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Patrick D. Campbell, Senior Vice President and CFO

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  • 1. Agenda Tuesday, October 9 1:00-1:45 Patrick D. Campbell, Senior Vice President and Chief Financial Officer 1:45–3:15 George W. Buckley, Chairman of the Board, President and Chief Executive Officer 3:15-3:30 Break 3:30-4:00 Brad T. Sauer, Executive Vice President, Health Care Business 4:00-4:30 Jean Lobey, Executive Vice President, Safety, Security & Protection Services Business 4:30-5:15 Panel Q&A 5:15-9:00 Product and technology displays, 3M Innovation Center tours; food and cocktails After 5:30 p.m., buses will depart every 30 minutes to the St. Paul Hotel Wednesday, October 10 6:30-7:30 Continental breakfast 7:30-8:00 John K. Woodworth, Senior Vice President, Supply Chain Operations 8:00 Depart for pilot plant 8:15-9:15 Film pilot plant tour 9:30 Depart for Hutchinson plant (box lunch/snack provided) 11:00-2:00 Hutchinson plant tour 2:00-3:30 Return trip to airport, St. Paul Hotel and 3M Center 1 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 2. 3M Innovation Center: Connecting With Customers • Opened Sept. 2006 • >35,000 visitors • ~1,500 events • >700 customer visits • 15% of visits from International customers • Supports worldwide network of customer technical centers in 26 countries Providing Access to Global 3M Problem Solving Capabilities 2 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 3. October 9 & 10, 2007 3M Investor Conference Forward-Looking Statements These presentations contains forward-looking information (within the meaning of the Private Securities Litigation Reform Act of 1995) about the company’s financial results and estimates, business prospects, and products under development that involve substantial risks and uncertainties. You can identify these statements by the use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic conditions; (2) competitive conditions and customer preferences; (3) foreign currency exchange rates and fluctuations in those rates; (4) the timing and acceptance of new product offerings; (5) the availability and cost of purchased components, compounds, raw materials and energy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply interruptions (including those caused by natural and other disasters and other events); (6) the impact of acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring; (7) generating less productivity improvements than estimated; and (8) legal proceedings, including significant developments that could occur in the legal and regulatory proceedings described in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2006 and its subsequent Quarterly Reports on Form 10-Q (the “Reports”). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports under Part I, Item 1A (Annual Report) and Part II, Item 1A (Quarterly Report), “Risk Factors.” The information contained in these presentations is as of the date indicated. The company assumes no obligation to update any forward-looking statements contained in thes presentations as a result of new information or future events or developments. 3 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 4. Patrick D. Campbell Sr. Vice President and Chief Financial Officer October 9th, 2007 Working Our Plan © 3M 2007. All Rights Reserved.
  • 5. Last Year We Asked These Questions…. Can we accelerate growth? Are our current margins sustainable? How will our more aggressive growth plans impact ROIC? How will we deploy the balance sheet? Plans To Drive Higher Earnings & P/E 5 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 6. …. And Since Then We Have Delivered These Results* 2005 2006 H107 ($Billions) Sales $20.4 $22.1 $12.1 Accelerating growth % Growth +8.7% +10.9% O.I. $4.6 $4.9 $2.8 Maintaining best-of-breed 22.7% 22.2% 23.4% % to Sales EPS $3.92 $4.26 $2.50 Double-digit gains % Growth 8.7% 17.9% Premium asset returns 21.9% 21.6% 22.7% ROIC Executing the Plan * Excludes special items and pharma in all periods. See appendix for GAAP reported numbers. Return on Invested Capital is a non-GAAP measure; see appendix for a full reconciliation to GAAP results. 