Honeywell 2014 Annual Report Download - page 25

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a global manufacturer of fixed and mobile printers, for $185 million (the transaction is expected
to close in early 2015).
•Expansion of Honeywell’s presence and sales in high growth regions and countries such as
China, India, Latin America, the Middle East and Eastern Europe. Sales to customers outside
the United States increased by 5% in 2014 and now account for approximately 55% of total
revenues.
•Operating cash flow grew by 16% in 2014 to $5,024 million. This operating cash flow
performance enabled us to invest $1,094 million in capital expenditures, repay $600 million in
long-term debt, provide a 15% increase in the Company’s cash dividend rate (vs. 2013) and
repurchase 10.0 million shares of common stock.
CONSOLIDATED RESULTS OF OPERATIONS
Net Sales
2014 2013 2012
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,306 $39,055 $37,665
% change compared with prior period . . . . . . . . . . . . . . . . . . 3% 4%
The change in net sales is attributable to the following:
2014
Versus
2013
2013
Versus
2012
Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3% 1%
Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1%
Acquisitions/Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1% 2%
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)% —
3% 4%
A discussion of net sales by segment can be found in the Review of Business Segments section
of this MD&A.
Cost of Products and Services Sold
2014 2013 2012
Cost of products and services sold . . . . . . . . . . . . . . . . . . . . $28,957 $28,364 $28,291
% change compared with prior period . . . . . . . . . . . . . . . . . . 2% —
Gross Margin percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.2% 27.4% 24.9%
Cost of products and services sold increased in 2014 compared with 2013 principally due to an
increase in direct material and labor costs of approximately $645 million (driven by higher sales volume
and acquisitions, net of divestitures) and an increase in pension and other postretirement benefit
expense of approximately $35 million, partially offset by a decrease in repositioning and other charges
of approximately $40 million.
Gross margin percentage increased in 2014 compared with 2013 principally due to higher gross
margin in all of our business segments (approximately 0.7 percentage point impact collectively) and
lower repositioning and other charges (approximately 0.1 percentage point impact), partially offset by
higher pension and other postretirement benefit expense (approximately 0.1 percentage point impact).
Cost of products and services sold increased in 2013 compared with 2012 principally due to an
increase in direct material costs of approximately $585 million and indirect material costs of
approximately $115 million (driven by higher sales volume and acquisitions) and increased
repositioning and other charges of approximately $140 million partially offset by a decrease in pension
expense of approximately $760 million, primarily driven by the $650 million decrease in the pension
mark-to-market adjustment allocated to cost of products and services sold (approximately $30 million
in 2013 versus approximately $680 million in 2012).
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