Otelco Inc. (NASDAQ:OTEL), a wireline telecommunications, cloud
hosting and managed services provider in Alabama, Maine,
Massachusetts, Missouri, New Hampshire, Vermont and West Virginia,
today announced results for its second quarter ended June 30, 2017.
Key highlights for Otelco include:
- Total revenues of $17.4 million for second quarter 2017.
- Operating income of $5.1 million for second quarter 2017.
- Net income of $1.5 million for second quarter 2017.
- Consolidated EBITDA (as defined below) of $7.0 million for
second quarter 2017.
During second quarter 2017, Otelco’s operating
income increased by $0.2 million to $5.1 million when compared to
the same period last year. As previously reported, the Company
began receiving revenue during the first quarter from the FCC’s
Alternative Connect America Model (or “ACAM”) program in the five
states where the program is applicable, which is the primary factor
driving revenue improvement during second quarter. The program
provides a known level of support for ten years to enhance and
build out the Company’s broadband network to provide increased
speed and accessibility to customers. The new model-based support
plus higher Connect America Fund (or “CAF”) funding provides an
increase of approximately $0.4 million in revenue each quarter this
year when compared with the revenue it replaced in 2016. As a
result, the Company reported an increase of $0.2 million in total
revenue for second quarter 2017 compared with second quarter 2016
and up slightly from first quarter 2017.
Net income for the second quarter of 2017
increased by $0.2 million, compared to the same period in 2016. The
decline in residential RLEC voice service was more than offset by
the decrease in interest costs associated with the Company’s credit
agreements, and the increase in ACAM and CAF revenue. Consolidated
EBITDA declined by less than $0.1 million.
The Company continues to make significant
progress in implementing its strategic goals. The first phase of
ACAM fiber-to-the-home projects in Missouri, Maine and Alabama
totaling $2.4 million are underway with completion of this work
expected in the fourth quarter of 2017. The projects will drive
fiber deeper into Otelco’s network and provide customers the
opportunity to subscribe to greater bandwidth offerings and benefit
from enhanced service. Today, the Company has over 1,600 fiber
route miles in its current network. On April 1, 2017, the Company
successfully connected over 1,000 voice and data access lines to
its network under a multi-year contract with the community of
Leverett, Massachusetts. Discussions continue with several
communities in Massachusetts on similar projects.
The work on consolidating and streamlining our
business operations continues to move forward. The Company is
making significant progress in replacing its billing and operations
systems with a common platform across its entire operation. “We are
adjusting our current bill cycles on October 1, 2017, to common
dates in preparation for the system conversion in 2018,” noted Rob
Souza, President and Chief Executive Officer of Otelco. “Carrier
billing is expected to begin converting to the new system during
first quarter 2018 with end-user billing to follow in second
quarter 2018. Our sales, marketing, customer service and technical
teams are already functioning on a company-wide basis in advance of
the conversion to effectively plan for the enhanced customer
service and improved efficiency provided by the consolidated
system.”
Cash grew from $10.5 million at the end of 2016
to $11.3 million at June 30, 2017. The growth in cash reflects the
continuing strength of the Company’s operations. In addition to its
scheduled quarterly $1.0 million principal payment on its senior
credit facility, Otelco is today making a $3.0 million additional
principal payment to further reduce its senior debt as part of its
plan to reduce leverage toward current industry norms. The
Company’s total leverage ratio, net of cash, at June 30, 2017, as
defined and calculated below, was 2.95.
“In the fall of 2016, we announced the
engagement of The Bank Street Group LLC to explore the Company’s
strategic alternatives,” added Souza. “While the Company will
continue to restrict public comments on the process, discussions
are ongoing with a number of entities who have been engaged in
reviewing both the Company’s performance and its future
possibilities. The discussions are consistent with other
telecommunications industry announcements within the broadly
defined telecom market.” However, there can be no assurance that
any transactions will occur as a result of these discussions.
