(Mark One)
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2013
|
|
OR
|
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to
|
OTELCO INC.
|
(Exact Name of Registrant as Specified in Its Charter)
|
Delaware
|
52-2126395
|
|
(State or Other Jurisdiction of Incorporation or
|
(I.R.S. Employer Identification No.)
|
|
Organization)
|
||
505 Third Avenue East, Oneonta, Alabama
|
35121
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
(205) 625-3574
|
(Registrant’s Telephone Number, Including Area Code)
|
N/A
|
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
|
Yes x
|
No o
|
Yes x
|
No o
|
Large accelerated filer o
|
Accelerated filer x
|
Non-accelerated filer o
|
Smaller reporting company o
|
Yes o
|
No x
|
Yes o
|
No o
|
Class
|
Outstanding at May 9, 2013
|
|
Class A Common Stock ($0.01 par value per share)
|
13,221,404
|
|
Class B Common Stock ($0.01 par value per share)
|
0
|
Page
|
||
2
|
||
2
|
||
2
|
||
3
|
||
4
|
||
5
|
||
15
|
||
23
|
||
23
|
||
24
|
||
24
|
||
24
|
(DEBTOR-IN-POSSESSION)
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
(unaudited)
|
||||||||
December 31,
|
March 31,
|
|||||||
2012
|
2013
|
|||||||
Assets
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$
|
32,516,283
|
$
|
34,293,319
|
||||
Accounts receivable:
|
||||||||
Due from subscribers, net of allowance for doubtful accounts of $239,274 and $457,068, respectively
|
4,205,944
|
4,083,418
|
||||||
Unbilled receivables
|
2,003,634
|
2,008,675
|
||||||
Other
|
5,336,162
|
3,520,880
|
||||||
Materials and supplies
|
1,845,246
|
1,924,191
|
||||||
Prepaid expenses
|
1,981,631
|
2,827,045
|
||||||
Deferred income taxes
|
1,843,160
|
1,843,160
|
||||||
Total current assets
|
49,732,060
|
50,500,688
|
||||||
Property and equipment, net
|
58,242,903
|
56,571,853
|
||||||
Goodwill
|
44,956,840
|
44,956,840
|
||||||
Intangible assets, net
|
6,670,392
|
5,580,929
|
||||||
Investments
|
1,919,327
|
1,912,950
|
||||||
Deferred financing costs
|
4,037,311
|
2,130,553
|
||||||
Deferred income taxes
|
6,275,997
|
6,275,997
|
||||||
Other assets
|
490,131
|
529,965
|
||||||
Total assets
|
$
|
172,324,961
|
$
|
168,459,775
|
||||
Liabilities and Stockholders’ Deficit
|
||||||||
Liabilities not subject to compromise
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$
|
2,007,405
|
$
|
1,075,570
|
||||
Accrued expenses
|
14,900,378
|
6,291,205
|
||||||
Advance billings and payments
|
1,560,190
|
1,507,137
|
||||||
Deferred income taxes
|
430,896
|
430,896
|
||||||
Customer deposits
|
90,837
|
93,492
|
||||||
Current maturity of long-term debt
|
270,990,023
|
—
|
||||||
Total current liabilities
|
289,979,729
|
9,398,300
|
||||||
Liabilities subject to compromise
|
—
|
278,827,862
|
||||||
Deferred income taxes
|
22,670,168
|
22,670,168
|
||||||
Advance billings and payments
|
788,638
|
775,354
|
||||||
Other liabilities
|
484,019
|
159,704
|
||||||
Total liabilities
|
313,922,554
|
311,831,388
|
||||||
Stockholders’ deficit
|
||||||||
Class A Common Stock, $.01 par value-authorized 20,000,000 shares; issued and outstanding 13,221,404 shares
|
132,214
|
132,214
|
||||||
Retained deficit
|
(141,729,807
|
)
|
(143,503,827
|
)
|
||||
Total stockholders’ deficit
|
(141,597,593
|
)
|
(143,371,613
|
)
|
||||
Total liabilities and stockholders’ deficit
|
$
|
172,324,961
|
$
|
168,459,775
|
OTELCO INC.
