FairPoint Communications 2004 Annual Report Download - page 43

accounted for $1.2 million of the increase and $0.3 million was attributable to the increased investment in our communications network for
existing operations we acquired prior to 2003. The other $0.7 million was related to accelerated depreciation on wireless equipment due to a
decision to exit certain wireless markets.
 For the year ended December 31, 2004, stock based compensation of $49,000 was incurred as a result
of modification of an employee stock option agreement with an executive officer and compensation expense from restricted stock units, offset
by the decrease in the estimated value of fully vested stockholder appreciation rights agreements. The restricted stock units issued in
December of 2003 resulted in a compensation charge of $0.2 million. Stock based compensation for the year ended December 31, 2003 was
$15,000.
 Income from operations increased $1.5 million to $73.6 million in 2004 from $72.1 million in 2003. A
$1.5 million decrease attributable to our existing operations was offset by a $3.0 million increase attributable to the Maine acquisition.
 Total other expense increased $16.8 million to $97.4 million in 2004 from $80.6 million in 2003. The
increase consisted primarily of interest expense on long-term debt, which increased $14.1 million to $104.3 million in 2004 from
$90.2 million in 2003, which was mainly attributable to the issuance of the 11 7/8% notes during the first quarter of 2003 at a higher interest
rate than prior debt financings and the adoption of Statement of Financial Accounting Standards 150 as of July 1, 2003, the latter of which
resulted in our recording $20.2 million in interest expense related to dividends and accretion on our series A preferred stock for the year
ended December 31, 2004 compared to $9.0 million for the year ended December 31, 2003. Earnings from equity investments increased
$0.8 million to $10.9 million in 2004 from $10.1 million in 2003. For the twelve months ended December 31, 2004, other non-operating
income (expense) includes the write-off of debt issuance and offering costs of $6.0 million associated with an abandoned offering of Income
Deposit Securities. For the year ended December 31, 2003, other non-operating income (expense) of $1.5 million represents the net loss on
the extinguishment of debt and expenses related to the loss on the write-off of loan origination costs. In conjunction with the issuance of
$225.0 million of the 117/8% notes during the first quarter of 2003, we recorded $3.5 million in non-operating gains on the extinguishment of
a portion of the 91/2% notes, the 121/2% notes and loans under Carrier Services' credit facility. These gains were offset by a non-operating
loss of $5.0 million for the write-off of debt issue costs related to this extinguishment of debt in 2003.
The following is a summary of amounts included in realized and unrealized gains (losses) on interest rate swaps (dollars in thousands):





Change in fair value of interest rate swaps $874 $7,693
Reclassification of transition adjustment included in other comprehensive
income (loss) (103) (1,029)
Realized losses (883) (8,051)
Total $(112)$(1,387)
 Income tax expense from continuing operations increased $0.7 million to $0.5 million in 2004 from a benefit of
$0.2 million in 2003. The income tax expense relates primarily to income taxes owed in certain states offset by investment tax credits in
certain states.
 Net income from discontinued operations of our existing operations sold in the South Dakota disposition
was $1.9 million in 2003. The companies were sold on September 30, 2003 and resulted in the recognition of a gain on disposal of the
discontinued operations of
40