FairPoint Communications 2004 Annual Report Download - page 97

In connection with the transitional goodwill impairment evaluation performed as of January 1, 2002, SFAS No. 142 required the
Company to perform an assessment of whether there was an indication that goodwill was impaired as of the date of adoption. To
accomplish this, the Company was required to identify its reporting units and determine the carrying value of each reporting unit by
assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of January 1,
2002. The Company was required to determine the fair value of each reporting unit and compare it to the carrying amount of the
reporting unit within six months of January 1, 2002. In performing the initial transitional impairment test, the Company determined
that the carrying amount of its reporting unit did not exceed its estimated fair value and, therefore, the Company did not record an
impairment loss upon adoption of SFAS No. 142. The Company updated its annual impairment testing of goodwill as of
December 31, 2004, 2003, and 2002, and determined that no impairment loss was required to be recognized.
Covenants not to compete are being amortized over their useful lives of three to five years. Accumulated amortization of
covenants not to compete was $4.7 million and $4.6 million at December 31, 2004 and 2003, respectively. The Company recorded
amortization of $0.1 million, $0.7 million, and $0.9 million for the years ended December 31, 2004, 2003, and 2002, respectively.
The Company will continue to amortize the covenants over their remaining estimated useful lives and will record amortization of less
than $0.1 million during 2005.
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A summary of property, plant, and equipment from continuing operations is shown below (dollars in thousands):
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Land — $3,851 3,861
Buildings and leasehold improvements 2-40 36,339 36,331
Telephone equipment 3-50 615,976 591,621
Cable equipment 3-20 3,143 1,568
Furniture and equipment 3-34 17,098 18,184
Vehicles and equipment 3-20 22,011 20,712
Computer software 3-5 4,577 2,277
Total property, plant, and equipment 702,995 674,554
Accumulated depreciation (450,733)(407,848)
Net property, plant, and equipment $252,262 266,706
The telephone company composite depreciation rate for property and equipment was 7.32%, 7.46%, and 7.62% in 2004, 2003,
and 2002, respectively. Depreciation expense from continuing operations for the years ended December 31, 2004, 2003, and 2002
was $50.3 million, $47.1 million, and $45.3 million, respectively.
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