(Mark One)
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30, 2014
|
|
OR | |
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from __________ to __________
|
|
Commission file number: 1-32362
|
OTELCO INC.
|
||
(Exact Name of Registrant as Specified in Its Charter)
|
||
Delaware
|
52-2126395
|
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
|
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)
|
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
|
|||
Yes
|
x
|
No
|
o
|
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
|
|||
Yes
|
x
|
No
|
o
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
|||||||
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
Non-accelerated filer
(Do not check if a smaller reporting company) |
o
|
Smaller reporting
company |
x
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|
Yes
|
o
|
No
|
x
|
||
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
|
|||||
Yes
|
x
|
No
|
o
|
||
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|
Class
|
Outstanding at August 8, 2014
|
|
Class A Common Stock ($0.01 par value per share)
|
2,870,948
|
|
Class B Common Stock ($0.01 par value per share)
|
232,780
|
Page
|
||
PART I FINANCIAL INFORMATION
|
||
Item 1.
|
Financial Statements
|
2
|
Consolidated Balance Sheets as of December 31, 2013 and June 30, 2014 (unaudited)
|
2
|
|
Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2013 and 2014 (unaudited)
|
3
|
|
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2014 (unaudited)
|
4
|
|
Notes to Consolidated Financial Statements (unaudited)
|
5
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
10
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
22
|
Item 4.
|
Controls and Procedures
|
22
|
PART II OTHER INFORMATION
|
||
Item 6.
|
Exhibits |
23
|
i |
1 |
OTELCO INC.
CONSOLIDATED BALANCE SHEETS
|
December 31,
2013
|
June 30,
2014
|
|||||||
Assets
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 9,916 | $ | 4,807 | ||||
Accounts receivable:
Due from subscribers, net of allowance for doubtful accounts of $274 and $271, respectively
|
3,730 | 3,772 | ||||||
Unbilled receivables
|
1,906 | 1,800 | ||||||
Other
|
2,050 | 2,125 | ||||||
Materials and supplies
|
1,654 | 1,642 | ||||||
Prepaid expenses
|
1,863 | 1,577 | ||||||
Deferred income taxes
|
905 | 905 | ||||||
Total current assets
|
22,024 | 16,628 | ||||||
Property and equipment, net
|
54,462 | 52,575 | ||||||
Goodwill
|
44,957 | 44,976 | ||||||
Intangible assets, net
|
4,074 | 3,718 | ||||||
Investments
|
1,895 | 1,882 | ||||||
Deferred financing costs, net
|
2,097 | 1,622 | ||||||
Deferred income taxes
|
1,606 | 1,606 | ||||||
Other assets
|
563 | 537 | ||||||
Total assets
|
$ | 131,678 | $ | 123,544 | ||||
Liabilities and Stockholders’ Deficit
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$ | 1,552 | $ | 1,154 | ||||
Accrued expenses
|
5,141 | 6,336 | ||||||
Advance billings and payments
|
1,422 | 1,416 | ||||||
Deferred income taxes
|
469 | 469 | ||||||
Customer deposits
|
84 | 75 | ||||||
Current maturity of long-term notes payable
|
7,441 | 6,665 | ||||||
Total current liabilities
|
16,109 | 16,115 | ||||||
Deferred income taxes
|
23,181 | 23,181 | ||||||
Advance billings and payments
|
736 | 708 | ||||||
Other liabilities
|
139 | 123 | ||||||
Long-term notes payable, less current maturities
|
121,192 | 110,394 | ||||||
Total liabilities
|
161,357 | 150,521 | ||||||
Stockholders’ deficit
|
||||||||
Class A Common Stock, $.01 par value-authorized 10,000,000 shares; issued and outstanding 2,870,948 shares
|
29 | 29 | ||||||
