FairPoint Communications 2009 Annual Report Download - page 66

Table of Contents
As a result of the Restatement, the Company determined that the Company was not in compliance with the interest coverage ratio maintenance
covenant and the leverage ratio maintenance covenant under the Pre-petition Credit Facility for the measurement period ended June 30, 2009, which
constituted an event of default under each of the Pre-petition Credit Facility and the Swaps, and may have constituted an event of default under the
Notes, in each case at June 30, 2009.
Basis of Presentation
On March 31, 2008, the Merger between Spinco and Legacy FairPoint was completed. In connection with the Merger and in accordance with the
terms of the Merger Agreement, Legacy FairPoint issued 53,760,623 shares of common stock to Verizon stockholders. Prior to the Merger, the
Verizon Group engaged in a series of restructuring transactions to effect the transfer of specified assets and liabilities of the Verizon Northern New
England business to Spinco and the entities that became Spinco's subsidiaries. Spinco was then spun off from Verizon immediately prior to the Merger.
While FairPoint was the surviving entity in the Merger, for accounting purposes Spinco is deemed to be the acquirer. 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, the financial results of Spinco for the nine months ended December 31, 2008 and the financial results of 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
nine months ended December 31, 2008 in this Annual Report reflects the actual results of the consolidated Company (FairPoint and Spinco) for such
period. 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. The statements of
operations in this Annual Report may not be indicative of the Company's future results. For more information, see note 1 to the "Consolidated Financial
Statements."
Management views our business of providing voice, data and communication services to residential and business customers as one business
segment as defined in the Segment Reporting Topic of the ASC.
The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern and contemplate the
realization of assets and the satisfaction of liabilities in the normal course of business. For further discussion, see note 1 to the "Consolidated Financial
Statements."
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We derive our revenues from:
• We receive revenues from our telephone operations from the provision of local exchange, local private line, wire
maintenance, voice messaging and value-added services. Value-added services are a family of services that expand the utilization of the
network, including products such as caller ID, call waiting and call return. The provision of local exchange services not only includes
retail revenues but also includes local wholesale revenues from UNEs, interconnection revenues from competitive LECs and wireless
carriers, and some data transport revenues.
• We receive revenues earned from end-user customers and long distance and other competing carriers who use
our local exchange facilities to provide usage services to
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