FairPoint Communications 2013 Annual Report Download - page 31

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negotiations with the unions for successor collective bargaining agreements, which would go into effect on or after August 4,
2014. As a result of these factors and as the number of eligible retirees continues to increase, the contributions we are required
to make to these plans may also increase.
Increasing cash requirements to fund benefits under our qualified pension and post-retirement healthcare plans may impact
our liquidity position and limit our operational flexibility. These future cash requirements could have a material adverse impact
on our business, financial condition, results of operations, liquidity and/or the market price of our outstanding securities.
Our long-lived assets and non-amortizable intangible assets may become impaired in the future.
At December 31, 2013, in addition to our net property, plant and equipment of $1,301.3 million, we have net amortizable
intangible assets of $66.7 million and a non-amortizable intangible asset of $39.2 million. Amortizable long-lived assets must be
reviewed for impairment whenever indicators of impairment exist. Non-amortizable long-lived assets are required to be reviewed
for impairment on an annual basis or more frequently whenever indicators of impairment exist. Indicators of impairment could
include, but are not limited to:
• an inability to perform at levels that were forecasted;
• a permanent decline in market capitalization;
• implementation of restructuring plans;
• changes in industry trends; and/or
• unfavorable changes in our capital structure, cost of debt, interest rates or capital expenditures levels.
Situations such as these could result in an impairment that would require a material non-cash charge to our results of operations
and could have a material adverse effect on our consolidated results of operations.
Our operations require substantial capital expenditures.
We require significant capital expenditures to maintain, upgrade and enhance our network facilities and operations. While
we have historically been able to fund capital expenditures from cash generated from operations and borrowings under our revolving
facility, the other risk factors described in this section could materially reduce cash available from operations or significantly
increase our capital expenditure requirements, and these outcomes may result in our inability to fund the necessary level of capital
expenditures to maintain, upgrade or enhance our network. This could adversely affect our business.
We are exposed to risks relating to evaluations of internal control systems required by Section 404 of the Sarbanes-Oxley Act.
As a public reporting company, we are required to comply with the Sarbanes-Oxley Act and the related rules and regulations
of the SEC, including accelerated reporting requirements and expanded disclosures regarding evaluations of internal control
systems. With respect to internal control over financial reporting, standards established by the Public Company Accounting
Oversight Board define a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial
statements will not be prevented or detected on a timely basis. If our management identifies one or more material weaknesses in
internal control over financial reporting in the future in accordance with the annual assessments and quarterly evaluations required
by the Sarbanes-Oxley Act, we will be unable to assert that our internal controls are effective which could result in sanctions or
investigation by regulatory authorities. In addition, any such material weakness could result in material misstatements in our
financial statements, prevent us from providing timely financial statements or meeting our reporting requirements both with the
SEC and under our debt obligations and cause investors to lose confidence in our reported financial information.
Risks Relating to Our Regulatory Environment
We are subject to significant regulations that could change in a manner adverse to us.
We operate in a heavily regulated industry. Laws and regulations applicable to us and our competitors may be, and have
been, challenged in the courts and could be changed by Congress or regulators. In addition, the following factors could have a
significant impact on us:
Risk of loss or reduction of network access charge revenues. A portion of our revenues comes from intrastate and interstate
network access charges, which are paid to us by interexchange carriers for originating and terminating telecommunications traffic.
Through 2011, our revenues also included various forms of high-cost USF support payments. Starting in 2012, these forms of