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EARTHLINK HOLDINGS CORP.
FORM 10-K
(Annual Report)
Filed 02/20/15 for the Period Ending 12/31/14
Address 1375 PEACHTREE STREET
SUITE 400
ATLANTA, GA 30309
Telephone 4048150770
CIK 0001102541
Symbol ELNK
SIC Code 7370 - Computer Programming, Data Processing, And
Industry Computer Services
Sector Technology
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2015, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ...-K (Annual Report) Filed 02/20/15 for the Period Ending 12/31/14 Address 1375 PEACHTREE STREET SUITE 400 ATLANTA, GA 30309 4048150770 0001102541 ELNK 7370 - Computer Programming, Data Processing, And Computer Services Technology 12/31 Telephone CIK Symbol SIC Code Industry Sector Fiscal Year http...

  • Page 2
    ... (State or other jurisdiction of incorporation or organization) 46-4228084 (I.R.S. Employer Identification No.) 1170 Peachtree St., Suite 900, Atlanta, Georgia 30309 (Address of principal executive offices) (Zip Code) (404) 815-0770 (Registrant's telephone number, including area code) _____...

  • Page 3

  • Page 4
    ...Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services...

  • Page 5
    SIGNATURES 98

  • Page 6
    ... data and voice IP service coverage across more than 90 percent of the United States. Our corporate offices are located at 1170 Peachtree Street NE, Suite 900, Atlanta, Georgia 30309, and our telephone number at that location is (404) 815-0770. Our website address is www.earthlink.net. History...

  • Page 7
    ... to business customers, including local, long-distance and related features over traditional copper lines; hosted voice, which provides customers a managed network solution that eliminates their cost of purchasing and maintaining an on-premises phone system; SIP trunking, which provides an IP-based...

  • Page 8
    ... in the United States, we offer remote facilities-based local and long distance services in markets by using our switches in other locations as hosts. Using our fiber optic network and leased facilities to connect our remote equipment to our switches, colocation provides costefficient access to last...

  • Page 9
    ...including email, a customizable start page, antivirus and firewall protection, acceleration tools and technical and customer support. We provide high-speed access services over various access types (cable, DSL and wireless access via 4G) and at various speeds. Availability for these services depends...

  • Page 10
    ...centers, search engine marketing, affinity marketing partners, resellers and marketing alliances such as our relationship with Time Warner Cable. Customer Service and Retention Our customer support is available by chat and phone as well as through help sites and Internet guide files on our web sites...

  • Page 11
    ..., our only significant access to offer broadband services over cable is through our agreement with Time Warner Cable. Regulatory Environment Our communications services are subject to varying degrees of federal, state and local regulation. Telecommunications services are subject to particularly...

  • Page 12
    ... carriers must make available as UNEs to competitive carriers such as us at rates based on the Total Element Long Run Incremental Cost, or TELRIC, standard. Incumbent carriers must offer access to their copper loops and subloops in all areas, until they choose to retire them, but must offer access...

  • Page 13
    ...carriers for the origination and termination of long distance traffic. These access rates historically have made up a significant portion of the cost of providing long distance service. In November 2011, however, the FCC adopted intercarrier compensation rules under which all traffic, including VoIP...

  • Page 14
    ... areas, while making it more difficult for competitive carriers to offer substitute services. In addition, the FCC has granted petitions by the incumbent carriers for forbearance from regulation of some special access services, including packet-switched services such as Ethernet, and optical carrier...

  • Page 15
    ... carrier must pay a USF contribution on its special access revenues, which these carriers as a matter of course pass through to the special access customer. This in turn increases our cost of purchasing special access service and using it as an input in providing broadband Internet access services...

  • Page 16
    ...local telephone service competition. States also regulate in part the intrastate carrier access services of carriers like us. As an interexchange carrier ("IXC"), we are required to pay intrastate access charges to local exchange carriers when they originate or terminate our intrastate long distance...

  • Page 17
    ... and termination services we provide to them. Under the FCC's November 2011 order, state commissions will have oversight of the intrastate access charge transition process to ensure that carriers comply with the FCC's timing and required reductions. States will continue to review intrastate switched...

  • Page 18
    ... by reference into this Annual Report on Form 10-K. We also provide a copy of our Annual Report on Form 10-K via mail, at no cost, upon receipt of a written request to the following address: Investor Relations EarthLink Holdings Corp. 1170 Peachtree Street NE, Suite 900 Atlanta, GA 30309 13

  • Page 19
    ... in our traditional voice and data products for small business customers, which makes us more reliant on the managed network services market and on increasing sales to larger multi-location businesses. If we do not have sufficient customer demand to support our new services, our financial results...

