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3M Company (96OI)

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Tuesday 30 October, 2007

3M Company

3rd Quarter Results - Part 1

3M Company
30 October 2007


                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                   FORM 10-Q



           x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934



               For the quarterly period ended September 30, 2007


                           Commission file number 1-3285


                                   3M COMPANY



State of Incorporation: Delaware   I.R.S. Employer Identification No. 41-0417775


       Principal executive offices: 3M Center, St. Paul, Minnesota 55144


                        Telephone number: (651) 733-1110


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days. Yes  x  . No o.

Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of 'accelerated
filer and large accelerated filer' in Rule 12b-2 of the Exchange Act.

Large accelerated filer x      Accelerated filer o      Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes o. No  x.


     Shares of common stock outstanding at September 30, 2007: 713,228,973.

             This document (excluding exhibits) contains 50 pages.
                 The table of contents is set forth on page 2.
                      The exhibit index begins on page 48.


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                                   3M COMPANY

Form 10-Q for the Quarterly Period Ended September 30, 2007

                               TABLE OF CONTENTS
                                                                                                                  PAGE
PART I             FINANCIAL INFORMATION

ITEM 1.            Financial Statements                                                                               3

                   Index to Financial Statements:
                   Consolidated Statement of Income                                                                   3
                   Consolidated Balance Sheet                                                                         4
                   Consolidated Statement of Cash Flows                                                               5
                   Notes to Consolidated Financial Statements                                                         6
                   Note 1. Basis of Presentation                                                                      6
                   Note 2. Acquisition and Divestitures                                                               7
                   Note 3. Goodwill and Intangible Assets                                                             8
                   Note 4. Restructuring Actions and Other Exit Activities                                           10
                   Note 5. Supplemental Comprehensive Income and Accumulated Other Comprehensive Income (AOCI)       13
                   Information
                   Note 6. Income Taxes                                                                              13
                   Note 7. Derivatives and Other Financial Instruments                                               14
                   Note 8. Marketable Securities                                                                     15
                   Note 9. Long-Term Debt and Short-Term Borrowings                                                  16
                   Note 10. Pension and Postretirement Benefit Plans                                                 17
                   Note 11. Commitments and Contingencies                                                            18
                   Note 12. Management Stock Ownership Program (MSOP) and General Employees' Stock Purchase Plan     22
                   (GESPP)
                   Note 13. Business Segments                                                                        25
                   Note 14. Review Report of Independent Registered Public Accounting Firm                           27
                   Report of Independent Registered Public Accounting Firm                                           28

ITEM 2.            Management's Discussion and Analysis of Financial Condition and Results of Operations             29
                   Index to Management's Discussion and Analysis:
                   Overview                                                                                          29
                   Results of Operations                                                                             31
                   Critical Accounting Estimates                                                                     34
                   Performance by Business Segment                                                                   34
                   Financial Condition and Liquidity                                                                 42
                   Forward-Looking Statements                                                                        45

ITEM 3.            Quantitative and Qualitative Disclosures About Market Risk                                        46

ITEM 4.            Controls and Procedures                                                                           46

PART II            OTHER INFORMATION
ITEM 1.            Legal Proceedings                                                                                 47

ITEM 1A.           Risk Factors                                                                                      47

ITEM 2.            Unregistered Sales of Equity Securities and Use of Proceeds                                       47

ITEM 3.            Defaults Upon Senior Securities                                                                   48

ITEM 4.            Submission of Matters to a Vote of Security Holders                                               48

ITEM 5.            Other Information                                                                                 48

ITEM 6.            Exhibits                                                                                          48



                                       2
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                                                         3M COMPANY

                                                         FORM 10-Q

                                       For the Quarterly Period Ended September 30, 2007

                                               PART I. Financial Information



Item 1. Financial Statements.



Consolidated Statement of Income

(Unaudited)



3M Company and Subsidiaries


                                                              Three months ended             Nine months ended
                                                                 September 30                   September 30
(Millions, except per share amounts)                         2007           2006            2007            2006
Net sales                                                 $     6,177    $     5,858    $     18,256    $     17,141
Operating expenses
Cost of sales                                                   3,240          2,990           9,437           8,551
Selling, general and administrative expenses                    1,174          1,186           3,741           3,691
Research, development and related expenses                        338            340           1,009           1,013
Gain on sale of businesses                                          -              -            (854 )             -
Total                                                           4,752          4,516          13,333          13,255
Operating income                                                1,425          1,342           4,923           3,886

Interest expense and income
Interest expense                                                   53             37             139              84
Interest income                                                   (37 )          (13 )           (94 )           (35 )
Total                                                              16             24              45              49

Income before income taxes and minority interest                1,409          1,318           4,878           3,837
Provision for income taxes                                        433            412           1,586           1,127
Minority interest                                                  16             12              47              35
Net income                                                $       960    $       894    $      3,245    $      2,675

Weighted average common shares outstanding - basic              714.5          745.2           720.7           751.6
Earnings per share - basic                                $      1.34    $      1.20    $       4.50    $       3.56

Weighted average common shares outstanding - diluted            729.9          756.2           734.3           765.1
Earnings per share - diluted                              $      1.32    $      1.18    $       4.42    $       3.50

Cash dividends paid per common share                      $      0.48    $      0.46    $       1.44    $       1.38



The accompanying Notes to Consolidated Financial Statements are an integral part
of this statement.



                                       3
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Consolidated Balance Sheet
(Unaudited)



3M Company and Subsidiaries


                                                                                       Sept. 30          Dec. 31
(Dollars in millions, except per share amounts)                                          2007              2006

Assets
Current assets
Cash and cash equivalents                                                           $        1,675    $        1,447
Marketable securities - current                                                              1,024               471
Accounts receivable - net                                                                    3,703             3,102
Inventories
Finished goods                                                                               1,324             1,235
Work in process                                                                                879               795
Raw materials and supplies                                                                     591               571
Total inventories                                                                            2,794             2,601
Other current assets                                                                         1,204             1,325
Total current assets                                                                        10,400             8,946

Marketable securities - non-current                                                            556               166
Investments                                                                                    295               314
Property, plant and equipment                                                               18,012            17,017
Less: Accumulated depreciation                                                             (11,672 )         (11,110 )
Property, plant and equipment - net                                                          6,340             5,907
Goodwill                                                                                     4,387             4,082
Intangible assets - net                                                                        748               708
Prepaid pension and postretirement benefits                                                    682               395
Other assets                                                                                   947               776
Total assets                                                                        $       24,355    $       21,294

Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings and current portion of long-term debt                         $        2,405    $        2,506
Accounts payable                                                                             1,503             1,402
Accrued payroll                                                                                610               520
Accrued income taxes                                                                           711             1,134
Other current liabilities                                                                    1,912             1,761
Total current liabilities                                                                    7,141             7,323

Long-term debt                                                                               2,824             1,047
Other liabilities                                                                            3,420             2,965
Total liabilities                                                                   $       13,385    $       11,335

Commitments and contingencies (Note 11)

Stockholders' equity
Common stock par value, $.01 par value, 944,033,056 shares issued                                9                 9
Additional paid-in capital                                                                   2,731             2,484
Retained earnings                                                                           19,852            17,933
Treasury stock, at cost; 230,804,083 shares at September 30, 2007; 209,670,254             (10,173 )          (8,456 )
shares at Dec. 31, 2006
Unearned compensation                                                                          (96 )            (138 )
Accumulated other comprehensive income (loss)                                               (1,353 )          (1,873 )
Stockholders' equity - net                                                                  10,970             9,959
Total liabilities and stockholders' equity                                          $       24,355    $       21,294



The accompanying Notes to Consolidated Financial Statements are an integral part
of this statement.



                                       4
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Consolidated Statement of Cash Flows
(Unaudited)



3M Company and Subsidiaries


                                                                                            Nine months ended
                                                                                              September 30
(Dollars in millions)                                                                    2007               2006

Cash Flows from Operating Activities
Net income                                                                          $        3,245     $        2,675
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization                                                                  796                728
Company pension and postretirement contributions                                              (373 )             (339 )
Company pension and postretirement expense                                                     188                299
Stock-based compensation expense                                                               182                162
Gain from sale of businesses                                                                  (854 )                -
Deferred income tax provision                                                                 (179 )             (111 )
Excess tax benefits from stock-based compensation                                              (65 )              (31 )
Changes in assets and liabilities
Accounts receivable                                                                           (458 )             (384 )
Inventories                                                                                    (89 )             (375 )
Accounts payable                                                                                60                 71
Accrued income taxes (current and long-term)                                                    85               (138 )
Product and other insurance receivables and claims                                             145                 51
Other - net                                                                                     36                (91 )
Net cash provided by operating activities                                                    2,719              2,517

Cash Flows from Investing Activities
Purchases of property, plant and equipment (PP&E)                                           (1,031 )             (763 )
Proceeds from sale of PP&E and other assets                                                     90                 53
Acquisitions, net of cash acquired                                                            (255 )             (468 )
Purchases of marketable securities and investments                                          (6,967 )           (2,442 )
Proceeds from sale of marketable securities and investments                                  5,541              2,034
Proceeds from maturities of marketable securities                                              547                157
Proceeds from sale of businesses                                                               897                  -
Net cash used in investing activities                                                       (1,178 )           (1,429 )

Cash Flows from Financing Activities
Change in short-term debt - net                                                               (144 )            1,293
Repayment of debt (maturities greater than 90 days)                                         (1,071 )             (151 )
Proceeds from debt (maturities greater than 90 days)                                         2,843                277
Purchases of treasury stock                                                                 (2,756 )           (2,021 )
Reissuances of treasury stock                                                                  689                426
Dividends paid to stockholders                                                              (1,039 )           (1,037 )
Distributions to minority interests                                                            (20 )              (38 )
Excess tax benefits from stock-based compensation                                               65                 31
Other - net                                                                                     (4 )              (18 )
Net cash used in financing activities                                                       (1,437 )           (1,238 )

Effect of exchange rate changes on cash and cash equivalents                                   124                 77

Net increase (decrease) in cash and cash equivalents                                           228                (73 )
Cash and cash equivalents at beginning of year                                               1,447              1,072
Cash and cash equivalents at end of period                                          $        1,675     $          999



The accompanying Notes to Consolidated Financial Statements are an integral part
of this statement.



                                       5
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3M Company and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)



NOTE 1. Basis of Presentation



The interim consolidated financial statements are unaudited but, in the opinion
of management, reflect all adjustments necessary for a fair statement of the
Company's consolidated financial position, results of operations and cash flows
for the periods presented. These adjustments consist of normal, recurring items.
The results of operations for any interim period are not necessarily indicative
of results for the full year. The interim consolidated financial statements and
notes are presented as permitted by the requirements for Quarterly Reports on
Form 10-Q.



As described in 3M's Current Report on Form 8-K dated May 25, 2007 (which
updated 3M's 2006 Annual Report on Form 10-K) and 3M's Quarterly Report on Form
10-Q for the period ended March 31, 2007, during the first quarter of 2007 the
Company reorganized its business segments (refer to Note 13). This Quarterly
Report on Form 10-Q should be read in conjunction with the Company's
consolidated financial statements and notes included in its Current Report on
Form 8-K dated May 25, 2007.