6 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 7. Driving Sustainable Results Over The Long Haul* …. Operating Income & Margins Total LC Growth Operating Income Operating Margin % $6,000 25% $5,000 R 9.0% 20% AG GR +6.3% C +12.0% CA 7.5% $4,000 5% 8.4% 8.1% 6% 1 15% 6.0% $3,000 4.5% +14.1% 5.3% 10% $2,000 3.0% (14.5%) 1.5% 5% $1,000 -1.1% 0.0% $0 0% -1.5% 2001 2005 2006 1H07 2001 2005 2006 1H07 ROIC EPS 24% R $5.00 AG 22.7% s 21.9% int C 21.6% o $4.00 P % 20% +8.7% 18 +15.0% .3 +6 $3.00 $2.00 +17.9% 16% (11.0%) 15.3% $1.00 $0.00 12% 2001 2005 2006 1H07 2001 2005 2006 1H07 Maintaining Premium Returns; Accelerating Sustainable LC Growth * Excludes special items and pharma in all periods. See appendix for GAAP reported numbers. Return on Invested Capital is a non-GAAP measure; see appendix for a full 7 reconciliation to GAAP results. 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 8. All Businesses Contributing, But Changing* Total Local Currency OI Margins 34% 21% +27.8% 31% 17% 28% 13% 25% 9% 22% 5% 19% 16% 1% 2001 2002 2003 2004 2005 2006 13% -3% 2001 2002 2003 2004 2005 2006 D&G LC Growth Other Segments LC Growth Total 3M LC Growth D&G OI Margin Other Segment OI Margin Total 3M OI Margin Portfolio Breadth Strengthens Results * Excludes special items and pharma in all periods. 8 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 9. Our Journey to a Faster Growth High Return Company… Productivity Value Creation Holding Margins While Accelerating Growth Growth 2001 2005 2008 2011 Margins* 15.8% 22.7% 22% to 23% 9 LC Growth* -1.1% 5.3% ~2X Global IPI 2007 3M Investor Conference * Excludes special items and pharma in all periods. © 3M 2007. All Rights Reserved.
  • 10. Our Journey to a Faster Growth High Return Company… Productivity ’01 ’05 ($ in Millions) Restructuring Indirect Costs $15.4 $20.4 Sales Global Sourcing Six Sigma Value Creation 6.0% % Growth Overhead Leverage $2.4 $4.6 Health Care Containment Operating Income 15.8% 22.7% % to Sales EPS $1.87 $3.92 Big 3M Upgrade Marketing Skills 15.0% % Change Brand Building End Mkt Org Structure Service Int’l Portfolio Planning ROIC 15.3% 21.9% Price Leakage Growth 2001 2005 2008 2011 Margins* 15.8% 22.7% 22% to 23% 10 LC Growth* -1.1% 5.3% ~2X Global IPI 2007 3M Investor Conference * Excludes special items and pharma in all periods. © 3M 2007. All Rights Reserved.
  • 11. 3M’s Iterative Financial Planning Model Double Digit EPS Growth Incremental Tax Rate Improvements Share repurchases offset dilution at minimum Other potential gains – FX, pension, asset sales Productivity offsets inflation/pricing; reinvest excess Leverage Total Local Currency Growth – 30% to 40% Total Local Currency Sales Growth 2x IPI Delivering Sustainable Long-Term Shareholder Return 11 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 12. Our Journey to a Faster Growth High Return Company… Productivity Restructuring Indirect Costs Global Sourcing Six Sigma Value Creation Overhead Leverage Health Care Containment Big 3M Upgrade Marketing Skills Brand Building End Mkt Org Structure Service Int’l Portfolio Planning Price Leakage Growth 2001 2005 2008 2011 Margins* 15.8% 22.7% 22% to 23% 12 LC Growth* -1.1% 5.3% ~2X Global IPI 2007 3M Investor Conference * Excludes special items and pharma in all periods. © 3M 2007. All Rights Reserved.
  • 13. General & Administrative Cost Leverage* $2.0 10% 8% Overhead Cost $B $1.5 % to Sales 6% $1.0 4% ~1.5% of ~2.5% of $0.5 Margin Margin 2% 2005-08 2001-05 $0.0 0% Via 2001 2005 2006 2008 Volume Leverage Technology Int’l Localization Lean Principles Blocking/Tackling Drive Out Cost … Localize … Reinvest in Growth … Iterate * Excludes pharma and special items in all periods. 13 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 14. Our Journey to a Faster Growth High Return Company… Productivity Restructuring Lean Six Sigma Indirect Costs Global Sourcing Six Sigma Value Creation Overhead Leverage Health Care Containment Big 3M Upgrade Marketing Skills Brand Building End Mkt Org Structure Service Int’l Portfolio Planning Price Leakage Growth 2001 2005 2008 2011 Margins* 15.8% 22.7% 22% to 23% 14 LC Growth* -1.1% 5.3% ~2X Global IPI 2007 3M Investor Conference * Excludes special items and pharma in all periods. © 3M 2007. All Rights Reserved.
