Earthlink 2009 Annual Report Download - page 62

Table of Contents
period the convertible debt is expected to be outstanding as additional non-
cash interest expense. Retrospective application to all periods
presented is required. The adoption of this new guidance on January 1, 2009 affected the accounting for our Notes, which were issued in
November 2006. Upon adoption, we recorded an adjustment to increase additional paid
-
in capital as of the November 2006 issuance date by
approximately $62.1 million. We are accreting the resulting debt discount to interest expense over the estimated five-
year life of the Notes,
which represents the first redemption date of November 2011. Upon adoption, we also recorded an adjustment to decrease additional paid-
in
capital and other long-term assets by approximately $1.8
million to reclassify debt issuance costs related to the equity component of the Notes.
We recorded a pre-
tax adjustment of approximately $22.3 million to accumulated deficit that represents accretion of the debt discount and
decrease in amortization of debt issuance costs during the years ended December 31, 2006, 2007 and 2008, recognized additional non-
cash
interest expense of $12.2 million during the year ending December 31, 2009 and will recognize additional non-
cash interest expense of
$13.4 million and $12.4 million during the years ending December 31, 2010 and 2011, respectively, for accretion of the debt discount and
decrease in amortization of debt issuance costs. As a result of the adoption of this new guidance, we reduced income from continuing operations
and net income for the year ended December 31, 2009 by $12.2 million and reduced basic and diluted earnings per share by $0.11 per share. We
also recorded a deferred tax liability for temporary tax differences. However, this was offset by a corresponding decrease in the valuation
allowance for deferred tax assets.
The following tables present the effect of the adoption of this new guidance on our affected financial statement line items for the years
ended December 31, 2007 and 2008 and as of December 31, 2008:
58
Year Ended December 31, 2007
Year Ended December 31, 2008
As Originally
Reported
As
Adjusted
Effect of
Change
As Originally
Reported
As
Adjusted
Effect of
Change
(in thousands, except per share data)
Statement of
Operations:
Interest income
(expense) and
other, net
$
12,824
$
2,824
$
(10,000
)
$
(1,381
)
$
(12,409
)
$
(11,028
)
Income (loss)
from
continuing
operations
(54,795
)
(64,795
)
(10,000
)
198,118
187,090
(11,028
)
Net income (loss)
(135,097
)
(145,097
)
(10,000
)
189,612
178,584
(11,028
)
Basic net income
(loss) per share
Continuing
operations
$
(0.45
)
$
(0.53
)
$
(0.08
)
$
1.81
$
1.71
$
(0.10
)
Basic net income
per share
(1.11
)
(1.19
)
(0.08
)
1.73
1.63
(0.10
)
Diluted net
income (loss)
per share
Continuing
operations
$
(0.45
)
$
(0.53
)
$
(0.08
)
$
1.78
$
1.68
$
(0.10
)
Diluted net
income per
share
(1.11
)
(1.19
)
(0.08
)
1.71
1.61
(0.10
)
As of December 31, 2008
As Originally
Reported
As
Adjusted
Effect of
Change
(in thousands)
Balance Sheet:
Other long
-
term assets
$
5,725
$
4,698
$
(1,027
)
Long
-
term debt
258,750
219,733
(39,017
)
Additional paid
-
in capital
2,075,571
2,135,887
60,316
Accumulated deficit
(994,507
)
(1,016,833
)
(22,326
)