FairPoint Communications 2012 Annual Report Download
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Table of contents
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Page 1
... Delaware (State or other jurisdigtion of ingorporation or organization) 13-3725229 (I.R.S. Employer Identifigation No.) 521 East Morehead Street, Suite 500 Charlotte, North Carolina (Tddress of pringipal exegutive offiges) 28202 (Zip Code) Registrant's telephone number, ingluding area gode... -
Page 2
...nmaller reporting company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant as of June 29, 2012 (based on the closing price... -
Page 3
... PTRT III Directors, Executive Officers and Corporate Governance Executive Compensation necurity Ownership of Certain Beneficial Owners and Management and Related ntockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and nervices... -
Page 4
...declines in access lines and disruption of our third party suppliers' provisioning of critical products or services; change in preference and use by customers of alternative technologies; the effects of competition on our business and market share; intellectual property infringement claims by third... -
Page 5
... business. Communications companies, including FairPoint, continue to experience a decline in access lines due to increased competition from competitive local exchange carriers ("CLECs"), wireless carriers and cable television operators, increased availability of alternative communications services... -
Page 6
... we would provision or expand mobile Ethernet backhaul connections or construct new fiber routes to cell towers. Coupled with recent regulatory reform in the states of Maine, New Hampshire and Iermont that will serve to promote fair competition among communication services providers in the region... -
Page 7
... over fiber and copper facilities. We also offer carrier Ethernet services throughout our market to our business and wholesale customers, which includes Ethernet virtual circuit technology for cellular backhaul. Network Switched Access Service. Network access enables long distance companies to... -
Page 8
... new communications plans. Our Markets Most of our 32 LECs (after the 2013 sale of our operations in Idaho) operate as the incumbent local exchange carrier ("ILEC") in each of their respective markets with business, wholesale and residential customers in addition to broadband subscribers... -
Page 9
...000 miles of fiber optic cable. This network is the largest IP/MPLn based network in northern New England. We have made significant investments in our fiber optic network to expand our business service offerings to meet the growing needs of our customers and to increase broadband speeds and capacity... -
Page 10
... of former customers and new product development. We offer attractive packages of value-added services that feature HnD along with local, long distance calling, enhanced telephone features and video offerings. For our business customers, we believe that the reliability and reach of our network is... -
Page 11
... Communications and FairPoint Logistics (collectively, the "Old Credit Agreement Borrowers") entered into a $1,075.0 million senior secured credit facility with a syndicate of lenders and Bank of America, N.A., as the administrative agent for the lenders, arranged by Banc of America necurities LLC... -
Page 12
... that concern, among other things, reforming high-cost and low-income programs to promote universal service to make those funds more efficient while promoting broadband communications in areas that otherwise would be unserved and to address changes to interstate access charges and other forms of... -
Page 13
... support funding to bring high speed broadband services to 697 customer locations in the state of Maine. FCC New Rules for ICC System. The CAF/ICC Order establishes rules to reform historical rules associated with local, state toll and interstate toll traffic exchanged among communications carriers... -
Page 14
... New Hampshire legislation enacted in its nession Laws of 2012, Chapter 177 (known as nenate Bill S8) ("nB S8"). nB S8 created a new class of telecommunications carriers known as "excepted local exchange carriers" ("ELECs") and our Northern New England operations qualify as an ELEC in New Hampshire... -
Page 15
...access to telephone numbers, operator service, directory assistance and directory listing, (iv) ensure competitive access to telephone poles, ducts, conduits and rights of way and (v) compensate competitors for the cost of completing calls to competitors' customers from the other carrier's customers... -
Page 16
... and (iii) acquire any services from their affiliated LEC at tariffed rates, terms and conditions. Our Northern New England operations, which are Bell Operating Companies, are subject to a different set of rules allowing them to offer both long distance and local exchange services in the regions... -
Page 17
... long distance rates are also subject to state regulation. ntates typically regulate local service quality, billing practices and other aspects of our business as well. As described above, intrastate access charges are subject to the transition plan established in the recent FCC's CAF/ICC Order... -
Page 18
... northern New England; (ii) Appoint a regulatory sub-committee of the board of directors that will monitor compliance with the terms of the Maine Merger Order, as modified by the Maine Regulatory nettlement; and (iii) Base any management bonuses on a combination of earnings before interest, taxes... -
Page 19
... general market conditions and market conditions affecting the stock of communications companies in general. Communications companies have, in the past, experienced extreme volatility in the trading prices and volumes of their securities, which has often been unrelated to operating performance. High... -
Page 20
... our business, financial condition, results of operations, liquidity and/or the market price of our outstanding securities. In addition, a substantial portion of our indebtedness, including borrowings under the New Credit Agreement, bears interest at variable rates. If market interest rates increase... -
Page 21
...Financial ntatements and nupplementary Data" included elsewhere in this Annual Report for more information regarding the New Credit Agreement and the Indenture. FairPoint Communications is a holding company and depends upon the cash flows of its operating subsidiaries to service its indebtedness and... -
Page 22
