Earthlink 2010 Annual Report Download - page 75

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Table of Contents
Capital expenditures.
We believe that to remain competitive with much larger telecommunications and cable companies, we will require
significant additional capital expenditures to enhance and operate our fiber network. We expect to incur capital expenditures to maintain and
upgrade our network and technology infrastructure. The actual amount of capital expenditures may fluctuate due to a number of factors which
are difficult to predict and could change significantly over time. Additionally, technological advances may require us to make capital
expenditures to develop or acquire new equipment or technology in order to replace aging or technologically obsolete equipment.
Dividends.
During the years ended December 31, 2009 and 2010, cash dividends declared were $0.28 and $0.62 per common share,
respectively. In January 2011, we reduced the amount of our quarterly dividend from $0.16 per share to $0.05 per share. We currently intend to
continue to pay regular quarterly dividends on our common stock. However, any decision to declare future 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.
Cost reduction initiatives.
We plan to continue to implement cost reduction initiatives and to manage our business more efficiently. This
may include outsourcing certain functions, renegotiating contacts with network service providers and consolidating or closing certain facilities,
including our data centers. We may incur upfront costs in connection with implementing these initiatives. We will also continue to use cash to
pay real estate obligations associated with facilities exited in our past restructuring plans and for workforce reduction initiatives.
Other.
We may use cash to invest in or acquire other companies or to repurchase common stock. We expect to continue to evaluate and
consider potential strategic transactions that we believe may complement our business. Although we continue to consider and evaluate potential
strategic transactions, there can be no assurance that we will be able to consummate any such transaction.
Our cash requirements depend on numerous factors, including costs required to integrate our acquisitions, costs required to repurchase debt,
the size and types of future acquisitions in which we may engage, the costs required to maintain our network infrastructure, the pricing of our
access services, and the level of resources used for our sales and marketing activities, among others. In addition, our use of cash in connection
with acquisitions may limit other potential uses of our cash, including stock repurchases, debt repayments, dividend payments and payments for
outstanding indebtedness.
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 years ended December 31, 2008, 2009 and 2010, we generated $230.6 million, $208.6 million and
$154.4 million in cash from operations, respectively. As of December 31, 2010, we had $243.0 million in cash and cash equivalents. In addition,
we held short- and long-term marketable securities valued at $307.8 million and $12.3 million, respectively. Short-
term marketable securities
consist of investments that have effective maturity dates of up to one year from the balance sheet date. Long-
term marketable securities consist
of investments that have effective maturity dates greater than one year from the balance sheet date. During the year ended December 31, 2010,
we sold $48.2 million of our auction rate securities to the selling broker at par, plus accrued interest. As such, we have no remaining liquidity
risk regarding our auction rate securities. However, our cash, cash equivalents and marketable securities are subject to general credit, liquidity,
market, and interest rate risks, which may be exacerbated by unfavorable economic conditions. If financial markets experience prolonged periods
of decline, the value or liquidity of our cash, cash equivalents and marketable securities could decline and result in an other-than-
temporary
decline in fair value, which could adversely affect our financial condition.
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