard currency-indexed billings, and localizing source of supply. 3M also used financial hedges to mitigate currency risk. Starting in the second quarter of 2024, Solventum established its own hedging program. Refer to Note 10 for additional details.

The stronger U.S. dollar had a negative impact on sales of 1 percent for the second quarter 2024 compared to the same period last year. The stronger U.S. dollar had a negative impact on sales of 1 percent in the first six months of 2024 compared to the first six months of 2023. Net of the Company's hedging strategy, foreign currency negatively impacted earnings for the second quarter and first six months of 2024 compared to the same periods last year.

Financial condition

Refer to the section entitled "—Financial Condition and Liquidity" below for a discussion of items impacting cash flows.

Results of Operations

Net Sales

Refer to the preceding "—Overview" section and the "—Performance by Business Segment" section later in MD&A for discussion of sales change.

Operating Expenses

						Three months ended June 30,																		Six months ended June 30,
(Percent of corresponding net sales)						2024						2023						Change						2024						2023						Change
Cost of product						51.3		%				47.4		%				3.9		%				49.0		%				48.0		%				1.0		%
Cost of software and rentals						25.4						26.7						(1.3)						25.6						26.6						(1.0)

Costs of Product

Costs of product includes manufacturing, engineering and freight costs.

Costs of product, measured as a percent of sales of product, increased in the second quarter of 2024 when compared to the second quarter of 2023. The increase was driven by increased costs in international and unfavorable mix within MedSurg that was driven by backorder recovery in our lower margin OEM business, as well as higher costs from transition manufacturing, procurement and distribution support provided by 3M.

Costs of product, measured as a percent of sales of product, increased in the first six months of 2024 when compared to the first six months of 2023. The increase was driven by higher costs from transition manufacturing, procurement and distribution support provided by 3M. These increases were partially offset by sales price benefit.

Costs of Software and Rentals

Costs of software and rentals includes compensation-related costs associated with installation, training and maintenance for our software products, and depreciation, maintenance and refurbishment cost and freight costs related to our hardware rental units.

Costs of software and rentals, measured as a percent of sales of software and rentals, decreased in both the second quarter and first six months of 2024 as compared to the same periods last year due to product mix from higher software sales.

						Three months ended June 30,																		Six months ended June 30,
(Percent of total net sales)						2024						2023						Change						2024						2023						Change
Selling, general and administrative (SG&A)						33.7		%				27.9		%				5.8		%				31.7		%				28.3		%				3.4		%
Research and development (R&D)						9.2						9.3						(0.1)						9.4						9.5						(0.1)
Operating Income						11.7						20.1						(8.4)						15.3						19.1						(3.8)

Selling, General and Administrative

SG&A, measured as a percent of total net sales, increased in both the second quarter and first six months of 2024 when compared to the same periods last year. The increase in both periods was driven by higher compensation, including equity- based awards, and higher costs associated with both initial standup and ongoing operations to support a standalone Company.

Research and Development

R&D, measured as a percent of total net sales, was flat in both the second quarter and the first six months of 2024 when compared to the same periods last year as the Company maintained consistent investment in research and development initiatives.

Interest Expense, Net and Other Expense (Income), Net

						Three months ended June 30,												Six months ended June 30,
(Dollars in millions)						2024						2023						2024						2023
Interest expense, net						$	114					$	—					$	153					$	—
Other expense (income), net						34						4						$	47					$	6

Interest expense, net includes interest accrued on debt and interest income from cash and marketable securities. Interest expense, net increased in both the second quarter and first six months of 2024 as compared to the same periods last year due to interest incurred on the February 2024 issuance of senior notes and March draw on the senior term loan credit facilities. Refer to Note 8 to the financial statements for more information. This increase was partially offset by interest earned from cash balances and marketable securities held during the period.

Other expense (income), net includes the non-service component of periodic pension cost, investment gains and losses, and currency-related impacts from foreign currency translation. Other expense (income), net increased in both the second quarter and the first six months of 2024 as compared to the same periods last year resulting from charges associated with the substantial liquidation of foreign operations completed as part of our separation from 3M.

