Does anyone know how much income was derived from the TWC contract. I know that OTT is loosing approx. $11.7 mil. in revenue. I noticed that the yahoo website already modified the 2013 sales and income to reflect the changes. If it's at all accurate, it's not as bad as I expected.[ sales approx. 91 mil and income .44/share]
Does anyone on this message board really understand what Otelco does and how the TWC deal will affect the company. TWC is a very high margin account - OTT simply provides dial tone and switching calls for TWC customers. There is little if any overhead that can be cut with the loss of this contract.If you look at OTT financials you'll also see it is the only area of growth. And every other segment of the company is declining or struggling. So, what you have is a highly leveraged entity with declining revenue and limitted ability to cut costs. Maine is a large state with a small population and yet OTT thought it prudent to buy a second CLEC there because of the TWC contract. OTT paid $100M for the company (Pine Tree) that had that contract and now it is gone, but they still have the debt. These guys are toast no matter how Weaver responds to the requisite softballs the analysts toss him on every earnings call.
TWC netted approx. 20% or $2.4MM to EBIDTA. 20 or so staff are directly connected to that contract which will possibly be non-renewed effective 1/1/13. Will it be extended? We'll see. For TWC to simply replace the service may or may not be all that easy and they had not one complaint all that time; OTT was uber reliable. So, lay off 20 utility co. workers ( say $50K per year, benefits?... that's $1MM) we have a loss of $1.4MM to EBIDA but no dividend as of now that retains some $9.3MM in cash. Sure, I wish I was still going to get that payment but let's say,a $0.97 interest payment supports what as a share price? 12%? That is an $8/sh price right there which equals the callable $7.50 bond x 1.06 premium. There are more cost cuts available by the final termination of the contract: autos, attendant insurance, fuel, assorted whatnot. The one great risk I see is the availability of refinancing but that was on the table long before the potential loss of the TWC contract and the smart money supported the $12 price as recent as 7 days ago. IMHO the question is how much of an overraction was had here. Toast? I really doubt it.
Sorry, my error, but still not too far off. The effect is a reduction in revenue of $12.1 mil. for 2013 and a reduction of free cash flow from $1.81/share to $1.39/share. It would appear that with some cost cutting in operations they may be able to add some to the fcf. Time will tell. Very interested to hear their conference call.
yeah I am not sure what the earnings impact will be we should get a better ideal on the CC Also keep in mind they are cutting the divy out so that there should help off set the loss revenues and earnings i can really care less about a divy mostly this one based on a few facts
1: Stock is EXTREMLY Oversold RSI 14 Now was 7 havent seen one this oversold in a while
2:News dont effect the company till 2013 the contract expires 2012 but there is a trasnsition period going into 2013
3:Company has time to make adjustments and can bring in new customers or reduce cost sounds like we have a good management team in place here they cut cost immediatatly by getting rid of the Divy
so the stock is way oversold down nearly 70% on a 11% loss in revenues... clearly people paniced and we really dont have a good ideal of the impact on earnings going forward and its impact want be till 2013 so no impact on earnings this year
this should rebound from these currently EXTEMLY Oversold conditions