Q1 2024 3M Co Earnings Call

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the 3M First Quarter Earnings Conference. During the presentation, all participants will be in a listen-only mode.

Ladies and gentlemen, thank you for standing by welcome to the three am first quarter earnings Conference call.

During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you do you have a question. Please press star one on your telephone keypad.

Operator: Afterward, we will conduct a question-and-answer session. At that time, if you do have a question, please press star 1 on your telephone keypad. As a reminder, this call is being recorded Tuesday, April 30th, 2020. I would now like to turn the call over to Bruce Jermeland, Senior Vice President of Investor Relations at the, Thank you and good morning everyone, and welcome to our first quarter earnings conference call. With me today are Mike Roman, 3M's Chairman and Chief Executive Officer, and Monish Patolawala, our President and Chief Financial Officer.

Speaker Change: As a reminder, this call is being recorded Tuesday April 30th 'twenty 'twenty four I would now like to turn the call over to Bruce German Lynn Senior Vice President of Investor Relations at three a M.

Speaker Change: Thank you and good morning, everyone and welcome to our first quarter earnings Conference call.

Speaker Change: With me today are Mike Roman three Adams, Chairman and Chief Executive Officer, Ammo Nash pathology Wala, our president and Chief Financial Officer.

Operator: Mike and Monish will make some formal comments, then we'll take your questions. Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our investor relations website at 3M.com. Please turn the slide to.

Michael F. Roman: Mike <unk> will make some formal comments then we'll take your questions.

Speaker Change: Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our Investor Relations website at three M Dot com.

Speaker Change: Please turn to slide two.

Bruce Jermeland: Please take a moment to read this forward-looking statement. During today's conference call, we'll be making certain predictive statements that reflect our current views about 3M's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainty. Item 1A of our most recent Form 10-K lists some of the most important risk factors that could cause actual results to differ from our predictions.

Speaker Change: Please take a moment to read the forward looking statements during today's conference call, we'll be making certain predictive statements that reflect our current views about <unk> future performance and financial results.

Speaker Change: These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties.

Speaker Change: Item one a of our most recent Form 10-K lists some of the most important risk factors that could cause actual results to differ from our predictions.

Bruce Jermeland: Please note, throughout today's presentation, we'll be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in the attachments to today's press release. Please turn to slide three.

Speaker Change: Yeah.

Speaker Change: Please note throughout today's presentation, we'll be making references to certain non-GAAP financial measures.

Speaker Change: Reconciliations of the non-GAAP measures can be found in the attachments to today's press release.

Speaker Change: Please turn to slide three.

Bruce Jermeland: During today's presentation, Mike and Monish will discuss our total company Q1 2024 results, which are inclusive of the healthcare business and are on the same basis on which 3M provided first quarter guidance back in January. As we have mentioned, it is important to note that Solventum Corporation's separate financial reporting will differ from the basis of presentation used by 3M for the healthcare segment. DRAM's Full Year 2024 Earnings Guidance, initiated today, is on a continuing operations basis, reflecting Solventum as discontinued operations for the full year, including the first quarter of 2024.

Speaker Change: During today's presentation, Mike ammonia Ash will discuss our total company Q1, 2024 results, which are inclusive of the health care business and are on the same basis.

Speaker Change: In which three of them provided first quarter guidance back in January.

Speaker Change: As we have mentioned it is important to note. That's all venting corporations separate financial reporting will differ from the basis of presentation used by three of them for the health care segment.

Speaker Change: Three of them as full year 2024 earnings guidance initiated today is on a continuing operations basis, reflecting saw vent them as discontinued operations for the full year, including the first quarter of 2024.

Bruce Jermeland: In addition, we will be treating changes in the value of our 19.9% equity interest in Solventum as a special item in arriving at non-GAAP results adjusted for special items. And finally, we are providing additional financial information this quarter in our press release and slide presentation, given the impact of the Solventum spin. We hope that you find the information useful in understanding our Q1 performance and outlook for 2024. We also plan on filing additional information on a continuing operations basis, including in late July or early August Form 8-Ks with recast 2023 Form 10-K and Q1 2024 Form 10-Q information.

Speaker Change: In addition, we will be treating changes in the value of our 19, 9% equity interest in solvent him as a special item.

Speaker Change: In arriving at non-GAAP results adjusted for special items.

Speaker Change: And finally, we are providing additional financial information this quarter in our press release and slide presentation, given the impact of this whole then some spin.

Speaker Change: We hope that you find the information useful in understanding our Q1 performance and outlook for 2024.

Speaker Change: We also plan on filing additional information on a continuing operations basis.

Speaker Change: Including in late July early August form 8-K, with recast 2023 Form 10-K, and Q1 2020 for Form 10-Q information.

Bruce Jermeland: Please turn to slide four for a summary of our updated post-spend financial reporting framework. Beginning with the second quarter, safety and industrial, transportation, electronics, and consumer business segment operating income will include the impact of the disenergies or straining costs previously associated with Sylventa. In addition, we have added a new operating category named OTHER for Sylventum Transition Service Agreement costs, which 3M will be reimbursed for beginning here in April. Finally, corporate and allocated will incorporate the commercial agreements between 3M and Solventum that started on April 1st.

Speaker Change: Please turn to slide four for a summary of our updated post spin financial reporting framework.

Speaker Change: Beginning with the second quarter safety, and industrial transportation electronics and consumer business segment operating income will include the impact of the dis synergies or stranded costs previously associated with solvent them.

Speaker Change: In addition, we have added a new operating category named other for cell vent them transition service agreement costs, which three of them will be reimbursed for beginning here in April.

Speaker Change: Finally, corporate and unallocated will incorporate the commercial agreements between three of them and solve anthem that started on April 1st.

Bruce Jermeland: One final comment. In the appendix on slide 27, you will find information on our public water suppliers and combat arms legal settlements, including the pre-tax payment schedule by year and total combined pre-tax present value and after-tax estimates. With that, please turn to slide five. And I'll now hand the call off to Mike.

Speaker Change: One final comment.

Speaker Change: In the appendix on Slide 27, you will find information on our public water suppliers and combat arms legal settlements, including the pre tax payment schedule by year and total combined pretax present value and after tax estimates.

Speaker Change: With that please turn to slide five and I'll now hand, the call off to Mike Mike.

Michael F. Roman: Thank you, Bruce. Good morning, everyone, and thank you for joining us. In the first quarter, we delivered strong results that were better than our expectations as we returned to adjusted organic growth and achieved double-digit adjusted earnings growth. We improved performance across our businesses and in our operational execution. We also completed the spin-off of Selventem and finalized two major legal settlements.

Michael F. Roman: Thank you Bruce good morning, everyone and thank you for joining us.

Michael F. Roman: In the first quarter, we delivered strong results that were better than our expectations as we returned to adjusted organic growth and achieved double digit adjusted earnings growth.

Michael F. Roman: We improved performance across our businesses and in our operational execution.

Speaker Change: We also completed the spin off or sell Bantam and finalized two major legal settlements.

Michael F. Roman: Our results demonstrate the positive impact of the changes we have made over the last several years. We've also made significant progress in executing our strategic priorities, which has positioned the company for long-term shareholder value creation. In the first quarter, on an adjusted basis, we delivered revenue of $7.7 billion, including Improved Organic Growth, operating margins of 22%, up 400 basis points, and earnings of $2.39 per share, up 21%. On April 1st, we successfully completed the spinoff of our healthcare business, Salventa.

Speaker Change: Our results demonstrate the positive impact of the changes we have made over the last several years. We've also made.

Speaker Change: Made significant progress in executing our strategic priorities, which has positioned the company for long term shareholder value creation.

Speaker Change: In the first quarter on an adjusted basis, we delivered revenue of $7.7 billion.

Speaker Change: Including improved organic growth.

Speaker Change: Operating margins of 22% up 400 basis points and earnings of $2 39 per share up 21%.

Speaker Change: On April one we successfully completed the spin off of our health care business saw Bantam.

Michael F. Roman: Creating two world-class companies well-positioned to deliver greater shareholder returns through distinct and compelling investment profiles. As independent companies, both 3M and Salventum are better able to tailor their capital allocation and investment priorities to win in their respective markets. I want to thank and congratulate the teams whose dedication made this major accomplishment possible and wish the entire Solventum team, led by CEO Bryan Hanson, great success in the future. In Q1, we also finalized two major legal settlements. First, our settlement agreement with U.S.-based public water suppliers received widespread support and participation. It was granted final approval by the court on March 29th.

Speaker Change: <unk> two world class companies, well positioned to deliver greater shareholder returns through distinct and compelling investment profiles.

Speaker Change: As independent companies, both three am and sell Bantam are better able to tailor their capital allocation and investment priorities to win in their respective markets.

Speaker Change: I want to thank and congratulate the teams whose dedication made this major accomplishment possible and wish the entire self anthem team led by CEO Bryan Hanson great success in the future.

Speaker Change: In Q1, we also finalized two major legal settlements.

Speaker Change: First our settlement agreement with U S based public water suppliers received widespread support and participation.

Speaker Change: It was granted final approval by the court on March 29th.

Michael F. Roman: We anticipate making total payments with a pre-tax present value of up to $10.3 billion over the next 13 years. The first payment is expected in the third quarter of 2024. It is important to note that our agreement with public water suppliers addresses the detection of any type of PFAS at any level.

Speaker Change: We anticipate making total payments with a pre tax present value of up to $10 $3 billion over the next 13 years.

Speaker Change: The first payment is expected in the third quarter of 2024.

Speaker Change: It is important to note our agreement with public water suppliers addresses the detection of any type of PFS at any level.

Michael F. Roman: This includes PFAS that have already been detected or may be detected in the future, including those that are the subject of the U.S. EPA's recently announced limits in drinking water. Second, we have settled the combat arms multi-district litigation. As of today, more than 99% of claimants have chosen to participate. This gives us the certainty and finality the settlement was intended to achieve. We anticipate making total payments up to a pre-tax present value of $5.3 billion through 2029.

Speaker Change: This includes PFS that have already been detected or may be detected in the future.

Speaker Change: Including those that are the subject of the U S E T as recently announced limits and drinking water.

Speaker Change: Second is our settlement of the combat arms multi district litigation.

Speaker Change: As of today more than 99% of claimants have chosen to participate there.

Speaker Change: This provides us the certainty and finality the settlement was intended to achieve.

Speaker Change: We anticipate making total payments up to a pre tax present value of $5 $3 billion through 2029.

Michael F. Roman: We also continue to make good progress on our exit from all PFAS manufacturing. We are on track to meet our commitment by the end of 2025 and are working closely with each of our customers to complete an orderly transition. In summary, the progress across all three of our strategic priorities has helped make 3M stronger, leaner, and more focused on what we do best, using 3M science to make indispensable products for our customers.

Speaker Change: We also continue to make good progress on our exit of all P fast manufacturing.

Speaker Change: We are on track to meet our commitment by the end of 2025 and are working closely with each of our customers to complete an orderly transition.

Speaker Change: In summary, the progress across all three of our strategic priorities has helped make three of them stronger leaner and more focused on what we do best utilized three M science to make indispensable products for our customers.

Michael F. Roman: I will now turn the call over to Monish for more details regarding our performance in Q1 and to discuss our guidance for 2024. Thank you, Mike, and I wish you all a very good morning. Please turn to slide 6.

Speaker Change: I will now turn the call over to more niche for more details regarding our performance in Q1 and to discuss our guidance for 2024.

More Niche: Thank you, Mike and I wish you all a very good morning.

Michael F. Roman: Please turn to slide six.

Monish Patolawala: We continue to build upon the strong foundation we laid in 2023. We remain focused on our priorities, and the team continues to deliver improving results. We posted strong adjusted results in the quarter, including sales of $7.7 billion and an operating margin of 21.9%. Earnings per share of $2.39 and free cash flow of over $800 million. These results were better than our expectations as we continue to drive strong operational execution and spending discipline. We also benefited from significant operating leverage, particularly in transportation and electronics, which is driven by strong organic volume growth in electronics and automotive.

Michael F. Roman: We continue to build upon the strong foundation, we laid in 2023.

Niche: We remain focused on our priorities and the team continues to deliver improving results.

Niche: We posted strong adjusted results in the quarter, including sales of $7.7 billion.

Niche: Operating margin of 21, 9%.

Michael F. Roman: Earnings per share of $2.39.

Michael F. Roman: And free cash flow of over $800 million.

More Niche: These results were better than our expectations as we continued to drive strong operational execution and spending discipline.

More Niche: We also benefited from significant operating leverage.

More Niche: Particularly in transportation and electronics, which was driven by strong organic volume growth in electronics and automotive.

