3M Company and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME

3M Company and Subsidiaries

OPERATING INCOME BY
BUSINESS SEGMENT

Reported GAAP
measure

Special
items

Adjusted Non-
GAAP measure

Reported GAAP
measure

Special
items

Adjusted Non-
GAAP measure

(i) In the second quarter of 2005, the Company announced its intent to reinvest $1.7 billion of foreign
earnings in the United States pursuant to the American Jobs Creation Act (Jobs Act) of 2004. As a
consequence, in the second quarter of 2005, 3M recorded a charge of $75 million after-tax.

(j) In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement
Obligations – an interpretation of FASB Statement No. 143” (“FIN 47”). In adopting FIN 47 in the fourth
quarter of 2005, 3M recorded a noncash charge of $35 million after-tax, as a cumulative effect of change
in accounting principle. This charge represents conditional retirement obligations associated with 3M’s
long-lived assets.

CONDENSED CONSOLIDATED BALANCE SHEET

(k) Reference SFAS No. 158 accounting pronouncements discussion and supplemental Consolidated
Balance Sheet information that follows

(l) Approximately $800 million of this increase when compared to year-end 2005 relates to
2006 acquisitions

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

accounting change in 2005):

25.3%

22.1%

22.5%

22.6%

(m) Free cash flow is not defined under U.S. generally accepted accounting
principles (GAAP). Therefore, it should not be considered a substitute for
income or cash flow data prepared in accordance with U.S. GAAP and may
not be comparable to similarly titled measures used by other companies.
The company defines free cash flow as net cash provided by operating activities
less purchases of property, plant and equipment. It should not be inferred that
the entire free cash flow amount is available for discretionary expenditures. The
company believes free cash flow is a useful measure of performance and uses
this measure as an indication of the strength of the company and its ability to
generate cash.

(n) The company uses various working capital measures that place emphasis and
focus on certain working capital assets and liabilities. 3M’s net working capital index
is defined as quarterly net sales multiplied by four, divided by ending net accounts
receivable plus inventory less accounts payable. This measure is not recognized
under U.S. generally accepted accounting principles and may not be comparable to
similarly titled measures used by other companies.

(o) The company uses non-GAAP measures to focus on shareholder value creation.
3M’s Economic Profit is defined as after-tax operating income less a charge for
operating capital. 3M also uses Return on Invested Capital, defined as after-tax
operating income divided by average operating capital. This measure is presented
as reported and also excluding special items. Special items were previously defined
within the Supplemental Consolidated Statement of Income Information section of this
document. These measures are not recognized under U.S. generally accepted
accounting principles and may not be comparable to similarly titled measures used by
other companies.

United
States

Inter-
national

Sales Change Analysis
By International
Geographic Area

Local-
currency
Sales

Trans-
lation

Total
Sales
Change

Worldwide
Sales Change Analysis
By Business Segment

Local-
currency
Sales

Trans-
lation

Total
Sales
Change

Note: Safety, Security and Protection Services includes a 10.2 percent benefit from acquisitions,
primarily Security Printing and Systems Limited, which was acquired in August 2006.

SALES CHANGE ANALYSIS

Note: Industrial and Transportation includes a 4.6 percent benefit from acquisitions, primarily
CUNO, which was acquired in August 2005. Safety, Security and Protection Services includes
a 4.0 percent benefit from acquisitions, primarily Security Printing and Systems Limited.

BUSINESS
SEGMENT
INFORMATION
(Millions)

Refer to Note (a) for discussion of the sales of 3M’s global branded pharmaceuticals business,
which resulted in a gain on sale of $1.074 billion (reflected in Health Care segment). In addition,
the Health Care segment included $284 million in restructuring costs, primarily employee related
severance and benefit costs. Of the $284 million, $157 million was related to the pharmaceuticals
business (refer to notes (b) and (c)), $112 million of severance and benefit costs related to
restructurings in certain corporate functions (refer to note (d)), and $15 million related to Health
Care severance and other costs (refer to note (e)). Health Care also included $95 million of
expensed in-process research and development costs related to the Brontes acquisition (refer to
note (f)). In total, the combination of the above items positively impacted the fourth quarter 2006
Health Care operating income by $695 million. The Company also incurred costs related to the
sale of the branded pharmaceuticals business in the second and third quarters of 2006 totaling
$22 million, which combined with the preceding items, positively impacted total year 2006 Health
Care operating income by $673 million.

