3M Company Overview David W. Meline, Sr. Vice President and CFO March 18, 2014 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Forward-looking statements This presentation 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," "project," "intend," "plan," "believe," "will," "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 and capital markets conditions and other factors beyond the Company's control, including natural and other disasters 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 i 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 g 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; and (10) 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 December 31, 2013. Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Annual Report under Cautionary Note Concerning Factors That May Affect Future Results and Risk Factors in Part I, Items 1 and 1A. The information contained in this presentation is as of the date indicated. The Company assumes no obligation to update any forward-looking statements contained in this presentation as a result of new information or future events or developments. 2 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
3M s fundamental strengths World-Class Talent Technological Strength Manufacturing & Engineering Process Unparalleled Global Reach Strong Financial Position 3 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
A history of world-class performance 2003 2013 Performance 22% 10% 6% EPS CAGR Sales CAGR Avg. ROIC Refer to 3M's Form 8-K dated January 30, 2014 for a discussion of non-gaap measures, including ROIC 4 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
2013 Full-Year Highlights Sales of $30.9 billion, up 3.2% in dollar terms Organic local currency +3.4% Health Care +5%, Industrial +5%, Safety & Graphics +4%, Consumer +3%, Electronics & Energy flat Latin America/Canada +7%, APAC +4%, U.S. +3%, EMEA (Europe/Middle East/Africa) +2% FX reduced sales by 1.6% Acquisitions iti added d +1.4% to sales growth (Ceradyne, FSTech and CodeRyte SM ) Operating margins of 21.6%, down 0.1 percentage points year-on-year Operating margins of 21.9% excluding acquisitions 4 of 5 business groups posted operating margins > 21% GAAP EPS of $6.72, up 6.3% year-on-year Returned record $6.9 billion of cash to shareholders via dividends and share repurchases Free cash flow conversion of 89%; ROIC of 20% Announced enhanced capital allocation strategy; Q1 2014 dividend increase of 35% 5 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
A portfolio of market-leading businesses 2013 Sales ($B), 2013-2017e 2017e Organic Local Currency Growth (%) $31 B Sales 4-6% Growth Industrial Health Care Consumer Safety & Graphics Electronics & Energy $10.6 B Sales $5.3 B Sales $4.4 B Sales $5.7 B Sales $5.4 B Sales 3-6% Growth 4-7% Growth 3-6% Growth 4-6% Growth 3-7% Growth Note: Business Group estimates include dual credit sales 6 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
A strong, global platform Canada $0.9B Sales 1871 1,871 1,800 Employees West Europe Central East Europe $5.4B Sales $1.1 $1.1B B Sales 16,809 16,100 Employees 3,688 3,700 Employees United States $11.2B Sales 34,700 Employees Latin America $2.8B $2.7B Sales Sales 12,800 13,200 Employees l Asia Pacific Greater China $3.9B $3.8B Sales 6,597 7,200 Employees 3M Worldwide (2013) Sales of $31B (64% international) Operating income of $6.7B Operating margin of 21.6% 73 international subsidiaries 89,000 employees, including 8,200 in R&D 216 Plant Sites in 39 countries Middle East & Africa $0.6B Sales 710 700 Employees Asia Pacific $5.3 $5.3BB Sales Sales 11,951 11,200 Employees 7 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
3M Corporate Portfolio 2013 Sales Heartland ive Stra ategic Attractiv veness Relat Strategic Review Push Forward Relative Shareholder Attractiveness 8 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Increasing R&D investment R&D Intensity (R&D / Total Sales) 5.5% 56% 5.6% ~6% Incremental investment t targeted t at developing new products for new markets to accelerate organic growth 2013 New Product Vitality Index (NPVI) of 33%; aiming for 37% by 2017 Enhances global competitiveness and drives relevancy with customers Maintain or increase value to customers Supports premium operating margins and ROIC 2012 2013 2017e A stronger commitment to disruptive innovation 9 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
