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FairPoint Reports Fourth Quarter 2007 Results
Feb 28, 2008 (06:02 AM EST)


CHARLOTTE, N.C., Feb. 28 /PRNewswire-FirstCall/ -- FairPoint Communications, Inc. ("FairPoint" or the "Company"), a leading provider of communications services to rural and small urban communities across the country, today announced its financial results for the fourth quarter ended December 31, 2007.

-- Revenues for the fourth quarter of 2007 decreased $2.2 million, or 3.1% over the fourth quarter of 2006. Revenues decreased $2.6 million, or 3.7% compared with the fourth quarter of 2006, excluding the impact of operations acquired in the last twelve months. -- Adjusted EBITDA (as defined herein) for the fourth quarter of 2007 was $30.2 million, compared with $33.3 million for the same period last year. The decrease in Adjusted EBITDA is principally due to a $2.7 million reduction in distributions from investments due to the sale of the Company's investment in Orange County-Poughkeepsie Limited Partnership in April 2007. -- Loss per share on a fully diluted basis for the fourth quarter of 2007 was ($0.56), compared with earnings per share on a fully diluted basis of $0.12 in the fourth quarter of 2006. The decrease in earnings per share is principally the result of expenses related to the Company's pending merger with Verizon's wireline operations in Maine, New Hampshire and Vermont and a non-cash loss of ($11.5) million related to certain interest rate swap agreements which are contingent upon the closing of the merger. Excluding the merger related expenses and the loss on contingent interest rate swap agreements, earnings per share was $0.13 on a fully diluted basis in the fourth quarter of 2007.

"I am extremely pleased with our operating results during 2007, particularly in light of the potential distractions we faced in dealing with the many facets of the Verizon transaction," said Gene Johnson, chairman and CEO of FairPoint Communications. "Having received all required regulatory approvals, we are poised to close this transformative and historic merger. The final terms of the transaction, our meticulous preparation and the dedication of the Verizon and FairPoint employees provide a great financial and operating foundation from which to create value for our shareholders. All of us at FairPoint are eager to complete this transaction and extremely excited about the future of our company. I wish to thank our shareholders for their patience during the extended period of regulatory review. I believe that patience will be well rewarded as our company will now have the scope and scale that I have so often discussed. Coupled with the financial underpinnings this transaction provides, the 'new' FairPoint has a very bright future."

Results for the three month period ended December 31, 2007

Operating Revenues

Consolidated revenues for the three months ended December 31, 2007 were $68.2 million, a decrease of $2.2 million, or 3.1%, compared with the three months ended December 31, 2006. Operations acquired in the last twelve months contributed approximately $0.4 million to total revenue. Excluding the impact of operations acquired in the previous twelve months, revenues decreased approximately $2.6 million, or 3.7%, compared with the fourth quarter of the prior year. Items contributing to the decrease in revenues were decreases in interstate access revenue of $2.2 million, other services revenue of $0.8 million, local service revenue of $0.8 million, intrastate access revenue of $0.8 million and universal service fund revenue of $0.6 million. These decreases were partially offset by increases in data and internet services revenue of $1.1 million and long distance revenue of $1.5 million.

Operating Expenses

Operating expenses (excluding depreciation and amortization) increased to $62.8 million compared to $43.2 million in the fourth quarter of 2006. Excluding the impact of operations acquired in the last twelve months, operating expenses increased $19.5 million. The primary driver of this increase was an increase in merger related expenses of $21.3 million. Excluding merger-related expenses, operating expenses decreased $1.8 million principally due to a decrease in employee-related costs of $1.8 million, marketing expenses of $0.4 million and materials and supplies expenses of $0.3 million. These decreases were offset by an increase in cost of services provided of $1.1 million (principally related to high speed data (HSD) and long distance services).

Included in operating expenses are costs associated with stock based compensation which are non-cash expenses. Total stock based compensation expenses for the three months ended December 31, 2007 and December 31, 2006 were $1.0 million and $0.8 million, respectively. Depreciation and amortization expense decreased $0.4 million compared to the same period in 2006.

