FairPoint Communications 2006 Annual Report Download - page 74

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

The Company reported other expense in the amount of $87.7 million, comprised of a $77.8 million loss on early retirement of debt and a $9.9 million
loss on redemption of series A preferred stock. With respect to the $77.8 million loss on early retirement of debt, $16.8 million was recorded for the write-off
of existing debt issuance costs and the remaining $61.0 million was fees and penalties.
(b) Dividends
The Company has adopted a dividend policy under which a substantial portion of the cash generated by the Company’s business in excess of operating
needs, interest and principal payments on indebtedness, dividends on future senior classes of capital stock, if any, capital expenditures, taxes and future
reserves, if any, would in general be distributed as regular quarterly dividend payments to the holders of its common stock, rather than retained and used for
other purposes.
On December 13, 2006, the Company declared a dividend of $0.39781 per share of common stock, which was paid on January 16, 2007 to holders of
record as of December 29, 2006. In 2006, the Company declared dividends totaling $55.4 million, or $1.59124 per share of common stock. In 2005, the
Company declared dividends totaling $49.1 million, or $1.41886 per share of common stock.

On November 15, 2006, the Company and certain subsidiaries completed its merger with The Germantown Independent Telephone Company, or GITC.
The merger consideration is $10.7 million (or $9.2 million net of cash acquired). Goodwill on this transaction will not be deductible for income tax purposes.
The Company incurred acquisition costs of $0.3 million. GITC is a single exchange rural incumbent local exchange carrier located in the Village of
Germantown, Ohio.
The GITC acquisition has been accounted for using the purchase method of accounting for business combinations and, accordingly, the acquired assets
and liabilities have been recorded at their estimated fair values as of the date of acquisition, and its results of operations have been included in the Company’s
consolidated financial statements from the date of acquisition. Based upon the Company’s preliminary purchase price allocation, subject to final settlement of
an escrow (for potential contingent liabilities), the excess of the purchase price and acquisition costs over the fair value of the net tangible assets acquired was
approximately $6.5 million. The Company recorded an intangible asset related to the acquired company’s customer relationships of $1.8 million and the
remaining $4.7 million has been recognized as goodwill. The estimated useful life of the $1.8 million intangible asset is 15 years.
On August 17, 2006, the Company completed the purchase of Unite Communications Systems, Inc., or Unite, for approximately $11.5 million (or
$11.4 million net of cash acquired). Goodwill on this transaction will be deductible for income tax purposes. The Company incurred acquisition costs of
$58,000. Unite owns ExOp of Missouri, Inc., which is a facilities-based voice, data and video service provider located outside of Kansas City, Missouri.
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