UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): May 14, 2020

 

Otelco Inc.

(Exact Name of Registrant as Specified in Charter)

 

Delaware   1-32362   52-2126395
(State or Other Jurisdiction of Incorporation)   (Commission File Number)  

(IRS Employer Identification No.)

 

  

505 Third Avenue East, Oneonta, AL 35121

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code: (205) 625-3574

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class  Trading Symbol(s)  Name of each exchange on which registered
Class A Common Stock ($0.01 par value per share)  OTEL  The Nasdaq Stock Market LLC

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

  ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
  ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
  ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
  ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

 

Item 7.01.Regulation FD Disclosure.

 

Information is being furnished herein in Exhibit 99.1 with respect to the slide presentation prepared for use in connection with the Otelco Inc. (the “Company”) 2020 Annual Meeting of Stockholders. These materials are dated May 14, 2020 and the Company does not undertake to update the materials after that date.

 

The presentation is also available on the Investors section of the Company’s website at www.otelco.com. The Company’s Annual Report to Shareholders and its reports on Forms 10-K, 10-Q and 8-K and other publicly available information should be consulted for other important information about the Company.

 

Information contained herein, including Exhibit 99.1, shall not be deemed filed for the purposes of the Securities Exchange Act of 1934, nor shall such information and Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01.Financial Statements and Exhibits.

 

Exhibit No.   Description
99.1   Investor Presentation

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  Otelco Inc.  
  (Registrant)  
Date: May 14, 2020    
     
  By:  /s/ Curtis L. Garner, Jr.  
    Name: Curtis L. Garner, Jr.  
    Title: Chief Financial Officer  

 

 

Exhibit 99.1

 

OTELCO INC. OTEL (Nasdaq) www.otelco.com May 2020 1

 

 

2 This presentation contains forward - looking statements that are subject to risks and uncertainties . Forward - looking statements give our current expectations relating to our financial condition, results of operations, plans, objectives, future performance and business . These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events . These forward - looking statements are based on assumptions that we have made in light of our experience in the industry in which we operate, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances . Although we believe that these forward - looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial condition or results of operations, or cause our actual results to differ materially from those in the forward - looking statements .

 

 

3 3  30+ years of experience  Appointed President in May 2019 and CEO in January 2020  Joined Otelco in October 2018 as COO  Previously Executive Vice President and CFO at Oxford Networks then FirstLight Fiber  40+ years of experience  Served as Chief Financial Officer since February 2004  20+ years of experience  Joined Otelco in 2017  Previously Vice President of Technology at Great Works Internet  20+ years of experience  Previously served as Vice President of Business Development and Director of Sales and Marketing at Great Works Internet  25+ years of experience  Served as General Counsel since 2013  Served as Director of Legal and Regulatory Affairs 2009 - 2013 Exceptional management team with deep expertise leading companies in the telecommunications industry and a demonstrated track record of managing growth platforms Richard Clark President and CEO Curtis Garner CFO David Allen VP of Network Operations Trevor Jones VP of Sales, Marketing and Customer Service Trina Bragdon General Counsel, VP of Human Resources and Regulatory Affairs Prior Experience Prior Experience Prior Experience Prior Experience Prior Experience Management Team

 

 

4 28,000+ ILEC Customers Both Business and Residential MILLION 2019 revenue $47 million in RLEC $15 million in CLEC $62+ SERVICE FOOTPRINT 11 RLECS across 6 states and CLEC serving 3 states MILLION 2019 EBITDA $23+ EMPLOYEES With 18 office facilities across 6 states 200+ CLEC BUSINESS CUSTOMERS Across critical industries 2,000+ Otelco At - a - Glance

 

 

5 0% 5% 10% 15% 20% 25% 30% 35% 40% Local Services Network Access Cable Television Internet Transport Services Managed Services 2017 2018 2019 Q1 2019 Q1 2020 Diverse Revenue Mix

 

 

6 Current Network Summary Otelco Network Summary New England CLEC Missouri RLEC New England RLEC Alabama RLEC Switching Facilities Remote Switches 31 Colos 89 107 75 Video Nodes - - - 46 Wireless Internet Access Points - 156 - - Total Fiber Route Miles 1,259 473 513 1,363 Owned Fiber Route Miles 243 473 513 1,363 Transport Fiber Route Miles 243 457 370 518 Distribution Fiber Route Miles - 16 143 845 IRU Fiber Route Miles 235 - - - Leased Fiber Route Miles 781 - - - Copper Route Miles - 1,010 1,501 3,119 1) Figures as of May 2020

 

 