Class B Common Stock, $.01 par value-authorized 250,000 shares; issued and outstanding 232,780 shares
|
2 | 2 | ||||||
Additional paid in capital
|
2,876 | 2,876 | ||||||
Retained deficit
|
(32,586 | ) | (29,884 | ) | ||||
Total stockholders’ deficit
|
(29,679 | ) | (26,977 | ) | ||||
Total liabilities and stockholders’ deficit
|
$ | 131,678 | $ | 123,544 |
2 |
OTELCO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2013
|
2014
|
2013
|
2014
|
|||||||||||||
Revenues
|
$ | 19,666 | $ | 18,488 | $ | 40,654 | $ | 37,271 | ||||||||
Operating expenses
|
||||||||||||||||
Cost of services
|
9,087 | 8,599 | 18,741 | 17,996 | ||||||||||||
Selling, general and administrative expenses
|
2,162 | 2,572 | 5,042 | 5,200 | ||||||||||||
Depreciation and amortization
|
3,296 | 2,807 | 6,862 | 5,592 | ||||||||||||
Total operating expenses
|
14,545 | 13,978 | 30,645 | 28,788 | ||||||||||||
Income from operations
|
5,121 | 4,510 | 10,009 | 8,483 | ||||||||||||
Other income (expense)
|
||||||||||||||||
Interest expense
|
(2,225 | ) | (2,244 | ) | (7,779 | ) | (4,566 | ) | ||||||||
Other income (expense)
|
18 | (77 | ) | 262 | 577 | |||||||||||
Total other expenses
|
(2,207 | ) | (2,321 | ) | (7,517 | ) | (3,989 | ) | ||||||||
Income before reorganization items and income tax
|
2,914 | 2,189 | 2,492 | 4,494 | ||||||||||||
Reorganization items
|
111,676 | — | 110,253 | — | ||||||||||||
Income before income tax
|
114,590 | 2,189 | 112,745 | 4,494 | ||||||||||||
Income tax expense
|
(4,942 | ) | (881 | ) | (4,871 | ) | (1,792 | ) | ||||||||
Net income
|
$ | 109,648 | $ | 1,308 | $ | 107,874 | $ | 2,702 | ||||||||
Weighted-average number of common shares outstanding
|
2,826,040 | 3,103,728 | 2,735,663 | 3,103,728 | ||||||||||||
Net income per common share
|
$ | 38.80 | $ | 0.42 | $ | 39.43 | $ | 0.87 |
3 |
OTELCO INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Six Months Ended June 30,
|
||||||||
2013
|
2014
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 107,874 | $ | 2,702 | ||||
Adjustments to reconcile net income to cash flows provided by operating activities:
|
||||||||
Depreciation
|
4,769 | 4,681 | ||||||
Amortization
|
2,093 | 911 | ||||||
Amortization of loan costs
|
575 | 475 | ||||||
Amortization of notes payable premium
|
(31 | ) | — | |||||
Provision for deferred income taxes
|
4,790 | — | ||||||
Provision for uncollectible accounts receivable
|
122 | 227 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
2,381 | (238 | ) | |||||
Materials and supplies
|
31 | 12 | ||||||
Prepaid expenses and other assets
|
(168 | ) | 312 | |||||
Accounts payable and accrued expenses
|
2,760 | 797 | ||||||
Advance billings and payments
|
(114 | ) | (34 | ) | ||||
Other liabilities
|
(339 | ) | (26 | ) | ||||
Reorganization adjustments:
|
||||||||
Non-cash reorganization income
|
(114,210 | ) | — | |||||
Net cash provided by operating activities
|
10,533 | 9,819 | ||||||
Cash flows used in investing activities:
|
||||||||
Acquisition and construction of property and equipment
|
(1,582 | ) | (2,913 | ) | ||||
Proceeds from sale of property and equipment
|
— | 58 | ||||||
Cash paid for the purchase of Reliable Networks net of cash acquired
|
— | (500 | ) | |||||
Net cash used in investing activities
|
(1,582 | ) | (3,355 | ) | ||||
Cash flows used in financing activities:
|
||||||||
Principal repayment of long-term notes payable
|
(28,700 | ) | (11,573 | ) | ||||
Loan origination costs
|
(1,647 | ) | — | |||||
Net cash used in financing activities
|
(30,347 | ) | (11,573 | ) | ||||
Net decrease in cash and cash equivalents
|
(21,396 | ) | (5,109 | ) | ||||
