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Otelco Reports Third Quarter 2012 Results

Operating Expenses

Operating expenses in the three months ended September 30, 2012, decreased 6.5% to $17.9 million from $19.2 million in the three months ended September 30, 2011. Cost of services and products decreased 5.7% to $10.4 million in the quarter ended September 30, 2012, from $11.0 million in the quarter ended September 30, 2011. Shoreham added $0.3 million which was more than offset by reduced RLEC expenses, long distance costs and overhead expenses, including the reduction in employees implemented at the end of second quarter 2012. Selling, general and administrative expenses increased 1.9% to $3.3 million in the three months ended September 30, 2012, from $3.2 million in the three months ended September 30, 2011. Shoreham accounted for the additional $0.1 million and restructuring expenses accounted for an additional $0.6 million. These increases were mostly offset by lower operating costs, including the reduction in employees implemented at the end of second quarter 2012. Depreciation and amortization for third quarter 2012 decreased 6.7% to $4.6 million from $4.9 million in third quarter 2011. Shoreham accounted for an increase of $0.2 million. Amortization of intangible assets associated with the Country Road acquisition increased $0.2 million, reflecting the shorter remaining life of the Time Warner Cable contract. The depreciation of RLEC assets decreased by $0.7 million. There was a goodwill impairment decrease of $0.3 million in the three months ended September 30, 2012 compared to no impairment in the same period in 2011. With the completion of the 2011 income tax work, the deferred tax associated with the Shoreham acquisition was updated, reducing the amount of goodwill associated with the acquisition. In second quarter 2012, the review of goodwill and long-lived assets had already shown all of the New England reporting units’ goodwill to be impaired resulting in the decrease in goodwill impairment.

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