FairPoint Communications 2010 Annual Report Download - page 56

Table of Contents
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Revenues decreased $48.1 million to $1,071.0 million in 2010 compared to 2009. Revenues in each of our revenue categories have been impacted by
continued weakness of the economy during 2010, which has caused a decrease in discretionary consumer spending and resulted in an increase in access line
losses and a decrease in usage. Our voice revenues have also been adversely impacted by the effects of competition and the use of alternative technologies.
Additionally, because of Cutover issues that prevented us from executing fully on our operating plan for 2009, as well as detrimental effects of the Chapter 11
Cases, our revenue has continued to decline. We derived our revenues from the following sources:
Voice services. Voice services revenues decreased $50.0 million to $531.6 million in 2010. This decrease consists of a $30.8 million decrease in long
distance services revenues and an $19.2 million decrease in local calling services revenues and is primarily attributable to a 10.3% decline in total voice access
lines in service at December 31, 2010 compared to December 31, 2009, largely offset by a $14.3 million decline in SQI penalties in addition to a $12.7 million
reduction of an accrual for forgiveness of fiscal 2008 and 2009 SQI penalties in New Hampshire and Vermont. SQI penalties are settled by crediting customer
accounts and are recorded as a reduction to revenue. The decrease in the number of voice access lines is due to an increase in competition from technology
substitution and the weakness of the economy.
Access. Access revenues were steady in 2010, increasing $0.6 million to $381.1 million in 2010 compared to 2009. Of this increase, $12.2 million is
attributable to an increase in interstate access revenues, largely offset by an $11.6 million decrease in intrastate access revenues. Decreases of $7.4 million
(9.9%) and $10.4 million (9.7%) in switched access revenues and end user revenues, respectively, were primarily attributable to a 10.3% decline in total voice
access lines in service at December 31, 2010 compared to December 31, 2009. However, these declines were more than offset by an $18.3 million (10.4%)
increase in special access revenues driven by increased efforts to sell our excess network capacity to other carriers as well as the availability of such excess
capacity resulting from the build-out of our Next Generation Network.
Data and Internet services. Data and Internet services revenues increased $0.3 million to $110.2 million in 2010 compared to 2009. This increase is
primarily attributable to an increase in HSD subscribers resulting from our bundling and other marketing efforts.
Other services. Other services revenues increased $1.1 million to $48.1 million in 2010 compared to 2009.
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Cost of services and sales. Cost of services and sales increased $10.3 million to $525.7 million in 2010 compared to 2009. This increase is primarily
attributable to the write-off of abandoned projects in 2010 of approximately $15.1 million. Cost of services and sales was also impacted by certain non-
recurring items totaling approximately $13.3 million. Excluding the abandonment charges and the prior year expenses, cost of services and sales would have
declined approximately $18.1 million.
Selling, general and administrative. Selling, general and administrative expenses decreased $52.1 million to $365.4 million in 2010 compared to 2009.
The decrease is primarily attributable to a $27.9 million reduction in bad debt expense due to improved cash collections during 2010 and settlements with
CLECs related to the Chapter 11 Cases. Additionally, prior to the Petition Date, all expenses related to restructuring activities were classified as selling, general
and administrative expenses. During the Chapter 11 Cases, such expenses have been classified as Reorganization items. Accordingly, the year ended
December 31, 2009 included $11.1 million in restructuring expenses as compared to zero for the year ended December 31, 2010.
Depreciation and amortization. Depreciation and amortization increased $14.5 million to $289.8 million in 2010 compared to 2009, due primarily to
significant capital expenditures in 2010 and the placement of plant assets into service.
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