FairPoint Communications 2003 Annual Report Download - page 27

the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of a non-public entity, in
which case this statement shall be effective for fiscal periods beginning after December 15, 2003. For purposes of SFAS No. 150, we meet
the definition of a nonpublic entity. As described in note 7 to our consolidated financial statements contained elsewhere in this Annual Report
on Form 10-K, we adopted SFAS No. 150 early, as of July 1, 2003.
In March 2003, the Emerging Issues Task Force, or EITF, reached consensus on EITF 00-21, 
, or EITF 00-21. This guidance addresses the determination of whether an arrangement involving multiple
deliverables contains more than one unit of accounting. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. The implementation of EITF 00-21 did not have a material impact on our financial statements.
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In November 2003, the EITF reached consensus on EITF 03-1, 
 that certain quantitative and qualitative disclosures are required for equity and fixed maturity securities
that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The guidance
requires companies to disclose the aggregate amount of unrealized losses and the related fair value of investments with unrealized losses for
securities that have been in an unrealized loss position for less than 12 months and separately for those that have been in an unrealized loss
position for over 12 months, by investment category. We have adopted the disclosure requirements in these financial statements. Further
discussion on the meaning of other-than-temporary impairments for EITF 03-1 is expected at a future EITF meeting.
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We do not believe inflation has a significant effect on our operations.

At December 31, 2003, we recorded our marketable available-for-sale equity securities at a fair value of $1.9 million. These securities
have exposure to price risk. A hypothetical ten percent adverse change in quoted market prices would decrease the recorded value by
approximately $0.2 million.
Approximately 75% of our debt bears interest at fixed rates or effectively at fixed rates. We have limited our exposure to material future
earnings or cash flow changes due to changes in interest rates on our floating rate long-term debt through the use of interest rate swaps.
However, our earnings are affected by changes in interest rates as our long-term debt under our credit facilities have variable interest based
on either the prime rate or LIBOR. If interest rates on our variable rate debt averaged 10% more, our interest expense would have increased,
and our loss from continuing operations before taxes would have increased by approximately $1.4 million for the year ended December 31,
2003.
We have entered into interest rate swaps to manage our exposure to fluctuations in interest rates on our variable rate debt. Our liability
for the fair value of these swaps was approximately $0.9 million at December 31, 2003. The fair value indicates an estimated amount we
would have to pay to cancel the contracts or transfer them to other parties. In connection with our credit facility, we used two interest rate swap
agreements, with notional amounts of $25.0 million each, to effectively convert a portion of our variable interest rate exposure to fixed rates
ranging from 8.07% to 10.34%. The swap agreements expire in May 2004.
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
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FairPoint Communications, Inc. and Subsidiaries:
Independent Auditors' Report 41
Consolidated Financial Statements for the Years Ended December 31, 2001, 2002 and 2003:
Consolidated Balance Sheets as of December 31, 2002 and 2003 42
Consolidated Statements of Operations for the Years Ended December 31, 2001, 2002, and 2003 44
Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 2001,
2002, and 2003 45
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31,
2001, 2002, and 2003 46
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2002, and 2003 47
Notes to Consolidated Financial Statements for the Years Ended December 31, 2001, 2002, and
2003 49