M Reports First-Quarter 2023 Results Company Announces Restructuring Actions

3M Reports First-Quarter 2023 Results

Company Announces Restructuring Actions

ST. PAUL, Minn. - April 25, 2023 3M (NYSE MMM) today reported first-quarter 2023 results.

"In the first quarter we continued our relentless focus on serving customers and aggressively managed costs," said 3M chairman and CEO Mike Roman. "Market trends were as we expected, and we made changes to improve our operations and position us for success as supply chains improve."

"To strengthen 3M for the future, today we announced actions that will reduce costs at the corporate center, further simplify and strengthen our supply chain structure, and streamline our go-to-market business models, which will improve margins and cash flow," Roman continued. "We will continue to prioritize investments in high-growth end markets where 3M science gives us a clear competitive advantage."

First-Quarter Highlights

Company reports GAAP earnings per share of $1.76.

Adjusted earnings per share of $1.97, excluding the impact of special items.

Sales of $8.0 billion, down 9.0 percent year-on-year, with organic sales decline of 4.9 percent year-on-year, a 1.3 percent headwind from divestitures and a 2.8 percent headwind from foreign currency translation due to strength of U.S. dollar.

Adjusted sales of $7.7 billion, down 9.7 percent year-on-year with adjusted organic sales decline of 5.6 percent year-on-year which included a 3.4 percentage point headwind from the decline in disposable respirator demand, along with the 2022 exit of Russia.

Operating cash flow was $1.3 billion, up 26 percent year-on-year, while adjusted free cash flow was $0.9 billion, up 24 percent year-on-year.

3M returned $856 million to shareholders.

The above includes reference to certain non-GAAP measures. See the "Supplemental Financial Information Non-GAAP Measures" section for applicable information.

3M Announces Restructuring Actions

3M is taking restructuring actions that are intended to make 3M stronger, leaner and more focused. The structural reorganization will reduce the size of the corporate center of the company, simplify supply chain, streamline 3M's geographic footprint, reduce layers of management, and further align business go-to-market models to customers. These restructuring actions are expected to affect all functions, businesses, and geographies and will impact approximately 6,000 positions globally, in addition to the reduction of 2,500 global manufacturing roles announced in January 2023. 3M anticipates annual pre-tax savings of $700 million to $900 million upon completion of these actions.

These actions are expected to meaningfully reduce costs and drive long-term improvement in margins and cash flow while enabling a more efficient and effective structure for driving long-term growth. The company will continue to focus its commercial efforts in high-growth markets including automotive electrification, home improvement, personal safety, electronics, and health care. In addition, 3M will prioritize emerging growth areas such as climate technology, sustainable packaging, industrial automation, semiconductors, and next-generation consumer electronics.

The company expects total pre-tax charges of $700 million to $900 million inclusive of previous actions announced in January 2023. 3M expects to incur approximately half of the pre-tax charges in 2023, with $175 million to $250 million expected in the second quarter. The charges will be offset by pre-tax savings and are included in the company's full-year 2023 guidance.

Full-Year 2023 Outlook

3M affirms its full-year expectations for 2023 including the following

-6 to -2 percent adjusted total sales growth , reflecting adjusted organic sales growth of -3 percent to flat

Adjusted earnings per share of $8.50 to $9.00

Adjusted operating cash flow of $5.8 to $6.3 billion contributing to 90% to 100% adjusted free cash flow conversion

As further discussed at * within the Supplemental Financial Information Non-GAAP Measures section, 3M cannot, without unreasonable effort, forecast certain items required to develop meaningful comparable GAAP financial measures and, therefore, does not provide them on a forward-looking basis reflecting these items.

3M will conduct an investor teleconference at 9 a.m. EDT (8 a.m. CDT) today. Investors can access this conference via the following

Live webcast at http investors.3M.com.

Call 800-762-2596 within the U.S. or +1 212-231-2916 outside the U.S. Please join the call at least 10 minutes before the start time.

Go to 3M's Investor Relations website at http investors.3M.com and click on "Quarterly Earnings."

Call 800-633-8284 within the U.S. or +1 402-977-9140 outside the U.S. (for both U.S. and outside the U.S., the access code is 22024174). The telephone replay will be available until 11 30 a.m. EDT (10 30 a.m. CDT) on May 2, 2023.

