Information  X 
Enter a valid email address

3M Company (96OI)

  Print   

Tuesday 30 October, 2007

3M Company

3rd Quarter Results - Part 2

3M Company
30 October 2007


CRITICAL ACCOUNTING ESTIMATES



Information regarding significant accounting policies is included in Note 1 to
3M's Current Report on Form 8-K dated May 25, 2007. As stated in Note 1, the
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities.
Management bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.



The Company believes its most critical accounting estimates relate to legal
proceedings, the Company's pension and postretirement obligations, potential
asset impairment issues and income taxes. Senior management has discussed the
development, selection and disclosure of its critical accounting estimates with
the Audit Committee of 3M's Board of Directors. In addition to the critical
accounting estimates detailed in 3M's Current Report on Form 8-K dated May 25,
2007, the Company added income taxes in the first quarter of 2007 (with the
January 1, 2007 adoption of FIN 48) as a critical accounting estimate.



Income Taxes:



The extent of 3M's operations involves dealing with uncertainties and judgments
in the application of complex tax regulations in a multitude of jurisdictions.
The final taxes paid are dependent upon many factors, including negotiations
with taxing authorities in various jurisdictions and resolution of disputes
arising from federal, state, and international tax audits. The Company
recognizes potential liabilities and records tax liabilities for anticipated tax
audit issues in the U.S. and other tax jurisdictions based on its estimate of
whether, and the extent to which, additional taxes will be due. As of January 1,
2007, the Company follows FIN 48 guidance to record these liabilities (refer to
Note 6 for additional information). The Company adjusts these reserves in light
of changing facts and circumstances; however, due to the complexity of some of
these uncertainties, the ultimate resolution may result in a payment that is
materially different from the Company's current estimate of the tax liabilities.
If the Company's estimate of tax liabilities proves to be less than the ultimate
assessment, an additional charge to expense would result. If payment of these
amounts ultimately proves to be less than the recorded amounts, the reversal of
the liabilities would result in tax benefits being recognized in the period when
the Company determines the liabilities are no longer necessary.



New Accounting Pronouncements:



Information regarding new accounting pronouncements is included in Note 1 to the
Consolidated Financial Statements.



PERFORMANCE BY BUSINESS SEGMENT



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.
Segment information for all periods presented has been reclassified to reflect
the new segment structure.



Information related to 3M's business segments for the third quarter and first
nine months of both 2007 and 2006 is presented in the tables that follow.
Local-currency sales (which includes both organic and acquisition volume impacts
plus price impacts) are provided for each segment. The translation impact and
total sales change are also provided for each segment.



Industrial and Transportation Business:


                                                Three months ended            Nine months ended
                                                   September 30                  September 30
                                               2007           2006           2007           2006
Sales (millions)                            $     1,807    $     1,654    $     5,396    $     4,988
Sales change analysis:
Local currency (volume and price)                   5.4 %          7.1 %          5.0 %         10.5 %
Translation                                         3.9            1.8            3.2              -
Total sales change                                  9.3 %          8.9 %          8.2 %         10.5 %

Operating income (millions)                 $       378    $       339    $     1,148    $     1,039
Percent change                                     11.4 %         16.8 %         10.4 %         13.9 %
Percent of sales                                   20.9 %         20.5 %         21.3 %         20.8 %



                                       34
--------------------------------------------------------------------------------




The Industrial and Transportation segment serves a broad range of markets, such
as appliance, paper and packaging, food and beverage, and automotive. Industrial
and Transportation products include tapes, a wide variety of coated and
non-woven abrasives, adhesives, specialty materials, filtration products,
closures for disposable diapers, and components and products that are used in
the manufacture, repair and maintenance of automotive, marine, aircraft and
specialty vehicles.



Third quarter of 2007:

Driven by broad-based growth across the portfolio, sales increased 9.3% to $1.8
billon. Local-currency sales grew 5.4%, including 1.2% from complimentary
acquisitions in the adhesives, tapes and abrasives area that have helped fill
gaps in product lines. Organic sales growth in the third quarter of 2007 was led
by the industrial adhesives and tapes, automotive, automotive aftermarket and
abrasives businesses. Some of the products driving growth in the third quarter
were specialty chemicals for the oil and gas markets; paint preparation systems
that deliver productivity in paint booths for body shops; laminating adhesives
providing attachment solutions in industrial applications; and packaging tapes.
Local-currency sales were down slightly in the diaper components business.



Geographically, strong market penetration in emerging markets, particularly the
BRICP countries (Brazil, Russia, India, China and Poland) continued in the third
quarter. Sales growth was led by the Europe and Latin America/Canada regions.
Solid operational performance resulted in an operating income increase of 11.4%
and operating income margins of 20.9%.



First nine months of 2007:

Year-to-date sales were up 8.2% over the first nine months of last year while
operating income increased 10.4% as this business continues to drive strong
productivity programs. Like the third quarter, first nine months sales growth
was led by industrial adhesives and tapes, automotive, automotive aftermarket
and abrasives businesses. Through the first nine months of the year, Industrial
and Transportation's operating income margins were 21.3%, up 0.5 percentage
points versus the same time period last year, as this business continues to
drive strong productivity programs.



In September 2007, 3M announced the acquisition of Venture Tape Corporation, a
global provider of pressure sensitive adhesive tapes based in Rockland,
Massachusetts. Venture Tape Corporation manufactures a broad range of tapes used
in construction, oil and gas, HVAC, electronics, aerospace, marine and appliance
markets. This acquisition broadens 3M's pressure sensitive adhesive tape
platform, bringing new channels to 3M, and allows 3M to expand into adjacent
markets such as the global construction market.



The Industrial and Transportation business continues to invest in R & D to
strengthen its core technologies while adding strategic complementary
acquisitions to boost its core adhesives, tapes and abrasives platforms and to
expand into adjacent markets.



In March 2005, 3M's automotive business completed the purchase of 19% of TI&M
Beteiligungsgesellschaft mbH (TI&M) for approximately $55 million. TI&M is the
parent company of I&T Innovation Technology Entwicklungs- und Holding
Aktiengesellschaft (I&T), an Austrian maker of flat flexible cable and
circuitry. Pursuant to a Shareholders Agreement, 3M marketed the firm's flat
flexible wiring systems for automotive interior applications to the global
automotive market. I&T filed a petition for bankruptcy protection in August
2006. As part of its agreement to purchase the shares of TI&M, the Company was
granted a put option, which gave the Company the right to sell back its entire
ownership interest in TI&M to the other investors from whom 3M acquired its 19%
interest. The put option became exercisable January 1, 2007. The Company
exercised the put option and recovered approximately $25 million of its
investment from one of the investors based in Belgium in February 2007. The
other two TI&M investors have filed a bankruptcy petition in Austria. The
Company is pursuing recovery of the balance of its investment both through the
Austrian bankruptcy proceedings and pursuant to the terms of the Share Purchase
Agreement. The Company believes collection of its remaining investment is
probable and, as a result, no impairment reserve has been recorded.