  • Page 20
    ... those related to severance, employee benefit costs, retention costs for executive officers and key employees, asset impairment charges, integration costs, charges from the elimination of duplicative facilities and contracts, unexpected liabilities, legal, accounting and financial advisory fees. Our...

  • Page 21
    ..., Inc. and XO Communications; interexchange carriers, such as Sprint Nextel Corporation; wireless and satellite service providers; cable service providers, such as Charter Communications, Inc., Comcast Corporation, Cox Communications, Inc. and Time Warner Cable; stand-alone VoIP providers; system...

  • Page 22
    ...by our customers. The FCC regulates the access rates charged by local carriers to interexchange carriers for the origination and termination of long distance traffic. These access rates make up a significant portion of the cost of providing long distance service. In late 2011, the FCC adopted policy...

  • Page 23
    ... of lower volume of traditional long distance voice minutes and FCC and state regulations compelling a reduction of switched access and reciprocal compensation rates. In late 2011, the FCC adopted policy changes that over time are reducing carriers' terminating access rates. We have modified our...

  • Page 24
    ... communications companies and local exchange carriers, such as AT&T, CenturyLink , Verizon and Windstream; cable companies providing broadband access, including Charter Communications, Inc., Comcast, Cox Communications, Inc. and Time Warner Cable; local and regional ISPs; established online services...

  • Page 25
    ... special introductory pricing or new product or service offerings. Any of the above could adversely affect our revenues and profitability. The continued decline of our consumer access subscribers will adversely affect our results of operations. During the years ended December 31, 2012, 2013 and 2014...

  • Page 26
    ...business support systems. Business support systems are needed for quoting, accepting and inputting customer orders for services; provisioning, installing and delivering services; providing customers with direct access to our information systems so that they can manage the services that they purchase...

  • Page 27
    ...ability to hire and retain key executive officers, senior management, sales, IT and other key personnel, many of whom have significant experience in our industry and whose expertise is required to successfully transition our business into a leading managed network, security and cloud provider. There...

  • Page 28
    ...our growth services. In addition, our business customers may not be able to obtain adequate access to credit, which could affect their ability to make timely payments to us. One or more of these circumstances could cause our revenues to decline, churn to increase, allowance for doubtful accounts and...

  • Page 29
    ...customer service and technical support, web hosting services, certain billing and collection services and E911 service for our VoIP services and our Consumer Services segment relies primarily on one customer service and technical support vendor. We may have to increase the price we pay or find a new...

  • Page 30
    ... flexibility to plan for, or react to, changes in our business and industry; limit our ability to engage in strategic transactions or to make divestitures of non-strategic businesses; place us at a competitive disadvantage compared to our less leveraged competitors; and increase our vulnerability to...

  • Page 31
    ... right of stockholders to call special meetings of stockholders and authorize the Board of Directors to issue preferred stock in one or more series without any action on the part of stockholders. These provisions could limit the price that investors might be willing to pay in the future for shares...

  • Page 32
    ...sales offices, data centers, switch sites and other facilities across our nationwide service area. These leases have various expiration dates through 2023. We believe our facilities are suitable and adequate for our business operations. Office space. Our corporate headquarters is in Atlanta, Georgia...

  • Page 33
    ...The following table sets forth the high and low sale prices for our common stock for the periods indicated, as reported by the NASDAQ Global Market. Stock Price High Low Year Ended December 31, 2013 First Quarter Second Quarter Third Quarter Fourth Quarter Year Ended December 31, 2014 First Quarter...

  • Page 34
    ... our total return to stockholders from December 31, 2009 to December 31, 2014, as compared to the total return for...stock and each index and also assumes dividend reinvestment. December 31, 2009 December 31, 2010 December 31, 2011 December 31, 2012 December 31, 2013 December 31, 2014 EarthLink...

  • Page 35
    ... statements and notes thereto included elsewhere in this Annual Report on Form 10-K. Year Ended December 31, 2010 (1) 2011 (1) 2012 2013 2014 (in thousands, except per share amounts) Statement of operations data: Revenues Operating costs and expenses (2)(3) Income (loss) from operations Income...

  • Page 36
    ...(1) On December 8, 2010, we acquired ITC^DeltaCom, Inc., a provider of integrated communications services to customers in the southeastern U.S. On April 1, 2011, we acquired One Communications Corp, a privately-held integrated telecommunications solutions provider serving customers in the northeast...

