Great to see everybody here in the room taking the time to spend the morning with us. I am Bruce Jermeland, Head of Investor Relations for 3M. Welcome also to everybody that’s on the line for the webcast this morning. Before we start today’s events, I just want to remind you of some upcoming dates of events for 2017. Our earnings call there, the dates in January, April, July and October. Also next summer, we will be hosting our first international investor event in Neuss, Germany on June 6 and 7. So please mark your calendars accordingly. Today’s lineup, we will start off with Inge Thulin, 3M’s Chairman and Chief Executive Officer and we will wrap up with Nick Gangestad at the end, our Chief Financial Officer. In between, you will get the opportunity to hear from Ashish Khandpur, who will talk about – talk to us regarding innovation; Julie Bushman, who will touch on business transformation; and then you also have the opportunity to hear from three of our five business leaders: Mike Roman, who heads up Industrial; Jim Bauman, who heads up the Electronics and Energy business; and Mike Vale, who heads up Health Care. Here is the lineup for the day. We will take a break roughly about 9:30 or so. If we are running ahead of time, we will stay ahead of schedule. We will leave about 45 minutes of Q&A at the end and we will get you out of here no later than noon. Before I turn it over to Inge, I draw your attention to our forward-looking statement. Please take a moment to read it. During today’s Outlook Meeting, we will make 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 uncertainties. Item 1A of our most recent 10-K lists some of the most important risk factors that could cause actual results to differ from our predictions. So with that, I will hand it off to Inge. Thank you.

Thank you, Bruce and good morning everyone. It’s morning. It’s nice to see you again, and hope that we will have a good morning here talking about 3M’s outlook for 2017. What I would do is I will talk about the highlights for the day. I will talk about how we have built strengths on strengths for the last 5 years, positioning us very well as we move into 2017 and the outcome of all this is all around efficient growth as you will see through the presentations today. The headlines for today is, first of all, you will see that we are very, very ready and well positioned for success in 2017. In our mind, we are in a position today to create better value for our customers than anytime in the past history. Our playbook is working and we will talk about all the key levers today in terms of portfolio management, invest in research and development and innovation and business transformation. You will also hear from Nick Gangestad in the end of how we will continue to deploy our capital to invest for both long-term success as well as return cash to our shareholders. And the 2017 outlook, as you probably saw this morning in the press release, is 1% to 3% total company organic local currency growth and 4% to 8% EPS growth. But before we go there, let me just talk again relative to the journey we are on and that we started back in 2012, which is important relative to understand and have confidence as we move forward. We started back in 2012 by clarify the vision and the strategies for the company, but we also start the portfolio management work that is ongoing. It was an important element for us as we move…

Thank you, Inge and good morning everyone. It is my pleasure to give you an update on 3M research and development. Innovation is central to both our vision and strategies and investing in innovation is one of the three strategic levers in our company’s playbook. We have been steadily increasing our investments in research and development from 5.5% of sales in 2012 to almost close to 6% last year and have invested $8.5 billion over the last 5 years. We have a proven innovation model, where the R or the research part of the organization sits at the center of the company and creates technology for the corporation. This technology then gets transformed into products by the D or the product development part of the organization, which actively resides in the respective businesses. This model ensures that we continue to invest in our fundamental strength of technology even in tough business conditions and that our common pool of technologies gets commercialized in very different markets through our different businesses. As Inge mentioned, we are a science-based company with a lot of depth in technology. We have 46 technology platforms. And the unique thing about 3M is that no single business owns any of these platforms, but that they are owned by the company and can be leveraged by any of our businesses to serve their respective customers or markets. As a company, we also invest heavily in intellectual property, not only to protect our own inventions, but to obtain and sustain premium margins on our products versus the competition. But technology itself is not sufficient to create the differentiated products and solutions. Our innovation truly comes from the confluence of customer and market insights, technology and our culture of collaboration and entrepreneurship. Combining these three factors on a routine basis…

Thank you, Ashish and good morning everyone. At 3M, we are well aligned around our playbook to drive value creation for our customers and for our shareholders and I am very pleased today to be able to present to you an update on business transformation, one of our key three levers. Business transformation creates value for our customers and our shareholders by increasing our front-end capacity and agility, freeing up our sales and marketing organization to be able – from the operational and transactional activities to spend more time with our customers. By further enhancing productivity through standardizing global processes and optimizing our supply chain, by delivering $500 million to $700 million annual pre-tax savings and $0.5 billion working capital improvement by 2020 and also at the same time, by increasing and improving our customer service levels. Business transformation starts and ends with the customer. So, how are we making it easier for our customers to do business with us? We are improving our quality as well as timeliness of service delivery. We are enhancing on-demand or self-serve type of capabilities for our customers. We are increasing our customer service responsiveness, targeting higher levels of responsiveness and we are enhancing our collaboration and our customer intimacy. What business transformation is doing is it is enabling end-to-end transparency and insights allowing us to better leverage data analytics and to improve that overall service performance. So, we are building strength on strength, driving to higher level of – higher levels of customer satisfaction. I will come back to the financials a little later in the presentation. There are three key elements to our business transformation roadmap. The first and foundational is simplification through our global ERP; second, optimization of our nine global processes that are within scope of business transformation; and third,…

