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TheStreet Open House

Otelco Reports Second Quarter 2013 Results

Second Quarter Investors Conference Call

Otelco has scheduled a conference call, which will be broadcast live over the internet, on Thursday, August 8, 2013, at 11:00 a.m. ET. To participate in the call, participants should dial (719) 325-2452 and ask for the Otelco call 10 minutes prior to the start time. Investors 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. 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 for 30 days. A one-week telephonic replay may also be accessed by calling (719) 457-0820 and using the confirmation code 3889655.

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 97,000 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)
 
December 31, June 30,
2012 2013
Assets
Current assets
Cash and cash equivalents $ 32,516,283 $ 11,120,506
Accounts receivable:

Due from subscribers, net of allowance for doubtful accounts of $239,274 and $246,860, respectively

4,205,944 4,107,747
Unbilled receivables 2,003,634 1,993,246
Other 5,336,162 2,942,818
Materials and supplies 1,845,246 1,814,131
Prepaid expenses 1,981,631 1,369,458
Deferred income taxes   1,843,160     2,426,335  
Total current assets   49,732,060     25,774,241  
 
Property and equipment, net 58,242,903 54,875,880
Goodwill 44,956,840 44,956,840
Intangible assets, net 6,670,392 4,769,800
Investments 1,919,327 1,906,572
Deferred financing costs, net 4,037,311 2,586,818
Deferred income taxes 6,275,997 1,564,378
Other assets   490,131     1,269,638  
Total assets $ 172,324,961   $ 137,704,167  
 
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 2,007,405 $ 3,226,384
Accrued expenses 14,900,378 5,892,739
Advance billings and payments 1,560,190 1,472,875
Deferred income taxes 430,896 397,865
Customer deposits 90,837 87,919
Current maturity of long-term notes payable   270,990,023     6,665,000  
Total current liabilities   289,979,729     17,742,782  
 
 
Deferred income taxes 22,670,168 23,365,004
Advance billings and payments 788,638 762,071
Other liabilities 484,019 148,026
Long-term notes payable, less current maturities   -     126,635,000  
Total liabilities   313,922,554     168,652,883  
 
Stockholders' deficit

Class A Common Stock, $.01 par value-authorized 20,000,000 shares; issued and outstanding 13,221,404 shares

132,214 -

Class A Common Stock, $.01 par value-authorized 10,000,000 shares; issued and outstanding 2,870,948 shares

- 28,709

Class B Common Stock, $.01 par value-authorized 250,000 shares; issued and outstanding 232,780 shares

- 2,328
Additional paid in capital - 2,875,852
Retained deficit   (141,729,807 )   (33,855,605 )
Total stockholders' deficit   (141,597,593 )   (30,948,716 )
Total liabilities and stockholders' deficit $ 172,324,961   $ 137,704,167  
 
 
               

OTELCO INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
 
Three Months Ended

June 30,

Six Months Ended

June 30,

2012 2013 2012 2013
 
Revenues $ 24,713,773 $ 19,666,285 $ 50,088,014 $ 40,654,193
 
Operating expenses
Cost of services 10,648,458 8,928,670 21,677,291 18,406,236
Selling, general and administrative expenses 3,623,941 2,320,551 6,830,018 5,376,340
Depreciation and amortization 5,882,402 3,296,382 10,404,995 6,862,277
Long-lived assets impairment - property, plant and equipment 2,874,000 - 2,874,000 -
Long-lived assets impairment - intangibles 5,748,000 - 5,748,000 -
Goodwill impairment   143,998,000     -     143,998,000     -  
Total operating expenses   172,774,801     14,545,603     191,532,304     30,644,853  
 
Income from operations   (148,061,028 )   5,120,682     (141,444,290 )   10,009,340  
 
Other income (expense)
Interest expense (5,654,655 ) (2,224,588 ) (11,488,305 ) (7,778,758 )
Change in fair value of derivatives - - 241,438 -
Other income   (7,957 )   18,043     310,212     261,530  
Total other expenses   (5,662,612 )   (2,206,545 )   (10,936,655 )   (7,517,228 )
 
Income (loss) before reorganization items and income tax (153,723,640 ) 2,914,137 (152,380,945 ) 2,492,112
 
Reorganization items   -     111,676,270     -     110,252,663  
 
Income (loss) before income tax (153,723,640 ) 114,590,407 (152,380,945 ) 112,744,775
Income tax (expense) benefit   25,713,027     (4,942,185 )   25,188,570     (4,870,574 )
 
Net income (loss) $ (128,010,613 ) $ 109,648,222   $ (127,192,375 ) $ 107,874,201  
 
 
Weighted average number of common shares outstanding (2012 restated) 2,644,281 2,826,040 2,644,281 2,735,663
 
Net income (loss) per common share $ (48.41 ) $ 38.78 $ (48.10 ) $ 39.43
 
Dividends declared per common share $ - $ - $ 0.18 $ -
 
 
       

OTELCO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 
Six Months Ended
June 30,
2012 2013
Cash flows from operating activities:
Net income (loss) $ (127,192,375 ) $ 107,874,201
Adjustments to reconcile net income (loss) to cash flows provided by operating activities:
Depreciation 5,475,268 4,768,811
Amortization 4,929,727 2,093,466
Long-lived assets impairment - property, plant and equipment 2,874,000 -
Long-lived assets impairment - intangibles 5,748,000 -
Goodwill impairment 143,998,000 -
Amortization of loan costs 684,048 575,157
Amortization of debt premium (56,499 ) (31,260 )
Change in fair value of derivatives (241,438 ) -
Provision for deferred income tax expense (benefit) (25,337,689 ) 4,790,249
Provision for uncollectible accounts receivable 201,950 120,483
Changes in operating assets and liabilities
Accounts receivable 86,329 2,381,447
Materials and supplies (158,766 ) 31,115
Prepaid expenses and other assets (152,533 ) (167,590 )
Accounts payable and accrued expenses 4,167,246 2,760,049
Advance billings and payments 208,118 (113,882 )
Other liabilities 260,949 (338,911 )
Reorganization adjustments:
Non-cash reorganization income   -     (114,210,236 )
 
Net cash from operating activities   15,494,335     10,533,099  
 
Cash used in investing activities:
Acquisition and construction of property and equipment   (2,544,811 )   (1,581,653 )
 
Net cash used in investing activities   (2,544,811 )   (1,581,653 )
 
Cash flows used in financing activities:
Cash dividends paid (2,330,272 ) -
Principal repayment of long-term notes payable - (28,700,000 )
Loan origination costs   (30,082 )   (1,647,223 )
 
Net cash used in financing activities   (2,360,354 )   (30,347,223 )
 
Net increase (decrease) in cash and cash equivalents 10,589,170 (21,395,777 )
Cash and cash equivalents, beginning of period   12,393,792     32,516,283  
 
Cash and cash equivalents, end of period $ 22,982,962   $ 11,120,506  
 
Supplemental disclosures of cash flow information:
Interest paid $ 10,860,755   $ 3,385,836  
 
Income taxes paid $ 65,749   $ 143,500  
 
Loan fees paid via issuance of Class B common stock $ -   $ 2,772,410  
 
Cancellation of Class A common stock $ -   $ 132,214  
 
Issuance of Class A common stock $ -   $ 28,709  




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