  • Page 37
    ...customers. We operate an extensive network including more than 29,000 route miles of fiber, 90 metro fiber rings and secure enterprise-class data centers that provide data and voice IP service coverage across more than 90 percent of the United States. 2014 Highlights Key developments in our business...

  • Page 38
    ..., marketing and sales. Our growth business products are MultiProtocol Label Switching ("MPLS"), hosted voice and managed services (Managed IP VPN, Managed Network, Managed Security and Managed Cloud, among others). We are focused on investing in products, marketing and sales to support these growth...

  • Page 39
    ... for narrowband Internet access. However, we expect the rate of churn to continue to generally decline as our customer base becomes longer tenured. We expect cost of revenues and operating expense to decline due to our cost saving initiatives and lower sales of traditional voice and data products...

  • Page 40
    ... services to other telecommunications carriers and businesses; and (3) other services, which primarily consists of web hosting. Revenues generally consist of recurring monthly charges for such services; usage fees; installation fees; termination fees; and administrative fees. Our Consumer Services...

  • Page 41
    ... to the prior years: 2013 vs 2012 (in millions) 2014 vs 2013 Due to cost saving initiatives and declines in traditional products (a) Due to favorable settlements (b) Due to change in reserves for regulatory audits (c) Due to acquisitions (d) Total change in Business Services cost of revenues _____...

  • Page 42
    ...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...

  • Page 43
    ...as advisory, legal, accounting, valuation and other professional fees; and 4) facility-related costs, such as lease termination and asset impairments. Restructuring, acquisition and integration-related costs are expensed in the period in which the costs are incurred and the services are received and...

  • Page 44
    ... the following an increase in costs to integrate operating support systems, networks and certain billing systems as we worked to complete several significant integration projects during the year; costs related to our acquisition of CenterBeam in July 2013; employee termination costs associated with...

  • Page 45
    ...2013 (in thousands) 2014 Revenues Operating costs and expenses Income tax benefit Loss from discontinued operations, net of tax $ $ 13,842 $ (17,860) 1,600 (2,418) $ 6,141 $ (8,102) - (1,961) $ 116 (497) - (381) The operating results of the our telecom systems business acquired as part of ITC...

  • Page 46
    ...and revenues from CenterBeam beginning in July 2013. The decrease in Business Services operating income improved in 2014 due to efforts to protect our revenue base, such as targeted price increases and re-terms, and efforts to manage cost of revenues and operating expenses. Consumer Services Segment...

  • Page 47
    ... longer tenured customers require less customer service and technical support and have a lower frequency of non-payment. Liquidity and Capital Resources The following table sets forth summarized cash flow data for the years ended December 31, 2012, 2013 and 2014 : Year Ended December 31, 2012 2013...

  • Page 48
    ...the year ended December 31, 2014. Future uses of cash Our cash requirements depend on numerous factors, including the costs required to maintain our network infrastructure, the outcome of various telecommunications-related disputes and proceedings, the pricing of our services, the level of resources...

  • Page 49
    ... evaluating ways to reduce the cost structure of our business, and may use cash for additional restructuring activities. • In October 2014, our Board of Directors authorized management to repurchase up to $30.0 million of our outstanding Senior Secured Notes or Senior Notes, so long as it is in...

  • Page 50
    ... table sets forth our contractual obligations and commercial commitments as of December 31, 2014 : Payment Due by Period Total 2015 20162017 (in thousands) 20182019 After 5 Years Long-term debt (1) Interest payments on long-term debt (2) Purchase commitments (3) Operating leases (4) Capital leases...

  • Page 51
    ...Year Ended December 31, 2012 2013 (in thousands) 2014 Net income (loss) Interest expense and other, net Income tax provision (benefit) Depreciation and amortization Stock-based compensation expense Impairment of goodwill and long-lived assets Restructuring, acquisition and integration-related costs...

  • Page 52
    ...Year Ended December 31, 2012 2013 (in thousands) 2014 Net income (loss) Interest expense and other, net Income tax provision (benefit) Depreciation and amortization Stock-based compensation expense Impairment of goodwill and long-lived assets Restructuring, acquisition and integration-related costs...

  • Page 53
    ... uncertainties because they require management to make assumptions and apply judgment about the amount and timing of unknown billing errors and disputes. We have not made any material changes in the accounting methodology we use to record sales credit reserves during the past three years. We do not...