|
|
Second Quarter 2017 Financial
Summary |
|
(Dollars in thousands, except per share amounts) |
|
(Unaudited) |
|
|
|
|
|
Three Months Ended June 30, |
|
Change |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Amount |
|
Percent |
|
|
Revenues |
$ |
17,406 |
|
|
$ |
17,232 |
|
|
$ |
174 |
|
|
|
1.0 |
|
% |
|
Operating
income |
$ |
5,053 |
|
|
$ |
4,899 |
|
|
$ |
154 |
|
|
|
3.1 |
|
% |
|
Interest
expense |
$ |
(2,571 |
) |
|
$ |
(2,721 |
) |
|
$ |
(150 |
) |
|
|
(5.5 |
) |
% |
|
Net income
available to stockholders |
$ |
1,536 |
|
|
$ |
1,324 |
|
|
$ |
212 |
|
|
|
16.0 |
|
% |
|
Basic net
income per share |
$ |
0.46 |
|
|
$ |
0.40 |
|
|
$ |
0.06 |
|
|
|
15.0 |
|
% |
|
Diluted net
income per share |
$ |
0.45 |
|
|
$ |
0.39 |
|
|
$ |
0.06 |
|
|
|
15.4 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA(1) |
$ |
7,005 |
|
|
$ |
7,053 |
|
|
$ |
(48 |
) |
|
|
(0.7 |
) |
% |
|
Capital
expenditures |
$ |
2,488 |
|
|
$ |
1,509 |
|
|
$ |
979 |
|
|
|
64.9 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
Change |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Amount |
|
Percent |
|
|
Revenues |
$ |
34,786 |
|
|
$ |
34,722 |
|
|
$ |
64 |
|
|
|
0.2 |
|
% |
|
Operating
income |
$ |
10,074 |
|
|
$ |
9,645 |
|
|
$ |
429 |
|
|
|
4.4 |
|
% |
|
Interest
expense |
$ |
(5,182 |
) |
|
$ |
(5,203 |
) |
|
$ |
(21 |
) |
|
|
(0.4 |
) |
% |
|
Net
income |
$ |
3,144 |
|
|
$ |
3,074 |
|
|
$ |
70 |
|
|
|
2.3 |
|
% |
|
Net income
per share |
$ |
0.94 |
|
|
$ |
0.94 |
|
|
$ |
- |
|
|
|
- |
|
% |
|
Diluted net
income per share |
$ |
0.91 |
|
|
$ |
0.91 |
|
|
$ |
- |
|
|
|
- |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA(1) |
$ |
14,203 |
|
|
$ |
14,680 |
|
|
$ |
(477 |
) |
|
|
(3.2 |
) |
% |
|
Capital
expenditures |
$ |
3,758 |
|
|
$ |
2,215 |
|
|
$ |
1,543 |
|
|
|
69.7 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Consolidated EBITDA(1) to Net
Income |
|
|
|
|
|
|
|
|
Twelve Months |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
Ended June 30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
2017 |
Net
income |
$ |
1,536 |
|
|
$ |
1,324 |
|
|
$ |
3,144 |
|
|
$ |
3,074 |
|
|
$ |
5,215 |
Add: |
Depreciation |
|
1,741 |
|
|
|
1,792 |
|
|
|
3,479 |
|
|
|
3,571 |
|
|
|
7,046 |
|
Interest expense less
interest income |
|
2,260 |
|
|
|
2,400 |
|
|
|
4,562 |
|
|
|
4,439 |
|
|
|
9,359 |
|
Interest expense -
amortized loan cost |
|
311 |
|
|
|
321 |
|
|
|
620 |
|
|
|
764 |
|
|
|
1,254 |
|
Income tax expense |
|
946 |
|
|
|
858 |
|
|
|
1,951 |
|
|
|
1,991 |
|
|
|
3,617 |
|
Amortization -
intangibles |
|
101 |
|
|
|
259 |
|
|
|
202 |
|
|
|
518 |
|
|
|
570 |
|
Loan fees |
|
39 |
|
|
|
40 |
|
|
|
79 |
|
|
|
124 |
|
|
|
158 |
|
Stock-based
compensation (earn-out) |
|
- |
|
|
|
(78 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Stock-based
compensation (senior management) |
|
71 |
|
|
|
137 |
|
|
|
166 |
|
|
|
199 |
|
|
|
382 |
Consolidated EBITDA(1) |
$ |
7,005 |
|
|
$ |
7,053 |
|
|
$ |
14,203 |
|
|
$ |
14,680 |
|
|
$ |
27,601 |
|
|
|
|
|
|
|
|
|
|
|
(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; and 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, including the Company’s ability to generate earnings
sufficient to service its debt, and enhance understanding of the
Company’s financial performance and highlight operational trends.