                                       35
--------------------------------------------------------------------------------




Health Care Business:


                                            Three months ended               Nine months ended
                                               September 30                    September 30
                                           2007            2006            2007            2006
Sales (millions)                        $       961     $       998     $     2,911     $     2,964
Sales change analysis:
Local currency (volume and price)              16.6 %           6.0 %          18.8 %           5.0 %
Divestitures                                  (24.3 )             -           (24.5 )             -
Translation                                     4.0             1.9             3.9            (0.3 )
Total sales change                             (3.7 )%          7.9 %          (1.8 )%          4.7 %

Operating income (millions)             $       259     $       287     $     1,600     $       846
Percent change                                 (9.9 )%          5.1 %           N/A             2.0 %
Percent of sales                               26.9 %          28.8 %           N/A            28.6 %



The Health Care segment serves markets that include medical, clinics and
hospitals, pharmaceuticals, dental and orthodontic practitioners, and health
information systems. Products and services provided to these and other markets
include medical and surgical supplies, skin health and infection prevention
products, drug delivery systems, dental and orthodontic products, health
information systems and microbiology solutions. As discussed in Note 2, the
global branded pharmaceuticals business was sold in December 2006 and January
2007.



The combination of the following items positively impacted first nine months
2007 Health Care operating income by $795 million. As discussed in Note 2, in
January 2007 the Company sold its branded pharmaceuticals business in the Europe
region. The operating income gain related to this sale, which is included in
Health Care, totaled $786 million. In addition, as discussed in Note 4, a net
operating income gain of $9 million was recorded in the first six months of
2007, which primarily related to adjustments to restructuring costs incurred in
the fourth quarter of 2006. In the third quarter and first nine months of 2006,
respectively, expenses of $13 million and $22 million were recorded related to
the Company's efforts to seek strategic alternatives for its branded
pharmaceuticals business.



The sale of the branded pharmaceuticals business will impact both sales growth
and operating income margins in Health Care and the total company throughout
2007. Sales growth in 2007 will be negatively impacted as significant
pharmaceuticals sales are in the base 2006 period. In addition, Health Care
operating income margins are expected to decline in 2007 year-on-year as a
result of this sale. The sale of the pharmaceuticals business reduced Health
Care sales growth by 24.3% for the third quarter and 24.5% for the first nine
months of 2007. 3M believes the disaggregated information that follows for 3M
Health Care's remaining businesses (without pharmaceuticals) and for
pharmaceuticals on a stand-alone basis provides useful information.



Health Care Business without Pharmaceuticals:


                                              Three months ended            Nine months ended
                                                 September 30                  September 30
                                             2007           2006           2007           2006
Sales (millions)                          $       961    $       797    $     2,911    $     2,373
Sales change analysis:
Local currency (volume and price)                16.6 %          7.8 %         18.8 %          7.6 %
Translation                                       4.0            1.9            3.9           (0.3 )
Total sales change                               20.6 %          9.7 %         22.7 %          7.3 %

Operating income (millions)               $       259    $       227    $       800    $       675
Percent change                                   13.7 %          3.7 %         18.3 %          3.5 %
Percent of sales                                 26.9 %         28.6 %         27.5 %         28.5 %



                                       36
--------------------------------------------------------------------------------




The following discussion provides information on 3M Health Care's remaining
businesses (without pharmaceuticals).



Third quarter of 2007:



In the third quarter of 2007, sales were up 20.6%, with operating income
increasing 26.9% to $259 million. Local-currency sales growth increased 16.6% in
the third quarter, with acquisitions contributing 4.6% of this growth. A large
part of the acquisition-driven local currency sales came from two acquisitions:
Biotrace International, PLC, a UK-based provider of microbiology products, and
SoftMed Systems Inc., a Maryland-based provider of health information software
solutions. 3M also acquired Neoplast, a Bangkok-based manufacturer and
distributor of consumer and professional skin and wound care products. Supply
agreements related to the sale of the branded pharmaceutical business, in which
the Drug Delivery Systems Division (DDSD) became a source of supply to the
acquiring companies, added 4.5% to sales growth.



Health Care sales growth was broad-based, led by drug delivery systems, where 3M
is a leading provider of inhalation and transdermal drug delivery solutions. 3M
also saw strong growth in its medical, health information systems and dental
businesses. 3M saw strong growth in its health information systems business,
where 3M is a provider of advanced software and services that help health care
organizations capture, classify and manage health care data. In dental, 3M
continues to deliver a steady stream of new products. 3M recently launched a new
product in dental which is a new-to-the-world technology that creates the lowest
shrinking composite filling material available along with two new state of the
art adhesives for better bonding and patient comfort. In orthodontics, where
self-ligating brackets are the fastest growing segment in that market, 3M's
exclusive SmartClip(TM)braces system is leading the way with solid growth again
this quarter. Geographically, sales growth was led by Europe and Latin America.
Operating income was up 13.7%, with operating income margins for the third
quarter of 2007 at 26.9%.



First nine months of 2007:



For the first nine months of 2007, sales were up 22.7%, with operating income up
18.3%. Like the third quarter, first nine months sales growth was broad-based
across drug delivery, medical, health information systems and dental. Operating
income for the first nine months of 2007 includes $5 million in restructuring
expenses, primarily severance and related benefits.



Pharmaceuticals Business:


                                             Three months ended             Nine months ended
                                                September 30                   September 30
                                            2007           2006            2007           2006
Sales (millions)                         $         -    $       201     $         -    $       591
Sales change analysis:
Local currency (volume and price)                N/A           (0.7 )%          N/A           (4.1 )%
Translation                                      N/A            2.0             N/A           (0.4 )
Total sales change                               N/A            1.3 %           N/A           (4.5 )%

Operating income (millions)              $         -    $        60     $       800    $       171
Percent change                                   N/A           10.8 %           N/A           (3.3 )%
Percent of sales                                 N/A           29.7 %           N/A           28.8 %



The combination of the following items positively impacted first nine months
2007 Health Care operating income by $800 million. As discussed in Note 2, in
January 2007 the Company sold its branded pharmaceuticals business in the Europe
region. The operating income gain related to this sale, which is included in
Health Care, totaled $786 million. In addition, as discussed in Note 4, a net
operating income gain of $14 million was recorded in the first six months of
2007, which primarily related to adjustments to restructuring costs incurred in
the fourth quarter of 2006. In the third quarter and first nine months of 2006,
respectively, expenses of $13 million and $22 million were recorded related to
the Company's efforts to seek strategic alternatives for its branded
pharmaceuticals business.



DDSD, which is a source of supply to the acquiring companies, records sales and
operating income related to the pharmaceuticals supply agreements. Remaining
pharmaceutical sales and operating results in the first nine months of 2007 were
not significant and were recorded in Corporate and Unallocated.



                                       37
--------------------------------------------------------------------------------




Display and Graphics Business:


                                             Three months ended             Nine months ended
                                                September 30                   September 30
                                            2007           2006            2007           2006
Sales (millions)                         $     1,012    $       992     $     2,939    $     2,824
Sales change analysis:
Local currency (volume and price)                1.0 %          7.4 %           2.9 %          7.2 %
Divestitures                                    (0.8 )            -            (0.2 )            -
Translation                                      1.8            0.7             1.4           (0.1 )
Total sales change                               2.0 %          8.1 %           4.1 %          7.1 %

Operating income (millions)              $       288    $       293     $       935    $       822
Percent change                                  (1.7 )%        (6.3 )%         13.7 %         (5.2 )%
Percent of sales                                28.5 %         29.5 %          31.8 %         29.1 %



The Display and Graphics segment serves markets that include electronic display,
touch screen, traffic safety and commercial graphics. This segment includes
optical film and lens solutions for electronic displays; touch screens and touch
monitors; reflective sheeting for transportation safety; and commercial graphics
systems. The optical film business provides films that serve numerous market
segments of the electronic display industry. 3M provides distinct products for
five market segments, including products for: 1) LCD computer monitors 2) LCD
televisions 3) handheld devices such as cellular phones 4) notebook PCs and 5)
automotive displays.



