UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

Commission file number 1-3285

3M COMPANY

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

                Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes  ý.   No  o.

Shares of common stock outstanding at March 31, 2005:  769,570,205.

This document (excluding exhibits) contains 36 pages.

The table of contents is set forth on page 2.

The exhibit index begins on page 34.

3M COMPANY

FORM 10-Q

For the Quarterly Period Ended March 31, 2005

TABLE OF CONTENTS

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3M COMPANY

FORM 10-Q

For the Quarterly Period Ended March 31, 2005

PART I.  Financial Information

Item 1.  Financial Statements.

Consolidated Statement of Income

(Unaudited)

3M Company and Subsidiaries

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

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Consolidated Balance Sheet

(Unaudited)

3M Company and Subsidiaries

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

4

Consolidated Statement of Cash Flows

(Unaudited)

3M Company and Subsidiaries

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

5

3M Company and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1.  Basis of Presentation

The interim consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented.  These adjustments consist of normal, recurring items.  The results of operations for any interim period are not necessarily indicative of results for the full year. The interim consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q.  This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its 2004 Annual Report on Form 10-K.

Earnings per share:  The difference in the weighted average shares outstanding for calculating basic and diluted earnings per share is attributable to the dilution associated with the Company’s stock-based compensation plans.  Certain Management Stock Ownership Program average options outstanding were not included in the computation of diluted earnings per share because they would not have had a dilutive effect (203,000 average options for the three months ended March 31, 2005; 135,000 average options for the three months ended March 31, 2004).  The conditions for conversion related to the Company’s $639 million in aggregate face amount of Convertible Notes were not met (refer to 3M’s 2004 Annual Report on Form 10-K, Note 9 to the Consolidated Financial Statements, for more detail); accordingly, there was no impact on 3M’s diluted earnings per share.  If the conditions for conversion are met, 3M may choose to pay in cash and/or common stock; however, if this occurs, the Company has the intent and ability to settle this debt security in cash.  Refer to the  “New Accounting Pronouncements” section that follows for discussion of EITF 04-08, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share”. The computations for basic and diluted earnings per share follow:

Earnings Per Share Computations

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Stock-based compensation:  The intrinsic value method is used as prescribed by Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees”, and generally no compensation cost is recognized for either the General Employees’ Stock Purchase Plan (GESPP) or the Management Stock Ownership Program (MSOP). The GESPP is considered non-compensatory. In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of SFAS No. 123.” The Company has adopted the disclosure requirements of SFAS No. 148. Refer to the “New Accounting Pronouncements” section that follows for discussion of SFAS No. 123R, “Share Based Payment”. Pro forma amounts based on the options’ estimated Black-Scholes fair value, net of tax, at the grant dates for awards under the Company’s stock-based compensation plans are as follows:

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004). SFAS No. 123R supersedes APB Opinion No. 25.  Under APB Opinion No. 25, no compensation expense is recognized for stock option grants if the exercise price of the Company’s stock option grants is at or above the fair market value of the underlying stock on the date of grant. SFAS No. 123R requires the determination of the fair value of the share-based compensation at the grant date and the recognition of the related expense over the period in which the share-based compensation vests. The original effective date for SFAS No. 123R for the Company was July 1, 2005. However, on April 14, 2005, the Securities and Exchange Commission (SEC) adopted a new rule that amends the effective dates for SFAS No. 123R.  The SEC’s new rule allows companies to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period, that begins after June 15, 2005. Therefore, the Company plans to adopt SFAS No. 123R effective January 1, 2006.

In March 2005, the FASB issued FASB Interpretation No. (FIN) 47, “Accounting for Conditional Asset Retirement Obligations”.  FIN 47 clarifies the term “conditional asset retirement obligation” used in SFAS No. 143.  FIN 47 is effective for the Company no later than December 31, 2005.  The Company is in the process of evaluating whether FIN 47 will result in the recognition of additional asset retirement obligations for the Company.

