Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 25, 2016 | |
Common Class B [Member] | ||
Entity Common Stock, Shares Outstanding (in shares) | 0 | |
Common Class A [Member] | ||
Entity Common Stock, Shares Outstanding (in shares) | 3,283,177 | |
Entity Registrant Name | OTELCO INC. | |
Entity Central Index Key | 1,288,359 | |
Trading Symbol | otel | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Common Class A [Member] | ||
Stockholders' deficit | ||
Common Stock, Value | $ 33 | $ 30 |
Common Class B [Member] | ||
Stockholders' deficit | ||
Common Stock, Value | 2 | |
Cash and cash equivalents | $ 6,927 | 6,884 |
Due from subscribers, net of allowance for doubtful accounts of $182 and $258, respectively | 3,426 | 3,575 |
Unbilled receivables | 1,622 | 1,610 |
Other | 1,664 | 1,722 |
Materials and supplies | 2,064 | 1,906 |
Prepaid expenses | 1,674 | 2,775 |
Deferred income taxes | 57 | 57 |
Total current assets | 17,434 | 18,529 |
Property and equipment, net | 48,648 | 49,811 |
Goodwill | 44,976 | 44,976 |
Intangible assets, net | 2,201 | 2,363 |
Investments | 1,839 | 1,846 |
Other assets | 290 | 259 |
Total assets | 115,388 | 117,784 |
Accounts payable | 995 | 1,818 |
Accrued expenses | 5,718 | 4,567 |
Advance billings and payments | 1,385 | 1,418 |
Customer Deposits | 72 | 68 |
Current maturity of long-term notes payable, net of debt issuance cost | 2,902 | 2,203 |
Total current liabilities | 11,072 | 10,074 |
Deferred income taxes | 26,163 | 26,163 |
Advance billings and payments | 615 | 628 |
Other liabilities | 17 | 27 |
Long-term notes payable, net of debt issuance cost, less current maturities (net) | 91,900 | 97,052 |
Total liabilities | 129,767 | 133,944 |
Additional paid in capital | 3,911 | 3,881 |
Retained deficit | (18,323) | (20,073) |
Total stockholders' deficit | (14,379) | (16,160) |
Total liabilities and stockholders' deficit | $ 115,388 | $ 117,784 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Common Class A [Member] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 10,000,000 | 10,000,000 |
Common stock, issued (in shares) | 3,283,177 | 3,015,099 |
Common stock, outstanding (in shares) | 3,283,177 | 3,015,099 |
Common Class B [Member] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized (in shares) | 250,000 | 250,000 |
Common stock, issued (in shares) | 0 | 232,780 |
Common stock, outstanding (in shares) | 0 | 232,780 |
Allowance for doubtful accounts | $ 182 | $ 258 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenues | $ 17,490 | $ 17,643 |
Operating expenses | ||
Cost of services | 8,131 | 8,257 |
Selling, general and administrative expenses | 2,576 | 2,630 |
Depreciation and amortization | 2,037 | 2,249 |
Total operating expenses | 12,744 | 13,136 |
Income from operations | 4,746 | 4,507 |
Other income (expense) | ||
Interest expense | (2,482) | (2,048) |
Other income | 619 | 1,064 |
Total other expenses | (1,863) | (984) |
Income before income tax expense | 2,883 | 3,523 |
Income tax expense | (1,133) | (1,388) |
Net income | $ 1,750 | $ 2,135 |
Weighted average number of common shares outstanding: | ||
Basic (in shares) | 3,283,177 | 3,239,306 |
Diluted (in shares) | 3,375,735 | 3,281,106 |
Basic net income per common share (in dollars per share) | $ 0.53 | $ 0.66 |
Diluted net income per common share (in dollars per share) | $ 0.52 | $ 0.65 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flows from operating activities: | ||
Net income | $ 1,750 | $ 2,135 |
Adjustments to reconcile net income to cash flows provided by operating activities: | ||
Depreciation | 1,778 | 1,914 |
Amortization | 259 | 335 |
Amortization of loan costs | 288 | $ 225 |
Loss on extinguishment of debt | 155 | |
Provision for uncollectible accounts receivable | 39 | $ 67 |
Stock-based compensation | 141 | $ 161 |
Payment in kind interest - subordinated debt | 37 | |
Changes in operating assets and liabilities | ||
Accounts receivable | 156 | $ 283 |
Material and supplies | (158) | (400) |
Prepaid expenses and other assets | 1,070 | 1,756 |
Accounts payable and accrued expenses | 328 | 323 |
Advance billings and payments | (46) | (10) |
Other liabilities | (6) | (3) |
Net cash from operating activities | 5,791 | 6,786 |
Cash flows used in investing activities: | ||
Acquisition and construction of property and equipment | (706) | (1,485) |
Net cash used in investing activities | (706) | $ (1,485) |
Cash flows used in financing activities: | ||
Loan origination costs | (5,181) | |
Principal repayment of long-term notes payable | (100,052) | $ (2,666) |
Proceeds from loan refinancing | 100,300 | |
Tax withholdings paid on behalf of employees for restricted stock units | (109) | |
Net cash used in financing activities | (5,042) | $ (2,666) |
Net increase in cash and cash equivalents | 43 | 2,635 |
Cash and cash equivalents, beginning of period | 6,884 | 5,082 |
Cash and cash equivalents, end of period | 6,927 | 7,717 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 1,378 | 1,822 |
Income taxes paid (refunded) | (440) | $ 2 |
Conversion of Class B common stock to Class A common stock | 2 | |
Issuance of Class A common stock | $ 1 |
