3M Reports First-Quarter 2018 Results

April 24, 2018

First-Quarter Highlights:

Sales of $8.3 billion, up 7.7 percent year-on-year
Organic local-currency sales growth of 2.8 percent; growth across
all business groups
GAAP EPS of $0.98, down 55 percent year-on-year
Adjusted EPS of $2.50, up 15.7 percent year-on-year, excluding
adjustments to provisional accounting for the Tax Cuts and Jobs Act
(TCJA) and a legal settlement
Returned $1.7 billion to shareholders via dividends and gross share
repurchases

ST. PAUL, Minn.–(BUSINESS WIRE)–3M (NYSE: MMM) today reported first-quarter 2018 results.

ÔÇ£Coming off a strong 2017, our team opened the new year with broad-based
organic growth of three percent, with positive growth across all
business groups,ÔÇØ said Inge G. Thulin, 3M chairman, president and chief
executive officer. ÔÇ£We also continued to invest in our commercialization
capabilities, while returning significant cash to our shareholders ÔÇô
including a 16 percent dividend increase. Going forward we will continue
to execute the 3M Playbook and leverage the world-class capabilities of
our people and our enterprise, and I am confident we will deliver strong
results in 2018.ÔÇØ

Sales were up 7.7 percent to $8.3 billion. Organic local-currency sales
increased 2.8 percent while acquisitions, net of divestitures, increased
sales by 0.7 percent. Foreign currency translation increased sales by
4.2 percent year-on-year.

Total sales grew 15.0 percent in Safety and Graphics, 7.1 percent in
Industrial, 7.1 percent in Health Care, 5.0 percent in Consumer, and 4.6
percent in Electronics and Energy. Organic local-currency sales
increased 6.9 percent in Safety and Graphics, 2.7 percent in Health
Care, 2.2 percent in Industrial, 2.1 percent in Consumer, and 1.7
percent in Electronics and Energy.

On a geographic basis, total sales grew 13.7 percent in EMEA (Europe,
Middle East and Africa), 10.0 percent in Asia Pacific, 4.3 percent in
Latin America/Canada, and 3.5 percent in the U.S. Organic local-currency
sales increased 4.9 percent in Asia Pacific, 3.5 percent in Latin
America/Canada, 2.3 percent in the U.S., and 0.1 percent in EMEA.

First-quarter GAAP earnings were $0.98 per share, a decrease of 55
percent versus the first quarter of 2017. During the quarter, the
company recorded an expense of $217 million, or $0.36 per share, related
to the Tax Cuts and Jobs Act (TCJA). In addition, the company resolved a
previously disclosed lawsuit with the State of Minnesota and recorded a
pre-tax charge of $897 million, inclusive of legal fees and other
related obligations, resulting in a reduction to first quarter earnings
of $1.16 per share. Excluding these two items, earnings were $2.50 per
share, an increase of 15.7 percent year-on-year, as referenced in the
ÔÇ£Supplemental Financial Information Non-GAAP MeasuresÔÇØ section.

First-quarter operating income was $1.0 billion with operating margins
of 12.2 percent. Excluding the legal settlement, operating income was
$1.9 billion with operating margins of 23.0 percent.

3M paid $810 million in cash dividends to shareholders and repurchased
$937 million of its own shares during the quarter.

The company updated its 2018 GAAP earnings expectations to be in the
range of $8.68 to $9.03 per share. Excluding the first quarter impact of
the TCJA-related expense and the legal settlement, 3M expects its
adjusted full-year 2018 earnings to be in the range of $10.20 to $10.55
per share versus a prior expectation of $10.20 to $10.70 per share. The
company also updated its organic local-currency sales growth guidance to
be in the range of 3 to 4 percent, versus a prior range of 3 to 5
percent.

First-Quarter Business Group Discussion

Industrial

Sales of $3.1 billion, up 7.1 percent in U.S. dollars. Organic
local-currency sales increased 2.2 percent, and foreign currency
translation increased sales by 4.9 percent.
On an organic local-currency basis:
- Sales growth was led by abrasives, automotive and aerospace, and
  industrial adhesives and tapes; automotive aftermarket declined.
- Sales grew in Asia Pacific, Latin America/Canada, and the U.S.;
  EMEA was flat.
Operating income was $719 million, an increase of 7.3 percent
year-on-year; operating margin of 22.9 percent.

