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2006 Annual Report
Our Magic
Working

Table of contents

  • Page 1
    2006 Annual Report Working Our Magic

  • Page 2
    ... shareholders Enhancing safety and security Making life better around the home Improving the quality of health care Always adding value for businesses Solving problems everywhere 14 16 23 24 IBC Magic 3M at work in the community 3M at a glance Directors and executives Financial summary Shareholder...

  • Page 3
    ... have an uncanny ability to see customer needs and then meet them by drawing on 3M's deep pool of technologies - a pool supported by R&D-related investment averaging more than 6 percent of sales. We create entirely new product categories and breathe new life into markets crying for reinvention. It...

  • Page 4
    ... and Canada. Seven major plant extensions are under construction in the United States and one in the U.K., principally to meet new demand in our health care, optical films and safety businesses. New capacity is being located close to customer demand to create shorter supply chains, aid customer...

  • Page 5
    ... programs in overhead electrical power transmission, renewable energy, minerals extraction, security and safety, together with opportunities in higher growth markets such as air and water quality. But the traditional core areas of 3M, such as industrial tapes, adhesives, abrasives and film product...

  • Page 6
    ... of us can't imagine. Imagining ways to help protect the protectors is the job of our occupational health and environmental safety scientists and engineers. They work to develop innovative safety products for first responders around the world. 3M's protective gear has been on the scene during such...

  • Page 7
    ..., center lines and crosswalks, highway safety is significantly raised. Engineered with specially designed optics, 3Mâ„¢ Stamarkâ„¢ High-Performance Wet Reï¬,ective Tapes and 3Mâ„¢ All Weather Paint are the only pavement markings that provide superior reï¬,ectivity even on wet roadways. Working Our...

  • Page 8
    ... also rely on 3M Vikuiti films to improve their products' brightness. Is there an easy way to display my digital photos? 3 3) You found a great new way to show off your favorite photos. With Post-it® Picture Paper, surrounding yourself with all the pictures you love is a snap. Just print out the...

  • Page 9
    ...Slim Air Purifier, designed by 3M and the renowned Italian design firm Pininfarina, is beautiful, elegant and only four inches wide. These high-performance air purifiers are available in the United States, Canada and Taiwan, and soon will be introduced in Europe and other parts of the world. Can...

  • Page 10
    ...inquisitive, innovation-centered culture, we never stop searching for ways to create new and better medical and surgical products, dental and orthodontic products, and drug delivery and health information systems. We know the need is great and that 3M technologies can enhance the quality of life for...

  • Page 11
    ... less time spent in the patient chair. The clean and open SmartClip braces design also is advantageous for patient hygiene. 2) You laugh more because your new dental work looks so natural. The innovative 3M™ ESPE™ Lava™ Crown and Bridge System gives dentists and their labs a more efficient...

  • Page 12
    ... capacity usually means building bigger electrical towers, which has a serious environmental impact and may mean displacing homes or businesses. The 3Mâ„¢ Aluminum Conductor Composite Reinforced (ACCR) is a breakthrough development embraced by major utility companies in the United States and abroad...

  • Page 13
    ... for road shows, too. 3 How can I give impressive presentations when my space is limited? 3) Your equipment and your customers depend on it. Restaurants and other businesses depend on CUNO® Commercial Systems for quality water. CUNO Incorporated, a 3M company, is a global leader in the large and...

  • Page 14
    ... customer needs. Each day, our people draw on 3M's deep pool of technology and develop products tailored to meet your needs - wherever you are. 1 Show off your brand The global marketplace is teeming with businesses vying for name recognition. To make their brands stand out, companies from St. Paul...

  • Page 15
    ... reï¬,ected light from signs to drivers as the brightest materials previously available, helping drivers make timely and correct decisions. The safety difference of this advanced sheeting is clearly visible to transportation agencies around the world, and extends our innovation in a product category...

  • Page 16
    ...and 3M product donations all come together to help raise the human care quotient of 3M communities. In 2006, donations of cash and products totaled more than $37 million in the United States alone. 3M is a major supporter of the United Way. In 2006, employees and retirees set new highs in giving for...

  • Page 17
    ... 1990. All new 3M products, everywhere in the world, are subject to Life Cycle Management. This takes environmental, health and safety issues into account at every stage of a product's development - from design and manufacturing to customer use and disposal. Life Cycle Management also supports the...

