Earthlink 2001 Annual Report Download - page 52

At December 31, 2000 and 2001, the Company had net operating loss carryforwards for federal income tax purposes totaling
approximately $439.7 million and $601.9 million, respectively, which begin to
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expire in 2010. At December 31, 2000 and 2001, the Company had net operating loss carryforwards for state income tax purposes totaling
approximately $360.4 million and $440.0 million, respectively, which begin to expire in 2002. The Internal Revenue Code of 1986, as
amended, includes provisions, that may limit the net operating loss carryforwards available for use in any given year if certain events occur,
including significant changes in ownership. Due to the merger of EarthLink Network and MindSpring, the acquisition of several companies,
and other issuances of common stock and common stock equivalents, utilization of the Company's net operating loss carryforwards to offset
future income may be limited. At December 31, 2000 and 2001, the net operating loss includes $65.3 million and $74.8 million related to the
exercise of employee stock options and warrants. Any benefit resulting from the utilization of this portion of the net operating loss will be
credited directly to equity.
13. Commitments and Contingencies
Leases
The Company leases certain of its facilities and equipment under non-cancelable operating leases expiring in various years through 2011.
Total rent expense in 1999, 2000 and 2001 for all operating leases amounted to $12.8 million, $19.8 million and $31.0 million, respectively.
The Company also leases equipment, primarily data communications equipment, under non-cancelable capital leases. Most of the Company's
capital leases include escalation clauses and purchase options at the end of the lease term.
During the three years ended December 31, 2001, the Company financed the acquisition of data processing and office equipment
amounting to approximately $13.5 million, $5.6 million and $0.9 million, respectively, by entering into a number of leases and agreements for
the sale and leaseback of equipment. The sale and leaseback transactions are recorded at cost, which approximates the fair market value of the
property and, therefore, no gains or losses have been recorded. The property remains on the books and continues to be depreciated. A financing
obligation representing the proceeds is recorded and reduced based upon payments under the lease agreement.
Minimum lease commitments under non-cancelable leases at December 31, 2001 are as follows:
Other —
3,862
Gross deferred tax assets
189,328
338,200
Valuation allowance
(187,222
)
(338,200
)
Net deferred tax assets
2,106
—
Deferred tax liabilities:
Member base and other intangibles
(476
)
—
Other
(1,630
)
—
Total deferred tax liabilities
(2,106
)
—
Net deferred taxes
$
—
$
—
Year Ending
December 31,
Capital
Leases
Operating
Leases
(In thousands)
2002
$
12,517
$
22,146
2003
2,945
22,403
2004
183
22,136
2005
8
17,025
2006
—
15,669
Thereafter
—
20,183
Total minimum lease payments
15,653
119,562
Less aggregate sublease income
—
(
2,577
)