Alright. Good morning. It is my pleasure to present our Industrial Business Group and our outlook for 2017. This is an outline of what I would like to share with you today. I will start with an overview of who we are then take a look at where we play and the market dynamics that we face and our outlook for 2017. Then I will share some specific examples of what we are doing to accelerate growth as we begin the New Year. So who we are begins with this idea of strengths on strengths – building strengths on strengths. And we are building a foundation for growth based on the strengths that are represented in our 3M playbook. And this starts with the sense of purpose that we have in our vision and how we take that purpose into our industrial business strategic intent [ph] to advance our history, really all of our customers with what we do to transform, how we engage them, how we transform and how we are continuing to transform and deliver even greater levels of leading service in our industry. We also get a clear focus from the playbook on the six strategies and the code of conduct and our leadership behaviors, a focus that enables us to build sustainable business for the long run. We also gained confidence from the extraordinary value that we are able to create with the big levers. And it is those levers that are helping us to build the strong foundation for growth as we enter the New Year. With what we are doing with portfolio management to shift to high growth, high value portfolios and how we are leveraging this to optimize business is facing challenging cycles. We are taking advantage of investments in innovation to increase…

So, good morning. I am Jim Bauman. And I would like to welcome you to the outlook update for the Electronics and Energy Business Group. The agenda I am going to follow today is who we are, how we are improving our business, and I’m going to give you some examples of how 3M is advancing a connected world and how that’s going to grow our portfolio. Enabling connectivity in every company, home and life has never been more pervasive. Our 3M vision and the strategic intent of the Electronics and Energy business group aligns well to advancing the connected world through our technology, products and innovation. Electronics and Energy is a $4.8 billion business group. 60% of our business is in electronics and 40% is in energy. In electronics, we provide high-performance films, which you know quite well, but we do so much more. Our $1 billion design material business includes products that enable precision assembly keeps devices running cooler through thermal protection and we have products that shield from signal interference. In addition to this, in our electronics portfolio, our Novec products offer a sustainable choice to problems ranging from fire protection to electronic cleaning. And with low global warming potential and short atmospheric lifetime, Novec fluids don’t deplete the ozone layer. In semiconductor manufacturing, we provide solutions that enable uniformity, cleanliness and precision and with our Novec fluids and the use of Trizact technology for wafer pad conditioning. In energy, you know us as a company that’s been developing and supplying reliable connection to utilities for over 70 years. Whether it’s to the grid or to the communications network, our infrastructure solutions are designed for ease of installation in very demanding applications and environments. And our high-performance films in the energy segment are used in a variety…

Thanks, Jim. So it’s my pleasure to be able to talk to you about 3M healthcare business and our outlook for 2017 and beyond. My presentation this morning is going to look at a number of core areas, the business overview and the key themes of the business, how we see ourselves winning in an attractive but changing landscape, and how we are going to drive growth acceleration in 2017 and beyond by focusing on high-growth markets, key geographies, driving impactful technology, supported by clinical evidence into the market, and increasing our customer engagement globally. As you have seen today, 3M is a very diversified, science-based company, but there are many unifying factors that bind the company together, none as powerful as the 3M vision statement. When you look at this, 3M healthcare embodies all aspects of the 3M vision as all 3M businesses do. But as you heard Inge describe this morning, healthcare is uniquely identified with that last statement: 3M innovation improving every life. And our healthcare employees worldwide come to work everyday, driven and passionate about that mission statement and about executing our global strategic intent, which is care pathway innovation for improved and cost-effective health outcomes. This is a strong business, consistently delivering market-leading growth rates at industry-leading operating margins. And in 2017 and beyond, we will continue to deliver those growth rates and performance driven by the depth that we have and all of 3M fundamental strengths, the new product pipeline and portfolio that we are bringing to market and that we are leveraging already in the market and the fact that we are investing in core aspects of the business today and developing new capabilities to amplify our growth impact in the market for tomorrow, all while staying disciplined in our focus on driving…

Good morning. It’s great to see everyone here today and thanks for coming and joining us as we share our plans for 2017. Before I address our 2017 outlook, let me provide a few comments about how we are seeing 2016 close out. We continue to expect to see positive low single-digit organic growth in the fourth quarter, which will bring our total year organic growth to approximately flat. Our business operations remain strong and on track and we expect another year of delivering strong cash flow and premium returns on invested capital. On a non-operational front, the recent strengthening of the U.S. dollar is creating some earnings headwind as we finish out the year. And as a result of FX, we now expect full year earnings per share to be at the low end of our current guidance of $8.15 to $8.20 or up 8% year-on-year. Now let’s look to a summary of 2017 sales growth, earnings per share and free cash flow conversion. As you’ve heard throughout the morning, our team is focused on executing our playbook and making investments to deliver our long-term success. Looking at 2017, we expect GAAP earnings to be in the range of $8.45 to $8.80 per share, up 4% to 8%, primarily driven by organic growth and operations. We expect organic local currency growth between 1% and 3%. And we expect foreign currency translation to reduce revenue between 1% and 2%. And finally, we anticipate another strong year of free cash flow generation with a conversion rate between 95% and 105%. Now, let’s take a look at the overall financial headlines on the next slide. In 2017, the main drivers of our year-on-year growth in GAAP earnings per share will come from organic growth, along with strong operational performance. And that strong…

First question, Andrew. Andrew Obin.

Just – can you hear me?

Yes.

Just a question, you brought up the U.S. stimulus plan. And a couple of things is any of it baked into your forecast for ‘17? And b), if you could go in more depth, because people perceive 3M as more consumer-oriented, big focused in emerging markets. If it happens, does 3M have the operating leverage and positioning to benefit from it?

Happen what? In terms of?

The stimulus. The stimulus, as you were talking about it, presuming it is happening, do you guys have operating leverage and positioning?