  • Page 18
    ... to print and display digital photos. We also continue to attract new consumers to the Post-it® brand with an array of important new products - from Post-it® Durable Filing Tabs to Post-it® Word Builder Notes that enhance early childhood learning. ® High-efficiency Filtrete™ Filters, used in...

  • Page 19
    ... new pavement marking materials that offer superior reï¬,ectivity even on wet roadways, the 3Mâ„¢ Digital License Plate System, and the creation of new service businesses for motor vehicle registration and road maintenance. In the commercial graphics market, patented 3Mâ„¢ Controltacâ„¢ Graphic Film...

  • Page 20
    ... compliance. Our acquisition of the cable accessories division of Indiabased Mahindra Engineering and Chemical Products Ltd. adds cable jointing kits and cable accessories. We generate nearly 75 percent of our sales outside the United States. We're building new technology centers and manufacturing...

  • Page 21
    ... We're a leading provider of medical, dental and orthodontic products, and drug delivery and health information systems. Drawing on 3M's rich technology base, we help improve the quality of care provided by health care professionals throughout the world. Driving growth With the sale of our branded...

  • Page 22
    ... of customers - from the world's largest automotive, aerospace, energy and construction companies to small auto body repair shops in emerging economies. We spend a great deal of time with customers in order to fully understand their businesses. Then, we mobilize 3M's innovation machine to add value...

  • Page 23
    ... new plant in Korea and expanding production in the United States. We're also broadening our product offerings through selective acquisitions. For example, our recent acquisition of Brazilian-based Pomp Medical and Healthcare Products LLC expands our line of hearing and eyewear protection products...

  • Page 24
    ... East and Africa Latin America and Canada 39% 27% 25% 9% 3Mâ„¢ Diamond Gradeâ„¢ Reï¬,ective Sheeting 3Mâ„¢ Stamarkâ„¢ Pavement Marking Tapes Scotch-Brite® Microfiber Hardwood Floor Mop 3Mâ„¢ Vinyl Film Graphics Scotch-Brite® Cleaning Products Creating borderless customer success Who we...

  • Page 25
    ... President, Safety, Security and Protection Services Business Robert D. MacDonald Senior Vice President, Marketing and Sales Moe S. Nozari Executive Vice President, Consumer and Office Business Frederick J. Palensky Executive Vice President, Research and Development and Chief Technology Officer...

  • Page 26
    ...) Additional Information Cash dividends paid Per share Stock price at year-end Total assets Long-term debt (excluding current portion) Capital expenditures Depreciation and amortization Research, development and related expenses Number of employees at year-end Average shares outstanding - basic...

  • Page 27
    ...] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2006 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...

  • Page 28
    ... 7A ITEM 8 ,7(0 &KDQJHVLQDQG'LVDJUHHPHQWVZLWK$FFRXQWDQWVRQ Accounting and Financial Disclosure Controls and Procedures 2WKHU,QIRUPDWLRQ 'LUHFWRUV([HFutive Officers and Corporate Governance Executive Compensation 6HFXULW\2ZQHUVKLSRI&HUWDLQ%HQHILFLDO2ZQHUVDQG0DQDJHPHQW...

  • Page 29
    ...care and automotive. Industrial and Transportation products include tapes, a wide variety of coated and nonwoven abrasives, adhesives, specialty materials, supply chain execution software solutions, closures for disposable diapers, and components and products that are used in the manufacture, repair...

  • Page 30
    ... Transportation Systems include emergency response and transit signal priority systems, traffic monitoring systems, and driver feedback signs. Major commercial graphics products include equipment, films, inks and related products used to produce graphics for vehicles and signs. Consumer and Office...

  • Page 31
    ..., automotive and medical markets. This segment provides products that enable the efficient transmission of electrical power and speed the delivery of information and ideas. Products include electronic and interconnect solutions, microinterconnect systems, high-performance fluids, high-temperature...

  • Page 32
    ... environmental compliancHWKH&RPSDQ\GRHVQRWEHOLHYHWKH\ will have a material effect on its capital expenditures, earnings or competitive position. Executive Officers Following is a list of the executive officers of 3M, and their age, present position, the year elected to their present position...

