##### 



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 June 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 Commission File No. 0-30900
 
 XO Holdings, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    54-1983517(State or other jurisdiction of
    
    (I.R.S. employerincorporation or organization)
    
    identification no.)
 11111 Sunset Hills Road
Reston, Virginia 20190
(Address of principal executive offices, including zip code)
(703) 547-2000
(Registrants telephone number, including area code)
 þ o
  o þ o
 o þ
 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
 R £




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##### 



XO Holdings, Inc. and Subsidiaries
Index to Form 10-Q
 PagePart I. Financial InformationItem 1.
    
    XO Holdings, Inc. and Subsidiaries Condensed Consolidated Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2006 (unaudited) and December
31, 2005
    
    
    1Condensed Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2006 and June 30, 2005 (unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30,
2006 and June 30, 2005 (unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    31Item 4.
    
    Controls and Procedures
    
    
    31Part II. Other Information
    
    
    32Item 1.
    
    Legal Proceedings
    
    
    32Item 1A.
    
    Risk Factors
    
    
    34Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 3.
    
    Defaults Upon Senior Securities
    
    
    42Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    42Item 5.
    
    Other Information
    
    
    42Item 6.
    
    Exhibits
    
    
    42Signatures
    
    
    44




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##### 



PART I. FINANCIAL INFORMATION
 Item 1. Financial Statements.
 XO Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands, except for share and per share data)
 June 30, 2006
    
    
    December 31, 2005(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    166,452
    
    
    $
    176,838Marketable securities and other investments
    
    
    7,430
    
    
    
    7,150Accounts receivable, net of allowance for doubtful accounts of $32,881 at
June 30, 2006, and $36,061 at December 31, 2005, respectively
    
    
    131,137
    
    
    
    137,564Other current assets
    
    
    35,713
    
    
    
    34,106Total current assets
    
    
    340,732
    
    
    
    355,658Property and equipment, net
    
    
    685,625
    
    
    
    717,627Broadband wireless licenses, net
    
    
    37,363
    
    
    
    40,527Other intangibles, net
    
    
    39,475
    
    
    
    51,252Other assets, net
    
    
    38,595
    
    
    
    37,661Total assets
    
    $
    1,141,790
    
    
    $
    1,202,725LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    86,238
    
    
    $
    79,935Other current liabilities
    
    
    213,070
    
    
    
    216,278Total current liabilities
    
    
    299,308
    
    
    
    296,213Long-term debt and accrued interest payable
    
    
    317,659
    
    
    
    301,113Other long-term liabilities
    
    
    62,870
    
    
    
    65,755Total liabilities
    
    
    679,837
    
    
    
    663,0816% Class A convertible preferred stock
    
    
    223,718
    
    
    
    217,056Commitments and contingencies (Note 9)
    
    
    
    
    
    
    Stockholders equityPreferred stock: par value $0.01 per share, 200,000,000 shares
authorized: 4,000,000 shares of 6% Class A convertible preferred stock
issued and outstanding on June 30, 2006 and December 31, 2005
    
    
    
    
    
    
    Warrants and common stock, par value $0.01 per share, 1,000,000,000
shares authorized: 182,001,285 and 181,933,035 shares issued and
outstanding on June 30, 2006 and December 31, 2005, respectively
    
    
    971,477
    
    
    
    976,447Deferred compensation
    
    
    
    
    
    
    (77
    )Accumulated other comprehensive income
    
    
    1,100
    
    
    
    820Accumulated deficit
    
    
    (734,342
    )
    
    
    (654,602
    )Total stockholders equity
    
    
    238,235
    
    
    
    322,588Total liabilities, convertible preferred stock and stockholders equity
    
    $
    1,141,790
    
    
    $
    1,202,725
  1




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##### 



XO Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Amounts in thousands, except for share and per share data)
(Unaudited)
 Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005Revenue
    
    $
    354,282
    
    
    $
    362,164
    
    
    $
    703,973
    
    
    $
    723,669Cost and expensesCost of service (exclusive of
depreciation and amortization)
    
    
    153,089
    
    
    
    138,024
    
    
    
    307,470
    
    
    
    285,947Selling, operating, and general
    
    
    181,354
    
    
    
    187,772
    
    
    
    360,217
    
    
    
    379,466Depreciation and amortization
    
    
    50,297
    
    
    
    61,097
    
    
    
    104,734
    
    
    
    119,461Total costs and expenses
    
    
    384,740
    
    
    
    386,893
    
    
    
    772,421
    
    
    
    784,874Loss from operations
    
    
    (30,458
    )
    
    
    (24,729
    )
    
    
    (68,448
    )
    
    
    (61,205
    )Interest income
    
    
    2,122
    
    
    
    1,919
    
    
    
    4,096
    
    
    
    3,820Investment gain, net
    
    
    
    
    
    
    1,891
    
    
    
    
    
    
    
    1,612Interest expense, net
    
    
    (7,745
    )
    
    
    (8,588
    )
    
    
    (15,388
    )
    
    
    (16,592
    )Net loss
    
    
    (36,081
    )
    
    
    (29,507
    )
    
    
    (79,740
    )
    
    
    (72,365
    )Preferred stock accretion
    
    
    (3,374
    )
    
    
    (3,145
    )
    
    
    (6,661
    )
    