Provision (benefit) for Income Taxes:

						Three months ended June 30,												Six months ended June 30,
(Percent of pre-tax income/loss)						2024						2023						2024						2023
Effective tax rate						7.3		%				22.3		%				23.3		%				20.9		%

The effective tax rates for the three months ended June 30, 2024 and 2023 were 7.3% and 22.3%, respectively. The effective tax rates for the six months ended June 30, 2024 and 2023 were 23.3% and 20.9% , respectively.

Refer to Note 7 to the financial statements for further discussion of income taxes.

Performance by Business Segment

Note 14 to the audited combined financial statements within the Company's Information Statement dated March 11, 2024, provides an overview of Solventum's business segments. In addition, disclosures relating to Solventum’s segments are provided in Note 15 to financial statements. We manage our operations in four business segments. The reportable segments are MedSurg, Dental Solutions, Health Information Systems, and Purification and Filtration. Our Chief Operating Decision Maker evaluates segment operating performance using net sales and business segment operating income.

Corporate and Unallocated

In addition to the four business segments, the Company assigns certain costs to "Corporate and Unallocated," which is presented separately in Note 15 to the condensed consolidated and combined financial statements. Corporate and Unallocated includes amortization of acquired intangible assets, restructuring and related charges, benefits or costs related to capitalized manufacturing variances, Spin-Off and separation related costs and other net costs that the Company chose not to allocate directly to its business segments. Spin-Off and separation related costs include any costs incurred as part of our separation from 3M and costs to setup operations as a standalone Company, including system implementations, manufacturing relocation, legal entity separation, certain equity awards granted as part of the Spin-Off, profit mark-ups on transition service arrangements with 3M and other one-time costs.

Corporate and Unallocated also includes sales and cost of sales related to product supplied to 3M and other supply agreements related to legacy 3M non-health care business that were assumed by the Company at Spin-Off. Because Corporate and Unallocated includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

Corporate and Unallocated net operating loss increased in both the second quarter and the first six months of 2024 when compared to the same period last year as the Company had higher Spin-Off and separation related costs.

Operating Business Segments

Information related to the Company’s segments is presented in the tables that follow with additional context in the corresponding narrative below the tables.

Refer to the section entitled "Business" in Solventum's Information Statement for discussion of products that are included in each business segment.

MedSurg (55.8 percent and 55.7 percent of consolidated sales for the three and six months ended June 30, 2024)

						Three months ended June 30,												Six months ended June 30,
						2024						2023						2024						2023
Sales (millions)						$	1,162					$	1,161					$	2,281					$	2,284
Sales change analysis:
Organic sales						1.8		%				0.3		%				1.0		%				1.5		%
Other						(0.5)						—						(0.3)						—		%
Translation						(1.1)						(1.0)						(0.8)						(2.0		%)
Total sales change						0.1		%				(0.7		%)				(0.1)		%				(0.5		%)
Business segment operating income (millions)						$	214					$	269					$	435					$	522
Percent change						(20.4)		%				(3.9)		%				(16.7)		%				(4.3		%)
Percent of sales						18.4		%				23.2 %						19.1		%				22.8 %

Second quarter 2024 results

Sales in MedSurg were up 0.1 percent:

• Organic sales growth was driven by both volume and price, including a benefit from OEM backorder reduction.

• Volume growth benefited from single-use negative pressure wound therapy and I.V. site management solutions.

• Other includes lost sales from certain health care businesses in India retained by 3M in connection with the Spin-Off.

• Foreign currency translation negatively impacted sales by (1.1%).

Business segment operating income margin decreased when compared to the same period last year. The decrease was driven by a mix penalty due to OEM backorder reduction and higher costs to standup and operate our standalone structure after Spin-Off.

First six months 2024 results

Sales in MedSurg were down (0.1) percent:

• Positive price growth was driven by the impact from actions initiated during the prior year in response to higher material and labor input costs. The favorable impact of prior year price actions is expected to decline as we progress in 2024.

