Windstream 2010 Annual Report Download - page 111

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Cost of Products Sold
Cost of products sold represent the cost of equipment sales to customers. The following table reflects the primary
drivers of year-over-year changes in cost of products sold:
Twelve Months Ended
December 31, 2010
Twelve Months Ended
December 31, 2009
(Millions)
Increase
(Decrease) %
Increase
(Decrease) %
Due to acquired businesses $ 5.5 $ 0.2
Due to disposal of the out-of-territory product distribution
operations (34.3) (34.0)
Due to changes in costs of contractor sales (a) 5.1 (11.2)
Due to decreases in equipment sales to business
customers (b) (3.8) (9.8)
Due to decreases in consumer costs of product sold (c) (5.1) (7.5)
Total decreases in cost of products sold $ (32.6) (30)% $ (62.3) (37)%
(a) Changes in contractor cost of products sold for both periods were consistent with the changes in contractor sales
in 2010 and 2009.
(b) Decreases in business cost of products sold were consistent with declines in business product sales for both
periods.
(c) Decreases in consumer cost of products sold for both periods, relative to the changes year-over-year in consumer
product sales, are primarily due to the mix of products sold.
Selling, General, Administrative and Other Expenses (“SG&A”)
SG&A expenses result from sales and marketing efforts, advertising, information technology support systems, costs
associated with corporate and other support functions and professional fees. These expenses also include salaries and
wages and employee benefits not directly associated with the provision of services. The following table reflects the
primary drivers of year-over-year changes in SG&A expenses:
Twelve Months Ended
December 31, 2010
Twelve Months Ended
December 31, 2009
(Millions)
Increase
(Decrease) %
Increase
(Decrease) %
Due to acquired businesses $ 150.1 $ 3.4
Due to impairment loss on acquired assets held for sale - (6.5)
Due to changes in advertising expense and other (a) 4.2 (18.1)
Due to changes in pension expense (b) (4.2) 18.3
Total changes in SG&A and other expenses $ 150.1 43% $ (2.9) (1)%
(a) Increases in advertising expense during 2010 are primarily due to increased spending to support sales of our
price-for-life bundles and to focus on business customers. Decreases in advertising expense and other in 2009 is
due to the decrease in general and administrative fees during 2009 attributable to declines in regulatory fees that
are based on access lines, improved insurance claims experience and the Company’s continued efforts to contain
costs.
(b) Decreases in pension expense are attributable to lower pension amortization in 2010 as a result of the $152.0
million, or 23.2 percent, return generated on pension plan assets during 2009. Increases in pension expense in
2009 are attributable to the amortization of losses sustained on pension plan assets during the 2008 plan year.
F-11