Note 6 - Subsidiary Guarantees

6 Months Ended

Jun. 30, 2011

Schedule of Guarantor Obligations [Table Text Block]

6.Subsidiary Guarantees

The Company has no independent assets or operations separate from its operating subsidiaries.  The guarantees of its senior subordinated notes by 12 of its 14 operating subsidiaries are full and unconditional, joint and several.  The operating subsidiaries have no independent long-term notes payable.  There are no significant restrictions on the ability of the Company to obtain funds from its operating subsidiaries by dividend or loan.  The condensed consolidated financial information is provided for the guarantor entities.

The following tables present condensed consolidating balance sheets as of December 31, 2010 and June 30, 2011; condensed consolidating statements of operations for the three months ended June 30, 2010 and 2011; condensed consolidating statements of operations for the six months ended June 30, 2010 and 2011; and condensed consolidating statements of cash flows for the six months ended June 30, 2010 and2011.

Otelco Inc.
Condensed Consolidating Balance Sheet
December 31, 2010
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
				Subsidiaries			Subsidiaries
ASSETS
Current assets
Cash and cash equivalents	$	-		$	18,064,970		$	161,404		$	-		$	18,226,374
Accounts receivable, net		-			9,741,477			1,125,145			-			10,866,622
Materials and supplies		-			893,186			924,125			-			1,817,311
Prepaid expenses		184,055			1,022,697			98,276			-			1,305,028
Deferred income taxes		626,267			-			-			-			626,267
Investment in subsidiaries		131,010,180			-			-			(131,010,180	)		-
Intercompany receivable		(129,599,481	)		-			-			129,599,481			-
Total current assets		2,221,021			29,722,330			2,308,950			(1,410,699	)		32,841,602
Property and equipment, net		218,301			54,043,819			9,625,093			-			63,887,213
Goodwill		239,970,317			(49,843,599	)		(1,936,640	)		-			188,190,078
Intangible assets, net		-			23,326,214			2,607,828			-			25,934,042
Investments		1,203,605			433,059			330,431			-			1,967,095
Deferred income taxes		4,415,097			-			-			-			4,415,097
Other long-term assets		5,757,825			183,946			-			-			5,941,771
Total assets	$	253,786,166		$	57,865,769		$	12,935,662		$	(1,410,699	)	$	323,176,898
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses	$	2,280,661		$	4,659,879		$	1,754,469		$	-		$	8,695,009
Intercompany payables		-			(131,769,870	)		2,170,389			129,599,481			-
Other current liabilities		353,285			1,678,145			89,467			-			2,120,897
Total current liabilities		2,633,946			(125,431,846	)		4,014,325			129,599,481			10,815,906
Deferred income taxes		22,592,597			16,666,501			3,253,478			-			42,512,576
Other liabilities		2,471,331			1,025,317			-			-			3,496,648
Long-term notes payable		231,332,379			40,263,476			-			-			271,595,855
Stockholders' equity (deficit)		(5,244,087	)		125,342,321			5,667,859			(131,010,180	)		(5,244,087	)
Total liabilities and stockholders' equity (deficit)	$	253,786,166		$	57,865,769		$	12,935,662		$	(1,410,699	)	$	323,176,898

Otelco Inc.
Condensed Consolidating Balance Sheet
June 30, 2011
	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
				Subsidiaries			Subsidiaries
ASSETS
Current assets
Cash and cash equivalents	$	-		$	15,915,478		$	517,693		$	-		$	16,433,171
Accounts receivable, net		-			10,340,393			1,032,930			-			11,373,323
Materials and supplies		-			975,870			929,705			-			1,905,575
Prepaid expenses		198,891			699,086			48,917			-			946,894
Deferred income taxes		626,267			-			-			-			626,267
Investment in subsidiaries		143,509,939			-			-			(143,509,939	)		-
Intercompany receivable		(146,735,044	)		689,458			(689,458	)		146,735,044			-
Total current assets		(2,399,947	)		28,620,285			1,839,787			3,225,105			31,285,230
Property and equipment, net		524,215			54,312,203			8,807,647			-			63,644,065
Goodwill		239,970,317			(49,843,599	)		(1,936,640	)		-			188,190,078
Intangible assets, net		-			19,828,465			2,483,646			-			22,312,111
Investments		1,203,605			420,304			330,431			-			1,954,340
Deferred income taxes		4,415,097			-			-			-			4,415,097
Other long-term assets		5,073,776			142,326			-			-			5,216,102
Total assets	$	248,787,063		$	53,479,984		$	11,524,871		$	3,225,105		$	317,017,023
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses	$	2,076,561		$	3,729,835		$	1,621,298		$	-		$	7,427,694
Intercompany payables		-			(146,735,044	)		-			146,735,044			-
Other current liabilities		353,285			1,616,029			92,521			-			2,061,835
Total current liabilities		2,429,846			(141,389,180	)		1,713,819			146,735,044			9,489,529
Deferred income taxes		22,592,594			16,666,504			3,253,478			-			42,512,576
Other liabilities		1,485,090			986,819			-			-			2,471,909
Long-term notes payable		230,896,232			40,263,476			-			-			271,159,708
Stockholders' equity (deficit)		(8,616,699	)		136,952,365			6,557,574			(143,509,939	)		(8,616,699	)
Total liabilities and stockholders' equity (deficit)	$	248,787,063		$	53,479,984		$	11,524,871		$	3,225,105		$	317,017,023

