XO Communications 2010 Annual Report Download - page 71

XO Holdings, Inc.
Notes to Consolidated Financial Statements
10. REDEEMABLE PREFERRED STOCK − (continued)
preferred stock will vote as a single class together with the holders of common stock and all other shares of
the Company which are granted rights to vote.
As of December 31, 2010, the redemption value of the Class C perpetual preferred stock was
$282.9 million, consisting of the face value and accreted dividends.
Initial Recognition
The Company has classified the Class B convertible preferred stock and Class C perpetual preferred
stock outside of permanent equity, as they are redeemable upon an event that is not solely within the control
of the Company. As such, the Class B convertible preferred stock and Class C perpetual preferred stock were
initially measured at their fair value less issuance costs. The Company is charging the accretion of the
Preferred Stock dividends to Net loss allocable to common shareholders, and increasing the values recorded
of the Class B convertible preferred stock and Class C perpetual preferred stock by the amount of such
dividend accretions.
The fair value of the Class B convertible preferred stock and the Class C perpetual preferred stock
on their date of issuance was less than the amounts of indebtedness extinguished and cash received by
$28.2 million, net of issuance costs. The Company recorded the difference as an increase in additional paid in
capital. The initial fair values of the Class B convertible preferred stock and Class C perpetual preferred stock
are currently not being adjusted to their full redemption amounts (which would otherwise include the accretion
of $30.5 million) as the Company currently does not believe it is probable that these instruments will be
redeemed by their holders. As noted above, redemption at the option of the holders is only permitted when a
change of control event occurs. No such event has occurred, and based upon the facts and circumstances
known to the Company, the Company believes that such an event is not probable of occurring in the
foreseeable future.
11. STOCKHOLDERS’ EQUITY
Warrants
As of December 31, 2010, substantially all of the Company’s warrants expired unexercised.
Earnings (Loss) Per Share
Net income (loss) per common share, basic is computed by dividing net income (loss) allocable to
common shareholders by the weighted average common shares outstanding during the period. Net income
(loss) per common share, diluted is calculated by dividing net income (loss) allocable to common shareholders
by the weighted average common shares outstanding adjusted for the dilutive effect of common stock
equivalents related to stock options, warrants and preferred stock. In periods where the assumed common
stock equivalents for stock options, warrants, and preferred stock are anti-dilutive, they are excluded from the
calculation of diluted weighted average shares.
The table below details the anti-dilutive items that were excluded in the computation of net loss per
common share, diluted for the years ended December 31, (in millions):
2010 2009 2008
Stock options ................................ 6.2 7.4 9.0
Warrants ................................... — 23.7 23.7
Class A preferred stock ......................... — 55.2 56.3
Class B convertible preferred stock ................. 438.2 408.9 381.5
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