Significant Accounting Policies



Earnings per share:  The difference in the weighted average shares outstanding
for calculating basic and diluted earnings per share is attributable to the
dilution associated with the Company's stock-based compensation plans. Certain
Management Stock Ownership Program (MSOP) options outstanding were not included
in the computation of diluted earnings per share because they would not have had
a dilutive effect (10.0 million average options for the three months ended
September 30, 2007; 24.0 million average options for the nine months ended
September 30, 2007; 36.0 million average options for the three months ended
September 30, 2006; 30.2 million average options for the nine months ended
September 30, 2006). The conditions for conversion related to the Company's '
Convertible Notes' were not met (refer to 3M's Current Report on Form 8-K dated
May 25, 2007, Note 10 to the Consolidated Financial Statements, for more
detail); accordingly, there was no impact on 3M's diluted earnings per share. If
the conditions for conversion are met, 3M may choose to pay in cash and/or
common stock; however, if this occurs, the Company has the intent and ability to
settle this debt security in cash. The computations for basic and diluted
earnings per share follow:



Earnings Per Share Computations


                                                  Three months ended        Nine months ended
                                                     September 30              September 30
(Amounts in millions, except per share            2007         2006         2007         2006
amounts)
Numerator:
Net income                                      $     960    $     894    $   3,245    $   2,675

Denominator:
Denominator for weighted average common             714.5        745.2        720.7        751.6
shares outstanding - basic

Dilution associated with the Company's               15.4         11.0         13.6         13.5
stock-based compensation plans

Denominator for weighted average common             729.9        756.2        734.3        765.1
shares outstanding - diluted

Earnings per share - basic                      $    1.34    $    1.20    $    4.50    $    3.56
Earnings per share - diluted                         1.32         1.18         4.42         3.50



New Accounting Pronouncements



In February 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 155, 'Hybrid Instruments.'  SFAS No. 155 amends SFAS No. 133 and SFAS
No. 140, 'Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities.' SFAS No. 155 also resolves issues addressed in
Statement 133 Implementation Issue No. D1, 'Application of Statement 133 to
Beneficial Interests in Securitized Financial Assets.' SFAS No. 155: a) permits
fair value remeasurement for any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation, b) clarifies which
interest-only strips and principal-only strips are not subject to the
requirements of SFAS No. 133, c) establishes a requirement to evaluate interests
in securitized financial assets to identify interests that are freestanding
derivatives or that are hybrid financial instruments that contain an embedded
derivative requiring bifurcation, d) clarifies that concentrations of credit
risk



                                       6
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in the form of subordination are not embedded derivatives, and e) amends SFAS
No. 140 to eliminate the prohibition on a qualifying special purpose entity from
holding a derivative financial instrument that pertains to a beneficial interest
other than another derivative financial instrument. The Company adopted SFAS No.
155 effective January 1, 2007; however, there was no material impact.



In June 2006, the FASB issued Interpretation No. 48 (FIN 48), 'Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.' This
interpretation was effective as of January 1, 2007. Refer to Note 6 for
additional information concerning this standard.



In September 2006, the FASB issued SFAS No. 157, 'Fair Value Measurements.' SFAS
No. 157 establishes a single definition of fair value and a framework for
measuring fair value, sets out a fair value hierarchy to be used to classify the
source of information used in fair value measurements, and requires new
disclosures of assets and liabilities measured at fair value based on their
level in the hierarchy. SFAS No. 157 is effective for all fiscal years beginning
after November 15, 2007 (January 1, 2008 for 3M) and is to be applied
prospectively. The Company is currently evaluating the impacts and disclosures
of this standard, but would not expect SFAS No. 157 to have a material impact on
3M's consolidated results of operations or financial condition.



In February 2007, the FASB issued SFAS No. 159, 'The Fair Value Option for
Financial Assets and Financial Liabilities'. SFAS No. 159 permits an entity to
choose, at specified election dates, to measure eligible financial instruments
and certain other items at fair value that are not currently required to be
measured at fair value. An entity shall report unrealized gains and losses on
items for which the fair value option has been elected in earnings at each
subsequent reporting date. Upfront costs and fees related to items for which the
fair value option is elected shall be recognized in earnings as incurred and not
deferred. SFAS No. 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. SFAS No. 159
is effective for financial statements issued for fiscal years beginning after
November 15, 2007 (January 1, 2008 for 3M) and interim periods within those
fiscal years. At the effective date, an entity may elect the fair value option
for eligible items that exist at that date. The entity shall report the effect
of the first remeasurement to fair value as a cumulative-effect adjustment to
the opening balance of retained earnings. The Company is currently evaluating
the impacts and disclosures of this standard, but would not expect SFAS No. 159
to have a material impact on 3M's consolidated results of operations or
financial condition.



In June 2007, the FASB's Emerging Issues Task Force reached a consensus on EITF
Issue No. 07-3, 'Accounting for Nonrefundable Advance Payments for Goods or
Services to Be Used in Future Research and Development Activities' that would
require nonrefundable advance payments made by the Company for future R&D
activities to be capitalized and recognized as an expense as the goods or
services are received by the Company. EITF Issue No. 07-3 is effective for 3M
with respect to new arrangements entered into beginning January 1, 2008. The
Company is currently evaluating the impacts and disclosures of this standard,
but would not expect EITF Issue No. 07-3 to have a material impact on 3M's
consolidated results of operations or financial condition.



NOTE 2. Acquisitions and Divestitures



Divestitures:

In January 2007, 3M completed the sale of its global branded pharmaceuticals
business in Europe to Meda AB. 3M received proceeds of $817 million for this
transaction and recognized, net of assets sold, a pre-tax gain of $786 million
(recorded in the Health Care segment) in the first quarter of 2007. In December
2006, 3M completed the sale of its global branded pharmaceuticals business in
the United States, Canada, and Latin America region and the Asia Pacific region,
including Australia and South Africa. In connection with all of these
transactions, 3M's Drug Delivery Systems Division (DDSD) entered into agreements
whereby it became a source of supply to the acquiring companies. Because of the
extent of 3M cash flows from these agreements in relation to those of the
disposed-of businesses, the operations of the branded pharmaceuticals business
are not classified as discontinued operations.



In June 2007, 3M completed the sale of its Opticom Priority Control Systems and
Canoga Traffic Detection businesses to TorQuest Partners Inc., a Toronto-based
investment firm. 3M received proceeds of $80 million for this transaction and
recognized, net of assets sold, transaction and other costs, a pre-tax gain of
$68 million (recorded in the Display and Graphics segment) in the second quarter
of 2007.



                                       7
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Acquisitions:

During the nine months ended September 30, 2007, the purchase price paid for
business combinations totaled $255 million in cash, net of cash acquired, plus
approximately 150 thousand shares of 3M common stock, which had a market value
of approximately $13 million.



The nine business combinations closed during the first nine months of 2007 are
summarized as follows:



1) In February 2007, 3M (Industrial and Transportation Business) purchased
certain assets of Accuspray Application Technologies Inc., a manufacturer of
spray paint equipment with a wide array of spray guns for architectural,
automotive refinishing, industrial and woodworking applications.

2) In February 2007, 3M (Industrial and Transportation Business) purchased
Sealed Air Corporation's 50 percent interest in PolyMask Corporation, a joint
venture between 3M and Sealed Air that produces protective films. The
acquisition of Sealed Air's interest results in 100 percent ownership by 3M.

3) In February 2007, 3M (Health Care Business) purchased 100 percent of the
outstanding shares of Acolyte Biomedica Ltd., a Salisbury, U.K.-based provider
of an automated microbial detection platform that aids in the rapid detection,
diagnosis, and treatment of infectious diseases.

4) In May 2007, 3M (Safety, Security and Protection Services Business) purchased
100 percent of the outstanding shares of E Wood Holdings PLC, a North Yorkshire,
UK-based manufacturer of high performance protective coatings for oil, gas,
water, rail and automotive industries.

5) In May 2007, 3M (Electro and Communications Business) purchased certain
assets of Innovative Paper Technologies LLC, a manufacturer of inorganic-based
technical papers, boards and laminates for a wide variety of high temperature
applications and Powell LLC, a supplier of non-woven polyester mats for the
electrical industry.

6) In May 2007, 3M (Health Care Business) purchased certain assets of Articulos
de Papel DMS Chile, a Santiago, Chile-based manufacturer of disposable surgical
packs, drapes, gowns and kits.

7) In June 2007, 3M (Industrial and Transportation Business) purchased certain
assets of Diamond Productions Inc., a manufacturer of superabrasive diamond and
cubic boron nitride wheels and tools for dimensioning and finishing
hard-to-grind materials in metalworking, woodworking and stone fabrication
markets in exchange for approximately 150 thousand shares of 3M common stock,
which had a market value of $13 million at the acquisition measurement date and
was previously held as 3M treasury stock.

8) In July 2007, 3M (Safety, Security and Protection Services Business)
purchased 100 percent of the outstanding shares of Rochford Thompson Equipment
Ltd., a manufacturer of optical character recognition passport readers used by
airlines and immigration authorities, headquartered in Newbury, U.K.

9) In August 2007, 3M (Health Care Business) purchased certain assets of
Neoplast Co. Ltd., a manufacturer/distributor of surgical tapes and dressings
and first aid bandages for both the professional and consumer markets across the
Asia Pacific region.



Purchased identifiable intangible assets for the nine business combinations
closed during the nine months ended September 30, 2007 totaled $53 million and
will be amortized on a straight-line basis over lives ranging from 2 to 10 years
(weighted-average life of seven years). Pro forma information related to the
above business combinations is not included because the impact on the Company's
consolidated results of operations is not considered to be material. In-process
research and development charges associated with these business combinations
were not material.



In addition to the business combinations above, 3M periodically acquires certain
tangible and/or intangible assets and purchases interests in certain enterprises
that do not otherwise qualify for accounting as business combinations. These
transactions are largely reflected as additional asset purchase and investment
activity.



NOTE 3. Goodwill and Intangible Assets



Goodwill is the excess of cost of an acquired entity over the amounts assigned
to assets acquired and liabilities assumed in a business combination. Goodwill
is not amortized. As discussed in Note 13, 3M made certain changes to its
business segments effective in the first quarter of 2007, which are reflected in
the goodwill balances presented below. For those changes that resulted in
reporting unit changes, the Company applied the relative fair value method to
determine the impact to reporting units. SFAS No. 142 requires that goodwill be
tested for impairment at least annually and when reporting units are changed.
During the first quarter of 2007, the Company completed its assessment of any
potential goodwill impairment under this new structure and determined that no
impairment existed.



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In the first nine months of 2007, goodwill related to business combinations
totaled $170 million, $18 million of which is deductible for tax purposes.
Translation and other in the following table primarily includes the impact of
changes in foreign currency exchange rates on goodwill balances. The goodwill
balance by business segment as of December 31, 2006 and September 30, 2007,
follow:



Goodwill


                                            Dec. 31,                                     Sept. 30,
                                              2006        Acquisition    Translation       2007
(Millions)                                   Balance       activity       and other       balance
Industrial and Transportation              $     1,302    $        40    $        47    $     1,389
Health Care                                        713             31             37            781
Display and Graphics                               886              -              5            891
Consumer and Office                                 89              -              3             92
Safety, Security and Protection                    525             73             23            621
Services
Electro and Communications                         567             26             20            613
Total Company                              $     4,082    $       170    $       135    $     4,387



Acquired Intangible Assets



The carrying amount and accumulated amortization of acquired intangible assets
as of September 30, 2007, and December 31, 2006, follow:


                                                       Sept. 30        Dec. 31
(Millions)                                               2007            2006
Patents                                              $        439    $        419
Other amortizable intangible assets (primarily                731             641
tradenames and customer related intangibles)
Non-amortizable intangible assets (tradenames)                 72              68
Total gross carrying amount                          $      1,242    $      1,128

Accumulated amortization - patents                           (295 )          (266 )
Accumulated amortization - other                             (199 )          (154 )
Total accumulated amortization                               (494 )          (420 )
Total intangible assets - net                        $        748    $        708



Amortization expense for acquired intangible assets for the three-month and
nine-month periods ended September 30, 2007 and 2006 follows:


                              Three months ended        Nine months ended
                                 September 30             September 30
(Millions)                     2007        2006        2007          2006
Amortization expense         $      22   $      21   $      64    $       50



The table below shows expected amortization expense for acquired intangible
assets recorded as of September 30, 2007:


                          Fourth
                         Quarter                                                  After
(Millions)                 2007       2008       2009       2010       2011       2012
Amortization expense     $     23    $    82    $    82    $    76    $    68    $   345



The expected amortization expense is an estimate. Actual amounts of amortization
expense may differ from estimated amounts due to additional intangible asset
acquisitions, changes in foreign currency exchange rates, impairment of
intangible assets, accelerated amortization of intangible assets and other
events.



                                       9
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NOTE 4. Restructuring Actions and Other Exit Activities



Restructuring Actions:

During the fourth quarter of 2006 and the first six months of 2007, management
approved and committed to undertake the following restructuring actions:

•                  Pharmaceuticals business actions - employee-related, asset
impairment and other costs pertaining to the Company's exit of its branded
pharmaceuticals operations. These costs included severance and benefits for
pharmaceuticals business employees who are not obtaining employment with the
buyers as well as impairment charges associated with certain assets not
transferred to the buyers.

•                  Overhead reduction actions - employee-related costs for
severance and benefits, costs associated with actions to reduce the Company's
cost structure.