Note 1 - Organization and Basis
Note 1 - Organization and Basis of Financial Reporting | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | 1. Organization and Basis of Financial Reporting Basis of Presentation and Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of Otelco Inc. (the “Company”) and its subsidiaries, all of which are either directly or indirectly wholly owned. These include: Blountsville Telephone LLC; Brindlee Mountain Telephone LLC; CRC Communications LLC (“CRC”); Granby Telephone LLC; Hopper Telecommunications LLC; Mid-Maine Telecom LLC; Mid-Maine TelPlus LLC; Otelco Mid-Missouri LLC (“MMT”) and its wholly owned subsidiary I-Land Internet Services LLC; Otelco Telecommunications LLC; Otelco Telephone LLC (“OTP”); Pine Tree Telephone LLC; Saco River Telephone LLC; Shoreham Telephone LLC; and War Telephone LLC. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all of the aforesaid subsidiaries after elimination of all material intercompany balances and transactions. The unaudited operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any other period. The unaudited condensed consolidated financial statements and notes included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The interim condensed consolidated financial information herein is unaudited. The information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods included in the report. Recent Accounting Pronouncements During 2016, the Financial Accounting Standards Board (the “FASB”) has issued Accounting Standards Updates (“ASUs”) 2016-01 through 2016-10. Except for ASU 2016-02, 2016-08, 2016-09 and 2016-10, which are discussed below, these ASUs provide technical corrections or simplification to existing guidance and to specialized industries or entities and therefore have minimal, if any, impact on the Company. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). In March 2016, the FASB issued ASU 2016-09 , Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Consideration (Reporting Revenues Gross versus Net) Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. . Financial Condition and Management’s Plan On January 25, 2016, the Company entered into a new senior loan agreement (the “Senior Loan Agreement”), providing for a five year term loan facility in the aggregate principal amount of $85.0 million and a five year $5.0 million revolving credit facility, and a new subordinated loan agreement (the “Subordinated Loan Agreement”), providing for a five and a half year term loan facility in the aggregate principal amount of $15.0 million. On February 17, 2016, the Subordinated Loan Agreement was amended to increase the aggregate principal amount available for borrowing thereunder to $15.3 million, and the Company borrowed $85.0 million under the term loan facility of the Senior Loan Agreement and $15.3 million under the Subordinated Loan Agreement. The Company used the borrowings under the Senior Loan Agreement and the Subordinated Loan Agreement to, among other things, pay all amounts due, including principal, interest and fees, and satisfy in full all of its obligations under its previous credit facility (the “Previous Credit Facility”), which was scheduled to mature on April 30, 2016. As a result of the repayment of the Previous Credit Facility, all of the shares of the Company’s Class B common stock were automatically converted into an equal number of shares of the Company’s Class A common stock. The term loan facility under the Senior Loan Agreement requires principal payments of $1.0 million quarterly, beginning on April 1, 2016. Principal amounts outstanding under the Subordinated Loan Agreement will generally not be due until maturity. The Company recorded costs of $15 thousand and write-off of loan costs of $140 thousand in connection with this refinancing. Reclassifications Certain items in the prior year’s condensed consolidated financial statements have been reclassified to conform with 2016 presentation. In addition, in this Form 10-Q, the Company has corrected a typographical mistake in its audited consolidated balance sheet as of December 31, 2015. Specifically, current liabilities as shown in its audited consolidated balance sheet as of December 31, 2015 included in its Annual Report on Form 10-K for the year ended December 31, 2015 was presented as $1,181 thousand but should have been $1,818 thousand, or an increase of $637 thousand. The typographical mistake did not affect the total current liabilities as of December 31, 2015, as set forth in the audited consolidated balance sheet as of December 31, 2015. Based on its evaluation, the Company concluded that it is not probable that the judgement of a reasonable person relying on the financial statements would have been changed or influenced by the mistake or its correction. |
Note 2 - Notes Payable
