Earthlink 2015 Annual Report Download - page 67

Download and view the complete annual report

Please find page 67 of the 2015 Earthlink annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

Table of Contents
EARTHLINK HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
EarthLink Holdings Corp. (“EarthLink” or the “Company”), together with its consolidated subsidiaries, is a leading managed network, security and cloud services
provider to business and residential customers in the United States. The Company provides a broad range of data, voice and managed network services to retail and
wholesale business customers. The Company also provides nationwide Internet access and related value-added services to residential customers. The Company
operates an extensive network including more than 29,000 route fiber miles and 90 metro fiber rings that provide data and voice IP service coverage across more
than 90 percent of the United States. The Company operates four reportable segments aligned around distinct customer categories: Enterprise/Mid-Market, Small
Business, Carrier/Transport and Consumer. For further information concerning the Company’s reportable segments, see Note 16, “Segment Information.”
2. Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements of EarthLink include the accounts of its wholly-owned subsidiaries. All significant intercompany transactions have been
eliminated.
Reclassifications
Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. Specifically, we reclassified $11.0 million
of debt issuance costs from other long-term assets to a direct deduction of long-term debt and capital lease obligations and $0.8 million of net deferred tax
liabilities from deferred income taxes, net, to long-term deferred income taxes, net, in the Consolidated Balance Sheet as of December 31, 2014 in connection with
the adoption of new accounting guidance. See further discussion later in this Footnote 2. We also reclassified $2.1 million of loss on extinguishment of debt from
interest expense and other, net, to loss on extinguishment of debt in the Consolidated Statement of Comprehensive Loss for the year ended December 31, 2013.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the consolidated
financial statements and accompanying footnotes. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates,
including, but not limited to, those related to the allowance for doubtful accounts; the useful lives of intangible assets and property and equipment; the use,
recoverability, and/or realizability of certain assets, including deferred tax assets and acquired intangible assets; facility exit and restructuring liabilities; revenue
reserves for billings to other carriers; expected results of disputed vendor charges for cost of revenues; stock-based compensation expense; unrecognized tax
benefits; and contingent liabilities. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable.
Business Combinations
The Company accounts for business combinations by recognizing all of the assets acquired and liabilities assumed at the acquisition date fair value. Goodwill as of
the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities
assumed. While the Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and
liabilities assumed at the acquisition date, the Company's estimates are inherently uncertain and subject to refinement. As a result, during the measurement period,
which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding
offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments arising from new facts and circumstances are recorded to the
Consolidated Statements of Comprehensive Loss.
64