The increase in gross margin versus 2013 was primarily due to higher volumes, favorable mix, decreased material and commodity costs and improved pricing.
The increase in selling, general and administrative expenses was primarily due to increased headcount and higher variable compensation expense.
The increase in research, development and engineering expenses was primarily due to lower expense recovery, increased consulting, increased variable compensation and increased investment to support new product initiatives.
The increase in equity, royalty and interest income from investees was primarily due to higher earnings at Beijing Foton Cummins Engine Co. , Ltd.  (Light-duty).2013 vs.  2012 Sales Engine segment sales decreased versus 2012 due to lower demand in stationary power, heavy-duty truck and industrial businesses, partially offset by the medium-duty truck business.
The following are the primary drivers by market: ?
Stationary power engine sales decreased due to lower demand in power generation markets.  ?
Heavy-duty truck engine sales decreased due to weaker demand in North American on-highway markets during the first half of the year compared to the recovery experienced in the first half of 2012 as trucking companies replaced aging fleets.  ?
Industrial market sales decreased primarily due to a 36 percent reduction in global mining shipments as a result of lower commodity prices and a 37 percent decline in engine shipments to North American oil and gas markets, partially offset by increased shipments to the Western European construction markets as a result of the pre-buy activity in 2013 ahead of the Tier IV emission regulations beginning in the first quarter of 2014.  ?
Foreign currency fluctuations unfavorably impacted sales.
The decreases above were partially offset by the following: ?
Medium-duty truck engine sales increased due to market share gains in the North American medium-duty truck market and improved demand in the Brazilian and European truck markets.
The improved sales in Brazil were primarily due to lower sales in the first half of 2012 as the result of the implementation of the Euro V emission regulations beginning in the first quarter of 2012.
Total on-highway-related sales for 2013 were 62 percent of total engine segment sales, compared to 59 percent in 2012.
Segment EBIT Engine segment EBIT decreased versus 2012, primarily due to lower gross margin, partially offset by lower research, development and engineering expenses and higher equity, royalty and interest income from investees.
Engine segment EBIT for 2012 included restructuring and other charges of $20 million in the fourth quarter of 2012.
Major components of EBIT and related changes to segment EBIT and EBIT as a percentage of sales were as follows:
## Table 0 ##
The decrease in gross margin versus 2012 was primarily due to unfavorable product mix and lower high-horsepower volumes, partially offset by improved price realization, decreased material and commodity costs and favorable foreign currency fluctuations.
The decrease in selling, general and administrative expenses was primarily due to lower discretionary spending and the absence of restructuring charges incurred in 2012, partially offset by increased headcount.
The decrease in research, development and engineering expenses was primarily due to lower discretionary spending in 2013, partially offset by increases in new product development spending and increased headcount to support our strategic growth initiatives.
The increase in equity, royalty and interest income from investees was primarily due to higher earnings at Beijing Foton Cummins Engine Co. , Ltd.  within the light-duty business and Dongfeng Cummins Engine Company, Ltd. , partially offset by lower earnings at Beijing Foton Engine Company, Ltd.  (Heavy-duty) in anticipation of production in the second quarter of 2014.
Operating Expenses:
## Table 1 ##
Pension and postretirement expense decreased $97 million in 2013 compared to 2012, compared to an increase of $95 million for 2012 compared to 2011.2012 includes a $26 million charge related to the first-quarter 2012 voluntary early retirement incentive program (discussed in Note 10).
Pension and postretirement expense is recorded in cost of sales; selling, general and administrative expenses (SG&A); and research, development and related expenses (R&D).
Refer to Note 10 (Pension and Postretirement Plans) for components of net periodic benefit cost and the assumptions used to determine net cost.
Cost of Sales: Cost of sales includes manufacturing, engineering and freight costs.
Cost of sales, measured as a percent of net sales, was 52.1 percent in 2013, a decrease of 0.3 percentage points from 2012.
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 rose 0.9 percent and raw material cost deflation was approximately 2 percent favorable year-on-year.
In addition, lower pension and postretirement costs (of which a portion impacts cost of sales), in addition to organic volume increases, decreased cost of sales as a percent of sales.
These benefits were partially offset by the impact of 2012 acquisitions and lower factory utilization.
Cost of sales, measured as a percent of net sales, was 52.4 percent in 2012, a decrease of 0.6 percentage points from 2011.
The net impact of selling price/raw material cost changes was the primary factor that decreased cost of sales as a percent of sales, as selling prices increased 1.4 percent and raw material costs decreased approximately 2 percent.
This benefit was partially offset by higher pension and postretirement costs.
Selling, General and Administrative Expenses: Selling, general and administrative expenses (SG&A) increased $282 million, or 4.6 percent, in 2013 when compared to 2012.
In 2013, SG&A included strategic investments in business transformation, enabled by 3M’s global enterprise resource planning (ERP) implementation, in addition to increases from acquired businesses that were largely not in 3M’s 2012 spending (Ceradyne, Inc.  and Federal Signal Technologies), which were partially offset by lower pension and postretirement expense.