Yes, we do. So first of all, is it baked in? No, it’s not baked in what you saw here today in terms of if anything is happening in the U.S., but we estimate it will happen. Then, I think it’s timing relative to when you can see it coming into the pipeline. And I think if you are realistic around it, if you talk about infrastructure and so forth, it probably take you some time before that acceleration will come. However, you should see earlier, which I will say is maybe in the second part of ‘17, acceleration relative to manufacturing start to come. So when we look upon it, in terms of we need to see more clarity on what will come, I think that’s a positive momentum in the minds of people that things will start to move. And the way I look upon it and we look upon it is that we should be early in that process. So you think about companies that have been talked about, that will have clear benefit early on in that process, you more – I start to think about that we should be ahead of them, because we are supplier to most of them. Do we have the capacity and capability? Yes, we have. And I think it’s important to think about it in the following way. 3M never left United States. We expanded internationally. So, we have the capabilities in United States in terms of research and development. This is the key place for us to do it. We have manufacturing capabilities and our brand equity is stronger in the United States than anywhere else in the world. And as I said many times before, this is our home arena. We should never lose here. So on that point, I think we are very well positioned in order to capitalize on what will happen in the economy. We are a $3.5 billion net exporter out from United States. So, that’s coming back to the point that we never moved. We expanded on a localization strategy. Now, if you connect that to that chart where the evolution of the economies are, we are – due to the fact it’s a localization strategy, we are in whatever country, have been there for long time in order to capitalize on the opportunity. And it looked like around the world that domestic businesses will have a favorable situation in countries, right? And that’s also where you can see where we look upon consumer will grow on the high-end for us and so will healthcare. So, the answer to your question is we are ready to capitalize on growth when it’s coming.

Steve Tusa?

Hey, Nick. You guys have crusted on the raw materials side for several years now. Oil is, I think – basically, you guys have it flattish year-over-year. Can you maybe talk about the sustainability of those raw materials benefits kind of going forward? Is this now $0.10 to $0.15 every year as far as the eye can see? And then I have a quick follow-up on healthcare.

Yes, thanks for the question, Steve. If you look over the last 2 or 3 years, 3M has been experiencing noticeable tailwinds or benefits from lower raw material commodity prices. In the last couple of years, that’s been a combination of multiple factors. Some of it has been market dynamics, where we experienced just outright in the market lower commodity prices, but it’s also been a component in the last couple of years where that’s been driven by 3M’s own efforts in sourcing, whether it be some of our negotiation efforts that’s being enabled through business transformation or material substitution is another example as we look for ways to optimize the components going into our raw materials. That’s been there and that will continue. And as we look at our savings that we are expecting in 2017, there is very little of that, that we are expecting from outright commodity price market reductions. The vast majority of that $0.10 to $0.15 of benefits we are expecting in 2017 is coming through our own sourcing efforts through material substitution and market negotiations.

And that’s sustainable in the kind of ‘18 time period?

That’s been something we have been able to do in the past and we will keep going. I think the only caveat I would put on that is this isn’t a year in 2017 where we are seeing commodity prices in the market being somewhat neutral. In 2018, we don’t know, could the commodity prices actually become an underlying headwind, but we will still be doing those underlying efforts to drive our own productivity sourcing.

Okay. And then on healthcare, I know that the business slowed a bit in the third quarter. There was some chatter about perhaps election-related. Can you guys maybe talk about how you would see repeal or a change in the ACA as impacting your business in the near-term understanding that longer term you guys will respond to value-based healthcare, etcetera? But I guess could there be a pause at some point? And what have you seen most recently around the election and healthcare in the U.S.?

Well, I don’t think generally speaking – first of all, it’s a global business. So when you look upon the result was in the third quarter, it was more than U.S. I think that was an impact of maybe wait and see in the U.S. and then you had other geopolitical things going on, on a global base. We said at our earnings call that we estimated Q4 to be very similar to Q1. And then I think as we move into ‘17, you see we have a guidance of 3% to 5%. And I think maybe – as you think about it, maybe first quarter of the year will look like the second part of 2016, but after that, we should be in a really good position to move forward. I think the important thing for – we have been in healthcare for so many years and I think I commented some point back that I personally was involved in healthcare early ‘90s back in Europe, right? I led healthcare then or some entities of healthcare from ‘91 to ‘95 before they sent me into Russia to learn some real business. But during that time, ‘91 to ‘95 and before that, you have the German healthcare act, etcetera. So what you see going on in the world from time-to-time, we have been part of that, so we know how to respond. And I always say the value creation of our solution in healthcare are incredible. And when you look upon our cost of goods sold, its world class. And so I think for us to respond with health economics, with paper and key opinion leaders plus a very effective manufacturing capability will put us in a very, very good position. So for me, generally speaking, I am not concerned at all about our healthcare business as we move forward, even if there maybe will be slowness in the next one quarter or two quarters. But we are here for the long-term and we have fantastic margins and we are in a very, very good position.

Joe Ritchie?

Thank you. Can you guys hear me? Great.

Yes.

So Nick, my first question is on the organic growth contribution, the 1% to 3% equating to roughly $0.20 to $0.50, last year we were here, we were expecting about 1% to 3% growth as well but the contribution was much less, so is there an embedded higher price flow through in 2017 versus ‘16 or what’s the key driver of the difference?

Hi, Joe, there is – as we look – go back a year ago when we were projecting 1% to 3%, we were pretty conservative in our estimate on price growth and the vast majority of that was volume growth that we were projecting. It’s still true for this year in our 1% to 3% growth that we are estimating. The majority of this is coming through volume. We have been historically able to drive 30 basis points to 50 basis points of price growth excluding FX. We continue to see price growth into 2017. But we are not expecting it to go up from the pace that we have been at in the past couple of years.

Okay. And then maybe one question, just follow-on on electronics and energy, so there is a pretty recent acquisition, Samsung acquiring Harman and their ability to get bigger in the infotainment space, how does that at all change the competitive dynamics for you guys and would you consider – is that an area where you are considering to vertically integrate?

