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Otelco Reports Second Quarter 2010 Results

^{Published on 2010-08-03 14:16:33 - Market Wire}
 

 - Total revenues of $26.5 million for second quarter 2010. - Operating income of $7.0 million for second quarter 2010. - Adjusted EBITDA (as defined below) of $12.9 million for second quarter 2010. 

 Distribution to Income Deposit Security Holders ----------------------------------------------- 

 Second Quarter 2010 Financial Summary (Dollars in thousands, except per share amounts) Change -------------------- 2Q 2009 2Q 2010 Amount Percent ------------------------------------------------------------------------- Revenues $ 25,797 $ 26,511 $ 714 2.8% Operating income $ 5,716 $ 7,011 $ 1,295 22.7% Interest expense $ (6,447) $ (6,179) $ (268) (4.2)% Net income available to stockholders $ 511 $ 417 $ (94) * Basic net income per share $ 0.04 $ 0.03 $ (0.01) * Diluted net income per share $ 0.03 $ 0.03 $ 0.00 * Adjusted EBITDA(a) $ 12,352 $ 12,890 $ 538 4.4% Capital expenditures $ 2,349 $ 2,333 $ (16) (0.7)% * Not a meaningful calculation Change Six Months Ended June 30, -------------------- YTD 2009 YTD 2010 Amount Percent ------------------------------------------------------------------------- Revenues $ 51,297 $ 52,305 $ 1,008 2.0% Operating income $ 10,181 $ 12,880 $ 2,699 26.5% Interest expense $ (13,046) $ (12,168) $ (878) (6.7)% Net income (loss) available to stockholders $ (1,323) $ 32 $ 1,355 * Basic net income (loss) per share $ (0.10) $ 0.00 $ 0.10 * Diluted net income (loss) per share $ (0.11) $ 0.00 $ 0.11 * Adjusted EBITDA(a) $ 23,854 $ 25,220 $ 1,366 5.7% Capital expenditures $ 3,578 $ 4,087 $ 509 14.2% * Not a meaningful calculation Reconciliation of Adjusted EBITDA to Net Income (Loss) ------------------------------------------------------ Three Months Ended Six Months Ended June 30, June 30, 2009 2010 2009 2010 ---------- ---------- ---------- ---------- Net income (loss) $ 511 $ 417 $ (1,323) $ 32 Add: Depreciation 3,496 3,327 7,177 6,900 Interest expense - net of premium 5,753 5,840 11,670 11,491 Interest expense - caplet cost 356 - 700 - Interest expense - amortize loan cost 338 339 676 677 Income tax expense (benefit) 61 262 (964) 1 Change in fair value of derivatives (1,290) 176 (339) 1,062 Loan fees 19 19 38 38 Amortization - intangibles 3,108 2,510 6,219 5,019 ---------- ---------- ---------- ---------- Adjusted EBITDA $ 12,352 $ 12,890 $ 23,854 $ 25,220 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (a) Adjusted EBITDA is defined as consolidated net income (loss) plus interest expense, depreciation and amortization, income taxes and certain non-recurring fees, expenses or charges and other non-cash charges reducing consolidated net income. Adjusted EBITDA is not a measure calculated in accordance with generally acceptable accounting principles (GAAP). While providing useful information, Adjusted EBITDA should not be considered in isolation or as a substitute for consolidated statement of operations data prepared in accordance with GAAP. The Company believes Adjusted EBITDA is useful as a tool to analyze the Company on the basis of operating performance and leverage. The definition of Adjusted EBITDA corresponds to the definition of Adjusted EBITDA in the indenture governing the Company's senior subordinated notes and its credit facility and certain of the covenants contained therein. The Company's presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. Otelco Inc. - Key Operating Statistics -------------------------------------- At and for the At and for the Year Ended Three Months Ended December 31, March 31, June 30, % Change 2008 2009 2010 2010 2010 --------- --------- --------- --------- --------- Otelco access line equivalents(1) 100,043 100,356 100,522 100,126 (0.4)% RLEC and other services: Voice access lines 51,530 48,215 47,552 46,788 (1.6)% Data access lines 18,709 20,066 20,614 20,703 0.4 % --------- --------- --------- --------- --------- Access line equivalents(1) 70,239 68,281 68,166 67,491 (1.0)% Cable television customers 4,082 4,195 4,239 4,205 (0.8)% Additional internet customers 11,864 9,116 8,528 8,048 (5.6)% RLEC dial-up 1,183 786 656 551 (16.0)% Other dial-up 9,213 6,439 5,765 5,340 (7.4)% Other data lines 1,468 1,891 2,107 2,157 2.4% Revenues (dollars in millions) $54.4 $61.3 $14.7 $14.4 (2.0)% CLEC: Voice access lines 26,558 28,647 28,889 29,070 0.6% Data access lines 3,246 3,428 3,467 3,565 2.8% --------- --------- --------- --------- --------- Access line equivalents(1) 29,804 32,075 32,356 32,635 0.9% Wholesale network connections 98,187 132,324 137,318 142,837 4.0% Revenues (dollars in millions) $22.7 $42.5 $11.1 $12.1 9.0% (1) We define access line equivalents as voice access lines and data access lines (including cable modems, digital subscriber lines, and dedicated data access trunks). FINANCIAL DISCUSSION FOR SECOND QUARTER 2010: Revenue ------- 

