UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 or
 o
    
    TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number: 0-30900
 XO HOLDINGS, INC.
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    54-1983517
(I.R.S. Employer Identification No.)
 
 
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ




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XO HOLDINGS, INC.
Table of Contents
 PagePART I  FINANCIAL INFORMATIONITEM 1. Financial StatementsCondensed Consolidated Balance Sheets
    
    
    1Condensed Consolidated Statements of Operations
    
    
    2Condensed Consolidated Statements of Cash Flows
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4ITEM 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    15ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27ITEM 4. Controls and Procedures
    
    
    28PART II  OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    29ITEM 1A. Risk Factors
    
    
    30ITEM 6. Exhibits
    
    
    30




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 XO Holdings, Inc.
 
 Condensed Consolidated Balance Sheets
 March 31, 2009
    
    
    December 31, 2008(Unaudited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    283,638
    
    
    $
    256,747Marketable securities
    
    
    107,683
    
    
    
    117,148Accounts receivable, net of allowance for doubtful
accounts of $8,748 and $9,727 respectively
    
    
    145,729
    
    
    
    152,622Prepaid expenses and other current assets
    
    
    35,862
    
    
    
    41,200Total current assets
    
    
    572,912
    
    
    
    567,717Property and equipment, net
    
    
    725,772
    
    
    
    724,404Intangible assets, net
    
    
    53,515
    
    
    
    53,515Other assets
    
    
    42,602
    
    
    
    30,348Total Assets
    
    $
    1,394,801
    
    
    $
    1,375,984LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS DEFICITCurrent LiabilitiesAccounts payable
    
    $
    100,524
    
    
    $
    93,547Accrued liabilities
    
    
    207,152
    
    
    
    221,356Total current liabilities
    
    
    307,676
    
    
    
    314,903Deferred revenue, less current portion
    
    
    50,123
    
    
    
    29,715Other liabilities
    
    
    50,683
    
    
    
    55,215Total Liabilities
    
    
    408,482
    
    
    
    399,833Class A convertible preferred stock
    
    
    263,875
    
    
    
    259,948Class B convertible preferred stock
    
    
    583,808
    
    
    
    573,795Class C perpetual preferred stock
    
    
    206,446
    
    
    
    200,877Commitments and contingenciesStockholders DeficitPreferred stock: par value $0.01 per share, 200,000,000
shares authorized; 4,000,000 shares of Class A convertible
preferred
stock issued and outstanding; 555,000 shares of Class B
convertible preferred stock issued and outstanding; 225,000
shares
of Class C perpetual preferred stock issued and outstanding
    
    
    
    
    
    
    Warrants, common stock and additional paid in capital: par value $0.01 per share, 1,000,000,000 shares authorized;
182,075,035 shares issued and outstanding
    
    
    922,015
    
    
    
    941,270Accumulated other comprehensive income (loss)
    
    
    9,538
    
    
    
    (4,844
    )Accumulated deficit
    
    
    (999,363
    )
    
    
    (994,895
    )Total Stockholders Deficit
    
    
    (67,810
    )
    
    
    (58,469
    )Total Liabilities, Redeemable Preferred Stock and Stockholders
Deficit
    
    $
    1,394,801
    
    
    $
    1,375,984
  1




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XO Holdings, Inc.
 
 Condensed Consolidated Statements of Operations
(Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Revenue
    
    $
    377,825
    
    
    $
    361,149Costs and expensesCost of service (exclusive of depreciation and amoritzation)
    
    
    220,004
    
    
    
    228,344Selling, general and administrative
    
    
    129,964
    
    
    
    127,799Depreciation and amortization
    
    
    43,396
    
    
    
    45,529Loss on write-down of assets
    
    
    1,515
    
    
    
    46Total costs and expenses
    
    
    394,879
    
    
    
    401,718Loss from operations
    
    
    (17,054
    )
    
    
    (40,569
    )Interest income
    
    
    3,907
    
    
    
    878Investment gain, net
    
    
    9,757
    
    
    
    4,121Interest expense, net
    
    
    (786
    )
    
    
    (8,750
    )Other income
    
    
    
    
    
    
    250Net loss before income taxes
    
    
    (4,176
    )
    
    
    (44,070
    )Income tax expense
    
    
    (292
    )
    
    
    (342
    )Net loss
    
    
    (4,468
    )
    
    
    (44,412
    )Preferred stock accretion
    
    
    (19,508
    )
    
    
    (3,701
    )Net loss allocable to common shareholders
    
    $
    (23,976
    )
    
    $
    (48,113
    )Net loss allocable to common shareholders per common
share, basic and diluted
    
    $
    (0.13
    )
    
    $
    (0.26
    )Weighted average shares, basic and diluted
    
    
    182,075,035
    
    
    
    182,075,035
  2




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##### 



XO Holdings, Inc.
 
 Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended March 31,2009
    
    
    2008OPERATING ACTIVITIES:Net loss
    
    $
    (4,468
    )
    
    $
    (44,412
    )Adjustments to reconcile net loss to net cash
provided by operating activitiesDepreciation and amortization
    
    
    43,396
    
    
    
    45,529Accrued interest converted to long term debt
    
    
    
    
    
    
    8,993Provision for doubtful accounts
    
    
    3,278
    
    
    
    2,723Stock-based compensation
    
    
    253
    
    
    
    483Gain from investments
    
    
    (9,757
    )
    
    
    (4,121
    )Loss on write-down of assets
    
    
    1,515
    
    
    
    46Changes in assets and liabilitiesAccounts receivable
    
    
    3,615
    
    
    
    (6,551
    )Other assets
    
    
    (8,092
    )
    
    
    (23,543
    )Accounts payable
    
    
    967
    
    
    
    14,396Accrued liabilities
    
    
    1,946
    
    
    
    15,354Net cash provided by operating activities
    
    
    32,653
    
    
    
    8,897INVESTING ACTIVITIES:Capital expenditures
    
    
    (40,314
    )
    
    
    (65,305
    )Proceeds from fixed asset sales
    
    
    45
    
    
    
    949Proceeds
from the sale of available-for-sale marketable securities
    
    
    34,781
    
    
    
    Net cash used in investing activities
    
    
    (5,488
    )
    
    
    (64,356
    )FINANCING ACTIVITIES:Proceeds from issuance of related party note
    
    
    
    
    
    
    75,000Financing costs
    
    
    
    
    
    
    (1,007
    )Payments on capital leases
    
    
    (274
    )
    
    
    (535
    )Net cash (used in) provided by financing activities
    
    
    (274
    )
    
    
    73,458Net increase in cash and cash equivalents
    
    
    26,891
    
    
    
    17,999Cash and cash equivalents, beginning of period
    
    
    256,747
    
    
    
    108,075Cash and cash equivalents, end of period
    
    $
    283,638
    
    
    $
    126,074SUPPLEMENTAL DATA:Cash paid for interest
    
    $
    393
    
    
    $
    231Cash paid for income taxes
    
    $
    58
    
    
    $
    46
  3




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XO Holdings, Inc.
 
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 a. Organization
  b. Basis of Presentation
   4




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##### 



c. Transaction Based Taxes and Other Surcharges
  d. New Accounting Pronouncements
  Interim Disclosures about Fair
Value of Financial Instruments, Disclosures about Fair Values of Financial Instruments, Interim Financial Reporting,
 Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly Fair Value Measurements,
 5




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##### 



Recognition and Presentation of
Other-Than-Temporary Impairments
 Determining Whether
an Instrument (or Embedded Feature) is Indexed to an Entitys Own Stock Accounting for Derivative Instruments and Hedging Activities
 e. Reclassifications
  2. COMPREHENSIVE LOSS
  Three Months Ended March 31,2009
    
    
    2008Net loss
    
    $
    (4,468
    )
    
    $
    (44,412
    )Other comprehensive income:Net unrealized gain (loss) on investments
    
    
    14,382
    
    
    
    (1,936
    )Comprehensive
income (loss)
    
    $
    9,914
    
    
    $
    (46,348
    )
 3. PRIOR PERIOD ADJUSTMENTS
  6




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##### 



Three Months Ended March 31, 2008Prior
    
    AdjustedUnderutilized operating lease liability
    
    $
    18,078
    
    
    $
    28,082Selling, general and administrative
    
    $
    126,327
    
    
    $
    127,799Net loss
    
    $
    (42,940
    )
    
    $
    (44,412
    )Accumulated deficit-beginning
    
    $
    (911,080
    )
    
    $
    (919,614
    )Net loss allocable to common shareholders per
common share, basic and diluted
    
    $
    (0.26
    )
    