Well, first of all, we are supplier to the industry, whoever is in that space, right. And I think that was a big acquisition for them and I think based in Europe, correct, right. So it’s a big space for them. We would continue to provide solution to whoever own those companies. If you ask relative to our own interest of an acquisition in a space like that, I think you should think about our pipeline in terms of acquisition. That’s strong in all five businesses. But the preference as we speak is in healthcare, safety and graphics and industrial. And the reason for that is we have still some work to do in order to make sure we are coming right with the portfolio in electronic and energy. Now if you think about that acquisition that is going very much into the automotive space, etcetera. If you take that on a bigger platform, which we talked about here – Ashish talked about it, I made an example. I would say if you think about that in terms of our capabilities moving forward organically, we are very strong in the automotive industry, by businesses and Mike Roman’s business. We are very strong in traffic safety, our businesses in safety and graphics. And we are very strong in electronics. If you combine those three together, that is an incredible space for us as we move forward. And we have the connection in the industry and we have the technology platform. That is up to us to build something like that. So I will not say that it’s a change for us relative to a move of ownership in that industry. I think we will become stronger as we move ahead. And I think that’s the strength of our technology platforms.

Andy Kaplowitz?

Thanks. So Nick, you seem like you are right on track in terms of business transformation, but at the March Analyst Day, you had talked about $125 million to $175 million of factory optimization and I am wondering if that’s in the $0.10 to $0.20 of other productivity that you talked about. And then Inge, in terms of business transformation, you talked about being very happy with the rollout in Europe of ERP, obviously sort of the big deal is the U.S. here as you go into ‘17, so are you sort of – I mean I know the numbers are the same, but are you sort of ahead of plan on what you see in Europe and does that help you get more confidence that business transformation can be sort of upside over time versus what you guys have been talking about?

Yes. Maybe I will start and then Nick go into. So first of all, maybe pleased is a better word than happy. It’s very seldom that you see me real happy. I am pleased with the progress. So as you know, I am pleased with the progress. And then I will say that why I am pleased is that I see the real benefit. First of all, there is a model for us now relative to the execution. So you have a timing in this process where you have the development and then you go to deployment. So we spent quite some time on the development in order to be ready. And then when you start with the deployment, as always, you run into some challenges, right. And we did as well. We overcome that and I think we became a much stronger team from a business perspective to understand once what needs to be done in terms of planning for it. And number two, the real benefit for us as a company and for the customer. So I can tell you when we started deployment in West Europe, I went myself and I think Paul Keel was in UK at the time as Managing Director, Julie and I went, maybe it’s Jim [ph]. I went myself to Germany to the biggest distribution center in order to kick the tires and try to convince them that we shouldn’t move forward. That was, I tried to challenge them that we are not ready. And they convinced me that we need to go and we moved. From that point, I – then, that was the starting point to understand we are totally ready in – at that time, in Germany, in Europe to move forward. That’s why I am very pleased that…

For the sake of you that maybe forgot the first part of Andy’s question I will reiterate what that is. In March, we laid out as part of our 5-year outlook that we were going to be taking actions on our supply chain footprint and that over the course of the next 4 years, we would be investing between $500 million and $600 million in taking action on that footprint, in some cases rationalizing our supply chain footprint. And that by 2020, we expected that to be generating between $125 million and $175 million in operating income benefits. We are progressing very well on that plan. We have taken the actions in 2016 and we anticipate more actions in 2017. And answer to your question of how much of that other productivity, additional productivity? Virtually none. This is one that is actually a little more back-end loaded than the business transformation, where we are seeing some of these savings starting in ‘16 and growing in ‘17. This takes a little longer time to fully realize the benefits as we go through our supply chain manufacturing footprint rationalization. So there is probably a little bit, but not even a penny’s worth in there, Andy.

Got it. And then Inge or Mike, just a follow-up on industrial, it’s been a little slow to turn, as you guys know, little stubborn. You guys talked about macro indicators improving, we all see it. You talked about organic growth turning positive in 4Q for the company. I would assume industrial is part of that and part of it is advanced materials starting to turn and you have got a defense contract that’s ramping up and you kind of alluded to it. So as we look at ‘17, is advanced materials up when it comes down to it? And how do we sort of look at – pick apart industrials when it comes down to – because that’s what’s sort of...

Yes, I think first of all that you – I think Mike and his team have done a very good job over the last 2 years relative to the portfolio and I think he showed that in terms of consolidation of some businesses and one acquisition in and a couple of them out, right? So I think we are positioned in a much, much stronger in the markets where we have decided to compete. And number two, there is a comparison, of course, that will help us as we move into 2017. And I think I made a statement that we will, after five quarters for Industrial, where we were flat to down, see a growth in Q4 and Mike had promised me that that is what he will do. So we will see that and so, yes.

Jeff Sprague.

Thank you. Good morning. Hey, just a couple of questions. First, I know you don’t want to get into the quarterly guidance, but what was said about healthcare and maybe naturally expecting with the anticipation of stimulus and other, the year that be back-end loaded maybe for everyone. Do you see your Q1 organic growth within the 1% to 3% band for the year? And also just on kind of a modeling point, we have heard from a number of companies and it’s probably quite obvious, that people have really torqued back the compensation big time to protect margins over the last year or two. Is that a factor within 3M? It sounds like it’s not a headwind for 2017, but is it something we should be thinking about? And then just a follow-up for Inge after that.

Jeff, to answer the two questions in there – I will take the back one first. From a compensation standpoint, are we seeing anything noticeably changing? Over the last few years, on a global scale, we see our wages and benefits expense has been going up about 3% per year. We are not expecting 2017 to be different from that. And Jeff, can you remind me the first part of the question?

Just wondering if you see your Q1 organic relative to...

