- Aearo Technologies and related entities have voluntarily
initiated chapter 11 proceedings
- 3M has committed $1 billion to fund a trust to resolve all claims
determined to be entitled to compensation
ST.
PAUL, Minn., July 26,
2022 /PRNewswire/ -- 3M
(NYSE: MMM) today announced it is taking action to resolve
litigation related to Combat Arms Earplugs Version 2 ("Combat Arms
Earplugs"). Aearo Technologies and related entities ("Aearo
Technologies"), all of which are wholly-owned 3M subsidiaries, have voluntarily initiated
chapter 11 proceedings seeking court supervision to help establish
a trust – funded by 3M – to
efficiently and equitably resolve all claims determined to be
entitled to compensation.
3M and Aearo Technologies believe
the Combat Arms Earplugs were effective and safe when used
properly, but nevertheless face increasing litigation, including
approximately 115,000 filed claims and an additional 120,000 claims
on an administrative docket as of June 30,
2022. The well-established chapter 11 process is intended to
achieve an efficient and equitable resolution, reduce uncertainty,
and increase clarity for all stakeholders, while reducing the cost
and time that could otherwise be required to litigate thousands of
cases. 3M and its other businesses
have not filed for chapter 11 and will continue to operate as
usual. Aearo Technologies will also continue to operate in the
ordinary course.
"We have great respect for the brave men and women who protect
us, and remain committed to the military as an active partner and
valued customer going forward," said 3M chairman and chief executive officer
Mike Roman. "We determined that
taking this decisive action now will allow 3M and Aearo Technologies to address these claims
in a way that is more efficient and equitable than the current
litigation."
The company believes that, absent the actions taken today, the
claims could take years, if not decades, to litigate on a
case-by-case basis. With this change in strategy, this process is
intended to resolve claims related to Combat Arms Earplugs in a
manner that is more efficient and equitable to all parties.
Announcement Details
- Aearo Technologies was acquired by 3M in 2008 and has since operated as a
wholly-owned subsidiary of 3M.
- 3M has entered into a funding
agreement with Aearo Technologies to establish a trust to resolve
all claims determined to be entitled to compensation, and to
support Aearo Technologies as it continues to operate during the
chapter 11 process.
- The claims largely relate to the previous generation Combat
Arms Earplugs manufactured by Aearo Technologies, as well as
discontinued Aearo Technologies mask and respirator products
utilized to reduce workplace exposure to asbestos, silica, coal
mine dust or occupational dusts.
- Aearo Technologies has indemnified 3M for obligations related to the claims.
- 3M has committed $1 billion to fund the trust, based on the
analysis of an experienced estimator of claims in chapter 11.
- 3M has also committed an
additional $240 million to fund
projected related case expenses.
- 3M will provide additional
funding if required under the terms of the agreement.
As a result, 3M recorded a total
pre-tax charge of $1.2 billion, or
$1.66 per share, and reflected it as
an adjustment in arriving at its results, adjusted for special
items.
Additional Information
In conjunction with the chapter 11 process, Aearo Technologies
will file customary first day motions with the bankruptcy court
seeking authority to continue operating in the normal course of
business, without interruption or disruption to its customers,
vendors, and employees.
The Aearo Technologies chapter 11 cases were filed in the U.S.
Bankruptcy Court for the Southern District of Indiana. Additional information is available
on resolvingearpluglitigation.com and www.3mearplugsfacts.com.
Court filings and information about the chapter 11 cases are
available on a separate website administered by Aearo Technologies'
claims agent, Kroll; information is also available by calling (855)
639-3375 (Toll-Free US/Canada) or
+1 (347) 897-3818 (International); or by emailing
aearotechnologiesinfo@ra.kroll.com.
Advisors
Kirkland & Ellis LLP is serving as legal counsel and
AlixPartners LLP is serving as restructuring advisor to Aearo
Technologies. PJT Partners is serving as financial advisor and
White & Case LLP is serving as legal counsel to 3M.
Planned Spin-Off of Health Care Business
In a separate press release issued today, 3M announced its intent to spin off its Health
Care business, resulting in two world-class public companies well
positioned to pursue their respective growth plans.
To access the press release, please visit our press release page
here.
Q2 2022 Earnings Results and Conference Call
In a separate press release issued today, 3M announced its second-quarter 2022 results and
updated its outlook for the full-year 2022. Please see the
company's second-quarter earnings press release for more
details.
