Right, welcome everyone to what I think is our third session of the second day at Baird's 53rd Industrial Conference. For those of you that don't know me, my name is Matt Krueger. I'm a Senior Research Associate here on the Packaging and Coatings team at Baird. With us today is 3M Company. It's my pleasure to welcome Monish Patolawala, I think, and Bruce Jermeland. Monish is the CFO and Chief Transformation Officer, joined the company in 2020 here, and Bruce is in the audience and is the Senior VP of Investor Relations, and he's been with the company for almost 28 years. So a wealth of knowledge, I'm sure. We're gonna have a few slides to go through and then plenty of time for Q&A. So I would encourage you to email your questions in. I think we're sessionfive@rwbaird.com. I'll double-check that before I prompt us again. But with that, Monish, why don't you- Great. Run us through your slides? Thanks. Thanks for having me, and, I'll use the podium since I've been told to. But again, thanks for having me. It's great to see you, and it's amazing to see the number of attendees here. I thought I'll do a quick view of 3M. As you know, we announced earnings just a few weeks ago, so I would request all of you, please make sure you read the 10-Q, make sure you've read our forward-looking statements. A lot of good progress in the third quarter, and I'll just walk you through that. So I'll just start by looking at first, just 2022 adjusted sales. We have $33 billion, give or take. And for the investors who don't follow 3M as much, I just thought I'll recap. We are organized around four market-facing segments. We got our Safety and Industrial business that pretty much serves industrial customers. You got, which is $12 billion, give or take. You've got Transportation and Electronics, which is $9 billion, but on an adjusted basis because of the exit of PFAS that we've announced by 2025, approximately $8 billion. That's the business that serves our automotive OEMs and Consumer electronics and electronics OEMs. You then got the Consumer business, which is $5 billion in size, that's does a lot of work with all the big-box retailers. It also includes DIY, mass merchandise, e-commerce, etc. And many of you know, Post-it Notes by the Consumer brands, and we have a lot of leading brands in the Consumer business. And then the last business, which is our Health Care business, which is on track to be spun out in the first half of 2024. The business serves the medical market, it serves the oral care market, biopharma, and then health information technology for hospitals. So amazing group of businesses that make up 3M, $33 billion in size in 2023 on a 2022 adjusted basis. If I just go down to our three priorities, and we talked about this a few weeks ago, so three simple priorities for us. One is driving performance through the 3M model. Underneath that, it's continuing to drive operational efficiency, making sure that we are executing on all our restructuring plans, and then thirdly, making sure we're being very proactive in controlling our spending, but at the same time, investing in businesses where we believe have the greatest opportunities for long-term growth. That's this pillar is the one that we will continue to gain leverage as we continue to drive the efficiency and as the macro continues to grow as the many years to come. The second one is the spin-off of Health Care. As I mentioned, that's on track for a closeout on first half 2024. We have appointed the leadership team in there, and the teams are making very good progress in driving to the spin date. And then the last piece, which is reducing risk and uncertainty, and we want to achieve that by making sure, one, we are being transparent about all the legal issues that we have faced through. But two, most importantly, is settling cases like we have done the two large ones that I'll go into more detail, or at the same time, fighting where we need to fight, where we see the need that we need to continue to fight our litigation issues, okay? So with that, let me quickly get through just our priorities in Q3 and talk about driving performance throughout 3M. You can see how operating efficiency is driving performance at 3M. We have been very focused. When we started the year, we had told you we will continue to drive the operating efficiency. We will continue to be a lighter 3M as we end the year, and you can see we are on track. In fact, our margin rates were up 160 basis points on a year-over-year basis, including that with 80 basis points of a restructuring charge that we took as a part of that. So in total, you can see what the margin rate operating performance is. We were sequentially up across all our business groups. So again, it's back to how the operating efficiencies that we are driving is showing up in margins. We are continuing to drive our efficiency programs on through restructuring. When we came into the year, we had announced a $700 million-$900 million benefit due to restructuring, which also had a se-... Post-pandemic, customers want to be served differently, and which is where the agility in our supply chain is definitely helping us out to making sure we continue to drive improvement in service levels, while at the same time getting the yield and efficiency that we should. And you can see that through expanding gross margins. You can see that through cash. We had generated 115% of free cash flow conversion in the third quarter, a lot driven by relentless work the supply chain team is doing on driving inventory down, but at the same time, being helped by using