• Organic growth was led by single-use negative pressure wound therapy, partially offset by declines in sterilization assurance and advanced wound dressings.

• Other includes certain health care businesses retained by 3M India in connection with the Spin-Off.

• Foreign currency translation negatively impacted sales by (0.8%).

Business segment operating income margin decreased when compared to the same period last year. The decrease was driven by higher costs to standup and operate our standalone structure after Spin-Off.

Dental Solutions (15.9 percent and 16.3 percent of consolidated sales for the three and six months ended June 30, 2024)

						Three months ended June 30,												Six months ended June 30,
						2024						2023						2024						2023
Sales (millions)						$	331					$	351					$	666					$	692
Sales change analysis:
Organic sales						(2.0)		%				1.1		%				(0.8)		%				1.3		%
Other						(2.4)						—						(2.1)						—
Translation						(1.5)						(0.8)						(0.9)						(2.1)
Total sales change						(5.8)		%				0.3%						(3.8)		%				(0.8)		%
Business segment operating income (millions)						$	90					$	124					$	200					$	235
Percent change						(27.4)		%				(5.3)		%				(14.9)		%				(7.5)		%
Percent of sales						27.2		%				35.3		%				30.0		%				34.0		%

Second quarter 2024 results:

Sales in Dental Solutions were down (5.8) percent.

• Volume declines were partially offset by modest price growth. Lower volumes were primarily driven by traditional orthodontics.

• Other includes lost sales from the Company's dental anesthetics business that was sold in August 2023 as well as certain health care businesses retained by 3M India in connection with the Spin-Off.

• Foreign currency translation negatively impacted sales by (1.5%).

Business segment operating income margin decreased when compared to the same period last year as a result of higher costs to standup and operate our standalone structure after Spin-Off, partially offset by the benefit from higher price.

First six months 2024 results:

Sales in Dental Solutions were down (3.8) percent.

• Volume declines were partially offset by positive price growth. The favorable impact of prior year price actions decreased during the period and the impact of such price actions are expected to continue to moderate through the remainder of 2024.

• Other is primarily driven by lost sales from the Company's dental anesthetics business that was sold in August 2023.

• Foreign currency translation negatively impacted sales by (0.9%)

Business segment operating income margin decreased when compared to the same period last year as a result of higher costs to standup and operate our standalone structure after Spin-Off, partially offset by the benefits from both higher price and lower manufacturing inflation.

Health Information Systems (15.8 percent and 15.7 percent of consolidated sales for the three and six months ended June 30, 2024)

						Three months ended June 30,												Six months ended June 30,
						2024						2023						2024						2023
Sales (millions)						$	328					$	316					$	645					$	632
Sales change analysis:
Organic sales						3.6		%				3.4		%				2.0		%				5.8		%
Other						—						—						—						—
Translation						(0.1)						(0.1)						—						(0.2)
Total sales change						3.5		%				3.3		%				2.0		%				5.6		%
Business segment operating income (millions)						$	111					$	96					$	212					$	190
Percent change						15.6		%				20.0		%				11.6		%				26.2		%
Percent of sales						33.8		%				30.4		%				32.9		%				30.1		%

Second quarter 2024 results:

Sales in Health Information Systems were up 3.5 percent.

• Positive growth was driven by continued adoption of our 3MTM 360 EncompassTM and performance management solutions.

• Clinician productivity solutions declined primarily impacted by changing market conditions.

Business segment operating income margin increased when compared to the same period last year driven by both price and a product mix benefit due to higher software sales and lower professional services.

First six months 2024 results:

Sales in Health Information Systems were up 2.0 percent.

• Positive growth was driven by continued adoption of our 3MTM 360 EncompassTM and performance management solutions.

• Clinician productivity solutions declined primarily impacted by changing market conditions.

Business segment operating income margin increased when compared to the same period last year driven by a product mix benefit due to higher software sales and lower professional services.