In September 2004, the FASB’s Emerging Issues Task Force finalized EITF Issue No. 04-08, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share” that would require the dilutive effect of shares from contingently convertible debt to be included in the diluted earnings per share calculation regardless of whether the contingency has been met. The Company has $639 million in aggregate face amount of 30-year zero coupon senior notes that are convertible into approximately six million shares of common stock if certain conditions are met. These conditions have never been met. The FASB is also in the process of amending SFAS No. 128, anticipated to be issued in 2005, which is expected to further address this and several other issues. Unless the Company takes steps to modify certain terms of this debt security, EITF Issue No. 04-08 and proposed SFAS No. 128R (when effective), would result in an increase of approximately six million shares to diluted shares outstanding to give effect to the contingent issuance of shares. Also, using the if-converted method, net income for the diluted earnings per share calculations would be adjusted for interest expense associated with this debt instrument. EITF Issue No. 04-08 would have been effective beginning with the Company’s 2004 fourth quarter. However, due to the FASB’s delay in issuing SFAS No. 128R and the Company’s intent and ability to settle this

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debt security in cash versus the issuance of stock, the impact of the additional diluted shares will not be included in the diluted earnings per share calculation until SFAS No. 128R is effective. Prior periods’ diluted shares outstanding and diluted earnings per share amounts will be restated to present comparable information when SFAS No. 128R is effective. The estimated annual reduction in 3M’s diluted earnings per share would have been approximately $.02 per share for total year 2004. Because the impact of this standard is ongoing, 3M’s diluted shares outstanding and diluted earnings per share amounts would be impacted until retirement or modification of certain terms of this debt security.

In December 2004, the FASB issued FASB Staff Position (FSP) No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004”, which provides guidance under SFAS No. 109, “Accounting for Income Taxes,” with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (the Jobs Act) on enterprises’ income tax expense and deferred tax liability. The Jobs Act was enacted on October 22, 2004. The Jobs Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. FSP No. 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109. The deduction is subject to a number of limitations and uncertainty remains as to how to interpret certain provisions in the Act. As such, the Company is not yet in a position to decide whether, and to what extent, the Company might repatriate foreign earnings that have not yet been remitted to the U.S. and, as provided for in FSP No. 109-2, the Company has not adjusted its tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act. Based on the Company’s analysis to date, however, it is possible that the Company will repatriate an amount totaling between $800 million and $950 million, with the respective tax liability ranging from $40 million to $50 million. The Company expects to be in a position to finalize its assessment after issuance of further regulatory guidance and enactment of statutory technical corrections.

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NOTE 2.  Goodwill and Intangible Assets

As discussed in Note 8, 3M realigned its business segments and began reporting under this new structure effective January 1, 2005.  To reflect this new structure, the December 31, 2004, goodwill balances presented below reflect a $67 million reclassification from the Industrial segment to the Electro and Communications segment.  The business segment realignment also resulted in certain changes in reporting units for 3M.  3M has 18 reporting units under the criteria set forth by SFAS No. 142.  SFAS No. 142 requires that goodwill be tested for impairment at least annually and when reporting units are changed.  During the first quarter of 2005, the Company completed its assessment of any potential goodwill impairments under this new structure and determined that no impairments existed.

The goodwill balance by business segment as of March 31, 2005, and December 31, 2004, follow:

Acquired Intangible Assets

The carrying amount and accumulated amortization of acquired intangible assets as of March 31, 2005, and December 31, 2004, follow:

Amortization expense for acquired intangible assets for the quarters ended March 31, 2005 and 2004 follow:

The table below shows expected amortization expense for acquired intangible assets recorded as of March 31, 2005:

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

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NOTE 3.  Supplemental Stockholders’ Equity and Comprehensive Income Information

Income tax effects for cumulative translation are not significant because no tax provision has been made for the translation of foreign currency financial statements into U.S. dollars.  Reclassification adjustments are made to avoid double counting in comprehensive income items that are also recorded as part of net income.  Reclassification adjustments (other than for cash flow hedging instruments discussed in Note 5 to the Consolidated Financial Statements) were not material.

NOTE 4.  Long-Term Debt and Short-Term Borrowings

Credit support for outstanding commercial paper is provided by a $565 million credit agreement among a group of primary relationship banks.  In March 2005, the Company replaced its 364-day credit agreement with a five-year credit agreement with similar terms. This $565 million credit facility provides up to $115 million in letters of credit ($94 million of which was utilized at March 31, 2005), with provisions for increasing this limit up to $150 million.

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NOTE 5.  Derivatives and Other Financial Instruments

The Company uses interest rate swaps, currency swaps, and forward and option contracts to manage risks generally associated with foreign exchange rate, interest rate and commodity market volatility.

Net Investment Hedging and Cash Flow Hedging:  The table that follows recaps net investment hedging and cash flow hedging amounts.  Reclassification adjustments are made to avoid double counting in comprehensive income items that are also included as part of net income.  The amount of the reclassification adjustment recognized in other comprehensive income is equal to, but opposite in sign from, the amount of the realized gain or loss in net income.

*Based on exchange rates at March 31, 2005, the Company expects to reclassify to earnings over the next 12 months a majority of the cash flow hedging instruments after-tax gain of $3 million (with the impact largely offset by foreign currency cash flows from underlying hedged items).

