Otelco (OTEL) 10-Q 7 Nov 16 2016 Q3 Quarterly report Financial data

Document And Entity Information

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 06, 2016
Document Information [Line Items]
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
Entity Common Stock, Shares Outstanding (in shares)		3,283,177
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q3
Amendment Flag	false

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Sep. 30, 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	9,333	6,884
Due from subscribers, net of allowance for doubtful accounts of $217 and $258, respectively	5,108	5,185
Other	1,722	1,722
Materials and supplies	2,232	1,906
Prepaid expenses	1,312	2,775
Deferred income taxes	57	57
Total current assets	19,764	18,529
Property and equipment, net	48,324	49,811
Goodwill	44,976	44,976
Intangible assets, net	1,909	2,363
Investments	1,826	1,846
Other assets	241	259
Total assets	117,040	117,784
Accounts payable	1,159	1,818
Accrued expenses	5,880	4,567
Advance billings and payments	1,381	1,418
Customer Deposits	68	68
Senior notes payable, net of debt issuance cost	2,929	2,203
Total current liabilities	11,417	10,074
Deferred income taxes	26,163	26,163
Advance billings and payments	588	628
Other liabilities	22	27
Long-term notes payable, less current maturities and debt issuance costs	90,609	97,052
Total liabilities	128,799	133,944
Additional paid in capital	4,082	3,881
Accumulated deficit	(15,874)	(20,073)
Total stockholders' deficit	(11,759)	(16,160)
Total liabilities and stockholders' deficit	$ 117,040	$ 117,784

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 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	$ 217	$ 258

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Revenues	$ 17,389	$ 17,850	$ 52,111	$ 53,385
Operating expenses
Cost of services	7,958	8,301	23,963	24,964
Selling, general and administrative expenses	2,888	2,458	7,871	7,544
Depreciation and amortization	1,982	2,181	6,071	6,694
Total operating expenses	12,828	12,940	37,905	39,202
Income from operations	4,561	4,910	14,206	14,183
Other income (expense)
Interest expense	(2,728)	(1,949)	(7,931)	(5,988)
Other income		14	624	1,060
Total other expense	(2,728)	(1,935)	(7,307)	(4,928)
Income before income tax expense	1,833	2,975	6,899	9,255
Income tax expense	(708)	(1,125)	(2,700)	(3,615)
Net income	$ 1,125	$ 1,850	$ 4,199	$ 5,640
Weighted average number of common shares outstanding:
Basic (in shares)	3,283,177	3,239,306	3,283,177	3,239,306
Diluted (in shares)	3,384,308	3,289,679	3,380,178	3,285,502
Basic net income per common share (in dollars per share)	$ 0.34	$ 0.57	$ 1.28	$ 1.74
Diluted net income per common share (in dollars per share)	$ 0.33	$ 0.56	$ 1.24	$ 1.72