However, Consolidated EBITDA should not be considered as an
alternative to net income or any other performance measures derived
in accordance with GAAP. 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) |
|
|
|
|
As of |
December 31, |
|
March 31, |
|
June 30, |
|
% Change from |
|
|
|
|
|
2015 |
|
2016 |
|
2017 |
|
2017 |
|
March 31, 2017 |
|
Business/Enterprise |
|
|
|
|
|
|
|
|
|
|
|
|
|
CLEC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice
lines |
|
18,606 |
|
17,034 |
|
16,852 |
|
16,582 |
|
(1.6 |
) |
% |
|
|
|
HPBX
seats |
|
10,880 |
|
11,487 |
|
11,532 |
|
11,322 |
|
(1.8 |
) |
% |
|
|
|
Data
lines |
|
3,629 |
|
3,655 |
|
3,315 |
|
3,435 |
|
3.6 |
|
% |
|
|
|
Wholesale
network lines |
|
2,743 |
|
2,570 |
|
2,584 |
|
2,521 |
|
(2.4 |
) |
% |
|
|
RLEC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice
lines |
|
16,123 |
|
16,621 |
|
16,359 |
|
15,853 |
|
(3.1 |
) |
% |
|
|
|
Data
lines |
|
1,539 |
|
1,634 |
|
1,624 |
|
1,625 |
|
0.1 |
|
% |
|
|
Access line equivalents(1) |
|
53,520 |
|
53,001 |
|
52,266 |
|
51,338 |
|
(1.8 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
CLEC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice
lines |
|
225 |
|
199 |
|
192 |
|
631 |
|
228.6 |
|
% |
|
|
|
Data
lines |
|
2,432 |
|
2,291 |
|
2,275 |
|
2,882 |
|
26.7 |
|
% |
|
|
RLEC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice
lines |
|
23,143 |
|
20,978 |
|
20,556 |
|
20,154 |
|
(2.0 |
) |
% |
|
|
|
Data
lines |
|
20,089 |
|
19,622 |
|
19,562 |
|
19,421 |
|
(0.7 |
) |
% |
|
|
|
Other
services |
|
3,728 |
|
3,682 |
|
3,665 |
|
3,633 |
|
(0.9 |
) |
% |
|
|
Access line equivalents(1) |
|
49,617 |
|
46,772 |
|
46,250 |
|
46,721 |
|
1.0 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Otelco
access line equivalents(1) |
|
103,137 |
|
99,773 |
|
98,516 |
|
98,059 |
|
(0.5 |
) |
% |
(1) The Company defines access line
equivalents as retail and wholesale voice lines, data lines
(including cable modems, digital subscriber lines, other broadband
connections and dedicated data access trunks) and other services
(including entertainment and security services).
The Company uses the ratio of debt, net of cash,
to Consolidated EBITDA for the last twelve months as an operational
performance measurement. Such ratio is a supplemental measure of
the Company’s performance that is not required by, or presented in
accordance with, GAAP. The Company reports such ratio 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, including the Company’s
ability to generate earnings sufficient to service its debt, and
enhance understanding of the Company’s financial performance and
highlight operational trends. However, such ratio should not be
considered as an alternative to net income or any other performance
measures derived in accordance with GAAP. The Company’s
presentation of such ratio may not be comparable to similarly
titled ratios used by other companies. The table below provides the
calculation of such ratio as of June 30, 2017.