Cash and cash equivalents, beginning of period
|
32,516 | 9,916 | ||||||
Cash and cash equivalents, end of period
|
$ | 11,120 | $ | 4,807 | ||||
Supplemental disclosures of cash flow information:
|
||||||||
Interest paid
|
$ | 3,386 | $ | 4,093 | ||||
Income taxes paid
|
$ | 144 | $ | 616 | ||||
Loan fees paid via issuance of Class B common stock
|
$ | 2,772 | $ | — | ||||
Cancellation of Class A common stock
|
$ | 132 | $ | — | ||||
Issuance of Class A common stock
|
$ | 29 | $ | — |
4 |
5 |
|
●
|
the $162.0 million of outstanding principal term loan obligations under the Company’s credit facility was reduced to $133.3 million through a cash payment of $28.7 million;
|
|
●
|
the maturity of the outstanding principal term loan obligations and any revolving loan obligations under the Company’s credit facility was extended to April 30, 2016;
|
|
●
|
the holders of the outstanding principal term loan obligations under the Company’s credit facility, which outstanding obligations totaled $162.0 million, received their pro rata share of the Company’s new Class B common stock, which new Class B common stock represented 7.5% of the Company’s total economic and voting interests immediately following the effectiveness of the Plan;
|
|
●
|
certain revolving loan commitments under the Company’s credit facility were reinstated, with availability of up to $5 million;
|
|
●
|
the Company’s outstanding senior subordinated notes (the “Notes”), which had an aggregate principal amount, including premium, of $109.0 million, were cancelled and the holders of outstanding Notes received their pro rata share of the Company’s new Class A common stock, which new Class A common stock represented 92.5% of the Company’s total economic and voting interests immediately following the effectiveness of the Plan; and
|
|
●
|
the outstanding shares of the Company’s old common stock were cancelled.
|
6 |
December 31,
2013
|
June 30,
2014
|
|||||||
Third amended and restated term credit facility; General Electric Capital Corporation; variable interest rate of 6.50% at December 31, 2013 and June 30, 2014. The credit facility is secured by the total assets of the subsidiary guarantors. The unpaid balance is due April 30, 2016.
|
$ | 128,633 | $ | 117,059 | ||||
Total notes payable
|
128,633 | 117,059 | ||||||
Less: current portion
|
(7,441 | ) | (6,665 | ) | ||||
Long-term notes payable
|
$ | 121,192 | $ | 110,394 |
2014 (remaining)
|
$
|
3,333
|
||
2015
|
6,665
|
|||
2016
|
107,061
|
|||
2017
|
—
|
|||
2018
|
—
|
|||
Thereafter
|
—
|
|||
Total
|
$
|
117,059
|
7 |
Three Months
Ended June 30,
|
Six Months
Ended June 30,
|
|||||||||||||||
2013(1)
|
2014
|
2013(1)
|
2014
|
|||||||||||||
Weighted-average number of common shares outstanding
|
2,826,040 | 3,103,728 | 2,735,663 | 3,103,728 | ||||||||||||
Net income
|
$ | 109,648 | $ | 1,308 | $ | 107,874 | $ | 2,702 | ||||||||
Net income per common share
|
$ | 38.80 | $ | 0.42 | $ | 39.43 | $ | 0.87 | ||||||||
(1) Adjusted to reflect the cancellation of old common stock and the issuance of new Class A common stock in exchange for Notes as part of the Plan.
|
8 |
9 |
●
|
Local services. We receive revenues from providing local exchange telecommunications services in our eleven rural territories, from the wholesale network services in New England and on a competitive basis throughout 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 significant portion of our rural subscribers take bundled service plans which contain multiple services, including unlimited domestic calling, for a flat monthly fee.