|
||||||||
(DEBTOR-IN-POSSESSION)
|
||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||
(unaudited)
|
||||||||
Three Months Ended
|
||||||||
March 31,
|
||||||||
2012
|
2013
|
|||||||
Revenues
|
$
|
25,374,241
|
$
|
20,987,909
|
||||
Operating expenses
|
||||||||
Cost of services
|
11,028,833
|
9,477,567
|
||||||
Selling, general and administrative expenses
|
3,206,077
|
3,055,790
|
||||||
Depreciation and amortization
|
4,522,593
|
3,565,896
|
||||||
Total operating expenses
|
18,757,503
|
16,099,253
|
||||||
Income from operations
|
6,616,738
|
4,888,656
|
||||||
Other income (expense)
|
||||||||
Interest expense
|
(5,833,650
|
)
|
(5,554,169
|
)
|
||||
Reorganization items
|
—
|
(1,423,607
|
)
|
|||||
Change in fair value of derivatives
|
241,438
|
—
|
||||||
Other income
|
318,169
|
243,488
|
||||||
Total other expenses
|
(5,274,043
|
)
|
(6,734,288
|
)
|
||||
Income (loss) before income tax
|
1,342,695
|
(1,845,632
|
)
|
|||||
Income tax (expense) benefit
|
(524,457
|
)
|
71,611
|
|||||
Net income (loss)
|
$
|
818,238
|
$
|
(1,774,021
|
)
|
|||
Common shares outstanding
|
13,221,404
|
13,221,404
|
||||||
Net income (loss) per common share
|
$
|
0.06
|
$
|
(0.13
|
)
|
|||
Dividends declared per common share
|
$
|
0.18
|
$
|
—
|
OTELCO INC.
|
||||||||
(DEBTOR-IN-POSSESSION)
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(unaudited)
|
||||||||
Three Months Ended
|
||||||||
March 31,
|
||||||||
2012
|
2013
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$
|
818,238
|
$
|
(1,774,021
|
)
|
|||
Adjustments to reconcile net income (loss) to cash flows from operating activities:
|
||||||||
Depreciation
|
2,728,557
|
2,379,971
|
||||||
Amortization
|
1,794,036
|
1,185,925
|
||||||
Amortization of debt premium
|
(27,840
|
)
|
(31,260
|
)
|
||||
Amortization of loan costs
|
342,024
|
342,024
|
||||||
Change in fair value of derivatives
|
(241,438
|
)
|
—
|
|||||
Provision for uncollectible revenue
|
122,402
|
37,253
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
864,192
|
1,895,515
|
||||||
Material and supplies
|
(245,676
|
)
|
(78,945
|
)
|
||||
Prepaid expenses and other assets
|
(200,130
|
)
|
(885,402
|
)
|
||||
Accounts payable and accrued liabilities
|
1,046,924
|
1,007,701
|
||||||
Advance billings and payments
|
222,279
|
(66,337
|
)
|
|||||
Other liabilities
|
67,487
|
(321,660
|
)
|
|||||
Net cash from operating activities
|
7,291,055
|
3,690,764
|
||||||
Cash flows used in investing activities:
|
||||||||
Acquisition and construction of property and equipment
|
(1,303,197
|
)
|
(798,853
|
)
|
||||
Net cash used in investing activities
|
(1,303,197
|
)
|
(798,853
|
)
|
||||
Cash flows used in financing activities:
|
||||||||
Cash dividends paid
|
(2,330,272
|
)
|
—
|
|||||
Loan origination costs
|
(9,499
|
)
|
(1,114,875
|
)
|
||||
Net cash used in financing activities
|
(2,339,771
|
)
|
(1,114,875
|
)
|
||||
Net increase in cash and cash equivalents
|
3,648,087
|
1,777,036
|
||||||
Cash and cash equivalents, beginning of period
|
12,393,792
|
32,516,283
|
||||||
Cash and cash equivalents, end of period
|
$
|
16,041,879
|
$
|
34,293,319
|
||||
Supplemental disclosures of cash flow information:
|
||||||||
Interest paid
|
$
|
5,820,846
|
$
|
1,825,337
|
||||
Income taxes paid
|
$
|
25,250
|
$
|
35,500
|
1.
|
Basis of Presentation and Principles of Consolidation
|
2.
|
Reorganization
|
Three Months
|
||||
Ended March 31,
|
||||
2013
|
||||
Professional fees(a)
|
$
|
1,423,607
|
||
Total reorganization items
|
$
|
1,423,607
|
||
(a) Professional fees relate to legal and other professional costs directly associated with the
reorganization process.
|
Three Months
|
||||
Ended March 31,
|
||||
2013
|
||||
Senior secured credit facility(a)
|
$
|
161,380,368
|
||
Senior subordinated notes – held in IDS(b)
|
98,513,017
|
|||
Senior subordinated notes – held separately(c)
|
8,385,769
|
|||
Accrued interest
|
||||
Senior subordinated notes – held in IDS
|
9,715,868
|
|||
Senior subordinated notes – held separately
|
832,840
|
|||
Total liabilities subject to compromise
|
$
|
278,827,862
|
||
(a) Net of $619,632 loan cost.
|
||||
(b) Net of $1,945,745 loan cost and premium of $1,298,231.
|
||||
(c) Net of $114,231 loan cost.
|
3.
