-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JVzkI3opGwOJnDxdqKnwSnhcE10aRoMI8Z1DRBPkF94pU8T6X5/AagJa2InwrwYP y85l3K/Dw2sznYek6ep8ZA== 0000897101-99-000784.txt : 19990810 0000897101-99-000784.hdr.sgml : 19990810 ACCESSION NUMBER: 0000897101-99-000784 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ULM TELECOM INC CENTRAL INDEX KEY: 0000071557 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 410440990 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-03024 FILM NUMBER: 99681055 BUSINESS ADDRESS: STREET 1: 400 2ND ST N CITY: NEW ULM STATE: MN ZIP: 56073 BUSINESS PHONE: 5073544111 MAIL ADDRESS: STREET 1: P O BOX 697 CITY: NEW ULM STATE: MN ZIP: 56073 FORMER COMPANY: FORMER CONFORMED NAME: NEW ULM RURAL TELEPHONE CO DATE OF NAME CHANGE: 19840816 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ___________to ___________. Commission File Number 0-3024 New Ulm Telecom, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Minnesota 41-0440990 - ---------------------------------------- ------------------------------------ (State or jurisdiction of incorporation) (IRS Employer Identification Number) 400 2nd Street North, New Ulm, MN 56073-0697 -------------------------------------------- (Address of Principal executive offices) (507) 354-4111 ------------------------------- (Registrant's telephone number) Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ____X____ No _________ APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 1,732,455. NEW ULM TELECOM, INC. CONTENTS Page ---- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Unaudited Consolidated Balance Sheets 3-4 Unaudited Consolidated State Income 5 Unaudited Consolidated Statements of Stockholders' Equity 6 Unaudited Consolidated Statements of Cash Flows 7 Notes to Unaudited Consolidated Financial Statements 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 9-11 PART II. OTHER INFORMATION 12-13 2 PART I. FINANCIAL INFORMATION NEW ULM TELECOM, INC. AND SUBSIDIARIES ITEM I. FINANCIAL STATEMENTS UNAUDITED CONSOLIDATED BALANCE SHEETS ASSETS
JUNE 30, DECEMBER 31, 1999 1998 ------------ ------------ CURRENT ASSETS: Cash $ 1,115,940 $ 2,551,066 Certificates of Deposit 900,000 900,000 Receivables, Net of Allowance for Doubtful Accounts of $41,933 and $33,000 1,141,881 1,322,903 Inventories 421,715 354,027 Prepaid Expenses 73,073 95,435 ------------ ------------ Total Current Assets 3,652,609 5,223,431 ------------ ------------ INVESTMENTS & OTHER ASSETS: Excess of Cost Over Net Assets Acquired 3,503,345 3,560,233 Notes Receivable, Less Current Portion of $4,552 and $4,997 780,937 783,448 Cellular Investments 4,924,557 4,507,078 Other 580,700 437,466 ------------ ------------ Total Investments and Other Assets 9,789,539 9,288,225 ------------ ------------ PROPERTY, PLANT & EQUIPMENT: Telecommunications Plant 27,464,255 26,261,325 Other Property & Equipment 1,696,387 1,568,153 Cable Television Plant 791,749 787,548 ------------ ------------ Total 29,952,391 28,617,026 Less Accumulated Depreciation 18,005,765 17,085,234 ------------ ------------ Net Property, Plant & Equipment 11,946,626 11,531,792 ------------ ------------ TOTAL ASSETS $ 25,388,774 $ 26,043,448 ============ ============
The accompanying notes are an integral part of the financial statements. 3 NEW ULM TELECOM, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 30, DECEMBER 31, 1999 1998 ------------ ------------ CURRENT LIABILITIES: Current Portion of Long-Term Debt $ 366,666 $ 366,666 Accounts Payable 232,827 1,686,643 Other Accrued Taxes 59,521 54,514 Other Accrued Liabilities 246,816 224,398 ------------ ------------ Total Current Liabilities 905,830 2,332,221 ------------ ------------ LONG-TERM DEBT, LESS CURRENT PORTION 3,116,667 3,300,000 ------------ ------------ DEFERRED CREDITS: Income Taxes 1,519,148 1,519,148 Investment Tax Credits 19,486 23,088 ------------ ------------ Total Deferred Credits 1,538,634 1,542,236 ------------ ------------ STOCKHOLDERS' EQUITY: Common Stock - $5 Par Value, 6,400,000 Shares Authorized, 1,732,455 Shares Issued and Outstanding 8,662,275 8,662,275 Retained Earnings 11,165,368 10,206,716 ------------ ------------ Total Stockholders' Equity 19,827,643 18,868,991 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,388,774 $ 26,043,448 ============ ============
The accompanying notes are an integral part of the financial statements. 