Earthlink 2002 Annual Report Download - page 27

Write-off of investments in other companies
EarthLink made equity investments in several companies prior to December 31, 2001. During the years ended December 31, 2001 and
2002, EarthLink management determined that the full recovery of certain investments was unlikely. Accordingly, EarthLink recorded a charge
of $10.0 million and $0.6 million during the years ended December 31, 2001 and 2002, respectively, to write investments down
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to their estimated net realizable value. The current carrying value of investments in other companies at December 31, 2002 is $0.9 million.
Interest income, net
Net interest income decreased 50% from $25.5 million during the year ended December 31, 2001 to $12.6 million during the year ended
December 31, 2002. The decrease was due to a decrease in our average cash and marketable securities balances and a decrease in investment
yields. Our cash and investment balances decreased as a result of (i) the purchases of subscriber bases from several companies; (ii) the
acquisitions of Cidco, the OmniSky platform and PeoplePC; (iii) the repurchase of 2.6 million shares of our common stock; and (iv) capital
expenditures. Our weighted average investment yields have decreased from approximately 4.2% during the year ended December 31, 2001 to
approximately 2.6% during the year ended December 31, 2002 as the U.S. Federal Reserve Bank has reduced interest rates. The decrease in net
interest income was partially offset by a reduction in interest expense attributable to a decrease in the average balance of obligations under
capital lease from $22.5 million during the year ended December 31, 2001 to $8.7 million during the year ended December 31, 2002.
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
Narrowband access revenues
Narrowband access revenues increased $165.9 million, or 20%, from $833.4 million during the year ended December 31, 2000 to
$999.3 million during the year ended December 31, 2001. The increase in narrowband revenues was due to an increase in the average number
of subscribers during the year ended December 31, 2001 as compared to the year ended December 31, 2000 and an increase in average monthly
revenue per narrowband subscriber.
Average narrowband subscribers increased 605,000, or 16%, from 3.7 million during the year ended December 31, 2000 to 4.3 million
during the year ended December 31, 2001. The acquisition of OneMain accounted for 57% of this growth, with organic growth and
acquisitions of smaller ISPs contributing the remainder. Average monthly narrowband access revenues per subscriber were $18.96 and $19.51
during the years ended December 31, 2000 and 2001, respectively.
The following is a summary of our narrowband subscriber activity for the years ended December 31, 2000 and 2001:
While the August 2001 price increase had a positive impact on revenues, it negatively impacted EarthLink's narrowband subscriber
growth during the year ended December 31, 2001, among certain other factors. On December 31, 2001, we had 4.2 million narrowband
subscribers, a decrease of 100,000 from December 31, 2000. This decrease resulted from (i) increased churn caused by the price increase to
traditional EarthLink customers as well as the conversion of OneMain and other acquired subscribers to standard EarthLink pricing plans,
(ii) the migration of narrowband subscribers to our broadband service, and (iii) the continued maturing of the market for narrowband Internet
access, resulting in fewer new customers from EarthLink's sales and marketing programs.
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Year Ended December 31,
2000 2001
(in thousands)
Subscribers at beginning of year
2,988
4,306
Gross organic subscriber additions
2,328
1,856
Acquired subscribers
941
428
Narrowband subscribers converted to broadband
(46
)
(62
)
Churn
(1,905
)
(2,325
)
Subscribers at end of year
4,306
4,203