|
●
|
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, the Massachusetts Department of Telecommunications and Cable, the Missouri Public Service Commission, the New Hampshire Public Utilities Commission, 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. The FCC Order directs that all charges between carriers move to a “bill and keep” arrangement by 2017.
|
10 |
●
|
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.
|
●
|
Cable, IPTV and satellite 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 IP television (“IPTV”) and Video on Demand. We are a reseller of satellite services for DirecTV® and Dish Network. We provide medical alert and home security systems in Alabama.
|
●
|
Managed services. We offer a variety of private/cloud hosting and managed services for companies that rely on mission-critical applications.
|
11 |
Key Operating Statistics(2) |
|
(Unaudited)
|
December 31
|
March 31,
|
June 30,
|
Quarterly %
Change from
|
|||||||||||||||
2012
|
2013
|
2014
|
2014
|
March 31, 2014
|
||||||||||||||
Business/Enterprise
|
||||||||||||||||||
CLEC
|
||||||||||||||||||
Voice lines
|
23,950
|
21,149
|
20,752
|
20,400
|
(1.7
|
)%
|
||||||||||||
HPBX seats
|
6,172
|
8,453
|
8,698
|
8,920
|
2.6
|
%
|
||||||||||||
Data lines
|
2,771
|
2,725
|
2,919
|
2,988
|
2.4
|
%
|
||||||||||||
Wholesale network lines
|
2,289
|
2,817
|
2,846
|
2,850
|
0.1
|
%
|
||||||||||||
RLEC
|
||||||||||||||||||
Voice lines
|
11,542
|
12,349
|
12,879
|
13,090
|
1.6
|
%
|
||||||||||||
Data lines
|
1,630
|
1,594
|
1,593
|
1,605
|
0.8
|
%
|
||||||||||||
Access line equivalents
|
48,354
|
49,087
|
49,687
|
49,853
|
0.3
|
%
|
||||||||||||
Residential
|
||||||||||||||||||
CLEC
|
||||||||||||||||||
Voice lines
|
348
|
339
|
324
|
305
|
(5.9
|
)%
|
||||||||||||
Data lines
|
391
|
416
|
407
|
385
|
(5.4
|
)%
|
||||||||||||
RLEC
|
||||||||||||||||||
Voice lines
|
31,479
|
28,323
|
27,670
|
27,068
|
(2.2
|
)%
|
||||||||||||
Data lines
|
21,112
|
20,566
|
20,620
|
20,498
|
(0.6
|
)%
|
||||||||||||
Access line equivalents(1)
|
53,330
|
49,644
|
49,021
|
48,256
|
(1.6
|
)%
|
||||||||||||
Otelco access line equivalents(1)
|
101,684
|
98,731
|
98,708
|
98,109
|
(0.6
|
)%
|
||||||||||||
Cable, IPTV & satellite
|
4,388
|
4,164
|
4,128
|
3,903
|
(5.5
|
)%
|
||||||||||||
Security systems
|
63
|
174
|
199
|
210
|
5.5
|
%
|
||||||||||||
Other internet lines
|
4,506
|
3,750
|
3,585
|
3,458
|
(3.5
|
)%
|
||||||||||||
(1) We define access line equivalents as voice lines and data lines (including cable modems, digital subscriber lines and dedicated data access trunks).