    $
    (0.26
    )
 4. MARKETABLE SECURITIES
  Quoted Prices inActive Markets(Level 1)Available-for-sale
marketable securitiesEquity securities
    
    $
    10,647Corporate debt securities
    
    
    97,036Total marketable securities
    
    $
    107,683
   7




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##### 



5. PROPERTY AND EQUIPMENT
  March 31, 2009
    
    
    December 31, 2008Telecommunications networks and acquired bandwith
    
    $
    1,253,923
    
    
    $
    1,211,894Furniture, fixtures, equipment and other
    
    
    376,791
    
    
    
    371,5611,630,714
    
    
    
    1,583,455Less: accumulated depreciation
    
    
    (977,613
    )
    
    
    (931,607
    )653,101
    
    
    
    651,848Construction-in-progress, parts and equipment
    
    
    72,671
    
    
    
    72,556Property and equipment, net
    
    $
    725,772
    
    
    $
    724,404
  6. EARNINGS (LOSS) PER SHARE
   Three Months Ended 
March 31,2009
    
    2008Stock options
    
    
    8.8
    
    
    
    9.6Warrants
    
    
    23.7
    
    
    
    23.7Class A preferred stock
    
    
    57.1
    
    
    
    53.8Class B convertible preferred stock
    
    
    388.1
    
    
    
    
 8




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##### 



7. INCOME TAXES
  Open Tax Years
  8. RELATED PARTY TRANSACTIONS
  At March 31, 20091
    
    At December 31, 20082Outstanding Common Stock
    
    Greater than 50%
    
    Greater than 50%Series A, B and C Warrants
    
    Greater than 40%
    
    Greater than 40%Class A Preferred Stock 3
    
    Greater than 70%
    
    Greater than 70%Class B Convertible Preferred Stock
    
    
    100
    %
    
    
    100
    %Class C Perpetual Preferred Stock
    
    
    100
    %
    
    
    100
    %
 
 1
    
    As reported in the April 1, 2009 Form 4 for the
Chairman and other parties to such joint filing, and the April 1, 2009
Amendment No. 17 to Schedule 13D filed by the Chairman and other parties to such joint
filing.2
    
    As reported in the January 5, 2009 Form 4 for the
Chairman and other parties to such joint filing and the January 5, 2009
Amendment No. 15 to Schedule 13D filed by the Chairman  and other parties to such joint
filing.3
    
    The terms of our Class A preferred stock provide that on January 15, 2010, we redeem
in cash and in a manner provided for therein all of the shares of Class A Preferred Stock then
outstanding at a redemption price equal to 100% of its liquidation preference. On February 5, 2009,
ACF Holding, an affiliate of our Chairman, agreed to extend the date on which we would be required
to redeem the shares of Class A Preferred Stock held by ACF Holding from January 15, 2010 to a date
no later than April 15, 2010. ACF Holding is the record holder of 3,096,549 shares of Class A
Preferred Stock (the ACF Holding Shares) which represent 77.4% of the outstanding shares of the
Class A Preferred Stock. The extension will not affect the redemption date of any of the shares of
Class A Preferred Stock other than the ACF Holding Shares.  9




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9. SEGMENT INFORMATION
   XO Communications
  10




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##### 



Nextlink
   Three Months Ended March 31, 2009IntercompanyXOC
    
    
    Nextlink
    
    
    Elimination
    
    
    ConsolidatedRevenue from external customers
    
    $
    377,465
    
    
    $
    360
    
    
    $
    
    
    
    $
    377,825Inter-segment revenue
    
    
    396
    
    
    
    902
    
    
    
    (1,298
    )
    
    
    Total revenue
    
    $
    377,861
    
    
    $
    1,262
    
    
    $
    (1,298
    )
    
    $
    377,825Depreciation and amortization
    
    $
    42,873
    
    
    $
    523
    
    
    $
    
    
    
    
    43,396Loss on write-down of assets
    
    $
    1,515
    
    
    $
    
    
    
    $
    
    
    
    
    1,515Loss from operations
    
    $
    (14,906
    )
    
    $
    (2,148
    )
    
    $
    
    
    
    
    (17,054
    )Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,907Investment gain, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,757Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (786
    )Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (292
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,468
    )
 11




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Three Months Ended March 31, 2008IntercompanyXOC
    
    
    Nextlink
    
    
    Elimination
    
    
    ConsolidatedRevenue from external customers
    
    $
    360,560
    
    
    $
    589
    
    
    $
    
    
    
