<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
<TABLE>
<C> <S>
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 333-56365
------------------------
FAIRPOINT COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3725229
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
521 EAST MOREHEAD STREET, SUITE 250 28202
CHARLOTTE, NORTH CAROLINA (Zip Code)
(Address of Principal Executive
Offices)
</TABLE>
(Registrant's telephone number, including area code)
(704) 344-8150
------------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
As of November 1, 2000, the registrant had outstanding 45,985,254 shares of
Class A common stock and 4,269,440 shares of Class C common stock.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
FAIRPOINT COMMUNICATIONS, INC.
QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2000
INDEX
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 3
Condensed Consolidated Balance Sheets as of September 30,
2000 and
December 31, 1999........................................... 3
Condensed Consolidated Statements of Operations for the
three months and nine months ended September 30, 2000 and
1999........................................................ 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and 1999.................... 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
Item 3a. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 17
PART II. OTHER INFORMATION
Item 5. Other Information........................................... 19
Item 6. Exhibits and Reports on Form 8-K............................ 19
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,799 $ 9,923
Accounts receivable and other............................. 53,775 40,257
-------- --------
Total current assets.................................... 58,574 50,180
-------- --------
Property, plant, and equipment, net......................... 303,443 178,296
-------- --------
Other assets:
Investments............................................... 49,642 36,246
Goodwill, net of accumulated amortization................. 451,796 229,389
Deferred charges and other assets......................... 30,651 23,924
-------- --------
Total other assets...................................... 532,089 289,559
-------- --------
Total assets............................................ $894,106 $518,035
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 14,449 $ 12,778
Current portion of long-term debt and other
long-term liabilities................................... 5,346 5,102
Demand notes payable...................................... 586 752
Accrued interest payable.................................. 20,051 4,396
Other accrued liabilities................................. 25,588 11,492
-------- --------
Total current liabilities............................... 66,020 34,520
-------- --------
Long-term liabilities:
Long-term debt, net of current portion.................... 680,689 458,529
Deferred credits and other long-term liabilities.......... 35,001 33,124
-------- --------
Total long-term liabilities............................. 715,690 491,653
-------- --------
Minority interest........................................... 17 443
-------- --------
Common stock subject to put option.......................... -- 3,000
-------- --------
Stockholders' equity (deficit):
Common stock.............................................. 503 345
Additional paid-in capital................................ 236,118 48,868
Unearned compensation..................................... (13,682) --
Accumulated other comprehensive income.................... 609 4,187
Accumulated deficit....................................... (111,169) (64,981)
-------- --------
Total stockholders' equity (deficit).................... 112,379 (11,581)
-------- --------
Total liabilities and stockholders' equity (deficit).... $894,106 $518,035
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues............................................. $ 69,015 $ 39,347 $173,563 $107,671
-------- -------- -------- --------
Operating expenses:
Network operating costs............................ 37,008 13,435 88,831 33,940
Selling, general and administrative................ 23,832 12,401 59,265 34,707
Depreciation and amortization...................... 14,844 7,532 36,729 22,496
Stock-based compensation expense................... 1,376 131 15,075 230
-------- -------- -------- --------
Total operating expenses............................. 77,060 33,499 199,900 91,373
-------- -------- -------- --------
Income (loss) from operations........................ (8,045) 5,848 (26,337) 16,298
-------- -------- -------- --------
Other income (expense):
Net gain on sale of investments.................... 3,387 136 6,230 362
Interest income.................................... 144 55 1,036 335
Dividend income.................................... 313 349 803 941
Interest expense................................... (19,117) (10,162) (46,376) (29,061)
Other, net......................................... (478) 266 2,768 1,338
-------- -------- -------- --------
Total other expense.................................. (15,751) (9,356) (35,539) (26,085)
-------- -------- -------- --------
Loss before income taxes............................. (23,796) (3,508) (61,876) (9,787)
Income tax benefit................................... 7,812 55 15,616 1,573
Minority interest in income of subsidiaries.......... (1) (19) (2) (58)
-------- -------- -------- --------
Net loss............................................. $(15,985) $ (3,472) $(46,262) $ (8,272)
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2000 1999
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(46,262) $(8,272)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization of debt issue costs.......................... 2,384 1,452
Depreciation and amortization............................. 36,729 22,496
Other non cash items...................................... 1,878 (6,325)
Changes in assets and liabilities arising from operations,
net of acquisitions:
Accounts receivable..................................... (10,943) 401
Accounts payable and accrued expenses................... 18,575 4,056
Income taxes recoverable................................ (7,315) 3,692
-------- -------
Total adjustments......................................... 41,308 25,772
-------- -------
Net cash provided by (used in) operating activities....... (4,954) 17,500
-------- -------
Cash flows from investing activities:
Net capital additions..................................... (49,517) (20,404)
Acquisitions of telephone properties, net of cash
acquired................................................ (253,937) (26,018)
Other, net................................................ 18,662 18,804
-------- -------
Net cash used in investing activities..................... (284,792) (27,618)
-------- -------
Cash flows from financing activities:
Loan origination costs.................................... (9,340) (64)
Proceeds from issuance of long-term debt.................. 561,586 32,016
Repayment of long-term debt............................... (424,695) (26,279)
Net proceeds from the issuance of common stock............ 158,896 --
Other, net................................................ (1,825) (60)
-------- -------
Net cash provided by financing activities................. 284,622 5,613
-------- -------
Net decrease in cash and cash equivalents................... (5,124) (4,505)
Cash and cash equivalents, beginning of period.............. 9,923 13,241
-------- -------
Cash and cash equivalents, end of period.................... $ 4,799 $ 8,736
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION AND BASIS OF FINANCIAL REPORTING
In April 2000, MJD Communications, Inc. (the "Company") changed its name to
FairPoint Communications, Inc.
In the opinion of the management, the accompanying financial statements
reflect all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of results of operations, financial position, and cash
flows. The results of operations for the interim periods are not necessarily
indicative of the results of operations which might be expected for the entire
year. The condensed consolidated financial statements should be read in
conjunction with the Company's 1999 Annual Report on Form 10-K, as amended.