... 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 outstanding securities. Concentration of ownership among stockholders may prevent new investors from... -
Page 23
... from bundled offerings by cable companies, the use of alternate technologies, including wireless, as well as challenging economic conditions and the offering of DnL services, which prompts some customers to cancel second line service. We believe that issues with transitioning certain back-office... -
Page 24
...competition from wireless carriers has increased and is expected to further increase. We also face increasing competition from wireline and cable television companies for our voice and Internet services. We estimate that most of the customers that we serve have access to voice, network transport and... -
Page 25
... to offer new products and services may be restricted, made more costly or delayed. We depend on third party providers for certain of our billing functions, IT services, including network support and improvements, and for the provision of our long distance and bandwidth services. We have agreements... -
Page 26
... could damage our network, network operations centers, call centers, data centers, central offices, corporate headquarters or other facilities. nuch an event could interrupt our services, adversely affect service quality, overwhelm customer support and ultimately harm our business and reputation... -
Page 27
...business, financial condition, results of operations, liquidity and/or the market price of our outstanding securities. We sponsor qualified pension and post-retirement medical and dental plans for certain employees which require significant amounts of cash to maintain. The accrual of future benefits... -
Page 28
... market price of our outstanding securities. During 2012, as a condition of our collective bargaining agreements, qualified pension plan participants covered by a collective bargaining agreement did not have the option to elect a lump sum payment if they voluntarily terminated their employment with... -
Page 29
... FCC high-cost programs, as more fully described in "Item 1. Business -Regulatory Environment-Overview of FCC Order to Reform Universal nervice and Intercarrier Compensation" included elsewhere in this Annual Report. Further, several of the carriers that provide long-distance services have declared... -
Page 30
... and distribution network facilities include fiber optic backbone and copper wire distribution facilities, which connect customers to remote switch locations or to the central office and to points of presence or interconnection with the long distance carriers. These facilities are located on land... -
Page 31
... table sets forth, for the periods indicated, the high and low sales prices per share of our Common ntock as reported on the NAnDAQ. The stock price information is based on published financial sources. Year Ended Degember 31, 2012 High Low First quarter necond quarter Third quarter Fourth quarter... -
Page 32
... features of the Long Term Incentive Plan, see note (1S) "ntock-Based Compensation" to our consolidated financial statements in "Item 8. Financial ntatements and nupplementary Data" included elsewhere in this Annual Report. Equity Compensation Plan Information (a) (b) (g) Plan Category Number... -
Page 33
... Group transferred certain specified assets and liabilities of the local exchange businesses of Ierizon New England in Maine, New Hampshire and Iermont and the customers of the related voice and Internet service provider businesses in those states to subsidiaries of npinco. The Merger was accounted... -
Page 34
...(1) Upon the October 26, 2009 filing of the Chapter 11 Cases and through the Effective Date, in accordance with guidance under the applicable reorganization accounting rules, we ceased to accrue interest expense on the Pre-Petition Notes and our interest rate swap agreements as it was unlikely that... -
Page 35
...communications services to business, wholesale and residential customers within our service territories. We offer our customers a suite of advanced data services such as Ethernet, high capacity data transport and other IP-based services over our Next Generation Network in addition to Internet access... -
Page 36
... IP-based services. These investments have paid off as we continue to see positive momentum in our growth-oriented business and broadband products. Data and Internet services revenue grew 12% in 2012 over 2011 and products like our retail Ethernet service offerings continue to attract new customers... -
Page 37
... We view our business of providing data, voice and communication services to business, wholesale and residential customers as one reportable segment as defined in the negment Reporting Topic of the Accounting ntandards Codification ("AnC"). Beginning in the second quarter of 2012, we reclassified... -
Page 38
...414,945) 586,907 (281,579) Access line equivalents: Residential Business Wholesale 586,725 299,701 65,6S1 952,067 326,367 6S5,S53 311,2S1 76,065 1,032,759 31S,135 1,346,894 712,591 327,812 87,1S2 Total voige aggess lines Broadband subscribers Total aggess line equivalents 1,127,545 289,7S5... -
Page 39
... services to business and residential customers, generally for a fixed monthly charge and service charges for special calling features. We also generate revenue through long distance services within our service areas on our network and through resale agreements with national interexchange carriers... -
Page 40
...receive revenues from monthly recurring charges for the provision of data and Internet services to residential and business customers through DnL technology, fiber-to-the-home technology, retail Ethernet, dedicated T-1 connections, Internet dial-up, high speed cable modem and wireless broadband. 39 -
Page 41
... the reach and capacity of the network to customers who did not previously have access to data and Internet products and to offer more competitive services to existing customers, including retail Ethernet products. During the years ended December 31, 2012 and 2011, we grew broadband subscribers by... -
Page 42
... salaries and wages and benefits (including stock based compensation) not directly attributable to a service or product, bad debt charges, taxes other than income, advertising and sales commission costs, customer billing, call center and information technology costs, professional service fees... -
Page 43
...Financial ntatements and nupplementary Data" included elsewhere in this Annual Report for further information on our post-retirement healthcare plans. (2) Increases in 2012 and 2011 qualified pension net periodic benefit cost are primarily attributable to declines in the discount rates from 5.56% at... -