    $
    361,149Inter-segment revenue
    
    
    82
    
    
    
    283
    
    
    
    (365
    )
    
    
    Total revenue
    
    $
    360,642
    
    
    $
    872
    
    
    $
    (365
    )
    
    $
    361,149Depreciation and amortization
    
    $
    45,326
    
    
    $
    203
    
    
    $
    
    
    
    
    45,529Loss on write-down of assets
    
    $
    46
    
    
    $
    
    
    
    $
    
    
    
    
    46Loss from operations
    
    $
    (37,312
    )
    
    $
    (3,257
    )
    
    $
    
    
    
    
    (40,569
    )Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    878Investment gain, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,121Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,750
    )Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (342
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (44,412
    )
  XOC
    
    Nextlink
    
    Consolidated2009
    
    $
    38,604
    
    
    $
    1,710
    
    
    $
    40,3142008
    
    $
    63,366
    
    
    $
    1,939
    
    
    $
    65,305
  XOC
    
    Nextlink
    
    ConsolidatedMarch 31, 2009
    
    $
    1,339,962
    
    
    $
    54,839
    
    
    $
    1,394,801December 31, 2008
    
    $
    1,322,891
    
    
    $
    53,093
    
    
    $
    1,375,984
 10. COMMITMENTS AND CONTINGENCIES
  12




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Metro Nashville
  Nashville Electric Service
  13




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##### 



Choice Tel
  City of Memphis Franchise Fees
 BellSouth vs. City of Memphis
 11.
SUBSEQUENT EVENTS
  14




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Cautionary Language Concerning Forward-Looking Statements
 The statements contained in this Quarterly Report on Form 10-Q that are not historical facts are
forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act
of 1995, that involve risks and uncertainties. These statements can be identified by the use of
words such as anticipate, believe, estimate, expect, plan, intend, can, may,
could or other comparable words. Our forward-looking statements are based on currently available
operational, financial and competitive information and managements current expectations, estimates
and projections. These forward-looking statements include:
 
    
    expectations regarding revenue, expenses, capital expenditures and financial position in
future periods;
    
    our ability to broaden our customer reach and expand our market share;
    
    pursuit of growth opportunities; and
    
    the necessity of obtaining future financing to fund our business plan and repay our
scheduled obligations.
 Readers are cautioned that these forward-looking statements are only predictions and are subject to
a number of both known and unknown risks and uncertainties. Should one or more of these risks or
uncertainties materialize, or should our underlying assumptions prove incorrect, our actual results
in future periods may differ materially from the future results, performance, and/or achievements
expressed or implied in this document. These risks include any failure by us to:
 
    
    generate funds from operations sufficient to meet our cash requirements and execute our
business strategy;
    
    prevail in our legal proceedings;
    
    increase the volume of traffic on our network;
    
    develop a market for our fixed wireless licenses; and
    
    achieve and maintain market penetration and revenue levels given the highly competitive
nature of the telecommunications industry.
 For a detailed discussion of risk factors affecting our business and operations, see Item 1A, Risk
Factors in our 2008 Annual Report. We undertake no obligation to update any forward-looking
statements, whether as a result of new information, future events or otherwise. These
forward-looking statements should not be relied on as representing our estimates or views as of any
subsequent date.
 15




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Executive Summary
      16




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##### 



Critical Accounting Policies and Estimates
   17




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##### 



Results of Operations
  Three Months Ended March 31,% of
    
    
    
    
    
    
    % ofConsolidated
    
    
    
    
    
    
    Consolidated
    
    
    Change2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    Dollars
    
    
    PercentRevenue
    
    $
    377,825
    
    
    
    100.0
    %
    
    $
    361,149
    
    
    
    100.0
    %
    
    $
    16,676
    
    
    
    4.6
    %Costs and expenses:Cost of service*
    
    
    220,004
    
    
    
    58.2
    %
    
    
    228,344
    
    
    
    63.2
    %
    
    
    (8,340
    )
    
    
    -3.7
    %Selling, general and administrative
    
    
    129,964
    
    
    
    34.4
    %
    
    
    127,799
    
    
    
    35.4
    %
    
    
    2,165
    
    
    
    1.7
    %Depreciation and amortization
    
    
    43,396
    
    
    
    11.5
    %
    
    
    45,529
    
    
    