Certain amounts from 1999 have been reclassified to conform to the current
period presentation.
(2) ACQUISITIONS
The Company acquired traditional telephone properties through a number of
acquisitions in 1999. On February 1, 1999, the Company acquired 100% of the
common stock of Ravenswood Communications, Inc. and its subsidiaries. On
February 16, 1999, the Company acquired 100% of the common stock of Columbus
Grove Telephone Company and its subsidiary. On April 30, 1999, the Company
acquired 100% of the common stock of Union Telephone Company of Hartford, Armour
Independent Telephone Co. and its subsidiaries, Bridgewater-Canistota
Independent Telephone Co. and WMW Cable TV Co. (collectively, "Union"). On
September 1, 1999, the Company acquired 100% of the common stock of Yates City
Telephone Company. On December 17, 1999 the Company acquired 100% of the common
stock of The Orwell Telephone Company. The aggregate purchase price for these
acquisitions was $82.7 million, which includes $7.4 million of acquired debt.
Acquisition costs were approximately $0.9 million. These acquisitions have been
accounted for under the purchase method of accounting for business combinations
and, accordingly, the acquired assets and liabilities have been recorded at
their estimated fair values at the dates of acquisition, and the results of
operations has been included in the accompanying consolidated financial
statements from the dates of acquisition. Goodwill recognized in connection with
these acquisitions was approximately $36.7 million and will be amortized over an
estimated useful life of 40 years.
On April 3, 2000, the Company acquired 100% of the common stock of TPG
Communications, Inc. and Peoples Mutual Telephone Company. On June 1, 2000, the
Company acquired 100% of the common stock of Fremont Telcom Co. On July 3, 2000,
the Company acquired 100% of the common stock of Comerco, Inc. The approximate
aggregate purchase price for these acquisitions was $363.2 million, which
includes $86.9 million of acquired debt. The Fremont acquisition was completed
using cash and the issuance of 457,318 shares of Class A common stock of the
Company valued at $13.12 per share. These acquisitions have been accounted for
under the purchase method of accounting for business combinations and,
accordingly, the acquired assets and liabilities have been recorded at their
estimated fair values at the dates of acquisition, and the results of operations
have been included in the Company's results from the date of acquisition.
Goodwill of approximately $187.4 million was recorded in connection with these
acquisitions of traditional telephone properties and will be amortized over an
estimated useful life of 40 years.
The following unaudited pro forma information presents the combined results
of operations of the Company as though the completed acquisitions referred to in
the preceding paragraphs occurred on January 1, 1999. These combined results
include certain adjustments, including amortization of
6
<PAGE>
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(2) ACQUISITIONS (CONTINUED)
goodwill, increased interest expense on debt related to the acquisitions,
certain preacquisition transaction costs, and related income tax effects. The
pro forma financial information does not necessarily reflect the results of
operations that would have been achieved had the acquisitions been consummated
as of the assumed dates, nor are the results necessarily indicative of the
Company's future results of operations.
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2000 1999
---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revenues................................................ $191,938 $154,445
Net loss................................................ (49,193) (15,352)
</TABLE>
(3) COMPENSATION EXPENSE
In January 2000, the Company recognized aggregate compensation expense of
$12,323,293 related to transactions involving employee stock options. Those
transactions included the modification of options to purchase 40,600 shares of
Class A common stock ($463,002), the settlement of options to purchase 260,340
shares of Class A common stock for cash ($3,349,665), and settlement of
compensatory cash payment obligations with employee-shareholders ($8,510,626).
In addition, the Company's board of directors approved the issuance of
compensatory stock options ($15,925,718) and cash bonus commitments ($5,308,573)
to participants in a subsidiary's stock option plan in exchange for the
cancellation of all existing stock options issued by the subsidiary. The
compensatory options and cash bonuses will be recognized in expense over the
five-year vesting period. The transaction was formally ratified by the
participants in the subsidiary's stock option plan in April 2000. In
April 2000, the Company issued 1,620,465 options to purchase Class A common
stock of the Company at an exercise price of $3.28 per share and 73,200 options
at an exercise price of $13.12 per share. Compensation expense of $2.8 million
was recognized for these options and accrued bonuses during the nine months
ended September 30, 2000.
(4) 2000 STOCK INCENTIVE PLAN
In May 2000, the Company adopted the 2000 Employee Stock Option Plan. The
2000 Plan provides for grants to members of management of up to 10,019,200
options to purchase Class A common stock, at the discretion of the compensation
committee. Options granted under the 2000 Plan may be of two types:
(i) incentive stock options and (ii) nonstatutory stock options. Unless the
compensation committee shall otherwise specify at the time of grant, any option
granted under the 2000 Plan shall be a nonstatutory stock option. The maximum
number of shares of Class A common stock subject to options granted to any
single participant in any calendar year is 1,500,000. During the quarter ended
September 30, 2000, 413,595 options were granted and 52,300 options were
forfeited. The Company has granted 4,939,054 options under the plan as of
September 30, 2000.
Unless otherwise determined by the compensation committee at the time of
grant, options granted pursuant to the 2000 Plan will have an exercise price
which is not less than the fair market value of a
7
<PAGE>
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(4) 2000 STOCK INCENTIVE PLAN (CONTINUED)
share of our Class A common stock on the date the option is granted. Options
have a term of ten years from date of grant. Options vest in increments of 10%
on the first anniversary, 15% on the second anniversary, and 25% on the third,
fourth and fifth anniversaries of an individual grant. Subject to certain
provisions, in the event of a change of control, we will cancel each option in
exchange for a payment in cash of an amount equal to the excess, if any, of the
highest price per share of Class A common stock offered in conjunction with any
transaction resulting in a change of control over the exercise price for such
option.
(5) LONG TERM DEBT
In May 2000, the Company issued $200.0 million aggregate principal amount of
12 1/2% senior subordinated notes. Interest on these notes is payable on May 1
and November 1 of each year, beginning on November 1, 2000. These notes will
mature on May 1, 2010. These notes are unsecured senior subordinated obligations
and rank equally with all of the Company's other unsecured senior subordinated
indebtedness which is subordinated in right of payment to all of the Company's
senior indebtedness.
