Otelco Inc: modeFinance Credit Report

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modeFinanceTM HeadquarterBuilding A - AREA Science ParkPadriciano 99 - 34149 Trieste - ItalyPh.: +39 040 375 5337Fax: +39 040 375 [email protected]

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OTELCO, INC.Monday, 04 February 2013

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D C CC CCC B BB BBB A AA AAA

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D C CC CCC B BB BBB A AA AAAnot

available

non return extremlypathological

pathological highdanger

weak sufficient adequate good very

strongextremely

strong

Company name OTELCO, INC.

Identification number US522126395

Country United States of America

ZIP code and city 35121 - ONEONTA

Address 505, THIRD AVENUE EAST

+1 205 625 3591

www.otelcoinc.com

[email protected]

Legal form Not available

Account Consolidated

Incorporation date 1998

NACE 2 Sector 6190 - Other telecommunications activities

Listed

Status Active

MORE Credit limit 680,000 e

31/12/2011 31/12/2010 31/12/2009

Turnover (th e) 78,711 78,091 72,022

Rating CCC CCC CCC

Probability of default 16.00% 16.00% 16.00%

Confidence Level 100% 100% 100%

Solvency ratios

Leverage ratio -26.69 -62.62 95.86

Total asset/Total liabilities 0.96 0.98 1.01

Liquidity ratios

Current Ratio 2.94 3.04 2.81

Quick Ratio 2.75 2.87 2.64

Profitability and economic equili-

brium ratios

Return on investement ROI (%) 8.57 8.06 6.20

Return on equity ROE (%) -17.76 -13.18 -89.46

Asset turnover 0.32 0.32 0.31

Interest paid weight 0.91 0.95 1.21

Gross Profit/Operating revenue 0.57 0.60 0.60

Interest Coverage ratios

EBIT interest coverage ratio 0.99 1.07 0.86

Analysis and trend of financial

strength


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modeFinance TM srlVAT number [email protected]

Area Science Park,Padriciano 99. 34149 Trieste, ItalyTel. +39 040 3755337Fax +39 040 3756741

Sector Analysis

Company Healthy Balanced Vulnerable Risky

Solvency ratios

Leverage ratio -26.69 0.44 2.04 2.63 -2.24

Total asset/Total liabilities 0.96 3.17 1.49 1.13 0.68

Liquidity ratios

Current Ratio 2.94 2.28 1.20 1.00 0.52

Quick Ratio 2.75 2.09 1.10 0.92 0.50

Profitability and economic equilibrium ratios

Return on investement ROI (%) 8.57 18.39 7.41 0.30 -15.07

Return on equity ROE (%) -17.76 20.04 13.87 -13.84 -49.59

Asset turnover 0.32 1.38 1.29 1.34 1.28

Interest paid weight 0.91 0.01 0.09 0.00 -0.06

Gross Profit/Operating revenue 0.57 0.43 0.35 0.32 0.26

Interest Coverage ratios

EBIT interest coverage ratio 0.99 146.00 9.27 0.19 -6.69

Cash Conversion Cycle (days)

Days Sales Of Inventory (DIO) 6 8 10 12 9

Days Sales Outstanding (DSO) 23 47 50 53 43

Days Payable Outstanding (DPO) 5 23 34 40 40

Cash Conversion Cycle (DIO + DSO - DPO) 24 31 24 14 1

Numer of analyzed companies - 429 779 409 164

(Average) Rating CCC A BBB B CC

The sector has been chosen according to:

international companies in the sector NACE 2 6190 with financial data of year 2011.


