Earthlink 2004 Annual Report Download - page 41

which favorably impacted our ability to deliver toll-free customer support. These decreases were partially offset by increased outsourced labor
costs associated with outsourcing certain contact center activities.
General and administrative
General and administrative expenses consist of fully burdened costs associated with the executive, finance, legal and human resources
departments; outside professional services; payment processing; credit card fees; collections and bad debt. General and administrative expenses
decreased from $127.7 million during the year ended December 31, 2003 to $105.0 million during the year ended December 31, 2004. The
decrease was primarily due to decreases in legal fees and related costs, bad debt expense and tax related costs. The decrease in tax related costs
was attributable to state sales tax refunds received in 2004 from taxes paid in previous years resulting from a change in state tax law and our
ability to invoice our customers for taxes on Internet access.
Acquisition
-related amortization
Acquisition-
related amortization represents the amortization of definite life intangible assets acquired in conjunction with the purchases of
businesses and customer bases from other ISPs. Generally, such definite life intangible assets are amortized on a straight-line basis over three
years from the date of their respective acquisitions. Acquisition
-related amortization decreased 71% from $84.3 million during the year ended
December 31, 2003 to $24.4 million during the year ended December 31, 2004. The decrease was primarily due to the subscriber base acquired
in the OneMain.com, Inc. (“OneMain”) transaction becoming fully amortized in September 2003 as well as several smaller subscriber base
acquisitions becoming fully amortized over the past two years.
Facility exit costs
During the first quarter of 2003, we executed a plan to streamline our contact center facilities (the “2003 Plan”). In connection with the
2003 Plan, we closed contact centers in Dallas, Texas; Sacramento, California; Pasadena, California; and Seattle, Washington during the
months of February and March 2003. The closure of the four contact centers resulted in the termination of 1,220 employees and a net reduction
of 920 employees, primarily customer support personnel. In connection with the 2003 Plan, we recorded facility exit costs of approximately
$36.6 million, including approximately $10.7 million for employee, personnel and related costs; $18.2 million for real estate and
telecommunications costs; and $7.7 million in asset disposals.
During the first quarter of 2004, we executed a plan to restructure and further streamline our contact center operations (the “2004 Plan”).
Under the 2004 Plan, we closed contact center operations in Harrisburg, Pennsylvania; Roseville, California; San Jose, California; and
Pasadena, California; and reduced contact center operations in Atlanta, Georgia. Approximately 1,140 employees were directly impacted,
primarily customer support personnel. In connection with the 2004 Plan, we recorded facility exit costs of $30.2 million, including
approximately $10.5 million for employee, personnel and related costs; $11.3 million for real estate and telecommunications costs; and $8.4
million in asset disposals.
During the year ended December 31, 2004, we reduced our estimates for real estate commitments associated with the 2003 Plan and the
2004 Plan by $2.0 million and realized additional expense of $0.2 million associated with the disposal and write-down of fixed assets, net of
proceeds received. As a result of the 2004 Plan and the subsequent changes in estimates to the 2003 Plan and 2004 Plan, we recorded facility
exit costs of $28.4 million during the year ended December 31, 2004.
38