Forward-Looking Statements

This news release contains forward-looking information about 3M's financial results and estimates and business prospects that involve substantial risks and uncertainties. You can identify these statements by the use of words such as anticipate, estimate, expect, aim, project, intend, plan, believe, will, should, could, target, forecast and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or business plans or prospects. Among the factors that could cause actual results to differ materially are the following (1) worldwide economic, political, regulatory, international trade, geopolitical, capital markets and other external conditions and other factors beyond the Company's control, including inflation, recession, military conflicts, natural and other disasters or climate change affecting the operations of the Company or its customers and suppliers (2) risks related to unexpected events such as the public health crises associated with the coronavirus (COVID-19) global pandemic (3) foreign currency exchange rates and fluctuations in those rates (4) risks related to certain fluorochemicals, including liabilities related to claims, lawsuits, and government regulatory proceedings concerning various PFAS-related products and chemistries, as well as risks related to the Company's plans to exit PFAS manufacturing and discontinue use of PFAS across its product portfolio (5) legal proceedings, including significant developments that could occur in the legal and regulatory proceedings described in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2022 and any subsequent quarterly reports on Form 10-Q (the Reports ) (6) competitive conditions and customer preferences (7) the timing and market acceptance of new product and service offerings (8) the availability and cost of purchased components, compounds, raw materials and energy due to shortages, increased demand and wages, supply chain interruptions, or natural or other disasters (9) unanticipated problems or delays with the phased implementation of a global enterprise resource planning (ERP) system, or security breaches and other disruptions to the Company's information technology infrastructure (10) the impact of acquisitions, strategic alliances, divestitures, and other strategic events resulting from portfolio management actions and other evolving business strategies (11) operational execution, including the extent to which the Company can realize the benefits of planned productivity improvements, as well as the impact of organizational restructuring activities (12) financial market risks that may affect the Company's funding obligations under defined benefit pension and postretirement plans (13) the Company's credit ratings and its cost of capital (14) tax-related external conditions, including changes in tax rates, laws or regulations (15) matters relating to the proposed spin-off of the Company's Health Care business, including whether the transaction will be completed, or if completed, will be on the expected terms the risk that the expected benefits will not be realized the risk that the costs or dis-synergies will exceed the anticipated amounts the ability to satisfy the various closing conditions potential business disruption the diversion of management time the impact of the transaction (or its pendency) on the Company's ability to retain talent potential impacts on the Company's relationships with its customers, suppliers, employees, regulators and other counterparties the ability to realize the desired tax treatment (including whether an Internal Revenue Service private letter ruling will be sought or obtained) the risk that any consents or approvals required will not be obtained risks associated with financings that may be undertaken and indebtedness that may be incurred in connection with the transaction and (16) matters relating to the voluntary chapter 11 proceedings of the Company's subsidiary Aearo Technologies and certain of its affiliates. Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports under Cautionary Note Concerning Factors That May Affect Future Results and Risk Factors in Part I, Items 1 and 1A (Annual Report) and in Part I, Item 2 and Part II, Item 1A (Quarterly Reports). The Company assumes no obligation to update any forward-looking statements discussed herein as a result of new information or future events or developments.

3M Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

(Millions, except per-share amounts)

3M Company and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEET

(Dollars in millions)

3M Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in millions)

3M Company and Subsidiaries

SALES CHANGE ANALYSIS (a)

(a)Total sales change is calculated based on reported sales results. The components of sales change include organic local-currency sales, acquisitions, divestitures, and translation. Organic local-currency sales include both organic volume impacts (which excludes acquisition and divestiture impacts) and selling price changes. Acquisition and divestiture impacts are measured separately for the first 12 months post-transaction.

3M Company and Subsidiaries

3M discloses business segment operating income as its measure of segment profit loss, reconciled to both total 3M operating income and income before taxes. Business segment operating income excludes certain expenses and income that are not allocated to business segments (as described below in "Corporate and Unallocated").

Effective in the first quarter of 2023, the measure of segment operating performance and segment composition used by 3M's chief operating decision maker (CODM) changed and, as a result, 3M's disclosed measure of segment profit loss (business segment operating income) was updated. The change to business segment operating income aligns with the update to how the CODM assesses performance and allocates resources for the Company's business segments. The changes included the items described below. The financial information presented herein reflects the impact of these business segment reporting changes for all periods presented.

Reflecting gains losses from sale of property, plant and equipment (PPE) and other assets within Corporate and Unallocated Change

3M updated its business segment operating performance measure to reflect all gains losses from sales of PPE and other assets within Corporate and Unallocated. Previously, certain of these gains losses were included in 3M's business segments' operating performance.

Movement of certain businesses between segments

The businesses associated with two groups of products (each with approximately $25 million in sales) were realigned with one moving from the Consumer business segment to the Health Care business segment and the other moving from the Health Care business segment to the Consumer business segment.

Also effective in the first quarter of 2023, the Consumer business segment re-aligned from four divisions to the following three divisions Home, Health and Auto Care Construction and Home Improvement Markets and Stationery and Office.

