FairPoint Communications 2007 Annual Report Download - page 142

5. COMMITMENTS
The General Partner, on behalf of the Partnership, and the Partnership itself have entered into operating leases for facilities,
equipment and spectrum 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, 2007, 2006 and 2005,
the Partnership recognized a total of $2,470, $2,001 and $1,845 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 commitments under noncancelable operating leases, excluding renewal options that are not
reasonably assured, for the years shown are as follows:
Years Amount
2008 $ 2,456
2009 2,023
2010 1,453
2011 1,183
2012 927
2013 and thereafter 3,642
Total minimum payments $11,684
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 Generals in a number of states
also are investigating certain sales, marketing and advertising practices. All of the above matters are subject to many uncertainties, and
outcomes are not predictable with assurance.
The Partnership may be allocated a portion of the damages that may result upon adjudication of these matters if the claimants
prevail in their actions. Consequently, the ultimate liability with respect to these matters at December 31, 2007 cannot be ascertained. The
potential effect, if any, on the financial condition and results of operations of the Partnership, in the period in which these matters are
resolved, may be material.
In addition to the aforementioned matters, Cellco is subject to various other legal actions and claims in the normal course of
business. While Cellco’s legal counsel cannot give assurance as to the outcome of each of these matters, in management’s opinion, based
on the advice of such legal counsel, the ultimate liability with respect to any of these actions, or all of them combined, will not materially
affect the financial statements of the Partnership.
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