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EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
New Edge
In December 2005, EarthLink entered into an agreement to acquire New Edge Holding Company (“New Edge”), a single-source national
provider of secure multi-site managed data networks and dedicated Internet access for businesses and communications carriers. Under the
terms of the merger agreement, EarthLink will acquire 100% of New Edge in a merger transaction for approximately $144.6 million, consisting
of 2.6 million shares of EarthLink common stock and $114.3 million in cash, including cash to be used to satisfy certain liabilities. The
completion of the acquisition is subject to regulatory approvals and closing conditions.
4. Facility Exit and Restructuring Costs
During the year ended December 31, 2003, EarthLink executed a plan to streamline its contact center facilities (the “2003 Plan”). In
connection with the 2003 Plan, EarthLink closed contact center facilities in Dallas, Texas; Sacramento, California; Pasadena, California; and
Seattle, Washington. The closure of the four contact center facilities resulted in the termination of 1,220 employees and the net reduction of
920 employees, primarily customer support personnel. In connection with the 2003 Plan, EarthLink recorded facility exit costs of $36.6
million, including $10.7 million for employee, personnel and related costs; $18.2 million for real estate and telecommunications costs; and $7.7
million in asset disposals.
During the year ended December 31, 2004, EarthLink executed a plan to restructure and further streamline its contact center operations
(the “2004 Plan”). Under the 2004 Plan, EarthLink closed contact center operations in Harrisburg, Pennsylvania; Roseville, California; San
Jose, California; and Pasadena, California; and reduced its contact center operations in Atlanta, Georgia. Approximately 1,140 employees were
directly impacted, primarily customer support personnel. As a result of the 2004 Plan, EarthLink recorded facility exit costs of $30.2 million,
including $10.5 million for employee, personnel and related costs; $11.3 million for real estate and telecommunications costs; and $8.4 million
in asset disposals.
During the year ended December 31, 2005, EarthLink executed plans to further streamline operations by outsourcing certain contact
center and credit and collections activities (the “2005 Plans”). Approximately 227 employees were directly impacted. As a result of the 2005
Plans, EarthLink recorded $1.4 million of restructuring costs for severance and personnel-related costs.
EarthLink periodically evaluates and adjusts its estimates for facility exit and restructuring costs based on currently-available information.
Such adjustments are included as facility exit and restructuring costs in the Consolidated Statements of Operations. During the year ended
December 31, 2004, EarthLink reduced its estimates for real estate commitments associated with the 2003 Plan and 2004 Plan by $2.0 million
based on events occurring during the period and realized additional expense of $0.2 million associated with the disposal and write-down of
property and equipment, net of proceeds received. As a result, EarthLink reduced its facility exit costs by $1.8 million during the year ended
December 31, 2004. During the year ended December 31, 2005, EarthLink increased its estimate for real estate commitments by $0.7 million
for the 2003 Plan and 2004 Plan based on events occurring during the period.
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