Third quarter of 2007:



For the third quarter, Display and Graphics sales were up 2.0% to more than $1
billion. Sales growth was negatively impacted by over 2% due to the divestiture
of the Opticom and Canoga loop business along with product rationalizations in a
couple of other businesses. Local currency sales growth was 1.0%.
Geographically, the strongest growth was in Latin America. Optical film sales
increased slightly both year-on-year and sequentially. Commercial graphics saw
an uplift in the vehicle wrapping market where it provides films, inks and other
products for this 'rolling billboard' industry. Likewise, traffic safety systems
posted continued seasonal growth internationally, driven largely by the road
construction season. The U.S. highway construction market work slowed in the
third quarter sequentially from the first half of the year as the industry is
facing substantial material inflation for cement and asphalt which is driving
more of their spending into construction materials for road surfacing versus
other spending such as sign sheeting. Operating income decreased 1.7%, driven by
decreases in optical systems, but overall this segment maintained a strong
operating income margin of 28.5%.



Optical systems continues to focus on market segmentation, with strong
penetration in handhelds, computer displays and LCD televisions. 3M experienced
an attachment rate loss in LCD desktop monitors and LCD TV segments in the third
quarter of 2007 as competition continues to intensify in this market. 3M also
noted a slowing in the mix shift from 720p to 1080p LCD TV's which impacts 3M
business as 3M films are used more heavily in the 1080p sets. 3M will continue
to compete aggressively, balancing product innovations, price and volumes across
the entire brightness enhancement film product pyramid. This means continued
price down to meet 3M's customers' cost down requirements. 3M's continued
commitment to invest in this business has led to a solid stream of new products.
3M's brightness enhancement films provide an environmental solution through
reduced energy consumption - a rapidly increasing requirement from retail
customers and government units. 3M also is on schedule in scaling up and
improving the productivity of its optical film manufacturing facilities.



First nine months of 2007:



For the first nine months, Display and Graphics sales increased 4.1%, with
operating income up 13.7%. In June 2007, 3M completed the sale of its Opticom
Priority Control Systems and Canoga Traffic Detection businesses. 3M received
proceeds of $80 million from this transaction and recognized an operating income
gain of $68 million in the Display and Graphics segment in the second quarter of
2007. In addition, Display and Graphics recorded restructuring-related expenses
of $4 million in the second quarter of 2007. First nine months 2007 operating
income was $935 million, including this aggregate net operating income benefit
of $64 million, which contributed 7.8 percentage points of the reported 13.7%
operating income growth and contributed 2.1 percentage points of the 31.8%
operating income margin.



                                       38
--------------------------------------------------------------------------------




Consumer and Office Business:


                                              Three months ended            Nine months ended
                                                 September 30                  September 30
                                             2007           2006           2007           2006
Sales (millions)                          $       898    $       848    $     2,544    $     2,358
Sales change analysis:
Local currency (volume and price)                 3.5 %          6.6 %          5.8 %          7.7 %
Translation                                       2.4            1.1            2.1            0.2
Total sales change                                5.9 %          7.7 %          7.9 %          7.9 %

Operating income (millions)               $       192    $       190    $       533    $       475
Percent change                                    0.6 %          5.2 %         12.0 %          4.7 %
Percent of sales                                 21.3 %         22.5 %         20.9 %         20.2 %



The Consumer and Office segment serves markets that include consumer retail,
office retail, home improvement, building maintenance and other markets.
Products in this segment include office supply products, stationery products,
construction and home improvement products, home care products, protective
material products and consumer health care products.



Third quarter of 2007:



Consumer and Office sales increased 5.9% to $898 million in the third quarter.
Local-currency sales increased 3.5%, including 1.1% of growth from acquisitions,
primarily due to the October 2006 acquisition of Nylonge, a global provider of
household cleaning products, including cellulose sponges. Sales growth was led
by the home care and construction and home improvement businesses. Sales growth
in the home care business came from Scotchbrite scouring products. In
construction and home improvement, sales growth came from Filtrete air
filtration for the U.S. residential HVAC systems along with Command mounting and
fastening products. Sales growth was tempered by weakness in the protective
materials business and the office mass retail channel in the U.S.
Geographically, 3M's international subsidiaries continued to drive growth again
this quarter, with growth in all regions led by Europe.



Operating income rose 0.6% to $192 million and operating income margins were
21.3%, a decrease of 1.2 percentage points compared to the third quarter last
year. During the third quarter, 3M stepped up investment in advertising and
merchandising to drive growth in the back-to-school season.



First nine months of 2007:



Year-to-date, sales are up 7.9% and operating income was up 12.0%. First nine
months 2007 sales growth was led by home care and the construction and home
improvement businesses, with the office supplies business also showing good
growth. 3M will continue to invest in advertising during the fourth quarter to
accelerate growth during the holiday season.



                                       39
--------------------------------------------------------------------------------




Safety, Security and Protection Services Business:


                                              Three months ended            Nine months ended
                                                 September 30                  September 30
                                             2007           2006           2007           2006
Sales (millions)                          $       766    $       691    $     2,323    $     1,992
Sales change analysis:
Local currency (volume and price)                 6.7 %         16.6 %         12.6 %         13.6 %
Translation                                       4.2            2.1            4.0            0.2
Total sales change                               10.9 %         18.7 %         16.6 %         13.8 %

Operating income (millions)               $       157    $       141    $       478    $       438
Percent change                                   10.8 %          6.5 %          9.1 %         11.6 %
Percent of sales                                 20.5 %         20.5 %         20.6 %         22.0 %



The Safety, Security and Protection Services segment serves a broad range of
markets that increase the safety, security and productivity of workers,
facilities and systems. Major product offerings include personal protection
products, safety and security products, energy control products, cleaning and
protection products for commercial establishments, roofing granules for asphalt
shingles, and supply chain execution software solutions. 3M's new emerging
business opportunity in its Track and Trace initiative within 3M's Safety,
Security and Protection Services segment 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.



Third quarter of 2007:



Safety, Security and Protection Services delivered solid growth in the third
quarter, with sales up 10.9% over last year's third quarter. Sales growth in
local currency was up 6.7%, including 5.8% from acquisitions. Acquired growth
was primarily from Security Printing Systems, Ltd, a leading provider of
finished, personalized passports and secure cards and E Wood Holdings PLC, a
manufacturer of high-performance protective coatings for the oil, gas, water,
rail and automotive industries, both based in the UK.