    
    (6,242
    )Net loss attributable to common shares
    
    $
    (39,455
    )
    
    $
    (32,652
    )
    
    $
    (86,401
    )
    
    $
    (78,607
    )Net loss attributable to common shares,
basic and diluted
    
    $
    (0.22
    )
    
    $
    (0.18
    )
    
    $
    (0.47
    )
    
    $
    (0.43
    )Weighted average shares, basic and diluted
    
    
    181,947,095
    
    
    
    181,933,035
    
    
    
    181,940,104
    
    
    
    181,933,035
  2




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##### 



XO Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
 Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2006
    
    
    June 30,2005OPERATING ACTIVITIES:Net loss
    
    $
    (79,740
    )
    
    $
    (72,365
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    104,734
    
    
    
    119,461Accrual of interest expense
    
    
    16,546
    
    
    
    16,399Stock-based compensation
    
    
    1,428
    
    
    
    111Realized gain on investments
    
    
    
    
    
    
    3,191Changes in assets and liabilities:Accounts receivable
    
    
    6,427
    
    
    
    12,418Other assets
    
    
    (10,104
    )
    
    
    (5,875
    )Accounts payable
    
    
    (1,930
    )
    
    
    (1,781
    )Accrued and other liabilities
    
    
    (4,784
    )
    
    
    (21,123
    )Net cash provided by operating activities
    
    
    32,577
    
    
    
    50,436INVESTING ACTIVITIES:Capital expenditures
    
    
    (49,559
    )
    
    
    (39,529
    )Proceeds from sale of marketable securities, investments and other assets
    
    
    7,562
    
    
    
    1,342Proceeds from release of escrow account
    
    
    
    
    
    
    25,430Net cash used in investing activities
    
    
    (41,997
    )
    
    
    (12,757
    )FINANCING ACTIVITIES:Repayments of capital leases
    
    
    (1,307
    )
    
    
    (1,525
    )Proceeds from exercise of stock options
    
    
    341
    
    
    
    Net cash used in financing activities
    
    
    (966
    )
    
    
    (1,525
    )Net (decrease) increase in cash and cash equivalents
    
    
    (10,386
    )
    
    
    36,154Cash and cash equivalents, beginning of period
    
    
    176,838
    
    
    
    233,989Cash and cash equivalents, end of period
    
    $
    166,452
    
    
    $
    270,143SUPPLEMENTAL DATA:Cash paid for interest
    
    $
    800
    
    
    $
    1,539Accrued interest converted to long-term debt
    
    $
    16,546
    
    
    $
    16,399
  3




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##### 



XO Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Basis of Presentation
   Significant Accounting Policies
  Share-Based Payments
  Principles of Consolidation
  Use of Estimates and Assumptions
   Reclassifications
  4




---



##### 



2. NET LOSS PER SHARE AND COMPREHENSIVE LOSS
 Net Loss Per Share
  Comprehensive Loss
  Three Months Ended June 30,2006
    
    
    2005Net loss
    
    $
    (36,081
    )
    
    $
    (29,507
    )Other comprehensive loss:Net unrealized gains(losses) on investment
    
    
    40
    
    
    
    (1,220
    )Comprehensive loss
    
    $
    (36,041
    )
    
    $
    (30,727
    )
 Six Months Ended June 30,2006
    
    
    2005Net loss
    
    $
    (79,740
    )
    
    $
    (72,365
    )Other comprehensive loss:Net unrealized gains (losses) on investment
    
    
    280
    
    
    
    (2,780
    )Reclassification adjustment for gain included in net income
    
    
    
    
    
    
    (532
    )Comprehensive loss
    
    $
    (79,460
    )
    
    $
    (75,677
    )
 3. SEGMENT INFORMATION
 Overview
  XOC
  5




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##### 



Nextlink
    Three Months Ended
    
    
    Three Months EndedJune 30, 2006
    
    
    June 30, 2005XOC
    
    
    Nextlink
    
    
    Consolidated
    
    
    XOC
    
    
    Nextlink
    
    
    ConsolidatedRevenue
    
    $
    354,166
    
    
    $
    116
    
    
    $
    354,282
    
    
    $
    362,164
    
    
    $
    
    
    
    $
    362,164Depreciation and amortization
    
    
    48,635
    
    
    
    1,662
    
    
    
    50,297
    
    
    
    60,006
    
    
    
    1,091
    
    
    
    61,097Operating loss
    
    
    (26,692
    )
    
    
    (3,766
    )
    
    
    (30,458
    )
    
    
    (23,042
    )
    
    
    (1,687
    )
    
    
    (24,729
    )Interest income
    
    
    
    
    
    
    
    
    
    
    2,122
    
    
    
    
    
    
    
    
    
    
    
    1,919Investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,891Interest expense, net
    
    
    
    
    
    
    
    
    
    
    (7,745
    )
    
    
    
    
    
    
    
    
    
    
    (8,588
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (36,081
    )
    
    
    
    
    
    
    
    
    
    
    (29,507
    )Capital expenditures
    
    $
    26,529
    
    
    $
    263
    
    
    $
    26,792
    
    
    $
    17,899
    
    
    $
    57
    
    
    $
    17,956
 Six Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005XOC
    
    
    Nextlink
    
    
    Consolidated
    
    
    XOC
    
    
    Nextlink
    
    
    ConsolidatedRevenue
    
    $
    703,746
    
    
    $
    227
    
    
    $
    703,973
    
    
    $
    723,669
    
    
    $
    
    
    