  • 15. John Houle, Lean Six Sigma Staff Vice President, Supply Chain and Manufacturing and Lean Six Sigma Driving Growth and Operational Excellence © 3M 2007. All Rights Reserved.
  • 16. Lean + Six Sigma = Strength in Processes Six Sigma Lean Six Sigma processes Lean processes tell advise…“Once we identify us……“Don’t value-added processes, let’s perpetuate a process absolutely minimize the that does not add variability and get them in value for the control.” CUSTOMER!” X VA VA VA Don’t waste your efforts employing Six Sigma principles to something that does not add value for the Customer. 16 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 17. Lean Six Sigma – Continuous Evolution, Strong Foundation Lean Six Sigma is aligned to our businesses enabling growth, productivity, and operational excellence Excellent deployment of Lean Six Sigma globally >55,000 employees trained >49,000 projects in-process or closed >700 full-time employees dedicated globally >760 customer projects either in-process or closed Contributed More Than $4.5B in Savings Since 2001 17 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 18. Lean Six Sigma Example 3M Perth, Ontario, Canada - Tape Manufacturing MANITOBA ONTARIO 18 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 19. 3M Perth, Ontario Products Filament Tapes Scotch® Filament Tape 893 Scotch® Filament Tape 894 Tartan™ Filament Tape Scotch® Filament Tape 19 8934 899 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 20. 3M Perth, Ontario Business situation: Needed improved linkage between planning, production and shipping Needed clear priorities established Manual printing of priority lists Lean tools applied Visual controls – scheduling and status boards 20 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 21. Visual Scheduling Benefits Quick assessment schedule to plan Quick visibility of order status Resource prioritization Overtime requirements planning Visibility for material delivery 21 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 22. 3M Perth, Ontario On-time Improvement – 19% 2005 2006 2007 22 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 23. Lean Six Sigma Example 3M Ames, Iowa – Abrasive Manufacturing Roloc TM Hookit TM Sheets Disc Roll 23 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 24. 3M Ames, Iowa Business situation: Cyclical customer demand, resulting in: • Poor service levels • Increased cost of goods sold Lean tools applied Changeover wheels Pull systems Level schedule loading 24 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 25. 3M Ames, Iowa Total Backorder Reduction -77% 2006 2007 25 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 26. 3M Ames, Iowa Lines on Time /Product Availability - 6% Improvement 2006 2007 26 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 27. Lean Six Sigma Example 3M Irvine, CA – Dental Product Manufacturing 27 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 28. 3M Irvine, CA – Products Filtek™ Z250 Filtek™ Supreme RelyX™ ARC Sof-Lex™ Paradigm™ MZ100 Crowns Imprint™ II Garant™ Adper™ Scotchbond Z100™ 28 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 29. 3M Irvine, CA Business situation Capacity and lead time negatively impacting service Lean tools applied 5S, visual management: production status boards Value stream maps – current & future Plan for every part / material delivery system Operator balance / standard work / cell design for flow Changeover reduction 29 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 30. 3M Irvine, CA Transforming the Shop Floor Before After 30 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 31. 3M Irvine, CA Lead Time Reduction from 105 days 55 days US Lines On-time delivery from 74% 89% Int’l Lines On-time delivery from 71% 84% 2005 2006 2003 2004 2005 2006 2003 2004 US International 31 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 32. Lean Six Sigma Strong foundation built on Six Sigma Aligned to our business objectives Transforming how we execute and energizing our workforce Driving growth through customer success A Key Tool To Achieve Growth And Productivity 32 © 3M 2007. All Rights Reserved. 2007 3M Investor Conference
  • 33. Our Journey to a Faster Growth High Return Company… Productivity Restructuring Lean Six Sigma Indirect Costs Global Sourcing Six Sigma Value Creation Supply Chain Overhead Leverage Service Health Care Containment Cost Working Capital Taxes Big 3M Upgrade Marketing Skills Brand Building End Mkt Org Structure Service Int’l Portfolio Planning Price Leakage Growth 2001 2005 2008 2011 Margins* 15.8% 22.7% 22% to 23% 33 LC Growth* -1.1% 5.3% ~2X Global IPI 2007 3M Investor Conference * Excludes special items and pharma in all periods. © 3M 2007. All Rights Reserved.
