Earthlink 2013 Annual Report Download - page 81

Table of Contents EARTHLINK HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Interest Expense and Other, Net
Interest expense and other, net, is comprised of interest expense incurred on the Company's debt and capital leases; amortization of debt
issuance costs, debt premiums and debt discounts; interest earned on the Company's cash, cash equivalents and marketable securities; and other
miscellaneous income and expense items. The following table presents the Company's interest expense and other, net, during the years ended
December 31, 2011, 2012 and 2013 :
Contingencies
The Company is party to various legal proceedings and other disputes arising in the normal course of business, including, but not
limited to, regulatory audits, trademark and patent infringement, billing disputes, rights of access, tax, consumer protection, employment and
tort. The Company accrues for such matters when it is both probable that a liability has been incurred and the amount of the loss can be
reasonably estimated. Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the
range is more likely than any other amount, the Company accrues at the low end of the range. The Company reviews its accruals each reporting
period.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between
the financial reporting and tax bases of existing assets and liabilities. Deferred tax assets and liabilities are measured using tax rates in effect for
the year in which the temporary differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amounts of net
deferred tax assets if it is "more-likely-than-
not" that those assets will not be realized. EarthLink considers many factors when assessing the
likelihood of future realization, including the Company's recent cumulative earnings experience by taxing jurisdiction, expectations of future
taxable income, prudent and feasible tax planning strategies that are available, the carryforward periods available to the Company for tax
reporting purposes and other relevant factors.
The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a
tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax (provision) benefit in the
Consolidated Statements of Comprehensive Income (Loss).
Earnings per Share
Basic earnings per share represents net income (loss) divided by the weighted average number of common shares outstanding during the
reported period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock,
including stock options, restricted stock units and convertible debt (collectively "Common Stock Equivalents"), were exercised or converted into
common stock. The dilutive effect of outstanding stock options, restricted stock units and convertible debt is reflected in diluted earnings per
share by application of the treasury stock method. In applying the treasury stock method for stock-
based compensation arrangements, the
assumed proceeds are computed as the sum of the amount the employee must pay upon exercise, the amount of compensation cost attributed to
future services and not yet recognized and the amount of excess tax benefits, if any, that would be credited to additional paid-
in capital assuming
exercise of the awards.
Comprehensive Income (Loss)
Comprehensive income (loss) as presented in the Consolidated Statements of Comprehensive Income (Loss) for the years ended
December 31, 2011, 2012 and 2013 includes unrealized gains and losses, net of tax, on certain investments classified as available-for-sale.
Year Ended December 31,
2011 2012 2013
(in thousands)
Interest expense
$
74,949
$
64,331
$
60,495
Interest income
(4,678
)
(2,076
)
(84
)
Other, net
369
1,161
275
Interest expense and other, net
$
70,640
$
63,416
$
60,686