Otelco Inc. (NASDAQ:OTEL), a wireline telecommunications services
provider in Alabama, Maine, Massachusetts, Missouri, New Hampshire,
Vermont and West Virginia, and a provider of cloud hosting and
managed services, today announced results for its second quarter
ended June 30, 2016. Key highlights for Otelco include:
- Total revenues of $17.2 million for second quarter 2016.
- Operating income of $4.9 million for second quarter 2016.
- Consolidated EBITDA (as defined below) of $7.1 million for
second quarter 2016.
“The improvements we have made in our network
and operations cost structure offset the decline in revenue this
quarter when compared with the same period in 2015,” said Rob
Souza, President and Chief Executive Officer of Otelco. “Operating
income increased $0.1 million, and Consolidated EBITDA was
essentially flat when compared with the prior year period. Top line
residential revenue remains under pressure for all telephone
companies, and our strategy is focused on both delivering
continuous cost improvements across our markets and implementing
top-line revenue enhancements, promotions, and, where appropriate,
pricing actions.
“Marketing programs, including new speed and
pricing options and delivery approaches, helped keep our
residential data lines basically flat compared to the end of 2015,”
continued Souza. “We have received a multi-year contract extension
for circuits serving Alabama schools in and adjacent to our
territory, including orders to increase capacity on the majority of
these circuits that will be upgraded during third quarter 2016. In
addition, we have added a second 10 gigabit light-wave to our new
northern fiber ring project to meet another customer’s requirement
for high-speed connectivity in Northern Maine. Sales of video and
security products, which are residentially focused, both grew
during second quarter. While sales of our Hosted PBX product
continue to grow as our flagship CLEC business product, we saw a
slower growth rate in second quarter 2016.
“Our capital investment of $1.5 million in the
business during second quarter 2016 is consistent with our level of
investment over the past several years,” noted Souza. “We continue
to increase the reach of fiber in our network to support higher
data speeds as required by our customers. We ended second quarter
2016 with $8.3 million in cash, or an increase of $1.4 million
since December 31, 2015.”
Second Quarter 2016 Financial
Summary |
|
(Dollars in thousands, except per share amounts) |
|
(Unaudited) |
|
|
|
Three Months Ended June 30, |
|
Change |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Amount |
|
Percent |
|
|
Revenues |
$ |
17,232 |
|
|
$ |
17,892 |
|
|
$ |
(660 |
) |
|
|
(3.7 |
) |
% |
|
Operating
income |
$ |
4,899 |
|
|
$ |
4,765 |
|
|
$ |
134 |
|
|
|
2.8 |
|
% |
|
Interest
expense |
$ |
(2,721 |
) |
|
$ |
(1,991 |
) |
|
$ |
730 |
|
|
|
36.7 |
|
% |
|
Net income
available to stockholders |
$ |
1,324 |
|
|
$ |
1,655 |
|
|
$ |
(331 |
) |
|
|
(20.0 |
) |
% |
|
Basic net
income per share |
$ |
0.40 |
|
|
$ |
0.51 |
|
|
$ |
(0.11 |
) |
|
|
(21.6 |
) |
% |
|
Diluted net
income per share |
$ |
0.39 |
|
|
$ |
0.50 |
|
|
$ |
(0.11 |
