UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
 
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of report (Date of earliest event reported): April 25, 2019
 
3M COMPANY
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of Incorporation)

File No. 1-3285	 	41-0417775	
(Commission File Number)	 	(IRS Employer Identification No.)	

3M Center, St. Paul, Minnesota	 	55144-1000	
(Address of Principal Executive Offices)	 	(Zip Code)	
 
(651) 733-1110
(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
o                  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o                  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o                  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o                  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 
Item 2.02.  Results of Operations and Financial Condition
 
On April 25, 2019, 3M Company issued a press release reporting first-quarter financial results and updating 2019 earnings outlook (attached hereunder as Exhibit 99.1 and incorporated herein by reference).
 
Item 9.01.  Financial Statements and Exhibits
 
(d) Exhibits

Exhibit Number	 	Description	
99.1	 	Press Release, dated as of April 25, 2019, of 3M Company (furnished pursuant to Item 2.02 hereof)	
 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 	3M COMPANY	
 	 	
 	By:	/s/ Gregg M. Larson	
 	 	Gregg M. Larson,	
 	 	Deputy General Counsel and Secretary	
 	 	
Dated: April 25, 2019	 	

2 

Exhibit 99.1 
 
For Immediate Release
 
3M Reports First-Quarter 2019 Results;
Company Initiates Restructuring
 
First-Quarter Summary:
 
·                   Sales of $7.9 billion, down 5.0 percent year-on-year
·                   Organic local-currency sales decline of 1.1 percent; China, automotive, and electronics collectively down mid-single digits
·                   GAAP EPS of $1.51 vs. $0.98 last year, up 54.1 percent year-on-year
·                   Adjusted EPS of $2.23 vs. $2.50 last year, down 10.8 percent year-on-year
·                   Q1 2019 excludes significant litigation-related charges of $0.72 per share
·                   Q1 2018 excludes a total charge of $1.52 per share for adjustments to provisional accounting for the Tax Cuts and Jobs Act (TCJA) and significant litigation-related charges
·                   Closed acquisition of M*Modal’s technology business
·                   Announced company realignment from five to four business groups effective April 1
 
ST. PAUL, Minn. — Apr. 25, 2019 - 3M (NYSE: MMM) today reported first-quarter 2019 results.
 
“The first quarter was a disappointing start to the year for 3M,” said Mike Roman, 3M chief executive officer. “We continued to face slowing conditions in key end markets which impacted both organic growth and margins, and our operational execution also fell short of the expectations we have for ourselves. As a result, we have stepped up additional actions — including restructuring — to drive productivity, reduce costs, and increase cash flow as we manage through challenges in some of our end markets.
 
“While we take actions to manage through the near-term, we also continue to invest in growth to position 3M for the future,” Roman continued. “We recently implemented a significant portfolio realignment from five to four business groups, which will enable us to better serve our customers and global markets. Moving forward, I am confident that we are making the necessary changes and focused on the right priorities to accelerate 3M into a stronger future.”
 
First-Quarter Results
 
Sales were down 5.0 percent to $7.9 billion. Organic local-currency sales declined 1.1 percent while divestitures, net of acquisitions, decreased sales by 0.5 percent. Foreign currency translation decreased sales by 3.4 percent year-on-year.
 
Total sales grew 0.3 percent in Health Care, with declines of 1.9 percent in Consumer, 4.2 percent in Safety and Graphics, 6.6 percent in Industrial, and 11.8 percent in Electronics and Energy. Organic local-currency sales increased 0.9 percent in Consumer and 0.7 percent in Health Care, with decreases of 0.1 percent in Safety and Graphics, 2.8 percent in Industrial, and 3.0 percent in Electronics and Energy.

 
On a geographic basis, total sales grew 0.1 percent in the U.S., with declines of 6.5 percent in Latin America/Canada, 7.4 percent in Asia Pacific, and 9.4 percent in EMEA (Europe, Middle East and Africa). Organic local-currency sales increased 0.8 percent in Latin America/Canada and 0.7 percent in EMEA, with decreases of 0.4 percent in the U.S. and 3.6 percent in Asia Pacific.
 
