FairPoint Communications 2010 Annual Report Download - page 122

Table of Contents
security, treasury, tax and audit services. The allocations were based on actual costs incurred by Verizon and periodic studies that identified employees or
groups of employees who were totally or partially dedicated to performing activities that benefited the Verizon Northern New England business, in activities
such as investor relations, financial planning, marketing services and benefits administration. These allocations were based on actual costs incurred by
Verizon, as well as on the size of the Verizon Northern New England business relative to other Verizon subsidiaries. The Company believes that these cost
allocations are reasonable for the services provided. The Company also believes that these cost allocations are consistent with the nature and approximate
amount of the costs that the Verizon Northern New England business would have incurred on a stand-alone basis.
The Verizon Northern New England business also recognized an allocated portion of interest expense in connection with contractual agreements between the
Verizon Companies and Verizon for the provision of short-term financing and cash management services. Verizon issues commercial paper and obtains bank
loans to fund the working capital requirements of Verizon’s subsidiaries, including the Verizon Companies, and invests funds in temporary investments on
their behalf. The Verizon Companies also recognized interest expense related to a promissory note held by Verizon.
The affiliate operating revenue and expense amounts do not include affiliate transactions between Verizon and VLD’s, VOL’s and VSSI’s operations in
Maine, New Hampshire and Vermont. Because the Verizon Northern New England business’ operating expenses associated with VLD, VOL, and VSSI were
determined predominantly through allocations, separate identification of the affiliate transactions was not readily available.
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In this Annual Report on Form 10-K for our fiscal year ended December 31, 2010 (this “Annual Report”), FairPoint Communications, Inc. (the
“Company”) is restating its unaudited quarterly financial statements for the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010
(collectively, the “2010 Interim Consolidated Financial Statements”).
The Company’s previously filed Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010
(collectively, the “2010 Quarterly Reports”) impacted by the restatement have not been and will not be amended. Accordingly, the Company cautions you that
certain information contained in the 2010 Quarterly Reports should no longer be relied upon, including the Company’s previously issued and filed 2010
Interim Consolidated Financial Statements and any financial information derived therefrom. In addition, the Company cautions you that other
communications or filings related to the 2010 Interim Consolidated Financial Statements should no longer be relied upon. All of the Company’s Quarterly
Reports on Form 10-Q that will be filed for fiscal year 2011 will include restated results for the corresponding interim periods of 2010. All amounts in this
Annual Report affected by the restatement adjustments reflect such amounts as restated.
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As previously disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on March 22, 2011,
management of the Company, with the concurrence of the Audit Committee of the Company’s Board of Directors (the “Audit Committee”), concluded that the
Company would restate the 2010 Interim Consolidated Financial Statements.
In connection with the preparation of the Company’s audited financial statements for the year ended December 31, 2010, management has discovered
accounting errors that impact the accuracy of the Company’s previously issued 2010 Interim Consolidated Financial Statements. These errors were detected in
areas in which the Company had previously identified and disclosed material weaknesses in internal controls.
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