Net Income (Loss) and Earnings per Share

Net income (loss) decreased $23.9 million compared to the fourth quarter of 2006, resulting in a net loss of $(19.5) million for the three months ended December 31, 2007. This decrease was primarily driven by higher expenses, principally related to the pending merger with Verizon's wireline operations in Maine, New Hampshire and Vermont and a non-cash loss of $(11.5) million related to certain interest rate swap agreements. The Company reported a loss per share on a fully diluted basis of $(0.56) for the three months ended December 31, 2007, compared with earnings per share on a fully diluted basis of $0.12 for the same period in 2006.

Net Cash Provided by Operating Activities from Continuing Operations

Net cash provided by operating activities from continuing operations for the twelve months ended December 31, 2007 was $35.8 million, a decrease of $45.9 million compared with the twelve months ended December 31, 2006. The primary driver of this decrease in net cash provided by operating activities from continuing operations was the $52.1 million of merger related expenses incurred during the twelve months ended December 31, 2007. The offsetting increase is due to other changes in current assets and liabilities.

Adjusted EBITDA and Cash Available for Dividends

Adjusted EBITDA for the three months ended December 31, 2007 was $30.2 million, compared with Adjusted EBITDA of $33.3 million for the same period in the prior year. The decrease in Adjusted EBITDA is due to a $2.7 million reduction in distributions from investments due mainly to the sale of the Company's investment in the Orange County-Poughkeepsie Limited Partnership in April 2007. The Company incurred expenses of $23.7 million in the fourth quarter of 2007 related to the pending merger with Verizon's wireline operations in Maine, New Hampshire and Vermont. The Company's credit facility allows merger related expenses to be added back to calculate Adjusted EBITDA and merger related capital expenditures to be added back to Cash Available for Dividends (as defined herein), up to $72.85 million in the aggregate, which cap was reached during the fourth quarter of 2007. Cash Available for Dividends of $3.3 million was generated during the three months ended December 31, 2007. Cash Available for Dividends for the three months ended December 31, 2007 was down from the $21.5 million generated in the three months ended September 30, 2007 due to $9.2 million of cash merger related capital expenditures that exceeded the cumulative add back of $72.85 million and, therefore, were not allowed to be added back to Cash Available for Dividends.

Operational highlights -- HSD penetration increased to 28.4% of voice access lines at December 31, 2007 compared to 23.6% at December 31, 2006. -- Interstate long distance penetration at December 31, 2007 increased to 54.4% of voice access lines compared to 45.2% at December 31, 2006. -- Total access line equivalents were 305,777 as of December 31, 2007. Total access line equivalents as of December 31, 2007 decreased 1.7% compared with December 31, 2006 and decreased 1.6% compared with December 31, 2006 including only lines owned for the full year. -- Voice access lines, excluding lines acquired or disposed of in the last twelve months, as of December 31, 2007 decreased 5.2% compared to December 31, 2006. Access Line Equivalents 12/31/2007 9/30/2007 12/31/2006 % change 12/31/07 to 12/31/06 Access lines owned for full year: Voice access lines 238,074 242,879 251,236 (5.2%) HSD subscribers 67,703 66,978 59,444 13.9% Subtotal: Access line equivalents 305,777 309,857 310,680 (1.6%) Access lines acquired or disposed of during the last twelve months(1): Voice access lines - - 470 N/A HSD subscribers - - - N/A Subtotal: Access line equivalents - - 470 N/A Total access line equivalents 305,777 309,857 311,150 (1.7%) (1) Represents voice access lines and HSD subscribers for companies owned less than twelve months. The Company completed the acquisition of the assets of Cass County Telephone Company Limited Partnership in the third quarter of 2006, the acquisition of Unite Communications Systems, Inc. in the third quarter of 2006 and the acquisition of The Germantown Independent Telephone Company in the fourth quarter of 2006. The Company sold the operations of a subsidiary, Fremont Broadband, LLC, during the second quarter of 2006 and sold the operations of a subsidiary, Yates City Telephone Company, during the third quarter of 2007.

