Earthlink 2008 Annual Report Download - page 25

Table of Contents
addition, the determination of our provision for income taxes and other tax liabilities requires significant judgment, and there are many
transactions and calculations where the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate
tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or
periods for which such determination is made.
Currently, our tax net operating losses can accumulate and be used to offset any of our future taxable income. However, an "ownership
change" that occurs during a "testing period" (as such terms are defined in Section 382 of the Internal Revenue Code of 1986, as amended) could
place significant limitations, on an annual basis, on the use of such net operating losses to offset future taxable income we may generate. In
general, future stock transactions and the timing of such transactions could cause an "ownership change" for income tax purposes. Such
transactions may include our purchases under our share repurchase program, additional issuances of common stock by us (including but not
limited to issuances upon future conversion of our outstanding convertible senior notes), and acquisitions or sales of shares by certain holders of
our shares, including persons who have held, currently hold, or may accumulate in the future five percent or more of our outstanding stock.
Many of these transactions are beyond our control. Calculations of an "ownership change" under Section 382 are complex and to some extent are
dependent on information that is not publicly available. The risk of an "ownership change" occurring could increase if additional shares are
repurchased, if additional persons acquire five percent or more of our outstanding common stock in the near future and/or current five percent
stockholders increase their interest. Due to this risk, we monitor our purchases of additional shares of our common stock.
Our stock price has been volatile historically and may continue to be volatile.
The trading price of our common stock has been and may continue to be subject to fluctuations, in particular due to deteriorating economic
conditions. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in results of operations;
announcements of new products, services or pricing by us or our competitors; the emergence of new competing technologies; developments in
our business strategy; changes in financial estimates and recommendations by securities analysts; the operating and stock price performance of
other companies that investors may deem comparable to us; and news reports relating to trends in the markets in which we operate or general
economic conditions.
In addition, the stock market in general and the market prices for Internet-
related companies in particular, have experienced volatility that
often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the
price of our stock, regardless of our operating performance. Additionally, volatility or a lack of positive performance in our stock price may
adversely affect our ability to retain key employees, many of whom have been granted stock incentive awards.
Our indebtedness could adversely affect our financial health and limit our ability to react to changes in our industry.
As of December 31, 2008, we had $258.8 million of indebtedness outstanding due to the issuance of our 3.25% Convertible Senior Notes
Due 2026 (the "Notes") in November 2006. Our indebtedness could have important consequences to us. For example, it could:
•
require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing
the availability of our cash flow to fund our business activities;
• limit our ability to secure additional financing, if necessary;
• increase our vulnerability to general adverse economic and industry conditions; and
•
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.
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