Reliant FORM 10-K manual Operating expenses, Selling, general and administrative expense

Optical Networks gross margin declined by approximately 5 percentage points in 2002 compared to 2001 primarily due to:

•pricing pressures on the sale of certain products; partially offset by

•reduced inventory provisioning and other contract and customer settlement costs in 2002.

Operating expenses

Selling, general and administrative expense

	For the years ended December 31,				2003 vs 2002		2002 vs 2001
	2003	2002	2001	$ Change		% Change	$ Change	% Change
SG&A expense	$ 1,939	$ 2,553	$ 6,111	$	(614)	(24)	$ (3,558)	(58)
As % of revenues	19.0%	23.2%	32.3%		(4.2 pts)		(9.1 pts)

SG&A expense declined $614 in 2003 compared to 2002 primarily due to:

•the continued impact of our workforce reductions and associated reductions in other related costs such as information services and real estate; and

•a net decrease of $471 (recovery of $180 in 2003 and expense of $291 in 2002) related to decreased provisioning for trade and customer financing receivables; partially offset by

•an increase of approximately $120 related to our RTP and regular bonus plans in 2003 compared to 2002; and

•an increase due to significant foreign exchange impacts associated with the Canadian dollar, euro and British pound; and

•an increase related to our stock-based compensation, including restricted stock unit and stock option programs, both of which are not allocated across all of our reportable segments.

SG&A expense declined $3,558 in 2002 compared to 2001 primarily due to:

•the impact of workforce reductions which, in turn, resulted in a reduction in other related costs including information services and real estate; and

•a decrease of $1,500 (expense of $291 in 2002 and expense of $1,791 in 2001) related to decreased provisioning for trade and customer financing receivables.

Overall in 2004, we expect increased SG&A expense compared to 2003 primarily as a result of net trade and customer financing receivable recoveries of $180 that were included in our SG&A expense in 2003 that are not expected to be repeated in 2004, negative foreign exchange impacts, increases in our stock-based compensation programs and costs of approximately $115 related to our restatement activities. Although we expect increased SG&A expense in 2004 compared to 2003, through the implementation of our strategic plan, we expect to reduce operating expenses (both SG&A and R&D expense) to 35% of revenues or lower on an annualized basis in 2005. See “Business overview — Our strategic plan and outlook”.

Segment selling, general and administrative expense

Wireless Networks

Wireless Networks SG&A expense decreased substantially in 2003 compared to 2002 primarily due to:

•the continued impact of our workforce reductions and organizational realignment across all regions and associated reductions in other related costs such as information services and real estate; and

•a decrease in provisioning for trade and customer financing receivables.

Wireless Networks SG&A expense decreased substantially in 2002 compared to 2001 primarily due to:

•the continued impact of our workforce reductions and organizational realignment across all regions and associated reductions in other related costs such as information services and real estate; partially offset by

•an increase in provisioning for trade and customer financing receivables.

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