digital or data and data analytics that helps them visualize where the inventory is, but at the same time decide what the efficient levels of production are. And then, the last most important piece is we are continuing to invest in growth, productivity, and sustainability. We are positioning 3M for the future. The macro trends that we see can help us not only build on the platforms that we have, which is home improvement, personal safety, and electronics, but at the same time, take advantage of new market trends that are emerging, whether it is sustainability, climate tech, Auto Electrification, etc. Just a data point to tell you how things are working: so the Auto Electrification business already is now a $600 million business that grew 30% in the third quarter. So again, amazing work by the team in continuing to drive the progress that we've made as we announced at the beginning of the year. I've talked about the spin-off Health Care on track first half of 2024. We have appointed Bryan Hanson as the CEO of our Health Care business and Carrie Cox as the executive chair of the Health Care business. Then reducing risk and uncertainty, we have announced two big litigation settlements. We are very aligned with the plaintiffs' counsel on making sure both of them are making progress. For people's benefit, we announced the settlement of Combat Arms, which was a $6 billion settlement, which is a combination of $5 billion in cash and $1 billion in stock that is going to get paid, or the $5+ billion the $1 billion is gonna get paid over the next six to seven years. Teams are making good progress. We have settled the PWS cases, the notices to all the settlement plaintiffs have gone out, and as I said, they continue to make progress. The second big one was a comprehensive settlement for, with the public water body, so we call it the PWS settlement. It's very comprehensive. It covers majority of the Americans for drinking water. Settlement of $10.5 billion-$12.5 billion, with a present value of $10.3 billion, again, for a payout that's gonna be spread over 13 years. We had some questions that we addressed from the attorney generals, and right now, all the parties are all engaged and moving forward. There are a couple of dates that you have to watch with the PWS settlement. In mid-December, there will be a hearing that tells us how many of them have opted out from the settlement, and then in February, you will get to the final hearing, and the judge will issue the final order. So confident that both of them are making good progress, but as always, please make sure you're always reading our SEC documents that we file, and as things evolve, we'll keep you all posted. Okay? Thought a quick recap on Q3 for those, some of you who we have met already, I said, "Give us a quick recap of Q3." Saves you the time. I'll give you a quick recap just here. Number one, sales of $8 billion. We had come in at the higher end of our range. We had talked about organic growth of -3.1%, which includes nearly 200 basis points of the headwind from disposable respirators and the exit of Russia that we did last year. So nothing to do with this year, but it's based on last year's comp. The end markets are pretty much in line to what we had told you coming into the year and what we told you in the second quarter and third quarter, which is the softness in electronics, Consumer retail in China. We are starting to see some stability in electronics. Of course, we're gonna make sure that we watch the trends through the holiday season, and then, Consumer retail, which you're all aware in China, as again, you're aware, it's driven by macro. But for 3M, China also is heavily impacted by electronics, and that's why you're seeing the -15% that we had at the end of Q3. And then you talk about the disposable respirator decline, which I've already talked about. The other good thing to talk about is or the strength in the automotive business. So automotive business in the third quarter grew 16%, which was way above the auto build rate of 4%. The teams have done a great job, not only on internal combustion engines and driving penetration there, but also providing new solutions for the electrified vehicles, $600 million business growing at 30%, so projected to be $600 million. So really nice work by the team there. Margin rates, I've already talked about it, but again, to recap, we are at 23.2%, up 160 basis points on a year-over-year benefit, driven by the benefit from the restructuring program, yield efficiency, and continuing to be very proactive in making sure we are spending the right amount of money and controlling the amount of money we spend, but not forgetting the fact that we're gonna keep investing in growth, productivity, and sustainability, because for the long term, it's the right thing to do. Adjusted EPS came in at $2.68 versus a previous guide of $2.25-$2.40. Included in that was approximately $0.10 per share of restructuring costs that got pushed in from Q3 to Q4. Nothing much in there, but again, it's driven by the strong execution. I've already talked about free cash flow, $1.9 billion, up 100% with a free cash flow conversion of 130%, year- to- date is at 115%, and we'll continue to drive the benefits that we're gonna get therefrom inventory and managing AP, while our CapEx spend continues to be also focused on driving growth, productivity, and sustainability. When you put all that together, where we are at the end of the three quarters and the hard work the team has done, we've increased guidance. Guidance is now at $8.95-$9.15 versus the