Yes, on the quarterly breakout and I used the word slightly. We are not planning a radical difference between first half and second half growth. We are expecting all of them to be pretty similar, slightly higher in the second half. I would expect – I am expecting the first quarter first half to be in the range that we laid out for the total year.

And then Inge, I was just wondering just looking at the portfolio holistically really kind of the product tempo within the portfolio. The stuff coming out the front end is very exciting and visible and tangible. Is there any acceleration on end-of-life given the amount of technology change that’s going on? In a way, I am kind of asking the question, are you being forced to kind of run harder to stay in place or to get that little bit of incremental bump that you are looking for? Any color there would be helpful.

Yes, I think, first of all, it’s – as I said, we are investing another $100 million plus relative to commercialization of programs that are very solid already. They are programs that are growing well, very good margins, but that we maybe not have capitalized totally on a global basis in order to execute. I think that will help us in terms of growth. In terms of – I think you talked about technology conversion in a way and you know we are always leading in technology conversion, because we work so closely with our customers and I think specifically on the process of customer-inspired innovation. And I will say that when you work direct in that process with customers, you are always challenged to move fast, because as I said in my presentation, we need to understand their business model and they promised their customer something and they are looking for technologies that will help them to come there. And they have deadlines. So, I will say that we have no choice. We have no choice. We need to stay ahead of what anyone else are doing. And I think my confidence in our model on that side is that, that is product that is spec-ed in or designed in for them and they have deadlines and they are very demanding relative to what we are doing. So, I think generally speaking with the investment that we have moved closer to 6% in research and development is helping us and we are close to the customers. And we are determined to go after more growth on existing programs that we have with additional money of over $100 million in terms of commercialization. That’s total commercialization. So, growth is not easy to come after when you have a slow economy generally speaking and we need to take market share in many cases and they should be profitable market share. That’s also why we identified our – this is 20 plus programs that we identified this summer during the strategic meeting we had with the management in order to, on a corporate level, decide on which one should we go after. So I think you have to accelerate the whole time, to be honest, right? We have to be on it, be on it, be on it.

Scott Davis.

Thank you. Thanks, guys. Can you – Inge, can you give us a sense when you walk around the world of what you are seeing in different emerging markets, because it doesn’t look like year-over-year your guidance in EM is any better yet? It does seem to be some improvement in places like Brazil, etcetera. So, maybe just take sort of the puts and takes there?

Yes, you are talking emerging markets specifically?

Yes, pleased to see.

Well, I think there is one place around the world where it will – I am pretty sure we take longer time as we speak and that is Middle East Africa. That’s you take Turkey and down in Middle East. That will be tough at least for a year plus. You see uptick in Russia and we had just people in visiting Russia last week where you can see 2X of improvement in our business and much more positive outlook. So, that’s good. So if you go that part of the world, in terms of size of business, Poland is doing very, very well, Russia start to do well. I think Turkey and Middle East, just wait and see, right? So that – if you think about growth rates there. I would say if you go to developing countries in Asia, of course, the big driver there will be China. We see China next year very much like this year, right? So for us, that would be mid to high single growth rate – low to mid-single as we look for the year. We don’t see any change there, by definition. And then I will say Latin America, we believe will be very much like this year. I think Brazil, which we also had yesterday interaction with here a couple of weeks ago. Brazil will take another year before they are coming back to growth. So I think the whole Turkey, Middle East is something that will temper that part, but you will see more growth in India, you will see more growth in Russia, you will see more growth in Latin America, generally speaking.

And what is – just as a follow-up on FX. So you are still a $3.5 billion, I think you said net exporter. I think you used to be a $5 billion net exporter maybe when you took the job, somewhere around there, but what’s kind of your FX mitigation strategy? I mean, do you ramp up production in EM and Western Europe or are the products you are exporting just happen to be things that structurally need to be exported?

Yes, Scott. I will take that piece. So yes, we have brought down our net exports as we continue to shift our manufacturing and align it a little more closely with our customers. We are still a net exporter out of the U.S. of approximately $3.5 billion. That will – we don’t see that becoming zero and there is a few reasons. One is we have a very established manufacturing base in the U.S. that’s highly productive and we want to continue to leverage the capabilities there. Second, from a intellectual property protection standpoint there are some things we feel more comfortable having it manufactured in the United States. From – but to the heart of your first part of your question on FX management, one part of that is as we have been shifting and aligning our manufacturing, getting it closer to our customers, that gives us the benefit of better servicing our customers and giving some natural FX hedging for us. So that’s part of our strategy. The part we can’t naturally offset, there is a portion that we in developing markets we can often offset with pricing to adjust and then the rest of that we go use financial hedging to diminish some of the short-term exposure for that. So that’s largely unchanged from our posture over the last several years and that continues to be our stance going forward.

Cliff Ransom?

Thank you very much. Just a question for some of the segment heads, can you talk a little bit about the flow of information in your strategic planning process from you to your – the people that report to you in the next layer, how does it get to the bottom and then how do you get feedback from the bottom back up?

Okay. So I mean that’s – I think Mike Roman can – Mike Roman is a good candidate to talk about that.

Coming out of the corporate strategy not too many years ago, so I would say our focus is really getting focused on simple set of priorities that we are driving our strategic plan. And they are very much aligned with what you saw as we think about how we are building foundation for growth in 2017. And in our process of putting together a strategic plan, we engage our entire organization globally. Our sales force, our technical service people, everybody around the world is part of that. So it’s not develop the strategic plan at the center and drive it out into the global organization. It’s develop a strategic plan with input from those sources that are many times furthest removed from the center and then bringing back to them, I think a very clear and simple and aligned set of priorities that we can drive. And then we bring them to life with what we do as part of our ongoing programs and priorities. It’s always in that context of the strategic plan. I think we had a great improvement this year with our overall planning process. At every level, we introduced workshop kind of discussions around our strategic plan from the very beginning of our planning process. And that among other things have created a much deeper understanding across the organization about where we are going. So there is a number of changes and improvements we are making, but I think that it really is a team sport and it lives as we go forward. It’s not an event and something that goes onto the shelf. It’s what we live day in and day out.