Sales growth was led by respiratory protection, corrosion protection and
building and commercial services. Overall segment year-on-year sales growth was
held back by almost 2% due to the industrial minerals business which supplies
mineral used on asphalt shingles for the U.S. residential housing market.
Housing in the U.S. remains very sluggish, and 3M's industrial minerals business
is a U.S. centric business. Geographically, sales growth was led by strong
growth in Europe, followed by Latin America and Asia Pacific. Operating income
increased 10.8% as the business continued to maintain consistent operating
margins in excess of 20%.



3M's Security business recently acquired Rochford Thompson Equipment Limited
(Rochford Thompson). Rochford Thompson is a manufacturer of optical character
recognition passport readers used by airlines and immigration authorities,
headquartered in Newbury, U.K. The addition of Rochford Thompson enhances 3M's
secure document scanning solutions portfolio and allows expansion into
transportation markets such as international airlines.



First nine months of 2007:



Safety, Security and Protection Services recorded a restructuring charge of $29
million in the second quarter of 2007 related to the phase-out of operations at
its New Jersey roofing granule facility. This included fixed asset impairments
and employee-related restructuring liabilities.



Year-to-date sales have increased 16.6%, with operating income up 9.1%. The $29
million restructuring charge recorded in the second quarter of 2007 negatively
impacted first nine months operating income growth by 6.6%. Including this
charge, operating income margins are still in excess of 20% for the first nine
months of 2007. The year-on year decline in industrial minerals reduced Safety,
Security and Protection Services' first nine months sales growth by
approximately 2%.



                                       40
--------------------------------------------------------------------------------




Electro and Communications Business:


                                              Three months ended            Nine months ended
                                                 September 30                  September 30
                                             2007           2006           2007           2006
Sales (millions)                          $       714    $       664    $     2,075    $     1,979
Sales change analysis:
Local currency (volume and price)                 4.3 %          2.6 %          2.3 %          5.2 %
Translation                                       3.3            1.7            2.6              -
Total sales change                                7.6 %          4.3 %          4.9 %          5.2 %

Operating income (millions)               $       114    $       121    $       357    $       355
Percent change                                   (5.1 )%         2.6 %          0.8 %         12.8 %
Percent of sales                                 16.0 %         18.1 %         17.2 %         17.9 %



The Electro and Communications segment serves the electrical, electronics and
communications industries, including electrical utilities; electrical
construction, maintenance and repair; OEM electrical and electronics; computers
and peripherals; consumer electronics; telecommunications central office,
outside plant and enterprise; as well as aerospace, military, automotive and
medical markets; with products that enable the efficient transmission of
electrical power and speed the delivery of information and ideas. Products
include electronic and interconnect solutions, micro interconnect systems,
high-performance fluids, high-temperature and display tapes, telecommunications
products, electrical products, and visual systems products.



Third quarter of 2007:



Sales were up 7.6% over the third quarter last year, with local currency growth
of 4.3%, including 1.1% from acquisitions. The results in this business continue
to be mixed. 3M continues to experience strong growth in electrical markets and
communication businesses, especially in Europe and the U.S., which has been
somewhat offset by declining sales growth in some of the products 3M supplies
into the consumer electronics market which are in devices that have come to end
of life, adversely impacting sales in 3M's electronic solutions business. The
electronics markets materials business started to see some recovery in the third
quarter in consumer electronic applications, fueled by demand for fluids.



Overall, the Electro and Communications business has taken the necessary
corrective actions to respond to the slowing consumer electronics market. The
electronic solution business announced a consolidation of manufacturing
operations and reductions in structure in the third quarter to allow the
business to strengthen its competitive position. 3M consolidated its global
flexible circuits manufacturing operations from two plants, one in Missouri, the
other in Singapore, into the Singapore plant, to better serve customers who are
primarily in Asia. As a result, a charge of $26 million was recorded related to
employee reductions and fixed asset impairments. The electrical markets and
communications businesses delivered strong operating income growth, offsetting
the weakness in the consumer electronics markets. Strong cost discipline
continues to help operating income results. Third quarter 2007 operating income
growth was negatively impacted by the preceding $26 million charge, which
negatively impacted third quarter operating income growth by 21.5% and operating
income margins by 3.6 percentage points.



First nine months of 2007:



Sales increased 4.9% in the first nine months, with strong sales growth in the
electrical markets and communications markets partially offset by the sluggish
consumer electronics market. Operating income increased 0.8% compared to the
first nine months of 2006. Operating income for the first nine months of 2007
included the $26 million third quarter charge discussed above and $19 million in
first quarter 2007 restructuring expenses, primarily for asset impairment
charges related to the Company's decision to close a facility in Wisconsin.
Combined, these two items negatively impacted first nine months operating income
growth by 12.7% and operating income margins by 2.2 percentage points.



                                       41
--------------------------------------------------------------------------------




FINANCIAL CONDITION AND LIQUIDITY

The Company's net debt position is as follows:


                                    Sept. 30        Dec. 31
(Millions)                            2007           2006

Total Debt                        $      5,229    $     3,553
Less: Cash and cash                      3,255          2,084
equivalents and marketable
securities
Net Debt                          $      1,974    $     1,469



Total debt to total capital (total capital is defined as debt plus book value of
equity) was approximately 32% at September 30, 2007, compared with approximately
26% at December 31, 2006. In 2007, the July 2007 Eurobond issuance for 750
million Euros (approximately $1.063 billion in U.S. Dollars at September 30,
2007) and the March 2007 long-term debt issuance of $750 million, have been
used, in part, to fund share repurchase activities. 3M believes its ongoing cash
flows provide ample cash to fund expected investments and capital expenditures.
The Company has an AA credit rating, with a stable outlook, from Standard &
Poor's and an Aa1 credit rating, with a negative outlook, from Moody's Investors
Service. The Company has sufficient access to capital markets to meet currently
anticipated growth and acquisition investment funding needs.



While the Company does not utilize derivative instruments linked to its stock,
it does have contingently convertible debt that, if conditions for conversion
are met, is convertible into shares of 3M Company stock (refer to Note 1 in this
document and Note 10 in 3M's Current Report on Form 8-K dated May 25, 2007). The
book value of this debt was approximately $544 million at September 30, 2007.
Holders of this debt have the option to require 3M to purchase their notes at
accreted value on November 21, 2007 (and at five year intervals thereafter). On
October 19, 2007, 3M notified investors of its intent to settle any redemptions
in connection with this option in cash.



The Company has investments in auction rate securities, asset-backed securities
and other marketable securities, which are classified as available-for-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. 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 auction rate
securities. These securities will be analyzed each reporting period for
other-than-temporary impairment factors.



The Company's financial condition and liquidity remain strong. Various assets
and liabilities, including cash and short-term debt, can fluctuate significantly
from month-to-month depending on short-term liquidity needs. Working capital
(defined as current assets minus current liabilities) totaled $3.259 billion at
September 30, 2007, increasing $1.636 billion from December 31, 2006, with this
increase driven by higher cash, cash equivalents, marketable securities and
accounts receivable. Primary short-term liquidity needs are provided through
U.S. commercial paper and Euro commercial paper issuances. Credit support for
outstanding commercial paper is provided by a five-year $1.5 billion
multi-currency credit facility. This facility was established in April 2007 and
replaced the Company's previous $565 million credit facility. This new credit
agreement has a sub-limit of $150 million for letters of credit and includes a
provision under which the Company may request an increase of the total facility
up to $2 billion, with the grant of such request at the lenders' discretion.
There were $110 million in letters of credit drawn against the facility as of
September 30, 2007. 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. To benefit from the SEC Securities
Offering Reform rules applicable to well-known seasoned issuers, the Company
filed a shelf registration statement on Form S-3 with the SEC on February 24,
2006, which became effective automatically, 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. 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.



