FairPoint Communications 2004 Annual Report Download - page 45

 Data and Internet services revenues increased $3.1 million from $10.3 million in 2002 to $13.4 million
in 2003. This increase is primarily from an increase of digital subscriber line customers from 6,659 to 17,937, an increase of 169%.
 Other revenues decreased by $0.8 million from $17.8 million in 2002 to $17.0 million in 2003 at our existing
operations. This decrease is mainly associated with reductions in billing and collections revenues, as interexchange carriers continue to take
back the billing function for their more significant long distance customers. We expect this trend to continue.
Operating Expenses
 Operating expenses increased $0.9 million to $111.2 million in
2003 from $110.3 million in 2002. Expenses of our wholesale long distance company decreased $0.7 million as a result of lower minutes of
use from our wholesale customers. This decrease was offset by an increase of $1.3 million related to our existing operations and
$0.3 million related to expenses of the companies we acquired in 2003 in the Maine acquisition. Several items contributed to the expense
increase, including network operations expense, transport and network costs associated with our broadband initiatives. Expenses also
increased because of an increase in the Universal Service Fund life line fund contribution expense which is directly assigned to the interstate
revenue requirement and is fully recovered via our interstate revenues. Marketing and promotion expenses increased due to higher levels of
activity related to the promotion of custom calling features, data services and other performance products. The increased expenses in 2003
would have been larger except for lower compensation costs in 2003 as a result of employee termination costs incurred in 2002, as well as a
$1.9 million bad debt expense incurred in 2002 when a carrier declared bankruptcy and a $0.6 million recovery of this write-off received in
2003 resulting in a year over year decrease in bad debt expense of $2.5 million.
 Depreciation and amortization from continuing operations increased $1.8 million to $48.1 million in
2003 from $46.3 million in 2002. An increase of $1.7 million was attributable to the increased investment in our communications network
by existing operations we acquired prior to 2003 and $0.1 million was attributable to the Maine acquisition.
 For the year ended December 31, 2002, stock based compensation of $0.9 million was incurred,
including $1.2 million resulting from a modification of an employee stock option agreement with an executive officer, offset by the decrease in
the estimated value of fully vested stockholder appreciation rights agreements of $0.3 million. Stock based compensation for the year ended
December 31, 2003 was $15,000.
 Income from continuing operations decreased $1.2 million to $72.1 million in 2003 from $73.3 million in
2002. A $0.5 million decrease attributable to our existing operations and a decrease of $1.0 million from our wholesale long distance
company was offset by a $0.3 million increase attributable to the Maine acquisition.
 Total other expense from continuing operations decreased $0.9 million to $80.6 million in 2003 from
$81.5 million in 2002. The expense consisted primarily of interest expense on long-term debt. Interest expense increased $20.7 million to
$90.2 million in 2003 from $69.5 million in 2002, mainly attributable to our March 2003 debt refinancing and our early adoption of
SFAS 150, as of July 1, 2003, the latter of which resulted in our recording $9.0 million in interest expense related to dividends and accretion
on preferred shares subject to mandatory redemption. During 2002, we recorded non-cash impairment of investments of $12.6 million
which is associated with other than temporary declines in fair value of approximately $8.2 million of Choice One stock and a write-down of
$4.4 million for certain investments accounted for under the equity method. There were no similar impairment losses recorded in 2003.
Earnings in equity investments increased $2.3 million to
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