I think – so one change we made, I think 2 years ago was actually to include sales reps globally in the process. So up to that point, they were – they did not give any input relative to the process. So we changed that and it’s a very simple format, but we engaged them in order for them to be able to give input of what they see in the market etcetera. So we feel good about that and because they will maybe see things that we, of course not can see it they had. So we have taken that step forward which I think is an important step forward.

John Inch.

Inge, at the March you are ahead, electronics and energy, your 5-year growth targets, you presented zero to 4% I know I asked, a couple of other people asked and you said zero would be pretty bad, I think that was a direct quote. And then...

In the 5-year plan, yes.

In the 5-year plan, so a year ago, you gave a flat guidance for electronics and energy and you woefully missed it and this year, you are actually giving an even more negative guide for it and I am trying to understand what is the strategic playbook, I am presuming you probably can’t sell the business because its competencies are intertwined within the rest of the organization, is there something else – number one, I guess why do you have the confidence that it’s not a repeat of 2017 – of 2016, is it just comparisons or what are you seeing. And number two, what can you do about this business, can you do M&A to it, can you just rapidly change pricing models, what’s sort of the playbook after 2 years, to the 5-year plan?

Yes. Well, I think we all can agree if you have a business that over the years are dilutive to your growth and are flat to down, you have to say, yes, that’s not the best. But if you – I hope you could see today with Jim Bauman’s presentation, what he had laid out, there are some fantastic opportunities as you move ahead. And I think it’s like to diversify the business as well. So you have both – in energy, we have good opportunities for us moving ahead. And if you think about the energy space, it’s almost like the core business of 3M. If you look upon electronics, due to technology conversion, from time-to-time, there will be a challenge as that business move forward. But it is a fantastic business for us as we, as I said earlier, can build it out to other segments around the world and connect it to our businesses. So the question of, can you do something there, I am committed to that business. I believe in that business long-term. There is no doubt for me that we have a very strong position moving forward and it’s based on our technology platforms. And much more will come. I think sometime we all are thinking very short-term, of course relative to some applications you hear now. But for me, that’s only to use the microscope. I would like to use the telescope relative to see where can we position ourselves as we move forward. And you can see that business now in terms of consolidation and margin expansion, the business is smaller, but it’s much more profitable than it was 4 years, 5 years ago. And you are coming to a point where I say that now you move forward when you feel now I have grips relative to our portfolio where we can win, then you can become offensive again and it could be through an acquisition. It could be through an acquisition. But I am also honest when I say, I am not there yet. I am not there yet in terms of making sure consolidation is right and we find the right application as we move ahead. I think that – personally, Jim laid out very well today all the stacks we have in devices, where some believe we have nothing. We have a lot of applications in every device and we are type of trapped, as always relative to the end demand in the market. But answer to the question, this is a very good platform for us to move ahead on as we go into ‘17 and beyond, right. But I think that business is for me, I look – if we underwrite 20% operating income, shifting the portfolio as we go and then see something in the telescope that is much stronger, that’s for me, the business that I would like to lead for the future.

Could you just as a follow-up, could you talk about Mexico and there are sort of a couple of aspects to the question, one what’s the scope of your operations there and number two...

3% of the total enterprise.

Had 3M been looking to, as many of U.S. companies have been, prospectively begin to move more of their ops there, consequently you would have perhaps underinvested in certain plants and other ops that would have been just slated for mothballing and moved down and so obviously now, we have this regime change, do you in fact have to go back to these North American plants and say, fine, we can’t politically or whatever move them to Mexico, but we are going to double down in automation or our investments or something in terms of – it doesn’t sound like that’s a runway based on your CapEx plans, but...?

Yes. No, we have not done that yet. And I don’t know if we will. Go back to our strategy, which is the localization strategy, right. That’s – so we have invested in Mexico for many, many years based on the local market in Mexico. That’s what we are doing. If there are any manufacturing capabilities there for things that will be exported out, it’s because we are following the supply chain of our customers. So we have automotive customers that are in some parts of the world, if that is in France or if it’s in Japan or if it’s in Mexico and they demand a fast respond from us, we will be there. But so customer is number one for us. And if we would like to serve them, we – they demand the investment of us to be at certain places. So I think that’s the answer to it.

Shannon O’Callaghan. Shannon O’Callaghan: Yes. Thanks. Maybe a follow-up Inge, to the telescope point there on electronics, assuming the LCD to OLED shift continues, when do these other opportunities become big enough to offset that and get the business to actually grow, whether it’s emerging, cooling or these other things? And what’s the barrier to those? I mean, it looks like the growth opportunities markets, is great. What’s the barrier to it really taking off for you? Is there still a cost barrier in terms of what you are making to gain wider adoption or – so what’s the barrier? And then when does the tipping point come to offset OLED?

Yes. I think for – and Jim will comment on this as well, of course. But if you look upon it, there is some of those business models that are spec-in and it take a little bit longer in the process that Jim will talk about. But the barrier is not, I will say, cost by definition. It’s more maybe timing relative to get the spec in, because some of them are really long projects run into the energy and utility please, right. On the electronic part of it, it’s basically to be able to spec in and design in as you go in order for it to be bigger. So I don’t know Jim, do you like to make some comments?