  • Page 33
    ... Executive Vice President, Safety, Security and Protection Services Business, 2002-2005 Executive Vice President, Specialty Material Markets and Corporate Services, 2001-2002 Executive Vice President, Electro and Communications Business, 2002-2004 Executive Director, Six Sigma, 2001-2002 Executive...

  • Page 34
    ... Vice President, Interconnect Solutions Division, 2001-2002 Partner, Cleary, Gottlieb, Steen & Hamilton, 1983-2002 Name Inge G. Thulin Age 53 Present Position Executive Vice President, International Operations John K. Woodworth 55 Senior Vice President, Corporate Supply Chain Operations 2006...

  • Page 35
    ...UHVHDUFKODERUDWRULHVDQGFHUWain division laboratories are located in St. Paul, Minnesota. In the United States, 3M has 10 sales offices in eight states and operates 66 manufacturing facilities in 26 states. Internationally, 3M has 159 sales offices. The Company operates 79 manufacturing and...

  • Page 36
    ... Second Third Fourth (Per share amounts) Quarter Quarter Quarter Quarter 2006 High $79.83 $88.35 $81.60 $81.95 2006 Low 70.30 75.76 67.05 73.00 2005 High $87.45 $86.21 $76.74 $79.84 2005 Low 80.73 72.25 70.41 69.71      Issuer Purchases of Equity Securities   Year $88.35 67...

  • Page 37
    ...manufacturer, technology innovator and marketer of a wide variety of products. 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...

  • Page 38
    ... Company expects to increase both research and development (excluding the pharmaceuticals business, acquired in-process research and development charge and restructuring-related items) and capital expenditures in 2007, with investments in growth programs around the world. Research, development and...

  • Page 39
    ...Transportation Health Care Display and Graphics Consumer and Office Safety, Security and Protection Services Electro and Communications Corporate and Unallocated  Total Company     Net Sales...IRUSHUVonal protection products and solutions, particularly respiratory protection producWV$...

  • Page 40
    ... all raw materials to meet its reasonably foreseeable production requirements, but it is impossible to predict future shortages of raw materials or the impact any such shortages would have. 3M manages commodity price risks through negotiated supply contracts, price protection agreements and forward...

  • Page 41
    ... Performance by geographic area Critical accounting estimates New accounting pronouncements Financial condition and liquidity Financial instruments Forward-looking statements Item 7A Quantitative and qualitative disclosures about market risk 5(68/762)23(5$7,216 Net Sales: 2006 86 $8,853 2005...

  • Page 42
    ...quarter of 2005 was impacted by a pre-tax charge of approximately $30 million in connection with settlement agreements of one antitrust class action and two individual such actions, all involving direct purchasers of transparent tape. Research, Development and Related Expenses: Research, development...

  • Page 43
    ... will be reflected in 3M¶VILQDQFLDOVWDWHPHQWVIRUWKHSHULRG...VDOHVLQ2SHUDWLQJLQFRPHLQLQFOXGHG the gain on sale, restructuring and other LWHPVWKDWEHQHILWHGRSHUDWLQJLQFRPHE\PLOOLRQRU...LQ6XPLWRPR0 Cumulative Effect of Accounting Change: $VRI'HFHPEHUWKH&...

  • Page 44
    ...Conditional asset retirement...WUDQVDFWLRQJDLQVDQGORVVHV had an immaterial impact on net income in 2006 and increased ...Health Care: ± ± ±  *DLQRQVDOHRISKDUPDFHXWLFDOVEXVLQHVV  5HVWUXFWXULQJDFWLRQVDQGRWKHU    ± ± Display and Graphics...

  • Page 45
    ... and Transportation, added 3.1% of growth in 2005. In addition, growth was led by the adhesives, tapes, and abrasives businesses. 3M continued to selectively raise selling prices to offset commodity raw material price pressures. 3M sales growth also benefited from customer-focused new products and...

  • Page 46
    ..., drug delivery systems, dental and orthodontic products, health information systems and microbiology products. As discussed below, the global branded pharmaceuticals business was sold in December 2006 and January 2007. In total, the combination of the following items positively impacted total year...