Cash Available for Dividends

The Company's credit facility contains a covenant that limits its ability to pay cash dividends on its common stock to the amount of Cumulative Cash Available for Dividends that accumulates from April 1, 2005 through the end of the Company's most recent fiscal quarter for which financial statements are available and a compliance certificate has been delivered (which, as of December 31, 2007, was the quarter ended September 30, 2007). Under this covenant, as of December 31, 2007, the Company had Cumulative Cash Available for Dividends of $51.2 million, from which it paid a dividend on January 16, 2008 of $13.9 million, resulting in a carryover of $37.3 million of Cumulative Cash Available for Dividends. In addition to this $37.3 million carryover, based on the Company's financial performance through December 31, 2007 as described in this earnings release, the Company generated an additional $3.3 million of Cash Available for Dividends and as a result expects to have $40.6 million of Cumulative Cash Available for Dividends from which to declare and pay its next dividend. Cash Available for Dividends corresponds to the term "Available Cash" in the Company's credit facility and Cumulative Cash Available for Dividends corresponds to the term "Cumulative Distributable Cash" in the Company's credit facility. Based on the restrictions contained in the fifth amendment to the Company's credit facility, the Company anticipates it will not be able to pay dividends on its common stock unless the merger is consummated.

Merger Information and Update

The Company announced on January 16, 2007 that it had signed definitive agreements with Verizon Communications Inc. that will result in Verizon establishing separate entities for its local exchange and related business assets in the region, spinning off the capital stock of the parent of those new entities to Verizon's stockholders, and merging the parent with and into FairPoint. FairPoint and Verizon are working to complete the merger as quickly as possible. For additional information on the merger agreement and related agreements, please refer to the Company's Registration Statement on Form S-4 declared effective by the Securities and Exchange Commission, or SEC, on July 16, 2007 and Current Reports on Form 8-K filed by the Company with the SEC on January 19, 2007, June 28, 2007, July 9, 2007 and November 16, 2007.

The merger was approved by FairPoint's stockholders at its annual meeting on August 22, 2007 and FairPoint expects to complete the merger by March 31, 2008. The FCC and the regulatory authorities in the states of Maine, New Hampshire and Vermont have each issued written orders approving the merger. These written orders contain certain restrictions on our future operations and capital structure and require certain capital expenditures. In addition, the Company is required to reduce its annual dividend to shareholders to approximately $1.03 per share annually (or approximately $0.2575 per share quarterly) following the closing of the merger. For additional information on the conditions required by the written orders, please refer to the Current Reports on Form 8-K filed by the Company with the SEC on February 6, 2008, February 21, 2008 and February 27, 2008.

Merger Integration Update -- Close readiness on track; staffing and training continues -- Two successful dry runs completed on ERP (Enterprise Resource Planning - human resources, supply chain and finance) system standup (at close systems) -- Very high percentage of billable accounts loaded into new billing and customer relationship management (CRM) systems (at cutover system).

Conference Call and Webcast

As previously announced, FairPoint will host a conference call and simultaneous webcast to discuss its fourth quarter results at 8:30 a.m. EST on February 28, 2008. Participants should call (888) 253-4456 (US/Canada) or (706) 643-3201 (International) and request the FairPoint Communications fourth quarter earnings call. A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call (800) 642-1687 and enter the confirmation code 3714-5276. The recording will be available from February 28, 2008 at 1:00 p.m. (EST) through March 6, 2008 at 11:59 p.m. (EST).

A live broadcast of the earnings conference call will be available via the Internet at www.fairpoint.com under the Investor Relations section. An online replay will be available beginning at 1:00 p.m. (EST) on February 28, 2008 and will remain available for one year.

Non-GAAP Financial Measures

EBITDA (as defined herein), Adjusted EBITDA and Cash Available for Dividends are non-GAAP financial measures (i.e., they are not measures of financial performance under generally accepted accounting principles) and should not be considered in isolation or as a substitute for consolidated statements of operations and cash flows data prepared in accordance with GAAP. In addition, the non-GAAP financial measures used by FairPoint may not be comparable to similarly titled measures of other companies. For definitions of and additional information regarding EBITDA, Adjusted EBITDA and Cash Available for Dividends, and a reconciliation of such measures to the most comparable financial measures calculated in accordance with GAAP, please see the attachments to this press release.