Yes. Thanks, Shannon. So, I think our focus on the core in the near term and the strength of what we have there, we will continue to build on it. Now with respect to some of those advanced technologies, I think part of its market adoption in terms of what I described and part of it is probably centered on – if you caught it, it’s a – there are some longer cycle businesses automotive electrification as an example. Our spec-in today maybe realized in 18 to 24 months maybe even longer depending on what the model expands to. So I think there is a part of that. So for us, it’s really concentrating on where we have strength in the core, both in electronics and energy migrating into the these advanced technologies, which maybe have a little bit longer cycle time, faster growing and we can continue to build on those. That’s our direction. Shannon O’Callaghan: Inge, maybe just one clarification on the healthcare turn, it sounds – I mean, some of the pressures there last quarter were Turkey and Brazil. It sounds like you are still pretty cautious on those. So is the turn in 2Q mainly getting through the oral care pressure or what else generates that turn after 1Q ‘17 in healthcare?

No, I think it’s not true. I think generally speaking, when you think about this supply chain also in healthcare consumables that type of – in the distribution system just became careful as we move ahead. And so oral care is one, but you have consumables into healthcare, where I think they made sure that they did and we are sitting with too much inventory as they end the year and move into the next one. So you take infection prevention and wound management, etcetera. It’s something in the logistics – logistic and supply chain system that’s just temporary.

Steve Winoker.

Thanks. Nick, you keep taking up leverage – incremental leverage every year, but the absolute levels are still pretty low for a company that generates the amount of cash that you guys do. Where are you headed with an optimal capital structure? What is the optimal capital structure for the company?

In March of this year, Steve, we laid out over the 5 years that we saw for our capital structure as well as for our capital allocation plans, us adding, over the course of 5 years, between $10 billion and $15 billion of leverage to our balance sheet. That puts us at the capital structure that we see ourselves targeting. Now that’s in the world as it existed in March. It’s still probably a good, good vision of what we think that capital structure looks like, but that’s the range of where we think we are headed.

What would it take you to push that more aggressively?

What would cause us to go outside that balance? The presence of a large, strategic acquisition opportunity would cause us to re-look at that and cause us to look at added leverage potentially even a credit rating downgrade for that. It would have to be something on that scale. It’s likely not going to be investments in our organic business or share buybacks that would cause us to rethink that capital structure strategy we laid out.

Okay. Inge, I guess, if we take R&D as a percent of sales back to the ‘90s, that’s probably when you peaked out at north of 7%. You are approaching 6% again right now. You are spending what sounds like a large absolute number, but maybe not relative to the size of the company. My question is given that innovation as you say is the lifeblood of the company, what’s stopping you from investing more and getting – and are you starting to see any results from the prior breakthrough investments that you have been talking about? You had some good examples up there. But I guess, my – if I look at the world’s – some of the world’s most innovative companies, sometimes there is a constraint to that spending. And given your margin levels, I just – it would challenge you. Why not? What stops you from taking that number higher?

I think when you are referring to 7% plus, I think that’s also when we had pharmaceutical as part of our business. So, you have to think about it from there. There is two industries, generally speaking, that is on the higher end of research and development: pharmaceutical and electronics. Those are on the higher end. And in our business, in fact, in electronic, as a percentage that is higher and so has healthcare. So, it’s actually more in those spaces. I think that – I am looking for really making sure that we get out efficiency and productivity from research and development. And will I be willing to spend more than 6%? Yes, if there is really good programs that will be presented, we will do it. And the move from 5.5% to 6% was related to, I would say, investment more in disruptive technologies. And I think from the beginning, we had 30 programs there. And as you know, when you are going to disruptive technologies, some of them are riskier and it takes longer time. I am generally speaking pleased with the outcome of research and development. But my point is also to say, I would like to – I would like us to grow faster and more organically, because I know that is the most effective model to do things as we move ahead. I don’t know if there is a specific target in terms of what you need to have for spending. We have measured NPVI, New Product Vitality Index, for a long time. And that is an indication, for me, of you do well or not and we are 30% plus of that. So you think about it as 3M that you have one-third of your business today that did not exist 5 years ago in terms of new product. I think that is acceptable, to be honest. I think in terms of you go after growth, there is a couple of things you have to address. You have to address organic local currency growth. You have also to address erosion. So you have erosion in the business. And if you can attack erosion and get 1% or 2% less erosion in a year, that’s 1% to 2% growth for you. So, will we invest more? Yes. If good programs are coming our way where we have high credibility in them, I will invest in them. And I think the best probability for us there is actually to do something coming out from customer-inspired innovation. So, big programs very specifically into end customers, where we can work for them, I am willing to invest, no doubt.

Nigel Coe.

Thanks. I wanted to go back to the $0.10 to $0.15 from raw materials in the bridge. You mentioned I think Nick that you are getting lower prices from your suppliers. And I am just wondering what’s causing the lower prices from suppliers. Is it consolidation of the supply chain? And what could change that dynamic and how much of this is actually sort of an indirect benefit from ERP? Are we seeing – are we getting better lens in the supply chain and therefore this is more of an ERP benefit?

So Nigel, of that $0.10 to $0.15, there is almost none of that coming from outright market price reductions. Almost all of that $0.10 to $0.15 is coming through what I will characterize as 3M-initiated actions. There is a portion of it and I am estimating as I say this, Nigel, up to a third of that, that is coming through our own ability to – with better visibility being negotiating and leveraging the full scale of 3M. So I could attribute some of that to what the progress we are making on our collective business transformation. It’s not included in the savings Julie is talking about, but some of that is currently part of as we become a better global sourcing organization and leveraging the full power of 3M’s volume of what we are purchasing. That’s a portion of it. But a bigger portion of it, Nigel, is coming from our own efforts, commodity by commodity, looking at is there a way to optimize the way we are making this product and in some cases, substituting out one raw material for another. It’s project by project and there is hundreds or thousands of them going on in our company to look at ways there to optimize. That’s the majority of the savings that we are seeing and then projecting in 2017.

