Note 18 - Subsidiary Guarantees

12 Months Ended

Dec. 31, 2012

Guarantees [Text Block]

18.   Subsidiary Guarantees

On October 1, 2011, MMT became a guarantor of the Company’s senior subordinated notes and on October 14, 2011, ST became a guarantor of the Company’s senior subordinated notes.

The Company has no independent assets or operations separate from its operating subsidiaries.  The guarantees of its senior subordinated notes by 14 of its 15 operating subsidiaries are full and unconditional, joint and several.  The operating subsidiaries have no independent long-term notes payable.  As of December 31, 2012, there  were 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, 2011 and 2012; condensed consolidating statements of operations for the years ended December 31, 2010, 2011 and 2012; and condensed consolidating statements of cash flows for the years ended December 31, 2010, 2011 and 2012.

Otelco Inc.
Condensed Consolidating Balance Sheet

December 31, 2011

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	-		$	12,393,441		$	351		$	-		$	12,393,792
Accounts receivable, net		-			11,445,049			543,122			-			11,988,171
Materials and supplies		-			827,194			953,626			-			1,780,820
Prepaid expenses		194,244			1,115,339			18,892			-			1,328,475
Deferred income taxes		726,310			-			-			-			726,310
Investment in subsidiaries		147,614,140			-			-			(147,614,140	)		-
Intercompany receivable		(154,849,721	)		(688,391	)		688,391			154,849,721			-
Total current assets		(6,315,027	)		25,092,632			2,204,382			7,235,581			28,217,568
Property and equipment, net		-			64,524,981			1,356,994			-			65,881,975
Goodwill		239,970,317			(47,435,761	)		(3,579,716	)		-			188,954,840
Intangible assets, net		-			18,186,227			2,359,464			-			20,545,691
Investments		1,203,605			432,186			308,014			-			1,943,805
Deferred income taxes		7,454,443			-			-			-			7,454,443
Other long-term assets		4,485,324			240,667			-			-			4,725,991
Total assets	$	246,798,662		$	61,040,932		$	2,649,138		$	7,235,581		$	317,724,313
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses	$	1,306,872		$	4,793,854		$	1,424,095		$	-		$	7,524,821
Intercompany payables		-			(154,849,721	)		-			154,849,721			-
Other current liabilities		353,285			1,668,933			65,413			-			2,087,631
Total current liabilities		1,660,157			(148,386,934	)		1,489,508			154,849,721			9,612,452
Deferred income taxes		26,421,911			20,354,646			1,335,827			-			48,112,384
Other liabilities		241,438			1,019,407			-			-			1,260,845
Long-term notes payable		230,842,911			40,263,476			-			-			271,106,387
Stockholders' equity (deficit)		(12,367,755	)		147,790,337			(176,197	)		(147,614,140	)		(12,367,755	)
Total liabilities and stockholders' equity (deficit)	$	246,798,662		$	61,040,932		$	2,649,138		$	7,235,581		$	317,724,313

Otelco Inc.

Condensed Consolidating Balance Sheet

December 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	-		$	32,515,933		$	350		$	-		$	32,516,283
Accounts receivable, net		-			11,160,581			385,159			-			11,545,740
Materials and supplies		-			1,165,042			680,204			-			1,845,246
Prepaid expenses		459,021			1,555,192			(32,582	)		-			1,981,631
Deferred income taxes		1,843,160			-			-			-			1,843,160
Investment in subsidiaries		72,218,114			-			-			(72,218,114	)		-
Intercompany receivable		(219,453,880	)		(29,764,405	)		29,764,405			219,453,880			-
Total current assets		(144,933,585	)		16,632,343			30,797,536			147,235,766			49,732,060
Property and equipment, net		-			56,819,459			1,423,444			-			58,242,903
Goodwill		239,970,317			(121,910,761	)		(73,102,716	)		-			44,956,840
Intangible assets, net		-			5,580,175			1,090,217			-			6,670,392
Investments		1,203,605			407,708			308,014			-			1,919,327
Deferred income taxes		6,275,997			-			-			-			6,275,997
Other long-term assets		4,037,311			490,131			-			-			4,527,442
Total assets	$	106,553,645		$	(41,980,945	)	$	(39,483,505	)	$	147,235,766		$	172,324,961
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses	$	8,585,915		$	6,980,505		$	1,341,363		$	-		$	16,907,783
Other current liabilities		430,896			1,581,987			69,040			-			2,081,923
Current notes payable		230,726,547			40,263,476			-			-			270,990,023
Intercompany payables		-			(219,453,880	)		-			219,453,880			-
Total current liabilities		239,743,358			(170,627,912	)		1,410,403			219,453,880			289,979,729
Deferred income taxes		8,407,880			12,970,082			1,292,206			-			22,670,168
Other liabilities		-			1,272,657			-			-			1,272,657
Long-term notes payable		-			-			-			-			-
Stockholders' equity (deficit)		(141,597,593	)		114,404,228			(42,186,114	)		(72,218,114	)		(141,597,593	)
Total liabilities and stockholders' equity (deficit)	$	106,553,645		$	(41,980,945	)	$	(39,483,505	)	$	147,235,766		$	172,324,961

Otelco Inc.
Condensed Consolidating Statement of Operations

For the Twelve Months Ended December 31, 2010

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	3,493,053		$	101,600,140		$	10,855,909		$	(11,548,883	)	$	104,400,219
Operating expenses		(3,493,053	)		(77,083,003	)		(9,004,282	)		11,548,883			(78,031,455	)
Income from operations		-			24,517,137			1,851,627			-			26,368,764
Other income (expense)		(24,856,925	)		(311,219	)		99,904			-			(25,068,240	)
Earnings from subsidiaries		26,157,449			-			-			(26,157,449	)		-
Income (loss) before income tax		1,300,524			24,205,918			1,951,531			(26,157,449	)		1,300,524
Income tax (expense) benefit		(609,809	)		(7,944,116	)		(761,943	)		8,706,059			(609,809	)
Net income (loss) to common stockholders	$	690,715		$	16,261,802		$	1,189,588		$	(17,451,390	)	$	690,715

