Earthlink 2012 Annual Report Download - page 44

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Table of Contents
Revenue Sources
Business Services .
Our Business Services segment earns revenue by providing a broad range of data, voice and IT services to retail and
wholesale business customers. We present our Business Services revenue in the following three categories: (1) retail services, which includes
data, voice and IT services provided to business customers; (2) wholesale services, which includes the sale of transmission capacity to other
telecommunications carriers; and (3) other services, which includes the sale of customer premises equipment and web hosting. Our IT services,
which are included within our retail services, include data centers, virtualization, security, applications, premises-
based solutions, managed
solutions and support services. Revenues generally consist of recurring monthly charges for such services; usage fees; installation fees;
equipment fees; and termination fees.
Consumer Services . Our Consumer Services segment earns revenue by providing nationwide Internet access and related value-
added
services to residential customers. We present our Consumer Services in two categories: (1) access services, which includes narrowband access
services and broadband access services; and (2) value-added services, which includes revenues from ancillary services sold as add-
on features to
EarthLink’
s Internet access services, such as security products, premium email only, home networking and email storage; search revenues; and
advertising revenues. Revenues generally consist of recurring monthly charges for such services; usage fees; installation fees; termination fees;
and equipment fees.
Consolidated Results of Operations
The following comparison of statement of operations data is affected by our acquisition of ITC^DeltaCom on December 8, 2010 and
our acquisition of One Communications on April 1, 2011. The results of operations of ITC^DeltaCom and One Communications are included in
our operating results beginning on the acquisition date. The following comparison of statement of operations data is also affected, to a lesser
extent, by our other acquisitions and transactions completed during 2011 including STS Telecom, Logical Solutions and Business Vitals, LLC,
among others.
The following table sets forth statement of operations data for the years ended December 31, 2010, 2011 and 2012 :
37
Year Ended December 31,
2010
2011
2012
(in thousands)
Revenues
$
622,212
$
1,314,104
1,348,977
Operating costs and expenses:
Cost of revenues (exclusive of depreciation and amortization shown
separately below)
234,633
590,486
641,621
Selling, general and administrative (exclusive of of depreciation and
amortization shown separately below)
178,417
406,358
437,803
Depreciation and amortization
23,390
160,083
183,304
Restructuring, acquisition and integration-related costs
22,368
32,068
18,244
Impairment of intangible assets
1,711
—
—
Total operating costs and expenses
460,519
1,188,995
1,280,972
Income from operations
161,693
125,109
68,005
Interest expense and other, net
(23,409
)
(70,640
)
(63,416
)
Income before income taxes
138,284
54,469
4,589
Income tax (provision) benefit
(56,804
)
(19,902
)
2,931
Net income
$
81,480
$
34,567
7,520