FairPoint Communications 2003 Annual Report Download - page 120

beginning two to five years after date of issue and expiring by 2002. The interest rate on the debt is a variable rate established periodically by
the RTFC. The rate at December 31, 2001, was 5.3%.
Substantially all assets of the Partnership are pledged as security under the mortgage and security agreement with the RTFC.
The mortgage and security and loan agreements underlying the RTFC notes contain certain restrictions on Partnership distributions,
return of partner capital contributions, and investment in, or loans to others. In 2000, the Partnership received a waiver from the lender to
make partnership distributions. Also included in the loan agreement is a provision which requires the partners to infuse, on an ongoing
basis, the greater of sufficient amounts of equity to accommodate any cash shortfalls or certain specified amounts. Further, the Partnership is
required, under the loan agreement, to achieve a debt service coverage ratio of not less than 1.25.
Of the funds available under the RTFC approved loans, including amendments, all amounts were advanced as of December 31, 2002.
Cash paid for interest net of amounts capitalized for 2002, 2001, and 2000, totaled $25,021, $92,928, and $158,095, respectively.
The fair value of the partnership debt is estimated based on the discounted value of future cash flows expected to be paid using current
rates of borrowing for similar types of debt. The fair value of debt approximates carrying value at December 31, 2002 and 2001.
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NOTE 7. RELATED PARTY TRANSACTIONS
MC, as operating and network partner, performed certain technical, professional, and administrative services on behalf of the
Partnership. In accordance with the Partnership Agreement, MC is reimbursed by the Partnership for the Partnership's share of these costs.
MC allocates these costs to the various cellular systems to which they provide service based on each entity's customer access lines.
Reimbursed expenses in 2002, 2001, and 2000 were $2,224,397, $1,944,325, and $1,725,222, respectively. These reimbursed expenses
are classified and presented under the Operating Expenses category to which each relates.
In addition, $276,062, $252,406, and $223,877 were paid to an affiliate of MC for contract labor, interest, and other services in 2002,
2001, and 2000, respectively.
Certain cellular equipment sold to subscribers by the Partnership is provided to the Partnership by a related entity at cost. Cost of goods
sold is recorded by the Partnership at the time of sale.
The Partnership has an arrangement with Illinois Valley Cellular RSA 2, Inc. (Switching Company) to provide switching services to the
Partnership. The stockholders of the Switching Company own 53% of the Partnership. In 2002, switching and toll roaming services of
$546,600 and $1,716,618, respectively, were provided to the Partnership. These services in 2001 were $455,250 and $1,592,348,
respectively, and in 2000 were $423,525 and $1,004,834, respectively. The Switching Company received $511,669, $334,881, and
$293,108 of access and billing and collecting services from the Partnership in 2002, 2001, and 2000, respectively.
NOTE 8. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Partnership to concentrations of credit risk consist principally of cash equivalents and
accounts receivable. The Partnership grants credit to cellular customers located primarily within its portion of the Illinois RSA 2 cellular
geographic service area, to other cellular carriers, and to other telecommunications carriers.
The Partnership maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Partnership has
not experienced any losses in such accounts. The Partnership believes it is not exposed to any significant credit risk on cash and cash
equivalents.
Retail service revenues are derived from customers located primarily within the Partnership's portion of the Illinois RSA 2 cellular
geographic service area. The Partnership grants credit to these customers, substantially all of whom are local residents of this geographic
area.
Roamer cellular revenues are derived under arrangements with other wireless carriers (roaming partners) whose customers use the
Partnership's network to place or complete calls. Roaming revenues from Verizon Wireless accounted for 21%, 31%, and 22% of total
operating revenues in 2002, 2001, and 2000, respectively.
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NOTE 9. LEASE COMMITMENTS
Future minimum rental payments under leases for facilities have initial non-cancelable lease terms at December 31, 2002 as follows:
Capitalized
Leases
Operating
Leases