Earthlink 2009 Annual Report Download - page 25

Table of Contents
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. Since an "ownership
change" also could result from a change in control of our company, with subsequent annual limitations on the use of our net operating losses, this
could discourage a change in control.
Risks Related to Ownership of Our Common Stock
We may change our cash return strategy.
During 2009, we began paying quarterly cash dividends on our common stock. The payment of future quarterly dividends is discretionary
and is subject to determination by our Board of Directors each quarter following its review of our financial condition, results of operations, cash
requirements, investment opportunities and such other factors as are deemed relevant by our Board of Directors. Changes in our business needs,
including working capital and funding for acquisitions, or a change in tax laws relating to dividends, among other factors, could cause our Board
of Directors to decide to reduce, or cease the payment of, dividends in the future. There can be no assurance that we will not decrease or
discontinue quarterly cash dividends, and if we do, our stock price could be negatively impacted.
In addition, we could increase the amount of cash dividends paid to shareholders either through a larger quarterly dividend or a special
dividend. This could negatively impact our cash flows and reduce our flexibility to engage in other strategic alternatives, such as acquisitions of
other businesses. This also could negatively impact our stock price, and may adversely affect our ability to retain key employees or harm
employee morale and productivity. We also could engage in a significant stock buyback which could have similar results.
Our stock price may be volatile.
The trading price of our common stock may be subject to fluctuations as we review our strategic alternatives or if we were to decide upon a
particular alternative, such as a business combination transaction or a specific capital return strategy. Our stock price also may fluctuate in
response to other events and factors, such as quarterly variations in results of operations; changes in financial estimates; unstable economic
conditions; changes in recommendations or reduced coverage 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 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
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