Note 7 - Subsidiary Guarantees

3 Months Ended

Mar. 31, 2013

Guarantees [Text Block]

7.        Subsidiary Guarantees

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.  Prior to the Petition Date, 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, 2012 and March 31, 2013; condensed consolidating statements of operations for the three months ended March 31, 2012 and 2013; and condensed consolidating statements of cash flows for the three months ended March 31, 2012 and 2013.

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
Intercompany payables		-			(219,453,880	)		-			219,453,880			-
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
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
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 Balance Sheet

March 31, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	230,856		$	34,061,963		$	500		$	-		$	34,293,319
Accounts receivable, net		-			9,195,452			417,521			-			9,612,973
Materials and supplies		-			1,140,587			783,604			-			1,924,191
Prepaid expenses		562,855			2,244,771			19,419			-			2,827,045
Deferred income taxes		1,843,160			-			-			-			1,843,160
Investment in subsidiaries		76,911,315			-			-			(76,911,315	)		-
Intercompany receivable		(224,623,263	)		(30,017,903	)		30,017,903			224,623,263			-
Total current assets		(145,075,077	)		16,624,870			31,238,947			147,711,948			50,500,688
Property and equipment, net					55,136,554			1,435,299			-			56,571,853
Goodwill		239,970,317			(121,910,761	)		(73,102,716	)		-			44,956,840
Intangible assets, net		-			4,522,777			1,058,152			-			5,580,929
Investments		1,203,605			401,331			308,014			-			1,912,950
Deferred income taxes		6,275,997			-			-			-			6,275,997
Other long-term assets		2,130,553			529,965			-			-			2,660,518
Total assets	$	104,505,395		$	(44,695,264	)	$	(39,062,304	)	$	147,711,948		$	168,459,775
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses	$	473,846		$	5,445,001		$	1,447,928		$	-		$	7,366,775
Intercompany payables		-			(224,623,263	)		-			224,623,263			-
Other current liabilities		430,896			1,522,789			77,840			-			2,031,525
Total current liabilities		904,742			(217,655,473	)		1,525,768			224,623,263			9,398,300
Liabilities subject to compromise		238,564,386			40,263,476			-			-			278,827,862
Deferred income taxes		8,407,880			12,970,082			1,292,206			-			22,670,168
Other liabilities		-			935,058			-			-			935,058
Stockholders' equity (deficit)		(143,371,613	)		118,791,593			(41,880,278	)		(76,911,315	)		(143,371,613	)
Total liabilities and stockholders' equity (deficit)	$	104,505,395		$	(44,695,264	)	$	(39,062,304	)	$	147,711,948		$	168,459,775

Otelco Inc.
Condensed Consolidating Statement of Operations

For the Three Months Ended March 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	880,787		$	23,460,360		$	1,033,094		$	-		$	25,374,241
Operating expenses		(880,787	)		(16,999,324	)		(877,392	)		-			(18,757,503	)
Income from operations		-			6,461,036			155,702			-			6,616,738
Other expense		(5,266,807	)		(7,229	)		(7	)		-			(5,274,043	)
Earnings from subsidiaries		6,609,502			-			-			(6,609,502	)		-
Income before income tax		1,342,695			6,453,807			155,695			(6,609,502	)		1,342,695
Income tax expense		(524,457	)		-			-			-			(524,457	)
Net income to common stockholders	$	818,238		$	6,453,807		$	155,695		$	(6,609,502	)	$	818,238

Otelco Inc.
Condensed Consolidating Statement of Operations

For the Three Months Ended March 31, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	884,619		$	19,031,627		$	1,071,663		$	-		$	20,987,909
Operating expenses		(884,620	)		(14,480,499	)		(734,134	)		-			(16,099,253	)
Income from operations		(1	)		4,551,128			337,529			-			4,888,656
Other expense		(6,728,279	)		(6,007	)		(2	)		-			(6,734,288	)
Earnings from subsidiaries		4,882,648			-			-			(4,882,648	)		-
Income (loss) before income tax		(1,845,632	)		4,545,121			337,527			(4,882,648	)		(1,845,632	)
Income tax benefit (expense)		71,611			(157,755	)		(31,691	)		189,446			71,611
Net income (loss) to common stockholders	$	(1,774,021	)	$	4,387,366		$	305,836		$	(4,693,202	)	$	(1,774,021	)

Otelco Inc.
Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2012

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	818,238		$	13,063,309		$	155,695		$	(13,219,004	)	$	818,238
Adjustment to reconcile net income to cash flows from operating activities		72,746			4,508,387			136,608			-			4,717,741
Changes in assets and liabilities		8,058,290			(6,093,315	)		(209,899	)		-			1,755,076
Net cash provided by operating activities		8,949,274			11,478,381			82,404			(13,219,004	)		7,291,055
Cash flows used in investing activities		-			(1,220,793	)		(82,404	)		-			(1,303,197	)
Cash flows used in financing activities		(8,949,274	)		(6,609,501	)		-			13,219,004			(2,339,771	)
Net increase in cash and cash equivalents		-			3,648,087			-			-			3,648,087
Cash and cash equivalents, beginning of period		-			12,393,442			350			-			12,393,792
Cash and cash equivalents, end of period	$	-		$	16,041,529		$	350		$	-		$	16,041,879

Otelco Inc.
Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2013

	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(1,774,021	)	$	4,387,367		$	305,835		$	(4,693,202	)	$	(1,774,021	)
Adjustment to reconcile net income (loss) to cash flows from operating activities		310,764			3,521,595			81,554			-			3,913,913
Changes in assets and liabilities		7,502,190			(5,623,054	)		(328,264	)		-			1,550,872
Net cash provided by operating activities		6,038,933			2,285,908			59,125			(4,693,202	)		3,690,764
Cash flows used in investing activities		-			(739,878	)		(58,975	)		-			(798,853	)
Cash flows used in financing activities		(6,038,933	)		-			-			4,924,058			(1,114,875	)
Net increase in cash and cash equivalents		-			1,546,030			150			230,856			1,777,036
Cash and cash equivalents, beginning of period		-			32,515,933			350			-			32,516,283
Cash and cash equivalents, end of period	$	-		$	34,061,963		$	500		$	230,856		$	34,293,319