|
Revenue Concentrations
|
4.
|
Derivative Activities
|
5.
|
Income (Loss) per Common Share
|
Three Months
|
||||||||
Ended March 31,
|
||||||||
2012
|
2013
|
|||||||
Common shares outstanding
|
13,221,404
|
13,221,404
|
||||||
Net income (loss)
|
$
|
818,238
|
$
|
(1,774,021
|
)
|
|||
Net income (loss) per common share
|
$
|
0.06
|
$
|
(0.13
|
)
|
6.
|
Fair Value Measurement
|
|
·
|
Level 1 consists of observable market data in an active market for identical assets or liabilities.
|
|
·
|
Level 2 consists of observable market data, other than that included in Level 1, that is either directly or indirectly observable.
|
|
·
|
Level 3 consists of unobservable market data. The input may reflect the assumptions of the Company, not a market participant, if there is little available market data and the Company’s own assumptions are considered by management to be the best available information.
|
December 31,
|
March 31,
|
|||||||
2012
|
2013
|
|||||||
Notes payable
|
$
|
171,841,824
|
$
|
160,328,713
|
7.
|
Subsidiary Guarantees
|
Guarantor
|
Non-Guarantor
|
|||||||||||||||||||
Parent
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
ASSETS
|
||||||||||||||||||||
Current assets
|
||||||||||||||||||||
Cash and cash equivalents
|
$
|
—
|
$
|
32,515,933
|
$
|
350
|
$
|
—
|
$
|
32,516,283
|
||||||||||
Accounts receivable, net
|
—
|
11,160,581
|
385,159
|
—
|
11,545,740
|
|||||||||||||||
Materials and supplies
|
—
|
1,165,042
|
680,204
|
—
|
1,845,246
|
|||||||||||||||
Prepaid expenses
|
459,021
|
1,555,192
|
(32,582
|
)
|
—
|
1,981,631
|
||||||||||||||
Deferred income taxes
|
1,843,160
|
—
|
—
|
—
|
1,843,160
|
|||||||||||||||
Investment in subsidiaries
|
72,218,114
|
—
|
—
|
(72,218,114
|
)
|
—
|
||||||||||||||
Intercompany receivable
|
(219,453,880
|
)
|
(29,764,405
|
)
|
29,764,405
|
219,453,880
|
—
|
|||||||||||||
Total current assets
|
(144,933,585
|
)
|
16,632,343
|
30,797,536
|
147,235,766
|
49,732,060
|
||||||||||||||
Property and equipment, net
|
—
|
56,819,459
|
1,423,444
|
—
|
58,242,903
|
|||||||||||||||
Goodwill
|
239,970,317
|
(121,910,761
|
)
|
(73,102,716
|
)
|
—
|
44,956,840
|
|||||||||||||
Intangible assets, net
|
—
|
5,580,175
|
1,090,217
|
—
|
6,670,392
|
|||||||||||||||
Investments
|
1,203,605
|
407,708
|
308,014
|
—
|
1,919,327
|
|||||||||||||||
Deferred income taxes
|
6,275,997
|
—
|
—
|
—
|
6,275,997
|
|||||||||||||||
Other long-term assets
|
4,037,311
|
490,131
|
—
|
—
|
4,527,442
|
|||||||||||||||
Total assets
|
$
|
106,553,645
|
$
|
(41,980,945
|
)
|
$
|
(39,483,505
|
)
|
$
|
147,235,766
|
$
|
172,324,961
|
||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||||||||||||||
Current liabilities
|
||||||||||||||||||||
Accounts payable and accrued expenses
|
$
|
8,585,915
|
$
|
6,980,505
|
$
|
1,341,363
|
$
|
—
|
$
|
16,907,783
|
||||||||||
Intercompany payables
|
—
|
(219,453,880
|
)
|
—
|
219,453,880
|
—
|
||||||||||||||
Other current liabilities
|
430,896
|
1,581,987
|
69,040
|
—
|
2,081,923
|
|||||||||||||||
Current notes payable
|
230,726,547
|
40,263,476
|
—
|
—
|
270,990,023
|
|||||||||||||||
Total current liabilities
|
239,743,358
|
(170,627,912
|
)
|
1,410,403
|
219,453,880
|
289,979,729
|
||||||||||||||
Deferred income taxes
|
8,407,880
|
12,970,082
|
1,292,206
|
—
|
22,670,168
|
|||||||||||||||
Other liabilities
|
—
|
1,272,657
|
—
|
—
|
1,272,657
|
|||||||||||||||
Stockholders’ equity (deficit)
|
(141,597,593
|
)
|
114,404,228
|
(42,186,114
|
)
|
(72,218,114
|
)
|
(141,597,593
|
)
|
|||||||||||
