Delaware
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1-32362
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52-2126395
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||
(State of Incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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Item 2.02.
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Results of Operations and Financial Condition.
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Item 9.01.
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Financial Statements and Exhibits.
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OTELCO INC.
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|||
(Registrant)
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Date: November 2, 2011
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By:
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/s/ Curtis L. Garner, Jr.
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||
Name: Curtis L. Garner, Jr.
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|||
Title: Chief Financial Officer
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Contact:
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Curtis Garner
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Chief Financial Officer
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||
Otelco Inc.
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205-625-3571
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||
Curtis@otelcotel.com
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·
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Total revenues of $25.3 million for third quarter 2011.
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·
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Operating income of $6.1 million for third quarter 2011.
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·
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Adjusted EBITDA (as defined below) of $11.1 million for third quarter 2011.
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Third Quarter 2011 Financial Summary
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||||||||||||||||
(Dollars in thousands, except per share amounts)
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||||||||||||||||
Three Months Ended September 30,
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Change
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|||||||||||||||
2010
|
2011
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Amount
|
Percent
|
|||||||||||||
Revenues
|
$ | 26,145 | $ | 25,303 | $ | (842 | ) | (3.2 | ) % | |||||||
Operating income
|
$ | 6,728 | $ | 6,124 | $ | (604 | ) | (9.0 | ) % | |||||||
Interest expense
|
$ | (6,321 | ) | $ | (6,222 | ) | $ | (99 | ) | (1.6 | ) % | |||||
Net income available to stockholders
|
$ | 63 | $ | 885 | $ | 822 | * | |||||||||
Basic net income per share
|
$ | - | $ | 0.07 | $ | 0.07 | * | |||||||||
Diluted net income per share
|
$ | - | $ | 0.07 | $ | 0.07 | * | |||||||||
Adjusted EBITDA(a)
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$ | 12,671 | $ | 11,094 | $ | (1,577 | ) | (12.4 | ) % | |||||||
Capital expenditures
|
$ | 2,357 | $ | 2,097 | $ | (260 | ) | (11.0 | ) % | |||||||
* Not a meaningful calculation
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||||||||||||||||
Nine Months Ended September 30,
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Change
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|||||||||||||||
2010 | 2011 |
Amount
|
Percent
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|||||||||||||
Revenues
|
$ | 78,450 | $ | 76,196 | $ | (2,254 | ) | (2.9 | ) % | |||||||
Operating income
|
$ | 19,608 | $ | 18,771 | $ | (837 | ) | (4.3 | ) % | |||||||
Interest expense
|
$ | (18,489 | ) | $ | (18,592 | ) | $ | 103 | 0.6 | % | ||||||
Net income available to stockholders
|
$ | 95 | $ | 2,173 | $ | 2,078 | * | |||||||||
Basic net income per share
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$ | 0.01 | $ | 0.16 | $ | 0.15 | * | |||||||||
Diluted net income per share
|
$ | 0.01 | $ | 0.16 | $ | 0.15 | * | |||||||||
Adjusted EBITDA(a)
|
$ | 37,891 | $ | 34,393 | $ | (3,498 | ) | (9.2 | ) % | |||||||
Capital expenditures
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$ | 6,444 | $ | 8,448 | $ | 2,004 | 31.1 | % | ||||||||
* Not a meaningful calculation
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||||||||||||||||
Reconciliation of Adjusted EBITDA to Net Income
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||||||||||||||||
Three Months ended September 30,