Purification and Filtration (11.4 percent and 11.8 percent of consolidated sales for the three and six months ended June 30, 2024)

						Three months ended June 30,												Six months ended June 30,
						2024						2023						2024						2023
Sales (millions)						$	238					$	248					$	483					$	479
Sales change analysis:
Organic sales						(0.9)		%				(4.7)		%				2.6		%				(6.1)		%
Other						(1.2)						—						(0.6)						—
Translation						(1.6)						(0.6)						(1.1)						(2.1)
Total sales change						(3.6)		%				(5.3)		%				0.9		%				(8.2)		%
Business segment operating income (millions)						$	19					$	50					$	58					$	86
Percent change						(62.0)		%				(12.3)		%				(32.6)		%				(27.9)		%
Percent of sales						8.0		%				20.2		%				12.0		%				17.9		%

Second quarter 2024 results:

Sales in Purification and Filtration were down (3.6) percent:

• Primarily driven by drinking water filtration end markets, partially offset by higher volume growth in bioprocessing filtration.

• Other includes certain business in India retained by 3M in connection with the Spin-Off.

• Foreign currency translation negatively impacted growth by (1.6%).

Business segment operating income margin decreased due to a negative impact from higher costs in international, sales mix and costs to standup and operate our standalone structure after Spin-Off.

First six months 2024 results:

Sales in Purification and Filtration were up 0.9 percent:

• Primarily driven by higher volume growth in both our bioprocessing filtration and membrane OEM product categories. This growth was partially offset by a decline in our separation filtration and drinking water filtration products.

• Other includes certain health care businesses retained by 3M India in connection with the Spin-Off.

• Foreign currency translation negatively impacted growth by (1.1%).

Business segment operating income margin decreased due to the negative impact from higher costs in international, sales mix and costs to standup and operate our standalone structure after Spin-Off.

Financial Condition and Liquidity

The strength and stability of Solventum’s operating model and strong free cash flow capability provides financial flexibility and enables the Company to invest through business cycles. Historically, Solventum generated positive operating cash flows and a majority of such cash flows were transferred to 3M Company as part of 3M’s cash pooling arrangements, the effect of which is presented as Net parent investment in our condensed combined financial statements.

Upon completion of the Spin-Off, Solventum has ceased participation in 3M's cash pooling arrangement and our cash and cash equivalents are held and used solely for our own operations. The Company's capital structure, long-term commitments and sources of liquidity will change significantly from historical practices. For additional detail regarding changes to our capital structure, see section entitled "Description of Material Indebtedness" below.

Debt and Credit Facilities

On February 16, 2024, the Company entered into a five-year $2.0 billion unsecured revolving credit facility expiring in 2029, an 18-month senior unsecured term loan facility of $500 million and a three-year senior unsecured term loan facility of $1.0 billion (together the "Facilities"). In March 2024, the Company withdrew $1.48 billion under the Facilities. The funds from the facilities were transferred to 3M as partial consideration for the Spin-Off.

On February 27, 2024, Solventum issued $6.9 billion of senior notes in preparation for the payment of partial consideration to 3M Company in connection with the Spin-Off. Refer to Note 8 for more information.

Commercial Paper

On March 4, 2024, the Company entered into a commercial paper program that allows Solventum up to $2.0 billion aggregate principal amount of short-term notes to finance short-term liabilities. Any such issuance will mature within 364 days from date of issue. There was no commercial paper outstanding as of June 30, 2024.

Cash, cash equivalents and marketable securities

At June 30, 2024, Solventum had $897 million of cash and cash equivalents, of which approximately $378 million was held by the Company’s foreign subsidiaries and approximately $519 million was held in the United States. These balances are invested in bank instruments and other high-quality fixed income securities. At December 31, 2023, Solventum had $194 million of cash and cash equivalents, of which approximately $150 million was held by the Company’s foreign subsidiaries and $44 million was held in the United States. The increase from December 31, 2023 resulted from both cash retained by the Company at Spin-Off and operating cash generated by the Company subsequent to the Spin-Off.