|
Total leverage ratio, net of cash |
|
|
as of |
June 30, 2017 |
|
|
|
($ 000) |
|
|
|
|
Senior
notes payable |
|
$ |
73,450 |
|
Debt
issuance costs |
|
|
3,425 |
|
|
Senior
notes outstanding |
|
$ |
76,875 |
|
|
|
|
|
Subordinated notes payable |
|
$ |
15,056 |
|
Debt
issuance costs |
|
|
674 |
|
|
Subordinated notes outstanding |
|
$ |
15,730 |
|
|
|
|
|
Total notes
outstanding |
|
$ |
92,605 |
|
Less
cash |
|
|
(11,274 |
) |
Notes
outstanding, net of cash |
|
$ |
81,331 |
|
Consolidated EBITDA for the |
|
|
|
last
twelve months |
|
$ |
27,601 |
|
|
|
|
|
Total
leverage ratio, net of cash |
|
|
2.95 |
|
|
|
|
|
FINANCIAL DISCUSSION FOR SECOND QUARTER
2017:
Revenues
Total revenues increased 1.0% in the three
months ended June 30, 2017, to $17.4 million from $17.2 million in
the three months ended June 30, 2016. The increase in network
access associated with the FCC’s ACAM program, internet, video and
security revenue were partially offset by the decrease in local
service revenue associated with residential RLEC access line
equivalents. The table below provides the components of the
Company’s revenues for the three months ended June 30, 2017,
compared to the same period of 2016.
|
|
|
Three Months Ended June 30, |
|
Change |
|
|
|
|
2017 |
|
2016 |
|
Amount |
|
Percent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
Local
services |
$ |
5,762 |
|
$ |
5,849 |
|
$ |
(87 |
) |
|
(1.5 |
) |
% |
|
Network
access |
|
5,604 |
|
|
5,345 |
|
|
259 |
|
|
4.8 |
|
% |
|
Internet |
|
3,958 |
|
|
3,879 |
|
|
79 |
|
|
2.0 |
|
% |
|
Transport
services |
|
1,168 |
|
|
1,230 |
|
|
(62 |
) |
|
(5.0 |
) |
% |
|
Video and
security |
|
747 |
|
|
718 |
|
|
29 |
|
|
4.0 |
|
% |
|
Managed
services |
|
167 |
|
|
211 |
|
|
(44 |
) |
|
(20.9 |
) |
% |
|
Total |
$ |
17,406 |
|
$ |
17,232 |
|
$ |
174 |
|
|
1.0 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
Local services revenue
decreased 1.5% in the three months ended June 30, 2017, to slightly
less than $5.8 million from slightly more than $5.8 million in the
three months ended June 30, 2016. The decline in RLEC residential
voice access lines and related revenue, such as long distance,
accounted for a decrease of $0.3 million. A portion of the RLEC
decrease is recovered through the CAF, which is categorized as
interstate access revenue. The decline in RLEC residential voice
access revenue was partially offset by an increase in HPBX and
fiber revenue of $0.2 million. Network access
revenue increased 4.8% in the three months ended June 30, 2017, to
$5.6 million from $5.3 million in the three months ended June 30,
2016. The initial ACAM revenue and transition payments and CAF
revenue increased $2.1 million. A one-time settlement accounted for
an increase of $0.2 million. These increases were partially offset
by a $1.6 million decrease in interstate access, including
universal service funding. End-user based fees decreased $0.2
million and special access charges decreased by $0.2 million.
Internet revenue increased 2.0% in the three
months ended June 30, 2017, to $4.0 million from $3.9 million in
the three months ended June 30, 2016. Increased data speeds and
equipment rental fees accounted for the increase in revenue.
Transport services revenue decreased 5.0% in the
three months ended June 30, 2017, to just under $1.2 million from
just over $1.2 million in the three months ended June 30, 2016,
reflecting customer churn and market pricing. Video and
security revenue in the three months ended June 30, 2017,
increased 4.0% from the three months ended June 30, 2016, to remain
at $0.7 million in both periods reflecting increases in IPTV and
security revenue. Managed services revenue
decreased 20.9% in the three months ended June 30, 2017, to just
under $0.2 million from just over $0.2 million in the three months
ended June 30, 2016, reflecting a decrease in professional services
revenue.
Operating Expenses
Operating expenses in the three months ended
June 30, 2017, increased 0.2% to $12.4 million from $12.3 million
in the three months ended June 30, 2016. Cost of
services increased 2.1% to just over $8.0 million in the
three months ended June 30, 2017, from just under $7.9 million in
the three months ended June 30, 2016. Network and other operations
expense increased just over $0.1 million and pole rental expense
increased by $0.1 million. These increases were partially offset by
a decrease of $0.1 million in customer service and sales costs.