4 NEW ULM TELECOM, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, 1999 1998 1999 1998 ----------- ----------- ----------- ----------- OPERATING REVENUES: Local Network $ 657,768 $ 561,465 $ 1,293,697 $ 1,113,133 Network Access 1,480,506 1,287,604 2,816,946 2,588,016 Billing and Collection 119,800 126,694 241,398 267,772 Miscellaneous 132,478 115,739 225,763 211,571 Nonregulated 593,577 506,901 1,148,305 1,003,012 ----------- ----------- ----------- ----------- Total Operating Revenues 2,984,129 2,598,403 5,726,109 5,183,504 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Plant Operations 352,804 326,750 678,433 585,244 Depreciation 476,289 458,268 953,430 916,535 Amortization 28,444 28,444 56,888 56,888 Customer 150,325 130,000 294,891 265,265 General and Administrative 372,867 352,720 721,617 671,529 Other Operating Expenses 282,845 307,502 562,915 625,722 ----------- ----------- ----------- ----------- Total Operating Expenses 1,663,574 1,603,684 3,268,174 3,121,183 ----------- ----------- ----------- ----------- OPERATING INCOME 1,320,555 994,719 2,457,935 2,062,321 ----------- ----------- ----------- ----------- OTHER (EXPENSES) INCOME: Interest Expense (57,366) (63,382) (116,428) (128,080) Interest Income 25,344 41,944 57,778 87,275 Cellular Partnership Income 327,120 268,549 654,240 563,644 Other Investment Income (Expense) (33,572) 52 (66,017) 52 ----------- ----------- ----------- ----------- Total Other Income, Net 261,526 247,163 529,573 522,891 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 1,582,081 1,241,882 2,987,508 2,585,212 INCOME TAXES 652,187 513,241 1,231,927 1,067,552 ----------- ----------- ----------- ----------- NET INCOME $ 929,894 $ 728,641 $ 1,755,581 $ 1,517,660 =========== =========== =========== =========== NET INCOME PER SHARE - NOTE 2 $ 0.54 $ 0.42 $ 1.01 $ 0.88 =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements. 5 NEW ULM TELECOM, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK RETAINED SHARES AMOUNT EARNINGS ------------ ------------ ------------ BALANCE on December 31, 1997 1,732,455 $ 8,662,275 $ 8,821,223 Net Income 3,239,220 Dividends (1,853,727) ------------ ------------ ------------ BALANCE on December 31, 1998 1,732,455 $ 8,662,275 $ 10,206,716 Net Income 1,755,581 Dividends (796,929) ------------ ------------ ------------ BALANCE on June 30, 1999 1,732,455 $ 8,662,275 $ 11,165,368 ============ ============ ============
The accompanying notes are an integral part of the financial statements. 6 NEW ULM TELECOM, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1999 AND 1998
1999 1998 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,755,581 $ 1,517,660 Adjustments to Reconcile Net Income to Net Net Cash Provided by Operating Activities: Depreciation and Amortization 1,010,318 973,423 Cellular Partnerships Income (654,240) (563,644) Distributions from Cellular Investments 236,761 0 (Increase) Decrease in: Receivables 180,577 (363,517) Inventories (67,688) (72,229) Prepaid Expenses 22,362 18,613 Increase (Decrease) in: Accounts Payable (1,453,816) (387,665) Other Accrued Taxes 5,007 4,289 Other Accrued Liabilities 22,418 (36,471) Deferred Investment Tax Credits (3,602) (6,005) ------------ ------------ Net Cash Provided by Operating Activities 1,053,678 1,084,454 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Property, Plant & Equipment, Net (1,368,264) (531,126) Change in Notes Receivable 2,956 1,585 Change in Temporary Cash Investments 0 (302,486) Other, Net (143,234) (53) ------------ ------------ Net Cash Used in Investing Activities (1,508,542) (832,080) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal Payments of Long-Term Debt (183,333) (183,332) Dividends Paid (796,929) (692,982) ------------ ------------ Net Cash Used in Financing Activities (980,262) (876,314) ------------ ------------ NET INCREASE (DECREASE) IN CASH (1,435,126) (623,940) CASH AT BEGINNING OF PERIOD 2,551,066 906,716 ------------ ------------ CASH AT END OF PERIOD $ 1,115,940 $ 282,776 ============ ============
The accompanying notes are an integral part of the financial statements. 7 NEW ULM TELECOM, INC. AND SUBSIDIARIES NOTES TO UNAUDITED FINANCIAL STATEMENTS NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position as of June 30, 1999 and December 31, 1998 and the results of operations and changes in cash flows for the six months ended June 30, 1999 and 1998. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1998 Annual Report to Shareholders. The results of operations for the period ending June 30, 1999 are not necessarily indicative of the operating results of the entire year. NOTE 2 - NET INCOME PER COMMON SHARE Net income per common share for 1999 and 1998 was computed by dividing the weighted average number of shares of common stock outstanding into the net income. NOTE 3 - STATEMENTS OF CASH FLOW Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: 1999 1998 ---- ---- Interest $117,415 $129,066 Income taxes $1,290,000 $1,194,000 8 NEW ULM TELECOM, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998 Operating revenues for the six months ended June 30, 1999 were $542,605 or 10.5% higher than for the same period in 1998. Local network revenue saw an increase of 16.2%, due to an increase in Centrex service, an increased demand for telephone lines to provide internet services, and an increase in the monthly local service rates that took effect October 1, 1998. Network Access revenues increased $228,930 or 8.9%, which can be attributed to an increase in minutes of use billed to interexchange carriers, an increase in special access billings and increased interstate access settlements from NECA. Billing and collection revenues decreased $26,374 or 9.9% as a result of IXC's taking back the billing and collection function. Nonregulated revenues continue to show strong growth. These