Earthlink 2004 Annual Report Download - page 84

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EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes share repurchases during the years ended December 31, 2002, 2003 and 2004 pursuant to the Repurchase
Program, which have been recorded as treasury stock in the accompanying Consolidated Balance Sheets as of December 31, 2003 and 2004:
In April 2003, the Company repurchased 9.0 million shares of its common stock from Sprint Corporation (“Sprint”) for $53.1 million,
which was executed pursuant to a separate authorization by the Board of Directors.
In October 2003, the Company filed a registration statement with the SEC with respect to a rescission offer for approximately 0.2 million
shares of EarthLink common stock in the EarthLink, Inc. 401(k) Plan that were not registered under the Securities Act of 1933 . During 2004,
EarthLink completed the rescission offer for the unregistered shares and repurchased approximately 48,000 shares of common stock for
approximately $1.0 million. Approximately $0.4 million of the amounts paid pursuant to the rescission offer was recorded as treasury stock
based on the fair value of common stock acquired on the date the rescission offer expired and the remainder was recorded as expense.
10. Convertible Preferred Stock
All issued and outstanding shares of Series A and Series B convertible preferred stock were held by Sprint. Each share of Series A and
Series B convertible preferred stock was convertible into such number of shares of common stock as was determined by dividing the
liquidation value per share in effect at such time by the conversion value per share in effect at such time. Sprint received dividends on Series A
and Series B convertible preferred stock at an annual rate of 3% of the stated liquidation value per share, compounded quarterly. Through
June 2003, such dividends were payable “in kind”
by way of an increase in the liquidation value per share. The increase in the liquidation value
per share resulted in an increase in the conversion ratio of the preferred stock, such that in June 2003, the liquidation value per share would
have been equal to the conversion value per share and each share of outstanding preferred stock would have been convertible into one share of
common stock. All shares of Series A and Series B convertible preferred stock were converted into common stock at less than a one to one
ratio prior to June 30, 2003.
During the year ended December 31, 2002, Sprint converted approximately 9.0 million shares of Series A convertible preferred stock into
8.8 million shares of the Company’s common stock. During the year ended December 31, 2003, Sprint converted approximately 1.1 million
and 16.8 million shares of Series A and Series B convertible preferred stock, respectively, into an approximately equivalent number of shares
of common stock. The conversions represented all of the outstanding shares of Series A and Series B convertible preferred stock.
Consequently, there are currently no shares of Series A or Series B convertible preferred stock outstanding and, accordingly, no associated
dividend obligations.
11. Deductions for Accretion Dividends
Increases in the liquidation value per share resulting from the payment “in kind” of dividends on the Series A and Series B convertible
preferred stock are included in deductions for accretion dividends and
81
Year Ended December 31,
2002
2003
2004
(in thousands)
Number of shares repurchased
2,551
5,816
12,628
Aggregate purchase price
$
14,176
$
37,068
$
125,286