Earthlink 2012 Annual Report Download - page 48

Table of Contents
Selling, general and administrative
The following table presents our selling, general and administrative expenses for the years ended December 31, 2010, 2011 and 2012 :
Selling, general and administrative expenses consist of expenses related to sales and marketing, customer service, network operations,
information technology, regulatory, billing and collections, corporate administration, and legal and accounting. Such costs include salaries and
related employee costs (including stock-
based compensation), outsourced labor, professional fees, property taxes, travel, insurance, occupancy
costs, advertising and other administrative expenses.
The following table presents the primary reasons for the changes in selling, general and administrative expenses for the years ended
December 31, 2011 and 2012 compared to the prior year periods:
______________
We expect that selling, general and administrative expenses will increase as we seek to grow our Business Services revenue. However,
we expect to realize cost synergies as we integrate our acquisitions. We will continue to seek operating efficiencies, such as consolidating
operations and integrating systems, though certain of these synergies may take longer or present greater costs to realize than originally
anticipated.
41
Year Ended December 31, 2011 vs 2010 2012 vs 2011
2010 2011 2012 $ Change % Change $ Change % Change
(dollars in thousands)
Selling, general and
administrative expenses
$
178,417
$
406,358
$
437,803
$
227,941
128
%
$
31,445
8
%
2011 vs 2010 2012 vs 2011
(in millions)
Due to acquisitions (a)
$
252.3
$
43.3
Due to change in Business Services (b)
1.5
(4.0
)
Due to decrease in Consumer Services (c)
(16.9
)
(5.8
)
Due to decrease in corporate operating expenses (d)
(9.0
)
(2.1
)
Total change in selling, general and administrative expenses
$
227.9
$
31.4
(a)
Increases due to the inclusion of selling, general and administrative expenses from DeltaCom beginning in December 2010, One
Communications beginning in April 2011 and STS Telecom beginning in March 2011.
(b)
Increase in 2011 Business Services selling, general and administrative expenses primarily due to increased expense related to our MPLS
growth products, including commissions and personnel-
related costs. Decrease in 2012 Business Services selling, general and
administrative expenses primarily due to cost savings realized from workforce reductions and other synergies from integrating our
businesses, offset by increased expense related to our growth products, including commissions and personnel-
related costs, and an
increase in tax expense related to a change in one-time benefits.
(c)
Decreases in Consumer Services selling, general and administrative expenses due to benefits as our overall consumer subscriber base
has decreased and become longer tenured. Longer tenured customers have a lower frequency of non-
payment and require less customer
service and technical support. The decrease in 2011 primarily consisted of decreases in personnel-
related costs, outsourced labor,
advertising expense, bad debt and payment processing fees. The decrease in 2012 primarily consisted of decreases in personnel-
related
costs, stock-based compensation expense and billing and payment processing fees.
(d)
Decreases in corporate selling, general and administrative expenses due to cost savings realized from workforce reductions and other
synergies. The decreases primarily consisted of personnel-related costs.