Page 44
...to pay outstanding bankruptcy claims and various other bankruptcy related fees (the "Claims Reserve"). As of December 31, 2012, the Claims Reserve is $1.3 million. Impairment of Intangible Assets and Goodwill At neptember 30, 2011, as a result of the significant sustained decline in our stock price... -
Page 45
... Under Chapter 11-Financial Reporting in Reorganization-Reorganization Items" to our consolidated financial statements in "Item 8. Financial ntatement and nupplementary Data" included elsewhere in this Annual Report. Income Taxes The effective income tax rate for the years ended December 31, 2012... -
Page 46
... Plan. For 2013, our annualized effective income tax rate is expected to range from 39% to S1%, excluding one-time discrete items. Changes in the relative profitability of our business, as well as recent and proposed changes to federal and state tax laws may cause the rate to change from historical... -
Page 47
...pay, interest on the PrePetition Credit Facility, as such interest was considered an allowed claim pursuant to the Plan. The non-payment of interest on the Pre-Petition Credit Facility resulted in a source of cash on hand. Upon the Effective Date, we began paying interest on our Old Credit Agreement... -
Page 48
... to our Company sponsored qualified pension plans of $19.8 million and funded benefit payments of $3.5 million under our post-retirement healthcare plans. On July 6, 2012, the Moving Apead for Progress in tpe 21st Century Act was signed into law. This act contains a pension funding stabilization... -
Page 49
... the lien securing the obligations under the New Credit Agreement. The Notes will mature on August 15, 2019 and accrue interest at a rate of 8.75% per annum, which is payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2013. On or after February 15, 2016, we may... -
Page 50
... Court issued a final order relating to the DIP Financing, permitting the DIP Borrowers access to the total $75.0 million of the DIP Financing, subject to the terms and conditions of the DIP Credit Agreement and related orders of the Bankruptcy Court, of which up to $30.0 million was available in... -
Page 51
... at December 31, 2012. For more information, see note (8) "Long-term Debt" to our consolidated financial statements in "Item 8. Financial ntatements and nupplementary Data" included elsewhere in this Annual Report. On February 1S, 2013, we entered into the New Credit Agreement and issued the Notes... -
Page 52
... pension and other post-retirement healthcare benefits; Accounting for income taxes; Depreciation of property, plant and equipment; ntock-based compensation; and Ialuation of long-lived assets. Revenue Recognition. We recognize service revenues based upon usage of our local exchange network... -
Page 53
... information on our qualified pension and post-retirement healthcare plans, see note (9) "Employee Benefit Plans" to our consolidated financial statements in "Item 8. Financial ntatements and nupplementary Data" included elsewhere in this Annual Report. Accounting for Income Taxes. Our current and... -
Page 54
... contained in the New Credit Agreement. Stock-based Compensation . Compensation expense for share-based awards made to employees and directors are recognized based on the estimated fair value of each award over the award's vesting period. We estimate the fair value of share-based payment awards on... -
Page 55
... in this Annual Report. Our qualified pension plan assets have historically funded a large portion of the benefits paid under our qualified pension plans. Payment of significant lump sum payments, lower returns on plan assets and lower discount rates could negatively impact the funded status of the... -
Page 56
...FAIRPOINT COMMUNICATIONn, INC. AND nUBnIDIARIEn: Report of Management on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Report...of ntockholders' Equity (Deficit) for the Year Ended December 31, 2012, the ... -
Page 57
... We, the management of FairPoint Communications, Inc., are responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Management has evaluated internal control over financial reporting of the Company as of December 31, 2012 using the criteria... -
Page 58
... the Public Company Accounting Oversight Board (United ntates), the consolidated balance sheets of FairPoint Communications, Inc. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive (loss) income, stockholders' equity (deficit) and... -
Page 59
... We have audited the accompanying consolidated balance sheets of FairPoint Communications, Inc. and subsidiaries (the Company) as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive (loss) income, stockholders' equity (deficit) and cash flows for the... -
Page 60
...' Defigit: Current portion of long-term debt Current portion of capital lease obligations $ 10,000 $ 10,000 Accounts payable Claims payable and estimated claims accrual 1,220 57,832 1,282 176 Accrued interest payable Other accrued liabilities Liabilities held for sale 72,036 S07 1,252 65... -
Page 61
...data) Predegessor Company Three Hundred Year Ended Degember 31, 2012...Cost of services and sales, excluding depreciation and amortization nelling, general...(9,S53) (30,517) 897,313 866,796 Reorganization items (Loss) ingome before ingome taxes Income tax benefit (expense) Net (loss) ingome - (248,854... -
Page 62
... 31, 2010 (in thousands) Predegessor Company Three Hundred Year Ended Degember 31, 2012 Forty-One Days Ended Degember 31, 2011...taxes: Qualified pension and post-retirement healthcare plans (net of $19.7 million tax benefit, $39.1 million tax benefit, $0.5 million tax expense and $S.6 million tax... -
Page 63
...equity (defigit) Shares Tmount Balange at Degember 31, 2009 (Predegessor Company) Net loss Restricted stock canceled for withholding tax...18 S93 Employee benefit adjustment to comprehensive income Cancellation of Predecessor Company common stock Elimination of Predecessor Company accumulated other... -
Page 64
... Restricted cash Accounts payable and accrued liabilities - (12,303) 3,36S (332) Accrued interest payable Other assets and liabilities, net 508 67 (7,752) (3,S23) - 26,627 9,017 177 (S,198) (5,002) (8,82S) 22,219 346,069 (6,83S) - (10,802) 137,111 (3,816) (20,00S) Reorganization adjustments... -
Page 65
... of capitalized interest $ 66,619 $ 62,290 $ Income tax paid, net of refunds Capital additions included in accounts payable, claims payable and estimated claims accrual or liabilities subject to compromise at period-end Reorganization costs paid Non-cash settlement of claims payable 562 218... -
