Earthlink 2008 Annual Report Download - page 51

Table of Contents
dividends will be made at the discretion of the board of directors and will depend on, among other things, our results of operations, financial
condition, cash requirements, investment opportunities and other factors the Board of Directors may deem relevant.
Our cash requirements depend on numerous factors, including the pricing of our access services, our ability to maintain our customer base,
the costs required to maintain our network infrastructure, the size and types of acquisitions in which we may engage, and the level of resources
used for our sales and marketing activities, among others.
Sources of cash.
Our principal sources of liquidity are our cash, cash equivalents and investments in marketable securities, as well as the
cash flow we generate from our operations. During the year ended December 31, 2008, we generated $230.6 million in cash from operations. As
of December 31, 2008, we had $486.6 million in cash and cash equivalents. In addition, we held long-
term marketable securities valued at
$47.8 million. Long-term marketable securities consisted of auction rate securities. These securities are variable-
rate debt instruments whose
underlying agreements have contractual maturities of up to 40 years. The securities are issued by various state related higher education agencies
and predominantly secured by student loans guaranteed by the agencies and reinsured by the United States Department of Education. Liquidity
for these auction rate securities is typically provided by an auction process that resets the applicable interest rate at pre-
determined intervals,
usually every 28 days. Beginning in February 2008, all of our auction rate securities failed to attract sufficient buyers, resulting in our 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. The
agreement also grants the broker the right to buy our auction rate securities at par plus accrued interest, until July 2, 2012. Based on our
remaining cash and marketable securities and operating cash flows, we do not anticipate the current lack of liquidity on these investments will
affect our ability to operate our business as usual.
We expect to generate positive cash flows from operations during the year ended December 31, 2009. Our available cash and marketable
securities, together with our results of operations, are expected to be sufficient to meet our operating expenses, capital requirements and
investment and other obligations for the next 12 months. However, as a result of other investment activities and possible acquisition
opportunities, we may seek additional financing in the future. We have no commitments for any additional financing and have no lines of credit
or similar sources of financing. We cannot be sure that we can obtain additional financing on favorable terms, if at all, through the issuance of
equity securities or the incurrence of additional debt. Additional equity financing may dilute our stockholders, and debt financing, if available,
may restrict our ability to repurchase common stock or debt, declare and pay dividends and raise future capital. If we are unable to obtain
additional needed financing, it may prohibit us from making acquisitions, capital expenditures and/or investments, which could materially and
adversely affect our prospects for long-term growth.
Off-Balance Sheet Arrangements
As of December 31, 2008, we did not have any off-
balance sheet arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors.
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