 Operating Expenses ------------------ 

 Interest Expense ---------------- 

 Change in Fair Value of Derivatives ----------------------------------- 

 Adjusted EBITDA --------------- 

 Balance Sheet ------------- 

 Capital Expenditures -------------------- 

 Second Quarter Earnings Conference Call --------------------------------------- 

 OTELCO INC. Consolidated Balance Sheets As of As of December 31, June 30, 2009 2010 ------------ ------------ (unaudited) Assets Current assets Cash and cash equivalents $ 17,731,044 $ 22,743,256 Accounts receivable: Due from subscribers, net of allowance for doubtful accounts of $473,572 and $254,645 respectively 4,650,909 4,584,262 Unbilled receivables 2,444,979 2,425,742 Other 3,200,945 3,218,327 Materials and supplies 1,969,966 1,994,968 Prepaid expenses 1,342,249 968,598 Income tax receivable 389,486 - Deferred income taxes 744,531 744,531 ------------ ------------ Total current assets 32,474,109 36,679,684 ------------ ------------ Property and equipment, net 69,028,973 65,451,303 Goodwill 188,190,078 188,190,078 Intangible assets, net 34,218,115 29,966,542 Investments 1,991,158 1,978,404 Deferred financing costs 6,964,015 6,441,873 Deferred income taxes 4,482,430 4,482,430 Other assets 179,325 127,553 ------------ ------------ Total assets $337,528,203 $333,317,867 ------------ ------------ ------------ ------------ Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 3,145,728 $ 2,191,810 Accrued expenses 6,167,023 6,680,436 Advance billings and payments 1,665,422 1,627,670 Deferred income taxes 394,850 394,850 Customer deposits 172,109 179,229 ------------ ------------ Total current liabilities 11,545,132 11,073,995 ------------ ------------ Deferred income taxes 42,239,262 42,239,262 Interest rate swaps 1,592,813 2,655,262 Advance billings and payments 698,352 677,660 Other liabilities 165,968 156,807 Long-term notes payable 273,717,301 277,757,514 ------------ ------------ Total liabilities 329,958,828 334,560,500 ------------ ------------ Class B common convertible to senior subordinated notes 4,085,033 - Stockholders' equity Class A Common stock, $.01 par value- authorized 20,000,000 shares; issued and outstanding 12,676,733 and 13,221,404 shares, respectively 126,767 132,214 Class B Common stock, $.01 par value- authorized 800,000 shares; issued and outstanding 544,671 and 0 shares, respectively 5,447 - Additional paid in capital 10,340,862 5,582,263 Retained deficit (6,988,734) (6,957,110) ------------ ------------ Total stockholders' equity 3,484,342 (1,242,633) ------------ ------------ Total liabilities and stockholders' equity $337,528,203 $333,317,867 ------------ ------------ ------------ ------------ OTELCO INC. Consolidated Statements of Operations (unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------------- ------------------------- 2009 2010 2009 2010 ------------ ------------ ------------ ------------ Revenues Local services $ 12,063,419 $ 12,286,314 $ 23,918,400 $ 24,524,988 Network access 8,265,063 8,603,635 16,359,196 16,588,604 Cable television 612,363 698,739 1,219,050 1,364,574 Internet 3,500,149 3,527,126 7,041,826 7,038,232 Transport services 1,355,677 1,395,130 2,758,376 2,788,755 ------------ ------------ ------------ ------------ Total revenues 25,796,671 26,510,944 51,296,848 52,305,153 ------------ ------------ ------------ ------------ Operating expenses Cost of services and products 10,133,256 10,427,781 20,799,712 21,037,973 Selling, general and administrative expenses 3,342,855 3,236,515 6,919,529 6,467,512 