Circuit, access, internet and cable costs were unchanged.
Selling, general and administrative
expenses increased 2.5% to $2.5 million in the
three months ended June 30, 2017, from $2.4 million in the three
months ended June 30, 2016. The increase was the result of a
transition from the stock-based senior management bonus plan, which
had been in place for three years, to a cash-based bonus plan for
2017. Depreciation and amortization decreased
10.2% in the three months ended June 30, 2017, to $1.8 million from
$2.1 million in three months ended June 30, 2016. The amortization
of the telephone plant adjustment decreased $0.1 million. New
England RLEC depreciation and amortization of other intangible
assets decreased $0.1 million, driven primarily by the end of
amortization of intangibles associated with acquisitions.
Operating Income
Operating income in the three months ended June
30, 2017, increased 3.1% to $5.1 million from $4.9 million in the
three months ended June 30, 2016, primarily related to the increase
in revenue associated with the FCC’s A-CAM program during second
quarter 2017.
Interest Expense
Interest expense in the three months ended June
30, 2017, decreased 5.5% to $2.6 million from $2.7 million in the
three months ended June 30, 2016. The lower outstanding balance on
the senior credit facility accounted for the decrease. The Company
has repaid $8.1 million of principal since it funded new senior and
subordinated credit facilities in February 2016. The credit
facilities mature in 2021.
Net Income
Reflecting the changes noted above, net income
increased $0.2 million to $1.5 million for the three months ended
June 30, 2017, when compared to $1.3 million for the three months
ended June 30, 2016, primarily driven by new ACAM revenue.
Consolidated EBITDA
Based on the changes noted above, Consolidated
EBITDA decreased by less than $0.1 million to $7.0 million for the
three months ended June 30, 2017, when compared to just under $7.1
million for the three months ended June 30, 2016. Consolidated
EBITDA was $7.2 million in the first quarter of 2017, including
$0.2 million in annual CoBank dividends. Stock-based compensation
and other excluded expenses are added back in the calculation of
Consolidated EBITDA. See financial tables for a reconciliation of
Consolidated EBITDA to net income.
Balance Sheet
As of June 30, 2017, the Company had cash and
cash equivalents of $11.3 million compared to $10.5 million at
the end of 2016. The growth in cash reflects the continuing
strength of the Company’s operations. During second quarter 2017,
the Company reduced its senior credit facility balance to $76.9
million through $1.0 million in scheduled principal payments. Total
notes payable as of June 30, 2017, was $92.6 million. The $5.0
million revolver remains undrawn. The Company made an additional
prepayment of $3.0 million today on its senior credit facility as
part of its strategy to reduce its leverage.
Capital Expenditures
Capital expenditures were $2.5 million for the
three months ended June 30, 2017, compared to $1.5 million in the
same period in 2016. The buildout requirements of the ACAM program
and the Company’s plans to convert its billing and operations
systems to a single platform are primarily responsible for this
increase. The Company has amended its credit facility to allow for
the potential increase in capital expenditures to $8.5 million and
$7.5 million in 2017 and 2018, respectively.
Second Quarter Earnings Conference
Call
Otelco has scheduled a conference call, which
will be broadcast live over the internet, on Wednesday, August 2,
2017, at 11:30 a.m. (Eastern Time). To participate in the call,
participants should dial (719) 457-2698 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 1377732.
