2016 Third Quarter Business Review · Tax rate +$0.03 Q3 2016 28.5% vs. Q3 2015 29.6% Shares...

1. All Rights Reserved.24 October 2016© 3M

2016 Third Quarter Business Review

October 25, 2016

(unaudited)


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December 13, 2016 – 8 a.m. to noon ET

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Forward Looking StatementThis presentation contains forward-looking information about 3M's financial results and estimates and business prospects thatinvolve 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 ofsimilar 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, andcapital markets conditions and other factors beyond the Company's control, including natural and other disasters or climatechange affecting the operations of the Company or its customers and suppliers; (2) the Company's credit ratings and its cost ofcapital; (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 supplyinterruptions (including those caused by natural and other disasters and other events); (7) the impact of acquisitions, strategicalliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving businessstrategies, 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, orsecurity breaches and other disruptions to the Company's information technology infrastructure; (10) financial market risks thatmay 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 AnnualReport on Form 10-K for the year ended Dec. 31, 2015, and its subsequent quarterly reports on Form 10-Q (the “Reports”). Changesin such assumptions or factors could produce significantly different results. A further description of these factors is located in theReports 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 presentation is as ofthe date indicated. The Company assumes no obligation to update any forward-looking statements contained in this presentationas a result of new information or future events or developments.


GAAP EPS of $2.15, up 4.9% year-on-year

Sales of $7.7 billion, flat year-on-year in dollar terms

Organic local currency decreased 0.8%

Acquisitions, net of divestitures, increased sales by 0.3%

Foreign exchange translation (FX) increased sales by 0.5%

Operating margins of 24.7%, up 0.4 percentage points year-on-year

Operating cash flow of $1.9 billion contributed to 19 percent increase in free cash flow year-on-year

Returned $1.4 billion to shareholders via dividends and gross share repurchases; marked 100th consecutive year of paying dividends

Q3 2016 Summary

Refer to 3M’s October 25, 2016 press release for full details.See the appendix for the reconciliation of GAAP amounts to free cash flow.


Building for the Future

Driving long-term growth

Investments in R&D and targeted growth programs

Acquisition of Semfinder, medical coding technology company

Partnered with Verily to develop new population health measurement technology for advancing patient care

Completed sale of temporary protective film business

Continued successful West Europe ERP deployments


0.0%

0.5%

0.3%

-0.8%

0.6%

-1.4%

Total

FX

Acquisition/divestiture

Organic local currency

Price

Organic volume

Worldwide Sales Change Due To:

Organic local currency:

U.S. -0.3%

APAC (Asia Pacific) -2.2%

China/Hong Kong -2%

Japan +1%

EMEA (Europe/Middle East/Africa) -1.0%

West Europe +1%

LAC (Latin America/Canada) +1.2%

Mexico +5%

Brazil +2%

FX increased sales by +0.5%

Euro flat, Yen +20%, Real +14%

Q3 2016 Sales Recap

U.S. APAC EMEA LAC

Organic volume -0.1% -1.9% -2.0% -4.2%

Price -0.2% -0.3% +1.0% +5.4%

Organic local currency -0.3% -2.2% -1.0% +1.2%

Acq/div +0.1% +0.4% +0.7% +0.4%

FX ----- +3.4% -2.1% -1.2%

Total growth -0.2% +1.6% -2.4% +0.4%

Refer to 3M’s October 25, 2016 press release for full details.


