3M Company

Ladies and gentlemen, thank you for standing by. Welcome to the 3M Fourth Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone keypad. It is recommended that you use a landline phone if you're going to register for a question. As a reminder, this conference is being recorded Tuesday, January 25th, 2022. I would now like to turn the call over to Bruce Germeland, Senior Vice President of Investor Relations at 3M.

Thank you and good morning, everyone, and welcome to our fourth quarter earnings conference call. With me today are Mike Roman, 3M's Chairman and Chief Executive Officer, and Monish Patelawalla, our Chief Financial and Transformation Officer. Mike and Monish will make some formal comments, then we'll take your questions. Please note that today's earnings release and slide presentation accompanying this call are posted on our investor relations website at 3M.com under the heading quarterly earnings. Please turn to slide two. Before we begin, I would like to announce our next two investor events. On the morning of February 14th, we will be having a virtual investor meeting where we will be providing a near-term strategic update along with our 2022 guidance. Also, please mark your calendars for our first quarter earnings conference call, which will take place on Tuesday, April 26th. Please take a moment to read the forward-looking statement on slide three. During today's conference call, we will be making certain predictive statements that reflect our current views about 3M's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risk and uncertainties. Item 1A of our most recent Form 10-K lists some of the most important risk factors that could cause actual results to differ from our predictions. Please note, throughout today's presentation, we'll be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in the attachments to today's press release. Before I hand the call over to Mike, I would like to take a moment and highlight a couple of presentation changes we are making in 2022 to simplify our financial reporting and increase understanding of our performance. These changes are a result of discussions we have had with many of you over the last few years, along with recent benchmarking work that we have done. First, we recognize that dual credit reporting has presented some challenges. For example, having a clear understanding of the impact of disposable respirator performance over the past two years on our segment results, particularly safety and industrial and healthcare. Therefore, we have decided to eliminate dual credit reporting and will no longer report dual credit within our business segments starting in Q1 2022. We will provide a Form 8K ahead of our February 14th meeting with updated history for the past three years reflecting this change. And second, we will be providing organic sales change components in aggregate as opposed to reporting separate volume and price components. With this change, we will also be updating the descriptor to organic sales versus organic local currency sales. Please note this change will be reflected in our 2021 Form 10-K filing. We remain committed to providing strong transparency of reporting our financial performance. And of course, we are always here to address your questions. With that, please turn to slide four, and I'll now hand the call off to Mike. Mike?

Thank you, Bruce. Good morning, everyone, and thank you for joining us. 3M delivered a solid performance in the fourth quarter, closing out a strong year, as we focused on serving customers in a dynamic external environment. Our revenue in the quarter finished better than we expected across all businesses, including an increase in respirator demand due to the impact from the Omicron variant. Organic growth company-wide was 1% on top of 6% in last year's Q4, with earnings of $2.31 per share, driven by a good December, strong execution, and a lower than anticipated tax rate. I am pleased with how we effectively manage production operations to meet customer demand, despite ongoing logistics and raw material challenges that are impacting many companies. While focusing on customers, we also saw good benefits from our actions to drive productivity, improve yields, and control costs, which helped offset the margin impact of supply chain disruptions, inflation, and COVID-19. In addition, our selling price actions continued to gain traction, with a year-on-year increase of 2.6% in Q4 versus 1.4% in Q3. We expect this to be a tailwind for the full year in 2022. Overall, demand remains strong across our market leading businesses, and we are continuing to prioritize growth investments in large attractive markets. We also took actions to strengthen our portfolio and advance our commitment to sustainability. I will highlight examples of our progress later in the call. In summary, we delivered a good finish to the year. and are well positioned to drive growth in 2022. As Bruce noted, we will provide full year guidance along with strategic updates from our business leaders at our February 14th meeting.