(2) Excludes Time Warner Cable (“TW”), which comprised 98% of the wholesale network connections on December 31, 2012 and none of the wholesale connections in 2013.
|
12 |
13 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2013
|
2014
|
2013
|
2014
|
|||||||||||||
Revenues
|
||||||||||||||||
Local services
|
40.9 | % | 36.1 | % | 40.8 | % | 36.1 | % | ||||||||
Network access
|
29.3 | 32.2 | 30.2 | 32.6 | ||||||||||||
Internet
|
18.6 | 19.5 | 18.1 | 19.2 | ||||||||||||
Transport services
|
7.4 | 7.1 | 7.2 | 7.1 | ||||||||||||
Cable, IP and satellite television
|
3.8 | 3.9 | 3.7 | 3.9 | ||||||||||||
Managed services
|
— | 1.2 | — | 1.1 | ||||||||||||
Total revenues
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Operating expenses
|
||||||||||||||||
Cost of services
|
45.4 | % | 46.5 | % | 45.3 | % | 48.3 | % | ||||||||
Selling, general and administrative expenses
|
11.8 | 13.9 | 13.2 | 14.0 | ||||||||||||
Depreciation and amortization
|
16.8 | 15.2 | 16.9 | 15.0 | ||||||||||||
Total operating expenses
|
74.0 | 75.6 | 75.4 | 77.3 | ||||||||||||
Income from operations
|
26.0 | 24.4 | 24.6 | 22.7 | ||||||||||||
Other income (expense)
|
||||||||||||||||
Interest expense
|
(11.3 | ) | (12.1 | ) | (19.1 | ) | (12.3 | ) | ||||||||
Other income
|
0.1 | (0.4 | ) | 0.6 | 1.5 | |||||||||||
Total other expenses
|
(11.2 | ) | (12.5 | ) | (18.5 | ) | (10.8 | ) | ||||||||
Income before reorganization items and income tax
|
14.8 | 11.9 | 6.1 | 11.9 | ||||||||||||
Reorganization items
|
567.9 | — | 271.2 | — | ||||||||||||
Income before income tax
|
582.7 | 11.9 | 277.3 | 11.9 | ||||||||||||
Income tax expense
|
(25.1 | ) | (4.8 | ) | (12.0 | ) | (4.8 | ) | ||||||||
Net income
|
557.6 | % | 7.1 | % | 265.3 | % | 7.1 | % | ||||||||
14 |
Three Months Ended June 30,
|
Change
|
|||||||||||||||
2013
|
2014
|
Amount
|
Percent
|
|||||||||||||
(dollars in thousands) | ||||||||||||||||
Local services
|
$ | 8,045 | $ | 6,682 | $ | (1,363 | ) | (16.9 | )% | |||||||
Network access
|
5,764 | 5,950 | 186 | 3.2 | ||||||||||||
Internet
|
3,665 | 3,602 | (63 | ) | (1.7 | ) | ||||||||||
Transport services
|
1,446 | 1,315 | (131 | ) | (9.1 | ) | ||||||||||
Cable, IP and satellite television
|
746 | 716 | (30 | ) | (4.0 | ) | ||||||||||
Managed services
|
— | 224 | 224 |
NM
|
||||||||||||
Total
|
$ | 19,666 | $ | 18,489 | $ | (1,177 | ) | (6.0 | ) |
Six Months Ended June 30,
|
Change
|
|||||||||||||||
2013
|
2014
|
Amount
|
Percent
|
|||||||||||||
(dollars in thousands) | ||||||||||||||||
Local services
|
$ | 16,587 | $ | 13,453 | $ | (3,134 | ) | (18.9 | )% | |||||||
Network access
|
12,260 | 12,145 | (115 | ) | (0.9 | ) | ||||||||||
Internet
|
7,341 | 7,163 | (178 | ) | (2.4 | ) | ||||||||||
Transport services
|
2,944 | 2,641 | (303 | ) | (10.3 | ) | ||||||||||
Cable, IP and satellite television
|
1,522 | 1,447 | (75 | ) | (4.9 | ) | ||||||||||
Managed services
|
— | 422 | 422 |
NM
|
||||||||||||
Total
|
$ | 40,654 | $ | 37,271 | $ | (3,383 | ) | (8.3 | ) |