(6) REPORTABLE SEGMENTS
The Company has two reportable segments: traditional telephone operations
and competitive communications operations. The traditional telephone operations
provide local, long distance and other communications services to customers in
rural communities in which competition is typically limited or currently does
not exist for local telecommunications services. The competitive operations
provide local, long distance, Internet, and other communications services to
customers in markets outside of the Company's traditional telephone markets.
8
<PAGE>
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(6) REPORTABLE SEGMENTS (CONTINUED)
The Company utilizes the following information for purposes of making
decisions about allocating resources to a segment and assessing a segment's
performance:
<TABLE>
<CAPTION>
TRADITIONAL COMPETITIVE
TELEPHONE COMMUNICATIONS
OPERATIONS OPERATIONS TOTAL
----------- -------------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Three months ended September 30, 2000:
Revenues from external customers................. $54,673 $ 14,342 $69,015
Intersegment revenues............................ -- 779 779
Adjusted EBITDA.................................. 31,372 (19,832) 11,540
Three months ended September 30, 1999:
Revenues from external customers................. $37,138 $ 2,209 $39,347
Intersegment revenues............................ -- 936 936
Adjusted EBITDA.................................. 19,659 (5,361) 14,298
</TABLE>
<TABLE>
<CAPTION>
TRADITIONAL COMPETITIVE
TELEPHONE COMMUNICATIONS
OPERATIONS OPERATIONS TOTAL
----------- -------------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Nine months ended September 30, 2000:
Revenues from external customers................ $138,009 $35,554 $173,563
Intersegment revenues........................... -- 2,293 2,293
Adjusted EBITDA................................. 83,251 (46,949) 36,302
Nine months ended September 30, 1999:
Revenues from external customers................ $100,913 $ 6,758 $107,671
Intersegment revenues........................... -- 1,529 1,529
Adjusted EBITDA................................. 53,824 (11,882) 41,942
</TABLE>
A reconciliation of Adjusted EBITDA to the Company's net loss for the three
months and nine months ended September 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Adjusted EBITDA to net loss:
Adjusted EBITDA..................... $ 11,540 $ 14,298 $ 36,302 $41,942
Other components of net loss:
Depreciation and amortization....... (14,844) (7,532) (36,729) (22,496)
Interest expense.................... (19,117) (10,162) (46,376) (29,061)
Stock-based compensation expense.... (1,376) (131) (15,075) (230)
Income tax benefit.................. 7,812 55 15,616 1,573
-------- -------- -------- -------
Net loss............................ $(15,985) $ (3,472) $(46,262) $(8,272)
======== ======== ======== =======
</TABLE>
9
<PAGE>
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(7) COMPREHENSIVE LOSSES
Comprehensive losses consist of the Company's net losses and the unrealized
holding gains, net of the related tax effect, on the Company's investments
classified as available-for-sale. The comprehensive loss for the three months
ended September 30, 2000 was $18.3 million and $49.9 million for the nine months
ended September 30, 2000. The Company did not have any investments
available-for-sale during the nine months ended September 30, 1999.
(8) SUBSEQUENT EVENT
On November 9, 2000, our subsidiary, FairPoint Communications Solutions
Corp. ("FairPoint Solutions"), amended and restated its existing credit facility
to increase the commitments of the lenders thereunder to $250.0 million. The
Amended and Restated Credit Agreement, which expires in November, 2007, provides
for a revolving tranche and a term tranche. FairPoint Solutions can borrow up to
$75.0 million under the revolving tranche and has the opportunity, subject to
certain conditions, to increase such availability by an additional
$50.0 million. FairPoint Solutions can borrow up to $175.0 million under the
term tranche of such facility.
(9) PREFERRED STOCK
Effective August 8, 2000, all the state regulatory approvals were received
in association with the January 20, 2000 equity transaction and the outstanding
21,461,720 shares of Preferred Stock were converted into an equal number of
shares of Class A common stock.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of the consolidated
results of operations and financial condition of FairPoint Communications, Inc.
and its Subsidiaries (collectively, the "Company" or "FairPoint"). The
discussion should be read in conjunction with the Company's Consolidated
Financial Statements for the year ended December 31, 1999 included in the
Company's Annual Report on Form 10-K, as amended.
Certain statements included in this document are forward-looking, such as
statements relating to estimates of operating and capital expenditure
requirements, future revenue and operating income, and cash flow and liquidity.
Such forward-looking statements are based on the Company's current expectations
and are subject to a number of risks and uncertainties that could cause actual
results in the future to differ significantly from results expressed or implied
in any forward-looking statements made by, or on behalf of, the Company. These
risks and uncertainties include, but are not limited to, uncertainties relating
to economic and business conditions, governmental and regulatory policies, and
the competitive environment in which the Company operates. These and other risks
are detailed below as well as in other documents filed by the Company with the
Securities and Exchange Commission.
OVERVIEW
In April 2000, MJD Communications, Inc. changed its name to FairPoint
Communications, Inc.
We are a national, facilities-based provider of voice, data and Internet
services. We began our business in 1993 for the purpose of acquiring and
operating traditional telephone companies in rural markets. Since our inception,
we have acquired 28 such companies, which currently operate in 17 states. In
early 1998, we launched our competitive communications business by competing for
small and medium-sized business customers in Tier IV and select Tier III
markets, which typically have populations of less than 100,000. These markets
are generally within a 200-mile radius of the areas served by our traditional
telephone companies. We refer to this as our "edge-out" strategy, which allows
us to leverage our existing network infrastructure, operating systems and
management expertise to accelerate the nationwide roll-out of our competitive
communications business in a capital-efficient manner. Furthermore, the stable
cash flows of our traditional telephone business provide financial capacity to
help fund our continued growth.