Note 2 - Notes Payable | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Debt Disclosure [Text Block] | 2. Notes Payable Notes payable consists of the following (in thousands, except percentages) as of: March 31, December 31, 2016 2015 Third amended and restated term credit facility; Antares Capital (formerly General Electric Capital Corporation); variable interest rate of 6.50% at March 31, 2016. The Previous Credit Facility was secured by the total assets of the subsidiary guarantors. The Previous Credit Facility was fully repaid on February 17, 2016. $ — $ 99,255 Less: Current portion of long-term debt, net of debt issuance cost of $0 and $797, respectively — (2,203 ) Long-term notes payable less current maturities (net) $ — $ 97,052 March 31, December 31, 2016 2015 Current + Long-term Senior Loan Agreement with Cerberus Business Finance, LLC; variable interest rate of 8.75% at March 31, 2016, interest is monthly, paid in arrears on the first business day of each month. The Senior Loan Agreeement is secured by the total assets of the subsidiary guarantors. The unpaid balance is due February 17, 2021. $ 4,000 $ 81,000 $ 85,000 $ — Debt issuance cost (1,098 ) (3,597 ) (4,695 ) — Senior notes payable, net of debt issuance cost $ 2,902 $ 77,403 $ 80,305 $ — March 31, December 31, 2016 2015 Subordinate Loan Agreement with NewSpring Mezzanine Capital III, L.P.; fixed interest rate due monthly at 12.0% at March 31, 2016. Payment in Kind ("PIK") interest rate of 2.0% per annum. PIK interest accrued is added to the principal amount then outstanding on the last business day of each quarter. The unpaid balance is due August 17, 2021. $ 15,300 $ - PIK interest added to principal 37 - Less: long-term portion of debt issuance cost (840 ) - Long-term notes payable, net of debt issuance cost $ 14,497 $ - Associated with the Senior Loan Agreement, the Company has capitalized and amortized deferred financing cost using the effective interest method. The Company has capitalized $4.8 million in deferred financing cost associated with the Senior Loan Agreement. Amortization expense for the deferred financing cost associated with the Senior Loan Agreement was $142 thousand for the three months ended March 31, 2016. Associated with the Subordinated Loan Agreement, the Company has capitalized and amortized deferred financing cost using the effective interest method. The Company has capitalized $860 thousand in deferred financing cost associated with the Subordinated Loan Agreement. Amortization expense for the deferred financing cost associated with the Subordinated Loan Agreement was $20 thousand for the three months ended March 31, 2016. Associated with the Previous Credit Facility, the Company has capitalized and amortized deferred financing cost using the effective interest method. The Company has capitalized $2.7 million in deferred financing cost associated with the Previous Credit Facility. Amortization expense for the deferred financing cost associated with the third amendment and restatement of the Previous Credit Facility was $141 thousand and $225 thousand for the three months ended March 31, 2016 and 2015, respectively. The Company wrote off $140 thousand of prior deferred financing cost and incurred $15 thousand in external legal fees during the quarter ended March 31, 2016 as a result of the extinguishment of the Previous Credit Facility which is included in interest expense. The Company had a revolving credit facility on December 31, 2015 of $5.0 million associated with the Previous Credit Facility. There was no balance outstanding as of December 31, 2015. The facility was terminated on February 17, 2016. The Company paid a commitment fee of 0.50% per annum, payable quarterly in arrears, on the unused portion of the revolver loan under the Previous Credit Facility. The commitment fee expense was $3 thousand and $6 thousand for the three months ended March 31, 2016 and 2015, respectively. The Company had a revolving credit facility on March 31, 2016 with a maximum borrowing capacity of $5.0 million associated with the Senior Loan Agreement. The revolving credit facility is available until February 17, 2021. There was no balance outstanding as of March 31, 2016. The Company pays a monthly fee of 0.75% on the unused portion of the revolver loan under the Senior Loan Agreement, payable in arrears. The fee expense was $5 thousand for the three months ended March 31, 2016. Maturities of notes payable for the next five years and thereafter, assuming no annual excess cash flow payments and the PIK interest, are as follows (in thousands): 2016 (remaining) $ 3,000 2017 4,000 2018 4,000 2019 4,000 2020 4,000 Thereafter 81,300 Total $ 100,300 In addition, PIK interest of $1,772 thousand associated with the Subordinated Loan Agreement will be paid at maturity. A total of $5,697 thousand of debt issuance cost is amortized over the life of the loans and is recorded net of the notes payable on the condensed consolidated balance sheets. The Company’s notes payable agreements are subject to certain financial covenants and restrictions on indebtedness, financial guarantees, business combinations and other related items. As of March 31, 2016, the Company was in compliance with all such covenants and restrictions. |
Note 3 - Income Tax