original guidance of $8.60-$9.10. Included in this guidance is all the pre-tax restructuring charges and benefits that don't change. You can still see that. It's still in the $400-$450. You have seen the cadence by quarter. That's available for you all if you'll wanna see it. Adjusted organic growth is -3% versus our original guide of 0% to the lower end of 0% to -3%. Included in that is some additional headwind from disposable respirators. So disposable respirators will now be a headwind of -2%, so it's included in the -3%, but it's approximately -2% from disposable respirator decline in the exit of 2022 in Russia. Same themes. Electronics continues. It was electronics, Consumer, and China and disposable respirators. Electronics, we're starting to see some stabilization. We're gonna watch how the holiday season plays out. Consumer retail continues to be a tough story, but no different from the trends that we had already seen. Again, we'll watch how the holiday season plays itself out. And then China, I think, will continue to grow as the macro finally as China settles down and China starts growing again. Just a reminder for us, China continues to be an important market for 3M. Approximately 10% of our revenue comes from China, and we will continue to invest as we see in China and be more focused as China growth comes back up. When you put that together and you take into account all the work that the team's done on inventory and how they've managed supply chains, we also increased our cash conversion from 90%-100% guide earlier to 100%-110% at the end of third quarter for the year. Sorry. Okay, I thought it was a question in the audience, so it's not. Implied-- So if you take that into account, the implied Q4 is a guide of $7.6 billion-$7.7 billion. Talked about the trends already. I just want you all to know when you think about historical seasonal trends for 3M, on an average, you will get a lower revenue in Q4 between $250 million-$300 million, depending on the year you cut, and that's mainly driven by the fact that there are less business days in the fourth quarter versus the third quarter. So you're seeing some of the seasonal trends play itself out, and adjusted earnings of $2.13-$2.33, which includes some of the pushout of restructuring charges from Q3 to Q4, but at the same time continue to deliver the benefits that we talked about of the program, which is $450-$400 to $450 for the year, and offsetting charges. So I would recap this with the teams are doing a great job. They're getting momentum by executing well. We are focused on our priorities of driving performance from the 3M model, helping to spin out the Health Care business and, as well as reducing risk and uncertainty by solving some of our bigger litigation issues that we have there. Really confident about the future. I think the teams are doing a great job, and as the macro stabilizes and as different emerging market trends work, play itself out, the strength of 3M, the ability of 3M to leverage its material science capabilities, just make sure that this business continues to grow in the long run and keeps driving good margin and cash that we have historically done. So with that, Matt, I'll come back to you for any Q&A. Terrific, terrific, terrific. Thanks, thanks for the great overview. Just a reminder to everyone, session five@ rwbaird.com. Your questions will come to me on the iPad, and we can prioritize those accordingly. You know, Monish, you know, if there's one company at this conference that is very well positioned to give a state of the union on the global macro, it might be yours. You're exposed to virtually every end market and geography we can think of. Can, can you give us your, you know, your, your latest thoughts on, what has happened this year, you know, what you're seeing to end the year and, and maybe early insights on what you and 3M are thinking about in, in 2024? Yeah. So, you know, Matt, I would say the same thing. When we came into the year, early in January, we said we would see electronics soft, we would see Consumer and Consumer electronics and Consumer retail both be soft, and, and China was a second half story. As we sit now, I would say electronics and Consumer electronics has been soft, but we are starting to see stability in that space. So I think the destocking, at least what we are seeing, seems to have slowed down. But the holiday season's gonna say a big thing about where electronics goes. Consumer retail continues to be soft. We have seen inventory stocking moderating in Consumer retail, but the big box retailers and others are watching demand and making sure that they can, that there's actual demand before they place the orders. Industrial markets have been mixed. You've had pockets where we have seen high growth. You have also seen pockets that, I would say customers are being a little cautious because they're saying supply chains are better, cycle times are better, so let's just be a little cautious. Overall, when I look at 3M and then say, go round the world, for us, the U.S., we, in the third quarter, was a small growth of 0.4%, despite the negative in retail, or Consumer business. So the industrial business was much stronger in the U.S. China is down 15%. As I said, China is heavily impacted by electronics and the broader macro, and Europe was in the -1%, partly driven by some of the macro situations, the political situations in Europe, but also partly driven by some of the industrial businesses and how they'll be stocking. I look at all of this and say we, we predicted some of these trends. The