Historically, our operating results have been primarily related to our
traditional telephone business, which is characterized by stable growth and cash
flow. In the future, we anticipate that our competitive communications business
will have an increasing impact on our operating results. We expect that our
revenue growth will accelerate along with the expansion of our competitive
communications services and web-enabled services. As we continue to expand our
services and enter new markets, we expect network operating costs, selling,
general and administrative expenses, capital expenditures and depreciation to
increase substantially. We expect to experience operating losses for the next
few years as a result of expanding our competitive communications business into
new markets.
REVENUES
We derive our revenues from:
- LOCAL CALLING SERVICES. We receive revenues from providing local exchange
telephone services, including monthly recurring charges for basic service,
usage charges for local calls and service charges for special calling
features.
- NETWORK ACCESS CHARGES. These revenues consist primarily of charges paid
by long distance companies and other customers for access to our networks
in connection with the completion of long distance telephone calls both to
and from our customers.
11
<PAGE>
- LONG DISTANCE SERVICES. We receive revenues from charges to our retail and
wholesale long distance customers.
- DATA AND INTERNET SERVICES. We receive revenues from monthly recurring
charges for services, including digital subscriber line, Voice over
Internet Protocol/Voice Telephony over Asynchronous Transfer Mode, special
access, private lines, Internet and other services.
- OTHER SERVICES. We receive revenues from other services, including billing
and collection, directory services and sale and maintenance of customer
premise equipment.
The following summarizes our percentage of revenues from these sources:
<TABLE>
<CAPTION>
% OF REVENUE
NINE-MONTH PERIOD ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
REVENUE SOURCE 2000 1999
-------------- ------------- -------------
<S> <C> <C>
Local calling services..................................... 34% 27%
Network access charges..................................... 42% 50%
Long distance services..................................... 10% 8%
Data and Internet services................................. 5% 4%
Other services............................................. 9% 11%
</TABLE>
OPERATING EXPENSES
Our principal operating expenses are categorized as network operating costs,
selling, general and administrative expenses, depreciation and amortization and
stock-based compensation expense.
- NETWORK OPERATING COSTS include costs incurred in connection with the
operation of our central offices and outside plant facilities and related
operations. In addition to the operational costs of owning and operating
our own facilities, we also lease and purchase local and long distance
services from the regional Bell operating companies, large independent
telephone companies and third party long distance providers.
- SELLING, GENERAL AND ADMINISTRATIVE EXPENSES consist of expenses relating
to sales and marketing, customer service and administration and corporate
and personnel administration.
- DEPRECIATION AND AMORTIZATION includes depreciation of our communications
network and equipment and amortization of goodwill related to our
acquisitions.
- STOCK-BASED COMPENSATION EXPENSE consists of non-cash compensation charges
incurred in connection with shareholder appreciation rights agreements
granted to a number of executive officers and stock options to employees.
ACQUISITIONS
As we continue to expand into competitive markets, we expect to focus our
acquisition efforts on companies that enable us to enhance the implementation of
our strategy as a competitive communications provider. Our past acquisitions
have had a major impact on our operations.
- In 2000, we acquired four traditional telephone companies for an aggregate
purchase price of $363.2 million, which included $86.9 million of acquired
debt. At the respective dates of acquisition, these companies served an
aggregate of approximately 79,500 access lines.
- In 1999, we acquired seven traditional telephone companies, which we refer
to as the 1999 acquisitions, for an aggregate purchase price of
$82.7 million, which included $7.4 million of acquired debt. At the
respective dates of acquisition, these companies served an aggregate of
approximately 14,700 access lines.
12
<PAGE>
STOCK-BASED COMPENSATION EXPENSE
In connection with the January 2000 equity financing and recapitalization,
we recognized a non-cash compensation charge of $12.3 million. The charge
consisted of compensation expense of $3.8 million recognized in connection with
the modification of employee stock options and the settlement of employee stock
options for cash by a principal shareholder of the Company. The compensation
expense also included the settlement of a cash payment obligation between
certain employee-shareholders of the Company and its principal shareholders
under their pre-existing shareholders' agreements for $8.5 million.
We are recognizing expense related to the excess of estimated fair market
value over the aggregate exercise price of options that were granted to some of
our officers and employees in April 2000 in exchange for options to purchase
common stock of FairPoint Solutions. This excess of $15.9 million of intrinsic
value of the options will be amortized over the vesting period of five years. In
conjunction with these options, we intend to provide a cash bonus of
$5.3 million that will also be recognized over the five-year vesting period. The
payment of the cash bonus will be deferred until the underlying options are
exercised, with proceeds from exercise being equal to the bonus. Accordingly,
there will not be any material cash impact to us from these transactions.
RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE MONTH PERIOD
ENDED SEPTEMBER 30, 1999
REVENUES. Revenues increased $29.7 million to $69.0 million for the three
months ended September 30, 2000 from $39.3 million for the three months ended
September 30, 1999. Of this increase, $12.2 million was attributable to the
internal growth of our competitive and traditional communications businesses,
$15.0 million was attributable to revenues from companies we acquired in 2000
and $2.5 million was attributable to revenues from companies we acquired in
1999. Local calling services accounted for $13.0 million of this increase,
including an increase of $6.8 million from new business lines in our competitive
markets and an increase in the number of access lines in our traditional
telephone companies, as well as an increase of $5.5 million from companies we
acquired in 2000 and an increase of $0.7 million from companies we acquired in
1999. Network access charges increased $8.6 million, including an increase of
$5.1 million from companies we acquired in 2000, $1.2 million from companies we
acquired in 1999 and $2.3 million from new business lines added in our
competitive and traditional communications markets. Long distance services
revenues increased $4.9 million, including an increase of $2.9 million from new
long distance retail and wholesale customers and an increase of $2.0 million
from companies we acquired in 2000 and 1999. Data and Internet services
increased $1.8 million to $3.3 million as a result of increased service
offerings to our customers and acquisitions. Other revenues increased
$1.4 million primarily due to other revenue contributed by the companies we
acquired in 2000 and 1999.
OPERATING EXPENSES.