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Nine Months ended September 30,
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|||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Net income
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$ | 63 | $ | 885 | $ | 95 | $ | 2,173 | ||||||||
Add: Depreciation
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3,264 | 2,922 | 10,164 | 8,751 | ||||||||||||
Interest expense - net of premium
|
5,979 | 5,880 | 17,470 | 17,566 | ||||||||||||
Interest expense - amortize loan cost
|
342 | 342 | 1,019 | 1,026 | ||||||||||||
Income tax expense (benefit)
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136 | (323 | ) | 137 | 36 | |||||||||||
Change in fair value of derivatives
|
359 | (654 | ) | 1,421 | (1,641 | ) | ||||||||||
Loan fees
|
19 | 19 | 57 | 57 | ||||||||||||
Amortization - intangibles
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2,509 | 2,023 | 7,528 | 6,425 | ||||||||||||
Adjusted EBITDA
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$ | 12,671 | $ | 11,094 | $ | 37,891 | $ | 34,393 |
Key Operating Statistics
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||||||||||||||||||||||||
Quarterly | ||||||||||||||||||||||||
% Change
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||||||||||||||||||||||||
December 31,
|
March 31,
|
June 30,
|
September 30,
|
from
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||||||||||||||||||||
2009
|
2010
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2011
|
2011
|
2011
|
June 30, 2011
|
|||||||||||||||||||
Otelco access line equivalents(1)
|
100,356 | 99,639 | 99,271 | 98,304 | 97,958 | (0.4 | ) % | |||||||||||||||||
RLEC and other services:
|
||||||||||||||||||||||||
Voice access lines
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48,215 | 45,461 | 44,770 | 44,113 | 43,444 | (1.5 | ) % | |||||||||||||||||
Data access lines
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20,066 | 20,852 | 21,158 | 21,137 | 21,162 | 0.1 | % | |||||||||||||||||
Access line equivalents(1)
|
68,281 | 66,313 | 65,928 | 65,250 | 64,606 | (1.0 | ) % | |||||||||||||||||
Cable television customers
|
4,195 | 4,227 | 4,029 | 4,054 | 4,156 | 2.5 | % | |||||||||||||||||
Satellite television customers
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100 | 125 | 217 | 222 | 224 | 0.9 | % | |||||||||||||||||
Additional internet customers
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9,116 | 6,975 | 6,435 | 6,046 | 5,654 | (6.5 | ) % | |||||||||||||||||
RLEC dial-up
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786 | 393 | 341 | 307 | 274 | (10.7 | ) % | |||||||||||||||||
Other dial-up
|
6,439 | 4,300 | 3,786 | 3,403 | 3,085 | (9.3 | ) % | |||||||||||||||||
Other data lines
|
1,891 | 2,282 | 2,308 | 2,336 | 2,295 | (1.8 | ) % | |||||||||||||||||
CLEC:
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||||||||||||||||||||||||
Voice access lines
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28,647 | 29,944 | 30,084 | 29,842 | 30,145 | 1.0 | % | |||||||||||||||||
Data access lines
|
3,428 | 3,382 | 3,259 | 3,212 | 3,207 | (0.2 | ) % | |||||||||||||||||
Access line equivalents(1)
|
32,075 | 33,326 | 33,343 | 33,054 | 33,352 | 0.9 | % | |||||||||||||||||
Wholesale network connections
|
132,324 | 149,043 | 152,101 | 154,785 | 155,691 | 0.6 | % | |||||||||||||||||
For the Year Ended
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For the Three Months Ended
|
|||||||||||||||||||||||
December 31,
|
March 31,
|
June 30,
|
September 30,
|
|||||||||||||||||||||
2009 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||
Total revenues (in millions):
|
$ | 103.8 | $ | 104.4 | $ | 25.4 | $ | 25.5 | $ | 25.3 | ||||||||||||||
RLEC
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$ | 60.8 | $ | 58.4 | $ | 14.2 | $ | 14.3 | $ | 14.1 | ||||||||||||||
CLEC
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$ | 43.0 | $ | 46.0 | $ | 11.2 | $ | 11.2 | $ | 11.2 | ||||||||||||||
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Three Months Ended September 30,
|
Change | ||||||||||||||
2010
|
2011
|
Amount
|
Percent
|
|||||||||||||
(dollars in thousands) | ||||||||||||||||
Local services
|
$ | 12,423 | $ | 11,715 | $ | (708 | ) | (5.7 | ) % | |||||||
Network access
|
8,077 | 8,048 | (29 | ) | (0.4 | ) | ||||||||||
Cable television
|
717 | 770 | 53 | 7.4 | ||||||||||||
Internet
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3,521 | 3,442 | (79 | ) | (2.2 | ) | ||||||||||
Transport services
|
1,407 | 1,328 | (79 | ) | (5.6 | ) | ||||||||||
Total
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$ | 26,145 | $ | 25,303 | $ | (842 | ) | (3.2 | ) |
OTELCO INC.