Safety and Graphics

Sales of $1.8 billion, up 15.0 percent in U.S. dollars. Organic
local-currency sales increased 6.9 percent, foreign currency
translation increased sales by 4.9 percent, and acquisitions, net of
divestitures, increased sales by 3.2 percent.
On an organic local-currency basis:
- Sales increased in all businesses, led by personal safety,
  commercial solutions, and roofing granules.
- Sales grew in all geographic areas led by Asia Pacific, the U.S.,
  and EMEA.
Operating income was $483 million, up 21.1 percent year-on-year;
operating margin of 27.1 percent.

Health Care

Sales of $1.5 billion, up 7.1 percent in U.S. dollars. Organic
local-currency sales increased 2.7 percent, foreign currency
translation increased sales by 4.3 percent, and acquisitions increased
sales by 0.1 percent.
On an organic local-currency basis:
- Sales growth was led by food safety, health information systems,
  and medical consumables; drug delivery declined.
- Sales increased in Asia Pacific, Latin America/Canada, and the
  U.S.; EMEA was flat.
Operating income was $460 million, an increase of 7.0 percent
year-on-year; operating margin of 29.9 percent.

Electronics and Energy

Sales of $1.4 billion, up 4.6 percent in U.S. dollars. Organic
local-currency sales increased 1.7 percent, foreign currency
translation increased sales by 3.1 percent and divestitures decreased
sales by 0.2 percent.
On an organic local-currency basis:
- Electronics-related sales increased 3 percent with growth in
  electronics materials solutions partially offset by a decline in
  display materials and systems; energy-related sales declined 2
  percent.
- Sales grew in Asia Pacific, while Latin America/Canada was flat;
  the U.S. and EMEA declined.
Operating income was $337 million, an increase of 31.3 percent
year-on-year; operating margin of 24.9 percent.

Consumer

Sales of $1.1 billion, up 5.0 percent in U.S. dollars. Organic
local-currency sales increased 2.1 percent and foreign currency
translation increased sales by 2.9 percent.
On an organic local-currency basis:
- Sales grew in home improvement and home care; consumer health care
  declined.
- Sales grew in the U.S. and Latin America/Canada; EMEA and Asia
  Pacific declined.
Operating income was $218 million, down 2.4 percent year-on-year;
operating margin of 19.3 percent.

3M will conduct an investor teleconference at 9:00 a.m. EDT (8:00 a.m.
CDT) today. Investors can access this conference via the following:

Live webcast at http://investors.3M.com.
Live telephone:
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.

Webcast replay:
Go to 3MÔÇÖs Investor Relations website at http://investors.3M.com
and click on ÔÇ£Quarterly Earnings.ÔÇØ

Telephone replay:
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 21863181). The telephone replay will be available until
11:30 a.m. EDT (10:30 a.m. CDT) on May 1, 2018.

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, and
capital markets conditions and other factors beyond the Company's
control, including natural and other disasters or climate change
affecting the operations of the Company or its customers and suppliers;
(2) the Company's credit ratings and its cost of capital; (3)
competitive conditions and customer preferences; (4) foreign currency
exchange rates and fluctuations in those rates; (5) the timing and
market acceptance of new product offerings; (6) the availability and
cost of purchased components, compounds, raw materials and energy
(including oil and natural gas and their derivatives) due to shortages,
increased demand or supply interruptions (including those caused by
natural and other disasters and other events); (7) the impact of
acquisitions, strategic alliances, divestitures, and other unusual
events resulting from portfolio management actions and other evolving
business strategies, and possible organizational restructuring; (8)
generating fewer productivity improvements than estimated; (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) financial market risks that may affect the
CompanyÔÇÖs funding obligations under defined benefit pension and
postretirement plans; and (11) 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, 2017, and any subsequent quarterly reports on Form 10-Q (the
ÔÇ£ReportsÔÇØ). 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 information contained in this news release is as of the
date indicated. The Company assumes no obligation to update any
forward-looking statements contained in this news release as a result of
new information or future events or developments.