NETWORK OPERATING COSTS. Network operating costs increased $23.6 million to
$37.0 million for the three months ended September 30, 2000 from $13.4 million
for the three months ended September 30, 1999. Of this increase, $19.4 million
was attributable to operating expenses associated with the expansion into
competitive markets and increased growth in our local calling, network access
and long distance service offerings. Of the remaining portion of the increase,
the companies we acquired in 2000 accounted for $3.6 million and the companies
we acquired in 1999 account for $0.6 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $11.4 million to $23.8 million for the three
months ended September 30, 2000 from $12.4 million for the three months ended
September 30, 1999. Contributing to this increase were costs
13
<PAGE>
of $8.8 million primarily related to our expansion of selling, customer support
and administration activities to support our growth in competitive markets. The
companies we acquired in 2000 contributed $2.3 million to the increase and the
companies we acquired in 1999 contributed $0.3 million to the increase.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$7.3 million to $14.8 million for the three months ended September 30, 2000 from
$7.5 million for the three months ended September 30, 1999. This increase
consisted of $2.1 million attributable to the increased investment in our
communications network to support the growth of our competitive communications
business and $5.2 million related to the companies we acquired in 2000 and 1999.
STOCK-BASED COMPENSATION EXPENSE. As discussed above, in connection with
the FairPoint Solutions stock options, we recognized non-cash compensation
charges of $1.4 million in the third quarter of 2000.
INCOME (LOSS) FROM OPERATIONS. Income from operations decreased
$13.8 million to an $8.0 million loss for the three months ended September 30,
2000 from income of $5.8 million for the three months ended September 30, 1999.
This decline was primarily attributable to the expenses associated with our
expansion into competitive markets. We expect this trend to continue for the
next few years as we build out our competitive communications business and
continue to amortize the non-cash expense related to the exchange and
cancellation of the FairPoint Solutions employee stock options.
OTHER INCOME (EXPENSE). Total other expense increased $6.4 million to
$15.8 million for the three months ended September 30, 2000 from $9.4 million
for the three months ended September 30, 1999. The expense consists primarily of
interest expense on long-term debt, offset by a $3.4 million net gain on sale of
stock investments for the three months ended September 30, 2000. In addition,
$0.9 million in costs associated with our proposed initial public offering were
written off as of September 30, 2000. Given the current market conditions and
FairPoint Solutions' ability to secure $250.0 million in long term debt, we have
decided not to pursue a public offering at this time.
INCOME TAX BENEFIT. Income tax benefit increased $7.7 million to
$7.8 million for the three months ended September 30, 2000. The income tax
benefit as a percentage of loss before taxes was 33% for the three months ended
September 30, 2000, compared to 2% for the three months ended September 30,
1999, primarily due to tax gains associated with the sale of assets during 1999.
NET LOSS. Our net loss was $16.0 million for the three months ended
September 30, 2000, compared to a net loss of $3.5 million for the three months
ended September 30, 1999, as a result of the factors discussed above.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1999
REVENUES. Revenues increased $65.9 million to $173.6 million for the nine
months ended September 30, 2000 from $107.7 million for the nine months ended
September 30, 1999. Of this increase, $30.9 million was attributable to the
internal growth of our competitive and traditional communications businesses,
$26.0 million was attributable to revenues from companies we acquired in 2000
and $9.0 million was attributable to revenues from companies we acquired in
1999. Local calling services accounted for $30.2 million of this increase,
including an increase of $18.5 million from new business lines in our
competitive markets and an increase in the number of access lines in our
traditional telephone companies, as well as an increase of $9.2 million from
companies we acquired in 2000 and $2.5 million from companies we acquired in
1999. Network access charges increased $19.1 million, including an increase of
$9.9 million from companies we acquired in 2000, $4.0 million from companies we
acquired in 1999, $3.0 million was from new business lines in our competitive
markets and $2.2 million from universal service revenue increases and interstate
cost study true-ups
14
<PAGE>
within our traditional telephone companies. Long distance services revenues
increased $9.8 million, including an increase of $7.2 million from new long
distance retail and wholesale customers and an increase of $2.6 million from
companies we acquired in 2000 and 1999. Data and Internet services increased
$4.4 million, including an increase of $3.2 million from acquisitions and an
increase of $1.2 million as a result of increased service offerings to our
customers. Other revenues increased $2.4 million primarily due to other revenue
contributed by the companies we acquired in 2000 and 1999.
OPERATING EXPENSES.
NETWORK OPERATING COSTS. Network operating costs increased $54.9 million to
$88.8 million for the nine months ended September 30, 2000 from $33.9 million
for the nine months ended September 30, 1999. Of this increase, $45.3 million
was attributable to operating expenses associated with the expansion into
competitive markets and increased growth in our local calling, network access
and long distance service offerings. Of the remaining portion of the increase,
the companies we acquired in 2000 accounted for $7.0 million and the companies
we acquired in 1999 account for $2.6 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $24.6 million to $59.3 million for the nine
months ended September 30, 2000 from $34.7 million for the nine months ended
September 30, 1999. Contributing to this increase were costs of $19.3 million
primarily related to our expansion of selling, customer support and
administration activities to support our growth in competitive markets. The
companies we acquired in 2000 contributed $4.2 million to the increase and the
companies we acquired in 1999 contributed $1.1 million to the increase.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$14.2 million to $36.7 million for the nine months ended September 30, 2000 from
$22.5 million for the nine months ended September 30, 1999. This increase
consisted of $4.3 million attributable to the increased investment in our
communications network to support the growth of our competitive communications
business and $9.9 million related to the companies we acquired in 2000 and 1999.
STOCK-BASED COMPENSATION EXPENSE. As discussed above, in connection with
our equity recapitalization, we recognized non-cash compensation charges of
$12.3 million for the nine months ended September 30, 2000. An additional
$2.8 million was recognized in association with the FairPoint Solutions employee
stock options.
