Oxford Networks reports $2.8 million loss in 2012, seeks new sources of capital [Bangor Daily News, Maine]
(Bangor Daily News (ME) Via Acquire Media NewsEdge) Aug. 20--LEWISTON, Maine -- After posting a small profit in 2011, Oxford Networks lost $2.8 million in 2012, according to the company's audited financial statement, which was obtained by the Bangor Daily News.
In addition to the net loss, the auditor's report states that as of Dec. 31, 2012, the company's current liabilities exceeded its current assets by $30.2 million. That disparity, along with the net loss, prompted the auditor to write: "Those factors, as well as the uncertain conditions that the company faces regarding its loan agreements, create an uncertainty about the company's ability to continue as a going concern."
Craig Gunderson, Oxford Networks' CEO, said in an interview on Monday with the Bangor Daily News that 2012 "was not a good financial year for the company," but said the losses and the auditor's note about the gap between liabilities and assets are "not currently reflective of the financial health of the company."
The losses, he said, are a result of growing pains as the company continues to evolve from a traditional telephone company into a full-service technology services provider. He said 2013 is off to a much better start, without a number of one-time charges that hurt the company's bottom line in 2012.
Oxford Networks is not publicly traded, but it does have shareholders. In a letter to those shareholders dated June 26, 2013, which was also obtained by the BDN, Gunderson reported that the company continues "to make great progress" in that evolution, but admitted that the "transition has not been easy and continues to be full of challenges, not the least of which has been the access to capital to appropriately fund this effort."
Context is necessary to understand where the company is in its evolution as a telecommunications provider, Gunderson said.
Oxford Networks was originally incorporated in 1900 as Oxford County Telephone and Telegraph Co., and until the late 1990s, the company was exactly that: a provider of traditional telephone service to residents and businesses within Oxford County.
In the late 1990s and early 2000s, the company's board of directors realized that diversification was necessary if the company expected to survive the massive changes brought on by evolving telecommunications technology. The company started selling dial-up Internet service, then began laying its own fiber network, first from Bangor to Portsmouth, and eventually all the way to Boston. In 2012, in response to the convergence of various services onto telecommunications technology, Oxford Networks acquired a data center in Brunswick from Resilient Tier V, and Norton Lamb & Co., a small information technology consulting firm in Falmouth.
The new data center and managed services part of the business that the Norton & Lamb acquisition provided was about 9 percent of its revenue as of the end of 2012, Gunderson said.
Oxford Networks employs roughly 120 people.
Gunderson told the BDN that the 2012 financials include a number of significant, one-time expenses that affected the company's bottom line, but that do not point to long-term deficiencies in the business plan. Those include the write-off of a prior multimillion-dollar investment in Resilient Tier V, the Brunswick-based data security startup Oxford Networks ended up acquiring outright in 2012; and start up as well as restructuring costs associated with some "very painful" layoffs the company made near the end of 2012, Gunderson said. It announced the layoffs of 12 people in early January.
"All of those investments we made were necessary steps to really evolve the company to meet the converging needs of our customers," Gunderson told the BDN. "And while it was painful to make some of the changes we made in 2012, they were very necessary for where we're taking the company in 2013 and beyond."
While it may have lost money, Oxford Networks did increase its revenue in 2012. The company's $2.8-million loss comes on revenue of $32.1 million, which is a 8.5 percent increase from the $29.6 million in revenue it posted in 2011.
As for the $30.2 million disparity between the company's liabilities and assets, Gunderson says that is a figure that captured a point in time -- Dec. 31, 2012 -- during which the company was in negotiations with its bank over the status of some long-term debt obligations. The company had a deal with its bank that assumed it would secure additional capital by the end of 2012. When that capital did not materialize, more than $20 million of debt migrated on the balance sheet from a long-term liability to a current liability, resulting in that large disparity.
"At that specific point in time, negotiations were still under way with the bank, and the auditor appropriately reflected how things stood at that time," Gunderson said.
However, by the time the shareholder meeting was held on July 25, Gunderson was able to report to shareholders that a deal had been negotiated with the bank on the long-term debt obligations that enabled the company to eliminate that massive gap between its current liabilities and current assets.
The company has two loans with its bank, Denver-based CoBank, both of which are scheduled to come due in full in 2014. The two loans combined had an outstanding balance of slightly more than $28 million as of Dec. 31, 2012. The company is currently renegotiating those loans with CoBank, Gunderson said.
The telecom business is capital intensive, he said, and so the search for capital continues. While Gunderson would not share specifics about the company's strategy for securing additional capital, he said: "We have embarked on a process to really find access to the kind of capital that will allow us to take advantage of the assets we've put together and the kind of opportunities that we're running across."
He said 2013 figures are strong and without the one-time charges on the books last year.
"The first six months of this year we've sold more than we've sold in many full years, and we're on track to beat our best sales year in history," Gunderson said. "That's an indication that our strategy made sense."
(c)2013 the Bangor Daily News (Bangor, Maine)
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