3M Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Millions, except per-share amounts)
(Unaudited)
Three months ended
March 31,
2018	2017
Net sales	$	8,278	$	7,685
Operating expenses
Cost of sales	4,236	3,882
Selling, general and administrative expenses	2,573	1,614
Research, development and related expenses	486	476
Gain on sale of businesses	(24	)	(29	)
Total operating expenses	7,271	5,943
Operating income	1,007	1,742
Other expense (income), net	42	5
Income before income taxes	965	1,737
Provision for income taxes	359	411
Net income including noncontrolling interest	$	606	$	1,326
Less: Net income attributable to noncontrolling interest	4	3
Net income attributable to 3M	$	602	$	1,323
Weighted average 3M common shares outstanding ÔÇô basic	596.2	598.1
Earnings per share attributable to 3M common shareholders ÔÇô basic	$	1.01	$	2.21
Weighted average 3M common shares outstanding ÔÇô diluted	612.7	612.0
Earnings per share attributable to 3M common shareholders ÔÇô diluted	$	0.98	$	2.16
Cash dividends paid per 3M common share	$	1.36	$	1.175

As discussed in note (c), results of operations for the first
quarter of 2018 were impacted by an $897 million pre-tax charge
related to settlement of a previously disclosed lawsuit with the
State of Minnesota and a $217 million measurement period adjustment
relative to the accounting for the 2017 enactment of the Tax Cuts
and Jobs Act. In addition, as discussed in 3MÔÇÖs Form 8-K dated March
15, 2018, the Company adopted Accounting Standards Update (ASU) No.
2017-07 relative to the presentation of pension and postretirement
benefit costs in the first quarter of 2018 with retroactive impact
to prior periods.

3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
March 31,	December 31,
2018	2017
ASSETS
Current assets
Cash and cash equivalents	$	3,491	$	3,053
Marketable securities ÔÇô current	604	1,076
Accounts receivable ÔÇô net	5,252	4,911
Inventories	4,295	4,034
Prepaids	832	937
Other current assets	344	266
Total current assets	14,818	14,277
Property, plant and equipment ÔÇô net	8,864	8,866
Goodwill and intangible assets ÔÇô net	13,455	13,449
Other assets	1,438	1,395
Total assets	$	38,575	$	37,987
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings and
current portion of long-term debt	$	3,449	$	1,853
Accounts payable	1,874	1,945
Accrued payroll	563	870
Accrued income taxes	282	310
Other current liabilities	2,791	2,709
Total current liabilities	8,959	7,687
Long-term debt	12,211	12,096
Other liabilities	6,366	6,582
Total liabilities	$	27,536	$	26,365
Total equity	$	11,039	$	11,622
Shares outstanding
March 31, 2018: 593,692,282 shares
December 31, 2017: 594,884,237 shares
Total liabilities and equity	$	38,575	$	37,987

3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Three months ended
March 31,
2018	2017
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	143	$	988
Cash flows from investing activities:
Purchases of property, plant and equipment	(304	)	(287	)
Purchases and proceeds from sale or maturities of marketable securities and investments ÔÇô net	473	138
Proceeds from sale of businesses, net of cash sold	40	53
Other investing activities	72	6
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	281	(90	)
Cash flows from financing activities:
Change in debt	1,581	(68	)
Purchases of treasury stock	(937	)	(690	)
Proceeds from issuances of treasury stock pursuant to stock option and benefit plans	219	315
Dividends paid to shareholders	(810	)	(702	)
Other financing activities	(7	)	(6	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	46	(1,151	)
Effect of exchange rate changes on cash and cash equivalents	(32	)	28
Net increase (decrease) in cash and cash equivalents	438	(225	)
Cash and cash equivalents at beginning of year	3,053	2,398
Cash and cash equivalents at end of period	$	3,491	$	2,173

3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL INFORMATION
NON-GAAP MEASURES
(Dollars in millions, except full-year 2018 forecast)
(Unaudited)
Three months ended
March 31,
Major GAAP Cash Flow Categories	2018	2017
Net cash provided by operating activities	$	143	$	988
Net cash provided by (used in) investing activities	281	(90	)
Net cash provided by (used in) financing activities	46	(1,151	)
Free Cash Flow (non-GAAP measure)	Full-Year 2018 Forecast (Billions)
Net cash provided by operating activities	$	143	$	988	$6.5 to $7.0
Purchases of property, plant and equipment	(304	)	(287	)	$1.5 to $1.8
Free cash flow (a)	(161	)	701	$4.7 to $5.5
Net income attributable to 3M	$	602	$	1,323	$5.2 to $5.5
Free cash flow conversion (a)	(27	)%	53	%	90% to 100%

(a)

Free cash flow and free cash flow conversion are not defined under
U.S. generally accepted accounting principles (GAAP). Therefore,
they should not be considered a substitute for income or cash flow
data prepared in accordance with U.S. GAAP and may not be comparable
to similarly titled measures used by other companies. The Company
defines free cash flow as net cash provided by operating activities
less purchases of property, plant and equipment. It should not be
inferred that the entire free cash flow amount is available for
discretionary expenditures. The Company defines free cash flow
conversion as free cash flow divided by net income attributable to
3M. The Company believes free cash flow and free cash flow
conversion are meaningful to investors as they function as useful
measures of performance, and the Company uses these measures as an
indication of the strength of the company and its ability to
generate cash.

