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Table of Contents
EARTHLINK HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Year Ended December 31,
2013
2014
2015
(in thousands)
Business Services
Revenues $ 964,227
$ 930,931
$ 877,912
Cost of revenues (excluding depreciation and amortization) 506,245
469,523
422,766
Gross margin 457,982
461,408
455,146
Direct segment operating expenses 342,630
345,982
316,220
Segment operating income $ 115,352
$ 115,426
$ 138,926
Consumer Services
Revenues $ 276,379
$ 245,964
$ 219,340
Cost of revenues (excluding depreciation and amortization) 94,497
87,913
77,862
Gross margin 181,882
158,051
141,478
Direct segment operating expenses 50,623
43,615
30,731
Segment operating income $ 131,259
$ 114,436
$ 110,747
Consolidated
Revenues $ 1,240,606
$ 1,176,895
$ 1,097,252
Cost of revenues (excluding depreciation and amortization) 600,742
557,436
500,628
Gross margin 639,864
619,459
596,624
Direct segment operating expenses 393,253
389,597
346,951
Segment operating income 246,611
229,862
249,673
Depreciation and amortization 183,114
186,872
188,315
Impairment of goodwill and long-lived assets 255,599
14,334
—
Restructuring, acquisition and integration-related costs 40,030
20,088
19,320
Corporate operating expenses 32,817
29,422
21,812
Interest expense and other, net 58,606
56,261
50,972
Loss on extinguishment of debt 2,080
—
9,734
Loss from continuing operations before income taxes $ (325,635)
$ (77,115)
$ (40,480)
The Company evaluated performance of its previous segment structure based on segment operating income. Segment operating income includes revenues from
external customers, related cost of revenues and operating expenses directly attributable to the segment, which included costs over which segment managers had
direct discretionary control, such as advertising and marketing programs, customer support expenses, product development expenses, certain technology and
facilities expenses, billing operations and provisions for doubtful accounts. Segment operating income excluded other income and expense items and certain
expenses over which segment managers do not have discretionary control. Costs excluded from segment operating income include various corporate expenses
(consisting of certain costs such as corporate management, human resources, finance and legal), depreciation and amortization, impairment of goodwill and
intangible assets, restructuring, acquisition and integration-related costs, stock-based compensation expense, and interest expense and other, net, as they were not
considered in the measurement of segment performance.
The Company manages its working capital on a consolidated basis and does not allocate long-lived assets to segments. In addition, segment assets are not reported
to, or used by, the Chief Operating Decision Maker and therefore, total segment assets and expenditures for additions of long-lived assets have not been disclosed.
The Company has not provided information about geographic segments because substantially all of the Company’s revenues, results of operations and identifiable
assets are in the United States.
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