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 over 98,000 voice and data access lines and other
related services, 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
impact the Company’s strategic review and exploration process or
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. There can be
no assurance regarding the outcome of any decisions that the
Company may make regarding strategic alternatives in connection
with the strategic review and exploration process. 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. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(in thousands, except share par value and share
amounts) |
(unaudited) |
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Assets |
|
|
|
|
|
Current
assets |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
$ |
11,274 |
|
|
$ |
10,538 |
|
|
|
|
Accounts receivable: |
|
|
|
|
|
|
|
|
|
Due from subscribers, net of allowance for doubtful |
|
|
|
|
|
|
|
accounts of $203 and $187, respectively |
|
|
4,631 |
|
|
|
5,035 |
|
|
|
|
Other |
|
|
|
|
|
1,537 |
|
|
|
1,528 |
|
|
|
|
Materials and supplies |
|
|
|
|
2,533 |
|
|
|
2,184 |
|
|
|
|
Prepaid expenses |
|
|
|
|
|
1,337 |
|
|
|
2,912 |
|
|
|
|
|
Total current assets |
|
|
|
|
21,312 |
|
|
|
22,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
|
|
|
49,604 |
|
|
|
49,271 |
|
|
|
Goodwill |
|
|
|
|
|
|
44,976 |
|
|
|
44,976 |
|
|
|
Intangible
assets, net |
|
|
|
|
|
1,542 |
|
|
|
1,785 |
|
|
|
Investments |
|
|
|
|
|
1,644 |
|
|
|
1,821 |
|
|
|
Other
assets |
|
|
|
|
|
243 |
|
|
|
222 |
|
|
|
|
|
Total assets |
|
|
|
|
$ |
119,321 |
|
|
$ |
120,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Deficit |
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
$ |
751 |
|
|
$ |
1,477 |
|
|
|
|
Accrued expenses |
|
|
|
|
|
5,346 |
|
|
|
4,730 |
|
|
|
|
Advance billings and payments |
|
|
|
|
1,525 |
|
|
|
1,487 |
|
|
|
|
Customer deposits |
|
|
|
|
|
67 |
|
|
|
62 |
|
|
|
|
Current maturity of long-term notes payable, net of debt
issuance cost |
|
2,959 |
|
|
|
6,071 |
|
|
|
|
|
Total current liabilities |
|
|
|
|
10,648 |
|
|
|
13,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes |
|
|
|
|
|
28,280 |
|
|
|
28,280 |
|
|
|
Advance
billings and payments |
|
|
|
|
2,444 |
|
|
|
1,987 |
|
|
|
Other
liabilities |
|
|
|
|
|
8 |
|
|
|
26 |
|
|
|
Long-term
notes payable, less current maturities and debt issuance cost |
|
85,547 |
|
|
|
86,860 |
|
|
|
|
|
Total liabilities |
|
|
|
|
|
126,927 |
|
|
|
130,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit |
|
|
|
|
|
|
|
|
|
|
Class A Common Stock, $.01 par value-authorized 10,000,000
shares; |
|
|
|
|
|
|
issued and outstanding 3,346,689 and 3,291,750 shares,
respectively |
|
34 |
|
|
|
33 |
|
|
|
|
Additional paid in capital |
|
|
|
|
4,143 |
|
|
|
4,186 |
|
|
|
|
Accumulated deficit |
|
|
|
|
(11,783 |
) |
|
|
(14,927 |
) |
|
|
|
|
Total stockholders' deficit |
|
|
|
|
(7,606 |
) |
|
|
(10,708 |
) |
|
|
|
|
Total liabilities and stockholders' deficit |
|
$ |
119,321 |
|
|
$ |
120,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
Revenues |
|
|
|
|
$ |
17,406 |
|
|
$ |
17,232 |
|
|
$ |
34,786 |
|
|
$ |
34,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
|
8,044 |
|
|
|
7,875 |
|
|
|
15,857 |
|
|
|
16,005 |
|
|
Selling, general and administrative expenses |
|
2,467 |
|
|
|
2,407 |
|
|
|
5,174 |
|
|
|
4,983 |
|
|
Depreciation and amortization |
|
|
1,842 |
|
|
|
2,051 |
|
|
|
3,681 |
|
|
|
4,089 |
|
|
|
Total operating expenses |
|
|
12,353 |
|
|
|
12,333 |
|
|
|
24,712 |
|
|
|
25,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations |
|
|
5,053 |
|
|
|
4,899 |
|
|
|
10,074 |
|
|
|
9,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense) |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
(2,571 |
) |
|
|
(2,721 |
) |
|
|
(5,182 |
) |
|
|
(5,203 |
) |
|
Other income |
|
|
|
- |
|
|
|
4 |
|
|
|
203 |
|
|
|
623 |
|
|
|