•                  Business-specific actions - employee-related costs for
severance and benefits, fixed and intangible asset impairments, certain
contractual obligations, and expenses from the exit of certain product lines.



The Company adjusted the 2006 restructuring actions cost estimates in the first,
second and third quarters of 2007. Components of these restructuring actions
include:



Restructuring Actions


                                                    Employee-       
                                                    Related       
                                                      Items         Contract
(Millions)                                            And         Terminations       Asset 
                                                    Benefits       and Other      Impairments       Total
Accrued liability balances as of December 31,
2006:
Pharmaceuticals business actions                   $        78    $          6    $         -    $        84
Overhead reduction actions                                 100               -              -            100
Business-specific actions                                   30               8              -             38
Total accrued liability balance                    $       208    $         14    $         -    $       222

Expenses (credits) incurred in first half 2007:
Pharmaceuticals business actions                   $       (10 )  $         (4 )  $         -    $       (14 )
Overhead reduction actions                                   5               -              -              5
Business-specific actions                                   15               4             35             54
First six months 2007 expense                      $        10    $          -    $        35    $        45

Non-cash (charges) credits in first half 2007:
Pharmaceuticals business actions                   $       (21 )  $          4    $         -    $       (17 )
Overhead reduction actions                                  (5 )             -              -             (5 )
Business-specific actions                                  (10 )            (4 )          (35 )          (49 )
First six months 2007 non-cash                     $       (36 )  $          -    $       (35 )  $       (71 )

Cash payments in first half 2007:
Pharmaceuticals business actions                   $       (24 )  $         (6 )  $         -    $       (30 )
Overhead reduction actions                                 (71 )             -              -            (71 )
Business-specific actions                                  (15 )             -              -            (15 )
First six months 2007 cash payments                $      (110 )  $         (6 )  $         -    $      (116 )

Accrued liability balances as of June 30, 2007:
Pharmaceuticals business actions                   $        23    $          -    $         -    $        23
Overhead reduction actions                                  29               -              -             29
Business-specific actions                                   20               8              -             28
Total accrued liability balance                    $        72    $          8    $         -    $        80



                                       10
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Restructuring Actions


                                                    Employee-       
                                                    Related       
                                                      Items         Contract
(Millions)                                            and         Terminations       Asset 
                                                    Benefits       and Other      Impairments       Total
Expenses (credits) incurred in Q3 2007:
Pharmaceuticals business actions                   $         -    $          -    $         -    $         -
Overhead reduction actions                                  (1 )             -              -             (1 )
Business-specific actions                                   (2 )             -              -             (2 )
Q3 2007 expense                                    $        (3 )  $          -    $         -    $        (3 )

Cash payments in Q3 2007:
Pharmaceuticals business actions                   $       (12 )  $          -    $         -    $       (12 )
Overhead reduction actions                                 (14 )             -              -            (14 )
Business-specific actions                                   (9 )             -              -             (9 )
Q3 2007 cash payments                              $       (35 )  $          -    $         -    $       (35 )

Accrued liability balances as of September 30,
2007:
Pharmaceuticals business actions                   $        11    $          -    $         -    $        11
Overhead reduction actions                                  14               -              -             14
Business-specific actions                                    9               8              -             17
Total accrued liability balance                    $        34    $          8    $         -    $        42



Income statement line in which the preceding 2007 expenses (credits) are
reflected:


                                                                       Q3 2007           YTD 2007
Cost of sales                                                       $            -    $           41
Selling, general and administrative expenses                                    (3 )               7
Research, development and related expenses                                       -                (6 )
Total                                                               $           (3 )  $           42



The amount of expenses (credits) incurred in 2007 associated with the preceding
are reflected in the Company's business segments as follows:


                                                                       Q3 2007           YTD 2007
Industrial and Transportation                                       $            -    $            2
Health Care                                                                     (1 )             (10 )
Electro and Communications                                                       -                19
Display and Graphics                                                            (1 )               3
Safety, Security and Protection Services                                        (1 )              28
Total                                                               $           (3 )  $           42



Actions with respect to the above activities are expected to be substantially
completed in 2007 and additional charges and adjustments are not expected to be
material.



In connection with this targeted restructuring plan, the Company eliminated a
total of approximately 1,900 positions from various functions within the
Company. Approximately 390 positions were pharmaceuticals business employees,
approximately 960 positions related primarily to corporate staff overhead
reductions, and approximately 550 positions were business-specific reduction
actions. Of the 1,900 employment reductions, about 58% are in the United States,
21% in Europe, 12% in Latin America and Canada, and 9% in the Asia Pacific area.
As a result of the second-quarter 2007 phase-out of operations at a New Jersey
roofing granule facility and the sale of the Company's Opticom Priority Control
Systems and Canoga Traffic Detection businesses, the Company eliminated
approximately 100 additional positions.



Employee-related severance charges are largely based upon distributed employment
policies and substantive severance plans and were reflected in the quarter in
which management approved the restructuring actions. Severance amounts for which
affected employees were required to render service in order to receive benefits
at their termination dates were measured at the date such benefits were
communicated to the applicable employees and recognized as expense over the
employees' remaining service periods.



                                       11
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Non-cash employee-related charges in 2007 primarily relate to special
termination pension and medical benefits granted to certain U.S. eligible
employees. These pension and medical benefits were reflected as a component of
the benefit obligation of the Company's pension and medical plans as of
September 30, 2007.



Contract termination and other charges primarily reflect costs to terminate a
contract before the end of its term (measured at fair value at the time the
Company provided notice to the counterparty) or costs that will continue to be
incurred under the contract for its remaining term without economic benefit to
the Company.



First-quarter 2007 business-specific asset impairment charges primarily related
to the Company's decision to close an Electro and Communications facility in
Wisconsin. Asset impairment charges in the first quarter of 2007 associated with
the business-specific actions included $10 million related to property, plant
and equipment and $1 million related to intangible assets. Second-quarter 2007
business-specific asset impairment charges of $24 million related to property,
plant and equipment are associated with the Company's decision to phase-out
operations at a New Jersey roofing granule facility (Safety, Security and
Protection Services segment). Impairment charges related to intangible assets
and property, plant and equipment reflect the excess of the assets' carrying
values over their fair values.



Other Exit Activities:

During the third quarter of 2007, the Company recorded a net pre-tax charge of
$26 million related to the consolidation of certain flexible circuit
manufacturing operations. This charge related to employee reductions ($17
million) and fixed asset impairments ($9 million) in the Electro and
Communications business segment and was recorded in cost of sales and selling,
general and administrative expenses.



                                       12
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NOTE 5. Supplemental Comprehensive Income and Accumulated Other Comprehensive
Income (AOCI) Information


                                                                           Comprehensive Income              AOCI
                                                                       Three-months ended Sept. 30,       Balance at
(Millions)                                                                2007              2006          Dec. 31,
                                                                                                             2006
Net income                                                            $         960     $         894

Cumulative translation                                                          245                59
Tax effect                                                                       51                (2 )
Cumulative translation - net of tax                                             296                57    $        210

Defined benefit pension and postretirement plans adjustment                      50                 -
Tax effect                                                                      (20 )               -
Defined benefit pension and postretirement plans adjustment - net                30                 -          (2,067 )
of tax

Debt and equity securities, unrealized gain (loss)                              (13 )               -
Tax effect                                                                        5                 -
Debt and equity securities, unrealized gain (loss) - net of tax                  (8 )               -               2

Cash flow hedging instruments, unrealized gain (loss)                           (21 )             (14 )
Tax effect                                                                        8                 6
Cash flow hedging instruments, unrealized gain (loss) - net of tax              (13 )              (8 )           (18 )
Total - net of tax                                                    $       1,265     $         943    $     (1,873 )


                                                                        Nine-months ended Sept. 30,       Balance at
                                                                          2007              2006          Sept. 30,
                                                                                                             2007
Net income                                                            $       3,245     $       2,675

Cumulative translation                                                          390               331
Tax effect                                                                       57                (9 )
Cumulative translation - net of tax                                             447               322    $        657

Defined benefit pension and postretirement plans adjustment                     146                 -
Tax effect                                                                      (52 )               -
Defined benefit pension and postretirement plans adjustment - net                94                 -          (1,973 )
of tax

Debt and equity securities, unrealized gain (loss)                               (6 )              (1 )
Tax effect                                                                        2                 -
Debt and equity securities, unrealized gain (loss) - net of tax                  (4 )              (1 )            (2 )

Cash flow hedging instruments, unrealized gain (loss)                           (28 )             (76 )
Tax effect                                                                       11                28
Cash flow hedging instruments, unrealized gain (loss) - net of tax              (17 )             (48 )           (35 )
Total - net of tax                                                    $       3,765     $       2,948    $     (1,353 )



No income tax provision is required for the translation of foreign currency
financial statements into U.S. dollars. Reclassification adjustments are made to
avoid double counting in comprehensive income items that are also recorded as
part of net income. Reclassification adjustments for cash flow hedging
instruments are discussed in Note 7 and reclassification adjustments for the
defined benefit pension and postretirement plans adjustment are discussed in
Note 10.



NOTE 6. Income Taxes



The Company files income tax returns in the U.S. federal jurisdiction, and
various states and foreign jurisdictions. With few exceptions, the Company is no
longer subject to U.S. federal, state and local, or non-U.S. income tax
examinations by tax authorities for years before 1999. The Internal Revenue
Service (IRS) closed its examination of the Company's U.S. income tax returns
for the years 1999 through 2001 in the second quarter of 2006, and it is



                                       13
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anticipated that its examination for the Company's U.S. income tax returns for
the years 2002 through 2004 will be completed by the end of 2007. As of
September 30, 2007, the IRS has not proposed any significant adjustments to the
Company's tax positions. Currently, the Company is not able to reasonably
estimate the amount by which the liability for unrecognized tax benefits will
increase or decrease during the next 12 months as a result of the ongoing IRS
audit. However, the Company does not anticipate any adjustments that would
result in a material change to its financial position. Payments relating to any
proposed assessments arising from the 2002 through 2004 audit may not be made
until a final agreement is reached between the Company and the IRS on such
assessments or upon a final resolution resulting from the administrative appeals
process or judicial action. In addition to the U.S. federal examination, there
is also limited audit activity in several U.S. state and foreign jurisdictions.



The Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, on January 1, 2007. As a result of the
implementation of Interpretation 48, the Company recognized an immaterial
increase in the liability for unrecognized tax benefits, which was accounted for
as a reduction to the January 1, 2007, balance of retained earnings. The total
amount of unrecognized tax benefits as of January 1, 2007 and September 30,
2007, respectively, are $261 million and $322 million. These amounts at January
1, 2007 and September 30, 2007, respectively, include accrued interest and
penalties of $45 million and $54 million, of which $23 million and $19 million
are for interest and penalties related to tax positions for which the ultimate
deductibility is highly certain but for which there is uncertainty about the
timing of such deductibility. Because of the impact of deferred tax accounting,
other than interest and penalties, the disallowance of the shorter deductibility
period would not affect the annual effective tax rate but would accelerate the
payment of cash to the taxing authority to an earlier period. The Company
recognizes interest accrued related to unrecognized tax benefits in tax expense.



NOTE 7. Derivatives and Other Financial Instruments



The Company uses interest rate swaps, currency swaps, and forward and option
contracts to manage risks generally associated with foreign exchange rate,
interest rate and commodity price fluctuations. As circumstances warrant, the
Company also uses cross currency swaps and forwards to hedge portions of the
Company's net investments in foreign operations. For a more detailed discussion
of the company's derivative instruments, refer to 3M's Current Report on Form
8-K dated May 25, 2007.



The Company enters into foreign exchange forward contracts, options and swaps to
hedge against the effect of exchange rate fluctuations on cash flows denominated
in foreign currencies and certain intercompany financing transactions. These
transactions are designated as cash flow hedges. Based on exchange rates at
September 30, 2007, the Company expects to reclassify to earnings over the next
12 months a majority of the cash flow hedging instruments after-tax loss of $35
million (with the impact offset by cash flows from underlying hedged items).
Amounts recorded in accumulated other comprehensive income (loss) related to
cash flow hedging instruments follow:


Cash Flow Hedging Instruments                  Three months ended            Nine months ended
Net of Tax                                        September 30                  September 30
(Millions)                                    2007           2006           2007           2006

Beginning balance                          $       (22 )  $        (2 )  $       (18 )  $        38

Changes in fair value of derivatives               (24 )          (13 )          (35 )          (42 )
Reclassifications to earnings from                  11              5             18             (6 )
equity
Total activity                                     (13 )           (8 )          (17 )          (48 )

Ending balance                             $       (35 )  $       (10 )  $       (35 )  $       (10 )



In June 2006, the Company entered into a $330 million fixed-to-floating interest
rate swap to hedge the 30-year bond due in 2028. The Company terminated the swap
in March 2007 and the resulting gain will be recognized over the remaining life
of the underlying debt. Accordingly, the termination of this swap did not have a
material impact on 3M's consolidated results of operations or financial
condition. Refer to Note 9 for discussion of hedges associated with the seven
year Eurobond issued in July 2007.