    12.6
    %
    
    
    (2,133
    )
    
    
    -4.7
    %Loss on write-down of assets
    
    
    1,515
    
    
    
    0.4
    %
    
    
    46
    
    
    nm
    
    
    
    1,469
    
    
    
    3193.5
    %Total costs and expenses
    
    
    394,879
    
    
    
    104.5
    %
    
    
    401,718
    
    
    
    111.2
    %
    
    
    (6,839
    )
    
    
    -1.7
    %Loss from operations
    
    
    (17,054
    )
    
    
    -4.5
    %
    
    
    (40,569
    )
    
    
    -11.2
    %
    
    
    (23,515
    )
    
    
    -58.0
    %Interest income
    
    
    3,907
    
    
    
    1.0
    %
    
    
    878
    
    
    
    0.2
    %
    
    
    3,029
    
    
    
    345.0
    %Investment gain, net
    
    
    9,757
    
    
    
    2.6
    %
    
    
    4,121
    
    
    
    1.1
    %
    
    
    5,636
    
    
    
    136.8
    %Interest expense, net
    
    
    (786
    )
    
    
    -0.2
    %
    
    
    (8,750
    )
    
    
    -2.4
    %
    
    
    (7,964
    )
    
    
    -91.0
    %Other income
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    0.1
    %
    
    
    (250
    )
    
    
    -100.0
    %Net loss before income taxes
    
    
    (4,176
    )
    
    
    -1.1
    %
    
    
    (44,070
    )
    
    
    -12.2
    %
    
    
    (39,894
    )
    
    
    -90.5
    %Income tax expense
    
    
    (292
    )
    
    
    -0.1
    %
    
    
    (342
    )
    
    
    -0.1
    %
    
    
    (50
    )
    
    
    -14.6
    %Net loss
    
    
    (4,468
    )
    
    
    -1.2
    %
    
    
    (44,412
    )
    
    
    -12.3
    %
    
    
    (39,944
    )
    
    
    -89.9
    %Preferred stock accretion
    
    
    (19,508
    )
    
    
    -5.1
    %
    
    
    (3,701
    )
    
    
    -1.0
    %
    
    
    15,807
    
    
    
    427.1
    %Net loss allocable to common
shareholders
    
    $
    (23,976
    )
    
    
    -6.3
    %
    
    $
    (48,113
    )
    
    
    -13.3
    %
    
    $
    (24,137
    )
    
    
    -50.2
    %
 
 *
    
    exclusive of depreciation and
amortizationnm  not meaningful Revenue
  18




---



##### 



Three Months Ended March 31,% of
    
    
    
    
    
    
    % of
    
    
    Change2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    Dollars
    
    
    PercentCore servicesBroadband
    
    $
    189,455
    
    
    
    50.2
    %
    
    $
    153,487
    
    
    
    42.5
    %
    
    $
    35,968
    
    
    
    23.4
    %Integrated/Voice
    
    
    73,747
    
    
    
    19.5
    %
    
    
    85,939
    
    
    
    23.8
    %
    
    
    (12,192
    )
    
    
    -14.2
    %Total core services
    
    
    263,202
    
    
    
    69.7
    %
    
    
    239,426
    
    
    
    66.3
    %
    
    
    23,776
    
    
    
    9.9
    %Legacy/TDM services
    
    
    114,623
    
    
    
    30.3
    %
    
    
    121,723
    
    
    
    33.7
    %
    
    
    (7,100
    )
    
    
    -5.8
    %Total revenue
    
    $
    377,825
    
    
    
    100.0
    %
    
    $
    361,149
    
    
    
    100.0
    %
    
    $
    16,676
    
    
    
    4.6
    %
 Core Services.
   Legacy/TDM Services.
 19




---



##### 



Cost of Service
   Three Months Ended March 31,% of
    
    
    
    
    
    
    % of
    
    
    Change2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    Dollars
    
    
    PercentTelecommunications services
    
    $
    158,888
    
    
    
    42.0
    %
    
    $
    164,692
    
    
    
    45.6
    %
    
    $
    (5,804
    )
    
    
    -3.5
    %Network operations
    
    
    49,389
    
    
    
    13.1
    %
    
    
    47,990
    
    
    
    13.3
    %
    
    
    1,399
    
    
    
    2.9
    %Pass-through taxes
    
    
    11,727
    
    
    
    3.1
    %
    
    
    15,662
    
    
    