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Sector Analysis - Graphs


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Balance Sheet

BALANCE SHEET (th e) 31/12/2011 31/12/2010 31/12/2009

Accounting practice Local GAAP Local GAAP Local GAAP

Exchange rate USD - EUR 0.77286 0.748 0.69416

Number of months 12 12 12

Total assets 245,556 241,736 234,297

Fixed assets 223,747 217,171 211,755

Intangible fixed assets 161,914 160,165 154,386

Tangible fixed assets 50,917 47,788 47,917

Other fixed assets 10,916 9,218 9,452

Current assets 21,808 24,566 22,542

Stocks 1,376 1,359 1,367

Debtors 5,054 4,913 4,926

Other current assets 15,378 18,294 16,249

Cash & cash equivalent 9,579 13,633 12,308

Shareholders funds -9,559 -3,923 2,419

Capital 102 99 92

Other shareholders funds -9,661 -4,021 2,327

Total liabilities 255,114 245,659 231,878

Non current liabilities 247,685 237,569 223,864

Long term debt 209,527 203,154 190,002

Other non-current liabilities 38,158 34,415 33,862

Current liabilities 7,429 8,090 8,014

Loans - 0 0

Creditors 1,152 575 2,184

Other current liabilities 6,277 7,516 5,830

Total shareh. funds & liab. 245,556 241,736 234,297

NET DEBT (th e) 31/12/2011 31/12/2010 31/12/2009

Short term debts - 0 0

Long term debt 209,527 203,154 190,002

Cash & cash equivalent 9,579 13,633 12,308

Net debt - 189,520 177,694

31/12/2011 31/12/2010 31/12/2009

Working capital 5,278 5,697 4,109

Net Current Assets 14,379 16,475 14,528

31/12/2011 31/12/2010 31/12/2009

Days Sales Of Inventory (DIO) 6 6 7

Days Sales Outstanding (DSO) 23 23 25

Days Payable Outstanding (DPO) 5 3 11

Cash Conversion Cycle (DIO + DSO - DPO) 24 26 21


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Income Statement

INCOME STATEMENT (th e) 31/12/2011 31/12/2010 31/12/2009

Accounting practice Local GAAP Local GAAP Local GAAP

Exchange rate USD - EUR 0.77286 0.748 0.69416

Number of months 12 12 12

Sales 78,711 78,091 72,022

Revenues growth (%) 1 8 -

Other revenues +/- variation in inventories and contract in progress + Fixed assets

own construction capitalized0 0 0

Operating revenue / turnover 78,711 78,091 72,022

Total operating costs 59,675 58,368 56,802

Costs growth (%) 2 3 -

Service costs - - -

Material costs - - -

Costs of employees - - -

EBITDA 34,667 37,424 33,576

Depreciation 15,632 17,701 18,356

EBIT 19,036 19,724 15,221

Financial P/L -17,144 -18,751 -18,334

Financial revenue - - -

Financial expenses 17,144 18,751 18,334

Interest paid 19,148 18,510 17,643

P/L before tax 1,891 973 -3,113

Extr. and other P/L - - -

Extr. and other revenue - - -

Extr. and other expenses - - -

P/L before tax + Extr. and other P/L - - -

Taxation 193 456 -949

P/L for period 1,698 517 -2,164

31/12/2011 31/12/2010 31/12/2009

Costs of Good Sold 34,008 30,887 28,614

Gross Profit 44,703 47,204 43,409

Other Operating Expenses 25,667 27,480 28,188

31/12/2011 31/12/2010 31/12/2009

Cash flow 17,330 18,217 16,191

Added value - - -

31/12/2011 31/12/2010 31/12/2009

Number of employees 330 315 299


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Evolutions and trends


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Qualitative information

Full overview The company is a full service communications provider that offers a wide range of wireline telephone services

to residents and businesses in North Central Alabama, Central Missouri and majority of Maine. The company

was founded in 1998 for the purpose of acquiring and operating rural local exchange carriers. Its corporate

headquarters is located in Oneonta, Alabama in the United States. The company provides wireline telephone

services such as telephone with caller identification, call waiting, call forwarding, and voicemail services, digital

cable television, high - speed Internet, and long distance service. It also provides network access to other wireline,

long distance and wireless carriers for calls originated or terminated on the company’s network. In addition, the

company publishes local telephone directories in rural local exchange carrier territories and offers other telephone

related services that include leasing, selling, installing, and maintaining customer premise telecommunications

equipment. The company offers ease and convenience of one bill system, local customer service, competitive

rates, convenient automatic bank draft, and credit card payment. It serves portions of a five county area in Alabama

including Blount, Etowah, Marshall, Cullman and Morgan counties, a five county area in Missouri including Cooper,

