Earthlink 2010 Annual Report Download - page 74

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Table of Contents
Financing activities
Our financing activities used cash of $25.0 million during the year ended December 31, 2008. This consisted primarily of $31.9 million
used to repurchase 3.8 million shares of our common stock and $2.7 million to pay off a capital lease obligation. Included in the share repurchase
amount is the repurchase of approximately 2.5 million shares of common stock for approximately $22.7 million in connection with the
termination of our convertible note hedge and warrant agreements. In connection with the issuance of the EarthLink Notes, we entered into
separate convertible note hedge transactions and separate warrant transactions with respect to our common stock to minimize the impact of the
potential dilution upon conversion of the EarthLink Notes. In September 2008, we terminated our convertible note hedge and warrant
agreements purchased approximately the shares of common stock the counterparties held in hedge positions. Partially offsetting cash used for
repurchases were proceeds of $8.1 million from the exercise of stock options.
Our financing activities used cash of $47.1 million during year ended December 31, 2009. This consisted primarily of $30.0 million for
payment of dividends and $22.3 million used to repurchase 3.6 million shares of our common stock, offset by $5.3 million of proceeds from the
exercise of stock options.
Our financing activities used cash of $68.3 million during the year ended December 31, 2010. This consisted primarily of $67.5 million of
dividend payments, $2.8 million to pay for early conversion of a portion of the EarthLink Notes and $0.9 million used to repurchase 0.1 million
shares of our common stock. Under the terms of the indenture governing the EarthLink Notes, our payment of cash dividends requires an
adjustment to the conversion rate for the EarthLink Notes. In addition, as a result of the adjustment, the EarthLink Notes may be surrendered for
conversion for a period of time between the
declaration date and the record date, as defined in the indenture, for the consideration provided for in
the indenture. These uses of cash were partially offset by $2.8 million of proceeds from the exercise of stock options.
Future Uses of Cash and Funding Sources
Uses of cash
Acquisitions.
We expect to use $370.0 million of cash upon closing of our acquisitions of One Communications and STS Telecom in the
first half of 2011. However, this amount could fluctuate based on One Communications' shareholders right to elect to receive equity or cash for
their portion of the transaction. We also expect to use cash for one-
time costs related to these transactions, including transaction and closing
costs, as well as integration costs. These transactions may result in significant costs and expenses, including those related to severance pay,
payments to executive officers and key employees under retention plans, employee benefit costs, and legal, accounting and financial advisory
fees. There are a number of systems that must be integrated, including management information, sales, billing and benefits. We expect to incur
expenses in connection with integrating the businesses, policies, procedures, operations, technologies and systems of our acquisitions with ours.
In addition, we expect to incur integration costs related to branding initiatives associated with changing the trade name to EarthLink Business.
Debt and interest.
We expect to use cash related to our outstanding indebtedness. On November 15, 2011, holders of the EarthLink Notes
have the right under the governing indenture to require us to repurchase the EarthLink Notes and the EarthLink Notes are convertible on
October 15, 2011 and upon certain events. We will use cash to repurchase EarthLink Notes or in connection with holders' conversion of
EarthLink Notes, if the holders exercise their right on those dates or potential future dates. In connection with our acquisition of ITC^DeltaCom,
we assumed their outstanding $325 million aggregate principal amount of 10.5% senior secured notes due on April 1, 2016. As a result, we also
expect to use cash for increased interest payments. We also may use cash to redeem the ITC^DeltaCom Notes in accordance with the terms of
the related indenture or to repurchase the ITC^DeltaCom Notes.
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