Okay, that’s helpful. I apologize for asking the question on tax reform. I know it’s very early days, but border adjustments, it’s obviously part of the mix on reform. As a net exporter from the U.S., it sounds like that might benefit you, but what about the other side of the ledger? I mean, how much of your raw mats are actually imported and how do you think about how that could play out?

Yes. Nigel, there is three points on the border adjustment portion. One is, yes, we are a net exporter. So that clearly plays to our favor with the current way border adjustment is being talked about. Second is commodities and the movement of raw materials when we buy them in the U.S. There is not a material amount of commodities that we are bringing over the border into the U.S. Much of how we manufacture is about often wanting to have our commodities sourced locally. And so that’s why there’s not a lot that crosses the border. The third point is our own strategy around intellectual property. 3M’s intellectual property is owned in the United States. And then under the current discussions around border adjustment that also would be a benefit for 3M. But as you started out saying, it’s early.

Well, to source locally is very important, right? We can – if we think about any model, if you move stuff to certain places, if you still have to ship raw material, it’s very, very costly.

Deane Dray.

Thank you. First question for Nick, just to clarify your answer to Steve’s question on the potential to lever up for a larger deal, does the current pipeline have any candidates over the near-term, let’s say, that would put you into that position?

Deane, I would say the current pipeline of what I would call likely, I would not say that that’s imminent or likely. Are there things of that size that are in our pipeline that we look at? Yes, they are, but I will not put them right now in the likely camp.

That’s helpful. And then for Inge, maybe comment on the divestiture pipeline. We have seen a few of what would appear to be one-off transactions cross. Are there businesses under strategic review, maybe potential size and timing? And you have used this comment about you may not be the natural owner. Just maybe give us a sense of what that thought process is? Does that also occur when you have a potential buyer on the outside that looks like they will pay a premium?

Yes. Well, first of all, portfolio management is an ongoing process, right? And I would say since we started 2012 with a much clearer understanding on a corporate level relative to our portfolio, we have done a decent job relative to both businesses that left us and that we added into the company. When we started the process, there was an – what we call an under strategic review was sales revenue of $2.5 billion. That is down today to couple of hundreds of millions. And in some cases, it’s not a business standalone, it’s product lines in different divisions that are there that are maybe underperforming relative to the company. So then you just drive them relative to improvements. Now coming back to your question – and I think this is important relative to the four fundamental strengths of 3M: technology, manufacturing, global reach and brand equity. If you have businesses that are not – cannot capitalize on that vertical integrating model fully, then that is the question to say, can we really continue to drive that business effectively inside the whole 3M? And if you are not you don’t need to be so-called green in four elements. But if you are not green in 2.5 to 3, you have had difficult time to keep pace with 3M’s performance. Now our performance is pretty good, I would say, in terms of your return and your margins, etcetera. But the truth is if you are not able to capitalize on many of those four fundamentals, you are not successful inside of 3M. That is also to say, when you make an acquisition, no one is coming today to me and talking about an acquisition without knowing exactly where they are on the portfolio, Heartland or Push Forward and can convince…

And we will wrap up with Julian.

Thanks. Maybe just a couple of quick ones then. One, for Nick, would be around business transformation savings. Do those see a big step up in ‘18 when we are thinking about the phasing of what’s left to gain and also what’s the earnings impact from Identity Management being divested? And then for Jim, just very quickly, $600 million of film sales in your smartphone business, should we assume that those fall at a double-digit rate for the next few years?

Okay. Julian, let me get started on the first two. First of all, on the business transformation savings, we have laid out by 2020 we expect to have between $500 million and $700 million. We started in 2016 with approximately $50 million. And what we laid out today is that we are expecting another $50 million to $100 million on top of that, bringing our cumulative savings from our baseline to now $100 million to $150 million for what we are expecting in ‘17. Our expectation in ‘18, ‘19 and ‘20 is it will continue to show good progress. I’m not going to commit to it being outpaced on it, but it will show a natural progression to us achieving that $500 million to $700 million of savings by 2020. In regards to the Identity Management business, I do want to remind everyone, this deal has not closed and it is subject to regulatory approvals. We are expecting it to close in the first half of the year. At the time it closes, we anticipate that it will generate approximately $0.55 earnings per share benefit for us based on the gain that we will be experiencing. We also, at the same time, anticipate that we will be taking actions directly and indirectly related to this divestiture. And so my request is that we not – that you are not baking this into the estimates for 2017 until we have clarity and certainty for this. And at that time that, that happens, we will then share the full details on the – both the gain side and any actions that we think will offset a portion of that gain.

Okay. Jim?

Yes. And then in regards to the question around the $600 million film in the growth rate, the example I gave was that transition from LCD to OLED and in the 1% to 3% for our particular business, the $50 million to $150 million, would be most aligned to that film segment because of the LCD transition.

Well, first, thank you. We are done with Q&A, Bruce? Okay, alright.

Yes. Yes. Go ahead.

I feel bad. That’s done. Yes. Well, let me then just thank all of you for coming today. On behalf of the 3M team, I hope that we have been able to convey to you that we have a very solid business model. We have a playbook that is well laid out and that is working and we have a very diverse portfolio that is playing very well for us despite the economic cycles in any country. Guidance for 2017, as we say, is 1% to 3% organic local currency growth and EPS guidance of 4% to 8%. So thank you very much for all your help and support and challenges and let’s look forward to a better 2017 that we ever can expect as we sit here today and have a nice holiday. Thank you.

Thank you.