3M will conduct an investor
teleconference at 9 a.m. EDT
(8 a.m. CDT) today. Investors can
access this conference via the following:
- Live webcast at http://investors.3M.com.
- Live telephone:
-
- Call 800-762-2596 within the U.S. or +1 212-231-2916 outside
the U.S. Please join the call at least 10 minutes before the start
time.
- Webcast replay:
- Go to 3M's Investor Relations website at
http://investors.3M.com and click on "Quarterly Earnings."
- Telephone replay:
-
- Call 800-633-8284 within the U.S. or +1 402-977-9140 outside
the U.S. (for both U.S. and outside the U.S., the access code is
21999290). The telephone replay will be available until
11:30 a.m. EDT (10:30 a.m. CDT) on August
1, 2022.
Forward-Looking Statements
This news release contains forward-looking information about
3M's financial results and estimates and business prospects that
involve substantial risks and uncertainties. You can identify these
statements by the use of words such as "anticipate," "estimate,"
"expect," "aim," "project," "intend," "plan," "believe," "will,"
"should," "could," "target," "forecast" and other words and terms
of similar meaning in connection with any discussion of future
operating or financial performance or business plans or prospects.
Among the factors that could cause actual results to differ
materially are the following: (1) worldwide economic, political,
regulatory, capital markets and other external conditions and other
factors beyond the Company's control, including natural and other
disasters or climate change affecting the operations of the Company
or its customers and suppliers; (2) risks related to public health
crises such as the global pandemic associated with the coronavirus
(COVID-19); (3) foreign currency exchange rates and fluctuations in
those rates; (4) liabilities related to certain fluorochemicals,
including lawsuits concerning various PFAS-related products and
chemistries, and claims and governmental regulatory proceedings and
inquiries related to PFAS in a variety of jurisdictions; (5) 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, 2021, as updated by the Company's
Current Report on Form 8-K dated April 26,
2022, and any subsequent quarterly reports on Form 10-Q (the
"Reports"); (6) competitive conditions and customer preferences;
(7) the timing and market acceptance of new product offerings; (8)
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); (9) unanticipated problems or delays
with the phased implementation of a global enterprise resource
planning (ERP) system, or security breaches and other disruptions
to the Company's information technology infrastructure; (10) 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; (11) operational execution, including scenarios
where the Company generates fewer productivity improvements than
estimated; (12) financial market risks that may affect the
Company's funding obligations under defined benefit pension and
postretirement plans; (13) the Company's credit ratings and its
cost of capital; (14) tax-related external conditions, including
changes in tax rates, laws or regulations; (15) matters relating to
the proposed spin-off of the Company's Health Care business,
including whether the transaction will be completed, or if
completed, will be on the expected terms; the risk that the
expected benefits will not be realized; the risk that the costs or
dis-synergies will exceed the anticipated amounts; the ability to
satisfy the various closing conditions; potential business
disruption; the diversion of management time; the impact of the
transaction (or its pendency) on the Company's ability to retain
talent; potential impacts on the Company's relationships with its
customers, suppliers, employees, regulators and other
counterparties; the ability to realize the desired tax treatment
(including whether an Internal Revenue Service private letter
ruling will be sought or obtained); the risk that any consents or
approvals required will not be obtained; risks associated with
financings that may be undertaken and indebtedness that may be
incurred in connection with the transaction; and (16) matters
relating to the voluntary chapter 11 proceedings of the Company's
subsidiary Aearo Technologies and certain of its affiliates (the
"Aearo Entities"), including legal risks related to the chapter 11
proceedings; potential impacts to the Company's reputation and its
relationships with customers, suppliers, employees, regulators and
other counterparties and community members; potential impacts to
the Company's liquidity or results of operations, including risks
related to the amount that will be necessary to fully and finally
resolve all of the Company's obligations to make payments to
resolve such claims under the terms of its funding and
indemnification agreement with the Aearo Entities; and the Aearo
Entities' ability to navigate the chapter 11 proceedings to obtain
approval and consummation of a plan of reorganization. Changes in
such assumptions or factors could produce significantly different
results. A further description of these factors is located in the
Reports under "Cautionary Note Concerning Factors That May Affect
Future Results" and "Risk Factors" in Part I, Items 1 and 1A
(Annual Report) and in Part I, Item 2 and Part II, Item 1A
(Quarterly Reports). The Company assumes no obligation to update
any forward-looking statements discussed herein as a result of new
information or future events or developments.
Investor Contact:
Bruce Jermeland
(651) 733-1807
Diane Farrow
(612) 202-2449
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SOURCE 3M