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Otelco Reports First Quarter 2011 Results

Stocks in this article: OTT

Adjusted EBITDA

Adjusted EBITDA for the three months ended March 31, 2011, was $11.4 million compared to $12.3 million for the same period in 2010 and $12.8 million in the fourth quarter of 2010. See financial tables for a reconciliation of Adjusted EBITDA to net income (loss).

Balance Sheet

As of March 31, 2011, the Company had cash and cash equivalents of $18.5 million compared to $18.2 million at the end of 2010. The Company intends to make a $0.4 million voluntary prepayment in May 2011 on its senior long-term notes payable, reducing the balance to $162.0 million. This represents a combined reduction of $11.5 million since October 2008. The first quarter distribution of $5.6 million in interest and dividends to our shareowners, and $0.3 million in interest to our bond holders, occurred on March 30, 2011. This represents the twenty-fifth consecutive quarterly distribution since going public in December 2004.

Capital Expenditures

Capital expenditures were $2.8 million for the quarter as the Company continues to grow and invest in its infrastructure. The Company is adding a softswitch in Alabama, while continuing to expand its CLEC capabilities in Maine, Massachusetts and New Hampshire; enhancing DSL and wireless broadband capacity; and expanding IPTV capability in Alabama.

First Quarter Earnings Conference Call

Otelco has scheduled a conference call, which will be broadcast live over the internet, on Thursday, May 5, 2011, at 11:00 a.m. ET. To participate in the call, participants should dial (719) 325-2363 and ask for the Otelco call 10 minutes prior to the start time. Investors, analysts and the general public will also have the opportunity to listen to the conference call free over the internet by visiting the Company's website at www.OtelcoInc.com or www.earnings.com. To listen to the live call online, please visit the website at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live webcast, a replay of the webcast will be available on the Company's website at www.OtelcoInc.com or www.earnings.com for 30 days. A one-week telephonic replay may also be accessed by calling (719) 457-0820 and using the passcode 1353922.

ABOUT OTELCO

Otelco Inc. provides wireline telecommunications services in Alabama, Maine, Massachusetts, Missouri, New Hampshire and West Virginia. The Company’s services include local and long distance telephone, network access, transport, digital high-speed data lines and dial-up internet access, cable television and other telephone related services. With more than 99,000 voice and data access lines, which are collectively referred to as access line equivalents, Otelco is among the top 25 largest local exchange carriers in the United States based on number of access lines. Otelco operates ten incumbent telephone companies serving rural markets, or rural local exchange carriers. It also provides competitive retail and wholesale communications services through several subsidiaries. For more information, visit the Company’s website at www.OtelcoInc.com.

FORWARD LOOKING STATEMENTS

Statements in this press release that are not statements of historical or current fact constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties, and other unknown factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms “believes”, “belief,” “expects,” ‘intends,” “anticipates,” “plans,” or similar terms to be uncertain and forward-looking. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s filings with the Securities and Exchange Commission.

OTELCO INC.
CONSOLIDATED BALANCE SHEETS
   
December 31, March 31,
2010 2011
Assets (unaudited)
Current assets
Cash and cash equivalents $ 18,226,374 $ 18,473,509
Accounts receivable:

Due from subscribers, net of allowance for doubtful accounts of $230,752 and $238,321, respectively

4,406,257 4,206,972
Unbilled receivables 2,161,277 2,156,605
Other 3,257,882 3,639,031
Materials and supplies 1,817,311 1,879,897
Prepaid expenses 1,305,028 1,072,212
Deferred income taxes   626,267     626,267  
Total current assets   31,800,396     32,054,493  
 
Property and equipment, net 63,887,213 62,824,961
Goodwill 188,190,078 188,190,078
Intangible assets, net 25,934,042 24,123,076
Investments 1,967,095 1,960,718
Deferred financing costs 5,757,825 5,415,801
Deferred income taxes 4,415,097 4,415,097
Other assets   183,946     169,760  
Total assets $ 322,135,692   $ 319,153,984  
 