  • Page 47
    ...RIWKHIROORZLQJLWHPVQHJDWively impacted 2006 fourth quarter and total year operating LQFRPHE\PLOOLRQ+HDOWK&DUHZLWKRXWSKDUPDFHXWicals included $95 million of expensed in-process research and development costs related to the Brontes acquisition. Business-specific restructuring actions...

  • Page 48
    ... displays; touch screens and touch monitors; computer screen filters; reflective sheeting for transportation safety; and commercial graphics systems. The optical film business provides films that serve numerous market segments of the display lighting industry. 3M provides distinct products for five...

  • Page 49
    ... division, which serves the do-it-yourself retail channel. 3M also posted very good sales growth in the mass retail channel. 3M continues to penetrate large key accounts, primarily in the United States, with an array of unique, highly functional products featuring customer-inspired designs...

  • Page 50
    ...the delivery of information and ideas. Products include electronic and interconnect solutions, microinterconnect systems, high-performance fluids, high-temperature and display tapes, telecommunications products and electrical products. In 2006, the Electro and Communications business posted sales of...

  • Page 51
    ... and Safety, Security and Protection Services. In the combined Latin America and Canada area, local-currency sales increases of ZHUHOHGE\,QGXVWULDl and Transportation, Safety, Security and Protection Services and Consumer and Office. Foreign currency translation positively impacted the...

  • Page 52
    ...and Postretirement Obligations: 3M has various company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the United States. The Company accounts for its defined benefit pension and postretirement health care and life insurance benefit plans in accordance...

  • Page 53
    ... of December 31, 2005, the Company converted to the RP (Retirement Plans) 2000 Mortality Table for calculating the year-end 2005 U.S. pension and postretirement obligations and 2006 expense. The impact of this change increased the year-end 2005 U.S. Projected Benefit Obligations for pension by $385...

  • Page 54
    ...IRU DGGLWLRQDOLQIRUPDWLRQFRQFHUQLQJWKLVVWDQGDUG $GGLWLRQDOLQIRUPDWLRQUHJDUGLQJRWKHUDFFRXQWLQJSURQRXQFHPHQWVLVLQFOXGHGLQ1RWH FINANCIAL CONDITION AND LIQUIDITY 7KH&RPSDQ\JHQHUDWHVVLJQLILFDQWRQJRLQJFDVKIORZ1HWGHEWLQFUHDVHGVOLJKWO\LQSULPDULO\UHODWHGWR LQFUHDVHG...

  • Page 55
    ... sheet will allow it to fund future pension needs without compromising growth opportunities. Cash Flows from Investing Activities:  Years ended December 31 (Millions) Purchases of property, plant and equipment (PP&E) Proceeds from sale of PP&E and other assets Acquisitions, net of cash acquired...

  • Page 56
    ..., helping to meet product demand and increasing manufacturing efficiency. Capital expenditures were $1.168 billion in 2006, an increase of $225 million compared with 2005, as 3M invested in a number of growing and highly profitable businesses such as medical, respiratory protection, LCD films and...

  • Page 57
    Repurchases of common stock are made to support the CoPSDQ\¶VVWRFNEDVHGHPSOR\HHFRPSHQVDWLRQSODQVDQGIRU RWKHUFRUSRUDWHSXUSRVHV2Q)HEUXDU\WKH%RDUGRI Directors authorized the purcKDVHRIELOOLRQRIWKH &RPSDQ\¶VFRPPRQVWRFNEHWZHHQ)HEUXDU\DQG)HEUXDU...

  • Page 58
    ... purchase obligations with terms of less than one year. Many of these commitments relate to take or pay contracts, in which 3M guarantees payment to ensure availability of products or services that are sold to customers. The Company expects to receive consideration (products or services) for these...

  • Page 59
    ... at-risk analysis is provided for these derivatives. The Company does not have leYHUDJHGGHULYDWLYHSRVLWLRQV+RZHYHU WKH&RPSDQ\GRHVKDYHFRQWLQJHQWO\ convertible debt that, if conditions for conversion are met, is convertible into shares RI0FRPPRQVWRFN UHIHUWR1RWHLQWKLVGRFXPHQW...