) |
|
|
(22.0 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA(1) |
$ |
7,053 |
|
|
$ |
7,104 |
|
|
$ |
(51 |
) |
|
|
(0.7 |
) |
% |
|
Capital
expenditures |
$ |
1,509 |
|
|
$ |
1,528 |
|
|
$ |
(19 |
) |
|
|
(1.2 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
Change |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Amount |
|
Percent |
|
|
Revenues |
$ |
34,722 |
|
|
$ |
35,535 |
|
|
$ |
(813 |
) |
|
|
(2.3 |
) |
% |
|
Operating
income |
$ |
9,645 |
|
|
$ |
9,273 |
|
|
$ |
372 |
|
|
|
4.0 |
|
% |
|
Interest
expense |
$ |
(5,203 |
) |
|
$ |
(4,039 |
) |
|
$ |
1,164 |
|
|
|
28.8 |
|
% |
|
Net income
available to stockholders |
$ |
3,074 |
|
|
$ |
3,790 |
|
|
$ |
(716 |
) |
|
|
(18.9 |
) |
% |
|
Basic net
income per share |
$ |
0.94 |
|
|
$ |
1.17 |
|
|
$ |
(0.23 |
) |
|
|
(19.7 |
) |
% |
|
Diluted net
income per share |
$ |
0.91 |
|
|
$ |
1.15 |
|
|
$ |
(0.24 |
) |
|
|
(20.9 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA(1) |
$ |
14,680 |
|
|
$ |
15,112 |
|
|
$ |
(432 |
) |
|
|
(2.9 |
) |
% |
|
Capital
expenditures |
$ |
2,215 |
|
|
$ |
3,013 |
|
|
$ |
(798 |
) |
|
|
(26.5 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Consolidated EBITDA to Net
Income |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
Net
income |
$ |
1,324 |
|
|
$ |
1,655 |
|
|
$ |
3,074 |
|
|
$ |
3,790 |
|
|
|
Add: |
Depreciation |
|
1,792 |
|
|
|
1,929 |
|
|
|
3,571 |
|
|
|
3,843 |
|
|
|
|
Interest expense less
interest income |
|
2,400 |
|
|
|
1,768 |
|
|
|
4,439 |
|
|
|
3,590 |
|
|
|
|
Interest expense -
amortize loan cost |
|
321 |
|
|
|
222 |
|
|
|
764 |
|
|
|
447 |
|
|
|
|
Income tax expense |
|
858 |
|
|
|
1,102 |
|
|
|
1,991 |
|
|
|
2,490 |
|
|
|
|
Amortization -
intangibles |
|
259 |
|
|
|
335 |
|
|
|
518 |
|
|
|
670 |
|
|
|
|
Stock-based
compensation (earn-out) |
|
(78 |
) |
|
|
(54 |
) |
|
|
- |
|
|
|
71 |
|
|
|
|
Stock-based
compensation (Board & senior management) |
|
137 |
|
|
|
105 |
|
|
|
199 |
|
|
|
141 |
|
|
|
|
Other excluded
expense |
|
- |
|
|
|
17 |
|
|
|
- |
|
|
|
20 |
|
|
|
|
Loan fees |
|
40 |
|
|
|
25 |
|
|
|
124 |
|
|
|
50 |
|
|
|
Consolidated EBITDA(1) |
$ |
7,053 |
|
|
$ |
7,104 |
|
|
$ |
14,680 |
|
|
$ |
15,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Consolidated EBITDA is defined as
consolidated net income (loss) plus consolidated net interest
expense, depreciation and amortization, income taxes and certain
other fees, expenses and non-cash charges reducing consolidated net
income. Consolidated EBITDA is a supplemental measure of the
Company’s performance that is not required by, or presented in
accordance with, accounting principles generally accepted in the
United States (“GAAP”). Consolidated EBITDA corresponds to the
definition of Consolidated EBITDA in the Company’s credit
facilities. The lenders under the Company’s credit facilities
utilize this measure to determine compliance with credit facility
requirements. The Company uses Consolidated EBITDA as an
operational performance measurement to focus attention on the
operational generation of cash which is used for reinvestment into
the business; to repay its debt and to pay interest on its debt; to