Cash Flows

Cash flows from operating, investing and financing activities are provided in the tables that follow. Individual amounts in the condensed consolidated and combined statements of cash flows exclude the effect of exchange rate impacts on cash and cash equivalents, which are presented separately in the cash flows. Thus, the amounts presented in the following operating, investing and financing activities tables reflect changes in balances from period to period adjusted for these effects.

Cash Flows from Operating Activities:

						Six months ended June 30,
(Millions)						2024						2023
Cash Flows from Operating Activities
Net income						$	326					$	614
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization						272						278
Postretirement benefit plan expense						19						21
Stock-based compensation expense						60						26
Deferred income taxes						(56)						(69)
Changes in assets and liabilities
Accounts receivable						70						(30)
Due from related parties						131						—
Inventories						(57)						(5)
Accounts payable						132						30
Due to related parties						(229)						—
All other operating activities						129						10
Net cash provided by operating activities						$	797					$	875

In the first six months of 2024, cash flows provided by operating activities decreased compared to the first six months of 2023 primarily due to lower net income, partially offset by payments from related parties and lower accounts receivable. The benefit in accounts payable is largely offset by due from related parties as the Company reimburses 3M for certain procurement activities managed through 3M's IT systems. In addition to this procurement activity, due to related parties also includes cash paid to 3M for operating transactions with Solventum entities prior to the Spin-Off and the net impact of payables and associated payments related to transition agreements with 3M.

Cash Flows from Investing Activities:

						Six months ended June 30,
(Millions)						2024						2023
Cash Flows from Investing Activities
Purchases of property, plant and equipment						$	(160)					$	(136)
Net cash used in investing activities						$	(160)					$	(136)

Purchases of property, plant and equipment increased in the first six months of 2024 as compared to the first six months of 2023. The increase is primarily driven by the timing of investment spend. The Company is focused on investments to support growth, renewal and maintenance programs, Environmental Health Services ("EHS") and relocating manufacturing operations currently co-located within 3M facilities.

Cash Flows from Financing Activities:

						Six months ended June 30,
(Millions)						2024						2023
Cash Flows from Financing Activities
Net transfers to 3M						$	(8,247)					$	(761)
Proceeds from long-term debt, net of issuance costs						8,303						—
Other — net						10						—
Net cash provided by (used in) financing activities						$	66					$	(761)

Proceeds from debt of $8.3 billion were related to the first quarter issuance of $6.9 billion in senior notes and $1.5 billion in senior term loan credit facilities. The proceeds from these financing transactions were transferred to 3M in connection with transaction, other than the amounts retained in order to achieve the $600 million retained cash target.

Cash flows from financing activities increased in the first six months of 2024 compared to the same period in 2023 due to proceeds of long-term debt, partially offset by net transfers to 3M.

Material Cash Requirement from Known Contractual and Other Obligations:

Solventum’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 condensed consolidated and combined financial statements and the audited consolidated financial statements included in the Information Statement:

• Tax obligations—Refer to Note 9 to the audited consolidated and combined financial statements and Note 7 to the unaudited condensed consolidated and combined financial statements.

• Debt—Refer to Note 8 to the unaudited condensed consolidated and combined financial statements.

• Commitments and contingencies—Refer to Note 11 to the audited consolidated and combined financial statements and Note 11 to the unaudited condensed consolidated and combined financial statements.

• Operating leases—Refer to Note 12 to the audited combined financial statements.

Solventum purchases the majority of its materials and services as needed, with no unconditional commitments. In limited circumstances, in the normal course of business, the Company enters into unconditional purchase obligations with various vendors that may take the form of, for example, take or pay contracts in which the Company guarantees payment to ensure availability 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.