  • Page 54
    ... Description Cost of Revenues We rely on other carriers to provide services where we do not have facilities, and we use a number of different carriers to terminate our long distance calls. These costs are expensed as incurred. The invoices received from other telecommunications providers are...

  • Page 55
    ... internal forecasts and projections years ended 2012 or 2014. developed by management for planning purposes, available industry/market data, strategic plans, discount As of December 31, 2014, we had approximately $137.8 rates and the growth rate to calculate the terminal value. million of goodwill...

  • Page 56
    ...Universal Service Administrative Company on previous ITC^DeltaCom Universal Service Fund assessments and payments, because the amount became probable and estimable during the period. During the year ended December 31, 2013, we recorded a $7.2 million favorable adjustment to decrease our reserves for...

  • Page 57
    ... if we are not offered competitive rates for the access services we need to provide our long distance services; (13) that we may experience reductions in switched access and reciprocal compensation revenue; (14) that failure to obtain and maintain necessary permits and rights-of-way could interfere...

  • Page 58
    ... indebtedness. As of December 31, 2013 and 2014 , we had approximately $592.2 million and $593.4 million , respectively, of long-term debt outstanding (excluding capital lease obligations), all of which bear interest at fixed rates. For more information regarding our outstanding indebtedness, refer...

  • Page 59
    ... And Supplementary Data. EARTHLINK HOLDINGS CORP. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 201 3 and 2014 Consolidated Statements of Comprehensive Income (Loss) for the years ended December...

  • Page 60
    ... 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 20, 2015 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Atlanta, Georgia...

  • Page 61
    ... REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of EarthLink Holdings Corp. We have audited EarthLink Holdings Corp.'s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the...

  • Page 62
    ...capital lease obligations Long-term deferred income taxes, net Other long-term liabilities Total liabilities Commitments and contingencies (See Note 15) Stockholders' equity: Preferred stock, $0.01 par value, 100,000 shares authorized, 0 shares issued and outstanding as of December 31, 2013 and 2014...

  • Page 63
    ...OF COMPREHENSIVE INCOME (LOSS) Year Ended December 31, 2012 2013 (in thousands, except per share data) 2014 Revenues Operating costs and expenses: Cost of revenues (exclusive of depreciation and amortization shown separately below) Selling, general and administrative (exclusive of depreciation and...

  • Page 64
    ..., 2012 Vesting of restricted stock units Tax withholdings related to net share settlements of restricted stock units Dividends paid on shares outstanding and restricted stock units Dividends payable on restricted stock units Stock-based compensation expense Return of One Communications escrow shares...

  • Page 65
    ... of fixed assets Non-cash income taxes Stock-based compensation Amortization of debt discount, premium and issuance costs (Gain) loss on conversion and repayment of debt Other operating activities (Increase) decrease in accounts receivable, net Decrease in prepaid expenses and other assets...

  • Page 66
    ... services to residential customers. The Company operates an extensive network including more than 29,000 route fiber miles, 90 metro fiber rings and enterprise-class data centers that provide data and voice IP service coverage across more than 90 percent of the United States. For further information...

  • Page 67
    ... to its Business Services customers to the extent they are recoverable. Customer installation costs represent nonrecurring fees paid to other telecommunications carriers for services performed by the carriers when the Company orders last mile facilities in connection with new customers acquired by...

  • Page 68
    62

  • Page 69
    ... material intangible assets are acquired in conjunction with the purchase of a business, the Company determines the fair values of the identifiable intangible assets by taking into account management's own analysis and an independent third party valuation specialist's appraisal. Intangible assets...

  • Page 70
    ... sale of transmission capacity and other services to other telecommunications carriers; and (3) other services, which includes web hosting. Revenues generally consist of recurring monthly charges for such services; usage fees; installation fees; equipment fees; termination fees; and administrative...

  • Page 71
    ...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...

  • Page 72
    professional fees. 65

  • Page 73
    ...Loss). Post-Employment Benefits Post-employment benefits primarily consist of the Company's severance plans. When the Company has either a formal severance plan or a history of consistently providing severance benefits representing a substantive plan, the Company recognizes severance costs when they...

  • Page 74
    66

  • Page 75
    ... 31, 2013 and 2014 , no customer accounted for more than 10% of gross accounts receivable. Supply Risk . The Company's business depends on the capacity, affordability, reliability and security of third-party network service providers. Only a small number of providers offer the network services the...