pay income taxes for other corporate requirements. The Company
reports Consolidated EBITDA to allow current and potential
investors to understand this performance metric and because the
Company believes that it provides current and potential investors
with helpful information with respect to the Company’s operating
performance and cash flows. However, Consolidated EBITDA should not
be considered as an alternative to net income, operating income or
any other performance measures derived in accordance with GAAP or
as an alternative to net cash provided by operating activities as a
measure of the Company’s liquidity. The Company’s presentation of
Consolidated EBITDA may not be comparable to similarly titled
measures used by other companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Otelco Inc. - Key Operating
Statistics |
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change |
|
|
|
|
|
|
|
As of |
|
December 31, |
|
March 31, |
|
June 30, |
|
from |
|
|
|
|
|
|
|
|
|
2014 |
|
2015 |
|
2016 |
|
2016 |
|
March 31, 2016 |
|
|
|
|
Business/Enterprise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLEC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice lines |
|
|
19,324 |
|
18,606 |
|
18,069 |
|
17,650 |
|
|
(2.3 |
) |
% |
|
|
|
|
|
|
HPBX seats |
|
|
10,029 |
|
10,740 |
|
10,746 |
|
10,800 |
|
|
0.5 |
|
% |
|
|
|
|
|
|
Data lines |
|
|
3,313 |
|
3,629 |
|
3,621 |
|
3,638 |
|
|
0.5 |
|
% |
|
|
|
|
|
|
Wholesale
network lines |
|
2,968 |
|
2,743 |
|
2,680 |
|
2,651 |
|
|
(1.1 |
) |
% |
|
|
|
|
|
|
Classifax |
|
|
80 |
|
140 |
|
158 |
|
163 |
|
|
3.2 |
|
% |
|
|
|
|
|
RLEC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice lines |
|
|
15,506 |
|
16,123 |
|
16,139 |
|
16,030 |
|
|
(0.7 |
) |
% |
|
|
|
|
|
|
Data lines |
|
|
1,587 |
|
1,539 |
|
1,532 |
|
1,652 |
|
|
7.8 |
|
% |
|
|
|
|
|
Access line
equivalents (1) |
|
52,807 |
|
53,520 |
|
52,945 |
|
52,584 |
|
|
(0.7 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLEC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice lines |
|
|
275 |
|
225 |
|
221 |
|
219 |
|
|
(0.9 |
) |
% |
|
|
|
|
|
|
Data lines |
|
|
363 |
|
282 |
|
281 |
|
278 |
|
|
(1.1 |
) |
% |
|
|
|
|
|
RLEC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice lines |
|
|
25,569 |
|
23,143 |
|
22,604 |
|
22,140 |
|
|
(2.1 |
) |
% |
|
|
|
|
|
|
Data lines |
|
|
20,206 |
|
20,089 |
|
20,031 |
|
20,009 |
|
|
(0.1 |
) |
% |
|
|
|
|
|
Access line
equivalents (1) |
|
46,413 |
|
43,739 |
|
43,137 |
|
42,646 |
|
|
(1.1 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Otelco
access line equivalents (1) |
|
99,220 |
|
97,259 |
|
96,082 |
|
95,230 |
|
|
(0.9 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Video |
|
|
|
3,852 |
|
3,648 |
|
3,708 |
|
3,671 |
|
|
(1.0 |
) |
% |
|
|
|
|
Security
systems |
|
|
243 |
|
326 |
|
337 |
|
343 |
|
|
1.8 |
|
% |
|
|
|
|
Other
internet lines |
|
|
3,202 |
|
2,840 |
|
2,794 |
|
2,684 |
|
|
(3.9 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) We define access line equivalents as retail and
wholesale voice lines (including Classifax, our virtual faxing
solution) and data lines (including cable modems, digital
subscriber lines, and dedicated data access trunks).