Total liabilities and stockholders’ equity (deficit)
|
$
|
106,553,645
|
$
|
(41,980,945
|
)
|
$
|
(39,483,505
|
)
|
$
|
147,235,766
|
$
|
172,324,961
|
Guarantor
|
Non-Guarantor
|
|||||||||||||||||||
Parent
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
ASSETS
|
||||||||||||||||||||
Current assets
|
||||||||||||||||||||
Cash and cash equivalents
|
$
|
230,856
|
$
|
34,061,963
|
$
|
500
|
$
|
—
|
$
|
34,293,319
|
||||||||||
Accounts receivable, net
|
—
|
9,195,452
|
417,521
|
—
|
9,612,973
|
|||||||||||||||
Materials and supplies
|
—
|
1,140,587
|
783,604
|
—
|
1,924,191
|
|||||||||||||||
Prepaid expenses
|
562,855
|
2,244,771
|
19,419
|
—
|
2,827,045
|
|||||||||||||||
Deferred income taxes
|
1,843,160
|
—
|
—
|
—
|
1,843,160
|
|||||||||||||||
Investment in subsidiaries
|
76,911,315
|
—
|
—
|
(76,911,315
|
)
|
—
|
||||||||||||||
Intercompany receivable
|
(224,623,263
|
)
|
(30,017,903
|
)
|
30,017,903
|
224,623,263
|
—
|
|||||||||||||
Total current assets
|
(145,075,077
|
)
|
16,624,870
|
31,238,947
|
147,711,948
|
50,500,688
|
||||||||||||||
Property and equipment, net
|
—
|
55,136,554
|
1,435,299
|
—
|
56,571,853
|
|||||||||||||||
Goodwill
|
239,970,317
|
(121,910,761
|
)
|
(73,102,716
|
)
|
—
|
44,956,840
|
|||||||||||||
Intangible assets, net
|
—
|
4,522,777
|
1,058,152
|
—
|
5,580,929
|
|||||||||||||||
Investments
|
1,203,605
|
401,331
|
308,014
|
—
|
1,912,950
|
|||||||||||||||
Deferred income taxes
|
6,275,997
|
—
|
—
|
—
|
6,275,997
|
|||||||||||||||
Other long-term assets
|
2,130,553
|
529,965
|
—
|
—
|
2,660,518
|
|||||||||||||||
Total assets
|
$
|
104,505,395
|
$
|
(44,695,264
|
)
|
$
|
(39,062,304
|
)
|
$
|
147,711,948
|
$
|
168,459,775
|
||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||||||||||||||
Liabilities not subject to compromise
|
||||||||||||||||||||
Current liabilities
|
||||||||||||||||||||
Accounts payable and accrued expenses
|
$
|
473,846
|
$
|
5,445,001
|
$
|
1,447,928
|
$
|
—
|
$
|
7,366,775
|
||||||||||
Intercompany payables
|
—
|
(224,623,263
|
)
|
—
|
224,623,263
|
—
|
||||||||||||||
Other current liabilities
|
430,896
|
1,522,789
|
77,840
|
—
|
2,031,525
|
|||||||||||||||
Total current liabilities
|
904,742
|
(217,655,473
|
)
|
1,525,768
|
224,623,263
|
9,398,300
|
||||||||||||||
Liabilities subject to compromise
|
238,564,386
|
40,263,476
|
—
|
—
|
278,827,862
|
|||||||||||||||
Deferred income taxes
|
8,407,880
|
12,970,082
|
1,292,206
|
—
|
22,670,168
|
|||||||||||||||
Other liabilities
|
—
|
935,058
|
—
|
—
|
935,058
|
|||||||||||||||
Stockholders’ equity (deficit)
|
(143,371,613
|
)
|
118,791,593
|
(41,880,278
|
)
|
(76,911,315
|
)
|
(143,371,613
|
)
|
|||||||||||
Total liabilities and stockholders’ equity (deficit)
|
$
|
104,505,395
|
$
|
(44,695,264
|
)
|
$
|
(39,062,304
|
)
|
$
|
147,711,948
|
$
|
168,459,775
|
Guarantor
|
Non-Guarantor
|
|||||||||||||||||||
Parent
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
Revenues
|
$
|
880,787
|
$
|
23,460,360
|
$
|
1,033,094
|
$
|
—
|
$
|
25,374,241
|
||||||||||
Operating expenses
|
(880,787
|
)
|
(16,999,324
|
)
|
(877,392
|
)
|
—
|
(18,757,503
|
)
|
|||||||||||
Income from operations
|
—
|
6,461,036
|
155,702
|
—
|
6,616,738
|
|||||||||||||||
Other expense
|
(5,266,807
|
)
|
(7,229
|
)
|
(7
|
)
|
—
|
(5,274,043
|
)
|
|||||||||||
Earnings from subsidiaries
|
6,609,502
|
—
|
—
|
(6,609,502
|
)
|
—
|
||||||||||||||
Income before income tax
|
1,342,695
|
6,453,807
|
155,695
|
(6,609,502
|
)
|
1,342,695
|
||||||||||||||
Income tax expense