    $
    723,669Depreciation and amortization
    
    
    101,432
    
    
    
    3,302
    
    
    
    104,734
    
    
    
    116,729
    
    
    
    2,732
    
    
    
    119,461Operating loss
    
    
    (57,978
    )
    
    
    (10,470
    )
    
    
    (68,448
    )
    
    
    (57,647
    )
    
    
    (3,558
    )
    
    
    (61,205
    )Interest income
    
    
    
    
    
    
    
    
    
    
    4,096
    
    
    
    
    
    
    
    
    
    
    
    3,820Investment income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,612Interest expense, net
    
    
    
    
    
    
    
    
    
    
    (15,388
    )
    
    
    
    
    
    
    
    
    
    
    (16,592
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (79,740
    )
    
    
    
    
    
    
    
    
    
    
    (72,365
    )Capital expenditures
    
    $
    47,401
    
    
    $
    2,158
    
    
    $
    49,559
    
    
    $
    39,444
    
    
    $
    85
    
    
    $
    39,529
 6




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##### 



XOC
    
    
    Nextlink
    
    
    ConsolidatedJune 30, 2006Total assets
    
    $
    1,098,810
    
    
    $
    42,980
    
    
    $
    1,141,790December 31, 2005Total assets
    
    $
    1,159,256
    
    
    $
    43,469
    
    
    $
    1,202,725
 4. MARKETABLE SECURITIES AND OTHER INVESTMENTS
  GrossUnrealizedBook Value
    
    
    Cost Basis
    
    
    Holding GainsAs of June 30, 2006Marketable securities
    
    $
    2,640
    
    
    $
    1,540
    
    
    $
    1,100Other investments
    
    
    4,790
    
    
    
    4,790
    
    
    
    Total marketable securities and other investments
    
    $
    7,430
    
    
    $
    6,330
    
    
    $
    1,100As of December 31, 2005Marketable securities
    
    $
    2,360
    
    
    $
    1,540
    
    
    $
    820Other investments
    
    
    4,790
    
    
    
    4,790
    
    
    
    Total marketable securities and other investments
    
    $
    7,150
    
    
    $
    6,330
    
    
    $
    820
  5. LONG-LIVED ASSETS
  Property and Equipment
  June 30, 2006
    
    
    December 31, 2005Telecommunications networks and acquired bandwidth
    
    $
    790,302
    
    
    $
    751,487Furniture, fixtures, equipment, leasehold improvements and other
    
    
    284,326
    
    
    
    258,0341,074,628
    
    
    
    1,009,521Less: accumulated depreciation
    
    
    (473,940
    )
    
    
    (387,334
    )600,688
    
    
    
    622,187Construction-in-progress and undeployed assets
    
    
    84,937
    
    
    
    95,440Property and equipment, net
    
    $
    685,625
    
    
    $
    717,627
  7




---



##### 



Broadband Wireless Licenses
  June 30, 2006
    
    
    December 31, 2005Broadband wireless licenses
    
    $
    59,508
    
    
    $
    59,508Less: accumulated amortization
    
    
    (22,145
    )
    
    
    (18,981
    )Broadband wireless licenses, net
    
    $
    37,363
    
    
    $
    40,527
  Other Intangibles
  June 30, 2006
    
    
    December 31, 2005Customer relationships
    
    $
    112,366
    
    
    $
    112,366Internally developed technology
    
    
    9,521
    
    
    
    9,521Acquired tradenames
    
    
    5,673
    
    
    
    5,673127,560
    
    
    
    127,560Less accumulated amortization
    
    
    (105,818
    )
    
    
    (94,041
    )21,742
    
    
    
    33,519Goodwill  indefinite life asset
    
    
    1,071
    
    
    
    1,071XO Trade name  indefinite life asset
    
    
    16,662
    
    
    
    16,662Other intangibles, net
    
    $
    39,475
    
    
    $
    51,252
   EstimatedAmortizationPeriod
    
    ExpenseJuly  December 2006
    
    $
    14,9132007
    
    
    16,3192008
    
    
    4,2252009
    
    
    1082010
    
    $
    81
 6. LONG-TERM DEBT
  8




---



##### 



7. RELATED PARTY TRANSACTIONS
  Outstanding
    
    Series A, B and CCommon Stock
    
    Warrants
    
    Credit Facility
    
    Preferred StockAt December 31, 2005
    
    Greater than 50%
    
    Greater than 40%
    
    Greater than 90%
    
    
    95
    %At June 30, 2006 (1)
    
    Greater than 50%
    
    Greater than 40%
    
    Greater than 90%
    
    
    52
    %
 
 (1)
    
    According to Amendment No. 8 to the Schedule 13D of Cardiff Holding LLC (Cardiff), filed
with the Commission on May 1, 2006, on April 28, 2006, Cardiff, an Icahn affiliated entity,
sold in a private sale to qualified institutional buyers an aggregate of 1,725,000 shares of
the Companys 6% Class A Convertible Preferred Stock (the Preferred Stock).   9




