FairPoint Communications 2010 Annual Report Download - page 91

Table of Contents
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.
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 value, paid in capital and per share information included herein has been retroactively restated to give effect to the
Merger.
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On December 5, 2008, the Company declared a dividend of $0.2575 per share of common stock, which was paid on January 16, 2009 to holders of
record as of December 31, 2008. In 2008, the Company declared dividends totaling $69.0 million, or $0.773 per share of common stock. Prior to the Merger,
Legacy FairPoint declared a dividend totaling $14.0 million, or $0.39781 per share of common stock, which was paid on April 16, 2008 to Legacy FairPoint
holders of record as of March 30, 2008.
On March 4, 2009, the Company’s board of directors voted to suspend the quarterly dividend on the Company’s common stock. The Company currently
does not expect to reinstate the payment of dividends.
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On March 31, 2008, the Company completed the Merger with Northern New England Spinco, Inc., or Spinco. The Merger of FairPoint and Spinco was
accounted for as a reverse acquisition of FairPoint by Spinco under the purchase method of accounting because Verizon’s stockholders owned a majority of the
shares of the combined Company following the Merger. The Merger consideration was $316.3 million. Goodwill resulting from this transaction will not be
deductible for income tax purposes. Spinco was a wholly-owned subsidiary of Verizon that owned Verizon’s local exchange and related business activities in
Maine, New Hampshire and Vermont. Spinco was spun off from Verizon immediately prior to the Merger. Spinco served approximately 1,562,000 access line
equivalents as of the date of acquisition.
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 local
exchange business of Verizon New England in Maine, New Hampshire and Vermont and the customers of the Verizon Group’s related voice and Internet
service provider businesses in those states to Spinco and the entities (including an entity formed for holding Vermont property) that became Spinco’s
subsidiaries. In connection with these restructuring transactions, and immediately prior to closing of the Merger on March 31, 2008, the Verizon Group
contributed certain of those assets and all of the direct and indirect equity interests of those entities to Spinco in exchange for:
 the issuance of additional shares of Spinco common stock that were distributed in a spin-off, referred to as the distribution;
 a special cash payment of $1,160.0 million to the Verizon Group; and
 the issuance by Spinco to the Verizon Group of the Old Notes.
As a result of these transactions, the Verizon Group received $1.7 billion of combined cash and principal amount of Old Notes.
The Verizon Group also contributed approximately $316.0 million in cash to Spinco at the time of the spin-off, in addition to the amount of working
capital, subject to adjustment, that it was required to contribute pursuant to the distribution agreement that was in effect prior to the Merger. During the third
quarter of 2008, the Company settled the working capital adjustment with Verizon, resulting in an additional contribution to the Company of approximately
$29.0 million from Verizon. In connection with this working capital settlement, the Company paid Verizon $66.3 million for certain payables (offset by any
receivables) owed to Verizon affiliates.
After the contribution and immediately prior to the Merger, Verizon spun off Spinco by distributing all of the shares of Spinco common stock to a third-
party distribution agent to be held collectively for the benefit of Verizon stockholders. We refer collectively to the transactions described above as the spin-off.
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