the preceding overview section, increased worldwide operating income by $523 million, with the largest impact in the United States. 

Employment:

Employment increased by approximately 4,100 people since year-end 2005, partially due to acquisitions, with more than 750 people added by our three largest 2006 acquisitions alone. In addition, 3M has increased employees in faster-growing areas of the world, such as Brazil, India, Russia, China and Poland, where on a local-currency basis sales increased more than 20% in 2006. The increase in 2005 compared with 2004 of approximately 3,000 people was primarily attributable to the August 2005 acquisition of CUNO, which added approximately 2,300 employees. Employment increases at a manufacturing plant in Latin America also contributed to increases of approximately 600 people and 700 people in 2006 and 2005, respectively. Sales per employee in local currencies increased 7.7% in 2006, approximately 3% in 2005 and approximately 7% in 2004.

Capital Spending/Net Property, Plant and Equipment:

The bulk of 3M capital spending historically has been in the United States, resulting in higher net property, plant and equipment balances in the United States. The Company is striving to more closely align its manufacturing and sourcing with geographic market sales, and because more than 60% of sales are outside the United States, this would increase production outside the United States, helping to improve customer service and reduce working capital requirements.

Capital expenditures are expected to increase from this $1.168 billion in 2006 to $1.4 billion to $1.5 billion in 2007. The majority of this spending is aimed directly at accelerating top-line growth in many of our core businesses. 3M has about 15 significant plant construction projects under way, some adding to existing facilities and a few of the greenfield variety. Internationally, 3M is building respiratory protection capacity in Russia and Korea, medical products capacity in China, an LCD plant in Poland, abrasives and tape capacity in China and India, and chemical facilities in China, just to name a few. This is backed up by similar investments in the U.S.

CRITICAL ACCOUNTING ESTIMATES

Information regarding significant accounting policies is included in Note 1. 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 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, and asset impairments. Senior management has discussed the development, selection and disclosure of its critical accounting estimates with the Audit