XO Communications 2010 Annual Report Download - page 67

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XO Holdings, Inc.
Notes to Consolidated Financial Statements
8. UNDERUTILIZED OPERATING LEASES − (continued)
The following table illustrates the activity in underutilized operating lease accruals (in thousands):
Balance as of January 1, 2009....................................... $23,611
Usage, net .................................................... (6,366)
Accretion ..................................................... 2,759
Estimate revisions ............................................... (1,221)
Balance as of December 31, 2009 .................................... $18,783
Usage, net .................................................... (6,098)
Accretion ..................................................... 2,627
Estimate revisions ............................................... (1,785)
Balance as of December 31, 2010 .................................... $13,527
9. ASSET RETIREMENT OBLIGATIONS
The Company has various agreements in which it leases conduit space and pole attachment rights for its
fiber from governmental entities, public utilities and other telecommunications service providers. Additionally,
the Company has its telecommunications and data center equipment in various leased technical facilities. In
many cases, the Company has contractual obligations to remove this equipment at the end of the lease.
Accordingly, the Company has recorded a liability and an asset for the present value of the estimated future
capital expenditures associated with the related asset retirement obligations (‘‘ARO’’). As of December 31,
2010, $5.8 million of the liability was classified as non-current and reported in the Company’s Consolidated
Balance Sheet as Other long-term liabilities. The leases with AROs expire periodically through 2024.
The following table summarizes the activity in the ARO liability (in thousands):
Balance as of January 1, 2009....................................... $8,192
Additions ..................................................... 18
Estimate revisions ............................................... (3,498)
Accretion ..................................................... 458
Balance as of December 31, 2009 .................................... $5,170
Additions ..................................................... 367
Estimate revisions ............................................... (161)
Accretion ..................................................... 465
Balance as of December 31, 2010 .................................... $5,841
10. REDEEMABLE PREFERRED STOCK
Issuance of Class A Convertible Preferred Stock
On August 6, 2004, the Company completed a private placement of 4.0 million shares of its 6% Class A
convertible preferred stock (the ‘‘Preferred Stock Offering’’) for net proceeds of $199.4 million. Affiliates of
Carl C. Icahn, the Chairman of the Company’s Board of Directors and majority shareholder, (the
‘‘Chairman’’), purchased 95% of the preferred shares sold in the Preferred Stock Offering, and an affiliate of
Amalgamated Gadget, L.P., holder of approximately 8% of the Company’s outstanding common stock,
purchased the remaining 5%.
The Preferred Stock Offering was reviewed and approved by a special committee of the Company’s
Board of Directors consisting of three independent directors. The special committee selected its own counsel
and financial advisor. The financial advisor advised the special committee that, subject to specified
qualifications, assumptions and limitations, the material terms of the Class A convertible preferred stock
(‘‘Class A preferred stock’’) were fair to the Company, from a financial point of view, at the time of issuance.
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