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities:
Net income	$ 4,199	$ 5,640
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation	5,328	5,756
Amortization	743	938
Amortization of loan costs	929	665
Loss on extinguishment of debt	155
Provision for uncollectible accounts receivable	271	350
Stock-based compensation	311	283
Payment in kind interest - subordinated debt	194
Changes in operating assets and liabilities
Accounts receivable	(194)	(577)
Material and supplies	(326)	(82)
Prepaid expenses and other assets	1,481	1,919
Accounts payable and accrued expenses	654	666
Advance billings and payments	(77)	(31)
Other liabilities	(5)	(3)
Net cash from operating activities	13,663	15,524
Cash flows used in investing activities:
Acquisition and construction of property and equipment	(4,111)	(4,568)
Net cash used in investing activities	(4,111)	(4,568)
Cash flows used in financing activities:
Loan origination costs	(5,242)	(25)
Principal repayment of long-term notes payable	(102,052)	(10,120)
Proceeds from loan refinancing	100,300
Tax withholdings paid on behalf of employees for restricted stock units	(109)
Net cash used in financing activities	(7,103)	(10,145)
Net increase in cash and cash equivalents	2,449	811
Cash and cash equivalents, beginning of period	6,884	5,082
Cash and cash equivalents, end of period	9,333	5,893
Supplemental disclosures of cash flow information:
Interest paid	6,065	5,322
Income taxes paid	1,197	1,726
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	9 Months Ended
	Sep. 30, 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 and nine months ended September 30, 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 Quarterly Report on 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 this report. Recent Accounting Pronouncements During 2016, the Financial Accounting Standards Board (the “FASB”) has issued Accounting Standards Updates (“ASUs”) 2016-01 through 2016-15. Except for ASU 2016-02, 2016-08, 2016-09, 2016-10, 2016-12 and 2016-15 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. Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. In August 2016, the FASB issued ASU 2016-15 , Statement of Cash Flows (Topic 230 ): Classification of Certain Cash Receipts and Cash Payments Refinancing On January 25, 2016, the Company entered into a 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 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 to 2016 presentation. In addition, the Company has corrected a typographical mistake in the Company’s 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 analysis 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	9 Months Ended
	Sep. 30, 2016
Notes to Financial Statements
Debt Disclosure [Text Block]	2. Notes Payable Notes payable consists of the following (in thousands, except percentages) as of: September 30, 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 December 31, 2015. 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 September 30, December 31, Current Long-term 2016 2015 Senior Loan Agreement with Cerberus Business Finance, LLC; variable interest rate of 8.75% at September 30, 2016, interest is monthly, paid in arrears on the first business day of each month. The Senior Loan Agreement is secured by the total assets of the subsidiary guarantors. The unpaid balance is due February 17, 2021. $ 4,000 $ 79,000 $ 83,000 $ — Debt issuance cost (1,071 ) (3,092 ) (4,163 ) — Senior notes payable, net of debt issuance cost $ 2,929 $ 75,908 $ 78,837 $ — September 30, December 31, 2016 2015 Subordinated Loan Agreement with NewSpring Mezzanine Capital III, L.P.; fixed interest rate due monthly of 12.0 0% at September 30, 2016. Payment in Kind (“PIK”) interest rate of 2.00% 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 194 — Less: Long-term portion of debt issuance cost (793 ) — Long-term notes payable, net of debt issuance cost $ 14,701 $ — Associated with the Senior Loan Agreement, the Company has capitalized and amortized deferred financing cost using the effective interest method. The Company has capitalized $4.9 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 $704 thousand for the nine months ended September 30, 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 $892 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 $99 thousand for the nine months ended September 30, 2016. Associated with the Previous Credit Facility, the Company had capitalized and amortized deferred financing cost using the effective interest method. The Company had 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 $665 thousand for the nine months ended September 30, 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 nine months ended September 30, 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 $19 thousand for the nine months ended September 30, 2016 and 2015, respectively. The revolving credit facility associated with the Company’s Senior Loan Agreement had a maximum borrowing capacity of $5.0 million on September 30, 2016. The revolving credit facility is available until February 17, 2021. There was no balance outstanding as of September 30, 2016. The Company pays a monthly fee of 0.75% per annum on the unused portion of the revolver loan under the Senior Loan Agreement, payable in arrears. The fee expense was $24 thousand for the nine months ended September 30, 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) $ 1,000 2017 4,000 2018 4,000 2019 4,000 2020 4,000 Thereafter 81,300 Total $ 98,300 In addition, PIK interest of $1,772 thousand associated with the Subordinated Loan Agreement will be paid at maturity. A total of $5,758 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 September 30, 2016, the Company was in compliance with all such covenants and restrictions.

Note 3 - Income Tax

Note 3 - Income Tax	9 Months Ended
	Sep. 30, 2016
Notes to Financial Statements
Income Tax Disclosure [Text Block]	3. Income Tax As of each of September 30, 2016 and December 31, 2015, the Company had U.S. federal and state net operating loss carryforwards of $0 and $25 thousand, respectively. The Company had no alternative minimum tax credit carryforwards as of September 30, 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 September 30, 2016, the Company had no valuation allowance recorded. The effective income tax rate as of September 30, 2016 and December 31, 2015 was 39.1% and 39.8%, respectively.