Monish Patolawala: Our results also benefitted from the acceleration of certain non-recurring actions, which I will go through in more detail on the next slide. Our first quarter adjusted sales of $7.7 billion exceeded our expectations of $7.6 billion as we delivered improved organic growth, which was partially offset by a headwind from foreign currency translation. We delivered adjusted organic growth of nearly 1%, or up 2.4%, excluding geographic prioritization, product portfolio initiatives, and last year's disposable respirator call.

More Niche: Our results also benefited from the acceleration of certain nonrecurring actions, which I will go through in more detail on the next slide.

More Niche: Our first quarter adjusted sales of $7 $7 billion exceeded our expectations of seven $6 billion as we delivered improved organic growth, which was partially offset by a headwind from foreign currency translation.

More Niche: We delivered adjusted organic growth of nearly 1% or up two 4%, excluding geographic prioritization product portfolio of initiatives and last year's disposable respirator call.

Monish Patolawala: Organic growth was driven by a transportation and electronics business, as the team won share gains from spec in wins and new product introductions with automotive and consumer electronics OEMs. This drove strong organic growth as the OEMs ramped production for new launches for NCAP. Geographically, year-on-year strength in China and EMEA was driven by strength in electronics and automotive. Sales in the U.S. were flat year-on-year, with industrial and healthcare end markets showing relative strength offset by consumer retail weakness.

More Niche: Organic growth was driven by our transportation and electronics business as the team won share gains from spec in wins and new product introductions with automotive and consumer electronics Oems.

More Niche: This drove strong organic growth as the Oems ramped production for new launches for end customers.

More Niche: Geographically you had on your strength in China, and EMEA was driven by our strength in electronics and automotive.

More Niche: Sales in the U S were flat year on year with industrial and health care end markets, showing relative strength offset by consumer retail softness.

Monish Patolawala: Please turn to slide 7 for details of the components that drove the year-on-year operating margin and earnings performance. As mentioned, on an adjusted basis, we delivered operating margins of 21.9%, up 400 basis points, and earnings of $2.39 per share, up 21% versus last year's first quarter. Our first quarter performance was driven by improved organic growth, particularly in transportation and electronics, along with a continued focus on operations, Restructuring Actions, and Spending Discipline, which drove better-than-expected improvements in operating margins of 340 basis points and earnings of $0.42 per share.

More Niche: Please turn to slide seven for details of the components that drove our year on year operating margin and earnings performance.

More Niche: As mentioned on an adjusted basis, we delivered operating margins of 21.9% up 400 basis points and earnings of $2 39 per share up 21% versus last year's first quarter.

More Niche: Our first quarter performance was driven by improved organic growth, particularly in transportation and electronics, along with a continued focus on operations.

More Niche: Restructuring actions and spending discipline, which drove better than expected improvements in operating margins of 340 basis points.

More Niche: And earnings of 42 cents per share.

Monish Patolawala: As disclosed in our Form 10-K and as factored into our 1Q guidance that we provided in January, our year-on-year margins and earnings were benefited from the delay of our stock-based compensation grants from our normal timing in the first quarter to the second quarter due to the solventum spin. This timing adjustment added 140 basis points to margins and 15 cents to earnings per share as compared to last year's first quarter.

More Niche: As disclosed in our Form 10-K, and that's factored into our <unk> guidance that we provided in January a year on your margins and earnings benefited from the delay of our stock based compensation grants from our normal timing in the first quarter to the second quarter due to the solid went them spin.

More Niche: This timing adjustment added 140 basis points to margins and 15 cents to earnings per share as compared to last year's first quarter.

Monish Patolawala: We also accelerated certain non-recurring benefits, including property sales, as we progress with our asset light strategy. This benefited first quarter year-on-year operating margins by approximately 70 basis points and earnings by 8 cents per share. We accelerated restructuring actions in the quarter, incurring pre-tax charges of $122 million, which was higher than our guidance of $75 to $100 million. This compared to last year's restructuring charge of $52 million, resulting in a negative year-on-year impact on margins of 90 basis points and 10 cents to earnings. Foreign currency negatively impacted adjusted margins by 60 basis points, or a negative nine cents per share, as a result of the strong U.S. dollar. This headwind was larger than we had expected.

More Niche: We also accelerated certain nonrecurring benefits, including property sales as we progress on our asset light strategy.

More Niche: This benefited first quarter year on year operating margins by approximately 70 basis points and earnings by eight cents per share.

More Niche: We accelerated restructuring actions in the quarter incurring pretax charges of $122 million, which was higher than our guidance of $75 million to $100 million.

More Niche: This compared to last year's restructuring charge of $52 million, resulting in a negative year on year impact of margins of 90 basis points and 10 cents to earnings.

More Niche: Foreign currency negatively impacted adjusted margins by 60 basis points out of negative nine cents per share as a result of the strong U S. Dollar.

More Niche: This headwind was larger than we had expected.

Monish Patolawala: The reconsolidation of aero technologies in Q2 2023 resulted in a one cent benefit year-on-year to earnings per share and was neutral to margin. As expected, our adjusted tax rate was 20.5% this year, which was higher when compared to 17.7% in last year's first quarter, resulting in a nine cent headwind to earnings. And finally, other financial items and shares outstanding netted to a positive four cents per share year-on-year impact. This benefit was primarily driven by interest income on proceeds from Solventum's issuance of $8.4 billion in debt prior to the separation, partially offset by a non-operating pension head. Please turn to slide 8.

More Niche: The Reconsolidation of Arrow technologies in Q2, 2023 resulted in a one cent benefit year on year to earnings per share and was neutral to margins.

More Niche: As expected our adjusted tax rate was 25% this year, which was higher than when compared to 17, 7% in last year's first quarter.

More Niche: Resulting in a nine cent headwind to earnings.

More Niche: And finally, other financial items and shares outstanding netted to a positive four cents per share year on year impact.

More Niche: This benefit was primarily driven by interest income on proceeds from Saul van <unk> issuance of $8 $4 billion in debt prior to the separation.

More Niche: Partially offset by a non op pension headwind.

More Niche: Please turn to slide eight.

Monish Patolawala: First quarter adjusted free cash flow was over $800 million, and adjusted free cash flow conversion was 63%, in line with our historical first quarter trend. We continue to focus on driving working capital efficiency, including improved cash conversion cycle time. I am pleased with the progress we have made. Yet there remains significant opportunity to further improve performance in all aspects of working capital. Adjusted capital expenditures were $355 million in the quarter, down 20% year on year.

More Niche: Okay.

More Niche: First quarter adjusted free cash flow was over $800 million.

More Niche: Adjusted free cash flow conversion was 63% in line with our historical first quarter trend.

More Niche: We continue to focus on driving working capital efficiency, including improved cash conversion cycle times I am pleased with the progress we have made.

More Niche: Yet there remains significant opportunity to further improve performance in all aspects of working capital.

More Niche: Adjusted capital expenditures were $355 million in the quarter.

More Niche: Down 20% year on year.

Monish Patolawala: The lower year-on-year spend is primarily due to nearing completion on water filtration investments at a manufacturing facility. And finally, we returned $835 million to shareholders via dividend. Turning to the balance sheet, net debt at the end of Q1 stood at $10.4 billion, a decline of 13% year-on-year driven by the strong free cash flow generation of our business. Also of note, in late February. Solventum issued debt of $8.4 billion, for which the repayment obligation went with Solventum, while 3M kept approximately $7.7 billion in proceeds upon its spin-off on April 1st.

More Niche: The lower euro on your spend is primarily due to nearing completion on water filtration investments at our manufacturing facilities.

More Niche: And finally, we returned $835 million to shareholders via dividends.

More Niche: Turning to the balance sheet net debt at the end of Q1 stood at 10 $4 billion a decline of 13% year on year, driven by strong free cash flow generation of our businesses.

More Niche: Also of note in late February.

More Niche: All went them issued debt of $8 $4 billion for which the repayment obligation Benfits all went up.

More Niche: While three of them kept approximately $7 $7 billion in proceeds upon spin on April 1st.

Monish Patolawala: These proceeds, combined with our business's strong and reliable cash generation, have further strengthened our balance. In addition, the retained 19.9% equity stake in Solventum will provide additional future liquidity. Also, during the quarter, we retired $2.9 billion of debt. Our strong capital structure and robust cash generation provides us with the financial flexibility to continue to invest in our business, return capital to shareholders, and meet the cash flow needs related to legal matters.

More Niche: These proceeds combined with our business is strong and reliable cash generation have further strengthened our balance sheet.

More Niche: In addition, the retain 19, 9% equity stake in Salt Vento will provide additional future liquidity.

More Niche: Also during the quarter, we retired $2.9 billion of debt.

More Niche: Our strong capital structure and robust cash generation provides us with the financial flexibility to continue to invest in our business.

More Niche: Return capital to shareholders and meet the cash flow needs related to legal matters.

Monish Patolawala: Now please turn to slide 10 for a discussion on business group performance, starting with our safety and industrial business, which posted sales of $2.7 billion, down 1.4% organically. Industrial and market demand remain mixed in the quarter. We delivered strong double-digit growth in roofing granules driven by replacement demand and storm repair. Industrial adhesives and tapes posted low single-digit organic growth driven by speck and winds in new bonding solutions for consumer electronics devices.

More Niche: Now please turn to slide 10 for a discussion of our business group performance.

More Niche: Starting with our safety and industrial business, which posted sales of $2 $7 billion down 1.4% organically.

More Niche: Industrial end market demand remain mixed in the quarter.

More Niche: We delivered strong double digit growth in roofing granules, driven by replacement demand and storm repair.

More Niche: Industrial adhesives, and tapes posted low single digit organic growth driven by spec in wins in new bonding solutions for consumer electronics devices.

Monish Patolawala: The personal safety business declined low single digits as strong demand for self-contained breathing apparatus for the first responder market was more than offset by year-on-year comp headwinds from disposable respirators. And finally, we experienced year-on-year organic sales declines in electrical markets, abrasives, automotive aftermarket, and industrial. Geographically, industrial markets in the United States were up 1%, while China remained challenged. Adjusted operating income was $664 million, up 18% versus last year. Adjusted operating margins were 24.3%, up 410 basis points year-on-year.

More Niche: The personal safety business declined low single digits as strong demand for self contained breathing apparatus for the first responder market was more than offset by year on year comp headwind from disposable respirators.

More Niche: And finally, we experienced year on year organic sales declines in electrical markets, abrasives, and automotive aftermarket and industrial specialties.

More Niche: Geographically industrial markets in the United States were up 1%, while China remained challenged.

More Niche: Adjusted operating income was $664 million up 18% versus last year.

More Niche: Adjusted operating margins were 24, 3%.

More Niche: Up 410 basis points year on year.

Monish Patolawala: This performance was driven by benefits from ongoing productivity action, timing of stock-based compensation, and strong spending discipline. These benefits more than offset headwinds from lower sales volume and higher restructuring costs. Moving to Transportation and Electronics on Slide 11, which posted adjusted sales of $1.8 billion, or up 6.7% organically. Consumer Electronics and Markets were stable in the quarter, while the semiconductor market remained soft.

More Niche: This performance was driven by benefits from ongoing productivity actions.

More Niche: Timing of stock based compensation and strong spending discipline.

More Niche: These benefits.

More Niche: More than offset headwinds from lower sales volume and higher restructuring costs.

More Niche: Moving to transportation and electronics on slide 11.

More Niche: Which posted adjusted sales of $1 $8 billion are up six 7% organically.

More Niche: Consumer electronics end markets was stable in the quarter, while the semiconductor market remains soft.

Monish Patolawala: Our electronics business outperformed the market, up mid-teens organically year-on-year. The introduction of new products continues to be well-received in the market, as evidenced by recent specks in wind. In addition, we also experience continued channel inventory normalization as electronics demand stabilizes. Our auto OEM business increased 13% in Q1 versus a 1% decline in global car and light truck sales.

More Niche: Our electronics business outperformed the market up mid teens organically year on year.

More Niche: The introduction of new products continues to be well received in the market as evidenced by recent spec in wins.

More Niche: In addition, we also experienced continued channel inventory normalization as electronics demand stabilizes.

More Niche: Our auto OEM business increased 13% in Q1, which is a 1% decline in global car and light truck builds.

Monish Patolawala: We continue to win and increase penetration, including strong momentum in automotive electrification, which was up over 30% year on year in Q1. We also saw an increase in channel inventory at tier suppliers during the quarter given the forecasted 8% sequential increase in the auto OEM bills from Q1 to Q2. Looking at the rest of transportation and electronics, commercial branding and transportation grew low single digits organically, and advanced materials were flat year on year.

More Niche: We continue to win increased penetration.