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NOTE 6.  Pension and Postretirement Benefit Plans

Components of net periodic benefit cost and other supplemental information for the three months ended March 31 follow:

As previously disclosed, the Company expects to contribute in 2005 an amount in the range of $100 million to $400 million to its U.S. and international pension plans and approximately $150 million to its post-retirement plans.  However, the amount of the anticipated discretionary pension contribution could vary significantly depending on the U.S. plans’ funding status as of the 2005 measurement date and the anticipated tax deductibility of the contribution. The Company does not have a required minimum pension contribution obligation for its U.S. plans in 2005. For the three months ended March 31, 2005, contributions totaling $54 million were made to the Company’s U.S. and international pension plans.

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NOTE 7.  Commitments and Contingencies

A description of the significant legal proceedings in which the company is involved, both in general and with respect to specific matters, is contained in the company’s Annual Report on Form 10-K for the period ending December 31, 2004, (the “Report”). This section describes significant developments since the preparation of the Report and should be read with reference to it. Unless specifically indicated, all previously reported matters remain pending.

The Company and plaintiff’s counsel in the previously disclosed twelve purported class actions filed in various state courts and a federal court in California on behalf of indirect purchasers of transparent tape have substantially negotiated a written settlement agreement of those actions. The settlement, if approved by the federal court, would also resolve the claims asserted in two additional such actions filed in state courts in Massachusetts and New Mexico after the settlement terms had been reached. The Company recorded a reserve with respect to the settlement agreement.

The United States District Court for the Eastern District of Pennsylvania denied a motion for summary judgment on liability brought by plaintiffs in the direct purchaser class action pending in that court, but determined that some (but not all) of the elements of the claim will be deemed established by virtue of the final judgment in the LePage’s case. The Company has moved for reconsideration of a portion of that ruling or in the alternative for certification of an immediate appeal, and the Court has scheduled oral arguments on the Company’s motion.

For more than 25 years, the Company has defended and resolved the claims of over 350,000 individual claimants alleging injuries from occupational dust exposures. As of March 31, 2005, the company is a named defendant, typically with multiple co-defendants, in numerous lawsuits in various courts that purport to assert claims by approximately 58,000 individual claimants and has accrued liabilities of $232 million and receivables for the likely amount of insurance recoveries of $437 million related to this litigation. Such accruals are subject to the various factors previously disclosed. The Company received $27 million from one insurer during the first quarter.

The vast majority of the lawsuits and claims resolved by and currently pending against the Company allege use of some of the Company’s mask and respirator products and seek damages from the Company and other defendants for alleged personal injury from workplace exposures to asbestos, silica, coal or other occupational dusts, found in products manufactured by other defendants or generally in the workplace. The remaining claimants generally allege personal injury from occupational exposure to asbestos from products previously manufactured by the Company, which are often unspecified, and by other defendants, or occasionally at Company premises.

On March 24, 2005, the Mississippi Supreme Court denied the plaintiffs’ motion for rehearing of its decision announced on January 20, 2005 to reverse the $22.5 million jury verdict adverse to the Company that was returned in Holmes County, Mississippi, in 2001. The courts decision makes the judgment in the Company’s favor final.

The Circuit Court of Morgan County, Alabama granted the Company’s motion to dismiss the named plaintiff’s personal injury-related claims in the purported class action lawsuit involving perfluorooctanyl chemistry that originally was filed in 2002 against the Company by a former employee of the Company’s Decatur, Alabama production facility, on the basis that such claims are barred by the exclusivity provisions of the state’s Workers Compensation Act. The Company’s other procedural motions are pending. The District Court for Washington County, Minnesota granted the Company’s motion to dismiss the claims for medical monitoring included in the purported class action brought by two county residents involving alleged emissions from the former perfluorooctanyl production facility at Cottage Grove, Minnesota. The Court rejected the Company’s dismissal motion with respect to other claims, and the plaintiffs have sought leave to file an amended complaint.

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NOTE 8. Business Segments

Effective January 1, 2005, as part of the continuing effort to drive growth by aligning businesses around markets and customers, the Electronics Markets Materials Division and certain high temperature and display tapes (2004 sales of approximately $350 million) within the Industrial Business transferred to the Electro and Communications Business, and the converter markets product line (2004 sales of approximately $10 million) within the Transportation Business transferred to the Display and Graphics Business. Internal management reporting for these business segment transfers commenced January 1, 2005, with segment information for all periods presented adjusted to reflect the new segment structure.