3M Company

Ladies and gentlemen, thank you for standing by. Welcome to this 3M Third 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, October 24th, 2023. I would now like to turn the call over to Bruce Germelin, Senior Vice President of Investor Relations at 3M.

Thank you and good morning, everyone. and welcome to our third quarter earnings conference call. With me today are Mike Roman, 3M's chairman and chief executive officer, and Monish Patalewala, our president and chief financial officer. Mike and Monish will make some formal comments and then we'll take your questions. Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our investor relations website at 3M.com. Please turn to slide two. Please take a moment to read the forward-looking statement. During today's conference call, we'll 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 risks and uncertainties. Item 1A of our most recent Form 10Q 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. With that, please turn to slide three, and I'll now hand the call off to Mike. Mike?

Thank you, Bruce. Good morning, everyone, and thank you for joining us. In the third quarter, we built momentum through strong operational execution as we again delivered for our customers, positioning us for a solid close to 2023. On an adjusted basis, we delivered earnings ahead of our expectations, expanded margins sequentially across all four businesses, and achieved our third consecutive quarter of double-digit, year-on-year growth in free cash flow. As we make progress and deliver improved financial results, we are increasing our full-year adjusted earnings per share guidance to $8.95 to $9.15. up from a previous range of $8.60 to $9.10, and our adjusted free cash flow conversion range to 100% to 110%, up from 90% to 100% previously. We continue to deliver against our priorities. We are driving performance throughout 3M with strong operational execution, restructuring actions, and spending discipline. We are progressing the spin of the healthcare business, which we expect to be completed during the first half of 2024. And we are reducing risk and uncertainty by reaching significant settlements to address combat arms and PFAS litigation. I will now provide some additional context around how we are advancing these priorities. Next slide, please. Our margin expansion clearly demonstrates the performance our team is driving throughout 3M. We delivered 240 basis points of year-over-year adjusted operating income margin expansion, excluding 80 basis points of restructuring-related charges. We are strengthening our business in several important ways. We are progressing with our restructuring actions to streamline our organization, reduce structural costs, and get us closer to customers. We have leaned out the center of our company simplified our global supply chain organization, and optimized our global go-to-market models. At the same time, we are advancing supply chain performance to improve service, drive productivity and yield, expand gross margins, and increase cash conversion. These results are being supported by initiatives that use our continuous improvement toolkit and leverage data and data analytics. For example, We have benefited from more than 60 Kaizen events this year to improve existing processes in our largest plants. We are also progressing the spin of our health care business, building the leadership team as we work toward completing the spin in the first half of 2024. During the quarter, we added two experienced leaders, naming Brian Hanson as the CEO of the standalone health care business and Carrie Cox as the board chair. Finally, we continue to manage risk and uncertainty by proactively and effectively managing litigation. We announced the combat arms settlement and we are working with all parties and the courts to implement it. The settlement administration process has been established and funded. The bellwether trial verdicts have been settled and the process for notifying and settling with claimants has begun. With respect to PFAS, The public water supplier settlement we announced last quarter has received preliminary court approval. We successfully resolved objections from state attorneys general and are working toward approval with the final hearing set for early February next year. In closing, I want to share a few thoughts about our future. Our momentum accelerates our ability to define where we go next at 3M. as we prioritize attractive markets where we have the right to win and the opportunity to differentiate ourselves through our unique capabilities and strengths. A good example is our automotive OEM business, where we continue to outperform the market with double-digit growth this quarter. Auto electrification is on track to be a $600 million business this year and has delivered organic growth of 30% year-to-date. Our material science expertise has led us to build a new business, and we see similar opportunities in other core platforms such as safety, home improvement, and consumer electronics. We are also prioritizing emerging global trends that have attractive growth rates and customer needs that match up well with 3M capabilities. We are building new platforms in areas like climate technology, industrial automation, and next generation electronics. Before I hand it over to Monish for additional insight into our performance, a few closing thoughts. I am pleased with the way our teams are executing. They delivered third quarter results that build on the momentum we saw in the second quarter, setting us up for a solid close to 2023. We are advancing our priorities, driving performance, progressing our healthcare spin, and reducing risk and uncertainty. 3M is delivering today lower costs, better margins, and greater cash generation and building for tomorrow, prioritizing growth platforms, innovating with impact, and empowering our teams. I will now turn it over to Monish for more details on the third quarter and our outlook for the rest of the year. Monish.