Page 66
... communications services to business, wholesale and residential customers within its service territories. FairPoint offers its customers a suite of advanced data services such as Ethernet, high capacity data transport and other IP-based services over a ubiquitous, next-generation fiber network... -
Page 67
... consolidated balance sheets. The Company also adopted a separate performance assurance plan ("PAP") for certain services provided on a wholesale basis to competitive local exchange carriers ("CLECs") in each of the states of Maine, New Hampshire and Iermont, pursuant to which FairPoint is required... -
Page 68
...pension plans, including the December 31, 2012 balance at risk, see note (9) "Employee Benefit Plans" herein. (f) Property, Plant and Equipment In connection with the Company's adoption of fresh start accounting on the Effective Date (as defined hereinafter in note (S) "Reorganization Under Chapter... -
Page 69
...to, the ongoing network deployment, technology upgrades and enhancements, planned retirements and the adequacy of reserves. The Company utilizes straight-line depreciation for its non-telephone property, plant and equipment. In 2012, with the assistance of outside expertise, the Company completed an... -
Page 70
... its estimated fair value, the asset is considered impaired. For its non-amortizable intangible asset impairment assessments of the FairPoint trade name, the Company makes certain assumptions including an estimated royalty rate, a long-term growth rate, an effective tax rate and a discount rate, and... -
Page 71
... fair value, but measured on a recurring basis. For the fair value of long-term debt, see note (8) "Long-term Debt" herein. (n) Business Segments Management views its business of providing data, video and voice communication services to residential, wholesale and business customers as one reportable... -
Page 72
... other comprehensive income balances. This new guidance is to be applied prospectively and effective for interim and annual periods beginning after December 15, 2012, with early adoption permitted. The Company will adopt this AnU during the quarter ended March 31, 2013 and does not expect... -
Page 73
... Communications and FairPoint Logistics (collectively, the "Old Credit Agreement Borrowers") entered into a $1,075.0 million senior secured credit facility with a syndicate of lenders and Bank of America, N.A., as the administrative agent for the lenders, arranged by Banc of America necurities LLC... -
Page 74
... allowed claim adjustments Cancellation of debt income (d) Goodwill adjustment (e) (e) (e) (e) Intangible assets adjustment Property, plant and equipment adjustment Other assets and liabilities adjustment (e) Pension and post-retirement healthcare adjustment Tax account adjustments (e) Other... -
Page 75
... as of January 2S, 2011 and for subsequent periods report the results of a new entity with no beginning retained earnings. With the exception of deferred taxes and assets and liabilities associated with pension and post-retirement healthcare plans, which were recorded in accordance with the Income... -
Page 76
...516,871 Liabilities and Stogkholders' Equity (Defigit): Liabilities not subject to compromise: Current portion of long-term debt Current portion of capital lease obligations $ - 1,233 98,67S - 61,065 160,972 Accounts payable Claims payable and estimated claims accrual Other accrued liabilities... -
Page 77
... indebtedness Income tax impact Other Total impagt on gonsolidated statement of operations $ $ Cancellation of predecessor common stock and additional paid-in capital Total reorganization adjustments (f) Reflects the fair values of property, plant and equipment in connection with the... -
Page 78
... FairPoint Communications trade name and a $0.S million favorable leasehold agreement intangible asset. Fair value estimates were based on the following valuation methods: • • The customer list asset was valued based on a cost method which utilized average cost to acquire a new line multiplied... -
Page 79
... million from other long-term assets to property, plant and equipment. (m) Liabilities not subject to compromise include: (1) liabilities incurred after the Petition Date; (2) pre-Petition Date liabilities that the Company expects to pay in full such as medical or retirement benefits; and (3) pre... -
Page 80
...): Estimated Life (in years) Degember 31, 2012 Degember 31, 2011 Land - S0 $ Buildings Central office equipment Outside communications plant Furniture, vehicles and other work equipment Plant under construction Other Total property, plant and equipment 7 - 10 15 - 35 5 - 15 - - 36,82S... -
Page 81
... to December 31, 2012 are as follows (in thousands): Year ending Degember 31, Balange Due 2013 201S $ 2015 2016 Total long-term debt, ingluding gurrent portion 10,000 25,000 37,500 88S,500 957,000 $ Pursuant to the Plan, the Company did not make any principal or interest payments on its pre... -
Page 82
... with FairPoint Communications and FairPoint Logistics, are collectively referred to as the "Financing Loan Parties"). The Old Credit Agreement Loans as a whole were secured by liens upon substantially all existing and after-acquired assets of the Financing Loan Parties, with first lien and payment... -
Page 83
... 31, 2012 and 2011, the Company had capitalized debt issue costs of $1.1 million and $1.8 million , respectively, net of amortization. (9) Employee Benefit Plans The Company sponsors noncontributory qualified pension plans and post-retirement healthcare plans which provide certain cash payments and... -
Page 84
... and Funded Status A summary of plan assets, projected benefit obligation and funded status of the plans are as follows for the year ended December 31, 2012 , the 3S1 days ended December 31, 2011 and the 2S days ended January 2S, 2011 (in thousands): Qualified Pension Plans Predegessor Company... -
Page 85
... service cost Net actuarial loss Net amount regognized in aggumulated other gomprehensive loss $ $ - (197,929) $ - (161,718) $ $ (29,150) (113,S55) (142,605) (197,929) $ (161,718) Qualified Pension Plan Assets. The qualified pension plans' portfolio strategy emphasizes a long-term equity... -
Page 86
... the purchase or sale of equity or fixed income securities. (b) Equity securities at December 31, 2012 include amounts held in hedged equity funds which primarily invest using a "fund of funds" strategy in multiple other equity funds. The fair values for the qualified pension plan assets by asset... -
