Exhibit 99.2
COMBINED INTERIM FINANCIAL INFORMATION OF GRANBY HOLDINGS, INC. (and subsidiary),
PINE TREE HOLDINGS, INC. (and subsidiaries), and WAR HOLDINGS, INC. (and subsidiary)
Combined Balance Sheet
September 30, 2008
(unaudited)
ASSETS
(in thousands)
Current assets | ||||
Cash and cash equivalents | $ | 146 | ||
Accounts receivable, net of allowance for doubtful accounts of $1,223 | 4,123 | |||
Materials and supplies | 219 | |||
Prepaid expenses and other current assets | 377 | |||
Total current assets | 4,865 | |||
Property, plant and equipment, net | 22,284 | |||
Deferred financing costs, net | 1,354 | |||
Intangible assets, net | 9,552 | |||
Covenants not to compete, net | 2 | |||
Goodwill | 42,718 | |||
Other assets | 841 | |||
Total assets | $ | 81,616 | ||
- 1 - -
COMBINED INTERIM FINANCIAL INFORMATION OF GRANBY HOLDINGS, INC. (and subsidiary),
PINE TREE HOLDINGS, INC. (and subsidiaries), and WAR HOLDINGS, INC. (and subsidiary)
Combined Balance Sheet
September 30, 2008
(unaudited)
LIABILITIES AND STOCKHOLDER'S EQUITY
(in thousands)
Current liabilities | ||||
Current portion of long-term debt | $ | 2,200 | ||
Borrowings under revolving credit | 1,500 | |||
Accounts payable | 1,142 | |||
Accrued expenses and other current liabilities | 1,793 | |||
Total current liabilities | 6,635 | |||
Long-term debt, net of current portion | 62,597 | |||
Deferred income taxes, net | 2,417 | |||
Fair value of interest rate swap | 1,473 | |||
Other liabilities | 23 | |||
Total liabilities | 73,145 | |||
Stockholder's equity | ||||
Granby Holdings, Inc. Common stock, $.01 par value - 1,000 shares authorized, 100 issued and outstanding | ||||
Pine Tree Holdings, Inc. Common stock, $.01 par value - 4,000 shares authorized, 200 issued and outstanding | ||||
War Holdings, Inc. Common stock, $.01 par value - 1,000 shares authorized, 100 issued and outstanding | — | |||
Capital contributions from Parent | 14,775 | |||
Accumulated deficit | (108 | ) | ||
14,667 | ||||
Amounts due from affiliates | (6,196 | ) | ||
Total stockholder's equity | 8,471 | |||
Total liabilities and stockholder's equity | $ | 81,616 |
- 2 - -
COMBINED INTERIM FINANCIAL INFORMATION OF GRANBY HOLDINGS, INC. (and subsidiary),
PINE TREE HOLDINGS, INC. (and subsidiaries), and WAR HOLDINGS, INC. (and subsidiary)
Combined Statements of Operations
For the Nine Months Ended September 30, 2008 and September 30, 2007
(unaudited)
(in thousands)
2008 | 2007 | |||||||
Operating revenues | ||||||||
Local service | $ | 11,683 | $ | 10,943 | ||||
Access service | 6,995 | 6,869 | ||||||
Toll | 2,220 | 2,140 | ||||||
Online services | 1,811 | 1,832 | ||||||
Other | 1,851 | 1,760 | ||||||
Total operating revenues | 24,560 | 23,544 | ||||||
Operating expenses | ||||||||
Cost of access and goods sold | 5,054 | 4,163 | ||||||
Plant operations | 3,656 | 3,170 | ||||||
Depreciation and amortization | 3,601 | 4,109 | ||||||
Customer operations | 1,511 | 1,414 | ||||||
Corporate operations | 1,322 | 1,296 | ||||||
Marketing and sales | 944 | 589 | ||||||
General and administrative | 3,118 | 2,371 | ||||||
Total operating expenses | 19,206 | 17,112 | ||||||
Income from operations | 5,354 | 6,432 | ||||||
Interest expense | (5,640 | ) | (5,469 | ) | ||||
Other income, net | 67 | 58 | ||||||
(Loss) income from operations before income taxes | (219 | ) | 1,021 | |||||
Income tax (benefit) provision | (88 | ) | 407 | |||||
Net (loss) income | $ | (131 | ) | $ | 614 | |||
- 3 - -
COMBINED INTERIM FINANCIAL INFORMATION OF GRANBY HOLDINGS, INC. (and subsidiary),
PINE TREE HOLDINGS, INC. (and subsidiaries), and WAR HOLDINGS, INC. (and subsidiary)
Combined Statements of Cash Flows
For the Nine Months Ended September 30, 2008 and September 30, 2007
(unaudited)
(in thousands)
2008 | 2007 | |||||||
Cash flows from operating activities | ||||||||
Net (loss) income | $ | (131 | ) | $ | 614 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 3,601 | 4,109 | ||||||
Amortization of deferred financing costs | 217 | 142 | ||||||
Deferred income taxes | (67 | ) | 408 | |||||
Noncash patronage dividends | (67 | ) | (67 | ) | ||||
Noncash interest rate swap | 119 | 58 | ||||||
Decrease (increase) in | ||||||||
Accounts receivable | 447 | 572 | ||||||
Materials and supplies | 16 | (37 | ) | |||||
Prepaid expenses and other current assets | (223 | ) | (263 | ) | ||||
Other assets | — | 11 | ||||||
Decrease in | ||||||||
Accounts payable | (191 | ) | (137 | ) | ||||
Accrued expenses and other current liabilities | (769 | ) | (145 | ) | ||||
Other liabilities | — | (11 | ) | |||||
Net cash provided by operating activities | 2,952 | 5,254 | ||||||
- 4 - -
COMBINED INTERIM FINANCIAL INFORMATION OF GRANBY HOLDINGS, INC. (and subsidiary),
PINE TREE HOLDINGS, INC. (and subsidiaries), and WAR HOLDINGS, INC. (and subsidiary)
Combined Statements of Cash Flows (Concluded)
For the Nine Months Ended September 30, 2008 and September 30, 2007
(unaudited)