                                       14
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NOTE 8. Marketable Securities



The Company invests in auction rate securities, asset-backed securities, and
other securities. The following is a summary of amounts recorded on the
Consolidated Balance Sheet for marketable securities (current and non-current)
at September 30, 2007.


                                                         Sept. 30,
(Millions)                                                  2007

Auction rate securities                                $          462
Asset-backed securities                                           230
Agency securities                                                 207
Other securities                                                  125

Current marketable securities                                   1,024

Asset-backed securities                                           400
Corporate medium-term notes securities                             92
Agency securities                                                  64

Non-current marketable securities                                 556

Total marketable securities                            $        1,580



Classification of marketable securities as current or non-current is dependent
upon management's intended holding period, the security's maturity date and
liquidity considerations based on market conditions. If management intends to
hold the securities for longer than one year as of the balance sheet date, they
are classified as non-current. Unrealized gains and losses were not material in
the first nine months of 2007 and 2006. Gross realized gains and gross realized
losses on sales of marketable securities were also not material. There were no
impairment losses recognized on marketable securities in the first nine months
of 2007 and 2006. The fair value of marketable securities approximates cost,
except for certain auction rate securities discussed in the next paragraph. Cost
of securities sold or reclassified use the first in first out (FIFO) method.
Since these marketable securities are classified as available-for-sale
securities, changes in fair value will flow through other comprehensive income,
with amounts reclassified out of other comprehensive income into earnings upon
sale.



In the third quarter of 2007, certain auction rate securities failed auction due
to sell orders exceeding buy orders. Of 3M's $1.6 billion marketable securities
portfolio at September 30, 2007, $34 million (at cost) is currently associated
with failed auctions, all of which have been in a loss position for less than 12
months. The funds associated with failed auctions will not be accessible until a
successful auction occurs or a buyer is found outside of the auction process.
These securities are rated AAA. Based on third party valuation models and an
analysis of other-than-temporary impairment factors, 3M recorded a temporary
impairment within Accumulated Other Comprehensive Income of approximately $8
million pre-tax at September 30, 2007 related to these auction rate securities.
These securities are being analyzed each reporting period for
other-than-temporary impairment factors.



The balance at September 30, 2007 for marketable securities and short-term
investments by contractual maturity are shown below. Actual maturities may
differ from contractual maturities because the issuers of the securities may
have the right to prepay obligations without prepayment penalties.


                                                           Sept. 30,
(Millions)                                                    2007

Due in one year or less                                    $      226
Due after one year through three years                            622
Due after three years through five years                          201
Due after five years                                              531

Total marketable securities                                $    1,580



                                       15
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NOTE 9. Long-Term Debt and Short-Term Borrowings



The Company has a 'well-known seasoned issuer' shelf registration statement,
effective February 24, 2006, to register an indeterminate amount of debt or
equity securities for future sales. As of September 30, 2007, no debt securities
have been issued off this shelf, but 150,718 shares of the Company's common
stock were registered on June 15, 2007 under this shelf on behalf of and for the
sole benefit of the selling stockholders in connection with the Company's
acquisition of assets of Diamond Productions, Inc. The Company intends to use
the proceeds from future securities sales off this shelf for general corporate
purposes. In connection with this shelf registration, in June 2007 the Company
established a medium-term notes program through which up to $3 billion of
medium-term notes may be offered.



In March 2007, the Company issued a 30-year, $750 million, fixed rate note with
a coupon rate of 5.70%. This debt security was issued under the $1.5 billion
shelf registration and medium-term notes program established in late 2003.



On April 30, 2007, the Company replaced its $565 million credit facility with a
new $1.5 billion five year credit facility, which has provisions for the Company
to request an increase of the facility up to $2 billion (at the lenders'
discretion), and providing for up to $150 million in letters of credit. As of
September 30, 2007, there are $110 million in letters of credit drawn against
the facility. Under the new credit agreement, 3M is required to maintain its
EBITDA to Interest Ratio as of the end of each fiscal quarter at not less than
3.0 to 1. This is calculated (as defined in the agreement) as the ratio of
consolidated total EBITDA for the four consecutive quarters then ended to total
interest expense on all funded debt for the same period. At September 30, 2007,
this ratio was approximately 45 to 1.



In the second quarter of 2007, 3M repurchased $42 million in floating rate notes
due in 2037 at par as the bondholder exercised put provisions associated with
this debt instrument.



In July 2007, 3M issued a seven year 5.0% fixed rate Eurobond for an amount of
750 million Euros (approximately $1.063 billion in U.S. Dollars at September 30,
2007). In June 2007, 3M executed a pre-issuance cash flow hedge on a notional
amount of 350 million Euros by entering into a floating-to-fixed interest rate
swap relating to the anticipated issuance of the Eurobond. Upon debt issuance in
July 2007, 3M completed a fixed-to-floating interest rate swap on a notional
amount of 400 million Euros as a fair value hedge of a portion of the fixed
interest rate Eurobond obligation and simultaneously terminated the
floating-to-fixed swap. The termination of the swap resulted in an immaterial
gain, which will be amortized over the seven year life of the Eurobond. 3M also
designated the 750 million Eurobond as a hedging instrument of the Company's net
investment in its European subsidiaries.



                                       16
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NOTE 10. Pension and Postretirement Benefit Plans



Components of net periodic benefit cost and other supplemental information for
the three months and nine months ended September 30 follow:



Benefit Plan Information


                                                Three months ended September 30
                                          Qualified and Non-qualified
                                               Pension Benefits         Postretirement
                                            United      International      Benefits                
                                            States      
(Millions)                                2007   2006   2007    2006    2007    2006

Service cost                              $ 48   $ 49   $ 29   $   30   $ 14   $    14
Interest cost                              142    135     55       43     26        26
Expected return on plan assets            (210 ) (192 )  (70 )    (59 )  (28 )     (27 )
Amortization of transition (asset)           -      -      2        1      -         -
obligation
Amortization of prior service cost           3      3     (1 )     (1 )  (17 )     (12 )
(benefit)
Recognized net actuarial (gain) loss        32     51     12       19     19        21
Net periodic benefit cost                 $ 15   $ 46   $ 27   $   33   $ 14   $    22
Settlements, curtailments and                4      -      -        -      -         -
special termination benefits
Net periodic benefit cost after           $ 19   $ 46   $ 27   $   33   $ 14   $    22
settlements, curtailments and
special termination benefits



Benefit Plan Information


                                                  Nine months ended September 30
                                           Qualified and Non-qualified
                                                Pension Benefits          Postretirement
                                          United States   International      Benefits
(Millions)                                2007    2006    2007    2006    2007    2006

Service cost                              $ 144   $ 147   $ 89   $   88   $ 42   $    42
Interest cost                               426     405    165      129     78        78
Expected return on plan assets             (630 )  (574 ) (210 )   (173 )  (80 )     (79 )
Amortization of transition (asset)            -       -      4        3      -         -
obligation
Amortization of prior service cost           10       9     (3 )     (3 )  (53 )     (38 )
(benefit)
Recognized net actuarial (gain)              95     153     38       49     55        63
loss
Net periodic benefit cost                 $  45   $ 140   $ 83   $   93   $ 42   $    66
Settlements, curtailments and                 5       -      -        -     13         -
special termination benefits
Net periodic benefit cost after           $  50   $ 140   $ 83   $   93   $ 55   $    66
settlements, curtailments and
special termination benefits



For the nine months ended September 30, 2007, contributions totaling $371
million were made to the Company's U.S. and international pension plans and $2
million to its post-retirement plans. In 2007, the Company expects to contribute
up to $420 million to its U.S. and international pension plans. The Company does
not have a required minimum pension contribution obligation for its U.S. plans
in 2007. Therefore, the amount of the anticipated discretionary pension
contribution could vary significantly depending on the U.S plans' funding status
as of the 2007 measurement date and the anticipated tax deductibility of the
contribution.



As a result of the Company's December 31, 2006 adoption of SFAS No. 158, '
Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans
', the Company recognized the transition obligation, prior service costs, and
net actuarial losses on the balance sheet as accumulated other comprehensive
income, which is a component of stockholders' equity. As disclosed in Note 5,
for the three and nine-months ended September 30, 2007, $30 million after tax
($20 million tax benefit) and $94 million after tax ($52 million tax benefit),
respectively, were reclassified to earnings from accumulated other comprehensive
income to pension and postretirement expense in the income statement. These
pension and postretirement expense amounts are shown in the table above as
amortization of transition (asset) obligation, amortization of prior service
cost (benefit) and recognized net actuarial (gain) loss.



                                       17
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NOTE 11. Commitments and Contingencies



Legal Proceedings:

The Company and some of its subsidiaries are involved in numerous claims and
lawsuits, principally in the United States, and regulatory proceedings
worldwide. These include various products liability (involving products that the
Company now or formerly manufactured and sold), intellectual property, and
commercial claims and lawsuits, including those brought under the antitrust
laws, and environmental proceedings. The following sections first describe the
significant legal proceedings in which the Company is involved, and then
describe the liabilities and associated insurance receivables the Company has
accrued relating to its significant legal proceedings. Unless otherwise stated,
the Company is vigorously defending all such litigation. Additional information
can be found in Note 13 'Commitments and Contingencies' in the Company's Current
Report on Form 8-K dated May 25, 2007, including information about the Company's
process for establishing and disclosing accruals and insurance receivables.



Shareholder Derivative Litigation



As previously reported, in July 2007, a shareholder derivative lawsuit was filed
in the U.S. District Court for the District of Delaware against the Company as
nominal defendant and against each then current member of the Board of Directors
and the officers named in the Summary Compensation Table of the 2007 Proxy
Statement. The suit alleges that the Company's 2007 Proxy Statement contained
false and misleading statements concerning the tax deductibility of compensation
payable under the Annual Incentive Plan ('Plan') and the standards for
determining the amounts payable under the Plan. The lawsuit seeks a declaration
voiding shareholder approval of the Plan, termination of the Plan, voiding the
elections of directors, equitable accounting, and awarding costs, including
attorneys' fees.



Breast Implant Litigation



The Company and certain other companies were named as defendants in past years
in numerous claims and lawsuits alleging damages for personal injuries of
various types resulting from breast implants formerly manufactured by the
Company or a related company. The vast majority of claims against the Company
have been resolved. The Company does not consider its remaining probable
liability to be material. Information concerning the associated insurance
receivable is in the table in the paragraph entitled Accrued Liabilities and
Insurance Receivables Related to Legal Proceedings.



Respirator Mask/Asbestos Litigation



As of September 30, 2007, the Company is a named defendant, with multiple
co-defendants, in numerous lawsuits in various courts that purport to represent
approximately 12,600 individual claimants, a decrease from the approximately
28,800 individual claimants with actions pending at September 30, 2006. The vast
majority of the lawsuits and claims resolved by and currently pending against
the Company allege use of some of the Company's mask and respirator products and
seek damages from the Company and other defendants for alleged personal injury
from workplace exposures to asbestos, silica, coal, or other occupational dusts
found in products manufactured by other defendants or generally in the
workplace. The remaining claimants generally allege personal injury from
occupational exposure to asbestos from products previously manufactured by the
Company, which are often unspecified, and by other defendants, or occasionally
at Company premises.



