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TheStreet Open House

Otelco Reports Fourth Quarter And Year 2011 Results

Adjusted EBITDA

Adjusted EBITDA for the three months ended December 31, 2011, was $10.9 million compared to $12.8 million for the same period in 2010 and $11.1 million in the third quarter of 2011. See financial tables for a reconciliation of Adjusted EBITDA to net income.

Balance Sheet

As of December 31, 2011, the Company had cash and cash equivalents of $12.4 million compared to $18.2 million at the end of 2010. The Company used $5.0 million in cash to acquire Shoreham Telephone Company Inc. during fourth quarter. Total long-term notes payable was reduced to $271.1 million, reflecting a voluntary prepayment of $0.4 million made in May 2011. The fourth quarter distribution of $5.6 million in interest and dividends to our stockholders and $0.3 million in interest to our bond holders occurred on December 30, 2011. This represents the twenty-eighth consecutive quarterly distribution since going public in December 2004.

Capital Expenditures

Capital expenditures were $2.1 million for the quarter as the Company continues to grow and invest in its infrastructure. The Company is expanding its CLEC capabilities in Maine and New Hampshire; enhancing DSL and wireless broadband capacity; and expanding IPTV capability in Alabama.

Fourth Quarter Earnings Conference Call

Otelco has scheduled a conference call, which will be broadcast live over the internet, on Wednesday, February 22, 2012, at 11:30 a.m. ET. To participate in the call, participants should dial (719) 325-2453 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 3616440.

ABOUT OTELCO

Otelco Inc. provides wireline telecommunications services in Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont 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 102,000 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 eleven 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
(Unaudited)   As of   As of
December 31, December 31,
  2010     2011  
Assets
Current assets
Cash and cash equivalents $ 18,226,374 $ 12,393,792
Accounts receivable:

Due from subscribers, net of allowance for doubtful accounts of $230,752 and $260,568, respectively

4,406,257 4,355,632
Unbilled receivables 2,161,277 2,183,465
Other 4,299,088 5,449,074
Materials and supplies 1,817,311 1,780,820
Prepaid expenses 1,305,028 1,328,475
Deferred income taxes   626,267     726,310  
Total current assets   32,841,602     28,217,568  
 
Property and equipment, net 63,887,213 65,881,975
Goodwill 188,190,078 188,954,840
Intangible assets, net 25,934,042 20,545,691
Investments 1,967,095 1,943,805
Deferred financing costs 5,757,825 4,485,324
Deferred income taxes 4,415,097 7,454,443
Prepaid expenses 106,685 238,386
Other assets   77,261     2,281  
Total assets $ 323,176,898   $ 317,724,313  
 
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 768,055 $ 1,490,717
Accrued expenses 7,926,954 6,034,104
Advance billings and payments 1,595,133 1,590,689
Deferred income taxes 353,285 353,285
Customer deposits   172,479     143,657  
Total current liabilities   10,815,906     9,612,452  
Deferred income taxes 42,512,576 48,112,384
Interest rate swaps 2,471,331 241,438
Advance billings and payments 656,968 615,584
Other liabilities 368,349 403,823
Long-term notes payable   271,595,855     271,106,387  
Total liabilities 328,420,985 330,092,068
 
 
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 )   (12,499,969 )
Total stockholders' deficit   (5,244,087 )   (12,367,755 )
 

Total liabilities and stockholders' deficit

$

323,176,898

 

$

317,724,313

 
OTELCO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
  Three Months Ended   Twelve Months Ended
December 31, December 31,
2010     2011   2010     2011  
Revenues $ 25,949,837 $ 25,647,760 $ 104,400,219 $ 101,843,567
 
Operating expenses
Cost of services and products 9,912,225 11,233,414 41,286,418 43,995,953
Selling, general and administrative expenses 3,299,539 3,498,924 13,074,794 12,984,686
Depreciation and amortization   5,977,344     5,056,804     23,670,243     20,232,833  
Total operating expenses   19,189,108     19,789,142     78,031,455     77,213,472  
 
Income from operations   6,760,729     5,858,618     26,368,764     24,630,095  
 
Other income (expense)
Interest expense (6,257,673 ) (6,184,333 ) (24,746,542 ) (24,776,123 )
Change in fair value of derivatives 542,764 588,861 (878,518 ) 2,229,893
Other income   23,171     (25,204 )   556,820     363,482  
Total other expenses   (5,691,738 )   (5,620,676 )   (25,068,240 )   (22,182,748 )
 
Income before income tax 1,068,991 237,942 1,300,524 2,447,347
Income tax expense   (472,974 )   (213,916 )   (609,809 )   (249,929 )
 
Net income available to common stockholders $ 596,017   $ 24,026   $ 690,715   $ 2,197,418  
 
Weighted average shares outstanding:
Basic 13,221,404 13,221,404 12,985,629 13,221,404
Diluted 13,221,404 13,221,404 13,221,404 13,221,404
Basic net income (loss) per share $ 0.04 $ - $ 0.05 $ 0.17
Diluted net income (loss) per share $ 0.04 $ - $ 0.05 $ 0.17
 
Dividends declared per share $ 0.18 $ 0.18 $ 0.71 $ 0.71
OTELCO INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
     
     
  2010     2011  
Cash flows from operating activities:
Net income $ 690,715 $ 2,197,418
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation 13,837,560 11,891,474
Amortization 9,832,683 8,341,359
Amortization of debt premium (92,307 ) (103,640 )
Amortization of loan costs 1,361,351 1,368,095
Change in fair value of derivatives 878,518 (2,229,893 )
Provision for deferred income taxes 428,098 226,962
Provision for uncollectible revenue 141,474 914,555
Changes in assets and liabilities; net of assets and liabilities acquired:
Accounts receivables 427,432 (1,590,110 )
Material and supplies 152,655 173,350
Prepaid expenses and other assets (69,464 ) (117,356 )
Income tax receivable 389,486 -
Accounts payable and accrued liabilities (1,657,758 ) (1,423,589 )
Advance billings and payments (111,673 ) (116,732 )
Other liabilities   202,751     (1,756 )
 
Net cash from operating activities   26,411,521     19,530,137  
 
Cash flows from investing activities:
Acquisition and construction of property and equipment (10,225,229 ) (10,547,705 )
Purchase of investment (1,708 ) (2,220 )
Proceeds from retirement of investment 1,067 -
Wholesale customer acquisition - -
Payments for the purchase of Shoreham Telephone, net of cash acquired - (5,010,284 )
Deferred charges/acquisition   (1,845 )   -  
 
Net cash used in investing activities   (10,227,715 )   (15,560,209 )
 
Cash flows used in financing activities:
Cash dividends paid (9,225,091 ) (9,321,086 )
Direct cost of exchange of Class B shares for Class A shares (194,053 ) -
Loan origination costs (155,160 ) (95,596 )
Repayment of long-term notes payable   (6,114,172 )   (385,828 )
 
Net cash used in financing activities   (15,688,476 )   (9,802,510 )
 
Net increase (decrease) in cash and cash equivalents 495,330 (5,832,582 )
Cash and cash equivalents, beginning of period   17,731,044     18,226,374  
 
Cash and cash equivalents, end of period $ 18,226,374   $ 12,393,792  
 
Supplemental disclosures of cash flow information:
Interest paid $ 23,484,474   $ 24,130,675  
 
Income taxes paid (received) $ (265,275 ) $ 90,517  




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