Earthlink 2003 Annual Report Download - page 14

(1)
1999 2000 2001 2002 2003
(in thousands)
Balance sheet data:
Cash and cash equivalents $
685,753
$
674,746
$
424,029
$
382,065
$
349,740
Investments in marketable securities (3)
—
—
169,995
133,372
138,125
Cash and marketable securities
685,753
674,746
594,024
515,437
487,865
Total assets
1,109,147
1,486,137
1,182,781
1,023,553
827,020
Long-term debt, including long-term portion of capital leases
188,367
13,472
2,423
937
342
Total liabilities
350,694
303,886
331,727
331,253
283,357
Accumulated deficit
(328,378
)
(698,030
)
(1,068,971
)
(1,236,991
)
(1,303,771
)
Stockholders' equity
758,453
1,182,251
851,054
692,300
543,663
Reflects the accretion of liquidation dividends on Series A and Series B convertible preferred stock at a 3% annual rate, compounded quarterly, and the accretion of a dividend
related to the beneficial conversion feature in accordance with Emerging Issues Task Force ("EITF") Issue No. 98-5. During 2003, the holder converted all remaining shares of
Series A and Series B convertible preferred stock into common stock. Consequently, there are currently no shares of Series A or Series B convertible preferred stock outstanding
and no associated dividend obligations.
(2)
In February 2000, each outstanding share of then existing EarthLink Network, Inc. common stock was exchanged for 1.615 shares of common stock of EarthLink and each
outstanding share of then existing MindSpring Enterprises, Inc. common stock was exchanged for one share of common stock of EarthLink.
(3)
Investments in marketable securities consist of debt securities classified as available-for-sale and have maturities greater than 90 days from the date of acquisition. EarthLink has
invested primarily in U.S. corporate notes and asset-backed securities, all of which have a minimum investment rating of A, and government agency notes.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this Report.
Safe Harbor Statement
The Management's Discussion and Analysis and other portions of this report include "forward-looking" statements (rather than historical
facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described. Although we believe
that the expectations expressed in these forward-looking statements are reasonable, we cannot promise that our expectations will turn out to be
correct. Our actual results could be materially different from and worse than our expectations. With respect to such forward-
looking statements,
we seek the protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include, without limitation, (1) that we
may not be able to successfully implement our broadband strategy which would materially and adversely affect our subscriber growth rates and
future overall revenues; (2) that we may not successfully enhance existing or develop new products and services in a cost-effective manner to
meet customer demand in the rapidly evolving market for Internet services; (3) that our service offerings may fail to be competitive with
existing and new competitors; (4) that competitive product, price or marketing pressures could cause us to lose existing customers to
competitors, or may cause us to reduce prices for our services; (5) that our commercial and alliance arrangements, including a marketing
arrangement with Sprint, may be terminated or may not be as beneficial to us as management anticipates; (6) that declining levels of economic
activity, increasing maturity of the market for Internet access, or fluctuations in the use of the Internet could negatively impact our subscriber
growth rates and incremental revenue levels; (7) that we may experience other difficulties that limit our growth potential or lower future overall
revenues; (8) that service interruptions could harm our business; (9) that we have historically not been profitable and we may not be able to
sustain profitability; (10) that our third-party network providers may be unwilling or unable to provide Internet access; (11) that we may be
unable to maintain or increase our customer levels if we do not have uninterrupted and reasonably priced access to local and long-distance
telecommunications systems for delivering dial-up and/or broadband access, including, specifically, that integrated local exchange carriers and
cable companies may not provide last mile broadband access to us on a wholesale basis or on terms or at prices that allow the company to grow
and be profitable in the broadband market; (12) that we may not be able to protect our proprietary technologies or successfully defend
infringement claims and may be required to enter licensing arrangements on unfavorable terms; (13) that government regulations could force us
to change our business practices; (14) that we may not experience the level of benefits we expect in connection with restructuring our contact
centers and may not otherwise be able to contain our costs; and (15) that some other unforeseen difficulties may occur. This list is intended to
identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements
included herein. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be
read in conjunction with the more detailed cautionary statements included in our other filings with the Securities and Exchange Commission.
Overview
EarthLink, Inc. ("EarthLink," "we," "us" or "our") is a leading Internet service provider ("ISP"), providing nationwide Internet access and
related value-added services to its individual and business customers. Our primary service offerings are narrowband, broadband or high-speed,
and wireless Internet access services; web hosting services; and advertising and related marketing services. We provide our broad range of
services to more than five million paying customers through a nationwide network of dial-up points of presence ("POPs"), a nationwide
broadband footprint and wireless technologies. We derive