Many of the resolved lawsuits and claims involved unimpaired claimants who were
recruited by plaintiffs' lawyers through mass chest x-ray screenings. The
Company experienced a significant decline in the number of claims filed in 2006
and through the third quarter of 2007 from prior years by apparently unimpaired
claimants. The Company attributes this decline to several factors, including
certain changes enacted in several states in recent years of the law governing
asbestos-and silica-related claims, and the highly-publicized decision in
mid-2005 of the United States District Court for the Southern District of Texas
that identified and criticized abuses by certain attorneys, doctors, and x-ray
screening companies on behalf of claimants. The Company expects the filing of
claims by unimpaired claimants in the future to continue at much lower levels
than in the past. The Company believes that due to this change in the type and
volume of incoming claims, it is likely that going forward the number of claims
alleging more serious injuries, including mesothelioma and other malignancies,
while remaining relatively constant, will represent a greater percentage of
total claims than in the past. The Company has demonstrated in past trial
proceedings that its respiratory protection products are effective as claimed
when used in the intended manner and in the intended circumstances. Consequently
the Company believes that claimants are unable to establish that their medical
condition, even if significant, is attributable to the Company's respiratory
protection products. Nonetheless, the Company's litigation experience indicates
that claims by persons alleging serious injuries are costlier to resolve than
the claims of unimpaired persons, and it therefore anticipates an increase in
the average cost of resolving pending and future claims on a per-claim basis
than it experienced in prior periods when the vast majority of claims were
asserted by the unimpaired.



On July 13, 2007, the Company won a defense verdict from a jury in the federal
court in the Eastern District of Missouri. The jury found the Company had no
liability whatever to a plaintiff who claimed he had silicosis and a



                                       18
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related cancer and sought to recover damages from the Company arising from his
alleged illness, which he claimed to have contracted from occupational exposure
to silica despite his purported use of the Company's respirator mask equipment
at various times. The jury rejected each of the plaintiff's theories of
liability against the Company. With this victory, the Company has prevailed in
seven of the eight cases tried to verdict (such trials occurred in 1999, 2000,
2003, 2004, and 2007), and an appellate reversal in 2005 of the one jury
verdict, in 2001, adverse to the Company.



Employment Litigation



As previously reported, one current and one former employee of the Company filed
a purported class action in the District Court of Ramsey County, Minnesota, in
December 2004, seeking to represent a class of all current and certain former
salaried employees employed by 3M in Minnesota below a certain salary grade who
were age 46 or older at any time during the applicable period to be determined
by the Court. The complaint alleges the plaintiffs suffered various forms of
employment discrimination on the basis of age in violation of the Minnesota
Human Rights Act and seeks injunctive relief, unspecified compensatory damages
(which they seek to treble under the statute), including back and front pay,
punitive damages (limited by statute to $8,500 per claimant) and attorneys'
fees. In January 2006, the plaintiffs filed a motion to join four additional
named plaintiffs. This motion was unopposed by the Company and the four
plaintiffs were joined in the case, although one claim has been dismissed
following an individual settlement. The class certification hearing is scheduled
for November 28, 2007.



A similar age discrimination purported class action was filed against the
Company in November 2005 in the Superior Court of Essex County, New Jersey, on
behalf of a class of New Jersey-based employees of the Company. The Company
removed this case to the United States District Court for the District of New
Jersey. On June 29, 2007, the attorneys for the plaintiff amended their
complaint and dropped the class action allegations.



In addition, three former employees filed age discrimination charges against the
Company with the U.S. Equal Employment Opportunity Commission and the pertinent
state agencies in Minnesota and California during 2005; two of these charges
were amended in 2006. Such filings include allegations that the release of
claims signed by certain former employees in the purported class defined in the
charges is invalid for various reasons and assert age discrimination claims on
behalf of certain current and former salaried employees in states other than
Minnesota and New Jersey. In 2006, one current employee filed an age
discrimination charge against the Company with the U.S. Equal Employment
Opportunity Commission and the pertinent state agency in Missouri, asserting
claims on behalf of a class of all current and certain former salaried employees
who worked in Missouri and other states other than Minnesota and New Jersey. The
same law firm represents the plaintiffs and claimants in each of these
proceedings.



Environmental Matters and Litigation



The Company's operations are subject to environmental laws and regulations
including those pertaining to air emissions, wastewater discharges, toxic
substances, and the handling and disposal of solid and hazardous wastes
enforceable by national, state, and local authorities around the world, and
private parties in the United States and abroad. These laws and regulations
provide, under certain circumstances, a basis for the remediation of
contamination and for personal injury and property damage claims. The Company
has incurred, and will continue to incur, costs and capital expenditures in
complying with these laws and regulations, defending personal injury and
property damage claims, and modifying its business operations in light of its
environmental responsibilities. In its effort to satisfy its environmental
responsibilities and comply with environmental laws and regulations, the Company
has established, and periodically updates, policies relating to environmental
standards of performance for its operations worldwide.



Remediation: Under certain environmental laws, including the United States
Comprehensive Environmental Response, Compensation and Liability Act of 1980 and
similar state laws, the Company may be jointly and severally liable, typically
with other companies, for the costs of environmental contamination at current or
former facilities and at off-site locations. The Company has identified numerous
locations, most of which are in the United States, at which it may have some
liability. Please refer to the following section, 'Accrued Liabilities and
Insurance Receivables Related to Legal Proceedings' for more information on this
subject.



Regulatory Activities: As previously reported, the Company has been voluntarily
cooperating with ongoing reviews by local, state, national (primarily the U.S.
Environmental Protection Agency (EPA)), and international agencies of possible
environmental and health effects of perfluorooctanyl compounds (perflurooctanoic
acid or 'PFOA' and perfluorooctane sulfonate or 'PFOS') and related compounds.
As a result of its phase-out decision in May 2000, the Company no longer
manufactures perfluorooctanyl compounds, except that a subsidiary recovers and
recycles PFOA in Gendorf, Germany, for internal use in production processes and
has agreed to a product stewardship initiative with the EPA to end its use of
PFOA by 2010.



The EPA signed a Memorandum of Understanding with the Company and Dyneon LLC, a
subsidiary of the Company, in October 2004, under which the Company is assessing
the potential presence of PFOA at and around the



                                       19
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Company's manufacturing facility in Decatur, Alabama. Activities are in progress
pursuant to this Memorandum of Understanding.



Regulatory activities concerning PFOA and/or PFOS continue in Europe and
elsewhere, and before certain international bodies. These activities include
gathering of exposure and use information, risk assessment, and consideration of
regulatory approaches. In December 2006, the European Union adopted an amendment
to the Marketing and Use Directive to limit use of PFOS. Member States must
enact the Directive into national law by December 27, 2007.



As previously reported, the Company and state agencies tested soil and
groundwater beneath three former waste disposal sites in Washington County,
Minnesota, used many years ago by the Company to dispose lawfully of waste
containing perfluoronated compounds. The test results show that water from
certain municipal wells in Oakdale, Minnesota, near two of the former disposal
sites and some private wells in that vicinity in Lake Elmo, Minnesota, contains
low levels of PFOS and PFOA that, in some cases, are slightly above guidelines
established by the Minnesota Department of Health ('MDH'). In March 2007 the MDH
lowered these advisory health-based values (HBV) (i.e., the amount of a chemical
in drinking water considered by the MDH staff to be safe for people to drink for
a lifetime) for PFOA from 7 parts per billion (ppb) to 0.5 ppb and for PFOS from
1 ppb to 0.3 ppb. Additional testing by the MDH has shown that water from the
municipal wells in Oakdale, Minnesota, and some private wells in Lake Elmo,
Minnesota, also contain low levels of other perfluoronated compounds. As
previously reported, the Company on its own initiative agreed with the City of
Oakdale to construct, operate, and maintain for at least five years a granular
activated carbon water treatment system to treat one or more of Oakdale's
municipal wells. The Company also donated several acres of land to the City of
Lake Elmo, Minnesota, for a water tower and granted the City approximately $5.6
million that the City used to expand municipal water service to neighborhoods
that included a small number of private wells in which levels of PFOS and PFOA
had been detected.



As previously reported, the MDH has also detected low levels of a perfluoronated
compound called perfluorobutanoic acid (PFBA) in municipal wells (and in private
wells as announced by the MDH in June 2007) in six nearby communities (Woodbury,
Cottage Grove, Newport, St. Paul Park, South St. Paul, and Hastings, all
communities located southeast of St. Paul), some of which slightly exceed the
MDH's interim advisory level for PFBA, currently at 1 ppb. The Company is
working with the MDH and the Minnesota Pollution Control Agency (MPCA) in
assessing the source of PFBA in these wells and is supplying data that could be
used in determining an appropriate guideline level. The MDH has not issued any
HBV for PFBA. The Company has advised the affected communities that it will
assist them in assuring their drinking water falls below the legally permissible
level for PFBA when such value is finally determined.



The Company is also working with the MPCA to determine whether low levels of
PFOA, PFOS and other perfluoronated compounds in the soil at the Company's
former perfluoronated compound production facility at Cottage Grove, Minnesota,
in the groundwater under the former plant and disposal sites, and in river
sediments near the former plant, are continuing sources of such compounds in the
Mississippi River, its fish and wildlife.



On May 22, 2007, the MPCA Citizen's Board approved the Settlement Agreement and
Consent Order to address the presence of perfluoronated compounds in the soil
and groundwater at former disposal sites in Washington County Minnesota and at
the Company's manufacturing facility at Cottage Grove Minnesota. Under this
agreement, the Company agreed to (i) evaluate releases of perfluoronated
compounds from these sites and propose response actions; (ii) provide
alternative drinking water if and when an HBV or Health Risk Limit ('HRL')
(i.e., the amount of a chemical in drinking water determined by the MDH to be
safe for people to drink for a lifetime) is exceeded for any perfluoronated
compounds as a result of contamination from these sites; (iii) remediate any
source of PFBA and provide alternative drinking water if and when levels are
found above an HBV or HRL; (iv) share information with the MPCA about
perfluoronated compounds; (v) reimburse the MPCA future costs of research that
are connected to releases from the Company's operations in Minnesota (the
Company agreed to reimburse the MPCA for past research costs and provided a
grant up to $5 million over the next four years for the purpose of investigating
and assessing the presence and effects of perflouronated compounds in the
environment and biota); and (vi) pay the MPCA up to $8 million for the purpose
of implementing remedial actions at the Washington County Landfill.



The Company cannot predict what regulatory actions arising from the foregoing
proceedings and activities, if any, may be taken regarding such compounds or the
consequences of any such actions.



Litigation: As previously reported, a former employee filed a purported class
action lawsuit in 2002 in the Circuit Court of Morgan County, Alabama, involving
perfluorooctanyl chemistry, alleging that the plaintiffs suffered fear,
increased risk, subclinical injuries, and property damage from exposure to
perfluorooctanyl chemistry at or near the Company's Decatur, Alabama,
manufacturing facility. The Circuit Court in 2005 granted the Company's motion
to dismiss the named plaintiff's personal injury-related claims on the basis
that such claims are barred by the exclusivity provisions of the state's Workers
Compensation Act. The plaintiffs' counsel filed an amended complaint in November
2006, limiting the case to property damage claims on behalf of a purported class
of residents and



                                       20
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property owners in the vicinity of the Decatur plant. Also in 2005, the judge in
a second purported class action lawsuit (filed by three residents of Morgan
County, Alabama, seeking unstated compensatory and punitive damages involving
alleged damage to their property from emissions of perfluorooctanyl compounds
from the Company's Decatur, Alabama, manufacturing facility that formerly
manufactured those compounds) granted the Company's motion to abate the case,
effectively putting the case on hold pending the resolution of class
certification issues in the action described above filed in the same court in
2002. Despite the stay, plaintiffs recently filed an amended complaint seeking
damages for alleged personal injuries and property damage on behalf of the named
plaintiffs and the members of a purported class. No further action in the case
is expected unless and until the stay is lifted.



As previously reported, two residents of Washington County, Minnesota, filed in
October 2004 a purported class action in the District Court of Washington County
on behalf of Washington county residents who have allegedly suffered personal
injuries and property damage from alleged emissions from the former
perfluorooctanyl production facility at Cottage Grove, Minnesota, and from
historic waste disposal sites in the vicinity of that facility. After the
District Court granted the Company's motion to dismiss the claims for medical
monitoring and public nuisance in April 2005, the plaintiffs filed an amended
complaint adding additional allegations involving other perfluoronated compounds
manufactured by the Company, alleging additional legal theories in support of
their claims, adding four plaintiffs, and seeking relief based on alleged
contamination of the City of Oakdale municipal water supply and certain private
wells in the vicinity of Lake Elmo, Minnesota. In April 2006, the plaintiffs
filed a second amended complaint adding two additional plaintiffs. The two
original plaintiffs thereafter dismissed their claims against the Company. After
a hearing on the plaintiffs' motion to certify the case as a class action at the
end of March 2007, the Court on June 19, 2007 denied the plaintiffs' motion to
certify the litigation as a class action. The deadline for the plaintiffs to
file an appeal has passed. The trial of the individual cases is scheduled for
the fall of 2008.