FairPoint believes EBITDA is useful to investors because EBITDA is commonly used in the communications industry to analyze companies on the basis of operating performance, liquidity and leverage. FairPoint believes EBITDA allows a standardized comparison between companies in the industry, while minimizing the differences from depreciation policies, financial leverage and tax strategies.

Certain covenants in FairPoint's credit facility contain ratios based on Adjusted EBITDA and the restricted payment covenant in FairPoint's credit facility regulating the payment of dividends on its common stock is based on Adjusted EBITDA. If FairPoint's Adjusted EBITDA were to decline below certain levels, covenants in FairPoint's credit facility that are based on Adjusted EBITDA may be violated and could cause, among other things, a default under such credit facility, or result in FairPoint's inability to pay dividends on its common stock.

FairPoint believes Cash Available for Dividends is useful to investors as a means to evaluate FairPoint's ability to pay dividends on its common stock. However, FairPoint is not required to use such cash to pay dividends and any dividends are subject to declaration by FairPoint's board of directors and compliance with Delaware law and the terms of its credit facility.

While FairPoint uses these non-GAAP financial measures in managing and analyzing its business and financial condition and believes they are useful to its management and investors for the reasons described above, these non-GAAP financial measures have certain shortcomings. In particular, Adjusted EBITDA does not represent the residual cash flows available for discretionary expenditures, since items such as debt repayment and interest payments are not deducted from such measure. FairPoint's management compensates for the shortcomings of these measures by utilizing them in conjunction with their comparable GAAP financial measures.

The information in this press release should be read in conjunction with the financial statements and footnotes contained in FairPoint's annual report to be filed with the Securities and Exchange Commission.

About FairPoint

FairPoint Communications, Inc. is an industry leading provider of communications services to rural and small urban communities across the country. Today, FairPoint owns and operates 30 local exchange companies in 18 states offering advanced communications with a personal touch including local and long distance voice, data, Internet, video and broadband services. FairPoint is traded on the New York Stock Exchange under the symbol FRP. Learn more at www.fairpoint.com .

This press release may contain forward-looking statements by FairPoint that are not based on historical fact, including, without limitation, statements containing the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions and statements. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements. Such factors include those risks described from time to time in FairPoint's filings with the Securities and Exchange Commission ("SEC"), including, without limitation, the risks described in FairPoint's most recent Annual Report on Form 10-K on file with the SEC. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date this press release is issued, and FairPoint undertakes no duty to update this information. FairPoint's results for the quarter ended December 31, 2007 are subject to the completion and filing with the Securities and Exchange Commission of its Annual Report on Form 10-K for the year ended December 31, 2007.