  • 34. A Huge Prize Remains for Supply Chain Improvements 2012 Opportunity +1 point minimum, Accelerated Growth adds ~$100M OI Service, higher fill rates plus +80 to 100 bps gross margin, Cost reduction adds ~$300M to $400M OI/year Labor, logistics, shrinkage plus Minimum +1 turn, Lower Inventory adds ~$700M to FCF WIP, FG, local sourcing equals $1 Billion-Plus Opportunity Accelerate Growth … Drive Productivity … Reinvest 34 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 35. Global Sales vs. Net PP&E Footprint 2006 PP&E - Net 2006 Sales 39% 43% 57% U.S. International 61% U.S. 2012 PP&E - Net International 2012 Sales U.S. ~35% ~45% ~55% U.S. U.S. ~65% International International Moving Assets to Low Tax Growth Markets 35 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 36. Geographic Imbalance Stresses Inventory Performance 2001-04 2004-06 $3.3B $2.9B Total Sales Growth ($0.4B) $0.7B Inventory Change 3.5 to 5.3 5.3 to 4.7 Inventory Turns Change 2004-06 2001-04 Renewed focus on service, Turns improved, but driving fundamental supply service levels declined … chain changes for permanent not sustainable turns improvement Minimum 1 Turn Improvement = $700MM In 2012 36 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 37. New Plant Construction Timeline 2 plants $2,500 1 plant $2,000 3 plants 1 plant ate apacity 4 plants $1,500 Ultim C $1,000 4 plants $500 4 plants $0 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Plan Is On Track 37 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 38. Tax Rate Vs. Peers 35.0% Why Are We Higher 30.0% Peer Ave = 27% Than Our Peers? 25.0% • Manufacturing and IP T a x R a te % 20.0% predominantly in the US, Western Europe and Japan 15.0% • All business operations 10.0% headquartered in US 5.0% 0.0% 3M ITW DHR UTX HON DD JNJ 2007e 2006 Rates Significant Opportunity To Create Sustainable Shareholder Value 38 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 39. Tax Reduction: A Benefit Of Our Supply Chain Strategy Today Future Manufacturing Asset Heavily weighted to US, Locate capacity in low-tax locations Locations Western Europe, Japan with common shipping locations to growth markets Technical Resources Heavily weighted to US, Technical capability will continue to Western Europe, Japan expand faster in international growth markets Business Unit All US-based Business unit operations will migrate Operations to international markets (~50% of divisions have int’l sales >60%) Internal Financial Pre-tax After-tax Measurements Target Tax Rate 30.5% by 2012; Reduction of ~2.5% 39 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 40. Our Journey to a Faster Growth High Return Company… Productivity Selective Restructuring Restructuring Lean Six Sigma Indirect Costs Global Sourcing Six Sigma Value Creation Supply Chain Overhead Leverage Service Health Care Containment Cost Working Capital Taxes Big 3M Upgrade Marketing Skills Brand Building End Mkt Org Structure Service Int’l Portfolio Planning Price Leakage Growth 2001 2005 2008 2011 Margins* 15.8% 22.7% 22% to 23% 40 LC Growth* -1.1% 5.3% ~2X Global IPI 2007 3M Investor Conference * Excludes special items and pharma in all periods. © 3M 2007. All Rights Reserved.
  • 41. Not Only Building, But Also Rationalizing Old and Acquired Facilities 2002 – 2005 – 2003 – 2006 – 2004 – 2007 – Actively Managing Excess Facilities to Improve Productivity and Inventories 41 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 42. Capital Allocation – ’07 to ‘08 © 3M 2007. All Rights Reserved.