In the second quarter of 2006, the New Jersey Department of Environmental
Protection served a lawsuit that was filed in New Jersey state court against the
Company and several other companies seeking cleanup and removal costs and
damages to natural resources allegedly caused by the discharge of hazardous
substances from two former waste disposal sites in New Jersey. The defendants
removed the case to federal court, which was recently granted that state's
motion to remand the case to state court.



Accrued Liabilities and Insurance Receivables Related to Legal Proceedings



The following table shows the major categories of on-going litigation,
environmental remediation and other environmental liabilities (as defined below)
for which the Company has been able to estimate its probable liability and for
which the Company has taken reserves and the related insurance receivables:



LIABILITY AND RECEIVABLE BALANCES


                                               Sept. 30      Dec. 31
(Millions)                                       2007         2006

Breast implant liabilities                     $       2    $       4
Breast implant insurance receivables                  70           93

Respirator mask/asbestos liabilities                 130          181
Respirator mask/asbestos insurance                   332          380
receivables

Environmental remediation liabilities                 37           44
Environmental remediation insurance                   15           15
receivables

Other environmental liabilities                $     149    $      14



For those significant pending legal proceedings that do not appear in the table
and that are not the subject of pending settlement agreements, the Company has
determined that liability is not probable or the amount of the liability is not
estimable, or both, and the Company is unable to estimate the possible loss or
range of loss at this time. The amounts in the preceding table with respect to
breast implant and environmental remediation represent the Company's best
estimate of the respective liabilities. The Company does not believe that there
is any single best estimate of the respirator/mask/asbestos liability or the
other environmental liabilities shown above, nor that it can reliably estimate
the amount or range of amounts by which those liabilities may exceed the
reserves the Company has established.



As previously reported, the Company increased its other environmental
liabilities by $121 million in the first quarter of 2007 as a result of
regulatory developments in Minnesota and the completion of a comprehensive
review with environmental consultants regarding its other environmental
liabilities which include the estimated costs of addressing trace amounts of
perfluoronated compounds in drinking water sources in the City of Oakdale and
Lake



                                       21
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Elmo, Minnesota, as well as presence in the soil and groundwater at the
Company's manufacturing facilities in Decatur, Alabama, and Cottage Grove,
Minnesota, and at two former disposal sites in Minnesota. The Company expects
that most of the spending will occur over the next three to seven years. While
the Company is not able to estimate the total costs of implementing the
Settlement Agreement and Consent Order with the MPCA (described above under
Environmental Matters and Litigation - Regulatory Matters) at this time, the
Company increased its other environmental liabilities by an additional $13
million in the second quarter of 2007 to reflect its best estimate of the
specific payment obligations under that agreement.



In the breast implant insurance coverage litigation, the District Court in
Ramsey County Minnesota entered an order in September 2007 dismissing from the
suit the last of the insurers that were still contesting the extent of their
coverage for the Company's breast implant product liability claims. The
dismissal was pursuant to a settlement the Company reached with those insurers
during the third quarter of 2007. As of September 30, 2007, the Company's
receivable for insurance recoveries related to breast implant matter was $70
million. The Company collected $23 million in the third quarter of 2007 from
four insurers, reducing this receivable by that amount. The Company also entered
into a settlement agreement with three insurers for additional payments of
approximately $53 million to be paid in 2008 which will be credited against this
receivable when paid. The Company continues to pursue recovery against its
remaining insurers and expects to collect the remaining receivable.



NOTE 12. Management Stock Ownership Program (MSOP) and General Employees' Stock
Purchase Plan (GESPP)



Effective with the May 2005 MSOP annual grant, the Company changed its vesting
period from one to three years with the expiration date remaining at 10 years
from date of grant. Beginning in 2007, the Company reduced the number of
traditional stock options granted under the MSOP plan by reducing the number of
employees eligible to receive annual grants and by shifting a portion of the
annual grant away from traditional stock options primarily to restricted stock
units. However, associated with the reduction in the number of eligible
employees, the Company provided a one-time 'buyout' grant of restricted stock
units to the impacted employees. Capitalized stock-based compensation amounts
were not material at September 30, 2007. The income tax benefits can fluctuate
by period due to the amount of Incentive Stock Options (ISO) exercised since the
Company receives the ISO tax benefit upon exercise. The Company last granted
ISO's in 2002. Amounts recognized in the financial statements with respect to
both the MSOP and GESPP (refer to Notes 15 and 16 in 3M's Current Report on Form
8-K dated May 25, 2007) are as follows:


                                            Three months ended            Nine months ended
                                               September 30                  September 30
(Millions, except per share amounts)       2007           2006           2007           2006
Cost of sales                           $        11    $        10    $        37    $        33
Selling, general and administrative              31             25            110             98
expenses
Research, development and related                11              9             35             31
expenses

Operating Income (Loss)                 $       (53 )  $       (44 )  $      (182 )  $      (162 )

Income tax benefits                     $        21    $        15    $        78    $        60

Net Income (Loss)                       $       (32 )  $       (29 )  $      (104 )  $      (102 )

Earnings per share impact- diluted      $     (0.04 )  $     (0.04 )  $     (0.14 )  $     (0.13 )
Earnings per share - diluted            $      1.32    $      1.18    $      4.42    $      3.50



                                       22
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The following table summarizes MSOP stock option activity during the nine months
ended September 30, 2007:



Stock Options
                                                                                              
                                                                               Remaining      Aggregate               
                                                                              Contractual     Intrinsic  
                                                Number of       Exercise        Life*           Value
                                                 Options         Price*        (months)       (millions)
Under option -
As of January 1, 2007                           82,867,903    $      67.41
Granted
Annual                                           4,434,583           84.81
Progressive (Reload)                               451,951           87.07
Other                                               41,888           83.07
Exercised                                      (11,332,025 )         54.92
Canceled                                          (644,235 )         77.06
September 30                                    75,820,065    $      70.33             69    $      1,763
Options exercisable as of September 30,         59,676,236    $      66.61             59    $      1,610
2007


--------------------

*Weighted average



As of September 30, 2007, there was $163 million of compensation expense that
has yet to be recognized related to non-vested stock option based awards. This
expense is expected to be recognized over the remaining vesting period with a
weighted-average life of 1.7 years. The total intrinsic values of stock options
exercised during the nine-month periods ended September 30, 2007 and 2006, was
$334 million and $253 million, respectively. Cash received from options
exercised was $622 million and $345 million for the nine months ended September
30, 2007 and 2006, respectively. The Company's actual tax benefits realized for
the tax deductions related to the exercise of employee stock options were $95
million and $72 million for the nine months ended September 30, 2007 and 2006,
respectively.



For annual stock options, the weighted average fair value at the date of grant
was calculated using the Black-Scholes option-pricing model and the assumptions
that follow.



Stock Option Assumptions


                                                                   Annual
                                                   2007             2006             2005
Exercise price                                 $      84.81     $      87.23     $      76.87
Risk-free interest rate                                 4.6 %            5.0 %            4.0 %
Dividend yield                                          2.1 %            2.0 %            2.0 %
Volatility                                             20.0 %           20.0 %           23.5 %
Expected life (months)                                   69               69               69
Black-Scholes fair value                       $      18.12     $      19.81     $      18.28



In connection with the adoption of SFAS No. 123R, in 2005 the Company reviewed
and updated, among other things, its volatility and expected term assumptions.
Expected volatility is a statistical measure of the amount by which a stock
price is expected to fluctuate during a period. For the 2007, 2006 and 2005
annual grant date, the Company estimated the expected volatility based upon the
average of the most recent one year volatility, the median of the term of the
expected life rolling volatility, the median of the most recent term of the
expected life volatility of 3M stock, and the implied volatility on the grant
date. The expected term assumption is based on the weighted average of
historical grants and assuming that options outstanding are exercised at the
midpoint of the future remaining term.



As previously mentioned, the Company expanded its utilization of restricted
stock units in conjunction with the May 2007 MSOP Annual Grant. The May 2007
restricted stock unit grant does not accrue dividends during the vesting period
and vests over three years. The one-time 'buyout' restricted stock unit grant
vests over five years.



                                       23
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The following table summarizes MSOP restricted stock and restricted stock unit
activity during the nine months ended September 30, 2007:



Restricted Stock and Restricted Stock Units


                                                     Number of         Grant Date
                                                       Awards         Fair Value*
Nonvested balance -
As of January 1, 2007                                     411,562    $        78.11
Granted
Annual                                                  1,695,701             77.88
Other                                                       5,889             82.81
Vested                                                    (41,967 )           77.21
Forfeited                                                 (21,825 )           77.91
As of September 30, 2007                                2,049,360    $        77.96


--------------------

*Weighted average



As of September 30, 2007, there was $104 million of compensation expense that
has yet to be recognized related to non-vested restricted stock and restricted
stock units. This expense is expected to be recognized over the remaining
vesting period with a weighted-average life of 3.4 years. The total fair value
of restricted stock and restricted stock units that vested during the nine-month
periods ended September 30, 2007 and 2006 was $3 million and $2 million,
respectively.



In addition, the Company issues cash settled Restricted Stock Units and Stock
Appreciation Rights in certain countries. These grants do not result in the
issuance of Common Stock and are considered immaterial by the Company.



The remaining total MSOP shares available for grant under the 2005 MSOP Program
are 4,330,934. Restricted stock and restricted stock units, per the 2005 Plan,
shall be counted against the total shares available as 2.45 shares for every one
share issued in connection with that award.



                                       24
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NOTE 13. Business Segments



As described in 3M's Current Report on Form 8-K dated May 25, 2007, effective in
the first quarter of 2007, 3M made certain changes to its business segments in
its continuing effort to drive growth by aligning businesses around markets and
customers. The most significant of these changes are summarized as follows:



•                  3M's new emerging business opportunity in its Track and Trace
initiative resulted in the merging of a number of formerly separate efforts into
one concerted effort for future growth. Track and Trace has a growing array of
applications - from tracking packages to managing medical and legal records. The
establishment of this new initiative within 3M's Safety, Security and Protection
Services segment resulted in the transfer of certain businesses to this segment
from other segments, including the transfer of HighJump Software Inc., a 3M
U.S.-based subsidiary that provides supply chain execution software and
solutions (Industrial and Transportation segment) and the transfer of certain
Track and Trace products from the Electro and Communications segment.

•                  3M's Visual Systems business (Consumer and Office segment),
which offers analog overhead and electronic projectors and film, was transferred
to the Electro and Communications segment. This transfer is intended to leverage
common markets, customers, suppliers and technologies.

•                  3M's Industrial and Transportation segment (Energy and
Advanced Materials business) transferred the 3M(TM)Aluminum Conductor Composite
Reinforced (ACCR) electrical power cable to the Electro and Communications
segment (Electrical Markets business). With an aluminum-based metal matrix at
its core, the ACCR product increases transmission capacity for existing power
lines. The Electrical Markets business sells insulating, testing and connecting
products to various markets, including the electric utility markets.

•                  Certain adhesives and tapes in the Industrial and
Transportation segment (Industrial Adhesives and Tapes business) were
transferred to the Consumer and Office segment (primarily related to the
Construction and Home Improvement business and the Stationery Products business)
and to the Electro and Communications segment (Electronics Markets Materials
business). Certain maintenance-free respirator products for the consumer market
in 3M's Safety, Security and Protection Services segment were transferred to the
Consumer and Office segment (Construction and Home Improvement business).

•                  3M transferred Film Manufacturing and Supply Chain
Operations, a resource for the manufacturing and development of films and
materials, to the Display and Graphics Business from Corporate and Unallocated.



3M's businesses are organized, managed and internally grouped into segments
based on differences in products, technologies and services. 3M continues to
manage its operations in six operating business segments: Industrial and
Transportation segment, Health Care segment, Display and Graphics segment,
Consumer and Office segment, Safety, Security and Protection Services segment,
and the Electro and Communications segment. 3M's six business segments bring
together common or related 3M technologies, enhancing the development of
innovative products and services and providing for efficient sharing of business
resources. These segments have worldwide responsibility for virtually all 3M
product lines. 3M is not dependent on any single product or market. Transactions
among reportable segments are recorded at cost. 3M is an integrated enterprise
characterized by substantial intersegment cooperation, cost allocations and
inventory transfers. Therefore, management does not represent that these
segments, if operated independently, would report the operating income
information shown.