Q3 2016

Organic volume/utilization

FX

Strategic investments

Acquisitions

Productivity from restructuring

Pension/OPEB

Price/raw materials

Q3 2015

Operating margin of 24.7% Up 40 basis points

+0.4%

($M)Q3

2015Q3

2016 Change

Sales $7,712 $7,709 ----

Gross profit $3,835 $3,862 +0.7%

% to sales 49.7% 50.1% +0.4 pts

SG&A $1,530 $1,531 ----

% to sales 19.8% 19.9% +0.1 pts

R&D & related $429 $427 -0.5%

% to sales 5.6% 5.5% -0.1 pts

Operating income $1,876 $1,904 +1.5%

% to sales 24.3% 24.7% +0.4 pts

Net income $1,296 $1,329 +2.6%

GAAP earnings per share $2.05 $2.15 +4.9%

24.3%

-0.1%

-0.4%

24.7%

Q3 2016 P&L

-0.5%

+0.9%

+1.0%


-0.9%


$2.05

$2.15

Q3 2015 Q3 2016

+4.9%Q3 2015 GAAP EPS $2.05

Organic growth, marginexpansion

+$0.05 Includes tailwind of $0.08 from

pension/OPEB expense

Acquisitions and divestitures*

----- Net impact from first 12 month closed

acquisitions and divestiture gains

FX -$0.02 Pre-tax earnings impact of $20M

Tax rate +$0.03 Q3 2016 28.5% vs. Q3 2015 29.6%

Shares outstanding +$0.04 Average diluted shares down 2%

Q3 2016 GAAP EPS $2.15

Q3 2016 GAAP EPS

* Acquisitions include Capital Safety, Membrana and Semfinder; divestitures include Library Systems, license plate converting business in France and Polyfoam adhesive business



($M)Q3

2015Q3

2016 ChangeQ3 YTD

2015Q3 YTD

2016 Change

Free cash flow (non-GAAP measure):

Operating cash flow $1,664 $1,908 $244 $4,082 $4,453 $371

Capital expenditures ($354) ($347) $7 ($1,015) ($984) $31 Expecting FY 2016 of $1.4B to $1.5B

Free cash flow $1,310 $1,561 $251 $3,067 $3,469 $402

Net income attributable to 3M $1,296 $1,329 $33 $3,795 $3,895 $100

Free cash flow conversion 101% 117% +16 pts 81% 89% +8 pts Expecting FY 2016 of 95% to 105%*

Cash to shareholders:

Dividends $635 $670 $35 $1,933 $2,014 $81 Increased per-share dividend 8%

Gross share repurchase $1,523 $774 ($749) $4,104 $2,829 ($1,275) Expecting FY 2016 of $3.5B to $4.5B

Total cash to shareholders $2,158 $1,444 ($714) $6,037 $4,843 ($1,194)

Q3 2016 Cash Flow

Refer to 3M’s October 25, 2016 press release for full details.*See the appendix for the reconciliation of expected FY 2016 free cash flow conversion.


($M)Q3

2015Q3

2016%

Growth

Sales $2,557 $2,582 +1.0%

Organic local currency -1.1%

Acquisition/divestiture +1.4%

FX +0.7%

Operating income $578 $591 +2.0%

Operating margin 22.6% 22.9% +0.3%

Industrial Organic local currency growth:

By business: sales growth in automotive OEM and automotive aftermarket was offset by declines across the rest of the portfolio

By area: sales increased in Asia Pacific and declined in EMEA, Latin America/Canada and the U.S.

Automotive aftermarket partnered with Festool to introduce the Total Automotive Sanding System to improve repair shops performance and profitability

Membrana integration on track and exceeding sales and profit expectations


($M)Q3

2015Q3

2016%

Growth

Sales $1,417 $1,448 +2.2%

Organic local currency +2.0%

Acquisition/divestiture -0.1%

FX +0.3%



Safety & Graphics Organic local currency growth:

By business: sales growth led by roofing granules and commercial solutions

By area: sales increased in Latin America/Canada, Asia Pacific and the U.S., and declined in EMEA

Continued strong growth in roofing granules driven by increased demand in shingle market

Commercial solutions delivered solid growth, with particular strength in the U.S. and Latin America

Capital Safety integration on track and meeting profit expectations


($M)Q3

2015Q3

2016%

Growth

Sales $1,346 $1,361 +1.1%


Acquisition/divestiture ----

FX -0.4%

Operating income $432 $429 -0.6%

Operating margin 32.1% 31.5% -0.6%

Health Care Organic local currency growth:

By business: sales growth led by food safety, drug delivery systems, and critical and chronic care

By area: sales grew in Asia Pacific, Latin America/Canada and EMEA, and declined in the U.S.