---



##### 



8. SHARE-BASED PAYMENTS
 Share-based payment arrangements
 XO Holdings, Inc. 2002 Stock Incentive Plan
    10




---



##### 



Adoption of SFAS No. 123(R)
   Stock-Based Compensation Expense
  Stock-Based Compensation Activity
  Weighted AverageWeighted Average
    
    
    Remaining
    
    
    Aggregate IntrinsicNumber of Shares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    ValueOutstanding at December 31, 2005
    
    
    9,296,457
    
    
    $
    5.06Granted
    
    
    1,294,000
    
    
    
    5.07Forfeited
    
    
    (225,524
    )
    
    
    5.21Expired
    
    
    (276,968
    )
    
    
    5.07Exercised
    
    
    (68,250
    )
    
    
    5.38Outstanding at June 30, 2006
    
    
    10,019,715
    
    
    $
    5.06
    
    
    7.5 years
    
    
    Exercisable at June 30, 2006
    
    
    6,734,084
    
    
    
    5.02
    
    
    6.8 years
    
    
    
    Fair Value Determination
  11




---



##### 



Three Months Ended June 30,2006
    
    2005Weighted average grant date price per share of Company stock
    
    $
    4.84
    
    
    $
    2.41Weighted average exercise price
    
    $
    5.10
    
    
    $
    5.00Range of expected volatility
    
    
    62.00 - 66.09
    %
    
    
    61.00
    %Range of risk free interest rate
    
    
    4.90 - 5.04
    %
    
    
    3.80
    %Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected term (in years)
    
    
    6.25
    
    
    
    4.00
 Six Months Ended June 30,2006
    
    2005Weighted average grant date price per share of Company stock
    
    $
    4.15
    
    
    $
    2.76Weighted average exercise price
    
    $
    5.07
    
    
    $
    5.00Range of expected volatility
    
    
    62.00 - 66.09
    %
    
    
    61.00
    %Range of risk free interest rate
    
    
    4.33 - 5.04
    %
    
    
    3.70
    %Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected term (in years)
    
    
    6.25
    
    
    
    4.00
 Prior Period Pro Forma Disclosures
  Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005Net loss applicable to common shares, as reported
    
    $
    (32,652
    )
    
    $
    (78,607
    )Add: Stock-based employee compensation expense included
in net loss, as reported
    
    
    45
    
    
    
    111Deduct: Total stock-based employee compensation expense
determined under fair value based methods for all stock
awards
    
    
    (1,776
    )
    
    
    (3,422
    )Pro forma net loss applicable to common shares
    
    $
    (34,383
    )
    
    $
    (81,918
    )Net loss per common share, basic and diluted  as reported
    
    $
    (0.18
    )
    
    $
    (0.43
    )Net loss per common share, basic and diluted  pro forma
    
    $
    (0.19
    )
    
    $
    (0.45
    )
 9. COMMITMENTS AND CONTINGENCIES
 Legal Proceedings
  12




---



##### 



Allegiance Telecom Liquidating Trust Litigation
     Litigation Relating to the Wireline Sale
  Allegiance Telecom
Liquidating Trust v. Carl C. Icahn, et al.
 13




---



##### 



Donald
J. Hillenmeyer, Jr. v. XO Communications, Inc., et al.
  Houlihan Lokey Howard and Zukin Capital LLC
  Level 3
   14




---



##### 



Verizon Indemnification Notice
  Verizon Indemnification Notice II
 TGIP, Inc. v AT&T Corp, Verizon Communications et al
 Cox Settlement
  Regulatory
 FCC Treatment of ESP Access Charge Exemption
  15




---



##### 



Amendment to Registration Rights Agreement
   16




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Introduction
  
    
    Overview of the Business;
    
    Results of Operations and Related Information;
    
    Comparison of Segment Financial Results;
    
    Liquidity and Capital Resources;
    
    Critical Accounting Policies and Estimates; and
    
    Regulatory Overview.
 Forward-looking and Cautionary Statements
  
    
    our services, including the development and deployment of data products and services
based on Internet protocol, or IP, Ethernet, broadband wireless and other technologies and
strategies to expand our targeted customer base and broaden our sales channels;
    
    the operation of our network and back office systems, including with respect to the
development of IP protocols;
    
    liquidity and financial resources, including anticipated capital expenditures, funding
of capital expenditures and anticipated levels of indebtedness;
    
    trends related to and expectations regarding the results of operations in future
periods, including but not limited to those statements set forth in Managements Discussion
and Analysis of Financial Condition and Results of Operations below; and
    
    the impact of judicial decisions, legislation, and regulatory developments on our cost
structure, services, and marketing initiatives.
  
    
    the inherent uncertainties in projecting future results for any business;
    
    the inability to predict the outcome of future judicial decisions, telecommunications
related legislation or regulatory decisions, or the reaction by incumbent carriers to such
developments;
    
    general economic conditions in the geographic areas that we are targeting for the sale
of telecommunications services;
    
    the ability to achieve and maintain market penetration and revenue levels sufficient to
provide financial viability to our business;
    
    the quality and price of similar or comparable telecommunications services offered, or
to be offered, by our current or future competitors; and
    
    future telecommunications-related legislation or regulatory developments and the conduct
of incumbent carriers in reaction to such developments.
 17




---



##### 



Overview of the Business
  XOC Business
   Nextlink Business
    18




---



##### 



Recent Events
   19




---



##### 



Results of Operations
 Overview and Comparison of Financial Results
  Three Months Ended
 June 30, 2006
    