Page 87
... note (2) "nummary of nignificant Accounting Policies-(m) Fair Ialue Measurements". Net Periodic Benefit Cost. Components of the net periodic benefit cost related to the Company's qualified pension plans and post-retirement healthcare plans for the year ended December 31, 2012 , the 3S1 days ended... -
Page 88
...): Qualified Pension Plans Predegessor Company Three Hundred Year Ended Degember 31, 2012 Forty-One Days Ended Degember 31, 2011 Twenty-Four Days Ended January 24, 2011 Year ended Degember 31, 2010 Amounts recognized in other comprehensive loss (income): New prior service cost $ Net... -
Page 89
... (a) In developing the expected long-term rate-of-return assumption, the Company evaluated historical investment performance and input from its investment advisors. Projected returns by such advisors were based on broad equity and bond indices. The target allocations of the qualified pension plans... -
Page 90
... and Benefit Payments On July 6, 2012, the Moving Ahead for Progress in the 21st Century Act was signed into law. This act contains a pension funding stabilization provision which allows pension plan sponsors to use higher interest rate assumptions when determining funded status and funding... -
Page 91
... expected to offset the future post-retirement healthcare benefit payments as of December 31, 2012 are as follows (in thousands): Qualified Pension Plans Post-retirement Healthgare Plans Expected employer contributions for fiscal year 2013 Expected benefit payments for fiscal years: $ $ 15,000 15... -
Page 92
... ingome tax (benefit) rate (35.0) % (35.0) % 35.0 % (35.0) % ntate income tax (benefit) expense, net of federal income tax expense Post-petition interest Goodwill impairment Non-taxable debt cancellation income Investment tax credits Restructuring charges Medicare subsidy impact of law change... -
Page 93
... initial public offering on February 8, 2005, which resulted in an "ownership change" within the meaning of the United ntates federal income tax laws addressing NOL carryforwards, alternative minimum tax credits and other similar tax attributes. The Merger and the Company's emergence from Chapter 11... -
Page 94
...payment of interest and penalties at December 31, 2012 and 2011, respectively, as the remaining unrecognized tax benefits would only serve to reduce the Company's current federal and state NOL carryforwards, if ultimately recognized. Income Tax Returns The Company and its eligible subsidiaries file... -
Page 95
... the Long Term Incentive Plan (as defined hereinafter in note (1S) "ntock-Based Compensation"). (13) Stogkholders' Defigit On the Effective Date, the Company issued 25,659,877 shares of Common ntock and 3,S58,390 Warrants to purchase Common ntock and established the Equity Claims Reserve which set... -
Page 96
...31, 2012 , the Company had $S.S million of stock-based compensation cost related to non-vested awards that will be recognized over a weighted average period of 1.23 years, all of which is related to awards granted under the FairPoint Communications, Inc. 2010 Long Term Incentive Plan (the "Long Term... -
Page 97
... an employee during this time period would be outstanding upon an analysis of stock options' strike price. (2) For all stock options granted during 2011 and 2012, no dividends are expected to be paid over the contractual term of the stock options resulting in the use of a zero expected dividend rate... -
Page 98
...to the Plan, all then outstanding equity interests of the Company, including but not limited to all outstanding shares of Common ntock, options and contractual or other rights to acquire any equity interests, were canceled and extinguished on the Effective Date. (15) Quarterly Finangial Information... -
Page 99
...services and resulting loss of access line equivalents which could have a material adverse effect on the Company's business, financial condition, results of operations, liquidity and/or the market price of the Company's outstanding securities. In addition, if state regulators in Maine, New Hampshire... -
Page 100
... current assets Property, plant and equipment (net of $S.6 million accumulated depreciation) $ 261 37 3 Other assets Total assets held for sale $ 6,SS1 5,807 12,549 Liabilities held for sale: Accounts payable Other accrued liabilities $ 137 1S8 122 $ 407 Other long-term liabilities Total... -
Page 101
...under the plans be paid by the Company in the form of credits applied to retail customer bills. However, as the result of separate orders in New Hampshire and Iermont issued in 2012, certain previously assessed nQI penalties in each respective state may be used for expansion of broadband services to... -
Page 102
...the Claims Reserve at December 31, 2011), together with another $0.5 million of Company funds, to build out broadband connections to customers in rural areas beyond the commitments made in the New Hampshire Merger Order. On January 29, 2013, the NHPUC approved the Company's detailed engineering plan... -
Page 103
... Old Term Loan, plus an additional approximately $7.7 million of accrued interest and (ii) pay approximately $33.0 million of fees, expenses and other costs relating to the Refinancing. The New Credit Agreement. In connection with the Refinancing, the Company entered into the New Credit Agreement... -
Page 104
... Agreement. The Company is required to pay a per annum letter of credit fee on the average daily amount available to be drawn under letters of credit issued under the New Revolving Facility equal to the applicable rate for revolving loans bearing interest based on LIBOR, calculated on a quarterly... -
Page 105
... lien securing the obligations under the New Credit Agreement. The Notes will mature on August 15, 2019 and accrue interest at a rate of 8.75% per annum, which is payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2013. On or after February 15, 2016, the Company... -
Page 106
... we continue to evaluate and work to improve our internal control over financial reporting, we may identify additional measures to address previous material weaknesses and other deficiencies. Our management, with the oversight of the audit committee of our board of directors, will continue to assess... -
Page 107
Table of Contents ITEM 9B. OTHER INFORMTTION Not applicable. 106 -
Page 108
... ntockholder Matters and Issuer Purchases of Equity necurities-necurities Authorized for Issuance under Equity Compensation Plans" included elsewhere in this Annual Report. ITEM 13. CERTTIN RELTTIONSHIPS TND RELTTED TRTNSTCTIONS, TND DIRECTOR INDEPENDENCE The information required by Items S0S... -