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 768,055 $ 445,386
Accrued expenses 6,885,748 7,106,276
Advance billings and payments 1,595,133 1,579,693
Deferred income taxes 353,285 353,285
Customer deposits   172,479     184,069  
Total current liabilities   9,774,700     9,668,709  
Deferred income taxes 42,512,576 42,512,575
Interest rate swaps 2,471,331 1,965,176
Advance billings and payments 656,968 646,622
Other liabilities 368,349 359,547
Long-term notes payable   271,595,855     271,571,060  
Total liabilities 327,379,779 326,723,689
 
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
Additional paid in capital 921,718 -
Retained deficit   (6,298,019 )   (7,701,919 )
Total stockholders' deficit   (5,244,087 )   (7,569,705 )
Total liabilities and stockholders' deficit $ 322,135,692   $ 319,153,984  
 
OTELCO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
   
Three months ended

March 31,

2010 2011
 
Revenues $ 25,794,209 $ 25,392,000
 
Operating expenses
Cost of services and products 10,610,193 11,020,212
Selling, general and administrative expenses 3,230,996 3,327,057
Depreciation and amortization   6,084,291     5,724,018  
Total operating expenses   19,925,480     20,071,287  
 
Income from operations   5,868,729     5,320,713  
 
Other income (expense)
Interest expense (5,988,642 ) (6,170,131 )
Change in fair value of derivatives (886,170 ) 506,155
Other income   358,832     349,349  
Total other expenses   (6,515,980 )   (5,314,627 )
 
Income (loss) before income tax (647,251 ) 6,086
Income tax (expense) benefit   261,595     (1,432 )
 
Net income (loss) available to common stockholders $ (385,656 ) $ 4,654  
 
Weighted average shares outstanding:
Basic 12,676,733 13,221,404
Diluted 13,221,404 13,221,404
Basic net income (loss) per share $ (0.03 ) $ -
Diluted net income (loss) per share $ (0.03 ) $ -
 
Dividends declared per share $ 0.18 $ 0.18
 
 
OTELCO INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
          Three months ended
March 31,
2010   2011
Cash flows from operating activities:
Net income (loss) $ (385,656 ) $ 4,654
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation 3,572,918 3,522,652
Amortization 2,511,373 2,201,365
Amortization of debt premium (22,086 ) (24,795 )
Amortization of loan costs 337,976 342,024
Change in fair value of derivatives 886,170 (506,155 )
Provision for uncollectible revenue 77,045 62,747
Changes in assets and liabilities; net of assets and liabilities acquired:
Accounts receivables 365,460 (215,112 )
Material and supplies (86,159 ) (62,586 )
Prepaid expenses and other assets (26,503 ) 220,510
Income tax receivable 389,486 -
Accounts payable and accrued liabilities (187,900 ) (102,141 )
Advance billings and payments 18,706 (25,786 )
Other liabilities   10,351     2,788  
 
Net cash from operating activities   7,461,181     5,420,165  
 
Cash flows used in investing activities:
Acquisition and construction of property and equipment   (1,753,170 )   (2,842,757 )
 
Net cash used in investing activities   (1,753,170 )   (2,842,757 )
 
Cash flows used in financing activities:
Cash dividends paid   (2,234,274 )   (2,330,273 )
 
Net cash used in financing activities   (2,234,274 )   (2,330,273 )
 
Net increase in cash and cash equivalents 3,473,737 247,135
Cash and cash equivalents, beginning of period   17,731,044     18,226,374  
 
Cash and cash equivalents, end of period $ 21,204,781   $ 18,473,509  
 
Supplemental disclosures of cash flow information:
Interest paid $ 5,569,134   $ 5,908,353  
 
Income taxes paid (received) $ (326,486 ) $ 122,895  

 





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