revenues grew 14.5% over the revenues recorded for the same period in 1998. The increase of $145,293 is the result of our success with cable television, Internet services, increased pricing of our inside wire maintenance fees and increased market share of our long distance service, which was introduced during the third quarter of 1997. Total operating expenses increased by $146,991 or 4.7%. Plant operations increased by $93,189 or 15.9% due to increased labor costs and higher maintenance expenses on telephone plant. Depreciation increased by $36,895 or 4.0%, resulting from an increase in property, plant and equipment. A $29,626 or 11.2% increase in customer operations is the result of an increase in labor costs due to increasing staff size to better serve a growing customer base. General and Administrative expenses were responsible for a $50,088 or 7.5% increase in operating expenses. This increase is attributed to an increase in labor expense and the Company's continued search for acquisition opportunities and other investments to enhance shareholder value and to strengthen corporate performance. The increase in G & A expenses were also effected by the hiring of outside consultants to assist with the development of a new Company Logo. This new logo reflects our expanding services, such as high speed data delivery and enhanced entertainment delivery to the home, while continuing to be focused on customer service and voice delivery. The company's logo uses futuristic art that will allow for growth and expansion of services. Other operating expenses decreased $62,807 or 10%. This decrease is the result of reduced cost of goods sold, through improved inventory purchasing and control, as compared to the same period in 1998. Interest expense decreased by $11,652 due to a decrease in long-term debt outstanding. Interest income decreased by $29,497 reflecting fewer funds available for investment. The investment in Midwest Wireless continues to be a strong performer, which is reflected by a 16.1% or $90,956 increase in partnership income. The $65,965 decrease in income from other investment income 9 consists of the anticipated loss from an investment in Fibercom, Inc. for 1999. Fibercom, Inc. is a startup operation, which seeks to provide competitive local exchange service in Iowa. Net income increased by $237,921 or 15.7%. THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1998 The increase in total operating revenues was $385,726 or 14.8%. Local network saw an increase of $96,303 or 17.2% due to an increase in Centrex service, an increased demand for telephone lines to provide internet services, and an increase in the monthly local service rate that took effect October 1, 1998. Network Access increased $192,902 or 15%, which can be attributed to an increase in minutes of use billed to interexchange carriers, increased special access billing, and increased interstate access settlements from NECA. Nonregulated revenue showed a 17.1% growth in the second quarter of 1999. This increase of $86,676 is attributed to our success with cable television, Internet services, increased pricing of our inside wire maintenance fees, and increased market share of our long distance service, which was introduced in the third quarter of 1997. Total operating expenses increased by $59,890 or 3.7%. Plant operations were accountable for 43.5% of the increase in operating expenses. This increase reflects the rise in labor cost and higher maintenance expenses on telephone plant. Customer operations contributed 33.9% of the increase in operating expenses through increased labor costs due to increasing staff size to better serve a growing customer base. General and Administrative expenses were responsible for 33.6% of the increase in operating expenses. This increase is attributed to an increase in labor expense and the use of outside consultants to enhance shareholder value and to strengthen corporate performance by searching out acquisition opportunities and developing a new Company Logo. This new logo reflects our expanding services such as high speed data delivery and enhanced entertainment delivery to the home, while continuing to be focused on customer service and voice delivery. The company's logo uses futuristic art that will allow for growth and expansion of services. Other operating expenses decreased $62,807 or 10%. This decrease is the result of reduced cost of goods sold, through improved inventory purchasing and control, as compared to the same period in 1998. Interest expense decreased by $6,016 due to a decrease in long-term debt outstanding. Interest income decreased by $16,600 reflecting fewer funds available for investment. The investment in Midwest Wireless continues its strong performance record, which is reflected by a 21.8% or $58,571 increase. Net income increased by $201,253 or 27.6%. LIQUIDITY AND CAPITAL RESOURCES The Company had a decrease in cash of $1,435,126 for the first six months of 1999 resulting in a balance of $1,115,940 as of June 30, 1999. Cash invested in Certificates of Deposit at June 30, 10 1999 remained unchanged from