Note 4 - Net Income Per Common

Note 4 - Net Income Per Common Share	9 Months Ended
	Sep. 30, 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 September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Weighted average number of common shares outstanding - basic 3,283,177 3,239,306 3,283,177 3,239,306 Effect of dilutive securities 101,131 50,373 97,001 46,196 Weighted average number of common shares and potential common shares - diluted 3,384,308 3,289,679 3,380,178 3,285,502 Net income $ 1,125 $ 1,850 $ 4,199 $ 5,640 Net income per common share - basic $ 0.34 $ 0.57 $ 1.28 $ 1.74 Net income per common share - diluted $ 0.33 $ 0.56 $ 1.24 $ 1.72

Note 5 - Revenue Concentrations

Note 5 - Revenue Concentrations	9 Months Ended
	Sep. 30, 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 18.4% and 16.9% of the Company’s total revenues for the nine months ended September 30, 2016 and 2015, respectively.

Note 6 - Commitments and Contin

Note 6 - Commitments and Contingencies	9 Months Ended
	Sep. 30, 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 (the “FCC”). 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”) 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 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 re -plead said claims, and denying the Defendants’ request to refer the matter to the FCC. The Court continues to handle pre-trial motions related to some LEC Defendants’ counterclaims, with decisions on those matters and final summary judgment motions not scheduled to occur until April of 2017. After all pre-trial matters are addressed, Sprint, MCI and Verizon have indicated they will appeal the Court’s November 17, 2015 decision making. Accordingly, it is not possible to determine at this time 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 and the FCC has given no indication that it intends to issue a ruling in the near future . Accordingly, it is not possible to determine at this time whether this action will have a material adverse effect on the Company’s business.

Note 7 - Stock Plans and Stock

Note 7 - Stock Plans and Stock Associated with Acquisition	9 Months Ended
	Sep. 30, 2016
Notes to Financial Statements
Shareholders' Equity and Share-based Payments [Text Block]	7. Stock Plans and Stock Associated with Acquisition During the nine months ended September 30, 2016, the Company granted RSUs underlying 119,655 shares of Class A common stock. The Company granted RSUs underlying 122,534 shares of Class A common stock on May 15, 2015. As of September 30, 2016, 212,213 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 September 30, 2016: RSUs Weighted Average Grant Date Fair Value Outstanding at December 31, 2015 155,761 $ 4.78 Granted 119,655 $ 4.40 Vested (56,728 ) $ 4.80 Forfeited or cancelled (6,475 ) $ 4.71 Outstanding at September 30, 2016 212,213 $ 4.56 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 were 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 nine months ended September 30, 2016. Stock-based compensation expense related to RSUs and the Earn-Out was $311 thousand and $283 thousand for the nine months ended September 30, 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 number of the final issuance of Class A common stock. As of September 30, 2016, the unrecognized total compensation cost related to unvested RSUs was $630 thousand. That cost is expected to be recognized by the end of 2019.

Significant Accounting Policies

Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 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 and nine months ended September 30, 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 Quarterly Report on 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 this 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 2016-15. Except for ASU 2016-02, 2016-08, 2016-09, 2016-10, 2016-12 and 2016-15 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. Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. In August 2016, the FASB issued ASU 2016-15 , Statement of Cash Flows (Topic 230 ): Classification of Certain Cash Receipts and Cash Payments
Costs Associated with Exit or Disposal Activities or Restructurings, Policy [Policy Text Block]	Refinancing On January 25, 2016, the Company entered into a 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 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 to 2016 presentation. In addition, the Company has corrected a typographical mistake in the Company’s 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 analysis 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)	9 Months Ended
	Sep. 30, 2016
Senior Notes [Member]
Notes Tables
Schedule of Long-term Debt Instruments [Table Text Block]	September 30, December 31, Current Long-term 2016 2015 Senior Loan Agreement with Cerberus Business Finance, LLC; variable interest rate of 8.75% at September 30, 2016, interest is monthly, paid in arrears on the first business day of each month. The Senior Loan Agreement is secured by the total assets of the subsidiary guarantors. The unpaid balance is due February 17, 2021. $ 4,000 $ 79,000 $ 83,000 $ — Debt issuance cost (1,071 ) (3,092 ) (4,163 ) — Senior notes payable, net of debt issuance cost $ 2,929 $ 75,908 $ 78,837 $ —
Schedule of Long-term Debt Instruments [Table Text Block]	September 30, 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 December 31, 2015. 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 September 30, December 31, 2016 2015 Subordinated Loan Agreement with NewSpring Mezzanine Capital III, L.P.; fixed interest rate due monthly of 12.0 0% at September 30, 2016. Payment in Kind (“PIK”) interest rate of 2.00% 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 194 — Less: Long-term portion of debt issuance cost (793 ) — Long-term notes payable, net of debt issuance cost $ 14,701 $ —
Schedule of Maturities of Long-term Debt [Table Text Block]	2016 (remaining) $ 1,000 2017 4,000 2018 4,000 2019 4,000 2020 4,000 Thereafter 81,300 Total $ 98,300