(in thousands)
2008 | 2007 | |||||||
Cash flows from investing activities | ||||||||
Capital expenditures | (1,799 | ) | (2,274 | ) | ||||
Net cash used by investing activities | (1,799 | ) | (2,274 | ) | ||||
Cash flows from financing activities | ||||||||
Principal payments on long-term debt | (1,650 | ) | (1,159 | ) | ||||
Borrowings under revolving credit | 1,500 | — | ||||||
Payments on capital leases | — | (169 | ) | |||||
Dividend to parent | (530 | ) | — | |||||
Advances to affiliates | (338 | ) | (1,818 | ) | ||||
Net cash used by financing activities | (1,018 | ) | (3,146 | ) | ||||
Net increase (decrease) in cash | 135 | (166 | ) | |||||
Cash beginning of year | 11 | 197 | ||||||
Cash, end of period | $ | 146 | $ | 31 | ||||
- 5 - -
COMBINED INTERIM FINANCIAL INFORMATION OF GRANBY HOLDINGS, INC. (and subsidiary),
PINE TREE HOLDINGS, INC. (and subsidiaries), and WAR HOLDINGS, INC. (and subsidiary)
NOTES TO COMBINED FINANCIAL INFORMATION
(unaudited)
(financial data in thousands)
1. | Basis of Presentation |
The accompanying unaudited combined financial information (CFI) has been prepared in contemplation of the sale of the Companies as described in Note 4 and includes the historical basis of assets and liabilities and historical results of operations of the Companies, which are wholly-owned subsidiaries of the Parent. The CFI has been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with Article 10 of Regulation S-X. Accordingly, it does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All material intercompany transactions and balances have been eliminated. Intercompany transactions shown in the CFI are balances carried with the Parent or its affiliate subsidiary.
2. | Long Term Debt and Notes Payable |
During the nine month period ended September 30, 2008, the Companies borrowed up to $2,000 under the Revolving Credit facility. The outstanding balance, net of repayments, was $1,500 at September 30, 2008.
3. | Recent Accounting Pronouncement |
Effective January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). In February 2008, the Financial Accounting Standards Board (“FASB”) issued a staff position (FSP 157-2) that delays the effective date of SFAS 157 for all non-financial assets and liabilities except those recognized or disclosed at least annually. Therefore, the Company has adopted the provisions of SFAS 157 with respect to its financial assets and liabilities only. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. Valuation techniques used to measure fair value under SFAS 157 must maximize the use of observable inputs. The standard describes a fair value hierarchy utilizing three levels of input. The first two levels are considered observable and the third, unobservable:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than Level 1 that are directly or indirectly observable, such as quoted prices for similar assets or liabilities or quoted prices in markets which are not active. The inputs are generally observable or can be corroborated in observable markets.
Level 3 – Unobservable inputs where there is little or no market activity to support valuation.
The adoption of SFAS 157 did not have a material impact on the combined financial information.
- 6 - -
COMBINED INTERIM FINANCIAL INFORMATION OF GRANBY HOLDINGS, INC. (and subsidiary),
PINE TREE HOLDINGS, INC. (and subsidiaries), and WAR HOLDINGS, INC. (and subsidiary)
NOTES TO COMBINED FINANCIAL INFORMATION
(unaudited)
(financial data in thousands)
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115” (“SFAS 159”). Under SFAS 159, a company may elect to measure many eligible financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The Company did not elect to adopt the fair value option under SFAS 159 for any items during the nine months ended September 30, 2008.
4. | Subsequent Events |
On August 7, 2008, the Parent signed a definitive agreement to sell all of the outstanding stock in the Companies to Otelco, Inc., a publicly traded telecommunications company headquartered in Alabama, for approximately $101,000. The transaction closed on October 31, 2008.
On January 16, 2008, The Granby Telephone & Telegraph Company (the subsidiary of Granby Holdings, Inc.) was notified by the Universal Administrative Company (“USAC”) that it had been randomly selected for an examination of compliance with FCC rules in relation to disbursements received as a beneficiary of the High Cost Program of the Universal Service Fund. Granby was informed that the examination would be performed under the direction of the Office of the Inspector General (“OIG”) of the FCC by an outside audit firm and would cover disbursements received during the period July 1, 2006 through June 30, 2007. Examination procedures commenced on February 18, 2008 by the audit firm; however, the firm subsequently withdrew from the engagement without comment and the results of the examination are unknown at this time.
- 7 - -