SG&A, measured as a percent of sales, increased 0.3 percentage points to 20.7 percent in 2013, compared to 20.4 percent in 2012.
SG&A decreased $68 million, or 1.1 percent, in 2012 when compared to 2011.
In addition to cost-control and other productivity efforts, 3M experienced some savings from its first-quarter 2012 voluntary early retirement incentive program and other restructuring actions.
These benefits more than offset increases related to acquisitions, higher year-on-year pension and postretirement expense, and restructuring expenses.
SG&A in 2012 included increases from acquired businesses which were not in 3M’s full-year 2011 base spending, primarily related to the 2011 acquisitions of Winterthur Technologie AG and the do-it-yourself and professional business of GPI Group, in addition to SG&A spending related to the 2012 acquisitions of Ceradyne, Inc. , Federal Signal Technologies Group, and CodeRyte, Inc.  SG&A, measured as a percent of sales, was 20.4 percent in 2012, a decrease of 0.4 percentage points when compared to 2011.
Research, Development and Related Expenses: Research, development and related expenses (R&D) increased 4.9 percent in 2013 compared to 2012 and increased 4.1 percent in 2012 compared to 2011, as 3M continued to support its key growth initiatives, including more R&D aimed at disruptive innovation.
In 2013, increases from acquired businesses that were largely not in 3M’s 2012 spending (primarily Ceradyne, Inc.  and Federal Signal Technologies) were partially offset by lower pension and postretirement expense.
In 2012, investments to support key growth initiatives, along with higher pension and postretirement expense, were partially
PRUDENTIAL FINANCIAL, INC.  Notes to Consolidated Financial Statements
## Table 2 ##
(1) Includes $91 million of fair value and $1 million of gross unrealized losses at December 31, 2014, on securities classified as held-to-maturity, a portion of which is not reflected in AOCI.
(2) Prior period amounts are presented on a basis consistent with the current period presentation.
The gross unrealized losses on fixed maturity securities at December 31, 2015 and 2014, were composed of $3,750 million and $1,156 million, related to high or highest quality securities based on the National Association of Insurance Commissioners (“NAIC”) or equivalent rating and $583 million and $200 million, related to other than high or highest quality securities based on NAIC or equivalent rating, respectively.
At December 31, 2015, the $1,802 million of gross unrealized losses of twelve months or more were concentrated in the energy, consumer non-cyclical, and basic industry sectors of the Company’s corporate securities.
At December 31, 2014, the $901 million of gross unrealized losses of twelve months or more were concentrated in the energy, consumer non-cyclical and utility sectors of the Company’s corporate securities.
In accordance with its policy described in Note 2, the Company concluded that an adjustment to earnings for OTTI for these securities was not warranted at either December 31, 2015 or 2014.
These conclusions are based on a detailed analysis of the underlying credit and cash flows on each security.
The gross unrealized losses are primarily attributable to general credit spread widening and foreign currency exchange rate movements.
At December 31, 2015, the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell these securities before the anticipated recovery of its remaining amortized cost basis.
At December 31, 2015, $19 million of the gross unrealized losses on equity securities represented declines in value of greater than 20%, $18 million of which had been in that position for less than six months.
At December 31, 2014, $13 million of the gross unrealized losses on equity securities represented declines in value of greater than 20%, all of which had been in that position for less than six months.
In accordance with its policy described in Note 2, the Company concluded that an adjustment for OTTI for these equity securities was not warranted at either December 31, 2015 or 2014.
In the normal course of business, the Company sells securities under agreements to repurchase and enters into securities lending transactions.
The following table sets forth the composition of repurchase agreements as of the date indicated.
## Table 3 ##
Contractual and Other Obligations Firm Commitments The following table summarizes certain of the Company’s aggregate contractual obligations as of March 29, 2008, and the estimated timing and effect that such obligations are expected to have on the Company’s liquidity and cash flow in future periods.
The Company expects to fund the firm commitments with operating cash flow generated in the normal course of business and, if necessary, availability under its $450 million credit facility or other potential sources of financing.