March 31,	December 31,
Net Debt (non-GAAP measure)	2018	2017
Total debt	$	15,660	$	13,949
Less: Cash, cash equivalents and marketable securities	4,122	4,156
Net debt (b)	$	11,538	$	9,793

(b)

Net debt is not defined under U.S. GAAP and may not be computed the
same as similarly titled measures used by other companies. The
Company defines net debt as total debt less the total of cash, cash
equivalents and current and long-term marketable securities. 3M
believes net debt is meaningful to investors as 3M considers net
debt and its components to be an important indicator of liquidity
and a guiding measure of capital structure strategy.

3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL INFORMATION
NON-GAAP MEASURES ÔÇô (CONTINUED)
(Dollars in millions, except per share amounts)
(Unaudited)
Three months ended March 31, 2018
Q1 2017	Q1 2018

	Adjustment
	for
Adjusted income, operating income margin,	Measurement
earnings per share, & effective tax rate (non-	Reported	Reported	Period	Adjustment	Adjusted
GAAP measures) (Dollars in millions, except per	GAAP	GAAP	Accounting	for MN NRD	Non-GAAP
share amounts)	Measure	Measure	of TCJA	Resolution	Measure (c)
Net sales	$	7,685	$	8,278	$	ÔÇö	$	ÔÇö	$	8,278
Operating income	$	1,742	$	1,007	$	ÔÇö	$	897	$	1,904
Operating income margin	22.7	%	12.2	%	23.0	%
Income before taxes	$	1,737	$	965	$	ÔÇö	$	897	$	1,862
Provision for income taxes	$	411	$	359	$	(217	)	$	187	$	329
Effective tax rate	23.7	%	37.2	%	17.6	%
Net income attributable to 3M	$	1,323	$	602	$	217	$	710	$	1,529
Earnings per diluted share	$	2.16	$	0.98	$	0.36	$	1.16	$	2.50
Earnings per diluted share percent change	(54.6	)%	15.7	%
Estimated Full Year 2018
Adjustment
	for
	Measurement
Adjusted income, earnings per share, & effective tax rate	Period	Adjustment	Adjusted
(non-GAAP measures) (Dollars in billions, except per	GAAP	Accounting	for MN NRD	Non-GAAP
share amounts)	Measure	of TCJA	Resolution	Measure (c)
Income before taxes	$6.8 to 7.3	$	ÔÇö	$	0.9	$7.7 to 8.2
Provision for income taxes	$1.6 to 1.8	$	(0.2	)	$	0.2	$1.5 to 1.8
Effective tax rate	23 to 25	%	20 to 22%
Net income attributable to 3M	$5.2 to 5.5	$	0.2	$	0.7	$6.2 to 6.4
Earnings per diluted share	$8.68 to 9.03	$	0.36	$	1.16	$10.20 to 10.55

(c)

In February 2018, 3M reached an agreement with the State of
Minnesota that resolved the previously disclosed Natural Resource
Damages (NRD) lawsuit filed by the State against the Company related
to certain PFCs present in the environment. Under the terms of the
settlement, 3M agreed to provide an $850 million grant to the State
for a special ÔÇ£3M Water Quality and Sustainability Fund.ÔÇØ This Fund
will enable projects that support water sustainability in the Twin
Cities East Metro region, such as continued delivery of water to
residents and enhancing groundwater recharge to support sustainable
growth. The projects will also result in habitat and recreation
improvements, such as fishing piers, trails, and open space
preservation. 3M recorded a pre-tax charge of $897 million,
inclusive of legal fees and other related obligations, in the first
quarter of 2018 associated with the resolution of this matter. Also
during the first quarter of 2018, 3M recorded a tax expense of $217
million related to a measurement period adjustment to the
provisional amounts recorded in December 2017 from the enactment of
the Tax Cuts and Jobs Act (TCJA). 3MÔÇÖs provisional accounting
continues to be subject to adjustment during the measurement period
of up to one year following the December 2017 enactment of TCJA.