Note 3 - Income Tax | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Income Tax Disclosure [Text Block] | 3. Income Tax As of each of March 31, 2016 and December 31, 2015, the Company had U.S. federal and state net operating loss carryforwards of $0 and $68 thousand, respectively. The Company had no alternative minimum tax credit carryforwards as of March 31, 2016 or December 31, 2015. The Company establishes valuation allowances when necessary to reduce deferred tax assets to amounts expected to be realized. As of March 31, 2016, the Company had no valuation allowance recorded. The effective income tax rate as of March 31, 2016 and December 31, 2015 was 39.3% and 39.8%, respectively. |
Note 4 - Net Income Per Common
Note 4 - Net Income Per Common Share | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Earnings Per Share [Text Block] | 4. Net Income per Common Share Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted net income per common share reflects the potential dilution that would occur should all of the shares of Class A common stock underlying restricted stock units (“RSUs”), as well as all of the shares of Class A common stock, for which the Company has accrued an expense, that may be delivered pursuant to the purchase agreement relating to the assets of Reliable Networks of Maine, LLC (“Reliable Networks”), be issued. A reconciliation of the common shares for purposes of the calculation of the Company’s basic and diluted net income per common share is as follows (weighted average number of common shares outstanding in whole numbers and net income in thousands): Three Months Ended March 31, 2016 2015 Weighted average number of common shares outstanding - basic 3,283,177 3,239,306 Effect of dilutive securities 92,558 41,800 Weighted average number of common shares and potential common shares - diluted 3,375,735 3,281,106 Net income $ 1,750 $ 2,135 Net income per common share - basic $ 0.53 $ 0.66 Net income per common share - diluted $ 0.52 $ 0.65 |
Note 5 - Revenue Concentrations
Note 5 - Revenue Concentrations | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Concentration Risk Disclosure [Text Block] | 5. Revenue Concentrations Revenues for interstate access services are based on reimbursement of costs and an allowed rate of return. Revenues of this nature are received from the National Exchange Carrier Association in the form of monthly settlements. Such revenues amounted to 19.1% and 16.4% of the Company’s total revenues for the three months ended March 31, 2016 and 2015, respectively. |
Note 6 - Commitments and Contin
Note 6 - Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Commitments and Contingencies Disclosure [Text Block] | 6. Commitments and Contingencies From time to time, the Company may be involved in various claims, legal actions and regulatory proceedings incidental to and in the ordinary course of business, including administrative hearings of the Alabama Public Service Commission, the Maine Public Utilities Commission, the Massachusetts Department of Telecommunications and Cable, the Missouri Public Service Commission, the New Hampshire Public Utilities Commission, the Vermont Public Service Board and the West Virginia Public Service Commission, relating primarily to rate making. In addition, the Company may be involved in similar proceedings with interconnection carriers and the Federal Communications Commission. Currently, except as set forth below, none of the Company’s legal proceedings are expected to have a material adverse effect on the Company’s business. Sprint Communications L.P. (“Sprint”), MCI Communications Services, Inc. (“MCI”) and Verizon Select Services, Inc. (“Verizon”) had previously filed more than 60 lawsuits in federal courts across the United States alleging that over 400 local exchange carriers (“LECs” or “LEC Defendants”) overcharged Sprint, MCI and Verizon for so-called intraMTA traffic (wireless phone calls that originate and terminate in the same metropolitan transit area). The lawsuits seek a refund of previously-paid access charges for intraMTA traffic, as well as a discount related to intraMTA traffic on a going-forward basis. One of the Company’s subsidiaries, MMT, was named as a defendant in two of the lawsuits that are being brought before the District Court for the Western District of Missouri (one filed on May 2, 2014 by Sprint and the other filed on September 5, 2014 by MCI and Verizon). In addition, one of the Company’s other subsidiaries, OTP, was named as a defendant in a lawsuit relating to these issues filed by MCI and Verizon in the District Court for the District of Delaware on September 5, 2014. As all of the lawsuits relating to these issues raise the same fundamental questions of law, the United States Judicial Panel on Multidistrict Litigation has consolidated the lawsuits in the District Court for the Northern District of Texas (the “Court”) for all pre-trial proceedings. On September 18, 2015, the Court held an oral argument on the LEC Defendants’ Motions to dismiss all of the pending proceedings. On November 17, 2015, the Court issued a memorandum opinion and order dismissing the federal-law claims with prejudice, dismissing the state-law claims but granting leave to replead said claims, and denying the Defendants’ request