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F-10
(e) The decrease in 2012 was primarily due to our pension plan assets performing better than expected, partially offset by
a decrease in the discount rate from 4.64 percent to 3.85 percent. The increase in pension expense in 2011 was
primarily due to a decline in the discount rate from 5.31 percent to 4.64 percent. Lower returns on pension plan assets
also contributed to the increase in pension expense in 2011.
Cost of Products Sold
Cost of products sold represents 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, 2012
Twelve Months Ended
December 31, 2011
(Millions)
Increase
(Decrease) %
Increase
(Decrease) %
Due to acquired companies $ 93.1 $ 16.3
Due to increases in costs of contractor sales (a) 17.4 14.1
Due to decreases in consumer costs of products sold (1.1)(3.5)
Due to changes in equipment sales to business customers
(4.7) 3.5
Total increases in cost of products sold $ 104.7 99% $ 30.4 41%
(a) Increases in contractor cost of products sold for both periods were consistent with the changes in contractor sales in
2012 and 2011.
Selling, General and Administrative ("SG&A")
SG&A expenses result from sales and marketing efforts, advertising, IT support, costs associated with corporate and other
support functions, and professional fees. These expenses include associated salaries, 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, 2012
Twelve Months Ended
December 31, 2011
(Millions)
Increase
(Decrease) %
Increase
(Decrease) %
Due to acquired companies $ 400.9 $ 83.2
Due to changes in medical insurance (a) 17.8 (4.2)
Due to increases in other costs 8.3 2.0
Due to changes in postretirement expense (b) 0.8 (4.3)
Due to changes in sales and marketing expenses (c) (29.1) 7.6
Due to changes in pension expense (d) (25.4) 26.7
Total changes in SG&A $ 373.3 62% $ 111.0 23%
(a) Increases in medical insurance in 2012 were primarily due to increases in medical claims and related costs.
(b) Decreases in 2011 postretirement expense were primarily attributable to a curtailment gain recognized during the third
quarter of 2011 as a result of the elimination of basic retiree life insurance coverage for certain and future retirees
effective January 1, 2012. During the second quarter of 2012 there was a curtailment gain recognized related to the
elimination of all benefits for certain current and future retirees. See Note 8 for additional information.
(c) Decreases in sales and marketing expenses in 2012 were due to lower compensation costs for the business channel and
decreased marketing and advertising expenses. Increases in sales and marketing expenses for 2011 were due to
commissions costs for the business channel and increased advertising expenses.