    4.3
    %
    
    
    (3,935
    )
    
    
    -25.1
    %Total cost of services
    
    $
    220,004
    
    
    
    58.2
    %
    
    $
    228,344
    
    
    
    63.2
    %
    
    $
    (8,340
    )
    
    
    -3.7
    %
  20




---



##### 



Selling, General and Administrative
  Interest Income
  Investment Gain, Net
  21




---



##### 



Interest Expense, Net
  Capital Expenditures
 Three Months Ended March 31,(dollars in thousands)
    
    Dollars
    
    % of Revenue2009
    
    $
    40,314
    
    
    
    10.7
    %2008
    
    $
    65,305
    
    
    
    18.1
    %
  Comparison of Segment Financial Results
  22




---



##### 



XO Communications
  Three Months Ended March 31,% of
    
    
    
    
    
    
    % ofXOC
    
    
    
    
    
    
    XOC
    
    
    Change2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    Dollars
    
    
    PercentRevenue from external customers
    
    $
    377,465
    
    
    
    99.9
    %
    
    $
    360,560
    
    
    
    99.9
    %
    
    $
    16,905
    
    
    
    4.7
    %Inter-segment revenue
    
    
    396
    
    
    
    0.1
    %
    
    
    82
    
    
    
    0.1
    %
    
    
    314
    
    
    
    382.9
    %Total revenue
    
    
    377,861
    
    
    
    100.0
    %
    
    
    360,642
    
    
    
    100.0
    %
    
    
    17,219
    
    
    
    4.8
    %Costs and expensesCost of service*
    
    
    219,885
    
    
    
    58.2
    %
    
    
    227,038
    
    
    
    63.0
    %
    
    
    (7,153
    )
    
    
    -3.2
    %Selling, general and administrative
    
    
    128,494
    
    
    
    34.0
    %
    
    
    125,544
    
    
    
    34.8
    %
    
    
    2,950
    
    
    
    2.3
    %Depreciation and amortization
    
    
    42,873
    
    
    
    11.3
    %
    
    
    45,326
    
    
    
    12.5
    %
    
    
    (2,453
    )
    
    
    -5.4
    %Loss on write-down of assets
    
    
    1,515
    
    
    
    0.4
    %
    
    
    46
    
    
    nm
    
    
    
    1,469
    
    
     nmTotal cost and expenses
    
    
    392,767
    
    
    
    103.9
    %
    
    
    397,954
    
    
    
    110.3
    %
    
    
    (5,187
    )
    
    
    -1.3
    %Segment loss
    
    $
    (14,906
    )
    
    
    -3.9
    %
    
    $
    (37,312
    )
    
    
    -10.3
    %
    
    $
    22,406
    
    
    
    -60.0
    %Capital expenditures
    
    $
    38,604
    
    
    
    10.2
    %
    
    $
    63,366
    
    
    
    17.6
    %
    
    $
    (24,762
    )
    
    
    -39.1
    %
 
 *
    
    exclusive of depreciation and amortizationnm  not meaningful  Nextlink
  Three Months Ended March 31,% of
    
    
    
    
    
    
    % ofNextlink
    
    
    
    
    
    
    Nextlink
    
    
    Change2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    Dollars
    
    
    PercentRevenue from external customers
    
    $
    360
    
    
    
    28.5
    %
    
    $
    589
    
    
    
    67.5
    %
    
    $
    (229
    )
    
    
    -38.9
    %Inter-segment revenue
    
    
    902
    
    
    
    71.5
    %
    
    
    283
    
    
    
    32.5
    %
    
    
    619
    
    
    
    218.7
    %Total revenue
    
    
    1,262
    
    
    
    100.0
    %
    
    
    872
    
    
    
    100.0
    %
    
    
    390
    
    
    
    44.7
    %Costs and expensesCost of service*
    
    
    1,405
    
    
    
    111.3
    %
    
    
    1,671
    
    
    
    191.6
    %
    
    
    (266
    )
    
    
    -15.9
    %Selling, general and
administrative
    
    
    1,482
    
    
    
    117.4
    %
    
    
    2,255
    
    
    
    258.6
    %
    
    
    (773
    )
    
    
    -34.3
    %Depreciation and amortization
    
    
    523
    
    
    
    41.5
    %
    
    
    203
    
    
    
    23.3
    %
    
    
    320
    
    
    
