3M Company

Ladies and gentlemen, thank you for standing by. Welcome to the 3M first 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 do have a question, please press star 1 on your telephone keypad. As a reminder, this call is being recorded Tuesday, April 30, 2024. 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 first quarter earnings conference call. With me today are Mike Roman, 3M's chairman and chief executive officer, and Monish Patalawala, our president and chief financial 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 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 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. Please turn to slide three. During today's presentation, Mike and Monish will discuss our total company Q1 2024 results, which are inclusive of the healthcare business and are on the same basis on which 3M provided first quarter guidance back in January. As we have mentioned, it is important to note that Solventum Corporation's separate financial reporting will differ from the basis of presentation used by 3M for the healthcare segment. 3M's full-year 2024 earnings guidance, initiated today, is on a continuing operations basis, reflecting solventum as discontinued operations for the full year, including the first quarter of 2024. In addition, we will be treating changes in the value of our 19.9% equity interest in Solventum as a special item in arriving at non-GAAP results adjusted for special items. And finally, we are providing additional financial information this quarter in our press release and slide presentation given the impact of the Solventum spin. We hope that you find the information useful in understanding our Q1 performance and outlook for 2024. We also plan on filing additional information on a continuing operations basis, including in late July or early August Form 8Ks with recast 2023 Form 10K and Q1 2024 Form 10Q information. Please turn to slide four for a summary of our updated post-spend financial reporting framework. Beginning with the second quarter, safety and industrial, transportation and electronics, and consumer business segment operating income will include the impact of the dis-energies or stranded costs previously associated with Silventum. In addition, we have added a new operating category named Other for Solventum transition service agreement costs, which 3M will be reimbursed for beginning here in April. Finally, corporate and allocated will incorporate the commercial agreements between 3M and Solventum that started on April 1st. One final comment. In the appendix on slide 27, you will find information on our public water suppliers and combat arms legal settlements, including the pre-tax payment schedule by year and total combined pre-tax present value and after-tax estimates. With that, please turn to slide five, 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 first quarter, we delivered strong results that were better than our expectations as we returned to adjusted organic growth and achieved double-digit adjusted earnings growth. We improved performance across our businesses and in our operational execution. We also completed the spin-off of Selventum and finalized two major legal settlements. Our results demonstrate the positive impact of the changes we have made over the last several years. We've also made significant progress in executing our strategic priorities, which has positioned the company for long-term shareholder value creation. In the first quarter, on an adjusted basis, we delivered revenue of $7.7 billion, including improved organic growth, operating margins of 22%, up 400 basis points, and earnings of $2.39 per share, up 21%. On April 1st, we successfully completed the spinoff of our healthcare business, Solventum, creating two world-class companies well-positioned to deliver greater shareholder returns through distinct and compelling investment profiles. As independent companies, both 3M and Solventum are better able to tailor their capital allocation and investment priorities to win in their respective markets. I want to thank and congratulate the teams whose dedication made this major accomplishment possible and wish the entire Selventum team, led by CEO Brian Hansen, great success in the future. In Q1, we also finalized two major legal settlements. First, our settlement agreement with U.S.-based public water suppliers received widespread support and participation. It was granted final approval by the court on March 29th. We anticipate making total payments with a pre-tax present value of up to $10.3 billion over the next 13 years. The first payment is expected in the third quarter of 2024. It is important to note our agreement with public water suppliers addresses the detection of any type of PFAS at any level. This includes PFAS that have already been detected or may be detected in the future. including those that are the subject of the US EPA's recently announced limits in drinking water. Second is our settlement of the combat arms multi-district litigation. As of today, more than 99% of claimants have chosen to participate. This provides us the certainty and finality the settlement was intended to achieve. We anticipate making total payments up to a pre-tax present value of $5.3 billion through 2029. We also continue to make good progress on our exit of all PFAS manufacturing. We are on track to meet our commitment by the end of 2025 and are working closely with each of our customers to complete an orderly transition. In summary, the progress across all three of our strategic priorities has helped make 3M stronger, leaner, and more focused on what we do best, utilize 3M science to make indispensable products for our customers. I will now turn the call over to Monish for more details regarding our performance in Q1 and to discuss our guidance for 2024.