15 |
Three Months Ended June 30,
|
Change
|
|||||||||||||||
2013
|
2014
|
Amount
|
Percent
|
|||||||||||||
(dollars in thousands) | ||||||||||||||||
Cost of services
|
$ | 9,087 | $ | 8,599 | $ | (488 | ) | (5.4 | )% | |||||||
Selling, general and administrative expenses
|
2,162 | 2,572 | 410 | 19.0 | ||||||||||||
Depreciation and amortization
|
3,296 | 2,807 | (489 | ) | (14.8 | ) | ||||||||||
Total
|
$ | 14,545 | $ | 13,978 | $ | (567 | ) | (3.9 | ) |
16 |
Six Months Ended June 30,
|
Change
|
|||||||||||||||
2013
|
2014
|
Amount
|
Percent
|
|||||||||||||
(dollars in thousands) | ||||||||||||||||
Cost of services
|
$ | 18,741 | $ | 17,996 | $ | (745 | ) | (4.0 | )% | |||||||
Selling, general and administrative expenses
|
5,042 | 5,200 | 158 | 3.1 | ||||||||||||
Depreciation and amortization
|
6,862 | 5,592 | (1,270 | ) | (18.5 | ) | ||||||||||
Total
|
$ | 30,645 | $ | 28,788 | $ | (1,857 | ) | (6.1 | ) |
Three Months Ended June 30,
|
Change
|
|||||||||||||||
2013
|
2014
|
Amount
|
Percent
|
|||||||||||||
(dollars in thousands) | ||||||||||||||||
Interest expense
|
$ | (2,225 | ) | $ | (2,244 | ) | $ | 19 | 0.9 | % | ||||||
Other income (expense)
|
18 | (77 | ) | (95 | ) |
NM
|
||||||||||
Reorganization items
|
111,676 | — | (111,676 | ) |
NM
|
|||||||||||
Income tax expense
|
(4,942 | ) | (881 | ) | 4,061 |
NM
|
17 |
Six Months Ended June 30,
|
Change
|
|||||||||||||||||
2013
|
2014
|
Amount
|
Percent
|
|||||||||||||||
(dollars in thousands)
|
||||||||||||||||||
Interest expense
|
$ | (7,779 | ) | $ | (4,566 | ) | $ | (3,213 | ) | (41.3 | )% | |||||||
Other income
|
262 | 577 | 315 | 120.2 | ||||||||||||||
Reorganization items
|
110,253 | — | (110,253 | ) |
NM
|
|||||||||||||
Income tax expense
|
(4,871 | ) | (1,792 | ) | 3,079 |
NM
|
||||||||||||
18 |
Six Months Ended June 30,
|
||||||||
2013
|
2014
|
|||||||
Cash generation
|
||||||||
Revenues
|
$ | 40,654 | $ | 37,271 | ||||
Other income
|
261 | 577 | ||||||
Cash received from operations
|
$ | 40,915 | $ | 37,848 | ||||
Cost of services
|
$ | 18,406 | $ | 17,996 | ||||
Selling general and administrative expenses(1)
|
5,376 | 4,959 | ||||||
Reorganization (cash) items
|
3,958 | — | ||||||
Cash consumed by operations
|
$ | 27,740 | $ | 22,955 | ||||
Cash generated from operations
|
$ | 13,175 | $ | 14,893 | ||||
Cash utilization
|
||||||||
Capital investment in operations
|
$ | 1,582 | $ | 2,913 | ||||
Debt interest and fees
|
3,825 | 4,105 | ||||||
Scheduled principal payment on long-term notes payable
|
— | 3,333 | ||||||
Loan origination costs
|
1,647 | — | ||||||
Cash utilized by the Company
|
$ | 7,054 | $ | 10,351 | ||||
Percentage cash utilized of cash generated
|
53.5 | % | 69.5 | % | ||||
Voluntary and excess cash flow repayment of long-term notes payable
|
— | $ | 8,240 | |||||
(1) Excludes non-cash stock compensation
|
19 |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2013
|
2014
|
2013
|
2014
|
|||||||||||||
Net income
