Earthlink 2005 Annual Report Download - page 53

Share Repurchase Program
During 2005, the Board of Directors increased the amount authorized to repurchase our common stock under our share repurchase
program by $200.0 million to a total of $550.0 million. Also during 2005, the Board of Directors approved repurchasing common stock
pursuant to plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. As of February 28, 2006, we have utilized
approximately $370.7 million pursuant to the authorizations and have $179.3 million available under the current authorization. In the first
quarter of 2006, we suspended repurchases of common stock pursuant to our 10b5-1 plan. We may repurchase our common stock from time to
time in compliance with the Securities and Exchange Commission’s regulations and other legal requirements, and subject to market conditions
and other factors. The share repurchase program does not require us to acquire any specific number of shares and may be terminated at any
time.
Income Taxes
We continue to maintain a valuation allowance against our deferred tax assets of $311.6 million, consisting primarily of net operating loss
carryforwards, and we may recognize deferred tax assets in future periods when they are determined to be realizable. To the extent we may
owe income taxes in future periods, we intend to use our net operating loss carryforwards to the extent available to reduce cash outflows for
income taxes.
Future Uses of Cash and Funding Sources
We expect to use and invest cash during the year ending December 31, 2006 for a number of reasons, including cash commitments related
to our investment in the HELIO joint venture; expected cash outlays to implement our municipal wireless broadband and VoIP strategic
initiatives, including an increase in capital expenditures; the cash consideration for our acquisition of New Edge; and the $50.0 million of cash
to be invested in Covad.
In March 2005, we completed the formation of HELIO, a joint venture with SK Telecom, to market wireless voice and data services in the
U.S. Pursuant to the Contribution and Formation Agreement, we invested $43.0 million of cash and contributed non-
cash assets valued at $40.0
million upon completing the formation of HELIO in March 2005, invested $39.0 million of cash in August 2005, invested $39.5 million of
cash in February 2006 and have committed to invest additional cash of $58.5 million in HELIO at various dates through August 2007. We
expect the future commitments to invest in HELIO to adversely affect our cash position.
We have expended and will continue to expend significant resources enhancing our existing services and developing, acquiring,
implementing and launching new services, such as VoIP services and wireless broadband services. We believe wireless and IP-based voice
services and wireless broadband services represent significant growth opportunities and may require significant cash outlays. These uses of
cash will be in the form of initial product development and infrastructure costs in addition to the sales and marketing costs to add customers
that will generate recurring revenues. Additionally, we also expect to continue to use cash to acquire and retain new and existing subscribers.
Capital expenditures are expected to increase in 2006 as we invest in our initiatives for wireless broadband services and IP-based voice
services. These initiatives may result in significant capital expenditures to develop, implement and build wireless broadband networks in
various municipalities. We also expect to incur capital expenditures to maintain and upgrade our network and technology infrastructure. The
actual amount of capital expenditures in future periods may fluctuate due to a number of factors which are difficult to predict and could change
significantly over time, including, without limitation, the timing and extent of municipal wireless network build-outs and additional awards to
build
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