Otelco Inc.
Condensed Consolidating Statement of Operations

For the Twelve Months Ended December 31, 2011

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	3,289,457		$	99,770,739		$	4,234,814		$	(5,451,443	)	$	101,843,567
Operating expenses		(3,289,457	)		(75,146,885	)		(4,228,573	)		5,451,443			(77,213,472	)
Income from operations		-			24,623,854			6,241			-			24,630,095
Other income (expense)		(21,825,630	)		(356,881	)		(237	)		-			(22,182,748	)
Earnings from subsidiaries		24,272,977			-			-			(24,272,977	)		-
Income before income tax		2,447,347			24,266,973			6,004			(24,272,977	)		2,447,347
Income tax expense		(249,929	)		(7,666,626	)		(2,395	)		7,669,021			(249,929	)
Net income to common stockholders	$	2,197,418		$	16,600,347		$	3,609		$	(16,603,956	)	$	2,197,418

Otelco Inc.
Condensed Consolidating Statement of Operations

For the Twelve Months Ended December 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Revenues	$	3,317,930		$	91,099,939		$	3,986,363		$	-	$	98,404,232
Operating expenses		(5,350,563	)		(148,572,542	)		(73,874,713	)		-		(227,797,818	)
Income (loss) from operations		(2,032,633	)		(57,472,603	)		(69,888,350	)		-		(129,393,586	)
Other income (expense)		(22,336,942	)		(36,827	)		(51	)		-		(22,373,820	)
Earnings from subsidiaries		(127,397,831	)		-			-			127,397,831		-
Income (loss) before income tax		(151,767,406	)		(57,509,430	)		(69,888,401	)		127,397,831		(151,767,406	)
Income tax expense		24,867,841			(27,878,483	)		27,878,483			-		24,867,841
Net income (loss) to common stockholders	$	(126,899,565	)	$	(85,387,913	)	$	(42,009,918	)	$	127,397,831	$	(126,899,565	)

Otelco Inc.
Condensed Consolidating Statement of Cash Flows

For the Twelve Months Ended December 31, 2010

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	690,715		$	16,261,802		$	1,189,588		$	(17,451,390	)	$	690,715
Adjustment to reconcile net income (loss) to cash flows from operating activities		5,075,290			18,105,293			3,206,795			-			26,387,378
Changes in assets and liabilities, net of assets and liabilities acquired		27,592,163			(25,289,272	)		(2,969,463	)		-			(666,572	)
Net cash provided by operating activities		33,358,168			9,077,823			1,426,920			(17,451,390	)		26,411,521
Cash flows used in investing activities		(218,301	)		(8,630,120	)		(1,379,294	)		-			(10,227,715	)
Cash flows used in financing activities		(33,139,867	)		1			-			17,451,390			(15,688,476	)
Net increase (decrease) in cash and cash equivalents		-			447,704			47,626			-			495,330
Cash and cash equivalents, beginning of period		-			17,617,266			113,778			-			17,731,044
Cash and cash equivalents, end of period	$	-		$	18,064,970		$	161,404		$	-		$	18,226,374

Otelco Inc.

Condensed Consolidating Statement of Cash Flows

For the Twelve Months Ended December 31, 2011

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	2,197,418		$	33,204,304		$	3,608		$	(33,207,912	)	$	2,197,418
Adjustment to reconcile net income to cash flows from operating activities		(275,513	)		19,762,543			921,882			-			20,408,912
Changes in assets and liabilities, net of assets and liabilities acquired		24,266,264			(27,119,787	)		(222,670	)		-			(3,076,193	)
Net cash provided by operating activities		26,188,169			25,847,060			702,820			(33,207,912	)		19,530,137
Cash flows provided by (used in) investing activities		218,301			(15,075,741	)		(702,769	)		-			(15,560,209	)
Cash flows provided by (used in) financing activities		(26,406,470	)		(16,603,952	)		-			33,207,912			(9,802,510	)
Net decrease in cash and cash equivalents		-			(5,832,633	)		51			-			(5,832,582	)
Cash and cash equivalents, beginning of period		-			18,226,074			300			-			18,226,374
Cash and cash equivalents, end of period	$	-		$	12,393,441		$	351		$	-		$	12,393,792

Otelco Inc.
Condensed Consolidating Statement of Cash Flows

For the Twelve Months Ended December 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(126,899,565	)	$	(180,220,349	)	$	(42,009,913	)	$	222,230,262		$	(126,899,565	)
Adjustment to reconcile net income (loss) to cash flows from operating activities		1,010,294			76,126,680			71,052,777			-			148,189,751
Changes in assets and liabilities, net of assets and liabilities acquired		71,618,424			(34,473,960	)		(28,703,463	)		-			8,441,001
Net cash provided by operating activities		(54,270,847	)		(138,567,629	)		339,401			222,230,262			29,731,187
Cash flows used in investing activities		-			(6,018,939	)		(339,401	)		-			(6,358,340	)
Cash flows used in financing activities		54,270,847			164,709,059			-			(222,230,262	)		(3,250,356	)
Net increase (decrease) in cash and cash equivalents		-			20,122,491			-			-			20,122,491
Cash and cash equivalents, beginning of period		-			12,393,442			350			-			12,393,792
Cash and cash equivalents, end of period	$	-		$	32,515,933		$	350		$	-		$	32,516,283