FairPoint has filed, and the SEC has declared effective, a registration statement in connection with the proposed merger. FairPoint urges investors to read this document and other materials filed and to be filed by FairPoint relating to the proposed merger because they contain and will contain important information. Investors can obtain copies of the registration statement, as well as other filed documents containing information about FairPoint and the proposed merger, at www.sec.gov www.fairpoint.com , the SEC's website. Investors may also obtain free copies of these documents and FairPoint's other SEC filings at under the Investor Relations section, or by written request to FairPoint Communications, Inc., 521 E. Morehead Street, Suite 250, Charlotte, NC 28202, Attention: Investor Relations.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets December 31, December 31, 2007 2006 (unaudited) (Dollars in thousands) Assets Current assets: Cash $2,942 $3,805 Current receivables, net 29,449 28,533 Other 9,650 13,184 Deferred income tax, net 4,459 33,648 Total current assets 46,500 79,170 Property, plant, and equipment, net 268,890 246,264 Investments 6,654 12,057 Goodwill 498,725 499,184 Deferred income tax, net 56,042 23,830 Deferred charges and other assets 19,656 24,725 Total assets $896,467 $885,230 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $35,256 $14,337 Dividends payable 13,952 13,908 Current portion of long-term debt 753 714 Demand notes payable 258 312 Accrued interest payable 580 560 Other accrued liabilities 25,664 16,017 Liabilities of discontinued operations - 486 Total current liabilities 76,463 46,334 Long-term liabilities: Long-term debt, net of current portion 624,219 607,272 Deferred credits and other long-term liabilities 33,880 6,897 Total long-term liabilities 658,099 614,169 Minority interest 7 8 Stockholders' equity: Common stock 352 352 Additional paid-in capital 477,625 530,536 Accumulated deficit (305,531) (311,545) Accumulated other comprehensive income, net (10,548) 5,376 Total stockholders' equity 161,898 224,719 Total liabilities and stockholders' equity $896,467 $885,230 FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) Three months ended Twelve months ended December 31, December 31, 2007 2006 2007 2006 (Dollars in thousands) Revenues $68,186 $70,382 $283,462 $270,069 Operating expenses: Operating expenses, excluding depreciation and amortization 62,844 43,221 218,560 155,463 Depreciation and amortization 12,963 13,410 50,836 53,236 Gain on sale of operating assets - - (2,164) - Total operating expenses 75,807 56,631 267,232 208,699 Income from operations (7,621) 13,751 16,230 61,370 Other income (expense): Net gain (loss) on sale of investments and other assets (131) 451 49,455 14,740 Interest and dividend income 160 177 965 3,315 Interest expense (9,730) (10,151) (39,662) (39,665) Equity in net earnings of investees 136 2,410 5,025 10,616 Loss on derivative instruments (11,533) - (17,202) - Total other income (expense) (21,098) (7,113) (1,419) (10,994) Income (loss) before income taxes (28,719) 6,638 14,811 50,376 Income tax (expense) benefit 8,881 (2,893) (9,093) (19,858) Minority interest - - (1) (2) Income from continuing operations (19,838) 3,745 5,717 30,516 Income from discontinued operations 297 574 297 574 Net income $(19,541) $4,319 $6,014 $31,090 Weighted average shares outstanding: Basic 34,799 34,660 34,752 34,629 Diluted 34,799 34,860 34,980 34,754 Basic earnings per share: Continuing operations $(0.57) $0.11 $0.16 $0.88 Discontinued operations 0.01 0.01 0.01 0.02 Net income (0.56) 0.12 0.17 0.90 Diluted earnings per share: Continuing operations $(0.57) $0.11 $0.16 $0.88 Discontinued operations 0.01 0.01 0.01 0.01 Net income (0.56) 0.12 0.17 0.89 FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) Twelve months ended December 31, 2007 2006 (Dollars in thousands) Cash flows from operating activities: Net income $6,014 $31,090 Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: Loss on discontinued operations (297) (574) Deferred income taxes 7,547 17,473 Amortization of debt issue costs 1,538 1,572 Provision for uncollectible revenue 2,733 1,798 Depreciation and amortization 50,836 53,236 Net loss on derivative instruments 17,202 - Minority interest in income of subsidiaries - 2 Income from equity method investments (5,025) (10,616) Net (gain) loss on sale of investments and other assets (49,455) (14,740) Gain on sale of operating assets (2,164) - Other non cash items 3,901 2,209 Changes in assets and liabilities arising from operations: Accounts receivable and other current assets (4,711) 4,710 Accounts