The financial information presented herein reflects the impact of all of the
preceding changes for all periods presented.



                                       25
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Business Segment Information


                                                Three months ended            Nine months ended
                                                   September 30                  September 30
(Millions)                                     2007           2006           2007           2006

NET SALES
Industrial and Transportation                    $1,807         $1,654         $5,396         $4,988
Health Care                                         961            998          2,911          2,964
Display and Graphics                              1,012            992          2,939          2,824
Consumer and Office                                 898            848          2,544          2,358
Safety, Security and Protection Services            766            691          2,323          1,992
Electro and Communications                          714            664          2,075          1,979
Corporate and Unallocated                            19             11             68             36
Total Company                                    $6,177         $5,858        $18,256        $17,141

OPERATING INCOME
Industrial and Transportation                      $378           $339         $1,148         $1,039
Health Care                                         259            287          1,600            846
Display and Graphics                                288            293            935            822
Consumer and Office                                 192            190            533            475
Safety, Security and Protection Services            157            141            478            438
Electro and Communications                          114            121            357            355
Corporate and Unallocated                            37            (29 )         (128 )          (89 )
Total Company                                    $1,425         $1,342         $4,923         $3,886



The following items are included in the reported operating income results
presented in the preceding table.



Third quarter 2007 operating income included net benefits from a gain on sale of
real estate ($52 million gain recorded in Corporate and Unallocated), partially
offset by exit activities ($26 million expense recorded in Electro and
Communications). Exit activities are discussed in more detail in Note 4
(Restructuring Actions and Other Exit Activities).



First nine months 2007 operating income included net gains of $701 million, with
a $795 million net gain recorded in Health Care and a $64 million net gain
recorded in Display and Graphics partially offset by expenses recorded in
Corporate and Unallocated ($82 million), Electro and Communications ($45
million), Safety, Security and Protection Services ($29 million) and Industrial
and Transportation ($2 million). Items impacting first nine months 2007
operating income included net benefits from gains related to the sale of
businesses ($854 million gain with $786 million recorded in Health Care and $68
million recorded in Display and Graphics), a gain on sale of real estate ($52
million gain recorded in Corporate and Unallocated), which were partially offset
by increases in environmental liabilities ($134 million expense recorded in
Corporate and Unallocated), restructuring actions ($45 million total
restructuring expense for the first six months of 2007, with $29 million expense
recorded in Safety, Security and Protection Services, $19 million expense
recorded in Electro and Communications, $4 million expense recorded in Display
and Graphics, $2 million expense recorded in Industrial and Transportation, and
a $9 million gain recorded in Health Care) and other exit activities ($26
million expense recorded in Electro and Communications). These items, except the
gain on sale of real estate, are discussed in more detail in Note 2
(Acquisitions and Divestitures), Note 4 (Restructuring Actions and Other Exit
Activities) and Note 11 (Commitments and Contingencies).



Third quarter 2006 operating income included costs related to seeking strategic
alternatives for pharmaceuticals ($13 million expense recorded in Health Care).
First nine months 2006 operating income included costs related to seeking
strategic alternatives for pharmaceuticals ($22 million expense recorded in
Health Care) and settlement costs related to an antitrust class action ($40
million expense recorded in Corporate and Unallocated).



Corporate and unallocated operating income includes a variety of miscellaneous
items, such as corporate investment gains and losses, certain derivative gains
and losses, insurance-related gains and losses, certain litigation and
environmental expenses, and corporate restructuring program charges. Because
this category includes a variety of miscellaneous items, it is subject to
fluctuation on a quarterly and annual basis.



                                       26
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NOTE 14. Review Report of Independent Registered Public Accounting Firm



PricewaterhouseCoopers LLP, the Company's independent registered public
accounting firm, has performed reviews of the unaudited interim consolidated
financial statements included herein, and their review report thereon
accompanies this filing. Pursuant to Rule 436(c) of the Securities Act of 1933
('Act') their report on these reviews should not be considered a 'report' within
the meaning of Sections 7 and 11 of the Act and the independent registered
public accounting firm liability under Section 11 does not extend to it.



                                       27
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Stockholders and Board of Directors of 3M Company:



We have reviewed the accompanying consolidated balance sheet of 3M Company and
its subsidiaries as of September 30, 2007 and the related consolidated
statements of income for the three-month and nine-month periods ended September
30, 2007 and 2006, and of cash flows for the nine-month periods ended September
30, 2007 and 2006. These interim financial statements are the responsibility of
the Company's management.



We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with accounting principles generally accepted in the United
States of America.



We previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet as of
December 31, 2006, and the related consolidated statements of income, of changes
in stockholders' equity and comprehensive income, and of cash flows for the year
then ended (not presented herein), and in our report dated February 12, 2007,
except with respect to our opinion on the consolidated financial statements
insofar as it relates to the effects of the change in the segments discussed in
Notes 3 and 17, as to which the date is May 25, 2007, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet
information as of December 31, 2006, is fairly stated in all material respects
in relation to the consolidated balance sheet from which it has been derived.



/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Minneapolis, Minnesota
October 26, 2007



                                       28
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.



Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) is designed to provide a reader of 3M's financial statements
with a narrative from the perspective of management. 3M's MD&A is presented in
six sections:



•                  Overview
•                  Results of Operations
•                  Critical Accounting Estimates
•                  Performance by Business Segment
•                  Financial Condition and Liquidity
•                  Forward-Looking Statements



OVERVIEW



3M is a diversified global manufacturer, technology innovator and marketer of a
wide variety of products and services. 3M manages its operations in six
operating business segments: Industrial and Transportation, Health Care, Display
and Graphics, Consumer and Office, Safety, Security and Protection Services, and
Electro and Communications.



As discussed in Note 13 to the Consolidated Financial Statements, effective in
the first quarter of 2007, 3M made certain changes to its business segments. The
financial information presented herein reflects the impact of these business
segment changes for all periods presented.



3M reported net sales of $6.177 billion and net income of $960 million, or $1.32
per diluted share, for the three months ended September 30, 2007, compared with
net sales of $5.858 billion and net income of $894 million, or $1.18 per diluted
share, for the three months ended September 30, 2006. Third quarter 2007
included items which on a net basis benefited earnings by $0.03 per diluted
share, while third quarter 2006 included net gains which benefited earnings by
$0.01 per diluted share. Refer to 'Note A' at the end of this overview section
for more detail on these 2007 and 2006 items.



The following table summarizes sales and operating income results by business
segment.


                                            Three months ended September 30
                                                2007              2006                     % change
                                            Net     Oper.     Net     Oper.           Net           Oper.
(Millions)                                 Sales    Income   Sales    Income         Sales          Income

Industrial and Transportation              $1,807     $378   $1,654     $339              9.3 %         11.4 %
Health Care                                   961      259      998      287             (3.7 )%        (9.9 )%
Display and Graphics                        1,012      288      992      293              2.0 %         (1.7 )%
Consumer and Office                           898      192      848      190              5.9 %          0.6 %
Safety, Security and Protection               766      157      691      141             10.9 %         10.8 %
Services
Electro and Communications                    714      114      664      121              7.6 %         (5.1 )%
Corporate and Unallocated                      19       37       11      (29 )
Total Company                              $6,177   $1,425   $5,858   $1,342              5.5 %          6.2 %



Third quarter 2007 worldwide total sales growth was 5.5%. Local-currency sales
growth (which includes volume, selling price and acquisition impacts, but
excludes divestiture and translation impacts) was 6.3%, with organic
local-currency growth of 4.2% and acquisitions adding 2.1%. Divestitures,
primarily the sale of the global branded pharmaceuticals business (Health Care
segment), decreased worldwide sales growth by 3.9%. The sale of the
pharmaceuticals business is not presented as a discontinued operation due to the
extent of the projected continuing cash flows from 3M's contractual supply
relationship with the buyers in relation to those of the business that was sold.



The breadth of 3M's product lines was evident, as 3M experienced solid sales
growth across the portfolio in the third quarter of 2007. Health Care led all
segments with local-currency sales growth of 16.6%. This includes a 4.6% benefit
from acquisitions and 4.5% benefit due to the aforementioned supply agreements.
The sale of 3M's global branded pharmaceuticals business reduced Health Care
sales growth by 24.3%. Local-currency sales increased 6.7% in Safety, Security
and Protection Services, including 5.8% from numerous acquisitions.
Local-currency sales increased 5.4% in Industrial and Transportation, 4.3% in
Electro and Communications, 3.5% in Consumer and Office and 1.0% in Display and
Graphics. While 3M experienced broad-based sales growth, there was softness in



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certain markets in the third quarter of 2007. Within Display and Graphics,
optical film sales increased slightly both year-on-year and sequentially, but 3M
experienced an attachment rate loss in LCD desktop monitors and LCD TV segments
in the third quarter quarter of 2007 as competition continues to intensify in
this market. 3M also experienced weakness in its industrial minerals business
for residential asphalt shingles and in its electronic interconnects solutions
business due to softness in certain segments of the consumer electronics market.
Refer to the Performance by Business Segment section for a more detailed
discussion of the results of the respective segments.



Geographically, the European region (which includes Europe, Middle East and
Africa) led local-currency sales growth in the third quarter of 2007, with an
increase of 11.8%, 8.1% of which was organic (excluding acquisitions). Sales
growth in Europe was led by the Safety, Security and Protection Services, Health
Care (without Pharmaceuticals) and Consumer and Office segments. The combined
Latin America and Canada area local-currency sales increased 11.0%, of which
10.3% was organic. Asia Pacific local-currency sales increased 4.1%, of which
3.6% was organic. United States local-currency sales increased 3.6%, of which
1.2% was organic. Organic volume growth in the U.S. was up slightly as strong
growth in Health Care (without Pharmaceuticals) and Electro and Communications
was offset by weakness in a few businesses that are impacted by the slowdown in
the U.S. housing, road construction and mass retail markets, primarily the
industrial minerals, protective materials, traffic safety and office supply
businesses. Divestitures, primarily the sale of the global branded
pharmaceuticals business, reduced sales in Europe by 6.6%, in the United States
sales by 4.2%, in the combined Latin America and Canada area by 2.9%, and in
Asia Pacific by 1.6%. Currency effects increased total international sales by
5.1%, with Europe positively impacted by 7.8%, the combined Latin America and
Canada area by 6.2%, and Asia Pacific by 2.4%, as the U.S. dollar weakened in
aggregate against the multitude of currencies in these geographic areas.



Operating income for the three months ended September 30, 2007 increased 6.2%
year-on-year, including a net 2.9% benefit from the impact of items discussed in
Note A below. Operating income margins were approximately 23% in both the third
quarter of 2007 and 2006.



3M generated $2.719 billion of operating cash flows for the nine months ended
September 30, 2007, an increase of $202 million compared to the nine months
ended September 30, 2006. For the nine months ended September 30, 2007, the
Company utilized $3.795 billion of cash to repurchase 3M common stock and pay
dividends, compared to $3.058 billion in the same period last year. In February
2007, 3M's Board of Directors approved a $7.0 billion two-year share repurchase
authorization for the period from February 12, 2007 to February 28, 2009. As of
September 30, 2007, approximately $4.6 billion remained available for
repurchase. In February 2007, 3M's Board also authorized a dividend increase of
4.3% for 2007, marking the 49th consecutive year of dividend increases for 3M.
3M's debt to total capital ratio (total capital defined as debt plus equity) as
of September 30, 2007 was 32%. 3M has an AA credit rating from Standard &
Poor's, with a stable outlook, and an Aa1 credit rating from Moody's Investors
Service, with a negative outlook. The Company has sufficient access to capital
markets to meet currently anticipated growth and acquisition investment funding
needs.



As discussed at year-end 2006, beginning in 2007, the Company modified elements
of its long-term incentive compensation programs. With the May 2007 Management
Stock Ownership Program (MSOP) Annual Grant, the Company reduced the number of
traditional stock options granted by reducing the number of employees eligible
to receive annual grants and by shifting a portion of the annual grant away from
traditional stock options primarily to restricted stock units. These changes
will reduce the annual dilution impact from approximately 1.5% of total
outstanding common stock to approximately 1%. However, associated with the
reduction in the number of eligible employees, the Company provided a one-time '
buyout' grant of restricted stock units to the impacted employees, which will
result in increased stock-based compensation expense in 2007. Stock-based
compensation expense is expected to total $0.18 per diluted share in 2007,
compared with $0.17 per diluted share in 2006. The Company's MSOP, including
restricted stock units, are discussed further in Note 12.