  • 43. Financial Policy First priority: fund available growth Capital expenditures: drive 20%+ ROIC via organic growth Supplement organic with accretive, growth-enhancing acquisitions Increase annual dividend Maintain competitive yield and payout ratio Offset inflation at a minimum, with the maximum dependent on other growth- generating uses at that time Opportunistic share buyback Economic dynamics and alternative cash uses will drive repurchase levels Ready to support the stock when warranted For the right growth investments, lever up as required Managing With “AA” Operating Discipline; Will Consider “A” For The Right Strategic Cash-Generating Opportunity 43 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 44. Capital Allocation Model – ’07 to ’08 Cash Flow Asset Cash Available = + From Operations Sales ~$9.5 to $10.5B ~$9 to $10B ~$400M to $500M Growth Employees/Retirees Shareholders Cap Ex Pension Dividends ~$2.8 to $3B ~$0.3 to $0.7B ~$2.8B Aligned to higher Fully-funded Continue historical growth status track record M&A Net Share $1B to $2B Repurchase Aligned with ~$2.5 to $3.5B strategic intent Opportunistically pursue additional shares Maintaining Balance While Increasing Growth Investments 44 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 45. Business and Real Estate Divestitures Businesses Real Estate Cergy, France 3M Pharmaceuticals St. Paul, MN San Felice, Italy Suwon, Korea 3M Opticom Priority Control Systems Divesting Non-Strategic Businesses; Actively Monetizing 8-10 Real Estate Properties at Present 45 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 46. Capital Expenditures & Depreciation $1,600 Cap Ex Depreciation $1,200 $800 $400 $0 1997 1998 2001 2002 2003 2004 2005 2006 2007e 2008e Depreciation % to sales 5.4% 5.5% 6.2% 5.6% 5.1% 4.8% 4.4% 4.3% 4.0% 4.0% Investing in Growth; Manageable Impact on D&A 46 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 47. M&A Strategy Strategic Intent Economics Will fit tightly defined strategic needs in the Margin dilutive acquisitions will always core or in near adjacencies contribute to net positive shareholder value through higher growth Majority will be bolt-on acquisitions placed in markets we understand Price will always be a factor Channels of distribution will be familiar Tail liabilities will be scrutinized The acquisition may bring technology, Will be EPS accretive or neutral end of market access or scale year 1 excluding purchase accounting Acquisitions will have an ethical fit Majority of acquisitions will be Economic Profit accretive by the end of year 3 Some acquisitions will be international, aimed at gaining market access While top brands are preferred, some will be appropriately chosen secondary brands M&A Remains A Key Component Of Our Growth Strategy 47 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 48. Expanding Our Business Portfolio Via Acquisitions … 2006-07 Acquisition Activity Purchase price $1.1B Price/sales 1.4x Price/EBITDA 8.4x Impact on Growth ~3% Business # of Acq’s Growth Impact Safety, Sec & Prot 7 7.5% Ind’l & Transp 7 3.6% Health Care 10 3.0% Consumer & Office 3 1.0% Electro & Comm 4 0.8% Display & Graphics 1 0.2% Current M&A Environment Favoring Strategic Buyers Amounts exclude Brontes, a pre-revenue technology acquisition in the dental business; price multiples reflect 12-month forward 48 sales and EBITDA amounts 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 49. Stepped Up Pace of Acquisitions 2006-07 Electro & Healthcare Communications Display & Graphics Safety, Security, & Protection Svcs Industrial & Transportation Consumer & Office Accelerating Growth In All Businesses 49 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 50. Global Pension & Post-Employment Liabilities 99% 100% 94% 95% 88% Funded Status (%) 90% 87% 83% 85% 80% 80% 75% 75% 70% 2001 2002 2003 2004 2005 2006 2007e Good Progress, Nearly Fully Funded 50 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 51. Dividend Trends S&P 500 Dividend-Paying S&P 500 Dividend-Paying Companies’ Dividend Yield1 Companies’ Payout Ratio2 4% 50% 3M 38.7% 40% 35.9% 3% Mean: 34.1% 33.7% 32.8% Dividend Payout 2.4% 3M Dividend Yield 30% 2.3% Mean: 2.1% 24.0% 2% 1.9% 1.8% 1.7% 20% 1% 10% 0% 0% < 5% ≥ 5% and < ≥ 10% and < ≥ 15% < 5% ≥ 5% and < ≥ 10% and < ≥ 15% 10% 15% 10% 15% Revenue Growth Revenue Growth 3 3 # Companies # Companies 201 156 68 67 201 156 68 67 # Paying Div. 164 130 48 29 # Paying Div. 164 130 48 29 % Paying Div. 82% 83% 71% 43% % Paying Div. 82% 83% 71% 43% Source: FactSet. Based on data as of September 28,2007 Note: Revenue growth calculated as CY2006-2008E CAGR. 1. Calculated as annualized dividends per share / average 2007 YTD share price. 2. Calculated as LTM dividends per share / LTM EPS from operations. 3. Excludes 1 company with dividend-payout ratio greater than 200% and 7 companies for which 2008E IBES projected revenues were not available. 51 2007 3M Investor Conference 10/9/2007 1:14 PM© 3M 2007. All Rights Reserved.
