FairPoint Communications 2004 Annual Report Download - page 29

per share and aggregate dividend amounts payable on such shares during the four fiscal quarters ending March 31, 2006. In order to
generate cash flow to pay dividends of $1.59125 per share of our common stock for the four fiscal quarters ending March 31, 2006, we
would require an estimated minimum Adjusted EBITDA of $120.7 million during such period.
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Estimated dividends on our common stock 34,451,716 $1.59125 $54,821
(7) The leverage ratio is calculated as total indebtedness divided by pro forma Adjusted EBITDA. Under our credit facility, we may not pay
dividends on our common stock if our leverage ratio is above 5.00 to 1.00. See "—Restrictions on Payment of Dividends and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations—Description of Certain Indebtedness
—Credit Facility."
(8) We have a number of minority investments and passive partnership interests from which we receive distributions. We do not control
the amount or timing of such distributions. Includes a non-recurring $2.5 million distribution.
(9) Includes non-recurring capital expenditures of $13.4 million for the year ended December 31, 2004 related to the conversion of our six
billing systems into an integrated billing platform and the centralization of our customer service records. Also includes non-recurring
capital expenditures of $4.8 million for the year ended December 31, 2004 related to capital investments in digital subscriber line
access multiplexers and other plant upgrades associated with our accelerated digital subscriber line initiative that began during the
third quarter of 2003. As a result, approximately 93% of our exchanges are broadband capable as of December 31, 2004 and
management expects that digital subscriber line investments will decrease significantly in 2005. Our management views non-
recurring capital expenditures as either one-time capital expenditures or discretionary capital expenditures which are not necessary to
maintain and enhance our network infrastructure or operate our business, such as the billing systems conversion and the digital
subscriber line initiative described above. Our dividend policy may cause us to reduce or eliminate such one-time or discretionary
capital expenditures in the future or to incur indebtedness to fund such capital expenditures. To the extent we finance capital
expenditures with indebtedness, we will begin to incur incremental interest and principal obligations which would reduce our cash
available for future dividend payments and other purposes. In addition, if we reduce or eliminate capital expenditures, the regulatory
settlement payments we receive may decline.
Assumptions and Considerations
Based on a review and analysis conducted by our management and our board of directors, we believe that our Adjusted EBITDA for the
four fiscal quarters ending March 31, 2006 will be at least $120.7 million and our average Adjusted EBITDA with respect to each such quarter
will be at least $30.2 million, and we have determined that our assumptions as to capital expenditures, cash interest expense and income
taxes in the above tables are reasonable. We considered numerous factors in making such determination, including the following factors
which we considered material in making such determination:
•For fiscal years 2004, 2003 and 2002, our Adjusted EBITDA was $141.2 million, $132.6 million and $131.7 million,
respectively.
•For fiscal years 2004, 2003 and 2002, we received distributions from minority investments and passive partnership interests
of $15.0 million (of which $2.5 million was non-recurring), $10.8 million and $9.0 million, respectively. Although we do not
control the amount or timing of
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