3M Company and Subsidiaries

BUSINESS SEGMENTS - (CONTINUED)

Corporate and Unallocated

Corporate and Unallocated operating income includes "corporate special items" and "other corporate expense-net". Corporate special items include net costs for significant litigation associated with Combat Arms Earplugs and Aearo-respirator mask asbestos matters during the chapter 11 bankruptcy period (which began in July 2022) and with PFAS-related other environmental matters. Corporate special items also include divestiture costs, gain loss on business divestitures, divestiture-related restructuring costs, and Russia exit costs. Divestiture costs include costs related to separating and divesting substantially an entire business segment of 3M following public announcement of its intended divestiture. Other corporate expense-net includes items such as net costs related to limited unallocated corporate staff and centrally managed material resource centers of expertise costs, corporate philanthropic activity, gains losses from sales of PPE and other assets, and other net costs that 3M may choose not to allocate directly to its business segments. Other corporate expense-net also includes costs and income from transition supply, manufacturing, and service arrangements with Neogen Corporation following the 2022 split-off of 3M's Food Safety business. Items classified as revenue from this activity are included in Corporate and Unallocated net sales. Because Corporate and Unallocated includes a variety of miscellaneous items, it is subject to fluctuation on a quarterly and annual basis.

3M Company and Subsidiaries

SUPPLEMENTAL FINANCIAL INFORMATION

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 Unallocated, 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.

In 2023, 3M changed certain of its non-GAAP measures by adjusting for the results of manufactured PFAS products in arriving at results, adjusted for special items. In the fourth quarter of 2022, 3M recorded a charge for PFAS manufacturing exit costs and included it as an adjustment in arriving at results, adjusted for special items. The 2023 non-GAAP measure change involved expanding the extent of adjustment to include the sales and estimates of income (including exit costs) and associated activity regarding manufactured PFAS products that 3M plans to exit by the end of 2025. This change also impacts other non-GAAP measures such as adjusted free cash flow, adjusted free cash flow conversion and adjusted EBITDA to similarly include relevant special item adjustments for manufactured PFAS products. The information herein reflects the impacts of these changes for all periods presented.

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

The following provides additional information and applicable GAAP amounts reconciled to non-GAAP measures.

3M Company and Subsidiaries

SUPPLEMENTAL FINANCIAL INFORMATION

NON-GAAP MEASURES - (CONTINUED)

Certain amounts adjusted for special items (non-GAAP measures)

(b)These items represent amounts adjusted for special items. See lead-in to non-GAAP measures discussion.

3M Company and Subsidiaries

SUPPLEMENTAL FINANCIAL INFORMATION

NON-GAAP MEASURES - (CONTINUED)

* 3M provides these forward-looking non-GAAP measures, but cannot, without unreasonable effort, forecast certain items to present or provide a reconciliation to corresponding forecasted GAAP measures. These include special items such as net costs for significant litigation projected divestiture gains divestiture costs divestiture-related restructuring and net sales and estimates of income and associated activity of exited manufactured PFAS products all of which are subject to limitations in predictability of timing, ultimate outcome and numerous conditions outside of 3M's control. 3M believes these limitations would result in a range of projected values so broad as to not be meaningful to investors. For these reasons, 3M believes that the probable significance of such information is low. Additionally, for similar reasons, 3M does not include the impact of potentially-divested or acquired businesses on expected operations in forecasted outlook guidance it provides until close of a transaction. Information with respect to special items for certain historical periods is included in the section entitled "Description of special items".

3M Company and Subsidiaries

SUPPLEMENTAL FINANCIAL INFORMATION

NON-GAAP MEASURES - (CONTINUED)

Adjusted net cash provided by (used in) operating activities adjusted purchases of property, plant and equipment (also referred to as adjusted capital expenditures) adjusted free cash flow and adjusted free cash flow conversion (non-GAAP measures)

(c)3M defines adjusted net cash provided by (used in) operating activities as net cash provided by operating activities, adjusted for special items. 3M defines adjusted purchases of property, plant and equipment (also referred to as adjusted capital expenditures) as purchases of property, plant and equipment (PPE) adjusted for the estimated impact of such purchases associated with manufactured PFAS products activity. 3M defines adjusted free cash flow as adjusted net cash provided by (used in) operating activities less adjusted purchases of PPE. Cash payments associated with special items in the determination of adjusted net cash provided by (used in) operating activities are reflected net of applicable tax using the U.S. statutory corporate tax rate during the period of payment. 3M defines adjusted free cash flow conversion as adjusted free cash flow divided by net income attributable to 3M, adjusted for special items.

3M Company and Subsidiaries

SUPPLEMENTAL FINANCIAL INFORMATION

NON-GAAP MEASURES - (CONTINUED)

Adjusted EBITDA and adjusted EBITDA margin (non-GAAP measures)

3M Company and Subsidiaries