trends have pretty much played out as they have. Disposable respirators are a little softer than we thought, which is the N95 mask for everybody's benefit. So coming into the year, we had said it would be between the $500 million-$600 million range of year-on-year headwind. We are seeing it's gonna be nearly $600 million. But more importantly, I would say the team said, "I control what I control. Let's control the costs. Let's start driving the efficiency." All the work that we have done over the last few years is coming together. You can see that in margin, you can see that in the cash that we are driving. So- Terrific. You know, let's expand on that last piece a little bit. You'd asked before we got on stage what the most notable theme was, you know, from day one, and you know, from our perspective, it was the companies that have a self-improvement element to their story seem much more confident than those that are relying on what appears to be a very uncertain or wide range of macro outcomes for next year. You've highlighted some, you know, actions that 3M is already taking. Can you give us a little bit more detail on those? You know, what the benefit could be, and then how you can flex or accelerate those programs depending on what end market demand looks like this year? Sure. Listen, I would, you know, just for recap, when we announced it, we, Mike announced it during earnings that, at the beginning of the year, that we're gonna relook at everything. We also had a catalyst, which was the spinout of Health Care, which allowed us to say, "What cost is needed to serve ParentC o versus SpinC o?" So using that catalyst, using macro that was quite uncertain coming into the year, we announced a restructuring program that's costing us between $700 million-$900 million, but most importantly, giving us benefits of $700 million-$900 million. The program was based around three or four things. One is proactively making sure we are addressing production volumes. Number two was going and looking at the structural cost in the company, at the center, and thinning that out. Number three was making sure that the supply chain that we are creating for the future is more agile, and making sure we're taking layers out and getting the signals that we can get from customers as quickly as we can. And number four, most importantly, is making sure we have the closest path to our customers. So when you put all that together, that's how we looked at the program. We said, "There is structural costs to take out, there are spans and layers to take out. There are office facilities, properties that we can downsize, et cetera," and that was basically the program. Now, the benefit of that was not just the $700 million-$900 million, but it also is starting to show in the operating efficiency that you're seeing from our factories. Once these costs come to an end, which between 2023, 2024, and 2025, the cost will play itself out, you've got $700 million-$900 million of benefits that will remain on a standalone basis. So then you ask the question: Can I flex? A lot of the work that we are doing is allowing us to be more agile, and it's allowing us to say, "As the volumes come back, as macroeconomies recover, the leverage that we are gonna get is much higher." We had said going out of 2023, we would be a much lighter 3M. And you can see that our exit rate on a margin basis, once you X out restructuring costs, is also much better. We came into the year saying, "We believe margin rates will be, for the year, in the range of 19%-20%, or 19%-19.5%." Then we said, "It's 19.5-20%." Right now, it's 20%+. So all the work that the teams have done, and I can't thank the 3Mers enough for all the hard work that they're doing in driving efficiency and yield, is actually showing up in the margin rates. It positions us very well for the future. 3Mers, I like that. So let's touch on the margin piece. You know, margins were particularly strong in the third quarter. You know, cost savings and restructuring are contributing to that, but, you know, the raw material environment has to be a big contributor as well. Yep. Can you talk a little bit about what price cost looks like this year? You know, maybe where it has surprised, I would assume, to the upside, and, you know, what the tailwind or headwind could look like into, into next year. And if you could comment specifically on labor costs as well- Sure ... given what we're seeing in, you know, the headlines- Sure ... that would be helpful. So, you know, again, you've already talked yield efficiency. I won't repeat myself on that piece. Talking specifically about price cost, when we came into the year, we said price will be around low single digits. We are pretty much seeing we are in that low single digits range. Inflation is moderating, but I would tell you inflation is sticky, so I use the word disinflation. It is sticky; it is moderating. You're still seeing labor inflation. So labor inflation is sticky. You've got utility inflation that still exists. We are seeing some of the benefits in logistics and some of our upstream materials that we are taking advantage of. I would say overall, we have been able to manage this, as we've shown you over the last few years. We have been able to use price as a lever to manage inflation. At the same time, the teams are not just relying on inflation getting better. They're going and driving single, dual sourcing, driving low-cost sourcing, making sure that we are taking advantage from indexes as, as, commodities start moving in the right direction. So I think the teams are