                                       42
--------------------------------------------------------------------------------




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.



The Company uses various working capital measures that place emphasis and focus
on certain working capital assets and liabilities. These measures are not
defined under U.S. generally accepted accounting principles and may not be
computed in the same way as similarly titled measures used by other companies.
One of the primary working capital measures 3M uses is a combined index, which
includes accounts receivable, inventory and accounts payable. This combined
index (defined as quarterly net sales - fourth quarter at year-end - multiplied
by four, divided by ending net accounts receivable plus inventory less accounts
payable) was 5.0 at September 30, 2007, down from 5.4 at December 31, 2006, and
also a decrease from 5.1 at September 30, 2006. Receivables increased $601
million, or 19.4%, compared with December 31, 2006, with higher September 2007
sales compared to December 2006 sales contributing to the increase. Inventories
increased $193 million, or 7.4%, compared with December 31, 2006. Accounts
payable increased $101 million compared with December 31, 2006.



Cash Flows from Operating Activities:


                                                       Nine months ended
                                                          September 30
(Millions)                                            2007            2006

Net income                                        $      3,245    $      2,675
Depreciation and amortization                              796             728
Company pension contributions                             (371 )          (303 )
Company postretirement contributions                        (2 )           (36 )
Company pension expense                                    133             233
Company postretirement expense                              55              66
Stock-based compensation expense                           182             162
Gain from sale of businesses                              (854 )             -
Income taxes (deferred and accrued income                  (94 )          (249 )
taxes)
Excess tax benefits from stock-based                       (65 )           (31 )
compensation
Accounts receivable                                       (458 )          (384 )
Inventories                                                (89 )          (375 )
Accounts payable                                            60              71
Product and other insurance receivables and                145              51
claims
Other - net                                                 36             (91 )
Net cash provided by operating activities         $      2,719    $      2,517



Cash flows from operating activities can fluctuate significantly from period to
period, as pension funding decisions, tax timing differences and other items can
significantly impact cash flows. In both the first nine months of 2007 and 2006,
the Company made discretionary contributions of $200 million to its U.S.
qualified pension plan. In the first nine months of 2007, cash flows provided by
operating activities increased $202 million. Net income increased $570 million,
with the combined after-tax impact of the gain on sale of the branded
pharmaceuticals business in Europe, the sale of 3M's Opticom Priority Control
Systems and Canoga Traffic Detection businesses and a gain on sale of real
estate, net of an increase in environmental liabilities, restructuring expenses
and other exit activities increasing net income by $460 million. Since the gain
from sale of businesses is included in and increases net income, the pre-tax
gain from the sale of the businesses must be subtracted, as shown above, to
properly reflect operating cash flows. The cash proceeds from sale of the
pharmaceuticals business are shown as part of cash from investing activities,
however, when the related taxes are paid they are required to be shown as part
of cash provided by operating activities. Thus, operating cash flows for the
first nine months of 2007 were penalized due to cash income tax payments of
approximately $540 million in the first nine months of 2007 that related to the
sale of the global branded pharmaceuticals business. Non-pharmaceutical related
cash income tax payments were



                                       43
--------------------------------------------------------------------------------




approximately $240 million lower than the first nine months of 2006 due to
normal timing differences in tax payments, benefiting cash flows.



Cash Flows from Investing Activities:


                                                               Nine months ended
                                                                  September 30
(Millions)                                                     2007          2006

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 )
Proceeds from sale of businesses                                   897             -
Purchases and proceeds from sale or maturities of
marketable securities and investments - net                       (879 )        (251 )
Net cash used in investing activities                       $   (1,178 )  $   (1,429 )



Investments in property, plant and equipment enable growth in diverse markets,
helping to meet product demand and increasing manufacturing efficiency. In the
third quarter of 2007, 3M opened a new respirator manufacturing facility in
Korea, opened manufacturing plants in China (both personal care and optical
businesses) and expanded manufacturing capabilities in the U.S. (both industrial
adhesive and optical businesses). In the second quarter of 2007, 3M opened an
optical film plant in Poland, an industrial tapes facility in China and
completed a construction and home improvement plant expansion in Canada. 3M also
exited several high-cost underutilized manufacturing facilities and streamlined
several supply chains by relocating equipment from one facility to another. The
streamlining work has primarily focused inside the U.S. and is in addition to
the streamlining achieved through plant construction. As a result of this
increased activity, capital expenditures were $1.031 billion in the first nine
months of 2007, an increase of $268 million when compared to the first nine
months of 2006. The Company expects capital expenditures to total approximately
$1.4 to $1.5 billion for total year 2007, compared with $1.168 billion in 2006.



Refer to Note 2 in this Quarterly Report on Form 10-Q for information on 2007
acquisitions and divestitures, including discussion of the $897 million in
proceeds received from the sale of businesses. The Company is actively
considering additional acquisitions, investments and strategic alliances, and
from time to time may also divest certain businesses.



In the Consolidated Statement of Cash Flows, purchases of marketable securities
and investments, and proceeds from sale or maturities of marketable securities
and investments are primarily attributable to auction rate securities,
asset-backed securities and other marketable securities, which are classified as
available-for-sale.



Cash Flows from Financing Activities:


                                                             Nine months ended
                                                                September 30
(Millions)                                                  2007           2006

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
Total change in debt                                     $     1,628    $     1,419
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 and other - net               41            (25 )
Net cash used in financing activities                    $    (1,437 )  $    (1,238 )



Total debt at September 30, 2007, was $5.229 billion, up from $3.553 billion at
December 31, 2006. In 2007, the July 2007 Eurobond issuance for 750 million
Euros (approximately $1.063 billion in U.S. Dollars at September 30, 2007) and
the March 2007 long-term debt issuance of $750 million have been used, in part,
to fund share repurchase activities. The Company accelerated the purchases of
treasury stock when compared to the same period in 2006, buying back nearly $2.8
billion in shares in the first nine months of 2007.



                                       44
--------------------------------------------------------------------------------




Repurchases of common stock are made to support the Company's stock-based
employee compensation plans and for other corporate purposes. 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. Refer to the table titled 'Issuer Purchases of Equity Securities' in
Part II, Item 2, for more information.



In February 2007, the Board of Directors increased the quarterly dividend on 3M
common stock by 4.3% to 48 cents per share, equivalent to an annual dividend of
$1.92 per share. This marked the 49th consecutive year of dividend increases.
Other cash flows from financing activities include distributions to minority
interests, excess tax benefits from stock-based compensation, changes in cash
overdraft balances, and principal payments for capital leases.



Contractual Obligations Update:



As indicated in 3M's Current Report on Form 8-K dated May 25, 2007, which
updated 3M's 2006 Annual Report on Form 10-K, total contractual cash obligations
at December 31, 2006, which would not have included an estimated FIN 48 impact,
were estimated at $3.775 billion. The total liability for uncertain tax
positions under FIN 48 at September 30, 2007 is $322 million (refer to Note 6).
The Company is not able to reasonably estimate the amount by which the liability
will increase or decrease over time. Payments by the Company relating to any
proposed assessments arising from the 2002 through 2004 Internal Revenue Service
(IRS) audit may be made once 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. These payments may occur
within the next 12 months.