|
(524,457
|
)
|
—
|
—
|
—
|
(524,457
|
)
|
|||||||||||||
Net income to common stockholders
|
$
|
818,238
|
$
|
6,453,807
|
$
|
155,695
|
$
|
(6,609,502
|
)
|
$
|
818,238
|
Guarantor
|
Non-Guarantor
|
|||||||||||||||||||
Parent
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
Revenues
|
$
|
884,619
|
$
|
19,031,627
|
$
|
1,071,663
|
$
|
—
|
$
|
20,987,909
|
||||||||||
Operating expenses
|
(884,620
|
)
|
(14,480,499
|
)
|
(734,134
|
)
|
—
|
(16,099,253
|
)
|
|||||||||||
Income from operations
|
(1
|
)
|
4,551,128
|
337,529
|
—
|
4,888,656
|
||||||||||||||
Other expense
|
(6,728,279
|
)
|
(6,007
|
)
|
(2
|
)
|
—
|
(6,734,288
|
)
|
|||||||||||
Earnings from subsidiaries
|
4,882,648
|
—
|
—
|
(4,882,648
|
)
|
—
|
||||||||||||||
Income (loss) before income tax
|
(1,845,632
|
)
|
4,545,121
|
337,527
|
(4,882,648
|
)
|
(1,845,632
|
)
|
||||||||||||
Income tax benefit (expense)
|
71,611
|
(157,755
|
)
|
(31,691
|
)
|
189,446
|
71,611
|
|||||||||||||
Net income (loss) to common stockholders
|
$
|
(1,774,021
|
)
|
$
|
4,387,366
|
$
|
305,836
|
$
|
(4,693,202
|
)
|
$
|
(1,774,021
|
)
|
Guarantor
|
Non-Guarantor
|
|||||||||||||||||||
Parent
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
Cash flows from operating activities:
|
||||||||||||||||||||
Net income
|
$
|
818,238
|
$
|
13,063,309
|
$
|
155,695
|
$
|
(13,219,004
|
)
|
$
|
818,238
|
|||||||||
Adjustment to reconcile net income to cash flows from operating activities
|
72,746
|
4,508,387
|
136,608
|
—
|
4,717,741
|
|||||||||||||||
Changes in assets and liabilities
|
8,058,290
|
(6,093,315
|
)
|
(209,899
|
)
|
—
|
1,755,076
|
|||||||||||||
Net cash provided by operating activities
|
8,949,274
|
11,478,381
|
82,404
|
(13,219,004
|
)
|
7,291,055
|
||||||||||||||
Cash flows used in investing activities
|
—
|
(1,220,793
|
)
|
(82,404
|
)
|
-
|
(1,303,197
|
)
|
||||||||||||
Cash flows used in financing activities
|
(8,949,274
|
)
|
(6,609,501
|
)
|
—
|
13,219,004
|
(2,339,771
|
)
|
||||||||||||
Net increase in cash and cash equivalents
|
—
|
3,648,087
|
—
|
—
|
3,648,087
|
|||||||||||||||
Cash and cash equivalents, beginning of period
|
—
|
12,393,442
|
350
|
—
|
12,393,792
|
|||||||||||||||
Cash and cash equivalents, end of period
|
$
|
—
|
$
|
16,041,529
|
$
|
350
|
$
|
—
|
$
|
16,041,879
|
Guarantor
|
Non-Guarantor
|
|||||||||||||||||||
Parent
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
Cash flows from operating activities:
|
||||||||||||||||||||
Net income (loss)
|
$
|
(1,774,021
|
)
|
$
|
4,387,367
|
$
|
305,835
|
$
|
(4,693,202
|
)
|
$
|
(1,774,021
|
)
|
|||||||
Adjustment to reconcile net income to cash flows from operating activities
|
310,764
|
3,521,595
|
81,554
|
—
|
3,913,913
|
|||||||||||||||
Changes in assets and liabilities
|
7,502,190
|
(5,623,054
|
)
|
(328,264
|
)
|
—
|
1,550,872
|
|||||||||||||
Net cash provided by operating activities
|
6,038,933
|
2,285,908
|
59,125
|
(4,693,202
|
)
|
3,690,764
|
||||||||||||||
Cash flows used in investing activities
|
—
|
(739,878
|
)
|
(58,975
|
)
|
—
|
(798,853
|
)
|
||||||||||||
Cash flows used in financing activities
|
(6,038,933
|
)
|
—
|
—
|
4,924,058
|
(1,114,875
|
)
|
|||||||||||||
Net increase in cash and cash equivalents
|
—
|
1,546,030
|
150
|
230,856
|
1,777,036
|
|||||||||||||||
Cash and cash equivalents, beginning of period
|
—
|
32,515,933
|
350
|
—
|
32,516,283
|
|||||||||||||||
Cash and cash equivalents, end of period
|
$
|
—
|
$
|
34,061,963
|
$
|
500
|
$
|
230,856
|
$
|
34,293,319
|
8.