Closed acquisition of Semfinder, a Switzerland-based medical coding technology company

Organic growth in developing markets led by China/Hong Kong, Taiwan, Thailand and India

Infection prevention launched the 3M Attest™ Rapid Readout Biological Indicator System

Continued to accelerate investments across the business to further enhance growth opportunities


($M)Q3

2015Q3

2016%

Growth

Sales $1,397 $1,293 -7.5%

Organic local currency -8.1%


FX +0.6%

Operating income $344 $312 -9.1%

Operating margin 24.6% 24.2% -0.4%

Electronics & Energy Organic local currency growth:

By business: electronic-related sales decreased 8%, with declines in both electronics materials solutions, and display materials and systems; energy-related sales declined 9% with declines in telecom, electrical markets and renewable energy

By area: sales decreased in all geographic areas

Utilizing 3M display technology, HP introduced the world’s only notebooks with integrated privacy screens

Strong operational execution driving margin performance in the face of soft market conditions


($M)Q3

2015Q3

2016%

Growth

Sales $1,162 $1,209 +4.0%



FX +1.1%



Consumer Organic local currency growth:

By business: sales growth across the entire portfolio led by home improvement and home care

By area: sales grew in Asia Pacific, the U.S. and Latin America/Canada, and declined in EMEA

Strong “back-to-school” season, led by double-digit growth in Command™ products along with solid growth in Scotch® home and office tapes

Filtrete™ brand continues to expand presence in home furnace filter market


Updating 2016 Planning Estimates

See the appendix for the reconciliation of expected FY 2016 free cash flow conversion.

GAAP EPS of $8.15 to $8.20 versus prior range of $8.15 to $8.30

Sales growth

Organic local-currency growth approximately flat versus previous

range of flat to +1%

Foreign currency translation headwind of approximately -1% versus

prior range of -1% to -2%

Acquisitions, net of divestitures, add approximately +1%

Tax rate of approximately 29% versus prior range of 29.0% to 29.5%

Free cash flow conversion of 95% to 105%


Q & A


Appendix


Business Segment Information

($M) Net Sales Operating Income

Business Groups Q3

2015Q3

2016Q3

2015Q3

2016

Industrial $2,557 $2,582 $578 $591

Safety & Graphics $1,417 $1,448 $324 $364

Health Care $1,346 $1,361 $432 $429

Electronics & Energy $1,397 $1,293 $344 $312

Consumer $1,162 $1,209 $293 $317

Corporate and Unallocated $1 $2 ($58) ($69)

Elimination of Dual Credit ($168) ($186) ($37) ($40)

Total $7,712 $7,709 $1,876 $1,904

Net Sales Operating Income

YTD 2015

YTD2016

YTD 2015

YTD2016

$7,845 $7,789 $1,782 $1,823

$4,221 $4,359 $1,023 $1,120

$4,039 $4,148 $1,280 $1,344

$4,033 $3,618 $907 $749

$3,321 $3,388 $792 $836

($1) $7 ($232) ($198)

($482) ($529) ($106) ($116)

$22,976 $22,780 $5,446 $5,558


Reconciliation of GAAP Amounts to Free Cash Flow Conversion

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 asubstitute 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. TheCompany 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 entirefree cash flow 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 Companyuses these measures as an indication of the strength of the Company and its ability to generate cash.

Full-Year 2016 Forecast:Quarter and Year-to-Date Results:

($M)Q3

2015Q3

2016 Change

Q3YTD 2015

Q3 YTD2016 Change

Major GAAP cash flow categories:


Investing cash flow ($2,777) ($543) $2,234 ($2,611) ($1,173) $1,438

Financing cash flow ($220) ($752) ($532) ($1,694) ($2,780) ($1,086)



Capital expenditures ($354) ($347) $7 ($1,015) ($984) $31

Free cash flow $1,310 $1,561 $251 $3,067 $3,469 $402

Net income attributable to 3M $1,296 $1,329 $33 $3,795 $3,895 $100

Free cash flow conversion 101% 117% +16 pts 81% 89% +8 pts

($B)Year 2016

Planning Estimate


Operating cash flow $6.1 to $6.9

Purchases of property, plant andequipment

$1.4 to $1.5

Free cash flow $4.7 to $5.4

Net income attributable to 3M $5.0 to $5.2

Free cash flow conversion 95% to 105%

2016 Third Quarter Business Review · Tax rate +$0.03 Q3 2016 28.5% vs. Q3 2015 29.6% Shares...

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