    157.6
    %Total cost and expenses
    
    
    3,410
    
    
    
    270.2
    %
    
    
    4,129
    
    
    
    473.5
    %
    
    
    (719
    )
    
    
    -17.4
    %Segment loss
    
    $
    (2,148
    )
    
    
    -170.2
    %
    
    $
    (3,257
    )
    
    
    -373.5
    %
    
    $
    (1,109
    )
    
    
    -34.1
    %Capital expenditures
    
    $
    1,710
    
    
    
    135.5
    %
    
    $
    1,939
    
    
    
    222.4
    %
    
    $
    (229
    )
    
    
    -11.8
    %
 
 *
    
    exclusive of depreciation and amortization 23




---



##### 



Revenue.
 Cost of Service.
 Selling, General and Administrative
 Depreciation and Amortization.
 Capital Expenditures.
 Liquidity and Capital Resources
  Redemption of Class A Convertible Preferred Stock
  24




---



##### 



Cash Flow
   2009
    
    2008
    
    ChangeCash provided by operating activities
    
    $
    32,653
    
    
    $
    8,897
    
    
    $
    23,756Cash used in investing activities
    
    $
    (5,488
    )
    
    $
    (64,356
    )
    
    $
    (58,868
    )Cash (used in) provided by financing activities
    
    $
    (274
    )
    
    $
    73,458
    
    
    $
    (73,732
    )
 Operating Activities.
 Investing Activities.
 Financing Activities.
 Recently Issued Accounting Pronouncements
 Interim Disclosures about Fair Value of Financial Instruments, Disclosures about
Fair Values of Financial Instruments, Interim Financial Reporting,
 25




---



##### 



Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly Fair Value Measurements,
 Recognition and Presentation of
Other-Than-Temporary Impairments
 Determining Whether
an Instrument (or Embedded Feature) is Indexed to an Entitys Own Stock Accounting
for Derivative Instruments and Hedging Activities
 Regulatory
  26




---



##### 



Additional
Federal Regulations
 Verizon and Qwest Petitions for Forbearance from Unbundling Requirements.
 Additional State and Local Regulation
 XO Complaints Against Verizon.
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  27




---



##### 



Item 4. Controls and Procedures.
 Disclosure Controls and Procedures
   Changes in Internal Controls
  28




---



##### 



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  Nashville Electric Service
  29




---



##### 



Item 1A. Risk Factors
  
 Item 6. Exhibits.
 3.1
    
    Certificate of Incorporation of XO Holdings, Inc., as filed with the
Secretary of State of the State of Delaware on October 25, 2005
(incorporated herein by reference to exhibit 3.1 filed with the
Current Report on Form 8-K of XO Holdings, Inc., filed on March 6,
2006)3.2
    
    Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and other Special Rights of the 6% Class A
Convertible Preferred Stock and Qualifications, Limitations and
Restrictions thereof, as filed with the Secretary of State of the
State of Delaware on February 28, 2006 (incorporated herein by
reference to exhibit 3.2 filed with the Current Report on Form 8-K of
XO Holdings, Inc., filed on March 6, 2006)3.3
    
    Bylaws of XO Holdings, Inc. (incorporated herein by reference to
exhibit 3.3 filed with the Current Report on Form 8-K of XO Holdings,
Inc., filed on March 6, 2006)10.1
    
    XO Holdings, Inc. 2009 Executive Bonus Plan (filed herewith)10.2
    
    Employment Agreement, dated as of January 5, 2009, by and between XO
Holdings, Inc. and Daniel J. Wagner (incorporated herein by reference
to exhibit 10.1 filed with the Current Report on Form 8-K of XO
Holdings, Inc., filed on January 20, 2009)14.1
    
    [Amended and Restated] XO Business Ethics Policy (incorporated herein
by reference to exhibit 14.1 filed with the Current Report on Form
8-K of XO Holdings, Inc., filed on March 17, 2009)31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
and Rule 15d-14(a) of the Securities Exchange Act, as amended (filed
herewith)31.2
    
    Certificate of Chief Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act as amended (filed
herewith)32.1
    
    Certifications of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of
Sarbanes-Oxley Act of 2002 (filed herewith)
 30




---



##### 



SIGNATURES
  Date: May 11, 2009
    XO HOLDINGS, INC.By:
    /s/  Carl J. GrivnerCarl J. GrivnerChief Executive Officer
(Principal Executive Officer) 31