Orange County-Poughkeepsie Limited Partnership

6 Months Ended

Jun. 30, 2011

Orange County-Poughkeepsie Limited Partnership

Orange County-Poughkeepsie Limited Partnership

NOTE 10:ORANGE COUNTY-POUGHKEEPSIE LIMITED PARTNERSHIP

The Company is a limited partner in the Orange County-Poughkeepsie Limited Partnership ("O-P") and had a 8.108% equity interest as of June 30, 2011 and 2010, which is accounted for under the equity method of accounting.The majority owner and general partner is Verizon Wireless of the East LP.

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, annual cash distributions from the O-P will be $13,600 and for 2012 and 2013 the annual cash distribution will be $13,000.  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) $50,000 or (b) the product of five (5) times 0.081081 times the O-P's EBITDA 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.Although the Company's share of the O-P net income recorded in the Company's income statement is expected to decrease as a result of the conversion to a retail business, the annual cash distributions the Company receives from the O-P will remain unchanged pursuant to the terms of the 4G Agreement.Regardless of the O-P's net income, pursuant to the 4G Agreement, the Company will receive from the O-P an annual cash distribution of $13,600 in 2011 and annual cash distributions of $13,000 in 2012 and 2013.

The value of the Company's investment in O-P was as follows:

		June 30,		December 31,
	2011		2010
Investment, beginning of period	$	7,681	$	7,669
Income from equity method investment		5,416		12,578
Cash distributions		(6,155)		(12,566)
	$	6,942	$	7,681

The following summarizes the income statement (unaudited) for the six months ended June 30, 2011 and 2010 that the O-P provided to the Company:

		2011(1)		2010
Net sales	$	116,165	$	87,186
Cellular service cost		32,508		10,669
Operating expenses		16,868		6,115
Operating income		66,789		70,402
Other income		14		431
Net income	$	66,803	$	70,833
Company share	$	5,416	$	5,743

 

(1) The six months ended June 30, 2011 income statement represents four months of the O-P operating as a wholesale business and two months of the O-P operating as a retail business in accordance with the Amendment to the O-P Limited Partnership Agreement effective May 1, 2011.

The following summarizes the income statement (unaudited) for the three months ended June 30, 2011 and 2010 that O-P provided to the Company:

		2011		2010
Net sales	$	67,776	$	44,549
Cellular service cost		27,020		5,417
Operating expenses		13,659		3,088
Operating income		27,097		36,044
Other income		16		176
Net income	$	27,113	$	36,220
Company share	$	2,198	$	2,937

The following summarizes the balance sheet as of June 30, 2011(unaudited) and December 31, 2010 that O-P provided to the Company:

		2011		2010
Current assets	$	25,046	$	10,916
Property, plant and equipment, net		38,694		34,294
Total assets	$	63,740	$	45,210
Total liabilities	$	50,464	$	818
Partners' capital		13,277		44,392
Total liabilities and partners' capital	$	63,741	$	45,210