-----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, BAIixtit/nRWefc10UjwYGOXyyxx2TLoUx1WVjgzUR0iBvK6+gV3SpK3EnZneRpR goshVGbE9XnVJebquT25JQ== 0000897101-99-001072.txt : 19991115 0000897101-99-001072.hdr.sgml : 19991115 ACCESSION NUMBER: 0000897101-99-001072 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99750560 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/A [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 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) Indicate by checkmark whether the registrant (1) has 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 Indicate the number of shares outstanding of each of the issuer's classes of Common stock, 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 NEW ULM TELECOM, INC. AND SUBSIDIARIES SEPTEMBER 30, 1999 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS UNAUDITED CONSOLIDATED BALANCE SHEETS ASSETS SEPTEMBER 30, DECEMBER 31, 1999 1998 ----------- ----------- CURRENT ASSETS: Cash $ 919,684 $ 2,551,066 Certificates of Deposit 1,200,000 900,000 Receivables, Net of Allowance for Doubtful Accounts of $47,863 and $33,000 1,650,518 1,322,903 Inventories 374,538 354,027 Prepaid Expenses 59,069 95,435 ----------- ----------- Total Current Assets 4,203,809 5,223,431 ----------- ----------- INVESTMENTS & OTHER ASSETS: Excess of Cost Over Net Assets Acquired 3,474,901 3,560,233 Notes Receivable, Less Current Portion of $4,304 and $4,997 781,532 783,448 Cellular Investments 5,100,149 4,507,078 Other 636,344 437,466 ----------- ----------- Total Investments and Other Assets 9,992,926 9,288,225 ----------- ----------- PROPERTY, PLANT & EQUIPMENT: Telecommunications Plant 27,746,747 26,261,325 Other Property & Equipment 1,716,818 1,568,153 Cable Television Plant 798,827 787,548 ----------- ----------- Total 30,262,392 28,617,026 Less Accumulated Depreciation 18,477,015 17,085,234 ----------- ----------- Net Property, Plant & Equipment 11,785,377 11,531,792 ----------- ----------- TOTAL ASSETS $25,982,112 $26,043,448 =========== =========== The accompanying notes are an integral part of the financial statements. 3 NEW ULM TELECOM, INC. AND SUBSIDIARIES SEPTEMBER 30, 1999 UNAUDITED CONSOLIDATED BALANCE SHEETS (CONTINUED) LIABILITIES AND STOCKHOLDERS' EQUITY SEPTEMBER 30, DECEMBER 31, 1999 1998 ----------- ----------- CURRENT LIABILITIES: Current Portion of Long-Term Debt $ 366,666 $ 366,666 Accounts Payable 507,472 1,686,643 Other Accrued Taxes 46,007 54,514 Other Accrued Liabilities 258,697 224,398 ----------- ----------- Total Current Liabilities 1,178,842 2,332,221 ----------- ----------- LONG-TERM DEBT, LESS CURRENT PORTION 3,025,000 3,300,000 ----------- ----------- DEFERRED CREDITS: Income Taxes 1,519,148 1,519,148 Investment Tax Credits 18,412 23,088 ----------- ----------- Total Deferred Credits 1,537,560 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 11,578,435 10,206,716 ----------- ----------- Total Stockholders' Equity 20,240,710 18,868,991 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $25,982,112 $26,043,448 =========== =========== The accompanying notes are an integral part of the financial statements. 4 NEW ULM TELECOM, INC. AND SUBSIDIARIES SEPTEMBER 30, 1999 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED FOR NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 ----------- ----------- ----------- ----------- OPERATING REVENUES: Local Network $ 646,085 $ 559,636 $ 1,939,782 $ 1,672,769 Network Access 1,429,004 1,348,749 4,245,950 3,936,765 Billing and Collection 115,920 124,022 357,318 391,793 Miscellaneous 95,649 94,174 321,412 305,745 Nonregulated 640,032 484,699 1,788,337 1,487,711 ----------- ----------- ----------- ----------- Total Operating Revenues 2,926,690 2,611,280 8,652,799 7,794,783 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Plant Operations 355,729 366,641 1,034,162 951,885 Depreciation 473,561 458,266 1,426,991 1,374,801 Amortization 28,480 28,444 85,368 85,332 Customer 145,855 118,947 440,746 384,212 General and Administrative 384,271 325,885 1,105,888 997,414 Other Operating Expenses 389,200 271,908 952,115 907,156 ----------- ----------- ----------- ----------- Total Operating Expenses 1,777,096 1,570,091 5,045,270 4,700,800 ----------- ----------- ----------- ----------- OPERATING INCOME 1,149,594 1,041,189 3,607,529 3,093,983 ----------- ----------- ----------- ----------- OTHER (EXPENSES) INCOME: Interest Expense (55,872) (61,847) (172,300) (189,927) Interest Income 26,049 42,240 83,827 129,515 Cellular Investment Income 327,119 265,094 981,359 828,738 Other Investment Income (Expense) (32,445) 0 (98,462) 9,579 ----------- ----------- ----------- ----------- Total Other Income, Net 264,851 245,487 794,424 777,905 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 1,414,445 1,286,676 4,401,953 3,871,888 INCOME TAXES 585,588 525,415 1,817,515 1,592,967 ----------- ----------- ----------- ----------- NET INCOME $ 828,857 $ 761,261 $ 2,584,438 $ 2,278,921 =========== =========== =========== =========== NET INCOME PER SHARE - NOTE 2 $ 0.48 $ 0.44 $ 1.49 $ 1.32 =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements. 