Honeywell 2011 Annual Report Download - page 29

partially offset by higher sales volume driven by each of our business segments (approximate 1.2 percentage point impact).
Cost of products and services sold increased by $1,461 million or 6 percent in 2010 compared with 2009, principally due to an estimated increase in
direct material costs and indirect costs of approximately $1,250 million and $300 million, respectively, driven substantially by an 8 percent increase in sales
as a result of the factors discussed above and in the Review of Business Segments section of this MD&A and approximately $130 million increase in
repositioning and other charges (see Note 3 of Notes to Financial Statements), partially offset by a $300 million decrease in pension expense.
Gross margin percentage increased by 1.3 percentage points in 2010 compared with 2009, primarily due to lower pension expense (approximate 1
percentage point impact) and higher sales volume driven by our Automation and Control Solutions segment, Performance Materials and Technologies
segment and Transportation Systems segment (approximate 0.7 percentage point impact), partially offset by higher repositioning and other charges
(approximate 0.5 percentage point impact).
Selling, General and Administrative Expenses
2011 2010 2009
Selling, general and administrative expense $ 5,399 $ 4,618 $ 4,323
Percent of sales 14.8% 14.3% 14.4%
Selling, general and administrative expenses (SG&A) increased as a percentage of sales by 0.5 percent in 2011 compared to 2010 driven by an
estimated $430 million increase in labor costs resulting from acquisitions, investment for growth, and merit increases, an estimated increase of $240 million in
pension and other postretirement expense (driven primarily by the allocated portion of the pension mark-to-market charge increase of approximately $270
million) and an estimated increase of $60 million in repositioning actions, partially offset by the impact of higher sales volume as a result of the factors
discussed in the Review of Business Segments section of this MD&A.
Selling, general and administrative expenses (SG&A) decreased as a percentage of sales by 0.1 percent in 2010 compared to 2009 driven by the impact
of higher sales volume, discussed above, and lower pension expense, partially offset by an estimated $500 million increase in labor costs (reflecting the
absence of prior period labor cost actions).
Other (Income) Expense
2011 2010 2009
Equity (income)/loss of affiliated companies $ (51) $ (28) $ (26)
Gain on sale of non-strategic businesses and assets (61) — (87)
Interest income (58) (39) (33)
Foreign exchange 50 12 45
Other, net 36 (42) 47
$ (84) $ (97) $ (54)
Other income decreased by $13 million in 2011 compared to 2010 due primarily to a $29 million loss resulting from early redemption of debt in the
first quarter of 2011, included within "Other, net", and the absence of a $62 million pre-tax gain related to the consolidation of a joint venture within our
Performance Materials and Technologies segment in the third quarter of 2010, included within "Other, net", (see Note 4 of Notes to Financial Statements for
further details), partially offset by a $61 million increase in gain on sale of non-strategic businesses and assets due primarily to a $50 million pre-tax gain
related to the divestiture of the automotive on-board sensors products business within our Automation and Control Solutions segment and the reduction of
approximately $12 million of acquisition related costs compared to 2010 included within "Other, net".
Other income increased by $43 million in 2010 compared to 2009 primarily due to the consolidation of a joint venture resulting in a $62 million pre-tax
gain within our Performance Materials and Technologies segment in the third quarter of 2010, included in "Other, net" (see Note 4 of Notes to Financial
Statements for further details),
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