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TableofContents
TheCompanyisinvestinginbusinesstransformation.Businesstransformationisdefinedaschangesinprocessesand
internal/externalservicedeliveryacross3Mtomovetomoreefficientbusinessmodelstoimproveoperationalefficiencyand
productivity,whileallowing3Mtoservecustomerswithgreaterspeedandefficiency.Thisisenabledbytheongoingmulti-year
phasedimplementationofanenterpriseresourceplanning(ERP)systemonaworldwidebasis.
Inthefourthquarterof2015,asdiscussedwithintheOverviewsectionabove,3Mincurredrestructuringchargesimpactingoperating
expensesasfollows:
 
(Millions)  2015 
Costofsales 40 
Selling,generalandadministrativeexpenses 62 
Research,developmentandrelatedexpenses 12 
Total $ 114 
Cost of Sales:
Costofsalesincludesmanufacturing,engineeringandfreightcosts.
Costofsales,measuredasapercentofnetsales,was50.9percentin2015,adecreaseof0.8percentagepointsfrom2014.Costof
salesasapercentofsalesdecreasedduetothecombinationofsellingpriceincreasesandrawmaterialcostdecreases,asselling
pricesincreasednetsalesby1.1percentandrawmaterialcostdeflationwasfavorablebyapproximately3.5percentyear-on-year.In
addition,higherpensionandpostretirementcosts(ofwhichaportionimpactscostofsales)andfourthquarter2015restructuring
charges,increasedcostofsalesasapercentofsales.
Costofsales,measuredasapercentofnetsales,was51.7percentin2014,adecreaseof0.4percentagepointsfrom2013.Costof
salesasapercentofsalesdecreasedduetothecombinationofsellingpriceincreasesandrawmaterialcostdecreases,asselling
pricesincreasednetsalesby1.0percentandrawmaterialcostdeflationwasfavorablebyapproximately1.5percentyear-on-year.In
addition,lowerpensionandpostretirementcosts(ofwhichaportionimpactscostofsales),alongwithorganicvolumeleverage,
decreasedcostofsalesasapercentofsales.
Selling, General and Administrative Expenses:
Selling,generalandadministrativeexpenses(SG&A)decreased$287million,or4.4percent,in2015whencomparedto2014.The
translationofforeigncurrenciesintoU.S.dollarsreducedSG&Aexpense,asevidencedbyourforeigncurrencytranslationimpact
whichreducedworldwidesalesby6.8percent.Thisforeigncurrencytranslationbenefitwaspartiallyoffsetbyhigherpensionand
postretirementexpenseandfourthquarter2015restructuringcharges.SG&A,measuredasapercentofsales,increased0.1
percentagepointsto20.4percentin2015,comparedto20.3percentofsalesin2014.
Selling,generalandadministrativeexpenses(SG&A)increased$85million,or1.3percent,in2014whencomparedto2013.Year
2014includedstrategicinvestmentsinbusinesstransformation,whilelowerpensionandpostretirementexpensebenefittedSG&A.
SG&A,measuredasapercentofsales,decreased0.4percentagepointsto20.3percentin2014,comparedto20.7percentofsalesin
2013.
Research, Development and Related Expenses:
Research,developmentandrelatedexpenses(R&D)decreased$7million,or0.4percent,in2015comparedto2014.R&Dincreased
3.2percentin2014comparedto2013.3Mcontinuedtosupportitskeygrowthinitiatives,includingmoreR&Daimedatdisruptive
innovation,whichreferstoinnovationwhichhasthepotentialtocreatenewmarketsanddisruptexistingmarkets.In2015,like
SG&A,R&DspendinginU.S.dollarswasreducedduetothetranslationofforeigncurrenciesintoU.S.dollars.These2015
translationbenefitswerepartiallyoffsetbyhigherpensionandpostretirementexpensein2015whencomparedto2014.In2014,
increasesinR&D,whencomparedto2013,werepartiallyoffsetbylowerpensionandpostretirementexpense.R&D,measuredasa
percentofsales,was5.8percentin2015,comparedto5.6percentinboth2014and2013.
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