Earthlink 2003 Annual Report Download - page 63

Mr. Campbell B. Lanier and Mr. William H. Scott, who prior to February 16, 2001 served on the Company's Board of Directors, were
members of the Board of Directors of ITC Holding Company, Inc. ("ITC Holding"), which was a substantial investor in EarthLink. ITC
Holding sold its 10.7 million shares of EarthLink common stock during February 2001. The Company entered into certain business
relationships with several subsidiaries and affiliates of ITC Holding. The Company purchased long-distance telephone services and wide area
network transport service from ITC DeltaCom, Inc. ("ITC DeltaCom"), a related party through relationships with ITC Holding. Long-distance
charges from ITC DeltaCom totaled approximately $9.4 million during the year ended December 31, 2001.
Officers and Directors
At December 31, 2002, the Company had notes receivable from one officer and one former officer aggregating $1.1 million. At
December 31, 2003, the Company had a note receivable from one officer of $0.7 million. The notes receivable at December 31, 2002 and 2003
are included in other current or long-term assets, depending on their respective maturities, in the accompanying Consolidated Balance Sheets.
F-30
The Company had commercial arrangements with Overture Services, Inc. (formerly known as GoTo.com) ("Overture"), which was
acquired by Yahoo! Inc. in October 2003. A member of the Company's Board of Directors was the Chairman of the Board of Directors of
Overture. Overture was (but no longer is) EarthLink's default search engine provider, and during the years ended December 31, 2001 and 2002,
Overture paid the Company approximately $6.8 million and $0.3 million, respectively, in connection with the commercial arrangements.
As of December 31, 2001, the Company had made equity capital investments totaling $10.0 million in eCompanies Venture Group, L.P.
("EVG"), an affiliate of eCompanies, LLC ("eCompanies"). The carrying value of the investment in EVG as of December 31, 2002 and 2003
was $0.9 million and $0.6 million, respectively. Sky Dayton, EarthLink's Chairman of the Board of Directors, is a founding partner in EVG, a
limited partnership formed to invest in domestic emerging Internet-related companies, and a founder and director of eCompanies. The
Company recorded adjustments of $10.0 million, $0.6 million and $0.2 million during the years ended December 31, 2001, 2002 and 2003,
respectively, to write equity investments in other companies, including EVG, down to their estimated realizable values. During the year ended
December 31, 2001, the Company paid consulting fees and expenses to eCompanies of approximately $0.5 million. The Company made no
payments to eCompanies during the years ended December 31, 2002 and 2003 and has paid all amounts due under the contract with
eCompanies.
During the year ended December 31, 2001, the Company had commercial arrangements with affiliates of 4Sure.com, Inc. ("4Sure"). A
member of EarthLink's Board of Directors was the Chairman of the Board of Directors of 4Sure through July 2001. The amount received from
4Sure during the year ended December 31, 2001 was not material.
During the year ended December 31, 2002, the Company entered into a commercial arrangement with Boingo Wireless, Inc. ("Boingo").
Sky Dayton, EarthLink's Chairman of the Board of Directors, is the founder and Chief Executive Officer of Boingo. The amounts paid to and
received from Boingo during the years ended December 31, 2002 and 2003 were not material.
18. Subsequent Event (Unaudited)
On January 6, 2004, EarthLink announced a comprehensive plan to restructure its contact center operations and further utilize outsourced
contact center service providers. Under the plan, EarthLink will close contact center operations in Harrisburg, Pennsylvania; Roseville,
California; San Jose, California; and Pasadena, California and reduce its contact center operations in Atlanta, Georgia by the end of the first
quarter of 2004. Approximately 1,300 employees will be directly impacted. The Company expects to record facility exit costs of approximately
$36.0 million in the first quarter of 2004 associated with this plan. These costs include approximately $13.0 million for employee, personnel
and related costs, $14.0 million for lease termination costs and $9.0 million for non-cash asset write-offs.
19. Quarterly Financial Data (Unaudited)
The following table sets forth certain unaudited quarterly consolidated financial data for the eight quarters in the period ended
December 31, 2003. In the opinion of the Company's management, this unaudited information has been prepared on the same basis as the
audited consolidated financial statements contained herein and includes all adjustments (consisting of normal recurring adjustments) necessary
to present fairly the information set forth therein when read in conjunction with the consolidated
F-31
financial statements and notes thereto. The operating results for any quarter are not necessarily indicative of results for any future period.
Three Months Ended