M&A will complement our organic growth Building on portfolio prioritization Immediate relevance in targeted areas Emphasize high-growth spaces Increased focus on technology Leveraging enhanced integration capabilities Planned investment of $5 - $10B+ during 2013 2017 net of divestiture proceeds 10 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Moving to one globally integrated ERP system a more agile and efficient 3M Common global business practices and expanded IT capabilities Mitigating risks via staged implementations Increased customer intimacy and responsiveness Improved business planning and faster decision making Estimated financial benefits once fully deployed: Improved working capital management of ~$500M Annual operational efficiencies of ~$500M/year Total project cost estimate of $0.7B to $0.8B Deployment tracking to plan 11 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Increasing share repurchase program to $17B to $22B, or 20% to 25% of market cap ($B) $15B to $7.5B $22B to $17B $18B of cash returned to shareholders h during 2003-12 via share repurchases 2013 gross share repurchases of $5.2B Forecasting 2014 full-year gross share repurchases in range of $3B to $5B Disciplined approach: minimum repurchase threshold; adjust up or down depending on evolving cash sources and uses and relative value Share repurchase program will add 2-3% to earnings growth annually 12 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Increasing 2014 dividend 35% to $3.42 per share +35% $14B in cash dividends id d paid to shareholders h over past decade +4% +2% +3% +5% +7% +8% 2014e cash dividend of ~$2.3B, an all-time record 2014 dividend marks 56th consecutive year of annual increases Paid dividends without interruption for 97 years Baseline assumption: future increases to grow in-line with earnings over time Note: 2014e reflects the annualized Q1 2014 declared dividend increase of 35% to $0.855 per share vs. $0.635 per share in Q1 2013 Strength of 3M business model supports more aggressive dividend payout 13 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
11 133 Advanced Composites for Transportation Systems 5 4 1 5 Ashish Khan 12 151 Digital Collaboration 5 3 2 5 Gayle Schue 13 147 Design Lighting Acceleration of design lighting commercialization. 4 5 1 4 Jim Sax 14 114 Thin Efficient Flat Back Light Unit 4 4 2 4 Robert Visse 15 152 CHIM Room Transformation Project Venus 4 4 2 4 Gayle Schue 16 110 Millimeter Wave Connectivity 4 3 3 4 Robert Visse 17 121 Next Generation Ultralightweight Proppants Polymer and Polymer 4 3 2 4 Larry Wendl 18 122 Rapid In Cycle Application Technology for Polymeric Ground 4 2 3 4 Larry Wendl 19 140 ASD Portable Bonded Program 4 1 5 4 Ashish Khan 20 109 Structured Glass 3 5 2 3 Robert Visse 21 118 Microencapsulation technology in Argentina 3 5 1 3 Larry Wendl 22 123 220kV Cable Accessories Development 3 5 2 3 Joe Liu 23 132 Kairos Advanced Films 3 5 2 3 Ashish Khan 24 142 Compliance Safety Mgmt Solution 3 5 2 3 Jim Sax 25 139 Automotive OEM Lighting 3 4 3 3 Ashish Khan 26 137 Fuel Management Development 3 3 4 3 Ashish Khan 27 103 Moisture Management & Detection Solution for Sterilization Packs 2 7 1 2 Todd Frucht 28 125 Remote Library 2 5 3 2 Joe Liu Discuss 9 Proposals $14.1M 50 FTE Do not consider this round 23 proposals $46.9M 146 FTE Strategic Hold Consider funding in this round 10 Proposals $19M 77 FTE Discuss 6 Proposals $9.4M 35 FTE Top Strategic Proposals not captured in Portfolio EEBG Lab Engineering MOGs Int l (EEBG) Relative Shareholder Attractiveness Key levers will drive value creation going forward 3M Corporate Portfolio 2013 Estimated Sales Heartland egic Attractiveness Relative Strate Strategic Review Relative Shareholder Attractiveness Push Forward 21 Confidential 2013 3M. All Rights Reserved. Portfolio Management Invest in Innovation I3 Inspiration Proposals 400 Ideas 75 Candidates Assessment CTOC Assessment Corporate Strategy Assessment Top CTOC CTOC Hold Finance review Corporate implications BG implications Business implications Must Continue to Invest in Long Term Growth Opportunities Investing in Innovation Relative Strategic Attractiveness I3 Board Funded Project(s) Innovation Board Pipeline 20 Funded 20 2013 Executive Conference 2013 3M. All Rights Reserved. Business Transformation Moving to One Globally Integrated IT Platform A More Efficient 3M: Common global business practices and expanded IT capabilities Key enabler to a fully integrated supply chain Improved working capital management Increased customer intimacy and responsiveness Improved business planning and decision-making speed Greater operational