XO Communications 2009 Annual Report Download - page 45

Impairment of LMDS Licenses
As a result of our integration of the Nextlink segment into our existing product offerings, we performed an
impairment evaluation of our LMDS licenses as of May 31, 2009. We 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 during 2009. We performed another impairment evaluation during October 2009. Based on the
results of this evaluation, no additional impairment changes were recorded in 2009. There were no
impairments of long-lived assets recognized during 2008 or 2007.
Investment Gain, Net
The net investment gain for 2009 was comprised of a $41.2 million gain from the sale of debt securities, a
$12.1 million gain from the sale of equity securities, a $5.8 million gain related to the settlement agreement
associated with the Company’s holding of Global Crossing debt securities and a $0.9 million gain from the
settlement of claims with ATLT related to the Company’s holdings of Allegiance debt securities.
The net investment gain for 2008 was due to a $35.9 million gain from the settlement with the ATLT and a
$4.4 million gain from the conversion of a non-current asset to an available-for-sale security, partially offset
by a $20.9 million impairment charge for other-than-temporary declines in market value for marketable
securities. Investment gain, net for 2007 primarily resulted from $21.5 million received from the settlement
related to our holdings of Global Crossing debt securities.
The marketable securities balance at December 31, 2009 was $1.3 million. Therefore, investment gains
comparable to those recognized in 2009 and 2008 are not anticipated for 2010.
Interest Expense, Net
Net interest expense was $1.6 million, $21.3 million and $37.7 million, for 2009, 2008 and 2007 respectively.
The decrease in net interest expense over these periods is primarily due to the retirement of all outstanding
debt in July 2008. We retired our long term debt with the issuance of preferred stock and therefore incurred no
related interest expense subsequent to the retirement in 2008. Net interest expense for 2009 primarily relates
to imputed interest under our capital lease agreements and interest on various accruals, partially offset by
capitalized interest.
Interest costs related to internally constructed assets, including our telecommunications networks, are capital-
ized. Total interest expense was offset by capitalized interest of $1.7 million, $2.4 million and $4.5 million,
respectively for 2009, 2008 and 2007.
Capital Expenditures
(dollars in thousands) Dollars % of Revenue
Capital Expenditures
2009 .................................................... $198,974 13.1%
2008 .................................................... $216,958 14.7%
2007 .................................................... $215,182 15.1%
During 2009, we continued to invest in our operations through enhancement and expansion of our network and
service capabilities. The reduction in capital expenditures from 2008 to 2009 primarily relates to improved
capital efficiency on new customer installations, the integration and rationalization of Nextlink, as well as, our
consolidation of switch facilities in 2008 which resulted in capital expenditures not repeated in 2009. Capital
expenditures remained flat between 2008 and 2007 as we continued to invest in network enhancements at a
similar pace as in 2007. We plan to spend between $210.0 million and $240.0 million on capital expenditures
during 2010 for continued investment in our networks, ethernet and IP-based services, expansion into new
markets and continuation of our transformation initiative.
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