(Note A). Third quarter 2007 included net benefits from a gain on sale of real
estate ($52 million pre-tax, $37 million after-tax), partially offset by exit
activities ($26 million pre-tax, $17 million after-tax). Concerning the real
estate sale, 3M sold its current lab facility located in Suwon, Korea and is
currently building a new state-of-the-art customer-oriented R&D facility closer
to Seoul and many of 3M's major customers. Exit activities related to the
consolidation of certain flexible circuit manufacturing operations are discussed
further in the Electro and Communications portion of the Performance by Business
Segment section. In the second quarter of 2007, 3M completed and recorded gains
from the sale of its Opticom Priority Control Systems and Canoga Traffic
Detection businesses, and in the first quarter of 2007, 3M completed the sale of
its global branded pharmaceuticals business in Europe. Both of these gains on
sale of businesses were partially offset by restructuring expenses and increases
in environmental liabilities. In summary, first nine months 2007 included net
benefits from gains related to the sale of businesses ($854 million pre-tax,
$553 million after-tax) and a gain on sale of real estate ($52 million pre-tax,
$37 million after-tax),



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which were partially offset by increases in environmental liabilities ($134
million pre-tax, $83 million after-tax), restructuring actions ($45 million
pre-tax, $30 million after-tax), and other exit activities ($26 million pre-tax,
$17 million after-tax). These items, except the gain on sale of real estate, are
discussed in more detail in Note 2 (Acquisitions and Divestitures), Note 4
(Restructuring Actions and Other Exit Activities) and Note 11 (Commitments and
Contingencies). Third quarter 2006 included gains due to a net benefit from
certain income tax adjustments ($19 million after-tax) and costs related to
seeking strategic alternatives for pharmaceuticals ($13 million pre-tax, $9
million after-tax). Second quarter and first six months 2006 included gains due
to a net benefit from certain income tax adjustments ($105 million after-tax),
settlement costs related to an antitrust class action ($40 million pre-tax, $25
million after-tax) and costs related to the Company's efforts to seek strategic
alternatives for its branded pharmaceuticals business ($9 million pre-tax, $6
million after-tax). In summary, first nine months of 2006 for these items
penalized operating income by $62 million, but due to the benefit from certain
income tax adjustments, benefited net income by $84 million. For further
discussion of these 2006 items, refer to 3M's Current Report on Form 8-K dated
May 25, 2007, which updated 3M's 2006 Annual Report on Form 10-K.



RESULTS OF OPERATIONS



Percent change information compares the third quarter and first nine months of
2007 with the same period last year, unless otherwise indicated.



Net Sales:


                                            Three months ended                          Nine months ended
                                            September 30, 2007                         September 30, 2007
                                    U.S.          Intl.       Worldwide        U.S.          Intl.        Worldwide
Net sales (millions)              $   2,318     $   3,859     $    6,177     $   6,795     $   11,461     $   18,256
% of worldwide sales                   37.5 %        62.5 %                       37.2 %         62.8 %
Components of net sales
change:
Volume - organic                        0.1 %         7.1 %          4.2 %         1.5 %          8.3 %          5.6 %
Volume - acquisitions                   2.4           1.7            2.1           2.7            2.3            2.5
Price                                   1.1          (0.8 )            -           1.1           (1.4 )         (0.4 )
Local-currency sales                    3.6           8.0            6.3           5.3            9.2            7.7
(including acquisitions)
Divestitures                           (4.2 )        (3.6 )         (3.9 )        (4.1 )         (3.7 )         (3.9 )
Translation                               -           5.1            3.1             -            4.4            2.7
Total sales change                     (0.6 )%        9.5 %          5.5 %         1.2 %          9.9 %          6.5 %



In the third quarter of 2007, worldwide local-currency sales growth increased
6.3%, with 8.0% growth from international operations and 3.6% growth from the
U.S. The biggest driver was organic local currency sales growth, with worldwide
organic volume up 4.2%, led by a 7.1% increase in international. Acquisitions
within the past 12 months, such as Security Printing and Systems Limited,
Softmed Systems Inc. and Biotrace International PLC, contributed 2.1% to
worldwide sales growth. Selling prices in the U.S. rose 1.1% and international
selling prices were down 0.8%, continuing to be negatively impacted by
businesses that serve the consumer electronics industry. Divestitures, primarily
the sale of the global branded pharmaceuticals business, reduced reported sales
growth by 3.9%, while foreign currency translation added 3.1% to third-quarter
2007 sales growth. Local currency sales growth was led by the Health Care
(without pharmaceuticals) and Safety, Security and Protection Services
businesses.



For the first nine months of 2007, sales increased 6.5% to $18.3 billion, driven
by a 7.7% increase in local-currency sales, including acquisitions. The
company's divestiture of its branded pharmaceuticals business reduced reported
sales growth by 3.9%, while foreign currency translation added 2.7% to sales in
the first nine months of 2007.



Refer to the 'Performance by Business Segment' section for additional discussion
of sales change by segment and the preceding 'Overview' section for discussion
of sales growth by geographic area.



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Operating Expenses:


                                       Three months ended                  Nine months ended
                                          September 30                        September 30
(Percent of net sales)                2007   2006   Change         2007           2006          Change
Cost of sales                         52.4 % 51.1 %    1.3 %          51.7 %         49.9 %          1.8 %
Selling, general and                  19.0   20.2     (1.2 )          20.5           21.5           (1.0 )
administrative expenses
Research, development and              5.5    5.8     (0.3 )           5.5            5.9           (0.4 )
related expenses
Gain on sale of businesses               -      -        -            (4.7 )            -           (4.7 )
Operating income                      23.1 % 22.9 %    0.2 %          27.0 %         22.7 %          4.3 %



Cost of sales as a percent of net sales increased 1.3 percentage points in the
third quarter and 1.8 percentage points in the first nine months of 2007
compared to the same periods in 2006, with approximately one percentage point of
this increase in both the third quarter and first nine months due to the sale of
the branded pharmaceuticals business, which had lower than average cost of
sales. Restructuring and other exit costs in 2007, primarily related to the
consolidation of certain flexible circuit manufacturing operations in the third
quarter, the phase-out of operations at the Company's New Jersey roofing granule
facility in the second quarter and charges related to the Company's decision to
close a facility in Wisconsin in the first quarter, penalized cost of sales as a
percent of net sales by approximately 0.2 percentage points in the third quarter
of 2007 and 0.3 percentage points for the first nine months of 2007.



Selling, general and administrative (SG&A) expenses as a percent of net sales
decreased 1.2 percentage points in the third quarter when compared to the same
period in 2006, as expenses incurred in 2006 in the Company's now-divested
global branded Pharmaceuticals business did not repeat in 2007.
Non-pharmaceutical ongoing SG&A expenses, after adjusting for the following
items, were up approximately 9% in dollars, reflecting the Company's continued
investment in sales and marketing to support growth markets. The Company
continues to constrain administrative costs. In the third quarter of 2007, the
gain on sale of real estate and certain employee related costs related to the
consolidation of certain flexible circuit manufacturing operations ($43 million
combined net benefit) reduced SG&A as a percent of sales by 0.7 percentage
points. Third quarter 2006 included costs related to the Company's efforts to
seek strategic alternatives for its branded pharmaceuticals business ($13
million), which increased third quarter 2006 SG&A as a percent of sales by 0.2
percentage points.



SG&A expenses as a percent of net sales decreased 1.0 percentage points for the
first nine months when compared to the same period in 2006, as expenses incurred
in 2006 in the Company's now-divested global branded Pharmaceuticals business
did not repeat in 2007. In addition to the third quarter 2007 items discussed in
the preceding paragraph ($43 million combined benefit), first nine months 2007
SG&A also includes an increase in environmental liabilities ($134 million) and
SG&A restructuring expenses ($10 million for the first six months of 2007).
Combined, these 2007 items increased first nine months 2007 SG&A by $101 million
or 0.6 percentage points as a percent of net sales (refer to Notes 11 and 4 for
more detail). First nine months 2006 includes settlement costs related to an
antitrust class action ($40 million) and costs related to the Company's efforts
to seek strategic alternatives for its branded pharmaceuticals business ($22
million), which combined increased SG&A by $62 million or 0.3 percentage points
as a percent of net sales.



Research, development and related expenses (R&D) as a percent of net sales
decreased 0.3 percentage points in the third quarter of 2007 and 0.4 percentage
points in the first nine months of 2007 when compared to the same periods in
2006, as expenses incurred in 2006 in the Company's now-divested R&D-intensive
Pharmaceuticals business did not repeat in 2007. Non-pharmaceutical ongoing R&D
and related costs increased approximately 10% in the third quarter of and first
nine months of 2007 as the Company continued to aggressively invest in future
technologies and growth opportunities.



Operating Income:



3M uses operating income as one of its primary business segment performance
measurement tools. Operating income has steadily improved the past few years,
helped by solid sales growth and an ongoing strong commitment to maintaining
operational discipline throughout 3M's global operations. Operating income
margins of 27.0% in the first nine months of 2007 were positively impacted by
3.9 percentage points from the gain on sale of businesses and real estate, net
of environmental liabilities, restructuring and other exit activities. Operating
income margins of 22.7% for the first nine months of 2006 were negatively
impacted by 0.3 percentage points from antitrust settlement costs and
pharmaceuticals costs discussed as part of SG&A.



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Interest Expense and Income:


                               Three months ended            Nine months ended
                                  September 30                  September 30
(Millions)                    2007           2006           2007           2006
Interest expense           $        53    $        37    $       139    $        84
Interest income                    (37 )          (13 )          (94 )          (35 )
Total                      $        16    $        24    $        45    $        49



Interest expense increased for the third quarter and first nine months of 2007
when compared to the same period in 2006, primarily related to increased debt
levels supporting share repurchases, along with higher borrowing rates in the
U.S. Interest income was higher in the third quarter and first nine months of
2007, predominately due to higher average levels of cash, cash equivalents and
marketable securities.



Provision for Income Taxes:


                                       Three months ended             Nine months ended
                                          September 30                  September 30
(Percent of pre-tax income)            2007           2006           2007           2006
Effective tax rate                        30.7 %         31.3 %         32.5 %         29.4 %



The tax rate for the third quarter of 2007 was 30.7%, compared to 31.3% in the
third quarter of 2006. The lower tax rate in the third quarter of 2007 was
principally due to a one-time cumulative impact of tax rate changes for several
of 3M's European subsidiaries. The tax rate for the first nine months of 2006
included a net benefit of $124 million from discrete tax reserve releases and
other income tax adjustments (both positive and negative), which reduced 3M's
tax rate for the first nine months of 2006 by approximately 3.2%.



During the third quarter of 2007, the Company completed the preparation and
filing of its 2006 U.S. federal income tax return. As anticipated, the
finalization of this return did not result in any material changes to the
Company's financial position.



Minority Interest:


                          Three months ended            Nine months ended
                             September 30                  September 30
(Millions)               2007           2006           2007           2006
Minority Interest     $        16    $        12    $        47    $        35



Minority interest expense eliminates the income or loss attributable to non-3M
ownership interests in 3M consolidated entities. 3M's most significant
consolidated entity with non-3M ownership interests is Sumitomo 3M Limited (3M
owns 75% of Sumitomo 3M Limited). The increase for the third quarter and first
nine months of 2007 is primarily related to Sumitomo 3M Limited.



Currency Effects:



3M estimates that year-on-year currency effects, including hedging impacts,
increased net income by approximately $35 million for the three months ended
September 30, 2007, and increased net income by approximately $50 million for
the nine months ended September 30, 2007. This estimate includes the effect of
translating profits from local currencies into U.S. dollars; the impact of
currency fluctuations on the transfer of goods between 3M operations in the
United States and abroad; and transaction gains and losses, including derivative
instruments designed to reduce foreign currency exchange rate risks. 3M
estimates that year-on-year derivative and other transaction gains had an
immaterial impact on net income for the three months ended September 30, 2007
and decreased net income by approximately $35 million for the nine months ended
September 30, 2007.



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