Cautionary Note Concerning Factors That May Affect Future Results

This Quarterly Report on Form 10-Q, including "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part I, Item 2, contains or incorporates by reference statements that relate to future events and expectations and, as such, constitute forward-looking statements that involve risk and uncertainties. Forward-looking statements include those containing such words as "anticipates," "believes," "could," "estimates," "expects," "forecasts," "goal," "guidance," "intends," "may," "outlook," "plans," "projects," "seeks," "sees," "should," "targets," "will," "would," or other words of similar meaning. All statements that reflect Solventum’s expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, forecasts relating to discussions of future operations and financial performance (including volume growth, pricing, sales and earnings per share growth and cash flows) and statements regarding Solventum’s strategy for growth, future product development, regulatory clearances and approvals, competitive position and expenditures. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict. Although Solventum believes that the expectations reflected in any forward-looking statements it makes are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Such risks and uncertainties include, but are not limited to:

• The effects of, and changes in, worldwide economic, political, regulatory, international, trade and geopolitical conditions, natural disasters, war, and other events beyond Solventum’s control.

• Unexpected events, such as those related to the COVID-19 public health crisis.

• Operational execution risks.

• Damage to our reputation or our brands.

• Risks from acquisitions, strategic alliances, divestitures and other strategic events.

• Solventum’s business dealings involving third-party partners in various markets.

• Solventum’s ability to access the capital and credit markets and changes in Solventum’s credit ratings.

• Exposure to interest rate and currency risks.

• The highly competitive environment in which Solventum operates and consolidation in the healthcare industry.

• Reduction in customers’ research budgets or government funding.

• The timing and market acceptance of Solventum’s new product and service offerings.

• Ongoing working relationships with certain key healthcare professionals.

• Changes in reimbursement practices of governments or private payers or other cost containment measures.

• Solventum’s ability to obtain components or raw materials supplied by third parties and other manufacturing and related supply chain difficulties, interruptions, and disruptive factors.

• Legal and regulatory proceedings and legal compliance risks (including third-party risks) with regards to antitrust, Foreign Corrupt Practices Act (FCPA) and other anti-bribery laws, environmental laws, anti-kickback and false claims laws, privacy laws, tax laws, and other laws and regulations in the United States and other countries in which Solventum operates.

• Potential liabilities related to a broad group of perfluoroalkyl and polyfluoroalkyl substances, collectively known as "PFAS."

• Risks related to the highly regulated environment in which Solventum operates.

• Risks associated with product liability claims.

• Climate change and measures to address climate change.

• Security breaches and other disruptions to information technology infrastructure.

• Solventum’s failure to obtain, maintain, protect, or effectively enforce its intellectual property rights.

• Pension and postretirement obligation liabilities.

• Any events that adversely affect the sale or profitability of one of Solventum’s key products or the revenue delivered from sales to its key customers.

• Any failure by 3M to perform any of its obligations under the various separation agreements in connection with the separation and distribution.

• The expected benefits and timing of the separation and the risk that conditions to the separation will not be satisfied and/or that the separation will not be completed within the expected time frame, on the expected terms or at all.

• A determination by the IRS or other tax authorities that the distribution or certain related transactions should be treated as taxable transactions.

• Expected financing transactions undertaken in connection with the separation and risks associated with additional indebtedness.

• The risk that incremental costs of operating on a standalone basis (including the loss of synergies), costs of restructuring transactions and other costs incurred in connection with the separation will exceed Solventum’s estimates.

• The impact of the separation on its businesses and the risk that the separation may be more difficult, time-consuming or costly than expected, including the impact on its resources, systems, procedures and controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties.

The above list of factors is not exhaustive or necessarily in the order of importance. Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those reflected in any such forward-looking statements depending on a variety of factors. Solventum assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Important information as to these factors can be found in this document, including, among others, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" under the headings of "Overview," "Financial Condition and Liquidity" and annually in "Critical Accounting Estimates." Discussion of these factors is incorporated by reference from Part II, Item 1A, "Risk Factors," of this document, and should be considered an integral part of Part I, Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations." For additional information concerning factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 8-K filed with the SEC from time to time and the Company's Registration Statement on Form 10, including the amendments thereto, as filed with the SEC.