FairPoint Communications 2007 Annual Report Download - page 88

Table of Contents
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Specifically, this statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial
statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest will be included in
consolidated net income on the face of the income statement. SFAS 160 clarifies that changes in a parent’s ownership interest in a
subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition,
this statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be
measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS 160 also includes expanded
disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS 160 is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company is
currently evaluating the impact, if any, the adoption of SFAS 160 will have on its consolidated financial statements.
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On January 15, 2007, the Company entered into an Agreement and Plan of Merger with Verizon Communications Inc., or Verizon,
and Northern New England Spinco Inc., or Spinco, as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of
April 20, 2007, Amendment No. 2 to Agreement and Plan of Merger, dated as of June 28, 2007, Amendment No. 3 to Agreement and Plan
of Merger, dated as of July 3, 2007, Amendment No. 4 to Agreement and Plan of Merger, dated as of November 16, 2007, and
Amendment No. 5 to Agreement and Plan of Merger, dated as of February 25, 2008 referred to herein as the Merger Agreement, pursuant
to which Spinco will merge with and into the Company with the Company continuing as the surviving corporation for legal purposes,
which transaction is referred to herein as the Merger. Spinco is a newly formed wholly-owned subsidiary of Verizon that will own or
indirectly own Verizon’s local exchange and related business activities in Maine, New Hampshire and Vermont. The Company will be the
acquiree for accounting purposes. Consequently, certain Merger related costs that are normally capitalized are being expensed as incurred
in connection with the transaction and FairPoint’s assets and liabilities will be recorded at fair value upon acquisition. The Merger is
subject to regulatory approval. The Company expects the merger to close on March 31, 2008.
As of December 31, 2007, approximately $70.9 million of systems development and associated costs had been capitalized and
$65.3 million had been expensed related to the Merger. These amounts were partially offset by approximately $26.9 million and
$13.1 million, respectively, for amounts that have been reimbursed to the Company by Verizon pursuant to the Merger Agreement. Under
the terms of the Merger Agreement, Verizon will reimburse the Company for up to $40.0 million of certain qualified transition costs
(subject to the specific terms contained in the Merger Agreement). As of December 31, 2007, the Company had received $34.2 million
from Verizon and the remaining $5.8 million was recorded within other receivables.
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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 existing credit facility, with a
syndicate of financial institutions, including Deutsche Bank Trust Company Americas, as administrative agent. The existing 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
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