XO Communications 2009 Annual Report Download - page 47

Barberry Corp., High River Limited Partnership and ACF Industries Holding Corp., entities affiliated with our
Chairman (together, the “Purchasers”), pursuant to which the Purchasers bought 555,000 shares of our Class B
convertible preferred stock for $555.0 million and 225,000 shares of our Class C perpetual preferred stock for
$225.0 million. The terms of the Stock Purchase Agreement were negotiated on behalf of XOH by a special
committee of the Board of Directors that was established on September 28, 2007 to assist us in evaluating
financing and other strategic alternatives. See Note 11 to our consolidated financial statements in Item 8 of
this Annual Report for additional details regarding the issuance of the Class B convertible preferred stock and
Class C perpetual preferred stock.
A portion of the purchase price for our Class B convertible preferred stock was paid through the $450.8 million
retirement of all of the Purchasers’ right, title and interest in our senior indebtedness. This amount represents
all indebtedness held by the Purchasers and their affiliates of $372.5 million in principal and accrued interest
under the Credit Facility and $78.3 million in principal and accrued interest for the Promissory Note. The
remainder of the purchase price for the Class B convertible preferred stock and all of the Class C perpetual
preferred stock was paid in cash. We used $22.3 million of the proceeds from the sale of the Class B
convertible and Class C perpetual preferred stock to retire in full the remainder of our indebtedness (including
accrued interest) under our Credit Facility, none of which was owed to the Chairman or any affiliates thereof.
Cash Flow
As of December 31, 2009, our balance of cash and cash equivalents was $363.2 million, an increase of
$106.4 million from December 31, 2008. The primary reason for this increase was proceeds received from the
sale of available-for-sale investments. We continued to focus on enhancing our next generation IP-based
network and customer driven success-based capital to grow revenue. Cash outflow for strategic, growth-related
investments during 2009 exceeded cash inflow from operations during the same period. We expect our growth-
related investment in network and services will continue to outpace our cash inflows from operations during
2010.
The following table summarizes the components of our cash flows for the years ended December 31 (in
thousands):
2009 2008 2007
Cash provided by operating activities ................... $148,541 $ 71,614 $ 139,534
Cash used in investing activities ....................... $(16,827) $(293,596) $(193,062)
Cash (used in) provided by financing activities ............ $(25,302) $ 370,654 $ (6,960)
Operating Activities. Cash provided by operating activities increased $76.9 million from 2008 to 2009. This
increase principally resulted from a $37.6 million year over year decrease in loss from operations and a
$34.4 million improvement in working capital cash flow from 2008 to 2009.
Cash provided by operating activities decreased $67.9 million from 2007 to 2008 primarily due to changes in
accounts receivable, other assets and accrued liabilities. The increase in cash used for accounts receivable
mainly resulted from increased revenue as well as the impact of significant collections in 2007 of customer
receivables previously reserved. This cash flow benefit was not realized in 2008 as a similar collections effort
was not deemed necessary in 2008. The increase in cash used for other assets mainly resulted from the timing
of our payroll funding as of December 31, 2008. Specifically, we shifted cash into other assets as of
December 31, 2008 as we funded our payroll account; however, our liability was not settled until January 2009.
The increase in cash used for operating activities from accrued liabilities principally resulted from timing of
payments.
Investing Activities. The $276.8 million decrease in cash used in investing activities primarily resulted from
proceeds of $180.9 million received from the sale of available-for-sale investments which were purchased in
2008 for $137.2 million. 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. Also
improving cash used in investing activities was an $18.0 million year over year reduction in capital
expenditures. These decreases in cash used in investing activities were partially offset by the $56.6 million
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