FINANCIAL DISCUSSION FOR SECOND QUARTER
2016:
Revenues
Total revenues decreased 3.7% in the three
months ended June 30, 2016, to $17.2 million from $17.9 million in
the three months ended June 30, 2015. The decrease in residential
RLEC voice access lines and access revenue decreases due to the
FCC’s inter-carrier compensation reform order (the “FCC’s order”)
account for the majority of the decline, which was partially offset
by an increase in internet, and video and security revenue. The
table below provides the components of our revenues for the three
months ended June 30, 2016, compared with the same period of
2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Change |
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Amount |
|
Percent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in
thousands) |
|
|
|
|
|
Local
services |
$ |
5,849 |
|
|
$ |
6,314 |
|
|
$ |
(465 |
) |
|
|
(7.4 |
) |
% |
|
|
Network
access |
|
5,345 |
|
|
|
5,614 |
|
|
|
(269 |
) |
|
|
(4.8 |
) |
% |
|
|
Internet |
|
3,879 |
|
|
|
3,726 |
|
|
|
153 |
|
|
|
4.1 |
|
% |
|
|
Transport
services |
|
1,230 |
|
|
|
1,328 |
|
|
|
(98 |
) |
|
|
(7.4 |
) |
% |
|
|
Video and
security |
|
718 |
|
|
|
688 |
|
|
|
30 |
|
|
|
4.4 |
|
% |
|
|
Managed
services |
|
211 |
|
|
|
222 |
|
|
|
(11 |
) |
|
|
(5.0 |
) |
% |
|
|
Total |
$ |
17,232 |
|
|
$ |
17,892 |
|
|
$ |
(660 |
) |
|
|
(3.7 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Local services revenue decreased 7.4% in the
quarter ended June 30, 2016, to $5.8 million from $6.3 million in
the quarter ended June 30, 2015. The decline in RLEC residential
voice access lines and the impact of the FCC’s order, which reduces
or eliminates intrastate and local cellular revenue, accounted for
a decrease of $0.3 million. A portion of the RLEC decrease is
recovered through the Connect America Fund, which is categorized as
interstate access revenue. The decline in long distance and special
line revenue accounted for a decrease of $0.2 million.
Network access revenue decreased 4.8% in the
second quarter 2016 to $5.3 million from $5.6 million in the second
quarter 2015. The Connect America Fund and end user charges
increased $0.1 million. This increase was offset by declines in
special access charges of $0.2 million and interstate and
intrastate switched access charges of $0.2 million.
Internet revenue increased 4.1% in the second
quarter 2016 to $3.9 million from $3.7 million in the second
quarter 2015. Higher equipment fees, increased broadband speed and
pricing accounted for the increase. Transport
services revenue decreased 7.4% in the quarter ended June
30, 2016, to $1.2 million from $1.3 million in the quarter ended
June 30, 2015. The decrease was in wide area network revenue,
including a one-time customer adjustment. Video and
security revenue increased 4.4% in the three months ended
June 30, 2016, to just over $0.7 million from just under $0.7
million in the three months ended June 30, 2015. Increases in
security and IPTV deployment and cable pricing were partially
offset by decreases in pay per view revenue and digital cable
subscribers. Managed services revenue
decreased 5.0% in the quarter ended June 30, 2016, over the
comparable period in 2015 to remain at just over $0.2 million. The
decrease was in equipment sales and groupware services.
Operating Expenses
Operating expenses in the three months ended
June 30, 2016, decreased 6.0% to $12.3 million from $13.1 million
in the three months ended June 30, 2015. Cost of
services decreased 6.3% to $7.9 million in the quarter
ended June 30, 2016, from $8.4 million in the quarter ended June
30, 2015. Internet, circuit and digital equipment expense decreased
$0.2 million; access, toll and reciprocal compensation expense
decreased by $0.1 million; HPBX expense decreased by $0.1 million;
and marketing, sales and directory expense decreased by $0.1
million, reflecting New England operations optimization.
Selling, general and administrative
expenses decreased 2.0% to $2.4 million in the
three months ended June 30, 2016, from $2.5 million in the three
months ended June 30, 2015. Small decreases in external relations,
executive, insurance and uncollectible were partially offset by
small increases in legal expense and sales concession costs.
Depreciation and amortization for second quarter
2016 decreased 9.4% to $2.1 million from $2.3 million in second
quarter 2015. New England CLEC and RLEC and Alabama cable
depreciation decreased $0.1 million and the amortization of other
intangible assets decreased $0.1 million.
Operating Income
Operating income in the three months ended June
30, 2016, increased 2.8% to $4.9 million from $4.8 million in the
three months ended June 30, 2015. Cost improvement and expense
management savings exceeded the decrease in revenue for the
period.