INCOME (LOSS) FROM OPERATIONS. Income from operations decreased
$42.6 million to a loss of $26.3 million for the nine months ended
September 30, 2000 from income of $16.3 million for the nine months ended
September 30, 1999. This decline was primarily attributable to the
$15.1 million stock based compensation expense and the expenses associated with
our expansion into competitive markets. Except for the effect of the
$12.3 million stock-based compensation charge discussed above, we expect this
trend to continue for the next few years as we build out our competitive
communications business and continue to amortize the non-cash expense related to
the exchange and cancellation of the FairPoint Solutions employee stock options.
OTHER INCOME (EXPENSE). Total other expense increased $9.4 million to
$35.5 million for the nine months ended September 30, 2000 from $26.1 million
for the nine months ended September 30, 1999. The expense consists primarily of
interest expense on long-term debt, offset by a $6.2 million net gain on sale of
stock and cellular investments for the nine-month period ended September 30,
2000. In addition, $0.9 million in costs associated with our proposed initial
public offering were written off as of September 30, 2000. Given the current
market conditions and FairPoint Solutions' ability to secure $250.0 million in
long term debt, we have decided not to pursue a public offering at this time.
15
<PAGE>
INCOME TAX BENEFIT. Income tax benefit increased $14.0 million to
$15.6 million for the nine months ended September 30, 2000. The income tax
benefit as a percentage of loss before taxes was 25% for the nine months ended
September 30, 2000, compared to 16% for the nine months ended September 30,
1999. The increase is primarily due to tax gains associated with the sale of
assets during 1999 and the deductibility of compensation expense associated with
the January 20, 2000 equity transaction.
NET LOSS. Our net loss was $46.3 million for the nine months ended
September 30, 2000, compared to a net loss of $8.3 million for the nine months
ended September 30, 1999, as a result of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow requirements include general corporate expenditures,
capital expenditures, debt service and acquisitions. The Company expects that
its traditional telephone companies' cash flow from operations and the Credit
Facility will fund the capital expenditures, working capital and debt service
requirements of its traditional telephone companies for the foreseeable future.
The Company will require significant capital resources as it expands its
competitive communications business. The Company's capital requirements will
include the funding of operations and capital asset expenditures.
Historically, the Company has used the proceeds from institutional and bank
debt, private equity offerings, and available cash flow to fund its operations.
The Company may secure additional funding through the sale of public or private
debt and/or equity securities or enter into another bank credit facility to fund
future acquisitions and operations. If the growth of the Company's competitive
communications business occurs more rapidly than the Company currently
anticipates or if the Company's operating results are below expectations, there
can be no assurance that the Company will be successful in raising sufficient
additional capital on terms that it considers acceptable, or that the Company's
operations will produce positive cash flow in sufficient amounts to meet its
liquidity requirements. The failure to raise and generate sufficient funds may
require the Company to delay or abandon some of its planned future growth or
expenditures, which could have a material adverse effect on the Company's growth
and its ability to compete in the communications industry.
DEBT FINANCING
We have utilized a variety of debt instruments to fund our business,
including:
THE CREDIT FACILITY. Our Credit Facility provides for two term facilities,
one with approximately $67.1 million principal amount outstanding as of
September 30, 2000 that matures on June 30, 2006 and the other with the
principal amount of approximately $70.6 million outstanding that matures on
June 30, 2007. Our Credit Facility also provides for a revolving facility with a
principal amount of $85.0 million that matures on September 30, 2004 and a
revolving acquisition facility with a principal amount of $165.0 million that
also matures on September 30, 2004. As of September 30, 2000, $73.8 million was
outstanding on the revolving acquisition facility and $176.2 million was
available for borrowing under the remaining revolving acquisition facility and
revolving facility.
SENIOR SUBORDINATED NOTES AND FLOATING RATE NOTES ISSUED IN 1998. We have
outstanding publicly-held debt comprised of $125.0 million aggregate principal
amount of 9 1/2% senior subordinated notes and $75.0 million aggregate principal
amount of floating rate notes. Interest on the senior subordinated notes and
floating rate notes is payable semi-annually in cash on each May 1 and
November 1. Both series of notes mature on May 1, 2008. We have entered into
interest rate swap agreements to reduce the impact of changes in interest rates
on our floating rate notes. These notes
16
<PAGE>
are general unsecured obligations, subordinated in right of payment to all
existing and future senior debt and effectively subordinated to all existing and
future debt and other liabilities of our subsidiaries.
SENIOR SUBORDINATED NOTES ISSUED IN 2000. In May 2000, we issued
$200.0 million aggregate principal amount of 12 1/2% senior subordinated notes.
Interest on these notes is payable on May 1 and November 1 of each year,
beginning on November 1, 2000. These notes will mature on May 1, 2010. These
notes are general unsecured obligations and rank equally with all of FairPoint's
other unsecured senior subordinated indebtedness and are subordinated in right
of payment to all of FairPoint's senior indebtedness, whether or not secured,
and effectively subordinated to all existing and future debt and other
liabilities of our subsidiaries.
FAIRPOINT SOLUTIONS CREDIT FACILITY. The Amended and Restated FairPoint
Solutions Credit Facility provides for a revolving tranche and a term tranche.
FairPoint Solutions can borrow up to $75.0 million under the revolving tranche
and has the opportunity, subject to certain conditions, to increase such
availability by an additional $50.0 million. FairPoint Solutions can borrow up
to $175.0 million under the term tranche of such facility. The total commitment
of $250.0 million matures on November 9, 2001; provided, however, that upon
receipt of all necessary regulatory approvals, which FairPoint Solutions
anticipates receiving prior to November 2001, the maturity date shall be
extended to November 9, 2007.
EQUITY FINANCING
In connection with our January 2000 equity financing and recapitalization
transaction, affiliates of Thomas H. Lee Equity Fund IV, L.P. (collectively,
"THL"), investment partnerships affiliated with Kelso & Company (collectively,
"Kelso"), and certain other institutional investors and members of management
acquired an aggregate of $408.8 million of our equity securities. We received
$158.9 million of net proceeds in such transaction, which we used to repay debt.
In addition, THL committed to invest up to an additional $50 million in our
equity securities, subject to various conditions. This commitment expires on
December 31, 2000.
