XO Communications 2010 Annual Report Download - page 64

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XO Holdings, Inc.
Notes to Consolidated Financial Statements
3. 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, 2010 and 2009 have been calculated based upon
available market information and are as follows (in thousands):
Quoted Prices in Active Markets
(Level 1)
2010 2009
Available-for-sale marketable equity securities ................. $180 $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, 2010 and 2009, (in thousands):
Significant Unobservable Inputs
(Level 3) Total Impairment Losses for the
Year Ended December 31,
2010 2009 2010 2009
LMDS licenses ................ $7,500 $27,500 $(20,000) $(8,282)
The Company performed its annual impairment evaluation of goodwill and indefinite-lived intangible
assets as of October 1, 2010 and determined that the fair value of the LMDS licenses was less than the
carrying value. Accordingly, LMDS licenses with a carrying amount of $27.5 million were written down to
their fair value of $7.5 million, resulting in an impairment charge of $20.0 million. 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 was less than the 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.
4. MARKETABLE SECURITIES
A summary of available-for-sale equity investments is as follows (in thousands):
Cost
Gross Unrealized
Fair ValueGains Losses
December 31, 2010 ................... $195 $ — $15 $ 180
December 31, 2009 ................... $195 $1,125 $— $1,320
The Company’s marketable securities at December 31, 2010 and 2009 consisted of equity securities. All
marketable securities are classified as available-for-sale and are stated at estimated fair value. Unrealized gains
and losses are computed on the basis of average cost and are reported as a separate component of
accumulated other comprehensive income (loss) in stockholders’ equity until realized. Proceeds from the sales
of marketable securities totaled $175.1 million and $0.1 million for the years ended December 31, 2009 and
2008. No marketable securities were sold during the year ended December 31, 2010. The gross realized gains
related to sales of marketable securities were $53.3 million for the year ended December 31, 2009. No gains
were realized related to the sale of marketable securities for the years ended December 31, 2010 and 2008.
There were no material gross realized losses related to the sales of marketable securities for the years ended
December 31, 2010, 2009 and 2008.
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