FairPoint Communications 2009 Annual Report Download - page 100

Table of Contents
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(a) Organization
FairPoint is a leading provider of communications services in rural and small urban communities, primarily in northern New England, offering an
array of services, including local and long distance voice, data, Internet and broadband product offerings, to both residential and business customers.
FairPoint is the seventh largest telephone company in the United States based on the number of access lines as of December 31, 2009. FairPoint
operates in 18 states with approximately 1.6 million access line equivalents (including voice access lines and high speed data lines, which include DSL,
wireless broadband, cable modem and fiber-to-the-premises) as of December 31, 2009.
(b) Principles of Consolidation and Basis of Presentation
On March 31, 2008, FairPoint completed the acquisition of Spinco, pursuant to which Spinco merged with and into FairPoint, with FairPoint
continuing as the surviving corporation for legal purposes. Spinco was a wholly-owned subsidiary of Verizon and prior to the Merger the Verizon
Group transferred certain specified assets and liabilities of the local exchange businesses of Verizon New England in Maine, New Hampshire and
Vermont and the customers of the related long distance and Internet service provider businesses in those states to subsidiaries of Spinco. The Merger
was accounted for as a "reverse acquisition" of Legacy FairPoint by Spinco under the purchase method of accounting because Verizon stockholders
owned a majority of the shares of the consolidated Company following the Merger and, therefore, Spinco is treated as the acquirer for accounting
purposes. The financial statements reflect the transaction as if Spinco had issued consideration to FairPoint shareholders. As a result, for the year ended
December 31, 2008, the statement of operations and the financial information derived from the statement of operations in this Annual Report reflect the
consolidated financial results of the Company by including the financial results of the Verizon Northern New England business for the three months
ended March 31, 2008 and the combined financial results of Spinco and Legacy FairPoint for the nine months ended December 31, 2008. The statement
of operations and the financial information derived from the statement of operations for the three months ended December 31, September 30, and
June 30, 2008 in this Annual Report reflect the actual results of the consolidated Company (Legacy FairPoint and Spinco) for such periods. The
statement of operations and the financial information derived from the statement of operations for all periods prior to April 1, 2008 in this Annual
Report reflect the actual results of the Verizon Northern New England business for such periods. The balance sheet and financial information derived
from the balance sheet in this Annual Report reflect the consolidated assets and liabilities of Legacy FairPoint and Spinco at December 31, 2009 and
2008. Certain assets and liabilities of the Verizon Northern New England business (principally related to pension, other post-employment benefits, and
associated deferred taxes) were not distributed to Spinco prior to the Merger and for accounting purposes were effectively contributed back to Verizon.
The assets and liabilities of the Verizon Northern New England business that were effectively contributed back to Verizon are reflected as net liabilities
contributed back to Verizon on the statement of stockholders' equity contained herein. The statement of operations in this Annual Report may not be
indicative of the Company's future results.
In order to effect the Merger described above, the Company issued 53,760,623 shares to Verizon stockholders for their interest in Spinco.
Accordingly the number of common shares outstanding, par
90