  • Page 60
    Item 8. Financial Statements and Supplementary Data. Index to Financial Statements Reference (pages) 0DQDJHPHQW¶V5HVSRQVLELOLW\IRU)LQDQFLDO5HSRUWLQJ 0DQDJHPHQW¶V5HSRUWRQ,QWHUQDO&RQWURO2YHU)LQDQFLDO5HSRUWLQJ 5HSRUWRI,QGHSHQGHQW5HJLVWHUHG3XEOLF$FFRXQWLQJ)LUP &RQVROLGDWHG6WDWHPHQW...

  • Page 61
    ... is supported by widely communicated written policies, including business conduct policies, which are designed to require all employees to maintain high ethical standards in the conduct of Company affairs. Internal auditors continually review the accounting and control system. 3M Company 0DQDJHPHQW...

  • Page 62
    ...Company changed the manner in which it accounts for conditional asset retirement obligations in 2005, the manner in which it accounts for share-based compensation in 2006, and the manner in which it accounts for defined benefit pension and other postretirement plans as of December 31, 2006. Internal...

  • Page 63
    ...3M Company and Subsidiaries Years ended December 31 (Millions, except per share amounts) Net sales Operating expenses Cost of sales Selling, general and administrative expenses Research, development and related expenses Gain on sale...effect of accounting change Cumulative effect of accounting change ...

  • Page 64
    ...securities ± current $FFRXQWVUHFHLYDEOH±QHWRIDOORZDQFHVRIDQG Inventories Finished goods Work in process 5DZPDWHULDOVDQGVXSSOLHV Total inventories Other current assets Total current assets 0DUNHWDEOHVHFXULWLHV±QRQFXUUHQW Investments Property, plant and equipment...

  • Page 65
    ... income Dividends paid ($1.44 per share) Amortization of unearned compensation Stock-based compensation, including tax benefit of $54 million Reacquired stock (22.0 million shares) Issuances pursuant to stock option and benefit plans (10.9 million shares) Issuances pursuant to acquisitions...

  • Page 66
    ... Accounts payable Accrued income taxes Product and other insurance receivables and claims 2WKHU±QHW Net cash provided by operating activities  Cash Flows from Investing Activities Purchases of property, plant and equipment (PP&E) Proceeds from sale of PP&E and other assets Acquisitions...

  • Page 67
    ... primarily include the cash surrender value of life insurance policies, real estate not used in the EXVLQHVVYHQWXUHFDSLWDODQGHTXLW\PHWKRGinvestments. Unrealized gains and losses relating to investments classified as available-for-sale are recorded as a component of accumuODWHGRWKHU...

  • Page 68
    ...software: The Company capitalizes direct costs of materials and services used in the development of internal-use software. Amounts capitalized are amortized on a straight-line basis over a period of three to five years and are reported as a component of machinery and equipment within property, plant...

  • Page 69
    ...HDUQLQJV per share. If the conditions for conversion are met, 3M may choose to pay in FDVKDQGRUFRPPRQVWRFNKRZHYHULIWKLV occurs, the Company has the intent and ability to settle this debt security in cash. The computations for basic and diluted earnings per share for the years ended December...

  • Page 70
    ...\UHSRUWHGDQGDPRXQWVUHYLVHGSHU6)$61R5IRU total year 2005 and 2004 are as follows: 2005 (Millions, except per share amounts) Net Sales Cost of sales Selling, general and administrative expenses Research, development and related expenses Operating Income Interest expense and income Income...

  • Page 71
    .... 3M employees in the United States are eligible to retire beginning at age 55 and after having completed five years of service. Approximately 25% of the number of stock-based compensation awards are made to this population. The Company changed to the nonsubstantive vesting period approach for new...

  • Page 72
    ... and is not a party to leveraged derivatives. However, the Company does have contingently convertible debt that, if conditions for conversion are met, is convertible into shares of 3M common stock (refer to Note 10 in this document). New Accounting Pronouncements In September 2006, the Financial...

  • Page 73
    ...certain terms of this debt security. NOTE 2. Acquisitions and Divestitures Divestitures: 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. 3M...

  • Page 74
    ...im Gesundheitswesen) GmbH, a Berlin-based developer of software for managing diagnosis-related information in hospitals. 6) In June 2006, 3M (Safety, Security and Protection Services Business) purchased certain assets of Pomp Medical and Occupational Health Products LLC, a Porto Alegre, Brazil-based...