Moniteau, Morgan, Pettis, and Saline counties, and a significant portion of the state of Maine. The company has

local customer sales and service offices located in Alabama at Oneonta, Walnut Grove, Arab and Blountsville, in

Missouri at Pilot Grove and Sedalia, and for the state of Maine at Bangor and Portland.

History Not available.

Primary business line Full service communications provider that offers a wide range of wireline telephone services to residents and

businesses in North Central Alabama, Central Missouri and majority of Maine.

Secondary business line Not available.

Main activity Services.

Secondary activity Not available.

Main products and services Wide range of wireline telephone services.

Size estimate Not available.

Strategy, organization and policy Not available.

Strategic alliances Not available.

Membership of a network Not available.

Main brand names Not available.

Main domestic country United States of America.

Main foreign countries or regions Not available.

Main production sites Not available.

Main distribution sites Not available.

Main sales representation sites Not available.


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Main customers Not available.

Auditor/Advisor/Bank

name type address

BDO USA, LLP Auditor -

Wells Fargo Shareowner Services Transfer Agent -

Board

name date of birth nationality function

Mr. Michael D Weaver - United States CHAIRMAN OF THE BOARD, PRESIDENT, CHIEF EXECUTIVE Officer

Mr. William Bak - - Independent Director

Mr. Robert E Guth - - Independent Director

Mr. Howard J Haug - - Independent Director

Mr. Stephen P Mccall - - Independent Director

Mr. Andrew Meyers - - Independent Director

Mr. William F Reddersen - - Independent Director

Sharehoders (the first twenty shareholders ordered by Direct %)

CI FINANCIAL CORP via its funds Rating:

Country ISO code CA Operating Revenue (MIL $) 1472.05

NACE Rev. 2, Core code - Total Assets (MIL $) -

Direct % - Number of Employees 1280

Total % 11.04 Information date 2012/09

Address : Not available

MAX % HELD BY NOT LISTED SHAREHOLDERS Rating:

Country ISO code - Operating Revenue (MIL $) -


Direct % 10.00 Number of Employees -

Total % - Information date 2012/03



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SIGNATURE GLOBAL ADVISORS Rating:

Country ISO code CA Operating Revenue (MIL $) -


Direct % 9.70 Number of Employees 0



SOCHET IRA Rating:

Country ISO code - Operating Revenue (MIL $) -


Direct % - Number of Employees -



HUBER CAPITAL MANAGEMENT, LLC via its funds Rating:

Country ISO code US Operating Revenue (MIL $) 0.41





NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY (THE) via its funds Rating:

Country ISO code US Operating Revenue (MIL $) 15457

NACE Rev. 2, Core code - Total Assets (MIL $) 189645




RAYMOND JAMES FINANCIAL INC via its funds Rating:


NACE Rev. 2, Core code - Total Assets (MIL $) 21160.3




BRIDGEWAY CAPITAL MANAGEMENT INC via its funds Rating:

Country ISO code US Operating Revenue (MIL $) -





RENAISSANCE TECHNOLOGIES LLC via its funds Rating:







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DEUTSCHE BANK AG via its funds Rating:

Country ISO code DE Operating Revenue (MIL $) 43152.86





WELLS FARGO & COMPANY via its funds Rating:

Country ISO code US Operating Revenue (MIL $) 79466

NACE Rev. 2, Core code - Total Assets (MIL $) 1313867




Subsidiaries (the first twenty subsidiaries ordered by Direct %)