First-quarter 2019 GAAP earnings were $1.51 per share, an increase of 54.1 percent versus the first quarter of 2018. During the first quarter of 2019, the company recorded significant litigation-related pre-tax charges of $548 million, or $0.72 per share, as referenced in the “Significant Litigation-Related Update” section below. First-quarter 2018 GAAP earnings were $0.98 per share which included a $0.36 per share impact for an expense related to the enactment of the Tax Cuts and Jobs Act (TCJA) and a $1.16 per share impact for significant litigation-related charges.
 
Excluding the above items, first-quarter 2019 adjusted earnings were $2.23 per share versus $2.50 per share in the first-quarter 2018, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.
 
First-quarter operating income was $1.1 billion with operating margins of 14.4 percent. Excluding significant litigation-related charges, operating income was $1.7 billion with operating margins of 21.4 percent.
 
The company’s operating cash flow was $1.0 billion, contributing to conversion of 74 percent of net income to free cash flow, as referenced in the “Supplemental Financial Information Non-GAAP Measures” section.
 
3M paid $830 million in cash dividends to shareholders and repurchased $701 million of its own shares during the quarter.
 
Significant Litigation-Related Update
 
Two significant litigation issues impacted 3M’s first-quarter results. The company established a reserve of $235 million to resolve certain environmental matters and litigation, in which 3M is a defendant, related to its historical manufacture and disposal of PFAS-containing waste. 3M manufactured or used PFAS at five manufacturing plants globally, including in Alabama, Illinois and Minnesota in the United States, as well as in Belgium and Germany. The company also increased its respirator reserve by $313 million to address the cost of resolving all current and expected future coal mine dust lawsuits in Kentucky and West Virginia. These actions resulted in a total significant litigation-related pre-tax charge of $548 million. 3M’s upcoming Form 10-Q filing will include additional details.
 
First-Quarter Business Group Discussion
 
Industrial
·                   Sales of $2.9 billion, down 6.6 percent in U.S. dollars. Organic local-currency sales decreased 2.8 percent, foreign currency translation decreased sales by 3.7 percent, and divestitures decreased sales by 0.1 percent.
·                   On an organic local-currency basis:

 
·                   Sales increased in advanced materials; declined in industrial adhesives and tapes, automotive aftermarket, separation and purification, abrasives, closure and masking, and automotive and aerospace.
·                   Sales grew in Latin America/Canada and EMEA; declined in the U.S. and Asia Pacific.
·                   Operating income was $585 million, a decrease of 18.0 percent year-on-year; operating margins of 20.0 percent.
 
Safety and Graphics
·                   Sales of $1.7 billion, down 4.2 percent in U.S. dollars. Organic local-currency sales decreased 0.1 percent, foreign currency translation decreased sales by 4.0 percent, and divestitures decreased sales by 0.1 percent.
·                   On an organic local-currency basis:
·                   Sales increased in personal safety; declined in commercial solutions, transportation safety and roofing granules.
·                   Sales grew in Latin America/Canada and EMEA; the U.S. declined.
·                   Operating income was $396 million, a decrease of 17.7 percent year-on-year; operating margins of 23.2 percent.
 
Health Care
·                   Sales of $1.5 billion, up 0.3 percent in U.S. dollars. Organic local-currency sales increased 0.7 percent, foreign currency translation decreased sales by 3.6 percent, and acquisitions increased sales by 3.2 percent.
·                   On an organic local-currency basis:
·                   Sales growth was led by food safety, health information systems, medical consumables, and oral care; declined in drug delivery.
·                   Sales increased in Asia Pacific and EMEA; the U.S. declined.
·                   Operating income was $432 million, a decrease of 5.6 percent year-on-year; operating margins of 28.1 percent.
 
Electronics and Energy
·                   Sales of $1.2 billion, down 11.8 percent in U.S. dollars. Organic local-currency sales decreased 3.0 percent, foreign currency translation decreased sales by 2.2 percent and divestitures decreased sales by 6.6 percent.
·                   On an organic local-currency basis:
·                   Energy-related sales grew 5 percent; electronics-related sales were down 6 percent with declines in both display materials and systems and electronics materials solutions.
·                   Sales grew in the U.S.; Latin America/Canada and Asia Pacific declined.
·                   Operating income was $284 million, a decrease of 15.6 percent year-on-year; operating margins of 23.8 percent.
 
