FairPoint Communications 2004 Annual Report Download - page 108

SFAS No. 150 requires the Company to classify as a long-term liability its series A preferred stock and to classify dividends and
accretion from the series A preferred stock as interest expense. Such stock is now described as "Preferred Shares Subject to
Mandatory Redemption" in the Balance Sheets as of December 31, 2004 and 2003 and dividends and accretion on these shares are
included in pretax income beginning July 1, 2003, whereas previously they were presented as a reduction to equity (a dividend) and,
therefore, a reduction of net income available to common shareholders.
The initial carrying amount of the series A preferred stock has been recorded at its fair value at the date of issuance
($78.4 million). The carrying amount is being increased by periodic accretions, using the interest method, so that the carrying amount
will equal the mandatory redemption amount ($82.3 million) at the mandatory redemption date (May 2011). On March 6, 2003, in
connection with the Company's issuance of the 2003 Notes, the Company used a portion of these proceeds to repurchase
$13.3 million aggregate liquidation preference of its series A preferred stock at a 35% discount (together with accrued and unpaid
dividends thereon). For the years ended December 31, 2004 and 2003, the series A preferred stock has been increased by
$1.4 million to reflect the periodic accretions. The carrying amount of the series A preferred stock has been further increased by
$18.8 million and $16.5 million in connection with dividends paid in kind on the outstanding shares of the series A preferred stock for
the years ended December 31, 2004 and 2003, respectively. Prior to the adoption of SFAS No. 150, additional paid-in capital has been
decreased $11.9 million and $8.9 million for the increases in the carrying balance of the series A preferred stock for the year ended
December 31, 2002 and the period ended June 30, 2003, respectively. Upon the adoption of SFAS No. 150, pretax income has been
decreased $20.2 million and $9.0 million for the increases in the carrying balance of the series A preferred stock for the year ended
December 31, 2004 and the period July 1, 2003 through December 31, 2003, respectively.
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The Company sponsors a voluntary 401(k) savings plan (the 401(k) Plan) that covers substantially all eligible employees. Each
401(k) Plan year, the Company contributes to the 401(k) Plan an amount of matching contributions determined by the Company at its
discretion. For the 401(k) Plan years ended December 31, 2004, 2003, and 2002, the Company matched 100% of each employee's
contribution up to 3% of compensation and 50% of additional contributions up to 6%. The 401(k) Plan also allows for a profit sharing
contribution that is made based upon management discretion. Total Company contributions to the 401(k) Plan were $2.4 million,
$2.7 million, and $1.4 million for the years ended December 31, 2004, 2003, and 2002, respectively.
In 1999, the Company began a Non-Qualified Deferred Compensation Plan (the NQDC Plan) that covers certain employees.
The NQDC Plan allows highly compensated individuals to defer additional compensation beyond the limitations of the 401(k) Plan.
Company matching contributions are subject to the same percentage as the 401(k) Plan. Total Company contributions to the NQDC
Plan were approximately $7,000, $7,000, and $1,000 for the years ended December 31, 2004, 2003, and 2002, respectively. At
December 31, 2004 and 2003, the NQDC Plan assets were $0.6 million and $0.5 million, respectively. The related deferred
compensation obligation is included in other liabilities in the accompanying consolidated balance sheets.
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