Total other expense |
|
|
(2,571 |
) |
|
|
(2,717 |
) |
|
|
(4,979 |
) |
|
|
(4,580 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income tax expense |
|
|
2,482 |
|
|
|
2,182 |
|
|
|
5,095 |
|
|
|
5,065 |
|
Income tax
expense |
|
|
|
(946 |
) |
|
|
(858 |
) |
|
|
(1,951 |
) |
|
|
(1,991 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
|
|
|
$ |
1,536 |
|
|
$ |
1,324 |
|
|
$ |
3,144 |
|
|
$ |
3,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
3,346,689 |
|
|
|
3,283,177 |
|
|
|
3,346,689 |
|
|
|
3,283,177 |
|
|
|
Diluted |
|
|
|
3,445,632 |
|
|
|
3,380,445 |
|
|
|
3,445,632 |
|
|
|
3,378,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net
income per common share |
|
$ |
0.46 |
|
|
$ |
0.40 |
|
|
$ |
0.94 |
|
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net
income per common share |
|
$ |
0.45 |
|
|
$ |
0.39 |
|
|
$ |
0.91 |
|
|
$ |
0.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTELCO INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(in thousands) |
(unaudited) |
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
Cash flows
from operating activities: |
|
|
|
|
|
Net income |
|
|
|
$ |
3,144 |
|
|
$ |
3,074 |
|
|
Adjustments to reconcile net income to cash flows provided by
operating activities: |
|
|
|
|
|
|
Depreciation |
|
|
|
3,479 |
|
|
|
3,571 |
|
|
|
|
Amortization |
|
|
|
202 |
|
|
|
518 |
|
|
|
|
Amortization of loan costs |
|
|
621 |
|
|
|
609 |
|
|
|
|
Loss on
extinguishment of debt |
|
|
- |
|
|
|
155 |
|
|
|
|
Provision
for uncollectible accounts receivable |
|
|
206 |
|
|
|
119 |
|
|
|
|
Stock-based
compensation |
|
|
166 |
|
|
|
199 |
|
|
|
|
Payment in
kind interest - subordinated debt |
|
|
157 |
|
|
|
115 |
|
|
|
|
Changes in
operating assets and liabilities |
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
189 |
|
|
|
115 |
|
|
|
|
|
|
Materials
and supplies |
|
|
(349 |
) |
|
|
(173 |
) |
|
|
|
|
|
Prepaid
expenses and other assets |
|
|
1,554 |
|
|
|
1,246 |
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
|
(110 |
) |
|
|
217 |
|
|
|
|
|
|
Advance
billings and payments |
|
|
495 |
|
|
|
(67 |
) |
|
|
|
|
|
Other
liabilities |
|
|
|
(13 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
Net cash
from operating activities |
|
|
9,741 |
|
|
|
9,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
used in investing activities: |
|
|
|
|
|
Acquisition and construction of property and equipment |
|
|
(3,758 |
) |
|
|
(2,215 |
) |
|
|
|
|
|
|
Net cash
used in investing activities |
|
|
(3,758 |
) |
|
|
(2,215 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows
used in financing activities: |
|
|
|
|
|
Loan origination costs |
|
|
|
(77 |
) |
|
|
(5,215 |
) |
|
Principal repayment of long-term notes payable |
|
|
(5,125 |
) |
|
|
(101,053 |
) |
|
Proceeds from loan refinancing |
|
|
- |
|
|
|
100,300 |
|
|
Retirement of CoBank equity |
|
|
164 |
|
|
|
- |
|
|
Tax withholdings paid on behalf of employees for restricted
stock units |
|
|
(209 |
) |
|
|
(109 |
) |
|
|
|
|
|
|
Net cash
used in financing activities |
|
|
(5,247 |
) |
|
|
(6,077 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents |
|
|
736 |
|
|
|
1,392 |
|
Cash and
cash equivalents, beginning of period |
|
|
10,538 |
|
|
|
6,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents, end of period |
|
$ |
11,274 |
|
|
$ |
8,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
Interest paid |
|
|
|
$ |
4,456 |
|
|
$ |
3,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
|
$ |
692 |
|
|
$ |
685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Class B common stock to Class A common stock |
|
$ |
- |
|
|
$ |
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Class A common stock |
|
$ |
1 |
|
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact:
Curtis Garner
Chief Financial Officer
Otelco Inc.
205-625-3580
Curtis@otelcotel.com
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