Consumer
·                   Sales of $1.1 billion, down 1.9 percent in U.S. dollars. Organic local-currency sales increased 0.9 percent and foreign currency translation decreased sales by 2.8 percent.

 
·                   On an organic local-currency basis:
·                   Sales grew in home improvement; declined in home care, and consumer health care.
·                   Sales grew in the U.S.; EMEA, Latin America/Canada, and Asia Pacific declined.
·                   Operating income was $219 million, down 0.7 percent year-on-year; operating margins of 19.5 percent.
 
Restructuring and Other Actions
 
Reflecting a slower than expected 2019, 3M has initiated restructuring and other actions that will result in an expected reduction of 2,000 positions worldwide with an estimated annual pre-tax savings range of $225 million to $250 million, with $100 million in the remainder of 2019. The company anticipates a pre-tax charge in 2019 of approximately $150 million, or $0.20 per share. These actions will span all business groups, functions and geographies, with emphasis on corporate structure and underperforming areas of the portfolio.
 
2019 Updated Outlook
 
The company updated its 2019 GAAP earnings expectations to be in the range of $8.53 to $9.03 per share. Excluding the impact of significant litigation-related charges, 3M expects its adjusted full-year 2019 earnings to be in the range of $9.25 to $9.75 per share versus a prior expectation of $10.45 to $10.90 per share. 3M also updated its organic local-currency sales growth guidance to be in the range of minus 1 to plus 2 percent versus a prior range of 1 to 4 percent and its expectation for return on invested capital of 20 to 22 percent versus a prior range of 22 to 25 percent. The company maintained its full-year expectations for free cash flow conversion of 95 to 105 percent. See the “Supplemental Financial Information Non-GAAP Measures” section for applicable information.
 
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 3M’s Investor Relations website at http://investors.3M.com and click on “Quarterly Earnings.”
·                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 21900593). The telephone replay will be available until 11:30 a.m. EDT (10:30 a.m. CDT) on May 3, 2019.
 
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, capital markets and other external 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) operational execution, including scenarios where the Company generates 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 Company’s 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, 2018, and any subsequent quarterly reports on Form 10-Q (the “Reports”). 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,	 	
			 	
 	 	2019	 	2018	 	
 	 	 	 	 	 	
Net sales	 	$	7,863	 	$	8,278	 	
 	 	 	 	 	 	
Operating expenses	 	 	 	 	 	
Cost of sales	 	4,310	 	4,236	 	
Selling, general and administrative expenses	 	1,948	 	2,573	 	
Research, development and related expenses	 	477	 	486	 	
Gain on sale of businesses	 	(8	)	(24	)	
 	 	 	 	 	 	
Total operating expenses	 	6,727	 	7,271	 	
 	 	 	 	 	 	
Operating income	 	1,136	 	1,007	 	
 	 	 	 	 	 	
Other expense (income), net	 	48	 	42	 	
 	 	 	 	 	 	
Income before income taxes	 	1,088	 	965	 	
 	 	 	 	 	 	
Provision for income taxes	 	195	 	359	 	
 	 	 	 	 	 	
Net income including noncontrolling interest	 	$	893	 	$	606	 	
 	 	 	 	 	 	
Less: Net income attributable to noncontrolling interest	 	2	 	4	 	
 	 	 	 	 	 	
Net income attributable to 3M	 	$	891	 	$	602	 	
 	 	 	 	 	 	
Weighted average 3M common shares outstanding — basic	 	577.5	 	596.2	 	
Earnings per share attributable to 3M common shareholders — basic	 	$	1.54	 	$	1.01	 	
 	 	 	 	 	 	
Weighted average 3M common shares outstanding — diluted	 	588.5	 	612.7	 	
Earnings per share attributable to 3M common shareholders — diluted	 	$	1.51	 	$	0.98	 	

 
3M Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)

