Time Warner Cable 2012 Annual Report Download - page 56

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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
Selling, general and administrative expenses. The components of selling, general and administrative expenses were as
follows (in millions):
Year Ended December 31,
2012 2011 % Change
Employee .......................................................$ 1,666 $ 1,472 13.2%
Marketing ....................................................... 653 635 2.8%
Bad debt(a) ...................................................... 131 118 11.0%
Other ........................................................... 1,170 1,086 7.7%
Total ...........................................................$ 3,620 $ 3,311 9.3%
(a) Bad debt expense includes amounts charged to expense associated with the Company’s allowance for doubtful accounts and collection expenses, net of
late fees billed to subscribers. Late fees billed to subscribers were $150 million and $140 million in 2012 and 2011, respectively.
Selling, general and administrative expenses increased primarily as a result of increases in employee costs and other
costs. The increase in employee costs was primarily the result of acquisitions, increased business services headcount and
higher compensation costs per employee. During 2012, pension costs increased $19 million, primarily due to the decline in
interest rates to historically low levels. The increase in other costs was primarily due to Insight-related costs and increased
facilities expense and legal costs, partially offset by lower consulting costs.
Merger-related and restructuring costs. The Company incurred merger-related costs of $54 million during 2012,
primarily due to severance costs and legal, professional and other fees incurred in connection with the Insight acquisition.
During 2011, the Company incurred merger-related costs of $10 million in connection with the acquisitions of NaviSite, the
NewWave cable systems and Insight.
The Company incurred restructuring costs of $61 million during 2012 compared to $60 million in 2011. These
restructuring costs were primarily related to approximately 1,135 and 775 employee terminations in 2012 and 2011,
respectively, and other exit costs. The Company expects to incur additional restructuring costs during 2013 in connection
with initiatives intended to improve operating efficiency, primarily related to employee terminations.
Asset impairments. In early 2012, TWC ceased making its existing wireless service available to new wireless
customers. As a result, during the fourth quarter of 2011, the Company impaired $60 million of assets related to the provision
of wireless service that would no longer be utilized. Of the $60 million noncash impairment, $44 million related to fixed
assets and wireless devices and $16 million related to the remaining value of wireless wholesale agreements with Sprint and
Clearwire that were recorded upon TWC’s initial investment in Clearwire Communications in 2008.
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