Earthlink 2004 Annual Report Download - page 87

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EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
date of grant and are converted to common stock upon the occurrence of various events. As of December 31, 2004, the Company had issued
approximately 17,000 phantom share units and approximately 8,000 were outstanding.
Restricted Stock Units
During the years ended December 31, 2003 and 2004, the Company issued approximately 24,000 and 467,000 restricted stock units,
respectively, to its non-employee directors and certain key employees. The weighted average fair value of these restricted stock units for the
years ended December 31, 2003 and 2004 was $8.90 and $9.49 per unit, respectively. The restricted stock units vest and become exercisable
over four to six years from the date of grant. The grants resulted in deferred compensation of $0.2 million and $4.4 million, respectively, which
is included in stockholders’ equity in the Consolidated Balance Sheets as of December 31, 2003 and 2004. The Company is amortizing the
deferred compensation to operating expense on a straight-line basis over the vesting period of the restricted stock units.
Employee Stock Purchase Plan
During the year ended December 31, 2002, the Company adopted the ESPP, and in January 2005, the Company terminated the ESPP.
Under the terms of the ESPP, eligible employees were able to have up to 15% of eligible compensation deducted from their pay to purchase
EarthLink common stock. Under the ESPP, withholdings were used to purchase shares at the beginning of each quarter at a per share purchase
price equal to 85% of the lesser of the closing price on the first trading day of the just completed quarter or the closing price on the last trading
day of the just completed quarter. During the years ended December 31, 2002, 2003 and 2004, employees purchased approximately 102,000,
221,000 and 223,000 shares, respectively, at weighted average per share purchase prices of $5.02, $5.13 and $7.58, respectively.
13. Income Taxes
The current and deferred income tax provision was as follows for the year ended December 31, 2004:
During the year ended December 31, 2004, the Company utilized approximately $94.1 million of federal net operating loss carryforwards
(“NOLs”) and $88.6 million of state NOLs to offset taxable income; however, EarthLink owed state income and federal and state alternative
minimum tax (“AMT”)
84
Year Ended
December 31, 2004
(in thousands)
Current
Federal
$
1,608
State
883
Total current
2,491
Deferred
Federal
1,969
State
—
Total deferred
1,969
Income tax provision
$
4,460