Otelco Inc.
Condensed Consolidating Statement of Operations
For the Three Months Ended June 30, 2010
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	801,566		$	25,763,717		$	2,755,166		$	(2,809,505	)	$	26,510,944
Operating expenses		(801,566	)		(19,287,396	)		(2,220,150	)		2,809,505			(19,499,607	)
Income from operations		-			6,476,321			535,016			-			7,011,337
Other expense		(6,244,557	)		(87,131	)		(34	)		-			(6,331,722	)
Earnings from subsidiaries		6,924,172			-			-			(6,924,172	)		-
Income before income tax		679,615			6,389,190			534,982			(6,924,172	)		679,615
Income tax expense		(262,339	)		-			-			-			(262,339	)
Net income to common stockholders	$	417,276		$	6,389,190		$	534,982		$	(6,924,172	)	$	417,276

Otelco Inc.
Condensed Consolidating Statement of Operations
For the Three Months Ended June 30, 2011
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	683,089		$	24,865,811		$	2,548,932		$	(2,596,770	)	$	25,501,062
Operating expenses		(683,090	)		(18,233,881	)		(1,854,250	)		2,596,770			(18,174,451	)
Income from operations		(1	)		6,631,930			694,682			-			7,326,611
Other income (expense)		(5,619,690	)		(69,270	)		3,022			-			(5,685,938	)
Earnings from subsidiaries		7,260,364			(389,568	)		-			(6,870,796	)		-
Income before income tax		1,640,673			6,173,092			697,704			(6,870,796	)		1,640,673
Income tax expense		(357,396	)		-			-			-			(357,396	)
Net income to common stockholders	$	1,283,277		$	6,173,092		$	697,704		$	(6,870,796	)	$	1,283,277

Otelco Inc.
Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2010
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	1,621,079		$	50,767,112		$	5,551,502		$	(5,634,540	)	$	52,305,153
Operating expenses		(1,621,079	)		(38,923,398	)		(4,515,150	)		5,634,540			(39,425,087	)
Income from operations		-			11,843,714			1,036,352			-			12,880,066
Other expense		(12,681,589	)		(166,063	)		(50	)		-			(12,847,702	)
Earnings from subsidiaries		12,713,953			-			-			(12,713,953	)		-
Income before income tax		32,364			11,677,651			1,036,302			(12,713,953	)		32,364
Income tax expense		(744	)		-			-			-			(744	)
Net income to common stockholders	$	31,620		$	11,677,651		$	1,036,302		$	(12,713,953	)	$	31,620

Otelco Inc.
Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2011
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues	$	1,567,352		$	49,653,245		$	5,123,906		$	(5,451,443	)	$	50,893,060
Operating expenses		(1,567,353	)		(37,892,644	)		(4,237,184	)		5,451,443			(38,245,738	)
Income from operations		(1	)		11,760,601			886,722			-			12,647,322
Other income (expense)		(10,853,003	)		(150,555	)		2,993			-			(11,000,565	)
Earnings from subsidiaries		12,499,761			-			-			(12,499,761	)		-
Income before income tax		1,646,757			11,610,046			889,715			(12,499,761	)		1,646,757
Income tax expense		(358,828	)		-			-			-			(358,828	)
Net income to common stockholders	$	1,287,929		$	11,610,046		$	889,715		$	(12,499,761	)	$	1,287,929

Otelco Inc.
Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2010
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	31,620		$	11,677,651		$	1,036,302		$	(12,713,953	)	$	31,620
Adjustment to reconcile net income to cash flows from operating activities		1,694,931			10,259,423			1,725,759			-			13,680,113
Changes in assets and liabilities, net of assets and liabilities acquired		15,901,162			(13,286,240	)		(2,312,380	)		-			302,542
Net cash provided by operating activities		17,627,713			8,650,834			449,681			(12,713,953	)		14,014,275
Cash flows used in investing activities		-			(3,668,494	)		(419,810	)		-			(4,088,304	)
Cash flows used in financing activities		(17,627,713	)		1			-			12,713,953			(4,913,759	)
Net increase in cash and cash equivalents		-			4,982,341			29,871			-			5,012,212
Cash and cash equivalents, beginning of period		-			17,617,266			113,778			-			17,731,044
Cash and cash equivalents, end of period	$	-		$	22,599,607		$	143,649		$	-		$	22,743,256

Otelco Inc.
Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2011
				Guarantor			Non-Guarantor
	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	1,287,929		$	11,610,044		$	889,715		$	(12,499,759	)	$	1,287,929
Adjustment to reconcile net income to cash flows from operating activities		(352,512	)		9,096,405			1,457,621			-			10,201,514
Changes in assets and liabilities, net of assets and liabilities acquired		16,916,630			(17,252,428	)		(1,549,649	)		-			(1,885,447	)
Net cash provided by operating activities		17,852,047			3,454,021			797,687			(12,499,759	)		9,603,996
Cash flows used in investing activities		(305,914	)		(5,603,515	)		(441,398	)		-			(6,350,827	)
Cash flows used in financing activities		(17,546,133	)		2			-			12,499,759			(5,046,372	)
Net increase (decrease) in cash and cash equivalents		-			(2,149,492	)		356,289			-			(1,793,203	)
Cash and cash equivalents, beginning of period		-			18,064,970			161,404			-			18,226,374
Cash and cash equivalents, end of period	$	-		$	15,915,478		$	517,693		$	-		$	16,433,171