BLOUNTSVILLE TELEPHONE LLC Rating:



Direct % MO Number of Employees -


BRINDLEE MOUNTAIN TELEPHONE LLC Rating:





COMMUNICATIONS DESIGN ACQUISITION LLC Rating:





CRC COMMUNICATIONS LLC Rating:





CRC COMMUNICATIONS LLC Rating:






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GRANBY TELEPHONE LLC Rating:





HOPPER TELECOMMUNICATIONS LLC Rating:





I - LAND INTERNET SERVICES LLC Rating:





MID - MAINE COMMUNICATIONS, INC. Rating:



Direct % MO Number of Employees 100


MID - MAINE TELECOM LLC Rating:





MID - MAINE TELPLUS LLC Rating:





OTELCO MID - MISSOURI LLC Rating:





OTELCO TELECOMMUNICATIONS LLC Rating:






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OTELCO TELEPHONE LLC Rating:





OTT COMMUNICATIONS Rating:





OTT COMMUNICATIONS Rating:





PINE TREE TELEPHONE AND TELEGRAPH COMPANY, THE Rating:





PINE TREE TELEPHONE LLC Rating:





SACO RIVER TELEPHONE LLC Rating:





SHOREHAM TELEPHONE LLC Rating:






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ASKMORE rating guide

General vision A credit rating is an opinion of the general creditworthiness of an obligor (issuer rating), or the creditworthiness of

an obligor in respect of a specific debt security, or other financial obligation (issue rating), based on relevant risk

factors.

The Multi Objective Rating Evaluation (MORE) model is essentially used to assess the level of distress of industrial

companies by using data included in financial statements.

The basic idea of the model is to analyze a set of financial and economic ratios in a predictive corporate bankruptcy

model with the purpose of creating a fundamental credit rating model for each industrial sector. Results of the

model are obtained by applying newly developed numerical methodologies, drawing together financial theory,

data mining and engineering design methodologies. The heart of MORE is a multi dimensional and multi objective

algorithm that produces a classification of each company, by taking into account any attributes (such as sector and

country) characterizing a firm.

The model gives the opportunity to assign a rating to a company even without considering a complete data analysis

and allows to process quality information. It induces a better understanding of a company’s strength and weakness

thanks to sophisticated data mining tools and taking into account the analyst knowledge.

The MORE rating vision is to look at the fundamental economics of the company. The main idea is to evaluate the

rating observing every aspect of the economical and financial behavior of the company: better is the equilibrium

between the different aspects, better will be the final rating.

This is done studying, evaluating and aggregating the most important sections of the financial and economic

behavior of a company such as: profitability, liquidity, solvency, interest coverage and efficiency.


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Rating scale

Rating class Rating macro class Assessment

AAA

Healthy

The company’s capacity to meet its financial commitments is extremely strong. The company shows an excellent

economic and financial flow and fund equilibrium.

AAThe company has very strong creditworthiness. It also has a good capital structure and economic and financial

equilibrium. Difference from AAA is slight.

AThe company has a high solvency. The company is however more susceptible to the adverse effects of changes in

circumstances and economic conditions than companies in higher rated categories.

BBB

Balanced

Capital structure and economic equilibrium are considered adequate. The company’s capacity to meet its financial

commitments could be affected by serious unfavourable events.

BBA company rated BB is more vulnerable than companies rated BBB. Furthermore the company faces major ongoing

uncertainties or exposure to adverse business, financial, or economic conditions.

B

Vulnerable

The company presents vulnerable signals with regards to its fundamentals. Adverse business, financial, or economic

conditions will be likely to impair the company’s capacity or willingness to meet its financial commitments.

CCC

A company rated CCC has a dangerous disequilibrium on the capital structure and on its economic and financial

fundamentals. Adverse market events and an inadequate management could affect with high probability the

company’s solvency.

CC

Risky

The company shows signals of high vulnerability. In the event of adverse market and economic conditions, the

company’s strong disequilibrium could increase.

