XO Communications 2009 Annual Report Download - page 48

decrease in investment recoveries. We continued to focus on investment in our technology infrastructure,
operations, and other areas of our business to lay the foundation for our long term strategic plan, which seeks
to improve operational efficiency, accelerate revenue growth and significantly shift our revenue mix.
For 2008, cash used in investing activities increased primarily due to the purchase of $137.2 million of
marketable securities, offset partially by the $35.9 million increase in investment recoveries. In 2008, we
received $57.4 million from the settlement related to Allegiance debt securities, while in 2007 we received
$21.5 million from a settlement related to Global Crossing debt securities. Investment in capital expenditures
remained relatively consistent from the prior year at $217.0 million for 2008.
We expect that our capital expenditures for 2010 will be between $210 million and $240 million. Without
these expenditures, we believe it would be difficult to continue to effectively compete against the ever
increasing pressures from the ILECs as well as wireless and cable providers.
Financing Activities. The primary use of cash for financing activities in 2009 was for the redemption of a
portion of our Class A preferred stock for $18.4 million. In addition payments on our capital leases were
$6.9 million during 2009.
For 2008, cash provided by financing activities increased substantially due to proceeds from the sale of
preferred stock in July 2008, totaling $329.2 million and the $75.0 million proceeds from the Promissory Note
in March 2008. During 2008 our Credit Facility and Promissory Note were repaid in full by the issuance of
the Class B convertible preferred stock in a non-cash transaction and a cash payment of $22.3 million.
Capital Requirements. Our capital requirements in 2010 include investments necessary to support revenue
growth and infrastructure to continue to provide our customers with the highest levels of service, quality and
performance. Our 2010 operating plan includes capital expenditure amounts for continued investment in, and
enhancement of, our (i) metro and long-haul fiber optic network, (ii) new markets, (iii) ethernet and IP-based
services and (iv) to support our transformation initiative.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2009 (in millions):
Total
Less
than 1 year 1-3 Years 3-5 Years
More than
5 years
Capital lease obligations ..................... $ 22.4 $ 5 .8 $ 4 .7 $ 3 .0 $ 8 .9
Operating lease obligations ................... 297.6 64.0 106.4 78.8 48.4
Purchase obligations
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....................... 355.8 81.5 120.1 68.7 85.5
Redemption of Class A preferred stock .......... 258.8 258.8 — — —
Total contractual obligations .................. $934.6 $410.1 $231.2 $150.5 $142.8
1
Includes various contractual obligations with other telecommunications service providers associated with maintenance costs, software
licenses and use fees to enable us to provide high quality telecommunications services to our customers under the most cost efficient
rates.
Off-Balance Sheet Arrangements
We are not currently engaged in the use of off-balance sheet derivative financial instruments to hedge or
partially hedge interest rate exposure nor do we maintain any other off-balance sheet arrangements for the
purpose of credit enhancement, hedging transactions, or other financial or investment purposes.
Recently Issued Accounting Pronouncements
In September 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-13 Revenue Recognition
(Topic 605) — Multiple Deliverable Revenue Arrangements. The amendment addresses how revenue should be
allocated to separate elements of a multiple deliverable revenue arrangement which could impact the timing of
revenue recognition. The amendment will be effective prospectively for revenue arrangements entered into or
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