FairPoint Communications 2010 Annual Report Download - page 38

Table of Contents
under Section 382 of the Code. This followed previous ownership changes resulting from our initial public offering in February 2005 which resulted in an
“ownership change” within the meaning of the U.S. federal income tax laws addressing NOL carryforwards, alternative minimum tax credits and other
similar tax attributes. Moreover, the Merger with Spinco resulted in a further ownership change for these purposes. As a result of these ownership changes,
there are specific limitations on our ability to use these NOL carryforwards and other tax attributes from periods prior to the initial public offering and the
Merger. Although we do not expect that these limitations will materially affect our U.S. federal and state income tax liability in the near term, it is possible in
the future if we were to generate taxable income in excess of the limitation on usage of NOL carryforwards that these limitations could limit our ability to utilize
the carryforwards and, therefore, result in an increase in our U.S. federal and state income tax payments over the amount we otherwise would have, had we
not experienced an ownership change. In addition, in the future we will be required to pay cash to satisfy our tax liabilities when all of our NOL carryforwards
have been used or have expired. Limitations on our usage of NOL carryforwards, and other factors requiring us to pay cash taxes in the future, would reduce
the funds available to service our debt and pay dividends, if any, in the future, which could have a material adverse impact on our business, financial
condition, results of operations, liquidity and/or the market price of our Common Stock.
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From time to time, we have released and may continue to release guidance regarding our future performance that represents our management’s estimates as
of the date of release. This guidance, which consists of forward-looking statements, is prepared by our management and is qualified by, and subject to, the
assumptions and the other information contained or referred to in the release. Our guidance is not prepared with a view toward compliance with published
guidelines of the American Institute of Certified Public Accountants, and neither our independent registered public accounting firm nor any other independent
expert or outside party compiles or examines the guidance and, accordingly, no such person expresses any opinion or any other form of assurance with respect
thereto.
Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with
respect to future business decisions, some of which will change. We generally state possible outcomes as high and low ranges which are intended to provide a
sensitivity analysis as variables are changed but are not intended to represent our actual results which could fall outside of the suggested ranges. The principal
reason that we release this data is to provide a basis for our management to discuss our business outlook with analysts and investors. Notwithstanding this,
we do not accept any responsibility for any projections or reports published by any such outside analysts or investors.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions or the guidance furnished by us will not
materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date
of release. Actual results will vary from the guidance and the variations may be material. Investors should also recognize that the reliability of any forecasted
financial data diminishes the farther in the future that the data is forecast. In light of the foregoing, investors are urged to put the guidance in context and not to
place undue reliance on it.
Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances discussed therein could result in the
actual operating results being different than the guidance, and such differences may be materially adverse.
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We generate revenue primarily by delivering voice and data services over access lines. During the years ended December 31, 2010 and 2009, respectively,
we experienced access line equivalent loss of 8.3% and 10.2%. These losses resulted mainly from competition, including competition from bundled offerings
by cable companies, the use of alternate technologies as well as challenging economic conditions and the offering of DSL services, which prompts some
customers to cancel second line service. We believe that the Chapter 11 Cases and certain issues associated with the Cutover may have had an adverse effect
on our ability to retain customers.
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