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CONSOLIDATED BALANCE SHEETS
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December 31,
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September 30,
|
||||||
2010
|
2011
|
||||||
Assets
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(unaudited)
|
||||||
Current assets
|
|||||||
Cash and cash equivalents
|
$ |
18,226,374
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$ 17,761,824
|
||||
Accounts receivable:
|
|||||||
Due from subscribers, net of allowance for doubtful
|
|||||||
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accounts of $230,752 and $273,345 respectively
|
4,406,257
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4,360,122
|
||||
Unbilled receivables
|
2,161,277
|
2,197,367
|
|||||
Other
|
4,299,088
|
5,486,213
|
|||||
Materials and supplies
|
1,817,311
|
1,999,397
|
|||||
Prepaid expenses
|
1,305,028
|
1,180,987
|
|||||
Deferred income taxes
|
626,267
|
626,267
|
|||||
Total current assets
|
32,841,602
|
33,612,177
|
|||||
Property and equipment, net
|
63,887,213
|
62,616,216
|
|||||
Goodwill
|
188,190,078
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188,190,078
|
|||||
Intangible assets, net
|
25,934,042
|
20,501,145
|
|||||
Investments
|
1,967,095
|
1,947,963
|
|||||
Deferred financing costs
|
5,757,825
|
4,731,752
|
|||||
Deferred income taxes
|
4,415,097
|
4,415,097
|
|||||
Other assets
|
183,946
|
122,940
|
|||||
Total assets
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$ |
323,176,898
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$ 316,137,368
|
||||
Liabilities and Stockholders' Deficit
|
|||||||
Current liabilities
|
|||||||
Accounts payable
|
$ |
768,055
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$ 1,460,497
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||||
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Accrued expenses
|
7,926,954
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7,217,175
|
||||
Advance billings and payments
|
1,595,133
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1,485,017
|
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Deferred income taxes
|
353,285
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353,285
|
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Customer deposits
|
172,479
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179,524
|
|||||
Total current liabilities
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10,815,906
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10,695,498
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|||||
Deferred income taxes
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42,512,576
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42,512,576
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|||||
Interest rate swaps
|
2,471,331
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830,299
|
|||||
Advance billings and payments
|
656,968
|
625,930
|
|||||
Other liabilities
|
368,349
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401,144
|
|||||
Long-term notes payable
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271,595,855
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271,133,432
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|||||
Total liabilities
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328,420,985
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326,198,879
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|||||
Stockholders' Deficit
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|||||||
Class A Common Stock, $.01 par value-authorized 20,000,000 shares;
|
|||||||
issued and outstanding 13,221,404 shares
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132,214
|
132,214
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Additional paid in capital
|
921,718
|
-
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Retained deficit
|
(6,298,019
|
) |
(10,193,725
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) | |||
Total stockholders' deficit
|
(5,244,087
|
) |
(10,061,511
|
) | |||
Total liabilities and stockholders' deficit
|
$ |
323,176,898
|
$ 316,137,368
|
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OTELCO INC.
|
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CONSOLIDATED STATEMENTS OF OPERATIONS
|