payable and accrued expenses 9,700 (3,664) Income taxes (867) 29 Other assets/liabilities (1,123) (759) Total adjustments 29,815 50,676 Net cash provided by operating activities of continuing operations 35,829 81,766 Cash flows from investing activities of continuing operations: Acquisitions of telephone properties, net of cash acquired - (49,837) Net capital additions (58,781) (31,990) Distributions from investments 2,672 10,654 Proceeds from sale of operating assets 2,496 - Net proceeds from sales of investments and other assets 57,452 43,832 Other, net (20) (20) Net cash used in investing activities of continuing operations 3,819 (27,361) Cash flows from financing activities of continuing operations: Debt issue and offering costs (628) - Proceeds from issuance of long-term debt 163,545 129,200 Repayments of long-term debt (146,586) (128,651) Payment of tax withholdings on vested restricted shares (1,127) - Proceeds from exercise of stock options - 24 Dividends paid to stockholders (55,709) (55,241) Net cash provided by (used in) financing activities of continuing operations (40,505) (54,668) Cash flows of discontinued operations: Operating cash flows, net used in (6) (1,015) Net (decrease) increase in cash (863) (1,278) Cash, beginning of period 3,805 5,083 Cash, end of period $2,942 $3,805 FairPoint Communications, Inc. Non - GAAP Financial Measures Reconciliation For the Three and Twelve Months Ended December 31, 2007 and 2006 Three Months Three Months Ended Ended 12/31/07 12/31/06 (Dollars in thousands) Net cash provided by operating activities from continuing operations $11,681 $22,771 Adjustments: Depreciation and amortization (12,963) (13,410) Other non-cash items (1,972) (1,855) Changes in assets and liabilities arising from continuing operations, net of acquisitions (16,287) (3,187) (Loss) income from continuing operations (19,541) 4,319 Adjustments: Interest expense 9,730 10,151 Provision for income taxes (8,881) 2,893 Depreciation and amortization 12,963 13,410 EBITDA (5,729) 30,773 Adjustments: Net loss (gain) on sale of investments and other assets 131 (451) Equity in net earnings of investees (136) (2,410) Distributions from investments 32 2,753 Non-cash stock based compensation 954 823 Merger transaction and transition expenses 23,694 2,371 Other non-cash item 11,236 (574) Deferred patronage dividends - (14) Adjusted EBITDA $30,182 $33,271 Twelve Months Twelve Months Ended Ended 12/31/07 12/31/06 Net cash provided by operating activities from continuing operations $35,829 $81,766 Adjustments: Depreciation and amortization (50,836) (53,236) Other non-cash items 24,020 2,876 Changes in assets and liabilities arising from continuing operations, net of acquisitions (2,999) (316) Income from continuing operations 6,014 31,090 Adjustments: Interest expense 39,662 39,665 Provision for income taxes 9,093 19,858 Depreciation and amortization 50,836 53,236 EBITDA 105,605 143,849 Adjustments: Net gain on sale of investments and other assets (50,145) (14,740) Equity in net earnings of investees (5,025) (10,616) Distributions from investments 2,672 10,654 Non-cash stock based compensation 3,966 2,859 Merger transaction and transition expenses 52,138 2,371 Other non-cash item 16,905 (1,211) Deferred patronage dividends (55) (1) Adjusted EBITDA $126,061 $133,165 Plus (minus): Scheduled principal payments (686) (651) Cash interest expense (adjusted for amortization and swap interest) (38,922) (38,094) Capital expenditures and other (38,069) (33,144) Investments - (112) Cash received on account of non-cash income excluded from Adjusted EBITDA - 4,000 Gain on sale of investment/assets 5,182 14,848 Cash income taxes (2,482) (2,369) Cash Available for Dividends $51,084 $77,643 "EBITDA" means net income before income from discontinued operations, interest expense, income taxes, and depreciation and amortization. "Adjusted EBITDA" is defined in FairPoint's credit facility as (i) the sum of Consolidated Net Income (which is defined in FairPoint's credit facility and includes distributions from investments), plus the following to the extent deducted from Consolidated Net Income: provision for taxes, consolidated interest expense, depreciation, amortization, losses on sales of assets and other extraordinary losses, certain one-time charges recorded as operating expenses related to the transactions contemplated by the Company's Merger Agreement with Verizon Communications Inc. and certain other non-cash items, each as defined, minus (ii) gains on sales of assets and other extraordinary gains and all non-cash items increasing Consolidated Net Income. "Cash Available for Dividends" means