In connection with the sale of the branded pharmaceuticals business, the Company also decided to
restructure certain products and businesses to streamline its cost structure following the sale
of the branded pharmaceuticals business (refer to note (e)). Fourth-quarter 2006 included costs
related to these restructuring actions, primarily severance, fixed asset impairments and intangible
impairments. Refer to the preceding Supplemental Consolidated Statement of Income Information
section for a table showing the impacts of these actions by business segment. Corporate and
Unallocated in the second quarter of 2006 included a $40 million charge for a class action settlement
(refer to note g).

2004 Reported

EPS with SFAS123R impact

2005 Reported

2005 - Excluding

Special Items (q)

2006 - Reported

2006 - Excluding

Special Items (q)

2007 - Reported - Estimated (r)

2007 - Excluding

Special Items - Estimated (q)

(p) 3M adopted Statement of Financial Accounting Standards No. 123R effective Jan. 1, 2006, using the
modified retrospective method, with prior periods adjusted to give effect to the fair-value-based method
of accounting for stock option awards granted in fiscal years beginning on or after Jan. 1, 1995. The fourth
quarter and year 2006 stock-based compensation expense is higher for the same reasons cited in previous
quarters. First, effective Jan. 1, 2006, accounting rules required acceleration of stock-based compensation
expense recognition when an employee is eligible to retire, instead of over the entire vesting period for these
retirement-eligible employees, resulting in recognition of approximately 25 percent of the expense in the month
of grant (second quarter for 3M’s annual stock option grant). Second, 3M changed its vesting period from one
to three years starting with the May 2005 grant. The third and fourth quarter of 2006 include expense from both
the 2005 and 2006 stock option grants, while the third and fourth quarter of 2005 only include expense from the
2005 stock option grant.

(q) In addition to disclosing results that are determined in accordance with U.S. generally accepted accounting
principles (GAAP), the company also discloses non-GAAP results that exclude special items. Special items
represent significant charges or credits that are important to an understanding of the company’s ongoing
operations. The company provides reconciliations of its non-GAAP financial reporting to the most comparable GAAP
reporting. The company believes that discussion of results excluding special items provides a useful analysis of
ongoing operating trends. Earnings per share and other amounts before special items are not measures recognized
under GAAP. The determination of special items may not be comparable to similarly titled measures used by other
companies. Refer to the preceding “Supplemental Consolidated Statement of Income Information” for discussion
of the special items that impacted 2006 and 2005, and the below note (r) for special items that will impact 2007.

(r) The total year 2007 estimate of reported EPS includes the gain on sale of the branded pharmaceuticals
business in Europe, which is expected to benefit first quarter and total year 2007 by approximately $0.60 to
$0.70 per diluted share, net of known restructuring costs.

In September 2006, the Financial Accounting Standards Board issued SFAS No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans.” This standard requires
employers to recognize the underfunded or overfunded status of a defined benefit postretirement
plan as an asset or liability in its statement of financial position. As a result of the implementation
of SFAS No. 158, the Company recognized an after-tax decrease in accumulated other comprehensive
income (which is part of stockholders’ equity) of approximately $1.2 billion and $500 million for the
U.S. and international pension benefit plans, respectively, and approximately $200 million for the
postretirement welfare benefit plans. This decrease of $1.9 billion in the fourth quarter of 2006 in
accumulated other comprehensive income is primarily due to our historical discretionary contributions
being in excess of book expense. These excess contributions as of our last measurement date of
Dec. 31, 2005 were classified in accordance with SFAS No. 87 as a prepaid asset. This change
impacts the Consolidated Balance Sheet only, with no impact to net income or cash flows.

In June 2006, the Financial Accounting Standards Board (FASB) issued Financial Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 prescribes a more-likely-than-not threshold
for financial statement recognition and measurement of a tax position taken or expected to be taken in a
tax return. This interpretation also provides guidance on derecognition of income tax assets and liabilities,
classification of current and deferred income tax assets and liabilities, accounting for interest and penalties
associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.
This interpretation is effective as of Jan. 1, 2007 and the cumulative effects, if any, of applying this
interpretation will be recorded as an adjustment to retained earnings as of Jan. 1, 2007. The Company
does not expect the adoption of FIN 48 to have a material impact on 3M’s consolidated results of
operations or financial condition.

Dec. 31,
2006

Pharma
impact

Pension

Special
items