Earthlink 2015 Annual Report Download - page 42

Table of Contents
2014 vs 2013
2015 vs 2014
(in millions)
Due to decrease in people costs (a) $ (4.4)
$ (35.7)
Due to decrease in rent and occupancy costs (b) (1.6)
(4.5)
Due to decrease in advertising and marketing (c) (1.3)
(2.1)
Due to decrease in bad debt expense (d) (1.0)
(2.5)
Due to change in loss contingencies (e) 2.2
(2.2)
Due to decrease in other selling, general and administrative costs (f) (1.0)
(3.3)
Total change in selling, general and administrative expenses $ (7.1)
$ (50.3)
______________
(a) Decrease in people costs primarily due to decreases in headcount, as full-time equivalents were 3,035, 2,659 and 2,138 as of December 31, 2013, 2014
and 2015, respectively. The decreases were primarily due to reductions in workforce driven by changes in our business strategy over the past two years,
including a reduction in workforce implemented during the fourth quarter of 2014 that eliminated approximately 450 positions. During 2015, we
implemented additional reductions in workforce.
(b) Decrease in rent and occupancy costs primarily due to cost savings from the closing of several sales offices and other properties over the past two years in
connection with changes to our business strategy and from moving our corporate headquarters location in September 2014.
(c) Decrease in advertising and marketing spend related to changes in our business strategy.
(d) Decrease in bad debt expense due to more effective collection efforts and the overall decrease in revenues.
(e) Change in loss contingencies due to $2.2 million of reserves recorded during year ended December 31, 2014, which was settled and paid during the year
ended December 31, 2015.
(f) Decrease in other selling, general and administrative costs such as commissions, outsourced labor, professional fees, payment processing, travel and
insurance due to increased focus on optimizing our cost structure. Partially offsetting the decline from 2013 to 2014 was the inclusion of CenterBeam
selling, general and administrative expenses beginning in July 2013.
Depreciation and amortization
Depreciation and amortization includes depreciation of property and equipment and amortization of definite-lived intangible assets acquired in purchases of
businesses and purchases of customer bases from other companies.
The following table presents our depreciation and amortization expense for the years ended December 31, 2013, 2014 and 2015 :
Year Ended December 31,
2014 vs 2013
2015 vs 2014
2013
2014
2015
$ Change
% Change
$ Change
% Change
(dollars in thousands)
Depreciation expense $ 116,744
$ 123,695
$ 122,151
$ 6,951
6%
$ (1,544)
(1)%
Amortization expense 66,370
63,177
66,164
(3,193)
(5)%
2,987
5%
Total depreciation and amortization $ 183,114
$ 186,872
$ 188,315
$ 3,758
2%
$ 1,443
1%
The increase in depreciation expense during the year ended December 31, 2014 compared to the prior year was primarily due to capital expenditures. The decrease
in amortization expense during the year ended December 31, 2014 compared to the prior year was primarily due to definite-lived intangible assets becoming fully
amortized over the years.
The decrease in depreciation expense during the year ended December 31, 2015 compared to the prior year was primarily due to a decrease in capital expenditures
and assets becoming fully depreciated over the past year, offset by accelerated depreciation on retirements of property and equipment. The increase in amortization
expense during the year ended December 31, 2015 compared to the prior year was primarily due to the shortening of useful lives for certain customer base
intangible assets, which increased amortization expense by $5.7 million during the year ended December 31, 2015, partially offset by definite-lived intangible
assets becoming fully amortized over the year.
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