|
Commitments and Contingencies
|
9.
|
Subsequent Events
|
|
●
|
the $162 million of outstanding principal term loan obligations under our senior credit facility will be reduced to a maximum of $142 million (or such higher amount that is agreed to in writing by the agent under our senior credit facility and the holders of more than 50% in number and 66 2/3% in amount of the outstanding principal term loan obligations under our senior credit facility) through a cash payment;
|
|
●
|
the maturity of the outstanding principal term loan obligations under our senior credit facility will be extended to April 30, 2016;
|
|
●
|
the holders of the outstanding principal term loan obligations under our senior credit facility will receive their pro rata share of our new Class B common stock, which new Class B common stock will represent 7.5% of our total economic and voting interests immediately following the effectiveness of the Plan, subject to dilution of up to 10% on account of the issuance of equity interests in the Company pursuant to a management equity plan which is expected to be adopted by us following our emergence from bankruptcy (the “Management Equity Plan”);
|
|
●
|
certain revolving loan commitments under our senior credit facility will be reinstated, with availability of up to $5 million;
|
|
●
|
our outstanding senior subordinated notes, including the outstanding senior subordinated notes constituting part of our Income Deposit Securities (“IDSs”), will be cancelled and the holders of outstanding senior subordinated notes, including senior subordinated notes held through IDSs, will receive their pro rata share of our new Class A common stock, which new Class A common stock will represent 92.5% of our total economic and voting interests immediately following the effectiveness of the Plan, subject to dilution of up to 10% on account of the issuance of equity interests in the Company pursuant to the Management Equity Plan; and
|
|
●
|
the outstanding shares of our existing common stock, all of which currently constitute part of the IDSs, will be cancelled.
|
|
●
|
Local services. We receive revenues from providing local exchange telecommunications services in our eleven rural territories, from the wholesale network services in Maine and, on a competitive basis, in Maine, Massachusetts and New Hampshire. These revenues include monthly subscription charges for basic service, calling beyond the local territory on a fixed price and on a per minute basis, local private line services and enhanced calling features, such as voicemail, caller identification, call waiting and call forwarding. We also provide billing and collections services for other carriers under contract and receive revenues from directory advertising. A growing portion of our rural subscribers take bundled service plans which include multiple services, including unlimited domestic calling, for a flat monthly fee. Our contract with Time Warner Cable (“TWC”) to provide wholesale network connections to TWC customers in Maine and New Hampshire expired on December 31, 2012 and service for TWC’s subscriber base was transitioned to the TWC network during first quarter 2013.
|
|
●
|
Network access. We receive revenues from charges established to compensate us for the origination, transport and termination of calls of long distance and other interexchange carriers. These include subscriber line charges imposed on end users and switched and special access charges paid by carriers. Switched access charges for long distance services within Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont and West Virginia are based on rates approved by the Alabama Public Service Commission, the Maine Public Utilities Commission (“MPUC”), the Massachusetts Department of Telecommunications and Cable, the Missouri Public Service Commission, the New Hampshire Public Utilities Commission (“NHPUC”), the Vermont Public Service Board and the West Virginia Public Service Commission, respectively, where appropriate. Switched and special access charges for interstate and international services are based on rates approved by the FCC.
|
|
●
|
Cable television. We offer basic, digital, high-definition, digital video recording and pay per view cable television services to the majority of our telephone service territory in Alabama, including Internet Protocol television (“IPTV”) and Video on Demand (“VOD”). We are a reseller of satellite services for DirecTV and Dish in Missouri.
|
|
●
|
Internet. We receive revenues from monthly recurring charges for digital high-speed data lines, dial-up internet access and ancillary services such as web hosting and computer virus protection.
|
|
●
|
Transport. We receive monthly recurring revenues for the rental of fiber to transport data and other telecommunications services in Maine and New Hampshire.
