Earthlink 2004 Annual Report Download - page 47

The following tables summarize the accrued costs associated with the 2003 Plan and 2004 Plan as of and for the years ended
December 31, 2003 and 2004:
Liquidity and Capital Resources
Cash flows for the year ended December 31, 2004
Our operating activities provided cash of $188.2 million, which primarily consisted of net income of $111.0 million adjusted for non-cash
items of $93.3 million. Non-cash items included depreciation and amortization relating to our network, facilities and intangible assets, non-
cash
disposals and impairments of fixed assets primarily associated with the 2004 Plan, loss on investments in other companies, deferred income
taxes and deferred compensation. This was partially offset by cash used for working capital of $16.2 million. Working capital activities
consisted of a $21.1 million decrease in accounts payable, accrued liabilities and deferred revenue offset by a $4.9 million decrease in accounts
receivable. Approximately $5.8 million of facility exit costs recorded during the year ended December 31, 2004 were accrued and unpaid as of
December 31, 2004, primarily related to non-cancelable operating lease payments accrued but payable in future periods, net of estimated
sublease income. Excluding the accruals for the facility exit costs, we used approximately $26.9 million to reduce accounts payable, accrued
and other liabilities and deferred revenue. The $26.9 million decline primarily resulted from declines in accrued liabilities for
telecommunications costs due largely to decreases in such costs, declines in deferred revenue primarily associated with the deferred service
liability and the discontinuation of the sale of Membership Packages, and payments associated with the 2003 Plan. In order to continue
improving cash flows from operating activities, we must seek to maintain or increase levels of revenues while reducing telecommunications
costs per subscriber, improve the efficiency of our customer support efforts, leverage the cost structure of our business and effectively manage
our working capital.
Our investing activities used cash of $69.1 million. This consisted primarily of $33.7 million for purchases of investments in marketable
securities, net of sales and maturities, as a result of investing cash flows generated by operating activities in marketable securities. In addition,
we used $29.9 million for capital expenditures, primarily associated with network and technology center related projects. We have invested
significantly in our network and technology center infrastructure, and we expect to continue to
44
2003 Plan
Facility
Exit
Costs
Non-Cash
Items
Payments
Net
Adjustments
Balance
December 31,
2003
Net
Adjustments
Payments
Balance
December 31,
2004
(in thousands)
Severance and personnel
related costs
$
10,737
$
—
$
(
11,220
)
$
483
$
—
$
—
$
—
$
—
Real estate and
telecommunications
costs, including non-
cancelable leases
18,207
—
(
7,832
)
(483
)
9,892
(867
)
(6,467
)
2,558
Abandoned and disposed
assets
7,652
(7,652
)
—
—
—
—
—
—
$36,596
$
(7,652
)
$
(19,052
)
$
—
$
9,892
$
(867
)
$
(6,467
)
$
2,558
2004 Plan
Facility
Exit
Costs
Net
Adjustments
Non
-
Cash
Items
Deferred Rent
Reclassification Payments
Balance
December 31,
2004
(in thousands)
Severance and personnel related costs
$
10,580
$
26
$
—
$
—
$
(
10,601
)
$
5
Real estate and telecommunications costs, including
non
-
cancelable leases
11,292
(1,202
)
—
1,359
(5,622
)
5,827
Abandoned and disposed assets
8,360
205
(8,565
)
—
—
—
$
30,232
$
(971
)
$
(8,565
)
$
1,359
$
(16,223
)
$
5,832