  • Page 76
    67

  • Page 77
    ... On July 1, 2013, the Company acquired substantially all of the assets of CenterBeam, Inc. ("CenterBeam"), a privately-held information technology managed service provider delivering cloud computing and hosted IT services to mid-sized businesses. The fair value of consideration transferred was $23...

  • Page 78
    ... costs, which are direct costs incurred to effect a business combination, such as advisory, legal, accounting, valuation and other professional fees. Restructuring, acquisition and integration-related costs are expensed in the period in which the costs are incurred and the services are received...

  • Page 79
    ...) 2014 Revenues Operating costs and expenses Income tax benefit Loss from discontinued operations, net of tax $ $ 13,842 $ (17,860) 1,600 (2,418) $ 6,141 $ (8,102) - (1,961) $ 116 (497) - (381) The operating results of the Company's telecom systems business acquired as part of ITC^DeltaCom...

  • Page 80
    ... in the carrying amount of goodwill by operating segment during the year ended December 31, 2014 were as follows: Consumer Services Segment Business Services Segment (in thousands) Total Balance as of December 31, 2013 Goodwill Accumulated impairment loss $ 88,920 - 88,920 - $ 394,873 $ (344...

  • Page 81
    ... level and involves a two-step process. The Company identified two reporting units, Business Services and Consumer Services, for evaluating goodwill. Each of these reporting units constitutes a business for which discrete financial information is available and segment management regularly reviews...

  • Page 82
    ..., available industry/market data, strategic plans, discount rates and the growth rate to calculate the terminal value. Definite-Lived Intangible Assets . The Company did not record any impairment charges for its definite-lived intangible assets during the years ended December 31, 2012, 2013 and 2014...

  • Page 83
    ... after deducting transaction fees of $9.5 million . In September 2011, in accordance with the registration rights granted to the original purchasers of the Senior Notes, the Company completed an exchange offer of the privately placed Senior Notes for new 8.875% Senior Notes due 2019 registered...

  • Page 84
    ... to make Restricted Payments varies over time, and is determined, in part, by the extent that the Company's cumulative EBITDA exceeds 300% of its cumulative interest expense. ITC^DeltaCom Senior Secured Notes due April 2016 General . In connection with the EarthLink's acquisition of ITC^DeltaCom in...

  • Page 85
    ... (with restrictions on cash netting) and a consolidated interest coverage ratio of not less than 3.0 to 1.0. As of December 31, 2014 , the Company was in compliance with these covenants. 2014 Developments In October 2014, the Board of Directors authorized the Company's management to repurchase up to...

  • Page 86
    ... share repurchase program, the Board of Directors has authorized a total of $750.0 million for the repurchase of EarthLink's common stock. As of December 31, 2014 , the Company had $65.7 million available under the current authorizations. The Company may repurchase its common stock from time to time...

  • Page 87
    ... the years ended December 31, 2012, 2013 and 2014 , respectively. The Company has classified stock-based compensation expense within selling, general and administrative expense, the same operating expense line item as cash compensation paid to employees. Stock Incentive Plans The Company has granted...

  • Page 88
    ...stock at the time of exercise and the exercise price, multiplied by the number of stock options exercised. There were no stock option exercises during the years ended December 31, 2013 and 2014. As of December 31, 2014 , there was $1.2 million of total unrecognized compensation cost related to stock...

  • Page 89
    79

  • Page 90
    ... 31, 2014 , there was $15.1 million of total unrecognized compensation cost related to nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 1.9 years . 13. Profit Sharing Plans The Company sponsors the EarthLink Holdings Corp. 401(k) Plan ("Plan...

  • Page 91
    ... ended December 31, 2012, 2013 and 2014 : Year Ended December 31, 2012 2013 (in thousands) 2014 Federal income tax (provision) benefit at statutory rate (35%) State income taxes, net of federal benefit Non-deductible expenses Net change to valuation allowance Change in state tax rate Uncertain tax...

  • Page 92
    ... as of December 31, 2013 and 2014 : As of December 31, 2013 (in thousands) 2014 Current deferred tax assets: Accrued liabilities and reserves Accrued bonus Other Valuation allowance Current deferred tax liabilities: Accrued liabilities and reserves Other Total net current deferred tax asset...

  • Page 93
    ...$350.5 million , $300.9 million and $253.8 million were limited under Internal Revenue Code Section 382 in 2012, 2013 and 2014, respectively. As of December 31, 2013 and 2014, the Company had net NOLs for state income tax purposes totaling approximately $32.6 million and $33.9 million , respectively...