|
Key Operating Statistics
|
|||||||||||||||||
(Unaudited)
|
Quarterly
|
||||||||||||||||
% Change
|
|||||||||||||||||
December 31,
|
March 31,
|
from
|
|||||||||||||||
2011
|
2012
|
2013
|
Dec. 31, 2012
|
||||||||||||||
Otelco access line equivalents(1)
|
102,378 | 99,395 | 98,839 | (0.6 | )% | ||||||||||||
RLEC and other services:
|
|||||||||||||||||
Voice access lines | 46,202 | 43,021 | 42,274 | (1.7 | )% | ||||||||||||
Data access lines | 22,904 | 22,742 | 22,718 | (0.1 | )% | ||||||||||||
Access line equivalents(1) | 69,106 | 65,763 | 64,992 | (1.2 | )% | ||||||||||||
Cable television customers | 4,201 | 4,155 | 4,102 | (1.3 | )% | ||||||||||||
Satellite television customers | 226 | 233 | 235 | 0.9 | % | ||||||||||||
Additional internet customers | 5,414 | 4,506 | 4,312 | (4.3 | )% | ||||||||||||
RLEC dial-up | 301 | 198 | 169 | (14.6 | )% | ||||||||||||
Other dial-up | 2,797 | 1,895 | 1,726 | (8.9 | )% | ||||||||||||
Other data lines | 2,316 | 2,413 | 2,417 | 0.2 | % | ||||||||||||
CLEC:
|
|||||||||||||||||
Voice access lines | 30,189 | 30,470 | 30,589 | 0.4 | % | ||||||||||||
Data access lines | 3,083 | 3,162 | 3,258 | 3.0 | % | ||||||||||||
Access line equivalents(1) | 33,272 | 33,632 | 33,847 | 0.6 | % | ||||||||||||
Wholesale network connections(2) | 157,144 | 162,117 | 2,372 | (98.5 | )% | ||||||||||||
For the Three Months
|
|||||||||||||||||
Ended March 31,
|
|||||||||||||||||
2012 | 2013 | ||||||||||||||||
Total Revenues (in millions):
|
$ | 25.4 | $ | 21.0 | |||||||||||||
RLEC
|
$ | 14.2 | $ | 13.2 | |||||||||||||
CLEC
|
$ | 11.2 | $ | 7.8 | |||||||||||||
(1)
|
We define access line equivalents as voice access lines and data access lines (including cable modems, digital subscriber lines and dedicated data access trunks).
|
||||||||||||||||
(2)
|
Prior to December 31, 2012, TWC was the source for approximately 98% of the wholesale network connections. The TWC contract was not renewed when it expired on December 31, 2012. Substantially all of the TWC connections were ported to the TWC network during the first quarter of 2013.
|
Three Months Ended March 31,
|
||||||||
2012
|
2013
|
|||||||
Revenues
|
||||||||
Local services
|
45.9
|
% |
40.7
|
% | ||||
Network access
|
30.8
|
31.0
|
||||||
Cable television
|
3.2
|
3.7
|
||||||
Internet
|
14.7
|
17.5
|
||||||
Transport services
|
5.4
|
7.1
|
||||||
Total revenues
|
100.0
|
% |
100.0
|
% | ||||
Operating expenses
|
||||||||
Cost of services
|
43.5
|
% |
45.2
|
% | ||||
Selling, general and administrative expenses
|
12.6
|
14.6
|
||||||
Depreciation and amortization
|
17.8
|
17.0
|
||||||
Total operating expenses
|
73.9
|
76.8
|
||||||
Income from operations
|
26.1
|
23.2
|
||||||
Other income (expense)
|
||||||||
Interest expense
|
(23.0
|
)
|
(26.5
|
)
|
||||
Change in fair value of derivatives
|
0.9
|
—
|
||||||
Reorganization items
|
—
|
(6.8
|
)
|
|||||
Other income
|
1.3
|
1.2
|
||||||
Total other expenses
|
(20.8
|
)
|
|
(32.1
|
)
|
|||
Income (loss) before income taxes
|
5.3
|
(8.9
|
)
|
|||||
Income tax (expense) benefit
|
(2.1
|
)
|
|
0.3
|
||||
Net income (loss)
|
3.2
|
% |
(8.5
|
)% |
Three Months Ended March 31,
|
Change
|
|||||||||||||||
2012
|
2013
|
Amount
|
Percent
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Local services
|
$ | 11,653 | $ | 8,542 | $ | (3,111 | ) | (26.7 | )% | |||||||
Network access
|
7,814 | 6,497 | (1,317 | ) | (16.9 | ) | ||||||||||
Cable television
|
805 | 775 | (30 | ) | (3.7 | ) | ||||||||||
Internet
|
3,726 | 3,676 | (50 | ) | (1.3 | ) | ||||||||||
Transport services
|
1,376 | 1,498 | 122 | 8.9 | ||||||||||||
Total
|
$ | 25,374 | $ | 20,988 | $ | (4,386 | ) | (17.3 | ) |
Three Months Ended March 31,
|
Change
|
|||||||||||||||
2012
|
2013
|
Amount
|
Percent
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Cost of services
|
$ | 11,029 | $ | 9,477 | $ | (1,552 | ) | (14.1 | )% | |||||||
Selling, general and administrative expenses
|
3,206 | 3,056 | (150 | ) | (4.7 | ) | ||||||||||
Depreciation and amortization
|
4,523 | 3,566 | (957 | ) | (21.2 | ) | ||||||||||
Total
|
$ | 18,758 | $ | 16,099 | $ | (2,659 | ) | (14.2 | ) |