to refer the matter to the FCC. At this time, it is too soon to determine whether these lawsuits will have a material adverse effect on the Company’s business. On November 10, 2014, a large coalition of the LEC Defendants, including MMT and OTP, filed a petition for declaratory ruling with the FCC seeking a ruling by the FCC that: (1) any traffic intentionally routed over Interexchange carrier (“IXC”) trunks by IXCs should be subject to access charges; (2) only carriers with specific agreements with an LEC may use alternative billing arrangements; (3) federal tariffing rules require the LECs to assess access charges for switched access traffic routed through Feature Group D trunks; and (4) the IXCs may not engage in self-help by refusing to pay the LEC Defendants’ properly assessed access charges. On March 11, 2015, the LEC Defendants filed their reply brief with the FCC. No timeline has been established for a decision by the FCC. |
Note 7 - Stock Plans and Stock
Note 7 - Stock Plans and Stock Associated with Acquisition | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Shareholders' Equity and Share-based Payments [Text Block] | 7. Stock Plans and Stock Associated with Acquisition During the three months ended March 31, 2016, no RSUs were granted by the Company. The Company granted RSUs underlying 124,167 shares of Class A common stock on July 9, 2014 and 122,534 shares of Class A common stock on May 15, 2015. As of March 31, 2016, 92,558 RSUs remained outstanding. These RSUs (or a portion thereof) vest with respect to each recipient over a one to three year period from the date of grant, provided the recipient remains in the employment or service of the Company as of the vesting date and, in selected instances, certain performance criteria are attained. Additionally, these RSUs (or a portion thereof) could vest earlier in the event of a change in control of the Company, or upon involuntary termination without cause. These grants are made primarily to executive-level personnel at the Company and, as a result, no compensation costs have been capitalized. The following table summarizes RSU activity as of March 31, 2016: RSUs Weighted Average Grant Date Fair Value Outstanding at December 31, 2015 155,761 $ 4.78 Granted — $ — Vested (56,728 ) $ 4.80 Forfeited or cancelled (6,475 ) $ 4.71 Outstanding at March 31, 2016 92,558 $ 4.77 CRC acquired substantially all of the assets of Reliable Networks on January 2, 2014. Pursuant to the purchase agreement relating to the Reliable Networks acquisition, Class A common stock was issued to the former owner of Reliable Networks in 2015 and will be issued to the former owner of Reliable Networks in 2017, contingent on Reliable Networks achieving certain financial objectives and certain other conditions being satisfied, including that certain individuals must be employed by the Company or any of its subsidiaries and in good standing on the last day of the applicable year (the “Earn-Out”). For the year ended December 31, 2014, the Company delivered 68,233 shares of Class A common stock to the former owner of Reliable Networks on March 12, 2015 as a result of the Earn-Out. For the year ended December 31, 2015, the applicable Earn-Out criteria was not met and no shares of Class A common stock will be issued as a result of the Earn-Out. No shares of Class A common stock were earned or issued as a result of the Earn-Out during the three months ended March 31, 2016. Stock-based compensation expense related to RSUs and the Earn-Out was $141 thousand and $161 thousand for the three months ended March 31, 2016 and 2015, respectively. Accounting standards require that the Company estimate forfeitures for RSUs and the Earn-Out and reduce compensation expense accordingly. The Company has reduced its expense by the assumed forfeiture rate and will evaluate actual experience against the assumed forfeiture rate going forward. The forfeiture rate has been developed using historical performance metrics which could impact the size of the final issuance of Class A common stock. As of March 31, 2016, the unrecognized total compensation cost related to unvested RSUs was $1,406 thousand. That cost is expected to be recognized by the end of 2019. |
Significant Accounting Policies
Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation and Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of Otelco Inc. (the “Company”) and its subsidiaries, all of which are either directly or indirectly wholly owned. These include: Blountsville Telephone LLC; Brindlee Mountain Telephone LLC; CRC Communications LLC (“CRC”); Granby Telephone LLC; Hopper Telecommunications LLC; Mid-Maine Telecom LLC; Mid-Maine TelPlus LLC; Otelco Mid-Missouri LLC (“MMT”) and its wholly owned subsidiary I-Land Internet Services LLC; Otelco Telecommunications LLC; Otelco Telephone LLC (“OTP”); Pine Tree Telephone LLC; Saco River Telephone LLC; Shoreham Telephone LLC; and War Telephone LLC. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all of the aforesaid subsidiaries after elimination of all material intercompany balances and transactions. The unaudited operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any other period. The unaudited condensed consolidated financial statements and notes included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The interim condensed consolidated financial information herein is unaudited. The information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods included in the report. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements During 2016, the Financial Accounting Standards Board (the “FASB”) has issued Accounting Standards Updates (“ASUs”) 2016-01 through 2016-10. Except for ASU 2016-02, 2016-04, 2016-08, 2016-09 and 2016-10, which are discussed below, these ASUs provide technical corrections or simplification to existing guidance and to specialized industries or entities and therefore have minimal, if any, impact on the Company. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). In March 2016, the FASB issued ASU 2016-09 , Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Consideration (Reporting Revenues Gross versus Net) Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. . |
Costs Associated with Exit or Disposal Activities or Restructurings, Policy [Policy Text Block] | Financial Condition and Management’s Plan On January 25, 2016, the Company entered into a new senior loan agreement (the “Senior Loan Agreement”), providing for a five year term loan facility in the aggregate principal amount of $85.0 million and a five year $5.0 million revolving credit facility, and a new subordinated loan agreement (the “Subordinated Loan Agreement”), providing for a five and a half year term loan facility in the aggregate principal amount of $15.0 million. On February 17, 2016, the Subordinated Loan Agreement was amended to increase the aggregate principal amount available for borrowing thereunder to $15.3 million, and the Company borrowed $85.0 million under the term loan facility of the Senior Loan Agreement and $15.3 million under the Subordinated Loan Agreement. The Company used the borrowings under the Senior Loan Agreement and the Subordinated Loan Agreement to, among other things, pay all amounts due, including principal, interest and fees, and satisfy in full all of its obligations under its previous credit facility (the “Previous Credit Facility”), which was scheduled to mature on April 30, 2016. As a result of the repayment of the Previous Credit Facility, all of the shares of the Company’s Class B common stock were automatically converted into an equal number of shares of the Company’s Class A common stock. The term loan facility under the Senior Loan Agreement requires principal payments of $1.0 million quarterly, beginning on April 1, 2016. Principal amounts outstanding under the Subordinated Loan Agreement will generally not be due until maturity. The Company recorded costs of $15 thousand and write-off of loan costs of $140 thousand in connection with this refinancing. |
Reclassification, Policy [Policy Text Block] | Reclassifications Certain items in the prior year’s condensed consolidated financial statements have been reclassified to conform with 2016 presentation. In addition, in this Form 10-Q, the Company has corrected a typographical mistake in its audited consolidated balance sheet as of December 31, 2015. Specifically, current liabilities as shown in its audited consolidated balance sheet as of December 31, 2015 included in its Annual Report on Form 10-K for the year ended December 31, 2015 was presented as $1,181 thousand but should have been $1,818 thousand, or an increase of $637 thousand. The typographical mistake did not affect the total current liabilities as of December 31, 2015, as set forth in the audited consolidated balance sheet as of December 31, 2015. Based on its evaluation, the Company concluded that it is not probable that the judgement of a reasonable person relying on the financial statements would have been changed or influenced by the mistake or its correction. |
Note 2 - Notes Payable (Tables)
Note 2 - Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Senior Notes [Member] | |
Notes Tables | |
Schedule of Long-term Debt Instruments [Table Text Block] | March 31, December 31, 2016 2015 Current + Long-term Senior Loan Agreement with Cerberus Business Finance, LLC; variable interest rate of 8.75% at March 31, 2016, interest is monthly, paid in arrears on the first business day of each month. The Senior Loan Agreeement is secured by the total assets of the subsidiary guarantors. The unpaid balance is due February 17, 2021. $ 4,000 $ 81,000 $ 85,000 $ — Debt issuance cost (1,098 ) (3,597 ) (4,695 ) — Senior notes payable, net of debt issuance cost $ 2,902 $ 77,403 $ 80,305 $ — |