Note 4 - Net Income Per Commo15

Note 4 - Net Income Per Common Share (Tables)	9 Months Ended
	Sep. 30, 2016
Notes Tables
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]	Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Weighted average number of common shares outstanding - basic 3,283,177 3,239,306 3,283,177 3,239,306 Effect of dilutive securities 101,131 50,373 97,001 46,196 Weighted average number of common shares and potential common shares - diluted 3,384,308 3,289,679 3,380,178 3,285,502 Net income $ 1,125 $ 1,850 $ 4,199 $ 5,640 Net income per common share - basic $ 0.34 $ 0.57 $ 1.28 $ 1.74 Net income per common share - diluted $ 0.33 $ 0.56 $ 1.24 $ 1.72

Note 7 - Stock Plans and Stoc16

Note 7 - Stock Plans and Stock Associated with Acquisition (Tables)	9 Months Ended
	Sep. 30, 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 119,655 $ 4.40 Vested (56,728 ) $ 4.80 Forfeited or cancelled (6,475 ) $ 4.71 Outstanding at September 30, 2016 212,213 $ 4.56

Note 1 - Organization and Bas17

Note 1 - Organization and Basis of Financial Reporting (Details Textual) - USD ($)	Jan. 25, 2016	Sep. 30, 2016	Sep. 30, 2016	Dec. 31, 2015	Feb. 17, 2016
Senior Notes [Member]
Debt Instrument, Term	5 years
Debt Instrument, Face Amount	$ 85,000,000
Proceeds from Issuance of Debt		$ 85,000,000
Debt Instrument, Periodic Payment			$ 1,000,000
Subordinated Debt [Member]
Debt Instrument, Term	5 years 182 days
Debt Instrument, Face Amount	$ 15,000,000				$ 15,300,000
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		$ 11,417,000	$ 11,417,000	$ 10,074,000

Note 2 - Notes Payable (Details

Note 2 - Notes Payable (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Jan. 25, 2016	Dec. 31, 2015
Previous Credit Facility [Member]
Long-term Line of Credit				$ 0
Debt Issuance Costs, Gross	$ 2,700,000
Amortization of Debt Issuance Costs	141,000	$ 665,000
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	19,000
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	$ 24,000
Senior Notes [Member]
Debt Issuance Costs, Gross	4,900,000
Amortization of Debt Issuance Costs	704,000
Subordinated Debt [Member]
Debt Issuance Costs, Gross	892,000
Amortization of Debt Issuance Costs	99,000
Accrued Paid-in-Kind Interest, Payment at Maturity	1,772,000
Notes Payable, Net [Member]
Debt Issuance Costs, Gross	5,758,000
Amortization of Debt Issuance Costs	929,000	$ 665,000
Write off of Deferred Debt Issuance Cost	$ 140,000

Note 2 - Notes Payable - Summar

Note 2 - Notes Payable - Summary of Notes Payable (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Subordinated Debt [Member]
Long-term debt	$ 15,300
Payment in kind interest - subordinated debt	194
Less: Long-term portion of debt issuance cost	(793)
Long-term notes payable, net of debt issuance cost	14,701
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	98,300
Less: Current portion of long-term debt, net of debt issuance cost of $0 and $797, respectively	(2,929)		(2,203)
Long-term notes payable less current maturities (net)	90,609		$ 97,052
Payment in kind interest - subordinated debt	$ 194