  • 52. Dividend Trends S&P 500 Dividend-Paying S&P 500 Dividend-Paying Companies’ Dividend Yield1 Companies’ Payout Ratio2 4% 50% 3M 38.7% 40% 35.9% 3% Mean: 34.1% 33.7% 32.8% Dividend Payout 2.4% 3M Dividend Yield 30% 2.3% Mean: 2.1% 24.0% 2% 1.9% 1.8% 1.7% 20% 1% 10% 0% 0% < 5% ≥ 5% and < ≥ 10% and < ≥ 15% < 5% ≥ 5% and < ≥ 10% and < ≥ 15% 10% 15% 10% 15% Revenue Growth Revenue Growth 3 3 # Companies # Companies 201 156 68 67 201 156 68 67 # Paying Div. 164 130 48 29 # Paying Div. 164 130 48 29 % Paying Div. 82% 83% 71% 43% % Paying Div. 82% 83% 71% 43% Highly Competitive Yield … Above Peers & S&P500 Source: FactSet. Based on data as of September 28,2007 Note: Revenue growth calculated as CY2006-2008E CAGR. 1. Calculated as annualized dividends per share / average 2007 YTD share price. 2. Calculated as LTM dividends per share / LTM EPS from operations. 3. Excludes 1 company with dividend-payout ratio greater than 200% and 7 companies for which 2008E IBES projected revenues were not available. 52 2007 3M Investor Conference 10/9/2007 1:14 PM© 3M 2007. All Rights Reserved.
  • 53. Share Repurchase Early 2007 Today Spreads wider, yield Rates low, tight spreads, Borrowing Costs curve steeper, markets stable markets uncertain Credit Availability Highly Liquid Tighter Economic Environment Relatively Stable Less Stable P/E (2007 EPS Consensus) 7% Premium 17% Premium Near-Term Economics Less Compelling; More Importantly, Maintaining Flexibility for Growth 53 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 54. Cash Back to Shareholders $2,500 For The Period 2001-1H07: Stock Repurchases in Millions $2,000 $11.7 billion in share $1,500 repurchases $1,000 $7.4 billion in dividends paid $500 Dividend CAGR of ~8% $0 2001 2002 2003 2004 2005 2006 1H07 No equity dilution policy $1,600 Dividends in Millions $1,200 Returned ~109% of Reported Net Income $800 Via Dividends and Share $400 Repurchases $0 2001 2002 2003 2004 2005 2006 1H07 54 2007 3M Investor Conference © 3M 2007. All Rights Reserved.
  • 55. Summary © 3M 2007. All Rights Reserved.
  • 56. We’ve Talked About Our Journey And Productivity… Productivity Selective Restructuring Restructuring Lean Six Sigma Indirect Costs Global Sourcing Six Sigma Value Creation Supply Chain Overhead Leverage Service Health Care Containment Cost Working Capital Taxes Big 3M Upgrade Marketing Skills Brand Building End Mkt Org Structure Service Int’l Portfolio Planning Price Leakage Growth 2001 2005 2008 2011 Margins* 15.8% 22.7% 22% to 23% 56 LC Growth* -1.1% 5.3% ~2X Global IPI 2007 3M Investor Conference * Excludes special items and pharma in all periods. © 3M 2007. All Rights Reserved.
  • 57. …Now Let’s Focus On Growth… Productivity Selective Restructuring Enduring Franchises Restructuring Lean Six Sigma Indirect Costs EBOs Global Sourcing Six Sigma Value Creation Supply Chain Capital Investments Overhead Leverage Service Health Care Containment Cost Rebuilding R&D Emerging Markets Working Capital Supply Chain Re-engineering Taxes Entrepreneurial Localization Culture Big 3M Upgrade Marketing Skills Brand Building M&A End Mkt Org Structure Service Int’l Portfolio Planning Price Leakage Growth 2001 2005 2008 2011 Margins* 15.8% 22.7% 22% to 23% 57 LC Growth* -1.1% 5.3% ~2X Global IPI 2007 3M Investor Conference * Excludes special items and pharma in all periods. © 3M 2007. All Rights Reserved.
  • 58. Appendix © 3M 2007. All Rights Reserved.