Interest Expense
Interest expense in the three months ended June
30, 2016, increased 36.7% to $2.7 million from $2.0 million in the
three months ended June 30, 2015. Higher interest rates on the
Company’s new loan facilities accounted for an increase of $0.6
million and the increased loan cost amortization accounted for an
increase of $0.1 million.
Net income
Based on the changes noted above, net income
decreased $0.3 million to $1.3 million for the three months ended
June 30, 2016, when compared to just over $1.6 million in the same
period in 2015.
Consolidated EBITDA
Consolidated EBITDA decreased slightly to just
under $7.1 million for the three months ended June 30, 2016, when
compared to just over $7.1 million in the same period in 2015.
Stock-based (non-cash) compensation is added back in the
calculation of Consolidated EBITDA. See financial tables for a
discussion of Consolidated EBITDA (a non-GAAP measurement) and a
reconciliation of Consolidated EBITDA to net income.
Balance Sheet
As of June 30, 2016, the Company had cash and
cash equivalents of $8.3 million compared with $6.9 million at the
end of 2015. As announced during first quarter, the Company entered
into new five year senior and five and a half year subordinated
loan facilities. The combined $100.3 million term loan facilities
were used to pay all amounts due under the Company’s previous
credit facility and, with cash from the balance sheet, to pay loan
costs associated with the transaction. A $5.0 million revolver
under the senior loan facility remains undrawn. Principal payments
on the senior term loan facility are $1.0 million per quarter,
payable on April 1, July 1, October 1 and January 1 of each year. A
change in GAAP nets loan costs against the outstanding balance of
the term loan facilities. At June 30, 2016, the outstanding senior
loan balance is $84.0 million and the outstanding subordinated loan
balance is $15.4 million.
Capital Expenditures
Capital expenditures were $1.5 million for both
second quarter 2016 and the same period in 2015.
Second Quarter Earnings Conference
Call
Otelco has scheduled a conference call, which
will be broadcast live over the internet, on Wednesday, August 3,
2016, at 11:30 a.m. (Eastern Time). To participate in the call,
participants should dial (719) 325-2402 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. 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 two-week telephonic replay may also be accessed by
calling (719) 457-0820 and entering the Confirmation Code
6457216.
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, digital high-speed data lines, transport
services, network access, cable television and other related
services. With approximately 95,000 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 and technology consulting,
managed services and private/hybrid cloud hosting 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. AND SUBSIDIARIES |
|
CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
(in thousands, except share par value and share
amounts) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
Assets |
|
|
|
|
|
|
Current
assets |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
$ |
8,276 |
|
|
$ |
6,884 |
|
|
|
|
|
Accounts
receivable: |
|
|
|
|
|
|
|
|
|
|
|
Due from subscribers,
net of allowance for doubtful accounts of $183 and $258,
respectively |
|
|
|
3,423 |
|
|
|
3,575 |
|
|
|
|
|
Unbilled
receivables |
|
|
|
|
|
1,610 |
|
|
|
1,610 |
|
|
|
|
|
Other |
|
|
|
|
|
|
1,640 |
|
|
|
1,722 |
|
|
|
|
|
Materials
and supplies |
|
|
|
|
2,079 |
|
|
|
1,906 |
|
|
|
|
|
Prepaid
expenses |
|
|
|
