FairPoint Communications 2006 Annual Report Download - page 50

Net cash used in investing activities of continuing operations was $27.4 million, $42.8 million and $21.0 million for the years ended December 31,
2006, 2005 and 2004, respectively. These cash flows primarily reflect capital expenditures of $32.3 million, $28.1 million and $36.5 million for the years
ended December 31, 2006, 2005 and 2004, respectively, and acquisitions of telephone properties, net of cash acquired, of $49.8 million and $26.3 million for
the years ended December 31, 2006 and 2005, respectively. There were no acquisitions during 2004.
Offsetting capital expenditures were distributions from investments of $10.7 million, $10.9 million and $15.0 million for the years ended December 31,
2006, 2005 and 2004, respectively. The $15.0 million received in 2004 included a one time $2.5 million distribution from our equity interest in Chouteau
Cellular Telephone Company as the partnership sold the majority of its assets. All of these distributions represent passive ownership interests in partnership
investments. We do not control the timing or amount of distributions from such investments. In addition, in 2006, we received proceeds of $43.8 million
principally related to the sale of our investments in the Rural Telephone Bank and Southern Illinois Cellular Corporation. On January 15, 2007, Taconic
entered into the O-P Purchase Agreement pursuant to which Taconic has agreed to sell its 7.5% limited partnership interest in Orange County-Poughkeepsie
Limited Partnership to Cellco Partnership. The transaction is expected to close in the second quarter of 2007, and we will no longer receive distributions from
Orange County-Poughkeepsie Limited Partnership following such closing.
Net cash used in financing activities from continuing operations was $54.7 million, $16.6 million and $24.0 million for the years ended December 31,
2006, 2005 and 2004, respectively. For the year ended December 31, 2006, net proceeds from the issuance of long-term debt were $0.5 million and we paid
dividends in the amount of $55.2 million. For the year ended December 31, 2005, net proceeds from the issuance of common stock of $431.9 million was
used for the net repayment of long term debt of $205.7 million and the repurchase of series A preferred stock and common stock of $129.3 million. The
remaining proceeds were used to pay fees and penalties associated with the early retirement of long term debt of $61.0 million, to pay a deferred transaction fee
of $8.4 million and to pay debt issuance costs of $9.0 million. For the year ended December 31, 2004, these cash flows primarily represented net repayment of
long-term debt of $15.2 million and $7.8 million in debt issuance and initial public offering related costs.
Our annual capital expenditures for our rural telephone operations have historically been significant. Because existing regulations allow us to recover our
operating and capital costs, plus a reasonable return on our invested capital in regulated telephone assets, capital expenditures have historically constituted an
attractive use of our cash flow. Capital expenditures were approximately $32.3 million, $28.1 million and $36.5 million for the years ended December 31,
2006, 2005 and 2004, respectively.
We expect that our annual capital expenditures will be approximately $73 to $75 million for fiscal 2007, including $44 million (net of $40 million which
Verizon has to reimburse us per the Merger Agreement) related to the Merger. A portion of these capital expenditures will be paid for with proceeds from the
pending sale of our Orange County-Poughkeepsie Limited Partnership investment to Cellco Partnership for $55 million. The remaining capital expenditures
are expected to be funded through our cash flow from operations and borrowings under our credit facility, if necessary. If cash is available beyond what is
required to support our dividend policy, we may consider additional capital expenditures if we believe they are beneficial. Although the amount of our capital
expenditures can fluctuate from quarter to quarter, on an annual basis we do not expect capital expenditures for our existing operations through fiscal 2009 to
vary significantly from our estimated amounts.
We expect to fund the Merger through the issuance of approximately 53.8 million shares of our common stock to existing Verizon stockholders at an
implied value of $18.88 per share totaling $1.015 billion in equity and the incurrence of $1.7 billion of new indebtedness. We anticipate that the new
indebtedness will consist of bank debt and senior unsecured notes in proportions that have yet to be determined. We have obtained commitment letters for up to
$2.080 billion of bank financing to facilitate the re-financing of our existing bank debt with the bank debt to be incurred at the time of the Merger.
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