strong cash flow and balance sheet will allow it to fund future pension needs without compromising growth opportunities.

Cash Flows from Investing Activities: 

Investments in property, plant and equipment enable growth in diverse markets, 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 others. The Company expects capital expenditures to total approximately $1.4 billion to $1.5 billion in 2007. Refer to the preceding “Capital Spending/Net Property, Plant and Equipment” section for more detail.

Refer to Note 2 for information on 2006, 2005 and 2004 acquisitions. Note 2 also provides information on the proceeds from the sale of the pharmaceuticals business. The Company is actively considering additional acquisitions, investments and strategic alliances, and from time to time may also divest certain businesses.

Purchases of marketable securities and investments and proceeds from sale (or maturities) of marketable securities and investments in 2006 and 2005 are primarily attributable to auction rate and asset-backed securities, which are classified as available-for-sale. 2006 includes purchases, net of sales and maturities, of $637 million for marketable securities. Prior to 2005, purchases of and proceeds from the sale of auction rate securities were classified as Cash and Cash Equivalents. At December 31, 2004, the amount of such securities taken as a whole was immaterial to Cash and Cash Equivalents, and accordingly was not reclassified for 2004 and prior.  Purchases of investments in 2005 include the purchase of 19% of TI&M Beteiligungsgesellschaft mbH (discussed previously under the Industrial and Transportation business segment). The purchase price of approximately $55 million is reported as “Investments” in the Consolidated Balance Sheet and as “Purchases of marketable securities and investments” in the Consolidated Statement of Cash Flows. Additional purchases of investments include additional survivor benefit insurance and equity investments.

Cash Flows from Financing Activities:  

Total debt at December 31, 2006, was $3.553 billion, up from $2.381 billion at year-end 2005, with the increase primarily attributable to commercial paper issuances and the November 2006 issuance of a three-year, $400 million, medium-term note. In 2006, the increase in net short-term debt of $882 million includes the portion of short-term debt with original maturities of 90 days or less, which primarily represents commercial paper activity. The repayment of debt for maturities greater than 90 days also primarily relates to commercial paper activity. Total debt was 26% of total capital (total capital is defined as debt plus equity), compared with 19% at year-end 2005.

Debt securities, including the Company’s shelf registration, its medium-term notes program, dealer remarketable securities and Convertible Note, are all discussed in more detail in Note 10. 3M has a shelf registration and medium-term notes program