efficiencies Operational Efficiency Improvements Create Space For Growth Investments 7 2013 Executive Conference 2013 3M. All Rights Reserved. Business Transformation These levers, combined with more aggressive capital deployment, will drive enhanced value creation 14 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Clear financial objectives (2013-17) ~100% 9-11% ~20% 4-6% EPS Growth Organic Revenue Growth ROIC Free Cash Flow Conversion Aggressive and realistic targets 15 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Appendix Refer to 3M's Form 8-K furnished on March 5, 2014 for a discussion of the product move between business segments and other changes within business segments that were effective in the first quarter of 2014. This presentation reflects the impact of these changes for all periods presented. 16 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Industrial ($M) 2011 2012 2013 CAGR Sales $9,688 $10,008 $10,657 5% GAAP Operating Income $1,988 $2,244 $2,307 8% GAAP Operating Margin 20.5% 22.4% 21.6% With Leading Market Positions In: Industrial abrasives Auto body repair solutions Car care DIY Structural adhesives and tapes Filtration and purification systems Specialty additives Tapes and fasteners for personal hygiene products Personal Care 6% Advanced Mat'ls 11% Abrasives 14% APAC 26% 2013 Sales By Business Filtration 6% Aerospace 3% 2013 Sales By Geography LAC 12% Adhesives & Tapes 32% Transportation 28% US U.S. 37% EMEA 25% 17 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Safety & Graphics ($M) 2011 2012 2013 CAGR Sales $5,398 $5,406 $5,584 2% GAAP Operating Income $1,232 $1,210 $1,227 ---- GAAP Operating Margin 22.8% 22.4% 22.0% With Leading Market Positions In: Respiratory, hearing and eye protection solutions Reflective signage for highway and construction safety and license plates Premium large format graphic films for advertising and fleet signage Roofing granules for asphalt shingles Personal identification issuance and authentication products Building safety solutions Architectural design solutions for surfaces and lighting applications Commercial Solutions 27% Roofing granules 5% Traffic Safety & Security Systems 28% 2013 Sales By Business 2013 Sales By Geography LAC 16% U.S. 35% Personal Safety 40% APAC 22% EMEA 27% 18 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Electronics & Energy Electrical Markets 24% 2013 Sales By Business ($M) 2011 2012 2013 CAGR Renewable Sales $5,732 $5,458 $5,393-3% Energy 7% Electronic GAAP Operating Income $1,140 $1,026 $954-9% GAAP Operating Margin 19.9% 18.8% 17.7% With Leading Market Positions In: Optically clear adhesives, Novec fluorochemicals, transport solutions and flexible circuits for electronic components Light management films that enhance brightness and provide energy efficiency in liquid crystal displays (LCD) Electrical l vinyl rubber and mastic tapes Medium voltage cable accessories, OEM insulation tapes Telecommunications copper splicing Fiber splicing/connectivity Telecom 9% 2013 Sales By Geography LAC 7% Electronic Markets Mtls 19% Electronic Solutions 11% Optical Systems 30% U.S. 18% EMEA 13% APAC 62% 19 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Health Care ($M) 2011 2012 2013 CAGR Sales $5,011 $5,138 $5,334 3% GAAP Operating Income $1,484 $1,641 $1,672 6% GAAP Operating Margin 29.6% 31.9% 31.3% Sys Health Info 11% Drug Delivery 9% 2013 Sales By Business Food Safety 4% Infection Prevention 29% With Leading Market Positions In: Skin and wound care (transparent IV dressings and tapes) Infection prevention (auscultation, specialty drapes and surgical clippers) Patient warming solutions Oral care solutions Coding and reimbursement software Drug delivery y( (inhalation systems) Food safety indicator solutions Critical & Chronic Care 22% APAC 16% 2013 Sales By Geography LAC 10% Oral Care 25% U.S. 44% EMEA 30% 20 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Consumer 2013 Sales By Business ($M) 2011 2012 2013 CAGR Consumer Health Care & Sales $4,230 $4,386 $4,435 2% Other 9% GAAP Operating Income $855 $943 $945 5% GAAP Operating Margin 20.2% 21.5% 21.3% 35% With Leading Market Positions In: Consumer tapes Repositionable notes Home air filtration Cleaning products for the home Consumer bandages braces and supports Retail abrasives Home Care 24% DIY 32% 2013 Sales By Geography LAC 12% Office & Stationery APAC 18% U.S. 55% EMEA 15% 21 Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014
Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2014