In addition to reporting financial results in accordance with U.S.
GAAP, the Company also provides non-GAAP measures that adjust for
the impacts of the NRD resolution and measurement period adjustment
to the impact of enactment of the TCJA. These items represent
significant charges that impacted the CompanyÔÇÖs financial results.
Operating income, income before taxes, net income, earnings per
share, and the effective tax rate are all measures for which 3M
provides the reported GAAP measure and an adjusted measure. The
adjusted measures are not in accordance with, nor are they a
substitute for, GAAP measures. The Company considers these non-GAAP
measures in evaluating and managing the CompanyÔÇÖs operations. The
Company believes that discussion of results adjusted for this item
is meaningful to investors as it provides a useful analysis of
ongoing underlying operating trends. The determination of this item
may not be comparable to similarly titled measures used by other
companies.

3M Company and Subsidiaries
SALES CHANGE ANALYSIS (d)
(Unaudited)
Three months ended March 31, 2018
Europe,
Middle	Latin
Sales Change Analysis	United	Asia-	East and	America/	World-
By Geographic Area	States	Pacific	Africa	Canada	Wide
Volume ÔÇô organic	1.5	%	4.9	%	(1.3	)%	2.5	%	2.1	%
Price	0.8	ÔÇö	1.4	1.0	0.7
Organic local-currency sales	2.3	4.9	0.1	3.5	2.8
Acquisitions	2.6	0.6	3.2	1.1	1.9
Divestitures	(1.4	)	(0.6	)	(2.0	)	(1.3	)	(1.2	)
Translation	ÔÇö	5.1	12.4	1.0	4.2
Total sales change	3.5	%	10.0	%	13.7	%	4.3	%	7.7	%
Three months ended March 31, 2018
Organic
Worldwide	local-	Total
Sales Change Analysis	currency	sales
By Business Segment	sales	Acquisitions	Divestitures	Translation	change
Industrial	2.2	%	ÔÇö	%	ÔÇö	%	4.9	%	7.1	%
Safety and Graphics	6.9	9.9	(6.7	)	4.9	15.0
Health Care	2.7	0.1	ÔÇö	4.3	7.1
Electronics and Energy	1.7	ÔÇö	(0.2	)	3.1	4.6
Consumer	2.1	ÔÇö	ÔÇö	2.9	5.0
Total Company	2.8	%	1.9	%	(1.2	)%	4.2	%	7.7	%

(d)

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 includes both organic volume impacts (which excludes
acquisition and divestiture impacts), plus selling price changes.
Acquisition and divestiture impacts are measured separately for the
first 12 months post-transaction.

3M Company and Subsidiaries
BUSINESS SEGMENTS
(Dollars
in millions)
(Unaudited)

As part of 3MÔÇÖs continuing effort to improve the alignment of its
businesses around markets and customers, the Company made the following
changes, effective in the first quarter of 2018, and other revisions
impacting business segment reporting:

Consolidation of customer account activity within international
countries ÔÇô expanding dual credit reporting

The Company consolidated its customer account activity in each country
into centralized sales districts for certain countries that make up
approximately 70 percent of 3MÔÇÖs 2017 international net sales.
Expansion of these initiatives, which previously had been deployed
only in the U.S., reduces the complexity for customers when
interacting with multiple 3M businesses. 3M business segment reporting
measures include dual credit to business segments for certain sales
and related operating income. This dual credit is based on which
business segment provides customer account activity with respect to a
particular product sold in a specific country. The expansion of
alignment of customer accounts within additional countries increased
the attribution of dual credit across 3MÔÇÖs business segments.
Additionally, certain sales and operating income results for
electronic bonding product lines that were previously equally divided
between the Electronics and Energy business segment and the Industrial
business segment are now reported similarly to dual credit. As a
result, previously reported aggregate business segment net sales and
operating income for total year 2017 increased $1.568 billion and $402
million, respectively, offset by similar increases in the elimination
of dual credit net sales and operating income amounts.

Centralization of manufacturing and supply technology platforms

Certain shared film manufacturing and supply technology platform
resources formerly reflected within the Electronics and Energy
business segment were combined with other shared and centrally managed
material resource centers of expertise within Corporate and
Unallocated.

Contacts

3M
Investor Contact:
Bruce Jermeland,
651-733-1807
or
Tony Riter, 651-733-1141
or
Media
Contact:
Lori Anderson, 651-733-0831

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