FairPoint Communications 2006 Annual Report Download - page 72

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recognition of tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company has determined that the impact of the
adoption of this interpretation will not have a material impact on its financial position, results of operations or cash flows.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 is definitional and disclosure oriented and addresses
how companies should approach measuring fair value when required by generally accepted accounting principles, or GAAP; it does not create or modify any
current GAAP requirements to apply fair value accounting. SFAS No. 157 provides a single definition for fair value that is to be applied consistently for all
accounting applications, and also generally describes and prioritizes according to reliability the methods and inputs used in valuations. The new measurement
and disclosure requirements of SFAS No. 157 are effective for the Company in the first quarter 2008. The Company does not expect a significant impact from
adopting SFAS No. 157.
In September 2006, the SEC issued Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying
Misstatements in Current Year Financial Statements”, which provides interpretive guidance on how the effects of the carryover or reversal of prior year
misstatements should be considered in quantifying a current year misstatement. The Company was required to adopt the provisions of SAB No. 108 in its
financial statements for the fiscal year ended December 31, 2006. The adoption of SAB No. 108 did not have an impact on the Company’s consolidated
financial statements.
In June 2006, the FASB ratified the consensus reached by the Emerging Issues Task Force on Issue No. 06-3, “How Sales Taxes Collected From
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement” (“EITF 06-3”). EITF 06-3 requires a company to disclose
its accounting policy (i.e. gross vs. net basis) relating to the presentation of taxes within the scope of EITF 06-3. Furthermore, for taxes reported on a gross
basis, an enterprise should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is
presented. The guidance is effective for all periods beginning after December 15, 2006. The adoption of this guidance will have no impact on the Company’s
consolidated financial statements.
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(a) General
On February 8, 2005, the Company consummated an initial public offering, or the offering, of 25,000,000 shares of its common stock, par value $0.01
per share, or common stock, at a price to the public of $18.50 per share.
In connection with the offering, the Company entered into a new senior secured credit facility, or the credit facility, with a syndicate of financial
institutions, including Deutsche Bank Trust Company Americas, as administrative agent. The credit facility is comprised of a revolving facility in an
aggregate principal amount of $100 million (less amounts reserved for letters of credit) and a term facility in an aggregate principal amount of $588.5 million
(including a $22.5 million delayed draw facility). The revolving facility has a six year maturity and the term facility has a seven year maturity. The offering,
the credit facility and the transactions described below are referred to herein collectively as the transactions.
The Company received gross proceeds of $462.5 million from the offering which, net of costs incurred of $30.6 million related to the offering, was
allocated to paid-in capital. The Company used the gross
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