7 3.48 3.11 2.90 3.00 2.99 65,000 70,000 75,000 80,000 85,000 90,000 95,000 100,000 2016 2017 2018 2019 Q1 2020 Debt Level and Year End Leverage Notes Outstanding (000) Leverage Ratio See appendix for reconciliation to GAAP measures

 

 

8 2020 Operational Initiatives • Mapping Project • Establishes accurate location data • Establishes accurate representation of plant • Facilitates plant analysis and reporting • Maine and Alabama completed, Missouri and Massachusetts complete by July • West Virginia and Vermont complete by end of year • Adtran/VDSL Deployment • Enable VDSL service in all Central Office and Remote locations • Meet 40% A - CAM coverage in 2020 • Provide 50Mbps to 75 Mbps service to 10% of market • Alabama and Missouri completed in 2019 • Northeast states are delayed by COVID - 19 travel restrictions • Expecting to complete by the end of September • Cable Deployment • Free up spectrum currently used by analog channels to enhance speeds for Cable internet customers • Offer increased speeds up to 1 Gbps service • Allow for deployment of additional HD channels • Expected completion in early 2021

 

 

Speed Coverage in Network 9 Gigabit-capable 2018 2019 Planned 2020 FTTP Locations 7,243 11% 10,685 16% 12,890 19% DOCSIS 3.1 Locations 5,524 8% TOTAL Gigabit-capable Locations 7,243 11% 10,685 16% 18,414 27% VDSL (25/3 Broadband, or better) 25Mbps 390 1% 3,839 6% 7,730 11% 50Mbps 561 1% 2,357 3% 4,961 7% 75Mbps 320 0% 564 1% 1,405 2% Total VDSL Locations 1,271 2% 6,761 10% 14,096 21% Market locations with 25/3 Mbps or better 8,514 13% 17,446 26% 32,510 48% Market locations with speeds of 1 Mbps to 24 Mbps (most under 10 Mbps) 58,907 87% 49,975 74% 34,911 52% Total estimated market locations 67,421 100% 67,421 100% 67,421 100%

 

 

10 Total Locations Passed with Fiber Locations Passed = Ready for service installation via drop fiber. Locations counts in 2020 reflect the completion and release of locations passed with 2019 projects. State Pre 2017 2017 2018 2019 2020 Total Fiber Customers Penetration Alabama Locations 3,329 1,230 1,351 2,786 2,005 10,701 2,622 25% Fiber Miles 511 41 102 191 - 845 New England Locations 187 409 373 629 227 1,825 765 42% Fiber Miles 20 31 29 63 - 143 Missouri Locations 51 221 92 - - 364 199 55% Fiber Miles 2 10 4 - - 16 Total Locations 3,567 1,860 1,816 3,415 2,232 12,890 3,586 28% Cumulative Locations 3,567 5,427 7,243 10,658 12,890 12,890 % of Total Market 5% 8% 11% 16% 19% 19% Total Fiber Miles 533 82 135 254 - 1,004 ACTUAL

 

 

11 Otelco Fiber 3/31/2020 Locations Passed = Ready for service installation via drop fiber. 25%

 

 

12 APPENDIX

 

 

13 Appendix: Select Financial Information Year End Results 2020 Q1 2019 Q1 2019 2018 2017 2016 Operating Revenues 15,421,719$ 15,755,190$ 62,766,100$ 66,067,725$ 68,525,759$ 68,944,452$ Operating Expenses (COGS and SG&A) (10,095,518) (10,075,217) (40,278,826) (41,042,221) (41,542,212) (42,108,830) Depreciation and Amortization (2,021,501) (1,916,635) (7,643,394) (7,232,339) (7,376,828) (8,022,627) Operating Income 3,304,700$ 3,763,338$ 14,843,880$ 17,793,165$ 19,606,719$ 18,812,995$ Interest Expense (1,181,348) (1,366,864) (5,270,820) (5,844,132) (13,249,547) (10,633,956) Other Income 707,391 594,243 615,343 262,886 204,461 624,355 Loss on Debt Prepayment Penalty - - - - (2,302,875) - Income Before Taxes 2,830,743$ 2,990,717$ 10,188,403$ 12,211,919$ 4,258,758$ 8,803,394$ Provision For income taxes (612,993) (710,178) (2,392,777) (2,744,598) 7,856,380 (3,657,617) Net Income 2,217,750$ 2,280,539$ 7,795,626$ 9,467,321$ 12,115,138$ 5,145,777$ Adjustments to EBITDA Amortization 66,772 79,004 299,439 326,269 375,876 885,175 Depreciation 1,954,729 1,837,630 7,343,954 6,906,070 7,000,952 7,137,453 Income Tax Expense 612,993 710,178 2,392,777 2,744,598 (7,856,380) 3,657,617 Interest Expense 1,176,128 1,365,912 5,254,862 5,843,383 13,249,487 10,633,235 Loan Fees 17,187 17,187 69,011 74,132 2,447,076 203,545 Stock Compensation 52,142 71,303 254,094 307,935 308,238 415,645 EBITDA 6,097,701$ 6,361,753$ 23,409,763$ 25,669,708$ 27,640,387$ 28,078,448$