Three Months Ended March 31,
|
Change
|
||||||||||||||||
2012
|
2013
|
Amount
|
Percent
|
||||||||||||||
(dollars in thousands)
|
|||||||||||||||||
Interest expense
|
$ | (5,834 | ) | $ | (5,554 | ) | $ | (280 | ) | (4.8 |
)%
|
|
|||||
Change in fair value of derivatives
|
241 | — | (241 | ) |
NM
|
||||||||||||
Reorganization items
|
— | (1,424 | ) | (1,424 | ) |
NM
|
|||||||||||
Other income
|
318 | 243 | (75 | ) | 23.6 | ||||||||||||
Income tax (expense) benefit
|
(524 | ) | 72 | 596 |
NM
|
Three Months Ended March 31,
|
||||||||
2012
|
2013
|
|||||||
(Dollars in thousands)
|
||||||||
Cash generation
|
||||||||
Revenues
|
$ | 25,374 | $ | 20,988 | ||||
Other income
|
318 | 243 | ||||||
Cash received from operations
|
$ | 25,692 | $ | 21,231 | ||||
Cost of services
|
$ | 11,029 | $ | 9,477 | ||||
Selling, general and administrative expenses
|
3,206 | 3,056 | ||||||
Cash consumed by operations
|
$ | 14,235 | $ | 12,533 | ||||
Cash generated from operations
|
$ | 11,457 | $ | 8,698 | ||||
Cash utilization
|
||||||||
Capital investment in operations
|
$ | 1,303 | $ | 799 | ||||
Senior debt interest and fees
|
1,993 | 1,823 | ||||||
Interest on senior subordinated notes
|
3,499 | — | ||||||
Dividends
|
2,330 | — | ||||||
Cash utilized by the Company
|
$ | 9,125 | $ | 2,622 | ||||
Percentage cash utilized of cash generated
|
79.6 | % | 30.1 | % |
Three Months Ended March 31,
|
||||||||
2012
|
2013
|
|||||||
Net income (loss)
|
$ | 818 | $ | (1,774 | ) | |||
Add: Depreciation
|
2,729 | 2,380 | ||||||
Interest expense - net of premium
|
5,491 | 5,212 | ||||||
Interest expense - amortize loan cost
|
342 | 342 | ||||||
Income tax (expense) benefit
|
524 | (72 | ) | |||||
Change in fair value of derivatives
|
(241 | ) | — | |||||
Loan fees
|
19 | 19 | ||||||
Amortization - intangibles
|
1,794 | 1,186 | ||||||
IXC tariff dispute settlement
|
— | 69 | ||||||
Reorganization items
|
— | 1,424 | ||||||
Adjusted EBITDA(1)
|
$ | 11,476 | $ | 8,786 |
(1) |
Adjusted EBITDA represents adjusted earnings before interest, taxes, depreciation and amortization and corresponds to the definition of Adjusted EBITDA in our senior credit facility.
|
Date: May 9, 2013
|
OTELCO INC.
|
||
|
By:
|
/s/ Curtis L. Garner, Jr. | |
Curtis L. Garner, Jr.
|
|||
Chief Financial Officer
|
Exhibit No.
|
Description
|
|
31.1
|
Certificate pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934 of the Chief Executive Officer
|
|
31.2
|
Certificate pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934 of the Chief Financial Officer
|
|
32.1
|
Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer
|
|
32.2
|
Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer
|
|
101
|
The following information from the Company’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2013 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Cash Flows; and (iv) Notes to Consolidated Financial Statements
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1.
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I have reviewed this quarterly report on Form 10-Q of Otelco Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Michael D. Weaver | |
Michael D. Weaver | |
President & Chief Executive Officer |
1.
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I have reviewed this quarterly report on Form 10-Q of Otelco Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Curtis L. Garner, Jr.
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Curtis L. Garner, Jr.
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Chief Financial Officer
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Michael D. Weaver | |
Michael D. Weaver | |
Chief Executive Officer | |
May 9, 2013 |
1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Curtis L. Garner, Jr.
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Curtis L. Garner, Jr.
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Chief Financial Officer
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May 9, 2013
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HP
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