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The change in net sales is attributable to the following:
A discussion of net sales by segment can be found in the Review of Business Segments section of this MD&A. The
foreign currency translation impact is principally driven by the weakening of the Euro and Canadian Dollar against the U.S.
Dollar.
Cost of Products and Services Sold
Cost of products and services sold decreased in 2015 compared with 2014 principally due to a decrease in direct and
indirect material costs of approximately $1,460 million (driven primarily by the favorable impact of foreign currency
translation, productivity, lower raw materials pass-through pricing and the absence of the Friction Materials business,
partially offset by higher sales volume), a decrease in labor costs of approximately $450 million and higher pension income
of approximately $230 million.
Gross margin percentage increased in 2015 compared with 2014 principally due to higher gross margin in all of our
business segments (approximately 2.0 percentage point impact collectively) and increased pension income allocated to cost
of products and services sold (approximately 0.5 percentage point impact).
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).
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) decreased in 2015 compared with 2014 primarily driven by the
favorable impact from foreign currency translation, increased pension income, decreased indirect costs and benefits from
repositioning, partially offset by increased labor costs (primarily merit increases and investment for growth).
SG&A increased in 2014 compared with 2013 primarily driven by an increase in labor costs (primarily acquisitions,
incentive compensation, merit increases and investment for growth) and an increase in pension and other postretirement
benefit expense, partially offset by a decrease in repositioning charges.
16
2015
Versus
2014
2014
Versus
2013
Volume
1%
3%
Price
(1)%
—
Acquisitions/Divestitures
(1)%
1%
Foreign Currency Translation
(4)%
—
Other
1%
(1)%
(4)%
3%
2015
2014
2013
Cost of products and services sold
$
26,747
$
28,957
$
28,364
% change compared with prior period
(8
)%
2
%
Gross Margin percentage
30.7
%
28.2
%
27.4
%
2015
2014
2013
Selling, general and administrative expense
$
5,006
$
5,518
$
5,190
% of sales
13.0
%
13.7
%
13.3
%