The Rising Influence of Rising Affluence

[DewDiligence]

3M’s earplug settlement_is_official—NPV=$5.3B pre-tax/$4.0-4.5B after-tax:

https://www.sec.gov/Archives/edgar/data/66740/000006674023000073/a829238kex-991.htm

• 3M will pay the earplug plaintiffs a cumulative $6.0B (consisting of $5B cash and $1B stock) over seven years (2023-2029). These payment obligations have a pre-tax net present value (NPV) of $5.3B (using a 5.6% discount rate).

• The anticipated schedule of settlement payments is set forth in slide #6 of today’s CC slide deck: https://d1io3yog0oux5.cloudfront.net/_301a30c91c73d8aa14cff777dcbd5df5/3m/db/3194/30703/presentation/CAE+Resolution+Presentation.pdf . 3M already reserved $1.1B for this liability, so a new $4.2B pre-tax charge to GAAP earnings will be made in 3Q23.

• 3M expects that the settlement payments will be fully tax-deductible, so the NPV of the settlement payments on an after-tax basis is in the $4.0-4.5B range.

• 3M hopes to recover as much as $1.5B of the settlement amount from liability insurance. Any recovery from insurance will reduce the settlement NPV; in the best-case scenario, the after-tax NPV of the settlement would be approximately $3B.