More Niche: Including strong momentum in automotive electrification, which was up almost 30% year on year in Q1.

More Niche: We also saw an increase in channel inventory at tier suppliers during the quarter given the forecasted 8% sequential increase in the auto OEM builds from Q1 for Q2.

More Niche: Looking at the rest of our transportation and electronics.

More Niche: Marshall branding and transportation grew low single digits organically and advanced materials was flat year on year.

Monish Patolawala: While our transportation and electronics business is off to a good start to the year, we estimate that approximately two-thirds of the strong first quarter organic growth was driven by initial buy ahead by customers as they ramped production and introduced new products, along with channel inventory normalization. Transportation and Electronics delivered $479 million in Adjusted Operating Income, up 68% year on year. Adjusted operating margins were 26.3%, up 960 basis points versus Q1 last year.

More Niche: While our transportation and electronics business is off to a good start to the year, we estimate that approximately two thirds of the strong first quarter organic growth was driven by initial buy ahead by customers as they ramp production and introduce new products, along with channel inventory normalization.

More Niche: Transportation and electronics delivered $479 million and adjusted operating income.

More Niche: Up 68% year on year.

More Niche: Adjusted operating margins were 26, 3% up 960 basis points versus Q1 last year.

Monish Patolawala: The team achieved this result through strong leverage on improved electronics volumes, ongoing productivity actions, strong spending discipline, and the previously mentioned timing of Stock-Based Compensation Grants. Partially offsetting these benefits were headwinds from restructuring costs. Turning to slide 12. The consumer business posted first quarter sales of $1.1 billion. However, organic sales declined 3.9% year on year with continued softness in consumer discretionary spending, which included a 2.4 percentage point impact from portfolio and geographic prioritization.

More Niche: The team achieved this result through strong leverage on improved electronics volume.

More Niche: Ongoing productivity actions strong spending discipline and the previously mentioned timing of stock based compensation grants.

More Niche: Partially offsetting these benefits while headwinds from restructuring costs.

More Niche: Turning to slide 12, the consumer business posted first quarter sales of $1.1 billion.

More Niche: Organic sales declined 3.9% year on year with continued softness in consumer discretionary spending which included a 2.4 percentage point impact from portfolio and geographic prioritization.

Monish Patolawala: Home Improvement and Consumer Safety and Well-Being Declined Low Single Digit, and Home and Auto Care declined mid-single digits, while packaging and expression declined high single digits organically. We continue to invest in the business, including supporting successful new product launches, such as command heavyweight hanging products and sustainably focused Scotch-Brite cleaning tools and Scotch home and office tape. Organic growth declined across all geographies.

More Niche: Home improvement.

More Niche: And consumer safety and well being declined low single digits.

More Niche: And home and auto care declined mid single digits.

More Niche: While packaging and expression declined high single digits organically.

More Niche: We continue to invest in the business, including supporting successful new product launches such as command heavyweight hanging products and sustainably focused Scotch brite cleaning tools and Scotch home and office tapes.

More Niche: Organic growth declined across all geographies.

Monish Patolawala: The U.S. was down low single digits; Asia-Pacific was Mid-Single Digits, and EMEA was High-Single Digits. Consumer's First Quarter Operating Income was $216 million, up 21% compared to last year with operating margins of 19%, up 400 basis points year-on-year. The improvement in operating margins was driven by benefits from the productivity act, Portfolio Initiatives, Strong Spending Discipline, and the previously mentioned timing of Stock-Based Compensation Grants. Partially offsetting these benefits were headwinds from lower sales volume and higher restructuring costs.

More Niche: The U S was down low single digits.

More Niche: Asia Pacific mid single digits, and EMEA high single digits.

More Niche: Consumers first quarter operating income.

More Niche: Was $216 million.

More Niche: Up 21% compared to last year with operating margins of 19% up 400 basis points year on year.

More Niche: The improvement in operating margins was driven by benefits from productivity actions.

More Niche: Portfolio initiatives.

More Niche: Strong spending discipline and the previously mentioned timing of stock based compensation grants.

More Niche: Partially offsetting these benefits while headwinds from lower sales volume and higher restructuring costs.

Monish Patolawala: Finally, included in the appendix is a slide on the first quarter performance for healthcare. The business delivered results within our expectations, with organic growth of 1% and operating margins of 17.5%. Now turning to guidance for the year on slide 14. As Bruce mentioned at the beginning of the call, a full year 2024 Outlook initiated today is on a continuing operations basis, reflecting healthcare as discontinued operations for the full year, including the first quarter.

More Niche: Finally included in the Appendix is a slide in the first quarter performance for health care.

More Niche: The business delivered results within our expectations with organic growth of 1% and operating margins of 17, 5%.

More Niche: Now turning to guidance for the year on slide 14.

More Niche: As Bruce mentioned at the beginning of the call our full year 2020 full outlook initiated today is on a continuing operations basis.

More Niche: Reflecting healthcare as discontinued operations for the full year, including the first quarter.

Monish Patolawala: We have confidence in the momentum we have built throughout 2023. We continue to deliver strong results, including the first quarter, which was better than expectations. The guidance initiated today represents a return to growth, with adjusted margins up 200 to 275 basis points year on year. What is the illustrative midpoint of 18.7% for 2023?

More Niche: We have confidence in the momentum we have built throughout 2023.

More Niche: We continue to deliver strong results, including the first quarter, which was better than expectations.

More Niche: The guidance initiated today represents a return to growth.

More Niche: Adjusted margins up 200 to 275 basis points year on year.

More Niche: What does the illustrative midpoint of 18, 7% for 2023 and.

Monish Patolawala: and over 15% earnings per share growth at the midpoint. We anticipate fully-adjusted organic growth of flat to up 2%, or up one to 3% excluding the impact from geographic prioritization and product portfolio initiatives we are taking. This estimated organic growth rate incorporates full year external forecasts for major end markets, including and Expectation of Continued Mixed Growth in Industrial End Markets. However, automotive OEM build rates are currently forecasted to be down slightly. Consumer electronics are expected to grow low single digits for the year, while the semiconductor market is currently forecasted to start the year slow and improve as the year progresses. And finally, Consumer Retail Discretionary Spending is expected to remain muted for the year.

More Niche: And over 15% earnings per share growth at the midpoint.

More Niche: We anticipate full year adjusted organic growth of flat to up 2%.

More Niche: Our up 1% to 3%, excluding the impact from geographic prioritization and product portfolio initiatives, we are taking.

More Niche: This estimated organic growth rate incorporates full year external forecasts for major end markets, including.

More Niche: And expectation of continued makes growth in industrial end markets.

More Niche: Automotive OEM build rates are currently forecasted to be down slightly.

More Niche: Consumer electronics, I expect it to grow low single digits for the year.

More Niche: While semiconductor market is currently forecasted to start the year slow and improve as the year progresses.

More Niche: And finally consumer retail discretionary spending is expected to remain muted for the year.

More Niche: Yeah.

Monish Patolawala: As mentioned, we expect a strong expansion and adjusted operating margins of approximately 200 to 275 basis points year on year, up from an estimated midpoint of 18.7% in 2023. With respect to adjusted EPS, we anticipate full-year 2024 earnings in the range of $6.80 to $7.30 per share on a continuing operations basis, or over 15% year-on-year growth at the midpoint, turning to cash. Our businesses continue to deliver strong and consistent free cash flow. Our expectation is that Adjusted Free Cash Flow Conversion performance post-spin will remain in the range of 90 to 110%.

More Niche: As mentioned, we expect a strong expansion in adjusted operating margins of approximately 200 to 275 basis points year on year up from an estimated midpoint of 18, 7% in 2023.

More Niche: With respect to adjusted EPS, We anticipate full year 2020 for earnings in the range of $6.80 to $7 30 per share on a continuing operations basis are over 15% year on year growth at the midpoint.

More Niche: Turning to cash.

More Niche: Our businesses continued to deliver strong and consistent free cash flow.

More Niche: Our expectation is that adjusted free cash flow conversion performance, both spin will remain in the range of 90% to 110%.

Monish Patolawala: Please turn to slide 15 for more details on our full-year guidance. Included in our outlook is for normal sequential patterns through the year, coupled with the end market trends just discussed. As a result, we anticipate that our second half of the year sales will be slightly stronger than the first half. Our expectations also include a 1% foreign currency headwind to sales, given the strength of the U.S. dollar at the current spot rate, or a negative 20 cents to earnings per share.

More Niche: Please turn to slide 15 for more details on our full year guidance.

More Niche: Included in our outlook is for normal sequential patterns through the year, coupled with the end market trends just discussed.

More Niche: As a result, we anticipate that our second half of the year sales will be slightly stronger than the first half.

More Niche: Our expectations also include a 1% foreign currency headwind to sales given the strength of the U S. Dollar at current spot rates or a negative <unk> 20 cents to earnings per share.

Monish Patolawala: We also anticipate an approximately 75 basis point benefit to sales from the commercial agreement with Solventum. Please note that this benefit will be reflected within acquisition and divestitures from an external reporting perspective. We expect adjusted operating income and earnings per share to show relative strength in the second half of the year. This is primarily due to the impact on the timing of the Solventum spin-off on April 1, along with our pre-tax restructuring charges of $250 to $300 million that are weighted 70% to the first half of the year.

More Niche: We also anticipate an approximately 75 basis point benefit to sales from the commercial agreement with Salt went up.

More Niche: Please note that this benefit will be reflected within acquisition and divestitures from an external reporting perspective.

More Niche: We expect adjusted operating income and earnings per share to show relative strength in the second half of the year.

More Niche: This is primarily due to the impact from the timing of the solvent and spend on April 1st along with a pre tax restructuring charges of $250 million to $300 million that are weighted 70% through the first half of the year.

Monish Patolawala: We will continue to benefit from productivity and restructuring actions, partially offset by increased investments in the business as we progress through the year. Looking at below-the-line items, we estimate full-year other expense net will be in the range of $75-$100 million, mostly weighted to the second half of the year. And our 2024 adjusted tax rate is expected to be in the range of 19 to 20%, with the first half of the year coming in at the high end of the range.

More Niche: We will continue to benefit from productivity and restructuring actions, partially offset by increased investments in the business as we progress through the year.

More Niche: Looking at below the line items, we estimate full year other expense net will be in the range of $75 million to $100 million, mostly weighted to the second half of the year.

More Niche: And our 2024 adjusted tax rate is expected to be in the range of 19% to 20% with the first half of the year coming in at the high end of the range.

Monish Patolawala: As Bruce mentioned earlier, and detailed further on slide 26 in the appendix, the new operating category named Other is forecasted to have a net operating loss of approximately neutral to $25 million. This range includes a first quarter net operating loss of approximately $65 million on a continuing operations basis.

More Niche: As Bruce mentioned earlier.

More Niche: And detailed further on slide 26 in the appendix.

More Niche: The new operating category named other is.

More Niche: Is forecasted to have a net operating loss of approximately neutral to $25 million.

More Niche: This range includes first quarter net operating loss of approximately $65 million on a continuing operations basis.

Monish Patolawala: Beginning in April, the transition service agreements cost plus a markup will be reimbursed to 3M, and therefore, we will generate modest income in the remaining three quarters of the year. Finally, corporate and unallocated includes full year 2024 sales in the range of $225 to $275 million for commercial agreements with Solventum beginning in April. We expect fully a corporate and unallocated net operating loss in the range of $125 to $175 million.

More Niche: Beginning in April.

More Niche: Transition service agreements cost plus a markup will be reimbursed at three am and therefore, we will generate modest income in the remaining three quarters of the year.

More Niche: Finally, corporate and unallocated includes full year 2024 sales in the range of $2 $25 million to $275 million for commercial agreements with Sol went them beginning in April.

More Niche: We expect full year corporate and unallocated net operating loss in the range of $125 million to $175 million.

Monish Patolawala: These ranges include first-quarter revenue of approximately $25 million and a net operating loss of approximately $75 billion. As we have previously discussed, we estimate annualized dis-synergies of approximately $150 to $175 million. These costs were previously associated with solventum and will now be allocated to safety and industrial, transportation and electronics, and consumers starting in April. Specific to Q2, we expect continued strong execution to drive operating performance, as disclosed in a Form 10-K. Stock-based compensation grants were delayed to Q2. As a result, we expect to incur $125 to $150 million in expenses in Q2.

More Niche: These ranges include first quarter revenue of approximately $25 million and net operating loss of approximately $75 million.

More Niche: As we have previously discussed we estimate annualized dis synergies of approximately $150 million to $175 million.

More Niche: These costs were previously associated with solve anthem and will now be allocated to safety and industrial transportation and electronics and consumer starting in April.