|
$ | 109,648 | $ | 1,308 | $ | 107,874 | $ | 2,702 | ||||||||
Add: Depreciation
|
2,389 | 2,337 | 4,769 | 4,681 | ||||||||||||
Interest expense – net of premium
|
1,991 | 2,009 | 7,204 | 4,091 | ||||||||||||
Interest expense – amortize loan cost
|
233 | 236 | 575 | 475 | ||||||||||||
Income tax expense
|
4,942 | 881 | 4,871 | 1,792 | ||||||||||||
Amortization – intangibles
|
908 | 469 | 2,093 | 911 | ||||||||||||
Loan fees
|
14 | 6 | 32 | 12 | ||||||||||||
Stock-based compensation (earn out)
|
— | 57 | — | 169 | ||||||||||||
Stock-based compensation (senior management)
|
— | 72 | — | 72 | ||||||||||||
Cancellation of debt
|
(114,210 | ) | — | (114,210 | ) | — | ||||||||||
Reorganization items
|
2,534 | — | 3,958 | — | ||||||||||||
Adjusted EBITDA
|
$ | 8,449 | $ | 7,375 | $ | 17,166 | $ | 14,905 | ||||||||
20 |
21 |
22 |
23 |
Date: August 8, 2014 | OTELCO INC. | |
By:
|
/s/ Curtis L. Garner, Jr. | |
Curtis L. Garner, Jr.
|
||
Chief Financial Officer
|
||
24 |
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 June 30, 2014 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
|
|
25 |
1.
|
I have reviewed this quarterly report on Form 10-Q of Otelco Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
(a)
|
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;
|
(b)
|
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;
|
(c)
|
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
|
(d)
|
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
|
5.
|
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):
|
(a)
|
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
|
(b)
|
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.
|
/s/ Michael D. Weaver | |
Michael D. Weaver | |
Chief Executive Officer |
1.
|
I have reviewed this quarterly report on Form 10-Q of Otelco Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
(a)
|
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;
|
(b)
|
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;
|
(c)
|
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
|
(d)
|
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
|
5.
|
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):
|
(a)
|
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
|
(b)
|
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.
|
/s/ Curtis L. Garner, Jr. | |
Curtis L. Garner, Jr. | |
Chief Financial Officer |
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Michael D. Weaver | |
Michael D. Weaver | |
Chief Executive Officer | |
August 8, 2014 |
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Curtis L. Garner, Jr. | |
Curtis L. Garner, Jr. | |
Chief Financial Officer | |
August 8, 2014 |
VL+5-6Q#^O=WXB"$((9)X;M9L;<_[K,G>[+R]P:*N
MHCE85VJ5$9:D)`*5:UFJ248^1B]QET3."R5%I15D9`F.#/J7%[W1TH"+PF[E
M,E)X;QXH=7D!M7")-J#"S%C;6OAP:R?4B'PJ)D!YFG9HKI4'Y6/?U"#]WA.,
MQ:SRT?,B/%Z16*@ 3+UPTLD; #-SD%2DR4G%&[IR7JET[M:?/RT/7#S)DE*%@*&1
M*Z=4JEUXGLQ*6A/I\I8V$"FXJ(F"1['S9"LHR4U277F![\=>35CC6(:%F,+!