    
    June 30, 2005XOC
    
    
    Nextlink
    
    
    Consolidated
    
    
    XOC
    
    
    Nextlink
    
    
    Consolidated% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    RevenueRevenue
    
    $
    354,166
    
    
    
    100.0
    %
    
    $
    116
    
    
    
    100.0
    %
    
    $
    354,282
    
    
    
    100.0
    %
    
    $
    362,164
    
    
    
    100.0
    %
    
    $
    
    
    
    NM
    
    $
    362,164
    
    
    
    100.0
    %Costs and expensesCost of service
    
    
    153,089
    
    
    
    43.2
    %
    
    
    
    
    
    NM
    
    
    153,089
    
    
    
    43.2
    %
    
    
    138,024
    
    
    
    38.1
    %
    
    
    
    
    
    NM
    
    
    138,024
    
    
    
    38.1
    %Selling,
operating, and
general
    
    
    179,134
    
    
    
    50.6
    %
    
    
    2,220
    
    
    NM
    
    
    181,354
    
    
    
    51.2
    %
    
    
    187,176
    
    
    
    51.7
    %
    
    
    596
    
    
    NM
    
    
    187,772
    
    
    
    51.8
    %Depreciation and
amortization
    
    
    48,635
    
    
    
    13.7
    %
    
    
    1,662
    
    
    NM
    
    
    50,297
    
    
    
    14.2
    %
    
    
    60,006
    
    
    
    16.6
    %
    
    
    1,091
    
    
    NM
    
    
    61,097
    
    
    
    16.9
    %Total costs and
expenses
    
    
    380,858
    
    
    
    107.5
    %
    
    
    3,882
    
    
    NM
    
    
    384,740
    
    
    
    108.6
    %
    
    
    385,206
    
    
    
    106.4
    %
    
    
    1,687
    
    
    NM
    
    
    386,893
    
    
    
    106.8
    %Loss from operations
    
    $
    (26,692
    )
    
    
    (7.5
    %)
    
    $
    (3,766
    )
    
    NM
    
    
    (30,458
    )
    
    
    (8.6
    %)
    
    $
    (23,042
    )
    
    
    (6.4
    %)
    
    $
    (1,687
    )
    
    NM
    
    
    (24,729
    )
    
    
    (6.8
    %)Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,122
    
    
    
    0.6
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,919
    
    
    
    0.5
    %Investment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,891
    
    
    
    0.5
    %Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,745
    )
    
    
    (2.2
    %)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,588
    )
    
    
    (2.4
    %)Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,081
    )
    
    
    (10.2
    %)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,507
    )
    
    
    (8.1
    %)Preferred stock
accretion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,374
    )
    
    
    (1.0
    %)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,145
    )
    
    
    (0.9
    %)Net loss applicable
to common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (39,455
    )
    
    
    (11.1
    %)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (32,652
    )
    
    
    (9.0
    %)Net loss per
common share, basic
and diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (0.22
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (0.18
    )Weighted average
shares, basic and
diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,947,095
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,933,035Gross margin (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    201,193
    
    
    
    56.8
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    224,140
    
    
    
    61.9
    %
 Six Months Ended
 June 30, 2006
    
    
    June 30, 2005XOC
    
    
    Nextlink
    
    
    Consolidated
    
    
    XOC
    
    
    Nextlink
    
    
    Consolidated% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    Revenue
    
    
    Amount
    
    
    RevenueRevenue
    
    $
    703,746
    
    
    
    100.0
    %
    
    $
    227
    
    
    
    100.0
    %
    
    $
    703,973
    
    
    
    100.0
    %
    
    $
    723,669
    
    
    
    100.0
    %
    
    $
    
    
    
    NM
    
    $
    723,669
    
    
    
    100.0
    %Costs and expensesCost of service
    
    
    307,470
    
    
    
    43.7
    %
    
    
    
    
    
    NM
    
    
    307,470
    
    
    
    43.7
    %
    
    
    285,947
    
    
    
    39.5
    %
    
    
    
    
    
    NM
    
    
    285,947
    
    
    
    39.5
    %Selling,
operating, and
general
    
    
    352,822
    
    
    
    50.2
    %
    
    
    7,395
    
    
    NM
    
    
    360,217
    
    
    
    51.2
    %
    
    
    378,640
    
    
    
    52.3
    %
    
    
    826
    
    
    NM
    
    
    379,466
    
    
    
    52.4
    %Depreciation and
amortization
    
    
    101,432
    
    
    
    14.4
    %
    
    
    3,302
    
    
    NM
    
    
    104,734
    
    
    
    14.9
    %
    
    
    116,729
    
    
    
    16.1
    %
    
    
    2,732
    
    
    NM
    
    
    119,461
    
    
    
    16.5
    %Total costs and
expenses
    
    
    761,724
    
    
    
    108.3
    %
    
    
    10,697
    
    
    NM
    
    
    772,421
    
    
    
    109.8
    %
    
    
    781,316
    
    
    
    107.9
    %
    
    
    3,558
    
    
    NM
    
    
    784,874
    
    
    
    108.4
    %Loss from operations
    
    $
    (57,978
    )
    
    
    (8.2
    %)
    