Page 109
... SCHEDULES (a) Financial Statements The financial statements filed as part of this Annual Report are listed in the index to the financial statements under "Item 8. Financial ntatements and nupplementary Data" included elsewhere in this Annual Report, which index to the financial statements is... -
Page 110
...of 193S, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FAIRPOINT COMMUNICATIONn, INC. By: /s/ Paul H. nunu Paul H. nunu, Chief Executive Officer and Director Date: March 7, 2013 Pursuant to the requirements of the necurities... -
Page 111
... by and among the guarantors party thereto in favor of Bank of America, N.A., as administrative agent, for the benefit of certain secured parties.(3) Credit Agreement, dated as of February 1S, 2013, among FairPoint Communications, Inc., the lenders party thereto from time to time and Morgan ntanley... -
Page 112
...January 22, 2013, by and between FairPoint Communications, Inc. and Peter G. Nixon. †* Employment Agreement, dated as of July 1, 2011, by and between FairPoint and Kathleen McLean. †(18) 10.21 10.22 10.23 10.2S Employment Agreement, made and entered into as of November 15, 2012, by and between... -
Page 113
... by reference to the Current Report on Form 8-K of FairPoint filed on January 2S, 2008. Incorporated by reference to the Quarterly Report on Form 10-Q of FairPoint for the period ended June 30, 2009. Incorporated by reference to the Annual Report on Form 10-K of FairPoint for the year ended December... -
Page 114
...Section 7 hereof, (iii) any benefits provided under the Company's employee benefit plans upon a termination of employment, in accordance with the terms contained therein, and (iv) any amounts payable under the FairPoint Communications, Inc. 2010 Long Term Incentive Plan ("LTIP"), in accordance with... -
Page 115
... as annual bonuses are generally payable to other senior executives of the Company subject to Executive's continuous employment through the payment date. (c) Other Plans . Executive shall be eligible for consideration by the Compensation Committee to participate in the benefit and other plans made... -
Page 116
...other claim shall not be subject to indemnification hereunder. Section 5. Employee Benefits . During the Term of Employment, Executive shall be entitled to participate in health, insurance, retirement, and other benefits provided generally to similarly situated employees of the Company. Executive... -
Page 117
... of Executive's employment by reason of a Disability, except as set forth in this Section 8(b), Executive shall have no further rights to any compensation or any other benefits under this Agreement. (c) Termination by the Company with Cause . (i) The Company may terminate Executive's employment at... -
Page 118
... the same conditions on payment and benefits as described in Section 8(d) hereof; provided, however, that Executive shall also be entitled to accelerated vesting of the next tranche of benefits payable under the LTIP. Following such termination of Executive's employment by Executive with Good Reason... -
Page 119
... in connection with employment with any prior employer. Section 11. Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment, and social insurance taxes, as shall be required by law. Executive acknowledges... -
Page 120
... of the invalid or unenforceable term or provision hereof. Section 17. Governing Law and Jurisdiction. THIS AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWS RULES. ANY DISPUTE OR CLAIM ARISING OUT OF OR RELATING... -
Page 121
... to the Company shall be mailed or delivered to the Company at its principal executive office, Attention: General Counsel, and all notices and communications by the Company to Executive may be given to Executive personally or may be mailed to Executive at Executive's last known address, as reflected... -
Page 122
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. FAIRPOINT COMMUNICATIONS, INC. /s/ Paul H. Sunu By: Paul H. Sunu Title: Chief Executive Officer EXECUTIVE /s/ Ajay Sabherwal Ajay Sabherwal 9 -
Page 123
... or performed services for the Company Group (the " Assignment Period "), whether as an officer, employee, director, independent contractor, consultant, or agent, or in any other capacity, I incorporate (or have incorporated) into a Company Group product or process any development, original work of... -
Page 124
... with the Company (the " Employment Period ") and the PostTermination Non-Compete Period, I shall not, directly or indirectly, individually or on behalf of any person, company, enterprise, or entity, or as a sole proprietor, partner, stockholder, director, officer, principal, agent, or executive, or... -
Page 125
... with or employment by the Company and is not publicly known. ii. "Competitive Activities " shall mean telecommunication services provided by a rural exchange carrier business which has substantial business operations in the state of Florida, Maine, New Hampshire, North Carolina, or Vermont. iii... -
Page 126
... to such disclosure. Section 10. General Provisions . (a) Governing Law and Jurisdiction . THIS NON-INTERFERENCE AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWS RULES. ANY DISPUTE OR CLAIM ARISING OUT OF OR RELATING... -
Page 127
... my employment with the Company and/or the assignment of this Non-Interference Agreement by the Company to any successor in interest or other assignee. * * * I, Ajay Sabherwal, have executed this Confidentiality, Non-Interference, and Invention Assignment Agreement on the respective date set forth... -
Page 128
...Section 7 hereof, (iii) any benefits provided under the Company's employee benefit plans upon a termination of employment, in accordance with the terms contained therein, and (iv) any amounts payable under the FairPoint Communications, Inc. 2010 Long Term Incentive Plan ("LTIP"), in accordance with... -
Page 129
... as annual bonuses are generally payable to other senior executives of the Company subject to Executive's continuous employment through the payment date. (c) Other Plans . Executive shall be eligible for consideration by the Compensation Committee to participate in the benefit and other plans made... -
Page 130
...other claim shall not be subject to indemnification hereunder. Section 5. Employee Benefits . During the Term of Employment, Executive shall be entitled to participate in health, insurance, retirement, and other benefits provided generally to similarly situated employees of the Company. Executive... -
