Time Warner Cable 2006 Annual Report Download - page 78
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Selling, general and administrative expenses. The major components of selling, general and administrative
expenses were as follows (in millions):
2006 2005 % Change
Year Ended December 31,
Employee ............................................ $ 872 $ 678 29%
Marketing ............................................ 414 306 35%
Other................................................ 840 545 54%
Total ................................................ $2,126 $1,529 39%
Selling, general and administrative expenses increased as a result of higher employee, marketing and other
costs. Employee costs increased primarily due to the impact of the Acquired Systems, increased headcount resulting
from the continued roll-out of advanced services and salary increases, partially offset by a benefit of approximately
$8 million related to both changes in estimates and a correction of prior period medical benefit accruals. Marketing
costs increased as a result of the Acquired Systems and higher costs associated with the roll-out of advanced
services. Other costs increased primarily due to the impact of the Acquired Systems and increases in administrative
costs associated with the increase in headcount discussed above.
Merger-related and restructuring costs. In 2006 and 2005, the Company expensed $38 million and
$8 million, respectively, of non-capitalizable merger-related costs associated with the Transactions. These
merger-related costs are related primarily to consulting fees concerning integration planning for the Transactions
and other costs incurred in connection with notifying new customers of the change in cable providers. Such costs are
expected to continue into 2007. In addition, the results for 2006 include $18 million of restructuring costs. The
results for 2005 included $35 million of restructuring costs, primarily associated with the early retirement of certain
senior executives and the closing of several local news channels, partially offset by a $1 million reduction in
restructuring charges, reflecting changes to previously established restructuring accruals. The Company’s restruc-
turing activities are part of the Company’s broader plans to simplify its organizational structure and enhance its
customer focus. TWC is in the process of executing these initiatives and expects to incur additional costs as these
plans continue to be implemented throughout 2007.
73
TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION — (Continued)