 	 	March 31,	 	December 31,	 	
 	 	2019	 	2018	 	
ASSETS	 	 	 	 	 	
Current assets	 	 	 	 	 	
Cash and cash equivalents	 	$	2,938	 	$	2,853	 	
Marketable securities — current	 	539	 	380	 	
Accounts receivable — net	 	5,173	 	5,020	 	
Inventories	 	4,538	 	4,366	 	
Prepaids	 	713	 	741	 	
Other current assets	 	473	 	349	 	
Total current assets	 	14,374	 	13,709	 	
Property, plant and equipment — net	 	8,829	 	8,738	 	
Operating lease right of use assets	 	797	 	—	 	
Goodwill and intangible assets — net	 	13,658	 	12,708	 	
Other assets	 	1,482	 	1,345	 	
Total assets	 	$	39,140	 	$	36,500	 	
 	 	 	 	 	 	
LIABILITIES AND EQUITY	 	 	 	 	 	
Current liabilities	 	 	 	 	 	
Short-term borrowings and current portion of long-term debt	 	$	790	 	$	1,211	 	
Accounts payable	 	2,309	 	2,266	 	
Accrued payroll	 	517	 	749	 	
Accrued income taxes	 	183	 	243	 	
Operating lease liabilities — current	 	255	 	—	 	
Other current liabilities	 	3,071	 	2,775	 	
Total current liabilities	 	7,125	 	7,244	 	
Long-term debt	 	15,580	 	13,411	 	
Other liabilities	 	6,678	 	5,997	 	
Total liabilities	 	$	29,383	 	$	26,652	 	
 	 	 	 	 	 	
Total equity	 	$	9,757	 	$	9,848	 	
Shares outstanding	 	 	 	 	 	
March 31, 2019: 576,426,706 shares	 	 	 	 	 	
December 31, 2018: 576,575,168 shares	 	 	 	 	 	
Total liabilities and equity	 	$	39,140	 	$	36,500	 	

 
3M Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(Unaudited)

 	 	Three months ended 
March 31,	 	
			 	
 	 	2019	 	2018	 	
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	 	$	1,048	 	$	143	 	
 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	
Purchases of property, plant and equipment	 	(391	)	(304	)	
Acquisitions, net of cash acquired	 	(704	)	—	 	
Purchases and proceeds from sale or maturities of marketable securities and investments — net	 	(142	)	473	 	
Proceeds from sale of businesses, net of cash sold	 	6	 	40	 	
Other investing activities	 	6	 	72	 	
 	 	 	 	 	 	
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	 	(1,225	)	281	 	
 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	
Change in debt	 	1,591	 	1,581	 	
Purchases of treasury stock	 	(701	)	(937	)	
Proceeds from issuances of treasury stock pursuant to stock option and benefit plans	 	215	 	219	 	
Dividends paid to shareholders	 	(830	)	(810	)	
Other financing activities	 	(17	)	(7	)	
 	 	 	 	 	 	
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	 	258	 	46	 	
 	 	 	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	 	4	 	(32	)	
 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	85	 	438	 	
Cash and cash equivalents at beginning of year	 	2,853	 	3,053	 	
 	 	 	 	 	 	
Cash and cash equivalents at end of period	 	$	2,938	 	$	3,491	 	

 
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL INFORMATION
NON-GAAP MEASURES
(Dollars in millions, except full-year 2019 forecast)
(Unaudited)

 	 	Three months ended	 	 	 	
 	 	March 31,	 	 	 	
Major GAAP Cash Flow Categories	 	2019	 	2018	 	 	 	
 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	$	1,048	 	$	143	 	 	 	
Net cash provided by (used in) investing activities	 	(1,225	)	281	 	 	 	
Net cash provided by (used in) financing activities	 	258	 	46	 	 	 	

 

Free Cash Flow (non-GAAP measure)	 	 	 	 	 	Full-Year 2019
Forecast
(Billions)	 	
 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	 	$	1,048	 	$	143	 	$6.4 to $7.2	 	
Purchases of property, plant and equipment	 	(391	)	(304	)	($1.6 to $1.7	)	
Free cash flow (a)	 	657	 	(161	)	$4.7 to $5.6	 	
 	 	 	 	 	 	 	 	
Net income attributable to 3M	 	$	891	 	$	602	 	$5.0 to $5.3	 	
Free cash flow conversion (a)	 	74	%	(27	)%	95% to 105%	 	