    $
    (10,470
    )
    
    NM
    
    
    (68,448
    )
    
    
    (9.7
    %)
    
    $
    (57,647
    )
    
    
    (8.0
    %)
    
    $
    (3,558
    )
    
    NM
    
    
    (61,205
    )
    
    
    (8.5
    %)Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,096
    
    
    
    0.6
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,820
    
    
    
    0.5
    %Investment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,612
    
    
    
    0.2
    %Interest expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,388
    )
    
    
    (2.2
    %)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,592
    )
    
    
    (2.3
    %)Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (79,740
    )
    
    
    (11.3
    %)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,365
    )
    
    
    (10.0
    %)Preferred stock
accretion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,661
    )
    
    
    (0.9
    %)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,242
    )
    
    
    (0.9
    %)Net loss applicable
to common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (86,401
    )
    
    
    (12.3
    %)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (78,607
    )
    
    
    (10.9
    %)Net loss per
common share, basic
and diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (0.47
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (0.43
    )Weighted average
shares, basic and
diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,940,104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,933,035Gross margin (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    396,503
    
    
    
    56.3
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    437,722
    
    
    
    60.5
    %
 
 NM= Not meaningful(1)
    
    Gross margin is a non-GAAP financial measure, which we define
as revenue less cost of service, and excludes depreciation and
amortization expenses. Gross margin is not intended to replace
operating income (loss), net income (loss), cash flow and other
measures of financial performance reported in accordance with
generally accepted accounting principles in the United States.
Rather, we consider gross margin to be an important financial measure
which allows management to further assess (i) our operating
performance, (ii) profitability across our customer base and (iii)
trends in our competitive and regulatory environments. Additionally,
we believe that gross margin is a standard measure of operating
performance that is commonly reported and widely used by analysts,
investors, and other interested parties in the telecommunications
industry. We believe gross margin provides investors with an
alternative means to evaluate the results of our operations. Gross
margin as used in this document may not be comparable to similarly
titled measures reported by other companies due to differences in
accounting policies and differences in definition of gross margin.
Therefore, we provide additional information on the components of
gross margin throughout this report and provide the reconciliations
to the most relevant GAAP financial measure. The following tables
reconcile reported net loss to gross margin, as defined above, for
the respective periods presented (amounts in thousands): 20




---



##### 



Three Months Ended June 30,2006
    
    
    2005Net loss
    
    $
    (36,081
    )
    
    $
    (29,507
    )Selling, operating and general
    
    
    181,354
    
    
    
    187,772Interest income
    
    
    (2,122
    )
    
    
    (1,919
    )Investment gain, net
    
    
    
    
    
    
    (1,891
    )Interest expense, net
    
    
    7,745
    
    
    
    8,588Depreciation and amortization
    
    
    50,297
    
    
    
    61,097Gross margin
    
    $
    201,193
    
    
    $
    224,140
 Six Months Ended June 30,2006
    
    
    2005Net loss
    
    $
    (79,740
    )
    
    $
    (72,365
    )Selling, operating and general
    
    
    360,217
    
    
    
    379,466Interest income
    
    
    (4,096
    )
    
    
    (3,820
    )Investment gain, net
    
    
    
    
    
    
    (1,612
    )Interest expense, net
    
    
    15,388
    
    
    
    16,592Depreciation and amortization
    
    
    104,734
    
    
    
    119,461Gross margin
    
    $
    396,503
    
    
    $
    437,722
 Revenue
  Three months ended June 30,% of
    
    
    
    
    
    
    % of2006
    
    
    Revenue
    
    
    2005
    
    
    Revenue
    
    
    % ChangeVoice services
    
    $
    180,301
    
    
    
    50.9
    %
    
    $
    188,498
    
    
    
    52.0
    %
    
    
    (4.3
    %)Data services
    
    
    107,044
    
    
    
    30.2
    %
    
    
    107,779
    
    
    
    29.8
    %
    
    
    (0.7
    %)Integrated voice and data services
    
    
    66,937
    
    
    
    18.9
    %
    
    
    65,887
    
    
    
    18.2
    %
    
    
    1.6
    %Total revenue
    
    $
    354,282
    
    
    
    100.0
    %
    
    $
    362,164
    
    
    
    100.0
    %
    
    
    (2.2
    %)
 Six months ended June 30,% of
    
    
    
    
    
    
    % of2006
    
    
    Revenue
    
    
    2005
    
    
    Revenue
    
    
    % ChangeVoice services
    
    $
    359,717
    
    
    
    51.1
    %
    
    $
    374,797
    
    
    
    51.8
    %
    
    
    (4.0
    %)Data services
    
    
    210,803
    
    
    
    29.9
    %
    
    
    216,171
    
    
    
    29.9
    %
    
    
    (2.5
    %)Integrated voice and data services
    
    
    133,453
    
    
    
    19.0
    %
    
    
    132,701
    
    
    
    18.3
    %
    
    
    0.6
    %Total revenue
    
    $
    703,973
    
    
    
    100.0
    %
    
    $
    723,669
    
    
    
    100.0
    %
    
    
    (2.7
    %)
 Voice
  Data
  21




---



##### 



Integrated Voice and Data Services
  Cost of service (excluding depreciation and amortization)
  Gross
margin.
 Selling, operating and general.
 22




