Honeywell 2012 Annual Report Download - page 36

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sold), lower repositioning actions (approximately 0.6 percentage point impact) and higher segment
gross margin in our Aerospace, Automation and Control Solutions and Performance Materials and
Technologies segments (approximately 0.4 percentage point impact collectively), partially offset by
higher other postretirement expense (approximately 0.4 percentage point impact).
Cost of products and services sold increased by $3,835 million or 16 percent in 2011 compared
with 2010, principally due to an estimated increase in direct material costs, labor costs and indirect
costs of approximately $2 billion, $520 million, and $280 million, respectively, driven substantially by a
13 percent increase in sales as a result of the factors (excluding price) shown above and discussed in
the Review of Business Segments section of this MD&A, an increase in pension and other
postretirement expense of approximately $880 million (primarily driven by the increase in the pension
mark-to-market adjustment allocated to cost of products and services sold of $1.1 billion) and an
increase in repositioning and other charges of approximately $90 million.
Gross margin percentage decreased by 1.8 percentage points in 2011 compared with 2010,
primarily due to higher pension and other postretirement expense (approximate 2.8 percentage point
impact primarily driven by an unfavorable 3.3 percentage point impact resulting from the increase in
the pension mark-to-market adjustment allocated to cost of products and services sold) and
repositioning and other charges (approximate 0.2 percentage point impact), partially offset by higher
sales volume driven by each of our business segments (approximate 1.2 percentage point impact).
Selling, General and Administrative Expenses
2012 2011 2010
Selling, general and administrative expense. . . . . . . . . . . . . . . . $5,218 $5,399 $4,618
Percent of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.9% 14.8% 14.3%
Selling, general and administrative expenses (SG&A) decreased as a percentage of sales by 0.9
percent in 2012 compared to 2011 driven by the impact of higher sales as a result of the factors
discussed in the Review of Business Segments section of this MD&A, an estimated $110 million
decrease in pension expense (driven by the decrease in the portion of the pension mark-to-market
charge allocated to SG&A), $90 million decrease due to foreign exchange and $80 million decrease in
repositioning actions, partially offset by the impact an estimated $140 million increase in costs resulting
from acquisitions, investment for growth and merit increases (net of other employee related costs).
Selling, general and administrative expenses 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.
Other (Income) Expense
2012 2011 2010
Equity (income)/loss of affiliated companies. . . . . . . . . . . . . . . . . . . . . . . $(45) $(51) $(28)
Gain on sale of non-strategic businesses and assets . . . . . . . . . . . . . (5) (61) —
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58) (58) (39)
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 50 12
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 36 (42)
$(70) $(84) $(97)
Other income decreased by $14 million in 2012 compared to 2011 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 in the first quarter of 2011, partially offset by a loss of $29
million resulting from early redemption of debt in 2011 included within “Other, net” and the reduction of
approximately $6 million of acquisition related costs compared to 2011 included within “Other, net”.
27