  • 59. Non-GAAP Financial Measures 3M Company and Subsidiaries SUPPLEMENTAL CONSOLIDATED INFORMATION Year Year Year First Six NON-GAAP FINANCIAL MEASURES 2001 2005 2006 Months 2007 (Millions, except per-share amounts) Sales Change Percents: (Unaudited) Total Reported Sales Change -3.9% 5.8% 8.3% 7.1% In addition to reporting financial results in accordance with U.S. generally accepted accounting principles Less: Translation Impact -3.3% 0.7% 0.6% 2.5% (GAAP), the Company also discusses non-GAAP measures that exclude special items. Sales, operating Total Reported Local-Currency Sales income and diluted earnings per share measures that exclude special items and that exclude the impact of Change -0.6% 5.1% 7.7% 4.6% Pharmaceuticals are not in accordance with, nor are they a substitute for, GAAP measures. Special items represent significant charges or credits that are important to an understanding of the Company’s ongoing Local Currency Sales Change ex- operations. The company uses these non-GAAP measures to evaluate and manage the Company’s Pharmaceuticals -1.1% 5.3% 8.1% 8.4% operations. The company believes that discussion of results excluding special items provides a useful analysis of ongoing operating trends. The determination of special items may not be comparable to similarly titled measures used by other companies. Special items for the six months ended June 30, 2007 The Company uses non-GAAP measures to focus on shareholder value creation. 3M uses Return on and prior periods presented have been previously provided (See Note 1). In addition, the Company believes Invested Capital, defined as after-tax operating income divided by average operating capital. This measure that providing financial results excluding the impact of Pharmaceuticals provides useful information (See excludes special items and the historical impacts of the Pharmaceuticals business (see Notes 1 and 2). Note 2). The reconciliations provided below reconcile the non-GAAP financial measures with the most These measures are not recognized under U.S. generally accepted accounting principles and may not be directly comparable GAAP financial measures for the periods indicated. comparable to similarly titled measures used by other companies. Year Year Year First Six (Millions, except per-share amounts) 2001 2005 2006 Months 2007 Sales Dollars: Year Year Year First Six Reported GAAP $ 16,054 $ 21,167 $ 22,923 $ 12,079 2001 2005 2006 Months 2007 Pharmaceutical $ (699) $ (797) $ (774) $ - Return on Invested Capital 12.8% 22.1% 25.3% 28.0% Adjusted Non-GAAP $ 15,355 $ 20,370 $ 22,149 $ 12,079 Return on Invested Capital - excluding Operating Income Dollars: Reported GAAP $ 2,075 $ 4,854 $ 5,696 $ 3,498 Pharmaceuticals and Special Items 15.3% 21.9% 21.6% 22.7% Special Items $ 504 $ (523) $ (675) Pharmaceutical $ (157) $ (226) $ (256) $ - Adjusted Non-GAAP $ 2,422 $ 4,628 $ 4,917 $ 2,823 (1) Special items for the periods presented have been discussed in Form 8-K’s that were furnished to the U.S. Securities and Exchange Commission on July 26, 2007 and January 30, 2007 and in 3M’s 2001 Diluted Earnings per Share: Form 10-K filed March 11, 2002. Reported GAAP $ 1.60 $ 3.98 $ 5.06 $ 3.10 Special Items $ 0.39 $ 0.14 $ (0.57) $ (0.60) (2) In December 2006 and January 2007, 3M completed the sale of its global branded Pharmaceuticals Pharmaceutical $ (0.12) $ (0.20) $ (0.23) $ - business. In connection with these transactions, 3M’s Drug Delivery Systems Division became a Adjusted Non-GAAP $ 1.87 $ 3.92 $ 4.26 $ 2.50 source of supply to the acquiring companies. Because of the extent of 3M cash flows from these agreements in relation to the disposed businesses, the operations of the branded Pharmaceuticals The Company uses local-currency sales growth, which excludes the impact of translation or currency business were not classified as discontinued operations. The sale of the branded Pharmaceuticals exchange rates, as an indication of its economic sales growth. The Company has provided the components business impacted both sales and operating income growth in 2007, as significant Pharmaceuticals of local-currency sales growth below, including the impact of translation. The Company has provided sales and income are in the reported base 2006 period and also in prior periods. Where indicated, to local-currency sales growth that excludes the historical impacts of the Pharmaceuticals business to portray provide more meaningful trend information, portions of this presentation exclude the impact of 2006 what it believes are more meaningful sales growth trends. 3M believes this non-GAAP sales growth and prior Pharmaceutical financial results, as this business was sold in December 2006 and January information excluding Pharmaceuticals provides useful information (See Note 2). These measures are not 2007. in accordance with, nor are they a substitute for, GAAP measures. 59 2007 3M Investor Conference © 3M 2007. All Rights Reserved.

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