  • Page 75
    ... for the CUNO acquisition will be amortized on a straight-line basis over lives ranging from 5 to 20 years (weighted-average life of 15 years). In-process research and development charges from the CUNO acquisition were not material. Pro forma information related to this acquisition is not included...

  • Page 76
    ... network management services for digital signage and interactive kiosk networks. Year 2004 acquisitions: In February 2004, 3M (Industrial and Transportation Business) purchased 100 percent of the outstanding common shares of HighJump Software Inc., a U.S. company that provides supply chaiQH[HFXWLRQ...

  • Page 77
    ...2004 (Millions) Balance  ,QGXVWULDODQG7UDQVSRUWDWLRQ HDOWK&DUH LVSOD\DQG*UDSKLFV   &RQVXPHUDQG2IILFH  Safety, Security and Protection Services  Electro and Communications 566  7RWDO&RPSDQ\  2005 2005 transacquilation Dec. 31, sition and 2005 activity other Balance...

  • Page 78
    ... business employees who are not obtaining employment with the buyers as well as impairment charges associated with certain assets not transferred to the buyers.  2YHUKHDGUHGXFWLRQDFWLRQV±HPSOR\HHUHODWHGFRVWVfor severance and benefits, costs associated with actions to reduce the Company...

  • Page 79
    ...ZLWKWKHSUHFHGLQJDUHUHIOHFWHGLQWKH&RPSDQ\¶V business segments as follows: Industrial and Transportation Health Care Display and Graphics Consumer and Office Safety, Security and Protection Services Electro and Communications Total $ 15 293 39 10 46 $403 Actions with respect to the above...

  • Page 80
    ... other current assets Investments Available-for-sale (fair value) Equity-method Cash surrender value of life insurance policies, real estate and other (cost, which approximates fair value) Total investments Property, plant and equipment ± at cost Land Buildings and leasehold improvements Machinery...

  • Page 81
    Supplemental Balance Sheet Information (continued)  (Millions) Other liabilities Non-funded pension and postretirement benefits Employee benefits Product and other claims Deferred income taxes Minority interest in subsidiaries Deferred income Capital lease obligations Other Total other liabilities...

  • Page 82
    ... U.S. and International pension benefit plans, respectively, and $218 million for the postretirement health care and life insurance benefit plan. See Note 11 for additional detail. Prior to the implementation of SFAS No. 158, a minimum pension liability adjustment would be recognized annually if the...

  • Page 83
    ...of foreign earnings in the United States pursuant to the provisions of the American Jobs Creation Act of 2004. This Act provided the Company the opportunity to taxefficiently repatriate foreign earnings for U.S. qualifying investments specified in its domestic reinvestment plan. As a consequence, in...

  • Page 84
    ...HDUQLQJVDVRI-DQXDU\7he Company does not expect the adoption of FIN 48 to have a material impact on its consolidated results of operations or financial condition. As a result of certain employment commitments and capital investments mDGHE\0LQFRPHIURPPDQXIDFWXULQJ activities...

  • Page 85
    ... 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. Dec. 31, 2006 $ 26 114 72 425 $637 (Millions) Due in one year or...

  • Page 86
    ...IRUFRQYHUVLRQ UHODWLQJWR the closing common stock prices of 3M exceeding the conversion trigger price for specified periods) are met, holders may convert each of the 30-year zero-coupon senior notes into 9.4602 shares of 3M common stock in any calendar quarter commencing after March 31, 2003...

  • Page 87
    ... health care and life insurance benefits for substantially all of its U.S. employees who reach retirement age while employed by the Company. Most international employees and retirees are covered by government health care programs. The cost of company-provided postretirement health care plans...

  • Page 88
    ... Actual return on plan assets Company contributions Participant contributions Foreign exchange rate changes Benefit payments Settlements, curtailments, special termination benefits and other Fair value of plan assets at end of year Funded status at end of year   Pension Benefits United States...

  • Page 89
    ... Prior service cost (credit) Ending balance   Pension Benefits United States 2006 2005 International 2006 ...relate to international pension plans with projected benefit obligations in excess of plan assets: (Millions) Projected benefit obligation Accumulated benefit obligation Fair value of plan...