(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)	 	2019	 	2018	 	
Total debt	 	$	16,370	 	$	14,622	 	
Less: Cash, cash equivalents and marketable securities	 	3,523	 	3,270	 	
Net debt (b)	 	$	12,847	 	$	11,352	 	

(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 — (CONTINUED)
(Dollars in millions, except full-year 2019 forecast)
(Unaudited)

 	 	Twelve months
ended	 	Full Year
Estimated	 	
Return on Invested Capital (non-GAAP measure)	 	December 31 2018	 	2019 (in billions)	 	
 	 	 	 	 	 	
Net income including non-controlling interest	 	$	5,363	 	$5.0 to $5.3	 	
Interest expense (after-tax) (1)	 	268	 	~$0.3	 	
Adjusted net income (Return)	 	$	5,631	 	$5.3 to $5.6	 	
 	 	 	 	 	 	
Average shareholders’ equity (including non-controlling interest) (2)	 	$	10,407	 	$9.0 to $10.0	 	
Average short-term and long-term debt (3)	 	14,912	 	$16.0 to $17.0	 	
Average invested capital	 	$	25,318	 	$25.0 to $27.0	 	
 	 	 	 	 	 	
Return on invested capital (non-GAAP measure) (c)	 	22.2	%	20% to 22%	 	
 	 	 	 	 	 	
(1) Effective income tax rate used for interest expense	 	23.4	%	20% to 22%	 	
 	 	 	 	 	 	
(2) Calculation of average equity (includes non-controlling interest)	 	 	 	 	 	
Ending total equity as of:	 	 	 	 	 	
March 31	 	$	11,039	 	 	 	
June 30	 	10,428	 	 	 	
September 30	 	10,311	 	 	 	
December 31	 	9,848	 	 	 	
Average total equity	 	$	10,407	 	 	 	
 	 	 	 	 	 	
(3) Calculation of average debt	 	 	 	 	 	
Ending short-term and long-term debt as of:	 	 	 	 	 	
March 31	 	$	15,660	 	 	 	
June 30	 	14,519	 	 	 	
September 30	 	14,846	 	 	 	
December 31	 	14,622	 	 	 	
Average short-term and long-term debt	 	$	14,912	 	 	 	

(c)                       Return on Invested Capital (ROIC) is not defined under U.S. generally accepted accounting principles. Therefore, ROIC should not be considered a substitute for other measures prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. The Company defines ROIC as adjusted net income (net income including non-controlling interest plus after-tax interest expense) divided by average invested capital (equity plus debt). The Company believes ROIC is meaningful to investors as it focuses on shareholder value creation.

 
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL INFORMATION
NON-GAAP MEASURES — (CONTINUED)
(Unaudited)

Adjusted income,
operating income
margin, earnings per
share, & effective tax
rate (non-GAAP
measures) (Dollars in
millions, except per
share amounts)	 	Net
Sales	 	Operating
Income	 	Operating
Income
Margin	 	Income
Before
Taxes	 	Provision
for
Income
Taxes	 	Effective
Tax
Rate	 	Net Income
Attributable
to 3M	 	Earnings
Per
Diluted
Share	 	Earnings
per
diluted
share
percent
change	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Q1 2018 GAAP	 	$	8,278	 	$	1,007	 	12.2	%	$	965	 	$	359	 	37.2	%	$	602	 	$	0.98	 	 	 	
Adjustment for significant litigation-related charges	 	—	 	897	 	 	 	897	 	187	 	 	 	710	 	1.16	 	 	 	
Adjustment for measurement period accounting of TCJA	 	—	 	—	 	 	 	—	 	(217	)	 	 	217	 	0.36	 	 	 	
Q1 2018 Adjusted Non-GAAP Measure (d)	 	$	8,278	 	$	1,904	 	23.0	%	$	1,862	 	$	329	 	17.6	%	$	1,529	 	$	2.50	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Q1 2019 GAAP	 	$	7,863	 	$	1,136	 	14.4	%	$	1,088	 	$	195	 	17.9	%	$	891	 	$	1.51	 	54.1	%	
Adjustment for significant litigation-related charges	 	—	 	548	 	 	 	548	 	124	 	 	 	424	 	0.72	 	 	 	
Q1 2019 Adjusted Non-GAAP Measure (d)	 	$	7,863	 	$	1,684	 	21.4	%	$	1,636	 	$	319	 	19.5	%	$	1,315	 	$	2.23	 	(10.8	)%	

