Cablevision 2013 Annual Report Download - page 63

(57)
Technical and operating expenses (excluding depreciation and amortization shown below) for 2013
increased $96,874 (4%) as compared to 2012. The net increase is attributable to the following:
Increase in programming costs due primarily to contractual rate increases, partially offset by lower
subscribers (see discussion below) ................................................................................................. $140,070
Increase in employee related costs, primarily merit increases, benefits, certain other compensation
increases (see discussion below) and an increase in the number of employees ................................. 61,282
Increase in other net repairs and maintenance costs .......................................................................... 11,427
Decreases in expenses, net of programming and other credits, incurred as a result of Superstorm
6DQG\LQFOXGLQJH[SHQVHVRILQFXUUHGLQWKHILUVWTXDUWHURI« .................................. (49,768)
Decrease in contractor costs due primarily to lower truck rolls .......................................................... (37,339)
Decrease in voice related fees, net due primarily to reduction in rate and volume ............................... (11,568)
Contract termination cost related to equipment purchase commitments in the fourth quarter of
2012 .............................................................................................................................................. (9,356)
Decrease in taxes and fees due primarily to the favorable resolution of certain voice related tax
matters in 2013 .............................................................................................................................. (6,931)
Other net decreases ......................................................................................................................... (943)
$ 96,874
Technical and operating expenses consist primarily of programming costs (including costs of video-on-
demand and pay-per-view) and direct costs associated with providing and maintaining services to our
customers. These costs typically rise due to increases in contractual programming rates, new channel
launches, the effect of increasing the number of subscribers receiving certain programming services, and
general inflationary cost increases for employees, contractors, insurance and other various expenses.
Certain of these costs are also variable based on the number of customers. Our programming costs
increased 10% in 2013 and we anticipate a similar increase in 2014. Costs of field operations, which
consist primarily of employee related, customer installation and repair and maintenance costs, may
fluctuate as a result of shifting between the utilization of contractors and employees. Also employee
related and customer installation costs increase as the portion of our expenses that we are able to
capitalize decrease due to lower new customer installations and lower new service upgrades. Network
related costs, which consist primarily of employee related, repair and maintenance and utility costs, also
fluctuate as capitalizable network upgrade and enhancement activity changes. Technical and operating
expenses also include franchise fees, which are payable to the state governments and local municipalities
where we operate and are primarily based on a percentage of certain categories of revenue, primarily
video revenue, which vary by state and municipality. These costs change in relation to changes in such
categories of revenues or rate changes. We expect that our technical and operating expenses will continue
to increase in the future.
As a result of a comprehensive study of its non-executive compensation practices with a focus on
individual competitive pay and career advancement, certain compensation changes were implemented
during the second quarter of 2012. The increase in certain employee costs reflects the full year impact of
these changes compared to 2012.
Selling, general and administrative expenses increased $52,537 (5%) for 2013 as compared to 2012. The
net increase is attributable to the following:
Increase in employee related costs, primarily merit increases, benefits, certain compensation
increases (see discussion above) ..................................................................................................... $ 55,960
Increase in legal and other professional fees ...................................................................................... 18,006
Increase in advertising and marketing costs ....................................................................................... 6,143
Increase in expenses related to long-term incentive awards offset by a decrease in share-based
compensation expense ................................................................................................................... 3,366
Decrease in customer promotional incentives .................................................................................... (17,707)
Expenses incurred as a result of Superstorm Sandy in 2012 ............................................................... (15,118)
Other net increases, including allocations of corporate overhead costs ............................................... 1,887
$ 52,537