Earthlink 2005 Annual Report Download - page 96

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EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
16. Supplemental Disclosure of Cash Flow Information
17. Related Party Transactions
HELIO
EarthLink and HELIO have entered into a services agreement pursuant to which EarthLink provides HELIO facilities, accounting, tax,
billing, procurement, risk management, payroll, human resource, employee benefit administration and other support services in exchange for
management fees. EarthLink believes that providing these services to HELIO enables HELIO to more quickly and cost effectively launch its
business than if it were to purchase these services from third parties. The management fees were determined based on EarthLink’s costs to
provide the services, and management believes such fees are reasonable. The total amount of fees that HELIO will pay to EarthLink will
depend on the extent to which HELIO utilizes EarthLink’s services. Fees for services provided to HELIO are reflected as reductions to the
associated expenses incurred by EarthLink to provide such services. During the year ended December 31, 2005, fees received for services
provided to HELIO were $3.0 million.
EarthLink markets HELIO’s products and services, and during the year ended December 31, 2005, EarthLink generated revenues of $0.3
million associated with marketing HELIO’s services.
EarthLink purchases wireless Internet access devices and services from HELIO. During the year ended December 31, 2005, fees paid for
products and services received from HELIO were $0.9 million.
As of December 31, 2005, the Company had accounts receivable from HELIO of approximately $0.3 million.
Sprint
Through its ownership interest in EarthLink, Sprint was considered a related party during the years ended December 31, 2003 and 2004.
Due to sales of EarthLink common stock during the year ended December 31, 2005, Sprint is no longer a related party. The Company has a
marketing relationship with Sprint. During the years ended December 31, 2003 and 2004, the Company’s relationship with Sprint generated
approximately 10% of EarthLink’s total gross organic subscriber additions.
In connection with the Company’s wholesale and customer referral arrangements with Sprint, the Company received approximately $27.3
million and $27.6 million during the years ended December 31, 2003 and 2004, respectively. The prices for services provided by the Company
to Sprint were negotiated at arms-length. As of December 31, 2004, the Company had accounts receivable related to these arrangements with
Sprint of $6.0 million.
EarthLink paid Sprint approximately $74.0 million and $57.6 million during the years ended December 31, 2003 and 2004, respectively,
associated with network and voice services agreements. The prices paid for services purchased from Sprint were negotiated at arms-
length. The
aggregate amount due to Sprint pursuant to these service agreements was $6.0 million as of December 31, 2004.
95
Year Ended December 31,
2003
2004
2005
(in thousands)
Significant non-cash transactions
Non
-
cash working capital adjustments to reduce goodwill
$
2,150
$
5,300
$
129
Additional cash flow information
Cash paid during the year for interest
$
877
$
677
$
383
Cash paid during the year for income taxes
—
1,778
5,507