5 NEW ULM TELECOM, INC. AND SUBSIDIARIES SEPTEMBER 30, 1999 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 2,584,438 Dividends (1,212,719) ----------- ----------- ----------- BALANCE on September 30, 1999 1,732,455 $ 8,662,275 $11,578,435 =========== =========== =========== The accompanying notes are an integral part of the financial statements. 6 NEW ULM TELECOM, INC. AND SUBSIDIARIES SEPTEMBER 30, 1999 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR NINE MONTHS ENDED 1999 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,584,438 $ 2,278,921 Adjustments to Reconcile Net Income to Net Net Cash Provided by Operating Activities: Depreciation and Amortization 1,512,359 1,460,134 Cellular Investment Income (981,359) (828,738) Distributions from Cellular Investments 388,288 110,757 (Increase) Decrease in: Receivables (328,308) (220,412) Inventories (20,511) 76,781 Prepaid Expenses 36,366 44,891 Increase (Decrease) in: Accounts Payable (1,179,171) (405,038) Other Accrued Taxes (8,507) (7,309) Other Accrued Liabilities 34,299 12,669 Deferred Investment Tax Credits (4,676) (9,007) ----------- ----------- Net Cash Provided by Operating Activities 2,033,218 2,513,649 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Property, Plant & Equipment, Net (1,680,612) (940,188) Change in Notes Receivable 2,609 (696,980) Change in Temporary Cash Investments (300,000) 600,000 Other, Net (198,878) 37,843 ----------- ----------- Net Cash Used in Investing Activities (2,176,881) (999,325) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal Payments of Long-Term Debt (275,000) (274,999) Dividends Paid (1,212,719) (1,039,473) ----------- ----------- Net Cash Used in Financing Activities (1,487,719) (1,314,472) ----------- ----------- NET INCREASE (DECREASE) IN CASH (1,631,382) 199,852 CASH AT BEGINNING OF PERIOD 2,551,066 906,716 ----------- ----------- CASH AT END OF PERIOD $ 919,684 $ 1,106,568 =========== ===========
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 September 30, 1999 and December 31, 1998 and the results of operations and changes in cash flows for the nine months ended September 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 September 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 $173,779 $191,405 Income taxes $2,031,000 $1,692,500 8 NEW ULM TELECOM, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998 The increase in total operating revenues for the nine months ended September 30, 1999 was $858,016 or 11.0%. Local network revenue saw an increase of 16.0% as the result of increased demand for telephone lines to provide internet services, an increase in Centrex service, and an increase in the monthly local service rates that took effect October 1, 1998. An increase in minutes of use billed to interexchange carriers (IXC's) and increased interstate access settlements from NECA is responsible for a 7.9% increase in network access revenues. Billing and collection revenues decreased $34,475 or 8.8% as the result of IXC's taking back the billing and collection function. Strong growth continues with our nonregulated services. These revenues grew 20.2% over the revenues recorded for the same period in 1998. The $300,626 increase in revenues is the result of our success with cable television, Internet services, price increase of our inside wire maintenance fees and increased market share of our long distance service, which was introduced during the third quarter of 1997. Continued growth of nonregulated revenues is expected as the Company increases its marketing of these services. Total operating expenses increased by $344,470 or 7.3%. Plant operations increased by $82,277 or 8.6% due to increased labor costs and higher maintenance expenses on telephone plant. Depreciation increased by $52,190 or 3.8%, resulting from an increase in property, plant and equipment. A $56,534 or 14.7% increase in customer operations is