Earthlink 2000 Annual Report Download - page 23

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April 2000, the Company repurchased approximately $180.0 million in aggregate principal amount of its 5% Convertible Subordinated Notes.
In May 2000, Sprint exercised its preemptive rights to maintain its ownership level in the Company after the merger of EarthLink Network and
MindSpring. Accordingly, Sprint purchased approximately 26.0 million shares consisting of approximately 6.0 million shares of common stock
and approximately 20.0 million shares of Series B convertible preferred stock. Proceeds from this sale of common and preferred stock to Sprint
were approximately $431.4 million. The Company repurchased 5 million shares of its common stock for approximately $56.7 million.
Proceeds from the exercise of stock options and warrants were $7.4 million during 2000. During 1998, 1999 and 2000 we financed the
acquisition of data processing and office equipment amounting to approximately $9.3 million, $13.5 million and $5.6 million respectively,
through equipment leases and sale leaseback agreements. We record sale leaseback transactions at cost, which approximates the fair market
value of the property, and, therefore, no gains or losses are recorded. We continue to depreciate the property and record a financing obligation
representing the proceeds based upon payments under the lease agreement.
On December 31, 2000, we had approximately $674.7 million in cash and cash equivalents. We believe our available cash is sufficient to meet
our operating expenses and capital requirements for more than the next 12 months. Our capital requirements depend on numerous factors,
including the rate of market acceptance of our services, our ability to maintain and expand our customer base, the rate of expansion of our
network infrastructure, the size and types of acquisitions in which we may engage and the level of resources required to expand our marketing
and sales programs. We cannot accurately predict the timing and amount of capital requirements. We may require additional financing sooner
than anticipated if capital requirements vary materially from those currently planned. We have no commitments for any additional financing
and have no lines of credit or similar sources of financing, and we cannot be sure that we can obtain additional commitments on favorable
terms, if at all. Additional equity financing may dilute our stockholders, and debt financing, if available, may restrict our ability to declare and
pay dividends and raise future capital. If we are unable to obtain additional needed financing, we may be required to reduce the scope of
operations or anticipated expansion, which could materially and adversely affect us.
BUSINESS OUTLOOK
The following statements are based on current expectations. These statements are forward-
looking, and actual results may differ materially. See
comments under "Safe Harbor Statement" above. The Company undertakes no obligations to update these statements.
In 2001, the Company's principal operating objectives are to continue growing the broadband business rapidly while significantly improving
profitability, demonstrating the ability to generate cash from operations. The Company is targeting achieving EBITDA-
positive operation in the
fourth quarter of 2001.
Based on current trends and operating plans now in place for the year, we expect to end 2001 with over 5 million paying customers. Most of
that growth will come from the broadband product line. We will capitalize on strong market demand, our national footprint, and our ability to
deploy DSL, cable, fixed wireless and satellite broadband solutions to grow our broadband base to over 500,000 subscribers by year-end. We
expect the number of our narrowband subscribers to be relatively flat year over year. Revenues for the year are expected to be between $1.2
and $1.3 billion.
We expect to improve operating margins in 2001 compared to 2000 by continuing to reduce telecommunications costs for both our narrowband
and broadband services; consolidating the former OneMain ISPs onto a single operating platform during the first half of the year; reducing
broadband installation costs by making the installation process more efficient, particularly through widespread adoption of self-
installation; and
growing all other operational expenses more slowly than revenues,
20