FairPoint posts profitable quarter on lower employee expenses after strike

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PORTLAND — FairPoint Communications posted net income of $40.3 million Wednesday morning, driven largely by cuts in pension and retirement benefits from the contract signed with workers after a 131-day strike.

The company in the second quarter reported a 5 percent drop in total revenue, to $214.1 million, with the steepest declines in voice service line revenue.

But with that dip in revenue, the company reported operating expenses dropped by 34 percent, to $154.8 million.

The drop in operating expenses came primarily from a lowered pension and retirement benefit expense as a result of the contract deal the company and unions struck in February to end a 131-day strike.

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The contract deal eliminated all retiree medical benefits for active employees and provided a stipend to cover retirement medical expenses to employees who retired within 30 months from the contract signing.

The deal also cut benefit accruals in half for defined-benefit pensions and replaced that with a 401(k) plan for new employees, with a company match equaling up to 5 percent of pay.

The company also laid off 229 employees effective July 29, bringing its total employment down to 2,931 from 3,160 one year ago. It had planned to lay off 260 employees total, with 79 of those positions in Maine.

Union leaders of the contract negotiations said to members in a Facebook post they were disappointed with the outcome.

“While we are deeply disappointed that the company chose to declare a surplus within three months of our return to work after a grueling 131-day strike, the contract that you all ratified on February 22 provided significant protections that were absent from the imposed terms and conditions that we struck over last fall,” the union group said in the post.

Peter McLaughlin, a lead negotiator for the International Brotherhood of Electrical Workers Local 2327, said during voting on the contract that he thought the concessions stand to make FairPoint more attractive to potential buyers.

The company’s CEO, Paul Sunu, said in an earnings announcement for the first quarter of 2015 that FairPoint “must consider mergers and acquisitions as either a seller or a buyer as part of our overall strategy.”

The company, which sells landline phone service and retail and wholesale broadband Internet, in 2008 struggled to take on the massive New England landline phone network it purchased from Verizon and in 2009 filed for Chapter 11 bankruptcy.

Since emerging from bankruptcy in 2011, the company has posted annual losses, posting $136.3 million in losses in 2014. For the first half of the year, the company has reported losses of about $5 million, compared with losses of about $55 million for the same period last year.

In every service category except for data and Internet services, the company for the first six months of the year has posted lower revenues, declining residential phone line subscribers and declining broadband Internet subscribers.

The company’s higher capacity Ethernet lines have increased, however, with total Ethernet circuits up 28 percent for the year and 4.6 percent for the quarter.

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