FairPoint Communications 2004 Annual Report Download - page 48

Offsetting capital expenditures were distributions from investments of $15.0 million, $10.8 million and $9.0 million for the years ended
December 31, 2004, 2003 and 2002, respectively. The $15.0 million received in the year ended December 31, 2004 includes a non-recurring
$2.5 million distribution to one of our subsidiaries, Chouteau Telephone Company, indirectly from Independent Cellular Telephone LLC
resulting from the sale of Independent Cellular Telephone LLC's membership interest in an operating cellular limited liability company.
These investments represent minority investments and passive partnership interests. We do not control the timing or amount of
distributions from such investments or interests. In addition, we have been advised that one of these partnerships has adjusted its pricing
structure. Based on such adjustments, the amount of future distributions from this partnership will decrease. Future price adjustments, if
any, may result in a significant decrease in distributions from this partnership. Historically, the amount of distributions from this partnership
represented a material portion of our cash flow.
Net cash used in financing activities from continuing operations was $24.0 million, $2.0 million and $12.5 million for the years ended
December 31, 2004, 2003 and 2002, respectively. These cash flows primarily represent net repayment of long-term debt of $15.2 million and
$7.8 million in debt issuance and offering related costs for the year ended December 31, 2004. For the year ended December 31, 2003, net
proceeds from the issuance of long term debt of $23.3 million were offset by debt issuance costs of $15.6 million and the repurchase of our
series A preferred stock and class A common stock of $8.6 million. For the year ended December 31, 2002, net repayments of long-term debt
were $11.5 million.
Our annual capital expenditures for our rural telephone operations have historically been significant. Because existing regulations allow
us to recover our operating and capital costs, plus a reasonable return on our invested capital in regulated telephone assets, capital
expenditures have historically constituted an attractive use of our cash flow. Capital expenditures were approximately $36.5 million,
$33.6 million and $38.8 million for the years ended December 31, 2004, 2003 and 2002, respectively. These amounts include $4.4 million
and $2.0 million for the years ended December 31, 2004 and 2003, respectively, of non-recurring capital expenditures related to the
conversion of our six billing systems into an integrated billing platform and the centralization of our customer service records. These amounts
also include $9.0 million and $4.8 million for the years ended December 31, 2004 and 2003, respectively, of non-recurring capital
expenditures 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.
We expect that our annual capital expenditures for our existing operations will be approximately $31.0 million for fiscal 2005 through
fiscal 2009. We estimate that approximately $28.0 million of this amount will be used to maintain and enhance our network infrastructure
and operate our business. This includes expenditures to meet our network, product offering and customer requirements, such as
investments in equipment, central office technology (which includes both hardware and software), inside and outside plant upgrades to meet
network capacity requirements and normal repair and maintenance to our infrastructure. In addition, approximately $3.0 million of this
amount will be available for one-time or discretionary capital expenditures, such as the billing systems conversion. We expect to fund all of
these capital expenditures through our cash flow from operations. If cash is available beyond what is required to support our dividend policy,
we may consider additional capital expenditures if we believe they are beneficial. Although the amount of our capital expenditures can
fluctuate from quarter to quarter, on an annual basis we do not expect capital expenditures for our existing operations through fiscal 2009 to
vary significantly from our estimated amounts.
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