Page 131
... of Executive's employment by reason of a Disability, except as set forth in this Section 8(b), Executive shall have no further rights to any compensation or any other benefits under this Agreement. (c) Termination by the Company with Cause . (i) The Company may terminate Executive's employment at... -
Page 132
... the same conditions on payment and benefits as described in Section 8(d) hereof; provided, however, that Executive shall also be entitled to accelerated vesting of the next tranche of benefits payable under the LTIP. Following such termination of Executive's employment by Executive with Good Reason... -
Page 133
... in connection with employment with any prior employer. Section 11. Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment, and social insurance taxes, as shall be required by law. Executive acknowledges... -
Page 134
... of the invalid or unenforceable term or provision hereof. Section 17. Governing Law and Jurisdiction. THIS AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWS RULES. ANY DISPUTE OR CLAIM ARISING OUT OF OR RELATING... -
Page 135
... to the Company shall be mailed or delivered to the Company at its principal executive office, Attention: General Counsel, and all notices and communications by the Company to Executive may be given to Executive personally or may be mailed to Executive at Executive's last known address, as reflected... -
Page 136
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. FAIRPOINT COMMUNICATIONS, INC. /s/ Paul H. Sunu By: Paul H. Sunu Title: Chief Executive Officer EXECUTIVE /s/ Shirley J. Linn Shirley J. Linn 9 -
Page 137
... or performed services for the Company Group (the " Assignment Period "), whether as an officer, employee, director, independent contractor, consultant, or agent, or in any other capacity, I incorporate (or have incorporated) into a Company Group product or process any development, original work of... -
Page 138
... with the Company (the " Employment Period ") and the PostTermination Non-Compete Period, I shall not, directly or indirectly, individually or on behalf of any person, company, enterprise, or entity, or as a sole proprietor, partner, stockholder, director, officer, principal, agent, or executive, or... -
Page 139
... with or employment by the Company and is not publicly known. (ii) "Competitive Activities " shall mean telecommunication services provided by a rural exchange carrier business which has substantial business operations in the state of Florida, Maine, New Hampshire, North Carolina, or Vermont. (iii... -
Page 140
... to such disclosure. Section 10. General Provisions . (a) Governing Law and Jurisdiction . THIS NON-INTERFERENCE AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWS RULES. ANY DISPUTE OR CLAIM ARISING OUT OF OR RELATING... -
Page 141
...my employment with the Company and/or the assignment of this Non-Interference Agreement by the Company to any successor in interest or other assignee. * * * I, Shirley J. Linn, have executed this Confidentiality, Non-Interference, and Invention Assignment Agreement on the respective date set forth... -
Page 142
...22nd day of January, 2013 (the "Commencement Date") by and between FairPoint Communications, Inc. (the "Company"), a Delaware corporation, and Peter G. Nixon (the " Executive"). WITNESSETH: WHEREAS, the Company desires to employ Executive and to enter into this Agreement embodying the terms of such... -
Page 143
... as annual bonuses are generally payable to other senior executives of the Company subject to Executive's continuous employment through the payment date. (c) Other Plans . Executive shall be eligible for consideration by the Compensation Committee to participate in the benefit and other plans made... -
Page 144
...other claim shall not be subject to indemnification hereunder. Section 5. Employee Benefits . During the Term of Employment, Executive shall be entitled to participate in health, insurance, retirement, and other benefits provided generally to similarly situated employees of the Company. Executive... -
Page 145
... of Executive's employment by reason of a Disability, except as set forth in this Section 8(b), Executive shall have no further rights to any compensation or any other benefits under this Agreement. (c) Termination by the Company with Cause . (i) The Company may terminate Executive's employment at... -
Page 146
... the same conditions on payment and benefits as described in Section 8(d) hereof; provided, however, that Executive shall also be entitled to accelerated vesting of the next tranche of benefits payable under the LTIP. Following such termination of Executive's employment by Executive with Good Reason... -
Page 147
... in connection with employment with any prior employer. Section 11. Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment, and social insurance taxes, as shall be required by law. Executive acknowledges... -
Page 148
... of the invalid or unenforceable term or provision hereof. Section 17. Governing Law and Jurisdiction. THIS AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWS RULES. ANY DISPUTE OR CLAIM ARISING OUT OF OR RELATING... -
Page 149
... to the Company shall be mailed or delivered to the Company at its principal executive office, Attention: General Counsel, and all notices and communications by the Company to Executive may be given to Executive personally or may be mailed to Executive at Executive's last known address, as reflected... -
Page 150
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. FAIRPOINT COMMUNICATIONS, INC. /s/ Paul H. Sunu By: Paul H. Sunu Title: Chief Executive Officer EXECUTIVE /s/ Peter G. Nixon Peter G. Nixon 9 -
Page 151
... or performed services for the Company Group (the " Assignment Period "), whether as an officer, employee, director, independent contractor, consultant, or agent, or in any other capacity, I incorporate (or have incorporated) into a Company Group product or process any development, original work of... -
Page 152
... of furthering the business of the Company Group. (d) Intellectual Property Rights . I agree to assist the Company, or its designee, at the Company's expense, in every way to secure the rights of the Company Group in the Developments and any copyrights, patents, trademarks, service marks, database... -
Page 153
... with or employment by the Company and is not publicly known. (ii) "Competitive Activities " shall mean telecommunication services provided by a rural exchange carrier business which has substantial business operations in the state of Florida, Maine, New Hampshire, North Carolina, or Vermont. (iii... -