FORWARD-LOOKING STATEMENTS



This Quarterly Report on Form 10-Q, including 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' in Part I, Item 2,
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company may also make forward-looking
statements in other reports filed with the Securities and Exchange Commission,
in materials delivered to stockholders and in press releases. In addition, the
Company's representatives may from time to time make oral forward-looking
statements.



Forward-looking statements relate to future events and typically address the
Company's expected future business and financial performance. Words such as  '
plan,' 'expect,' 'aim,' 'believe,' 'project,' 'target,' 'anticipate,' 'intend,'
'estimate,' 'will,' 'should,' 'could' and other words and terms of similar
meaning, typically identify such forward-looking statements. In particular,
these include statements about: (1) worldwide economic conditions; (2)
competitive conditions and customer preferences; (3) foreign currency exchange
rates and fluctuations in those rates; (4) the timing and acceptance of new
product offerings; (5) the availability and cost of purchased components,
compounds, raw materials and energy (including oil and natural gas and their
derivatives) due to shortages, increased demand or supply interruptions
(including those caused by natural and other disasters and other events); (6)
the impact of acquisitions, strategic alliances, divestitures, and other unusual
events resulting from portfolio management actions and other evolving business
strategies, and possible organizational restructuring; (7) expected productivity
improvements; and (8) legal proceedings. The Company assumes no obligation to
update or revise any forward-looking statements.



Forward-looking statements are based on certain assumptions and expectations of
future events and trends that are subject to risks and uncertainties. Actual
future results and trends may differ materially from historical results or those
reflected in any such forward-looking statements depending on a variety of
factors. Discussion of these factors is incorporated by reference from Part II,
Item 1A, 'Risk Factors', of this document and from Part I, Item 1A, 'Risk
Factors', of 3M's Current Report on Form 8-K dated May 25, 2007, and should be
considered an integral part of Part I, Item 2, 'Management's Discussion and
Analysis of Financial Condition and Results of Operations'.



                                       45
--------------------------------------------------------------------------------




Item 3. Quantitative and Qualitative Disclosures About Market Risk.



In the context of Item 3, market risk refers to the risk of loss arising from
adverse changes in financial and derivative instrument market rates and prices,
such as fluctuations in interest rates and currency exchange rates. For a
discussion of sensitivity analysis related to these types of market risks, refer
to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk,
in 3M's Annual Report on Form 10-K for the year ended December 31, 2006. The
Company believes that there have been no material changes in these market risks
since year-end 2006.



Item 4. Controls and Procedures.



a. The Company carried out an evaluation, under the supervision and with the
participation of its management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's 'disclosure controls and procedures' (as defined in the Exchange Act
Rule 13a-15(e)) as of the end of the period covered by this report. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective.



b. There was no change in the Company's internal control over financial
reporting that occurred during the Company's most recently completed fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.



                                       46
--------------------------------------------------------------------------------




                                   3M COMPANY
                                   FORM 10-Q
                For the Quarterly Period Ended September 30, 2007
                          PART II. Other Information



Item 1. Legal Proceedings.



Discussion of legal matters is incorporated by reference from Part I, Item 1,
Note 11, 'Commitments and Contingencies', of this document, and should be
considered an integral part of Part II, Item 1, 'Legal Proceedings'.



Item 1A. Risk Factors.



The most significant risk factors applicable to the Company are described in
Part I, Item 1A 'Risk Factors' of 3M's Current Report on Form 8-K dated May 25,
2007. There have been no material changes from the risk factors previously
disclosed in 3M's Current Report on Form 8-K dated May 25, 2007.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.



(e) Issuer Purchases of Equity Securities



Repurchases of common stock are made to support the Company's stock-based
employee compensation plans and for other corporate purposes. On February 13,
2006, the Board of Directors authorized the purchase of $2.0 billion of the
Company's common stock between February 13, 2006 and February 28, 2007. In
August 2006, 3M's Board of Directors authorized the repurchase of an additional
$1.0 billion in share repurchases, raising the total authorization to $3.0
billion for the period from February 13, 2006 to February 28, 2007. 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.



Issuer Purchases of Equity Securities (registered pursuant to Section 12 of the
Exchange Act)


Period                                                Total         Average        Total          Maximum
                                                    Number of     Price Paid       Number       Approximate
                                                     Shares        per Share      of Shares       Dollar
                                                    Purchased                    Purchased         Value
                                                                                     as          of Shares
                                                                                   Part of       that May
                                                                                  Publicly          Yet
                                                                                  Announced         Be
                                                                                  Plans or       Purchased
                                                                                  Programs       under the
                                                                                                 Plans or
                                                                                                 Programs
                                                       (1)                                      (Millions)
January 1-31, 2007                                   1,311,268    $     76.33      1,277,200    $       651
February 1-28, 2007                                  6,542,591    $     75.12      6,522,500    $     6,731
March 1-31, 2007                                     8,187,472    $     75.59      8,151,700    $     6,115
Total January 1 - March 31, 2007                    16,041,331    $     75.46     15,951,400    $     6,115
April 1-30, 2007                                     3,548,221    $     77.55      3,476,700    $     5,846
May 1-31, 2007                                       4,428,219    $     85.84      4,202,800    $     5,485
June 1-30, 2007                                      3,885,033    $     86.58      3,810,800    $     5,155
Total April 1-June 30, 2007                         11,861,473    $     83.60     11,490,300    $     5,155
July 1-31, 2007                                      1,646,251    $     89.01      1,510,300    $     5,021
August 1-31, 2007                                    2,329,478    $     87.05      2,247,300    $     4,825
September 1-30, 2007                                 2,086,564    $     90.24      2,029,600    $     4,642
Total July 1-September 30, 2007                      6,062,293    $     88.68      5,787,200    $     4,642
Total January 1-September 30, 2007                  33,965,097    $     80.66     33,228,900    $     4,642


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

(1) The total number of shares purchased includes: (i) shares purchased under
the Board's authorizations described above, and (ii) shares purchased in
connection with the exercise of stock options (which combined totaled 34,068
shares in January 2007, 20,091 shares in February 2007, 35,772 shares in March
2007, 71,521



                                       47
--------------------------------------------------------------------------------




shares in April 2007, 225,419 shares in May 2007, 74,233 shares in June 2007,
135,951 shares in July, 82,178 shares in August and 56,964 shares in September).



Item 3. Defaults Upon Senior Securities. - No matters require disclosure.



Item 4. Submission of Matters to a Vote of Security Holders. - No matters
require disclosure.



Item 5. Other Information.



As stated in our Form 8-K dated June 28, 2007, Margaret M. Smyth, Vice President
and Chief Accounting Officer, has resigned from 3M effective August 2, 2007, to
take a position with United Technologies Corporation as Vice President and
Controller.