MBX)E](%G^YHVRI((6A$%^F7)6GEBJ[,I=#413_OV)N-U"Q1;5C'U:D@=5&>+
M;[N&"[*MH.X7?$NR$[=YN*"O62:XY(5R@ &ULY)W=;MQ(EN?O%YAW(`P/R@8D61^V;->'
M![)D5[O;EC227(5!82ZH3$IB.Y/,)I.6U9B+OMR[!18+#`:8!>INWZ,>I9YD
M?O\3P:]@9DJNF:H:8-&-;DL,1IPX<3[_YP3U]3]\FDZBCTE1IGGVS;VMC))GR3?W;I+RWC^\^+O_\759SB/>S
M)"ZDIV'C*EZ$+RU@89M.K6#A<8&%2& [UW^M(B1
M&N`(>3'7`\M5N7+"V(T2/\0`1ULJU2/3E`[*]E+Q^I\%X2.5)0F.)'`]DF"X
MG9@<'I/AVB6[P2S"4?RQ!,^68]QY((JLEX(?$"PY$"Q;HAW_?=K9X8X,X$T>;E<\/'D^(SGC,%/[[^?3\ZWO*J+\K)QQ<)SG?RR
M+7?%Y;!Q__G[T[N5Z]1-=MEEI_*2;]P?>>V^?_[UEZ>WLOI:'_.\<72$2[UQ
MCTUS72^7]?:8G[-Z45[SBQ[9E]4Y:_3;ZK"LKU6>[=I)Y]-2>EZX/&?%Q84(
MZVI*C'*_+[;YQW+[>LXO#02I\E/6:/[UL;C6MVCG[91PYZSZ^GI]MRW/5QWB
MI3@5S8\VJ.N,D\)1\X+,
MTW>UN`$$2^W8++.]]NSIYMKSQ\^<[C:O=)=>RDZ=[O;.]MK39YMW>KVO^TY6
M:@?)5!U&.+?\.7,')VW
2)EK"XU4F&ZQAE-->'$%@)20V$=]M`@P_P
M71')V[P^`MJCES6>@II6Y)VCYC:5,<&`3I=&&91:#WJO+,&T>SB,"_.C*ZHT
M<[2&3X!1S*DU2=]U&"$0G>\MF$RX@%R*T7SBXA9B#KDA_(=X.BNIB-/FX"A?
M3M1W-+LC>/7`4W]AS-W<%`E:^WM2[^B[M.!K/WP'9P4!EAG"09\WZ':RLG#E
M`]/X`P_`@-WW
)8`JC4RE5B'$*?`5*0:`L!1`H$8`J9BU&-0U`-3;U#4!5,(7!]\QIB@WL#U
MD(HP`!XE45'6"3VNQSBC&@@$51F2>(.A*D52#*IR9&D*0U6*)!!494AJ"54I
MDF)0E2.)*52E2`(!-*(D0U)+J$J1%(.J'%F:HJ\J11((JC(DL43_Q"FR0Z=-
MTTE4,G]ZA7=_'9IZ!`/EP_]M6[TN:R=2>X<&34`K;YZ.GM*1(]B"C:7(4!K!
MV;C?'>=.M>%M;6HE`5R8<
M5*<`2F$=CP57]\2U-LV6&&NU6`N.#!`/6W07W/XQ(E\<\H86ADQS%MM<>'PM
M=)2Y!4NC_O;LLKCUI(P7.&N=``LUPV[55A=_A]RJ&FASKSJH2@J_K1=5@][O
M]$=YT6Z<[2>>#KZ$(ZHV"9!![V&W.A$XU89J.I!ME.(YSX$'?'U5*;X&7/-@
M%';(EC;_WRG$ZF+F*(T=4RIR87WV:FUOS!SJ(JK1-??*K[:+:)IYFJUSD"FA
M4Y0J+4/XG/[8MOOG'/)K2^(UX)J'RU$IJ:6*H?Z8LQ%-=M-(52DM%,YM4Z1T
M0$_N=
::S:TQF;8V%Q&%HT%DJXTMM`::SQT'[1[E"4VMY*Q
M17.AI"O-16ISYH,^QL=*8^H9QR:2[CCC\GDG923)21E)@$;L11T4U0G]V\8!WZ,<;72ZT,
M6/,7R@]8AR\Y'=SLL5S;CZ\MBG]IPZ#5IU>XL$.T_M9G*V*7MIBTY5+CM%S6
M9XLF6(=6S?KSBUMH\:S/EK.P#BVLT)9+T094AZU)89TA;1E>W$)KDWVV0H5U
M:(FR/[ZXA58J*9&7ZM""99\M6U&T>G&DZ<