  • Page 90
    ... of December 31, 2005, the Company converted to the RP (Retirement Plans) 2000 Mortality Table for calculating the year-end 2005 U.S. pension and postretirement obligations and 2006 expense. The impact of this change increased the year-end 2005 U.S. Projected Benefit Obligations for pension by $385...

  • Page 91
    ...the expected return on plan assets was 8.75% in 2006. Projected returns are based primarily on broad, publicly traded equity and fixed-income indices and forward-looking estimates of active portfolio and investment management. The Company's expected long-term rate of return on U.S. plan assets is...

  • Page 92
    ...DYHUDJHDOORFDWLRQIRU86 SODQV 7KHLQWHUQDWLRQDOSODQV¶ZHLJKWHGDYHUDJHDVVHWDOORFDWLRQDVRISODQPHDVXUHPHQWGDWHVIROORZV Percentage of Plan Assets 2005 2006 11% 11 35 3 19 5 15  1 ± $VVHW&DWHJRU\ ,QWHUQDWLRQDOSHQVLRQSODQV 'RPHVWLFHTXLW\ )RUHLJQHTXLW\ *OREDO...

  • Page 93
    ...Commodity Price Management: The Company manages commodity price risks through negotiated supply contracts, price protection agreements and forward physical contracts. The Company uses commodity price swaps as cash flow hedges of forecasted transactions to manage price volatility. The related mark-to...

  • Page 94
    ... and current portion of long-term debt (except the $350 million dealer remarketable security) approximated carrying values because of the short-term nature of these instruments. Available-for-sale marketable securities, investments and derivative contracts are reported at fair values. Fair values...

  • Page 95
    ... a building in...term liabilities, are estimated at approximately $25 million DVRI'HFHPEHU0GRHVQRWFRQVLGHUWKLV DPRXQWWREHPDWHULDO7KHIDLUYDOXHRI0JXDUDQWHHVRIORDQVZLWKWKLUGSDUWLHVDQGRWKHUJXDUDQWHHDUUDQJHPHQWV are not material. Related...). 3M sales to related parties...

  • Page 96
    ...PDWHULDO,QIRUPDWLRQFRQFHUQLQJWKHDVVRFLDWHGLQVXUDQFH UHFHLYDEOHDQGOHJDOSURFHHGLQJVUHODWHGWRLWIROORZVLQWKHSDUDJUDSKHQWLWOHGBreast Implant Insurance Receivables 5HVSLUDWRU0DVN$VEHVWRV/LWLJDWLRQ )RUPRUHWKDQ\HDUVWKH&RPSDQ\KDVGHIHQGHGDQGUHVROYHGWKHFODLPVRIKXQGUHGVRI...

  • Page 97
    ... charges against the Company with the U.S. Equal Employment Opportunity Commission and the pertinent state agencies in Texas, Minnesota and California, during 2005. Such filings include allegations that the release of claims signed by certain former employees in the purported class defined in the...

  • Page 98
    ... 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...

  • Page 99
    ³0'+´ 7KH0'+LVUHHYDOXDWLQJWKHVHDGYLVRU\KHDOWKEDVHGYDOXHV +%9 IRU3)263)2$ LHWKHDPRXQWRID FKHPLFDOLQGULQNLQJZDWHUFRQVLGHUHGE\WKH0'+VWDIIWREHVDIHIRUSHRSOHWRGULQNIRUDOLIHWLPH DQGPD\ORZHUWKHP LQWKHIXWXUH$GGLWLRQDOWHVWLQJE\WKH0'+VKRZVWKDWZDWHU...

  • Page 100
    ... operations. 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...

  • Page 101
    ..., silica, coal or other occupational dusts, and claims pleading use of asbestos-containing products allegedly manufactured by the Company), (v) the number of current claims and a projection of the number of future asbestos and other claims that may be filed against the Company, (vi) the cost to...

  • Page 102
    ...FODLPDQWVDWWKHHQGRIHDFKTXDUWHU Environmental and Other Liabilities and Insurance Receivables: $VRI'HFHPEHUWKH&RPSDQ\KDG...ZKLFKWKH&RPSDQ\LV FRQWUDFWXDOO\REOLJDWHG NOTE 14. Employee Savings and Stock Ownership Plans 7KH&RPSDQ\VSRQVRUVHPSOR\HHVDYLQJVSODQVXQGHU6HFWLRQ...