Effective March 31, 2007, 3M voluntarily delisted from NYSE Arca Inc., formerly
the Pacific Exchange, to eliminate duplicative administrative requirements and
costs inherent with dual listings as a result of the NYSE Group's recent merger
with Archipelago Holdings, the parent company of NYSE Arca. 3M does not believe
that withdrawing its listing from NYSE Arca Inc. will have any impact on the
liquidity of its stock. NYSE Arca will continue to trade 3M stock on an unlisted
trading privilege basis. 3M's common stock will continue to be listed on the New
York Stock Exchange, the company's principal listing exchange.



Item 6. Exhibits.



Exhibits. These exhibits are either incorporated by reference into this report
or filed with this report as indicated below. Exhibit numbers 10.1 through 10.24
are management contracts or compensatory plans or arrangements.



Index to Exhibits:


(3) Articles of Incorporation and bylaws

   (3.1) Certificate of incorporation, as amended as of May 11, 2007, is incorporated by reference from our Form 8-K
         dated May 14, 2007.

   (3.2) Bylaws, as amended as of November 13, 2006, are incorporated by reference from our Annual Report on Form 10-K
         for the year ended December 31, 2006.

(4) Instruments defining the rights of security holders, including indentures:

   (4.1) Indenture, dated as of November 17, 2000, between 3M and Citibank, N.A. with respect to 3M's senior debt
         securities, is incorporated by reference from the Form 8-K dated December 7, 2000.

   (4.2) Indenture, dated as of November 21, 2002, between 3M and Citibank, N.A. with respect to Liquid Yield OptionTM
         Notes zero coupon senior debt securities, is incorporated by reference from Registration No. 333-103234 on
         Form S-3 filed on February 14, 2003.

   (4.3) First Supplemental Indenture, dated as of November 16, 2005, to Indenture between 3M and Citibank, N.A. with
         respect to Liquid Yield Option(TM)Notes zero coupon senior debt securities, is incorporated by reference from
         our 8-K dated November 17, 2005.

   (4.4) Except as set forth in the preceding Exhibits 4.1, 4.2 and 4.3, the instruments defining the rights of holders
         of long-term debt securities of 3M have been omitted. We agree to furnish to the SEC, upon request, a copy of
         such instruments with respect to issuances of long-term debt of 3M.

(10) Material contracts and management compensation plans and arrangements:

   (10.1)   3M 2005 Management Stock Ownership Program is incorporated by reference from our Proxy Statement for the
            2005 Annual Meeting of Stockholders.

   (10.2)   3M 2002 Management Stock Ownership Program is incorporated by reference from our Proxy Statement for the
            2002 Annual Meeting of Stockholders.

   (10.3)   3M 1997 Management Stock Ownership Program is incorporated by reference from our Proxy Statement for the
            1997 Annual Meeting of Stockholders.

   (10.4)   3M 1992 Management Stock Ownership Program is incorporated by reference from our Proxy Statement for the
            1992 Annual Meeting of Stockholders.

   (10.5)   Form of award agreement for non-qualified stock options granted under the 2005 Management Stock Ownership
            Program, is incorporated by reference from our Form 8-K dated May 16, 2005.

   (10.6)   Form of award agreement for non-qualified stock options granted under the 2002 Management Stock Ownership
            Program, is incorporated by reference from our Form 10-K for the year ended December 31, 2004.



                                       48
--------------------------------------------------------------------------------



     (10.7)   3M 1997 General Employees' Stock Purchase Plan, as amended through November 8, 2004, is incorporated by
              reference from our Form 10-K for the year ended December 31, 2004.

     (10.8)   3M VIP (Voluntary Investment Plan) Plus is incorporated by reference from Registration Statement No.
              333-73192 on Form S-8, filed on November 13, 2001.

     (10.9)   3M Deferred Compensation Plan, as amended through November 2005, is incorporated by reference from our
              Registration Statement on Form S-8 filed on December 6, 2005.

     (10.10)  3M Executive Annual Incentive Plan is incorporated by reference from our Form 8-K dated May 14, 2007.

     (10.11)  3M Performance Unit Plan, as amended through February 11, 2007 is incorporated by reference from our Form
              8-K dated May 14, 2007.

     (10.12)  Description of changes to Non-Employee Director Compensation and Stock Ownership Guidelines dated as of
              August 13, 2007, is filed electronically herewith.

     (10.13)  Description of changes to 3M Compensation Plan for Non-Employee Directors is incorporated by reference
              from our Form 8-K dated August 8, 2005.

     (10.14)  3M Compensation Plan for Non-Employee Directors, as amended, through November 8, 2004, is incorporated by
              reference from our Form 10-K for the year ended December 31, 2004.

     (10.15)  3M 1992 Directors Stock Ownership Program, as amended through November 8, 2004, is incorporated by
              reference from our Form 10-K for the year ended December 31, 2004.

     (10.16)  3M Executive Life Insurance Plan, as amended, is incorporated by reference from our Form 10-K for the
              year ended December 31, 2003.

     (10.17)  Summary of Personal Financial Planning Services for 3M Executives is incorporated by reference from our
              Form 10-K for the year ended December 31, 2003.

     (10.18)  3M policy on reimbursement of incentive payments is incorporated by reference from our Form 10-K for the
              year ended December 31, 2006.

     (10.19)  Employment agreement dated as of December 6, 2005, between 3M and George W. Buckley is incorporated by
              reference from our Form 8-K dated December 9, 2005.

     (10.20)  Amendment, dated August 14, 2006, to employment agreement between 3M and George W. Buckley is
              incorporated by reference from our Form 10-Q for the quarter ended September 30, 2006.

     (10.21)  Description of compensation plan for Robert S. Morrison is incorporated by reference from our
              Form 8-K dated August 8, 2005.

     (10.22)  Employment agreement dated as of January 23, 2002, between 3M and Patrick D. Campbell is incorporated by
              reference from our Form 10-K for the year ended December 31, 2001.

     (10.23)  Employment agreement dated as of November 19, 2002, between 3M and Richard F. Ziegler is incorporated by
              reference from our Form 10-K for the year ended December 31, 2002.

     (10.24)  Letter Agreement dated as of March 14, 2007, between 3M and Richard F. Ziegler is incorporated by
              reference from our Form 8-K dated March 19, 2007.

     (10.25)  Five-year Credit Agreement as of April 30, 2007 is incorporated by reference from our Form 8-K dated May
              3, 2007.

Filed electronically herewith:

  (10.12)  Description of changes to Non-Employee Director Compensation and Stock Ownership Guidelines

    (12)   Calculation of ratio of earnings to fixed charges.

    (15)   A letter from the Company's independent registered public accounting firm regarding unaudited interim
           consolidated financial statements.

   (31.1)  Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18
           U.S.C. Section 1350.

   (31.2)  Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18
           U.S.C. Section 1350.

   (32.1)  Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18
           U.S.C. Section 1350.

   (32.2)  Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18
           U.S.C. Section 1350.



                                       49
--------------------------------------------------------------------------------




                                   SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                   3M COMPANY
                                  (Registrant)


Date:  October 29, 2007


                                              By /s/ Patrick D. Campbell

                                                 Patrick D. Campbell,
                                   Senior Vice President and Chief Financial Officer

                               (Mr. Campbell is the Principal Financial Officer and has
                              been duly authorized to sign on behalf of the Registrant.)



