Earthlink 2011 Annual Report Download - page 41

Table of Contents
• increase our vulnerability to the impact of adverse economic and industry conditions.
Our ability to make payments on or to refinance our indebtedness will depend on our ability in the future to generate cash flows from
operations, which is subject to all the risks of our business. We may not be able to generate sufficient cash flows from operations for us to repay
our indebtedness when such indebtedness becomes due and to meet our other cash needs.
The agreements that govern the ITC^DeltaCom Notes, Senior Notes and senior secured revolving credit facility impose significant
operating and financial restrictions on us. These restrictions limit or restrict, among other things, our ability and the ability of our restricted
subsidiaries to:
• incur or guarantee additional indebtedness or issue preferred stock;
•
pay dividends or make other distributions to stockholders;
•
purchase or redeem capital stock or subordinated indebtedness;
• make investments;
• create liens or use assets as security;
•
enter into agreements restricting such restricted subsidiaries' ability to pay dividends, make loans or transfer assets to us or other
restricted subsidiaries;
• engage in transactions with affiliates; and
•
consolidate or merge with or into other companies or transfer all or substantially all of our or their assets.
If we breach any of these covenants, a default could result under one or more of these agreements, which may require us to repay some or
all of our indebtedness.
We may require additional capital to support business growth, and this capital may not be available to us on acceptable terms, or at all.
We will require substantial capital to maintain, upgrade and enhance our network facilities and operations. We may also require additional
capital to support our business growth, including the need to develop new services and products, invest in data center space to support new cloud
and managed IT services, enhance our operating infrastructure and acquire complementary businesses and technologies. While we have
historically been able to fund capital expenditures from cash generated by operations, the other risk factors described in this section could
materially reduce cash available from operations or significantly increase our capital expenditures requirements. We may need to raise additional
funds through equity or debt financings in the future in order to meet our operating and capital needs. We may not be able to secure additional
debt or equity financing on favorable terms, or at all, at the time when we need such funding. If we are unable to obtain additional capital when
needed, we may not be able to pursue our growth strategy and our business could suffer. If we raise additional funds through further issuances of
equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of our company,
and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. In addition,
any debt financing that we may obtain in the future could have restrictive covenants relating to our capital raising activities and other financial
and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including
potential acquisitions.
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