|
|
1,519 |
|
|
|
2,775 |
|
|
|
|
|
Deferred
income taxes |
|
|
|
|
57 |
|
|
|
57 |
|
|
|
|
|
|
Total
current assets |
|
|
|
|
18,604 |
|
|
|
18,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
|
|
|
48,274 |
|
|
|
49,811 |
|
|
|
|
Goodwill |
|
|
|
|
|
|
44,976 |
|
|
|
44,976 |
|
|
|
|
Intangible
assets, net |
|
|
|
|
|
2,038 |
|
|
|
2,363 |
|
|
|
|
Investments |
|
|
|
|
|
1,833 |
|
|
|
1,846 |
|
|
|
|
Other
assets |
|
|
|
|
|
269 |
|
|
|
259 |
|
|
|
|
|
|
Total
assets |
|
|
|
|
$ |
115,994 |
|
|
$ |
117,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Deficit |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable |
|
|
|
|
$ |
940 |
|
|
$ |
1,818 |
|
|
|
|
|
Accrued
expenses |
|
|
|
|
|
5,662 |
|
|
|
4,567 |
|
|
|
|
|
Advance
billings and payments |
|
|
|
|
1,377 |
|
|
|
1,418 |
|
|
|
|
|
Customer
deposits |
|
|
|
|
|
72 |
|
|
|
68 |
|
|
|
|
|
Current
maturity of long-term notes payable, net of debt issuance cost |
|
|
2,912 |
|
|
|
2,203 |
|
|
|
|
|
|
Total
current liabilities |
|
|
|
|
10,963 |
|
|
|
10,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes |
|
|
|
|
|
26,163 |
|
|
|
26,163 |
|
|
|
|
Advance
billings and payments |
|
|
|
|
601 |
|
|
|
628 |
|
|
|
|
Other
liabilities |
|
|
|
|
|
8 |
|
|
|
27 |
|
|
|
|
Long-term
notes payable, less current maturities and net of debt issuance
costs |
|
|
91,254 |
|
|
|
97,052 |
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
128,989 |
|
|
|
133,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit |
|
|
|
|
|
|
|
|
|
|
|
Class A
Common Stock, $.01 par value-authorized 10,000,000 shares; issued
and outstanding 3,283,177 and 3,015,099 shares, respectively |
|
|
33 |
|
|
|
30 |
|
|
|
|
|
Class B
Common Stock, $.01 par value-authorized 250,000 shares; issued and
outstanding 0 and 232,780 shares, respectively |
|
|
- |
|
|
|
2 |
|
|
|
|
|
Additional
paid in capital |
|
|
|
|
3,971 |
|
|
|
3,881 |
|
|
|
|
|
Retained
deficit |
|
|
|
|
|
(16,999 |
) |
|
|
(20,073 |
) |
|
|
|
|
|
Total
stockholders' deficit |
|
|
|
|
(12,995 |
) |
|
|
(16,160 |
) |
|
|
|
|
|
Total
liabilities and stockholders' deficit |
|
|
$ |
115,994 |
|
|
$ |
117,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
condensed consolidated financial statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTELCO INC. AND SUBSIDIARIES |
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
(in thousands, except share and per share
amounts) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
$ |
17,232 |
|
|
$ |
17,892 |
|
|
$ |
34,722 |
|
|
$ |
35,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
Cost of
services |
|
|
|
7,875 |
|
|
|
8,406 |
|
|
|
16,005 |
|
|
|
16,663 |
|
|
|
Selling,
general and administrative expenses |
|
|
2,407 |
|
|
|
2,457 |
|
|
|
4,983 |
|
|
|
5,086 |
|
|
|
Depreciation and amortization |
|
|
2,051 |
|
|
|
2,264 |
|
|
|
4,089 |
|
|
|
4,513 |
|
|
|
|
Total operating expenses |
|
|
12,333 |
|
|
|
13,127 |
|
|
|
25,077 |
|
|
|
26,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations |
|
|
4,899 |
|
|
|
4,765 |
|
|
|
9,645 |
|
|
|
9,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
(2,721 |
) |
|
|
(1,991 |
) |
|
|
(5,203 |
) |
|
|
(4,039 |
) |
|
|
Other income (expense) |
|
|
4 |
|
|
|
(17 |
) |
|
|
623 |
|
|
|
1,046 |
|
|
|
|
Total other expenses |
|
|
(2,717 |
) |
|
|
(2,008 |
) |
|
|
(4,580 |
) |
|
|
(2,993 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income tax expense |
|
|
2,182 |
|
|
|
2,757 |
|
|
|
5,065 |
|
|
|
6,280 |
|
|
Income tax
expense |
|
|
|
(858 |
) |
|
|
(1,102 |
) |
|
|
(1,991 |
) |
|
|
(2,490 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
$ |