More Niche: Specific to Q2, we expect continued strong execution to drive operating performance.

More Niche: As disclosed in our Form 10-K stock based compensation grants were delayed to Q2.

More Niche: As a result, we expect to incur 125 $250 million in expense in Q2.

Monish Patolawala: We will also increase investments to support end market demand and drive growth and productivity. Please turn to slide 16 for more details by business. Taking into account my earlier comments regarding current full-year macroeconomic and major end-market forecasts, we estimate organic sales growth and safety in the industrial sector to be flat to up low single digits. Adjusted organic sales growth for transportation and electronics is forecasted to be in the low single digits. This is better than our estimated range of flat to up-low single digits provided in January, recognizing our strong Q1 growth performance. And in consumer, we estimate organic sales to be down low single digits, which includes our ongoing product portfolio initiative.

More Niche: We will also increase investments to support end market demand and drive growth and productivity.

More Niche: Please turn to slide 16 for more details by business group.

More Niche: Taking into account my earlier comments regarding current full year macroeconomic and major end market forecasts, we estimate organic sales growth in safety and industrial to be flat to up low single digits.

More Niche: Adjusted organic sales growth for transportation and electronics is forecasted to be up low single digits. This is better than our estimated range of flat to up low single digits provided in January recognizing our strong Q1 growth performance.

More Niche: And in consumer we estimate organic sales to be down low single digits, which includes our ongoing product portfolio initiatives.

Monish Patolawala: These actions are estimated to create a year-on-year organic growth headwind for the consumer business of approximately two percentage points. I want to take a moment to thank our team for the work they have done in successfully executing across our three strategic priorities. Their disciplined work has created value and returned capital to shareholders with the successful spin-out of our healthcare business. They've also helped reduce risk by reaching two large settlements while making progress on the exit of PFAS manufacturing. And most importantly, our teams have made tremendous progress on fundamentally improving how we work, which is driving better performance across the business. In closing, we delivered a strong start to the year.

More Niche: These actions are estimated to create a year on year organic growth headwind for the consumer business of approximately two percentage points.

More Niche: I wanted to take a moment to thank our team for the work they have done in successfully executing across our three strategic priorities.

More Niche: That discipline work has created value and return capital to shareholders with a successful spin out of our health care business.

More Niche: They are also help reduce risk by reaching two large settlements, while making progress on the exit of P fast manufacturing.

More Niche: And most importantly, our teams have made tremendous progress on fundamentally improving how we work, which is driving better performance across the business.

More Niche: In closing, we delivered a strong start to the year as.

Monish Patolawala: As we look ahead, we are focused on building on our momentum, supporting expectations for a return to organic top-line growth, Margin Expansion, Investments in High-Growth and Attractive End Markets, and Continued Strong Cash Generation. This leaves us well positioned for long-term success and consistent value creation for our customers and shareholders. Please turn to slide 17. And I will turn it back over to Mike.

More Niche: As we look ahead, we are focused on building on our momentum supporting expectations for a return to organic topline growth margin expansion investments in high growth in attractive end markets and continued strong cash generation.

More Niche: This leaves us well positioned for long term success and consistent value creation for our customers and shareholders.

More Niche: Please turn to slide 17, and I will turn it back over to Mike.

More Niche: Mike.

Michael F. Roman: Thanks, Monish. Paying a competitive dividend has been a priority for 3M for more than 100 years, and this will continue to be true following the spinoff of Salventa. As part of the spin, we distributed 80.1% of Solventum's outstanding shares to our shareholders, and Poe Spin has made the decision to reset 3M's dividends.

Michael F. Roman: Thanks, Moonish paying a competitive dividend has been a priority for three of them for more than 100 years.

More Niche: This will continue to be true following the spinoff of solve them to them.

Michael F. Roman: As part of the spin we distributed 81% of <unk> outstanding shares to our shareholders and post spin have made the decision to reset three EMS dividend.

Michael F. Roman: As a result, we anticipate a dividend of approximately 40% of adjusted free cash flow. This represents a dividend that is in line with our industrial peers and well above the S&P 500 median, with the potential to increase over time. We expect to seek board approval to declare the second quarter dividend in May, with payments anticipated in June.

Michael F. Roman: As a result, we anticipate a dividend of approximately 40% of adjusted free cash flow.

More Niche: This represents a dividend that is in line with our industrial peers and well above the S&P 500 median with a potential to increase overtime.

More Niche: We expect to seek board approval to declare the second quarter dividend in may with payments anticipated in June.

Operator: In addition, post spin, we have stepped back into the market for share repurchase. Before I conclude, let me emphasize some important points from the quarter. Q1 was a strong start to the year, driven by significant improvements in operational execution as well as the achievement of several major milestones toward our strategic goals, including the successful spinoff of Salventum and the settlement of two major legal matters. I would like to thank our people for their dedication and continued focus on delivering value for our customers and shareholders.

More Niche: In addition post spin we have stepped back into the market for share repurchases.

Speaker Change: Before I conclude let me emphasize some important points from the quarter.

Speaker Change: Q1 was a strong start to the year driven by significant improvements in operational execution as well as the achievement of several major milestones towards our strategic goals, including the successful spin off or sell Bantam and the settlement of two major legal matters.

More Niche: I would like to thank our people for their dedication and continued focus on delivering value for our customers and shareholders.

Operator: Through their efforts, we are well positioned to deliver a strong 2024. Tomorrow, May 1st, I transition into the role of Executive Chairman. I look forward to working with Bill Brown as he assumes the role of CEO. That concludes our formal remarks, and we will now take your questions. Ladies and gentlemen, if you would like to register a question, please press star 1 on your telephone keypad. If your question has been answered and you would like to withdraw, please press star 2. If you are using a speakerphone, please lift up your handset before entering your request.

More Niche: Through their efforts, we are well positioned to deliver a strong 2024.

Speaker Change: Tomorrow may 1st I transitioned into the role of executive Chairman I look forward to working with Bill Brown as he assumes the role of CEO.

Speaker Change: That concludes our formal remarks, and we will now take your questions.

Speaker Change: Ladies and gentlemen, if you would like to register a question. Please press star one on your telephone keypad. If your question has been answered and you would like to withdraw please press star two.

Speaker Change: If you are using a speaker phone please lift up your handset before entering your request.

Operator: Please limit your participation to one question and one follow-up. We go first this morning to Julian Mitchell of Barclays. Thanks very much.

Speaker Change: Your participation to one question and one follow up.

Speaker Change: We go first this morning to Julian Mitchell of Barclays.

Julian C.H. Mitchell: Good morning. And congratulations, Mike, on the transition. And obviously, you'll stay very involved in the executive chairman role. Yeah, thank you.

Julian C.H. Mitchell: Thanks, very much good morning, and congratulations Mike on the transition and one overseas you'll stay very involved in the executive chairman role yeah. Thank you.

Michael F. Roman: Absolutely. Maybe just to start off with Monish, you packed a lot of clarification on the moving part into the prepared remarks, so thanks for that. Maybe just to try and understand a little bit better the quarterly sort of cadence here. So it sounds like second quarter EPS, you know, down slightly, maybe versus the sort of 170 cont ops number for Q1. And that's really because of the stock comp and the one-timers that you talked about. So do we think about sort of a second quarter?

Julian C.H. Mitchell: Absolutely maybe just to start off with the munis you packed a lot of clarification on the moving parts into the prepared remarks. So thanks for that maybe just to try and understand a little bit better.

Julian C.H. Mitchell: The quarterly sort of.

Julian C.H. Mitchell: Cadence here, so it sounds like second quarter E. P S.

Julian C.H. Mitchell: Down slightly maybe versus the sort of 170, <unk> Con ops number for Q1, and that's really because of the the stock comp and the one timers that you talked about so do we think about sort of second quarter.

Monish Patolawala: Revenue being similar to the first quarter; margins down a bit because of the stock comp and one-timer. And then as we step into the second half, you've got higher revenues half on half, and then sort of good operating leverage of the stepped up revenue, maybe just any thoughts around, Yeah, I would say Julian, so you summarized it. I would go back and say there's so many moving pieces that I would really say first look at the first half.

Speaker Change: Revenue being similar to first quarter margins down a bit because of the stock comp and one timers.

Speaker Change: And then as we step into the second half you've got higher revenues half on half.

Speaker Change: And then sort of good operating leverage off the stepped up revenue, maybe just any thoughts around that.

Speaker Change: Yeah, I would say Julian so you summarize it I would go back and say, there's so many moving pieces that I would really say first look at first half second half.

Monish Patolawala: And then when you do that, we would also show you that on revenue, we are starting to hit the normal seasonality trend. So on revenue, the first half, second half is $49.51. And then the margin split, first half, second half is $47.53.

Speaker Change: And then we need to do that we would also show you that on revenue we are starting to hit normal seasonality trends.

Julian C.H. Mitchell: So on revenue is it first half second half is 49 51.

Julian C.H. Mitchell: And then the margin split first half second half is 47 53.

Monish Patolawala: And the reason for that is some of the items that you mentioned, part of the biggest item there is the... is Solventum's first quarter where we don't get reimbursed for TSAs, and that's driving the 47 to 53. If you now go into the important factors just into Q2, to make sure that I cover all the points. Restructuring charges are between 250 to 300 for the year, 70% of which is weighted to the first half.

Julian C.H. Mitchell: And the reason for that is some of the items that you mentioned part of the biggest item there is the.

Speaker Change: This is <unk> first quarter, where we don't get reimbursed for P. S. A's and that's driving the 47 to 53. If you now go into the important factors just into Q2 to make sure that I covered all the points.

Speaker Change: Restructuring charges are between 250 to 300 for the year, 70% is weighted to the first half semi.

Monish Patolawala: Similarly, you mentioned it too, and I said that in my prepared remarks, we will incur stock-based compensation headwinds of around $120 to $150 million. FX, the stronger dollar, continues to remain in the second quarter, so we've got to factor all that in. And I would say that's why we've given you first-half and second-half guidance. There are more details, I know Bruce and the team can walk you through it, but if you start with that, I think you'll get a directionally start in the zone that we're talking about. That's very helpful.

Speaker Change: Similarly, you mentioned it too and I would I'd said that in my prepared remarks, we will incur stock based compensation headwind around 120 to 150 million FX. The stronger dollar continues to remain in the second quarter. So we got to factor all that in and I would say that's why we've given you a first half second half guidance that more deep.

Speaker Change: Sales I know Bruce and the team can walk you through it but if you start with that I think it will get directionally in the zone that we're talking about.

Speaker Change: That's very helpful. Thanks, Manish and then maybe a second.

Monish Patolawala: Thanks, Monish. And then maybe a second question, perhaps, you know, more for Mike, but on capital allocation. So clearly, you know, you and the board spent a lot of time thinking about balance sheet leverage of 3M to settle on that sort of 40% dividend payout ratio. You also mentioned, though, that on the buyback, some step up since the Solventum spin. So maybe help us understand kind of how you and the board are thinking about 3M's leverage. Transcripts provided by Transcription Outsourcing, LLC. Sure, Julian.

Speaker Change: Perhaps you know for most of them, Mike, but on capital allocation.

Speaker Change: So clearly you know you and the board spent a lot of time thinking about balance sheet leverage of three M to settle on that sort of 40% dividend payout ratio.

Speaker Change: You also mentioned, though that on the buyback some step up since the solvents and spin them.

Speaker Change: So maybe help us understand kind of how you and the board are thinking about mm three EMS leverage.

Speaker Change: Requirements are from here, how meaningful could a buyback be and and then tied to that monish any clarification on interest expense guide for this year based on that balance sheet sure Julien.

Michael F. Roman: Yeah, I would start with, you know, we continue to be a strong cash generator, and we're well capitalized to invest in our business, which continues to be the first priority for capital allocation, and also return capital to shareholders, including the dividend that we've been talking about and share repurchases. And my comment, we're back in the market, you know, the pace will depend on how we view the macro, how we look at our performance, the intrinsic value of our stock. We haven't, we haven't declared, you know, really how we're going to move forward on that. But so well positioned to, like I said, invest in and drive the capital allocation priorities that we talked about. Julian, I'll answer your second question.

Julien: I would start with we continue to be a strong cash generator and we're well capitalized to invest in our business, which is continues to be the first priority for capital allocation and also return capital to shareholders, including the dividend that we've been talking about and and share repurchases.

Speaker Change: So my comment we're back in the market you know the pace will depend on how we view the macro how we look at our performance the intrinsic value of our stock we haven't we haven't declared.

Speaker Change: It really how we're going to move forward on that but so well positioned to like I said invest in and drive the capital allocation priorities that we talk about.