Page 154
... to such disclosure. Section 10. General Provisions . (a) Governing Law and Jurisdiction . THIS NON-INTERFERENCE AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWS RULES. ANY DISPUTE OR CLAIM ARISING OUT OF OR RELATING... -
Page 155
... my employment with the Company and/or the assignment of this Non-Interference Agreement by the Company to any successor in interest or other assignee. * * * I, Peter G. Nixon, have executed this Confidentiality, Non-Interference, and Invention Assignment Agreement on the respective date set forth... -
Page 156
...Section 7 hereof, (iii) any benefits provided under the Company's employee benefit plans upon a termination of employment, in accordance with the terms contained therein, and (iv) any amounts payable under the FairPoint Communications, Inc. 2010 Long Term Incentive Plan ("LTIP"), in accordance with... -
Page 157
... as annual bonuses are generally payable to other senior executives of the Company subject to Executive's continuous employment through the payment date. (c) Other Plans . Executive shall be eligible for consideration by the Compensation Committee to participate in the benefit and other plans made... -
Page 158
...other claim shall not be subject to indemnification hereunder. Section 5. Employee Benefits . During the Term of Employment, Executive shall be entitled to participate in health, insurance, retirement, and other benefits provided generally to similarly situated employees of the Company. Executive... -
Page 159
... of Executive's employment by reason of a Disability, except as set forth in this Section 8(b), Executive shall have no further rights to any compensation or any other benefits under this Agreement. (c) Termination by the Company with Cause . (i) The Company may terminate Executive's employment at... -
Page 160
... the same conditions on payment and benefits as described in Section 8(d) hereof; provided, however, that Executive shall also be entitled to accelerated vesting of the next tranche of benefits payable under the LTIP. Following such termination of Executive's employment by Executive with Good Reason... -
Page 161
... in connection with employment with any prior employer. Section 11. Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment, and social insurance taxes, as shall be required by law. Executive acknowledges... -
Page 162
... of the invalid or unenforceable term or provision hereof. Section 17. Governing Law and Jurisdiction. THIS AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWS RULES. ANY DISPUTE OR CLAIM ARISING OUT OF OR RELATING... -
Page 163
... to the Company shall be mailed or delivered to the Company at its principal executive office, Attention: General Counsel, and all notices and communications by the Company to Executive may be given to Executive personally or may be mailed to Executive at Executive's last known address, as reflected... -
Page 164
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. FAIRPOINT COMMUNICATIONS, INC. /s/ Paul H. Sunu By: Paul H. Sunu Title: Chief Executive Officer EXECUTIVE /s/ Anthony A. Tomae Anthony A. Tomae 9 -
Page 165
... or performed services for the Company Group (the " Assignment Period "), whether as an officer, employee, director, independent contractor, consultant, or agent, or in any other capacity, I incorporate (or have incorporated) into a Company Group product or process any development, original work of... -
Page 166
... with the Company (the " Employment Period ") and the PostTermination Non-Compete Period, I shall not, directly or indirectly, individually or on behalf of any person, company, enterprise, or entity, or as a sole proprietor, partner, stockholder, director, officer, principal, agent, or executive, or... -
Page 167
... with or employment by the Company and is not publicly known. (ii) "Competitive Activities " shall mean telecommunication services provided by a rural exchange carrier business which has substantial business operations in the state of Florida, Maine, New Hampshire, North Carolina, or Vermont. (iii... -
Page 168
... to such disclosure. Section 10. General Provisions . (a) Governing Law and Jurisdiction . THIS NON-INTERFERENCE AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT OF LAWS RULES. ANY DISPUTE OR CLAIM ARISING OUT OF OR RELATING... -
Page 169
... employment with the Company and/or the assignment of this Non-Interference Agreement by the Company to any successor in interest or other assignee. * * * I, Anthony A. Tomae, have executed this Confidentiality, Non-Interference, and Invention Assignment Agreement on the respective date set forth... -
Page 170
... Long Distance, Inc. Illinois Community Service Telephone Co. Maine Sidney Telephone Company Maine Utilities, Inc. Maine China Telephone Company Maine Maine Telephone Company Maine Standish Telephone Company Maine UI Long Distance, Inc. Maine Berkshire Telephone Corporation New York Berkshire Cable... -
Page 171
...Carrier Services, Inc. Delaware (f/k/a FairPoint Communications Solutions Corp., f/k/a FairPoint Communications Corp.) FairPoint Broadband, Inc. Delaware Northern New England Telephone Operations LLC Delaware Telephone Operating Company of Vermont LLC Delaware Enhanced Communications of Northern New... -
Page 172
... of FairPoint Communications, Inc. and subsidiaries, and the effectiveness of internal control over financial reporting of FairPoint Communications, Inc. and subsidiaries included in this Annual Report (Form 10-K) for the year ended December 31, 2012. /s/ Ernst & Young LLP Charlotte, North Carolina... -
Page 173
... Paul H. Sunu, certify that: 1. I have reviewed this Annual Report on Form 10-K of FairPoint Communications, Inc. (the "Company"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in... -
Page 174
...I, Ajay Sabherwal, certify that: 1. I have reviewed this Annual Report on Form 10-K of FairPoint Communications, Inc. (the "Company"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made... -
Page 175
... OF 2002 In connection with the Annual Report on Form 10-K of FairPoint Communications, Inc. (the "Company") for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Paul H. Sunu, Chief Executive Officer of the Company, certify... -
Page 176
... OF 2002 In connection with the Annual Report on Form 10-K of FairPoint Communications, Inc. (the "Company") for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ajay Sabherwal, Chief Financial Officer of the Company, certify... -
Page 177