Orange County-Poughkeepsie Limited Partnership

12 Months Ended

Dec. 31, 2012

Orange County-Poughkeepsie Limited Partnership [Abstract]

Orange County-Poughkeepsie Limited Partnership

NOTE 12: ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP

The Company is a limited partner in the Orange County-Poughkeepsie Limited Partnership ("O-P") and has a 8.108% limited partnership interest as of December 31, 2012 and 2011, which is accounted for under the equity method of accounting. The majority owner and general partner of the O-P is Verizon Wireless of the East LP ("Verizon").

On May 26, 2011, the Company entered into an agreement with Verizon and Cellco Partnership, the other limited partner, in the O-P to make certain changes to the O-P partnership agreement which, among other things, specifies that the O-P will provide 4G cellular services (the "4G Agreement"). The 4G Agreement provides that the O-P's business will be converted from a wholesale business to a retail business. The 4G Agreement provides for guaranteed annual cash distributions to the Company from the O-P through 2013. For 2011 and 2012, annual cash distributions from the O-P were $13.6 million and $13.0 million, respectively and for 2013 the annual cash distributions will be $13.0 million. Annual cash distributions will be paid in equal quarterly amounts. The 4G Agreement also gives the Company the right (the "Put") to require one of the O-P's limited partners to purchase all of the Company's ownership interest in the O-P during April 2013 or April 2014 for an amount equal to the greater of (a) $50.0 million or (b) the product of five (5) times 0.081081 times the O-P's EBITDA, as defined in the 4G Agreement for the calendar year preceding the exercise of the Put.

The conversion of the O-P from a wholesale business to a retail business pursuant to the 4G Agreement will increase the cellular service costs and operating expenses incurred by the O-P, which is expected to cause a subsequent reduction in the O-P's net income primarily due to the inclusion of sales and marketing expenses. Although the Company's share of the O-P net income recorded in the Company's statement of operations is expected to decrease, the annual cash distributions the Company receives from the O-P will remain unchanged through 2013 pursuant to the terms of the 4G Agreement.

Pursuant to the equity method accounting of the Company's investment income, the Company is required to record the income from the O-P as an increase to the Company's investment account. The Company is required to apply the cash payments made under the 4G Agreement as a return on its investment when received. As a result of receiving the fixed guaranteed cash distributions from the O-P in excess of the Company's proportionate share of the O-P income, the investment account was reduced to zero within the first six months of 2012. Thereafter, the Company recorded the fixed guaranteed cash distributions that were received from the O-P in excess of the proportionate share of the O-P income directly to the Company's statement of operations as other income.

As of December 31, the value of the Company's holding in O-P is as follows:

($ in thousands)	2012			2011
Equity interest in O-P Partnership	$	-	$	-
Goodwill		-		1,979
	$	-	$	1,979

The following summarizes O-P's audited income statement for the years ended December 31:

($ in thousands)		2012		2011(1)		2010
Net revenue	$	310,416	$	273,340	$	187,985
Cellular service cost		151,712		122,142		23,859
Operating expenses		81,152		53,832		10,035
Operating income		77,552		97,366		154,091
Other income		14		40		1,034
Net income	$	77,566	$	97,406	$	155,125
Company share	$	6,290	$	7,898	$	12,578

(1) The twelve months ended December 31, 2011 income statement represents five months of the O-P operating as a wholesale business and seven months of the O-P operating as a retail business in accordance with Amendment 6 to the O-P Limited Partnership Agreement effective May 1, 2011.

The following summarizes the O-P's audited balance sheet that O-P provided to the Company as of December 31:

($ in thousands)		2012		2011
Current assets	$	22,370	$	20,525
Property, plant and equipment, net		41,072		39,596
Total assets	$	63,442	$	60,121
Total liabilities	$	30,162	$	42,500
Partners' capital		33,280		17,621
Total liabilities and partners' capital	$	63,442	$	60,121