CThe company shows considerable pathological situations. The company’s capacity to meet its financial

commitments is very low.

D The company has not any longer the capacity to meet its financial commitments.


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Fundamental Credit Rating Ratios

Analysis area Ratio Assessment

Solvency ratios

Leverage ratioThis measures the level of total liabilities of the company in comparison

with equity.

Assets to debtThis indicates company’s solvency. The company shows a level of deficit

when the value of this ratio is under one unit.

Financial ratios Fixed Assets coverage ratioThis is calculated only for holdings. It measures the capital structure i.e.

whether a company covers the fixed assets with long term capital.

Liquidity ratios

Current ratioThis measures whether a company has sufficient short-term assets to cover

its short-term liabilities.

Quick ratioThis compares current liabilities only to those assets that can be readily

turned into cash.

Profitability and economic ratios

Return on Investement(ROI)This measures the profitability of company investments without regard to

the way the investment is financed.

Return on Equity(ROE) This measures the profitability of the equity.

Asset turnover

This indicates the investments turnover with regards to sales. The level

assumed from the ratio depends on the sector in which the company

operates.

Profit margin This indicates the profitability of sales.

Interest coverage ratio Interest Paid coverage

This indicate the ability of the company to cover interest expenses through

the economic margins (Gross profit and EBIT) and through the cash flow

from operating activities.


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MORE Credit Limit, Probability of default and Confidence Level

MORE Credit Limit MORE Credit limit is the estimation of the amount of maximum credit that is possible to assign on a commercial

relationship with the analyzed company with an outlook of one year.

modeFinance used the following values associated with the company analyzed while computing the credit limit:

• Size;

• Years in Business;

• Average number of suppliers;

• Liquidity of the company and the comparison with its sector;

• The funds dedicated to be paid to suppliers;

• The likelihood that a company may pay its debts in the next 12 months (MORE Ratings).

The credit limit in this report is merely a suggested value of commercial credit limit calculated on the basis of annual

public data. This value should be reviewed by paying attention to the Confidence Level value and by using other

information such as other business information, news... etc; and private information such as the relationship with

client, history of payments, guarantees and the knowledge of the sector.

Probability of default e Confidence

Level

In addition to the MORE Rating, modeFinance also estimates the probability of default and provides a level of

confidence. The probability of default is the degree of certainty (in quantitative terms) that the company will go

into default.

As the probability of default is strongly affected by the economic climate that the company is operating in,

companies in the same MORE class will not necessarily have the same probability of default.

The MORE model can produce a MORE rating even if there is missing data by using an associated confidence level:

Confidence =

∑Available Information∑

Total Information

The level of confidence does not indicate financial confidence in the company. It is a reflection of the variations in

availability of financial data across Europe due to filing regulations and suggests the degree of financial detail the

MORE rating is able to take into account for each company.

For companies with fully populated records a confidence level of 100% would be applied: companies where no

financial data is provided, 0%. This puts the MORE rating in a context for the user and aids interpretation.


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Notes and disclaimer

NOTES modeFinance has based the present analysis on the company available financial statements, coming from one or

more of the following sources: local providers, Commercial Register (Companies House), websites, modeFinance’s

database etc.

DISCLAIMER All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any

form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of

the publisher modeFinance. The facts of this report are believed to be correct at the time of publication but cannot

be guaranteed. Please note that the findings, conclusions and recommendations that modeFinance delivers will

be based on information gathered in good faith from both primary and secondary sources, whose accuracy we

are not always in a position to guarantee. As such modeFinance can accept no liability whatever for actions taken

based on any information that may subsequently prove to be incorrect.

Contacts

Company modeFinance

Products MORE rating

Where AREA Science Park

34149 Trieste, via Padriciano 99 - ITALY

Info [email protected]

web www.modefinance.com

Phone +39 040 3755337

Otelco Inc: modeFinance Credit Report

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