Speaker Change: Julian I'll answer your second question when we talk about below the line items, we talk about two things we mainly its pension.

Monish Patolawala: You know, when we talk about below the line items, we talk about two things: mainly, its pension and its interest expense slashing income. So I'll combine the two. So a guide is a net expense of 75 to $100 million, or 10 to 15 cents per share.

Speaker Change: And its interest expense slash income so combine the two so our guide is net expense of $75 million to $100 million are 10 to 15 cents per share.

Monish Patolawala: Q2, as I mentioned, will continue to benefit from the interest income that we received from the dividend that we received from Solventum of $7.7 billion. And so, therefore, the $75 to the $100 million guide for the year will mostly be weighted to the second half of the year. Great, thank you. Thank you. We go next now to Nigel Coe.

Speaker Change: Q2, as I mentioned will continue to benefit from the interest income that we received from the dividend that we received from Salt went almost $7 7 billion and so therefore, the 75 for the $100 million guide for the year will mostly be weighted to the second half of the year.

Speaker Change: Great. Thank you.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Thank you we'll go next now too.

Operator: Thanks, good morning. Morning, morning, and Mike, hopefully, the executive chairman role is a bit less stressful than the chairman and CEO role, so congratulations on that. So just a few more, maybe a few more details on the 2Q, Monish. The restructuring, and I understand 3% in the first half, 3% in the second half. How does that phase between 1Q and 2Q?

Speaker Change: With Wolfe research.

Wolfe Research: Oh, Thanks, good morning, good morning, joining.

Wolfe Research: Good morning, Mike Hope hopefully the exact chairman roles a bit less stressful than our chairman and CEO roles. So congratulations on that so.

Wolfe Research: Just a few more maybe some more details on the tissue when each the restructuring and understand since then in the first half and the second half how does that phase between lung human take I'm just trying understand so you know whether that's fairly level loaded all weather.

Nigel Edward Coe: I'm just trying to understand, you know, whether that's fairly level loaded or whether there's a bit more coming through in the second quarter. And then on the restructuring, I see the total charges, but in terms of the gross payback, you know, what kind of payback are we assuming on that restructuring? And are we still, you know, on a 3M Remainco basis still on track for $700, $900 million of savings by 2020? Yeah, so I'll start with the first one, Nigel. As I said, it's 70% weighted in the first half, in the 250-300 range.

Wolfe Research: Whether it's a bit more coming through in the second quarter and then on the restructuring I see the total charges, but in terms of the the gross payback, but what kind of payback are we.

Wolfe Research: Assuming on that restructuring and are we still on the three of them remain co base is still.

Wolfe Research: On track for $790 million of savings by 2035.

Speaker Change: Yeah. So I'll start with the first one Nigel is as I said, it's 70% weighted in the first half.

Speaker Change: Off the 250 to 300 range in the first quarter at a holdco basis, we did 122 million of restructuring that I've said in my announcement and then you'll see health care was approximately $20 million of that so you've got 100 million that is on a remain co basis.

Monish Patolawala: In the first quarter, at a whole co-basis, we did $122 million of the restructuring that I said in my announcement. And then you'll see healthcare was approximately $20 million of that. So you've got $100 million that is on a remain co-basis. And so the balance is, so you can do the math. When I come to your next piece on payback, I just wanted to start again. I've said this before. I'll say it again:

Speaker Change: And so the balance is is US is so you can get the math when I come to your next piece on payback I just wanted to start again I've said this before I I'd say it again you have to look at restructuring in total so when we started this program. We said that multiple things. They wanted to achieve number one was we wanted to change the way we work.

Monish Patolawala: You have to look at restructuring in total. So when we started this program, we said there were multiple things we wanted to achieve. Number one was we wanted to change the way we worked. And the way we achieved that was streamlining our supply chain, getting a shorter path to customers, and thirdly, reducing stranded costs, having a lighter center as well as creating oxygen to invest in the business. And when we put that program together, that was including Whole Coal.

Speaker Change: And the way, we achieved that was streamlining our supply chain.

Speaker Change: Getting a shorter path to customers and third was reduce stranded costs have a lighter center as well as create oxygen to invest in the business and.

Speaker Change: And when we put that program together that was including political ads.

Monish Patolawala: As we have now spun out healthcare, you can see all those items starting to come in, which is margin expansion. And that is a big thing happening because of the improvement we have in our supply chain and the way we work. It's happening because we are closer to customers. It's happening because we have reduced stranded costs.

Speaker Change: As we have now spun out health care you can see all of those items starting to come in which is margin expansion is coming in and that is happening because of the improvement we have in our supply chain and the way. We work it is happening because we are closer to customers.

Speaker Change: It's happening because we have reduced stranded cost when we started our journey and we announced the spinoff healthcare. We had said industry benchmark was somewhere between one to one 5% of sales, which is like $400 million to $450 million and now our dis synergies from the spin out of health care on the $1 50 to $1 75, and we're going to keep working that.

Monish Patolawala: When we started our journey and we announced the spin of healthcare, we said the industry benchmark was somewhere between 1% to 1.5% of sales, which is like $400 million to $450 million. And now our dis-energy is from the spin out of healthcare and $150 million to $175 million. And we're going to keep working on that, and in some cases, grow into it.

Speaker Change: And in some cases grow into it in some cases, we'll keep working it down and you've seen we've been able to do that and at the same time, we've created oxygen to invest in the business and Mike mentioned some of the spec in wins that we've got in T. B G. We've continued to invest in C. B G.

Monish Patolawala: In some cases, we'll keep working it down. And you've seen we've been able to do that. And at the same time, we've created oxygen to invest in the business. And Mike mentioned some of the big wins that we have got in TBG. We have continued to invest in CBG in a down market.

Monish Patolawala: We have done the same with SIBG, and we had over 30 new launches across the company in the first quarter. So that's the way I would look at it on a payback basis.

Speaker Change: On marketing we've done the same with S. I B G and we had over 30, new launches across the company in the first quarter. So that's the way I would look at it on a payback basis I would tell you that we are still continuing to have very good payback and in fact, we were able to accelerate some of our restructuring actions as well as get some onetime gains like property.

Monish Patolawala: I would tell you that we are still continuing to have very good payback. And, in fact, we were able to accelerate some of our restructuring actions as well as get some one-time gains like property sales in Q1. So overall, look at the total margin, 200 to 275 basis points higher on a year-over-year basis, which is a reflection of all the actions the team has taken. Thanks, Monish. My follow-up question is on dividends.

Speaker Change: Sales in Q1, so overall look at the total margin 200, 275 basis points up on a year over year basis, which is a reflection of all the actions the team has taken.

Speaker Change: Great. Thanks, Mike.

Speaker Change: And my follow up question is on the dividend, it's been a huge supercuts industry about the potential dividend scenarios, but so hope that's now behind us, but the flips that payout ratio on adjusted free cash flow is the intense Mike to keep that's a 40% relatively stable going forward. So no as you grow earnings and free cash flow going forward.

Nigel Edward Coe: There's been a huge sort of courage industry about the potential dividend scenarios, but hopefully, that's now behind us. But the 40% payout ratio on adjusted free cash flow, is the intent, Mike, to keep that 40% relatively stable going forward? So, you know, as you grow earnings and free cash flow going forward, the dividend should increase as well? Yeah, I would think of it as a guide to how we're thinking about it.

Speaker Change: And should increase as well.

Speaker Change: I would think of it as a guide of how we're thinking about it.

Speaker Change: Approximately 40% of adjusted free cash flow.

Speaker Change: So that's the way the board that's the guide the board is looking at as we go forward.

Speaker Change: That's where we start as we go forward with continuing operations that's the.

Michael F. Roman: You know, approximately 40% of adjusted free cash flow. You know, that's the way the board, that's the guide that the board is looking at as we go forward. So that's where we start as we go forward with continuing operations. That's the best way to think about it, Nigel.

Speaker Change: Best way to think about it in Idaho.

Speaker Change: Okay fair enough. Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you we'll go next now to Andy Kaplowitz at Citi.

Andrew Alec Kaplowitz: Good morning, everyone Hi, Andy.

Andrew Alec Kaplowitz: Mike Thanks for all your help over the years. Congratulations can you update us on your industrial channels within safety and industrial are they generally to the point, where you have better visibility and destocking supposedly over and it does seem like prices industrial adhesives and tapes its been turning the corner over the last couple of quarters is that you know a bit of a canary in the shorts.

Nigel Edward Coe: Okay, fair enough. Thank you. Thank you. We go next now to Andy Kapowitz at Citi. Good morning, everyone. Hi, Andy.

Operator: Mike, thanks for all your help over the years. Congratulations. Can you update us on your industrial channels within safety and industrial? Are they generally at the point where you have better visibility and de-stocking is mostly over?

Speaker Change: Cycle industrial businesses that you have.

Speaker Change: Andy I would say if you look at inventory in the channels I was kind of a measure of that that's I would say, it's it's that it's been reducing some of the inventory in the channel really around improving supply chains, we talked a bit about this last quarter and our supply chain improve our distributors in the channel are taking advantage of.

Andrew Alec Kaplowitz: And it does seem like, for instance, industrially, adhesives and tapes have been turning the corner over the last couple quarters, you know, a bit of a canary in the short cycle industrial businesses that you, Yeah, Andy, I would say if you look at inventory in the channels as kind of a measure of that, that's, I would say it's that it's been reducing some of the inventory in the channel really around We talked a bit about this last quarter; as supply chains improve, our distributors in the channel are taking advantage of shorter cycle times and managing down some of their inventory.

Speaker Change: Shorter cycle times and in managing down some of their inventory. There is also a bit of a cautious outlook. You know when you just talked about a mixed outlook for industrial markets.

Speaker Change: If you think about it look at our results from Q1, our industrial adhesives and tapes and personal safety. When you when you adjust for the year over year respiratory changes those were both there are multiple market multiple industrial market focused and they were both up slightly in the quarter, so they're seeing a bit of both across their markets.

Speaker Change: We have some market focused businesses like industrial mineral has that's seeing strong demand and then we have some other market focused businesses industrial like automotive aftermarket.

Andrew Alec Kaplowitz: There's also a bit of a cautious outlook, you know, when it's talked about in the mix Unknown Speaker, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee And then, Monish, obviously, you mentioned a relatively good T&E start. You know, you had a pretty easy comparison in Q1.

Speaker Change: And our kind.

Speaker Change: Kind of our industrial specialties, which was a lot of our our products that go into shipping so the shipping dynamics, a mild winter impacts on an auto repairs, all those or as we're seeing kind of the downside of that and some of those markets. So it's a mixed market again the channels adjusting taking advantage of improving.

Speaker Change: Apply change then I would say somewhat cautious about the broader mix nature of those end markets.

Speaker Change: That's helpful. Mike and then Monday, obviously, you mentioned the relatively a good teeny start you know you did have a pretty easy comparison in Q1.

Michael F. Roman: But, you know, 7% growth, you're still kind of in the low single digits. I know it's up a little bit. You mentioned the buy-ahead was a big part of the Q1 improvement, but is there any reason why your improved spec-ins wouldn't continue in electronics? And then, are you seeing any improvement at all yet, you know, in semiconductors? And those kinds of things.

Speaker Change: But you know, 7% gorilla, you're still guiding to low single digits I know, it's up a little bit you mentioned the buy had was a big part of the Q1 improvement but is there any reason why your improves seconds wouldn't continue in electronics and then are you seeing any improvement at all yet you know in semiconductors and.

Speaker Change: Those kind of end markets.

Monish Patolawala: Yeah, I would say first we are thrilled that we've got the spec in. So that's a big positive. As I said, two-thirds of the total 6.7%. That's an approximate number; we don't have the perfect number, we believe is partly driven by inventory normalization, both in auto and electronics, plus customers starting to buy ahead as they start building for end markets or consumer end markets.

Speaker Change: Yeah.

Speaker Change: I'd say first we are thrilled that we've got the spec and so that's a big positive as I said two third of the total of six 7%. That's approximate we don't have the perfect number. We believe is partly driven by inventory normalization bought in auto and electronics plus customers starting to.

Speaker Change: Buy ahead as they start building for end market.

Speaker Change: Our consumer end markets.

Monish Patolawala: You know, what I would tell you is the second half is so important for the consumer electronics business, and we are watching that trend. If there is a big pickup in consumer electronics, we will definitely grow with it because we are now specced into many more devices than before. So that, I would say the second half is what we are watching, but this is where we see it right now.

Speaker Change: And what I would tell you is second half is so important for the consumer electronics business and we are watching that trend.

Speaker Change: If there is a big pick up in consumer electronics, we will definitely grow with it because we announced specced into many more devices than before.