doing a lot of self-help, and which again, positions ourselves very well. Historically, 3M has always added value to its customers, so we've always had a positive price-raw equation. Long term, I don't see why that changes, because as we keep innovating for our customers, you're gonna continue to get the value. So it's, it's all, it's all about innovation for impact and making sure we are adding value to our customers. Perfect. Just a reminder to everyone, session five@r wbaird.com or be brave and raise your hand. So destocking has been a big theme across, you know, our coverage universe, certainly, and I'm sure for you as well. I wanna focus in on Consumer a little bit. That's been a weak point, and that, I would imagine, is an end market that everyone is used to being comparatively stable. So can you talk a little bit about when you expect this destocking cycle to play out? You know, do we flip positive by early 2024? You know, when do you start comping out some of these easier negative numbers? So when you think about our business as 3M, we are in the discretionary hard line category, so we are not in groceries, et cetera. So what we are seeing is, just in general, discretionary spending is lower. Specifically talking about destocking, I would tell you, we have seen moderation of inventory levels or destocking in the, in the big box retailers. So I think now it's all about the demand environment and making sure that... That's what the retailers are watching, is what's the demand environment look like? So we are positioned as we need to supply when the demand is there, so I have no issue with that at all. Mm-hmm. And then one from the audience: You know, the 3M model has been built on innovation driving above GDP growth. That's been... You know, that's fallen off a bit in recent years. You know, what does it take for 3M to get back to that company? Is it- is the scale just too significant right now to, you know, dodge some of the pockets of weakness in the market? What can the company do to ensure outsized growth moving forward? Yeah. Listen, I would tell you, it starts from just making sure... History of 3M has always been we've been close to customers, solving customer problems. I don't think that has changed, and I don't think that will change. Mm-hmm. Then I think about some of the platform businesses that we have. Whether you think about our home improvement business, or you think about our electronics businesses, or you think about our personal safety businesses, as long as we continue to keep innovating, keep adding value, you're gonna continue to see that grow as the macro trends all align towards that. Similarly, there are amazing new trends or emerging trends that 3M's material science can be a big help. Whether you think about climate tech and what we can do there, whether you think about sustainability and what we can do there, through our Auto Electrification business, are all amazing platforms. I mean, I, I'm quite... I'm very bullish about the future about 3M because this is a space that 3M plays in. Big problems, we go solve it. We help the world get better. At the end of the day, 3M was always built on innovation for impact, and that's what we're gonna keep doing, is driving impact through innovation. So very confident. We are continuing to invest. As I mentioned in Q3 also, we have kept investing in these areas that we believe are long-term secular trends that 3M can win in. Perfect. Let's, you know, let's touch on one of the areas where you are growing above market rate, and that's automotive. You know, EVs, I would imagine, are a big opportunity for 3M. You know, replenishing backlogs across a variety of the different kind of niches within auto, I'm sure, assist in this recovery. Can you, can you talk a little bit about- Sure ... how, you know, how long the tail can be on that growth? 3M has a 100-year-plus history with automotives and automotive OEMs. The benefit we have is we are so closely partnering with our customers that many a times we get a chance to look at the biggest problems that they are facing. Mm-hmm. As a part of that, our success doesn't come just from internal combustion engines, but it also comes from the electrification of cars. Many of our solutions, whether you talk about light weighting, you talk about our display technologies, you talk about some of the soundproofing, it's agnostic to whether it is an auto electrified car or it's an internal combustion engine. But then we also use other material sciences that we have to make very unique solutions for electrified cars. So, for example, we have a battery thermal barrier or runaway barrier that makes sure that if a battery explodes or have fire, we have products that can help make the car safer. So when you put all that together, the partnership we have with the OEMs, the teams that we have who understand the space, allows us to win 300-500 basis points above build rate over the long term. 3M has done it for years. You can see it in 2023, we are doing it. You've seen we do it in 2022. And just the Auto Electrification business, which is, it's going to be projected to be $600 million and growing - it grew at 30%. So it's a space that, as the world evolves, whether it's electrified cars or internal combustion engine, the partnership we have, the material science capabilities we have, allows us to be very, very successful in that space. Terrific. Monish, it's almost like you've done this before. Good timing. Thank you, everyone, for joining us. Thank you, 3M. Thanks for having us. Thank you, Bruce. Great. Thank you.