Schedule of Long-term Debt Instruments [Table Text Block] | March 31, December 31, 2016 2015 Third amended and restated term credit facility; Antares Capital (formerly General Electric Capital Corporation); variable interest rate of 6.50% at March 31, 2016. The Previous Credit Facility was secured by the total assets of the subsidiary guarantors. The Previous Credit Facility was fully repaid on February 17, 2016. $ — $ 99,255 Less: Current portion of long-term debt, net of debt issuance cost of $0 and $797, respectively — (2,203 ) Long-term notes payable less current maturities (net) $ — $ 97,052 March 31, December 31, 2016 2015 Subordinate Loan Agreement with NewSpring Mezzanine Capital III, L.P.; fixed interest rate due monthly at 12.0% at March 31, 2016. Payment in Kind ("PIK") interest rate of 2.0% per annum. PIK interest accrued is added to the principal amount then outstanding on the last business day of each quarter. The unpaid balance is due August 17, 2021. $ 15,300 $ - PIK interest added to principal 37 - Less: long-term portion of debt issuance cost (840 ) - Long-term notes payable, net of debt issuance cost $ 14,497 $ - |
Schedule of Maturities of Long-term Debt [Table Text Block] | 2016 (remaining) $ 3,000 2017 4,000 2018 4,000 2019 4,000 2020 4,000 Thereafter 81,300 Total $ 100,300 |
Note 4 - Net Income Per Commo15
Note 4 - Net Income Per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Notes Tables | |
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] | Three Months Ended March 31, 2016 2015 Weighted average number of common shares outstanding - basic 3,283,177 3,239,306 Effect of dilutive securities 92,558 41,800 Weighted average number of common shares and potential common shares - diluted 3,375,735 3,281,106 Net income $ 1,750 $ 2,135 Net income per common share - basic $ 0.53 $ 0.66 Net income per common share - diluted $ 0.52 $ 0.65 |
Note 7 - Stock Plans and Stoc16
Note 7 - Stock Plans and Stock Associated with Acquisition (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Notes Tables | |
Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block] | RSUs Weighted Average Grant Date Fair Value Outstanding at December 31, 2015 155,761 $ 4.78 Granted — $ — Vested (56,728 ) $ 4.80 Forfeited or cancelled (6,475 ) $ 4.71 Outstanding at March 31, 2016 92,558 $ 4.77 |
Note 1 - Organization and Bas17
Note 1 - Organization and Basis of Financial Reporting (Details Textual) - USD ($) | Jan. 25, 2016 | Mar. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Feb. 17, 2016 |
Senior Notes [Member] | |||||
Debt Instrument, Face Amount | $ 85,000,000 | ||||
Debt Instrument, Term | 5 years | ||||
Proceeds from Issuance of Debt | $ 85,000,000 | ||||
Debt Instrument, Periodic Payment | $ 1,000,000 | ||||
Debt Issuance Costs, Net | 4,695,000 | 4,695,000 | |||
Subordinated Debt [Member] | |||||
Debt Instrument, Face Amount | $ 15,000,000 | $ 15,300,000 | |||
Debt Instrument, Term | 5 years 182 days | ||||
Proceeds from Issuance of Debt | 15,300,000 | ||||
Revolving Credit Facility [Member] | |||||
Debt Instrument, Term | 5 years | ||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 5,000,000 | 5,000,000 | 5,000,000 | ||
Error Correction from Typographical Mistake [Member] | Scenario, Previously Reported [Member] | |||||
Liabilities, Current | $ 1,181,000 | ||||
Error Correction from Typographical Mistake [Member] | Restatement Adjustment [Member] | |||||
Increase (Decrease) in Operating Liabilities | 637,000 | ||||
Error Correction from Typographical Mistake [Member] | |||||
Liabilities, Current | 1,818,000 | ||||
Debt Issuance Costs, Net | 15,000 | 15,000 | |||
Write off of Deferred Debt Issuance Cost | 140,000 | ||||
Liabilities, Current | $ 11,072,000 | $ 11,072,000 | $ 10,074,000 |
Note 2 - Notes Payable (Details
Note 2 - Notes Payable (Details Textual) - USD ($) | 3 Months Ended | |||
Mar. 31, 2016 | Mar. 31, 2015 | Jan. 25, 2016 | Dec. 31, 2015 | |
Revolving Credit Facility [Member] | ||||
Long-term Line of Credit | $ 0 | |||
Line of Credit Facility, Maximum Borrowing Capacity | $ 5,000,000 | $ 5,000,000 | ||
Line of Credit Facility, Commitment Fee Percentage | 0.75% | |||
Line of Credit Facility, Commitment Fee Amount | $ 5,000 | |||
Previous Credit Facility [Member] | ||||
Long-term Line of Credit | $ 0 | |||
Debt Issuance Costs, Gross | 2,700,000 | |||
Amortization of Debt Issuance Costs | 141,000 | $ 225,000 | ||
Write off of Deferred Debt Issuance Cost | 140,000 | |||
Legal Fees | $ 15,000 | |||
Line of Credit Facility, Maximum Borrowing Capacity | $ 5,000,000 | |||
Line of Credit Facility, Commitment Fee Percentage | 0.50% | |||
Line of Credit Facility, Commitment Fee Amount | $ 3,000 | 6,000 | ||
Senior Notes [Member] | ||||
Debt Issuance Costs, Gross | 4,800,000 | |||
Amortization of Debt Issuance Costs | 142,000 | |||
Subordinated Debt [Member] | ||||
Debt Issuance Costs, Gross | 860,000 | |||
Amortization of Debt Issuance Costs | 20,000 | |||
Accrued Paid-in-Kind Interest, Payment at Maturity | 1,772,000 | |||
Notes Payable, Net [Member] | ||||
Debt Issuance Costs, Gross | 5,697,000 | |||
Amortization of Debt Issuance Costs | 288,000 | $ 225,000 | ||
Write off of Deferred Debt Issuance Cost | $ 140,000 |
Note 2 - Summary of Notes Payab
Note 2 - Summary of Notes Payable (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Subordinated Debt [Member] | |||
Long-term Debt | $ 15,300 | ||
Payment in kind interest - subordinated debt | 37 | ||
Less: long-term portion of debt issuance cost | (840) | ||
Long-term notes payable, net of debt issuance cost | $ 14,497 | ||
Previous Credit Facility [Member] | |||