  • Page 94
    ... to pay operating costs, including property taxes, insurance and maintenance, and generally contain annual escalation provisions as well as renewal options. Total rent expense (including operating expenses) during the years ended December 31, 2012, 2013 and 2014 for all operating leases, excluding...

  • Page 95

  • Page 96
    ... recorded an $8.3 million charge as cost of revenue to increase its reserves for regulatory audits, primarily an audit that was conducted by the Universal Service Administrative Company on previous ITC^DeltaCom Universal Service Fund assessments and payments, because the amount became probable and...

  • Page 97
    85

  • Page 98
    ... disputes with telecommunication vendors during the year ended December 31, 2014 , which is included in Business Services cost of revenues in the Consolidated Statement of Comprehensive Loss. Regulation The Company's services are subject to varying degrees of federal, state and local regulation...

  • Page 99
    ... its chief executive officer reviews its operating results in assessing performance and allocating resources. The Company operates two reportable segments, Business Services and Consumer Services. The Company's Business Services segment provides a broad range of data, voice and managed services to...

  • Page 100
    ... 31, 2012, 2013 and 2014 is as follows: Year Ended December 31, 2012 2013 (in thousands) 2014 Business Services Revenues Cost of revenues (excluding depreciation and amortization) Gross margin Direct segment operating expenses Segment operating income Consumer Services Revenues Cost of revenues...

  • Page 101
    ... and other services to other telecommunications carriers and businesses; and (3) other services, which primarily consists of web hosting. Revenues generally consist of recurring monthly charges for such services; usage fees; installation fees; termination fees; and administrative fees. The Company...

  • Page 102
    ... Months Ended Mar. 31, 2013 June 30, 2013 Sept. 30, 2013 Dec. 31, 2013 Mar. 31, 2014 June 30, 2014 Sept. 30, 2014 Dec. 31, 2014 (unaudited) (in thousands, except per share data) Revenues Cost of revenues Income (loss) from operations (1) Gain (loss) from discontinued operations, net of tax (2) Net...

  • Page 103
    ..., is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate...

  • Page 104
    ...Cash Incentive Plan EarthLink Holdings Corp. Equity Plan for Non-Employee Directors 13,414,249 197,352 13,611,601 (4) Pursuant to our merger agreement with New Edge Holding Company in 2006, we were required to grant options to purchase up to 657,000 shares of our Common Stock to New Edge employees...

  • Page 105

  • Page 106
    .... The Leadership and Compensation Committee then granted options to purchase 657,000 shares of our Common Stock to these New Edge employees in accordance with this plan. As of December 31, 2014 , 141,523 of these options were outstanding. The options have an exercise price of $9.48 per share and...

  • Page 107
    ... filed as part of this Annual Report on Form 10-K (1) Financial Statements 1. Reports of Independent Registered Public Accounting Firm 2. Consolidated Balance Sheets as of December 31, 2013 and 2014 3. Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2012, 2013...

  • Page 108
    94

  • Page 109
    ... March 31, 2014 -File No. 001-15605). 2014 Short-Term Incentive Bonus Plan. EarthLink Holding Corp. Board of Directors Compensation Plan, effective February 2014 (incorporated by reference to Exhibit 10.23 of EarthLink Holding Corp.'s Report on Form 10-K for the year ended December 31, 2013 -File No...

  • Page 110
    ..., Inc., EarthLink Shared Services, LLC and Joseph F. Eazor, dated December 23, 2013 (incorporated by reference to Exhibit 10.1 of EarthLink Holding Corp.'s Report on Form 8-K dated December 23, 2013-File No. 001-15605). High-Speed Service Agreement between EarthLink, Inc. and Time Warner Cable Inc...

  • Page 111
    96

  • Page 112
    ... of section 18 of the Securities and Exchanges Act of 1934, as amended, and otherwise is not subject to liability under these sections. (b) Exhibits The response to this portion of Item 15 is submitted as a separate section of this Annual Report on Form 10-K. (c) Financial Statement Schedule The...

  • Page 113
    ... sign any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents full power and authority to do and perform each and every act...

  • Page 114
    ... of Contents Date: February 20, 2015 /s/ JOSEPH F. EAZOR Joseph F. Eazor, Chief Executive Officer and President (principal executive officer) /s/ BRADLEY A. FERGUSON Bradley A. Ferguson, Chief Financial Officer (principal financial and accounting officer) /s/ JULIE A. SHIMER PH.D. Julie A. Shimer...

