FairPoint Communications 2004 Annual Report Download - page 120

(b) Investments
Investments classified as available-for-sale and trading are carried at their fair value, which were approximately
$0.0 million and $0.6 million, respectively, at December 31, 2004 and $1.9 million and $0.5 million, respectively, at
December 31, 2003 (see note 6 and note 9).
At December 31, 2004, the Company had cost method investments with a carrying value of $30.4 million. The Company
did not estimate the fair value of these investments as to do so would involve significant judgment and a value could not be
determined with any degree of accuracy.
(c) Long-term Debt
The fair value of the Company's publicly registered long-term debt is stated at quoted market prices. The fair value of the
Company's remaining long-term debt is estimated by discounting the future cash flows of each instrument at rates currently
offered to the Company for similar debt instruments of comparable maturities. At December 31, 2004 and 2003, the Company
had long-term debt with a carrying value of $810.4 million and $825.6 million, respectively, and estimated fair values of
$865.2 million and $870.7 million, respectively.
(d) Redeemable preferred stock
The fair value of the Company's redeemable preferred stock is estimated utilizing a cash flow analysis at a discount rate
equal to rates available for debt with terms similar to the preferred stock. At December 31, 2004 and 2003, the Company's
carrying value of its redeemable preferred stock was $116.9 million and $96.7 million, respectively, and estimated fair value
was $126.8 million and $97.3 million, respectively.
(e) Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the
financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment
and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
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Revenues for interstate access services are based on reimbursement of costs and an allowed rate of return. A substantial portion
of revenues of this nature are received from NECA in the form of monthly settlements. Such revenues amounted to 25.7%, 26.3%,
and 26.3% of the Company's total revenues from continuing operations for the years ended December 31, 2004, 2003, and 2002,
respectively.
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Certain of the Company's telephone subsidiaries participate in revenue-sharing arrangements with other telephone companies
for interstate revenue-sharing arrangements and for certain intrastate revenue. Such sharing arrangements are funded by toll revenue
and/or access charges within state jurisdiction and by access charges in the interstate market. Revenues earned through
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