FairPoint Communications 2007 Annual Report Download - page 89

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Table of Contents


existing credit facility and the transactions described below are referred to herein collectively as the transactions. The Company received
gross proceeds of $462.5 million from the offering which, net of costs incurred of $30.6 million related to the offering, was allocated to
paid-in capital.
On March 10, 2005, the Company used $18.4 million which it had invested in temporary investments, together with $6.6 million
of cash on hand, to redeem the $0.2 million aggregate principal amount of the 91/2% notes (including accrued interest and redemption
premiums) that were not tendered in the tender offer for such notes and the $24.2 million aggregate principal amount of the floating rate
notes (including accrued interest) that were not tendered in the tender offer for such notes.
On May 2, 2005, the Company used $22.4 million of borrowings under the delayed draw facility of the existing credit facility to
redeem the $19.9 million aggregate principal amount of the 121/2% notes (including accrued interest and redemption premiums) that were
not tendered in the tender offer for such notes. In connection with such redemption, a premium of $1.2 million was recorded and an
additional $0.4 million of existing debt issuance costs was charged off, resulting in the recognition of a loss of $1.6 million for retirement
of debt in 2005.
The Company reported other expense in the amount of $87.7 million, comprised of a $77.8 million loss on early retirement of debt
and a $9.9 million loss on redemption of series A preferred stock. With respect to the $77.8 million loss on early retirement of debt,
$16.8 million was recorded for the write-off of existing debt issuance costs and the remaining $61.0 million was fees and penalties.

The Company has adopted a dividend policy under which a substantial portion of the cash generated by the Company’s business in
excess of operating needs, interest and principal payments on indebtedness, dividends on future senior classes of capital stock, if any,
capital expenditures, taxes and future reserves, if any, would in general be distributed as regular quarterly dividend payments to the
holders of its common stock, rather than retained and used for other purposes.
On December 14, 2007, the Company declared a dividend of $0.39781 per share of common stock, which was paid on
January 16, 2008 to holders of record as of December 31, 2007. In 2007, the Company declared dividends totaling $55.8 million, or
$1.59124 per share of common stock. In 2006, the Company declared dividends totaling $55.4 million, or $1.59124 per share of
common stock.
 
On July 31, 2007, the Company completed the sale of the assets of Yates City Telephone Company, or Yates, for $2.5 million.
Yates is located in Yates City, Illinois and had less than 500 access lines at the time of the sale. The Company recorded a gain on the sale
of $2.2 million in operating income.
On November 15, 2006, the Company and certain subsidiaries completed the merger with The Germantown Independent Telephone
Company, or GITC. The merger consideration was $10.7 million (or $9.2 million net of cash acquired). Goodwill on this transaction
will not be deductible for income tax purposes. The Company incurred acquisition costs of $0.3 million. GITC is a single exchange rural
incumbent local exchange carrier located in the Village of Germantown, Ohio. In 2007, the Company recorded a $0.3 million purchase
adjustment to reduce the goodwill related to GITC.
The GITC acquisition has been accounted for using the purchase method of accounting for business combinations and,
accordingly, the acquired assets and liabilities have been recorded at their estimated fair values as of the date of acquisition, and its
results of operations have been included in the Company’s consolidated financial statements from the date of acquisition. Based upon the
Company’s purchase price allocation, the excess of the purchase price and acquisition costs over the fair value of the net tangible assets
87