                                       50
--------------------------------------------------------------------------------


                                                                   EXHIBIT 10.12



Description of Changes to Non-Employee Director Compensation and Stock Ownership
                                   Guidelines



On August 13, 2007, the 3M Company (the 'Company') Board of Directors, on the
recommendation of the Nominating and Governance Committee, approved changes in
the non-employees directors' compensation effective October 1, 2007. The changes
provide that the cash portion of the annual retainer increases from $75,000 to
$85,000 and the portion of the annual retainer payable only in the Company's
common stock increases from $95,000 to $120,000. The additional annual retainer
paid to committee chairs remains at $15,000. These changes are intended to keep
the directors' compensation competitive. Other elements of directors'
compensation remain unchanged.



The following table shows compensation payable to non-employee directors before
and after this increase:


                                                                                    Before            After
                                                                                   Increase          Increase
Portion of the Annual Retainer Payable in Cash                                  $       75,000    $       85,000
Portion of the Annual Retainer Payable Only in Common Stock                     $       95,000    $      120,000
Total Annual Retainer                                                           $      170,000    $      205,000

Additional Annual Retainer for Committee Chairs                                 $       15,000    $       15,000



In addition, the Board has adopted new stock ownership guidelines, also
effective October 1, 2007, that provide that each director should retain the
stock portion of his or her annual retainer until the director leaves the Board.
The previous guidelines provided that each director should attain over his or
her three-year term a 3M stock investment position (including deferred stock
units) equal to two times the annual retainer.


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


                                                                      EXHIBIT 12



                          3M COMPANY AND SUBSIDIARIES

               CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES

                                   (Millions)


                                          Nine months
                                             Ended
                                           Sept. 30,       Year        Year        Year        Year        Year
                                             2007          2006        2005        2004        2003        2002
EARNINGS

Income before income taxes, minority      $     4,878    $  5,625    $  4,828    $  4,303    $  3,448    $  2,775
interest, and cumulative effect of
accounting change*

Add:

Interest expense                                  150         139         101          88         103         100

Interest component of the ESOP benefit              4           8          10          12          14          16
expense

Portion of rent under operating leases             52          70          64          60          53          45
representative of the interest
component

Less:
Equity in undistributed income of                   4           6           4           6           7          10
20-50% owned companies

TOTAL EARNINGS AVAILABLE FOR FIXED        $     5,080    $  5,836    $  4,999    $  4,457    $  3,611    $  2,926
CHARGES

FIXED CHARGES

Interest on debt                                  159         138          94          78          93         100

Interest component of the ESOP benefit              4           8          10          12          14          16
expense

Portion of rent under operating leases             52          70          64          60          53          45
representative of the interest
component

TOTAL FIXED CHARGES                       $       215    $    216    $    168    $    150    $    160    $    161

RATIO OF EARNINGS TO FIXED CHARGES               23.6        27.0        29.8        29.7        22.6        18.2


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

* First nine months 2007 results included net pre-tax gains of $701 million,
with net benefits from gains related to the sale of businesses and real estate
partially offset by increases in environmental liabilities, restructuring
actions and other exit activities. 2006 results included net pre-tax gains of
$523 million, with net benefits from gains related to the sale of certain
portions of 3M's branded pharmaceuticals business partially offset by
restructuring actions, acquired in-process research and development expenses,
settlement costs of a previously disclosed antitrust class action, and
environmental obligations related to the pharmaceuticals business. 2003 includes
a $93 million pre-tax loss related to an adverse ruling associated with a
lawsuit filed by LePage's Inc. 2002 includes net pre-tax losses of $202 million,
primarily related to the 2001/2002 corporate restructuring program.


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


                                                                      EXHIBIT 15

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549


Commissioners:


We are aware that our report dated October 26, 2007 on our review of interim
consolidated financial information of 3M Company and its subsidiaries for the
three and nine-month periods ended September 30, 2007 and 2006, and included in
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
2007, is incorporated by reference in the Company's registration statements on
Form S-8 (Registration Nos. 33-14791, 33-49842, 33-58767, 333-26957, 333-30689,
333-30691, 333-44760, 333-44692, 333-73192, 333-101727, 333-101751, 333-109282,
333-128251 and 333-130150), and Form S-3 (Registration Nos. 33-48089, 333-42660,
333-98163, 333-109211, 333-112563 and 333-132041).




/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Minneapolis, Minnesota
October 29, 2007


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


                                                                    EXHIBIT 31.1



SARBANES-OXLEY SECTION 302 CERTIFICATION



I, George W. Buckley, certify that:



1.     I have reviewed this quarterly report on Form 10-Q of 3M Company;



2.     Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;



3.     Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as
of, and for, the periods presented in this report;



4.     The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Registrant and have:



(a)     Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;



(b)     Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;



(c)     Evaluated the effectiveness of the Registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and



(d)     Disclosed in this report any change in the Registrant's internal control
over financial reporting that occurred during the Registrant's most recent
fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial reporting; and



5.     The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
Registrant's auditors and the audit committee of the Registrant's board of
directors (or persons performing the equivalent functions):



(a)     All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and



(b)     Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal control over
financial reporting.




/s/ George W.
Buckley

George W. Buckley
Chief Executive Officer

October 29, 2007


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

                                                                    EXHIBIT 31.2



SARBANES-OXLEY SECTION 302 CERTIFICATION



I, Patrick D. Campbell, certify that:



1.     I have reviewed this quarterly report on Form 10-Q of 3M Company;



2.     Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;



3.     Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as
of, and for, the periods presented in this report;



4.     The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
Registrant and have:



(a)     Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;



(b)     Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;



(c)     Evaluated the effectiveness of the Registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and



(d)     Disclosed in this report any change in the Registrant's internal control
over financial reporting that occurred during the Registrant's most recent
fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial reporting; and



5.     The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
Registrant's auditors and the audit committee of the Registrant's board of
directors (or persons performing the equivalent functions):



(a)     All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and



(b)     Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal control over
financial reporting.




/s/ Patrick D.
Campbell

Patrick D. Campbell
Chief Financial Officer

October 29, 2007


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

                                                                    EXHIBIT 32.1



SARBANES-OXLEY SECTION 906 CERTIFICATION



In connection with the Quarterly Report of 3M Company (the 'Company') on Form
10-Q for the period ended September 30, 2007 as filed with the Securities and
Exchange Commission on the date hereof (the 'Report'), I, George W. Buckley,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to my knowledge:



1.               The Report fully complies with the requirements of Section 13
(a) or 15(d) of the Securities Exchange Act of 1934; and



2.               The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.




/s/ George W.
Buckley

George W. Buckley
Chief Executive Officer

October 29, 2007


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

                                                                    EXHIBIT 32.2



SARBANES-OXLEY SECTION 906 CERTIFICATION



In connection with the Quarterly Report of 3M Company (the 'Company') on Form
10-Q for the period ended September 30, 2007 as filed with the Securities and
Exchange Commission on the date hereof (the 'Report'), I, Patrick D. Campbell,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to my knowledge:



1.               The Report fully complies with the requirements of Section 13
(a) or 15(d) of the Securities Exchange Act of 1934; and



2.               The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.




/s/ Patrick D.
Campbell

Patrick D. Campbell
Chief Financial Officer

October 29, 2007


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



                      This information is provided by RNS
            The company news service from the London Stock Exchange
                                                                                                                                                                                    

a d v e r t i s e m e n t