Orbitz 2011 Annual Report Download - page 42

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42
Selling, General and Administrative
Our selling, general and administrative expense is comprised of wages and benefits, contract labor costs, network
communications, systems maintenance and equipment costs and other costs, which include legal, foreign currency transaction
and hedging and other administrative costs.
Years Ended
December 31, Increase/ (Decrease)
Years Ended
December 31, Increase/ (Decrease)
2011 2010 $ % 2010 2009 $ %
Selling, general and
administrative:
(in thousands)
(in thousands)
Wages and benefits (a) . . . . . . . . . $ 152,887 $ 146,754 $ 6,133 4% $ 146,754 $ 160,014 $ (13,260) (8)%
Contract labor (a) . . . . . . . . . . . . . 27,002 20,245 6,757 33% 20,245 20,736 (491) (2)%
Network communications,
systems maintenance and
equipment . . . . . . . . . . . . . . . . . . . 25,760 25,051 709 3% 25,051 26,657 (1,606) (6)%
Other . . . . . . . . . . . . . . . . . . . . . . . 64,968 52,064 12,904 25% 52,064 49,252 2,812 6 %
Total selling, general, and
administrative. . . . . . . . . . $ 270,617 $ 244,114 $ 26,503 11% $ 244,114 $ 256,659 $ (12,545) (5)%
(a) The amounts presented for wages and benefits and contract labor are net of amounts capitalized related to software
development.
Selling, general and administrative expense increased $26.5 million ($17.9 million excluding the impact of foreign
currency fluctuations) for the year ended December 31, 2011 compared with the same period in 2010. The increase was
primarily driven by a $9.2 million increase in legal costs, net of insurance reimbursements, a $6.8 million increase in contract
labor costs, a $6.1 million increase in wages and benefits, a $2.1 million increase in facilities costs, a $0.7 million increase in
network communications, systems maintenance and equipment costs and a $0.6 million increase in travel expenses. Legal
costs, net of insurance reimbursements, increased primarily due to ongoing litigation, contract disputes and lower insurance
reimbursements in 2011.Wages and benefits, contract labor costs and travel expenses increased primarily due to higher staffing
levels required to support our strategic initiatives including the global platform migration.
Going forward, there is no assurance that we will receive insurance reimbursements for legal expenses at the same levels
we have historically received them, if at all.
Selling, general and administrative expense decreased by $12.5 million ($17.2 million excluding the impact of foreign
currency fluctuations) for the year ended December 31, 2010 compared with the same period in 2009. The decrease was
primarily driven by a $13.3 million decrease in wages and benefits expense, a $1.6 million decrease in network
communications, systems maintenance and equipment costs and a $1.2 million decrease in facilities costs, partially offset by a
$2.0 million increase in travel expenses and a $1.6 million increase in foreign currency losses and hedging costs. Wages and
benefits decreased due to lower severance and lower employee incentive compensation expense. Network communications,
systems maintenance and equipment costs declined due to cost cutting efforts. Facilities costs declined primarily due to the
favorable renegotiation of lease terms for certain office space leased by ebookers.
Marketing
Our marketing expense is primarily comprised of online marketing costs, such as search and banner advertising and
affiliate commissions, and offline marketing costs, such as television, radio and print advertising. Our online marketing
spending is significantly greater than our offline marketing spending.
Marketing expense increased $8.9 million ($1.8 million excluding the impact of foreign currency fluctuations) for the
year ended December 31, 2011 compared with the same period in 2010. These increases were primarily due to higher
marketing spending at ebookers and continued growth in our private label channel, partially offset by lower marketing spending
for our domestic leisure brands.
Marketing expense increased $7.6 million ($5.0 million excluding the impact of foreign currency fluctuations), for the
year ended December 31, 2010 compared with the same period in 2009. The increase was due to a $4.6 million increase in
affiliate commissions and higher online marketing spending driven by higher transaction volume for ebookers and a higher cost