FairPoint Communications 2011 Annual Report Download - page 31

Table of Contents
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 may 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 inability 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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Upon our emergence from Chapter 11 protection on January 24, 2011, we adopted fresh start accounting in accordance with guidance under the
applicable reorganization accounting rules, pursuant to which our reorganization value, which represents the fair value of the entity before considering
liabilities and approximates the amount a willing buyer would pay for the assets of the entity immediately after the reorganization, has been allocated to the fair
value of assets in conformity with guidance under the applicable accounting rules for business combinations, using the purchase method of accounting for
business combinations. The amount remaining after allocation of the reorganization value to the fair value of identified tangible and intangible assets was
reflected as goodwill, which is subject to periodic evaluation for impairment. In addition to fresh start accounting, our post-emergence consolidated financial
statements reflect all effects of the transactions contemplated by the Plan. Therefore, our post-emergence consolidated statements of financial position and
consolidated statements of operations are not comparable in many respects to our consolidated statements of financial position and consolidated statements of
operations for periods prior to our adoption of fresh start accounting and prior to accounting for the effects of the reorganization, including the financial
statements contained herein.
In addition, as the Chapter 11 Cases remained open, our consolidated balance sheet upon our emergence from Chapter 11 included accruals for
unresolved claims related to the Chapter 11 Cases. These accruals were based on management’s best estimate of future settlements of such unresolved claims
and are subject to adjustment subsequent to the Effective Date. To the extent that our negotiations result in favorable or unfavorable settlements in relation to the
amount accrued, we recognize gains and/or losses in our consolidated statement of operations subsequent to the Effective Date.
Risks Related to Our Business
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We generate revenue primarily by delivering voice and data services over access lines. During the years ended December 31, 2011 and 2010,
respectively, we experienced access line equivalent loss of 5.0% and 8.3%. 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 have had and may continue
to have an adverse effect on our ability to retain customers.
We expect to continue to experience net access line losses. Our inability to retain access lines could adversely affect our business, financial condition,
results of operations, liquidity and/or the market price of our Common Stock.
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