Orange County-Poughkeepsie Limited Partnership

9 Months Ended

Sep. 30, 2011

Orange County-Poughkeepsie Limited Partnership [Abstract]

Orange County-Poughkeepsie Limited Partnership

NOTE 13: 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 September 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, 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 due primarily to the inclusion of sales and marketing expenses. Although the Company's share of the O-P net income recorded in the Company's income statement is expected to decrease, 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.

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.  Under equity method accounting, the Company currently reports as income its proportionate share of the O-P income, which is less than the guaranteed cash distributions it receives from the O-P.   The cash distributions the Company receives from the O-P that are in excess of the Company's proportionate share of the O-P income is applied to its investment account.  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 is expected to be reduced to zero within the first six months of 2012. Thereafter, the Company will record the fixed guaranteed cash distributions that are 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. 

The following is a summary of the Company's investment in O-P as of:

		September 30,		December 31,
	2011		2010
Investment, beginning of period	$	7,681	$	7,669
Income from equity method investment		6,744		12,578
Cash distributions		(9,878)		(12,566)
	$	4,547	$	7,681

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

		2011  (1)		2010
Net sales	$	193,208	$	137,110
Cellular service cost		73,123		16,193
Operating expenses		36,925		9,290
Operating income		83,160		111,627
Other income		15		675
Net income	$	83,175	$	112,302
Company share	$	6,744	$	9,105

(1) The nine months ended September 30, 2011 income statement represents four months of the O-P operating as a wholesale business and five 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 income statement (unaudited) for the three months ended September 30, 2011 and 2010 that O-P provided to the Company:

		2011		2010
Net sales	$	77,043	$	49,925
Cellular service cost		40,615		5,524
Operating expenses		20,057		3,176
Operating income		16,371		41,225
Other income		1		244
Net income	$	16,372	$	41,469
Company share	$	1,328	$	3,362

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

		2011		2010
Current assets	$	25,397	$	10,916
Property, plant and equipment, net		38,418		34,294
Total assets	$	63,815	$	45,210
Total liabilities	$	49,888	$	818
Partners' capital		13,927		44,392
Total liabilities and partners' capital	$	63,815	$	45,210