  • Page 115
    EARTHLINK SHARED SERVICES, LLC 2014 SHORT-TERM INCENTIVE BONUS PLAN THIS 2014 SHORT-TERM INCENTIVE BONUS PLAN (this "Plan") of EarthLink Shared Services, LLC, a Delaware limited liability company (the "Company"), for the benefit of the eligible employees described herein, is adopted as of the 17th ...

  • Page 116
    ... Internal Revenue Code of 1986, as amended. " Committee " means the Leadership and Compensation Committee of the Board of Directors of EarthLink which will administer the Plan. " Compensation " means the Participant's actual wages earned during the Bonus Period, excluding incentive payments, salary...

  • Page 117
    ...Revenue Service or any other authority ultimately determines such classification to be correct or incorrect as a matter of law or (iii) any person who is classified other than as "exempt" on the Employer's payroll, personnel or tax records. " Employer " means EarthLink, the Company and any Affiliate...

  • Page 118
    ... Employer's compensation structure. " Plan " means this EarthLink Shared Services, LLC 2014 Short-Term Incentive Bonus Plan, in its current form and as it may be hereafter amended. " Revenue " means gross revenue from operations of EarthLink and its Affiliates. " Target Potential Discretionary Bonus...

  • Page 119
    ... party with knowledge of the relevant facts. The Corporate Performance Objectives may be stated with respect to EarthLink's, an Affiliate's, a product's, and/or a business unit's Adjusted EBITDA, Total Free Cash Flow, Revenue or other Corporate Performance Objectives and/or any combination of the...

  • Page 120
    ... such limitation. 6. PAYMENT OF AWARDS 6.1 Eligibility for Payment . Except as otherwise set forth in Sections 7.1 and 8.1 of this Plan, Bonus Awards shall not be paid to any Participant who is not employed by an Employer on the date the Distribution is to be made, and a Participant who terminates...

  • Page 121
    ... the third month following the end of the Bonus Period. If before a Change in Control occurs the Participant's employment with all Employers is terminated by an Employer, such that the Participant is entitled to receive benefits under any severance plan maintained by an Employer, if the Participant...

  • Page 122
    ... contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant or any former Participant any right to be retained in the employ of an Employer or receive or continue to receive any rate of pay or other compensation, nor shall it...

  • Page 123
    ... clawback or compensation recoupment policy that the Employer may adopt as long as such requirement to reimburse or return is triggered by action of the Committee or the Board that is taken prior to a Change in Control. 10. AMENDMENT AND TERMINATION OF THE PLAN 10.1 Amendment . Except as set forth...

  • Page 124
    ... contingent on achieving the Corporate Performance Objectives may not be awarded under the Plan. However, an Employer may pay a bonus, or other types of compensation, inside or outside the Plan, which may or may not be deductible. In no event, however, may any Management Participant be entitled to...

  • Page 125
    ... and Restated Change-in-Control Accelerated Vesting and Severance Plan) (this "Plan") is established by EarthLink Shared Services, LLC, a Delaware limited liability company ("Company"), and its Affiliates (as defined below) for the benefit of the eligible employees designated to participate herein...

  • Page 126
    ... " Benefits Severance Period " shall mean (1) for a Participant in Category 1, the one and one-half years, and (2) for a Participant in Category 2, the one year, beginning in each case on the Participant's Termination of Employment. (e) " Bonus Target " shall mean the annual incentive bonus payable...

  • Page 127
    ... power of such Board of Directors were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors providing for that Business Combination and as a result of or in connection with such Business Combination, no Person has a right...

  • Page 128
    ... residence in connection with that relocation; or (5) The failure by the Company or an Affiliate to continue in effect any material retirement or compensation plan, performance share plan, stock option plan, life insurance plan, health and accident plan, disability plan or another benefit plan in...

  • Page 129
    ... of a Person other than HoldCo's Board of Directors. (o) " Non-Compete Payment " means 66 2 / 3 % of the sum of the Participant's Salary and Bonus Target. (p) " On Account of Disability " shall exist where the Participant's Termination of Employment results from the Participant being "Disabled" as...

  • Page 130
    ... continued employment and to not have a separation from service while on a leave of absence if the leave does not exceed 6 consecutive months (29 months for a disability leave of absence) or, if longer, so long as the Participant retains a right to reemployment with the Company or Affiliate under...

  • Page 131
    ... other than Cause, On Account of Disability or death, or (ii) the Participant has a Termination of Employment by the Participant For Good Reason: (1) The Company or Affiliate which employs the Participant shall pay the Participant the Cash Severance in one lump sum payment, subject to all applicable...

