Earthlink 2010 Annual Report Download - page 103

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Table of Contents
EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company's cash investment policy limits investments to investment grade instruments. Accounts receivable are typically unsecured and
are derived from revenues earned from customers primarily located in the U.S. Credit risk with respect to trade receivables is limited due to the
large number of customers comprising the Company's customer base. Additionally, the Company maintains allowances for potential credit
losses. As of December 31, 2009, two companies each accounted for more than 10% of gross accounts receivable. As of December 31, 2010, one
company accounted for approximately 10% of gross accounts receivable. Management regularly evaluates the recoverability of its investments
in other companies based on the performance and the financial position of those companies as well as other evidence of market value.
Regulatory Risk.
The Company is subject to certain regulations and requirements of the Federal Communications Commission (the
"FCC") and various state public service commissions. Please refer to "Regulatory Environment" in the Business section of this Annual Report on
Form 10-K for a discussion of the regulatory risks to which the Company is subject.
Supply Risk. The Company's business depends on the capacity, affordability, reliability and security of third-
party network service
providers. Only a small number of providers offer the network services the Company requires, and the majority of its network services are
currently purchased from a limited number of network service providers. Although management believes that alternate network providers could
be found in a timely manner, any disruption of these services could have a material adverse effect on the Company's financial position, results of
operations and cash flows.
The Company also relies on the reliability, capacity and effectiveness of its outsourced customer service and technical support providers.
The Company's Consumer Services segment relies primarily on one customer service and technical support vendor. The Company purchases
customer service and technical support services primarily from geographically dispersed service providers. The customer service and technical
support service providers may become subject to financial, economic, environmental and political risks, system failures or other services
interruptions beyond the Company's or the providers' control which could jeopardize their ability to deliver services. Although management
believes that alternate contact center service providers could be found in a timely manner, any disruption of these services could have a material
adverse effect on the Company's financial position, results of operations and cash flows.
Fair Value of Financial Instruments
The carrying amounts of the Company's cash, cash equivalents, trade receivables and trade payables approximate their fair values because
of their nature and respective durations. The Company's short- and long-term investments in marketable securities consist of available-for-
sale
and trading securities that are carried at fair value. The Company's equity investments in publicly-
held companies are stated at fair value, which
is based on quoted market prices, with unrealized gains and losses included in stockholders' equity. The Company's investments in privately-
held
companies are stated at cost, net of other-than-temporary impairments, because it is impracticable to estimate fair value.
Reclassifications
Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. Specifically, the
Company combined sales and marketing, operations and customer support and general and administrative expenses into selling, general and
administrative expenses. In addition, the Company reclassified depreciation expense from cost of revenues and selling, general and
administrative expenses to depreciation and amortization. Approximately $11.5 million and $8.1 million was reclassified from cost of revenues
to depreciation and amortization during the years ended
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