CASH FLOWS
Net cash used by operating activities was $5.0 million for the nine months
ended September 30, 2000 and net cash provided by operating activities was
$17.5 million for the nine months ended September 30, 1999. Net cash used in
investing activities was $284.8 million and $27.6 million for the nine months
ended September 30, 2000 and 1999, respectively. These cash flows primarily
reflect expenditures relating to traditional telephone company acquisitions of
$253.9 million and $26.0 million and capital expenditures of $49.5 million and
$20.4 million for the nine months ended September 30, 2000 and 1999,
respectively. Net cash provided by financing activities was $284.6 million and
$5.6 million for the nine months ended September 30, 2000 and 1999,
respectively. These cash flows for the nine months ended September 30, 2000
primarily represent the proceeds from the January equity transaction of
$158.9 million and the net issuance of long term debt of $136.9 million. The
cash flows for the nine months ended September 30, 1999 primarily represent the
net issuance of long term debt.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. SFAS 137, or
Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB Statement No. 133, delays the effective date of this
statement to all fiscal years
17
<PAGE>
beginning after June 15, 2000. We will adopt SFAS 133 effective January 1, 2001.
We are currently assessing the impact of SFAS 133; however, based on our initial
analysis, the adoption of SFAS 133 will not have a material effect on our
financial position or results of operations.
On December 3, 1999, the Securities and Exchange Commission (SEC) staff
issued Staff Accounting Bulletin (SAB) No. 101, REVENUE RECOGNITION IN FINANCIAL
STATEMENTS. SAB No. 101 summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. SAB No. 101 covers a broad range of topics, some of which include
revenue recognition for "bill and hold" arrangements, accounting for refundable
and nonrefundable up-front fees, accounting for multiple element arrangements,
contingent rentals and gross and net reporting of revenues from internet sales.
As amended by SAB 101A and SAB 101B, the effective date for calendar year-end
companies is no later than the quarter beginning October 1, 2000. The Company
does not believe that the adoption of SAB No. 101 will be significant to its
financial reporting.
INFLATION
We do not believe inflation has a significant effect on our operations.
YEAR 2000
We did not experience significant disruptions in our operations as a result
of the Year 2000 issue.
ITEM 3A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At September 30, 2000, we recorded our marketable equity securities at a
fair value of $1.2 million. These securities have exposure to price risk. A
hypothetical ten percent adverse change in quoted market prices would decrease
the recorded value by approximately $0.1 million.
We have limited our exposure to material future earnings or cash flow
exposures from changes in interest rates on long-term debt, since approximately
65% of our debt bears interest at fixed rates or effectively at fixed rates
through the use of interest rate swaps. However, our earnings are affected by
changes in interest rates as our long-term debt under our senior credit facility
has variable interest rates based on either the prime rate or LIBOR. If interest
rates on our variable debt averaged 10% more, our interest expense would have
increased, and loss before taxes would have increased by approximately
$1.5 million for the nine months ended September 30, 2000.
We have entered into interest rate swaps to manage our exposure to
fluctuations in interest rates on our variable rate debt. The fair value of
these swaps was approximately $0.7 million at September 30, 2000. The positive
fair value indicates an estimated amount we would be paid to cancel the
contracts or transfer them to other parties. In connection with our credit
facility, we used an interest rate swap agreement with a notional amount of
$25 million to effectively convert a portion of our variable interest rate
exposure to a fixed rate of 9.91%. The swap agreement expired on September 29,
2000. In connection with our floating rate notes, we used two interest rate swap
agreements, with notional amounts of $50 million and $25 million, respectively,
to effectively convert our variable interest rate exposure to a fixed rate of
10.01% and 9.95%, respectively. The swap agreements expire on November 1, 2001
and 2000, respectively.
Effective November 1, 2000, we entered into additional interest rate swaps
that effectively convert $275 million of our variable rate debt to fixed rate
debt.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FAIRPOINT COMMUNICATIONS, INC.
By: _____/S/ WALTER E. LEACH, JR._____
Name: Walter E. Leach, Jr.
Title: Senior Vice President and
Chief
Financial Officer
Dated: November 14, 2000
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<C> <S>
2.1 Stock Purchase Agreement dated as of December 10, 1999 by
and among MJD Ventures, Inc., Peoples Mutual Telephone
Company and the other parties thereto.(1)
2.2 Stock Purchase Agreement dated as of December 23, 1999 by
and among MJD Ventures, Inc., TPG Communications, Inc., TPG
Partners, L.P., TPG Parallel I, L.P., J. Milton Lewis and
Robert DiPauli.(1)
2.3 Stock Purchase Agreement dated as of January 4, 2000 by and
among FairPoint, Thomas H. Lee Equity IV, L.P., Kelso
Investment Associates V, L.P., Kelso Equity Partners V,
L.P., Carousel Capital Partners, L.P. and certain other
signatories thereto.(1)
2.4 Stock Purchase Agreement dated as April 25, 2000 by and
among MJD Ventures, Inc., Fremont Telcom Co. and the other
parties thereto.(4)
2.5 Stock Purchase Agreement dated as of May 23, 2000 by and
among MJD Ventures, Inc., W.B.W. Trust Number One and
Comerco, Inc.(4)
3.1 Sixth Amended and Restated Certificate of Incorporation of
FairPoint.(2)
3.2 By-Laws of FairPoint.(4)