Speaker Change: So that I would say second half is what we are watching but this is why we see it right now.

Speaker Change: And then on semiconductor our view as we saw the first quarter slow and we believe that this will pick up in the second half and that's what we are watching there too.

Monish Patolawala: And then on Semiconductor, our view is that we saw the first quarter slow, and we believe that this will pick up in the second half, Andy, and that's what we are watching there too. All indications keep saying that it's going to get better, but we are watching. It's helpful, Monish. Thanks, guys. We'll go next to Scott Davis of Melius Research. Hey, good morning, guys. Mike Goss

Speaker Change: All indications keep saying that it's going to get better, but we are watching those trends.

Speaker Change: That's helpful. Many thanks guys.

Speaker Change: We'll go next now to Scott Davis of Melius research.

Scott Reed Davis: Hey, Yeah, good morning, guys Hi, Scott.

Scott Reed Davis: Best of luck to you Mike.

Operator: Hey, Seth. Best of luck to you, Mike. Guys, a couple of questions. I'll just start with a nit and then and then ask a real question.

Scott Reed Davis: And your next endeavors et cetera, Thanks, Scott.

Scott Reed Davis: Yes.

Scott Reed Davis: Coupled I'll just start with a Nit and then and then ask a real question, but what I'm looking at slide 27, why does the 2026 payment depth, what was kind of just walk us through a little bit of color.

Scott Reed Davis: But why am I looking at slide 27? Why does the 2026 payment dip? What was kind of the let's walk through a little bit of the color of the, Yeah, so there were so many facts that were put together, Scott. This is one of them on how these profiles were scheduled. So there's no particular reason to give it out to you.

Scott Reed Davis: Kind of how are these payments were negotiated annually.

Scott Reed Davis: Yeah. So there are so many facts that we'll put together Scott. This is one of them on how these profiles with schedule. So there's no particular reason to give it out to you. This is Jeff.

Monish Patolawala: There are a lot of factors, pluses and minuses that put the whole agreement together. Okay, so there's nothing specific. No, I can't think at all.

Scott Reed Davis: A lot of factors pluses and minuses that put the whole agreement together.

Jeff: Okay. So there's nothing specific in there that 2026 years.

Speaker Change: No I don't think it offline okay.

Monish Patolawala: Okay, more importantly, you know, Mike, if you look back at the long-term growth rate, Ex-Healthcare of 3M, it's been kind of sub-2%, below GDP. Unknown Speaker, What do you think the entitlement growth rate of this business is? longer term. Go back 10 years. I think that's a full cycle for sure, but when you think about the next, You know, three or five years, what do you think the business should be able to grow at? You know, obviously, Bill's going to have his own, you know, his own initiative.

Speaker Change: More importantly, you know Mike if you look back at the long term growth rate.

Speaker Change: <unk> health care of three M. It's been kind of sub 2%.

Speaker Change: So below GDP in that.

Speaker Change: <unk> some price inevitably I would assume.

Speaker Change: What.

Speaker Change: What do you think the entitlement growth rate of this business is longer term I mean go back 10 years. So I think that's the full cycle for sure, but when you think about the next.

Speaker Change: Three or five years, what do you think that the business should be able to grow at a.

Speaker Change: Obviously bill is gonna have his own.

Speaker Change: He has his own initiatives, but what is your view on that.

Michael F. Roman: Unknown Speaker: Yeah, Scott, I won't get ahead of Bill and kind of how he's going to think about going forward. I, you saw our guidance for this year. It's in line with macro. You know, importantly, when you look at what drives our growth, it's really investing in the business. Organic investments have been the dominant driver of growth for us as a company.

Speaker Change: Scott I won't get ahead of Bill and kind of how he is going to think about going forward. I know you saw our guidance for this year, it's in line with macro.

Speaker Change: Importantly, when you look at what drives our growth, it's really investing in the business of organic investments have been the.

Speaker Change: The dominant driver of growth for us as a company and we expect that to continue as we move forward and like I said in my speech, making indispensable products for our customers and that means leveraging our innovation and our technologies our manufacturing capabilities to two.

Michael F. Roman: And we expect that to continue as we move forward. As I said in my speech, making indispensable products for our customers. And that means leveraging our innovation, our technologies, our manufacturing capabilities to come up with differentiated solutions for our customers and do that more and more prioritizing our investments as we've talked a lot about where do we prioritize investments and attractive markets that are, you know, have growth dynamics that are better than the macro.

Speaker Change: Come up with differentiated solutions for our customers and do that more and more prioritizing our investments as we've talked a lot about where do we prioritize investments in attractive markets markets that are.

Speaker Change: We have growth dynamics that are better than the macro that's that's kind of a way to really drive that this growth strategy forward and that's that's how we think about it that's how we focus it's important that we really do.

Speaker Change: <unk> leveraging our innovation so that we create not only the growth, but the differentiated value of the leader in.

Speaker Change: Way, we deliver value to shareholders.

Speaker Change: Terms of margins and cash and so.

Speaker Change: That's the way I think about the formula for growth and that's been the foundation for building the company and that's a foundation for success as we go forward as well.

Michael F. Roman: That's, that's kind of the way to really drive this growth strategy forward. And that's, that's how we think about it. That's how we focus, it's important that we really do prioritize leveraging our innovation so that we create not only growth but a differentiated value leader in the way we deliver value to shareholders in terms of margins and cash. And so it's a, that's the way I think about the formula for growth.

Speaker Change: Totally fair I'll pass it on but congrats on getting all this work done in the last year. It's I'm sure. It's been a lot of heavy lifting so congrats and best of luck. This year. Thanks, Scott. Thank you.

Speaker Change: Well go next now to you Andrew Owen of Bank of America.

Andrew Alec Kaplowitz: Yeah. Good morning, It's Andrew Robyn, Hey, Andrew Andrew.

Andrew Alec Kaplowitz: And Mike Congratulations and Oh, great job getting all this legal stuff out of the way.

Andrew Alec Kaplowitz: Yeah, So I would take an issue with Scott statement about lack of growth of three I don't know what he's getting his numbers because pre COVID-19. Our company has grown at an average of three 7% organically based on my model. So I actually have the exact opposite question.

Michael F. Roman: And it's been the foundation for building the company, and it's a foundation for success as we go forward as well. Totally fair. I'll pass it on, but congrats on getting all this work done in the last year. I'm sure it's been a lot of, and Bess DeLacroix.

Speaker Change: Oh, you know what is this you know for example, a safe Tam growth right. If you say that industrial production is growing 2% yet the guidance is zero to 2% are you have 100.

Scott Reed Davis: Thanks, Scott. We'll go next to Andrew Obin of Bank of America. Yeah, good morning. It's Andrew Obin.

Speaker Change: It's sort of this portfolio geography drag can we just dig in as to what you think are impediments to growth coming out of post COVID-19 because it does seem thing has changed after that can we just right because I would've expected that you would outperform.

Operator: Good morning, Andrew. Hey, and Mike, congratulations and great job getting all this legal stuff out of the way. Thanks. Yeah, so I would take an issue with Scott's statement about lack of growth at 3M. I don't know where he's getting his numbers from because pre COVID, the company has grown on average at 3.7% organically based on my model. So I actually have the exact opposite question.

Speaker Change: Industrial production right and you know every year they seem to be sort of new headwinds are you know that are completely logical but they seemingly have come out of nowhere why the company's growth sort of seems to be below average. Thank you yeah, Andrew I know its kind of building on maybe my answer to Scott.

Andrew Burris Obin: You know, what is this, you know, for example, safety and growth, right? You say that industrial production has grown 2%, yet the guidance is 0 to 2%. You have 100 BIPs, sort of this portfolio geography drag. Can we just dig in as to what you think are impediments to growth coming out post COVID? Because it does seem things have changed after that.

Speaker Change: The macro is an important part of this and we think about the macro for us.

Speaker Change: Or three am is a combination of GDP, where we have the you know our our consumer business and then it's also around industrial production and the broader industrial and transportation electronics, but importantly, we go down and we really look at the markets that we're part of and so driving that growth and you know again the way we we deliver on it.

Speaker Change: Better than macro or in line with macro is tough to pick markets, where we can really leverage our innovation and be differentiated and drive our growth out of those attractive markets and so what is what is the driver of it maybe if you don't do this well. That's your impediments question is too to really prioritize those attractive.

Michael F. Roman: Can we just, right? Because I would have expected that you would outperform industrial production, right? And, you know, every year, there seem to be a sort of new headwinds that are completely logical, but they seemingly come out of nowhere. Why the company's growth sort of seems to be below average? Thank you. Yeah, Andrew, I'm kind of building on maybe my answer to Scott, it's, you know, the macro is an important part of this.

Speaker Change: Markets, where you can where we can deliver differentiated <unk> solutions. That's that's the that's the model that will drive us forward.

Speaker Change: Right.

Speaker Change: Then maybe just a follow up I know you guys are tweaking our your global distribution are exiting.

Speaker Change: Some write direct distribution you are starting to utilize distributors can you just talk about sort of what have you experienced so far with these changes to the bottles one.

Michael F. Roman: And we think about the macro for us, or 3M is a combination of GDP, where we have the, you know, our consumer business, and then it's also around industrial production in a broader industrial and transportation electronics. But importantly, we go down, and we really look at the markets that we're part of. And so driving that growth, and, you know, again, the way we deliver on growth better than macro or in line with macro is to pick markets where we can really leverage our innovation and be differentiated and drive our growth out of those attractive markets. And so what is the driver of that growth?

Speaker Change: The pros and cons are because you know some of the commentary referred is that Oh, sorry, I was leaving money on the table with distributor you know some sort of legal risk associated how do you mitigate those and what has the experience been so far thank you.

Speaker Change: Yeah, Andrew It just talking about the change. So this was a part of the.

Speaker Change: Structuring actually it was part of the model change that we've been making really focusing on leading through our businesses globally.

Andrew: And prioritizing where they.

Andrew: Important parts of their business and looking at what's the best model to put in place and so geographic prioritization was the way we termed it and so we focused on some of the smaller countries that we operate in.

Andrew: And we talked about approximately 30, we've launched this in 27 countries at this point, it's really a model to move to an export model and and we do have two it's much more than kind of the way we've talked about on the headlines you have to set up a successful model you have to set up a model to support distributors, you're changing from the traditional three I'm modeling those countries to an export driven.

Andrew Burris Obin: Maybe, if you don't do this, well, that's your impediment question is to really prioritize those attractive markets where you can, where we can deliver differentiated 3M solutions. I think that's the, that's the model that will drive us forward. Right. And then maybe just to follow up, I know you guys are tweaking your global distribution, exiting some right direct distribution, and you are starting to utilize distributors. Can you just talk about sort of what you have experienced so far with these changes to the models? What are the pros and cons?

Speaker Change: Model. So it's important that we not only have capabilities.

Speaker Change: In region, but globally to support that kind of model in those countries. It's also important that we have a strong governance.

Speaker Change: Everywhere, we operate around the world. So we continue to focus on advancing our governance model.

Speaker Change: As we make those changes so it is a much.

Speaker Change: Much more dimensions to the change.

Michael F. Roman: Because, you know, some of the commentary referred to is that, oh, 3M was leaving money on the table with distributors, you know, some sort of legal risk associated. How do you mitigate those? And what has the experience been so far?

Speaker Change: After a good start and successful without it we call it out.

Speaker Change: Our revenue impact this year, because we're switching to an end.

Speaker Change: Export model and so we are you know where you know.

Speaker Change: Driving a different price model with our distributors, but that's that is going to continue to drive I think that's it as extra seats will drive very good performance for us on a go forward basis. It also helps us to add on to Mikes comments on pros benefits you.

Michael F. Roman: Thank you. Yeah, Andrew, just talking about the change. So this was a part of the restructuring, actually; it was part of the model change that we've been making really focusing on leading our businesses globally and prioritizing where they are, you know, the most important parts of their business and looking at what's the best model to put in place. And so geographic prioritization was the way we termed it. And so we focused on some of the smaller countries that we operate in.

Speaker Change: A lot of structure out from those countries that also has benefited us on the margin line. It also helps us focus our portfolio like what are we going to sell and therefore, its SKU rationalization that once you get through this he will have a different inventory profile that support those smaller countries. So they're still very important.

Michael F. Roman: And we talked about approximately 30, we've launched this in 27 countries at this point, and it's really a model to move to an export model. And, and we do have to, it's much more than the kind of way we've talked about in the headlines, you have to set up a successful model, you have to set up a model to support distributors, you're changing from the traditional 3M model in those countries to an export-driven model.

Speaker Change: And countries for us in no way would be walking away, it's just a different way of approaching them.

Speaker Change: Thank you very much.