December 31, 1998 at $900,000. Cash decreased due to the reduction in accounts payable as compared to December 31, 1998. Working Capital decreased $144,431 from December 31, 1998. This decrease results from the reduction in cash to pay for capital expenditures. Notes Receivable includes $700,000 from Manager. The note is secured by 51,230 shares of stock in New Ulm Telecom, Inc., has a variable interest rate which was 6% at December 31, 1998. Interest payments are to be paid annually on December 31. The note is to be paid in full on January 1, 2001. The Company continues to make investments in state-of-the-art technology to offer subscribers the best possible service. Capital expenditures for 1999 are expected to be $2,450,000. Management believes the Company will generate sufficient working capital internally from operations to meet its operating needs and maintain historical dividend levels. YEAR 2000 CONVERSION The "Year 2000 Issue" results from computer programs that were written using two digits rather than four to define the applicable year. A problem arises when the Registrant's date sensitive computer programs recognize a date using "00" as the Year 1900 rather than 2000. This could result in a system failure or miscalculations causing disruptions of operations, including the temporary inability to process transactions, send invoices or engage in normal business activities. A team of internal staff is managing the Company's comprehensive Year 2000 initiative. The team's activities are designed to ensure that there is no adverse effect on the Company's core business operations and that transactions with customers, suppliers and financial institutions are fully supported. The Company has identified which software upgrades to its NORTEL switching and transport network are necessary to become Year 2000 compliant. All upgrades have been completed. These upgrades are part of an ongoing contract that is entered into every three years to keep the network up to current standards. The Company would be entering into this upgrade normally and did not need to accelerate any upgrades to become Year 2000 compliant. The Company's internal business software consists of a billing and customer care, plant records and trouble reporting software that is currently Year 2000 compliant. A conversion of the Company's accounting and financial reporting software was converted on July 1, 1999. This conversion was part of the Company's business plan and was not entered into for the sole purpose of Year 2000 compliance. However, the new system is Year 2000 compliant. While the Company believes its planning efforts are adequate to address its Year 2000 concerns, there can be no guarantee that the systems of other companies on which the Company's systems and operations rely will be converted on a timely basis and will not have material effect on the Company. The cost of the Year 2000 initiatives is not expected to be material to the Company's results of operations or financial position. 11 PART II. OTHER INFORMATION Items 1-3. Not Applicable Item 4. Submission of matters to a vote of Security Holders The annual meeting of the shareholders of the registrant was held May 6, 1999 in New Ulm, MN. The total number of shares outstanding and entitled to vote at the meeting was 1,732,455 of which 1,217,095 were present either in person or by proxy. Three directors were elected to serve three-year terms. The names of the directors elected at the annual meeting and the applicable votes were as follows: DIRECTOR FOR AGAINST ABSTAIN Robert Ranweiler 1,230,079 3,216 Mark Retzlaff 1,205,392 6,303 Duane Lambrecht 1,202,654 9,041 Also, one director was elected to fill the unexpired term of the deceased Linus Grathwohl to hold office until the Annual Meeting of Shareholders to be held in May of the year 2000. The name of the director elected and the applicable votes were as follows: DIRECTOR FOR AGAINST ABSTAIN Mary Ellen Domeier 1,208,260 3,435 The Board Members continuing and whose terms expire at subsequent annual meetings are as follows: 2000 Annual Meeting 2001 Annual Meeting Rosemary Dittrich Lavern Biebl Gary Nelson James Jensen Mary Ellen Domeier Perry Meyer The shareholders also approved the appointment of Olsen, Thielen & Co., Ltd. as the auditors for 1999, by a vote of 1,213,908 for, 855 against, and 2,332 abstained. Item 5. Not Applicable Item 6. Exhibits and Reports on Form 8-K There were no reports on Form 8-K for the Quarter ended June 30, 1999. 12 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized NEW ULM TELECOM, INC. (Registrant) Dated: By /s/ James P. Jensen ---------------------------------- James P. Jensen, Chairman Dated: By /s/ Bill Otis ---------------------------------- Bill Otis, President 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1999 JUN-30-1999 1,115,940 900,000 1,141,881 41,933 421,715 3,652,609 29,952,391 18,005,765 25,388,774 905,830 3,116,667 0 0 8,662,275 11,165,368 25,388,774 0 5,726,109 0 3,266,174 (646,001) 0 116,428 2,987,508 1,231,927 1,755,581 0 0 0 1,755,581 1.01 1.01
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