Note 2 - Notes Payable - Summ20

Note 2 - Notes Payable - Summary of Notes Payable (Details) (Parentheticals) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Previous Credit Facility [Member]
Interest rate	6.50%	6.50%
Issuance costs, net	$ 0	$ 797,000
Fixed interest rate	12.00%	2.00%

Note 2 - Notes Payable - Senior

Note 2 - Notes Payable - Senior Loan Agreement (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Senior Notes [Member]
Senior note payable, current	$ 4,000
Senior note payable, long-term	79,000
Senior note payable, face amount	83,000
Debt issuance cost	(1,071)
Senior notes payable, net of debt issuance cost	2,929
Long-term notes payable less current maturities (net)	75,908
Senior notes payable, net of debt issuance cost	78,837
Senior notes payable, net of debt issuance cost	2,929	2,203
Long-term notes payable less current maturities (net)	$ 90,609	$ 97,052

Note 2 - Notes Payable - Maturi

Note 2 - Notes Payable - Maturities of Notes Payable (Details) $ in Millions	Sep. 30, 2016USD ($)
2016 (remaining)	$ 1
2,017	4
2,018	4
2,019	4
2,020	4
Thereafter	81.3
Total	$ 98.3

Note 3 - Income Tax (Details Te

Note 3 - Income Tax (Details Textual) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Domestic Tax Authority [Member]
Operating Loss Carryforwards	$ 0	$ 25,000
Deferred Tax Assets, Tax Credit Carryforwards, Alternative Minimum Tax	0	$ 0
Deferred Tax Assets, Valuation Allowance	$ 0
Effective Income Tax Rate Reconciliation, Percent	39.10%	39.80%

Note 4 - Net Income Per Commo24

Note 4 - Net Income Per Common Share - Reconciliation of Income (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Weighted average number of common shares outstanding - basic (in shares)	3,283,177	3,239,306	3,283,177	3,239,306
Effect of dilutive securities (in shares)	101,131	50,373	97,001	46,196
Weighted average number of common shares and potential common shares - diluted (in shares)	3,384,308	3,289,679	3,380,178	3,285,502
Net income	$ 1,125	$ 1,850	$ 4,199	$ 5,640
Net income per common share - basic (in dollars per share)	$ 0.34	$ 0.57	$ 1.28	$ 1.74
Net income per common share - diluted (in dollars per share)	$ 0.33	$ 0.56	$ 1.24	$ 1.72

Note 5 - Revenue Concentratio25

Note 5 - Revenue Concentrations (Details Textual)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
National Exchange Carrier Association [Member] | Customer Concentration Risk [Member] | Sales Revenue, Net [Member]
Concentration Risk, Percentage	18.40%	16.90%

Note 7 - Stock Plans and Stoc26

Note 7 - Stock Plans and Stock Associated with Acquisition (Details Textual) - USD ($)	May 15, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2014
Reliable Networks [Member] | Common Class A [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		0
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares		0		68,233
Common Class A [Member] | Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		119,655
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		119,655
Employee Service Share-based Compensation, Allocation of Recognized Period Costs, Capitalized Amount		$ 0
Allocated Share-based Compensation Expense		$ 311,000	$ 283,000
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number		212,213
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized		$ 630

Note 7 - Stock Plans and Stoc27

Note 7 - Stock Plans and Stock Associated with Acquisition - Summary of RSU Activity (Details) - Restricted Stock Units (RSUs) [Member]	9 Months Ended
	Sep. 30, 2016$ / sharesshares
Outstanding at December 31, 2015 (in shares) | shares	155,761
Outstanding at December 31, 2015 (in dollars per share) | $ / shares	$ 4.78
Granted (in shares) | shares	119,655
Granted (in dollars per share) | $ / shares	$ 4.40
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 September 30, 2016 (in shares) | shares	212,213
Outstanding at September 30, 2016 (in dollars per share) | $ / shares	$ 4.56