---



##### 



Depreciation and amortization
  Interest income
 Investment gain, net
 Interest expense, net.
 Comparison of Segment Financial Results
 Overview
  XOC Segment
  23




---



##### 



Nextlink Segment
 Revenue
 Cost of service (exclusive of depreciation and amortization)
 Selling, operating and general.
 Depreciation and amortization
 Liquidity and Capital Resources
  Cash Flow
    Credit Facility and Borrowing Capacity
  24




---



##### 



Credit Risk
  Contractual Obligations
    25




---



##### 



OtherLong-Term
    
    
    OperatingCredit
    
    
    Contractual
    
    
    Lease
    
    
    Capital Lease
    
    
    TotalJune 30,
    
    Facility
    
    
    Obligations
    
    
    Obligations
    
    
    Obligations
    
    
    Obligations2006
    
    $
    
    
    
    $
    48,251
    
    
    $
    35,873
    
    
    $
    2,268
    
    
    $
    86,3922007
    
    
    
    
    
    
    91,638
    
    
    
    65,883
    
    
    
    3,854
    
    
    
    161,3752008
    
    
    
    
    
    
    80,617
    
    
    
    55,404
    
    
    
    2,398
    
    
    
    138,4192009
    
    
    317,659
    
    
    
    56,025
    
    
    
    47,492
    
    
    
    1,770
    
    
    
    422,9462010
    
    
    
    
    
    
    17,921
    
    
    
    41,773
    
    
    
    1,419
    
    
    
    61,113Thereafter
    
    
    
    
    
    
    87,322
    
    
    
    129,881
    
    
    
    12,491
    
    
    
    229,694Total minimum commitments
    
    $
    317,659
    
    
    $
    381,774
    
    
    $
    376,306
    
    
    $
    24,200
    
    
    $
    1,099,939
 Critical Accounting Policies and Estimates
  Accounting for Stock-based Compensation
    26




---



##### 



Regulatory Overview
 Overview
     Federal Regulation
    FCC Regulation of Wireless Services
  27




---



##### 



FCC Regulation of LMDS and 39 GHz Services in Particular
 Generally .
 Performance Requirements .
   Auctions .
 Other Issues Affecting our Spectrum Licenses .
 Additional Federal Regulations
  Unbundling of Incumbent Network Elements
 28




---



##### 



United States Telecom Association v. FCC
  VoIP
 AT&T Declaratory Ruling Re: VoIP
 ILEC Provision of Broadband Telecommunications Services and Information Services e.g
 29




---



##### 



Intercarrier Compensation Reform
 Cost-based TELRIC Pricing
 VoIP 911 Regulation
 CALEA Regulation th
 Georgia Public Service Commission Petition for Declaratory Ruling re: 271 Pricing .
 30




---



##### 



AT&T/BellSouth Consolidation
 State and Local Regulation
  Wireless Services Affected by State Regulations
   Item 3. Quantitative and Qualitative Disclosures about Market Risk.
    Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  31




---



##### 



Changes in Internal Controls
   PART II. OTHER INFORMATION
 Item 1. Legal Proceedings.
  Allegiance Telecom Liquidating Trust Litigation
     32




---



##### 



Litigation Relating to the Wireline Sale
  Allegiance Telecom
Liquidating Trust v. Carl C. Icahn, et al.
 Donald
J. Hillenmeyer, Jr. v. XO Communications, Inc., et al.
  Houlihan Lokey Howard and Zukin Capital LLC
  33




---



##### 



Level 3
   Verizon Indemnification Notice
  Verizon Indemnification Notice II
 TGIP, Inc. v AT&T Corp, Verizon Communications et al
 Item 1A. Risk Factors.
  Risks Related to Liquidity, Financial Resources, and Capitalization
 The covenants in the Credit Facility restrict the Companys financial and operational flexibility,
which could have an adverse affect on its results of operations.
 34




---



##### 




    
    they may impair the Companys ability to obtain additional financing in the future;
    
    they may limit the Companys flexibility in planning for or reacting to changes in market conditions; and
    
    they may cause the Company to be more vulnerable in the event of a downturn in its business.
 The Company may not prevail in its $50 million claim against the ATLT, and it may not be successful
in defending against the ATLTs counterclaim.
   The agreement to sell the Companys national wireline telecommunications business has been
terminated, requiring the Company to reevaluate the feasibility of its strategic alternatives for
addressing its liquidity and financing challenges.
 35




