FairPoint Communications 2006 Annual Report Download - page 149

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All affiliate transactions captured above are based on actual amounts directly incurred by Cellco on behalf of the Partnership and/or allocations from
Cellco. Revenues and expenses were allocated based on the Partnership’s percentage of total customers, gross customer additions or minutes of use where
applicable. The General Partner believes the allocations are reasonable. The affiliate transactions are not necessarily conducted at arm’s length.
The Partnership had net purchases of plant, property, and equipment with affiliates of $4,691, $4,738 and $7,245 in 2006, 2005 and 2004,
respectively.
5. COMMITMENTS
The General Partner, on behalf of the Partnership, and the Partnership itself have entered into operating leases for facilities and equipment used in its
operations. Lease contracts include renewal options that include rent expense adjustments based on the Consumer Price Index as well as annual and end-
of-lease term adjustments. Rent expense is recorded on a straight-line basis. The noncancellable lease term used to calculate the amount of the straight-line
rent expense is generally determined to be the initial lease term, including any optional renewal terms that are reasonably assured. Leasehold
improvements related to these operating leases are amortized over the shorter of their estimated useful lives or the noncancellable lease term. For the years
ended December 31, 2006, 2005 and 2004, the Partnership recognized a total of $2,001, $1,845 and $1,446, respectively, as rent expense related to
payments under these operating leases, which was included in cost of service in the accompanying Statements of Operations.
Aggregate future minimum rental commitmen ts under noncancelable operating leases, excluding renewal options that are not reasonably assured, for the
years shown are as follows:
Years Amount
2007 $1,758
2008 1,661
2009 1,159
2010 515
2011 198
2012 and thereafter 255
Total minimum payments $5,546
From time to time the General Partner enters into purchase commitments, primarily for network equipment, on behalf of the Partnership.
6. CONTINGENCIES
Cellco is subject to various lawsuits and other claims including class actions, product liability, patent infringement, antitrust, partnership disputes, and
claims involving relations with resellers and agents. Cellco is also defending lawsuits filed against itself and other participants in the wireless industry
alleging various adverse effects as a result of wireless phone usage. Various consumer class action lawsuits allege that Cellco breached contracts with
consumers, violated certain state consumer protection laws and other statutes and defrauded customers through concealed or misleading billing practices.
Certain of these lawsuits and other claims may impact the Partnership. These litigation matters may involve indemnification obligations by third parties
and/or affiliated parties covering all or part of any potential damage awards against Cellco and the Partnership and/or insurance coverage. Attorney
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