XO Communications 2009 Annual Report Download - page 61

Download and view the complete annual report

Please find page 61 of the 2009 XO Communications 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 89

  • 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

In the fourth quarter of 2008, the Company determined that during each period between 2004 and the third
quarter of 2008, it had incorrectly calculated the net present value for its Underutilized operating leases. As a
result, net loss was understated by $1.7 million for 2007. The Company’s Underutilized operating lease
liability was understated by $8.5 million as of December 31, 2007. The Company concluded that the impact of
these adjustments was not material to prior years’ results of operations under the rollover approach. However,
under the iron curtain method, the cumulative underutilized lease adjustments were material to the Company’s
2008 consolidated financial statements. Therefore, the Company recorded the following immaterial corrections
in its previously issued financial statements (in thousands, except per share data):
Prior Adjusted
2007
Underutilized operating lease liability ............................ $ 20,422 $ 28,953
SG&A ................................................... $507,200 $ 508,901
Net loss .................................................. $(115,654) $(117,355)
Accumulated deficit-beginning ................................. $(795,426) $(802,259)
Net loss allocable to common shareholders per common share, basic and
diluted ................................................. $ (0.71) $ (0.72)
4. FAIR VALUE MEASUREMENTS
The carrying amounts reported in the Company’s Consolidated Balance Sheets for cash and cash equivalents,
accounts receivable, accounts payable, accrued liabilities and other liabilities approximate fair value due to the
immediate to short-term maturity of these financial instruments. The estimated fair values of the Company’s
marketable securities at December 31, 2009 have been calculated based upon available market information and
are as follows (in thousands):
Quoted Prices in
Active Markets
(Level 1)
Available-for-sale marketable equity securities ............................. $1,320
The following are the major categories of assets and liabilities measured at fair value on a nonrecurring basis
during the year ended December 31, 2009, (in thousands):
Significant
Unobservable
Inputs
(Level 3)
Total Impairment
Losses for the
Year Ended
December 31,
2009
LMDS licenses ........................................ $27,500 $(8,282)
As a result of integrating the Company’s Nextlink segment into its existing product offerings, the Company
performed an impairment evaluation of its LMDS licenses as of May 31, 2009. The Company determined that
the fair value of the LMDS licenses were less than their carrying value. Accordingly,LMDS licenses with a
carrying amount of $35.8 million were written down to their fair value of $27.5 million, resulting in an
impairment charge of $8.3 million. The fair value of the licenses was determined using a discounted cash flow
model. Cash flow projections and assumptions are based on a combination of the Company’s historical
performance and trends, the Company’s business plans and management’s estimate of future performance.
Other assumptions include the discount rate, costs to build and operate the network and the Company’s
projected growth rate.
57