 

 

14 Appendix: Leverage Ratio Year End Results 2020 Q1 TTM 2019 Q1 TTM 2019 2018 2017 2016 Net Income 7,732,837$ 9,752,141$ 7,795,626$ 9,467,321$ 12,115,138$ 5,145,777$ Adjustments to EBITDA Amortization 287,208 321,130 299,439 326,269 375,876 885,175 Depreciation 7,461,053 7,008,805 7,343,954 6,906,070 7,000,952 7,137,453 Income Tax Expense 2,295,592 2,680,586 2,392,777 2,744,598 (7,856,380) 3,657,617 Interest Expense 5,065,078 5,750,797 5,254,862 5,843,383 13,249,487 10,633,235 Loan Fees 69,011 72,570 69,011 74,132 2,447,076 203,545 Stock Compensation 234,931 307,985 254,094 307,935 308,238 415,645 EBITDA 23,145,710$ 25,894,014$ 23,409,763$ 25,669,708$ 27,640,387$ 28,078,448$ Senior Notes Payable 64,775,000$ 66,950,000$ 65,862,500$ 70,212,500$ 81,562,500$ 74,875,000$ Current Portion LT Debt 4,350,000 4,350,000 4,350,000 4,350,000 4,350,000 7,125,000 Sub Notes Payable - - - - - 15,572,726 Sub Notes Outstanding - - - - - Notes Outstanding 69,125,000$ 71,300,000$ 70,212,500$ 74,562,500$ 85,912,500$ 97,572,726$ Leverage 2.99 2.75 3.00 2.90 3.11 3.48

 

 

15 Appendix: Select Financial Information Year End Results 2020 Q1 2019 Q1 2019 2018 2017 2016 Operating Revenues 15,421,719$ 15,755,190$ 62,766,100$ 66,067,725$ 68,525,759$ 68,944,452$ Operating COGS and SG&A (10,026,188)$ (9,986,727)$ (39,955,722)$ (40,660,154)$ (41,089,773)$ (41,489,638)$ Other Income 702,170$ 593,290$ 599,385$ 262,137$ 204,401$ 623,634$ % Revenue 60% 60% 63% 61% 60% 59% Consolidated EBITDA 6,097,701$ 6,361,753$ 23,409,763$ 25,669,708$ 27,640,387$ 28,078,448$ % Revenue 40% 40% 37% 39% 40% 41%

 

 

16 Appendix: Select Financial Information 2020 Q1 2019 Q1 2019 2018 2017 2016 EBITDA 6,097,701$ 6,361,753$ 23,409,763$ 25,669,708$ 27,640,387$ 28,078,448$ Capital Expenditures 3,250,277 1,532,486 12,439,624 7,983,158 8,510,625 6,879,677 Free Cash Flow 2,847,424 4,829,267 10,970,139 17,686,550 19,129,762 21,198,771 2020 Q1 TTM 2019 Q1 TTM 2019 2018 2017 2016 EBITDA 23,145,710 25,894,014 23,409,763 25,669,708 27,640,387 28,078,448 Debt 69,125,000$ 71,300,000$ 70,212,500$ 74,562,500$ 85,912,500$ 97,572,726$ Cash 4,128,052 5,478,454 3,113,092 4,656,624 3,570,367 10,537,577 Net Debt 64,996,948 65,821,546 67,099,408 69,905,876 82,342,133 87,035,149 Debt/EBITDA 2.99 2.75 3.00 2.90 3.11 3.48 Net Debt/EBITDA 2.81 2.54 2.87 2.72 2.98 3.10

 

 

Glossary of Terms A - CAM Alternative Connect America Model CAF II Connect America Fund II CAF BLS Connect America Fund Broadband Loop Support CLEC Competitive Local Exchange Carrier FTTN Fiber to the Node (fiber to a remote office, allows for increased speed over existing copper network) FTTP Fiber to the Premise HCLS High Cost Loop Support ICLS Interstate Common Line Support ISP Internet Service Provider MSO Multiple System Operators RLEC Rural Local Exchange Carrier TSF Transitional Support Fund USF Universal Service Fund VDSL Very - high - bit - rate Digital Subscriber Line 17

 

 

OTELCO Inc. OTEL (Nasdaq) www.otelco.com 18