 	 	Estimated Full Year 2019	 	
Adjusted income, earnings per share, & effective tax rate (non-GAAP
measures) (Dollars in billions, except per share amounts)	 	GAAP Measure	 	Adjustment for
Significant
Litigation-
related Charges	 	Adjusted Non-
GAAP Measure
(d)	 	
 	 	 	 	 	 	 	 	
Income before taxes	 	$6.4 to $6.6	 	$	0.5	 	$6.9 to $7.1	 	
Provision for income taxes	 	$1.3 to $1.4	 	$	0.1	 	$1.4 to $1.5	 	
Effective tax rate	 	20.0 to 22.0	%	 	 	20.0 to 22.0	%	
 	 	 	 	 	 	 	 	
Net income attributable to 3M	 	$5.0 to $5.3	 	$	0.4	 	$5.4 to $5.7	 	
Earnings per diluted share	 	$8.53 to $9.03	 	$	0.72	 	$9.25 to $9.75	 	

 
3M Company and Subsidiaries
SUPPLEMENTAL FINANCIAL INFORMATION
NON-GAAP MEASURES — (CONTINUED)
(Unaudited)
 
(d)                      In the first quarter of 2019, the Company recorded significant litigation-related charges of $548 million ($424 million after tax) related to historical PFAS (certain perfluorinated compounds) manufacturing operations and coal mine dust respirator mask lawsuits. In the first quarter of 2018, the Company recorded significant litigation-related charges of $897 million ($710 million after tax) from the previously disclosed agreement reached with the State of Minnesota that resolved the Natural Resource Damages (NRD) lawsuit. 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).
 
In addition to providing financial results in accordance with U.S. GAAP, the Company also provides non-GAAP measures that adjust for the impacts of significant litigation-related charges and enactment/measurement period adjustments to the impact of the enactment of the TCJA. These items represent significant charges/benefits that impacted the Company’s financial results. Operating income, operating income margin, effective tax rate, net income, and earnings per share are all measures for which 3M provides the 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 Company’s operations. The Company believes that discussion of results adjusted for these items is meaningful to investors as it provides a useful analysis of ongoing underlying operating trends. The determination of these items may not be comparable to similarly titled measures used by other companies.

 
3M Company and Subsidiaries
SALES CHANGE ANALYSIS (e)
(Unaudited)

 	 	Three months ended March 31, 2019	 	
 	 	 	 	 	 	Europe,	 	 	 	 	 	
 	 	 	 	 	 	Middle	 	Latin	 	 	 	
Sales Change Analysis	 	United	 	Asia-	 	East and	 	America/	 	World-	 	
By Geographic Area	 	States	 	Pacific	 	Africa	 	Canada	 	Wide	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Volume — organic	 	(1.2	)%	(4.3	)%	(0.7	)%	(0.3	)%	(2.0	)%	
Price	 	0.8	 	0.7	 	1.4	 	1.1	 	0.9	 	
Organic local-currency sales	 	(0.4	)	(3.6	)	0.7	 	0.8	 	(1.1	)	
Acquisitions	 	1.5	 	—	 	0.1	 	0.1	 	0.6	 	
Divestitures	 	(1.0	)	(0.3	)	(2.4	)	(1.2	)	(1.1	)	
Translation	 	—	 	(3.5	)	(7.8	)	(6.2	)	(3.4	)	
Total sales change	 	0.1	%	(7.4	)%	(9.4	)%	(6.5	)%	(5.0	)%	

 	 	Three months ended March 31, 2019	 	
Worldwide Sales Change	 	Organic local-	 	 	 	 	 	 	 	Total sales	 	
By Business Segment	 	currency sales	 	Acquisitions	 	Divestitures	 	Translation	 	change	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Industrial	 	(2.8	)%	—	%	(0.1	)%	(3.7	)%	(6.6	)%	
Safety and Graphics	 	(0.1	)	—	 	(0.1	)	(4.0	)	(4.2	)	
Health Care	 	0.7	 	3.2	 	—	 	(3.6	)	0.3	 	
Electronics and Energy	 	(3.0	)	—	 	(6.6	)	(2.2	)	(11.8	)	
Consumer	 	0.9	 	—	 	—	 	(2.8	)	(1.9	)	
Total Company	 	(1.1	)%	0.6	%	(1.1	)%	(3.4	)%	(5.0	)%	

