FairPoint Communications 2011 Annual Report Download - page 56

Table of Contents
Net cash (used in) provided by financing activities was ($0.2) million, ($1.7) million, $1.8 million and $66.1 million for the 341 days ended
December 31, 2011, the 24 days ended January 24, 2011 and the years ended December 31, 2010 and 2009, respectively. We paid $2.4 million of loan
origination costs on the Credit Agreement, of which $0.9 million and $1.5 million were paid during the 341 days ended December 31, 2011 and the 24 days
ended January 24, 2011, respectively. For the year ended December 31, 2010, we drew down $5.5 million on letters of credit under the Pre-Petition Credit
Facility and incurred $1.5 million of loan origination costs on the DIP Credit Agreement, which was terminated by its conversion into the Revolving Facility,
and all notes, security agreements and other agreements related to the DIP Credit Agreement. For the year ended December 31, 2009, net proceeds from our
issuance of long-term debt were $50.0 million, repayment of long-term debt was $20.8 million and dividends paid to stockholders was $23.0 million.
Additionally, $65.1 million was released from restricted cash during the year ended December 31, 2009.
We made contributions to our Company sponsored qualified pension plans and post-retirement healthcare plans of $6.8 million and $0.8 million,
respectively, in 2011. In addition, we made $1.8 million in post-retirement healthcare plan expenditures in 2011. We expect to contribute approximately $19.8
million to our Company sponsored qualified pension plans, as required by the Pension Protection Act of 2006, and approximately $5.5 million to our post-
retirement healthcare plans in 2012. In 2011, due to lower interest rates and higher healthcare rate increases, we had a significant cost increase in our qualified
pension and post-retirement healthcare liabilities. While this may not affect our short-term cash position, it may indicate the need for higher cash contributions
in the future.
Capital Expenditures
We require significant capital expenditures to maintain, upgrade and enhance our network facilities and operations. In 2011, our capital expenditures
totaled $176.1 million. We anticipate that we will fund future capital expenditures through cash flows from operations, cash on hand and funds available
under the Revolving Facility.
We have a five year contract with our primary IT vendor, which was executed in 2009. In the years ended December 31, 2011 and 2010, we spent
approximately $22.1 million and $28.7 million, respectively, for services under such contract, of which approximately $9.2 million and $12.8 million,
respectively, was capitalized in accordance with the Intangibles – Goodwill and Other Topic and the Interest Topic of the ASC and approximately $12.9
million and $15.9 million, respectively, was included in operating expenses. In 2011, we provided notice to the vendor of our intent to in-source or
alternatively source certain functions which we expected would result in a future reduction of approximately 95% of the baseline service costs commencing on
April 11, 2012 from this vendor. We expect that these savings will be largely offset in the near term by other vendors for these functions and other IT
initiatives.
Debt
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On the Effective Date, the Borrowers entered into the Credit Agreement. The Credit Agreement is comprised of the Revolving Facility, which has a sub-
facility providing for the issuance of up to $30.0 million of letters of credit, and the Term Loan. On the Effective Date, we paid to the lenders providing the
Revolving Facility an aggregate fee equal to $1.5 million. Interest on the Credit Agreement Loans accrues at an annual rate equal to either (a) LIBOR plus
4.50%, with a minimum LIBOR floor of 2.00% for the Term Loan, or (b) a base rate plus 3.50% per annum, which base rate is equal to the highest of
(x) Bank of America’s prime rate, (y) the federal funds effective rate plus 0.50% and (z) LIBOR (with minimum LIBOR floor of 2.00%) plus 1.00%. In
addition, we are required to pay a 0.75% per annum commitment fee on the average daily unused portion of the Revolving Facility. The entire outstanding
principal amount of the Credit Agreement Loans is due and payable five years after the Effective Date (the “Maturity Date”); provided that on the third
anniversary of the Effective Date, we must elect (subject to the absence of events of default under the Credit Agreement) to continue the maturity of the
Revolving Facility and must pay a continuation fee of $0.75 million and, on the fourth anniversary of the Effective Date, we must elect (subject to the absence
of events of default under the Credit Agreement) to continue the maturity of the Revolving Facility and must pay a second continuation fee of $0.75 million.
The Credit Agreement requires quarterly repayments of principal of the Term Loan after the first anniversary of the Effective Date. In the second and third
years following the Effective Date, such quarterly payments shall each be in an amount equal to $2.5 million; during the fourth year following the Effective
Date, such quarterly payments shall each be in an amount equal to $6.25 million; and for the first three quarters during the fifth year following the Effective
Date, such quarterly payments shall each be in an amount equal to $12.5 million, with all remaining outstanding amounts owed in respect of the Credit
Agreement being due and payable on the Maturity Date. As of December 31, 2011, we had approximately $62.6 million, net of approximately $12.4 million
outstanding letters of credit, available for additional borrowing under our Revolving Facility.
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