  • Page 132
    ..., assumption or substitution by the Company or its successor in connection with the Change in Control of outstanding stock options the Company or an Affiliate granted before the Change in Control, then on the Participant's Termination of Employment on or after a Change in Control occurs under the...

  • Page 133
    ... or any Affiliate. Notwithstanding any other provision of this Plan, no payments shall be made or benefits provided pursuant to this Plan during the first 30 days (60 days in the event of a group termination) after the Participant's Termination of Employment, and any payments or benefits that are...

  • Page 134
    ... his employment, and (ii) for a period of 18 months following his or her Termination of Employment under the circumstances described in Section 3(a) above, he or she shall not perform within the 50 states of the United States of America any services which are in competition with the Business of...

  • Page 135
    ...used herein, "Restricted Employee" means any employee of the Company or its Affiliates with whom the Participant had material business-related contact while performing services for the Company or an Affiliate and who is: (1) a member of executive management; (2) a corporate officer of the Company or...

  • Page 136
    ... to be an employment contract between a Participant and the Company or an Affiliate. The creation, continuance or termination of this Plan or any payment hereunder does not give any person a non-statutory legal or equitable right against the Company or an Affiliate to remain employed by the Company...

  • Page 137
    ...Company: EarthLink Shared Services, LLC 1375 Peachtree Street, N.W., Level A Atlanta, Georgia 30309-2935 Attention: Human Resources If to a Participant: The address last indicated on the records of the Company or applicable Affiliate. 18. Excise Tax. Despite any other provisions of this Plan to the...

  • Page 138
    ... the right of the Company or an Affiliate thereafter to enforce such provision. (b) The benefits that this Plan provides shall not be reduced or offset by any other payments or benefits that the Participant may receive from any other third party or other employer after the Participant's Termination...

  • Page 139
    ... and Severance Plan NAME, ADDRESS, AND TELEPHONE NUMBER OF SPONSOR AND PLAN ADMINISTRATOR: EarthLink Shared Services, LLC (the "Company") 1375 Peachtree Street, N.W., Level A Atlanta, Georgia 30309-2935 (404) 748-7317 The Company administers the Plan. EMPLOYER IDENTIFICATION NUMBER: 51-0553722 PLAN...

  • Page 140
    ... CLAIMS AND REDRESS OF DENIED CLAIMS: Section 7 provides detailed instructions for filing a claim and redress of a denied claim. AGENT FOR SERVICE OF PROCESS: c/o EarthLink Shared Services, LLC General Counsel 1375 Peachtree Street, Level A Atlanta, Georgia 30309 (404) 748-6634 In addition to the...

  • Page 141
    ...order you to pay these costs and fees. If you have any questions about your Plan, you should contact the Company. If you have any questions about this statement or about your rights under ERISA, you should contact the nearest office of the Pension and Welfare Benefits Administration, U.S. Department...

  • Page 142
    ...her annual base salary plus bonus target in consideration of compliance with non-compete and non-recruitment covenants set forth in the Plan. 2141099v11 and be exercisable in full, if not already fully vested, if within 24 months of the change in control the company terminates employee's employment...

  • Page 143
    ... Corp. (MA) CTC Communications of Virginia, Inc. (VA) DeltaCom, LLC (AL) EarthLink Business Holdings, LLC (DE) EarthLink Business, LLC (DE) EarthLink Carrier, LLC (DE) EarthLink Managed Services, LLC (SC) EarthLink Shared Services, LLC (DE) EarthLink, LLC (DE) Lightship Telecom, LLC (DE) US Xchange...

  • Page 144
    ... statements of EarthLink Holdings Corp. and the effectiveness of internal control over financial reporting of EarthLink Holdings Corp. included in this Annual Report (Form 10-K) of EarthLink Holdings Corp. for the year ended December 31, 2014. /s/ Ernst & Young LLP Atlanta, Georgia February 20...

  • Page 145
    ...certify that: 1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2014 of EarthLink Holdings Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in...

  • Page 146
    ...certify that: 1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2014 of EarthLink Holdings Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in...

  • Page 147
    ... ACT OF 2002 In connection with the Annual Report on Form 10-K of EarthLink Holdings Corp. (the "Company") for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joseph F. Eazor, Chief Executive Officer of the Company, certify...

  • Page 148
    ... OF 2002 In connection with the Annual Report on Form 10-K of EarthLink Holdings Corp. (the "Company") for the year ended December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bradley A. Ferguson, Chief Financial Officer of the Company, certify...