Depreciation and amortization 6,604,748 5,835,311 13,396,586 11,919,602 ------------ ------------ ------------ ------------ Total operating expenses 20,080,859 19,499,607 41,115,827 39,425,087 ------------ ------------ ------------ ------------ Income from operations 5,715,812 7,011,337 10,181,021 12,880,066 ------------ ------------ ------------ ------------ Other income (expense) Interest expense (6,446,902) (6,179,470) (13,045,855) (12,168,112) Change in fair value of derivatives 1,289,832 (176,279) 338,729 (1,062,449) Other income 12,510 24,027 238,371 382,859 ------------ ------------ ------------ ------------ Total other expense (5,144,560) (6,331,722) (12,468,755) (12,847,702) ------------ ------------ ------------ ------------ Income (loss) before income tax 571,252 679,615 (2,287,734) 32,364 Income tax (expense) benefit (60,552) (262,339) 964,401 (744) ------------ ------------ ------------ ------------ Net income (loss) available to common stockholders $ 510,700 $ 417,276 $ (1,323,333)$ 31,620 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Weighted average shares outstanding: Basic 12,676,733 12,812,901 12,676,733 12,747,540 Diluted 13,221,404 13,221,404 13,221,404 13,221,404 Net income (loss) per share: Basic $ 0.04 $ 0.03 $ (0.10) $ 0.00 Diluted $ 0.03 $ 0.03 $ (0.11) $ 0.00 Dividends declared per share $ 0.18 $ 0.18 $ 0.35 $ 0.35 OTELCO INC. Consolidated Statements of Cash Flows (unaudited) Six Months Ended June 30, 2009 2010 ------------ ------------ Cash flows from operating activities: Net income (loss) $ (1,323,333)$ 31,620 Adjustments to reconcile net income to cash flows from operating activities: Depreciation 7,176,803 6,900,218 Amortization 6,219,783 5,019,383 Interest rate caplet 699,783 - Amortization of debt premium (39,918) (44,820) Amortization of loan costs 675,953 677,302 Change in fair value of derivatives (338,729) 1,062,449 Provision for uncollectible revenue 149,765 65,581 Changes in assets and liabilities; net of assets and liabilities acquired: Accounts receivables 86,941 53,458 Material and supplies 239,576 (25,002) Income tax receivable - 389,486 Prepaid expenses and other assets 234,189 373,651 Accounts payable and accrued liabilities (518,565) (428,566) Advance billings and payments (46,205) (58,444) Other liabilities (30,003) (2,041) ------------ ------------ Net cash from operating activities 13,186,040 14,014,275 ------------ ------------ Cash flows from investing activities: Acquisition and construction of property and equipment (3,577,514) (4,087,263) Adjustment to the purchase of the CR Companies 170,175 - Deferred charges - (1,041) ------------ ------------ Net cash used in investing activities (3,407,339) (4,088,304) ------------ ------------ Cash flows from financing activities: Cash dividends paid (4,468,548) (4,564,546) Direct cost of exchange of Class B shares for Class A shares - (194,053) Loan origination costs - (155,160) ------------ ------------ Net cash used in financing activities (4,468,548) (4,913,759) ------------ ------------ Net increase in cash and cash equivalents 5,310,153 5,012,212 Cash and cash equivalents, beginning of period 13,542,255 17,731,044 ------------ ------------ Cash and cash equivalents, end of period $ 18,852,408 $ 22,743,256 ------------ ------------ ------------ ------------ Supplemental disclosures of cash flow information: Interest paid $ 12,018,858 $ 11,535,629 ------------ ------------ ------------ ------------ Income taxes received $ (15,342) $ (289,163) ------------ ------------ ------------ ------------