Adjusted EBITDA, minus (i) cash interest expense (adjusted for amortization and swap interest), (ii) scheduled principal payments on indebtedness, (iii) capital expenditures, (iv) investments, (v) cash income taxes, and (vi) non-cash items excluded from Adjusted EBITDA and paid in cash, plus (i) the cash amount of any extraordinary gains and gains realized on asset sales other than in the ordinary course of business, and (ii) cash received on account of non-cash gains or non-cash income excluded from Adjusted EBITDA. FairPoint Communications, Inc. Sequential Financial Information for the Quarters ending December 31, September 30, June 30, March 31, 2007 and December 31, 2006 Three Three Three Three Three Months Months Months Months Months (Dollars in thousands) Ended Ended Ended Ended Ended December September June 30, March 31, December 31, 2007 30, 2007 2007 2007 31, 2006 Consolidated Results: Revenues (1): Local calling services $17,166 $17,453 $17,532 $17,504 $17,784 USF - high cost loop support 4,784 5,245 4,445 4,616 5,380 Interstate access revenue 16,659 18,360 18,134 18,404 18,774 Intrastate access revenue 8,546 13,541 9,606 9,725 9,328 Long distance services 7,651 7,843 7,542 7,121 6,155 Data and internet services 8,714 8,805 8,225 7,832 7,520 Other services 4,666 4,460 4,413 4,470 5,441 Total revenues 68,186 75,707 69,897 69,672 70,382 Operating expenses 75,807 65,306 63,948 62,171 56,631 Income from operations (7,621) 10,401 5,949 7,501 13,751 Other income (expense) (21,098) (12,220) 39,036 (7,137) (7,113) Earnings from continuing operations before income taxes (28,719) (1,819) 44,985 364 6,638 Income taxes 8,881 (3,372) (14,205) (397) (2,893) Minority interest in income of subsidiaries - - (1) - - Income from discontinued operations 297 - - - 574 Net income (loss) $(19,541) $(5,191) $30,779 $(33) $4,319 Cash Available for Dividends: Adjusted EBITDA $30,182 $34,581 $29,904 $31,394 $33,271 Plus (minus): Scheduled principal payments (175) (173) (170) (168) (166) Cash interest expense (adjusted for amortization and capitalized interest) (9,789) (9,781) (9,705) (9,647) (9,780) Capital expenditures and other (16,568) (6,849) (7,759) (6,893) (6,412) Cash received on account of non-cash income excluded from Adjusted EBITDA - - - - 1,000 Gain on sale of investment/assets (131) 5,165 75 73 350 Cash income taxes (212) (1,423) (263) (584) (85) Cash Available for Dividends $3,307 $21,520 $12,082 $14,175 $18,178 Cumulative Cash Available for Dividends: (2) Beginning Balance $51,214 $43,637 $45,504 $45,246 40,964 Add: Cash Available for Dividends generated/ (used) during the quarter 3,307 21,520 12,082 14,175 18,178 Less: Dividends declared and/or paid after July 30, 2005 (13,941) (13,943) (13,949) (13,917) (13,896) Cumulative Cash Available for Dividends $40,580 $51,214 $43,637 $45,504 $45,246 Other information: Gross property, plant and equipment $896,369 $869,999 $856,999 $837,221 $829,234 Net capital expenditures 18,911 16,295 15,832 7,743 6,354 Cash Interest expense (adjusted for amortization and swap interest) (9,789) (9,781) (9,705) (9,647) (9,780) Access line equivalents (3) 305,777 309,857 312,494 310,180 311,150 Residential access lines 182,182 186,304 190,417 191,571 194,119 Business access lines 55,892 56,575 56,945 56,795 57,587 High Speed Data subscribers 67,703 66,978 65,132 61,814 59,444 DSL subscribers 62,428 61,548 59,880 56,851 54,752 Other HSD subscribers (Wireless and Cable modems) 5,275 5,430 5,252 4,963 4,692 (1) During the second quarter of 2007, the Company re-categorized certain revenues to more accurately reflect the nature of those revenues. Total revenues did not change as a result of this re-categorization. Revenue categories for prior quarters have been re-classified to present on a comparable basis. (2) Cumulative Cash Available for Dividends means the amount of Cash Available for Dividends generated beginning on April 1, 2005, minus the aggregate amount of dividends paid after July 30, 2005, minus the aggregate amount of investments made after April 1, 2005 using such cash, plus the aggregate amount of distributions received from such investments (not to exceed the amount originally invested). (3) In the third quarter of 2006, the Company began including access lines and HSD subscribers from its two competitive local exchange carrier (CLEC) companies. Historically, these access lines have not been included in the Company's access line and subscriber counts.

CONTACT: Investors, Brett Ellis, +1-866-377-3747, bellis@fairpoint.com, orMedia, Rose Cummings, +1-704-602-7304, , both ofFairPoint Communications, Inc.

Web site: http://www.fairpoint.com/