Earthlink 2008 Annual Report Download - page 45

Table of Contents
exit and restructuring costs based on currently-
available information and record such adjustments as facility exit and restructuring costs. During
the years ended December 31, 2006 and 2008, we recorded a $0.1 million and $0.3 million reduction, respectively, to facility exit and
restructuring costs and during the year ended December 31, 2007, we recorded $1.1 million of facility exit and restructuring costs as a result of
changes in estimates for Legacy Plans.
Net losses of equity affiliate
We accounted for our investment in HELIO under the equity method of accounting because we were able to exert significant influence over
HELIO's operating and financial policies. Accordingly, we recorded our proportionate share of HELIO's net losses. These equity method losses
were offset by increases in the carrying value of our investment associated with amortizing the difference between the carrying value and fair
value of non-cash assets contributed to HELIO.
Net losses of equity affiliate for the years ended December 31, 2006 and 2007 of $84.8 million and $111.3 million, respectively, included
our proportionate share of HELIO's net losses offset by amortization associated with recognizing the difference between the carrying value and
fair value of non-cash assets contributed. HELIO's net loss increased during the year ended December 31, 2007 due to the start-
up nature of
HELIO's operations and HELIO's product launches. During the year ended December 31, 2007, we stopped recording additional net losses of
equity affiliate because the carrying value of our investment in HELIO was reduced to zero. As a result, we did not record any net losses of
equity affiliate during the year ended December 31, 2008. In August 2008, Virgin Mobile acquired HELIO and our investment in HELIO was
exchanged for limited partnership units equivalent to approximately 1.8 million shares of Virgin Mobile common stock.
Gain (loss) on investments, net
During the year ended December 31, 2006, we recognized a gain on investments of $0.4 million. This consisted of $0.4 million in cash
distributions from eCompanies Venture Group, L.P. ("EVG"), a limited partnership that has invested in domestic emerging Internet-
related
companies. During the year ended December 31, 2007, we recognized a net loss on investments of $5.6 million. This consisted of $7.1 million of
impairment losses due to declines in the values of certain investments in other companies deemed to be other than temporary and $1.6 million in
cash distributions from EVG. During the year ended December 31, 2008, we recognized a net gain on investments of $2.7 million. This
consisted of a gain of $2.0 million from the sale of our Covad common stock to Platinum Equity, LLC and a net gain of $1.5 million related to
our Virgin Mobile investment, offset by a $0.7 million impairment loss due to a decline in the value of our investments in other companies
deemed to be other than temporary and a net loss of $0.1 million related to our auction rate securities (as described below). The net gain related
to our Virgin Mobile investment consisted of a $4.4 million gain recognized upon receipt of our Virgin Mobile shares for our HELIO
investment, offset by a $2.9 million impairment loss due to a decline in the value of our Virgin Mobile investment deemed to be other than
temporary. All of these transactions were recorded as gain (loss) on investments, net, in the Consolidated Statements of Operations.
As of December 31, 2008, we held auction rate securities with a carrying value and fair value of $47.8 million. These securities are
variable-
rate debt instruments whose underlying agreements have contractual maturities of up to 40 years, but have interest rate reset periods at
pre-
determined intervals, usually every 28 days. These securities are predominantly secured by student loans guaranteed by state related higher
education agencies and reinsured by the U.S. Department of Education. Beginning in February 2008, auctions for these securities failed to attract
sufficient buyers, resulting in us continuing to hold such securities. In October 2008, we entered into an agreement with the broker that sold us
our auction rate securities that gives us the right to sell our existing auction rate securities back to the broker at par plus accrued interest,
beginning on June 30, 2010 until July 2, 2012 (herein referred to as "put right'). In the fourth quarter of 2008, we recorded an other-than-
temporary impairment of $9.9 million to reflect
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