Virgin Media 2013 Annual Report Download - page 118

III - 8
• A decrease in marketing and advertising costs of £16.4 million or 7.9%, primarily due to lower advertising and promotional
activities;
• A decrease in staff-related costs of £5.0 million or 2.4%, primarily due to the net impact of (i) an increase in staffing
levels, (ii) lower achievement levels for certain of our 2013 bonus plans, (iii) a decrease in employee severance costs that
are not classified as restructuring expenses and (iv) a net decrease in defined benefit and contribution plan costs; and
• An increase in outsourced labor and professional fees associated with integration activities in connection with the LG/
VM Transaction of £4.2 million.
Share-based compensation expense (included in SG&A expenses)
Our share-based compensation expense after the LG/VM Transaction represents amounts allocated to our company by Liberty
Global. The amounts allocated by Liberty Global to our company represent share-based compensation associated with the Liberty
Global share-based incentive awards held by certain employees of our subsidiaries. Share-based compensation expense allocated
to our company by Liberty Global is reflected as an increase to equity and is offset by any amounts recharged to us by Liberty
Global, as further described in note 11 to our consolidated financial statements. Share-based compensation expense prior to the
LG/VM Transaction includes amounts for options, shares and performance shares related to the common stock of Old Virgin
Media. A summary of the share-based compensation expense that is included in our SG&A expenses is set forth below:
Year ended December 31,
2013 2012
in millions
Performance-based incentive awards...................................................................................................... £ 13.0 £ 7.2
Other share-based incentive awards........................................................................................................ 94.6 18.6
Total (a) ......................................................................................................................................... £ 107.6 £ 25.8
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(a) In connection with the LG/VM Transaction, the Virgin Media Replacement Awards were remeasured as of June 7, 2013,
resulting in an aggregate estimated fair value attributable to the post-transaction period of £123.8 million. During the 2013
period following the LG/VM Transaction, £51.1 million of the June 7, 2013 estimated fair value of the Virgin Media
Replacement Awards was charged to expense in recognition of the Virgin Media Replacement Awards that were fully vested
on June 7, 2013 or for which vesting was accelerated pursuant to the terms of the LG/VM Transaction Agreement on or
prior to December 31, 2013. The remaining June 7, 2013 estimated fair value will be amortized over the remaining service
periods of the unvested Virgin Media Replacement Awards, subject to forfeitures and the satisfaction of performance
conditions. In addition, £3.5 million was charged to share-based compensation expense with respect to awards issued
subsequent to June 7, 2013 or issued by Liberty Global prior to June 7, 2013 for individuals who are now Virgin Media
employees.
For additional information concerning our share-based compensation, see note 10 to our consolidated financial statements.
Depreciation and amortization expense
Our depreciation and amortization expense increased £376.6 million or 39.0% during 2013, as compared to 2012, due primarily
to the impacts of higher cost bases of our intangible assets and property and equipment as a result of the push-down of acquisition
accounting in connection with the LG/VM Transaction and, to a lesser extent, increases associated with property and equipment
additions related to the installation of customer premises equipment, the expansion and upgrade of our networks and other capital
initiatives.