Long-term Debt | $ 99,255 | ||
Less: Current portion of long-term debt, net of debt issuance cost of $0 and $797, respectively | (2,203) | ||
Long-term notes payable less current maturities (net) | 97,052 | ||
Long-term Debt | $ 100,300 | ||
Less: Current portion of long-term debt, net of debt issuance cost of $0 and $797, respectively | 2,902 | 2,203 | |
Long-term notes payable less current maturities (net) | 91,900 | $ 97,052 | |
Payment in kind interest - subordinated debt | $ 37 |
Note 2 - Summary of Notes Pay20
Note 2 - Summary of Notes Payable (Details) (Parentheticals) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Subordinated Debt [Member] | ||
Fixed interest rate | 12.00% | |
Payment in Kind (PIK) Note [Member] | ||
Fixed interest rate | 2.00% | |
Previous Credit Facility [Member] | ||
Interest Rate | 6.50% | 6.50% |
Issuance Costs, Net | $ 0 | $ 797,000 |
Note 2 - Senior Loan Agreement
Note 2 - Senior Loan Agreement (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Senior Notes [Member] | ||
Senior note payable, current | $ 4,000 | |
Senior note payable, long-term | 81,000 | |
Senior note payable, face amount | 85,000 | |
Debt issuance cost | (1,098) | |
Debt issuance cost | (3,597) | |
Debt issuance cost | (4,695) | |
Senior notes payable, net of debt issuance cost | 2,902 | |
Senior notes payable, net of debt issuance cost | 77,403 | |
Senior notes payable, net of debt issuance cost | 80,305 | |
Debt issuance cost | (15) | |
Senior notes payable, net of debt issuance cost | 2,902 | $ 2,203 |
Senior notes payable, net of debt issuance cost | $ 91,900 | $ 97,052 |
Note 2 - Senior Loan Agreemen22
Note 2 - Senior Loan Agreement (Details) (Parentheticals) | Mar. 31, 2016 |
Senior Notes [Member] | |
Interest Rate | 8.75% |
Note 2 - Maturities of Notes Pa
Note 2 - Maturities of Notes Payable (Details) $ in Millions | Mar. 31, 2016USD ($) |
2016 (remaining) | $ 3 |
2,017 | 4 |
2,018 | 4 |
2,019 | 4 |
2,020 | 4 |
Thereafter | 81.3 |
Total | $ 100.3 |
Note 3 - Income Tax (Details Te
Note 3 - Income Tax (Details Textual) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | Jan. 31, 2016 | |
Domestic Tax Authority [Member] | |||
Operating Loss Carryforwards | $ 68,000 | $ 0 | |
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax | $ 0 | $ 0 | |
Deferred Tax Assets, Valuation Allowance | $ 0 | ||
Effective Income Tax Rate Reconciliation, Percent | 39.30% | 39.80% |
Note 4 - Reconciliation of Inco
Note 4 - Reconciliation of Income (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Weighted average number of common shares outstanding - basic (in shares) | 3,283,177 | 3,239,306 |
Effect of dilutive securities (in shares) | 92,558 | 41,800 |
Weighted average number of common shares and potential common shares - diluted (in shares) | 3,375,735 | 3,281,106 |
Net income | $ 1,750 | $ 2,135 |
Net income per common share - basic (in dollars per share) | $ 0.53 | $ 0.66 |
Net income per common share - diluted (in dollars per share) | $ 0.52 | $ 0.65 |
Note 5 - Revenue Concentratio26
Note 5 - Revenue Concentrations (Details Textual) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
National Exchange Carrier Association [Member] | Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | ||
Concentration Risk, Percentage | 19.10% | 16.40% |
Note 7 - Stock Plans and Stoc27
Note 7 - Stock Plans and Stock Associated with Acquisition (Details Textual) - USD ($) | May. 15, 2015 | Jul. 09, 2014 | Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2014 |
Restricted Stock Units (RSUs) [Member] | Common Class A [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 124,167 | ||||
Allocated Share-based Compensation Expense | $ 122,534 | ||||
Restricted Stock Units (RSUs) [Member] | Minimum [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 1 year | ||||
Restricted Stock Units (RSUs) [Member] | Maximum [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 3 years | ||||
Restricted Stock Units (RSUs) [Member] | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 0 | ||||
Allocated Share-based Compensation Expense | $ 141,000 | $ 161,000 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number | 92,558 | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs, Capitalized Amount | $ 0 | ||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 1,406,000 | ||||
Common Class A [Member] | Reliable Networks [Member] | |||||
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares | 0 | 68,233 |
Note 7 - Summary of RSU Activit
Note 7 - Summary of RSU Activity (Details) - Restricted Stock Units (RSUs) [Member] | 3 Months Ended |
Mar. 31, 2016$ / sharesshares | |
Outstanding at December 31, 2015 (in shares) | shares | 155,761 |
Outstanding at December 31, 2015 (in dollars per share) | $ / shares | $ 4.78 |
Vested (in shares) | shares | (56,728) |
Vested (in dollars per share) | $ / shares | $ 4.80 |
Forfeited or cancelled (in shares) | shares | (6,475) |
Forfeited or cancelled (in dollars per share) | $ / shares | $ 4.71 |
Outstanding at March 31, 2016 (in shares) | shares | 92,558 |
Outstanding at March 31, 2016 (in dollars per share) | $ / shares | $ 4.77 |