Earthlink 2001 Annual Report Download - page 12

(1)
Balance sheet data:
Cash and cash equivalents
$
25,836
$
308,607
$
685,753
$
674,746
$
424,029
Investments in marketable securities (5) — — — —
169,995
Cash and marketable securities
25,836
308,607
685,753
674,746
594,024
Total assets
91,175
510,002
1,109,147
1,486,137
1,179,319
Long-term debt
13,308
10,125
188,367
13,472
2,423
Total liabilities
63,685
109,515
350,694
303,886
328,265
Accumulated deficit
(79,799
)
(140,578
)
(328,378
)
(698,030
)
(1,068,971
)
Stockholders' equity
27,490
400,487
758,453
1,182,251
851,054
Reflects the accretion of liquidation dividends on Series A and B convertible preferred stock at 3% compounded quarterly and the accretion of a dividend related to the beneficial
conversion feature in accordance with EITF 98-5.
(2)
Each outstanding share of then existing EarthLink Network, Inc. common stock was exchanged for 1.615 shares of the common stock of EarthLink and each outstanding share of
then existing MindSpring Enterprises, Inc. common stock was exchanged for one share of the common stock of EarthLink. See note 1 of the Notes to Consolidated Financial
Statements for an explanation of the determination of the number of weighted average shares outstanding in the net loss per share computation.
(3)
In February 2001, the Company renegotiated its commercial and governance arrangements with Sprint Corporation. The Company's exclusive marketing and co-branding
arrangements with Sprint have been terminated. Accordingly, management recorded a non-cash charge of approximately $11.3 million to write-
off unamortized assets related to the
marketing and co-branding agreements with Sprint.
(4)
Represents earnings (loss) before depreciation and amortization, write-off of investments in other companies, interest income and expense and income tax expense. EBITDA is not
determined in accordance with accounting principles generally accepted in the United States, is not indicative of cash used by operating activities and should not be considered in
isolation from, as an alternative to, or more meaningful than measures of performance determined in accordance with accounting principles generally accepted in the United States.
(5)
Investments consist of debt securities classified as available-for-sale and have maturities greater than 90 days from the date of acquisition. The Company has invested primarily in
U.S. corporate notes, all of which have a minimum investment rating of A, and government agency notes.
11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discusses the financial condition and results of operations of EarthLink, Inc. for 2000 and 2001 and the consolidated results
of EarthLink Network, Inc. and MindSpring Enterprises, Inc. for 1999. The following 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, other portions of this report, and the information incorporated by reference may include
"forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. We intend the
forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in those sections. In addition, and with
respect to each of these forward-looking statements, EarthLink seeks the protections afforded by the Private Securities Litigation Reform Act
of 1995. All statements regarding our expected financial position and operating results, our business strategy and our financing plans are
forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as "may," "will,"
"believe," "anticipate," "estimate," "expect," or "intend." Known and unknown risks, uncertainties and other factors could cause the actual
results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and was
derived using numerous assumptions.
Although we believe that our expectations that are 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, the Company seeks the protections afforded by the Private Securities Litigation Reform Act of 1995.
These risks include, without limitation, (1) 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; (2) that our service offerings may fail to be
competitive with existing and new competitors; (3) that competitive product, price or marketing pressures could cause us to lose existing
customers to competitors, or may cause us to reduce, or prevent us from raising, prices for our services; (4) that our commercial and alliance
arrangements, including marketing arrangements with Apple and Sprint, may be terminated or may not be as beneficial to us as management
anticipates; (5) 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; (6) that we may experience other difficulties that
limit our growth potential or lower future overall revenues; (7) that service interruptions could harm our business; (8) that we are not profitable
and may never achieve profitability or positive cash flow; (9) that our third party network providers may be unwilling or unable to provide
Internet access; (10) 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 the Company on a wholesale basis at all
or on terms or at prices that allow the Company to grow and be profitable in the broadband market; (11) 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;
(12) that our new initiatives such as "EarthLink Everywhere" may not be as successful as management anticipates; (13) that government