Speaker Change: Thanks.

Speaker Change: We'll go next now to Joe Ritchie of Goldman Sachs.

Joseph Alfred Ritchie: Hey, guys, good hygiene and Mike all the best of luck congratulations.

Joseph Alfred Ritchie: Thanks, Joe I'm going to start just a decision has to start with a quick just clarification. So just apologies on this but like slide 15, where you can.

Joseph Alfred Ritchie: The operating income number of $1 2 billion. So if I just kind of back out the performance this quarter it assumes hell.

Michael F. Roman: So it's important that we not only have capabilities, you know, in the region but globally to support that kind of model in those countries. It's also important that we have strong governance everywhere we operate around the world.

Joseph Alfred Ritchie: Health care stranded costs of roughly $100 million to $150 million the segments I just want to make sure I have that right.

Joseph Alfred Ritchie: And then also on that slide on the restructuring charges money is coming back to your comments from earlier.

Speaker Change: <unk> to think about it.

Michael F. Roman: So we continue to focus on, you know, advancing our governance model as we make those changes. So it, it is much, you know, many more dimensions to the change. We're off to a good start and successful with that we call it a, you know, revenue impact this year because we're switching to an export model. And so we are, you know, we're, you know, driving a different price model with our distributors.

Joseph Alfred Ritchie: Is 100 million the first quarter extra health care number.

Joseph Alfred Ritchie: What's the apples to apples comparison to their restructuring charges of $2 50 to 300 for the year.

Joseph Alfred Ritchie: So.

Speaker Change: Try me again on the first piece of your question do I didn't follow exactly but I'll answer the second one so the $2 50 to the 300 is embedded in here and that's on a continuing ops basis. So that does not include health care.

Speaker Change: Okay, all right great. Yeah. So just on the operating income quickly I think you guys had roughly $1 7 billion. This quarter I think we had like roughly call it $350 million or so in health care profit. So you back that out that's above the $1 $2 billion number. So I was just basically trying to understand how much of that first.

Michael F. Roman: But that's, that is going to continue to drive, I think, as it succeeds, will drive very good performance for us on a going forward pace. It also helps us to add on to Mike's, you know, your comments on pros and benefits; you take a lot of structure out of those countries that also have benefited us on the margin line. It also helps us focus our portfolio, like what are we going to sell?

Speaker Change: Stranded costs go into the other segments, yes. So I think that there are two pieces to this one is the dis synergies of healthcare, which on an annualized basis right. Now we think it's $1 50 to $1 75, and then the second piece of this is as I've mentioned, there's 250 million of cost that we hold on behalf of <unk>.

Speaker Change: Vent them for which you'll get reimbursed in April 1st onwards, So youll eat Q1 with no reimbursement basically so if you look at our other segment. Joe you will see all other category you will see a loss of 65 million in there in Q1 and Thats basically.

Michael F. Roman: And therefore, it's skew rationalization that once you get through this, you will have a different inventory profile that supports those smaller countries. So they're still very important countries for us. In no way are we walking away. It's just a different way of approaching.

Speaker Change: <unk>.

Speaker Change: We don't get reimbursed for that in Q1.

Andrew Burris Obin: Thank you very much. Thank you. We'll go next to Joe Ritchie now.

Speaker Change: Got it Okay, no I think I think I've got it.

Speaker Change: And you can follow up afterwards.

Operator: Hey guys, good morning. And Mike, I echo all the best of luck. Congratulations. Thanks, Joe. I'm going to start just to start with a quick clarification. So just apologies on this, but like slide 15, where you get the operating income number of $1.2 billion. So if I just kind of back out the performance this quarter, it assumes healthcare, you know, stranded costs of roughly $100 to $150 million go into this segment. So I just want to make sure I have that right.

Bruce Jermeland: Bruce Campbell.

Speaker Change: Yeah.

Bruce Jermeland: Yeah, and then there's just there's just another quick follow up on the electronics business and so I know I know that that can kind of gave an on demand and then inventory normalization is it possible to kind of parse out the inventory benefit that you're seeing I'm just curious like how much of that 15% came from this inventory.

Speaker Change: He is normalizing.

Speaker Change: Just because.

Speaker Change: Maybe I'm, just not close to it anymore, but.

Speaker Change: I'm just curious like what other products are really kind of driving end market demand for electronics at this point, yes, Joe what we talked about in our in the results for T V. G. In the first quarter and in electronics, it because theres a spec in wins on on some of the mobile platforms and so the inventory you know it's.

Joseph Alfred Ritchie: And then also on that slide on the restructuring charges, Monish, going back to your comments from earlier, so the way to think about it is $100 million-ish for the first quarter X the healthcare number. That's the apple to apple comparison to the restructuring charges of $250 to $300 for the year.

Speaker Change: It's getting ready for the demand really the demand that they're seeing in the second quarter and and at this point, it's really that's that's the step up in that.

Speaker Change: There is a portion of it that's inventory kind of filling into the the the value chain of those Oems, but it's the bigger part of it is the the spec count for US anyway, the bigger part of it as the wins in the second side of it.

Monish Patolawala: Try me again on the first piece of your question, Joe. I didn't follow exactly, but I'll answer your second one. So the 250 to the 300 is embedded in here, and that's on a continuing operations basis. So that does not include health.

Speaker Change: And Mike that smartphone demand.

Speaker Change: It's mobile devices largely phones yep yep, our telephones.

Speaker Change: Okay, Great alright, thank you very much.

Speaker Change: Okay.

Speaker Change: Well go next now to Steve Tusa of JP Morgan.

Monish Patolawala: Okay, all right, great. Yeah, so just on the operating income quickly, you know, I think you guys have roughly $1.7 billion this quarter. I think we had like roughly call it $350 million or so in health care profit. So you back that out, that's above the $1.2 billion number. So I was just basically trying to understand how much of the health care stranded costs go into the other segments.

Charles Stephen Tusa: Hey, good morning.

Charles Stephen Tusa: Good morning, Steve.

Charles Stephen Tusa: Mike Congrats again and thanks for all the help over the years.

Charles Stephen Tusa: In Africa.

Charles Stephen Tusa: Did you just to be clear you said, 40% of adjusted free cash flow can you just help us with what the construct of that is what what is adjusted free cash flow.

Charles Stephen Tusa: Youre, referring to the dividend Steve.

Charles Stephen Tusa: Yeah, just the construct that don't need a number for cash just how do you define that adjusted free cash if you look at.

Joseph Alfred Ritchie: Yeah, so I think that there are two pieces to this. One is the dis-synergies of health care, which on an annualized basis right now, we think it's between 150 and 175. And then the second piece of this is, as I've mentioned, there's $250 million of costs that we hold on behalf of solventum, for which you get reimbursed on April 1st onwards. So you eat Q1 with no reimbursement, basically. So if you look at our other segment, Joe, you will see our other category; you will see a loss of $65 million in there in Q1. And that's basically because we don't get reimbursed for that in Cuba.

Charles Stephen Tusa: All our <unk>.

Charles Stephen Tusa: Material that we have submitted you will see historically, what we have broken out is.

Speaker Change: From.

Speaker Change: Our GAAP results there are certain items that we have been adjusting to get to adjusted results, which is litigation.

Speaker Change: Expenses number one number two is a P fast because we've been exiting we have been showing P faster than exit and number three was all the cost incurred to spin out to solve into mobile healthcare business. So it's the same same construct there and as all.

Monish Patolawala: Got it. Okay. No, I think I think I think I've got it.

Speaker Change: Steve if he decided to change something we'll keep you all posted on changes to adjustments, but those are the big ones and if you see our press release.

Joseph Alfred Ritchie: It can follow up afterwards. Yeah, and then just another quick follow up on the electronics business. And so I know the stats you kind of gave on demand and then inventory normalization. Is it possible to kind of parse out the inventory benefit that you're seeing? I'm just curious, like how much of that 15% came from just inventory normalization? Just because, you know, maybe I'm just not close to it anymore, but I'm just curious, what other products are really kind of driving market demand for electronics at the moment?

Speaker Change: Statements are schedules, you will see that split by category in there, yes, even right all detailed in our press release attachments.

Speaker Change: Right. So so whenever you whenever you are paying out in cash for these liabilities out is that that is adjusted out of free cash. So for example.

Speaker Change: The $4 3 billion or whatever.

Speaker Change: This year will be adjusted out and then you take whatever we want to assume for free cash flow and then take 40% of that correct correct.

Speaker Change: Okay. Thanks for that clarification I appreciate it yep Yep.

Speaker Change: Right.

Speaker Change: Yeah.

Speaker Change: Well go next now to Jeff Sprague of vertical research partners.

Michael F. Roman: Yeah, Joe, what we talked about in the results for TBG in the first quarter and electronics, that these are spec wins on some of the mobile platforms. And so the inventory, you know, it's getting ready for the demand, really the demand that they're seeing into the second quarter. And, and at this point, it's really that step up. And then, you know, there's a portion of that inventory kind of filling into the value chain of those OEMs.

Jeffrey Todd Sprague: Thank you and good morning, everyone, Hey, Jerry and Joe.

Jeffrey Todd Sprague: Good morning, Thanks for clarifying that on the dividend that was a key question.

Jeffrey Todd Sprague: Also I just wonder.

Jeffrey Todd Sprague: Any degree.

Jeffrey Todd Sprague: You know as Bill Brown Ben.

Jeffrey Todd Sprague: <unk> and the kind of the formulation of the updated guidance here.

Jeffrey Todd Sprague: Whether explicitly or tests that Lee and.

Jeffrey Todd Sprague: I know he's formerly starting tomorrow, but just any color on that would be interesting and helpful.

Jeffrey Todd Sprague: Sure Jeff you, you'll build as you would expect getting ready to step into the role he's been engaged with myself and senior management and the board since the announcement, but he's really is.

Michael F. Roman: But the bigger part of it is the spec, in for us anyway, the bigger part of it is the wins in the spec inside of, and Mike, that's smartphone demand. It's mobile devices, largely phones, yep, yep, largely phones.

Jeffrey Todd Sprague: As part as being informed and getting ready to start as you said tomorrow.

Jeffrey Todd Sprague: He's not part of the decisions on on what we've laid out here on the earnings call today.

Jeffrey Todd Sprague: He starts tomorrow, they will start tomorrow, and I look forward to working with him as he does.

Joseph Alfred Ritchie: Okay, great. All right. Thank you very much. We'll go next to Steve Tusa of JPMorgan. Hey, good morning.

Jeffrey Todd Sprague: Right and then just thinking about again the cash flows as it relates to the liability outflow that we're looking at here.

Jeffrey Todd Sprague:

Operator: Mike, congrats again. And thanks for all the help over the years and the effort. Just to be clear, you said 40% of adjusted free cash flow. Can you just help us with what the construct of that is? What is adjusted free cash flow?

Jeffrey Todd Sprague: What guidance if any could you provide on what you're thinking on insurance recoveries and if you're successful in those claims when.

Jeffrey Todd Sprague: Those might start flowing as potential offsets.

Jeffrey Todd Sprague: To the liability schedule.

Charles Stephen Tusa: You're referring to the dividends, Steve, I presume? Yeah, just the construct. I don't need a number for cash.

Speaker Change: Yeah. So we believe that we are eligible for insurance payments, we have put our insurance providers on notice.

Monish Patolawala: Just how do you define that? If you look at all the material that we have submitted, you will see historically what we have broken out is, from our GAP results, there are certain items that we have been adjusting to get to adjusted results, which is litigation. [inaudible] Yes, Stephen, all details are in our press release attached. Right, so whatever you're paying out in cash for these liabilities, that is adjusted out of free cash. So, for example, the $4.3 billion or whatever this year will be adjusted out, and then you take whatever we want to assume for free cash flow and then take 40% of that.

Jeffrey Todd Sprague: Fault PWM and for combat arms and in fact for combat arms, we have we're working on in arbitration.

Jeffrey Todd Sprague: To recover that so as you know these things take some time to work through and that's what the teams are working on them.

Jeffrey Todd Sprague: We'll keep you posted as soon as we.

Jeffrey Todd Sprague: Come to know on what that number could look like.

Speaker Change: Great. Thank you I'll leave it there.

Speaker Change: Thank you we'll go next now to Brett Linzey Xu.

Jeffrey Todd Sprague: Okay.

Jeffrey Todd Sprague: Hey, good morning, all and congrats to Mike, Thanks, Brett Brett Hi, Brian Yeah.

Speaker Change: To come back to the portfolio and the geographic prioritization. So you called out the 100 basis points headwind in 'twenty four should we think of the first quarter as the starting point and just simply you know anniversary that headwind for the balance of the year and it's complete or is this more of a multi year initiative with some top line drag.

