FairPoint Communications 2004 Annual Report Download - page 31

As noted above, we have presented our initial dividend payment level and our minimum Adjusted EBITDA only for the four fiscal
quarters ending March 31, 2006. Moreover, there can be no assurance that during or following such period that we will pay dividends at the
level set forth above, or at all. In the future, our capital and cash needs will invariably change, which could impact the level of any dividends
we pay.
We are not required to pay dividends, and our board of directors may modify or revoke our dividend policy at any time. Dividend
payments are within the sole discretion of our board of directors and will depend upon, among other things, our results of operations, our
financial condition and future developments that could differ materially from our current expectations. We expect that our general policy will be
to distribute rather than retain a substantial portion of our cash in excess of operating needs, interest and principal payments on our
indebtedness, dividends on our future senior classes of capital stock, if any, capital expenditures, taxes and future reserves, if any. These
policies are based upon our current assessment of our business and the environment in which it operates, and that assessment could
change based on competitive or technological developments (which could, for example, increase our need for capital expenditures),
acquisition opportunities or other factors. We believe that our dividend policy limits, but does not preclude, our ability to pursue growth. If we
continue paying dividends at the level currently anticipated under our dividend policy, we expect that we would need additional financing to
fund significant acquisitions or to pursue growth opportunities requiring capital expenditures significantly beyond our current expectations.
Such additional financing could include, among other transactions, the issuance of additional shares of common stock. However, we intend
to retain sufficient cash after the distribution of dividends to permit the pursuit of growth opportunities that do not require material capital
investments. In the recent past, such growth opportunities have included investments in the roll-out of new services such as digital
subscriber line internet access to our existing customer base and the selective expansion of our business into new and/or adjacent markets.
Management currently has no specific plans to make a significant acquisition or to increase capital spending to expand our business
materially. However, management will evaluate potential growth opportunities as they arise and, if our board of directors determines that it is
in our best interest to use cash that would otherwise be available for distribution as dividends to pursue an acquisition opportunity, to
materially increase capital spending or for some other purpose, the board would be free to depart from or change our dividend policy at any
time. Management currently does not anticipate pursuing growth opportunities, including acquisitions, unless they are expected to be at least
neutral or accretive to our ability to pay dividends to the holders of our common stock.
Borrowings under our credit facility will bear interest at variable interest rates. In connection with the offering, we entered into three
interest rate swap agreements which fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at
6.11% until December 31, 2009, fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 5.98%
until December 31, 2008 and fixed the interest rate on approximately $130.0 million of the term loans under our credit facility at 5.76% until
December 31, 2007. After these interest rate swap agreements expire, our annual debt service obligations on such portion of the term loans
will vary from year to year unless we enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge. An
increase of ten percent in the annual interest rate applicable to borrowings under the term loan facility of our credit facility would result in an
increase of approximately $0.9 million in our annual cash interest expense, and a corresponding decrease in cash available to pay dividends
on our common stock. If we choose to enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge in the
future, the amount of cash available to pay dividends on our common stock may decrease. However, to the extent interest rates increase in
the future, we may not be able to enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge on acceptable
terms. In addition, our credit facility's revolving facility will need to be refinanced prior to February 2011 and our credit facility's term loan
facility will need to be refinanced prior to February 2012. We may not be able to refinance our credit facility, or if refinanced,
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