Orange County-Poughkeepsie Limited Partnership

3 Months Ended

Mar. 31, 2013

Orange County-Poughkeepsie Limited Partnership [Abstract]

Orange County-Poughkeepsie Limited Partnership

NOTE 9: ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP

The Company is a limited partner in the Orange County-Poughkeepsie Limited Partnership (the "O-P") and had an 8.108% equity interest in the O-P as of March 31, 2013 and 2012, 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 L.P.

On May 26, 2011, the Company entered into an agreement with Verizon Wireless of the East LP, the general partner and a limited partner, 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 $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 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 million or (b) the product of five (5) times 0.081081 times the O-P's EBITDA, as defined in the 4G Agreement.

The conversion of the O-P from a wholesale business to a retail business in 2011 pursuant to the 4G Agreement increased the cellular service costs and operating expenses incurred by the O-P, which caused 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's net income recorded in the Company's income statement decreased, 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, the Company is required to record the income from the O-P as an increase to the Company's investment account. As a result of receiving the fixed guaranteed cash distributions from the O-P in excess of the Company's cumulative proportionate share of the O-P income, the investment account was reduced to zero during the first six months of 2012. These payments are shown as a return on investments in the investing section of the Condensed Consolidated Statements of Cash Flows. 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. All payments received in excess of the Company's proportionate share of the O-P income is considered a return of investment and is shown in the investing section of the consolidated statements of cash flows.

The following summarizes the income statement (unaudited) for the three months ended March 31, 2013 and 2012 that the O-P provided to the Company:

		For the three months ended
($ in thousands)		March 31, 2013		March 31, 2012
Net sales	$	79,892	$	74,235
Cellular service cost		35,980		36,047
Operating expenses		21,398		20,620
Operating income		22,514		17,568
Other income (expense)		3		3
Net income	$	22,517	$	17,571
Company share	$	1,826	$	1,425

The following summarizes the balance sheet as of March 31, 2013 (unaudited) and December 31, 2012 that O-P provided to the Company:

	As of
($ in thousands)		March 31, 2013	December 31, 2012
Current assets	$	20,788	$	22,370
Property, plant and equipment, net		41,121		41,072
Total assets	$	61,909	$	63,442
Total liabilities	$	25,427	$	30,162
Partners' capital		36,482		33,280
Total liabilities and partners' capital	$	61,909	$	63,442