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(unaudited)
|
|||||||||||||||||
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||||||||||||||||
2010
|
2011
|
2010
|
2011
|
||||||||||||||
Revenues
|
26,145,227
|
25,302,747
|
78,450,381
|
76,195,806
|
|||||||||||||
Operating expenses
|
|||||||||||||||||
Cost of services and products
|
10,336,220
|
10,985,814
|
31,374,193
|
32,762,538
|
|||||||||||||
Selling, general and administrative expenses
|
3,307,743
|
3,248,746
|
9,775,255
|
9,485,763
|
|||||||||||||
Depreciation and amortization
|
5,773,298
|
4,944,033
|
17,692,899
|
15,176,030
|
|||||||||||||
Total operating expenses
|
19,417,261
|
19,178,593
|
58,842,347
|
57,424,331
|
|||||||||||||
|
Income from operations
|
6,727,966
|
6,124,154
|
19,608,034
|
18,771,475
|
||||||||||||
Other income (expense)
|
|||||||||||||||||
Interest expense
|
(6,320,757
|
) |
(6,222,487
|
) |
(18,488,869
|
) |
(18,591,790
|
) | |||||||||
Change in fair value of derivatives
|
(358,833
|
) |
654,791
|
(1,421,282
|
) |
1,641,032
|
|||||||||||
Other income
|
150,790
|
6,189
|
533,649
|
388,686
|
|||||||||||||
Total other expenses
|
(6,528,800
|
) |
(5,561,507
|
) |
(19,376,502
|
) |
(16,562,072
|
) | |||||||||
Income before income tax
|
199,166
|
562,647
|
231,532
|
2,209,403
|
|||||||||||||
Income tax (expense) benefit
|
(136,091
|
) |
322,815
|
(136,835
|
) |
(36,013
|
) | ||||||||||
Net income available to common stockholders
|
$ 63,075
|
$ 885,462
|
$ 94,697
|
$ 2,173,390
|
|||||||||||||
Weighted average common shares outstanding:
|
|||||||||||||||||
Basic
|
13,221,404
|
13,221,404
|
12,906,173
|
13,221,404
|
|||||||||||||
Diluted
|
13,221,404
|
13,221,404
|
13,221,404
|
13,221,404
|
|||||||||||||
Basic net income per common share
|
$ -
|
$ 0.07
|
$ 0.01
|
$ 0.16
|
|||||||||||||
Diluted net income per common share
|
$ -
|
$ 0.07
|
$ 0.01
|
$ 0.16
|
|||||||||||||
Dividends declared per common share
|
$ 0.18
|
$ 0.18
|
$ 0.53
|
$ 0.53
|
OTELCO INC.
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(unaudited)
|
||||||||
Nine Months Ended
|
||||||||
September 30,
|
||||||||
2010
|
2011
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 94,697 | $ | 2,173,390 | ||||
Adjustments to reconcile net income to cash flows from operating activities:
|
||||||||
Depreciation
|
10,164,224 | 8,751,166 | ||||||
Amortization
|
7,528,676 | 6,424,864 | ||||||
Amortization of debt premium
|
(68,220 | ) | (76,595 | ) | ||||
Amortization of loan costs
|
1,019,326 | 1,026,072 | ||||||
Change in fair value of derivatives
|
1,421,282 | (1,641,032 | ) | |||||
Provision for uncollectible revenue
|
179,634 | 545,338 | ||||||
Changes in operating assets and liabilities; net of operating assets and liabilities acquired:
|
||||||||
Accounts receivable
|
(1,574,850 | ) | (1,654,102 | ) | ||||
Material and supplies
|
205,834 | (182,086 | ) | |||||
Prepaid expenses and other assets
|
206,918 | 111,735 | ||||||
Income tax receivable
|
389,486 | - | ||||||
Accounts payable and accrued liabilities
|
(142,257 | ) | (17,338 | ) | ||||
Advance billings and payments
|
(59,859 | ) | (141,154 | ) | ||||
Other liabilities
|
69,397 | 39,841 | ||||||
Net cash from operating activities
|
19,434,288 | 15,360,099 | ||||||
Cash flows used in investing activities:
|
||||||||
Acquisition and construction of property and equipment
|
(6,443,959 | ) | (8,448,004 | ) | ||||
Deferred charges
|
(1,041 | ) | - | |||||
Net cash used in investing activities
|
(6,445,000 | ) | (8,448,004 | ) | ||||
Cash flows used in financing activities:
|
||||||||
Cash dividends paid
|
(6,894,819 | ) | (6,990,817 | ) | ||||
Direct cost of exchange of Class B shares for Class A common shares
|
(194,053 | ) | - | |||||
Principal repayment of long-term debt
|
- | (385,828 | ) | |||||
Loan origination costs
|
(155,160 | ) | - | |||||
Net cash used in financing activities
|
(7,244,032 | ) | (7,376,645 | ) | ||||
Net increase (decrease) in cash and cash equivalents
|
5,745,256 | (464,550 | ) | |||||
Cash and cash equivalents, beginning of period
|
17,731,044 | 18,226,374 | ||||||
Cash and cash equivalents, end of period
|
$ | 23,476,300 | $ | 17,761,824 | ||||
Supplemental disclosures of cash flow information:
|
||||||||
Interest paid
|
$ | 17,345,346 | $ | 17,642,313 | ||||
Income taxes paid (received)
|
$ | (197,534 | ) | $ | 165,061 |
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