<table><tr><td></td><td colspan="3">Year ended December 31, 2013 vs. 2012 Favorable/(Unfavorable) Change</td></tr><tr><td>In millions</td><td>Amount</td><td>Percent</td><td>Percentage point changeas a percent of sales</td></tr><tr><td>Gross margin</td><td>$-237</td><td>-10%</td><td>-0.7</td></tr><tr><td>Selling, general and administrative expenses</td><td>1</td><td>—%</td><td>-0.5</td></tr><tr><td>Research, development and engineering expenses</td><td>17</td><td>4%</td><td>-0.2</td></tr><tr><td>Equity, royalty and interest income from investees</td><td>9</td><td>7%</td><td>0.2</td></tr></table>
<table><tr><td>(Percent of net sales)</td><td>2013</td><td>2012</td><td>2011</td><td>2013 Versus 2012</td><td>2012 Versus 2011</td></tr><tr><td>Cost of sales</td><td>52.1%</td><td>52.4%</td><td>53.0%</td><td>-0.3%</td><td>-0.6%</td></tr><tr><td>Selling, general and administrative expenses</td><td>20.7</td><td>20.4</td><td>20.8</td><td>0.3</td><td>-0.4</td></tr><tr><td>Research, development and related expenses</td><td>5.6</td><td>5.5</td><td>5.3</td><td>0.1</td><td>0.2</td></tr><tr><td>Operating income</td><td>21.6%</td><td>21.7%</td><td>20.9%</td><td>-0.1%</td><td>0.8%</td></tr></table>
<table><tr><td></td><td colspan="6">2014-2</td></tr><tr><td></td><td colspan="2">Less than twelve months</td><td colspan="2">Twelve months or more</td><td colspan="2">Total</td></tr><tr><td></td><td>Fair Value</td><td>GrossUnrealizedLosses</td><td>Fair Value</td><td>GrossUnrealizedLosses</td><td>Fair Value</td><td>GrossUnrealizedLosses</td></tr><tr><td></td><td colspan="6">(in millions)</td></tr><tr><td>Fixed maturities-1</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>U.S. Treasury securities and obligations of U.S. government authorities and agencies</td><td>$2,145</td><td>$5</td><td>$10</td><td>$0</td><td>$2,155</td><td>$5</td></tr><tr><td>Obligations of U.S. states and their political subdivisions</td><td>105</td><td>1</td><td>89</td><td>2</td><td>194</td><td>3</td></tr><tr><td>Foreign government bonds</td><td>839</td><td>26</td><td>1,052</td><td>91</td><td>1,891</td><td>117</td></tr><tr><td>U.S. corporate public securities</td><td>4,213</td><td>95</td><td>9,548</td><td>441</td><td>13,761</td><td>536</td></tr><tr><td>U.S. corporate private securities</td><td>1,866</td><td>55</td><td>838</td><td>34</td><td>2,704</td><td>89</td></tr><tr><td>Foreign corporate public securities</td><td>1,902</td><td>72</td><td>2,400</td><td>143</td><td>4,302</td><td>215</td></tr><tr><td>Foreign corporate private securities</td><td>3,345</td><td>179</td><td>560</td><td>36</td><td>3,905</td><td>215</td></tr><tr><td>Commercial mortgage-backed securities</td><td>1,299</td><td>6</td><td>1,746</td><td>33</td><td>3,045</td><td>39</td></tr><tr><td>Asset-backed securities</td><td>3,417</td><td>16</td><td>3,229</td><td>118</td><td>6,646</td><td>134</td></tr><tr><td>Residential mortgage-backed securities</td><td>35</td><td>0</td><td>194</td><td>3</td><td>229</td><td>3</td></tr><tr><td>Total</td><td>$19,166</td><td>$455</td><td>$19,666</td><td>$901</td><td>$38,832</td><td>$1,356</td></tr><tr><td>Equity securities, available-for-sale</td><td>$1,670</td><td>$82</td><td>$9</td><td>$1</td><td>$1,679</td><td>$83</td></tr></table>
<table><tr><td></td><td colspan="5">December 31, 2015 Remaining Contractual Maturity of the Agreements</td></tr><tr><td></td><td>Overnight & Continuous</td><td>Up to 30 Days</td><td>30 to 90 Days</td><td>Greater than 90 Days</td><td>Total</td></tr><tr><td></td><td colspan="5">(in millions)</td></tr><tr><td>U.S. Treasury securities and obligations of U.S. government authorities and agencies</td><td>$1,991</td><td>$4,513</td><td>$253</td><td>$0</td><td>$6,757</td></tr><tr><td>Obligations of U.S. states and their political subdivisions</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td></tr><tr><td>Foreign government bonds</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td></tr><tr><td>U.S. corporate public securities</td><td>11</td><td>0</td><td>0</td><td>0</td><td>11</td></tr><tr><td>U.S. corporate private securities</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td></tr><tr><td>Foreign corporate public securities</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td></tr><tr><td>Foreign corporate private securities</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td></tr><tr><td>Asset-backed securities</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td></tr><tr><td>Commercial mortgage-backed securities</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td></tr><tr><td>Residential mortgage-backed securities</td><td>169</td><td>945</td><td>0</td><td>0</td><td>1,114</td></tr><tr><td>Equity securities</td><td>0</td><td>0</td><td>0</td><td>0</td><td>0</td></tr><tr><td>Total repurchase agreements</td><td>$2,171</td><td>$5,458</td><td>$253</td><td>$0</td><td>$7,882</td></tr></table>

Question: in 2012 what was the percent of the voluntary early retirement incentive program to the increase in the pension and postretirement expense