FairPoint Communications 2004 Annual Report Download - page 59

Risks Related to our Common Stock and our Substantial Indebtedness
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Our board of directors has adopted a dividend policy which reflects an intention to distribute a substantial portion of the cash generated by
our business 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, as regular quarterly dividends to our stockholders. Our board of
directors may, in its discretion, amend or repeal this dividend policy. Our dividend policy is based upon our directors' current assessment of
our business and the environment in which we operate, and that assessment could change based on competitive or technological
developments (which could, for example, increase our need for capital expenditures) or new growth opportunities. In addition, future
dividends with respect to shares of our common stock, if any, will depend on, among other things, our cash flows, cash requirements,
financial condition, contractual restrictions, provisions of applicable law and other factors that our board of directors may deem relevant. Our
board of directors may decrease the level of dividends provided for in the dividend policy or entirely discontinue the payment of dividends. Our
credit facility contains significant restrictions on our ability to make dividend payments. There can be no assurance that we will generate
sufficient cash from continuing operations in the future, or have sufficient surplus or net profits, as the case may be, under Delaware law, to
pay dividends on our common stock in accordance with the dividend policy established by our board of directors. If we were to use borrowings
under our credit facility's revolving facility to fund dividends, we would have less cash available for future dividends. The reduction or
elimination of dividends may negatively affect the market price of our common stock.
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We may not retain a sufficient amount of cash to finance a material expansion of our business, or to fund our operations consistent with
past levels of funding in the event of a significant business downturn. In addition, because a substantial portion of cash available to pay
dividends will be distributed to holders of our common stock under our dividend policy, our ability to pursue any material expansion of our
business, including through acquisitions or increased capital spending, will depend more than it otherwise would on our ability to obtain third
party financing. There can be no assurance that such financing will be available to us at all, or at an acceptable cost.
Our ability to consummate acquisitions and to make payments on our indebtedness will depend on our ability to generate cash flow
from operations in the future. This ability, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. There can be no assurance, however, that our business will generate sufficient cash flow from
operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other
liquidity needs.
A significant portion of our cash flow from operations will be dedicated to capital expenditures and debt service. In addition, we currently
expect to distribute a significant portion of our cash earnings to our stockholders in the form of quarterly dividends. As a result, we may not
retain a sufficient amount of cash to finance growth opportunities, including acquisitions, or unanticipated capital expenditures or to fund our
operations. In addition, if we reduce capital expenditures, the regulatory settlement payments we receive may decline.
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