  • Page 103
    ... shares, DFFRXQWHGIRUDWIDLUYDOXHWRHPSOR\HHVDYLQJVSODQVWRFRYHUREOLJDWLRQVQRWIXQGHGE\WKH(623 UHSRUWHGDVDQ HPSOR\HHEHQHILWH[SHQVH Employee Savings and Stock Ownership Plans  0LOOLRQV  2005 2004 2006 'LYLGHQGVRQVKDUHVKHOGE\WKH(623 $36 $33 $39 Company contributions...

  • Page 104
    ... date remaining at 10 years from date of grant. Outstanding shares under option include grants from previous plans. There were approximately 14,800 participants in the plan with outstanding options at December 31, 2006 Management Stock Ownership Program 2005 2004   2006 Number of Exercise Number...

  • Page 105
    ... amount by which a stock price is expected to fluctuate during a period. For the 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...

  • Page 106
    ...RIWKH XQGHUO\LQJDFWLYLW\IRUVHJPHQWDVVHWVGHSUHFLDWLRQDQGDPRUWL]DWLRQDQGFDSLWDOH[SHQGLWXUHV Business Segment Products Major Products 7DSHVFRDWHGDQGQRQZRYHQDEUDVLYHVDGKHVLYHV VSHFLDOW\PDWHULDOVVXSSO\FKDLQH[HFXWLRQVRIWZDUH VROXWLRQVILOWUDWLRQSURGXFWVFORVXUHVIRU...

  • Page 107
    ... 2005 2004 2006 2005 2004 2006 2005 2004   Health Care  Display and Graphics Consumer and Office  Safety, Security and Protection Services  Electro and Communications  Corporate and Unallocated  Total Company  Depr. Capital    Net Operating and ExpendiSales Income Assets...

  • Page 108
    ... Company as a secondary performance measure to manage its businesses. Export sales and certain income and expense items are reported within the geographic area where the final sales to 3M customers are made. Geographic Area Information Europe, Middle Latin East America and and Africa Canada $5,726...

  • Page 109
    ... in the fourth quarter of 2006. 2006 included net benefits from gains related to the sale of certain portions of 0¶VEUDQGHGSKDUPDFHXWLFDOVEXVLQHVVDQGIDYRUDEOHLQFRPHWD[DGMXVWPHQWVZKLFKZHUHSDUWLDOO\RIIVHWE\ restructuring actions, acquired in-process research and development expenses...

  • Page 110
    ... its website KWWSZZZ0FRPEXVLQHVVFRQGXFW $WWKHVDPHZHEVLWHDQ\IXWXUHDPendments to the code of ethics will also be posted. Any person may request a copy of the code of ethics, at no cost, by wrLWLQJWRXVDWWKHIROORZLQJDGGUHVV 3M Company 3M Center, Building 220-11W-02 St. Paul, MN...

  • Page 111
    ...Executive Compensation. The information... Security Ownership of Certain Beneficial Owners and Management and Related...SODQVLQIRUPDWLRQIROORZV Equity Compensation Plans Information $ % & 3ODQ...information is incorporated E\UHIHUHQFHKHUHLQ Item 14. Principal Accounting Fees and Services...

  • Page 112
    ... 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...

  • Page 113
    ...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. (10.17) 3M policy on reimbursement of incentive payments is filed electronically herewith. (10.18) Employment agreement dated as of December 6, 2005...

  • Page 114
    ..., the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 3M COMPANY By /s/ Patrick D. Campbell _____ Patrick D. Campbell, Senior Vice President and Chief Financial Officer (Principal Financial Officer) February 23, 2007 Pursuant to the...

  • Page 115
    ...) 737-2901 3M Investor Relations 3M Center, Building 225-01-S-15 St. Paul, MN 55144-1000 Corporate News and Reports Corporate news releases, 3M's Annual Report, and Forms 10-K and 10-Q are available online at: http://investor.3M.com Product Information Information about 3M products and services is...

  • Page 116
    ... by the people of 3M and their singular commitment to make life easier and better for people around the world. www.3M.com Corporate Headquarters 3M Center St. Paul, MN 55144-1000 U.S.A. (651) 733-1110 www.3M.com  Minimum 10% Post-Consumer Fiber  Printed in U.S.A. © 3M 2007. All rights reserved...