Charles Stephen Tusa: Okay, thanks for the clarification. Appreciate it. Bye. We'll go next now to Jeff Sprague of Vertical. Thank you. Good morning, everyone. Good morning. Thanks for clarifying that on the dividends. That was a key question.

Speaker Change: So there's a little bit of a drag next year, but I, it's not big I would just say the first half of this year will be slightly heavier than the second but directionally I would say, yes, you can use the first quarter as the as the math that gets you across the four quarters.

Operator: Also, I just wonder to any degree whether Bill Brown has been involved in the kind of formulation of the updated guidance here, whether explicitly or tacitly, and I know he's formally starting tomorrow, but just any color on that would be interesting and helpful. Sure, Jeff. You know, Bill is, as you would expect, getting ready to step into the role. He's been engaged with myself, senior management, and the board since the announcement.

Speaker Change: Okay, Great I guess the follow up.

Speaker Change: Called out some contribution from those initiatives in each of the segments.

Speaker Change: Are you able to size what that what that benefit is and I would imagine, it's a sort of structural but any color would be great.

Speaker Change: Yeah, I would just say when I look at it in total is why are we doing these portfolio moves the geographic moves it comes down to it allows us to do better focus better prioritization. So.

Operator: But he's really, you know, his part is being informed and getting ready to start, as you said, tomorrow. He's not part of the decisions on what we've laid out here in the earnings call today. So he starts tomorrow.

Speaker Change: So at the end of the day, you're going to see it in multiple places you're going to see better sales growth in other products. Because we are exiting these and the teams can focus, but that's AD merch et cetera, you will.

Jeffrey Todd Sprague: Bill starts tomorrow, and I look forward to working with him as he does. Right. And then again, the cash flows as it relates to the liability outflow that we're looking at here. What guidance, if any, could you provide on, you know, what you're thinking on insurance recoveries?

Speaker Change: See it in inventory because again, we will be able to focus our inventory on the products that we want to focus on and youre going to see it a little bit in margin that margin will take a little bit of time to come through but some of these products that we are exiting are below our average margins. So it does help us lift the average margin and then as I said on the Geo.

Michael F. Roman: And if you're successful in those claims, you know when those might start flowing as potential offsets? To the liability schedule, Unknown Speaker Yeah, so, we believe that we are eligible for insurance payments. We have put our insurance providers on notice, for PWS and for Combat Arms. And in fact, for Combat Arms, we have, and we are working on an arbitration.

Speaker Change: Graphic prioritization side, you get a lot of structure out which is already embedded in our margin that we are seeing and we have and we are getting some one time benefits on property sales that we disclosed this quarter.

Speaker Change: Okay, Great appreciate the detail best of luck. Thank.

Jeffrey Todd Sprague: [inaudible] Great. Thank you. I'll leave it there. Thank you. We go next now to Brett Lindsey of Mizzou Hope.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Well go next now to Joe O'dea of Wells Fargo.

Joseph Alfred Ritchie: Hi, Good morning, Thanks for taking my Joe Hey, Joe Hi.

Operator: Hey, good morning, all, and congratulations to Mike. Thanks, Brett. Hi Brett. Yeah, I wanted to come back to the portfolio and the geographic prioritization. So you called out the 100 basis points headwind in 24.

Joseph Alfred Ritchie: Wanted to ask on <unk>.

Joseph Alfred Ritchie: He says and you've talked about you know the exits there kind of progressing to plan if not a little bit ahead of plan, but just how do we think about alternatives and I think you know there's been press over the years on different applications across a number of different end markets. When we think about semiconductors or military or auto.

Brett Logan Linzey: Should we think of the first quarter as the starting point and just simply, you know, anniversary that headwind for the balance of the year, and it's complete? Or is this more of a multi-year initiative with some top-line drag? So there's a little bit of drag next year, but it's not big. I would just say the first half of this year will be slightly heavier than the second, but directionally, I would say, yes, you can use the first quarter as the map that gets you across the four quarters.

Speaker Change: Do you expect to participate in that I mean, where are you on the sort of product innovation pipeline and being able to sort of provide alternative products, yes, you're exiting and joy.

Speaker Change: As I said in my comments, so we can work with each of our customers as part of the transition I would say, there's kind of three alternatives for them. One is P fast from another source.

Monish Patolawala: Okay, great. I guess the follow-up, you called out some contribution from those initiatives in each of the segments. Are you able to size what that benefit is? And I would imagine it's sort of structural, but you know, any color would be great.

Speaker Change: Number of the applications of many of the significant applications. There. They are challenged to find an alternative so that's that's what they're looking to do is source PFS from another supplier.

Monish Patolawala: Yeah, I would just say when we look at it in total, why are we doing these portfolio moves or geographic moves? It comes down to it allows us to do better focus, and better prioritization. So, at the end of the day, you're going to see it in multiple places. You're going to see better sales growth in other products because we're exiting these, and the teams can focus, whether it's ad merch, etc. You'll see it in inventory because, again, we'll be able to focus our inventory on the products that we want to focus on. And you'll see it a little bit in margin.

Speaker Change: The second one is perhaps there's a chemistry that has similar properties that isn't P. Fast and you can move into that.

Speaker Change: We're exiting pass and we're not going to move into other chemistries there'll be durable and persistent two to meet the requirements of these applications. The one area, where we can help in what we're doing for ourselves as working to discontinue the use of PFS on our products and we're engineering them. All we're designing around them in it and there's a number of applications of our customers have where that's very difficult to do and.

Speaker Change: Challenging and I don't know a solution today, but for US the majority of the vast majority of where we're already.

Monish Patolawala: That margin will take a little bit of time to come through, but some of these products that we are exiting are below our average margin, so it does help us lift the average margin.

Speaker Change: Through solutions. So that's something that we can help customers with and we are we're helping them look at.

Brett Logan Linzey: And then, as I said, on the geographic prioritization side, you get a lot of structure out, which is already embedded in our margin that we are seeing. And we're getting some one-time benefits on property sales that we disclosed this quarter. Okay, great. Appreciate the detail.

Speaker Change: There are alternative ways to design and engineer their processes and products.

Speaker Change: That's helpful. And then second question is just related to Cercla designation and you know really just trying to understand what the the designation versus not getting the designation means that at a high level I think when you first announced that is being proposed you talked about how <unk> view was this would not lead to a time.

Operator: Best of luck. Thank you. We'll go next now to Joe O'Day of Wells Fargo. Hi, good morning. Thanks for taking my question. Hi, Joe.

Joseph Alfred Ritchie: Hi. I wanted to ask you about PFAS, and you've talked about, you know, the exits there, kind of progressing to plan, if not a little bit ahead of plan, but just how do we think about alternatives? I think, you know, there's been press over the years on, you know, different applications across a number of different end markets, and we think about semiconductors or military or auto.

Speaker Change: They are appropriate kind of remediation, but just to try to understand you know, having having the designation versus not having it you know at the end of the day kind of what what that means yes. There are there are certain.

Speaker Change: I would say.

Speaker Change: E P a.

Speaker Change: Sponsored abilities that would come with circle that designation.

Michael F. Roman: Do you expect to participate in that? I mean, where are you on the sort of product innovation pipeline and being able to sort of provide alternative products? Yeah. And Joe, you know, as I said in my comments, we work with each of our customers as part of the transition. I would say there are kind of three alternatives for them. One is PFAS from another source. A number of applications, many of the significant applications, they're, you know, they're challenged to find an alternative.

Speaker Change: At this point, we don't anticipate an impact on our ability to serve customers in and we'll as we better understand all of those requirements and we're committed to meeting and complying with the.

Speaker Change: The requirements under Cercla and the EPA guidelines.

Speaker Change: Okay. Thank you.

Speaker Change: And we'll go next now to Deane dray of RBC capital markets.

Deane Michael Dray: Thank you good morning, everyone and my congrats to Mike and also to the team on orchestrating all these moving parts.

Deane Michael Dray: Thank you Dean.

Deane Michael Dray: Hey, just a quick follow up on that last P. Fast question. So the enforcement actions by the E. P. A they sat P. Fosse's hazardous so that's a milestone and then in the process of setting up the Super fun, So would either of these actions.

Michael F. Roman: So that's what they're looking to do is source PFAS from another supplier. The second one is perhaps there's a chemistry that has similar properties that isn't PFAS, and you can move into that. We're exiting PFAS, and we're not going to move into other chemistries. They'll be durable and persistent to meet the requirements of these applications.

Michael F. Roman: The one area where we can help and what we're doing for ourselves is working to discontinue the use of PFAS in our products, and we're engineering them out. We're designing around them. And there's a number of applications our customers have where that's very difficult to do and challenging, and they don't know a solution today.

Deane Michael Dray: This puts you closer to be able to set a reserves I know you couldn't before for accounting purposes. It was not as sort of a ball or the probable but now we're closer to that so are you closer to where you could be setting reserves for these remaining unaddressed P pause liabilities yeah Deane.

Michael F. Roman: But for us, the majority, the vast majority, we've already worked out solutions. So that's something that we can help customers with, and we do. We're helping them look at, you know, alternative ways to design and engineer their processes, and that's helpful. And then the second question is just related to CERCLA designation and, you know, really just trying to understand what the designation versus not getting the designation means at a high level.

Deane Michael Dray: We are as I've said, a number of times, we're proactively managing this all aspects of the PFS dynamic and is as soon as we can get to a probable and estimable. We will you know we will take the reserves.

Deane Michael Dray: And we'll you know, we'll keep you informed and I would refer to our SEC filings for updates.

Speaker Change: That's real helpful. And then just one other one I'm sorry is there any scenario, where three M would continue to manufacturer P. Fast after the year end 'twenty 'twenty five target.

Michael F. Roman: I think when you first announced this being proposed, you talked about how 3M's view was this would not lead to a timely or appropriate kind of remediation. Just to try to understand, you know, having the designation versus not having it, you know, at the end of the day, kind of what that means. Yeah, there are certain, you know, I would say, EPA responsibilities that would come with CERCLA designation.

Deane Michael Dray: No idea and we're committed to that exit we're on track and were committed to follow through.

Speaker Change: Alright, loud and clear thank you.

Speaker Change: Thank you. This concludes the question and answer portion of our conference call I will now turn the call back over to Mike Roman for some closing comments.

Michael F. Roman: This concludes my last earnings call is three of them CEO I would like to thank the investors shareholders analysts employees and family who join these calls each quarter I greatly appreciate your questions and diligence and working to better understand our company I'm confident that under Bill's leadership, our people will continue to build on the momentum from our strong start to.

Joseph Alfred Ritchie: At this point, we don't anticipate an impact on our ability to serve customers, and we'll, you know, as we better understand all those requirements, and we're committed to meeting and complying with the requirements under CERCLA and the EPA guidelines. Okay, thank you. We'll go next to Deane Dray of RBC Capital. Thank you. Good morning, everyone.

Speaker Change: The year. Thank you for joining us and have a great day.

Speaker Change: Ladies and gentlemen that does conclude today's conference call. We thank you for your participation and ask that you. Please disconnect. Your line at this time.

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Operator: And my congratulations to Mike and also to the team on orchestrating all these moving parts. Yeah, thanks. Thank you, Dean. Hey, and just a quick follow-up on that last question about PFAS. So the enforcement actions by the EPA have set PFAS as hazardous, so that's a milestone, and then in the process of setting up the Superfund. So would either of these actions put you closer to being able to set a reserve

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Deane Michael Dray: I know you couldn't before for accounting purposes; it was not estimable or probable, but now we're closer to that. So are you closer to where you could be setting reserves for these remaining unaddressed PFAS liabilities? Yeah, Dean, we're, you know, we are, as I've said a number of times, proactively managing all aspects of the PFAS dynamic. And as soon as we can get to probable and estimable, we will, you know, we will take the reserves.

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Deane Michael Dray: So, and we'll, you know, we'll keep you informed. And I would refer to our SEC filings for updates. That's real helpful. Just one other question. I'm sorry. Is there any scenario where 3M would continue to manufacture PFAS after the year-end 2025 target?

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Michael F. Roman: Now, Dean, we're committed to that exit. We're on track, and we're committed to following through. All right, loud and clear. Thank you. This concludes the question and answer portion of our conference call. I will now return the call.

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Operator: This concludes my last earnings call as 3M CEO. I would like to thank the investors, shareholders, analysts, employees, and family who join these calls each quarter. I greatly appreciate your questions and diligence in working to better understand our company. I'm confident that under Bill's leadership, our people will continue to build on the momentum from our strong start to the year.

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Michael F. Roman: Thank you for joining us, and have a great day. Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation and ask that you please disconnect your line at this time..........

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