the result of an increase in labor costs due to an increasing focus on the customer service operations of the company, which is a result of an increasing customer base and product offerings. General and Administrative expenses were responsible for a $108,474 or 10.9% 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 to the home, while maintaining focus on customer service and voice delivery. The logo's design uses futuristic art that will allow for growth and expansion of services. Other operating expenses increased $44,959 or 5%. This increase is associated with the increased marketing efforts of our nonregulated services. Interest expense decreased by $17,627 due to a decrease in long-term debt outstanding. Interest income decreased by $45,688 reflecting fewer funds available for investment. The investment in Midwest Wireless continues to be a strong performer, which is reflected by an 18.4% or 9 $152,621 increase in cellular investment income. The $88,883 decrease in income from other investment income 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 $305,517 or 13.4%. THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1998 The increase in total operating revenues was $315,410 or 12.1%. Local network saw an increase of $86,449 or 15.5% 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 $80,255 or 6% 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 32.1% growth in the third quarter of 1999. This increase of $155,333 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 $207,005 or 13.2%. Plant operations were accountable for 5.3% decrease in operating expenses. This decrease reflects the absence of the costs associated with the repair of telephone plant incurred in 1998 by a storm on July 20, 1998. Customer operations contributed 13% 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 28.2% 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. The new Company 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 logo's design uses futuristic art that will allow for growth & expansion of services. Other operating expenses accounted for 56.7% of the increase in operating expenses. This increase is associated with the increased marketing efforts of our nonregulated services. Interest expense decreased by $5,975 due to a decrease in long-term debt outstanding. Interest income decreased by $16,191 reflecting fewer funds available for investment. The investment in Midwest Wireless continues its strong performance record, which is reflected by a 23.4% or $62,025 increase. Net income increased by $67,596 or 8.9%. 10 LIQUIDITY AND CAPITAL RESOURCES The Company had a decrease in cash of $1,631,382 for the first nine months of 1999 resulting in a balance of $919,684 as of September 30, 1999. Cash invested in Certificates of Deposit at September 30, 1999 was $1,200,000, which is an increase of $300,000 over the balance at December 31, 1998. Cash decreased due to the reduction in accounts payable and increased investment of cash resources as compared to December 31, 1998. Working Capital increased $133,757 from December 31, 1998. This increase is the result of profitable internal operations. Notes Receivable includes $700,000 from the General 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 completed 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 a material effect on the 11 Company. The cost of the Year 2000 initiatives is not expected to be material to the Company's results of operations or financial position. 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 12 Item 6. Exhibits and Reports on Form 8-K On October 29, 1999 the Registrant filed a Form 8-K. The form reported the Company's plan to upgrade the communications infrastructure of the urban district of New Ulm, Minnesota. The project is estimated to cost $10 million. The company will begin construction in the fourth quarter of 1999 with an estimated completion of third quarter 2000. 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: November 10, 1999 By /s/ James P. Jensen ------------------------- James P. Jensen, Chairman Dated: November 10, 1999 By /s/ Bill Otis ------------------------- Bill Otis, President 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 SEP-30-1999 919,684 1,200,000 1,650,518 47,863 374,538 4,203,809 30,262,392 18,477,015 25,982,112 1,178,842 3,025,000 0 0 8,662,275 11,578,435 25,982,112 0 8,652,799 0 5,045,270 (966,724) 0 172,300 4,401,953 1,817,515 2,584,438 0 0 0 2,584,438 1.49 1.49
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