(e)                       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), and 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 3M’s 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 2019, and other revisions impacting business segment reporting:
 
Continued alignment of customer account activity
 
·                   As part of 3M’s regular customer-focus initiatives, the Company realigned certain customer account activity (“sales district”) to correlate with the primary divisional product offerings in various countries and reduce complexity for customers when interacting with multiple 3M businesses. This largely impacted the amount of dual credit certain business segments receive as a result of sales district attribution. 3M business segment reporting measures include dual credit to business segments for certain sales and 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.
 
Creation of Closure and Masking Systems Division and Medical Solutions Division
 
·                   3M created the Closure and Masking Systems Division, which combines the masking tape, packaging tape and personal care portfolios formerly within Industrial Adhesives and Tapes Division in the Industrial business segment into a separate division also within the Industrial business segment. 3M created the Medical Solutions Division in the Health Care business segment, which combines the former Critical and Chronic Care Division and Infection Prevention Division (which were also both within the Health Care business segment).
 
Additional actions impacting business segment reporting
 
·                   The business associated with certain safety products sold through retail channels in the Asia Pacific region was realigned from the Personal Safety Division within the Safety and Graphics Business segment to the Construction and Home Improvement Division within the Consumer Business segment. Additionally, certain previously non-allocated costs related to manufacturing and technology of centrally managed material resource centers of expertise within Corporate and Unallocated are now reflected as being allocated to the business segments.
 
The financial information presented herein reflects the impact of the preceding changes for all periods presented. Refer to 3M’s Current Report on Form 8-K furnished on March 8, 2019, for additional supplemental unaudited historical business segment net sales and operating income information.

 

BUSINESS SEGMENT INFORMATION	 	Three months ended 	 	
NET SALES	 	March 31,	 	
(Millions)	 	2019	 	2018	 	
 	 	 	 	 	 	
Industrial	 	$	2,929	 	$	3,135	 	
Safety and Graphics	 	1,704	 	1,779	 	
Health Care	 	1,540	 	1,535	 	
Electronics and Energy	 	1,190	 	1,350	 	
Consumer	 	1,123	 	1,145	 	
Corporate and Unallocated	 	21	 	—	 	
Elimination of Dual Credit	 	(644	)	(666	)	
 	 	 	 	 	 	
Total Company	 	$	7,863	 	$	8,278	 	

BUSINESS SEGMENT INFORMATION	 	Three months ended 	 	
OPERATING INCOME	 	March 31,	 	
(Millions)	 	2019	 	2018	 	
 	 	 	 	 	 	
Industrial	 	$	585	 	$	714	 	
Safety and Graphics	 	396	 	481	 	
Health Care	 	432	 	458	 	
Electronics and Energy	 	284	 	336	 	
Consumer	 	219	 	220	 	
Corporate and Unallocated (f)	 	(624	)	(1,037	)	
Elimination of Dual Credit	 	(156	)	(165	)	
 	 	 	 	 	 	
Total Company	 	$	1,136	 	$	1,007	 	

(f)                        Corporate and Unallocated operating income was impacted by significant litigation-related charges in the first quarter of 2019 related to historical PFAS (certain perfluorinated compounds) manufacturing operations and coal mine dust respirator mask lawsuits. Corporate and Unallocated operating income was also impacted by significant litigation-related charges in the first quarter of 2018 related to the previously disclosed agreement reached with the State of Minnesota that resolved the Natural Resource Damages lawsuit.

 
About 3M
 
At 3M, we apply science in collaborative ways to improve lives daily. With $33 billion in sales, our 93,000 employees connect with customers all around the world.
 
Contacts
3M
Investor Contacts:
Bruce Jermeland, 651-733-1807
or
Tony Riter, 651-733-1141
or
Media Contact:
Lori Anderson, 651-733-0831