FairPoint Communications 2006 Annual Report Download - page 147

balance at December 31, 2006, and 2005 respectively. The Partnership maintains an allowance for losses, as necessary, based on the expected
collectibility of accounts receivable.
Approximately 98% of the Partnership’s 2006, 2005 and 2004 revenue is affiliate revenue.
Cellco and the Partnership rely on local and long-distance telephone companies, some of whom are related parties, and other companies to provide certain
communication services. Although management believes alternative telecommunications facilities could be found in a timely manner, any disruption of
these services could potentially have an adverse impact on the Partnership’s operating results.
Although Cellco and the General Partner attempt to maintain multiple vendors for equipment, which are important components of its operations, they are
currently acquired from only a few sources. Certain of these products are in turn utilized by the Partnership and are important components of the
Partnership’s operations. If the suppliers are unable to meet the General Partner’s needs as it builds out its network infrastructure and sells service,
delays and increased costs in the expansion of the Partnership’s network infrastructure or losses of potential customers could result, which would
adversely affect operating results.
Financial Instruments—The Partnership’s trade receivables and payables are short-term in nature, and accordingly, their carrying value approximates
fair value.
Income Taxes—The Partnership is not a taxable entity for Federal and state income tax purposes. Any taxable income or loss is apportioned to the
partners based on their respective partnership interests and is reported by them individually.
Due to/from General Partner—Due to/from General Partner principally represents the Partnership’s cash position. The General Partner manages all
cash, investing and financing activities of the Partnership. As such, the change in Due from General Partners is reflected as an investing activity in the
Statements of Cash Flows while the change in Due to General Partner is reflected as a financing activity. Additionally, administrative and operating costs
incurred by the General Partner on behalf of the Partnership are charged to the Partnership through this account. Interest expense/income is based on the
average monthly outstanding balance in this account and is calculated by applying Cellco’s average cost of borrowing from Verizon Global Funding, a
wholly owned subsidiary of Verizon Communications. The cost of borrowing was approximately 5.4%, 4.8%, and 5.9% for the years ended December
31, 2006, 2005 and 2004, respectively. Included in Interest and Other Income, Net is net interest income related to the Due from General Partner balance
of $693, $782 and $980 for the years ended December 31, 2006, 2005 and 2004, respectively.
Distributions—The Partnership is required to make distributions to its partners on a quarterly basis based upon the Partnership’s operating results,
cash availability and financing needs as determined by the General Partner at the date of distribution.
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