"During first quarter 2014, the Company reduced its credit facility by $5.4 million through scheduled, Excess Cash and voluntary payments."
OTEL's Disclosure Statement estimate for debt reduction was $14.4M for all of 2014. They're off to a good start. Restructuring expenses in 2Q/13 were over $2.5M. There will be none of those expenses in 2Q/14. If the SIP passes in 9 days it will further enable OTEL to conserve cash and reduce debt at a quicker pace.
Only $9M to go to hit OTEL's 2014 debt reduction target with three quarters left in the year. A slam dunk.
Of the $3mm drop in cash, a little over $1mm could be attributed to the $500k paid to Reliable Networks and $600k added to capital expenditures compared to the year ago quarter (all things considered equal.) So, I figure that less than $2mm of that cash was used up to pay down the facility.
This would mean that about $3.5mm was paid as figured ($14mm for the year) and an extra $1.9mm of cash was used to get to the total of $5.4mm paid down. Does that make sense?
I agree with Walk that management must have felt comfortable using some additional cash to pay down debt UNLESS they were concerned with hitting some kind of debt trigger. This helps reduce interest expense (although minimal) as well as the mentioned $1.2mm in operating cost reductions. Could even have been a very nice gesture by management to continue to work with creditors on debt negotiations going forward.
Taking down debt of $5.4mm this quarter is very nice in my opinion. More importantly, stabilization of access line equivalents was very big.
Something is very wrong if OTEL PPS does not reverse course after this earnings release.
The required payment is roughly $1.7M per quarter. He didn't, but I am very happy that OTEL used some of that cash sitting around earning nothing to pay down debt that the banks are charging considerable interest to service. I'm surprised they didn't do this sooner. What this says to me is that OTEL is feeling more comfortable with the business so they don't have to have as large of a cash cushion. It also makes the banks more likely to come to the table on a new credit agreement with more favorable terms.
Access line equivalents stable. When is the last time that has happened?
Increased Capex "in anticipation of growth in Reliable Networks" tells me integration is going well there.
Operating cost reductions of $1.2M are coming this year.
As I mentioned before, over $9M of cash will not be consumed by restructuring costs as was the case last year.
I'll be surprised if the SIP doesn't pass next week. It will enhance EBITDA and further conserve cash.