3.3 Certificate of Designation of Series D Preferred Stock of
FairPoint.(1)
4.1 Indenture, dated as of May 5, 1998, between FairPoint and
United States Trust Company of New York, relating to
FairPoint's $125,000,000 9 1/2% Senior Subordinated Notes
due 2008 and $75,000,000 Floating Rate Callable Securities
due 2008.(3)
4.2 Indenture, dated as of May 24, 2000, between FairPoint and
United States Trust Company of New York, relating to
FairPoint's $200,000,000 12 1/2% Senior Subordinated Notes
due 2010.(4)
4.3 Form of Initial Fixed Rate Security.(3)
4.4 Form of Initial Floating Rate Security.(3)
4.5 Form of Exchange Fixed Rate Security.(3)
4.6 Form of Exchange Floating Rate Security.(3)
4.7 Form of 144A Senior Subordinated Note due 2010.(4)
4.8 Form of Regulation S Senior Subordinated Note due 2010.(4)
4.9 Registration Rights Agreement dated as of May 19, 2000
between FairPoint and the Initial Purchasers named
therein.(4)
10.1 Credit Agreement dated as of March 30, 1998 among FairPoint,
various lending institutions, NationsBank of Texas, N.A. and
Bankers Trust Company.(3)
10.2 First Amendment to Credit Agreement dated as of April 30,
1998 among FairPoint, NationsBank of Texas, N.A. and Bankers
Trust Company.(1)
</TABLE>
20
<PAGE>
<TABLE>
<C> <S>
10.3 Second Amendment to Credit Agreement dated as of May 14,
1999 among FairPoint, NationsBank of Texas, N.A. and Bankers
Trust Company.(4)
10.4 Amendment and Waiver dated as of January 12, 2000 among
FairPoint, NationsBank of Texas, N.A. and Bankers Trust
Company.(4)
10.5 Fourth Amendment and Consent dated as of March 14, 2000
among FairPoint, First Union National Bank, Bank of America,
N.A. and Bankers Trust Company.(2)
10.6 Fifth Amendment and Consent dated as of October 6, 2000
among FairPoint, First Union, National Bank, Bank of
America, N.A. and Bankers Trust Company.*
10.7 Amended and Restated Credit Agreement dated as of November
9, 2000 by and among FairPoint Solutions, various lending
institutions, Bank of America, N.A., Bankers Trust Company
and First Union National Bank.*
10.8 Amended and Restated Security Agreement dated as of
November 9, 2000 by and among FairPoint Solutions and First
Union National Bank.*
10.9 Amended and Restated Subsidiary Guaranty dated as of
November 9, 2000 made by FairPoint Communications Solutions
Corp.--New York, FairPoint Communications Solutions Corp.--
Virginia and FairPoint Solutions Capital, LLC.*
10.10 Amended and Restated Preferred Stock Issuance and Capital
Contribution Agreement dated as of November 9, 2000 among
FairPoint and First Union National Bank.*
10.11 Amended and Restated Pledge Agreement dated as of
November 9, 2000 by and among FairPoint Solutions, the
Guarantors, the Pledgors and First Union National Bank.*
10.12 Amended and Restated Tax Sharing Agreement dated
November 9, 2000 by and among FairPoint and its
Subsidiaries.*
10.13 Form of B Term Note.(3)
10.14 Form of C Term Note Floating Rate.(3)
10.15 Form of C Term Note Fixed Rate.(3)
10.16 Form of RF Note.(3)
10.17 Form of AF Note.(3)
10.18 Subsidiary Guaratee dated as of March 30, 1998 by MJD
Holdings Corp., MJD Ventures, Inc., MJD Services Corp., ST
Enterprises, Ltd. for the benefit of Bankers Trust
Company.(3)
10.19 Pledge Agreement dated as of March 30, 1998 among MJD
Communications, Inc., ST Enterprises, Ltd., MJD Holdings
Corp., MJD Services Corp., MJD Ventures, Inc., C-R
Communications, Inc., as pledgors, and Bankers Trust
Company, as collateral agent and pledgee.(3)
10.20 Stockholders' Agreement dated as of January 20, 2000 of
FairPoint.(1)
10.21 Registration Rights Agreement dated as of January 20, 2000
of FairPoint.(1)
10.22 Management Services Agreement dated as of January 20, 2000
by and between FairPoint and THL Equity Advisors IV, LLC.(1)
10.23 Amended and Restated Financial Advisory Agreement dated as
of January 20, 2000 by and between FairPoint and Kelso &
Company, L.P.(1)
</TABLE>
21
<PAGE>
<TABLE>
<C> <S>
10.24 Non-Competition, Non-Solicitation and Non-Disclosure
Agreement dated as of January 20, 2000 by and between
FairPoint and JED Communications Associates, Inc.(1)
10.25 Non-Competition, Non-Solicitation and Non-Disclosure
Agreement dated as of January 20, 2000 by and between
FairPoint and Daniel G. Bergstein.(1)
10.26 Non-Competition, Non-Solicitation and Non-Disclosure
Agreement dated as of January 20, 2000 by and between
FairPoint and Meyer Haberman.(1)
10.27 Subscription Agreement dated as of January 31, 2000 by and
between FairPoint and each of the Subscribers party
thereto.(1)
10.28 Employment Agreement dated as of January 20, 2000 by and
between FairPoint and Jack Thomas.(1)
10.29 Employment Agreement dated as of January 20, 2000 by and
between FairPoint and Eugene Johnson.(1)
10.30 Employment Agreement dated as of January 20, 2000 by and
between FairPoint and John P. Duda.(1)
10.31 Employment Agreement dated as of January 20, 2000 by and
between FairPoint and Walter E. Leach, Jr.(1)
10.27 Institutional Stock Purchase Agreement dated as of January
20, 2000 by and among FairPoint and the other parties
thereto.(1)
10.32 Institutional Stockholders Agreement dated as of January 20,
2000 by and among FairPoint and the other parties
thereto.(1)
10.33 FairPoint 1995 Stock Option Plan.(4)
10.34 FairPoint Amended and Restated 1998 Stock Incentive Plan.(4)
10.35 FairPoint 2000 Employee Stock Option Plan.(4)
27.1 Financial Data Schedule*
</TABLE>
------------------------
* Filed herewith.
(1) Incorporated by reference to the annual report of FairPoint for the year
ended 1999, filed on Form 10-K.
(2) Incorporated by reference to Amendment No. 1 to the annual report of
FairPoint for the year ended 1999, filed on Form 10-K/A.
(3) Incorporated by reference to the registration statement on Form S-4 of
FairPoint, declared effective as of October 1, 1998 (file no. 333-56365).
(4) Incorporated by reference to the registration statement on Form S-4 of
FairPoint, declared effective as of August 9, 2000 (file no. 333-41462).
22
