Verizon Wireless 2010 Annual Report Download - page 21

Selling, General and Administrative Expense
Selling, general and administrative expense includes salaries and wages
and benefits not directly attributable to a service or product; bad debt
charges; taxes other than income taxes; advertising and sales commis-
sion costs; customer billing; call center and information technology costs;
professional service fees; and rent and utilities for administrative space.
Selling, general and administrative expense increased during 2010 com-
pared to 2009 primarily due to higher severance, pension and benefit
charges which primarily included a pension and postretirement benefit
plan remeasurement loss in 2010 compared to a remeasurement gain in
2009 as well as the charges in connection with an agreement reached with
certainunionsontemporaryenhancements(see“OtherItems”).Inaddi-
tion, the increase in Selling, general and administrative expense reflected
higher sales commission expense at our Domestic Wireless segment in our
indirect channel as a result of increases in both the average commission
per unit, as the mix of units continues to shift toward data devices and
more customers activating data service, and increased contract renewals
in connection with equipment upgrades. Partially offsetting the increase
was the sale of the divested operations and the impact of cost reduc-
tion initiatives in our Wireline segment. Selling, general and administrative
expense during 2010 was also impacted by lower access line spin-off and
merger integration related charges noted in the table below.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased during 2010 com-
pared to 2009. The decrease was primarily due to the sale of the divested
operations partially offset by additions to the depreciable asset base.
Depreciation and amortization expense during 2010 was also impacted
by lower non-operational charges noted in the table below.
2009 Compared to 2008
Cost of Services and Sales
Consolidated cost of services and sales during 2009 increased compared
to 2008 primarily due to higher severance, pension and benefits charges
recorded during 2009 and other non-operational charges noted in the
table below. Also contributing to the increases were higher wireless
network costs, including the effects of operating an expanded wire-
less network as a result of the acquisition of Alltel, and increased costs
of equipment. Additionally, we experienced increased costs associated
with our growth businesses including higher content and customer
acquisition costs. Also contributing to the increase were an increase in
the numbers of both data and phone equipment units sold as well as an
increase in the average cost per equipment unit. Partially offsetting these
increases were reduced roaming costs realized by moving more traffic
to our own network as a result of the acquisition of Alltel and declines
due in part to lower headcount and productivity improvements at our
Wireline segment.
Selling, General and Administrative Expense
Consolidated selling, general and administrative expense in 2009
decreased compared to 2008 primarily due to the pension and post-
retirement benefit plan remeasurement gain in 2009 compared to the
remeasurement loss in 2008 noted in the table below. Partially offset-
ting the decrease were other non-operational charges noted in the table
below as well as increased wireless salary and benefits as a result of a
larger employee base after the acquisition of Alltel and higher sales com-
mission in our indirect channel in Domestic Wireless, partially offset by
the impact of cost reduction initiatives in our Wireline segment.
Depreciation and Amortization Expense
Depreciation and amortization expense in 2009 increased compared
to 2008 mainly driven by depreciable property and equipment and
finite-lived intangible assets acquired from Alltel, as well as growth in
depreciable plant from capital spending partially offset by lower rates of
depreciation. Depreciation and amortization expense in 2009 included
merger integration costs related to the Alltel acquisition.
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Management’sDiscussionandAnalysis
ofFinancialConditionandResultsofOperations – As Adjusted continued
Non-operational Charges
Non-operational charges included in operating expenses were as follows:
(dollars in millions)
Years Ended December 31, 2010 2009 2008
Merger Integration and Acquisition
Related Charges
Cost of services and sales $ 376 $ 195 $ 24
Selling, general and administrative expense 389 442 150
Depreciation and amortization expense 102 317 –
Total $ 867 $ 954 $ 174
Access Line Spin-off Related Charges
Cost of services and sales $ 42 $ 38 $ 16
Selling, general and administrative expense 365 415 87
Total $ 407 $ 453 $ 103
Severance, Pension and Benefit Charges
Cost of services and sales $ 1,723 $ 1,443 $ 65
Selling, general and administrative expense 1,331 (3) 15,537
Total $ 3,054 $ 1,440 $ 15,602
See“OtherItems”foradescriptionofnon-operationalitems.