Earthlink 2014 Annual Report Download - page 73

Download and view the complete annual report

Please find page 73 of the 2014 Earthlink annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

Table of Contents EARTHLINK HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company recognizes a liability for costs associated with an exit or disposal activity when the liability is incurred. Facility exit and
restructuring liabilities include estimates for, among other things, severance payments and amounts due under lease obligations, net of estimated
sublease income, if any. Key variables in determining lease estimates include operating expenses due under lease arrangements, the timing and
amounts of sublease rental payments, tenant improvement costs and brokerage and other related costs. The Company periodically evaluates and,
if necessary, adjusts its estimates based on currently-
available information. Such adjustments are classified as restructuring, acquisition and
integration-related costs in the Consolidated Statements of Comprehensive Income (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 are both
probable and reasonably estimable.
Interest Expense and Other, Net
Interest expense and other, net, is comprised of interest expense incurred on the Company's debt and capital leases; amortization of debt issuance
costs, debt premiums and debt discounts; interest earned on the Company's cash, cash equivalents and marketable securities; and other
miscellaneous income and expense items. The following table presents the Company's interest expense and other, net, during the years ended
December 31, 2012, 2013 and 2014 :
Contingencies
The Company is party to various legal proceedings and other disputes arising in the normal course of business, including, but not limited to,
regulatory audits, trademark and patent infringement, billing disputes, rights of access, tax, consumer protection, employment and tort. The
Company accrues for such matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably
estimated. Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the range is more
likely than any other amount, the Company accrues at the low end of the range. The Company reviews its accruals each reporting period.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the
financial reporting and tax bases of existing assets and liabilities. Deferred tax assets and liabilities are measured using tax rates in effect for the
year in which the temporary differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amounts of deferred
tax assets if it is "more-likely-than-
not" that those assets will not be realized. The Company considers many factors when assessing the
likelihood of future realization, including the Company's recent cumulative earnings experience by taxing jurisdiction, expectations of future
taxable income, prudent and feasible tax planning strategies that are available, the carryforward periods available to the Company for tax
reporting purposes and other relevant factors.
The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return.
The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax (provision) benefit in the Consolidated
Statements of Comprehensive Income (Loss).
Earnings per Share
Basic earnings per share represents net income (loss) divided by the weighted average number of common shares outstanding during the reported
period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, including
stock options and restricted stock units (collectively "Common Stock Equivalents"), were
Year Ended December 31,
2012
2013
2014
(in thousands)
Interest expense
$
64,331
$
60,495
$
56,382
Interest income
(2,076
)
(84
)
(125
)
Other, net
1,161
275
Interest expense and other, net
$
63,416
$
60,686
$
56,261