---



##### 



The Company incurred a net loss in the past and, in the near term, may not generate funds from
operations sufficient to meet all of its cash requirements.
  Risks Related to the Companys Wireline Operations
 In the event of a substantial failure of the Companys operations support systems, including the
systems for sales tracking, order entry and provisioning, and billing, the Companys Disaster
Recovery System may not permit the recovery of its systems operations and/or to perform critical
aspects of its services for an extended period, which would adversely affect the Companys revenues
and/or capital resources.
  The Companys rights to the use of the unlit capacity that makes up its network may be affected by
the financial health of the Companys fiber providers.
  The Company may not be able to continue to connect its network to ILEC networks or to maintain
Internet peering arrangements on favorable terms, which would impair the Companys growth and
performance.
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The Company depends on a limited number of third party service providers for the performance of
several of its business operations, including payroll and billing services.
  The Company may be unable to adequately protect its intellectual property or rights to licenses for
use of third-party intellectual property, and may be subject to claims that the Company infringes
the intellectual property of others, which could substantially harm the Companys business.
  The Company experiences turnover among its experienced and trained employee base, which could
result in the Companys inability to continue performing certain functions and completing certain
initiatives in accordance with its existing budgets and operating plans.
  Several customers account for a significant portion of the Companys revenue, and some of its
customer agreements may not continue due to bankruptcies, acquisitions, nonrenewal, or other
factors.
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Risks Related to Our Wireless Operations
 The Companys wireless business is in the early stages of development and the Company may not be
able to implement its business strategy or to obtain new customers.
  One customer accounts for nearly all of the Companys wireless services revenue.
  The Companys licenses may not be renewed upon expiration.
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If the Company does not secure a waiver of the substantial performance obligations for its A3 Block
in New York, it may lose that LMDS license.
  A key aspect of the Companys business strategy is to provide backhaul services for providers of
cellular wireless mobile telecommunications, and its business will depend to a substantial degree
on the widespread adoption of bandwidth-intensive applications, such as 3G applications.
  The Company may not be able to successfully execute the necessary real estate transactions, or to
negotiate acceptable rates in those agreements for placing antennas and having access to necessary
equipment.
  Additional spectrum may become available from the FCC, increasing the number of and/or viability of
the Companys competitors or even allowing the Companys customers or potential customers to obtain
their own spectrum outright, reducing their need to obtain spectrum or services from the Company.
   39




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The Company is dependent on key personnel and its success depends on its ability to attract, train
and retain additional qualified personnel.
  FCC Regulation of RF emissions and RF environments may increase the Companys costs and/or limit
its operations.
  Risks Related to Competition and the Companys Industry
 Technological advances and regulatory changes are eroding traditional barriers between formerly
distinct telecommunications markets, which could increase the competition the Company faces and put
downward pressure on prices, which could impair its results.
  The telecommunications industry is highly competitive, and has experienced the consolidation of
many existing competitors and the introduction of significant new competitors.
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The Company is subject to comprehensive and continually evolving regulation.
   Risks Related to the Companys Common Stock
 An entity owned and controlled by Mr. Icahn is the Companys majority stockholder.
  Future sales or issuances of the Companys common stock could adversely affect the Companys stock
price and/or its ability to raise capital.
    Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
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Item 3. Defaults Upon Senior Securities.
  Item 4. Submission of Matters to a Vote of Security Holders.
  Votes For
    
    Votes WithheldCarl C. Icahn
    
    
    127,768,548
    
    
    
    67,403,885Carl J. Grivner
    
    
    127,759,950
    
    
    
    67,412,483Jon F. Weber
    
    
    127,780,053
    
    
    
    67,392,380Adam Dell
    
    
    128,853,751
    
    
    
    66,318,682Vincent J. Intrieri
    
    
    128,853,751
    
    
    
    66,318,682Keith Meister
    
    
    127,775,053
    
    
    
    67,397,380Robert Knauss
    
    
    128,537,832
    
    
    
    66,634,601Fredrik Gradin
    
    
    127,774,903
    
    
    
    67,397,530
 Item 5. Other Information.
  Item 6. Exhibits.
 2.1
    
    Agreement and Plan of Merger, dated as of February 28, 2006, by and among XO
Communications, Inc., XO Holdings, Inc. and XO Communications, LLC (Incorporated herein by
reference to exhibit 2.1 filed with the Current Report on Form 8-K of XO Holdings, Inc.,
filed on March 6, 2006)2.2
    
    Amendment No. 1 to Equity Purchase Agreement, dated as of March 1, 2006, by and among
XO Holdings, Inc., XO Communications, LLC (as successor by merger to XO Communications,
Inc.) and Elk Associates LLC (Incorporated herein by reference to exhibit 2.2 filed with
the Current Report on Form 8-K of XO Holdings, Inc., filed on March 6, 2006)2.3
    
    Letter Agreement, dated March 30, 2006, between the XO Holdings, Inc. and Elk
Associates LLC (Incorporated herein by reference to exhibit 2.1 filed with the Current
Report on Form 8-K of XO Holdings, Inc., filed on June 30, 2006)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)10.4
    
    Waiver Agreement, dated as of April 28, 2006, between the Company, its subsidiaries and
Arnos Corp., as Requisite Lenders (Incorporated herein by reference to exhibit 10.1 filed
with the Current Report on Form 8-K/A of XO Holdings, Inc., filed on May 2, 2006)10.5
    
    Amendment No. 1 to Registration Rights Agreement made and enacted by XO Holdings, Inc.
as of April 28, 2006 (Incorporated herein by reference to exhibit 10.2 filed with the
Current Report on Form 8-K/A of XO Holdings, Inc., filed on May 2, 2006)
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31.1
    
    Rule 13a  14(a)/15(d)  14(a) Certifications31.2
    
    Rule 13a  14(a)/15(d)  14(a) Certifications32.1
    
    Certifications pursuant to 18 U.S.C. Section 1350
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Date: August 9, 2006
    
    XO HOLDINGS, INC.By:
    
    /s/ Gregory W. Freiberg

Name:Gregory W. FreibergTitle: Senior Vice President and Chief Financial Officer(Principal Financial Officer)
 44