1,324 |
|
|
$ |
1,655 |
|
|
$ |
3,074 |
|
|
$ |
3,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
3,283,177 |
|
|
|
3,239,306 |
|
|
|
3,283,177 |
|
|
|
3,239,306 |
|
|
|
|
Diluted |
|
|
|
|
3,380,445 |
|
|
|
3,285,534 |
|
|
|
3,378,090 |
|
|
|
3,283,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net
income per common share |
|
$ |
0.40 |
|
|
$ |
0.51 |
|
|
$ |
0.94 |
|
|
$ |
1.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net
income per common share |
|
$ |
0.39 |
|
|
$ |
0.50 |
|
|
$ |
0.91 |
|
|
$ |
1.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTELCO INC. AND SUBSIDIARIES |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
(in thousands) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June
30, |
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Cash flows
from operating activities: |
|
|
|
|
|
|
Net
income |
|
|
|
$ |
3,074 |
|
|
$ |
3,790 |
|
|
|
Adjustments
to reconcile net income to cash flows provided by operating
activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
3,571 |
|
|
|
3,843 |
|
|
|
|
|
Amortization |
|
|
|
518 |
|
|
|
670 |
|
|
|
|
|
Amortization of loan costs |
|
|
609 |
|
|
|
447 |
|
|
|
|
|
Loss on
extinguishment of debt |
|
|
155 |
|
|
|
- |
|
|
|
|
|
Provision
for uncollectible accounts receivable |
|
|
119 |
|
|
|
175 |
|
|
|
|
|
Stock-based
compensation |
|
|
199 |
|
|
|
211 |
|
|
|
|
|
Payment in
kind interest - subordinated debt |
|
|
115 |
|
|
|
- |
|
|
|
|
|
Changes in
operating assets and liabilities |
|
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
115 |
|
|
|
(1 |
) |
|
|
|
|
|
|
Material
and supplies |
|
|
(173 |
) |
|
|
(221 |
) |
|
|
|
|
|
|
Prepaid
expenses and other assets |
|
|
1,246 |
|
|
|
2,076 |
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
|
217 |
|
|
|
905 |
|
|
|
|
|
|
|
Advance
billings and payments |
|
|
(67 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
Other
liabilities |
|
|
|
(14 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
|
Net cash
from operating activities |
|
|
9,684 |
|
|
|
11,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
used in investing activities: |
|
|
|
|
|
|
Acquisition
and construction of property and equipment |
|
|
(2,215 |
) |
|
|
(3,013 |
) |
|
|
|
|
|
|
|
Net cash
used in investing activities |
|
|
(2,215 |
) |
|
|
(3,013 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
used in financing activities: |
|
|
|
|
|
|
Loan
origination costs |
|
|
|
(5,215 |
) |
|
|
(15 |
) |
|
|
Principal
repayment of long-term notes payable |
|
|
(101,053 |
) |
|
|
(7,046 |
) |
|
|
Proceeds
from loan refinancing |
|
|
100,300 |
|
|
|
- |
|
|
|
Tax
withholdings paid on behalf of employees for restricted stock
units |
|
|
(109 |
) |
|
|
- |
|
|
|
|
|
|
|
|
Net cash
used in financing activities |
|
|
(6,077 |
) |
|
|
(7,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents |
|
|
1,392 |
|
|
|
1,781 |
|
|
Cash and
cash equivalents, beginning of period |
|
|
6,884 |
|
|
|
5,082 |
|
|
Cash and
cash equivalents, end of period |
|
$ |
8,276 |
|
|
$ |
6,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
Interest
paid |
|
|
|
$ |
3,728 |
|
|
$ |
3,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes paid |
|
|
$ |
685 |
|
|
$ |
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of Class B common stock to Class A common stock |
|
$ |
2 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
Class A common stock |
|
$ |
1 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact: Curtis Garner
Chief Financial Officer
Otelco Inc.
205-625-3580
Curtis@otelcotel.com
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