FairPoint Communications 2007 Annual Report Download - page 59

Table of Contents
  USF high-cost loop payments increased $0.3 million to $20.0 million in 2006.
Acquired operations added $0.6 million in USF revenue and USF revenues from our existing operations declined $0.3 million. The
national average cost per loop in relation to our average cost per loop has increased and, as a result, our receipts from the USF have
declined. We expect this trend to continue as we anticipate the national average cost per loop will likely continue to increase in relation to
our average cost per loop.
 Interstate access revenues decreased $2.9 million to $72.4 million in 2006 compared to 2005. Acquired
operations added $2.8 million in interstate access revenues in 2006. Interstate access revenues from our existing operations decreased
$5.7 million. In 2006, we recognized certain negative interstate revenue settlement adjustments related to prior years in the amount of
$0.8 million. In addition, in 2005, we recognized certain positive interstate revenue settlement adjustments related to prior years which
accounted for approximately $4.3 million of interstate access revenue. Excluding these prior year adjustments and acquired operations,
interstate access revenue would have declined $0.6 million in 2006.
 Intrastate access revenues decreased $1.9 million to $37.3 million in 2006 compared to 2005. Acquired
operations added $1.3 million in intrastate access revenues in 2006. Intrastate access revenues from our existing operations decreased
$3.2 million. Intrastate access revenues declined primarily due to a decrease in access rates and a decrease in minutes of use compared to
2005. The rate decrease is primarily due to intrastate rate reductions implemented in Maine in the second quarter of 2005. Intrastate access
revenues are expected to continue to decline.
 Long distance services revenues increased $3.1 million to $24.1 million in 2006 compared to 2005. Of
this increase, $0.3 million was attributable to acquired companies and $2.8 million was attributable to our existing operations. This
increase was primarily a result of promotional efforts and bundled product offerings with unlimited long distance designed to generate
more revenue.
 Data and Internet services revenues increased $4.0 million to $28.2 million in 2006 compared to 2005.
Of this increase, $1.1 million was attributable to acquired companies and $2.9 million was attributable to our existing operations. The
increase from existing operations is due primarily to increases in HSD customers as we continue to aggressively market our HSD
services. Our HSD subscriber customer base as of December 31, 2006 increased to 59,444 subscribers compared to 45,365 subscribers
as of December 31, 2005, a 31% increase during this period.
 Other services revenues increased $2.8 million to $20.4 million in 2006 compared to 2005. Of this increase,
$1.5 million was attributable to acquired companies and $1.3 million was attributable to our existing operations. This increase is
principally due to an increase in directory revenues in 2006.

 . Operating expenses increased $12.0 million to $155.5 million in
2006 compared to 2005. Of the increase, $5.9 million is related to our existing operations and $6.1 million is related to expenses of the
acquired operations. The increase from existing operations is principally due to $2.4 million in transaction expenses related to the merger,
an increase in compensation and benefit expenses of $1.6 million, an increase in expenses related to data and long distance services of
$1.4 million, an increase in billing expenses of $1.2 million, an increase in audit and tax fees of $0.7 million and an increase in operating
taxes of $0.6 million. These increases were partially offset by a decrease in bad debt expense of $1.5 million and a decrease in consulting
expenses of $2.2 million.
Included in operating expenses are non-cash stock based compensation expenses associated with the award of restricted stock and
restricted units. Stock based compensation expenses totaled $2.9 million and $2.4 million for the years ended December 31, 2006 and
2005, respectively.
 Depreciation and amortization from continuing operations increased $0.8 million to $53.2 million
in 2006 compared to 2005. Acquired operations added $2.0 million to depreciation expense. Depreciation expense from our existing
operations decreased $1.2 million.
 Income from operations decreased $5.7 million to $61.4 million in 2006 compared to 2005. This
decrease is principally due to the increase in expenses discussed above.
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